With the first half of 2020 behind us, I would like to extend our appreciation to the entire Heliospectra team for showing true leadership, resourcefulness and strength to our community during these challenging times. I would also like to thank you, our shareholders, for your unwavering support and commitment to our people, our vision and our purpose.
As governments around the globe are working hard to control the pandemic and keep its people safe, we are working on
untiringly. While remaining fully operational, we have strengthened our relationships and provided support to our grower and customers through virtual avenues. These efforts combined with an enhanced marketing strategy have resulted in significantly more leads that we have seen in previous periods.
Due to the Covid-19 crisis and travel restrictions, many of our customers experienced delays in their greenfield projects, such as Nectar Farms. Additionally, in the early stages of the pandemic, there was a spike in demand for food products. This forced growers to pause plans for expansion and instead focus on supporting day to day operations. As a resulting of these dynamics and headwinds, Q2 did not yield sales as we had expected.
To compensate for the lower sales we took proactive measures to save on the bottom line. This includes restructuring our organization as well as using available government programs – specifically support from the Swedish Agency for Economic and a long-term government interest-free loan in Canada. We will see the cumulative effect of these initiatives in Q4, during which we expect to achieve a 10% reduction in operating costs.
During this uniquely challenging period, we were able to drive positive results from our research and development efforts, specifically improvements to our product and service portfolio. Furthermore, we have greatly increased our brand recognition by launching our digital marketing strategy. The initial phase was the introduction of the by Growers for Growers webinar series, which resulted in half a million impressions and produced over 2,000 quality leads (300% increase from previous period). The second part of our digital marketing initiative included the redevelopment and launch of our new website. This allows us to prominently highlight the benefits of our products and services, better communicate our global reach, and further our goal of feeding and healing the world by facilitating knowledge sharing across the grower community. This quarter we achieved sales growth of 18% compared to last year with decline in our order intake due to the reasons explained above, which affect the industry as a whole. However, we are positive about the rebound in coming quarters.
Lastly, we have strengthened our partnerships with resellers by providing virtual training and other tools that will help them effectively sell our products and services to the global community. This will help us generate new opportunities and customers.
Heliospectra’s mission to redefine nature’s potential has never been more relevant and timelier. While there is still uncertainty in the market, we are confident we can deliver on the strong opportunities the team is working on in the near future and we remain committed to our mission to provide exceptional products, services and support to our growers.
President & CEO
2019 was a year of transitions as we rebuilt our product portfolio for Heliospectra. The strategic decision in mid-2018 to revamp our product portfolio created some challenges. But with the hard work of our team, we came out of 2019 in a stronger market leadership position and with good momentum in our business. Heliospectra remains dedicated to our front-line mission of helping growers and their businesses feed the world and heal the world in a sustainable way with locally grown products, superior yields and highest quality crops.
In 2018, our main lighting product for the greenhouse and indoor growing market was ELIXIA, which was originally developed in 2014. ELIXIA has a variable spectrum, which is a great feature for many crops and applications, but not necessarily for light-hungry crops like tomatoes, cucumbers and cannabis, where quantity (or intensity) of light is as important as its quality (or spectrum). We could continue to push ELIXIA for light-hungry crops too but would put Heliospectra at reputational risk and undermine our long-term market position as light and plant experts.
MITRA is a market stand out Committed to providing our customers and growers with advanced lighting technologies and innovative performance, we anticipated the need to update our ELIXIA series to the new MITRA platform, aware of the risk to our order intake and sales in the short term. Our aim was to optimize capital expenditures for new customer installations while delivering a powerful new light that helped our growers achieve reliable production results. The 2019 introduction of MITRA was met with immediate customer interest and orders. MITRA’s highest controllable light output in the LED market, an efficacy of up to 2.8 mol/J, and modular form factor with multiple spectra differentiates Heliospectra in a crowded market.
In September, Heliospectra won the Lighting Systems award at the Grow Up cultivation conference in Ontario, Canada. The award recognizes the best LED lighting product in the market, as voted by the cannabis industry. The award and our participation in other horticulture trade shows and photobiology speaking panels gar-nered high interest and orders from customers that immediately recognized that MITRA, together with our helioCORE light control system, elevated Heliospectra above the competition.
Stronger local presence in North America
While we developed the new product platform, we also reorganized our internal team to focus more on sales and growth. These efforts included my own temporary move to Canada to establish the Heliospectra Canada Office and the creation of a more focused organization across our key markets in North America. These initiatives give Heliospectra a stronger local presence in a very dynamic market and enable us to develop strong strategic partner-ships with global players across the industry.
The strongest current driver of the North American grow light market has been cannabis. The sales revenues of the certified recreational growers in Canada have so far fallen short of initial expectations. There are many reasons for this, including a sluggish rollout of physical retail stores, lack of production experience and challenging technology choice. However, we believe that the recreational and medical growers will mature in their operations and turn their focus even more to quality which can be achieved by right technology choice and obtaining expertise. This will benefit us as we are advantaged with integrating control and automation into the production process and support our growers with our technical services through our helioCARE service platform.
Produce dominates the long-term
While medical cannabis continues as an important driver for the grow lighting market today, food will dominate as the longer-term opportunity. As populations and cities grow and the need to address climate change becomes ever more urgent, our long-term commitment to supporting commercial food growers and future food supply with local and global market pres-ence is vital. Microgreens, herbs and salads, grown in urban vertical farms and greenhouses will become more common. Heliospectra solutions and our technical helioCARE expertise enable food growers to apply and control light for more efficient production cycles. Our customers consistently deliver locally grown, nutritional produce to market faster while reducing carbon footprint and plant waste.
In the end, the opportunity to scale sales and markets for both food supply and medicinal plants depends on creating clear economic benefits for the grower that demonstrate our ability to boost yields, nutritional or medicinal values, flavour and shelf life. With worldclass solutions, our holistic systems approach and our cultivation expertise, Heliospectra is well positioned to be the right partner and the right technology for both the short and long term.
With that, I would like to thank the entire Heliospectra team for their hard work and the passion for our customers that you have shown throughout the year. I would also like to thank our shareholders for supporting us in our decision to prioritize our long-term market position and leadership. I look forward to a bright future for Heliospectra.
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