Enwave Corporation

EnWave (ENW.V yes it’s a venture stock) developed Radiant Energy Vacuum (REV), a technology combining microwave and a vacuum environment that can be used to dehydrate and preserve food and pharmaceutical products.  Their unique technology applies a rapid and low-temperature drying method that maintains the product’s colour, flavour, and nutrients and enables uniform drying with flexible moisture content (crunchy or chewy?) which are not possible with traditional freeze or air-drying methods.  Not only does their technology speed drying time, it significantly reduces the footprint required.  To demonstrate their technology, they established a subsidiary called NutraDried that produces Moon Cheese which is available in over 20,000 stores in North America including Starbucks, Publix, Target, Rite Aid, CVS, Safeway, Loblaws, Whole Foods, Save-On-foods, and formerly Costco.  Go try it!  The company sells their machines to large food and pharmaceutical companies (still early days) and they collect a royalty on sales of end products. Customers include Merck, Bonduelle, the U.S. Army, Nestle, and other companies that might not be household names.  In February 2018, the company announced its first shipment to a cannabis company, Tilray and signed a license agreement which was subsequently terminated in November 2020; management does not believe this to be indicative of the quality or performance of EnWave’s technology for cannabis processing.  Aurora obtained exclusive license options in Australia and South America excluding Peru and a non-exclusive sub-license in Canada.  Aurora also invested $10m into Enwave at $1.89 (under 5%).  And in March 2020, EnWave announced plans to license its REV technology into the U.S. cannabis market through a new wholly-owned subsidiary.  In October 2020, EnWave announced its first royalty-bearing U.S. cannabis license with GentleDry Technologies and is engaged in discussions with other prospective licensees.  At FY2020, EnWave has signed 41 royalty-bearing licenses.  The company started building a toll-manufacturing operation in Canada called REVworx to help accelerate adoption, expected production was initially March 2021 but delayed to late 2021.

P=0.21, Cash=$3.4m, TTM EPS=(.03)

 

3Q24 (.00) vs (.00)

Aug 23, 2024, P=0.21

Revs +5.5% to 2.6m, GM 43.9% vs 28.9%, EBITDA 85k vs (192k), 1st positive EBITDA in 5 Qs

Developments in the quarter include singing a TELOA with a NA food company led by a famous Michelin starred chef, 2 machine sales, 1 100kw machine to BranchOut foods and 1 120kw machine to an existing partner, subsequent to 3Q repurchased a large scale machine from a cannabis operator to resell 120kw machine to BranchOut foods (previous purchase order).

Hired a VP of gobal sales who has experience in Private Equity and at Gordon Food Service overseeing the division in British Columbia with annual sales over $1bn with over 900 employees.

2Q24 (.01) vs .008

  • May 24, 2024, P=0.26, TTM EPS=(0.03)

  • Revs -85.7% to 663k, GM (25.2%) vs 28.9%, EBITDA (1.3m) vs (1.6m)

  • OCF 136k vs (742k)

  • No machine sales in recent quarters worked through the revenue line but with 2 sales announced subsequent to quarter end, hopefully the dearth is behind us.

  • Subsequent to qtr end, announced sale of 1 120kW REV machine with an existing royalty partner, “well advanced” on a number of similar opportunities. Also announced 3rd machine to Branch Out Machine (100kW previously used by NutraDried).

1Q24 (.01) vs (.00)

  • Feb 23, 2024, P=0.26, TTM EPS=(.01)

  • Revs -55% to 1.26m, GM 18.5% vs 39%, adj EBITDA (756k) vs (256k), OCF (683) vs (1.7m), mostly offset by cash flow from disc ops good for now but not repeatable.

  • Royalty revenue continues to increase but rental and testing fees were down.

  • No new machine sales in the quarter but various encouraging events (product development, tight capacity) at royalty partners suggesting future capacity expansions

  • Bridgford (supplier for U.S. Army) installation should be completed in March, also “evaluating a number of additional toll development and launch of commercial products”.

  • Dole relationship progressing well, current machine utilization is high, new potential products under development.

  • BranchOut Foods landed multi-million dollar contracts with large U.S. grocery stores, engaged REVworx for immediate capacity, 2nd large-scale machine is due in 2H24   

  • “Seeing shorter times between engagement and license agreement negotiations”

4Q23 (.004) vs (.003), TTM EPS (.005) vs (.013)

  • Dec 14, 2023, P=0.365, TTM EPS=(.005)

  • Revs -48.6% to 1.46m, GM 28.9% vs 39%, adj EBITDA -324 vs -27

  • Revenues lower due to fewer machines in fabrication stage

  • Re royalties in FY24, “potentially could see robust growth on an improvement in installed capacity of REV machines”, anticipate “several” go or no-go large purchase decisions tied to new and existing royalty partners in the next 2-3 months, more in the latter half of FY24.

3Q23 (.00) vs (.00)

  • Aug 25, 2023, P=0.27, TTM EPS=.00

  • Revs -6.5% to 2.5m, GM 28.9% vs 50% (high margin resale last year), adj EBITDA -192 vs -224

  • Somewhat uneventful quarter, management still working on a number of new machine sales but sold a machine to Bridgford Foods and signed an agreement for U.S Army rations.

2Q23 .01 vs (.02) ex (.03) discontinued ops, YTD EPS .00

  • May 25, 2023, P=.37, TTM EPS=(.01)

  • Revs +209% to 4.6m, GM 48.8% vs 37.6%, adj EBITDA 1.15m vs (1m), OpInc 687k vs (1.7m)

  • Results boosted by resale of 2 large-scale machines (but generally up due to more units in prodn), 1 repurchased from cannabis customer, 1 100kW Nutradried machine for US $935k, 65k remaining over 25m, 2nd machine from Nutradried in inventory for resale. $1.6m for Nutradried IP and inventory etc went through disc ops, funding wind-down

  • Commissioned 2 large-scale 120kW machines for customers in Italy and Thailand (1 for Dole)

  • Have several pending machine orders, recent customer product launches doing well, continued success could drive additional machine sales to expand capacity

  • 4 large-scale machines and 1 small-scale in fabrication, 4 TELOAs

  • RevWorx line trials and negotiations continues, 1st customer product launch expected soon.

 Results going forward exclude Nutradried which is winding down as discontinued ops

1Q23 (.02) vs .(00)

Feb 22, 2023, P=0.285, TTM EPS=(.07)

  • Revs -25% to 4.7m, GM 17% vs 43%, adj EBITDA (1.2m) vs 301k

  • Enwave -31.5% to 2.8m (due to timing of construction contracts), EBT (466) vs 600

  • NutraDried -13.5% to 1.9m, EBT (1.7m) vs (900k)

  • EnWave GM 37%, consolidated GM 17% due to NutraDried

  • Machine sales Pipeline “robust”

  • Several large-scale machines starting up in near term to contribute to royalties

  • In discussions with several potential buyers for NutraDried, still expect completion this fiscal year and neutral to positive cash impact.

  • Revworx customer to launch a cheesecake snack in June, expect robust contracts in 2H

  • Targeting contract with US Army this year

 

Mid Quarter Update – Jan 23, 2023

  • Intention to Exit NutraDried, exploring options including JV with seasoned operator, sale of brand assets, sale of some or all of equipment.

  • Will fulfill POs “through the next few months pursuant to available inventory”

  • Expect the process to be cash neutral or positive

3Q22   (.02) vs .003, est (.01)

  • Aug 22, 2022, P=0.65, TTM EPS=(.04)

  • Revs -24% to 5.55m (est 7.9m down from 10.1m), GM 26% vs 36%, EBITDA (1.1m) vs 937k

  • EnWave -25% to 2.66m, OpInc (191k) vs 530k

  • NutraDried -24% to 2.9m, OpInc (1.6m) vs (245k), Kroger added MoonCheese while Target removed it, no additional sales into Costco, no 10% customers in 3 Q

  • Some customers stocked up prior to price increase, cheese prices have moderated.

  • 8 viable “large companies” undergoing line trials, one customer could take up 1/3 of capacity, hope to have several customers next quarter.

1Q22 (.00) vs (.01), est (.01)

  • Feb 24, 2022, P=0.94, TTM EPS=(.03)

  • Revs -16% to 6.3m (est 7.1m), GM 43.1% vs 22.5%, EBITDA 301k vs (911k), 

  • EnWave Revs +52% to 4.1m , OpInc 600k vs (25k) 

  • NutraDried -54% to 2.2m, -5% ex Costco, OpInc (853k) vs (1346k), $700k Costco shipment delayed into January due to poor weather, distributors reduced inventory despite higher shipments to end customers, more distribution points coming.

  • OCF before NWC positive, building inventories of critical components to ensure timely schedules for machine prodn to get ahead of supply chain delays. Some electrical components and some sub-assembly 3rd party manufacturer backlogs are building so their windows have been expanding from 8 weeks to 16 weeks. 

4Q21   (.007) vs (.006), est .00, FY21 (.04) vs (.047)

  • Dec 15, 2021, P=0.99, TTM EPS=(.04)

  • Revs -36% to 6.9m (+39% ex Costco), GM 34.4% vs 20%, adj EBITDA (223) vs 20

  • Nutradried -67% to 3m, (-10% ex Costco), -20% q/q, EnWave (rest of company) +142% to 3.9m

  • EnWave delivered positive EBITDA and Nutradried delivered negative EBITDA which should improve as sales grow.

  • Reminder last year Nutradried’s sales included promotion to Costco to blow out excess inventory. Whole Foods to be selling new product cheese sticks

  • FY21 had record new machine sales, mgmt. still optimistic about engagements materializing into strong FY22. 

  • Sounds like management is anticipating inflection at Nutradried around the midpoint of FY22 and if so might have to start planning capacity expansion.

  • REVworx almost complete, expect commissioning in January.  

3Q21   .00 vs (.01), est (.01)

  • Aug 26, 2021, P=0.91, TTM EPS=(.04)

  • Revs +23% to 7.35m (+40% ex Costco), GM 35.6% vs 26%, adj EBITDA 937 vs 20 vs 864 on lowered cost structure

  • Nutradried -14% y/y (+3.7% ex Costco) but +62% q/q, EnWave (Rest of Company) +121% y/y and +51% q/q

  • Top customer 11% vs 15% last year, not Costco, possibly SBUX.

  • NutraDried was CFO positive, shipped >100k pound of bulk sales to several new customers (4 customers accounted for majority), lots of interest from snack companies so mgmt. expects growth but could be lumpy, starting small Moon Cheese trial in Walmart stores in late 4Q (already received P.O.), working to regain Costco distribution.

  • RevWorx waiting for final permit for flooring, expect commissioning in October then modest revenue generating starting 1Q22.

  • Announced strategic partnership with Dole, had been collaborating since late 2020, limited by confidentiality agreement but CEO thinks could evolve into something material over next 12m, involves product and ingredients, relationship at highest level of execs in that group. 

  • Completed installation of 10kW REV machine at US Army’s manufacturer, Bridgford

  • AstraZeneca to trial REV for dehydration and shelf-stabilization of liquid monoclonal antibody formulations, could lead to a more robust agreement for R&D

  • FY22 mgmt looks to double number of machines sold vs FY21 

2Q21 (.02) vs (.02) 

  • May 27, 2021, P=1.44, TTM EPS=(.05)

  • Revs -37% to 4.7m, GM 10.2% vs 25%, adj EBT -2.6m vs -2m (ex 0.5m govt support)

  • Nutradried -56% due to no Costco, ex Costco down due to some SBUX store closures, trade spending which nets to revenue, and fx.  

  • Equipment +2.9% to 2m, royalties and rentals also up albeit at low levels, should continue growing.

  • Enwave profitable, loss driven by NutraDried, results should improve esp with contract mfng.

  • RevWorx delayed due to city permits, target August completion and Sept start-up.

  • Completed restructuring at NutraDried, 691k severance charge

  • NutraDried contract mfng secured >100k lbs of bulk sales since February for several new customers, to contribute $1.5m in 3Q, mgmt. optimistic will grow but no clarity on recurring orders.

  • Stock weak in response but other than the RevWorks delay which isn’t material, things look good under the hood.  Mgmt tone bullish with the pace of equipment orders, interest in RevWorx, contract manufacturing opportunity, and cannabis and pharmaceutical applications. 

1Q21   (.01) vs (.01) est (.01)

  • Feb 26, 2021, P=1.42, TTM EPS (.05)

  • Revs -12% to 7.5m, GM 22.5% vs 37.1%, adj EBITDA (911k) vs (743k) ex govt support

  • Product +20% to 4.9m, Costco +98%, Product ex Costco -15%, Equipment -43% to 2.1m

  • CFO 4.2m vs (2.8m)

  • In context of pandemic and the year, results are pretty encouraging with equipment sales up q/q and highest in 4 quarters, company has been making progress with customer wins, looking forward to seeing REVworx and contract manufacturing opportunities unfold. 

  • Maintained solid balance sheet through the year. 

  • Management’s tone is very encouraging, they feel REV could be a game-changer for cannabis drying, significant opportunities for REVworx, a number of potential customers could each consume all the planned capacity but ultimately management is focused on incubating a number of products and helping customers get them to market.  

Mid Quarter Update Feb 18, 2021

  • Undertaking a restructuring at NutraDried, reducing 22 employees, non-essential 3rd party consultants and conractors

  • Expected to reduce costs by $2m, 600k restructuring charge in 1Q

  • Hiring new head of NutraDried

  • “Objective is to return NutraDried to positive EBITDA and cash flows as quickly as possible” coupled with exit of head of NutraDried sounds like recent initiatives might not be as positive as thought.

  • Recently secured a major contract manufacturing opportunity with a global snack company to supply REV cheese for a snack mix product. 

4Q20   (01) vs .01 ex .01 govt assistance, est (.01), FY20 EPS=(.05) vs .01

  • Dec 18, 2020, P=1.25, TTM EPS=(.05)

  • Revs -33% to 10.8m, GM 20% vs 28.4%, adj EBITDA 20k vs 864k, ex 929k gov’t support

  • Product -23% to 9.2m, Costco -37% to 5.8m, Product ex Costco +27% to 3.4m

  • While Costco down y/y, +692% q/q

  • Total cumulative CEWS $658k, $C 961k equivalent of PPP from US

  • 2.7m warrants expired unexercised on Oct 22nd, Cash 14.7m, 18m at Dec 21st.   

  • Have completed 2 remote installations, subsequent to 4Q have completed “several” others, “some” customers have chosen to wait until EnWave staff can install in person.  Have sent staff to Costa Rica and Peru to install 2 lines which should be operational in 2Q21.  

  • Since August, interest has picked up “significantly” and management expects accelerated deployment in 2021

  • NutraDried expanded sales and marketing team, has seen improvement in recent months and expects “impactful new points of distribution” in FY21

  • REVworx should be ready by March 2021, expect customer announcements prior to launch.  

  • Tilray agreement has been terminated due to specific Tilray issues, not reflective of capabilities in cannabis, royalties that would have gone to Tilray now revert back to EnWave.

  • Mgmt discussed recently announced Terpene Max process for cannabis retaining ~10% higher terpenes than traditional air-drying, have been receiving in-bound inquiries in cannabis and pharma

  • Stock opened -12% to -27% from its Dec 14th high after a strong run from Nov 27th to Dec 14th, solid correction territory.

  • Results improved q/q, mgmt. made significant progress during the year despite delays from the pandemic, I expect significant improvement going forward, net cash balance sheet puts them in solid position to execute on their plan and generate value.

3Q20   (.01) vs (.01) est (.01) 

  • Aug 27, 2020, P=0.97, TTM EPS (.04)

  • Revs -40% to 6m, GM 26% vs 28.4%, EBT (1.3m) vs (1.3m), adj EBITDA (1m) vs 139k ex 690k in govt assistance

  • Product -12% to 4.4m, Costco -58% to 733k, ex Costco product +13%, Equipment -71% to 1.4m

  • Cash 15.8m, flat q/q, non-cash NWC 8.2m vs 8.5m at 1Q

  • Nutradried inventory 7.7m vs 3.6m at 4Q19

  • CFO 20k vs (2m)

  • Some customers electing for in-person commissioning rather than remotely, travel restrictions delaying about $1m revenue equipment awaiting  installation, further disruptions to milestones.  

  • Significant disruption to business but solid expense and cash management, promotion with Costco should generate some cash.  

  • Obtained Health Canada license under Cannabis Act for various cannabis products, previous trials “yielded very positive results” 

  • Launching “toll manufacturing” to help reduce CPG companies’ initial capital requirements for food innovations, can help speed-to-market for food products and REV adoption, should be ready early 2021, expected initial investment $1.5m

Mid Quarter Update August 20, 2020

  • Won 1-month national promotion with Costco in US for Moon Cheese 10oz “Cheddar Believe It” product with BOGO, product to be delivered in 4Q20, possibly smaller quantities in October.  Should clear excess inventory and improve cash position as well as enhance brand identity with customers.

2Q20   (.02) vs .01, est 0.0 (1 estimate)

  • May 29, 2020, P=0.78, TTM EPS (.03)

  • Revs -15% to 7.5m, GM 24.9% vs 35.6%, adj EBT (2m) vs 0.5m

  • Equipment +8.6% to 1.9m but -47% q/q due to inability to complete final installations due to pandemic and global travel bans.

  • Product -21.3% to 5.3m but +31% q/q, 

  • YTD Costco and Starbucks 27% and 10% of Nutradried revs vs 54% and 10% last year. 

  • Costco 1.2m vs 3.5m and 1.27m in 1Q but ex Costco Nutradried +24% to 4.1m +47% q/q, 

  • Still solid balance sheet with 15.5m in cash, additional 8.5m in non-cash WC

 

1Q20 (01) vs .01

  • Feb 26, 2020, P=1.31, TTM EPS (.003)

  • Revs +10% to 8.6m, GM 37% vs 39%, adj EBT (1.1m) vs 600k, higher OpEx

  • US sales (product) -36% as Costco -67% due to inventory, US sales ex Costco +13%, Equipment +250%, Total Revs ex Costco +86% 

  • Had highest number of REV machines in fabrication at any 1 point in time.

  • MoonCheese sales affected by excess inventory in club channel (Costco) build in 4Q19

  • 1Q20 sales to Costco were 1.3m vs 3.9m last year and 9.2m in 4Q19 which was significantly higher than any previous quarter.  Importantly equipment sales and product sales continue ot gain traction.  

  • Adding more flavours of MoonCheese

  • Signed 6 new royalty agreements in 1Q20, 3 food and 3 cannabis.