Release Date: August 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EnWave Corp (NWVCF, Financial) reported the highest quarterly base royalties ever at 425k.
- The company achieved an adjusted EBITDA profit of 85k, marking only the second time in the past eight quarters.
- Quarterly revenue increased to 2.6 million, up 136,000 year-over-year.
- Gross margin significantly improved to 44% due to new large-scale REV machine orders and royalty growth.
- The company signed multiple new commercial licenses and agreements, including a Technology Evaluation and License Option Agreement with a North American food company led by a Michelin-starred chef.
Negative Points
- SG&A expenses, including R&D, increased by 178k, or 15%, primarily due to higher personnel costs, legal fees, and increased sales efforts.
- The company remains cautious about providing future royalty rate guidance due to uncertainties in the timing of new purchase orders and facility readiness.
- The cannabis industry, a potential market for EnWave's technology, is still in a stage of consolidation and cost reduction, limiting immediate growth opportunities.
- The average utilization rate of installed REV machines varies significantly among partners, with some still working towards higher utilization.
- Despite the positive outlook, the company acknowledges that past quarters have been challenging, indicating potential volatility in performance.
Q & A Highlights
Q: Can you give me a number of the total installed capacity with your clients in kilowatts and what the average utilization rate of these machines is?
A: Right now, we have three active 10 kilowatt machines placed at foreign facilities for product development and potential commercialization. Most clients now prefer to work directly at our innovation center in Vancouver. As for total installed capacity, as of September 30, it was around 2800 kilowatts, with current capacity utilization ranging between 50% and 100%.
Q: How many machines are under construction at the end of Q3?
A: We are working to deliver two machines (120 kilowatt and 100 kilowatt) to BranchOut Foods, with some modifications needed. Additionally, we are building a third 120 kilowatt machine for an unnamed current royalty partner. We always have 10 kilowatt machines in inventory for immediate deployment.
Q: Can you give us an impression or a range of the targeted royalty rate for next year?
A: It would be premature to provide guidance for next year due to uncertainties in the timing of new purchase orders and facility readiness. We will reevaluate and provide updated guidance after the next quarter.
Q: What are your plans to expand your network in other countries for the utilization of this technology in the cannabis space?
A: We are open to partnering with cannabis companies operating in legal jurisdictions. However, the cannabis industry is currently in a stage of consolidation and cost reduction. Our pipeline is dominated by large food opportunities, with around 90% being food-related and 10% pharmaceutical and cannabis.
Q: Can you provide an update on your joint partnership with GEA Lyophil and the potential in the pharma industry?
A: GEA has been attracting top global pharma companies to explore REV technology at their R&D center in Germany. This has resulted in several requests for quotes on pilot-scale REV machinery, which could lead to sales in fiscal year 2025.
Q: What is the status of your collaboration with the US Army and Navy for military ration inclusions?
A: We are actively working with the US Army and Navy to test and develop new military ration inclusions. Cheesecake was the first accepted item, and we expect more items to follow.
Q: Can you provide more details on the new commercial licenses signed in Q3?
A: We signed a Technology Evaluation and License Option Agreement with a North American food company led by a Michelin-starred chef. We also signed two new commercial licenses: one with Bounty Farms of the Philippines for REV dried meat and fruit products, and another with a longstanding royalty partner for tropical fruits in Central America.
Q: What are the future volume forecasts from your larger blue-chip royalty partners?
A: Several of our larger blue-chip royalty partners have shared encouraging future volume forecasts for products already launched to market. We anticipate the need for many new large-scale REV machines in the coming 12 months to meet their projected throughput needs.
Q: Can you provide more details on the new Vice President of Global Sales and Business Development?
A: We hired Ms. Danna Dunnage as the new Vice President of Global Sales and Business Development. She has over 25 years of executive experience in sales and strategy roles in the food service, distribution, hospitality, and SaaS industries. She previously worked for Gordon Food Service, where she was responsible for annual revenues of over $1 billion.
Q: What are your plans for international trade show attendance?
A: We recently attended IFT in Chicago and FOOMA in Japan. We will also have representation at upcoming events such as Anuga FoodTec India, SupplySide West in Las Vegas, the FoodTec Summit in Mexico, and Gulfood Manufacturing in Dubai within the next three months.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
