EnWave Ends Third Quarter Well Positioned to Capture More Market Share

EnWave Corporation (TSXV:ENW – $0.90 CAD & OTC:NWVCF – $0.73 USD & Frankfurt:E4U – €0.62), which offers industrial-scale dehydration technologies for food and pharmaceutical companies, reported revenue of $4.67 million for its third quarter of fiscal year 2017, ended June 30, 2017, compared with $5.22 million in the comparable period last year, a decrease of 11%.

The decrease in revenue is primarily due to a lower number of purchase orders for Radiant Energy Vacuum (REV) machinery. The timing of large-scale machine purchase orders is hard to predict, and in this year’s third quarter less orders were received compared to last year’s. However, the Company is making up for this… fast.

Since April 1st, 2017 EnWave received the following REV purchase orders:
• An order for a 10kW small-scale machine from Pitalia, a Costa Rican company formerly operating under the name Agricola Industrial La Lydia S.A. This order represents the second purchase of a 10kW small-scale machine by Pitalia for processing fruits in Costa Rica.
• A few weeks later, Pitalia ordered a large commercial 100kW quantaREV, representing a significant expansion of its royalty-bearing processing capacity. Delivery of this machine is expected for mid-2018. It will allow Pitalia to start selling pineapple, apple, mango and banana snack products through its Pure Joy brand in the European and South, Central and North American markets. This order alone is estimated to be worth approximately $1.5 million.
• An order for a 10kW REV dryer from Ashgrove Cheese, a diversified dairy processor based in Australia. The goal is to produce dried cheese products similar to EnWave’s Moon Cheese snacks.

In addition, EnWave commissioned:
• The second 120kW quantaREV machine at Milne Fruit Products’ processing facility. This second machine will expand Milne’s royalty-bearing production capacity for its Microdried fruit and vegetable product line.
• Ereğli’s Agrosan’s first 100kW nutraREV machine at its facility in Turkey.

And it doesn’t stop there. Just this week, EnWave signed more commercial agreements with machine purchase orders attached (see below).

Moreover, EnWave has numerous prospective royalty partners evaluating its REV technology under Technology Evaluation and License Option Agreements (TELOAs). The strategy under these arrangements is to co-develop product applications using the technology for specific partner opportunities and to ultimately convert them into commercial licenses. EnWave earns revenues under TELOAs from short-term REV machine rentals as well as fees for access to EnWave’s R&D facilities and product development expertise. Since April 1st, 2017 EnWave signed no less than six new TELOAs with food and other processing companies that will evaluate the use of REV technology to develop new product applications.

Finally, the Company made significant progress with the construction and testing of the first commercial powderREV machine for Sutro Biopharma, a U.S. based pharmaceutical partner. More news is expected shortly. EnWave also commenced the assembly and construction phase for the first scaled-up GMP freezeREV for Merck. If the powderREV and freezeREV platforms prove to yield superior performance to incumbent dehydration technologies, it would be a major breakthrough for EnWave.

More Machine Sales in Past Week

On Thursday, EnWave signed a commercial royalty-bearing license with Ultima Foods, a major Canadian yogurt processor. This is EnWave’s twenty-second commercial royalty-bearing license and the first for yogurt products.

The license grants Ultima the exclusive right to use EnWave’s REV technology to process yogurt products in Canada. In exchange for this exclusivity, Ultima has agreed to purchase a 10kW commercial REV machine to enable a focused market trial in early 2018. Subject to maintaining the exclusivity of the license, Ultima is also required to order a larger, continuous REV machine before the end of 2018. Moreover, Ultima will have to pay EnWave a royalty – typically between 3 and 5 percent – on the wholesale price of all REV-dried products sold.

Ultima Foods, a joint venture of two of Canada’s largest dairy cooperatives Agropur and Agrifoods, has over 700 employees and produces more than 100 million kilos (220 million lbs) of fresh dairy products each year at its Granby, Quebec plant. Ultima is a big player in the market, with well-known brands such as Iögo and Olympic.

Also this week, Milne Fruit Products paid a USD$100,000 non-refundable deposit towards the purchase of additional REV machinery. The U.S. based processor and supplier for the industrial food ingredient, beverage, and health & wellness markets has to order REV machines with a total minimum capacity of 100kW within 18 months. This was part of an amendment of the existing commercial license agreement between Milne Fruit and EnWave.

Prior to the amendment, Milne’s exclusive territory for drying blueberries and strawberries with EnWave’s REV technology was the State of Idaho. Now Milne was granted the right to produce those dried fruits in the entire United States.

This deal is a clear win-win for both parties. EnWave will sell more machinery, while Milne Fruit has eliminated any other party from producing REV dried versions of these popular fruits within the United States.

Milne Fruit is one of EnWave’s largest customers. In fact, more than 50 consumer products on the market today already use its ingredients.

Up until a few weeks ago, Milne produced all these products on a large scale commercial dryer. Then, early August a new 120kW quantaREV dryer was commissioned, which significantly expanded the company’s processing capacity. With its new commitment to buy additional machinery, Milne has indicated that the demand for its REV dried fruits continues to grow.

Third Quarter Financials and Balance Sheet

EnWave generates revenue from two business segments: EnWave Canada and NutraDried. EnWave Canada sells REV machinery to royalty partners, rents REV units to prospective royalty partners, and earns royalties from customers that sell REV dried products. NutraDried, on the other hand, sells Moon Cheese snacks into retail and wholesale distribution channels.

Three Months Ended
June 30
Nine Months Ended
June 30
Amounts in $000’s
Net Sales
Direct Costs
Net Income (Loss)
Earnings (Loss) Per Share
Selected income statement data for the quarters and nine months ended June 30, 2017 and June 30, 2016. Source: Company Filing

EnWave Canada had revenue of $2.79 million for the three months ended June 30, 2017 compared to $3.49 million for the three months ended June 30, 2016, a decrease of $.70 million. As noted above, the decrease in revenue is due to lower machine purchase orders.

As for the nine months ended June 30, 2017 EnWave Canada had revenue of $7.78 million, compared to $7.56 million for the nine months ended June 30, 2016, an increase of $.22 million. The increase in revenues for the nine months ended June 30, 2017 relative to June 30, 2016 was driven by an increase in equipment rental fees earned from companies evaluating the use of REV technology under TELOAs.

It is worth noting that EnWave Canada earned royalties of $293 thousand during the nine months ended June 30, 2017 compared to $186 thousand for the nine months ended June 30, 2016. EnWave Canada earned royalties of $94 thousand during three months ended June 30, 2017 compared to $75 thousand for the three months ended June 30, 2016.

The increase in royalty revenues is due to EnWave’s royalty partners’ advancing the commercialization of REV products in the marketplace, as well as the payment of minimum royalties under the terms of the license agreements. These royalties are expected to increase dramatically over the coming years as additional REV machinery orders, for example from Ereğli Agrosan, Bonduelle, Pitalia, and many others are taken into operation.

Revenue from NutraDried was $1.89 million for the three months ended June 30, 2017 compared to $1.73 million for the three months ended June 30, 2016. Revenue from NutraDried was $4.55 million for the nine months ended June 30, 2017 compared to $4.86 million for the nine months ended June 30, 2016.

Results from NutraDried for the third quarter, and especially the nine months; were negatively impacted by slow transition of the customer accounts from Spire Brands to NutraDried. Remember that in December of last year, Spire Brands, the former master distributor of Moon Cheese, was replaced by Slant Design. Spire was reluctant to turn over all the necessary information, which disrupted the consistency of Moon Cheese orders. This situation was rectified in the third quarter.

Meanwhile, Slant has expanded the distribution of the dried cheese snack into 2,000 Rite Aid pharmacy stores, 1,600 CVS stores, and 440 Targets in the United States. All in all, Moon Cheese in now available in over 20,000 stores in the U.S. and Canada.

Amounts in $000’s
June 30, 2017
June 30, 2016
Cash and Cash Equivalents
Restricted Cash
Trade Receivable
Due from Customers on Contract
Total Current Assets
Property and Equipment
Intangible Assets
Total Assets
Accounts Payable
Total Current Liabilities
Long Term Debt
Total Liabilities
Total Stockholder Equity
Selected balance sheet data for the periods ended June 30, 2017 and June 30, 2016. Source: Company Filing

On June 30, 2017, the Company had working capital of $6.96 million, compared to $7.93 million on June 30, 2016. Also on June 30, 2017 the cash and cash equivalents balance was $2.21 million compared to $5.73 million on June 30, 2016, a decrease of $3.52 million.

However, Trade receivables, Due from customers on contract, and inventory increased by $1.19 million, $.69 million, and $.86 million respectively compared to the previous year. These increases were all related to EnWave’s higher machine production number.

Additional Exposure In Canada

In other news, EnWave hired Adelaide Capital Markets (ACM) to provide investor relations and corporate development services for the Company.

ACM’s President, Ms. Deborah Honig, the president of ACM, has extensive experience working in the Canadian capital markets. As such, the main goal is to introduce the Company to ACM’s institutional investor network in Canada.


The constantly growing number of TELOAs, commercial agreements and machine purchase orders help to build a strong and prosperous future for EnWave. In addition, the higher number of commercial machines is beneficial for EnWave’s royalty income.

As for NutraDried, the transition from Spire to Slant is now complete. This should be positive for both sales and margins.

In addition, several important milestones are ahead. To name two, we could hear more about the cooperation with the US Army Natick Soldier R&D Center to jointly develop low weight, high quality, nutritious field rations for the U.S. and/or about the startup of the powderREV machine at Sutro Biopharma. Success in either one of these cases would be a major event for EnWave. Recommendation BUY.

For important disclosures, please read our disclaimer.Latest Company Report (pdf)

  • What I don’t understand is the limited growth in royalties earned: 293000 over 9 month.

    If I calculate the royalties from the sources below, I come to a current royalty stream that should be somewere between 2,4 and 4,8 million a year. The only explanation I can think of is that the REV machines are far away from full utilization. Or does you have anonther explanation?

    – Q3 statement:
    EnWave Canada earned royalties of $293 during nine months ended June 30, 2017 compared to $186 for the nine months ended June 30, 2016.
    – corporate presentation:
    1200 kW installed REV

    – Smallcap.us:
    A 100kW machine sells on average for $1.5 million and generates between $200,000 and $400,000 in royalties per year at full utilization.

    Please give some explanation.

    • John Peters (editor)

      First of all, thank you all for your feedback and comments. Keep them coming.

      Let me do my best to clarify a few things.

      First of all, EnWave’s third quarter was a positive one for the following reasons:

      NutraDried sales (Moon Cheese) were $1.887 million, up 9% versus Q3 2016
      Equipment rental fees were $334 thousand, up 79% versus Q3 2016
      Royalties were $94 thousand, up 25% versus Q3 2016 (see below)

      Only sales of REV dryers were down in the third quarter. $2.359 million versus $3.230 million in Q3 2016. This will always be a lumpy part of total revenues as the timing of orders and delivery of machinery is hard to control. Remember that EnWave gets paid when machines are under construction and at delivery.

      In addition there is $2.778 million “due from customers” on the balance sheet. This is work performed on equipment construction contracts where revenue has been recognized; however, the amounts are still to be invoiced to the customer.

      As for the Company’s royalties, they are most certainly moving in the right direction. First, although lots of REV capacity has already been installed, most of the current royalties are derived from two parties only, NutraDried and Milne Fruit.

      In the past nine months NutraDried contributed $217 thousand in royalties. Note that NutraDried sales, and as such royalties, are picking up speed as Slant has taken over the distribution from Spire. Also important is that the NutraDried royalty is NOT included in the regular royalties that are announced because they are considered an intercompany transaction, and as such eliminated upon consolidation from revenue.

      Excluding NutraDried, $293 thousand in royalties has been received in the first nine months of 2017. The most significant products that we know of that have been on the market for a considerable time are Milne’s. As mentioned, more than 50 consumer products on the market today already use its ingredients.

      The other royalty partners have either small 10kW machines, which are generating smaller royalties, or they have not yet started generating meaningful sales. Bonduelle and Ereğli Agrosan, for example, are in the process of starting commercial production on their full scale dryer. We expect royalties to kick in shortly from those two. Also, Milne’s second 120kW quantaREV dryer was commissioned early August, which will be an additional source of royalties. Also Gay Lea and Van Dyk will start contributing to royalties later this year.

      So based on the first nine months of FY 2017, EnWave will have close to $700 thousand in royalties this year. Next FY that number could easily reach $1.5 million. A number that goes straight to the bottom line!

      I hope this is helpful.



  • What surprises me is the low number of royalties received. I’ve read here that a 100 kW machine generates $ 200,000 – $ 400,000 a year. So why is it that the 9-months royalties is just $ 293,000?
    Bonduelle alone has a 120 kW machine and it has been updated to double production.
    In the corporate presentation they mention 1200 kW installed REV. So why the low number of royalties?
    Am I missing something?

  • When the company states that the lower than expect orders for REV machinery are attributed to decreased revenues, what are they saying? Are they saying that previous orders for machinery have been cancelled? When machinery is ordered is Enwave providing projections or guidance towards what the future revenue stream should look like; what it will do to the bottom line; whether or not they’re achieve their business objectives
    I’m approaching this with some degree of skepticism.

  • John,

    Thanks for the informative breakdown. It’s clear to see that there are a lot of irons in the fire and ENW is starting to show a lot of positive momentum. I believe those who do their due diligence and have foresight will be rewarded. It’s an exciting stock to hold when even one “milestone” payment from a project could have drastically changed a quarterly financial. Good luck to all.

  • Thanks a lot John for your reply!!!

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