EnWave Corporation (TSX.V:ENW) is a Canadian technology company with a proprietary edge in the dehydration technology market, providing machines that can help companies in the food, cannabis and pharmaceutical industries to dehydrate products for shipping and storage more quickly, and more cheaply than other methods, while maintaining excellent product quality.
We caught up this month with EnWave’s CEO Brent Charleton on the recent developments at the company.
Radiant Energy Vacuum technology
EnWave’s business hinges on the licensing and sale of its drying machines (Radiant Energy Vacuum – aka REV), which come in different sizes and can be scaled up according to requirements. These are measured in terms of their energy consumption – e.g. EnWave signed a deal in September with one of the largest US multi-state cannabis operators that involved the purchase of a large scale, 120kW REV machine. At the same time it secured a recent deal in Australia for a 10kW machine for cannabis drying.
This is important in that it allows new partners to test the technology using smaller and less expensive hardware first, then progress to larger devices as they increase their reliance on it within their manufacturing processes. These is also a toll manufacturing service available to let companies test the water with REV.
The company’s core business model is to secure multiple, diversified royalty streams through the licensing of its technology – sales of equipment, royalties/licensing fees, equipment rentals and toll manufacturing.
Toll manufacturing and REVworx
Toll manufacturing is worth touching on as it was launched earlier this year: here EnWave is using a new division within the company called REVworx which aims to accelerate the commercialisation of more food products using its technology.
The scheme will use both pilot scale and large scale REV equipment to deliver a fee for service facility. It is intended to complement the current equipment sales and the royalty-licensing business model that EnWave already employs. It also serves as a low barrier to entry for companies that want to trial the technology in their own processes.
Investors should note that the company already has its own wholly-owned subsidiary called NutraDried Food Corp which operates in the US and employs REV technology for the manufacture of dried cheese snacks using two 100kW machines. Its Moon Cheese snacks are sold in over 25,000 locations across the US and Canada at the moment.
The EnWave edge
EnWave is valued in the cannabis sector because of its Terpene Max drying protocol, which offers a fast, gentle drying method that removes moisture homogenously from cannabis at controlled, low temperatures. These are below the point at which decarboxylation occurs, helping to preserve essential terpenes. This can provide cannabis firms with an important competitive edge in production quality.
This is the crux of the EnWave appeal to its customers: the preservation of the quality of the ingredients within the substance being dehydrated for storage and transport, superior to that of other processes.
Progress across all market segments
The EnWave business breaks down into three core distribution sectors – cannabis, food and pharma. According to Charleton, the company is seeing significant growth in all three areas. He reports progress in the pharma space where the company is involved in trials of its technology in the drying of medicines including vaccines.
We asked Charleton about whether the opening up of the global economy in the wake of the pandemic has proven to be a boon. It sounds as if EnWave is already making significant progress in a number of international markets. Australia has been mentioned, but the company is already active in the European pharma space, and has secured a deal with M/S Lalsai Dehy Foods in India which will see the Indian food firm evaluating the REV technology using a 10kW REV machine.
“We’re travelling now and have been, we’re doing face to face meetings, we’re completing deals and we’re completing international installations for the machines,” Charleton says.
He expects to see more large scale orders for the REV technology early next year. He is especially bullish on the prospects for the US cannabis market and expects further US market growth in 2022.
Robust growth projected for 2022
Starting early 2022 Charleton is expecting to see some robust growth with several new deals for large scale REV machines. These include from existing partners who have been road testing the technology and are looking to scale up. While some of these deals have yet to be made public, what is impressive about them is the sheer geographical diversity. The European dried foods sector is starting to look like it will be especially fruitful for EnWave next year.
Another potentially exciting growth market to watch is the dried ramen sector in Japan. EnWave has the scope to make a big difference here in helping with the development of shelf-stable noodle products that have no requirement for cold storage.
Charleton says the company continues to field license requests from companies active in the fruit and veg market, dairy and cannabis. It is working on some very bespoke licensing agreements.
Pea protein isolate is another potentially enormous area for this technology. It is now one of the most common alternatives to dairy and meat products. Often used by athletes and body builders it is also being utilised by makers of alternative meat products.
Regular readers of The Armchair Trader will know that we are already big fans of this space so will be interested to see what progress EnWave can make here. The company is already in discussions with operators in this space to see how it can play a role in the production pipeline for future zero meat and zero dairy alternatives. It is a large and fast expanding area of the food market to be operating in.
Much to look forward to in 2022
EnWave is not standing still, however; the company is also working on making subtle improvements to its technology, making it easier to ship and transport its trademark REV machines. This includes making machines with a more consolidated footprint, which means they can occupy a smaller floor area within the factories where they get sited.
There is much for EnWave shareholders to look forward to in 2022: the company has already stated it has multiple repeat order opportunities, while there is also considerable interest building in its pharma vertical and its GEA Lyophil joint development relationship. Sales of REV machines for 2021 were also well ahead of any of the four previous years by the start of October. YTD (Q3) financial performance in the licensing and royalty business saw net profits and EBITDA well on course to beat its 2020 numbers with revenue also on course to top FY20.
