Food dehydration specialist EnWave Corp [TSXV:ENW / FSE:E4U] reported that its royalties grew CAD 750,000 in Q2 YTD as it published its interim results at the end of last week. This represented a 55% gain in its high margin royalty base on a year-on-year basis.
The company owns proprietary dehydration technology which it leases to food manufacturers as well as companies operating in the cannabis sector. It offers a faster and more economical way to produce dried food products while retaining much higher levels of important nutrients. It also owns dried food brand NutraDried which is now distributed via Walmart in the US.
EnWave reported that NutraDried Q2 revenue was up by 142% relative to Q1.
New food drying facility up and running
EnWave has also been developing its own food drying facility, REVworx, which is now operational and it reported that food safety certifications had been applied for. It leases or sells its REV technology as machines of various levels of capacity to food manufacturers around the world. It reported that it has a robust new royalty partner pipeline with six technology evaluation agreements and many near-term opportunities for large scale machinery scale up with current partners.
EnWave reported consolidated revenue for Q2 2022 of C$6.8, compared to C$4.6m in Q2 2021, an increase of 47%. EnWave’s segment revenue was C$1.4m compared to C$2.34m in Q2 2021, a decrease of 36%. Royalty revenues for Q2 2022 were C$245,000 compared to C$163,000 for Q2 2021, an increase of 51%.
EnWave said it expects to confirm further large-scale orders with royalty partners scaling-up projects in the near future. Machinery related revenue has been historically lumpy and management expects this to continue.
Big wins on proprietary dried food sales
NutraDried’s segment revenue was C$5.3m compared to C$2.3m for Q2 2021, an increase of 126%. In Q2 NutraDried secured a national program for Moon Cheese in Costco Canada, and further expanded its grocery distribution into Kroger; Moon Cheese Crunchy Sticks launched nationally in Canada into Whole Foods Market.
The gross margin for Q2 2022 was 20%, up from 10% for Q2 2021, and down from 43% in Q1 2022. Gross margin in Q2 was downwardly impacted by lower EnWave machine revenue relative to Q1, which was offset partially by growth in higher margin royalty revenues.
EnWave has remained very active over the quarter with the sale of one of its larger 120kW REV machines to its Italian partner, Orto Al Sole, to help it scale up commercial drying of premium fruits and vegetables in Italy. It also advanced its global strategic partnership with Dole Worldwide Food and Beverage Group and placed a second 10kW machine with Dole to accommodate the market trial of its line of products made using EnWave’s technology.
Other key developments in the sale/leasing of the REV machines include a Technology Evaluation and License Option Agreement with GoldenCrops Corporation, a Southeast Asian ingredient manufacturer, to evaluate the potential commercial use of REV technology in producing a variety of fruit, dairy and grain products. The company also installed 10kW REV machine in Spain for Fresh Business to conduct intensive new product development using EnWave’s technology as a new chokepoint for expansion into Western European industries.
