Earnings call transcript: EnWave Corp sees 456% revenue rise in Q2 2025

EnWave Corporation reported a significant revenue increase for the second quarter of fiscal year 2025, with a 456% rise year-over-year, reaching $3.7 million. The net income stood at $764,000, marking a substantial recovery from previous losses. According to InvestingPro analysis, the company maintains strong financial health with an impressive current ratio of 17.24, indicating robust liquidity. Despite the positive financial performance, EnWave’s stock saw a slight decline of 2.11%, closing at $0.19. The company remains optimistic about future growth, particularly in the food and pharmaceutical sectors.

Key Takeaways

• EnWave’s Q2 2025 revenue increased by 456% to $3.7 million.
• Net income reached $764,000, with a notable improvement in adjusted EBITDA.
• The company sold multiple large-scale REV machines, boosting its market presence.
• EnWave’s stock price fell by 2.11% following the earnings release.
• Strong growth prospects in food and pharmaceutical markets.

Company Performance

EnWave Corporation demonstrated robust performance in Q2 2025, driven by increased sales of its Radiant Energy Vacuum (REV) machines. The company reported a significant revenue increase compared to the same period last year, reflecting strong demand for its innovative dehydration technology. InvestingPro data reveals the company holds more cash than debt on its balance sheet, with a minimal debt-to-equity ratio of 0.01. EnWave’s strategic focus on expanding its international presence and tapping into the pharmaceutical market is expected to bolster future growth. Get detailed insights and 8 additional ProTips with an InvestingPro subscription.

Financial Highlights

• Revenue: $3.7 million (up 456% YoY)
• Net Income: $764,000
• Adjusted EBITDA: $112,000 (improved from -$1.3 million)
• Gross Margins: 33%
• Cash and Cash Equivalents: $3.8 million
• Net Working Capital Surplus: $7.9 million

Outlook & Guidance

EnWave projects continued royalty growth and aims to sell at least four large-scale REV machines in fiscal year 2025. InvestingPro analysis indicates the stock is currently trading below its Fair Value, suggesting potential upside opportunity. The company is exploring opportunities in the pharmaceutical sector, with ongoing evaluations and trials that could lead to new revenue streams. With a strong return over the last month and a 20.63% price gain over the past six months, the guidance suggests a focus on increasing sales and expanding market reach.

Executive Commentary

CEO Brent Charlton emphasized the importance of machine sales for achieving profitability, stating, "EnWave needs to sell and deliver four large scale machines a year with the current trailing twelve month royalty run rate to breakeven." He also highlighted the positive impact of consumer trends on REV technology adoption, noting, "Consumer trends continue to support the use of REV technology."

Risks and Challenges

• Dependence on machine sales for profitability.
• Potential supply chain disruptions affecting production.
• Market competition in the dehydration technology sector.
• Regulatory challenges in expanding into the pharmaceutical market.
• Economic factors influencing customer investment decisions.

EnWave’s performance in Q2 2025 reflects its strategic efforts to capitalize on market demand for innovative food and pharmaceutical solutions. The company’s focus on expanding its machine sales and international presence positions it well for future growth, despite facing some challenges in a competitive and evolving market landscape.

Full transcript - EnWave Corp (ENW) Q2 2025:

Operator: Good morning, and welcome to EnWave Corporation’s Q2 twenty twenty five Earnings Conference Call. My name is Kevin, and I’ll be your operator for today’s call. Joining us for today’s presentation are the company’s President and CEO, Brent Charlton and Dylan Murray, EnWave’s CFO. As a reminder, all participants are in a listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.

Finally, I’d like to remind everyone that this call will be made available for replay via a link in the Investor Relations section of the company’s website at www.enwave.net. Now I’d like to turn the call over to EnWave’s CEO, Mr. Brent Charlton. Brent, please go ahead.

Brent Charlton, President and CEO, EnWave Corporation: Thanks very much, and good morning to everyone who has joined us today for EnWave’s Q2 fiscal twenty twenty five quarterly conference call. We had a great quarter, and I’m excited to speak more on our future expectations and the wins we’ve already announced. And as always, the information we will present today contains forward looking information that is based on our management’s expectations, estimates and projections. Our statements are not a guarantee of future performance and involve a number of risks, uncertainties and assumptions. Please consider the risk factors in the filings made by EnWave on SEDAR when reviewing this information.

Also, all amounts discussed today will be in Canadian dollars unless otherwise noted. EnWave’s second quarter fiscal twenty twenty five performance was an improvement from our first quarter and materially better year over year. We reported revenue of $3,700,000 and $112,000 in adjusted EBITDA. We reported net income of $764,000 mainly due to an employee retention tax credit payment received from the U. S.

Government regarding our former operating subsidiary. Overall, a very solid quarter. Gross margins also remained strong at 33%. Now as we continue to build EnWave’s business, I encourage stakeholders to monitor two critical metrics. The first is third party royalties and the second being the number of large scale radiant energy vacuum or REV for short machines that we sell.

In Q2, our third party royalties grew to $474,000 up 14% from the prior quarter and the largest base royalties for any quarter historically. We expect royalties to continue to grow in coming quarters due to increased average capacity utilization for deployed REV machinery and additional REV machine sales that we complete. Up to the date of this call, we’ve confirmed two large scale REV machines this fiscal year. The first, a 120 kilowatt to be delivered to our Mexican royalty partner process here in July for the production of fruit and vegetable products and the second, a 60 kilowatt machine sold to Microdried to increase their manufacturing capacity to four large scale REV manufacturing lines. Microdryde is EnWave’s longest standing royalty partner and has seen great growth in their business recently.

Current U. S. Tariffs have actually helped their business as importers of foreign food ingredients have been hit, creating a situation where many large food companies are looking for new domestic supply of ingredients. EnWave needs to sell and deliver four large scale machines a year with the current trailing twelve month royalty run rate to breakeven. Each additional REV machine sale above this minimum and any incremental increases in royalties collected will lead to profitability for our business.

This also assumes that we keep our current G and A expense structure within its current range, which we intend to do. And as stated in times past, we have current capacity to produce up to 10 large scale REV machines per year. Our operating leverage has the potential of increasing materially as each incremental large scale REV machine sale occurs beyond the first four sold each year. In Q2 and up to the date of this call, we had several material commercial announcements. As discussed moments ago, we sold a large scale REV machine to Microdryd and consummated the sale of 120 kilowatt unit to process here.

We also sold 10 kilowatt REV machines to both Spreaded Proteins of Peru and Hokkaida Yamamote of Japan. We signed four license amendments to allow higher REV machine capacity utilization by several royalty partners, including Creations Foods more recently for Pet Treats in The U. S, Patatus Fritas Of Spain for high protein snack items, and we granted Branch Out Foods the exclusivity for blueberries in Peru in exchange for a higher minimum annual royalty, and also granted processing exclusivity for Apple products to Microdried for the states of Washington, Idaho and Oregon. Further, a technology evaluation and license option agreement was signed with Solve Solutions of Brazil and a master service agreement with BioTechnique of The U. S.

For the continued evaluation of REV technology as a viable drying platform for biopharmaceutical products. Of note, Solve Solutions is a well capitalized firm that intends to make a go no go decision to enter into a royalty bearing license and buy REV equipment within this fiscal year. Now Solve Solutions is one of many companies currently pipeline for fiscal year twenty twenty five. We are setting ourselves up to meet the four machine minimum target within the year as we’ve begun to build a 60 kilowatt rev machine for inventory and have opportunistically recently agreed to buy back 120 kilowatt rev machine from cannabis company. As we’ve done in years past with other cannabis companies, our intent is to refurbish this 120 kilowatt machine and resell the unit good as new as soon as possible to a more reliable royalty partner in the food industry.

This prospective transaction should yield a margin consistent with new machine sales. Now our efforts to continue bolstering our sales pipeline has also increased. In the past quarter, we successfully hired a new European business development manager, onboarded her and now have her actively hunting new leads, leveraging her existing network and attending trade shows. Our existing sales leadership led by Dana Dunnage have also been extremely active, attending Natural Products Expo West, the North American Pet Food Forum and participating in a federal government trade mission to Australia. Further, we are scheduled to attend the upcoming IFT trade show in Chicago and Supply Side West later in this year.

Now over the past two quarters, we’ve seen an increasing demand for many household name food companies to procure new innovative snack items as well as the demand for healthier ingredients for flavor and color purposes. Consumer trends continue to support the use of REV technology and the recent more strict rules being enforced by HHS in The U. S. Has also stimulated more timely transitions from artificial to natural ingredients across the food manufacturing ecosystem. In many of these interactions, these blue chip companies have made it clear they don’t intend to invest in CapEx to produce these products internally, but rather prefer to buy from our existing royalty partners who act as co manufacturers in the food industry supply chain.

This is a huge opportunity for EnWave as the potential volume requirements are massive and could drive numerous new large scale REV machine sales to existing partners. Our two most recent large scale sales are examples of this scenario. Lastly, RevWorks’ toll manufacturing business was quite busy in Q2, generating $140,000 in revenue for the quarter and $259,000 year to date. We are expecting additional contracts for RevWorks in the coming months regarding four specific projects in negotiation currently. RevWorks continues to be a phenomenal showroom for our tech and a critical sales tool used to derisk adoption.

Now with my summarized update complete, I’ll now ask Dylan to summarize EnWave’s detailed quarterly financial performance. Dylan?

Dylan Murray, CFO, EnWave Corporation: Thanks, Brent. Good morning, everyone, and thank you for joining us today. Please note that the figures I’ll be discussing can be found in our press release from yesterday and in the financial statements and MD and A filed on SEDAR, and all amounts are in Canadian dollars unless otherwise noted. I will make reference to adjusted EBITDA, which is a non IFRS financial measure. So please refer to the non IFRS financial measure disclosure and reconciliation to GAAP net income both in the press release and our MD and A.

Also please note the comparative period I’ll refer to throughout this presentation is the prior year Q2 ended 03/31/2025. Revenues for Q2 were 3,700,000 compared to $700,000 in Q2 twenty twenty four, an increase of $3,000,000 or 456%. The increase was primarily related to a large scale machine sale and the commissioning of two small scale machines during the period. Third party royalty revenue was 4 and $74,000 in Q2 twenty twenty five compared to 4 and $14,000 in the comparative period, an increase of $60,000 or 14%. Royalties grew due to increased royalty partners, product sales and partner production for the quarter.

And as our royalty partners grow their businesses and increase capacity utilization of installed REV equipment, further REV installations will follow from new sales contracts and material royalty growth should continue in the coming quarters. Gross margin for the company in Q2 twenty twenty five was 33% compared to negative 25% in the comparative period. The increase in margin was a result of higher machine sales, royalties and tolling revenue for the quarter. SG and A expenses including R and D were CAD1.4 million for Q2 twenty twenty five and for the comparative period. The company will continue to further invest in sales and marketing activities in the coming quarters.

In April, the company hired another business development manager, Domestalt, in The Netherlands. This new business development manager will play a pivotal role in strengthening the company’s international presence and accelerating growth in the European market. Adjusted EBITDA is a non IFRS financial measure. So please refer to our MD and A for reconciliation from GAAP net income to adjusted EBITDA. The company reported adjusted EBITDA of $112,000 for Q2 twenty twenty five compared to an adjusted EBITDA loss of CAD1.3 million dollars for Q2 twenty twenty four, an improvement of $1,400,000 over the comparative period.

The increase in adjusted EBITDA was driven primarily by a large scale machine sale and the commissioning of two small scale machines, increased royalties and tolling revenue during the period. We finished Q2 twenty twenty five with cash and cash equivalents of $3,800,000 and a net working capital surplus of $7,900,000 as of March 31. EnWave has a credit facility with Desjardins for growth and working capital purposes. The amount available to the company under the credit facility is calculated as the lesser of $5,000,000 and a function of royalties, receivables and inventory. As of the date of our quarterly filings, approximately $1,500,000 is available to the company at a rate of Canadian prime plus 1.5.

The facility remains undrawn to date. The company recognized a USD 8 and 36,000 tax refund for NutraDry during the quarter and discontinued operations. The tax refund was for the employee retention tax credit, which is a refundable tax credit from the United States government for businesses that were affected during the COVID-nineteen pandemic. NutraDried received USD460000 of this ERTC during the quarter. The remaining balance of USD376000 was received subsequent to the quarter and is recognized in prepaid and other receivables at March 31.

The company does not expect to receive any additional tax refunds or credits related to NutraDry going forward. Subsequent to the quarter, the company commenced manufacturing of two large scale 60 kilowatt machines as Brent indicated. One of the machines as announced in April was sold to MicroDrive. The second sixty kilowatt is being manufactured anticipation of a future machine order. Additionally and subsequent to the quarter, the company repurchased a 10 kilowatt machine and 120 kilowatt machine from an Illinois U.

S.-based Cannabis company. This transaction along with the manufacturing of a second sixty kilowatt machine on spec, increases inventory levels and strengthens the company’s position to deliver on partnership opportunities, explaining the fulfillment and revenue recognition of prospective machine sales.

Brent Charlton, President and CEO, EnWave Corporation: Thanks, Dylan. With that, I’d like now to open the call for your questions. Operator, please provide the appropriate instructions.

Operator: Thank you. If there are any outstanding questions at the end of the call, the company will be happy to take them by e mail at irnwave dot net. One moment please while we poll for questions. We reached the end of our question and answer session. I’d like to turn the floor back over to Brent Charleson, CEO, for closing remarks.

Brent Charlton, President and CEO, EnWave Corporation: Thanks so much. I did receive one question via email prior to the call, which I’ll address right now. And the question was, why were there no exclusivity related royalties paid for Q2? And the simple answer there is that the majority of our exclusivity top up royalty payments, this is when a company has a minimum royalty to pay the EnWave to retain their exclusive rights over the technology for a certain product in a certain geography, are typically paid in Q1, so the end of each calendar year. And that’s why we tend to see a top up during that time.

Last year, we had another contract being signed where exclusivity payment was made to retain the rights to potentially operate in a separate country by one of our current royalty partners, and that was completed in Q3. So we do expect the payment to occur in Q3 of sorry, Q4, excuse me, of this year, as well as Q1 as we’ve had exclusivity payments in times past. And I don’t see any other question. I see one just came in. What about the pharmaceutical front?

So that’s quite a broad question. But in short, we continue to operate our joint partnership with GEA Lyophil, who are domiciled in Germany and have purchased a pilot scale unit from EnWave to showcase to their large scale pharma company partners. There are several different evaluations ongoing to date with the hope that GEA can attract a consortium or a single pharmaceutical company to make a material investment in the scale up of a continuous GMP certified vacuum microwave dryer to displace lyophilization. That takes not only the investment in the CapEx, but it also takes a commitment on the pharmaceutical company side to identify a drug under development to take through that process using vacuum microwave as the core drying platform. Concurrent to that work, we announced the master service agreement with BioTechnique, who in fact were at our facilities this past week, doing a number of trials with a derivative of a flu vaccination.

And the results on first glance have been very favorable. So now those results will then be shared with BioTechnique’s client. And if that client decides to move forward with this project, the likely next step would be for BioTechnique to look at purchasing their own pilot scale equipment to have at their facility to continue the trials. That is the current status of, EnWave’s participation in the pharmaceutical industry. And I’ll wait ten seconds more to see if any other questions come in or dial in questions come up.

Okay. And seeing none, I’d like to thank everybody for joining the call today. As stated by the operator, if you do have questions, please feel free to follow-up to discuss with either Dylan or myself. Thanks, everybody. Have a great weekend.

Cheers.

Operator: Thank you for joining us today for EnWave’s Q2 twenty twenty five earnings conference call. At this time, you may now disconnect.

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