Earnings call transcript: EnWave’s Q3 2025 sees revenue rise, stock dips

EnWave Corporation reported a 5% increase in Q3 2025 revenues, reaching $2.75 million. The company’s gross margin dropped significantly to 19% from 44% the previous year, contributing to a negative adjusted EBITDA of $570,000. Following the earnings call, EnWave’s stock experienced a 1.63% decline, closing at $0.246. According to InvestingPro data, the company maintains a strong financial health score of 3.22 (rated as "GREAT"), despite current challenges. The company anticipates revenue acceleration in Q4 and superior machine sales in fiscal 2026.

Key Takeaways

• Q3 revenues increased by 5% year-over-year.
• Gross margin fell to 19%, impacting profitability.
• Stock price declined by 1.63% post-earnings.
• EnWave is expanding its sales team and trade show presence.
• Revenue acceleration is expected in Q4 2025.

Company Performance

EnWave Corporation’s Q3 2025 performance showed a mixed picture. While revenues increased by 5% year-over-year, reaching $2.75 million, the significant drop in gross margin to 19% from 44% last year raised concerns. The company reported a negative adjusted EBITDA of $570,000, compared to a positive $85,000 in the previous year. InvestingPro analysis reveals the company holds more cash than debt on its balance sheet, with a remarkable current ratio of 23.94x, indicating strong liquidity. Despite these challenges, EnWave is focusing on expanding its market presence and targeting improved machine sales performance in fiscal 2026.

Financial Highlights

• Revenue: $2.75 million, a 5% increase year-over-year
• Gross Margin: 19%, down from 44% last year
• Adjusted EBITDA: -$570,000, compared to +$85,000 last year
• Cash and Equivalents: $4.6 million
• Net Working Capital Surplus: $7 million

Outlook & Guidance

EnWave is optimistic about its future prospects, anticipating revenue acceleration in Q4 2025. The company is targeting superior machine sales in fiscal 2026 and expects continued royalty growth from existing partners. EnWave is also expanding its geographic reach, focusing on Europe, Australia, South America, Japan, North America, and Northern Africa.

Executive Commentary

Brent Charlton, CEO of EnWave, emphasized the company’s strong capitalization for the commercialization of its REV technology. He noted, "Our sales pipeline is far more expansive than these opportunities," highlighting the potential for growth. Charlton also expressed confidence in continued royalty growth from existing partners.

Risks and Challenges

• Declining gross margins could affect profitability.
• Market integration and product positioning pose challenges.
• Management changes may impact strategic direction.
• Competition in the drying technology sector is intensifying.
• Economic uncertainties could affect demand in key markets.

Q&A

During the earnings call, analysts inquired about the potential acceleration in REV machine sales. EnWave confirmed expectations of increased sales, with 50% of opportunities coming from existing royalty partners expanding capacity. Another key question addressed the biggest obstacles to growth, to which EnWave responded that challenges include management changes, product positioning, and market integration. For deeper insights into EnWave’s growth potential and comprehensive analysis, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 US equities with expert analysis and actionable intelligence.

Full transcript - EnWave Corp (ENW) Q3 2025:

Conference Operator: Greetings, and welcome to the EnWave Corporation Q3 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It’s now my pleasure to turn the call over to CEO, Brent Charlton.

Please go ahead.

Brent Charlton, CEO, EnWave Corporation: Thanks very much, and good morning to everyone who has joined us today for EnWave’s Q3 fiscal twenty twenty five quarterly conference call. We are pleased with the performance in Q3 with modest improvements year over year and consistent revenue quarter to quarter as a result of the initial manufacturing and fabrication of two sixty kilowatt machines during the period. Thus far in Q4, we have continued to expedite the completion of these 60 kilowatt machines for our royalty partner Microdryd, and we’re likely to recognize many 10 kilowatt units that are planned for commissioning prior to September 30. Further, we are optimistic regarding additional REV equipment purchase orders, which I’ll discuss in more detail momentarily. 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 third quarter was solid and we anticipate improvement in Q4 if we were able to transact on a large scale rev machine opportunity that we are currently negotiating. Given that we’ve already begun the fabrication of a 100 kilowatt Nutrev machine and have bought back 120 kilowatt Quantrev unit from a U.

S. Cannabis company, which has already been refurbished to good as new, there is an opportunity to recognize material revenue in Q4 if we sell these machines. Additionally, we continue the manufacturing and fabrication process as I just spoke about for each of the 60 kilowatt machines on order for Microdried and are scheduled to commission up to five ten kilowatt machines before September 30. Our revenues in Q3 were $2,750,000 up 5% year over year. Royalties were flat year over year due to the termination of The U.

S. Cannabis partner license, offset by growth in royalties from other partners. We expect continued royalty growth from existing partners through Q4 and throughout fiscal year twenty twenty six. Our gross margin was slightly down in the quarter, tied to a bulk discount applied to the MicroDrive purchase of two sixty kilowatt machines for their new dairy processing facility, and we expect gross margins to rebound in coming quarters. Year to date financial metrics, including revenue, royalties and margin generally improved compared year over year.

In Q3 and to the date of this call, we confirmed the purchase of the two sixty kilowatt QuantRev machines and two ten kilowatt REV machines by Microdried, Enliv’s most material royalty partner. And Microdried intends to expand their fruit and vegetable production capacity as well as initiate the production of numerous REV dried dairy applications at a second REV drying facility being built out in Washington State currently. Additionally, the 120 kilowatt QuantiRev unit to ProseSir of Mexico has now been delivered and is expected to be commissioned this month for immediate commercial production. ProseSir signed a supply agreement with a leading U. S.

Snack company that initially requires 60% to 70% of the annual capacity from their new 120 kilowatt line. But we believe the supply arrangement could expand to need more than a single 120 kilowatt machine capacity in 2026. During Q3, we also signed several license agreement amendments with Microdried, Proseccier and Creations Foods respectively. The amendment with Creations Foods allows for the production of cheese snacks made from block cheese to now be produced as pet treats. The amendment signed with ProseSierra allows for the expanded production of a number of new fruits and vegetables in Mexico for their clients.

And lastly, the amendment signed with MicroDried grants the exclusive production rights for Apple products in Washington State, Idaho and Oregon in exchange for meeting new and incremental minimum royalty payment requirements. MicroDried also signed that new license with the rights to produce a number of new dairy products at that facility in Washington State, and this license has standalone minimum royalty requirements for each product application category licensed. Subsequent to Q3, we sold two additional 10 kilowatt REV machines to Dairy Concepts Ireland. They will now operate six ten kilowatt units for the production of their premium cheese snack SKUs. Dairy Concepts has had tremendous recent success in Marks and Spencer, the largest retail chain in The UK and have won additional material distribution with several other leading grocery and convenience store chains in Europe.

In Q3, RevWorks continued to service a major U. S. Snacking company, producing a significant volume of natural fruit snacks for expanded commercialization. We expect this tool manufacturing relationship to grow in coming quarters as the continued rollout by The U. S.

Snack company evolves. We are developing new opportunities for RevWorks with ingredient and snack companies in North America with three companies considering production in 2026. RevWorks continues to be an important sales tool for our team, allowing them to showcase large scale REV technology. To date, this fiscal year, we’ve confirmed three large scale REV machines and six ten kilowatt units. We’re currently negotiating with four counterparties regarding potential near term large scale REV machine purchases.

Now our sales pipeline is far more expansive than these opportunities with our growing sales team actively cold calling new prospects, attending multiple international food technology trade shows, triggering outbound email sales sequences and cultivating our relationships with current royalty partners to help them plan for manufacturing capacity expansion. We are targeting superior machine sales performance in fiscal year twenty twenty six, both in the number of large scale units and 10 kilowatt sales. And of these prospective sales, we anticipate at least half of these potential orders to come from existing royalty partners. In regards to market verticals in which we see the most promise for growth, fruit and vegetables, dairy, pet food, alternative protein, meat snacks, baked good applications continue to dominate our opportunities. Geographically, our new hire in Europe has sourced several high potential projects.

I’m excited to get over there in September to support her by attending PPMA in The UK, the trade show forthcoming. Moreover, we’ve sourced several legitimate projects in Australia recently, ongoing deals in South America, Japan, North America and a new territory for us, Northern Africa in recent months. This summer, we attended the IFT trade show in Chicago and most recently the AIFST conference in Australia, which both yielded new prospects for conversion in fiscal year twenty twenty six. Forthcoming, we are attending, as I mentioned, PPMA in The U. K.

And then FoodTech in Mexico, SupplySite Global in October and PLMA in Vegas during November. Our successful fully subscribed $3,000,000 life offering closed yesterday, enabling the manufacture of two large scale REV machines for our inventory and will allow us to deploy large scale machinery more expeditiously. It takes us about six months to build large scale REV equipment, prolonging revenue recognition if machines aren’t ready made for sale. This capital raise was not a necessity for EnWave, but it’s advantageous to support faster potential growth of our royalty base given our robust sales pipeline. We are very pleased with the result of our Life private placement and the support of Clara Securities throughout the process by attracting new Canadian institutions to become shareholders, all of which have communicated their intent to be long term investors.

On the Investor Relations front, we are confirmed to participate at the Small Caps Discoveries Conference in Vancouver in October as well as the CanTech Conference and the MicroCap Club Conference in Toronto, both in September and October, respectively. And overall, I’m very excited about our growth prospects. We’re well capitalized for commercialization of REV technology should accelerate and the majority of our current royalty partners are making positive advancements. If we execute operationally by closing these sales, the cadence and number of machine transactions should elevate our financial performance in coming quarters. Now with my summarized update complete, I’ll now ask Dylan to summarize EnWave’s detailed quarterly financial performance.

Dylan, Financial Officer, 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 disclosures and reconciliation to GAAP net income both in the press release and in our MD and A.

Also please note that the comparative period I’ll refer to throughout this presentation is the prior year Q3 ended 06/30/2024. Revenues for Q3 were $2,700,000 compared to $2,600,000 in Q2 twenty twenty four, an increase of CAD122K or 5%. And during the period, there was the completed fabrication of a large scale 120 kilowatt REV machine for process here of Mexico and the initial fabrication of two sixty kilowatt REV machines sold to MicroDrive, and Wave’s longest standing royalty partner. There were no 10 kilowatt sales recognized in Q3 twenty twenty five. Revenue from the sale of small scale 10 kilowatt machines is recognized at a point in time, which is generally upon machine commissioning at the partner’s facility.

There are currently five ten kilowatts, one to Hokkai Yamato, two to MicroDrive, two to Dairy Concepts that are in the process of being delivered and on track to be commissioned by the end of the fiscal year. During the quarter, EnWave bought back 120 kilowatt machine from an Illinois U. S.-based cannabis company that is recognized in inventory at June 30. As the fabrication of this machine has been completed, most of the associated revenue will be recognized upon the sale of the machine. Third party royalty revenue was 4 and $31,000 in Q3 twenty twenty five compared to $425,000 in the comparative period, an increase of $6,000 or 1%.

And royalties grew due to the increased number of royalty partners and the expansion of both product sales and REV machine capacity utilization for the quarter, offset by a decrease in royalties associated with the license termination and machinery buyback from the Illinois U. S.-based cannabis company during the period. And for the nine months ended June 30, third party royalty revenue was $1,500,000 an increase of $145,000 or 11% relative to the comparative period in the prior year. 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 Q3 twenty twenty five was 19% compared to 44% in the comparative period.

The decrease in margin was primarily a result of the production sales mix, particularly the absence of 10 kilowatt sales during the quarter and a high margin large scale machinery sale in the comparative period. Additionally, a bulk discount was given to MicroDrive on the two sixty kilowatt large scale machines. SG and A expenses, including R and D, were $1,400,000 for Q3 twenty twenty five, an increase of $40,000 from the comparative period, with the increase primarily related to sales personnel, increased trade show attendance and the timing of patent maintenance fees, offset by a decrease in legal fees. The company will continue to further invest in sales and marketing activities in the coming quarters. Adjusted EBITDA is a non IFRS financial measure, so please refer to our MD and A for the reconciliation from GAAP net income to adjusted EBITDA.

The company reported an adjusted EBITDA loss of 5 and $70,000 for Q3 twenty twenty five compared to an adjusted EBITDA of $85,000 for Q3 twenty twenty four, a decrease of 6 and $60,000 over the comparative period. The decrease in adjusted EBITDA is primarily attributable to the resale of a high margin large scale machine in the comparative period and the absence of small scale machine sales in Q3 twenty twenty five compared to two that were in Q3 twenty twenty four. And we finished Q3 twenty twenty five with cash and cash equivalents of $4,600,000 and a net working capital surplus of $7,000,000 as of June 30. EnWave has a credit facility with Desjardins for growth and working capital purposes and the amount available to the company under the credit facility is calculated as a lesser of CAD5 million and a function of royalties, receivables and inventory. As of the date of our quarterly filings, approximately CAD2.1 million is available to the company at a rate of Canadian prime plus 1.5% and the facility remains undrawn to date.

Subsequent to the quarter, the company entered into an agreement with Clarus Securities as lead agent and sole book runner pursuant to which Clarus agreed to sell on the best efforts private placement basis up to 7,500,000.0 common shares of the company at a price per share of $0.40 for aggregate gross proceeds to the company of up to $3,000,000 The offering closed yesterday, August twenty one and was fully subscribed. The company intends to use the funds to increase inventory levels by manufacturing two large scale machines. The manufacturing and fabrication process takes approximately six months per machine to complete. This investment combined with an expanded marketing presence through increased trade show attendance and sales personnel is designed to ensure faster order fulfillment and support prospective future machine sales. And additionally, as the amount available to the company under its credit facility with Desjardins is calculated as lesser $5,000,000 in a function of royalties receivables and inventory, the company expects that additional credit facility availability will be unlocked on completion of the offering and the manufacturing of two large scale machines, further bolstering the company’s ability to accelerate growth while providing flexibility to optimize its capital structure as appropriate.

With our cash on hand as of June 30, together with the recently completed private placement and anticipated expanded amount available under the company’s Desjardins credit facility, we believe EnWave is well capitalized to accelerate the execution of its strategic growth initiatives given the current opportunity pipeline. And finally, subsequent to the quarter, the company signed a new lease agreement at sixteen thirty nine Foster’s Way to be used for machine manufacturing. The manufacturing lease is closer to the company’s head office and concurrently the company signed a termination agreement for its existing manufacturing facility. There’s no change to machine manufacturing capacity or capability with the new lease.

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

Conference Operator: Certainly. We’ll now be conducting a question and answer session. We’ve reached the end of our question and answer session. I’d to turn the floor back over for any further or closing comments.

Brent Charlton, CEO, EnWave Corporation: Thanks. Thanks, there. There is actually two questions being submitted through the online submission. So I will address those. The first question was, can we expect an acceleration in the sales of REV machines in the near future, either from existing customers or from new customers?

And my answer to that is, yes. My personal expectation is that there will be an acceleration of the sales of REV machines throughout the rest of this quarter and into fiscal twenty twenty six based on the robustness of our sales pipeline. And if we look at the breakdown of that pipeline, about 50% of the opportunities look like they’ll come from existing royalty partners buying additional machines because they’ve exceeded their current manufacturing capacity based on growing market demand for their products. That’s an important thing to consider given that those repeat orders, once those machines are turned on, will likely accelerate royalty growth faster than a new project where that adopter of the technology still has to organize their marketing, gain distribution and slowly integrate their products to market. That’s an exciting position to be in for the company.

And the second question this year, what is the biggest obstacle for achieving faster growth for EnWave? And how is this being addressed? And I’ll respond to that and state that it’s the technology is mature. The economic models have been developed and are attractive enough to commercialize several different products from different market verticals. I wouldn’t say that there’s one specific biggest obstacle.

There’s just a myriad of certain challenges that arise at varying points within a project, whether that be management changeover, restructuring of the counterparties, looking at what type of products that particular company wants to bring to market. Are they more commoditized good company versus a premium product company? And those are all discoveries that take place throughout the dialogue. And so there isn’t one specific obstacle for these projects. It’s moreover just the experience of dealing with these different challenges throughout and working to overcome them quickly to try and convert faster.

Okay. I do not see any other questions submitted at this time. But as always, Dylan and I are available to answer questions offline. I’d like to thank everybody for joining us today on our Q3 fiscal twenty twenty five conference call. You may all now disconnect.

Thank you.

Conference Operator: Thank you. That does conclude today’s teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

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