EnWave Corporation

Good morning. Welcome to OnWave Corporation's first quarter 2025 earnings conference call. My name is Robert, 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, OnWave 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. Excuse me. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Finally, I'd like to remind everyone that this call will be made available for replay via a link in the investor relations sections of the company's website at www.onwave.net. Now I'd like to turn the call over to your host, OnWave CEO, Mr. Brent Charlton.

Thanks again to everyone who has joined us today for NWAVE's Q1 fiscal 2025 quarterly conference call. 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 NWAVE on CDAR when reviewing this information. Also, all amounts discussed will be in Canadian dollars unless otherwise noted. NOA's first quarter fiscal 2025 yielded several positive developments, including the continued improvement of third-party royalties paid to the company, which was $559,000 for the quarter, up $80,000 year over year. We had an increased number of RevWorks tolling contracts, which we have continued throughout Q2, and we signed two new license agreements, one with Alea Technology of Germany and the other with Cinta, a research and development center located in Spain. CINTA purchased a 10-kilowatt unit and ALAIA is leasing a 10-kilowatt unit. Further, our gross margin remained strong at 29% and our G&A expenses remained consistent. Lastly, we secured a credit facility with Desjardins Group. The amount available to us under the facility is calculated at the lesser of $5 million and a function of royalties, receivables and inventory. This facility was secured to remain flexible with our growth plans. Dylan will summarize the details of this financial tool later during this call. We also continue to build a 120-kilowatt large-scale radiant energy vacuum, aka REV machine on spec during the quarter, expecting to consummate a transaction to sell this unit in the near term. Given we recognize revenue regarding large-scale REV machine sales on a percentage completion basis, we will immediately record a large sum of revenue once the transaction is finalized. and the majority of our revenue in Q1 came from royalties and total revenue rather than machine sales revenue. Following the end of Q1 and to the date of this call, EnWave also signed five additional agreements, including three license amendments, a 10 kilowatt equipment sale, and a new technology evaluation and license option agreement. The three license amendments broaden the scope of certain product exclusivities granted to branch out foods of Peru, spread of proteins of Peru, and patatas fritas of Spain. Each of the amendments include increased minimum annual royalty payments to be submitted to N-Wave on a go-forward basis. Spreaded Proteins also purchased a 10-kilowatt rev machine and signed a lease to use a second 10-kilowatt unit for their commercialization. The new technology evaluation agreement was signed with Solve Solutions of Brazil for the development and potential commercialization of several high-quality fruit and vegetable applications, both ingredient and snack. We expect a license to be negotiated with Solve Solutions within this fiscal year. In regard to our sales and marketing effort in Q1, our expanding team held numerous meetings qualifying many new leads for our pipeline, and I'm happy to report that we've hired two additional team members in the past quarter, one being a new senior sales manager based in Europe who will begin in early April. We successfully attended four trade shows in the quarter, including Supply Side West in Vegas, Gulf Food in Dubai, Aftia in Singapore, and we also participated in the federal government trade mission to Indonesia and the Philippines. I'm confident that these efforts will lead to new licenses and rev machine sales this fiscal year and beyond. Furthermore, we recently returned from another federal government trade mission into Australia and are scheduled to attend the upcoming National Products Expo West next week in L.A., the pet food forum in april last conference call i stated that we have several imminent large-scale rev machine purchase order decisions now all of those projects are still in play for fiscal 2025 and we feel positive momentum building our redworks business which is our total drying operation was much busier in the second half of fiscal year 2024 and continued through q1 and now into q2 We've been told Ryan primarily a healthy snack product line for a major better for you brand in North America. And these volumes projected by this new RevWorks customer simply put are massive. And we believe there is an opportunity to receive consistent tolling contracts for the foreseeable future. I hope to be able to share more details regarding this emerging opportunity very soon. Royalties are growing. Our margins remain strong and our cash position is around 4 million. And we secured that credit facility with Deja Dan for our growth plans. Our sales pipeline is very full, and RevWorks is reaching its potential. We now need to confirm several of our large-scale rev machine sales opportunities. These material transactions will significantly affect our quarterly performance going forward, and we are all very aware of their importance. And with my summarized update complete, I'll now ask Dylan to summarize NWAVE's detailed quarterly financial performance.

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&A filed on CDAR, 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 gap net income both in the press release and in our MD&A. Also, please note that the comparative period I'll refer to throughout this presentation is the prior year Q1 ended December 31st, 2023. Revenues for Q1 were 1.2 million compared to 1.3 million in Q1 2024, a decrease of 0.1 million or 7%. The decrease was primarily related to reduced equipment construction contract revenue for the period offset by an increase in royalties and tolling revenue. Third party royalty revenue was 559K in Q1 2025 compared to 480K in the comparative period. an increase of 79K or 16%. And royalties grew due to increased royalty partners, product sales, partner production, and exclusivity payments for the quarter. 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. Additionally, the recent license amendments announcements with branch of foods, tapas fritas and sprouted proteins increases the minimum exclusivity royalties to end wave and calendar 2025. Gross margin for the company in Q1 2025 was 29% compared to 18% in the comparative period. The increase in margin a result of higher royalties and tolling revenue for the quarter. SG&A expenses, including R&D, for 1.3 million for Q1 2025 and for the comparative period. There was an increase in sales and marketing activities, primarily related to trade show attendance and Enway's investments in driving new sales leads, offset by the capitalization of term loan and credit facility issuance costs. The company will continue to further invest in sales and marketing activities in the coming quarters. And recently, and as Brent mentioned, the company hired another business development manager, Doma Sald in the Netherlands, who starts work in April. Adjusted EBITDA is a non-apartheid financial measure, so please refer to our MD&A for the reconciliation from GAAP net income to adjusted EBITDA. The company reported an adjusted EBITDA loss of $624K for Q1 2025 compared to an adjusted EBITDA loss of $756K for Q1 2024, an improvement of $132K over the comparative period. The increase in adjusted EBITDA was primarily driven by increased royalties and tolling revenue. And we finished Q1 2025 with cash and cash equivalents of $4 million and a networking capital surplus of 6.8 million as at December 31st. And during the quarter, EnWave entered into 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 million and a function of royalties, receivables, and inventory. And as the date of our quarterly filings, approximately $1.9 million is available to the company at a rate of Canadian Prime plus 1.5%. Additionally, EnWave signed a term loan with Desjardins for 500K with an amortization period of 48 months. The term loan is to be repaid monthly on equal and consecutive payments of principal plus interest at a rate of Canadian prime plus 2%. And this non-dilutive debt, in addition to the company's available working capital, will be used to fund EnWave's growth strategy and for general working capital purposes. In anticipation of a large-scale machine order from an existing partner, the company started the manufacturing of a large-scale machine during the quarter. As of December 31st, the manufacturing of this large-scale machine was approximately 45% complete. And this contributed to the increase in inventory for the period from 2.7 million on September 30th to 2.8 million on December 31st. This machine is expected to be substantially completed by the end of this upcoming quarter.