EnWave Corp (TSX-V:ENW, OTC:NWVCF) is transforming the food manufacturing industry with its innovative dehydration technology, which combines vacuum and microwave energy to dry foods and plants more efficiently and to a higher quality.
The company’s Radiant Energy Vacuum (REV) technology has been successfully commercialized across multiple verticals within the food industry, including dairy, fruit and vegetable, baked goods, meats, seafood, and pet treats.
“We’ve got a very strong competitive positioning, value proposition proven at scale and intellectual property portfolio, and extensive blue-chip adoptees coming in, which is giving us more credibility to accelerate growth in the business,” EnWave’s CEO Brent Charleton told Proactive.
Traditional methods of freeze-drying or air-drying are time-consuming, require far more space, and often deliver underwhelming results.
“We have found two primary solutions to mechanically engineer the even distribution of microwave energy under a large vacuum environment, which is typically quite difficult to do,” Charleton explained.
EnWave’s REV technology is about five times faster than freeze drying and requires up to 30% less space than traditional drying methods, with the end product retaining more nutrients and flavor.
This innovative technology is protected by 18 patents, which Charleton said “create a moat around the commercial viability” of EnWave’s technology.
EnWave has partnered with more than 50 established brands in over 25 countries to deploy its offering, including household names like Dole, Calbee, Gay Lea, and Perdue Farms. The company is also working with the US Army to create shelf-stable military rations, including a cheesecake bar.
“It shows the diversity of the drying technology and the ability to handle with care each ingredient,” Charleton said. “Those more noteworthy names bring more credibility to the technology and the claims that we make regarding the value created.”
Unique licensing royalty model
The company’s unique value proposition allows it to operate on a licensing royalty business model.
EnWave sells its machinery built in Vancouver, British Columbia with a margin on that sale and also collects a royalty in the form of a percentage of gross revenue from the sale of food products or ingredients that are dried using the technology or a fee per pound or kilogram of product produced. For example, for every kilogram of dried pineapple produced, a company could pay EnWave $0.25, Charleton explained.
“We are the only known company to have successfully scaled up vacuum microwave drying to commercial feasibility for large consumer packaged goods companies and that is one of the primary reasons, combined with the value proposition that this platform inherently provides, that we’ve been able to implement the licensing royalty business model,” Charleton said.
“Companies typically don’t pay original machine manufacturers a royalty. They just want to buy the machinery and be done with it but in this business model, it’s more of a partnership.”
Over the past six fiscal years, the company’s been growing its royalty revenue at an approximately 19% compound annual growth rate (CAGR), the CEO highlighted.
In fiscal 2023, EnWave collected $1.5 million in royalties and the company anticipates royalty revenue of approximately $2 million for fiscal 2024, which ended on September 30.
“We’ve seen a good jump in the past year and with confirmed additional large machine installations, there’s an expectation that in fiscal 2025 we’ll see similar growth year-over-year to what we saw between fiscal 2023 and fiscal 2024,” Charleton said.
This is in addition to revenue from sales and rentals, which made up 84% of EnWave’s revenue in fiscal 2023.
Growth prospects across verticals
Charleton sees growth opportunities for EnWave in each of the verticals where it has already established commercial viability.
“What we foresee in terms of growth is many large-scale machine purchase orders in the next 12 months, coming from current partners in the fruit and vegetable space, the dairy space, the pet treat space, the meat snack space, and the baked goods space, in regards to being able to create shelf-stable, variable moisture iterations of your favorite dessert,” he said.
The company is working on blue-sky projects in the pharmaceutical and industrial sectors, but Charleton sees “just so much opportunity” in the food space alone.
EnWave has sold between three and five large-scale machines per year for the past three years, priced in the range of $2 million to $2.5 million each putting revenue at between $10 million to $12 million per year.
Its pipeline for fiscal 2025 is “more robust” than it was for fiscal 2024, Charleton highlighted, with the company hoping to lock in more machine sales than achieved in past years.
“The number of projects that we are targeting to close is way higher and the number of large-scale machine opportunities is way higher, giving us internal confidence that we can supersede that performance we’ve had the past three years,” the CEO said.
“Then, if successful, our financial profile in fiscal 2025 will be markedly different. We will no longer be a borderline EBITDA-breakeven business.”
Persistence paid off
Charleton has been with EnWave for about 14 years, starting at the company as a marketing coordinator after a career as a professional basketball player. He was appointed CEO in 2018, a time when he said the company was seeing its commercial inflection and a change in the culture of the business.
“It was primarily academic before that, and the board decided to make changes to strengthen the business acumen and ultimately those changes helped us achieve now 50-plus commercial royalty-bearing licenses,” Charleton said.
Persistence and strong support from shareholders are what have allowed the company to grow into a global leader in the innovation and the application of vacuum microwave dehydration, he believes.
“The reason I’ve chosen to stay with EnWave for the time that I have is because I very much believe in the tremendous upside this technology can bring to the global food industry,” Charleton said.
“We’re breaking through to push that snowball down the hill and ultimately see that turn into an avalanche.”