EnWave Corp (TSX-V:ENW, OTC:NWVCF) CEO Brent Charleton talked with Proactive about the company’s financial performance in Q2 and recent strategic developments.
Charleton highlighted a notable revenue increase driven by a new machine sale to MicroDried, a long-time royalty partner.
Gross margins also improved significantly during Q2, a trend Charleton attributed to a better balance between royalty income and machine sales. He noted that royalties, being almost pure margin, are expected to continue bolstering profitability.
Proactive: All right. Welcome back inside our Proactive newsroom. Joining me now is Brent Charleton. He's the CEO of EnWave Corp. And Brent, it's great to see you again. How are you?
Brent Charleton: Very well. Good to see you.
So the company out with your financial numbers this week. Very strong numbers overall. You're fairly happy with what you're seeing so far?
Yeah. I mean, Q2 is an improvement significantly on Q1 and year over year, even more so. And that's a reflection of what we're seeing in terms of an increase in transactions, selling the array of equipment that we're aiming to deploy to grow our diversified royalty portfolio.
I notice also that your gross margins had a strong improvement as well. That's obviously positive also.
Yeah, gross margins are expected to continue to improve as the mix between royalties and machine sales revenue starts to equilibrate. So the more royalties that we generate, being basically pure margin, is going to dramatically improve our gross margin long term.
And we should also mention that there's a number of deals that you've announced in the last little while that weren't reflected within that. So there's obviously more to come on the books in the next couple of months?
You're exactly right. So we've just sold another machine to MicroDried, which is one of the longest-standing royalty partners. This is the fourth large scale line that they're investing in, and that revenue will be primarily recognized in Q3. And we're also hoping to close off a few additional transactions here before the end of June, to also be reflected in Q3. And then we have another batch, let's call it, of transactions we'll hopefully close in August and September.
Okay. We should also mention you put out news about Creations Foods and about amending the agreement with them. This is to add another category here—dog food?
Yeah. They've had tremendous demand for their dry cheese snacks—not for human consumption, but as dog treats. And they're selling phenomenally well through a number of different purveyors, well-known brands in the US. And we're starting to see a trend beyond the Creations amendment, where we're having a lot more interest from the pet food vertical. So we're hoping to announce again some new relationships on that front in the coming months.
Yeah. Brent, and you had thought about pet food in the past because it really is an interesting one. Considering, you know, I have a dog, and all of his treats basically need to be shelf stable for a while. So that's a really interesting category.
It is—and growing. And I think also the trend towards more premium pet treats versus your standard kibble product, which tends to be dry using hot air dryers and it's lower quality. So this evolution, per se, in the pet treat area is providing us with a pretty awesome opportunity to pursue.
Quotes have been lightly edited for clarity and style