Enwave Corp Q4 2021 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Steve Hansen - Raymond James - Analyst : A couple from me just to start with, just on the commentary, Dan or Brent, around consistently hitting positive EBITDA through 2021. Should we expect that to start in the front quarter or is it more of a 2Q-3Q starting point concerning that pace? Dan Henriques - EnWave Corporation Q1, our machine sales, the pipeline that we are dealing with seems to be stacking up to hit more in Q2-Q3 and certainly into Q4. So, you could expect it to shape up probably in the second half of the year. The turnaround at NutraDried is still well underway and we've made a bunch of commercial progress. But the commitments we get from retailers tend to come 3 to 4 months in advance of products leaving our dock. So, that should also start to show up in the second half of the year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 16, 2021 / 3:00PM, ENW.V - Q4 2021 Enwave Corp Earnings Call Brent Charleton - EnWave Corporation Just to add to Dan's commentary, we do have, as you mentioned, a fully fabricated 120-kilowatt machine, and we've actually got four different suitors that are -- hopefully one of them is going to pull the trigger within weeks here. And then we've got several other machines that are partially fabricated. So, our ability to recognize revenue on the sales of those large-scale machines will be advantageous through, hopefully, the next few weeks here of Q1 and certainly in Q2.

Question: Steve Hansen - Raymond James - Analyst : In the Whole Foods launch nationally, it sounds like it's an exclusive deal to some degree, at least for the initial term. Or is it going to be something you'll launch more broadly thereafter? Brent Charleton - EnWave Corporation We're going to be launching everywhere that we possibly can. Whole Food stepped up and committed first, so they're going to have an exclusive on one particular flavor profile for a limited time period to provide a slight competitive edge in terms of bringing a new product to market. But the core flavors within that five flavor portfolio will be readily available for distribution everywhere and anywhere.

Question: Steve Hansen - Raymond James - Analyst : Okay. Very helpful. I'll get back in the queue. Thanks.

Question: Neil Linsdell - iA Capital Markets - Analyst : I was just kind of feeding into what Steve was asking as well. So, the different products that you have -- so you're going to have your Moon Cheese, you've got your sticks, you've got your bulk sales. Can you provide any additional color? It looks like the sticks are going to go into Whole Foods first, but do you expect to get additional traction out of your existing, I guess, channels? Are customers going to have Moon Cheese plus cheese sticks, or are some thinking about replacing Moon Cheese with cheese sticks? Or where do you see the traction for each one of the products gaining the most benefit? Dan Henriques - EnWave Corporation That's a good question, Neil. We definitely see the new lineup as complementary to the core Moon Cheese lineup. For example, Whole Foods taking three items of sticks nationally, a huge first win for us with the new lineup. It's not displacing our existing distribution of Moon Cheese with Whole Foods. It's two places in the store. Historically our Moon Cheese -- our core Moon Cheese lineup has been shelved in different places in the store, most often crackers, sometimes in the deli. The occasional time we're in the snack section but surprisingly not always. And the new lineup of sticks really belongs in the salty snack section. And if you go into a Whole Foods in the states, there's a whole -- there's three or four brands that are trying to knock off the better for you cheese puff Cheeto. And we're going to be the first ones to bring the 100% cheese format of that to market. So, we see it being shelved in different parts of the store. Whole Foods was the first customer that we actually presented it to and we got the distribution. So, we're pretty bullish on this being incremental to our core Moon Cheese. Brent Charleton - EnWave Corporation I'll add to Dan's comments in that Whole Foods with their set lineup for the spring, really had spaces for two SKUs, and they actually displaced another product so they could bring in three SKUs of Moon Cheese crunchy cheese sticks. So, they are also quite bullish on the prospects of this product line. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 16, 2021 / 3:00PM, ENW.V - Q4 2021 Enwave Corp Earnings Call

Question: Neil Linsdell - iA Capital Markets - Analyst : Okay. So, then that brings me to the question of capacity at NutraDried. I think you have two large-scale machines running there now, right? But you have space for a third? Dan Henriques - EnWave Corporation We have two large-scale machines running right now. With some leasehold improvements we could install a third at that facility. We would just have to reshuffle some of the warehousing for finished goods, but that is our expansion plan when we get ready for the third machine.

Question: Neil Linsdell - iA Capital Markets - Analyst : Okay, and if we can dive in, I know in negotiations with Dole you can't give out a lot of details. But it sounds like that's just a really huge potential, and I'm guessing one of those groundbreaking relationships that could really take your business to the next level, as you were mentioning. Can you provide us any additional details on the advancement of their snack products or the up-cycling of the other ingredients? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 16, 2021 / 3:00PM, ENW.V - Q4 2021 Enwave Corp Earnings Call Brent Charleton - EnWave Corporation Yes, certainly. And I would recommend for all those on the line and any shareholders that hear the recording of this call to go and read their Sunshine for All plan where they're looking to, again, prove the amount of waste being converted into up-cycled salable product by 2025 in a material way. And they've directly told us that they look at REV as a key platform to accomplish this goal. And so, that's great for them to communicate that, but rubber needs to hit the road within the next 3 to 4 months here with prospectively several large-scale purchase orders tied to two specific projects, the first focused on healthier snack products that differentiate in the marketplace. And so, we're hopeful that we'll see Dole commercial product in market within the fiscal year 2022 generating royalties for us. And the second being an upscaling of waste material in Southeast Asia, which I can't speak to too much detail, but the scale, the scope of the opportunities are more than we've encountered with other large CPG companies in the past. And so, that's what really gets the juices flowing here within our team is ensuring that we help them prepare and plan for the manufacturing capacity needed for their projects in collaboration with a few additional service providers that they've engaged with. So, I'll leave it there. I can't say too much more, but to say that this year we're looking to generate royalties from Dole commercialization of REV dried product.

Question: Neil Linsdell - iA Capital Markets - Analyst : Okay, great. Thanks a lot.

Question: Liam Dotchison - Cormark Securities - Analyst : Was just wondering if you could repeat the guidance on machine sales, both small and large? And then also do you have any expectation on timeline, just some additional color, for when material inflection point might be hit regarding the ramp-up and royalties based on how you're seeing clients using machines? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 16, 2021 / 3:00PM, ENW.V - Q4 2021 Enwave Corp Earnings Call Brent Charleton - EnWave Corporation Yes, happy to provide a little bit more color. The guidance remains consistent from our Q3 conference call where we're targeting to confirm 10 large scale, so 60 kilowatts or greater purchase orders through fiscal 2022, and 15 10-kilowatt machine sales, which is our smaller entry-level unit that we hopefully can enable folks to take product to market and justify the CapEx deployment for larger scale machines. The influx of POs we are hoping to see should come in Q2-Q3. That's when key decision points have communicated to us in terms of when they're going to say go or no go. And then from a royalty generation standpoint, as we mentioned, the 540 kilowatts of machinery that was purchased in fiscal 2021, we should have all of those machines installed by Q3. And from there on see an uptick in royalties that is material when compared to

Question: Steve Hansen - Raymond James - Analyst : Just wanted to follow up on the national Costco promotion you guys have talked about recently. I kind of view Costco as a double edged sword. It's great in that it comes with large volumes, but it's also tends to be chunky and can be fleeting at times. How do you view the latest promotion win there and whether or not you can sustain a presence there? And I guess the secondary related question is how do you think about Costco with respect to the cheese sticks? Dan Henriques - EnWave Corporation Yes, we recently announced the national distribution with Costco Canada, so that will be on shelf in January. It is a 10 ounce Gouda product, so it will be in all Canadian Costcos. So, not as onerous of an undertaking to deliver the product for that rotation with Costco because it's Canada. So, REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 16, 2021 / 3:00PM, ENW.V - Q4 2021 Enwave Corp Earnings Call it's fewer warehouses, but still a very, very solid opportunity and we're glad to be back into Costco Canada after our initial distribution we had there last year in April. So, Costco and the club channel is still an important channel for us. A lot of consumers shop there. It's a very good place to get brand awareness. So, with the stick we certainly will be pursuing and have already started to pursue Costco for that product. It's to be seen whether we're going to be able to get it in there under circumstances that we'll be able to deliver on. Because if they come and say we want national Costco we're going to ramp-up the plant pretty quickly. But we're going to be going for it because it's a great place to get brand awareness, especially for a new product.