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EnWave Corporation (OTC:NWVCF)
Q4  Earnings Call
Dec 03, 2019, 12:12 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. Welcome to EnWave Corporation's fourth-quarter and fiscal-year 2019 earnings conference call. My name is Kevin and I'll be your operator for today's call. Joining us for today's presentation are the company's president and CEO, Brent Charleton; CFO Dan Henriques and Executive Chairman John Budreski.

As a reminder, all participants are in a listen-only mode and the conference is being recorded. [Operator instructions] Finally, I'd like to remind everyone that this call will be made available for replay via a link in the Investor Relations section of the company's website at www.enwave.net. Now, I would like to turn the call over to EnWave CEO, Mr. Brent Charleton.

Sir, please proceed.

Brent Charleton -- President and Chief Executive Officer

Thank you and good morning to everyone. Before proceeding, I would like to make everybody aware that the information that we are about to present contains some forward-looking information. It is based on management's expectations, estimates, and projections. These 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, although most of EnWave's business is done in U.S. dollars, numbers reported here are in Canadian dollars. This is the first investor conference call for EnWave and the evolution of a greater effort to make sure that our investors and prospective investors are as well informed as we can make them.

On a consolidated basis, EnWave reported it's best ever quarterly revenue in Q4 and best ever annual revenue in fiscal-year 2019. EnWave has two reportable business units; EnWave USA or NutraDried, which is our U.S. business that manufactures and distribute Moon Cheese, and EnWave Canada, the Radiant Energy Vacuum or REV technology business that licenses our proprietary technology to companies in the food and legal cannabis markets, as well as our subsidiary, NutraDried, in exchange for a royalty or some form of carried interest. Both business units approximately doubled revenues in 2019.

Let's first talk about NutraDried, our Star subsidiary; that is a material part of the EnWave story, and something that we feel that we have somewhat undersold to the investment community. NutraDried was initially started in mid-2014, the intention was to establish a proof-of-concept business to prove the commerciality of our REV technology on a large-scale and derisk further adoption by potential licensees. This proof-of-concept quickly has grown into a business that we are massively excited about, and in love with. I can tell you why this is so by reviewing a few numbers, being the revenues from the sales on Moon Cheese.

In its initial and partial year, NutraDried's revenue were 260,000, the second year saw 2.6 million, third year saw 6.1 million, the fourth year received 6.6 million of sales, and last year's number was 16.5 million. In 2019, NutraDried generated 29.9 million in revenue. A little over a year ago, in September, we made two material step changes to NutraDried. Firstly, we doubled production capacity; our sales were continuing to ramp up dramatically and we were reaching the limits of our single production line.

We had access to a second 100-kilowatt REV machine and moved quickly to capture more floor space, rearrange the packaging line, create larger space for inventory, and install the second parallel production line. This capacity addition allowed us to rapidly grow inventory and install second -- excuse me, rapidly grow sales in fiscal 2019. More recently, we committed to a third 120-kilowatt REV line to improve capacity by about 50% and support sales in 2020 which will hopefully be yet another record year. NutraDried will have the capability of generating up to 60 million in top-line revenue when the third large-scale REV machine is installed.

Secondly, and equally as important, we hired Mike Pytlinski to be NutraDried's full-time CEO. Mike is a highly experienced veteran of the U.S. consumer packaged goods industry. He brings 27 years of experience; his experience has breadth.

He was with the Kraft Foods organization, then a start-up company, and more recently with Palermo's Pizza, a mid-sized family owned business. He has held positions in Accounting, Sales, Marketing, Manufacturing and new product introduction. In the months following Mike's hire, NutraDried has continued it's rapid build out. We now have a dedicated team of in-house sales and marketing professionals pursuing more distribution of Moon Cheese.

Our plans for 2020 to grow the business involves a four-pronged approach. First, the sales team is seeking to continue to win with Costco and maintain our club business. Second, we are launching a new one else package size with the strategy of pursuing new channels, namely, convenience stores and food service. Third, Mike and team completed a rebranding of Moon Cheese and are launching two new flavors and seek to expand our presence in existing and new retailers.

We have already received many commitments on expanding distribution opportunities from buyers. The two new flavors are Bacon Me Crazy and Garlickin' Parmesan, and yes, both are delicious. Lastly, NutraDried is investing heavily in digital marketing to drive velocities where we have distribution in brick-and-mortar, as well as online. With this plan in place and the right people running the show, NutraDried is expected to continue it's material contribution to EnWave's future consolidated financial performance.

EnWave's machine sales and royalty generation business has also grown handsomely in 2019. We successfully penetrated multiple verticals with REV technology and have proven the business case for fruit, vegetable, dairy, and cannabis drying on a global basis. We expect to continue to secure new contracts for REV machines and to expand the installed base of royalty-bearing capacity with the installation of REV machines in our current fabrication pipeline. The path to profitability of the REV business will be tied to growth in our royalties as these are high margin, compounding in recurring revenues.

Royalties collected in 2019, including NutraDried, were 2.5 million, up from 1.4 million in 2018. EnWave secured nine new commercial royalty-bearing licenses and two research and development licenses in 2019, up from five new licenses signed in 2018. The total REV machinery capacity sold in 2019 with 962-kilowatts, up 244% from 280-kilowatts in 2018, which led to an approximate doubling of machine sales revenue. In the latter half of 2019, EnWave increased it's headcount to intensify our manufacturing and sales efforts.

More recently, we successfully recruited a new Director-R&D who will explicitly focus on the development of cannabis know-how as it relates to REV technology. In 2019, we entered into a lease for a 21,000 square foot manufacturing facility close to our corporate headquarters that is now fully operational, and our staff are busy building several large-scale machines concurrently with several 10-kilowatt units for delivery in the coming quarter. That being said, we are mindful of staffing costs. In our REV business this year, we've hired a company with six individuals and hired 16 new employees upgrading the caliber of talent to execute our business plan.

With our current fixed overhead base, we need to sell eight large-scale machines and eight 10-kilowatt machines per year to breakeven on a cash basis. This assumes growth in royalties in 2020 to 1.5 million from third-party royalty partners and 2 million from NutraDried. EnWave's target for 2020 is at least 10 large-scale and 10 small-scale purchase orders. The timing of these potential orders will dramatically affect cash flows.

Notable commercial developments in fiscal-year 2019 with food manufacturing companies included royalty-bearing licenses signed with Calbee, Japan's largest snack-food company; and Royal Friesland Campina, the sixth largest global dairy company, as well as repeat REV machinery purchase orders from Bare Snacks, which is owned by PepsiCo, and Milne Microdried. In the cannabis industry, we continue to proactively engage with numerous companies in the global cannabis market as the value proposition offered by REV technology is robust. EnWave continues to target companies in jurisdictions where either medical or recreational use is legal. EnWave is in active discussions with over 2000 companies for potential licensing of the REV dehydration technology to allow cannabis producers to decrease drying times, increase yield, and ensure specific composition of the finished products.

EnWave currently has secured purchase orders for large-scale REV machines with Aurora, Tilray, and The Green Organic Dutchman; all leading global cannabis companies. EnWave has also signed commercial license agreements and secured purchases of 10-kilowatt REV machines with Glasshouse Botanics in Canada, Cann Group in Australia, an unnamed Swiss Medicinal Health Company in Switzerland, and as of this morning, Helios Therapeutics of New Zealand. With these value partnerships verifying the capabilities of the company's patented technology, EnWave expects continued growth in the number of royalty bearing commercial licenses and equipment purchase contracts for this vertical. A significant portion of EnWave's machine sales in 2019 were generated from sales to the Canadian legalized cannabis sector.

While the industry in Canada has grown significantly since the legalization of recreational cannabis on October 17th, 2018, it is still in its early stages of maturation and is subject to many distribution and operational challenges. It remains unknown how large the market will be in Canada for recreational cannabis products, but we remain optimistic regarding our rule in this industry. In summary, both business units are advancing very well, and I'd now -- I'd like to introduce Dan Henriques, our CFO to discuss our Q4 and fiscal 2019 financial statements in detail to further expand on our improving performance.

Dan Henriques -- Chief Financial Officer

Thank you, Brent. EnWave had a record year in 2019 from a growth perspective, and I will share some commentary on our financial performance for Q4 2019 and for fiscal-year 2019. As Brent mentioned, we have started to achieve commercial success, and this is underscored in our strong financial performance and top-line growth. In Q4, we reported the highest ever quarterly revenues for the company at 16.2 million.

Of the 16.2 million in revenue, NutraDried represented 11.9 million, and EnWave Canada represented 4.3 million. NutraDried's revenues was the highest ever quarterly revenue. We had a major distribution push in Q4 for Moon Cheese throughout Costco in the US as we participated in the Most Valuable Member Coupon Program and the product was temporarily sold in all Costco stores in the US for four weeks. Not only did the Costco MVM program provides a substantial distribution lift in Q4, but it also had a large consumer impression impact as well.

Having Moon Cheese in all US Costco stores paired with the in-store tastings allowed us to do sampling with many, many new consumers across the US. This was excellent marketing exposure. Revenue from EnWave Canada was 4.3 million in Q4 of 2019. A significant increase from the 0.8 million for Q4 of 2018.

We secured a number of large scale machine orders for which we recognized revenue on a percentage of completion basis in Q4, including two large machines for Aurora, four large machines for the Green Organic Dutchman, one large machine for Milne MicroDried. We also sold several 10 kilowatt machines in Q4 that contributed to additional revenue growth.Our royalty revenue for Q4 was 224,000 compared to 113,000 for the comparative period, which represents growth of 98%. This does not include royalties from NutraDried, our subsidiary. When you include NutraDried, our Q4 royalties alone were 1 million.

Our royalties do not represent a substantial portion of overall revenues at 6% of EnWave Canada revenues. However, we expect this to continue to grow as we install more REV capacity globally. We do not generate royalties from a REV machine until fabrication is complete. The machine is installed and our royalty partner begins commercial operations.

At the end of Q4, we had yet to install the two Aurora machines, the four TGOD machines and the third Milne machine, the Pitalia machine and one of the two Tilray machines. This represents nine large REV machines and for perspective, we have eight large REV machines currently installed. That means our royalty bearing capacity will double when these machines are installed and commissioned. As such, we anticipate our royalties will continue to grow, once these machines begin commercial operations.

Gross margins for Q4 2019 was 28% relative to 44% for Q4 of 2018. The decrease to margin was driven largely by two factors. The first was the discount consumers in the Costco MVM. It had substantial top-line benefit but resulted in lower gross margin percentage at NutraDried.

While we sold product at a lower margin in the MVM, the brand exposure and national consumer trials provided incremental benefits. The second is the shift in our sales mix with proportionately higher revenues from the REV business which yields lower margin than the Moon Cheese revenue. Our Q4 2019, adjusted EBITDA was 864,000 which was another quarter of positive adjusted EBITDA for the company. Our machine sales are lumpy and therefore adjusted EBITDA tends to fluctuate quarter to quarter.

Looking at the full-year 2019, adjusted EBITDA was 3.1 million compared to 2.9 million for 2018 showing that the cash flow profile continues to improve. We maintain a positive adjusted EBITDA in a year where when we made a number of strategic personnel and marketing investments. I will now discuss several of those investments in the expense analysis. Our Q4 G&A expenses were 1.1 million.

We have increased our G&A spending as part of building a world-class team at NutraDried that is properly scaled to grow the CPG snacking company. Some of these investments include a full time CEO with nearly 30 years of CPG experience. We have also added bandwidth in sales planning, human resources and finance and accounting to support the growth in NutraDried. We aim to prudently manage G&A spending or having the right infrastructure in place to support a high rate of growth in both EnWave Canada and NutraDried.

Selling and marketing expenses for Q4 were 2.5 million compared to 1.3 million in Q4 of 2018. Selling and marketing expense growth was driven by NutraDried as we undertook a project to rebrand Moon Cheese with new packaging designs, new consumer messaging, new digital assets and prepared to launch two new flavors. We also record sales commission expenses that are paid to NutraDried's brokers in selling and marketing expenses and our commissions increased proportionately to our revenues. We incurred a one-time restructuring charge in the third quarter of 612,000 to exit a contract with the sales agent previously responsible for marketing and selling NutraDried's product.

This expense was one-off and non-recurring and we're now positioned to more effectively and more rapidly scale our distribution. As part of the restructuring we hired a team of in-house professionals that consists of a new SVP of Sales, a chief marketing officer and three full-time sales reps. We now have five full-time people focused on growing NutraDried's distribution and brand value as opposed to a single part time agency effort. We feel, we now have the right team and cost structures that will ultimately be more profitable as our distribution grows.

R&D expenses for Q4 were 300,000, which is very comparable to Q4 2018. Our R&D spending primarily relates to two areas, patent filings and maintenance fees and our in-house R&D team. The patent filing expenses grew in 2019 overall as we filed internationally for four new patents. Our ability to patent innovations related to REV remains the backbone for our licensing business model and we seek to increase our intellectual property assets while controlling spending.

I will now highlight some of the full-year fiscal 2019 results which in our view underscore strong commercial momentum on both sides of our business. We reported consolidated revenues of 42.8 million for 2019, up from 22.8 million for 2018. That is a 20 million year-over-year increase. EnWave Canada reported revenue of 12.8 million for 2019, up from 6.5 million in 2018, nearly doubling.

As we have highlighted previously, the adoption of REV technology in the cannabis industry has compounded. We secured sales contracts in 2019 for capacity greater than we secured in the three previous years combined. The sale of REV machinery drove the increase to revenues in EnWave Canada and our royalties grew modestly to 735,000 when you include NutraDried royalties fiscal 2019 royalty revenue was 2.5 million, up from 1.4 million in 2018, considerable growth. As I explained before when we commissioned the additional REV capacity we've contracted, we expect to grow our high margin royalty revenues.

NutraDried also materially increased revenues to 29.9 million for fiscal-year 2019, annual growth of 81%. A lot of NutraDried's growth is attributable to the increased distribution in Costco in the US. This has been a great catalyst for other retailer stocking our products as Costco is notoriously selective and only carries top-tier items. We also grew revenues by growing velocities across more traditional retail grocery distribution.

The growth in velocity is an important trend that I'd like to highlight. Velocity is the number of packs sold per week per store. That metric increased in many of our important retailers and is a signal of both sticking power of our products and growing demand which should lead to revenue growth. Looking ahead, our strategy with Costco is to hold our position and seek to continue distribution levels comparable to 2019 and leverage that brand exposure with our sales efforts in the retail grocery convenience store and food service channels.

This should allow us to further diversify our customer base. Turning to our balance sheet, our financial position is incredibly strong at the end of 2019. We closed a strategic investment by Aurora Cannabis in April 2019 for net proceeds of 9.1 million. At September 30th, we had 18.6 million of cash available to fund new growth initiatives.

Our net working capital was positive 26.1 million, a signal of strengthened liquidity and turnover of our trade accounts. Our cash flow from operations prior to changes in working capital items was 2.9 million for 2019, showing that our business is generating strong positive cash flows. As we scale, both sides of the business we expect this trend to continue to improve, which will allow us to maintain healthy liquidity. Our strong balance sheet today reflects the result of this trend.

Our due from customers on contract balance was 1.5 million and our deferred revenue was 2.7 million which when netted represents a net balance of 1.2 million in cash deposits collected in excess of revenues booked on machine contracts. Simply put, we are prudently collecting cash faster than we spend it on machine fabrication, a testament to the scalability of our REV machine business model. We have initiated a capital project of up to 8 million to expand our production capacity at NutraDried by just over 50%. This will involve a potential relocation to a new facility, a third REV processing line and a number of other capital items related to this capacity expansion.

We foresee this capacity being necessary by early Q4 2020. With our current plan, the gating of this capital spend will start in Q2 2020 and continue through Q4 2020. We will finance a portion from our treasury and are evaluating other forms of financing to complete this project on schedule. With that I'd like to turn it back to Brent for some closing remarks.

Brent Charleton -- President and Chief Executive Officer

Thanks very much, Dan. EnWave has transformed its culture, improved operational protocols and upgraded talent pool in 2019. The company is fully resourced to continued growth and execute upon a strategic plan. EnWave maintained a strong business development pipeline and we are planning for improved financial performance in fiscal-year 2020.

This means positive cash flows from operations and continued revenue growth. NutraDried has vastly improved its capabilities and performance. It is a focal point for value creation and our executive management fully supports the thoughtful strategy developed by Mike and the NutraDried team. NutraDried has pioneered the shelf-stable cheese snacking category and we expect this business will continue to gain new distribution and ultimately grow the brand value of our innovative product, Moon Cheese.

Our business is cash flow positive and we have reported positive adjusted EBITDA for the last two years. We anticipate solid revenue growth through next year and if we hit our targets we ought to be bottom line profitable in fiscal-year 2021 on a consolidated basis. Our fiscal '20 and fiscal '21 projections are based on bullish growth prospects in the NutraDried business supported by detailed budgeting and pragmatic growth in the number of machine sales with compounding royalties being generated from the installed machinery base as well as taking into account, the revenue recognized for each perspective large scale, REV machine project on a percentage completion basis. In closing, I would state that we are aware, investors might envision EnWave to be a pick and shovel supplier of the cannabis industry or perhaps an advanced technology company with a licensing and royalty business model or see just snack food company.

At EnWave, we do not consider ourselves to be solely any one of these, but consider ourselves to be all of these and our future has never looked brighter. And with that I'm going to wrap up my prepared remarks and believe we are ready to open the call for your questions. Operator, please provide the appropriate instructions.

Questions & Answers:

Operator

Certainly. We will now be conducting a question-and-answer session. [Operator instructions] Our first question today is coming from [Inaudible] from [Inaudible]. Your line is now live.

Unknown speaker

It is [Inaudible]. Congratulations on the results. I saw that in NutraDried, the expenses are up. Could you detail those expenses, a bit more and talk about also -- in total NutraDried, what the percentage of sales for Costco was?

Dan Henriques -- Chief Financial Officer

Certainly. Bart, Dan Henriques here, CFO. NutraDried had a year of rapid growth. We scale the business, both from a top line and increase in expenses to support that growth.

Part of that included hiring of Mike Pytlinski, the full-time CEO. He was hired in August of 2018. So we had him on for a full year of fiscal 2019. So that's part of those expenses.

We also added bandwidth on the marketing and sales side. So we hired three sales directors based regionally in the US who are full-time focused on growing sales for NutraDried. We hired a sales planner, HR Administrator, an accounting and finance professional, as well as a number of other people to support the rate of growth in the company. And lastly, we undertook a major project to rebrand and launch Moon Cheese in a more meaningful and appealing way for consumers.

So part of that includes new packaging, hiring of an agency of record to support the branding and outreach efforts as well as a number of digital marketing efforts. So those are the -- those are sort of the primary expenses that we increased. We think we see those investments that are going to lead to more revenue growth for the company.

Unknown speaker

OK, Dan. And can you put the number on that in the millions of dollars.

Dan Henriques -- Chief Financial Officer

For the full year, it's in the range of about $3 million, those investments and we're planning for -- no, similar investments for 2020, as we're investing in the brand and the consumer product that we're trying to create demand pull for. And so that's part of growing a CEG snack company.

Unknown speaker

OK. And percentage of NutraDried sales to Costco in Q4 and for the entire year?

Dan Henriques -- Chief Financial Officer

We're not commenting on specifics with respect to the relationship with Costco. However, certain of these disclosures are available in our Management Discussion and Analysis.

Unknown speaker

OK, thank you.

Operator

Thank you. Our next question is coming from Neil Linsdell from Industrial Alliance Securities. Your line is now live.

Neil Linsdell -- Industrial Alliance Securities -- Analyst

Yes, thanks. Well, good morning, guys and congratulations. That's been quite a year.

Brent Charleton -- President and Chief Executive Officer

Thanks, Neil.

Neil Linsdell -- Industrial Alliance Securities -- Analyst

So on the NutraDried again, can you just go through -- so you're talking about Costco continuing basically in the same vein, as you've had in the last year, would that include participating again in any kind of coupon program at the end of fiscal September 2020?

Dan Henriques -- Chief Financial Officer

We can't predict where the product goes with Costco. And so we can't -- we're not in a position to comment on continued distribution with Costco. What I will say is that, we are consistently exceeding velocity expectations in that channel as well as a number of other stores where we're selling the product right now. And so the rate at which we're adding new retailers is exceeding the rate at which we're losing them.

So, in our opinion, we think that sales will continue to grow. We want to continue to hold strong in our position with Costco. But the future holds in terms of NBMs and other promotions and rotations, it's still TBD.

Brent Charleton -- President and Chief Executive Officer

Yes. Without disclosing in particular is when we look at the budget for next year with NutraDried they aim to grow all of the relationships, they currently have with different distribution channels.

Neil Linsdell -- Industrial Alliance Securities -- Analyst

OK. And you gave a target for the royalties from NutraDried and non-NutraDried for next year too?

Dan Henriques -- Chief Financial Officer

Yes. We gave approximate targets. We hope to grow a royalty base by at least 50% next year and so the split between NutraDried and non-NutraDried are pro forma, but those are general targets.

Neil Linsdell -- Industrial Alliance Securities -- Analyst

OK. So, that would put your NutraDried sales at around 40 million which would be up considerably from this previous year. So I'm just wondering how much of that would be continued growth and expansion through the Costco network, because it sounds like, on the retail grocery convenience store, there has been a lot of investment in marketing, sales and working through that distribution? So can you talk about the growth expectations through that side?

Brent Charleton -- President and Chief Executive Officer

Neil, it's Brent here. So yes, we certainly see very good growth prospects for both retail grocery and big box which would include Costco. Getting into further distribution of retail grocery is typically looked at as being more sticky distribution. So there is a hyper-focus on significantly growing retail grocery distribution.

Well again, pragmatically growing big box through several opportunities that could present themselves in distribution outlets, such as Costco, and others.

Neil Linsdell -- Industrial Alliance Securities -- Analyst

OK. Can you give us any more detail about the rollout into some of these retail customers? And is this, you're already in Whole Foods, Publix and such. Is this more penetration into those existing retail channels? Or are you further expanding that?

Dan Henriques -- Chief Financial Officer

It's both -- it's both. But in terms of particulars, we don't like to publicly disclose the strategic details as competitors could get their hands on this particular transcript and then pursue those same strategy. So we'll leave it there.

Neil Linsdell -- Industrial Alliance Securities -- Analyst

OK. But I would think as you're getting on to the retail channels with the growth that you're forecasting, you must have some CPG companies that are looking at being able to take your product and put it into their own platforms and stuff like that. Are you seeing, are you getting any indications of interest from these potential acquirers or partners?

Dan Henriques -- Chief Financial Officer

We're solely focused on growing branded Moon Cheese product at this time. So we have been approached by other companies looking to buy Moon Cheese as an ingredient as an inclusion for other snack offerings. It's not concurrent with our strategy of growing the Moon Cheese brand and offering a unique branded product that ultimately should drive more value for shareholders.

Brent Charleton -- President and Chief Executive Officer

But we know we're being watched Neil. We know we're being watched.

Neil Linsdell -- Industrial Alliance Securities -- Analyst

I would expect so. And so your capacity expansion at NutraDried, if you keep growing at this trajectory, you're going to run out of capacity in the next 18 months or so, is there further plans, I think with the capital expansion plan you were making room to be able to put an additional lines beyond the third that you're doing now.

Dan Henriques -- Chief Financial Officer

Yes. We're in the process of prospecting new facilities. And the current facility, we operate out of -- doesn't have the room for additional REV capacity. So, most likely, we will be moving to a new facility.

The facility we select will be large enough to hold, not only the third REV line, but hopefully a fourth and fifth line as well, which should give us once fully built out capacity to get toward 100 million in top-line revenue. So we'll start by adding the third line in the new facility. And then as necessary, we can add those additional lines when the time comes.

Brent Charleton -- President and Chief Executive Officer

And Lower incremental cost.

Neil Linsdell -- Industrial Alliance Securities -- Analyst

And, but you don't have any specific timeline for the fourth machine yet, but it would be, presumably in early fiscal '21.

Brent Charleton -- President and Chief Executive Officer

No specific timing yet. Let's first breach the capacity on the third line and then plan accordingly.

Neil Linsdell -- Industrial Alliance Securities -- Analyst

OK. And then just turning over to the other side, the REV units that you've been shipping, obviously the cannabis you've got multiple cannabis partners now using your equipment. We saw Aurora Cannabis, they were delaying some manufacturing capacity expansion, which would have included your units. Is that just a single customer you're seeing any kind of slow down, and does that only affect basically when you would expect to get royalties or does it affect anything on your manufacturing of the REV units for them?

Brent Charleton -- President and Chief Executive Officer

So certainly the delays with a few of the machine installations tied to the infrastructure build out with our current license partners will delay some of the royalty uptick, but the communication from each of those royalty partners at this time when regarding to operational build out is that they intend to use the machinery that they purchased. In terms of the overall market we are seeing it obviously slowdown in Canada in terms of capital infrastructure build out, but internationally we still view the cannabis market as a very, very robust opportunity for us. And in case -- in point this morning another license being signed at this time for New Zealand partner.

Neil Linsdell -- Industrial Alliance Securities -- Analyst

Right. So any kind of adjustments in your budget right now seem to be limited to that one partner or relatively minor and overall a lot of the units are still continuing to go and get commissioned and are scheduled to generate royalties, is that right?

Brent Charleton -- President and Chief Executive Officer

Yes. I mean on the manufacturing side, so, as far as a relationship with the Aurora, we continue to build the machines around order as we have some expected timelines for start-up. With the TGOD scenario, obviously with their financing challenges, we are pragmatically building those machines for their Valleyfield facility and obviously being prudent in our cash collection. So at this point, we've collected far more cash and we spent on those three machines.

The 60 kilowatt which they stayed purchased for their Ancaster facility has already been delivered and expected to start up in Q2.

Neil Linsdell -- Industrial Alliance Securities -- Analyst

OK. And the royalties that you're expecting excluding the NutraDried royalties, is that growth going to come primarily from the cannabis machines, can you say as far as being commissioned this year?

Dan Henriques -- Chief Financial Officer

Part will come from Cannabis and then part will come from food. We also have a number of food licenses that are starting to ramp up. And so it's not solely driven by those cannabis machine that's a part of it, no doubt, there's a lot of large capacity on order that will start to come online in fiscal 2020, but food will drive a portion of that growth as well.

Neil Linsdell -- Industrial Alliance Securities -- Analyst

OK. And then, I'm guessing from the number of machines that you're talking about delivering and commissioning over the next 12 months, then that royalty number should grow roughly equivalent amount in the following year?

Brent Charleton -- President and Chief Executive Officer

Yes, that's the safe way to look at it. We're going to start to add -- we have nine large machines in our fabrication pipeline right now. Currently out there we have eight large machines that contributed to the royalty generation in fiscal 2019. So, if you look at it and the gating of when those machines will begin commercial operations, it will be staggered through fiscal-year 2020, and so looking out for fiscal 2021.

Ideally, we'll have all of those machines up and running and have doubled our royalty capacity.

Neil Linsdell -- Industrial Alliance Securities -- Analyst

OK. Well, that's great. Congratulations. Good luck.

Brent Charleton -- President and Chief Executive Officer

Thanks, Neil.

Dan Henriques -- Chief Financial Officer

Thanks, Neil

Operator

Thank you. Our next question today is coming from Boris [Inaudible]. Your line is now live.

Unknown speaker

Good afternoon. First of all, we see that Moon Cheese is gathering pace in a substantial way in United States. Now other countries in the world, we have couple of the largest dairy companies like Friesland Campina and Arla Foods in Denmark, we have Galia, we have Ashgrove Cheese [Inaudible]. Is there any of those companies where you're -- because they have -- they are a couple of years behind where you're starting to feel same momentum build up?

Brent Charleton -- President and Chief Executive Officer

Hey, Boris, Brent here. I believe that the potential with some of our larger license partners is immense. However, they haven't yet hit an inflection point with momentum as many of them have recently introduced their new product iterations to -- via small centric market trials. Thankfully, the feedback from these market trials has been very positive.

So the future of our relationships with these companies, hopefully, will include the purchase of large-scale machine orders in the near-term. And with more capacity, obviously, that will become far more meaningful for us in terms of royalty generation. With the breadth of distribution some of the larger dairy companies have internationally, I think the potential on royalty generation can even supersede what NutraDried is doing currently in the U.S.

Unknown speaker

And would Arla Foods be the one that is most of first events?

Brent Charleton -- President and Chief Executive Officer

Arla launched our snack products under their explorers brand in Denmark to children, and it's going quite well. So, I think they are most advanced, and also our Australian partner Ash drove Cheese also has had good commercial success gaining distribution in some of the top retailers in that country, leading them to buy a second 10-kilowatt and contemplating larger-scale machinery in the future here. So those two are a leading the way; Patatas Fritas is yet to receive their 10-kilowatt unit to start Friesland Campina has done some very, very good product and market development work, and we have planned collaboration with them in the early New Year; so all are going in the right direction.

Unknown speaker

OK. And then, in the MD&A you talking about the investment in the purpose-built commercial infrastructure for NutraDried allows up for a total of five large-scale REV machine. So your capacity will be like $100 million then on the revenue side?

Dan Henriques -- Chief Financial Officer

Yeah. Dan here, Boris. We're looking at a facility that will have space for upto five large machines; we currently own two, and are operating those two. So when we move to that facility, we would install a third to start, and then as needed based on demand and need, we would install a fourth and a fifth line to get to that level.

Unknown speaker

OK. Then the rebranding is coming up; can you tell us something more about that rebranding or you're playing solely on taste or are there also health aspects or any other?

Brent Charleton -- President and Chief Executive Officer

Yes. So we've launched all new packaging for Moon Cheese, we went through a process where we've collected a lot of empirical data on different concepts, we tested them with consumers to see which package designs would have the most appeal, which would stand around shelf, and which would ultimately create more purchase decisions. Part of that includes calling out some of the nutritional benefits of the product, bold face on the front of the package, the fact that it's high on protein, has very low to no carbs, and no sugars. And so we're making bolder claims with respect to those nutritional benefits, as well as marketing those benefits on our website through new digital assets.

And then focus more on PR and other efforts to get the awareness out. And the two new flavors that we're introducing are based on data. So again, Mike and his team went out and tested a variety of different concepts and the number two and three ranked flavors were again, Cheddar Bacon and Garlic Parmesan, No. 1 was Cheddar.

So we're using data to, again, influence the strategy that NutraDried is implementing.

Unknown speaker

OK. Then jumping to Calbee where are we at that Calbee as they are very large snack company too?

Brent Charleton -- President and Chief Executive Officer

Yes, we're really excited about the Calbee relationship as it's been very close collaboration on the product development side. They've received their 10-kilowatt machine that's now fully operational at their facilities in Japan. We have a full-some understanding of their product rollout and testing over the next 12 months, and I can't disclose certain timing that they've given us, but it is a very well thought-out scale-up project that they anticipate to make more meaningful to their company through 2020-2021.

Unknown speaker

And for commercial sales in Japan only or also brought --

Brent Charleton -- President and Chief Executive Officer

The initial focus is on the domestic market with obviously longer term sight lines on international distribution.

Unknown speaker

OK. Many thanks, that's it from my side.

Operator

[Operator instructions] Our next question today is coming from Nicolas [Inaudible] from Cormark Securities. Your line is now live.

Unknown speaker

Good morning, guys, thanks for taking my call. I just have two quick questions, just to clarify some of the numbers. For NutraDried, for next year you're thinking upto 60 million of top-line revenue once you get the next machine up and running, is that correct?

Brent Charleton -- President and Chief Executive Officer

That would be our stated capacity for NutraDried for next year. So the three lines would provide us with capacity for upto 60 million in sales.

Unknown speaker

Gotcha, thank you. And then, the target for 2024 and REV in terms of actual machine sales; you're thinking 10 large-scale and 10 small-scale machines, that's the goal, correct?

Brent Charleton -- President and Chief Executive Officer

That's our target.

Unknown speaker

OK, that's awesome. Thanks, guys. Congrats on the quarter.

Brent Charleton -- President and Chief Executive Officer

Thank you.

Operator

Thank you. At this time, I'd like to turn the floor back over to Brent Charleton for any further or closing comments.

Brent Charleton -- President and Chief Executive Officer

Thank you for joining us today for EnWave's first annual earnings conference call. At this time, you may disconnect or if you have again, additional questions that you'd like answered, please send them to ir@enwave.net. And this conference call will again be available on our website, www.enwave.net/investors.

Operator

[Operator signoff]

Duration: 41 minutes

Call participants:

Brent Charleton -- President and Chief Executive Officer

Dan Henriques -- Chief Financial Officer

Unknown speaker

Neil Linsdell -- Industrial Alliance Securities -- Analyst

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