EnWave (ENW -5.26%) (NWVCF -5.62%) reported third-quarter results for fiscal 2019 after the market close on Wednesday, Aug. 28. 

Revenue jumped 49% year over year, which is a deceleration from year-over-year growth of 110% in the second quarter and 73% in the first quarter. The bottom line edged slightly lower, coming in at a net loss per share of 0.01 Canadian dollars, down from breakeven in the year-ago period as well as in the previous two quarters.

The Canada-based company makes all-natural dried cheese snacks, and it licenses, manufactures, and installs equipment for dehydrating organic materials, including food, pharmaceuticals, and cannabis -- both marijuana and hemp. 

EnWave shares on Canada's TSX Venture Exchange (TSX) have gained 77.1% in 2019 through the regular trading session on Aug. 28, while shares traded over the counter (OTC) in the United States are up 74.6%. The S&P 500 has returned 16.8% over this period.

Here's how the third quarter worked out for EnWave and its investors.

Dried cannabis buds in glass jars sitting on a flat surface.

Image source: Getty Images.

EnWave's results: The raw numbers

All monetary figures are in Canadian dollars.


Fiscal Q3 2019 

Fiscal Q3 2018



CA$10.08 million

CA$6.78 million   


Net income (loss)

(CA$1.32 million)


N/A. Loss widened by CA$1.22 million.

Earnings per share 




Data source: EnWave. Results are for the period ended June 30 and are based on International Financial Reporting Standards (IFRS). 

Gross margin came in at 28.4%, down from 43.2% in the year-ago period, and lower than last quarter's 35.6%. Gross margin will likely be lumpy for some time due to the timing of machine sales because the EnWave Canada segment sells relatively few machines. For the first nine months of this year, gross margin was 33.8%, down from 36.5% in the year-ago period.

Nearly half the quarter's loss was due to a restructuring charge of CA$612,000, which will be discussed further in a moment. 

Segment results

Management breaks out segment results on a fiscal year-to-date basis, rather than by the quarter, and that's the best way for investors to consider the results, given the lumpiness factor previously discussed.


First Nine Months of Fiscal 2019 Revenue

Year-Over-Year Change

First Nine Months of Fiscal 2019 Segment Income

Year-Over-Year Change


CA$18.09 million


CA$2.56 million


EnWave Canada (REV dehydration business)

CA$8.56 million

56% (CA$4.08 million) N/A. Loss widened from CA$2.83 million in year-ago period. 

Segment totals

CA$26.65 million

72% (CA$1.52 million)  N/A. Loss widened from CA$547,000 million in the year-ago period.

Data source: EnWave. 

EnWave's wholly owned NutraDried Food subsidiary, in Washington State, produces Moon Cheese using EnWave Canada's Radiant Energy Vacuum (REV) dehydration technology. It distributes its products via retailers such as Costco in the U.S. and Canadian markets. 

The company said in the management discussion part of its its earnings release that it "secured a significant number of equipment purchase orders at the end of Q2 2019 and early Q3 2019 that will continue to increase EnWave Canada's revenues for the remainder of fiscal year 2019."

What happened with EnWave in the quarter? 

  • In April, it reorganized the NutraDried sales and marketing operation, incurring a one-time restructuring charge of CA$612,000. It hired a new senior vice president for sales and a chief marketing officer, and terminated its management services agreement with an outside entity. It expects this move to reduce the
    overall cost of its sales and marketing function.
  • In April, the company signed a royalty-bearing license agreement with Fresh Business Consulting, giving it "the exclusive rights to produce a variety of premium food products in Peru." Fresh purchased a 10kW REV machine to kick off commercial production. 
  • In May, EnWave signed a royalty-bearing license with food company Calbee, which will explore the use of REV tech for developing snack products and ingredients in Japan. Calbee purchased a 10kW REV machine.
  • In April, as I wrote last quarter, EnWave entered a licensing deal and formed an intellectual-property partnership with Aurora Cannabis (ACB -2.02%), a top Canadian marijuana grower. In addition, Aurora made a $10 million strategic equity investment in EnWave, giving it an approximate 4.91% stake. Also, as I've previously written:
  • The royalty-bearing license agreement gives Aurora the exclusive rights to EnWave's patented radiant energy vacuum (REV) drying technology for the production of cannabis materials in the European Union, excluding Portugal. "Aurora has also secured exclusive license options for both Australia and South America, excluding Peru, exercisable pursuant to minimum REV machine purchase order requirements," according to the press release. (Since then, Aurora has purchased a 60kW REV machine to be installed in South America in 2020.) "Additionally, Aurora has signed a nonexclusive sub-license to use REV technology in Canada." Canadian grower Tilray (TLRY) has the exclusive right to use and sub-license EnWave's REV tech in Canada, so it also stands to financially benefit from Aurora's using REV in Canada.

    Moreover, Aurora placed a purchase order for two of EnWave's 120kW REV dehydration systems for its Aurora Sky and Aurora Sun facilities in Canada, and intends to purchase a third 120kW system for its Aurora Nordic facility in Denmark within 60 days of the agreement. (The companies are currently
    negotiating the scope of an EU-GMP certified machine.) 

Major cannabis market activity after the quarter ended

In July, EnWave signed a royalty-bearing license with Electric Farms, which will use the 10kW REV machine it purchased to rapidly dehydrate hemp flowers grown in both its indoor and outdoor facilities in Tennessee. 

In August, the company installed the first 60kW REV machine at Tilray's Ontario facility. "The machine is expected to begin commercial operations in late Q4 2019 or early Q1 2020 and will represent the first commercial-scale machine installed for
cannabis processing in Canada," according to the management discussion release.

What management had to say

Management didn't provide a quote in the earnings release, nor did it hold a conference call. This isn't unusual for small companies.

Looking ahead

While year-over-year revenue growth decelerated in the quarter, fiscal year-to-date revenue growth remains strong at 72%. 

The company doesn't provide official guidance. As previously noted, however, management expects EnWave Canada's revenue to increase for the remainder of the fiscal year. As of Aug. 28, the segment's backlog consisted of 11 machines:

  • One for Tilray (60 kW, cannabis, Portugal)
  • One for Milne Microdried (120kW, fruits and vegetables, U.S.)
  • Four for The Green Organic Dutchman (three 120kW and one 60kW, cannabis, Canada)
  • Three for Aurora Cannabis (two 120kW, one 60 kW, cannabis, Canada)
  • One for Calbee (10kW, fruits and vegetables, Japan)
  • One for Electric Farms (10kW, hemp, U.S.).