Eguana Technologies Inc. (EGT.V) designs and manufactures s high performance residential and commercial energy storage systems. EGT.V has two decades of experience in grid edge power electronics for fuel cell, photovoltaic and battery applications, and delivers proven, durable, high quality solutions. With thousands of its proprietary energy storage inverters deployed in the European and North American markets, Eguana is one of the leading suppliers of power controls for solar self-consumption, grid services and demand charge applications at the grid edge.
Coverage was initiated July 2017, with subsequent notes issued on January 2018, February 2018, June 2018. December 2018, July 2019. April 2020, December 2020, September 2021 and June 2022.
News Releases
June 14 - Receives +$7 Million Micro Inverter Order: Announced it has received its first micro inverter order from the Omega Group. The order, consisting of single, dual, and quad style micro inverters, totals nearly 26,000 units with a combined value of just over $7M . Initial bulk container shipments are currently in transit with installer and branch level fulfillment orders expected to commence shipping in the next 4 weeks.
The micro inverter line has been developed to accept higher power than competitive products delivering up to 15% more energy annually. Single, dual, and quad PV panel configurations are immediately available for distribution.
Aug. 2 - Continue Leadership Position in Hawaii Battery Bonus Program with Pineapple Energy: received follow on orders of over $2.4M in units to be deployed in Hawaii’s VPP Battery Bonus program this year. Eguana’s partner Pineapple Energy (NASDAQ: PEGY), who recently acquired Hawaii Energy Connection.
Aug. 26 - $33.0M Investment by ITOCHU Corporation and on US$5M Loan from Western Technology Investment: Strategic investment by the ITOCHU Corporation of C$33M in the form of an unsecured convertible debenture of the Company convertible into common shares of the Company at a conversion price of C$0.50 per share. Use of proceeds from the financing will be to fund working capital and general corporate expenditures of the Company.
ITOCHU's investment is expected to expand the two companies' long-term relationship and significantly increase Eguana's immediate access to working capital to achieve business growth objectives globally.
In addition, further to the Company's news release dated April 4, 2022, the Company has elected to complete its second tranche draw with lending partner Western Technology Investment ("WTI"), Eguana expects WTI to make the remaining US$5 million under the second tranche available to the Company on or about the Closing Date. In connection with the Loan, the Lenders have waived the financial milestones required under the Loan Agreement.
Aug. 29 - Announces 3rd Quarter 2022 Financial Results: Total order book of $27M: Received $2.4M energy storage order for Hawaii VPP + Received +$7M micro inverter order for North American markets. Completed phase one plant commissioning, production transition, and IFT (production test and capacity) installation for turn-key manufacturing in San Jose, CA. A second IFT installation planned for September 2022, doubling capacity to 800 units per month
Aug. 31 - Announces Closing of C$33 M Investment by ITOCHU and US$5M from Western Technology Investment: Proceeds will be allocated to fund working capital and general corporate expenditures of the Company.
Nov. 21 - Announces 4th Quarter 2022 Financial Results: Notes that due to a change that will make December the Company’s year end adding a fifth quarter to fiscal 2022 results, September results do not represent its full fiscal year.
Eguana doubled its energy storage and micro inverter shipments during fiscal Q4 compared to the previous quarter while continuing to scale full turnkey production in San Jose, California. Supply chain risk continues to be effectively managed through the Company’s Alternative Parts program, and additional production capacity test equipment has been installed and commissioned
Nov. 30 - Receives Additional $15 Million Micro Inverter Order: Shipments will commence in January with complete fulfillment expected over the next two quarters. Eguana confirmed it has fulfilled its $7M micro inverter backlog from June 2022 with increasing visibility on future orders and demand through its partners.
Dec. 22 - Grants Key Employees Stock Options for 2022: Aggregate of 4,195,000 common shares. Of the options granted, 2,7M were granted to directors and executives at $0.40 per share, the remainder to employees at $0.265.
Feb 21 - Provides Revenue Update for its Fifth Fiscal Quarter and 2022 Fiscal Year:
i) Preliminary unaudited revenue for the fiscal quarter ending December 31, 2022, is expected to exceed $10.3M, representing an increase of >300% compared to December 31, 2021. ii Preliminary unaudited revenue for FY2022 ended December 31, 2022, revenue is expected to exceed $17M, an increase o f>135% compared to FY 2021.
Summary
Manufacture and Licensing
Eguana has a major licensing agreements with PowerCenter+ (an Omega EMS Subsidiary). The manufacturing and licensing agreement with PowerCenter+ outlined a minimum of 10,000 systems over three years with the goal of launching a premium line of home energy storage systems in North American and Caribbean markets. Inclusive to the deal is a manufacturing agreement with Omega EMS to build systems in San Jose, California.
“The partnership with the Omega entities was critical for us to significantly increase our manufacturing capacity and move towards our objective of 800-1000 units per month for North American markets. We also expect to see a step up with respect to product quality which inherently simplifies the installer and customer experience,” - Eguana CEO.
Orders
A number of significant orders materialized:. i) August 2022, orders >$2.4M in units to be deployed in Hawaii’s VPP Battery Bonus program from Pineapple Energy; ii) June 2022. Eguana received a $7M Micro Inverter order from the Omega Group. The micro inverter line has been developed to accept her power than competitive products delivering up to 15% more energy annually; iii) November 2022, an additional $15M Micro Inverter order from Omega.
The two above order of $22M from Omega build on two previous major orders with PowerCenter+ (17M).: a first order of $6M (500 units, December 2021) and a subsequent +$11M (1,000 units, February 2022) totaling a combined $39M.
Financing
A $33M Investment by Itochu Corporation ($0.50 cents conversion) and $5M Loan from WTI were salient. The Itochu Investment bears a 7% interest which can also be paid in shares .WTI also waved previous conditions for the loan.
The Debenture will mature and be repayable on the date that is three (3) years from the Closing Date. The Debenture will bear interest at a rate of 7% per annum, compounded semi-annually and payable semi-annually or on such earlier date on which the Debenture is converted pursuant to its terms. The Company may satisfy its obligation to pay the interest due, in whole or in part, by issuing to ITOCHU such number of Common Shares as is equal to the aggregate amount of interest owing divided by the 5-day volume weighted average trading price of the Common Shares on the TSXV immediately prior to the date on which such interest becomes due and payable.
Earnings
Recently Eguana provided some preliminary unaudited numbers for Q5 2022 (A result of a change of the year end date from September 2022 to December 2022; a fifth quarter to fiscal 2022 was added). Overall the Q5 2022 revenue estimate (RE) is $10.3M representing $17M for FY2022. This constitute a major departure from previous years.
Options
A total of 4,195,000 common shares were granted; 2,7M to directors and executives at $0.40 per share, the remainder to employees at $0.265 cents. Note it was similar to last year's grants: 4.5M; 3.45M at $0.40 and rest at $0.275 cents.
Insider Activity
George Powlick (Chairman of the Board) has been active in the last period investing more than $185,000.
In short
In the last nine months EGT.V valuation ranged from $0.21 cents to $0.46 cents.
The ITOCHU investment of $33M ($0.50 cents conversion) and incremental $5M loan from WTI were critical in permitting Eguana to meet over $22M in orders received by Omega Group resulting in record earnings.
For perspective, Q5 (Q4 2022) unaudited revenues (one quarter; $10M) are greater than FY202 revenues. In addition, the unaudited estimated revenue for FY2022 ($17M) represent more than the whole FY2021 and FY2020 combined.
Otherwise, Stifel has issued a few price targets August 29, 2022 ($0.65 cents), November 30, 2022 ($0.50 cents) and more recently February 21, 2023 ($50 cents) based on a revenue forecast of $61M for FY2023 which seems "rich".
Remember Eguana has not provided guidance: No additional details were provided on outlook or profitability. Hence, Stifel's target is based on a multiple: EGT trades at 1.6x 2023E EV/Sales, while the median peer group average is 5.0x.
Keep in mind, despite exercising 7.7M of warrants in the Fourth Quarter, EGT still have 27.6M of warrants outstanding.
These warrants are in addition to the ITOCHU Convertible Debentures ($33M).
As per release: ITOCHU will be entitled to convert all or part of the principal amount of the Debenture into common shares at a price of $0.50 per common share. If all the debentures were converted it's 66M shares at $0.50 cents!
These parameters assist in explaining the current stock price but also frame a ceiling on valuation. It is yet to be determined whether this is the beginning of a new era for Eguana or if the recent performance is an anomaly.
Its likely not a "one-off" as Mr. Powlick's insider activity suggests otherwise.
Q4 2022 filings stated:
For the three-month period ending September 30, 2022,... revenue for the period was $2,602,195 (1,150 units comprised of Evolve, Enduro, Elevate and Enfuse)
For the twelve-month period ended September 30, 2022, product sales were $6,469,208 (6,387 units comprised of Evolve, Enduro, Elevate and Enfuse),
The agreement stated: PowerCenter+ has committed to a minimum volume of 10,000 systems over three years.
The above suggests that Eguana could be half-way through from the minimum 10,000 systems already. Overall, Its difficult to ascertain. Hence, investors would be served with a FY2023 detailed outlook and a clear revenue guidance.
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