Comment on Eevia Health’s Q1-23 Report

On May 16th, Eevia Health published the company’s quarterly report for Q1-23.

Enters the First Quarter with Robust Revenue Performance and a Solid Order Backlog

During Q1-23, the net sales amounted to approx. EUR 1.7m (1.7), corresponding to an increase of 3% YoY and 20% QoQ. When excluding revenue of EUR 42k from raw materials trading income in Q1-22, the net sales grew to EUR 1.7 in Q1-23 compared to EUR 1.6m in Q1-22, which corresponds to a 6% growth. The net sales were relatively in line with our expectations, where we estimated that Eevia would capitalize on market tailwinds going into 2023. The company has achieved significant production improvements during Q1-23 and has received a large sales order in Q2-23 amounting to EUR 2.1m, which corresponds to roughly one third of the year 2022’s net sales. In the previous CEO comment, it was mentioned that a slight slowdown in customer demand had been observed, which could cause headwinds in the fall. Nonetheless, we see that Eevia has a solid order backlog in the short term and is well-positioned to perform well in the year of 2023 going forward.

EBITDA Positive for the Third Quarter in a Row

The EBITDA during Q1-23 amounted to EUR 0.3m, compared to EUR -0.4m in Q1-22, resulting in an EBITDA margin of 15%, which was above our expectations. The YoY improvement in EBITDA was attributed to a stronger gross margin due to better production yields and improved productivity. Eevia has now achieved three consecutive quarters with a positive EBITDA, and Analyst Group expects the trend to continue going into the year 2023, where the company is forecasted to reach a positive EBITDA for the full year of 2023. Remarkably, Eevia also managed to show a positive net income of EUR 17k during Q1-23, which is the first time to date, and something Analyst Group does not expect on a full-year basis until year 2024. The positive net result was mainly attributable to the increased revenue, improved EBITDA and a discontinuation of non-recurring financial costs incurred during Q4-22.

Financial Position and Cash Flow

At the end of Q1-23, Eevia’s cash balance was EUR 81k, compared to EUR 0.6m at the end of Q4-22. The decrease in cash was mainly attributable to repayment of loans amounting to EUR 0.6m. Eevia’s free cash flow during Q1-23 amounted to EUR 47k, compared to EUR -1.1m during the previous quarter which is a significant improvement. The improvement in the free cash flow was mainly attributable to a positive operating cash flow and positive changes in working capital. Although the cash position looks challenging, Eevia had current assets of EUR 3m at the end of Q1-23, where EUR 2.3m consisted of inventory, and given that this is converted to cash, it should be sufficient to finance the operations in the next 12 months. After the end of Q1-23, Eevia has also announced a number of business wins, for example a sales order of EUR 2.1m which will be delivered and invoiced during in Q2-23. Additionally, Eevia had a current ratio where the current assets exceed the current liabilities with a factor of 1.1x in Q1-23, which indicates that the company’s ability to pay its near-term obligations is good.

In conclusion, we see that Eevia continues to progress well operatively. Although the demand from customers may slow down in the medium term, we see that Eevia has taken proactive measures, such as improving production to free up capacity and streamlining the cost structure to counteract an eventual slowdown in demand, which has also benefitted the company’s operating results. Additionally, Eevia has a substantial order amounting to EUR 2.1m which is estimated to be invoiced in Q2-23. Thus, Analyst Group see that Eevia is well-positioned to continue growing the business where we iterate our positive view of Eevia.

We will return with an updated analysis of Eevia Health.