Comment on Eevia Health’s Q4-22 Report

On February 24th, Eevia Health published the company’s quarterly report for Q4-22.

Finishing off the Final Quarter with Solid Growth

During Q4-22, the net sales amounted to EUR 1.4m (1.3), corresponding to an increase of 115% YoY and 24% QoQ. Adjusted for one-off charges of EUR 0.14m in Q4-21, net sales increased by 77%, from EUR 0.8m in Q4-21 to EUR 1.4m in Q4-22. In a full-year perspective, net sales amounted to EUR 5.9m (6.7), corresponding to a decrease of 11%, which is below our expectation as we had forecasted EUR 7.0m. Revenues in 2021 included approximately EUR 2m trading revenues, which was not the case in 2022. Hence, there was an underlying revenue growth when the trading revenues are corrected for. Although the net sales were below our forecast, we estimate that Eevia will capitalize on market tailwinds going into 2023. The company has achieved significant production improvements during Q4-22 and received multiple sales orders in Q1-23, where the biggest order amounted to EUR 187k. In the CEO comment, it is mentioned that the average product output per batch has increased from 65 kg in Q1-22 to 250 kg at the end of Q4-22, with further expected improvements in Q1-23, which indicates that production issues are becoming less of a problem. However, it is also mentioned that a slight slowdown in customer demand has been observed, which is estimated to cause headwinds in the short-term. Nonetheless, we believe that Eevia’s improved operations and the unique product offerings will enable the company to capitalize on the structural market growth in the nutraceutical market going forward.

Another Quarter Yielding a Positive EBITDA

The EBITDA during Q4-22 amounted to EUR 17k, compared to EUR -811k in Q4-21, resulting in an EBITDA-margin of 1%. A small decrease in EBITDA from Q3-22 was attributed to higher personnel and other operating expenses. Looking at the full year results, EBITDA amounted to EUR -0.6m (-2.1), corresponding to a 73% decrease in the negative result. The result for the full year is relatively in line with our estimate as we had forecasted an EBITDA of EUR -0.5m. While we had forecasted higher net sales, the gross margin was stronger than expected due to continued improvements in production and recovery yields, which boosted the EBITDA. Eevia has now achieved two 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.

Cash Position and Free Cash Flow

At the end of Q4-22, Eevia’s cash balance was EUR 0.6m, compared to EUR 0.1m at the end of Q3-22, corresponding to a net change in cash of EUR 0.5m. The increase in cash was mainly attributable to the net proceeds of EUR 1.9m from the rights issue in November 2022. Eevia’s free cash flow during Q4-22 amounted to EUR -1.1m, compared to EUR -0.5m during the previous quarter. The widening of the negative free cash flow was mainly attributable to a build-up in inventory causing a cash outflow of EUR -0.8m. Furthermore, Eevia had current assets of EUR 3.9m at the end of Q4-22, where EUR 2.7m consisted of inventory, given that this is converted to cash, this should be sufficient to finance the operations in the next 12 months. During the first weeks of 2023, Eevia has also announced a number of business wins, for example a sales order of EUR 187k which will be delivered over three deliveries during 2023, the first one in February. Additionally, Eevia had a current ratio of 1.1x which indicates that the company’s is able to pay its near-term obligations.

In conclusion, we see that Eevia continues to progress well operatively. Although the demand from customers may slow down in the short term, we see that Eevia has taken proactive measures, such as improving production to free up capacity and streamlining the cost structure to counteract a potential demand slowdown, which is estimated to benefit the company’s bottom line over time. Thus, Analyst Group iterates its positive view of Eevia.

We will return with an updated analysis of Eevia Health.