Eevia Health Plc (”Eevia” or “the Company”) announced on Tuesday, March 19^th, that the Company has received a grant of approx. SEK 2.7m (EUR 243k) from Business Finland for finalizing a development project for the documentation of bioactivity on Eevia’s products. Eevia executed the project in 2023 and submitted the final report in Q1-24, which has now been approved.

A central activity in the project was a broad in vitro screening of Eevia’s top extracts on the Eurofins BioMAP phenotyping platform. The successful execution of the study provided Eevia with a collection of new insightful research data on the Company’s products, with especially promising bioactivity for one ingredient. Eevia is now seeking approx. EUR 0.8m in new non-dilutive funding from the continuation project named ”Global Vision”.

Additionally, Eevia announced on Monday, March 18^th, that the Company has revised its information policy. This means that from now on, Eevia will only disclose orders or contracts with a sales value over EUR 50k, or when the accumulated value of several smaller orders exceeds that threshold, contrasting with the previous threshold of EUR 10k.

Yesterday’s announcement was closely followed by the news that Eevia has received a framework agreement of approx. SEK 1.5m (USD 142k) for the elderberry extract Feno-Sambucus™ 7 Organic from a distributor in the US. The order comes from Select Ingredients, a distributor located in San Diego, specialized in organic ingredients and high-quality natural plant extracts, serving branded customers in California and other large states across the US. The end customer is a company in the whole foods and drinks segment, which is experiencing rapid growth across North America.

On Tuesday, March 19^th, Eevia announced that the Company has received multiple orders with an accumulated value of approx. SEK 0.5m (EUR 50k) from various European customers. The sales orders are for the products Feno-Chaga M (Chaga extract), Feno-Myrtillus 25 Organic, Feno-Myrtillus 36 Organic (both bilberry extracts) and Fenoprolic 70 Organic (Pine bark extract). Thus, Eevia has received sales orders totaling approx. SEK 2.0m during the last two days, and the Company expects further repeat orders in the future from the same customers.

Analyst Group’s view

“Given Eevia’s challenging H2-23, where the repercussions from the loss of the major customer became evident, Analyst Group is pleased to see signs of a strengthened business momentum, as highlighted by the multiple sales orders totaling approx. SEK 2.0m announced recently. To put this number in context, Eevia’s net sales amounted to approx. SEK 3.6m (EUR 317k) during Q4-23, hence, the sales orders from this week equals approx. 56 % of the net sales in the last quarter.

The large framework agreement of approx. SEK 1.5m marks the first order where Eevia offers free on board (FOB) prices from New Jersey. The Company’s recent reorganization of distribution in North America, announced in January 2024, is already yielding results. By maintaining buffer stock in New Jersey and thus reducing lead times, Eevia is poised to enhance the Company’s competitiveness in the North American market, which presents considerable growth opportunities ahead.

Additionally, the received grant of approx. SEK 2.7m is of major importance, given Eevia’s strained financial position at the end of Q4-23. A strengthened cash position enables Eevia to be more flexible in terms of marketing incentives to fuel future growth and broadening the customer base, which is an important task following the major customer loss last year.

Overall, Analyst Group views the recent news positively, as the sales orders demonstrate that Eevia has taken necessary actions towards regaining growth. This is exemplified by the reorganized distribution in the US, which is already bearing fruit. With a more diversified customer base, a strong product portfolio, promising growth prospects in North America, and a strengthened balance sheet, Eevia is taking the right steps toward returning to growth.”

On February 14^th, Eevia Health published the company’s quarterly report for Q4-23. The following are some points that we have chosen to highlight from the report:

• The reported net sales fell short of our estimates
• Strong gross margin contributed to the first full year with positive EBITDA
• Recent positive development bodes well for future growth
• Short-term financial position secured by credit facility

A Weak H2-23 Hampered the Net Sales for the Full Year 2023

During Q4-23, the net sales amounted to approx. EUR 0.3m (1.4), corresponding to a decrease of 78% YoY, and a decrease of 65% QoQ compared to Q3-23, where net sales amounted to EUR 0.9m. The repercussions of the major customer’s temporary pause in order placements due to inventory buildup, as announced in the last report, are evident in the sharp revenue decline during the quarter. Although Analyst Group had anticipated lower net sales compared to the same period last year, the reported net sales fell well below our estimate of EUR 0.9m, as we did not foresee such a rapid decline.

It’s worth mentioning that the company was compelled to relabel several batches due to a global analytical service partner’s disclosure of erroneous lab reports, leading to product returns from some customers and negatively impacting net sales directly through credit notes by approx. EUR 0.2m. The indirect consequences of delayed sales are not quantified. To clarify, adjusted for credit notes from returns, net sales amounted to approx. EUR 0.6m during Q4-22, and Eevia confirms that the problem has since then been resolved.

Eevia has initiated several strategic initiatives during the quarter to mitigate the declining revenue, such as increased marketing activities, participation in a trade show exhibition, and appointing a new Commercial Director. Analyst Group believes that the outcomes of the company’s recent initiatives have yet to reach their full potential, and that Eevia’s efforts are crucial to diversify the customer base and thereby pave the way for future growth.

Regarding the full year of 2023, Eevias net sales amounted to EUR 4.9m (5.9), corresponding to a decrease of approx. 17% or EUR -1.0m in absolute terms, which fell short of Analyst Group’s estimates in our latest analysis, where we estimated net sales of EUR 5.5m for the full year. The decline in revenue for the full year can predominantly be ascribed to the same factor that affected sales this quarter: the major customer abruptly halted order placements starting in June 2023 and credit notes due to product returns. This action led to weak sales development in H2-23, given that the customer constituted a significant part of Eevia’s revenues. Eevia stated in the Q4-report that the company added EUR 1.2m in sales from other clients in H2-23, an increase of 64% from H2-22, which indicates that the large customer that halted order placements constituted approx. 70% of the net sales during H2-22.

Strong Gross Margin Compensated for the Major Net Sales Decline

The gross profit during Q4-23, adjusted for non-recurring items, reached EUR 0.2m (1.0), corresponding to a decrease of 81% YoY, and 48% QoQ compared to Q3-23, where gross profit amounted to EUR 0.3m. The gross margin was 57% during the quarter, which was down from 68% in Q4-22, but up from 38% in the previous quarter. The increase in gross margin compared to Q3-23 stems from a changing product mix, where higher margin products constituted a larger part of the revenue. Additionally, there was no effect on gross margin from side-stream products in Q4-23.

For the full year of 2023, the gross margin amounted to 58% (41%), which exceeds the company’s target of achieving a gross margin over 50% going into 2024. With increased focus on optimizing the product mix as well as utilizing side-stream products more efficiently, Analyst Group estimates that Eevia can continue this trend going into the new year and deliver a gross margin exceeding 50% in 2024.

The EBITDA during Q4-23 amounted to EUR -146k (17k), corresponding to a YoY decrease of EUR -163k in absolute terms and a decrease of EUR -148 compared to the previous quarter, where the EBITDA amounted to EUR 2k. The decrease in EBITDA was mainly attributed to lower sales. Looking at the company’s operating expenses, excluding COGS and depreciation, these amounted to approx. EUR -0.5m (-0.9), which corresponds to a decrease of 46% and EUR 0.4m in absolute terms Y-Y, in line with Analyst Group’s estimates. The decrease in the cost mass compared to the same quarter 2022 is derived from a reduction in both personnel- and overhead costs, signaling Eevia’s ability to adapts the cost costume as the circumstance’s changes, which became evident when the large customer abruptly disappeared from the order book.

In reflection of the full year 2023, the EBITDA amounted to EUR 0.8m (-0.6), equivalent to an EBITDA margin of 15%, and marks the first full year with positive EBITDA in the company’s history. Despite a 17% decline in net sales compared to 2022, the improved EBITDA result of EUR 1.3m in absolute terms shows that Eevia’s efforts to enhance production efficiency and reduce the company’s cost base are paying off. This is evidenced by the impressive gross margin development (58% in 2023 vs. 41% in 2022) and the reduction in personnel and overhead costs. These improvements are promising for the coming years, as Analyst Group estimates that the top-line development will improve dramatically.

Communicated Several Positive Updates Recently

Eevia has demonstrated significant operational developments unfolding in the first weeks of 2024. For example, the company has announced a reorganized distribution in North America, initial negotiations for a potential sales contract for 2025, a secured credit line of approx. EUR 0.6m, evaluation of a collaboration with a global market leader in eye health regarding a novel ingredient Eevia developed over the last 4 years, as well as a number of communicated sales orders.

Analyst Group has previously commented on the reorganized distribution, which you can find here. The new local distributor in New Jersey will not only lower logistical costs, a crucial consideration given the current financial situation, but it will also bolster Eevia’s value proposition by enabling more competitive prices and fulfilling the rising demand with quicker deliveries and increased supply reliability.

After the end of the quarter, Eevia revealed negotiations with a European food manufacturer whose annual revenue exceeds EUR 500m, with the potential for significant contribution to Eevia’s topline and profits in 2025. A more comprehensive comment from Analyst Group can be found here. While no contracts have been confirmed, this indicates an increasing demand for Eevia’s products. Securing such a substantial sales contract could affirm Eevia’s capabilities and set the stage for sustained long-term growth. Eevia expect to finalize the discussions by the end of Q1-24, which serves as a trigger in the near term.

One notable aspect of an order announced in early January (EUR 46k) is its origin from side streams of Eevia’s primary berry extract production. The company highlighted, with an example, that producing EUR 50k worth of berry extract could generate an additional EUR 35k in side-stream revenue. Despite costs associated with processing side-stream products, this underscores significant potential to 1) increase future revenues and 2) contribute to an increased gross margin. This is due to lower COGS for valorizing non-utilized side streams compared to berry extracts.

The announcement of a possible collaboration with a leading eye health player in early February highlights how investments in studies, such as the BioMAP study concluded in Q3-23, can pave the way for potential collaborations. Eevia can demonstrate herbal equivalence or superiority against market leaders’ products, and such data is crucial in securing sales contracts with major brands. In the report, Eevia’s CEO, Stein Ulve, emphasized that the data from the study could potentially be a game-changer for the company’s revenue growth.

Constrained Financial Position Despite Positive Operating Cash Flow During the Quarter

At the end of Q4-23, Eevia had a cash balance of approx. EUR 0.1m, compared to EUR 0.5m at the end of Q3-23, resulting in a net cash of approx. EUR -0.4m. This decline was primarily driven by investments in intangible and tangible assets, as well as loan repayments. Following the quarter’s end, Eevia secured a credit line of EUR 640k to enhance working capital flexibility. Eevia reported a positive operating cash flow (OCF) of approx. EUR 0.1m during the quarter, compared to EUR -0.9m in Q4-22, marking a substantial improvement from the previous quarter’s OCF of EUR -1.0m. The positive OCF was mainly due to changes in working capital during the period. Despite facing declining revenues and increased efforts to compensate for this decline, Eevia has exhibited stable cost control.

However, the free cash flow (FCF) for the quarter was negative (EUR -0.2m), impacted by investments totaling EUR -0.3m. According to Analyst Group, Eevia is facing the challenge of balancing investments needed to maintain operations and fuel further growth while managing a constrained liquidity position. This could potentially hinder the company’s pursuit of necessary growth activities to return to historical growth levels in the coming quarters. Therefore, it’s worth considering that Eevia may need to explore external capital-raising avenues to strengthen the company’s balance sheet moving forward.

In conclusion, Eevia delivered a Q4 report that fell short of our estimates, particularly in net sales, as Analyst Group did not anticipate such a drastic decline. The company surprised positively on the upside concerning the gross margin, and coupled with a reduction in the OPEX base, Eevia demonstrated an impressive cost control. Despite the significant drop in net sales this quarter, Analyst Group believes that the marketing and sales efforts seen in recent months have yet to fully materialize. With a more efficient and streamlined organization, Eevia is well positioned to capitalize on its strong product portfolio. Nevertheless, the company’s liquidity needs careful monitoring going forward, as acquiring customers requires resources that may strain the cash balance.

We will return with an updated equity research report of Eevia Health.

Eevia Health Plc (”Eevia” or the “Company”) announced on Friday, January 12^th, that the Company has entered into negotiations with a European food manufacturer, with annual revenue amounting to approx. EUR 500m, to manufacture a new plant extract (the “Product”) with the potential to significantly contribute to Eevia’s topline and profits in 2025. The manufacturing would start earliest in December 2024 and will require 20% to 40% of Eevia’s annual production capacity for 2025, with an option to extend both annual volumes and the contract period till 2027. The parties expect to finalize negotiations by the end of Q1-24.

The customer is a listed and well-established medium-sized European branded food corporation, and Eevia has executed five (5) pilot test productions for the customer during 2023. The Product is an innovative extract from a plant material and the starting material for Eevia will be pre-manufactured and provided to the Company by the customer, free of charge. Additionally, part of the contract volume will be “take and pay,” which will guarantee a minimum sales volume for Eevia.

“This project is a welcome opportunity for Eevia to lock in significant revenues for 2025, and potentially for 2026 and 2027. This and similar opportunities we have in our pipeline provide traction towards achieving our long-term revenue target of EUR 25 million,” says Stein Ulve, Eevia’s CEO.

Analyst Group’s view

In our last equity research report, we mentioned that the ramp-up in sales had fallen short of our expectations, primarily attributed to a larger customer temporarily halting order placements due to inventory buildup. In the Q3 report, Eevia communicated that the Company expected to announce significant sales orders in the latter part of Q4-23 and going into 2024, following the drastic increase in sales and marketing efforts in Q3-23. Consequently, Analyst Group views the news of a potential sales contract positively, anticipating a significant impact on top-line development in the coming years, given that the negotiations succeed.

The fact that a well-established company of that size is choosing to negotiate with Eevia regarding the production of a new innovative extract is not only crucial for Eevia in reaching the Company’s long-term financial goal of EUR 25m in revenue, but if executed properly, it would also validate Eevia’s capabilities. This could demonstrate that the Company has the necessary infrastructure, resources, and expertise to handle substantial demands, thereby creating ripples in the water and setting the stage for further long-term growth.

Another crucial factor to consider if the negotiations materialize is that Eevia is guaranteed a minimum sales volume, and that the Company won’t have to bear the costs of the starting material. This lowers the project risk for Eevia, a significant aspect given that it could potentially require up to 40% of Eevia’s annual production capacity for 2025.

Eevia Health Plc’s (”Eevia” or ”the Company”) announced on the 10^th of January 2024 that the Company has reorganized distribution in North America with the objective to have a more transparent value chain beyond the distributors, which will result in shortened delivery time to end clients as well as reduced logistic costs for Eevia.

Eevia implemented a new policy in early 2023, requiring transparency with distributors regarding the end clients of sales in all markets. Moving into 2024, Eevia is working with Select Ingredients as a distributor in the US, while the distribution agreement with Barrington has been terminated, thereby transferring Barrington’s client relationships to Eevia’s new Commercial Director, Erik Eide, who joined the Company in December 2023.

Eevia is initiating collaboration with a local New Jersey company specializing in forwarding dietary ingredients under the USDA NOP program, which facilitates the import of products to the US, allowing Eevia to maintain buffer stock in New Jersey with all transaction certificates issued (including the NOP organic certificate) ready for customers.

The agreement enables cost-effective transportation of larger volumes from Finland to the US via sea freight, avoiding the more expensive air freight. This approach not only reduces transportation costs but also streamlines handling, customs procedures, and certification efforts on larger volumes with less time pressure.

In addition to the abovementioned news, Eevia communicated today that the Company received an extension of EUR 11k (SEK 115k) to the sales order of EUR 22k (SEK 228k) which was announced on the 20^th of December 2023. The initial order as well as the extra order is from a German customer for Feno-Myrtillus® 36 organic, an organically certified bilberry extract, which the Company has in stock for immediate delivery.

Analyst Group’s view of the news

Analyst Group has an optimistic view of the new distribution partner with a local presence in the US, as it is expected to improve the Company’s value proposition by enabling faster delivery, higher reliability of supply, and simultaneously reducing logistic costs. In light of Eevia’s announcement in the Q3 report regarding the Company’s intent to diversify the customer base and reduce dependence on a few major customers, the reorganized distribution strategy in North America is seen as an initial stride toward broadening the Company’s presence in the North American market. This could potentially serve as a strong growth catalyst in the years to come, given the substantial market potential.

With a reorganized distribution system in place and a new, experienced Commercial Director based in North America, Eevia has laid a solid foundation to capitalize on the increased demand from the North American market. The Company communicated that this increased demand was observed during the Supply Side West tradeshow in Las Vegas in Q3-23, and Analyst Group expects the Company to convert some of this into actual sales contracts going forward.

Additionally, as one of Eevia’s major clients temporarily suspended order placements in Q3-22 due to inventory buildup, creating short-term pressure on revenue growth, it’s imperative for Eevia to uphold effective cost control. Reducing logistics costs by reorganizing distribution is a vital step in maintaining a healthy cost base, while simultaneously paving the way for future growth and is well-positioned to capitalize on the growing demand from the North American market.

Regarding the additional order of Feno-Myrtillus® 36 Organic that Eevia communicated today, Analyst Group is encouraged to observe continued demand from the German customer for Eevia’s concentrated bilberry extract. Eevia has communicated several sales orders since the publication of the Q3 report in late November, ranging from EUR 11k to EUR 69k, totalling EUR 218k. Despite the challenging market conditions, the steady sales momentum reinforces the market interest in the Company’s products, indicating that Eevia meet the markets demand.

On November 22^nd, Eevia Health published the company’s quarterly report for Q3-23.

Lower Net Sales Than Anticipated – Guides for a Similar Q4

During Q3-23, the net sales amounted to approx. EUR 0.9m (1.1), corresponding to a decrease of 20 % YoY, and a decrease of 54 % QoQ compared to Q2-23, where net sales amounted to EUR 2.0m. Although the company had guided for a weaker H2-23, net sales were below our estimates. The decrease is mainly attributed to a larger customer that has temporarily halted order placements due to inventory buildup.

Eevia Health delivered the final volumes of an order to one of its largest customers in the previous quarter (Q2-23), indicating that we most likely won’t see any recurring orders from this customer until late 2024 or early 2025, when they will need to replenish their stock. Due to Eevia’s concentrated customer base, where a few large customers constitute the majority of the sales, there is a possibility of lower production volumes throughout a significant portion of 2024. Consequently, the company has entered a transformational phase, aiming to broaden its customer base and move away from its historical reliance on a few large customers. Thus, the beginning of the third quarter was marked by a reduction in the short-term sales order base, leading to a significant increase in marketing and sales efforts. To illustrate this rapid increase in marketing, Eevia produced much more marketing “content” in Q3-23 than in the combined years of 2020, 2021, 2022, and H1-23.

One of the main marketing activities during the quarter was to attend the tradeshow, Supply Side West, in Las Vegas. This stands out as a pivotal event in the global nutraceutical industry, with over 18 000 industry professionals attending and with more than 84 % of the attendees expressing their primary goal as sourcing new ingredients and suppliers, thus the event serves as a crucial platform. According to the company, the exhibition at the event was successful, and the company is currently experiencing the highest level of interest to date from potential customers, with many new leads and a range of significant sales opportunities. Eevia is diligently working to convert these potential sales opportunities into actual sales contracts. Additionally, Eevia has strengthened the marketing and sales side during the quarter, especially in North America. The company expects to continue to strengthen competence and capacity in these fields and is utilizing the increased interest from the North American market.

In the CEO letter, Stein Ulve shed some guidance going forward, where he states:

“Revenues in Q4-23 itself will likely remain on par or below Q3-23. However, we expect gross margin to improve to over 50% going into 2024, We expect to announce significant orders as a result of our recent sales and marketing efforts in the latter half of Q4-23 and going into 2024.”

Change in Product Mix Put Short Term Pressure on the Gross Margin

The gross profit during Q3-22 reached EUR 0.3m (0.7), corresponding to a decrease of 52 % YoY, and 70 % QoQ compared to Q2-23, where gross profit amounted to EUR 1.4m. The gross margin was 38 % during the quarter, which was down from 63 % in Q3-22, and down from 68 % in the previous quarter. The decrease in gross margin stems from a change in product mix, where lower margin products constituted a larger part of the net sales during the quarter. The company highlights that side-stream products had no effect on the gross margin during Q3-23.

The EBITDA during Q3-23 amounted to EUR 2k (EUR 56k in Q3-22), which was below our expectations, and a substantial decline compared to the previous quarter, where the EBITDA amounted to EUR 0.6m. The decrease in EBITDA is attributed to lower turnover combined with a weaker gross margin. However, the decline was to a certain extent mitigated by significantly reduced personal and overhead costs during the quarter, which enabled the company to show a positive EBITDA-result, albeit close to zero.

During the year, the company has successfully improved its production efficiency, allowing the company to reduce the labor requirements by approx. 25 %, while maintaining the same output capacity. The production improvements are attributed to a new operational model that was implemented during August, where the company transitioned from a 24/7 (21 shift) to a 24/5 (14 shifts) operational model. Apart from this, additional temporary layoffs helped to further reduce the personnel costs during Q3-23.

In summary, Eevia has reported positive EBITDA results over five consecutive quarters, albeit a substantial decrease during Q3-23 compared to previous quarter. When examining the EBITDA LTM, a significant improvement is observed in the first nine months of 2023 compared to 2022. As the company hints at a reduced short-term sales order base, it’s encouraging to see that efficiency improvements and the streamlining of operations are bearing fruit. This acts as a cushion for the company in case it experiences lower sales volumes going forward.

Financial position

At the end of Q3-23, Eevia’s cash balance amounted to EUR 0.5m, compared to EUR 0.3m at the end of Q2-23, resulting in a net cash of EUR 0.2m. The increase in cash was mainly attributable to a capital injection following the direct share issue in August, which resulted in gross proceeds before fees of approx. EUR 1m (SEK 11.5m). Additionally, a commercial bank loan of EUR 0.5m was entered with Nordea during the quarter, which further strengthened the liquidity. Eevia’s operational burn rate amounted to EUR -1m during Q3-23, equivalent to EUR -0.3m per month, compared to a positive operating cash flow of EUR 0.1m per month during the previous quarter. The negative change is attributed to the lower operating result, investments in R&D, as well as a negative effect of changes in working capital, including an increased receivables balance following shipment of volumes in the latter part of the quarter. The FCF during the quarter amounted to EUR -1.3m, reflecting an increase in investments, which amounted to approx. EUR -0,2m during Q3-23. Going forward, assuming a burn rate of EUR -0.1m per month, which we believe is reasonable given the transformative phase that the company is entering with increased customer acquisition costs (CAC), Eevia’s cash balance of EUR 0.5m is estimated to be sufficient to finance the company until the end of Q1-24, all else equal. Analyst Group believes that the current financial position is strained, and the increased burn rate has rapidly diminished the capital injection from the directed share issue and the loan. Thus, considering the current situation, we cannot rule out the possibility that Eevia may need to pursue some form of external capital raise in the near future.

In conclusion, all though Eevia had guided for a weaker second half of 2023, the company delivered a Q3-report that fell short of our estimates, both on top-line as well as profitability. Analyst Group views the transformative phase the company is entering as positive in a long-term perspective. The increased CAC is expected to lead to a more diversified customer base, reducing the dependence on a single customer and thereby lowering customer concentration risk in the long term. However, the negative aspect of this is that it will most likely exert pressure on the company’s growth plans for 2024, resulting in lower revenue growth than previously guided. Finally, the liquidity of the company must be closely monitored going forwards, since the increased burn rate has put pressure on the cash balance. Analyst Group cannot rule out the possibility that the company must pursue some form of external capital raise to strengthen the financial position further.

We will return with an updated equity research report of Eevia Health.

On August 23^rd, Eevia Health published the company’s quarterly report for Q2-23.

Continued Revenue Growth

During Q2-23, the net sales amounted to approx. EUR 1.9m (1.8), corresponding to an increase of 8% YoY, and 16% QoQ compared to Q1-23, where net sales amounted to EUR 1.7m. The net sales were in relatively in line with our expectations, where we estimated that Eevia would record sales from several orders in April amounting to EUR 2.1m. Looking forward, the Company guides for weaker results in the second half of 2023. 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. However, longer term revenue targets remain intact. Eevia delivers a strong quarter in terms of top-line results and although the H2-23 is expected to be weaker than H1-23, we see that Eevia is well-positioned to reach long-term goals as the company has managed to resolve temporary issues with production and achieved increased efficiency.

EBITDA Reaches New Record Levels

The EBITDA during Q2-23 amounted to EUR 0.6m (-69k in Q2-22), resulting in an EBITDA margin of 32%, which was significantly 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 a positive EBITDA in the last twelve months, and we estimate that the company will reach a positive EBITDA for the full year of 2023. However, we forecast the EBITDA margin to reach high single-digits for the full year rather than double-digits. Eevia also managed to show a positive net income of EUR 0.4m during Q2-23, resulting in a net margin of 21%. The positive net result was mainly attributable to the increased revenue and improved EBITDA due to higher gross margins as well as reductions in personnel which was enabled by productivity increases in production.

Strong Cash Flow and External Funding Strengthens Financial Position

At the end of Q2-23, Eevia’s cash balance was EUR 0.3m, compared to EUR 81k at the end of Q1-23, resulting in a net cash of EUR 0.24m. The increase in cash was mainly attributable to stronger operating cash flow which amounted to EUR 0.3m. Furthermore, after the end Q2-23, Eevia Health managed to secure additional funding of approximately EUR 1m (or SEK 11.5m) before fees through a directed share issue in August. Going forward, assuming a burn rate of EUR -0.1m per month, which we believe is conservative to assume and is also in line with the LTM burn rate per month, and cash balance of EUR 0.3m as well as proceeds from the directed share issue of EUR 1m, Eevia is estimated to be financed until the end of Q2-24. However, CEO Stein Ulve expects that the company will be able to tap into more conventional funding now when the Eevia has strengthened its capitalization which will enable the company, along with improved operating results, to be financed longer than estimated. Therefore, we believe that Eevia is sufficiently capitalized and that the worst uncertainty regarding the financial position is behind the company.

In conclusion, we see that Eevia continues to progress well operatively. Although the second half of 2023 is expected to be weaker, Eevia has shown that the company can deliver black numbers with high margins despite a tough macro-environment. With a streamlined production, a strengthened balance sheet, and opportunities to attract credit financing, we believe that Eevia is in a position to accelerate the path towards the company’s long-term revenue targets and to become a market-leader in the nutraceutical and plant extract markets. Based on our forecast for year 2024, which is the year where we estimate that Eevia will show a positive operating result (EBIT) on a full-year basis, Eevia is trading at P/S 0.4x and EV/EBIT 5x where we believe the present valuation provides an attractive upside as well as risk/reward from current levels. Given a Market Cap of SEK 139m in a Base scenario, corresponding to an implied value per share of SEK 3.9 (4.5), which is a technical adjustment due to new shares from the directed share issue, this yields a 36% upside from the last closing price, per our last equity research report.

We will return with an updated analysis of Eevia Health.

On May 16^th, 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.

On February 24^th, 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.

On the November 25^th, Eevia Health (“Eevia” or “The company”) released its quarterly report for Q3-22.

Statement of Operations

During Q3-22, the net sales amounted to EUR 1.1m (1.3), corresponding to a decrease of 11% YoY which was in line with our expectations. Adjusted for raw material trading revenues of EUR 0.7m, net sales increased from EUR 0.6m to EUR 1.1m, corresponding to an increase of 105%.

Gross profit in Q3-22 amounted to EUR 0.7m, compared to EUR 0.1m in Q3-21, and EUR 0.7m in Q2-22. However, the gross margin was up from 25% in Q3-21, and from 35% in Q2-22, to 63% in Q3-22. This is a substantial improvement, since Eevia’s gross margin has been depressed due to temporary issues with equipment from Q2-21 and onwards. The total improvement in the gross margin stem from multiple factors however, such as higher production yields from changes in production protocols, efficiency gains from new equipment, high-margin product mix, and improved pricing in terms of both purchase and sales price.

The EBITDA during Q3-22 amounted to EUR 56k, compared to EUR -749k in Q3-21, which was above our expectations, resulting in an EBITDA-margin of 5%. The increase in EBITDA was attributed to the same factors that improved the gross profit, i.e., improving yields, better pricing etc., but also due to lower personnel and other operating expenses. Worth to note is that this is the first time Eevia shows a positive EBITDA, which is a major financial milestone for the company in our view.

The net income of Q3-22 amounted to EUR -0.4m, an improvement of EUR 0.5m compared to Q3-21 EUR -0.9m. However, the net income in Q3-22 was impacted by a non-cash foreign exchange loss of EUR 0.2m.

In summary, seeing a near break-even and positive EBITDA two quarters in a row is something that, according to Analyst Group, indicates improving operational performance. Furthermore, we see that Eevia is continuing the company’s path to high growth balanced with improving margins going forward.

Cash Position and Burn Rate

At the end of Q3-22, Eevia’s cash balance was EUR 0.1m, compared to EUR 0.6m at the end of Q2-22, corresponding to a net change in cash of EUR 0.5m. The decrease in cash was mainly due to a build-up in inventory and minor investments in assets. However, in November, Eevia announced that the company received approximately SEK 18.6m in net proceeds from a recent rights issue, which corresponds to roughly EUR 1.7m, given the current exchange rate of EUR/SEK. Moreover, Eevia managed to secure a short-term bridge loan of NOK 2.0m from the company’s largest shareholder Betulum AS in November, which will be repaid at latest in December with the proceeds from the rights issue. The bridge loan was used to strategically procure sufficient volumes of high-quality berries in a timely and cost-efficient manner for contracted bilberry sales orders, since the proceeds from the rights issue had not been received yet.

Eevia’s burn rate per month amounted to EUR -0.2m, compared to EUR -0.1m in the previous quarter. Given the cash position at the end of September amounting to EUR 0.1m, the net proceeds from the rights issue of EUR 1.7m, the repayment of the bridge loan of NOK 2m, and an estimated burn rate of EUR -0.1m going forward, Eevia is estimated to be financed until the beginning of Q3-23, all else equal. However, depending on how the net sales contributes to strengthening Eevia’s liquidity position and profitability, as well how effectively the working capital is managed, the company could be financed longer than estimated.

Triggers

Going forward, we see the following triggers:

• Continued sales growth by booking new orders from customers
• Improving profitability by shifting to higher margin products as well as increased efficiency
• Launch of new proprietary products, i.e., Retinari against the eye disease AMD

In conclusion, Eevia is progressing well operatively, where achieving a positive EBITDA-margin for the first time is a solid achievement. With the net proceeds from the fully subscribed rights issue, Eevia’s financial position is substantially stronger, where Analyst Group expect that Eevia will continue to deliver on the strong customer demand in order to reach a positive EBITDA in 2023.

We will return with an updated analysis of Eevia Health.

The 3^rd of November, Eevia Health (“Eevia” or “the company”) announced that the company has developed a new plant extract with product benefits for cognitive health and improved sleep. The new ingredient product, Feno-Cerasus™, is a standardized anthocyanin extract from tart cherry (Prunus Cerasus). Eevia Health focuses on the cognitive effects, including sleep quality and quantity, memory, as well as stress, and cortisol levels.

The main health benefit for promoting Feno-Cerasus™ is improved cognitive function. Tart cherry has one clinical study with 37 subjects showing a positive effect on cognitive performance, and another four clinical studies with 63 subjects documented positive outcomes in sleep quality parameters. From PubMed 10/2022, one can also observe that 39 clinical studies have been published in peer-reviewed journals. Furthermore, tart cherries have been studied for muscle recovery (15 studies, 280 subjects), metabolic health (8 studies, 180 subjects), cardiovascular health (5 studies, 150 subjects), antioxidant properties in clinical studies (2 studies, 59 subjects), and for pain management with positive results (2 studies, 108 subjects). Consequently, Eevia Health’s recent strategic focus on cellular recycling is supported as the tart cherry has preclinical evidence of autophagy induction via AMPK signal pathway and anti-inflammatory properties via Sirtuin6 activation of cyanidin, which has been confirmed in in-vitro studies.

“We are pleased to offer a new anthocyanin extract for cognitive health. The maintenance of cognitive health is a growing area for consumers. Eevia Health already has customer interest. The product will have perhaps the highest concentration of anthocyanins in the industry, while also providing a whole spectrum of other health-beneficial polyphenols as well,” says Petri Lackman, CTO of Eevia Health.

In conjunction with the press release, Analyst Group has contacted Eevia Health CEO Stein Ulve to ask questions about the new product.

Could you give us a brief background about the product and how the idea to create the product, Feno-Cerasus™, came to mind?

We are looking to utilize our green-chemistry platform to make other polyphenol extracts with the technologies we employ, especially when our technology can provide a superior product in terms of bioactive or nutritional profile than for instance membrane filtration technologies can. Over the last year, we have had multiple requests for tart cherry extract, so we thought this product fits well with our capabilities and matches up with our strategic focus on certain health indications.

Can you tell us more about Eevia’s strategic focus on cellular recycling and what role the tart cherry plays for someone uninitiated? Are there synergies with other product lines?

The Cellular Recycling is an extremely interesting area of human health. The failure of cells in recycling waste materials such as protein precipitates, organelles and other waste products is deemed as a root cause for a range of disease pathways. You will see an escalating interest in cellular recycling over the next five years and it will become a mega-trend within health and nutrition. Tart cherry has some documentation towards autophagy induction. It is not a key product for this strategy, but it is complimentary. It has benefits for cognitive health and as a polyphenol rich product, it is anyway a product that fits our equity story.

We understand that this might be difficult question to answer, but could you give us some insight into Feno-Cerasus’s potential price level and positioning in relation to your existing product portfolio?

We are probably the first manufacturer to offer a tart cherry extract standardized at 10% anthocyanins and with a high concentration of polyphenols. It follows that it will be a quite expensive product compared to other tart cherry extract that may offer 2% anthocyanins. Therefore, the price of the product will be over 300 euro per kg.

Which markets are, in your view, relevant for Feno-Cerasus™, how fast are they growing, what are some of the main players that develops and sells comparable products, and how do you differentiate?

US brand owners which focus on condition-specific supplement will be the primary target group. The segment for Cognitive Health is growing faster than the overall market. We will differentiate with a higher concentration of anthocyanin, and a wider composition of other polyphenols, and compounds of high molecular weight.

What are your expectations with the new ingredient product in the portfolio? How will it drive sales going forward?

We do not expect large sales coming from the Feno-Cerasus™ (tart cherry extract). If so, it will be a bonus. However, the effort will provide a decent ROI, because the investment was small. It has been a nice and reinvigorating experience for us to develop a new product this year after a few years of focusing on existing products and manufacturing. Launching a new product satisfies some customer and shows our agility with customers. The Feno-Cerasus™ also compliments our focus on Cognitive Health and it is for us, quite easy to manufacture.

Following a successful exhibition at the Supply Side West trade show in Las Vegas, US, last week, Eevia Health (”Eevia” or ”the company”) received an order for the elderberry extract Feno-Sambucus™, corresponding to SEK 34.4 million in order value. The order is a new contractual volume section related to a five-year sales agreement with a US brand owner.

Eevia has received a call-off for quantities for November 2022 – December 2023 for Feno-Sambucus, an elderberry extract product. The value of the call-off equals a revenue of SEK 34.4 million. The customer uses the elderberry ingredients from Eevia in nutraceutical formulations for sales primarily in the US market. The new order makes it the largest order ever received since Eevia went public, succeeding the previous largest order of SEK 8m over three years that was communicated the 9^th of March this year.

According to the global food and agriculture intelligence service Tridge¹, the US is the number #1 importer of value-added elderberries, with a total import value of USD 1.7bn in 2021. Furthermore, the import value in the US has grown 59% over the last five years. Thus, this trend supports Analyst Group’s view that Eevia will continue to grow as the company’s target markets are growing rapidly. Additionally, Eevia’s end customer is an internationally recognized brand leader in the marketplace with a global footprint. The group had sales of USD 1.4bn in 2021. It offers over 500 premium dietary supplements, including single herbs, vitamins, minerals, and specialty formulas sold under the Company’s well-recognized brands in over 60 countries.

”This call-off secures an important part of our order book and sales revenues going into 2023. We have improved our yields and productivity and adjusted the margins so that we can expect acceptable profitability for this volume,” says CEO Stein Ulve.

Eevia initially entered the sales agreement on June 11th, 2021. The new volume sections of the sales agreement, which the parties refer to as “Programs,” are contracted at adjusted prices. The reason is that the new program will consume raw materials purchased at different prices than the earlier programs. All raw materials for this order have already been purchased and are in stock in Finland.

References:

1. Value Added Elderberry Global Imports and Top Importers – Tridge

The 18^th of October, and on the 19^th of October, Eevia Health (“Eevia” or “the company”) the company has received sales orders for bilberry extract products from different customers amounting to EUR 96k, 20k, and 85k, corresponding to a total of EUR 201k.

Eevia reported that a sales order worth EUR 96k from a European nutraceutical brand owner was received. The customer is a European brand owner headquartered in Sweden, which is marketing its consumer products in over 50,000 pharmacies, health food shops, and other retail outlets across 36 countries, including China, and the US. The product is a bilberry extract standardized for anthocyanins and is a repeat order. Eevia is selected due to the high quality and authenticity of the product. This is one of the customers Eevia services without using a distributor. The business has been developed over the last few years, with growing repeat orders.

Furthermore, Eevia received two additional orders. The first order was worth approximately EUR 20k and was received from a contract manufacturer in Helsinki, Finland, that manufactures nutraceutical products of all types of administration forms for large brand holders in the Nordics. The customer ordered a standardized bilberry extract product from Eevia. This is one of the customers Eevia services without using a distributor since the customer is based in Finland and the need for distribution services is very limited. The business and client are new, and Eevia was selected due to the high quality and authenticity of the product. The second order that Eevia received was from Natural Ingredients, Eevia’s distributor in France and certain other European countries. The order is worth EUR 85k and originated from an on-site quality audit that Natural Ingredients undertook at the beginning of October, which resulted in successful audit, and a sales order on standardized bilberry extract products from the distributor.

In conclusion, Eevia has received several sales orders the last couple of days with a total worth of EUR 201k. Although the sales orders are relatively small, Analyst Group believe it is positive that Eevia keeps receiving smaller orders more frequently which keeps the momentum going and adds continuous cash flows which strengthens the liquidity. Furthermore, it is as of now advantageous for the company, as it broadens its customer portfolio and reduces dependency on single large customers. By continuously receiving frequent small orders, we see that it could create “rings-on-the-water”, triggering more sales orders, which will further increase the sales momentum and create a flywheel effect where smaller orders will accumulate over time to become substantial.

On the 29^th of August, Eevia Health (“Eevia” or “The company”) released its quarterly report for Q2-22. Our thoughts about the development during the quarter are presented below:

Statement of Operations at a Glance

During the Q2-22, the net sales amounted to EUR 1.8m (1.5), corresponding to a growth of 23% YoY which is in line with our expectations. The increase in net sales was attributed to improved production performance and output enabled by previous investments which thus made the company to catch up with backlogged sales contracts.

Gross profit in Q2-22 came in at EUR 0.7m, up from EUR 0.4m in Q2-21 and EUR 0.2m in Q1-22. The gross profit in the quarter represents a gross margin of 35% (as a percentage for net sales). This is a significant improvement compared to the latest quarters, and it is in line with our expectations since Eevia’s gross margin has been depressed due to temporary issues with equipment and capacity. Going forward, Analyst Group believes that Eevia should be able to consistently achieve a gross margin of 35-40%. Additionally, the management has guided for an improving gross margin in the future.

The EBITDA during the second quarter amounted to EUR -70k (0.4m) which is near a breakeven level. The decrease of the operating loss was a consequence of implemented changes in production protocols as well as efficiency improvements from the new equipment installations. For example, Eevia installed a new decanter increasing liquid-solid separation by 400% during Q2-22.

Cash Position and Burn Rate

At the end of Q2-22, Eevia’s cash balance was EUR 0.6m, compared to EUR 0.4m the previous quarter at the end of Q1-22, corresponding to a net change in cash of EUR 0.2m. The increase in cash was partly due to Eevia improving the net change in working capital and achieving a positive cash flow of operations of EUR 12k, partly due to a new loan received of EUR 0.6m. Eevia has not been cash flow positive since Q4-20, but after several investments and improvements, it seems that the company has now capacity to take advantage of operational leverage to achieve profitability. Although, one quarter is not a trend, we are positive about Eevia’s prospects going forward. The company’s burn rate per month amounted to EUR -0.1m, compared to EUR -0.5m in the previous quarter which a significant improvement attributed to both a lower operating loss and positive net change in working capital. Given a cash position of EUR 0.6m, and an assumed burn rate of
EUR -0.1m which we think is reasonable due to the company’s improving yields and margins, Eevia is estimated to be financed until the end of Q4-22, all else equal. However, it should be noted that depending on how the net sales contributes to strengthen Eevia’s liquidity position, as well how effectively the working capital is managed, the company could be financed longer than estimated.

Triggers

Going forward, we see the following triggers:

• Continued sales growth by booking new orders from customers
• Improving profitability by shifting to higher margin products as well as increased efficiency
• Launch of new proprietary products, i.e., Retinari against the eye disease AMD

In conclusion, Analyst Group sees that Eevia is progressing well operatively, where achieving a positive cash flow during times of market turmoil is something we see as a significant sign of strength and resilience in the business model. Although, the company’s liquidity in the short-term looks challenging, we are of the opinion that Eevia’s growth trajectory is sustainable and is likely to continue, given that the company can continue to deliver on the sales backlog, where we have a positive long-term outlook on the company.

We will return with an updated analysis of Eevia Health.