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Good morning. Welcome to EnWave Corporation's First Quarter 2024 Earnings Conference Call. My name is Camilla, and I will be your operator for today's call. Joining us for today's presentation are the company's President and CEO, Brent Charleton; and Dylan Murray, EnWave's CFO. [Operator Instructions] And the conference is being recorded. [Operator Instructions] Finally, I would like to remind everyone that this call will be made available for replay via a link in the Investor Relations section of the company's website at www.enwave.net. Now I would like to turn the call over to Enwave's CEO, Mr. Brent Charleton.
Good morning to everyone who has joined us today to discuss EnWave Corporation's Q1 performance and more importantly, our outlook for the rest of fiscal 2024. Consistent with our past quarterly earnings calls, the information we will present today contains forward-looking information that is based on our management's expectations, estimates and projections. Our statements are not a guarantee of future performance and involve a number of risks, uncertainties and assumptions.
Please consider the risk factors in the filings made by EnWave on SEDAR when reviewing this information. Also, all amounts discussed will be in Canadian dollars unless otherwise noted. EnWave's first fiscal quarter for 2024 demonstrated volatility in Radiant Energy Vacuum machine contracts as no new orders were received, which negatively impacted revenue. Currently, there are several active projects and potential orders for about 10-kilowatt and large-scale REV drying lines, which we hope to confirm in the near future.
Quarterly royalties were the highest they've ever been in the past 2.5 years at $480,000, an increase of $67,000 year-over-year. Further, the percentage of royalties collected from RevDrive product sales by our royalty partners versus the exclusivity top-up payments made increased when compared to Q1 2023. This is a good indicator that the company is commercializing RevDrive products, continue to build their respective REV businesses. We monitor the use of all large-scale REV equipment through remote programs and have seen an uptick in usage.
Now despite the absence of new machine sales in Q1, which should be no surprise to anybody, we continue to keep our expense structure tight and had a modest reduction in cash position. We will continue to operate in this manner, only making material investments when a clear return is highly probable. We are comfortable with our manufacturing capabilities and innovation competency but we'll likely invest in a more robust sales structure this year.
Our pipeline is strong, and I'll speak to several developments in a moment, but we will not continue to accept the status quo, which is being typically 4 to 6 large-scale machine sales over the past few years. If we achieve the status quo, we are a breakeven business on an adjusted EBITDA basis. Many shareholders have asked for a more robust summary of the key projects we are working on with current and potential royalty partners.
To begin, the installation of the 120-kilowatt REV machine at Bridgford Foods is scheduled to complete in March, enabling the U.S. Army to continue progressing a project to incorporate a dry cheesecake ration component into many of their field ration packs. Concurrent with this work, Bridgford is evaluating a number of additional toll manufacturing projects and their own development and launch of commercial products. They've had a 10-kilowatt unit at their facility for more than a year and are very capable operators.
I'm very much looking forward to witnessing their progress as we move forward over the coming quarters. U.S. Army has also engaged BranchOut Foods and Michael Foods, they're royalty partners of ours, among others, to collaborate on additional ration inclusions, more hopefully to come on these projects later in the year. The second large REV line was recently commissioned in Japan for Calbee. Calbee launched a premium dried apple snack that did well during initial market trials, and we anticipate broader domestic sales of the snack line and the potential expansion of their portfolio again in the coming quarters.
Dole continues to commercialize their Good Crunch Snack line in North America selling 3 SKUs currently. We remain optimistic about the future of this relationship given the high utilization rate of the 120-kilowatt REV machinery operating in Thailand and the new potential SKUs under development. Also, there has been intensive collaboration with additional royalty partners of ours to potentially support growing capacity needs in the near term.
Moving forward, additional large-scale REV orders may either come directly from Dole or other royalty partners who may toll manufacture for the brand. Good Crunch is currently available online in North America and at many traditional grocery channels. Now many of our royalty partners using REV technology to produce dairy snack products are also making headway. Day-Lee Foods in Canada has maxed out their capacity on their first 100-kilowatt unit and elected to maintain their exclusivity to produce cheese snacks here domestically. We hope they decide to increase their capacity in the coming quarters.
Ashgrove in Australia is diversifying their formats of cheese snacks offered in their domestic market and Dairy Concepts Ireland launched their product line into the largest retailer in the U.K., Marks and Spencer and by all accounts, the sales continue to capacity exceed expectations. That being said, we're optimistic about their continued growth this year and a need for additional manufacturing capacity. BranchOut Foods, which I mentioned in relation to the U.S. Army previously, is another royalty partner who has had some major recent wins.
They landed repeat, multimillion-dollar contracts with the largest grocery retailers in the U.S. to sell their line of premium fruit and vegetable snacks. They engaged us to use our REVworx toll dry facility to make up the immediate shortfall in capacity, and we anticipate that this toll-drying contract will likely extend for most of this fiscal year.
We are contracted to deliver a second large-scale REV machine to BranchOut in the second half of 2024 to support this growth. Orto Al Sole of Italy has also expanded domestic grocery distribution for their ultra-premium line of healthy snacks. And Alarko of Turkey has communicated their goal of winning several major supply agreements with leading domestic brands this year. Those brands they've targeted, they have close ongoing relationships with and I feel it as a highly probable goal to achieve. Alarko is one of the largest conglomerates in Turkey, and they're actively investing to grow their REV business significantly.
On the business-to-business ingredient front, MicroDried, one of our most important royalty partners, continues to build a meaningful business. They've won supply contracts, in many household brands in the cereal, craft beer, snack bar, smoothie and dairy application areas in North America and internationally. They operate 3 large-scale lines currently. They're a top-tier partner, and we believe they have the capabilities to also grow in the coming years.
In addition to the updates provided, there are many more royalty partners moving in the right direction. Enwave's portfolio of diversified royalty streams is growing, and we expect that trend to continue. In our pipeline, we are actively quoting new royalty partners in the pet treat, seafood and meat snack space. There has been minimal penetration in these verticals to date, and we're hopeful about our prospects to sign new licenses and sell REV machinery into these market segments in 2024.
We've also been busy developing new commercially viable self-stable snack products, the most recent breakthrough being a shelf-stable soft crunch French fries that we are now pitching to every major potato product manufacturer, already receiving positive feedback meetings, follow-up and of course sampling of these products. We also have several new leads in the fruit and vegetable area. With the increasing commercial success of Dole, Calbee and others, we are now seeing shorter times between engagement and license agreement negotiations. I hope to be able to talk about these prospects as close deals come in as soon as possible.
I'll now ask Dylan to summarize EnWave's detailed quarterly financial performance.
Thanks, Brent. Good morning, everyone, and thank you for joining us today. Please note that the figures I'll be going over today can be found in our press release from yesterday and in the financial statements and MD&A filed on SEDAR, and all amounts are in Canadian dollars unless otherwise noted. I will make reference to adjusted EBITDA, which is a non-IFRS financial measure, so please refer to the non-IFRS financial measure disclosures and reconciliation to GAAP net income, both in the press release and in our MD&A.
Also, please note that the comparative period I'll refer to throughout this presentation is the prior year Q1 ended December 31, 2022. Revenues for Q1 were $1.3 million compared to $2.8 million in Q1 2023, a decrease of $1.5 million or 55%. And the decrease was primarily related to fewer machine sales and machines in fabrication during the period. The decrease in revenue was partially offset by third-party royalty revenue, which was $480,000 in Q1 2024 compared to $413,000 in Q1 2023, an increase of $67,000 or 16%.
Royalties grew due to increased partner product sales and production, offset by a decrease in exclusivity fees for the quarter. As our royalty partners grow their businesses and increase capacity utilization on REV equipments alongside new REV installations arising from new sales, we hope to see material royalty growth over the coming quarters.
Gross margin for the company in Q1 2024 was 18% compared to 37% in Q1 2023. The decrease in margin was a result of fewer machine sales and machines and fabrication to absorb fixed overhead costs. SG&A expenses, including R&D, were $1.3 million for Q1 2024 compared to $1.6 million for Q1 2023, a decrease of $303,000 or 19%. The decrease primarily related to reduction in commissions to third-party sales representatives and the concerted efforts to maintain discretionary spending.
Adjusted EBITDA is a non-IFRS financial measures, so please refer to our MD&A for the reconciliation from GAAP net income to adjusted EBITDA. The company reported an adjusted EBITDA loss of 756,000 for Q1 2024 compared to adjusted EBITDA loss of $256,000 for Q1 2023, a decrease of $500,000. The decrease in adjusted EBITDA was primarily related to top line revenue, fewer machine sales and machines in fabrication during the period. And we finished Q1 2024 with cash and cash equivalents of $3.9 million and a net working capital surplus of $7.6 million as of December 31. Our balance sheet remains debt free.
Thanks for that commentary, Dylan. And as just noted, we were able to limit our cash burn through continued strict expense management. Timing of large-scale REV machine sales has been historically volatile and in Q1, we experienced a slow period. It's imperative that the frequency of new machine orders picks up in the coming months to ensure that the total number of large-scale machines sold this fiscal year surpasses 5 machines, a status quo. The number needed, timing and price dependent, of course, yield positive adjusted EBITDA.
With several active projects prospectively needing additional REV drying capacity this year, many of which large scale, we are optimistic about our prospects and I shared numerous royalty partner updates that I hope builds confidence amongst our stakeholder group regarding the future of EnWave. I certainly continue to be excited about our commercial opportunities. I'd now like to open up the call for your questions. Operator, please provide the appropriate instructions.
[Operator Instructions] If there are any outstanding questions at the end of the call, the company will be happy to take them by e-mail at ir@enwave.net. Our first question comes from the line of Bart Goemaere with BeursTips.
Brent, this is Bart Goemaere from BeursTips in Belgium. I have a question regarding the installation pipeline in the MD&A. There seems to be 1 big machine of 120 kilowatts for BranchOut Foods in production. If I read in the MD&A, under the Revenue section, it stated that 2 big machines are under production and 1 small one. So can you please clarify this and state me how many machines are under production right now? And how many that you have in inventory that are not sold yet.
So BranchOut Foods, what you're referring to, and Brent mentioned in his commentary, there's a machine that's contracted to begin fabrication this summer of 2024. And at this time, fabrication of that machine has not started. In terms of your second question, how many machines do we have built in inventory. We continue to have that 1 large-scale machine that was repatriated from NutraDried.
Okay. And the number of small ones?
Number of small machines is in and around 10 at this point. 10 machines either have come back from rental agreements or are setting inventory. We have a few near-term projects with 10-kilowatt units should significantly deplete that number in it down to below 4 machines in the very near term. So multiple 10 kilowatts are likely to be needed for singular royalty partners to begin commercial production prior to respectively receiving a large-scale machine thereafter. So what we'd like to see, of course, is immediacy on the deployment of 10 kilowatts to be used during the time period from purchase order, fabrication, delivery and commissioning of large-scale machines, which, as I just stated, several of those opportunities are in our pipeline near term.
Okay. And then a second question, can you give me an overview of the state of the cannabis market in the United States because it seems that the legislation is going to change over there. So do you feel in contact with cannabis companies in the United States that there is a change imminent?
I think the ability for us to generate new opportunities in the U.S. cannabis market is not simply to do with the legislation changing for the positive on a federal basis. More so, it was about connecting with competent operators who had the available capital to do the trials and test work on the machinery.
Now we've taken a different strategic path in offering 10-kilowatt units to all of the major multistate operators for test work, but even then they've been so inundated with trying to right size their own businesses and control expenses, but it's really only been in the past 3 to 4 months where we've had feedback and appetite to move forward. So we announced recently [indiscernible] with a U.S.-based cannabis company to trial our product. And we anticipate that additional projects like that will come to fruition this fiscal year, some of which with some of the bigger companies, given that they finally see some calm waters ahead for their own operations.
Thank you. We've reached the end of our audio question-and-answer session. And I will now turn the call back over to Brent Charleton, CEO, for any closing remarks.
I just want to thank everybody for joining today. If you have questions that you'd like to address directly off-line, please do reach out to either Dylan or myself after the call either today or next week. Thanks very much.
Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.