UV applied: a relevant experience
Actor of the disinfection technology Applied UV Inc. (AUVI, Financial) has been one of my favorite microcaps. The company has an interesting history as it began as a marriage between a furniture company, Munn Works, and a proprietary surface disinfection technology, SteriLumen. The management team was able to make the most of the Covid-19 pandemic and then forged key partnerships with some of the largest hotel chains in the world, where they were able to sell their UV-based furniture such as drains and mirrors. . The company has had a very interesting journey so far, including a promising set of updates and recent acquisitions that could re-energize the action.
Applied UV may have started out as an expert in surface disinfection technology with a focus on the hospitality industry, but then diversified both its product offerings and its customer base. Today, the company has customers among military facilities, museums, hospitals, wineries, schools, manufacturing companies and home users. Its first major product diversification move took the form of acquiring the rights to produce and sell Airocide air purification technology from Akida Holdings. Since Airocide was developed to meet the needs of NASA, Applied UV was able to attract a good portion of the high profile clientele, including the Boston Red Sox. The company has further strengthened its position in this space with a few new acquisitions.
Acquisition of KES Science and JJS Technologies
Applied UV recently completed the acquisition of the assets of privately held KES Science & Technology Inc., based in Kennesaw, Georgia, and JJS Technologies LLC through its wholly owned subsidiary, SteriLumen. The acquisition gives Applied UV the rights to produce and distribute all of its patented air disinfection and air purification tools around the world. The consideration for the acquisition was a mix of $ 4.3 million in cash and 300,000 common shares of Applied UV, but it involved acquiring the asset base of both companies. This acquisition complements the Airocide air purification systems as well as the SteriLumen surface disinfection systems and allows the company to have customers in sectors such as cannabis, food distribution and post-harvest markets. . The impact of the acquisition on the company’s results is not yet visible.
One of the most significant developments of Applied UV recently was the appointment of James Alecxih as CEO and member of the Board of Directors on December 8th. He replaced Keyoumars Saeed, who had been CEO of Applied UV since its inception in early 2020.
Alecxih is a veteran of the biotechnology and healthcare industry and was previously the President of ViveBio Scientific. With a new CEO at the helm, Applied UV appears poised to further expand its customer base. Earlier this month, the company announced the installation of its Airocide air purification systems at a prestigious biomedical facility in Thailand. This was a major development that resulted in a temporary rise in the company’s share price when its Thai distributor, Sithiporn Associates, confirmed the deployment of Airocide units to the Armed Forces Research Institute in medical sciences (AFRIMS) in Bangkok. Airocide’s photocatalytic oxidation technology is believed to be ideal for a biomedical research center like AFRIMS to help create cleaner and safer environments for visitors and staff. It also happens to be used by the Walter Reed Army Institute of Research of the United States Army, where rigorous research is conducted on diseases related to infectious pathogens. In addition to Applied UV’s successful business-to-business strategy, Applied UV is also attempting to sell its disinfection offerings directly to consumers online, priced at approximately $ 900. All of these developments point to significant revenue growth expected in the future.
Improve financial performance
Applied UV’s revenue has already started to gain momentum and its recent quarterly results for the third quarter are a prime example. The company’s net sales increased 127.6% to nearly $ 3.6 million, from about $ 1.6 million in the previous year quarter. The increase in turnover occurred despite the fact that, like most industrial players, the company also suffered from various supply chain and transportation issues in key markets, resulting in delays in l ‘fulfillment of orders. The company’s net loss of $ 1.08 million for the quarter represents a 49% improvement over the loss reported in the second quarter. Applied UV has a positive gross margin of nearly 30% and with rapidly expanding distribution and revenue, it is only a matter of time before the company hits its breakeven point.
Key points to remember
Every major spike in the Applied UV share price has always been followed by significant profit taking, which is not always justified. The same goes for the recent massive sell-off, which came after the company’s shares rose when the AFRIMS facility was announced. Interestingly, Chairman Max Munn recently bought 10,000 shares this week, showing just how confident the management team is about the rise in stock prices. Applied UV trades at a price / book ratio of 1.78 and an enterprise value / revenue multiple of approximately 4.5. Its current value tells me that the market is ignoring the potential for future growth. Overall, I am extremely bullish on Applied UV and believe the company could be a great choice for microcap investors with a high risk appetite.