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By Meg Flippin, Benzinga
Greenwave Technology Solutions Inc. (NASDAQ: GWAV), the operator of 13 metal recycling facilities in Virginia, North Carolina and Ohio, is positioning itself for more growth by cleaning up its balance sheet. This includes a recent debt-for-equity exchange, as the Chairman and CEO of the company, Danny Meeks, exchanged all outstanding notes he held into equity demonstrating his confidence in the companys prospects and commitment to its shareholders.
As a follow on to this news, the company reported today that it is expecting to generate revenues exceeding $40 million during the year ended December 31, 2024. Growth is being driven by its Cleveland, OH, and Virginia Beach, VA, locations. The company expects its second American Pulverizer 60×85 shredder will result in the company being EBITDA positive and generating positive cashflows from operating activities.
Greenwave operates in a highly fragmented market it believes is ripe for consolidation. Paying down its debt puts the company in a better position to pursue bolt-on buys and expand its market share.
Under the terms of the debt-for-equity swap, Greenwave exchanged $17.22 million in debt for shares. Of the debt exchange, $10 million was exchanged for shares of Series D Preferred Stock and $7.22 million in debt was exchanged into common stock at $0.1167 per share.
"Over the past several weeks, we have significantly strengthened Greenwave's balance sheet and positioned the company for the next phase of its growth," says Greenwave CEO Danny Meeks. "I believe exchanging my debt into equity further aligns me with all shareholders and reflects the confidence I have in our business and growth strategy."
Demand Driving Growth
Greenwave is in growth mode at a time when demand for recycled steel is increasing as manufacturers look for greener alternatives. Using recycled steel instead of new material can cut CO2 emissions by about 75% as it uses about 70% less energy than manufacturing new materials. As it stands, two out of every three tons of steel produced come from recycling. In 1980, this figure was at just one out of every ten tons produced. It's also a big market. In 2019, the metal recycling industry was valued at $52.1 billion and is projected to reach $76.1 billion by 2025, growing at a CAGR of 7.8% over 2020-2025.
"With a significantly strengthened balance sheet, I believe Greenwave is well positioned for the next phase of growth," stated Greenwave CEO Danny Meeks in todays press release. "The investments we've made in Greenwave's infrastructure will facilitate significant growth in our copper and steel processing capacity, which we anticipate will create significant shareholder value."
In addition to running state-of-the-art metal recycling plants, Greenwave operates Scrap App Inc., a wholly owned subsidiary that created an AI-based quoting system for metal from construction and demolition projects, lists the nearest scrap yards with their real-time pricing and introduced a points-based rewards system. The unit generated over $200,000 in revenue within its first 130 days of operations. Sales have been growing at Greenwave, with the company posting $18.46 million in revenue and $1.23 million in cash flow from operating activities in the six months ended June 30, 2023. For the fourth quarter, revenue of $9 million was up 10% sequentially.
Shoring Up The Balance Sheet
Greenwave has been paying down debt and strengthening its balance sheet for some time now. In the first quarter alone, it received proceeds from warrant exercises of approximately $2.81 million, converted about $2.06 million of third-party debt to equity, closed an equity investment of $5.25 million, and exchanged $17.22 million of related-party debt into equity. As a result of its efforts, Greenwave reports that it increased its shareholders' equity by approximately $27 million. The company also secured waivers from its senior secured noteholders of the quarterly cash covenants until September 30, 2024, as well as monthly amortization payments until July 31, 2024. Extra cash flow from the debt restructuring is going to support growth.
As for the type of buys Greenwave will pursue with its newfound cash, Greenwave says it's focused on scrap yard deals that dont have a lot of dilution or impact on cash flow. It is also committed to not overpaying, aiming to utilize sellers notes as its preferred form of consideration.
Cash is king in the recycled metals market, and Greenwave is shoring up more of it to support its aggressive growth plans. With its financials in order, Greenwave could be well-positioned to meet the rising demand for recycled metal.
Featured photo by Evan Demicoli on Unsplash.
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