Danavation Technologies Corp. (DVN:CSE; DVNCF:OTCQB) has quickly established itself as a major player in the smart label market. Its principal activity involves the sale of micro e-paper displays and software to retailers. These solutions automate labeling, pricing, product, and promotions in real time.
Danavation’s ™ Labels™, powered by proprietary automation technology and an underlying Platform-as-a-Service (PaaS) model, enables the automation of labeling, prices, and product descriptions, as well as the management of promotions in real-time.
The use of Danavation’s Digital Smart Labels™ also enhances data accuracy and improves performance by optimizing inventory, removing the high labor costs and low productivity traditionally associated with labor-intensive merchandising workflows.
The company has introduced its solution to retailers across North America, including big box and boutique grocers, while also targeting new markets, including healthcare providers, manufacturing, and logistics companies.
The Catalyst: More New Installations
In a press release on February 17, the company announced that it had received four new contracts for additional installations of its innovative Digital Smart Labels™.
This announcement brings the total number of new retail locations across Canada and the U.S. announced this year to ten. New installations include roll-out to the third and fourth installations for Palma Pasta in the Greater Toronto Area, following on the heels of Danavation's success with the first Palma Pasta installation in Mississauga, Ontario, which was announced on May 5, 2022.
Palma Pasta found the solution helped to automate in-store operations and drove improved margins by increasing staff efficiency and reducing costs associated with inaccurate shelf pricing. New installations are expected to be complete by late spring 2023.
Danavation is also deploying its tech for two new customers in Ontario, one of which is CSR Building Supplies, Canada’s largest specialist drywall and finishing tool superstore. CSR has contracted to install Danavation's solution into its main location, with a second potential install predicated on the success of the first.
The company announced the expansion of its Digital Smart Labels™ solution into two new Ace Hardware locations, two Fowler's Garden Centers in New York, and one installation for "an independently operated store under a national building material brand in Quebec."
The second new customer is a specialty appliance retailer in Ontario, where Danavation will install Digital Smart Labels™ at one location in the Greater Toronto Area.
"Each installation represents incremental success in further building our client base and the total number of locations leveraging our Digital Smart Labels™, both of which are key contributors to the Company's long-term goal of realizing meaningful revenue expansion," said Danavation CEO John Ricci.
"Continuing to secure new installations — whether for smaller boutique stores or national big box retailers — is at the heart of Danavation's business model and a testament to our ability to foster trusted relationships across North America."
Earlier this year, the company announced the expansion of its Digital Smart Labels™ solution into two new Ace Hardware locations, two Fowler's Garden Centers in New York, and one installation for "an independently operated store under a national building material brand in Quebec." That retailer has now been revealed as CSR.
The total contracted value of those five installations represents one-time revenue of approximately US$800,000, with continuing recurring revenue thereafter for the lives of the contracts.
Why This Sector? Slowing but Continual Growth
The market for IoT devices appears poised for considerable growth. According to a report from Mordor Intelligence, "the IoT market is expected to register a CAGR of 10.53% during the forecast period (2022-2027)."
"IoT technology is the keystone for various organizations to digitally transform, thus, empowering them to upgrade the existing processes by creating and tracking new business models. Enterprises and service providers have been looking at IoT as the key enabler to augment digital transformation and unlock operational efficiencies."
The IoT Market Update Q1 2023 from IoT Analytics backs up this assessment, but with reservations, explaining that "the enterprise IoT market grew 21.5% to US$201 billion in 2022 . . . The market grew slightly slower than the 23% forecasted for last year and is expected to grow even slower in 2023. At our last forecast, we expected a faster recovery of the world economy, stronger supply chains, and sustained investment into new technologies to mitigate labor shortage."
"We ended up with estimated spending growth of 24% for 2023," the report continues. "However, nine months on from our last update, we must lower our forecast for 2023 to only 19%. At this point, IoT Analytics forecasts the IoT market size to grow at a CAGR of 19.4% to US$483 billion from 2022 until 2027."
Why This Company? A Single Solution to Two Problems
On-shelf merchandising is one of the most labor-intensive aspects of modern retail, and errors in on-shelf labeling can also be costly at the cash register, as most retailers’ policies involve selling the product at the mislabeled price whenever there’s an error — even if this means selling items at a loss.
On November 9, 2022, analyst Clive Maund wrote that "A large Head-and-Shoulders bottom appears to be completing in Danavation, with the price having reacted back since August to what is believed to be the Right Shoulder low. If so, it is at a great entry point here.
Automation of shelf labeling, when coupled with centralized management of pricing data, alleviates both of these concerns.
Danavation’s novel product addresses these issues with aplomb, relying on a simple but effective technical solution that puts merchandising control and pricing automation back in the hands of store-level, regional or executive management.
Why Now? The Right Solution at the Right Price
Streetwise Ownership Overview*
Danavation Technologies Corp. (DVN:CSE; DVN.WT:CSE; DVNCF:OTCQB)
Danavation is a commercial-stage tech company with proven execution and a growing pipeline of premier customers. The company has also experienced increasing annual recurring revenue driven by its PaaS model.
The experienced management team has served retail clients for over 30 years. The team and tech are also North America-based, which is rare in the Digital Smart Labels™ market and can be a determining factor for potential clients seeking transparency, credibility, and security. Despite its Canadian origin, the company expects the U.S. market — where such features are highly desired — to drive around 80% of sales through 2026
On November 9, 2022, analyst Clive Maund wrote that "A large Head-and-Shoulders bottom appears to be completing in Danavation, with the price having reacted back since August to what is believed to be the Right Shoulder low. If so, it is at a great entry point here. The Accumulation line is very strong and making new highs despite the dip, and with its MACD indicator below the zero line, it has plenty of upside potential from here. It should start higher soon."
Ownership and Share Structure
Management owns roughly 36% of the share base. The company reports no institutions but strategic investor T. Sean Harvey holds 7% of the common shares outstanding.
Danavation enjoys a market cap of roughly CA$21 million as of February 28, 2023, with 114,174,850 shares outstanding, as well as 5,891,011 warrants and 8,550,000 options. Convertible debt outstanding is CA$3.85mm at CA$0.45 / share.
As of October 31, 2022, the company had CA$ 1.175 million in current assets, of which CA$60,000 was cash, and CA$270,000 was amounts receivable. Its monthly burn rate is CA$ 200,000.
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Disclosures:
1) Owen Ferguson wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
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