Disinfection technology player Applied UV Inc. (AUVI, Financial) had a decent quarter and has started 2021 on a positive note. With enhanced infection prevention protocols being implemented across multiple industries, the company's surface disinfection and air purification products are becoming more and more relevant. The company's core market has always been the hospitality industry, which has started to show signs of recovery as the economy rebounds from the Covid-19 pandemic.
Applied UV was recently in the news for entering into a distribution agreement with 3Sixty Biopharmaceuticals with a focus to expand its market share and geographical reach. This new partnership has excellent potential, especially after the successful integration of Airocide's air purification technology, and could result in a bright future for both companies.
Partnership with 3Sixty Biopharmaceuticals
The management of Applied UV recently announced the signing of an exclusive distribution agreement with 3Sixty Biopharmaceuticals for Airocide consumer and commercial air purification systems. 3Sixty Biopharmaceuticals is a South African health care company working toward the development and commercialization of intellectual property and is on the lookout for collaboration partners within the public and private sectors. Its primary focus is on the health care crisis market and has an ongoing requirement of air purification systems as well as surface disinfection systems.
As per the company's latest press release, 3Sixty has agreed to an upfront binding purchase agreement of a minimum of $3.5 million of Airocide systems over the initial one-year term of the contract. After the initial term ends, both parties will be accessing opportunities to expand the product line to include the SteriLumen platform of connected infection control devices in and around high-traffic areas. Management believes that air and surface infection control is a serious safety issue for the public, so offering the Airocide systems will provide an excellent air purification alternative for its customers. If Applied UV is able to make 3Sixty a regular client, it would imply a minimum level of turnover for the company and would indicate a strong level of revenue stability.
Other key developments
During the first quarter of 2021, Applied UV completed the acquisition of considerably all of the assets of Akida, including all of the rights to manufacture and sell the Airocide System of patented, air disinfection and purification technologies. With the addition of Airocide, Applied UV now has three complementary businesses – SteriLumen (surface disinfection technology), Munn Works (furnishings that integrate SteriLumen's technology) and Airocide (air purification). It is worth highlighting that Airocide products have witnessed broad adoption across all major markets, including resorts and hotels, hospitals and nursing homes, food distribution and winemaking commercial buildings and the retail sectors. A big achievement for Applied UV came in the form of its partnership with the Boston Red Sox to install the Airocide System at Fenway Park and JetBlue Park, making Airoicide the official air purification provider to a giant sports brand.
Despite such progress in its business, Applied UV continues to build its intellectual property with SteriLumen owning eight issued patents in the U.S., one issued patent in the EU and one patent in China. Management expects the patent portfolio to expand as the company develops new disinfection technologies and adds new products to its offerings based on the same. It is also worth mentioning that the company recently appointed a new chief financial officer, Mike Riccio, who brings extensive financial experience, including a background with global public companies in corporate finance and corporate merger and acquisition planning and integration. Overall, the company has definitely had an interesting set of developments in the past few months.
Final thoughts
Applied UV's results showed a triple-digit growth in the first quarter of 2021 following the acquisition of Airocide, but the stock movement has been particularly slow. I believe that there is a lot of untapped potential in this stock. Once the large-sized orders from the hospitality giants as well as companies like 3Sixty Biopharmaceuticals start reflecting in the quarterly results of the company, it will definitely result in an improved perception of the stock, leading to multiples expansion.
The liquidity of Applied UV remains strong with a cash balance of $8.9 million and a solid cash-to-debt multiple of 9.2, implying sufficient funding for future growth. Overall, I believe that Applied UV has an abundance of growth opportunities ahead and could be an excellent investment opportunity for microcap investors with a high risk appetite.
Disclosure: No positions.
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