Mr. William Crossland reports

THERMAL ENERGY REPORTS FIRST QUARTER REVENUE WITH GROWTH OF 120% AND A STRONG ORDER BACKLOG OF $9.3 MILLION

Thermal Energy International Inc. has released its financial results for the three-month period ended Aug. 31, 2018.

Highlights:

• Revenue increased 120 per cent to $6.8-million.
• Gross profit for the quarter increased 46 per cent to $2.2-million.
• EBITDAS (earnings before interest, tax, depreciation, amortization and share-based payments) for the quarter was ($50,736), a $135,533 improvement compared with first quarter last year.
• EBITDAS would have been $167,406, a $353,675 increase compared with last year if the company excludes strategic investments in growth and one-time expenses noted herein.
• Net loss for the quarter was $49,458, a $131,322 improvement compared with last year.
• The company had an order backlog of $9.3-million as at Oct. 30, 2018, compared with $7.8-million when the company reported first quarter results last year.

"Following our record revenue for all of fiscal year 2018, we achieved record revenue again for the first quarter of fiscal 2019," said William Crossland, chief executive officer of Thermal Energy.

"The ongoing strategic investments we are making in expanding our team, capabilities and product offerings is clearly beginning to pay off. The acquisition of Boilerroom Equipment Inc. in June not only expanded our offering of complementary products but also gave us direct access to significant new sales channels and provides us with a strong United States base of operations. Last week, we announced two orders that moved us beyond our traditional thermal energy efficiency market into the broader water efficiency and sustainability markets. As businesses across the globe search for ways they can reduce operating costs and improve sustainability, they will increasingly be looking to suppliers that have a broad range of sustainability capabilities to identify, recommend and implement the most advantageous solutions.

"With a strong order book and our expanded team, product offering, and market reach, we are well positioned to continue our momentum in fiscal 2019 and beyond."

                                    SUMMARY FINANCIAL RESULTS
                               (in thousands except per-cent data)

                                                         Three months ended              Three months ended 
                                                              Aug. 31, 2018                   Aug. 31, 2017

Revenue                                                              $6,801                          $3,098
Gross profit                                                         $2,210                          $1,518
Gross margin                                                           32.5%                           49.0%
Operating expenses                                                   $2,296                          $1,704
Net (loss)                                                             $(49)                          $(181)
EBITDAS                                                                $(51)                          $(186)
Order backlog as at Aug. 31                                          $7,300                          $5,800
Order backlog as at October reporting date                           $9,300                          $7,800

First quarter 2018 financial review

Revenues were $6,800,861 in the quarter ended Aug. 31, 2018, representing an increase of $3,703,277, or 119.6 per cent, over the $3,097,584 recognized in the quarter ended Aug. 31, 2017. The increase in revenues from the current quarter was mainly due to the partial delivery of the $11-million energy efficiency project with the pulp and paper customer announced Dec. 5, 2017, which was approximately 74 per cent complete as at Aug. 31, 2018, plus the addition of the Boilerroom Equipment Inc. business, effective June 29, 2018.

The gross profit of $2,209,885 in the quarter ended Aug. 31, 2018, represented an increase of $692,088, or 45.6 per cent, from the $1,517,797 achieved in the quarter ended Aug. 31, 2017. The increase was mainly the result of increased revenues. Gross profit expressed as a percentage of sales was 32.5 per cent in the first quarter of fiscal 2019 compared with 49.0 per cent in the first quarter of fiscal 2018. The decrease in gross profit percentage was due to the product split between heat recovery and steam traps.

Administration, selling, marketing and business development expenses (operating expenses) in the quarter ended Aug. 31, 2018, totalled $2,295,743 compared with $1,704,019 in the quarter ended Aug. 31, 2017, an increase of $591,724 or 34.7 per cent. Main increases included one-time costs related to the acquisition of Boilerroom Equipment ($107,342), the integration of Boilerroom Equipment's results into the consolidated results, increased commission payable related to the increased revenue, the strategic investments in the future growth of the company, including the addition of new sales and technical staff, and additional investments in advertisement and marketing activities ($110,800), plus foreign exchange losses experienced in the quarter compared with foreign exchange gains experienced in the same quarter of the previous year (a difference of $54,644). Despite the increases, operating expenses as a percentage of revenue were only 33.8 per cent this year compared with 55.0 per cent last year. Furthermore, excluding the one-time costs related to the acquisition of Boilerroom Equipment and the strategic investments to support the future growth of the business, operating expenses for the quarter would have been only $2,077,601.

EBITDAS for the quarter was negative $50,736, a $135,533 improvement compared with first quarter last year. However, EBITDAS would have been $167,406, a $353,675 increase compared with the same quarter last year if the company excluded the strategic investments in growth and one-time expenses noted herein.

Even including the strategic investments in growth and one-time expenses, the company's net loss for the quarter was $49,458, a $131,322 improvement over the $180,780 loss recorded a year earlier.

Cash resources and working capital

The company had working capital of $2.3-million as at Aug. 31, 2018, compared with $2.0-million as at May 31, 2018. Management is of the opinion that sufficient working capital will be obtained from future cash flows by achieving profitable operations through continuing to manage expenditures, concentrating on building upon revenue levels experienced in 2016, 2017 and 2018, and increasing revenues at growth rates experienced in the years ended May 31, 2010, through May 31, 2018.

Full financial results, including management's discussion and analysis and accompanying notes to the financial results, are available on SEDAR and the Thermal Energy website.

Order and backlog summary

The company had an order backlog of approximately $9.5-million as at Oct. 30, 2018, compared with $7.8-million when the company reported first quarter results last year. The company includes, in order backlog, the value of projects in respect of which purchase orders have been received but have not yet been reflected as revenue in the company's published quarterly financial statements.

About Thermal Energy International Inc.

Thermal Energy International is an established global supplier of proprietary and proven energy efficiency, emission reduction and sustainability solutions to the industrial, commercial and institutional sectors. It saves its customers money and improves their bottom line by reducing their fuel use and cutting their carbon emissions. Its customers include a large number of Fortune 500 and other leading multinational companies across a wide range of industry sectors.

Thermal Energy is also a fully accredited professional engineering firm, and by providing a unique mix of proprietary products, together with process, energy and environmental engineering expertise, Thermal Energy is able to deliver unique turnkey projects with significant financial and environmental benefits for its customers.

We seek Safe Harbor.