Mr. William Crossland reports

THERMAL ENERGY REPORTS STRONG YEAR-TO-DATE REVENUE GROWTH AND A RECORD LEVEL ORDER BOOK

Thermal Energy International Inc. has released its third quarter and year-to-date financial results for the period ended Feb. 28, 2019.

Highlights:

• Revenue has increased 50 per cent to $15.1-million for the first nine months of fiscal 2019.
• Gross profit increased 16 per cent to $5.8-million for the first nine months of fiscal 2019.
• The company has an order book (confirmed orders with revenue yet to be recognized) of $16.6-million as of April 29, 2019, which is the highest in the company's history.

"Our year-to-date figures represent a continuation of our strong growth trajectory with both our revenue and gross profit at record levels," said William Crossland, chief executive officer of Thermal Energy.

"Over the last three years, we have been investing heavily in the future growth of the company, and some large key project wins over the last 12 to 18 months have allowed us to accelerate our strategic growth plans. We have been investing significantly across the business, growing our team and capabilities throughout sales, engineering, operations and marketing, and expanding our geographical footprint to include key markets of Germany and Poland, as well as Texas and the U.S. Gulf coast, and then earlier this year, we also acquired Boilerroom Equipment Inc.

"By taking this approach, operating expenses have increased, and profitability has been impacted, but at the same time this accelerated investment is already driving results, as evidenced by the strong level of orders received and the resulting record order book for the coming 12 months, and now, with much of our short- to medium-term strategic growth investments complete, we see significant potential to deliver enhanced returns from this investment going forward.

"At $16.6-million, our order book highlights the robustness of our strategy to grow organically and through acquisition. This can clearly be seen in recently secured projects that have allowed us to expand into new subsectors with customers that represent a global opportunity for our entire product base.

"The acquisition of Boilerroom Equipment Inc. in June, 2018, is operating in line with expectations. It is both a profitable and a welcome addition to our portfolio of products and bank of expertise. The synergistic benefits of Boilerroom's HeatSponge technology, together with Thermal Energy's expertise, has already resulted in a notable $1.8-million project with a major U.S. dairy group, a project that neither company could have obtained independently.

"As we look ahead into the next financial year and beyond, we'll be seeking to further optimize the significant investment we have made in the business over the last few years, maximizing its benefit to strengthen our profit margins and deliver [return on investment]."

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

                                                     Three months ended                    Nine months ended 
                                               Feb. 28, 2019      Feb. 28, 2018      Feb. 28, 2019      Feb. 28, 2018

Revenue                                               $3,115             $3,228            $15,109            $10,055
Gross profit                                          $1,448             $1,600             $5,760             $4,971
Gross margin                                            46.5%              49.6%              38.1%              49.4%
Operating expenses                                    $2,287             $1,757             $6,803             $5,202
Net (loss)                                             $(889)             $(159)           $(1,051)             $(269)
EBITDAS                                                $(734)             $(156)             $(853)             $(234)
Order backlog as at April reporting date             $16,600            $16,300            $16,600            $16,300

Third quarter and first-nine-month financial review

Year-to-date revenue increased to $5.1-million or 50 per cent compared with the first nine months of last year. Gross profit was also up $788,922 or 16 per cent compared with the same period last year. The decrease in gross margin (that is, gross profit as a percentage of revenue) for the nine months ended Feb. 28, 2019, is a result of the impact on product mix represented by the megaproject with a pulp and paper company announced Dec. 5, 2017. With the Resolute project now substantially complete, gross margins for three months ended Feb, 28, 2019, were now more in line with historical levels. A decrease in revenues in the current quarter was due to project timing mainly related to the substantial completion of the Resolute project before the booking of substantial revenues from many of the recently received orders. Major contributors to the increased year-to-date revenue were:

• An energy-efficiency project with a pulp and paper company announced Dec. 5, 2017;
• A heat recovery project with a teaching hospital announced March 26, 2018;
• A heat recovery project with a leading Fortune 500 food and beverage company announced in June, 2018;
• The addition of the Boilerroom Equipment Inc. (BEI) business, effective June 29, 2018.

Administration, selling, marketing and business development expenses (operating expenses) in the quarter ended Feb. 28, 2019, totalled $2,286,949 compared with $1,757,387 for the same period last year, an increase of $529,562, or 30.1 per cent. In the nine months ended Feb. 28, 2019, the operating expenses totalled $6,803,320 compared with $5,201,620 for the same period last year, an increase of $1,601,700, or 30.8 per cent. Including BEI, over the last three years, Thermal Energy has added 26 talented staff to the company, 16 in the last 12 months alone. Many of these people are not yet fully contributing to results. In this regard, the main increases to operating expenses are related to:

• Strategic growth-oriented investments across the business by adding to the company's team and enhancing capabilities throughout sales, engineering, operations and marketing;
• Expanding the company's geographical footprint to include key markets of Germany and Poland, as well as Texas and the U.S. Gulf coast;
• The integration of BEI's operating expenses into the consolidated results.

This year, operating expenses also include some one-time costs related to the acquisition of BEI, as well as additional depreciation and amortization expense on the intangibles and fixed assets acquired from BEI.

Business update and order backlog summary

As of April 29, 2019, the company had a record order backlog of approximately $16.6-million. This is compared with $16.3-million (which included $11-million from the Resolute megaorder alone) when it reported third quarter results for fiscal 2018.

The company defines order backlog as the value of projects, for which purchase orders have been received, but have not yet been fully reflected as revenue, in the company's published quarterly financial statements. These include:

• A $1.3-million order to install a water recovery system for a major food and beverage company, announced Oct. 25, 2018;
• A $960,000 order to design, manufacture and install a turnkey heat recovery project for leading speciality chemicals producer, announced Nov. 19, 2018;
• A $300,000 order to integrate a Flu-Ace heat recovery system with a solar thermal water heating system for a major food and beverage company, announced Nov. 26, 2018;
• A $2.4-million order to add a second Flu-Ace to a major food and beverage company's existing Thermal Energy heat recovery system, announced Dec. 13, 2018;
• A $2.4-million order to install an innovative heat recovery system for a leading food ingredient company, announced Jan. 29, 2019;
• A $1.8-million order to install a HeatSponge heat recovery system and implement a number of boiler room and steam system upgrades for a major dairy group, announced March 11, 2019;
• A $2.3-million order to install two Flu-Ace heat recovery systems for a leading animal nutrition company, announced March 27, 2019;
• An $850,000 order to supply a heat recovery system to a top-10 global tissue company, announced April 1, 2019.

In addition to these announced orders, the company also received a number of orders totalling $436,169 from a leading hospitality company to install high-efficiency Gem steam traps and a $275,000 order from a petrochemical company to implement a heat recovery system, as well as a large number of lower-volume GEM trap orders.

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.

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.

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.