Mr. William Crossland reports

THERMAL ENERGY INTERNATIONAL REPORTS 71% REVENUE GROWTH AND IMPROVED PROFITABILITY IN SECOND QUARTER

Thermal Energy International Inc. has released its financial results for the second quarter ended Nov. 30, 2023.

Highlights:

• Revenue -- $7.1-million, a 71-per-cent increase from the same quarter last year;
• Gross profit -- $3.5-million, a 97-per-cent increase from the same quarter last year;
• EBITDA (earnings before interest, taxes, depreciation and amortization) -- $830,000, compared with a loss of $28,000 in the second quarter of last year;
• Net income -- $486,000 compared with a loss of $266,000 in the same quarter last year;
• Order intake -- $12.8-million for the quarter and $22.2-million for fiscal 2024 year to date (as at Jan. 23, 2024);
• Order backlog -- $17.5-million as at Nov. 30, 2023, and $23.6-million as at Jan. 23, 2024.

Overview

"We had a very strong second quarter, with growth of more than 70 per cent in both our turnkey projects and custom equipment businesses," said William Crossland, chief executive officer of Thermal Energy. "Our higher revenue for the quarter and first six months of the fiscal year translated to significantly stronger gross profits and a much improved bottom line -- all while continuing to invest in growth. During the quarter, we hired additional engineers and sales staff and continued the digitalization and automation of key business processes. Subsequent to quarter-end, in response to the remarkable growth in demand for our proprietary GEM steam trap product, we relocated our U.K. [United Kingdom] operations to a much larger production facility.

"We are very pleased with our quarterly and year-to-date results. Historically, there has always been variability in the company's results from quarter to quarter, as a function of product mix and the timing of large projects, and, in the most recent quarter, we benefited from a positive impact of both of these factors. As previously discussed, over the last few years, large turnkey project revenue has been negatively impacted by the pandemic while the higher-margin custom equipment revenue has continued to grow. As our order intake and order backlog for turnkey projects rebounds and our product mix returns to normal, we would expect margins to return to more historical levels. Regardless, our overall outlook is strong and our year-to-date order intake and order backlog as at our January reporting date both exceed last year's annual revenue. Following the end of the quarter, we received a $3.7-million turnkey heat recovery order from a multinational food and drink producer. And earlier this month, we announced the largest single order in our wholly owned subsidiary, Boilerroom Equipment Inc.'s history, followed by our first order ever for a hybrid Flu-Ace incorporating technology we acquired from Sofame Technologies in 2021."

Second quarter 2024 and year-to-date financial review

Second quarter revenue was $7.1-million, up 71 per cent from the same quarter the year before, with strong increases in both the custom equipment and turnkey heat recovery projects businesses. Gross profit increased by 97 per cent to $3.5-million, due to the growth in revenues and higher margin achieved on custom equipment.

Operating expenses for the quarter were $884,000 more than the same quarter last year as the company continued investing in the growth of the business. The increase in operating expenses was mainly due to higher recruitment and salary expenses because of the hiring of additional project engineers and sales staff, and inflationary adjustments made to salaries of existing staff. Also contributing to the increase was the company's continued investment in the digitalization and automation of key business processes. Second quarter operating expenses as a percentage of revenue decreased to 39 per cent from 46 per cent year over year.

For the quarter, the company had EBITDA of $830,000 and net income of $486,000, compared with losses of $28,000 and $266,000, respectively, in the second quarter a year earlier.

For the six months ended Nov. 30, 2023, revenue was $12.3-million, up about 69 per cent year over year, with higher revenues from both custom equipment and turnkey heat recovery projects. Gross profit for the first six months was $6.3-million, more than double the $3.1-million recorded in the same period a year ago, due to higher revenues and higher margins achieved from both custom equipment and turnkey heat recovery projects.

Operating expenses incurred for the first two quarters amounted to $5.3-million, up $1.6-million compared with same period a year ago. Of the increase, $380,000 was due to a decrease in foreign exchange gains compared with the same period of last year. The rest of the increases were related to the growth of the teams, the increased business development and marketing activities, increased travelling costs, the continued investment in digital infrastructure, and inflationary increases on regular operating costs and salaries. For the six-month period, operating expenses as a percentage of revenue decreased to 43 per cent from 50 per cent year over year.

The company achieved EBITDA of $1.2-million and net income of $647,000 for the six months ended Nov. 30, 2023.

Quarter-end cash and working capital balances were around $3.4-million and $3.5-million, respectively.

Business outlook and order summary

Orders received (order intake) during the second quarter totalled $12.8-million. The company ended the quarter with an order backlog of $17.5-million, up 2 per cent from the $17.1-million at the end of the same quarter of prior year.

The company has also received $6.1-million in new orders subsequent to the Nov. 30, 2023, quarter-end, bringing the current order backlog to $23.6-million as of Jan. 23, 2024. A list and description of recent order highlights are available on page 16 of the management discussion and analysis filed today.

Full financial results, including the management 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 provides energy efficiency and emission reduction solutions to Fortune 500 and other large multinational companies. Thermal Energy saves its customers money by reducing their fuel use and cutting their carbon emissions. Thermal Energy's proprietary and proven solutions can recover up to 80 per cent of energy lost in typical boiler plant and steam system operations while delivering a high return on investment with a short, compelling payback.

Thermal Energy is a fully accredited professional engineering firm with engineering offices in Ottawa, Canada; Pittsburgh, United States; as well as Bristol, United Kingdom, with sales offices in Canada, the United Kingdom, the United States, Germany, Poland and Italy. By providing a unique mix of proprietary products, together with process, energy and environmental engineering expertise, Thermal Energy can deliver unique, site-specific turnkey and custom-engineered solutions with significant financial and environmental benefits for its customers.

Thermal Energy's common shares are traded on the TSX Venture Exchange under the symbol TMG and on the OTCQB under the symbol TMGEF.

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