Mr. William Crossland reports

THERMAL ENERGY INTERNATIONAL'S THIRD QUARTER RESULTS HIGHLIGHTED BY CONTINUED REVENUE GROWTH AND STRONG MOMENTUM

Thermal Energy International Inc. has released its financial results for the third quarter ended Feb. 29, 2024.

Highlights:

• Revenue increased 8 per cent to $6.1-million for the quarter and 42 per cent to $18.4-million for the nine months ended Feb. 29, 2024, on a year-over-year (YoY) basis;
• Gross profit increased 17 per cent to $3.1-million for the quarter and 63 per cent to $9.3-million for the nine-month period, on a YoY basis;
• EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter was $322,000 compared with $816,000 in the third quarter of last year. Year-to-date EBITDA increased by $1-million, or 181 per cent YoY, to $1.6-million;
• Net income for the quarter was $44,000 compared with an income of $524,000 in the same quarter last year. Year-to-date net income increased by $943,000 YoY;
• Cash balances and working capital remain strong at $7.5-million and $3.4-million, respectively;
• Order intake was $8.3-million for the quarter and $26.9-million for fiscal 2024 year-to-date (as at April 24, 2024);
• Order backlog was $20.4-million as at Feb. 29, 2024, and $22.9-million as at April 24, 2024.

Overview

"We had a strong quarter with growth of 8 per cent and 17 per cent in revenue and gross profit, respectively," said William Crossland, Thermal Energy's chief executive officer. "While we remained profitable, investments we made for continued growth did lower our EBITDA and net income for the quarter. These investments included expanding our team, investments in technology and the recent move of our U.K. operations. We've added nine net new people in the first nine months of fiscal 2024. On the technology side, we made investments in our carbon reduction and efficiency scoping tool that allows our sales and engineering teams to quickly and efficiently identify energy saving and carbon reducing opportunities while on site with customers, as well as a new global accounting program, and enterprise resource planning software. We also had additional moving, leasing and renovation expenses related to our new, larger U.K. production facility, which has more than double the throughput capacity of our former premises.

"Our outlook remains strong, fuelled by robust business development activity yielding continued growth in order intake and order backlog, and the investments in growing our business mentioned earlier. With our continued track record of driving positive environmental impact while saving our customers money, Thermal Energy is well positioned to be the energy-efficiency partner of choice for multinational companies looking to achieve their net-zero and other sustainability targets."

Third quarter 2024 and year-to-date financial review

Third quarter revenue was $6.1-million, up 8 per cent from the same quarter the year before, driven by a strong increase in turnkey heat recovery projects. Gross profit increased by 17 per cent to $3.1-million, due to the growth in revenues and higher margin achieved on turnkey heat recovery projects.

Operating expenses for the quarter were $958,000 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 associated with the hiring of additional project engineers and sales staff, higher facility costs related to the relocation of the company's United Kingdom team to a new facility, and inflationary adjustments 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. In addition, comparing with the same quarter of last year, the company had an unfavourable change in foreign exchange of $216,000, which also contributed to the increase in operating expenses. Third-quarter operating expenses as a percentage of revenue increased to 48 per cent from 35 per cent year-over-year.

For the quarter, the company had EBITDA of $322,000 and net income of $44,000, compared with $816,000 and $524,000, respectively, in the third quarter a year earlier.

For the nine months ended Feb. 29, 2024, revenue was $18.4-million, up about 42 per cent year-over-year, with higher revenues from both custom equipment and turnkey heat recovery projects. Gross profit for the nine months was $9.3-million, as compared with $5.7-million recorded in the same period a year ago, an increase of 62 per cent, due to higher revenues and higher margins achieved from both custom equipment and turnkey heat recovery projects.

Operating expenses incurred for the nine months amounted to $8.2-million, up $2.6-million compared with same period a year ago. Foreign exchange loss accounted for $596,000 of the increase compared with the same period of last year. The rest of the increase was related to the growth in headcount, the increased business development and marketing activities, higher traveling costs, the continued investment in digital infrastructure, increased facility costs due to the relocation of the company's U.K. operations, and inflation-related increases to regular operating costs and salaries.

The company achieved EBITDA of $1.6-million and net income of $692,000 for the nine months ended Feb. 29, 2024.

Quarter-end cash and working capital balances were approximately $7.5-million and $3.4-million, respectively.

Business outlook and order summary

Orders received during the third quarter totalled $8.3-million. The company ended the quarter with an order backlog of $20.4-million, up 26 per cent from the $16.2-million at the end of the same quarter of the prior year.

The company also received $2.5-million in new orders subsequent to the quarter ended Feb. 29, 2024, bringing the current order backlog to $22.9-million as of April 24, 2024. A list and description of recent order highlights is available on page 16 and page 17 of the management's discussion and analysis filed today.

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

Notice of earnings call and webcast

Management of Thermal Energy will host an earnings call and webcast today, April 25, 2024, at 8:30 a.m. Eastern Time to discuss its third-quarter financial results. A question-and-answer session will follow management's prepared remarks, at which time qualified equity analysts will be able to submit questions via the webcast.

The live webcast with a slide presentation will be available on-line. You may join the webcast via Microsoft Teams on your computer, mobile app or room device using the meeting ID: 336 346 945 221 and the passcode: bwTidd.

To access the conference call via dial-in, please use the information below.

Calling from Canada:  1-437-703-4481

Find a local number on-line.

Phone conference ID:  951 767 501 followed by the pound key

The webcast will be archived on Thermal Energy's website following the call date.

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.

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