“Following our record revenue for all of the fiscal year 2018, we achieved record revenue again for the first quarter of fiscal 2019” said William Crossland, CEO of Thermal Energy.
“The ongoing strategic investments we are making in expanding our team, capabilities and product offerings are 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
Q1 2018 Financial Review:
Revenues were $6,800,861 in the quarter ended August 31, 2018, representing an increase of $3,703,277, or 119.6%, over the $3,097,584 recognized in the quarter ended August 31, 2017. The increase in revenues in the current quarter was mainly due to the partial delivery of the $11 million energy efficiency project with the Pulp & Paper Customer announced December 5, 2017, which was approximately 74% complete as at August 31, 2018, plus the addition of the Boilerroom Equipment business effective June 29, 2018.
The gross profit of $2,209,885 in the quarter ended August 31, 2018 represented an increase of $692,088, or 45.6%, from the $1,517,797 achieved in the quarter ended August 31, 2017. The increase was mainly the result of increased revenues. Gross profit expressed as a percentage of sales was 32.5% in the first quarter of FY 2019 compared with 49.0% in the first quarter of FY 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 August 31, 2018 totalled $2,295,743 compared to $1,704,019 in the quarter ended August 31, 2017, an increase of $591,724, or 34.7%. Main increases included one-time costs related to the acquisition of Boilerroom Equipment Inc. ($107,342), the integration of Boilerroom Equipment
Inc’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 to foreign exchange gains experienced in the same quarter of the previous year (a difference of $54,644). Despite the increases, Operating Expenses as a per cent of revenue were only 33.8% this year compared to 55.0% last year. Furthermore, excluding the one-time costs related to the acquisition of Boilerroom
Equipment Inc. and the strategic investments to support the future growth of the business, Operating EBITDAS for the quarter was negative $50,736, a $135,533 improvement compared to the first quarter last year. However, EBITDAS would have been $167,406, a $353,675 increase compared to the same quarter last year if we excluded the strategic investments in growth and one-time expenses noted above.
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 August 31, 2018 compared to $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 growing 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 www.SEDAR.com and http://www.thermalenergy.com/financial-reports.html.
Order and Backlog Summary
The Company had an order backlog of approximately $9.5 million as of October 30, 2018, compared to $7.8 million when we 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.
For more information on the products and service available from Thermal Energy International visit www.ThermalEnergy.com.