OTTAWA, ONTARIO – January 25, 2024 – Thermal Energy International Inc. (“Thermal Energy” or the “Company”) (TSX-V: TMG, OTCQB: TMGEF), a provider of innovative energy efficiency and carbon emission reduction solutions to major corporations around the world, today reported its financial results for the second quarter ended November 30, 2023. All figures are in Canadian dollars.
Highlights:
Overview
“We had a very strong second quarter, with growth of more than 70% in both our Turn-Key Projects and Custom Equipment businesses,” said William Crossland, Thermal Energy CEO. “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 UK 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 turn-key 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 turn-key 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 turn-key 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.”
|
In thousand except % data |
Three months ended Nov 30, 2023 |
Three months ended Nov 30, 2022 |
Six months ended Nov 30, 2023 |
Six months ended Nov 30, 2022 |
|
Revenue |
$7,105 |
$4,159 |
$12,288 |
$7,282 |
|
Gross profit |
$3,489 |
$1,769 |
$6,256 |
$3,118 |
|
Gross margin |
49% |
43% |
51% |
43% |
|
Operating expenses |
$2,782 |
$1,898 |
$5,259 |
$3,627 |
|
Net income (loss) |
$486 |
$($266) |
$647 |
$(775) |
|
EBITDA[1] |
$830 |
$($28) |
$1,244 |
$(258) |
|
Cash position |
$3,424 |
$2,724 |
$3,424 |
$2,724 |
|
Working capital |
$3,492 |
$1,766 |
$3,492 |
$1,766 |
|
Orders received |
$12,785 |
$14,443 |
$16,089 |
$18,102 |
|
Order backlog[2] as of November 30 |
$17,500 |
$17,100 |
$17,500 |
$17,100 |
Second Quarter 2024 and Year-to-Date Financial Review
Second quarter revenue was $7.1 million, up 71% from the same quarter the year before, with strong increases in both the Custom Equipment and Turn-Key Heat Recovery Projects businesses. Gross profit increased by 97% to $3.5 million, due to the growth in revenues and higher margin achieved on Custom Equipment.
Operating expenses for the quarter were $884 thousand 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% from 46% year-over-year.
For the quarter, the Company had EBITDA of $830 thousand and net income of $486 thousand, compared to losses of $28 thousand and $266 thousand respectively in the second quarter a year earlier.
For the six months ended November 30, 2023, revenue was $12.3 million, up about 69% year-over-year, with higher revenues from both Custom Equipment and Turn-Key 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 Turn-Key Heat Recovery Projects.
Operating expenses incurred for the first two quarters amounted to $5.3 million, up $1.6 million compared to same period a year ago. $380 thousand of the increase was due to a decrease in foreign exchange gains compared to the same period of last year. The rest of the increases were related to the growth of the teams, the increased business development & 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% from 50% year-over-year.
The Company achieved EBITDA of $1.2 million and net income of $647 thousand for the six months ended November 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% 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 November 30, 2023, quarter-end, bringing the current order backlog to $23.6 million as of January 23, 2024. A list and description of recent order highlights is available on page 16 of the Management’s Discussion and Analysis filed today.
Full financial results including Management’s Discussion and Analysis and accompanying notes to the financial results are available on www.sedarplus.ca and investors-thermalenergy.com/en/financial-overview.
[1] EBITDA represents earnings before interest, taxation, depreciation, amortization, impairment of intangible assets, and share-based compensation expense. See note below about non-IFRS measures.
[2] Order backlog represents any purchase orders that have been received by the Company but have not yet been reflected as revenue in the Company’s published financial statements. See note below about non-IFRS measures.
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ENDS
For media enquiries contact:
Thermal Energy International Inc.
Canada: 613-723-6776
UK: +44 (0)117 917 2179
Marketing@thermalenergy.com
For investor enquiries:
William Croslland
President and CEO
Thermal Energy International Inc.
613-723-6776
Investors@thermalenergy.com
Notes to editors
About Thermal Energy International Inc.
Thermal Energy International Inc. provides energy efficiency and emissions reduction solutions to Fortune 500 and other large multinational companies. We save our customers money by reducing their fuel use and cutting their carbon emissions. Thermal Energy’s proprietary and proven solutions can recover up to 80% 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, USA, as well as Bristol, UK, with sales offices in Canada, UK, USA, 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 our customers.
Thermal Energy’s common shares are traded on the TSX Venture Exchange (TSX-V) under the symbol TMG and on the OTCQB under the symbol TMGEF. For more information, visit our investor website at https://investors-thermalenergy.com or company website at www.thermalenergy.com and follow us on Twitter at https://twitter.com/GoThermalEnergy.
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Forward-Looking Statements
This press release contains forward-looking statements relating to, and amongst other things, based on management’s expectations, estimates and projections, the anticipated effectiveness of the Company’s products and services, the timing of revenues to be received by the Company, the anticipated effects of COVID-19 on the business, backlog and revenue, the expectation that orders in backlog will become revenue, the anticipated benefits of the Company’s current efforts at training and business improvement efforts, opportunities for growth, the Company’s belief that it can capitalize on opportunities, the size of markets and opportunities open to the Company and expectations that order intake will bounce back.. Information as to the amount of heat recovered, energy savings and payback period associated with Thermal Energy International’s products are based on the Company’s own testing and average customer results to date. Statements relating to the expected installation and revenue recognition for projects, statements about the anticipated effectiveness and lifespan of the Company’s products, statements about the expected environmental effects and cost savings associated with the Company’s products and statements about the Company’s ability to cross-sell its products and sell to more sites are forward looking statements. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, some of which are outside of the Company’s control, could cause events and results to differ materially from those stated. Fulfilment of orders, installation of product and activation of product could all be delayed for a number of reasons, some of which are outside of the Company’s control, which would result in anticipated revenues from such projects being delayed or in the most serious cases eliminated. Actions taken by the Company’s customers and factors inherent in the customer’s facilities but not anticipated by the Company can have a negative impact on the expected effectiveness and lifespan of the Company’s products and on the expected environmental effects and cost savings expected from the Company’s products. Any customer’s willingness to purchase additional products from the Company and whether orders in the Company’s backlog as described above will turn into revenue is dependent on many factors, some of which are outside of the Company’s control, including but not limited to the customer’s perceived needs and the continuing financial viability of the customer. The Company disclaims any obligation to publicly update or revise any such statements except as required by law. Readers are referred to the risk factors associated with the Company’s business as described in the Company’s most recent Management’s Discussion and Analysis available at www.sedarplus.ca.
Non-IFRS Financial Measures
The Company believes the following non-IFRS financial measures provide useful information to both management and investors to better understand the financial performance and financial position of the Company.
EBITDA
Management believes that EBITDA (earnings before interest, taxation, depreciation, amortization, impairment of intangible assets, and share-based compensation expense) is a useful performance measure as it approximates cash generated from operations, before tax, capital expenditures and changes in working capital, and excludes impairment of intangible assets. EBITDA also assists comparison among companies as it eliminates the differences in earnings due to how a company is financed. EBITDA does not have a standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and therefore may not be comparable to similar measures presented by other companies. There is no direct comparable IFRS measure for EBITDA.
A reconciliation of net income (loss) to EBITDA is shown below.
|
|
Three months ended |
Six months ended |
||
|
|
Nov 30, 2023 $ |
Nov 30, 2022 $ |
Nov 30, 2023 $ |
Nov 30, 2022 $ |
|
Total net income (loss) attributable to owners of the parent |
462,777 |
(265,525) |
622,020 |
(778,182) |
|
Total net income (loss) attributable to non-controlling interest |
22,762 |
(726) |
25,349 |
3,430 |
|
Interest charge |
114,639 |
113,310 |
227,903 |
216,396 |
|
Income tax (recovery) expense |
93,209 |
(3,249) |
94,992 |
6,342 |
|
Depreciation and amortization |
83,124 |
72,597 |
167,257 |
183,330 |
|
Share based compensation |
53,319 |
55,148 |
106,638 |
110,296 |
|
EBITDA |
829,830 |
(28,445) |
1,244,159 |
(258,388) |
Order Backlog
Order backlog is a useful performance measure that Management uses as an indicator of the short-term future revenue of our Company resulting from already recognized orders. The Company includes in “order backlog” any purchase orders that have been received by the Company but have not yet been reflected as revenue in the Company’s published financial statements. It is important to note that once an order or partial order is recorded as revenue, the order backlog is reduced by the amount of the newly reported revenue. Order backlog does not have a standardized meaning prescribed by International Financial Reporting Standards and therefore may not be comparable to similar measures presented by other companies.
For additional details on non-IFRS financial measures, please refer to the Company’s most recent Management’s Discussion and Analysis available at www.sedarplus.ca for more details about these non-IFRS financial measures.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.