thermal energy international · markets and growth of recurring revenue streams; upcoming projects;...

An Innovative Technology Company Providing Sustainability Solutions

TSX-V: TMG | [email protected] | www.thermalenergy.com

Thermal Energy InternationalProfitable energy efficiency & emission reduction solutions

https://web.tmxmoney.com/quote.php?locale=en&qm_symbol=TMG

Forward-looking statementsTSX-V: TMG | March 2020

This presentation includes “forward-looking information”.

For example, statements about the opportunities for repeat business, additional orders, entry into newmarkets and growth of recurring revenue streams; upcoming projects; introduction of new products andservices and growth opportunities and strategies are all forward looking information. Such forward lookinginformation reflects Thermal Energy International’s (“TEI”) current expectations with respect to futureevents and are based on information currently available to management.

Forward-looking information involves significant known and unknown risks, uncertainties and assumptions.Should one or more of these risks or uncertainties materialize, or should assumptions underlying theforward-looking information prove incorrect, actual results, performance or achievements could varymaterially from those expressed or implied by the forward-looking information contained in thispresentation. Readers should not place undue reliance on forward-looking information. The forward-lookinginformation is made as of the date of this presentation and TEI does not assume any obligation to update orrevise it to reflect new events or circumstances, except as required by law.

www.thermalenergy.com | 2

Thermal Energy InternationalA proprietary solution provider and a fully accredited engineering firm

With a unique mix of:• Proprietary products, and• Process, energy and environmental engineering expertise…

We engineer, design and deliver innovative and compelling turnkey energy efficiency projects that improve our customers’ profitability and sustainability by:

• Reducing their fuel use, and • Cutting their carbon emissions.



1991TEI founded

1994TEI IPO

2008GEM acquiredComplementary

productSmaller moreregular ordersEU operations

Global recession, energy markets

collapse2008 – 2010EU Recession

2012

TEI growth, expansion

and investment

2016 – 2020

2020LTM

Revenue: $22MEBITDA $1.5M

Net income: $340k

TEI is an R&D co.Avg annual revenue $1M

Avg annual loss $1.1M 1991-2007

2007Crossland

joins Board of Directors

Revenue: $821kNet loss: $2.4M

2009Mgmt & Board reorgCrossland app’d CEO

Revenue: $4MNet loss: $3.2M

2015Paris Accord on Climate

Change agreed to at

COP21

TEI cost cutting and corporate

reorganization2010 – 2015

2018BEI acquired

Complementary product

New sales channelCommercial

market

Corporate history

Investment highlights


1

2

4

Enormous, fast-growing global market with strong fundamentalsProprietary products sold to leading companies in many sectors

Poised to continue strong track record of growth

3 Low capital intensity business model

“Energy efficiency has been called a ‘hidden fuel’.However, the degree of global investment in energy efficiency, and the resulting energy savings, are somassive that energy efficiency is not just a hidden fuel but rather the world’s first fuel.”


Maria van der Hoeven, IEA Executive Director

Enormous global market for energy efficiencyMore than 50% of the world’s energy is lost due to inefficiency

Global marketfor TEI Products


Enormous global market for our productsFocused on reducing industrial natural gas use

>$250B1

1 Calculations based on data from U.S. Dept. of Energy, 2018 Energy Outlook, UK BEIS Natural Gas Prices in IEA countries, CIA World Factbook Industrial GDP per country

>$50B1

North American & EU marketfor TEI Products

Governments and industries around the world are taking unprecedented action on climate change• Improved energy efficiency can

meet 50% of the world’s carbon reduction commitments

• 3x more than what all forms of renewable energy can achieve

• A 9x increase in annual energy investment is required to meet our carbon reduction commitments

Market fundamentals stronger than ever


Increasing energy efficiency is the fastest, cheapest and easiest way to reduce GHG emissions

• Systematically cheaper than other sustainability solutions

• Does not cost money• Saves money and

increases profitability• Improves competitiveness

Efficiency is the cheapest solution


McKinsey & Company

To date, our energy saving and carbon emission reducing products installed around the world have delivered for our customers an estimated:

• $434 million in energy savings

• 4.6 million tonnes of carbon emission reductions

Every year, our products deliver an estimated:

• $63 million in energy savings

• 560,000 tonnes carbon emission reductions


Energy savings and carbon emission reductionsOur impact to date

Every year the energy saved and emissions reduced by products installed around the world is equivalent to:

Energy savings and carbon emission reductionsOur impact to date


Products and solutions


Direct contact condensing heat recovery system

High efficiency steam trapping technology

Indirect contact steam boiler economizer

Indirect contact hot water boiler economizer

Fuel & CO2Savings

10-20% Fuel & CO2Savings



5-10%

~Order $500K -

2M+

~Order$1K -

$500K

~Order $5K-

$250K+

~Order $5K-

$250K+

~Payback2 - 5 years

~Payback1 – 3 years

~Payback2 - 5 years

~Payback2 - 5 years

Delivered through engineered Turnkey Solutions (~70% of revenue)

Products and solutions - Developing


Low temperature biomass drying system• Paid study with multi-national food ingredient company• Through first round for NRC-IRAP funding• Designing demonstration unit

Renewable energy & water recovery systems1. Developing Flu-Ace for water recovery2. Turnkey water recovery projects3. Integrating TEI products into renewable energy

~ Potential order value: $1M - $5M One order already in each area

~Expected payback: 2-5 years Total value of orders: $1.3M

I• Food & Beverage• Pulp & Paper• Laundry• Building materials

• Healthcare• Chemical• Petrochemical• Rubber

• Pharmaceutical• Agribusiness• Brewing• Mining

Our customers include a large number of leading multinational companies across a wide range of industry sectors:


Broad range of industries and customers

We can recover ~80% of energy lost in typical boiler plant and steam system operations

Corporate AccountsLeveraging trusted global relationships to create efficient repeatable sales


Fortune 500 food &

beverage leader

Major hospitalgroup #1

Leading performance materials co.

Multinational agribusiness

company

Large pulp & paper

customer

Major hospitalgroup #2

14 sites36 orders

2 sites2 orders

3 sites50 orders

3 sites15 orders

2 sites2 orders

18 sites42 orders

Sample projectsFood-products industry

• $1.4M order to supply a heat recovery system to a multinational specialty nutrition corporation

• Set to provide energy savings of over $570K/year

• Expected payback of 1.9 years


Part of a company-wide commitment to improving energy efficiency and minimizing emissions, this turn key, energy saving heat recovery system will deliver both pollution prevention and pollution control.

Expected to fuel use by up to 12%, equating to an annual energy saving of up to $570,000. Carbon emissions will also be reduced by up to 2,610 tonnes, as will end-of-pipe particulate matter by between 50% and 90%.Project combines our extensive experience in both the dairy and medical nutrition sector and highlights the diversity of the food and beverage processing market as a whole.

Sample projectsAnimal nutrition

• $2.3M order from a leading multinational animal nutrition & agricultural products co.

• Two FLU-ACE Heat recovery systems

• Expected to provide utility savings of $920K/year

• Expected payback of 3.1 years


The recovered heat will be used to displace steam and natural gas currently heating water and air used within the production process.

Set to reduce the customer’s fuel usage by over 15% and carbon emissions by over 2,122 tonnes annually.

This is the equivalent amount of energy saved by permanently removing more than 450 cars from the road or switching more than 80,000 incandescent light bulbs to LED.

Sample projectsFood and beverage

• $1.3M order for water recovery system for leading Fortune 500 food & beverage customer

• Expected to reduce annual water usage by 25M gallons


Part of an ongoing sustainability drive the innovative system is designed to reduce water usage by over 25 million gallons per year and save the customer an estimated $289,000 annually.

FLU-ACE® technology is not only one of the most efficient ways of recovering waste heat from boiler exhausts, it also continuously condenses water vapor, delivering water savings and improving site sustainability.Thermal Energy delivers considerable water savings of over 10 million gallons per year to this key client through past FLU-ACE heat recovery projects.

Represents another significant order as a result of a longstanding and successful partnership with this customer.


• Latin America sales person (Apr 2016)• Ontario / CoGen sales person (May 2016)• CoGen Engineer (Jul 2016)• Junior Engineer (Nov 2016)• South Germany sales person (Jan 2017)• NA Marketing Manager (May 2017)• EU Sales Director (Jul 2017)• Senior engineer (Oct 2017)• Operational Systems Manager (Jan 2018)

• Texas sales person (Feb 2018)• EU marketing manager (Apr 2018)• North Germany sales person (Apr 2018)• BEI admin, engineering and production team

(8 staff) (June 2018)• Poland sales person (Jul 2018)• DryRex Engineer (Aug 2018) • NA to EU Cross training engineer (Sep 2018)• Junior EU Project Engineer (Oct 2018)

Added

Investing in growthExpanding our team & global presence

• 24 new staff added over the last three years (16 new positions plus 8 from BEI)• Many of these positions are not yet fully contributing to results (takes 1 – 2 years)

Positioned for continued strong growth

Global presenceEstablished sales and engineering platforms in our key markets of North America and the EU

Sales territories recently added:• Ontario and Cogen• Latin America• Texas & US Gulf

Coast

• South Germany• North Germany• Poland


Major offices:Ottawa, Canada, Bristol, UK, and Pittsburgh, USA

Direct sales people

Representation in 28 countries:

Financial summary2015 to last twelve months (LTM) of fiscal year 2020 Q2


Revenue


$6.8

$12.4 $13.2

$17.4

$21.1 $21.9

0

5

10

15

20

25

FY 15 FY 16 FY 17 FY 18 FY 19 LTM

• 33% compound annual growth since 2015

• Impact of Resolute Mega Order in FY2018 and FY 2019 replaced by a number of normal course orders to a variety of companies and sectors in LTM

• LTM revenue up $820k or 3.8% from last year

($ millions)

Annual and last twelve months (LTM) as of fiscal year 2020 Q2

Gross profitAnnual and last twelve months (LTM) as of fiscal year 2020 Q2


• Record Gross Profit

• Gross margin impacted by project and product mix – individual product margins are stable

• LTM gross profit up $1.3 million or 17% since May 2019

• Lower margin Resolute Mega Order in FY2018 and FY2019 replaced by a number of normal course orders to a variety of companies and sectors in LTM

$3.1

$5.8 $6.3$6.9

$8.0$9.4

0123456789

10

FY 15 FY 16 FY 17 FY 18 FY 19 LTM

($ millions)

46% 47% 48% 40% 38% 43%

Gross margin

$5.4 $5.4 $5.6$6.3

$8.2 $8.5

0123456789

FY 15 FY 16 FY 17 FY 18 FY 19 LTM

Operating expenses (excluding R&D)


• In FY2018 & FY2019 we made $1.3 million in strategic investments in the future growth of the company which added:

• $600k in additional annual expense in FY2018; and

• $700k in additional annual expense in FY2019.

• FY2019 expenses also impacted by the integration of Boilerroom Equipment Inc’s expenses including increased depreciation and amortization

($ millions)


79% 44% 43% 36% 39% 39%

Operating expenses as % of revenue

EBITDAS


($ thousands)• Excluding the $1.3 million in strategic

investments made during FY2018-FY2019 in the future growth of the business, EBITDAS would have been:

• FY2018: $1.2 million • FY2019: $1.5 million

• 1H 2020 EBITDA up $1.3 million compared to 1H 2019

• LTM EBITDAS is up $1.3 million or 738% since May 2019


-$2,049

$564$750 $617

$176

$1,476

-2500

-2000

-1500

-1000

-500

0

500

1000

1500

FY 15 FY 16 FY 17 FY 18 FY 19 LTM

Net incomeAnnual and last twelve months (LTM) as of fiscal year 2020 Q2


• FY2019 net income impacted by $1.3 million in new strategic investments made over the last two years to drive future growth in the business

• LTM net income is $337k, an increase of $788k since May

-$2,155

$259 $393$619

-$451

$337

-2500

-2000

-1500

-1000

-500

0

500

1000

FY 15 FY 16 FY 17 FY 18 FY 19 LTM

($ thousands)

Cash positionYear end and most recent quarter end (FY20 Q2 - Nov. 30/19)


$0.7$1.1

$3.0 $3.3

$4.2

$5.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

May.15 May.16 May.17 May.18 May.19 Nov.19

• Steady year over year increases

• FY2020 Q2 cash position increased by $856k or 20% from last year

• FY2020 Q2 cash position up $4.3 million since FY 2015

($ millions)

Working capitalYear end and most recent quarter end (FY20 Q2 - Nov. 30/19)


$0.5

$1.0

$1.4

$2.0 $2.0$2.4

0.0

0.5

1.0

1.5

2.0

2.5

3.0

May.15 May.16 May.17 May.18 May.19 Nov.19

• Working capital remains strong

• FY2020 Q2 working capital increased $417k or 20% compared to last year

($ millions)

Order bookOrder backlog as at most recent quarter end


$2.3

$6.5 $6.5$5.3 $4.9

$8.2

0123456789

Q2 15 Q2 16 Q2 17 Q2 18 Q2 19 Q2 20

• Order backlog at the end of the second quarter FY2020 was $8.2 million, up $3.3 million or 67% higher than the same time last year

($ millions)

Sector and geographic diversityCustomers include leading global companies across many sectors


SECTOR VALUE PAYBACK LOCATION

Tire Manufacturing $482K 2.0 yrs EU

Meat Processing $738K 2.8 yrs EU

Specialty Nutrition $1.4M 1.9 yrs EU

Brewing $650K 1.6 yrs EU

Snack Food Production $1.5M 3.9 yrs NA

(NA – North America)


SECTOR VALUE PAYBACK LOCATION

Tissue Production $850K 2.3 yrs NA

Animal Nutrition $2.3M 3.1 yrs EU

Milk Processing $1.8M 4.0 yrs NA

Food Ingredients $2.4M 2.0 yrs NA

Beverage Bottling $2.4M 6.5 yrs NA

(NA – North America)

Sector and geographic diversityCustomers include leading global companies across many sectors

FY 15 FY 16 FY 17 FY 18 FY 19 LTM

FY 15 FY 16 FY 17 FY 18 FY 19 LTM

Financial summary• 33% revenue CAGR since FY2015 • FY2020 YTD – highest 1H revenue and profitability in

company’s history, (net income of $600k and EBITDAS of $1.2 million)

• LTM EBITDA of $1.5 million• Exceptionally strong and growing cash and working capital• Revenue growth in new territories (Germany and Poland)• Growth in the number of HR projects especially in the EU • Effective integration of the BEI products in some of our

projects • Strong evidence our strategy is working


REVENUE

EBITDAS

Senior management

More than 25 years of experience delivering corporate growth, development, finance and M&A transactions to a broad range of industries with an emphasis on Cleantech, Alternative & Renewable Energy and Food & Beverage.

William M. Crossland, B. Sc, MBAPresident & CEO; Director


More than 14 years of financial management and reporting experience across publicly traded companies, environmental engineering consultancies and multinational businesses.

Julia Zhang, CPA CA CFO

Over 15 years of steam industry experience heading up the technical team and business development functions, spearheading large projects for Fortune 500 and multinationals

Sam Mawby, M.EngDirector of Business Development & Technology

Recognized expert in environmental technologies, responsibilities have ranged from R&D to project design and implementation. Expert Reviewer with the Sustainable Development Technology Corporation (SDTC).

Robert Triebe, M.Sc., P.Eng. B. Sc. COO

Engineering and management experience across manufacturing, quality, supply chain and export. Marketing and operations lead providing the link between technical, production and sales teams.

Isobel Wales, B.Eng, MA Director of Operations

Founded Boilerroom Equipment Inc in 2005. Over 26 years of experience in the commercial and industrial boiler industry across sales, engineering, and senior management positions.

Vince Sands, P.E. Founder & President

Board of directors

One of Ottawa’s most respected executives and serial entrepreneurs. Ottawa’s Business Man of the Year (2001) and Lifetime Achievement Award (2014). Founder and CEO of Why Interactive, Computer Innovations Distribution Inc., NabuNetwork Corp. and SHL Systemhouse Ltd. Co-Chair, Canadian Advanced Technology Alliance.

John KellyChairman


Senior Vice President, Oil & Gas of Ausenco., a global engineering, procurement, construction management, and operations service provider to the energy and resources sectors. Prior to this he was Founder, President of Reaction Consulting Inc. (sold to Ausenco 2014), and the President of Triumph-Effisyn Ltd.

David Spagnolo, BSc (Eng), PhDDirector

Past President of DuPont Canada following 30 year career with DuPont globally in progressive sales, operations and senior management roles. Currently Chairman of CHAR Technologies, COO Woodland Biofuels, Chair of advisory board for Schulich Center of Excellence for Responsible Business and Chair of the Sustainable Chemistry Alliance.

William White, BSc (Eng)Director

Principal, Ollerhead Capital; CEO & Director CuspisCapital Ltd. Since founding Ollerhead Capital in 1997 he has structured and arranged $800 million of private debt financing. Previously worked in corporate finance and fixed income sales and trading for a major investment dealer and debt private placements for two institutional investors.

William Ollerhead, BA, MBADirector

Portfolio Manager, Independent Accountant Investment Council Inc.; Sales Manager & Senior Account Executive, Honeywell Limited; Manager, Program Development in Eastern Canada, Johnson Controls

Michael Williams, BSc (Eng), P.Eng, MBA, CFADirector

More than 25 years of experience delivering corporate growth, development, finance and M&A transactions to a broad range of industries with an emphasis on Cleantech, Alternative & Renewable Energy and Food & Beverage.

William M. Crossland, B. Sc, MBAPresident & CEO; Director

One of Canada’s fastest growing companies


• Sep 2019 - Named one of Canada’s Top Growing Companies, in the Globe and Mail, Report on Business’s inaugural ranking of Canadian companies

Enormous, fast growing, global market with strong fundamentals

Proprietary products sold to leading companies across sectors

Investment summary


• Proprietary business-centric solutions that pay for themselves

• Established partner with some of the world’s leading companies

Poised to continue strong track record of growth

• Ever-increasing demand for energy efficiency, sustainability

• Growing government and industry support for climate change solutions

• Increased interest in corporate responsibility and ESG investing

• Low capital intensity business model

• Well-defined and proven growth strategy

• Leveraging established North American and European platforms

• Becoming a unique, one-stop-shop for all of our customers’ sustainability needs

Poised to continue growing organically and through accretive acquisitions

Capitalization


Share data as of March 10, 2020Balance sheet data as of November 30, 2019

TSX-V TMG

Recent Price: $0.090

52 Week Range: $0.150 - $0.055

# of Shares: 162 million

Market Cap: $14.6 million

Cash: $5.0 million

Total Debt: $2.4 million

An Innovative Technology Company Providing Sustainability Solutions

TSX-V: TMG | [email protected] | www.thermalenergy.com

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thermal energy international · markets and growth of recurring revenue streams; upcoming projects;...

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