Thermal Energy International · in the future growth of the business, EBITDAS would have been: •...

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 | February 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 International

We engineer, design and deliver propriety energy efficiencysolutions for companies worldwide

Improving our customers’ profitability and sustainability by:• Reducing their fuel use• Cutting their carbon emissions


Investment highlights


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Enormous, fast-growing global market with strong fundamentals

Proprietary products sold to leading companies in many sectors

Poised to continue strong track record of growth

“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 marketMore than 50% of the world’s energy is lost due to inefficiency

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


Recovers waste heat and water

• Waste heat is recovered from exhausts

• Returned as hot water for use in process or heating

• Typical annual fuel saving of between 5% and 25%

• Typical payback period 2 – 5 years

• Typical order $250K to millions

Products and solutionsFLU-ACE® Heat Recovery System


HotAir

CoolAir

Cool Water

HotWater

The new generation of steam trapping

• More efficient than traditional mechanical traps

• Unlike traditional traps GEM traps have no moving parts and 10 year no fail guarantee

• Typical payback period 1 – 2 years• 100’s to 1,000’s of traps per

location• Typical order $5K - $500K

Products and solutionsGEM™ Steam Traps

Replace with Tim pic -

Mechanical trap

GEM™ Trap


Complimentary heat recovery portfolio – growing our offering, reach and channels

Direct contact condensing heat recovery systems• Custom engineered • Direct sale• Large industrial & institutional

sites• Order value $250K - millions

Indirect contact condensing heat recovery products• Mass customization via modulated design• Sale via manufacturing reps and OEM• All sizes of industrial, commercial and

institutional sites• Order value $5K to $150K

Products and solutionsBoilerroom Equipment Inc., acquired Jun 2018



Low temp biomass drying

• Application of waste heat to dry alternative fuel

• Evaporates water for less cost • Operates at low temps of 50 to 200°F • Typical ROI of 2 to 5 years• Renewable energy solution

Products and solutions - DevelopingDry-Rex™ Biomass drying with waste heat

Product Line Product Status

Dry-Rex™ low temperature biomass drying system

• Paid study with multi-national food ingredient company

• Through first round for NRC-IRAP funding

• Designing demonstration unit

Developing Flu-Ace for water recoveryTurnkey water recovery projectsIntegrating TEI products into renewable energy

• One order already received in each area


Products and solutions - Developing

A suite of proprietary, proven solutionsBecoming a unique one stop shop for all of our customers’ sustainability needs

• Over 20 years of expertise and proven performance

• 10-30% reduction in energy costs• High ROI with short, compelling

paybacks of 1-5 years• Turnkey solutions or equipment


Developing and commercialization

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


• 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

• Resolute Mega Order replaced by a number of normal course orders to a variety of companies and sectors

• 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

• Resolute Mega Order replaced by a number of normal course orders to a variety of companies and sectors

$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%

Gross margin

-$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

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: $0.9 million

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

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


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 LOCATION

Tire Manufacturing $482K EU

Meat Processing $738K EU

Specialty Nutrition $1.4M EU

Brewing $650K EU

Snack Food Production $1.5M NA

(NA – North America)


SECTOR VALUE LOCATION

Tissue Production $850K NA

Animal Nutrition $2.3M EU

Milk Processing $1.8M NA

Food Ingredients $2.4M NA

Beverage Bottling $2.4M 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

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

Capitalization


Share data as of February 21, 2020Balance sheet data as of November 30, 2019

TSX-V TMG

Recent Price: $0.12

52 Week Range: $0.06 - $0.16

# of Shares: 162 million

Market Cap: $19.4 million

Cash: $5.0 million

Total Debt: $2.4 million

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

• Well-defined and proven growth strategy

• Leveraging established North American and European sales and engineering platforms

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

Poised to continue growing organically and through accretive acquisitions

An Innovative Technology Company Providing Sustainability Solutions

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

Thank youwww.thermalenergy.com

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A great growth story, that is waiting to be told!

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