Thermal Energy International · 2020. 11. 9. · Thermal Energy International A proprietary...

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 | November 2020

www.thermalenergy.com | 2

This presentation includes “forward-looking information”. For example, statements about the opportunities for repeat business; the possibility or expectation ofadditional orders; growth in existing markets; entry into new markets; order backlog; introduction of new products and services; establishment and growth ofnew distribution channels; growth opportunities and strategies; conversion of existing orders into revenues; are all forward looking information. Such forwardlooking information reflects Thermal Energy International’s (“TEI”) current expectations with respect to future events and are based on information currentlyavailable to management. Forward-looking information involves significant known and unknown risks, uncertainties and assumptions. For example, existing andnew customers may not place orders for any number of reasons; fulfilment of orders, installation of product and activation of product could all be delayed for anumber of reasons, some of which are outside of TEI’s control, which would result in anticipated revenues from such projects being delayed or in the most seriouscases eliminated; TEI may not be successful in identifying and developing new products and our new or existing products may not result in new orders or gainacceptance in new geographical or industrial markets; we may not be successful in establishing new distribution channels or such new channels may not besuccessful; our growth strategies may not be successful or result in the anticipated growth and orders received by TEI may not turn into revenue in the time frameanticipated, or at all, due to many factors, some of which are outside of TEI’s control, including but not limited to TEI’s ability to deliver products on time and inaccordance with specifications and the continuing financial viability of the customer. Readers are also referred to the risk factors outlined in our management’sdiscussion and analysis available at www.SEDAR.com. 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 vary materially from those expressed or implied by the forward-lookinginformationcontainedinthis presentation.

Readers should not place undue reliance on forward-looking information. The forward-looking information is made as of the date of this presentation and TEI doesnot assume any obligation to update or revise it to reflect new events or circumstances, except as required by law.

The term “EBITDA” as used in this presentation is not a recognized measure under IFRS, does not have a standardized meaning prescribed by IFRS and is thereforeunlikely to be comparable to similar measures presented by other companies. This measure is provided as additional information to complement IFRS measuresby providing further understanding of the Company’s results of operations from management’s perspective and should not be considered in isolation nor as asubstitute for analysis of our financial information reported under IFRS. Please refer to our management’s discussion and analysis for the applicable period for areconciliation of EBITDA to Net income (loss), the closest IFRS measure.

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 – 2019

F2020Revenue: $21.4M

EBITDA $1.9MNet income excluding non-

cash write-down: $1.2M

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 historyImpact of COVID-19

Global Pandemic

2020

Q1 F2021Order

intake up 36%

compared to last year

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.”


International Energy Agency

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, Thermal Energy International 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 reductionsThermal Energy International impact to date

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

Energy savings and carbon emission reductionsThermal Energy International 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

SECTOR VALUE PAYBACK LOCATION

Food & Beverage $920K 2.1 yrs Eur

Consumer Protein $950K NA

Tire Manufacturing $482K 2.0 yrs Eur

Food Products $1.4M 1.9 yrs Eur

Brewer $650K 1.6 yrs Eur

Sector and geographic diversityCustomers include leading global companies across many sectors


(NA – North America)

SECTOR VALUE PAYBACK LOCATION

Snack Food Manufacturer $1.5M 3.9 yrs NA

Tissue Manufacturer $850K 2.3 yrs NA

Animal Nutrition $2.3M 3.1 yrs Eur

Chemical Producer $960K 2.9 yrs Eur

Food Ingredients $2.4M 2.0 yrs NA


(NA – North America)

Sector and geographic diversityCustomers include leading global companies across many sectors

Sample projectsFood and beverage industry

• $920K order to supply a turnkey heat recovery system to a one of Europe’s largest food and drink groups

• Set to provide energy savings of over $383K/year


“Bolt-on” CHP Heat Recovery Solution TO BE installed at a canning and pouch packaging facility in the Eur. Recaptured energy will then preheat process water required during the cooking, canning, and sterilization processes, and heat boiler make up water used to create steam.

Once commissioned, the system is expected to deliver an annual fuel saving of $383,300 and reduce the site’s carbon emissions by 2,868 tonnes a year – helping to support the Group’s company-wide targets. This project is particularly exciting as the FLU-ACE® unit is integrating with the site CHP, taking an already efficient system from between 60 to 80% into the high 90s.

Sample projectsConsumer protein industry

• $950K order from a leading consumer protein company

• Efficient equipment and engineering for a plant upgrade project

• Expected to heat 2,700 US gallons of process water/min from 85°F to 140°F


Energy efficient equipment will be used to heat process water for the plant operation producing up to 2,700 US gallons per minute of water heated from 85°F to 140°F. This project represents one of the first orders for the Company for fiscal year 2021 and the Company’s largest “major equipment package” order to-date (equipment and engineering only, no turn-key delivery) and it serves as Thermal Energy’s premiere project with this customer.

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 turnkey, 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.


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

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

(8 staff) (June 2018)• Poland salesperson (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 positions added over the last three years (16 new positions plus 8 from BEI)• Many of these positions are just beginning to contribute to results

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:

Business as (un)usualMaintaining operations through COVID-19


• Our customized turnkey best-in-class product and services often require detailed site surveys and facility visits

• Most of our clients are essential businesses and continue to operate

• Travel restrictions and other Covid-19 mitigation measures had an impact on order intake and revenue from Jan – Jun 2020

• But … order intake has since rebounded strongly and for Q1 2020 was 36% ahead of the same period last year

NO

ENTRY

Business as (un)usualTaking advantage of the COVID-19 slowdown


After three years of business expansion with staff and product additions, we used the COVID-19 slowdown to improve and enhance systems and capabilities

• Company-wide upskilling and training

• Technology upgrades

• Product R&D

• Improving connectivity, communication capabilities, and remote collaboration

Business as (un)usualTaking advantage of the COVID-19 slowdown


By using the current slowdown to improve and enhance systems and capabilities….

• We were not just responding to the current circumstances

• But also, preparing for the altered state of business going forward

• All of the initiatives taken were designed to increase our longer-term productivity and profitability potential

Business as (un)usualEmerging into the new normal


Using the COVID-19 slowdown to improve and enhance systems and capabilities ensures we…

• Emerge from this challenging period in as strong a position as possible

• Are able to meet any accumulated demand for increased energy efficiency

Taking these initiatives now provides a clear clear roadmap for growth going forward with improved productivity and profitability

Q1 FY2021 Financial ReviewLast-twelve-months for the first quarter ending August 31, 2020


Revenue


$6.8

$12.4 $13.2

$17.4

$21.1 $21.4$19.3

0

5

10

15

20

25

FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 LTM

• 31% CAGR prior to COVID-19 global pandemic being declared in March 2020

• FY2020 (May 31) revenue still up despite COVID-19 global pandemic

• Last twelve months (LTM) revenue impacted by six months of COVID-19 global pandemic

($ millions)

Annual and last twelve months for the first quarter ending August 31, 2020

Gross profitAnnual and last twelve months for the first quarter ending August 31, 2020


• LTM gross profit impacted by COVID-19 global pandemic

• LTM gross margin remained steady at 42%

$3.1

$5.8 $6.3$6.9

$8.0$9.0

$8.1

0123456789

10


($ millions)

46% 47% 48% 40% 38% 42% 42%

Gross margin

$5.4 $5.4 $5.6$6.3

$8.2 $7.8 $7.5

0123456789


Operating expenses


• FY2020 and LTM operating expenses down due to:

• COVID-19 cost saving measures implemented

• COVID-19 government wage subsidies• Despite decreased revenue due to Covid-19,

as a percent revenue, FY2020 and LTM operating expenses are less than FY2019

($ millions)


79% 44% 43% 36% 39% 35% 38%

Percentage of revenue

EBITDA


($ thousands)• After record EBITDA for FY2020, LTM is

showing the impact of COVID-19

• Excluding the $1.3 million in strategic growth-oriented investments made during FY2018 & FY2019 EBITDA would have been:

• FY2018: $1.2 million • FY2019: $0.9 million


-$2,049

$564 $750 $617$176

$1,921$1,465

-3000

-2000

-1000

0

1000

2000

3000


Net incomeAnnual and last twelve months for the first quarter ending August 31, 2020


• FY2020 and LTM net loss impacted by a $3.1 million non-cash write down of goodwill and other intangible assets

• Excluding the $3.1 million in goodwill and other intangible assets write-offs FY2020 and LTM net income would have been $1.2 million and $705 thousand respectively

-$2,155

$259 $393 $619

-$451

-$1,897-$2,356

-3000

-2500

-2000

-1500

-1000

-500

0

500

1000

1500


($ thousands)

Cash positionYear end and first quarter ending August 31, 2020


$0.7$1.1

$3.0 $3.3

$4.2$4.8 $4.6

0.0

1.0

2.0

3.0

4.0

5.0

6.0

May.15 May.16 May.17 May.18 May.19 May.20 Aug.20

• Cash position remains strong and largely unchanged

($ millions)

Working capital


$0.5$1.0

$1.4

$2.0 $2.0

$2.9

$3.7

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

May.15 May.16 May.17 May.18 May.19 May.20 Aug.20

• Working capital position remains strong

• May 31, 2020 working capital was the strongest it had been in over 10 years

• August 31, 2020 working capital further benefited from a low interest government backed COVID-19 working capital loan

($ millions)

Year end and first quarter ending August 31, 2020

Order Book


$3.4

$7.8 $7.8$9.3

$14.6

$9.6

0.000

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

Oct.15 Oct.16 Oct.17 Oct.18 Oct.19 Oct.20

• Order backlog has dropped since last year due to COVID-19 but remains the second-best October order backlog in company history

• While order backlog is lower:• Orders received for Q1 this year are

• 74% higher than Q4 last year and• 43% higher than Q1 last year

• Orders received since the beginning of this fiscal year (June 1) total $8.7 million and are 64% higher than the same period last year

($ millions)

Order backlog as of reporting date

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 & 2020 - Named one of Canada’s Top Growing Companies, in the Globe and Mail, Report on Business’s annual ranking two years in row

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 November 9, 2020Balance sheet data as of August 31, 2020

TSX-V TMG

Recent Price: $0.080

52 Week Range: $0.150 - $0.050

# of Shares: 160.5 million

Market Cap: $12 million

Cash: $4.6 million

Total Debt: $3.2 million

An Innovative Technology Company Providing Sustainability Solutions

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

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Thermal Energy International · 2020. 11. 9. · Thermal Energy International A proprietary...

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