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An Innovative Technology Company Providing Sustainability Solutions
TSX-V: TMG | [email protected] | www.thermalenergy.com
Thermal Energy InternationalProfitable energy efficiency & emission reduction solutions
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.
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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
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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.”
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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:
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Broad range of industries and customers
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• 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
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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
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Revenue
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$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
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• 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)
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• 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)
Annual and last twelve months (LTM) as of fiscal year 2020 Q2
79% 44% 43% 36% 39% 39%
Gross margin
-$2,049
$564$750 $617
$176
$1,476
-2500
-2000
-1500
-1000
-500
0
500
1000
1500
FY 15 FY 16 FY 17 FY 18 FY 19 LTM
EBITDAS
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($ 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
Annual and last twelve months (LTM) as of fiscal year 2020 Q2
Net incomeAnnual and last twelve months (LTM) as of fiscal year 2020 Q2
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• 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)
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$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)
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$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
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$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
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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)
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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
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REVENUE
EBITDAS
One of Canada’s fastest growing companies
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• 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
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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
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• 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!