Thermal Energy International Inc.

Good. Are we recording? Can we start?

Yep.

Great. Fantastic. Good morning, everyone. I'm William Crossland, CEO of Thermal Energy International. Thank you for joining our call this morning. Earlier today, we reported our financial results for the first quarter ended August 31st. Our news release, financial statements and MD&A will be posted on our website and have been filed on CDAR. After my prepared remarks, we'll have a question and answer session, at which time qualified equity research analysts joining us on MS Teams will be able to ask questions. If you're joining us online, you should be able to see our slide presentation on your screen now. Before we go any further, I need to point out that today's earnings call may contain forward-looking statements within the meaning of applicable securities laws. Forward-looking statements are subject to risks and uncertainties and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements and actual results may differ materially from those expressed or implied in such statements. For additional information, please refer to our year-end financial statement and our management discussion and analysis for the quarter and our other filings with the Canadian securities regulators. As a quick overview, we had a very strong start to fiscal 2025 with record revenue for both the quarter and the trailing 12 months ended August 31st. And net income, EBITDA and net income were both up compared to Q1 of last year and have both increased in each of the last two sequential quarters as well. We exited the quarter with a strong balance sheet and we are well positioned for growth, and we continue to have a very favorable outlook with strong market fundamentals. In terms of revenue, we had revenue of $8.5 million for the quarter, our highest quarterly revenue to date, representing an increase of 63% compared to Q1 last year and 171% compared to Q1 of fiscal 2023. The quarter benefited from the strongest turnkey project revenue we've seen since before the pandemic. While we're pleased to see such a resurgence in our turnkey business, the timing of turnkey projects can result in our quarterly revenues being quite lumpy at times. This is why management prefers to look at things over a trailing 12-month or longer basis. Looking at the 12 months ended August 31st, or TTM, we had revenues of $29.2 million, which was also a record number for us. Importantly, our trailing 12-month revenue was up significantly over last year and up 93% from two years ago. We had EBITDA of $553,000 for the quarter, which represents Increases of $139,000 compared to Q1 last year and $783,000 increase compared to Q1 of 2023. The trailing 12 months EBITDA was $2.1 million, which was down $200,000 from the trailing 12 months a year ago, but up $3.2 million over the past two years. It's important to note that trailing 12 months last year include our exceptionally strong fourth quarter of fiscal 2023, which had EBITDA of $1.2 million in that quarter alone. And trailing 12 months this year had a higher cost base as well, mostly due to $1.6 million in additional expenses related to investments to drive future growth of the business. including increases in staff, digitization and system automation, and costs related to our new, much larger UK facility, including leasehold improvements, additional rent, and new equipment. So even though we had $1.6 million in extra growth-related expenses, EBITDA was only about $200,000 lower. Net income for the quarter was $300,000, representing increases of $147,000 from last year and $818,000 compared to 2023. For the trailing 12 months, we had net income of $1.1 million, which is down $200,000 from the year before, but up $3.3 million from two years ago. Similar to my comments on the trailing 12-month EBITDA on the prior slide, Trailing 12-month net income included our exceptionally strong fiscal 2023 fourth quarter, and the trailing 12-month 2005 expenses include the investments we made for future growth. So again, even though we had $1.6 million in extra future growth-related expenses, net income was only about $200,000 lower. now to talk a little bit about this investment in future growth i know i've mentioned this previously but it's important to highlight again the significant investments we've made in our business in fiscal 2024 and beyond to keep up with growing demand we moved our uk operations to a much larger industrial production facility that has more than double the throughput capacity of our prior relocation in the last 12 months We've added a total of nine people, two people to our sales and marketing team, six people to engineering and production, and one in admin. And we've invested in technology, including our custom-developed mobile app called CREST, which stands for Carbon Reduction and Efficiency Scoping Tool. CREST will enable our sales and engineering teams to efficiently identify thermal energy savings and carbon reduction opportunities while on site with our customers. We are also investing in a robust global accounting program and ERP software to create agility in our accounting, manufacturing and fulfillment. Importantly, while these investments lowered our profitability in the trailing 12 months period, most of this has yet to contribute to our top line, but will enable the next stage of growth for thermal energy. This slide shows the growth on our EBITDA and net income. in each of the last two sequential quarters, or since we first announced the growth investments. I just highlighted, since we first announced the growth investment, I just highlighted. Q1 EBITDA was $131,000 higher than Q4 2024, and $231,000 higher than Q3 2024. That's an improvement of 72% over the last two sequential quarters. Similarly, net income was up $19,000 compared to Q4 2024 and up $265,000 from Q3 2024. That's about a sevenfold increase. On to the balance sheet. At the end of August, we had cash and cash equivalents of about $5 million and working capital of $3.8 million. And we continue to lower our debt, which is now down to about $2.1 million at the end of August. Like our revenues, order intake can be quite lumpy on a quarterly basis, which is, again, why we focus more on the trailing 12 months and longer timeframes. Looking at our order intake for the past two years on a trailing 12-month basis, we had $29 million in orders for trailing 12 months ending August 31st, which is up about 7.8% from a year earlier and more than double what we had two years ago. This slide also shows two of our more notable orders that we received subsequent to Q1. On September 23rd, we announced repeat business in the form of an order for a heat recovery project and heat pump project valued at approximately $2.2 million from a leading multinational pharmaceutical company. And that was our second project with this company. And earlier this week, we announced a heat recovery project valued at approximately $1.5 million from a multinational confectionery company and a new customer for thermal energy. This project is at a Canadian site, but the customer has more than 20 plants around the world. We exited the fiscal quarter with an order backlog of about $13.5 million, which was about 16% higher than it was at the end of Q1 last year. and up about 121% from two years ago. Since the end of the quarter, our backlog has increased by almost $5 million to 18.4 million as of October 28th. A quick look at activity pertaining to our project development agreements or PDAs, which usually precede turnkey project orders. At the end of Q1, we had 32 projects in development. While the number of live PDAs, that is projects in development, is well above what it was two years ago, it has dropped from a year ago. However, the number and value of the projects we're working on has stayed quite stable over the last four quarters, despite the fact that we've received seven new projects totaling $18 million during that time. And as I mentioned during our call last month, we are increasing our PDA pricing to reflect the continued strong demand we're seeing for our project development agreements. In terms of outlook, we remain quite bullish on our outlook as this is a very exciting time for thermal energy. The significant reinvestments we made in our business strongly position us for our next stage of growth. As always, I would like to remind people that our revenues can be quite lumpy from quarter to quarter, depending on the timing of projects. But overall, demand remains high. Market fundamentals are as strong as ever. And importantly, improving thermal energy is still and always will be the fastest, cheapest and easiest way for our customers to reduce their carbon emissions. So in summary. Our first quarter and trailing 12-month revenues represent new record highs for our company. We are pleased with the strong improvements in EBITDA and net income for the quarter, both on a year-over-year and sequential quarter basis. We have a strong balance sheet, and we're well positioned for growth. And finally, we have a very favorable market outlook, and we are excited for the future. So now... That concludes our prepared remarks. We would now like to open the call for questions. I'll turn it over to Trevor Heisler at NBC Capital Markets Advisors, who will moderate our Q and answer. Please go ahead, Trevor.