Thermal Energy International Inc.

I'm William Crossland, CEO of Thermal Energy International. Thank you for joining us on this lovely morning for our first quarter earnings call. Our news release, financial statements, MD&A are all available on our website and have also been filed on CDAR. Following 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 get started, I have to point out that today's earning call may contain forward-looking statement within the meaning of applicable security laws. forward-looking statements are subject to risks and uncertainties and undue reliance should not be placed on such statements. Certain material facts 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 financial statements and our MD&A for the quarter and other filings with Canadian securities regulators. In terms of overview, it's important first to highlight that our first quarter of fiscal 2026 is compared against an abnormally strong first quarter a year ago when we reported a 63% growth in revenue and strong increases in EBITDA and net income. Q1 of last year was our highest first quarter revenue ever. In fact, even though Q1 is typically the weakest quarter of the year, last year's Q1 was the second best quarter ever in the company's history. And the only quarter to beat it was the next quarter, the second quarter of last year. So while we didn't beat last year's Q1 revenue, this year's revenue is up very significantly compared to two and three years ago. We also had an excellent start to the new fiscal year in a number of ways. We had the strongest order intake of any first quarter in our history, and our order backlog is the highest it's ever been at the end of Q1. And this has positioned us very well for a strong back half of fiscal 2026. We continue to make inroads into the pharmaceutical sector, which is becoming a very important sector for us. And we continue to pay down our bank debt with $2 million repaid over the last 12 months alone.

We had revenue of $6.9 million for the quarter.

While this was down from the exceptionally strong and record first quarter last year, it was stronger than any other first quarter in our history. And it was up 32% from Q1 2024 and 114% from Q1 2023. On a trailing 12-month basis, we had revenue of $28.2 million, which was down slightly from a year ago. but still up about 22% from 2024 and 86% from 2023. So the longer term revenue trend remains very positive. As we've described previously, during fiscal 2024 and 2025, operating expenses increased due to our investment of approximately $2 million in the future growth of the business. These investments included a new larger production facility in the UK, significant growth in the number of salespeople and engineers, and the development of our award-winning carbon reduction and efficiency scoping tool, or CREST for short, mobile app. As you can see, with these investments now complete, operating expenses have leveled off and in fact have decreased slightly. And while these expenses are impacting our bottom line, they are not yet adding significantly to the top line. Nonetheless, we remain profitable in the quarter and the trailing 12 month period, but our adjusted EBITDA was down compared to last year, due mostly to lower revenue in the quarter, even though gross margin improved during the quarter, due to product mix. For the trailing 12 months, we had adjusted EBITDA of $850,000 compared to $2.1 million a year ago. Again, the decrease was mainly attributable to lower revenue and a slightly reduced gross margin, again, due only to product mix, and product mix varies from quarter to quarter. Net income for the quarter and the trailing 12-month period follows a similar story as adjusted EBITDA. We had net income of nearly $170,000 for the quarter. That was down from a year ago, but still higher than Q1 of fiscal 2024. On a trailing 12-month basis, we had a net income of $15,000, down from the $1.1 million a year ago, but obviously still up very significantly compared to 2023. So again, the long-term trends are still positive. And importantly, we continued to generate very strong operating cash flow. For the trailing 12 months, we had operating cash flow of 1.1 million, excluding changes in working capital items, temporary changes in working capital items. And over the last three years, we have actually generated approximately $5 million from our operating cash flow.