2017 shareholders meeting - management presentation

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Annual General Meeting of Shareholders TSX-V: TMG | November 28, 2017

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Annual General Meeting of Shareholders

TSX-V: TMG | November 28, 2017

Forward-looking statements

This presentation includes “forward-looking information”. For example, statements about the opportunities for repeat business; thepossibility or expectation of additional orders; growth in existing markets; entry into new markets; order backlog; introduction of newproducts and services; establishment and growth of new distribution channels; growth opportunities and strategies; conversion ofexisting orders into revenues; are all forward looking information. Such forward looking information reflects Thermal EnergyInternational’s (“TEI”) current expectations with respect to future events and are based on information currently available tomanagement. Forward-looking information involves significant known and unknown risks, uncertainties and assumptions. For example,existing and new customers may not place orders for any number of reasons; fulfilment of orders, installation of product and activation ofproduct could all be delayed for a number of reasons, some of which are outside of TEI’s control, which would result in anticipatedrevenues from such projects being delayed or in the most serious cases eliminated; TEI may not be successful in identifying anddeveloping new products and our new or existing products may not result in new orders or gain acceptance in new geographical orindustrial markets; we may not be successful in establishing new distribution channels or such new channels may not be successful; ourgrowth strategies may not be successful or result in the anticipated growth and orders received by TEI may not turn into revenue in thetime frame anticipated, or at all, due to many factors, some of which are outside of TEI’s control, including but not limited to TEI’s abilityto deliver products on time and in accordance with specifications and the continuing financial viability of the customer. Readers are alsoreferred to the risk factors outlined in our management’s discussion and analysis available at www.SEDAR.com. Should one or more ofthese risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results,performance or achievements could vary materially from those expressed or implied by the forward-looking informationcontained in this presentation.

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

The term “EBITDAS” as used in this presentation is not a recognized measure under IFRS, does not have a standardized meaningprescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other companies. This measure isprovided as additional information to complement IFRS measures by providing further understanding of the Company’s results ofoperations from management’s perspective and should not be considered in isolation nor as a substitute for analysis of our financialinformation reported under IFRS. Please refer to our management’s discussion and analysis for the applicable period for a reconciliationof EBITDAS to Net income (loss), the closest IFRS measure.

Year end financial results

Year end revenue

($ millions)

0

2

4

6

8

10

12

14

FY 15 FY 16 FY 17

$13.2

FY 2017 highlights:

Record revenue

Up 6.4% over FY 2016

GEM revenue up 28.6% over FY 2016

Heat recovery revenue down 9.4% versus FY 2016

Year end gross profit

($ millions)

0

1

2

3

4

5

6

7

8

FY 15 FY 16 FY 17

$7.4

FY 2017 highlights:

Record gross profit

Up 9.5% over FY 2016

Gross margin of 56.4% versus 54.8% in FY 2016

Higher proportion of GEM revenue

Year end operating expenses

($ millions)

0

1

2

3

4

5

6

7

FY 15 FY 16 FY 17

FY 2017 highlights:

Operating expenses as a percent of revenue were flat despite additional staff and increased marketing activities

88.3% 52.1% 52.0%

Percentage of revenue

-2500

-2000

-1500

-1000

-500

0

500

1000

EBITDAS Net loss

($ thousands)

FY 15 FY 16 FY 17

Year end EBITDAS and net income

FY 2017 highlights:

EBITDAS increased 33% to $750K

Net income was up 52% to $393K

First quarter financial results

Q1 revenue

($ millions)

0

0.5

1

1.5

2

2.5

3

3.5

Q1 16 Q1 17 Q1 18

$3.1

Q1 2018 highlights:

Record Q1 revenue

Up 45.1% over Q1 2017

Heat recovery revenue up 168.6%

Second strongest Q1 GEM revenue on record

Q1 gross profit

($ millions)

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

Q1 16 Q1 17 Q1 18

$1.5

Q1 2018 highlights:

Record Q1 gross profit

Up 4.3% over Q1 2017

Gross margin of 49.0% vs 68.2% in Q1 2017

Much higher proportion of heat recovery revenue

Q1 operating expenses

($ millions)

0

0.5

1

1.5

2

Q1 16 Q1 17 Q1 18

Q1 2018 highlights:

Operating expenses were $1.7M versus $1.5M in Q1 2017:

More than half of the increase relates to:

New sales staff

New technical staff

Other strategic growth initiatives

61.3% 69.8% 56.1%

Percentage of revenue

-500

-400

-300

-200

-100

0

100

EBITDAS Net loss

Q1 EBITDAS and net income

($ thousands)

Q1 16 Q1 17 Q1 18

Q1 2018 highlights:

Our second best Q1 EBITDAS in the past 5 years

EBITDAS lower mainly as a result of change in product mix and growth expenditures

Financial summary

Record revenue and gross profit for FY 2017 followed by record Q1 revenue and gross profit

L4Q revenue of $14.2 million compared to previous 4 quarters revenue of $12.0 million

Cash balance of $1.3 million

No debt

Order backlog & recent orders

Order backlog remains strong

At the time of first quarter reporting in October of each year

($ millions)

0

1

2

3

4

5

6

7

8

9

Q1 16 Q1 17 Q1 18

$7.8

Order backlog: The value of projects in respect of which purchase orders have been received but have not yet been reflected as revenue in the Company’s published quarterly financial statements.

Recently announced orders included in order backlog:

$1.32 million heat recovery order from a hospital group

$3.28 million from 2 separate orders from a leading

Fortune 500 food & beverage customer

$351 thousand GEM order from a leading performance

materials company

$189 thousand GEM order from a leading vacation

destination company

Orders from many industries

Growth strategy & outlook

Corporate accounts

Sales tools & support

Growth strategy

Growing productivity

Grow organically and through accretive acquisitions

Enhanced marketing &

branding

Corporate accounts

New products

Sales tools & support

Growth strategy

Growing productivity Expanding the business

Grow organically and through accretive acquisitions

Growing our team & global

presence

Enhanced marketing &

branding

Corporate accounts

Growing our team & global

presenceNew

productsSales tools &

support

Growth strategy

Growing productivity Expanding the business

Grow organically and through accretive acquisitions

Enhanced marketing &

branding

Sales tools & support

Heat Recovery Analysis & Proposal Generator

Increases analysis and response speed

Screen out poor opportunities quicker

GEM data sizing data base

Online library of sales support resources, case studies, slide decks, product animations, technical FAQ

On-going and regular training

Fully open internal training program

Upgrading and enhancing CRM system

Sales tools & support – incentive funding

Creates compelling event, provides 3rd party validation, improves customer ROI

UK SALIX

NHS Efficiency fund

Wisconsin - Focus on Energy

California - PG&E

Quebec - BEIE

EU funding in Poland

Germany: KfW 294

OCE target GHG program.

UK Heat Recovery Fund

Canadian Clean Growth Program

Enhanced marketing and branding

Added a Sales & Marketing Coordinator (Ottawa) in May 2017

Hiring a Sales & Marketing Coordinator (UK) IN Jan/Feb 2018

New internal and new external newsletters a

Updated product brochures and case studies

Launched German website in October 2017

Goal: Better communications, better content, shared knowledge and a stronger brand internally and externally.

Corporate accounts update

Director of Corporate Accounts (appointed January 2016) to mentor and develop the team

Corporate account opportunities expected for every member of sales team

Existing customer engaged at a corporate level

Manufacturing sites in more than 1 sales territory

More than $2 million in sales potential

Corporate accounts update

Fortune 500 food &

beverage leader

Major hospital group #1

Leading performance materials co.

Major hospital group #2

Multinational agribusiness

company

Leading travel destination company

Global beer company

Leading food ingredients

business

Large pulp & paper customer

Fortune 500 life sciences company

Global building materials company

Multinational mining &

resources co.

Quebec (2014)

Midwest US (2014)

Southeast UK (2014)

Latin America (2016)

Ontario / CoGen (2016)

Germany (2017)

EU Sales Director (2017)

Engineering / CoGen (2016)

Senior engineering (2017)

Junior engineering X2 (2017)

Added:

Growing our team & global presence

Quebec (2014)

Midwest US (2014)

Southeast UK (2014)

Latin America (2016)

Ontario / CoGen (2016)

Germany (2017)

EU Sales Director (2017)

Engineering / CoGen (2016)

Senior engineering (2017)

Junior engineering X2 (2017)

Added:

Growing our team & global presence

Texas (expect to hire soon)

Germany (interviewing candidates for 2nd person)

Northwestern North America (2018)

France

Eastern Europe

Planned:

Growing our team & global presence

Hired a European Sales Director in July 2017

20+ years of international sales experience (capital goods & services)

+10 years of sales management

Speaks 5 languages

Hired a Senior Project Engineer in October 2017

Former CTO at SofameTechnologies Inc.

Strengthens our engineering & product development capabilities

Experience with new products we are targeting

Support agents/distributors in secondary markets

Increase penetration in key strategic markets

Corporate / Sales Office EU Sales Director

Growing our team & global presence

* Company has engineering offices in Ottawa and Bristol (U.K.)

New Sales People / Territory

Agent / Distributor

Strategic territory expansion

Germany – Large industrial market with strong market fundamentals

High fuel costs

Aggressive carbon reduction targets

Attractive incentives

July 2016Launched our Super-Efficient Cogeneration™ solution

Introduce new products

August 2017Received our 1st order

$1.46 million order from a leading Fortune 500 food & beverage customer

Co-gen

First order received

Dry-Rex low-temp. biomass drying

Working with local customer to relocate BC based decommissioned Dry-Rex

Indirect heat recovery

Direct fired water heater (Percomax – Sofame)

Combined direct contact water heater and direct contact heat recovery (Hybrid Percomtherm – Sofame)

Wastewater heat recovery system (Launrec RBT – Sofame)

Combustion humidification unit to reduce NOx (Steam Pump – Sofame)

Introduce new products

Our long term track record

Base business Revenue from mega projects

($ millions)

0

2

4

6

8

10

12

14

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

L4Q

Revenue

Base business Revenue from mega projects

($ millions)

0

2

4

6

8

10

12

14

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

L4Q

*L4Q = last 4 quarters ending with Q1 2018

Revenue

14.2

Revenue –base business

0

2

4

6

8

10

12

14

2009 2010 2011 2012 2013 2014 2015 2016 2017 L4Q

($ m

illio

ns)

CAGR 20%CAGR 11%

CAGR 17%

Revenue

1993 – 2009

(17 years)

$23.5M

2010 – 2017

(8 years)

$82.4M

$105.9million

Profitability

Years in

period

Years with

net income

Years with

+ EBITDAS

17 00FY1993 to FY2009

Profitability

Years in

period

Years with

net income

Years with

+ EBITDAS

8 45

17 00FY1993 to FY2009

FY2010 to FY2017

Growing productivity

Sales tools & support

Enhanced marketing & branding

Corporate accounts

Expanding the business

Growing our team & global presence

New products

Grow organically

and/or through

accretive

acquisitions

Growth strategy summary

Strong market fundamentals, enormous growth potential

Falling natural gas prices

(USD/mmBTU)

Nov. 2017

June 2008