thermal energy 2016 agm presentation
TRANSCRIPT
Annual General Meeting
of Shareholders
TSX-V: TMG | November 28, 2016
Forward-looking statements
This presentation includes “forward-looking information”. For example,statements about the opportunities for repeat business, additional orders,entry into new markets and growth of recurring revenue streams; orderbacklog; introduction of new products and services and growth opportunitiesand strategies are all forward looking information. Such forward lookinginformation reflects Thermal Energy International’s (“TEI”) currentexpectations with respect to future events and are based on informationcurrently available to management. Forward-looking information involvessignificant known and unknown risks, uncertainties and assumptions. Shouldone or more of these risks or uncertainties materialize, or should assumptionsunderlying the forward-looking information prove incorrect, actual results,performance or achievements could vary materially from those expressed orimplied by the forward-looking information contained in this presentation.
Readers should not place undue reliance on forward-looking information. Theforward-looking information is made as of the date of this presentation andTEI does not assume any obligation to update or revise it to reflect newevents or circumstances, except as required by law.
Financial
review
Revenue – FY 2009 to FY 2016
0
2
4
6
8
10
12
14
2009 2010 2011 2012 2013 2014 2015 2016
($ millions)
Revenue from mega projects ($2 million or above)
18% CAGR
0
2
4
6
8
10
12
14
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Revenue – FY 1993 to FY 2016
($ millions)
Revenue from mega projects ($2 million or above)
Gross profit
0
1
2
3
4
5
6
7
8
2009 2010 2011 2012 2013 2014 2015 2016
($ millions)
59.7% 61.2% 53.4%53.0%60.6%42.9%48.2%
Percentages figures are gross profit as a percentage of total revenue.
54.8%
Cash expenses
0
1
2
3
4
5
6
7
2009 2010 2011 2012 2013 2014 2015 2016
($ millions)
FY 2016 summary
Strong year for both our heat recovery and GEM businesses
Net income improved to $259K
Adjusted cash flow of $710K
Cash balance of $1.1 million ($428K increase)
No debt
0
0.5
1
1.5
2
2.5
3
Q1 13 Q1 14 Q1 15 Q1 16 Q1 17
($ millions)
Q1 revenue
Q1 17 GEM sales up 55%; HR Impacted by timing of orders
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Q1 13 Q1 14 Q1 15 Q1 16 Q1 17
($ millions)
Q1 gross profit
Q1 17 gross profit up 32% - Our highest Q1 gross profit ever!
60.9% 43.0%60.0%63.7%
Percentages figures are gross profit as a percentage of total revenue.
68.2%
Q1 2017 summary
GEM revenue up 55%
Heat recovery supported by strong order backlog
Gross profit up 32% - Our highest Q1 gross profit ever!
Positive EBITDAS of $3K vs. loss of $401K last year
Cash balance of $836K
No debt
Order
backlog
Order backlog: The value of projects in respect of which purchase orders have been received but have not yet been reflected as revenue in the Company’s published quarterly financial statements.
7.8
9.5
Growing order backlog
($ millions)
Last Year Today
Recently announced orders included in order backlog:
4 orders totaling ~$3,700,000 from hospitals
$1,700,000 heat recovery order from an ethanol producer
$750,000 heat recovery order from a global brewing company
$1,015,000 heat recovery order from leading food products
business
Other orders from textiles, mining, performance materials,
pharmaceutical, biotech, tire manufacturing, and
food ingredients businesses
Orders from many industries
Marketing
update
Improved marketing capabilities
Began using MailChimp for email marketing and investor news alerts
Branded appearance
Provides analytics
Created a global repository for marketing assets
Ensures uniformity and access to latest versions
Used by our sales team + agents and distributors
Brochures, data sheets, over 50 case studies, and other materials
10 different languages
Improved online presence
Continued to make improvements to our website
Added additional content; keeping it current
Increased our social media following:
Continued to build our presence on LinkedIn and YouTube
5,920 followers(4,885 a year ago)
1,613 page likes(1,551 a year ago)
33,492 views (last 12 months)
Enhanced marketing materials
New case studies, data sheets and white papers
New CoGeneration marketing materials
New brochures, including foreign language brochures
Continued to build awareness
We now have a better story to tell
Recent media coverage includes
Ottawa Business Journal
Canadian Manufacturing
Investment Pitch Media
Meetings with investor audiences
We will continue to get the story out
CleanTechies
Canadian Greentech
Decentralized Energy
Strategy and
outlook
Increasing penetration in key markets
2014: Hired 7 sales & marketing staff (net increase of 3)
Quebec
Mid-West US
North East UK
2016: Hired 3 sales staff
Ontario
Puerto Rico
Germany
Support agents & distributors in in secondary markets
Increase penetration in existing and new key strategic markets
Corporate / Sales Office Agent / Distributor
Increasing penetration in key markets
Support agents & distributors in in secondary markets
Increase penetration in existing and new key strategic markets
Corporate / Sales Office Agent / Distributor
Increasing penetration in key markets
Corporate accounts update
Director of Corporate Accounts appointed (January 2016)
Fortune 500 Food & Beverage Leader
Major Hospital Group
Leading Performance Materials Company
Global PricingAgreement (June 2015)
FY 16: $1,579K in revenue at 7 sites
FY 17: $135K orders to date Additional projects
under development
Master Contractor Agreement (July 2015)
1st order received Nov. 2015
2nd order received Nov. 2016
Additional projects under development
Master Purchase Agreement (July 2015)
FY 16: $404K in revenue from 4 sites
FY 17: $560K orders to date
In development: leading tire manufacturer, premium beer co., food ingredients co., multinational pharmaceutical co., and leading food products business
Corporate development initiatives
Reinvent the Toilet
ISTP / indirect contact / dirty streams HX
Direct fired gas heater
Dry-Rex®
Cogeneration
All while maintaining primary focus on continued growth of core business
Reinvent the Toilet
2012 Demonstration at Reinvent the Toilet Fair in India
2014 grant to deploy in Alaska, but alternative approach taken (TEI / Climate Change Foundation not included)
Now looking to creating biochar with crop residues
Likely no Dry-Rex required, FLU-ACE® possible
Progress is in infancy stage, ultimate incorporation of our technologies not a certainty
Cooperation continuing
What is Cogeneration ?
ISTP / indirect heat exchanger
Currently buy and implement indirect contact condensing heat exchangers in heat recovery projects around the world
Look to brand / develop / acquire product
Look to develop unit for application to dirty streams (biomass)
Agreement in place with Canmet MATERIALS, Natural Resources Canada for exclusive use of patented metal-impregnated fluoropolymer coating
ISTP tests in China cut short due to limited production at test site
Looking to demonstrate locally
ISTP / indirect heat exchanger
Direct fired gas heater
FLU-ACE® with a burner
Allows more sales into “new build” rather than into retrofit space, also allows entry into smaller applications
Sells into a growing trend of hot water heating systems in the institutional / commercial market
Design complete, next steps - proto-type testing and permitting (TSSA) , or gain through acquisition
Direct fired gas heater
Dry-Rex
Market study completed (FY2016) revealing ideal market space (food & beverage, alternative pulp & paper applications)
Seeking partner for demonstration
Moved test lab to Ottawa in 2016
Completing paid study for relocation of decommissioned Dry-Rex in British Columbia to customer site in Ontario (still years away)
Promising product given move to renewables and match with FLU-ACE®
Dry-Rex
Cogeneration
Also known as CHP (Combined Heat & Power)
CHP is an integrated energy system that:
Generates electrical power
Recovers waste heat for space heating, water heating, process heating
Can utilize a variety of technologies and fuels
Cogeneration
Why cogeneration?
1) Price difference between natural gas and electricity expected to remain favorable
2) Provides clean power and protection from grid failure
3) Conservation programs – designed to reduce demand on the grid
4) Financial incentives (i.e. in Ontario, up to 40% of the project capital can be funded)
5) Distributed generation – more efficient to produce power locally.
Why cogeneration for TEI?
Proven track record
Completed heat recovery from numerous Cogen systems to drive overall efficiencies to the mid-90s
Our specialty
Heat recovery / waste heat use is the primary driver in determining CHP efficiency
Established relationships
We now have a great reputation with large established corporate clients executing CHP projects, allowing for ready market access
Why cogeneration for TEI?
Experienced team
We’ve grown and added experience related to Cogen on the sales and engineering sides
Leverage funding programs
Some locations (Ontario) have funding available for Cogen but not heat recovery. By bundling heat recovery with Cogen, the heat recovery also receives incentive funding
Governments and industries
around the world taking
unprecedented action on
climate change
Increasing energy efficiency is the cheapest
& easiest way to reduce GHG emissions
Strong market fundamentals
1 2015 International Energy Agency. 32% of the $68 trillion world energy sector investment.2 P&S Market Research Report on Global Waste Heat Recovery Market
$21.8 trillion
Expected investment in end-use energy
efficiency from 2015 to 20401
20% to 50%
Amount of industrial energy
consumption lost as waste heat2
6.8% CAGR
Projected for the global waste heat
recovery market from 2016 to 20222
Strong market fundamentals
Strong market fundamentals
Compared to North America and most of Europe, energy prices in Germany are high and rising
Desire for energy security: Germany currently imports more than 70% of its primary energy consumption
Generous incentives: federal funding reached €320 million in 2015 and is expected to grow
German energy efficiency market is expected to grow to $250 billion by 2025
Source: Germany Trade & Invest (GTAI) - economic development agency of the Federal Republic of Germany.
Strong market fundamentals
Nov. 17 – U.K. became 111th country to ratify Paris Agreement
China poised to take a leadership role
Most clean energy initiatives in the U.S. are state and city level, not federal
Bloomberg-chaired Global Covenant of Mayors, which includes 128 U.S. mayors, plans to join Paris Agreement if U.S. federal government withdraws
Strategy and outlook summary
Increase penetration in existing key & secondary markets
Corporate accounts
Introduce new products & services
Strong market fundamentals
Grow organically
and/or through
accretive
acquisitions
facebook.com/GoThermalEnergy
Follow @GoThermalEnergy on Twitter
www.thermalenergy.com