Okay. Good morning, everyone. I'm William Crossland, CEO of Thermal Energy International. Thank you for joining us today for our earnings call for the third quarter ended February 28, 2025. Our news release, financial statements, and MD&A are available on our website and have been filed on SEDAR. Following my prepared remarks, we will 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'll 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 financial statements, our MD&A for the quarter, and other filings with the Canadian securities regulators. All right. As an overview, although our revenue is a little softer in the quarter, our revenue for the year-to-date period was at an all-time high, 25% ahead of last year. Compared to last year, our quarterly margins were impacted by heat recovery projects that delivered much higher than normal margins last year and a bit lower than average this year. We see the current period as a temporary lull as our business development pipeline remains very strong. Moreover, our strong balance sheet and the investments we've made in our business over the past two years have positioned us to drive profitable growth.
Sorry. Revenue for the quarter was CAD 5.8 million, reflecting a decrease of 4.1% from the year before. This decrease was primarily driven by lower contributions from heat recovery projects, as several existing projects neared completion, while newly launched ones were still in early mobilization phase. When looking at the trailing 12 months ended February 28, our revenue was CAD 30.5 million, which is just off the record mark we set for the trailing 12-month period, November 30th, 2024. As you can see on the slide, our trailing 12-month revenue is up 76% over the past two years. Our EBITDA for the quarter swung to a -CAD 130,000 as a result of the lower revenue and reduced gross margin on heat recovery projects. Plus, we continue to incur additional growth-oriented expenses that are expected to drive results in fiscal 2026 and beyond.
We remain EBITDA positive on a trailing 12-month basis with EBITDA of about CAD 1.1 million. I want to point out that our profitability over the past two years has been lower as a result of the significant investments we have made in our business. Importantly, we are not currently planning to incur any additional growth-oriented expenses over the coming quarter, but instead are going to focus on maximizing the return on the investments already made. We expect these investments to start realizing benefits to our top line and to our profitability in fiscal 2026, which is right around the corner. For net income, we had a loss of CAD 400,000 for the quarter, but again, we remained profitable on a trailing 12-month basis with net income of CAD 230,000.
Again, we expect the investments made in our business to allow us to continue driving higher revenues and for those higher revenues to contribute more to profitability. Our balance sheet remains strong. At the end of February, we had cash and cash equivalents of CAD 5.1 million and working capital of CAD 2.4 million. We also continued to pay down our long-term debt, which was down to CAD 1.4 million at quarter end. Over the last two years, we've reduced our debt by approximately CAD 2.1 million, and our net working capital increased by approximately CAD 600,000, all from internally generated cash flow. I'd like to talk briefly on a subject that's getting a lot of press these days, tariffs, and more specifically, the on-again, off-again threat of a trade war with the United States.
Although there is a lot of uncertainty with regard to tariffs and trade policies will likely continue to evolve, we do not expect them to significantly disrupt our operations. Based on what we currently know, we believe that tariffs are unlikely to have a material negative impact on Thermal Energy . Our supply chain is both flexible and geographically diverse. Since most of our manufacturing is outsourced, we typically work with various manufacturing partners and suppliers across various regions, often within the same country where our projects are based, which mitigates the threat of changing trade conditions. We also wanted to highlight that we have established a U.S. presence with BEI Boilerroom Equipment, which is based in Pennsylvania. By the end of the third quarter, we had year-to-date order intake of CAD 17 million, including orders of about CAD 7 million in the quarter.
While our revenue for the year-to-date was at an all-time high, our order intake for the year-to-date remains behind where we were at this time last year. Our engineering and production team has done a good job converting our backlog, which stood at CAD 14.8 million at quarter end. Since the end of the third quarter, we received an additional CAD 2.3 million in orders, including the CAD 1 million heat recovery expansion project we announced on April 16. The orders received since quarter end have increased our order backlog to CAD 17.1 million as at April 28, 2025. I wanted to emphasize that while our order intake has been lower so far in fiscal 2025, our business has always been fairly lumpy in terms of when orders come in and when revenue is booked.
Our business development pipeline remains very strong, with many repeat opportunities with existing customers as well as potential opportunities with prospective new customers. We continue to see a lot of demand for energy efficiency and carbon emission reduction solutions, and the payback on our projects from energy savings remains strong. A good example of that demand is the CAD 500,000 engineering contract we signed in February with a new customer, another leading multinational pharmaceutical company. This was our largest engineering contract ever. The scope of the engineering work to be completed under this contract is significantly more comprehensive than what we typically deliver under a project development agreement. In fact, we entered into a project development agreement with this client about a year ago and completed it.
Based on the results of that engagement, they wanted us to carry out the full detailed engineering for the project. That typically does not happen until we receive the order. This client prefers to approve things in stages. The fact that they have already spent more than CAD 500,000 in this project leaves us optimistic we can turn this into a complete Turn-key heat recovery project. This multinational pharmaceutical company is committed to achieving substantial carbon emission reductions and is aligned with the United Nations' Race to Zero campaign, a global initiative encouraging non-state actors, including businesses, to take decisive steps towards halving their global emissions by 2030. They have come to Thermal Energy to help them achieve their goals. A great example of repeat business is the CAD 1 million heat recovery expansion project I mentioned earlier that we announced this month.
In 2019, we completed a Turn-key FLU-ACE heat recovery project for this leading food and beverage company at this very same U.S. location. After experiencing the benefits firsthand of our project and our installation, the customer invited us to collaborate on an expansion project to recover additional waste heat from this multi-boiler site. To date, we have successfully delivered 11 heat recovery projects across 10 of the customer's global locations and installed 4,000 GEM steam traps at 60 of their sites. Our partnership continues to grow with many more opportunities for future projects. Both at these existing sites and at over 200 additional locations, we've yet to engage. In summary, we had record revenue for the first nine months of fiscal 2025 but had softer revenue and margins in the third quarter.
We fully believe we are in a temporary lull and are encouraged by our strong business development pipeline. Importantly, the significant reinvestments we made in our business over the past two years position us well for our next stage of profitable growth. We expect these investments will start to bear fruit in 2026. This concludes my prepared remarks. I would now like to open the call for questions. I'll turn it over to Trevor Heisler at MBC Capital Markets, who will moderate our Q&A. Please go ahead, Trevor.
Good morning, and thank you, Bill. If you are a qualified equity analyst joining us on MS Teams this morning and would like to ask a question, please notify me by using the raise your hand feature. Your first question comes from Russell Stanley at Beacon Securities. Please go ahead, Russell.
Good morning, and thank you for taking my question. Bill, just to start with a question around the CAD 500,000 engineering contract, that structure, I think, separates the engineering from the equipment. I'm just wondering if you're seeing more interest in that type of structure from other customers, be it new or existing. Can you talk about the pros and cons of that structure for Thermal Energy?
Yeah, I'm not sure there's any pros and cons. We're not seeing it. This is the first time it's happened. Typically, when we do, the output from a project development agreement is a fixed price. We give the customer a fixed price with guaranteed savings. Usually, that's enough for the customer to go ahead, and they don't normally want to spend the CAD 500,000 on the detailed engineering unless they're definitely going to go ahead with the project.
It could be that that's typically the way this customer does it. We don't know. Or it could be just that this is the first time they've done a project with us, so they're being a little bit more cautious. It's certainly not a trend that we're seeing. Having said that, we wouldn't care if that was the trend. I mean, for us, we're kind of indifferent as long as we get the project in the end. Obviously, I tend to be part of the reason I mentioned that the heat recovery project's margin was higher than normal. It was unusually high this time last year. That's because we also had some large engineering projects, or a large portion of the revenue was engineering. The engineering tends to have a higher margin. In the end, we'll go either way.
It doesn't really matter, and it's certainly not a trend that we've seen yet.
Great. That's helpful. Maybe more generally, understanding your comments around tariffs and really no direct impact, I'm wondering just more generally on the macro picture. It's clouded a bit since the last conference call. Just wondering, looking beyond the new orders and the backlog numbers, do you have any—are you seeing any macro uncertainty filtering into conversations with customers? Are you seeing any additional reluctance to pull the trigger on projects? Is that filtering through, or are we just seeing evidence of the lumpiness, lumpy nature of the business? Thanks.
Yeah, it's always hard to know, Russell. Certainly, there has been. When you just look at our order intake, there's been a little bit of a slowdown, certainly started before the tariffs.
People were starting to talk last fall about a bit of a slowdown. We are not sure what it is related to, but it also could be just the lumpiness of our business. We are still with CAD 30 million in revenue. We are much bigger than we used to be, but we are still a relatively small company. There is some lumpiness when you are talking about CAD 4 million or CAD 5 million order sizes and CAD 30 million in revenue. It could be just normal lumpiness, or it could be the initial signs of, excuse me, a bit of a slowdown, or it could be people's uncertainty due to tariffs. Excuse me. For us, we are very well positioned on the tariff side because we have manufacturing and suppliers in all our key markets. We do not think it is going to have a significant impact on us regardless of what happens.
Great. Maybe one more from me, and I'll hop back in the queue. Just on gross margins, you talked about the revenue base in the quarter kind of transitioning out of some projects that were finishing, just ramping up on some new projects. Is that, I guess, the connection there that you've got some front-end loaded costs on the new projects? The MD&A notes that higher expected costs played a role in the quarter. Just wanted to bridge the gap on that commentary. Thanks.
Yeah, it's just one of the challenges with the heat recovery projects in that the revenue and the profitability is booked on a percent complete basis. Each quarter, we have to estimate at what percent of the project has been completed and what the new budget is. There's always a bit of up and down.
With every project, we do take a risk and contingency amount that's in the budget, but we don't book that to the end. Often, we sometimes see a little bit of an increase in the margin right at the end when we book the risk and contingency. Because to be conservative, we can't take that into account until right at the end when we know there's no further costs. If we see the costs going up midway through the project, then that's going to impact the margins at that time. We often will catch up because we're not booking any further risk and contingency. There is a bit of a variance in the margin as we work through the project from any given project from start to finish. There's nothing we really can do about that. That's just sort of the accounting policies.
That's great. Thanks for the color. I'll get back to you.
Thank you, Russell. If you are a qualified equity analyst joining us on MS Teams this morning and would like to ask a question, please notify me by using the raise your hand feature. It looks like there are no further questions at this time. Please go ahead, Bill.
Thank you for your continued support of Thermal Energy. I look forward to speaking with you again next quarter. I would also like to point out, partly in response to Russell's question, we do have a little bit of lull right now, but we believe our pipeline is exceptionally strong. Russell said our customers are sort of delaying a little bit, and that's not what we're seeing. We have a number of customers that we're actively developing more projects for.
We have not seen any real slowdown in the market in terms of project development at all yet. There has, as I noted, been a little bit of a slowdown in order intake. Thank you so much, and bye for now.