Now presenting Bill Crossland with Thermal Energy International.
Welcome, everyone, and thank you for coming. If you have heard the story before, thank you for your continued interest. This is the cover of our deck, but sometimes I think it is the only slide we really need, because I am going to take credit for that little slogan at the bottom, and I love it. We are the profitable path to net zero. Why are we the profitable path? For two reasons. Number one, we are profitable, and we have been profitable every year for the last four years. Number two, we exist because we make our customers, primarily large multinationals, more profitable. So we are the profitable path to net zero for us and for our customers. Forward-looking statement disclaimer.
We are a proven energy and carbon emission reduction solution and partner to large multinationals, and we really work in partnership with our customers, largely on a sole source basis. We are not out there at bid to spec. We are working with our customers to meet their carbon emission reduction goals using our proprietary technology and know-how. As I said, we save our customers money by reducing their fuel use and reducing their carbon emission. Most of our projects with our customers pay for themselves in one to five years, strictly from fuel savings alone. Any additional benefit they can get from carbon reduction just adds to the story. It adds to the payback. In terms of investment highlights, energy efficiency saves money and is the fastest, cheapest, and easiest way for our customers to reduce their carbon emissions.
As a society, we waste about two-thirds of the energy we use. So two-thirds is just disappearing somewhere. Only one-third is actually used. If we could flip that around and actually use two-thirds and waste one-third, which is still a lot, we could cut our carbon emissions in half right there. So that is why energy efficiency is the best way to reduce carbon emissions and meet our carbon reduction goals. We have proprietary solutions with a high return on investment and short payback. Again, I mentioned a one to five year payback on a project and a piece of equipment that will basically last as long as the plant is in operation. So it is a very good IRR for our customers. Significant repeat business from primarily blue-chip multinationals. That is our focus. That is who most of our customers are.
We have a track record of profitable growth, both organically and through acquisitions, but most of our growth has been organic. The acquisitions have been small tuck-under acquisitions of complementary technologies. I talked about how inefficient we are as a society. A building like this would be roughly 50% electrical and 50% thermal energy. The energy sources is 50% electrical for the lights and things like that, and then 50% thermal, heat, usually natural gas for heat. On the industrial side, 90% is thermal and only 10% is electrical. If they want to meet their carbon emission reduction goals, they have to reduce thermal energy efficiency. The electrical side is easy. You can buy green electricity off the grid. You can put some solar panels on your roof. The thermal is much more challenging. That is what we help our customers do.
On average, an industrial sector loses about 50% of the thermal energy they are using. If they are losing thermal energy, that means there is heat escaping somewhere in the system. We can recover about 80% of that lost heat using all our technologies. In theory, if they are 50% efficient, they use all our technologies, we can get them up to 90% efficient, again, with a high return on investment and strong payback.
How do we do it? It is simple really. It is two things. There is heat being lost, so we either recover that heat and upgrade it and give it back to them in the form they can use it, or we stop them from losing the heat or the steam in the first place. I mentioned a suite of complementary technologies. They are all related to industrial thermal efficiency. They are all highly engineered and application and site-specific.
The company started way back in the 1990s with the invention of the FLU-ACE technology. That is where we started. Then we acquired the GEM steam traps. About five years ago, we acquired HeatSponge and Rainmaker, and then, I think three or four years ago, the other technologies. As I said, they are all related. They are all very complementary to each other, all have to do with thermal energy efficiency. We sell these products two ways. Either as a total turnkey package, that is where we do everything. We go to our customers, we develop the project, we engineer it, we install it, we manufacture the equipment. Literally, all they have to do is turn a key. Or we can sell it just as a piece of customized equipment that they will install themselves.
It tends to be the smaller, simpler stuff that is sold as a piece of custom equipment where they can install it themselves. The more complicated projects are the turnkey ones. I mentioned we focus on large multinationals, and the reason we do that is for two reasons. Number one, we want to go to a site that is using a lot of energy. As a rough rule of thumb, we say if they are not spending at least CAD 1 million on their fuel bill, that is probably not a site that we are interested in, because if they are spending CAD 1 million and we can save them 10%, 20%, 30%, that is going to be a CAD 1 million project or CAD 1 million worth of opportunities. If it is less than that, we are not interested.
It tends to be large multinationals that have the large sites, and the large multinationals have hundreds of sites around the world. Our goal is to sell one site, establish a corporate relationship, they like it, and then go from site to site, and we have done that a number of times now. Our top 10 customers have about 1,000 sites worldwide, and we have penetrated about 20% of those sites. That is, we have provided some solution to about 20% of their sites. That sounds like a lot, but I said we have only partially done, so we are probably less than 10% of the opportunity captured so far with our largest customers alone. Still lots of opportunity with our existing customers as well as other customers. In terms of our financial results, we have a wonky year-end. It is May. In September, we reported our year-end results.
Revenue was about CAD 34 million, up about 13%. Over the last three years, it is up about 43%. Adjusted EBITDA, almost CAD 2 million. Net income, just over CAD 1 million. As I mentioned, we have been profitable every year for the last four years. Operating cash flow, before working capital changes, was about CAD 2 million. Order intake increased 37% or 38% to a record CAD 30 million for our last fiscal year. For Q1, revenue of CAD 6.2 million was down a bit. We do, given the nature of our industry, our business, large orders, there is a fair bit of fluctuation quarter to quarter, and I am always emphasizing investors not to focus on the quarter. They do not ever seem to hear me. Focus on the trailing 12 months, because that is really a better indicator in the long-term growth trajectory.
You can see on a trailing 12-month basis, we continue to grow revenue. This most recent quarter, we had good order backlog, good order intake, but it just happened to be on a couple of different projects that we are starting to install with the customer. There is a couple of things the customer had to do to get ready for it that they had not done, and that delayed our timing a bit. The revenue was down more than we had thought. We did not get as much of the projects done as we had hoped. The other thing was just jam. Again, this was timing. I am always telling the team, "Get the orders out before quarter end," which they did. But the shipping terms require that we cannot book the revenue until it arrives on site of the customer.
For those two reasons, revenue was down a little bit, but not a concern at all. Adjusted EBITDA. Again, for the quarter, it was down a little bit because revenue was down. Operating expenses are up. Most of that was, again, this is for the quarter, most of that was due to a foreign exchange as well as some inflationary impact on the cost, but up just a little bit. But for a trailing 12-month basis, you can see we are well ahead of where we were at this time last year. You can see, I will talk in a minute, the profitability was much higher two or three years ago, and there is a reason for that, and that was expected, and that was intentional on our part.
This shows the net income over the last four years and the operating cash flow, which I pay attention to both, but operating cash flow is very important because that's what's flowing back into the business. You can see the profitability and the cash flow dropped a lot in 2020. By Q1 2026, that was basically most of fiscal 2025. In 2023 and 2024, we redid our strategic plan and decided we wanted to invest pretty significantly in the future growth of the company. That added over CAD 1 million in SG&A, which reduced the bottom line, didn't have any impact on the top line, and that was hiring a bunch of additional salespeople and engineers. It was opening a new plant and facility and office in the U.K., and it was developing some proprietary app called CREST to help us sell better.
Those all added about CAD 1 million, so profitability went down. But now we can see it's starting to pay for itself as expected, and the profitability is coming back. Over the last four years, we've generated about CAD 8 million in operating cash flow. Our last major acquisition was done with debt. We had about CAD 3 million in debt a few years ago. We paid all of that debt off with our own cash flow. We're now standing at the end of Q1 with CAD 4.5 million in cash. It's up CAD 1 million or so from last year, CAD 3.8 million in working capital, and essentially no bank debt. We got a little bit of bank debt, but that was just an equipment loan that we recently did to install some new equipment in our U.S. facility. We've got sites.
We operate primarily in Europe and North America. We sell globally, but 90% of our revenue is Europe and North America. It's about 50/50. We have sales, administrative, and engineering offices in Ottawa, in Pittsburgh, and in Bristol, U.K. Subsequent quarter end, just in the last three days, actually. I can tell you, because sometimes investors say, "Why do you announce things all at once?" We announce things as soon as we get them. On Monday, we got a CAD 3.2 million order for a turnkey project with a dairy cooperative. Again, food and beverage and pharma represent probably 80%-90% of our business. Those are our key sectors. This is a new customer, and we just received the order on October 26th. Then just this morning, another CAD 2 million. This is the 12th project that we've done for this customer.
It's a large multinational dairy and nutrition company. It's repeat business. That's CAD 5.2 million just in the last couple of days. That's CAD 8 million received since August 31st. Our order backlog is now the highest it's ever been at CAD 21 million right now, higher than it was at this time last year. What's new? I mentioned about four years ago, we redo our strategic plan about every three years or whenever we feel it's necessary. Three or four years ago, we had a plan to add salespeople in territories we weren't in, add some engineers, open a new facility, and that added about CAD 1 million. Then a year ago, we did a new strategic plan. We thought, "Where do we want to go from here?" Number one, we want to make the most of those investments.
We want to continue to leverage those investments and get the most out of them. We have no plans to add extra cost, to add extra people at this point. We want to make the most of the investments we've already made. That's the first thing, and number two, we want to figure out ways to scale the business. What's efficient ways that we can grow the revenue and grow the profitability? In terms of scaling the business, we've developed. I mentioned everything we do is customized to the site and the application, but we realize on some of these smaller, simpler projects, there's an opportunity to sell. Previously, I developed a portfolio of standardized customized equipment so that people can just sort of order off a standard sheet. We've developed that.
We're selling that both ourselves, as well as through rep network, and we've already received CAD 1.3 million in orders for standardized equipment packages. We're developing in order to sell standardized equipment, we're developing part of the market we feel we've missed a little bit. It's the smaller, simpler stuff. We've always prided ourselves on solving our problems for our large multinationals, but there's a whole bunch of business that's just everyday sort of orders of steam traps that have failed or a small economizer that traditionally is sold through a network of manufacturer's reps. We're going to develop a network of manufacturer's reps to sell those smaller, simpler projects both in North America and Europe. We've hired a very experienced guy in North America.
He worked a number of years with Spirax Sarco, which also sells a traditional steam trap, and we've hired somebody in Europe to do the same thing. Again, that's a way to generate revenue where we don't have any costs of maintaining a salesperson. We don't have any commission. We just sell it at a set price. That just started. We hired both of those guys at the tail end of fiscal 2026, so less than six months ago. The other thing we're looking at is how can we simplify the big turnkey heat recovery projects. Our customers love us because we solve their problems. We get projects done fast. They can do a project with us in the time it would take them to go out and try and find a project and find an engineer to do it. So they love us for that.
But we realized, is there a way we can simplify that? These big projects, which we are going to continue to do and is what we're really known for, is there ways we can simplify it? We developed a HeatSponge is one of the technologies we acquired a few years ago. It's a heat recovery technology, but the heat goes right back into the boiler. So it's a fairly simple installation. We developed a simplified HeatSponge turnkey offering. Traditionally, the HeatSponge has just been sold as a piece of equipment, but we realized we can do a turnkey package very simply without a detailed engineering report, without a project development agreement with the customer, quicker sales cycle, quicker installation, quicker to revenue. We launched that last year.
It says here there's no controls, no project development agreement, better margins, and we've already got about CAD 5 million in orders over the last 18 months from multiple orders from two different customers. We're excited about that for the future. Again, that's scaling the business. How do we generate more revenue quicker, more profitable, improve the margins, focused on our proprietary technology? Summary, as I said, energy efficiency, fastest, cheapest, easiest way to reduce carbon emissions. High return on investment, short payback for our customers, significant repeat orders from all of our customers, from our who's who list of customers, and we have a track record of profitable growth, and we want to continue growing as we have profitably. That's the goal. That's the strategy. That's what we're working on. With that, I would welcome any questions. Right back there.
In terms of the payback and the ROI, is there any carbon credits or policy stuff in there, or is it also profitable for the companies to do just on an ad hoc basis without the carbon emissions side?
The question was, when it comes to a return on investment for the customer or a payback, does that include carbon credits or carbon offsets or carbon tax? The answer is that's for the customer's benefit. Most of our customers, most of our projects pay for themselves with the fuel savings alone. The carbon is sometimes a slight benefit, but that's for their purposes. They do that analysis. I can't think of too many cases where I can think of one case, so that's not too many. I can think of one case where the price of carbon came into play fairly significantly. That project was a 10-year payback without carbon, but like a three-year payback with. Most of the time, the terms that I say, when I say it's one to five years, that's without carbon credits. That's just for energy savings alone.
Again, it varies in the market because it's generally natural gas that we're saving. Natural gas is three times more expensive in Europe than it is in North America. The North American projects tend to have a little bit longer payback. The European one's much shorter. At the end of the day, the answer to your question is everything we do is because we save fuel, not carbon. That's why the customer does it. Yes, [Jane].
I like the company and good presentation. I wasn't in it on ownership, and if I remember well, you were a big buyer yourself this year. Can you talk about the ownership structure and your own sort of purchase and what the sort of cap table looks like from that perspective?
Yeah, the question is what's the ownership and the cap table? I mean, the cap table is it's all equity. There's no debt. In terms of ownership, I came in first as a board member, then as CEO. Didn't own any stock, wasn't given any stock, and over the last number of years, I keep buying more. I'm now the single largest shareholder. I haven't sold any ever. So I own about just over 10 million shares, so it's a pretty significant part of my net worth because I believe in the company. The same with the rest of the management. I think the management and the board is about 10%. The other 90% is mostly retail. There's the odd small institution there, but for the most part, it's mostly retail. So it's very widely held.
Like I said, at 10 million shares, I'm the largest single shareholder that I'm aware of, so nobody's over 10%. Right at the back.
You mentioned that the ROI is attractive for customers, and also that penetration's still around 10%. Can you talk about the bottlenecks that you're running into with some customers?
Yeah. Sorry. The question was, the technologies have a great return on investment for the customer, and our customer penetration is still fairly low, so what is the bottleneck? The bottleneck really is just time and people and resources. Not just for us, but for the customer. One of our greatest strengths and why our customers like us is because we can do complicated projects pretty quickly with low risk. So we develop a project for them with a fixed price and guaranteed savings, so we get projects done. That is a long sales cycle and a long development cycle for us because it is all customized. From the customer's standpoint, it is the same time. Usually, they have a corporate team that is doing this, and they are only going to do a couple of sites every year.
If we get from our key customers that have 100 sites around the world, if we can do two or three sites with them in a year, that is a big success. It is not the type of product or project where you can say, "Okay, we did one this year. Next year, we are going to roll it out to all 100 sites." It is just you go methodically site by site working with the customer, usually at the corporate level and their corporate sustainability group saying, "Okay, where is the next best site you want us to go to next?
Give us some data from all your sites. We can figure out where the priorities are." So it is really just sort of methodically adding to our pool of customers so that we have got more and more customers where we are doing two or three sites every year. Thank you.
Right in the back right corner.
Yeah. I think in the past, correct me if I am wrong, but you had a stock buyback in place. But is that current? Did that expire? Are you contemplating a new buyback?
We're always considering, yeah. Every quarter we look at what have we got coming up over the next quarter or two, and should we be buying back stock? We will do it again. The way it works is I think it expired just before our year-end. Our year-end is May. Then you're essentially in a blackout till you report year-end results in September. We couldn't really do anything then. Yeah, going forward, we're continuing to generate cash. We will continue to generate cash, and we're going to do one of two things, either an acquisition or stock buybacks. That's something we're always considering, and we will do it again. Right here.
Could there be a service or data component? You talked about doing two out of 100 facilities, and it's like a dairy farm. Have you learned something with those two on an ongoing basis that you then implement as part of a theme, or is it really a one-time CapEx?
It's a one-time CapEx at that site for that technology. Sometimes there's add-on. Sometimes we can add some of our other technologies. But in terms of service, I think you asked the question, was is there any service which is sort of recurring revenue? There isn't very little service. We offer a service contract to almost all our customers. But if we do a CAD 2 million project, the annual service is CAD 20,000. I think our total service revenue is somewhere around CAD 2 million. It's a small amount. It always will be. It's just earning the trust of the customer and going from site to site to do the next project. And we're still a tiny part of the market, so there's still huge potential.
I did an analysis once on what's the potential, and it's trillions of dollars literally because it's literally every industry globally that could use our services. Everybody uses heat. Everybody wastes heat. Any other questions? Come on. I got some extra time. There's got to be one more. Back in the corner again.
Just to put it out there, you're looking at acquisition, fragmented. You're still a pretty small company. There are a lot of larger players in this energy business market. What do you and the board think about if you have the opportunity for you to be acquired at a premium by another player?
The question said it's a very fragmented industry. There's lots of small companies. On the other side, there might be large companies that would have an interest in acquiring us, and I think that's very true. I'm a shareholder. I'm the single largest shareholder. I want to do what's best for the shareholders to get a good return on investment. I see over the last few years a lot of traditional industrial equipment supply companies that are starting to look and sound a lot more like us because they realize that's a great market and they have to address it. Everybody's talking about reducing their carbon emissions still to this day, and these are solutions that pay for themselves. I think there is a good opportunity to potentially be acquired by a larger company.
Having said that, as a shareholder, I'm not selling at the current price or anything close to the current price. Again, it's frustrating. We released some results, quarterly results. Don't focus on the quarter results, but this quarter was down a little bit, so the share price went down. It's at CAD 0.14 . So that's about a CAD 24 million market cap, and we got CAD 34 million in revenue and we're profitable. To me, that looks like we're pretty undervalued right now. One more. Right here.
Does the build-out in data centers, is that something you're looking at?
We are still looking at it, but so far not. The issue with us is data centers do use a lot of energy, and they have a lot of waste heat. The problem is you need something to do with that waste heat. Usually a data center has no use for that. They just want to get rid of it. They have nothing they can use the heat for. Unless there is a greenhouse or something next door to the data center, there is no point in saving that heat. But we are continuing to look at it, for sure. Okay. I think my time is up. Thank you very much and hopefully, I am going to see a few of you.