Earnings call transcript: Tecogen Q2 2025 sees revenue growth, stock dips

Tecogen Inc (NASDAQ:TGEN) reported its Q2 2025 earnings, revealing a mixed financial performance with a notable increase in revenue but a slight miss in earnings per share (EPS) compared to forecasts. The company posted a revenue of $7.3 million, up from $4.8 million in Q2 2024, while the EPS was reported at -$0.06, slightly below market expectations. Following the earnings release, Tecogen’s stock experienced a decline of 3.67%, closing at $2.68, amidst broader market volatility. According to InvestingPro data, TGEN has seen remarkable YTD returns of 502%, with the stock currently trading at $10.63, significantly above its reported earnings price. Analysis suggests the stock is trading above its Fair Value.

Key Takeaways

• Tecogen’s revenue increased by 52% compared to the same quarter last year.
• The company reported a net loss reduction, with a decrease in net loss to $1.46 million.
• Gross margin saw a decline, dropping to 34% from 44% in Q2 2024.
• The stock price fell by 3.67% post-earnings announcement.

Company Performance

Tecogen demonstrated strong revenue growth in Q2 2025, driven by increased demand for its innovative cooling solutions tailored for data centers. Despite the revenue boost, the company’s gross margin contracted, reflecting increased costs or pricing pressures. The net loss narrowed slightly, indicating improved operational efficiencies or cost management compared to the previous year. InvestingPro analysis shows a healthy current ratio of 1.38 and an overall Financial Health Score of "FAIR," with particularly strong momentum metrics. For deeper insights into TGEN’s financial health and growth potential, InvestingPro offers comprehensive analysis with 12 additional key metrics and ProTips.

Financial Highlights

• Revenue: $7.3 million, a 52% increase year-over-year.
• Earnings per share: -$0.06, compared to market expectations.
• Gross margin: 34%, down from 44% in Q2 2024.
• Current cash position: $18.7 million.

Earnings vs. Forecast

Tecogen’s EPS of -$0.06 fell short of analysts’ expectations, indicating a slight miss. The revenue of $7.3 million, however, surpassed the actual revenue figure provided, which was $7.29 million, demonstrating a strong sales performance. The EPS miss suggests potential challenges in cost management or higher operational expenses.

Market Reaction

Following the earnings release, Tecogen’s stock declined by 3.67%, closing at $2.68. The stock’s movement reflects investor concerns over the EPS miss and declining gross margins, despite strong revenue growth. The current stock price remains above its 52-week low but has retreated from recent highs, indicating cautious investor sentiment.

Outlook & Guidance

Tecogen is targeting full capacity sales for 2026 and is exploring opportunities to license its technology to other manufacturers. The company is focused on converting letters of intent to purchase orders and securing larger data center cooling contracts. These strategic initiatives are expected to drive future growth and market penetration. InvestingPro forecasts suggest strong revenue growth potential for FY2025 at 151%. Subscribers can access the detailed Pro Research Report, which provides comprehensive analysis of TGEN’s growth trajectory and market position among 1,400+ top US stocks.

Executive Commentary

CEO Abhinand Ranges emphasized the company’s strategic focus: "My goal is to put us in a position where the market demand for our technology exceeds supply." This statement underscores Tecogen’s commitment to scaling production and meeting rising demand in the data center cooling sector.

Risks and Challenges

• Supply Chain Optimization: The need for increased inventory of critical components could strain resources.
• Market Competition: As demand for cooling solutions grows, competition may intensify, impacting market share.
• Technological Advancements: Rapid advancements in data center technology may require continuous innovation from Tecogen.

Q&A

During the earnings call, analysts inquired about Tecogen’s first letter of intent for a 100 MW+ data center project, which involves six chillers. The potential expansion of this project to 500 MW was also discussed, highlighting the company’s growth prospects in the data center cooling market.

Full transcript - Tecogen Inc (TGEN) Q2 2025:

Conference Operator: Greetings, and welcome to the Tecogen Second Quarter twenty twenty five Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jack Whiting, General Counsel.

Please go ahead.

Jack Whiting, General Counsel and Secretary, Tecogen: Good morning. This is Jack Whiting, General Counsel and Secretary of Tecogen. This call is being recorded and will be archived on our website at tecogen.com. The press release regarding our second quarter twenty twenty five earnings and the presentation provided this morning are available in the Investors section of our website as well. I would like to direct your attention to our Safe Harbor statement included in our earnings press release and presentation.

Various remarks that we may make about the company’s expectations, plans and prospects constitute forward looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by forward looking statements as a result of various factors, including those discussed in the company’s most recent annual and quarterly reports on Forms 10 ks and 10 Q under the caption Risk Factors filed with the Securities and Exchange Commission and also available in the Investors section of our website under the heading SEC Filings. While we may elect to update forward looking statements, we specifically disclaim any obligation to do so. So you should not rely on any forward looking statements as representing our views as of any future date. During this call, we will refer to certain financial measures not prepared in accordance with GAAP.

A reconciliation of non GAAP financial measures to the most directly comparable GAAP measures is provided in the press release regarding our second quarter twenty twenty five earnings and on our website. I will now turn the call over to Abhinand Ranges, Tecogen’s CEO, who will provide an overview of second quarter twenty twenty five activity and results and Roger Deschen, Tecogen’s CFO, who will provide additional information regarding second quarter twenty twenty five financial results. Aminan?

Abhinand Ranges, CEO, Tecogen: Thank you, Jack. Welcome to our Q2 twenty twenty five earnings presentation. We’ve made tremendous progress towards our data center strategy. We’ve hit some key milestones and have generated leads for much larger projects. I’ll update shareholders on progress to date, feedback from prospective customers and how we plan to scale up.

We also have an exciting product announcement. Before we get into these, I want to address the one setback during the quarter, the lower gross profit margins. This quarter, we shipped the first few units of the hybrid chiller. It had lower margins than our other products because we bought materials in lower volumes and had higher labor costs as we refine our production process and gain experience building the product. The supply chain for this product uses easily available components from multiple sources, so volume production will lead to lower costs.

The other products shipped this quarter had similar margins to before. On the services segment, our margin decline was due to increased costs in New Jersey and Manhattan. Post COVID, travel times into Manhattan and between sites has increased. This has led to longer days getting the work finished, especially during the summertime when both chillers and cogeneration systems are running. This led to a much higher overtime labor hours.

We have also been making improvements to our Inverde engines to double the oil service intervals. The majority of our Inverde units are in Manhattan. So although this has a short term hit to profitability, in the long term, this will significantly increase gross profit margins on the inverter. To better improve labor efficiency, we are working with our customers so we can have parts drop off at sites ahead of service and tools stored at some of the larger sites. This means that technicians can travel between sites faster either by parking at one location and taking the subway or having a truck drop off technicians at each site.

We are also creating teams of technicians who are experts on each type of product so that diagnosis and service can be performed faster. With these changes and the increased in Verde service intervals, we are still targeting gross profit margins on service of greater than 50% within the next nine to twelve months. However, management’s priority is on the data center strategy. This will have the largest impact on shareholder value. My goal is to put us in a position where the market demand for our technology exceeds supply.

This will in turn lead to great strategic options. For those of you who are new shareholders, I’d like to reiterate the value proposition that Tecogen offers to data centers. As chips have become more powerful, they need more cooling. Cooling systems are designed for the worst case, how to stay, full AI load. In some parts of the country, this can be as high as 120 degrees Fahrenheit.

When you design for the peak, you tie up a lot of the data center’s power since you don’t know when you’ll need to turn on the cooling system. In the past, this wasn’t a big problem. But with the latest NVIDIA Blackwell chips, it could be anywhere between 25% to 35% of a data center’s power, And it’s only increasing as chips get more powerful. If you take this peak and move it to natural gas, you will have a lot more power for ICE heat. I know many of you might have heard of data center cooling technologies such as liquid cooling, immersion cooling, etcetera.

All these technologies are targeted at what happens inside a data center. All of these technologies still connect to a chiller, today powered by electricity, to eliminate this heat. Our chillers can interface with any of these liquid cooling or emergent cooling options. I’ll explain what makes Tecogen’s solution unique and how we plan to expand our technology edge. But first, I’d like to walk through some of the projects we are quoting and why our solution is being considered.

We have signed our first LOI with 100 megawatt plus data center. This letter of intent contemplates delivering six SDX chillers in Q4 or early next year depending on the customer’s construction schedule. The chillers will be used for part of the room cooling load in the first phase of the project. If the customer likes the chillers, they will use more of our chillers for the subsequent phases of the project. This project has great potential as the customer expects to eventually expand the site to greater than 500 megawatts, and we hope to grow with them.

This project is one of the best use cases for our chillers. The customer has some grid power, so they want to save it for IT and not waste it on ancillary loads like cooling. We’ve also been asked to quote two projects with 60 to 100 chillers apiece. These projects expect to commence construction sometime in 2026. The timing on these projects is contingent on the data centers finding their anchor tenants and receiving construction financing.

On one of the projects, the potential customer wants chillers to increase the power available for IT in two ways. The first is for cooling the chips. The second is for turbine inlet cooling. In some of these larger data centers, customers are building on-site power plants with gas turbines from large companies like GE, Caterpillar, etcetera. As the outside air gets hotter, these gas turbines or jet engines make less power.

If you can cool the air entering the power plant, you get a lot more power. So our chillers are perfect for this since they run on natural gas, the same as the gas turbines. We have also received other inquiries where we are at earlier stages but have similar potential in terms of chillers per project. Currently, these leads are from our own marketing efforts. As mentioned before, we’ve been going to trade shows, doing direct outreach to data center developers and to engineers designing data centers.

As a result, we are getting great inbound leads. With our recent capital raise, we have also engaged a marketing firm and plan to advertise in key data center publications. Over the last three months, we also continue to have strong engagement with the Vertiv team. They have put together a great marketing plan. Their marketing plan has taken slightly longer to be approved internally, but we should see more from them soon with activity ramping up over Q3 and Q4.

We have also been developing some relationships with very large data center developers. For example, we were on a call with a developer who was deploying 80 or more pillars every two months. They have their key engineers and first serving people on the call with us. Feedback from them has given us a better understanding of decision making for bigger projects. Some of the key areas that we’ve learned from this is, first, speed of deployment and avoiding space usage inside the data center was critical for them.

Therefore, they wanted a solution that requires minimal engineering design and was prepackaged to be installed on a roof or outside a data center. Second, to be considered for larger projects, we needed to have a significant production capacity. Our team looked at how we could address these needs in the shortest time possible. To address the speed of deployment, we have an exciting product update. Shown here is our new fuel power source 300 ton data center specific chiller.

This chiller is built from our standard hybrid chiller, so R and D time is minimal. It takes two of our hybrid chillers and puts them end to end with some minor modifications to have increased efficiency and more cooling at data center liquid cooling conditions. Using bigger chillers is attractive to data centers because it saves space. It is self contained, so it can be easily installed on a roof or outside. For example, the hybrid chillers we shipped to a commercial customer in the second quarter are already running on-site.

They had their piping already installed, so as soon as the chiller arrived, they connected the pipes and started to dump. This chiller has some big advantages for data centers. The first is, of course, bringing up power for IT. Second, a huge increase in resiliency because of two power sources. The two power sources also gives long term fuel flexibility.

A data center can choose to run the chiller on natural gas, electricity, or bulk, all from the same chiller. Lastly, one area of particular concern to data center customers is having uninterrupted cooling. Currently, if a data center runs on electrical chillers and the power goes out, the chillers will shut down. Then a diesel generator will start up and bring the chillers back online. This process can take five minutes or more.

Given the amount of cooling needed, customers need to install large thermal storage tanks to ride through the time between power loss on the chillers reaching full load. When a natural gas chiller or a dual power source chiller, the chiller can keep running through a blackout because they don’t need electricity to run. This dual power source chiller is also something that is very hard for competitors to replicate. So we feel this gives us an added technology edge. I’ll show you why it’s hard to replicate.

The dual power source chiller uses the patented inverter system that we developed in house. This can take two power sources and blend them seamlessly. The underlying software and power electronics has already been proven in our InVerde product over eight million hours of operation. It uses the same patented emission system we use in our other products for super low NOx and CO. That means that data centers get easy air permits.

I’ve sometimes been asked why someone couldn’t just buy a generator and market next to an electric chiller or if a competitor could replicate our solution. The key to making a natural gas chiller solution work reliably and efficiently requires integrated controls for engine, emissions and refrigeration. It also requires engine expertise, 20 fourseven service and a supply chain to support demanding operations. As a result, it would already be hard for a competitor to copy our DTX and STX water cooled chillers. This product pushes our technology edge even further.

The dual power source technology can even be licensed and integrated with chillers built by other manufacturers with some minor design modifications. As I mentioned earlier, these are all strategic options to consider once we have established demand for the solutions. The second part of securing orders is having the factory capacity to produce enough units. In many cases, customers wait until their anchor AI tenants are secured, then deploy capital to construct the data center. Therefore, a lead time and the ability to supply a large chunk of a data center’s cooling needs is a big part of the decision making.

We raised capital for two reasons. First, to have a stronger balance sheet for potential customers who feel comfortable giving us larger orders. The second is to put us in a position to build up capacity. We estimate that with no modifications to our factory and eliminating any supply chain bottlenecks, we can build forty sixty kilos a year. We believe that it’s possible to increase this number to 80 to 100 killers with some minor factory modifications and utilizing contract manufacturing for certain subassemblies.

For example, items such as the sheet metal assemblies on the air cooled chiller is labor intensive, but there are multiple contract manufacturers who provide overflow capacity for electric chiller. We are already in discussions with these suppliers. This sub assembly will arrive at our factory for integration with engine and power electronics. It will be tested and then shipped. Given that we may see orders for water cooled chillers or air cooled chillers, we are modifying our factory to add additional test cells and have a more flexible layout so that we can adapt to any kind of product mix.

We estimate that the capital investment here is less than $100,000 but will help us react to market needs quickly. We’re also working with our supply chain to identify potential bottlenecks and plan to increase inventory of items such as circuit boards, permanent magnet generators and certain other low dollar but critical items. I believe it is important to look at the road ahead in terms of milestones so that we can move towards hitting some of the strategic goals. As I mentioned at the start of the call, my goal is to maximize the value of Tecogen. In my opinion, this comes from generating enough interest for our products in the market so demand exceeds supply.

The second is to figure out the best strategic option on a go forward basis. There are multiple ways to quantify the value of Tecogen. For example, if our solutions give a manufacturer selling complementary products a competitive advantage that allows them to secure more data center orders and that is worth a premium. Or if a hyperscaler or large data center developer can construct a data center faster because they don’t have to wait for power, keeping this technology out of the hands of competitors is also worth a premium. But before we can explore such options, we have to meet a couple of key milestones.

The first milestone is turning the LOI that we received into a PO as quickly as possible. The timing on this is contingent on factors outside our control, such as developers signing their AI tenants and unlocking construction tenants. However, both the LOI as well as all the other projects that we’ve been asked to quote are in high demand areas, so we believe tenants and construction financing will be easily secured. The second milestone is to secure a larger quarter. Given the great projects we’ve already quoted and the new leads we are getting each week, our goal is to attempt to sell all our capacity for 2026 to one or two customers even if this takes a little longer to secure.

Concurrently, we are working with Vertiv on both the marketing and the supply chain. Originally, I thought we would not see larger projects until we had pilot projects operating. Now I believe we have the chance to secure a larger order because we’ve addressed or are in the process of addressing some key areas of customer concern. We have a strong balance sheet. We will have the manufacturing capacity.

Finally, we have a chiller product with two power sources for extra peace of mind. Backlog and cash. Our current cash is presently at $18,700,000 Our cash was at $1.6 at the end of the quarter and is now at 18,700,000.0 post raise. As mentioned, we plan to spend cash on marketing and some key materials. Our backlog is at $4,700,000 This does not include any of the units we have LOIs for and we are expecting another 2,500,000.0 to $3,500,000 of cannabis projects to close in the second quarter.

We now these have been slightly delayed, but we expect these to close now in Q3 and Q4 and hopefully ship in Q4. As mentioned earlier, all our focus is presently on converting some of these larger leads into orders. It is in the best interest of the company to say have one or two larger projects because this will act as a stepping stone to even larger projects. The last item to note is that we are considering repaying the related party note early, so we don’t have any debt on the balance sheet. I’ll now hand over to Roger to take us through the financials.

Roger Deschen, CFO, Tecogen: Thank you, Abhinav, and good morning, everyone. I’ll begin with the second quarter twenty twenty five results. Total revenues for the quarter increased $2,500,000 to $7,300,000 which compares to $4,800,000 in the 2024. And this is due to a $3,100,000 or a 54 percent increase in products revenues, which is offset by reductions in our service and energy production revenue segments. Our net loss decreased in the second quarter to $1,460,000 which compares to $1,540,000 in the 2024 and this is due to increased revenue and gross margin and this is partially offset by an increase in operating expenses.

For the quarter, our gross profit increased 18% due to increased revenues. Our gross margin for the 2025 decreased by 10% to 34% from 44% in the same period in 2024. I will discuss and review the gross margin further in the segment performance slide. Operating expenses increased 9% quarter over quarter due to increases in administrative and R and D payroll, increased benefits and the grouping costs and higher sales commissions. Moving to EBITDA reconciliation.

For the second quarter, the EBITDA loss was $1,160,000 and the adjusted EBITDA loss was $1,540,000 which compares to an EBITDA loss of $2,300,000 and adjusted EBITDA loss of $2,190,000 in the 2024. The improvements in EBITDA and adjusted EBITDA are due to again the increased revenues and gross profits we realized in the second quarter. Moving to the segment performance. Our products revenue increased in the second quarter to $3,200,000 from $100,000 in 2024. This is due to increases in both our chiller and cogeneration shipments and this also includes initial deliveries of our hybrid drive air cooled chiller.

Our products margin increased to 29% in the 2025, which compares to negative 43% in the same period of 2024. However, our 2025 product margin was impacted by the as Amadine alluded to earlier, it was impacted by higher costs incurred for the vehicle chillers, which is due to low volume material costs and increased labor costs. And we also sold a prototype unit at a discounted price. It should be noted also that the 2024 margin was impacted by our plant relocation in April year, which reduced manufacturing capacity resulting in increased unabsorbed labor and overhead costs. Our services revenue decreased 4% quarter over quarter to $4,000,000 in 2025 from $4,100,000 dollars in 2024.

Our gross profit margin decreased 9% to 38 from 47%, which is due to increased labor and material costs in our Manhattan and Jersey territory as we continue rolling out bulk oil system upgrades. Moving on to an energy production, the revenue decreased by 64% quarter over quarter to $174,000 in the 2025 period from $482,000 in 2024. This is due to the expiration of certain contracts, which occurred late at the end of fiscal twenty twenty four. And during the current period, the temporary shutdown of certain sites for repairs and maintenance. Temporary shutdown also resulted in a decrease in our gross margin to 25%, which compares to 41% in the 2024 period.

Overall, our gross profit margin decreased 10% to 32% from 44%. And as we have stated, this is due to the impact of the lower margins on our hybrid dry vehicle chiller in our product segment and increased labor and material costs in our New Jersey territory in other markets. Now this concludes our review of the 2025 financials. And I’ll turn the call back over to Abhinav.

Abhinand Ranges, CEO, Tecogen: Thank you, Roger. When we started 2025, I had some key milestones I wanted the company to achieve. The first was signing the Veritiv marketing agreement. The second was uplisting to a national exchange. The third was to get the company better capitalized and finally get our first data center projects.

We’ve completed most of those milestones and are well on our way to completing the last. We have achieved great market feedback and have generated leads for multiple projects that could give us the great problem of solving having enough factory capacity. Now with a dual power source chiller and a natural gas only chiller, we have a full lineup of chiller products for the data center market. The second half of this year, we’re going to remove any factory and supply chain bottlenecks. Hopefully convert the LOI to a PO and make traction on the larger on these larger orders that we larger projects that we’ve quoted.

I’ll now open the floor for any questions.

Conference Operator: We’ll now be conducting a question and answer session. Thank you. Our first question is from Chip Moore with ROTH Capital Partners.

Chip Moore, Analyst, ROTH Capital Partners: Good morning. Thanks for taking the question and congratulations on the data center momentum. I want to ask on the LOI. Is there a way to help us think about how quickly after you get that PO, you can get delivery to the site? And then how should we think about that evaluation phase?

Is that a six month process? Or what are your thoughts there? And then maybe just help us think about that total opportunity at that site. I know it’s 100 megawatts or so now, I think that can grow to 500 plus. Just any help there?

Abhinand Ranges, CEO, Tecogen: Yes. So great question, Chip. So the first piece, I think, is that we feel that it would be worth doing some risk purchasing of materials for that opportunity. So we are planning on at least having some portion of that those units starting to be constructed in Q4. So I would expect to be able to ship at least part of it if things go to plan in Q4 and Q1.

Those six chillers, just to give an idea of dollar, I mean, it’s a smaller chiller. So I would estimate that without getting into exact pricing on units, putting 1,500,000.0 and $2 something million for just those six chillers. But the rest of the project will actually use substantially more chillers. I mean each some of the bigger phases of the project will use 20 to 30 chillers per phase. This is really just evaluation portion.

So we’re taking a very small portion of the load. This how quickly they built the rest of the project, it’s hard to tell, I would say sometime in 2026. At this point, I also am not I don’t believe that this is going to be the gating factor to get other projects in the data center space. This just happens to be a great pilot project. But I think some of the other opportunities may come through without needing this to be secured before or evaluated.

Chip Moore, Analyst, ROTH Capital Partners: Very, very helpful, Abhinav. And just a follow-up on just that one. The bigger phases, do you think they’d still be using the smaller chiller? Or would they potentially move to the DTX just given the higher need?

Abhinand Ranges, CEO, Tecogen: So one of the reasons that this the smaller SDX was chosen was they had designed around an electric chiller originally and we were able to switch them to the FDX. So I’m not sure what the fact the bigger the rest of the project would use in terms of design. If they chose to design around our chillers from round out, there are many other ways that they could approach it. So it’s unclear at this point. Yes.

Chip Moore, Analyst, ROTH Capital Partners: Got you. No, very helpful. If I could ask another one just on the quoting activity, the two larger opportunities that you could potentially sell out on, I think. Just did I hear you correctly, you might not need a pilot phase there? Or how are you thinking about that?

Abhinand Ranges, CEO, Tecogen: At this point, that is one of the hardest pieces that we are trying to work through internally because those bigger opportunities, the potential customer has not brought up anything about a pilot phase, especially if some of those might actually use that dual power source chiller. I think the customers feel that they have some level of redundancy there. The other piece in those projects are the underlying data centers are much bigger. So we are not the only source of cooling on-site. So we may be a portion of the bigger sets of cooling over there.

So it it’s it’s unclear whether those will be we could secure them without any pilot at this point. And that is part of what we’re working through in the second half of this year to work through what any potential customer concerns may be and how we can allay them. I believe a lot of the feedback we’re receiving is really tied to lead time and the ability to manufacture enough chillers that it would be a meaningful reduction in power. The way we are viewing it is that many of these larger projects don’t want to allocate a tiny amount of chillers to us and then have everything else come from electric because that doesn’t really solve the underlying problem. So if we can show them that we can actually hit a meaningful amount of their overall power needs, I think that’s really what’s driving that decision there.

Chip Moore, Analyst, ROTH Capital Partners: Interesting. Yes. Good problem to have. And maybe the follow-up there is some of the smaller opportunities, the modular data centers you’re seeing inbounds on and then obviously, Vertiv sort of set to ramp up their marketing efforts. Just given some of those constraints, how are thinking about prioritizing some of these other opportunities when you could be sold out pretty quickly?

Abhinand Ranges, CEO, Tecogen: I think that’s essentially a good problem to have. And I think that is exactly what we’re going to use to try and secure some of these bigger projects. The way we’re approaching some of these bigger potential projects is being very open about what our pipeline looks like and telling them whoever wants to buy up the capacity in one shot, that is really their best option because it gives them the fastest way to get more power. I think the needs of some of these projects are such that the technology risk is relatively low because they have other chillers, they have ways to back it up, that it’s in their best interest to do so. If things like modular data centers, other items do come through, you know, if they come through hopefully, opportunities could come through before something bigger like this happens.

We don’t know. If they those do, I think the reality is we could add additional capacity. Right? We we have a little bit of time. If we’re able to secure some of these bigger orders early enough, then the next phase is, okay, how do we how do we scale up to beyond this?

Chip Moore, Analyst, ROTH Capital Partners: Very helpful. Maybe just a last one for me, if I could. That new dual power source product, very interesting. How much is that customer driven? I there’s a lot of focus on demand response type capabilities, obviously, resiliency piece, but particularly for AI loads versus some of the legacy loads.

Just what’s the reception there? And how customer driven is that?

Abhinand Ranges, CEO, Tecogen: So that one’s almost fully customer driven because what we were finding when we went to some of these potential customers with the DTX chillers, some people said, look, we have enough water. We have we don’t mind having a water cooled chiller that can use a cooling tower. There were some other people that said, look, we just don’t want to use water on-site. We want we primarily buy electric air cooled chillers today. We want something that’s an equivalent amount.

We understand the value proposition of moving to natural gas, but we want something that is essentially identical in terms of both footprint as well as not using water as an electric air cooled chiller. So since we have this hybrid chiller already and in normal cooling conditions, like in air conditioning cooling conditions, that’s only 100 ton chiller. But one of the other pieces of feedback we were getting was provide us a way to get more cooling because we don’t want to use 300 tiny 100 ton chillers. We’d rather have one hundred and fifty three hundred ton chillers because it just takes less space. You don’t need as much space around the chiller and so on.

So we felt this isn’t very hard for us to take that 100 ton chiller and modify it so it can be you could put two of them together and really get a 300 ton chiller. And the reason for that is because when you’re operating in liquid cooling loads, you operate very warm water. They operate 70 degree water instead of 45 degree water as you might do in an air conditioning application. So chillers become more efficient. You get more cooling out of it.

So we could have a larger chiller just by having two of them. And I didn’t want us to go into a big R and D project because that takes resources away from what we really need to achieve right now. So by building on the back of what we already had, we felt like we were addressing the customer needs because some customers really want that air cooled, some would want the water cooled. So there’s different trade offs that happen by choosing one or the other. We wanted to be able to address the needs of a broader chunk of the market.

Chip Moore, Analyst, ROTH Capital Partners: Very helpful. Appreciate it. I will hop back in queue. Thanks.

Abhinand Ranges, CEO, Tecogen: Thanks so much, Jeff.

Conference Operator: Our next question is from Alex Blanton with Clear Harbor Asset Management.

Abhinand Ranges, CEO, Tecogen: Good morning. Good morning, Alex. Good morning, Alex.

Alex Blanton, Analyst, Clear Harbor Asset Management: I wanted to ask about whether or not you can get help from Vertiv, in terms of capacity needs. Is there any thought to doing that or is that practical? Because if you need additional manufacturing capacity, it might be available there.

Abhinand Ranges, CEO, Tecogen: Yes, I can’t really comment on anything, any ongoing discussions with Vertiv just because all of that is covered by our confidentiality agreement. What I can say though is the original marketing agreement from day one always contemplated Vertiv helping us with the supply chain. If you look at the marketing agreement, it says that, you know, Vertiv will help us get better supply of components. So that that is something that we plan to rely on Vertiv for, because that’s really where especially when you look at the dual power source chiller, there are a lot of components there that we if there are bigger opportunities, we can work with Vertiv on supply chain.

Alex Blanton, Analyst, Clear Harbor Asset Management: Okay. Thank you. That’s helpful because that should be a marketing point too if you have the help of a larger company available to take care of some of these big orders? And secondly, I wasn’t clear on what the when you talked about the the $1,500,000 to $2,000,000 was that for all six chillers? It wasn’t clear to me.

Abhinand Ranges, CEO, Tecogen: The SDX is a much I’d say between 1,500,000.0 and $2,500,000 The SDX is a much smaller chiller. So like the so diff we have a whole range of different chillers at different prices. Right? Most of the other data center opportunities are much, much larger. And I know people would like an average dollar per ton in terms of what we do on, like what’s revenue worth, right?

I think that’s what everyone is trying to really ask. So in in our previous call and on our investor slide deck, what I had mentioned was something like 11,000 tons of cooling would represent somewhere around $13,000,000 maybe a little more, a little less depending on pricing and what which chiller it is. So and I would that kind of gives you a rough idea in terms of dollar per ton. And SDX is roughly a 200 ton chiller. So that kind of gives you a rough idea of what the dollar per ton is.

I don’t want to get too much into pricing on units just purely for the fact that we have this is something that we just don’t disclose to the market, possibly. But the the other point I wanna make around that is the real goal here is to get us to that point where, like, the the short term revenue and all of that, it it matters. But to a large extent, it’s getting ourselves into that position where that that the first few larger projects really happen. Because once those happen, there’s more than enough of a market here that people will want to use this as part of the broader range of solutions they’re using to solve their power constraints. And once we’re at that point, we have many good options including, we can get margin down just by operational improve I mean margin up by operational improvements.

We can do one of the potential options that I put out earlier, right, was licensing some of the technology. There are many ways to grow this company in a way that makes sense for shareholders. So the key is to get number of chillers out there. That I think is going to be the gating factor in terms of being viable for much of these the broader market that exists in the data center space.

Alex Blanton, Analyst, Clear Harbor Asset Management: Thank you. Just to clarify, the 200 ton, that’s the smaller one?

Abhinand Ranges, CEO, Tecogen: Correct.

Alex Blanton, Analyst, Clear Harbor Asset Management: And what’s the designation on that again?

Abhinand Ranges, CEO, Tecogen: That’s the SDX. And

Alex Blanton, Analyst, Clear Harbor Asset Management: the 1,500,000.0 to $2,500,000 is six of those, is that it?

Abhinand Ranges, CEO, Tecogen: That is correct, yes.

Alex Blanton, Analyst, Clear Harbor Asset Management: Okay. I just wanted to clarify that. Thank you.

Conference Operator: Thank you. There are no further questions at this time. I would like to hand the floor back over to management for any closing comments.

Abhinand Ranges, CEO, Tecogen: Thank you very much for being shareholders of Tecogen, and I look forward to being able to update shareholders as we make further progress in this industry. Thank you.

Conference Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.

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