Tecogen (TGEN) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Nov. 12, 2026

CALL PARTICIPANTS

• General Counsel and Secretary - Jack Whiting
• Chief Executive Officer - Abinand Rangesh
• Chief Financial Officer - Roger Deschenes

TAKEAWAYS

• Revenue -- $7.87 million, up 9.6% from $7.18 million in the third quarter of 2025 due to growth across all business segments.
• Services Revenue -- $4.46 million, an increase of 13.2% reflecting higher operating hours, price increases, and contributions from Aegis maintenance contracts.
• Products Revenue -- $3.05 million, representing a 2.2% increase driven by higher chiller sales.
• Energy Production Revenue -- $0.36 million, a 42.0% increase due to improved site operations and increased uptime.
• Gross Margin -- 37.4%, representing a 7 percentage point increase from 30.4% in the prior-year period.
• Services Gross Margin -- 42.6%, up from 25.3% due to decreased labor and material costs, particularly in the Greater New York City area.
• Products Gross Margin -- 27.1%, down from 36.8% due to material cost increases for hybrid drive air coolers and factory floor realignment expenses.
• Energy Production Gross Margin -- 60.2%, up from 34.4% following decreased service maintenance costs.
• Net Loss -- $1.59 million, compared to a $2.13 million loss in the third quarter of 2025.
• Loss Per Share -- $0.05, compared to a $0.07 loss in the prior-year period.
• Adjusted EBITDA -- Negative $1.01 million, an improvement from negative $1.67 million in the same period of the prior year.
• Operating Expenses -- $4.51 million, a 5.3% increase driven by payroll, stock-based compensation, and investments in the data center strategy.
• Cash and Cash Equivalents -- $5.33 million as of Sept. 30, 2026.
• Total Backlog -- Over 8 million, with over 70% comprising large property owners and energy service companies.
• Deposit Collection -- $800,000 expected to be collected within two weeks of the call date.
• Colocation Project Pipeline -- $1 million to $5 million for the smaller data center category.
• Industrial Lead Size -- $2 million to $5 million for projects in the industrial and healthcare segments.
• Service Revenue Average -- Over $4.3 million per quarter throughout the first nine months of the year.
• Unit Sales History -- Over 3,200 units shipped since the company was established.
• Accounts Receivable -- $5.18 million, representing an increase from $4.28 million at the end of 2025.
• Inventory -- $11.49 million, reflecting a slight increase from $10.95 million at the 2025 year-end.

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RISKS

• CFO Deschenes stated, "This is due to material cost increases incurred on our hybrid drive air coolers, chillers and additional cost incurred as we continue to realign the factory floor to increase efficiency and productivity," noting factors that reduced product segment gross margins.

SUMMARY

Tecogen Inc. (NYSEMKT:TGEN) reported increased quarterly revenue and a narrowed net loss, driven by expansion in the Services segment and improved operational efficiency across several service centers. Management introduced a modular dual-power-source package designed to retrofit existing data center equipment, such as chillers and dry coolers, allowing for production scaling without substantial upfront capital. The company transitioned its sales strategy to focus on large property portfolio owners and energy service companies, who now represent over 70% of the product backlog. This shift aims to increase sales efficiency by leveraging successful initial projects into broader portfolio-wide deployments.

• The newly announced modular power package aims to bypass supply chain constraints by utilizing engines already purchased in volume for the service fleet.
• Management noted that the modular design allows data centers to maximize IT capacity at sites already approved for utility power.
• CEO Rangesh stated, "The supply chain is robust, since we already buy much of the same material in volume for our service fleet, and our inverter units."
• The company's emissions technology provides near-zero NOx and carbon monoxide, addressing air quality moratoriums affecting large data center projects.
• CFO Deschenes indicated that a headcount reduction in the second quarter led to lower operating expenses for the Services segment in the third quarter.
• The dual-power-source technology allows customers to switch to natural gas during peak utility pricing or power shortages without interrupting AI computing loads.

INDUSTRY GLOSSARY

• Adjusted EBITDA: Net income or loss adjusted for interest, taxes, depreciation, amortization, and non-cash items like stock-based compensation.
• CHP: Combined Heat and Power, a system that simultaneously produces electricity and useful thermal energy.
• InVerde e+: A specific cogeneration unit model produced by Tecogen that provides both electricity and hot water.
• NOx: Nitrogen oxides, a group of highly reactive gases often regulated as air pollutants.
• Ultera: A proprietary emissions control technology developed by Tecogen to reduce pollutants in engine exhaust.
• VOCs: Volatile Organic Compounds, organic chemicals that have a high vapor pressure at room temperature and are subject to environmental regulation.

Full Conference Call Transcript

Operator: Greetings. Welcome to the Tecogen Third Quarter 26 Conference Call. At this time, participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference is being recorded. At this time, I will turn the conference over to Jack Whiting, General Counsel and Secretary. Thank you. You may now begin your presentation.

John Kimball Whiting: 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 third quarter 26 earnings and the presentation provided this morning are available in the Investors section of our website. I would like to direct your attention to our safe harbor statement included in our earnings press release and presentation. Various remarks that we 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 2000.

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-Q and 10-K under the caption risk factors filed with the Securities and Exchange Commission and available in the Investors section of our website under the heading SEC Filings. While we may elect to update forward looking statements, we specifically do disclaim any obligation to do 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 Generally Accepted Accounting Principles or GAAP.

Reconciliation of non GAAP financial measures to the most directly comparable GAAP measures is provided in the press release regarding our Q3 26 earnings and on our website. I will now turn the call over to Abinand Rangesh, Tecogen's CEO who will provide an overview of third quarter 26 activity and results. And Roger Deschenes, Tecogen's CFO, who will provide additional information regarding Q3 26 financial results.

Abinand Rangesh: Thank you, Jack. Welcome to Tecogen's Q3 26 earnings call. Today, I am going to start with the base business and then talk about where we stand with data centers and some of the larger projects. First, we saw a significant increase in revenue in the third quarter compared to the first and second quarters this year. We also saw an increase in revenue compared to the same period last year. The gross margin also increased by 7 percentage points compared to the same period last year showing that our operational improvements, especially in service, are having an effect. Our backlog is presently more than $8 million.

As a reminder, this backlog does not include our recurring service contracts for our energy services. As a result of strong deposit collection and the increase in revenue, our cash position is now higher than it was at the end of the third quarter. We are also expecting to collect more than $800 thousand in the next week or 2. In 2024, we recognized that to increase product revenue, we needed to increase the average dollar value per project. And build relationships with larger property owners. Successful initial projects would then lead to sales across the whole building portfolio, increasing sales efficiency. We have worked diligently on this strategy alongside the data center outreach.

I am pleased to say that this is finally coming to fruition. More than 70% of our backlog is now with large property owners, Portfolio owners. And with large energy services companies. Some of these owners have already started to look at more properties in their portfolio to incorporate our equipment. Given the recent spikes in utility rates nationwide, and increased power shortages, we are also seeing an influx of leads for projects in the $2 million to $5 million range in industrial and health care segments. With regards to data centers, there are 2 categories of projects in our pipeline. The first category is the smaller colocation data centers.

Electric bills are a big portion of the operating expenses for these smaller data centers. As you may have seen from our recent press release, 1 of our data center customers is saving significant amounts on their utility bills and is also giving them an edge against competitors. The projects in this pipeline are between $1 million and $5 million in size. We believe these smaller projects have a high likelihood of closing. The timing here is really a function of expansion plans being approved. The second category are the larger Neo Cloud hyperscale and large colocation data centers. Since the summer demonstrations, the discussions are predominantly focused on how Tecogen can provide a pathway to scale up production output.

1 of the challenges is that for bigger names to pilot and deploy any new technology, it needs to be deployable in volume quickly and hit aggressive delivery schedules. Given Tecogen size, we needed a solution that allowed us to scale production quickly without large amounts of upfront capital and, while, if possible, increasing margins. The good news, though, was that the hyperscalers and some of the larger data centers were excited enough about the dual power source technology that they wanted to see how it could be adapted for other applications within the data center in addition to just cooling.

As we explored how this option would work in practice, this led us to an innovation that is highly scalable, and that we are excited to announce today. We have designed a modular dual-power-source package that can be retrofitted to third party chillers dry coolers, and any other data center load. It has all the advantages of the dual power source chiller, and is protected by the same patents, but is much easier to scale up production. The supply chain is robust, since we already buy much of the same material in volume for our service fleet, and our inverter units.

This approach allows us to focus on the areas that the customer values and that make us unique compared to conventional power generation. The first, of course, is the dual power source capability. And the ability to blend power sources dynamically. This allows the customer to seamlessly switch to natural gas to maximize power for AI loads at and ride through power outages, increasing resiliency. Our patented control algorithms optimized part load efficiency. In many of these thermal applications in a data center, chillers and dry coolers may operate at part load for large periods of time. Most conventional power generation systems see significant reductions in efficiency during part load operation.

Our system can keep constant efficiency through much of the power range. The last area we have patents is in our emission system. Most competing systems use consumables to maintain emissions. Ours is a catalyst based system that is easy to maintain while providing near zero NOx, CO, and VOCs. This dual power source module includes integrated heat rejection, emissions control, and microgrids control in a low noise package from the factory, so it can also command premium pricing because it requires very little on-site installation time. As a result, we expect to maintain higher margins on this product and hence significantly reduce the need for incremental working capital as customer deposits can fund much more of the material costs.

Last, focusing on the dual power source module means no specialized tooling or labor is needed beyond what we already use for the cogen production. Therefore, adding additional factory capacity when we run out of space in our current site is straightforward. From the customer standpoint, this is also an easy solution to approve internally since they can use a chiller that is already on their drawings and add our package in parallel. Because this solution is fully modular, it can be applied to any chiller size or any dry cooler size so it is fully adaptable to any future data center design including the 800-volt architecture.

This also means that if a data center has enough space, it could even be applied to a site that is already designed. The dual power source option means that the system has redundancy built in. Of course, this is not just applicable to data centers. Many of our existing customer base, such as hospitals and campuses, are very interested in this solution, because it is fast to deploy. In fact, 1 prospect has already specified the solution into their project. The power-dense building block also allows us to now address bigger industrial facilities that have power draw similar to a medium sized data center.

These facilities have similar issues as data centers where they would rather allocate scarce utility power to revenue generating assets and cut operating costs at the same time. Although I cannot comment today on when we will ship the first units to customers, almost all the underlying components are already operating in our dual power source chiller and our InVerde units today. We are working with our partners and end customers to find launch customers to deploy this solution. I will update shareholders as I have more news. I will now hand the call over to Roger to discuss the financials.

Roger Deschenes: Thank you, Abinand, and good morning, everybody. Beginning with the results, our revenues for the quarter that just concluded increased 9.6% to $7.9 million which compares to $7.2 million in the third quarter of 2025. And this is due mainly to increased Services segment revenue and increases in our products and energy production segments revenues as well. Our gross profit increased $800 thousand or 35.3% to just under $3 million in the third quarter of 26, which compares to $2.2 million in the third quarter of 2025, and this is due to the increased revenues and in the decreased material and labor costs in our services segment.

Our gross margin increased 7% to 37.4% in the third quarter from 30.4% in the comparable period in 2025 and this is due largely to improve services segment gross margin. Our operating expenses increased 5.3% in the third quarter to $4.5 million from $4.3 million in the third quarter of 2025, which we saw increases in operating costs in our product segment and a general increase in operating costs incurred for payroll stock based compensation, credit losses, and depreciation and amortization.

And cost incurred for the manufacturing capacity expansion along with the cost that we incurred for the continued development and refinement of our dual-power-source chiller and the design of a modular dual-power-source package that Abinand noted earlier in his remarks, all of which are continued costs or investment in our data center strategy. As a consequence of our services segment headcount reduction in the second quarter, we did see a reduction in our services segment OpEx in the third quarter of this year. Our net loss decreased in the third quarter to $1.4 million compared to $1.3 million in the same period last year, Which is due to the increased. The services segment sales and gross margin.

And again, this is partially offset by the increase in OpEx. We will go into performance by segment. Our products revenues increased slightly 2% to $3.1 million from $3 million in the comparable period of last year, and this is due to increased chiller sales. As we have discussed in the past, product revenue has a significant variability quarter to quarter. Our products gross margin decreased to 27.1% in the third quarter from 36.8% in the third quarter of 2025. This is due to material cost increases incurred on our hybrid drive air coolers, chillers and additional cost incurred as we continue to realign the factory floor to increase efficiency and productivity.

As we increase shipment volume going forward, we would anticipate to see our material cost, our unit material cost would be reduced going forward. Our services revenue increased 13% in the third quarter of 26 to $4.5 million which compares to $3.9 million in the third quarter of 2025. And this is due to increased operating hours for our existing and existing service contracts and the Aegis-acquired contracts as well as general price increases. Our services gross margin increased 17.3% to 42.6% in the third quarter 2026, which compares to gross margin or gross profit. Gross margin of 25.3% in the same period of 2025, and this is due to decreased labor and material cost.

And this is most notably occurred in the Greater New York City area and we have also seen improvements across the majority of our service centers. In the most recent period Our energy production revenues increased 42% in the third quarter of 2026 to $0.36 million from $0.26 million. In this comparable period of 2025, and this is due to increased uptime at certain energy production sites. The energy production gross margins also increased during the period to 60.2% from 34.4% in the 2025 period, and this is due to decreased service maintenance cost incurred in the period. I will now hand the call over to Abinand for his closing remarks.

Abinand Rangesh: Thank you, Roger. First, our base business is picking up. The product backlog is increasing. The cash position is flat or actually slightly higher since we last reported. And we are expecting to collect $800 thousand in the next week or 2. The second is that our current product backlog has significant expansion potential because of the nature of the customers. Third, our services business is averaging more than $4.3 million per quarter so far this year. So the recurring cash flow has increased year-on-year. With regards to data centers, the solution we unveiled today was not developed in isolation.

It was developed based on feedback and listening very closely to the needs of hyperscalers and some of the largest data center developers. Right now, we have multiple options beyond just our current dual power source chiller. It gives data centers substantial flexibility on how they choose to deploy our solution. It allows us to also bridge where we are today in size versus some of the projects with minimal risk for a data center to try the solution. Existing reference designs can be used with minor modifications with this solution. It is also both future-proof and potentially retrofitted to operational sites.

The route to ramp up production also uses supply chain that is not constrained, and it solves 2 key problems given much of the recent AI data center backlash. First is the fuel-cell-like emissions. We have continued to improve and tune our emissions technology. See the image on the slide. Near zero NOx and very, very low CO, Multiple large data center power projects have faced moratoriums, due to air quality concerns. In our case, the customer can use gas strategically with very clean emissions. Second, as access to power has become more uncertain in the current climate, more data centers are interested in using every bit of available power at already approved sites.

I will now thank you for listening, and I will open the floor for questions.

Operator: Thank you. We will now be conducting a question-and-answer session. Before pressing the star keys. And 1 moment please for our first question. Thank you. And our first question is from the line of Eric Stine with Craig Hallum. Please proceed with your questions.

Eric Stine: Hi, Abinand. Hi, Roger.

Abinand Rangesh: Hey, Eric. Morning. Hey, Eric.

Roger Deschenes: Hey.

Abinand Rangesh: Good morning. Good morning.

Eric Stine: So I want to just start with this, your new technology, the dual power source modules. When we think about capacity, obviously, dependent, and, obviously, you laid out the 2 categories of data center opportunities that you are going after. But, I mean, is there. Oh, is it too early to think about? Or what would it be if you allocated that entire facility to these modules?

Abinand Rangesh: So it is a little early. But we have been asked some of that question, and it really depends on how you think about it. Right? If you-- but I would say just from an output standpoint, it will be more than 2x of what we could do in terms of the chiller. Numbers. That kind of hopefully gives you a number. Mhmm. In terms of I would say we could-- you know, when we were talking about the chillers, right, we were saying something like 100 units or so of chillers. This would basically double that easily. And adding additional capacity is also much, much more capable on this.

And as I said earlier in the call, part of the reason also with this is to add additional. If we needed to just say, if we get a multiple unit, you know, data center order, or let's say, a customer wants to expand onto multiple sites, for us to add additional assembly areas for this would really just require renting out additional factory capacity. A lot of the supply chain, a lot of what we already do, it is, you know, much more scalable. So it is mix-dependent, but we think the potential especially when you include the margin expansion that can come with this, it can fundamentally change the business.

Eric Stine: Yep. No. Absolutely. Well, then thinking about. Obviously, you are. You have been in active discussions with some of your customer prospects. And you mentioned that maybe it is speeds things up a little bit, but what, you know, do you have an idea of what a potential customer might need to see in terms of testing this? I know it is a. it is, I guess maybe simpler But I would assume they would still need to run these for a period of time to get comfortable before rolling them out more broadly.

Abinand Rangesh: So yes, I definitely agree with that. I think part of the advantage is many of them have come and now seen the dual power source chiller. Technology. Right? So I think the way they are and some. A lot of this, unfortunately, is there is a lot of confidential pieces here, so I cannot talk specifics. Mhmm. But, what I can say is, the way they are viewing this is, okay, how do I design in the potential for this? Further down? Right? So what they will do at this point is they will evaluate this as a cost benefit in terms of how much IT capacity it gets added in. Then they would potentially do a smaller pilot.

I do not know how big that would be. But concurrently, they would basically you know, start designing into bigger data centers the extra space and all the pieces that would be required to connect this up. A certain extent, this module did not just come out of nowhere. Right? It came with the discussions with what they are trying to do here. And also what they feel they can get approved the fastest way through. And the advantage here is they do not need to change any of their thermal design and that is why we think it could happen. A lot of things can happen in parallel paths here.

But, again, the timing is pretty hard to determine based on this because a lot of things typically happen in parallel in these kind of discussions.

Eric Stine: Yep. No. I get that. Alright. Maybe last 1 for me. Just how do we think about this, in the context of the Vertiv relationship? And I know that, you know, last call you talked about getting close on the master partnership agreement. You have not really mentioned Vertiv on this call. I mean, is this is should we think of Vertiv is still an active partner here? Is this outside of that or just maybe thoughts on that?

Abinand Rangesh: All I am going to say on this 1 for the moment is stay tuned. I cannot comment further on it at this juncture. On stuff, but things are in a great place. But just stay tuned is all I will say on that 1.

Eric Stine: Okay. I will leave it there. Thank you.

Operator: The next questions are from the line of Bobby Brooks with Northland Capital. Please proceed with your question.

Bobby Brooks: Hey, good morning team and thank you for taking my question. What I wanted to dig on a little bit deeper on is just like understanding how this modular retrofits potential retrofits solution is quicker to scale production versus your legacy dual power source chiller because I thought the dual power source chiller was also relatively easy to scale on production, so just kind of wanted to understand the nuances that make this-- you know, it seems like this would be a lot easier to scale So just trying to get a sense on that.

Abinand Rangesh: Yeah. So there are 2 pieces to this. Right? The first fundamental thing is the what. With the dual power source module, the bit that we are really providing to the customer, is all the power control, the engine, the emissions in a single box. With the chiller, you are providing that plus all the refrigeration assembly. So here, you have essentially been able to drop this on-site with just the box and connect it to a chiller that the customer already says they are happy with. And it is a little more nuanced than that, but that is a, you know, very simple way. that is kind of how it works.

So the advantage that we have in today's climate would be. Would with the dual-power-source boxes, the kind of engines that we have-- there is a-- we already buy a lot of those engines in volume. So 1, we are already getting volume pricing. And number 2, this the supply chain associated with the engines that we buy right now is very easy to scale up because you can get a lot of those engines. Some of the larger, you know, single large reciprocating engines and so on, they are in short supply. So using our engine platform with the existing power electronics, it frees up It uses a portion of the supply chain that is not constrained today.

So that it increases our odds that a data center will actually do this because they can get supply very quickly. We know that downstream the supply of all of the components that we use on the product is available. The second piece is just space. When you are dealing with a bigger chiller, right, you are having to maneuver a much larger piece of equipment here. Whereas with the dual power source, piece, you are only doing the power module, which means just from a factory space and layout standpoint, you can get a lot more units through the floor. And so the 2 put together allows you to scale up production much, much faster.

But it is also this us being able to even show our prospects, look. We know and we can show you what the supply chain further upstream that all of these components are, you know, available. And therefore, we can deliver these on time with enough volume. So it is really also being able to show our end customer. That we will increase the odds that these orders will come through.

Bobby Brooks: that is super helpful detail. Got it, Abinand. And then just on your on the dual power source chillers, STX, DTX, right, it was I know it is you know it can provide as the STX is 200 tons of cooling, the DTX is 400 tons of cooling, I know it is probably not an apples to apples comparison with this new module rolled out today, but could you maybe just help us get a sense, like, what 1 of these modules can provide in terms of, like, technical aspects to a data center on, like, the power usage or the cooling capacity or however might we however might we should look at it.

Abinand Rangesh: that is, again, that is a phenomenal question, Bobby. And you know, that actually is the other reason we did this because a lot of the data center design today that is on the on the things may use a you know, a 600-, 800- or even a 900-ton chiller. With this power module, we could power a 600- or a 900-ton chiller. Without having to build a chiller that can you know, do all the refrigeration design for the bigger chiller. We can actually power something that is already on the spec. Right now. So you wanna. We. Okay. So what this the really unique thing about this is it we could if.

Think of it almost like building blocks. Right? So you could use what we have in our current dual power source chiller. Would have, you know, 2 of the building blocks to power a you know, a 300-ton chiller. In this case, we. What we are doing is we are stacking the building blocks together so that whatever the customer is using on-site, the building blocks just get bigger and you could power a 900-ton chiller with just a bigger box. So it is in that sense, that is what makes it very, very unique. You can just say, okay. If the customer is using a 300-ton chiller, use 2 of our little building blocks in 1 package.

If the customer is using a you know, 600-ton, you would use 4 of the little building blocks to make the package, and that same way, you could do the same thing for other thermal loads like a dry cooler. So if a customer turns around and says, I want to have a I am gonna use a lot more of the big fans and the other systems that we have in the data center you do exactly the same. You would just power the same thing with that with that same package. So it is very, very adaptable to whatever they wanna run on-site.

Bobby Brooks: that is really interesting to hear and super helpful color. I will return to the queue. Thank you, Abinand.

Operator: Our next question is from the line of Alexander Blanton with Clear Harbor Asset Management. Please proceed with your question.

Alex Blanton: Good morning. Sounds like you are making good progress. And I have a question about the supply of natural gas to these sites Are there any developments among the hyperscalers that would help you do business with them in terms of they are bringing in natural gas for other purposes. That could be used by your equipment. Should it be adopted?

Abinand Rangesh: So definitely. So there are 2 categories that we are seeing. There are people that are going to do on-site power generation anyway where they are bringing in, you know, big transmission line level natural gas. In those cases, we have multiple things that we can do for them. 1 is you know, allow them to keep their big power gen equipment for the IT capacity and so that they do not waste it on the cooling. Our equipment can help over there. There are other cases where the site may not be planning on doing any power generation, And let's say, for example, they have 100 megawatts of utility power available. In those cases, you can still get.

You do not need a transmission level amount of gas available to do what we are suggesting here. Because you would just use this to trim as much you could get distribution level gas that you would find in any industrial facility or any you know, most urban environments, you could use that to really just shave at the peak time, especially at the very, very peak of summer where the utility is the most constrained. So the 1, if you can shed the load quicker when the utility asks you to, they are more likely to give you whatever utility power you are asking for on the electric side.

And number 2, it also allows you to basically take every bit of electric utility power you have and use it for the chips. So that is a slightly different use case. But both of these are available and the second case is much easier to really maximize. Right? You do not need to think about can I get a pipeline level gas supply to the site? You only need distribution level gas to be able to do this.

Alex Blanton: Thank you. So is Elon Musk's sites moving to natural gas that you know of and would you be involved in any of their work?

Abinand Rangesh: So I cannot comment on any specific customers or any specific things at this point, right? Pretty much every that we are talking to, we have confidentiality agreements with. On a more general case, right, we are seeing a lot of the bigger data centers looking to do on-site power generation, whether they do turbines or so on. And in those cases, we can definitely support, however, it works, you know, whether they. Whether it is with turbine cooling, direct you know, the cooling equipment, dry coolers. But we are seeing quite a bit of a shift of our generation happening on-site. So. And that is happening at the hyperscaler level as well as the smaller entities.

Alex Blanton: When you say dry cooling, what do you really mean?

Abinand Rangesh: So some data centers especially what they would do is they take the liquid cooling that is required for the chips and they basically just use big fans. They may use a chiller for only a portion of the time Especially in the cooler climate, sometimes they will just use a big fan and they will just let it run you know, as hard as they can. there is a few data centers that do it. there is very few that are actually in practice doing it. But they may have a comp both fans just you know, on cooler conditions.

They might just send the water through a big fan and blow, you know, project it to the atmosphere and not turn on the air conditioning. So they might have that running through a lot of the year, and then turn on the mechanical chillers and so on just for the summer. The very peak. So they might have a combination of both. So those loads are still pretty large because you are talking, you know, massive sites here. So for a data center, that could still just the fans alone could represent, you know, 5%, 10% of a 100-megawatt load. Right?

So if can be it can be a large chunk of the overall power need of a data center.

Alex Blanton: Okay. I am gonna just switch topics a little bit. As you know, there is a tremendous pushback against data centers that became an election issue during the recent election. Do you see any indication that could be that those. That pushback could be lessening after the election as included political needs the needs of politicians diminish, And do you see any indication that any projects that you have been working with have been delayed or canceled. Because of this of the NIMBY objections to data centers and people's communities. Around the country.

Abinand Rangesh: So, I mean, I will address that in 2 ways. The first 1 is just our general size compared to the overall market. Right? That we have. We do not need to win at the same scale as somebody else to really have an impact on our financials. And the other piece is that our equipment can be deployed on sites that are already approved. And we are starting to see a lot more interest from people saying, we do not know if these big gigawatt scale power purely on-site power generation projects are necessarily going to get approved.

But we have you know, hundreds of sites that might have 20 megawatts, 50 megawatts, that there is utility power, If we can take as much of that utility power and apply it to IT that all adds up when you look at across the whole country. So for us, actually, it does not matter how the politics play out. I think we have enough opportunities of different sizes that and in particular, the ones where they have some utility power and we can help them get maximize that, that is something that is very unique. Right? If you. If you are gonna do power generation, it is a much more involved process.

Here, a customer puts this in, they can use as much gas as they like or not, and they just switch dynamically. And if the utility turns around and says, I am not gonna give you enough or I need you to curtail power and peak time, you can do so. And you can still not have to turn down your computing on-site. So that is the play that we see it. Being. So I it is the bigger politics is a little too hard right now to gauge. We are looking across the board as enough opportunities that we do not think it is gonna be an impact that we need to worry about at our scale.

Alex Blanton: Yes. Given the fact that the corporations using AI keep expanding their applications and their use to demand for compute. Should keep going and it does not look like the current anti data center sentiment in the country politically will really restrict your growth. Is that correct?

Abinand Rangesh: That is correct. Yes. I mean, the demand is there. Right? They are gonna find ways to do this that may not involve single large campuses. Like, the market could go either direction and either like, we are seeing people look at a bunch of smaller sites.

That would then in aggregate turn around and become the what provide the amount of AI compute. it is especially as more and more is moving towards inference and so on where it is the end application rather than training. there is many more ways that our products, especially of the size ranges that we are in, can do so, the market, I think, is definitely much, much we are not gonna be constrained on in terms of what is happening in the broader market.

But to a certain extent, that is also why we are looking at this modular dual power source approach because it gives us a lot of flexibility also in terms of the size of the design of the data center. Like, you could if it is a small site, you could either put our current chiller as is or use our power modules. If it is a much larger site, whatever is on the reference design, plus the power module, gets us to the same goal.

Alex Blanton: So thank you very much. I will get back in the queue.

Operator: Thank you, Alexander. Our next question is from the line of Barry Hymes with Sage Asset Management. Please proceed with your question.

Barry Hymes: Thanks for taking my question. Could you talk a little bit more about the smaller colo market, the first segment that you mentioned. And just give us a little feel. You know, I saw, you know, you saw the press release, of course, you put out with the 1, I think it was in Connecticut, who was using your unit quite successfully. But, you know, what is the backlog, the pipeline look like there? Are there any discussions that are pretty far along where we might expect to see some orders, you know, over the next month or 2? If you could just characterize that market for us. Thanks.

Abinand Rangesh: So I cannot give you any specifics on you know, order and when we expect orders to close on that. Again, for confidentiality reasons. What I can say is there are multiple projects Some everything from 1 or 2 inverters to multiple chillers to some that are as large as like, you know, 15, 20 megawatts in size. And there are various stages. Some of them are operational data centers. That are expanding their capacity, and they are just waiting on additional tenants to sign so they can increase the load on-site and hence, they might add more piece of equipment. There are some that have existing sites that they are in final negotiations with tenants.

They would need to build a data center on-site, But as soon as they typically get the tenants there, able to start placing, equipment orders. So there are things of different sizes in that range. And then we are also seeing, you know, new opportunities there where our sales team is going out and finding other sites where, again, their operational data centers, they might be doing just cloud based colo type things where utility bills, especially in the Northeast and so on, are very high. We are adding some you know, small scale, either power generation or our cooling, can make a big difference to their, energy bills.

Barry Hymes: Great. Thank you. Great. Thank you. Good luck.

Operator: Thank you, Barry. The next question is from the line of Roger Collins, a private investor. Please proceed with your questions. Mr. Collins, line is live for questions.

Analyst: Yes, thank you. Good morning. 2 parts or 2 different questions. 1 is on Vertiv. I appreciate you cannot comment on anything going forward, but would not it be appropriate to be able to comment on the things that have happened during this quarter? That would be the first question.

Abinand Rangesh: So, I am covered by confidentiality. Agreements on that. I cannot comment right now on that. Okay. Thank you. And then the second question, it kind of comes back to what has been kind of suggested, but that is the political environment seems to be. And the-- and the general environment seems to be much more concerned about people about the amount of power these AI centers are using. And I think we can expect that the new administration is tends to be more regulation-oriented. Would not that create, even greater opportunities for alternate power, I e, a natural gas and then the opportunities that natural gas fits in with the Tecogen strategy. Yes.

So the natural gas side of things. Right? there is 2 sides to that. Argument. So when you do the very large power generation project, there is a lot of. there is still quite a lot of pushback from local constituents because of the fact that the emissions, all of those other pieces. And in particular, when you are having to do those power generation projects, the utility is still having to support it. that is where I think we come in. Because there are 2 things that we bring to the table. 1 is the very, very clean emissions. Right? So that allows you to mitigate much of that air quality issue.

And number 2, you do not actually, you do not have to even use natural gas all the time because it really can the utility grid is constrained for periods of time. But for a lot of the year, it does actually have capacity. So if you can avoid the peak time, many of these sites can actually have sufficient capacity without having to make substantial upgrades to the utility. That again is where this dual power source and the ability to act in a hybrid fashion. You choose when to use natural gas and when to use electric when there is sufficient. You can do that on the fly without having to shut down and switch.

And the third piece, which is actually very unique to this approach, is we, in many cases, because you are powering a thermal load, direct through this box, essentially. You have you avoid a lot of the utility hassles that you would need to actually deploy this. If you were doing conventional power generation, you would have to get utility interconnects. You would have to go through a lot of this. Here You are essentially isolating a load and avoiding some of that utility requirements that you would need. So there is there is multiple ways that our solutions impact this. The potential is there. Right?

I think right now, what we are really focused on is how do we provide a pathway to get from here to actually getting these projects to close. And a lot of that is where we see this power module as a way to scale up output so that can provide enough power for these data centers that would then get us to that next stage.

Analyst: Thank you.

Operator: The next question is from the line of Chip Moore with Roth MCM. Please proceed with your questions.

Chip Moore: Hey, good morning. Thanks. Apologies at the start of the call. Hey, Abinand, if you have covered any of this already. Just curious on the retrofit opportunity and your comments. You know, it would seem that your value proposition is only increasing you know, with some of the political dynamics out there. Just curious, you know, how much of this has been developed sort of in tandem with the discussions you have had ongoing You know, how much can you leverage, the work you have already done? Around that? And how should we think about you know, potential first proof points on that side?

Analyst: You know, would this be sort of a demonstration type rollout at a smaller facility, or what is the what is the scale of the conversation So we can pretty much use all of the existing discussions.

Abinand Rangesh: As you know, the. This actually allows us to accelerate some of this. Right? Because it means that an existing site or something that is in design today could have this incorporated. It does not require you to design around the full chiller. that is number 1. Number 2, in terms of the initial pilot or sites where this might go, I cannot comment on it right at this point. There are multiple places, both data center and non data center, that we are pursuing right now for that. You know, stay tuned on that. We will do our best to provide interim updates to shareholders on this.

Chip Moore: Fair enough. Fair enough. We will look forward to that And on the non data center side, this sort of uptick you are seeing, you know, it feels like it is got some legs to it. Just expand on that and you know, the ability. You know, I think you talked about you know, for some larger business to come in through some of these larger type of types of clients. Well, what are you seeing on that side?

Abinand Rangesh: So a large 1, with this political environment, people are looking to see how they are gonna leverage every bit of available power on existing sites? Right? Sites that have already been approved that have less risk of having them shut down because they cannot scale up or they cannot get it into construction. Right? So those are places where we are starting to see bunch of new leads. The. A lot of this is really coming down in terms of getting these projects. And actually securing the projects, it is coming down to how much capacity can you deliver quickly within a period of time. that is what is gonna drive those orders to close.

And this approach allows us to really go back down to the every piece of our supply chain and show the end customers that we can actually deliver these in volume in aggressive time scales. And that is what is gonna get those things these orders to close. And that is really what we are working on right now because the good thing with the summer demonstrations was it allowed us to build some pretty strong relationships with a lot of these sites. And they have been very open in their feedback as to what they need to be able to see from us to give us orders. And this is kind of a little bit of a dynamic process.

Without getting into specifics, that is as much as I can say for the moment.

Chip Moore: Thanks. And maybe just a last 1, Abhinand, did the service side, the margins you know, very nice this quarter. Good to see. You know, do you think you are past some of the challenges you have had there and any update there? Thanks.

Abinand Rangesh: So consistently this year, we have been running, you know, the revenue has gone up. Right? So some of the investments we have made last year, seem to be working. So far, 3 quarters in, we have still been, you know, mid fours. Typically, the 2 summer quarters have lower service revenue just because of, less thermal load. And last year, same period, right, we were 13% lower in terms of service revenue. So some of that margin expansion is just as a function of just more runtime. And I think we are seeing things looking good so far. But we will see how next quarter and the quarter after, and we will make refinements as needed.

But it seems like so far 3 quarters in a row we have been running over $4 million and in revenue on the service side.

Chip Moore: Great. Thanks very much. Thanks, Jeff.

Operator: The next question is from the line of Maj Soudan with GeoInvesting. Please proceed with your question.

Analyst: Thank you. Hey, Abinand. I would like Thanks for taking my call.

Abinand Rangesh: Hey, Maj. This is a base-related question on the service, and maybe I missed it. Maybe you answered it earlier. But some of these new projects that you are talking about in your release and on your earnings call here, $2 million to $5 million worth or maybe $1 million to $5 million you said may be imminent. Are those also going to have a component of service revenue to them? I am just curious to understand if most of these project revenues you will be potentially getting over time is there a potential for your 10% to 20% service revenue that we expect to get from those things or that you get?

And on a related note, on the new kind of retrofit kind of you know, offering you are talking about deploying here potentially? Is there a service component related to that at all? Yep. So great questions. So first, our current backlog, right, our product backlog, which is over 8 million. A lot of that actually is chillers and so on, and they are going into industrial hospital. Commercial building. So they are. The definitely service revenue associated with that similar to you know, every unit that goes into the field from that product side will increase service revenue. And in particular, chillers are great from a service standpoint because we offer 24/7 service on that end.

That allows us to charge a premium for that for that as a result. So definitely a service component associated with that. Everything that we are selling right now, again, will have a service component. To it. This power module and so on will again, how you would treat the service on that very similar to the chiller. Because, again, we are providing this all the core portions that we add value on would come in there. So it would be similar type to what we would do on our current chillers. it is perfect. Perfect.

I guess I am trying to figure out, like, you know, when you first start talking about the data center, know, potential, maybe 2 years ago, maybe. You are kinda hinting at it. A lot of narrative was focused around holding it, and that is the direction you have got to go to build this company into something as a public company. And you really did not have that much kind of, I guess, expectations for the legacy business. And now you are seeing the legacy business start to get a little better here.

I guess my first question really is, given your cash position, and I think part of what you were saying back in the day was that you wanted to put all your CapEx and cash towards all. And your sales efforts all towards growing the data center business. So with your current cash position, can you grow both now that you have the legacy stuff coming growing again to some degree can you do you have enough capital to get both going at the same time? And I have a follow-up question on the service revenue after you answer this 1. Yes. So that is a great question on that.

So what part of the reason that we are looking at this from the this module basis is if we can get. If we basically focus on the pieces that we add the highest value on, we can expand margins because the supply chain is already robust. As we grow the supply chain, as we grow volume on it, we should be able to get even better pricing. The more and some of that we are already turning because of the service desk. So the same components are being used turns will be faster. When you have faster turns, the amount of incremental working capital you need goes way down because we collect customer deposits.

We collect pretty substantial customer deposits on each sale that we make. So the cash flow position gets way better if you can expand the margins on this. The other piece that we are finding is even 2 or 3 years ago, majority of our sales were based on pure economic savings. what is happening today both through a combination of online marketing as well as just people facing power constraints is that we are seeing a lot of larger facilities coming to us and saying, we do not have enough power.

So this package that we have can be used for both the larger base business type projects as well as the data centers. it is pretty much the same problem. And therefore, it is not necessarily either or. Both could have the same requirements. Right? So you are not necessarily having to spend huge amounts of marketing dollars being spread in both directions. What we are. What we have done to a certain extent is split the sales team a little bit to focus on some of the legacy business as well as the data centers, but a lot of it is also now coming in.

A lot of what we have put in to the market over the last 2 years and continue to do it. Is generating a lot of inbound leads. So we think being able to address some of the larger facilities with this module as well can help us grow the dollar value per sale. Okay. So perfect. Well, thanks for your. I mean, it is a little easier to understand. Perfect. But I still have a question related to all this stuff. Like, I think that you know, there is there is 2 things here. Okay?

Do you have proven technology that could work out there that people that could solve the problems that we are talking about here? that is that is 1 thing. Kind of establishing your legacy business over the years, 1 of the things you talked about, like, who wants to be the first 1, like, in the data center business to use your technology? Right? Or use your solution? And that is maybe some of the I am assuming some of the kind of challenge you have kind of faced here Obviously, Vertiv believes in you guys to some degree, but, that has not panned out yet. So I have now a bunch more questions coming here. I am sorry.

But as I talk here, but the first thing really here is, like, as you are doing deploying this-- this modular solution, are you gonna run this the same. Okay. who is gonna be the. Who wants to be the first to take it? Or do you think it will be an easier deployment? And then I still have a couple more questions after you answer this. So the first portion of who is going to be first actually, 1 of the reasons we put that press release out earlier was to actually show that this thing is working in a data center environment, and it is working very, very well. Right?

And to a large extent, the bridge between that and this modular solution is very easy because it is both the chiller and the inverter. They are all based on the same underlying technology. And having that data center and being able to point to it is actually based on again, not getting into specifics. It seems to be easing some of that angst from end customers about where is this operating in a data center. Today, a lot of that conversation is, this is great. Show me you can scale it.

Because for us to actually go through the piloting process internally, we wanna know that you can deliver enough volume over the course of the next 2 or 3 years that it is meaningful in terms of the amount of power freed up in a data center. So I am not saying that the initial technology risk problem has gone away, but it is reduced substantially by having this even the single site. And we have a couple of others that are actually. That do power data center loads operational right now. So being able to point to those and show data from that is actually quite has been quite helpful so far. Okay.

And does this have any, relevance to your relationship with Vertiv? Does that does this new product offering, also kind of bring Vertiv into the mix to help, to bring into this product offering or is it totally separate And if it is not, can you kind of make it part of the conversation to include a solution that they might actually want to push there? I mean. Or could they could they use it in their own, you know, like, the. Their own, you know, products set that just to sell it as their own private label. All I am gonna say on this 1 again is stay tuned.

Just We will announce what we can when we can here. Okay. Okay. Okay. Great. Great. And I guess finally, like, you know, your service revenue, you are you are right about, I think it is about $4 million here. Right? that is your kinda running And I am assuming the sooner you get that up, I mean, it would be it would be nice to be able to tell us, hey. You can tell investors that, you know, you have gotten to a situation where you can breakeven just on service revenue and not to worry about the volatility in the project revenue.

I am just wondering throwing that I do not know if that is possible in a relatively short period of time. But I think that is an interesting goal kinda to, like, to, you know, aim for. So we are running I mean, this quarter, we ran $4.5 million, right, on service. And we ran $4.6 million on the first quarter, I believe, and then $4.3 million I believe. $4.5. Yes. 4.5. So yes. So we are running substantially higher than we were last year and the year before. So the service is definitely growing. Probably wanna be about 3. You probably wanna be about $7 million, $8 million, I am assuming. To get to breakeven kind of conversation.

The end of the conversation. Right? So that is. I guess that is what you had not talked about in the past. Maybe it is a little higher now because you have got some more things going. But I am figuring you need to double the service revenue probably today. Start getting comfortable with doing that. You know? You can break evens around the corner just in that part of it. There. I mean, there. there is different pathways there. Right? And I think this is a that is the service revenue is gonna make bigger and bigger components of our you know, it is gonna cover a larger chunk of our cost. it is it is growing.

Exactly where that number stands and I think we are not in a position right now to comment on what that number would look like today. But I think the pathway to profitability is getting closer, especially if we can get a few. A couple of these additional, you know, projects in addition to the base business. The breakeven point lowers substantially. Right? Because the base product business the backlog is relatively solid. it is going to increase. So we do think that it is lumpy. But as long as we can see 2 or 3 quarters out, we it gives us some level of managing the cash flow there. Right. Okay.

I guess if you sell more of the modular stuff, the breakeven comes down. Right, because it is less cost to secure that. Right? That can get you to breakeven faster than-- that is the goal, maybe. Yeah. Yeah. Okay. That is the goal. All right. That is the goal. Thank you, Abinand. Thank you.

Operator: Thank you, Maj. Final question is from the line of Bobby Brooks with Northland Capital. Please proceed with your question.

Bobby Brooks: Hey, tried to lower my hand. I will just ask it on the callback.

Abinand Rangesh: Okay.

Bobby Brooks: Sounds good.

Operator: Thank you, Bobby. Thank you. I will now turn the floor back to management for closing remarks.

Abinand Rangesh: Well, thank you all for listening to our Q3 26 earnings call. We will update investors as things happen here. Part of the. there is a number of confidential discussions happening presently, which is why we may not provide as many announcements as people may necessarily want, but as anything substantial happens, we will definitely try to keep people updated between now and the next reporting period. Thank you.

Operator: This now concludes our teleconference. You may disconnect your lines at this time. We thank you for your participation. Have a wonderful day.

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