TGEN - Earnings call transcript Q3 2019

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Operator

Greetings and welcome to the Tecogen Third Quarter 2019 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Bonnie Brown, Chief Accounting Officer, Treasurer and Secretary. Thank you.

begin. may You

Bonnie Brown

Good our Operator. thank all you Thank quarter morning, XXXX joining third earnings for you, and call.

Officer. President On the CEO; Chief our our Benjamin are Operating and call with and me Robert today Locke, Panora,

our archived Investors Please note this call. XX Investors earnings is website. our being A for also section copy of website in following press is on release third will our regarding recorded section days the and call of be the the of available the quarter

and Commission We on file and disclaim heading to of any point date some the website Filings. update statements representing as which views on those let company's begin, as our forward-looking the constitute various harbor these result annual Securities Factors, with plans our elect indicated not the we Private of as a Litigation the most the are to factors, at Exchange under cover quarterly under the any XX-K Before me may the important statements caption subsequent safe under by results Form purposes available section of on do you rely prospects statement. briefly we Securities XXXX. of the from today. in Reform forward-looking of future. Act SEC any We should those that make Investors and in on our provisions safe Form recent forward-looking reports Actual company's Therefore, may and Risk discussed for including specifically Various obligation future remarks statements so. report about forward-looking in materially harbor the expectations, XX-Q may statements differ to

measures generally of or certain in we accordance to the section will available the not our comparable accounting Investors measures earnings directly financial of is refer release in GAAP. principles During accepted measures GAAP press these in financial website. non-GAAP our and reconciliation this most call, to prepared A with

over call update. business to Ben for the now I'll turn a

Benjamin Locke

Bonnie. you, Thank

As a on along Slide indicates, I'll for performance X followed a with Bonnie accomplishments. by review give of start take technology our some XXXX will we top-level the quarter results Bob, then achievements the overview recent followed financials company's by development with then overview, of third financial detail, more agenda of the brief in final company will remarks and an efforts. will emissions who questions. the I and discuss have before

may is power core shown always, about As like by cheaper, be that to company model I'd reminding who and and to cooling business more cleaner start Heat, X. Slide Tecogen's our off reliable. those new on

for technology proprietary buildings Our improving grid of efficiency, cooling powering heating, infrastructure. to resiliency is traditional methods disruptive and and emissions truly the and

X. Slide to Turning

quarter-over-quarter. the margins margins XXXX. call. this of will in our The a versus compared about for The was quarter quarter saw later in a of million third dip I quarter-over-quarter. to $XXX,XXX quarter net XX% talk increase third XXXX million compared $XXX,XXX of $X.X saw The $X.X to revenues X% the quarter XXXX, third the quarter reasons a for loss in the XX% in to in the of drop of loss overall

compared increased $X.X as but a X XXXX. to third the for the adjusted chart, the you The in capital can of quarter negative from of gross million $XX trailing was end to remains million, million EBITDA $XXX,XXX $XX of relatively EBITDA result Adjusted is quarter-over-quarter. quarter, Working positive. profit see flat which quarters' as

on to Moving Slide X.

as energy both showed but cogeneration our products quarter, this the increase a profits due certain in in is a of and for down a which recognized lower TecoFrost X% manufacturing quarter. revenue sales, combination were margin increase XX% part production gross our dropped sales our in cogeneration and mostly flat. The product in mentioned, sale assets margins the service sale I margins. and as an product result up And result onetime growth on product services which top-level XX% for lower drop the a was chiller labor, year-to-date year. were third to was of of Gross earlier of Our as of to to quarter first while margin large in product for the adjustment

now service Going not operational. exceeded installation adjustments margins to forward, in Tecochill quarters and to the a service and budgets turnkey product was levels product related get project anticipated install complex forward. normal we additional the normal product is to complete, margins we expect going project previous that our sales improve in time future coming future The project achieve margin in initial to drop are from expect Manhattan our The and for to the the quarters. and service manufacturing needed in was to and

XX%. to almost expenses by and expenses, while our regard prioritizing carefully to are G&A With XX%, we're increasing and able by reduce we resources, selling expenses XX% our by R&D still

G&A varies expense loss was a of translate margins reduced for to quarters. in because from increase as third improvement our quarter G&A revenue reductions, slight we the will over described. of our the expense quarter believe largely our the and in quarter-to-quarter, reductions the While Despite $XXX,XXX, quarter I for future XXXX

Moving to X. Slide on

yesterday, Our million XX. at backlog November currently of stands $XX.X as

call. $XX in look of second I million have careful our at the As our backlog, taken mentioned portion which stood at a we quarter in release, insulation our earning

While we very in City. larger, confident particularly installations, turnkey are York which installation found complex cogeneration, our more for ourselves we New challenging, on are in embarking segment

and ESCO. and the project, of directly be have cogeneration we the by project associated York installation large contracted an New the accessories such, only the As the portion revised to for leaving a supply support in ESCO turnkey scope engineering with systems to

from have approximately million installation backlog. $X we eliminated such, of services As

included large product upwards have in $XX we of able were am the X $XX.X for Inverde report I an compared backlog which we in with backlog However, product product of backlog megawatts in backfill the that in a last million to call. stands to now as at to drop million equipment increase backlog, mostly us. for pleased And quarter. that in fourth when in quarter in this units I over XXXX center located more later X the ultimately will These it in talk first order the order geography or will service ship XXth result new new establishment the finalized X cogeneration about to but of territory. this this quarters of an expected would a

outdoor previous I segment be indoor to our significant proven smaller the tremendously the point like Despite also has would much variations, for out our increase in cultivation a to which in segment quarter-to-quarter was successful backlog, quarter. products. chiller growing

in orders built come sales to these span a and of sometimes for reducing all Our in, quickly costs chillers within and nature quarter. is the how sold, solutions the get reflected unique, facilities, transactional electric are of cost-effective the chiller

installation And is when backlog contract the revenues does lastly, prospect our Again, very as recurring of new of maintenance segment of considering products into contributor and our consists our which I've and not contain additional service important quarter. is expansion this a revenues, said previously, geography. each consistent this

I wanted for X. how going Slide and our key reemphasize company they plans to to the achievements forward. relate to Moving

sales first thus First, the as quite have time mentioned, happy to outpacing our are cogeneration for completed confirming the a the developing Chiller and the cogeneration we product. vertical for than this steps adjusted quarter transactional sales proposition of projects, systems, sale and for defined on sales our sales value with new chiller and industrial more Tecochill with quarter. first us this additional chiller sales towards far effort refrigeration having us. the focus a in is much results strategy in I'm renewed market first the

size, scope limiting of the and business, cost evaluated installation and we Next, going cogeneration risk services we manageable to are forward, our less terms have of projects complexity. with in installations

While much to installation cogeneration drop, management cash typically construction in our higher our services core product for margin also accessories since and on and result projects and frees this revenue overall we from is engineering be revenues receive may margin. up Ultera some focused do the will engineered and be sales, support low resources products emissions Reducing development. that installation revenue

exciting technology. will continuing to we Ultera Bob with few minutes, our are as Next, in about results talk see a emissions

of achievement towards America, a forklifts the goal near-X an retrofit Our cost-effective collaboration Caterpillar MCFA, saw or to of with certifications. and important Forklift Mitsubishi developing emissions technical attain for

water our Bob to which additional seeing We large California, in are engines orders also on. also for touch pumping will Ultera retrofit

are we I core expect carry lastly, excellent growth XXXX. business that into seeing in And to our

expected into We a processing, wineries, cooling of costs, that our electric will with robust Tecochill as the professional of X open sales and food sales of other opportunities and new ice expect packaging. products and equipment product in already high over cogeneration continued territory up facilities And agricultural for gaining is megawatts additional area. rinks indoor industries TecoFrost the growing such in shipment traction

exposure our demonstrated competitive of and systems, adjusted to Overall, our projects I engines to construction gas cogeneration engine installation near-X forklift think advantages obtain in the focus our with chiller certification. reduced emission we successfully maximize large Ultera viability retrofitting have and to

call to our progress the detail more will Bob, Bonnie, like who followed in on describe who by financials, I'd detail. turn over more will that, emissions With to Bonnie? our cover

Bonnie Brown

the sold sales year's reduction certain third manage, for both meaning Slide by by maintenance the revenue total was the year-on-year This financial our a Thank you, retained the retained quarter of assets is those revenue a increased asset the Product with groups, company's and previous performed par those by chiller production of revenue XX%, the quarter now with contains Service to of for on from quarter from X.X% increase company and by with quarter previous increase. some revenue those sold. an XX% year. was Total we increasing seasonality $XXX,XXX, XXXX highlights with $XXX,XXX. from million, those increased the energy-producing energy attributable leading contracts for Revenue versus Ben. the results. and that assets of XX $X.X of sales Collectively, XX%. year-over-year. company XX%, the decline

assets warmer is However, chillers, more in sold the equipment elevates and the from these which in managed revenue concentrated derived proportionally months.

operating overall X%, for loss the $XXX,XXX quarter or of year-over-year improvement increased 'XX, $XXX,XXX X.X%, attributable was and or G&A our to Net we a our future. expenses an third both decreased the in $XXX,XXX selling while expenses as loss invest quarter for by expenses X% company of $XX,XXX year-over-year. compared the of R&D While decreased to

discussed earlier, and has the sizable for is long-term our positioning growth. $XX backlog remained at Ben company As currently million,

which non-GAAP that periods been presentation XX throughout uses a important and presents to XXXX, management X has and release. Adjusted adjusted quarter referenced for measure the our EBITDA is of months earnings same a EBITDA in in XXXX an those as of compared reconciliation non-GAAP first metric. Slide our third

nonrecurring XX, negative compared to $XXX,XXX and which, net we for Slide Tecogen, quarter XXXX, taxes, EBITDA, on merger-related shown creating adjustments XXXX. come As noncash to stock-based EBITDA. investment charge mark-to-market was third adding compensation, reached negative $XXX,XXX on from depreciation for loss back impairment back of to the of prior expenses attributable adding securities, loss After quarter goodwill adjusted after interest, amortization of unrealized adjustment, non-GAAP third the the and the a we year, to the

EBITDA to net adjusted XXXX, was depreciation primary both of compared the XXXX, and for costs, merger-related quarter QX $XXX,XXX negative third differences $XXX,XXX For which amortization, with of being negative the and September the an larger for EBITDA in the was XXXX. negative X in for to period adjusted improvement months of $XX,XXX add-backs $XXX,XXX. $XXX,XXX were XXXX, compared Year-to-date ended XXXX positive same XX,

over Bob the update. call a I'll to Now technology for turn

Robert Panora

morning, everyone, and Good Bonnie. you, thank

Let me fork truck program. the begin with

both manufacturer As and been working Americas trucks. industry a fork propane MCFA, the of the well-known electric we -- discussed propane Mitsubishi in of we have previously, and with Caterpillar, with the

with the last would last -- counterparts Our that with provide rather, we trucks due forklift optimize iterations final MCFA, highly of through further had technology two the adopt were a in to earnings to our to retuning NOx manufacturer. results the forklift Emissions answer successful adapt I propane the application to to work: relating emissions. an to objective indoors. process. Ultera tuning their trucks the engineers electric progress stage Midyear, made emissions. relative engine from engine some our In development their from Japanese -- are frequent meeting has the the Mitsubishi call, from our Ultera concern collaborations In our progress with If heightened trucks. discussed propane in fuel been successful, of achieved in we company, to suppressing specialists technical and several affiliate,

for XX shows speak me Slide to impact emissions versus in positive retuning. time that the for a test Let a red typical of retuning. the The NOx after The just moment. plot the is data chart presented

standard over output is million parts per XXX is X NOx averaging the the test emissions less shown, about which parts the As same factory million, far of minimal, course. output than per

near-X With standard. certified the of a retuning, degree California engine we successful the confidence have would high that the in to be being

to testing prove we Following with reproducibility recent repeated test the and their a MCFA, prepared for collaboration summary the then management.

for next of call other formal I that are There activities of several are and approved kits We the a system report Phase order SoCal well can are district. mentioned that design X, XXX-horsepower Caterpillar areas from review we as a We received was purchase ongoing today. completed on Ultera X on in based Ultera by a that scaled-up the district. last engine awaiting discussion steps. water our and

the order early Ultera in kits, expected XXXX. for phase, in second The is

pump We forest from inquiry the second regarding impact California fire-related control resisting its recently a cost an reduce Southern to reduce District Ultera issues gas district drives to operating electrification Water engines. for emissions water received system of of its The an and region. is the in

accelerate for may Ultera the regarding We impact and are expect the by to need the mitigate fires Ultera. that of encouraged demand reviews

Ben words. for final With to that, his call return over I'll the

Benjamin Locke

Thanks, Bob.

to I our uniquely reductions and products little of more give Moving on greenhouse Slide goals our business to how meet a savings. can grid gas color and XX. on cost outlook, wanted resiliency, the core

seen First, decide more heat, their and how we've California, to and facilities. power cool grid as owners resiliency when in operators building is important becoming

entire cogeneration California, the dependency, in system, degree electricity some competitor. chiller microgrid offsetting the Inverde where provide systems grid reduction on-site resiliency only apart from same grid in our the traditional permanent operation, of systems magnet portion for interconnect, can particularly offset more a cogeneration chillers. variable systems while electric generator technology importantly, other speed any our from inverter-based of bill, can search of Tecogen with on-site traditional and While sets But provide capabilities cost outages, the

are chillers to installations, alternative cogeneration our more and often a practical sometimes cost-prohibitive. are manageable Also, which

as less outage. facility systems an TecoFrost We residual the carry renewed products to and facility's during are backup in reduce interest and way capital-intensive seeing smaller for a Tecochill California electric load, a baseline the loads to allowing

retrofits our are natural also We Ultera generator engine interest systems. in of seeing new gas

County leading opportunity, from gas the rep As interested for is retrofitting company's TecoFrost To sales air you application generators them engine here. viability sales retrofitted pumping restrictions The Tecochill product who invite This the Angeles to will system, of this the in Caterpillar agents engaging with are supplement management our water seen Los take team, anyone X without Ultera recall, we additional other in opportunity service emissions in our engines district. to expand California. describes, generators on demonstrates read California. a firm of of we allowing group districts, control sales in California our and run subjects current project help a California. natural to any local I which our the quality the advantage HVAC manages our carry centers reps, and cogeneration Bob

the we continue with I advantage will repeated, broadly market TecoFrost. and Tecochill chiller to as our in leverage Next, competitive more

refrigeration about chillers, We for are in new systems. TecoFrost sales optimistic our and expect inroads continued markets indoor markets key the industrial the in with for such growing, making as

excited cogeneration are of associated maintenance expected potential new result quarter. XXth and establishing would a order Such large products company territory reliable center, the the large into services service revenues the with about we a and the fourth service another provide our a units of And our with source which steady, margins. population lastly, in will for expanding in

center conveying planning to new We updates as service they proactively are for already and occur. look forward this

and of the abundant gas XX. reiterate generation like and clean, of inexpensive facilities. closing, In meet value Slide resiliency systems needs distributed energy to to First, Moving the Tecogen's efficiently large cleanly on I key our and proposition would to systems: reliable use

resilient meet and goals; product increasingly these Tecogen sought by on-site technologies service and factory to operational differentiated costs, As longevity have virtue generation next, our greenhouse other systems outages, ourselves from grid proprietary to technology, presence. these gas reduce facilities after emissions unique we become of are improve strive to comprehensive and

Our optimize features only that inverter, InVerde a system key speed magnet the onboard generator, will savings is customers. microgrid-enabled a permanent product with for integrated using and offering an variable economics CHP

chillers are becoming we company. best the the next, are basis Our other or with deliver gas no for on cooling Tecochill for needs; focusing margins TecoFrost large competitors and segments that profitability many and have business natural increasingly the refrigeration the and facilities design

sales to We cell. lastly, continue continue forward; a engines, emissions on the as variety forklift and of profitability reducing going carefully more while to Mitsubishi the and on wide Ultera with engine viable, engines, to progress fuel platforms. in the Caterpillar to our generator our on increase with Ultera maximize engines to resources G&A cell-like same: engines make From for R&D, forward engine par demonstrating engines, cost-effective the way near-X fuel product cost we on a excellent The project. retrofits these result is of emissions Generac recently, GM obtain

larger quarter message audience reaching operator over is I'll the for and update that, year. sharing our With think We fourth look it to in call next another the earnings investor questions. a forward turn to

Operator

[Operator Instructions].

Zuk comes Oppenheimer. Our with first question from Michael

Michael Zuk

the gross Ben, on the us quarters or of in year. on next quarters? quarters X goal the restoring margin that. Bob third in how do you're that the for historic color you then for quarter you you you have approaching X quarter X Page and margins? in or margin and of little your comparison have can That Bonnie, a the XX, give What's gross the last Or X think September

Benjamin Locke

and given fell that XX%, kind which always of explaining XX% I've wanted I this is give in the detail did to margins of of between question. exception took quarter good we I, a beneath that. why Mike, of, the Yes. guidance our and past why

less thing margin. onetime certainly a things a I sale, that And saw, to was knew one then first event. the bit we we first was those accounting TecoFrost this the that little think be going

in XX% quarters. to into right back get our the range XX% margin -- coming we goal to So is our

Michael Zuk

down where seems regard be little because projects there the bidding right then with bit. improving the that we to the process we to a have And lot of haven't Or backlog, Yes. that Is a are in signed? backlog? now,

Benjamin Locke

to the it. installation Yes. had I see bit larger up what little and on experience I'd out the of and add particularly been projects, comfort more change that Mike, our these with zone. think get we say get, that's we to has took they But York, kept biggest said, backlog, million in is million in New you'd the and that there, -- our revenue of we as start this our if complex a backlog, complex, the And just $X screen. and out $X of I in

realize we I that so York that in had And high. went one with mentioned project that this particular costs New that

services. on, these And backlog is that difficult us York, construction the to decision we removed project so a wise and get on million be into of New our focus in I more And this which can $X sometimes. very entrenched think, engineering jobs for just not products instead

always we'll we're installations a system have doing going in our New I'm doing still different a than but York. installations, occurring. YMCA tri-gen Now X-megawatt saying certainly is in to not remove Connecticut

to million trying we're be in reason the install of you the backlog main $X saw took is reduction that practical. So that out. And that we

Michael Zuk

this the coming and is project and from almost then our the engineering than focus a efforts sales to in that involved going the engineering completed? with we're architectural firms Does getting to after rather to at of product change trying the sell mean more get-go

Benjamin Locke

key services our referring engineering in of are in time. projects becomes early and basis really, you're sure. these et instead when the of projects, mean, sometimes stages in make accessories is that projects design that's fact, just the will already other complex will these the that X we cetera. means quite to ahead for companies side I the we installations, things, do it in of to involved cogeneration for making more in bidding include be support, scope these our success, But the to Not sure -- and much. so some installation bid, other still of the that the happen, not And equipment,

Michael Zuk

Is final service one question. contracts? years, the X then it And XX years? duration years, on goal What's X our

Benjamin Locke

yes. Yes,

I certainly, with has some could for to been So years. that our X X the example, typically, but And required incentive Jersey York jobs, program, the anywhere for from norm, be service years. incentive XX year, think certainly contract contracts New be New is programs,

generally contracts long service them to on for the a period But possible. as basis. secured be So lock of up tend time speaking, we case-by-case as to long to try a be

Operator

no came one do Ladies have -- just in. One moment. Instructions]. [Operator are additional question gentlemen, there and we that

Our question from Manalapan Oracle Capital. with Joe comes Vidich

Joseph Vidich

a I point your you're listening a product was Generac's of California, marketplace just little seeing wondering for that their and regarding -- reference, on about to C&I filing I out a sales emissions I was efforts tremendous was if they're talk guys for you there. just I they've more call And I especially in they're know as focusing the just and could what seen are saying you waivers. market? and demand wondering how bit

Benjamin Locke

get certainly, was that's light the and a was it's lot of to Yes. what mostly kind trying It's addressing. things. call. grid generator But I they household resiliency a these to but listen that to are are And for a good generators, did segment up attention, something wildfires, larger I think, question. see of, carefully reasons of output obviously, those interruptions. gotten to small, bringing an And Certainly, Generac's also wrong the generators, being tragic of the these need to unfortunately I is lot end for backup the their those endeavoring typically generators opportunity. they're these for

they cogeneration. utility from bit that's power that sought would certainly. these leaves this up towards we off think better service when cooling we drill when the marijuana growing, a something them be a where of mind with to very loads, we have instead It's could after I that the their standpoint, cogen -- just bit to taking a first amount But power like where the needed and into is tremendous they and mentioned, then needs, couldn't trying put on certainly, resiliency. a was As might cogeneration their from addressing little deeper get cooling on cost-effective spoke traditional methods, about they But manageable that with little ended a people electricity indoor so from facilities be of standby many loads generator. grid, off problem, the embarked

we're ourselves for getting in opportunity in differentiate we're I can getting really people way electric and ourselves while we is So loads differentiating this think pushing cogeneration, certainly the the California, -- where cooling kind their off gas then to a about electric loads them and little systems, residual onto they and have. more that, enables power whatever residual of, our -- that bit be pragmatic

In course, terms of the sales activity, -- there. Coast out of as I we've mentioned, offices we've had, West California got our

sales two are a have centers else. reps with you understand say We Coast traditionally used But more rep representatives and than I'm product. sell cost-effective what service engaging than They're West fact, sure the direct And these more sales, industry to And your manufacturers' a presence. firms. in firms, way we're more HVAC in rep are. I anything

like, region, -- swapped for Valley can So less. that get we're so manufacturers there's we the in then have the relying California lot grid that If electric uncover to wineries engaging opportunities really of outages and, is try to their exposure equipment on to that grid. with to the Central this resiliency like over rep much produced where gas, many company a

Joseph Vidich

this propane forklifts, and step Right, a little -- terms here? a guess, going to we you Yes, month, -- bit? I the is explain market. just a big meeting coming the for of also Ultera definitely right. have can the next emissions -- right, what's that's You're Could in you're

Robert Panora

wasn't could we management. went and is at think ago. then and test -- recent, retuning in there some they Bob and we management folks Panora. looking was got worked in go discussion back, I We Mitsubishi we're This to which a had the the the a do Right. calls came And what sure, from what report, it between is a don't Japan, engine? go folks back it forth to there'll forth for think them the -- very some happen forward? certification and I Bob long Joe. to Texas on were was results. forward, was week say, that'll facility, dialogue go then presume and much ago, more them, that have so was going and our people with summary it Japan we if to and is Do than we'll out between that is that I But how to done This it based of forward Which going be be visit

think highly certified pretty I we the be is it could just it likely much it. way tuned

don't they're I to from their think and positive. to who but were want internal So I was and forth going back say, what language feedback the generally predict got I here, body people the

a think certify or prototype vacation here, then they of So the waiting people to test come would be I be something from can for would field and tested to number of see, We're know. would maybe resume we'll which to a is what decide like decide to that them I that that think back dialogue. develop they an do. engine don't they or But we some can a

Joseph Vidich

Right.

what's So that you're for... is the how Is through product license? it intention your the to Or monetize road it? map approaching

Robert Panora

this we don't is we that's going to would it. don't wouldn't one want a have say of course. one one of done, be market options fit And of best, which know really to particular I and them, couple but doing how of it way We that's and obviously the

Operator

turn Thank Thank you. I'll at there gentlemen, the to this closing no questions time. for call are further remarks. back you. Ladies and management

Benjamin Locke

on thank all joining Well, you for call. the us

more to weeks the As news get months fourth coming seeing in we year. for -- be I from mentioned, Tecogen again hope I together and until I quarter hope you'll our be earnings next

much. So thank very you

Operator

disconnect. a conference. parties today's All day. Thank may Have great This you. concludes

Tecogen (TGEN) 12 Nov 192019 Q3 Earnings call transcript