TGEN - Earnings call transcript Q4 2019

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Operator

Greetings, and welcome to the Tecogen Fourth Quarter and Fiscal Year Ending Earnings Call. [Operator Instructions].

It is now my pleasure to introduce your host, Ms. Bonnie Brown, CAO and Treasurer. Thank you, Bonnie.

begin. may You

Bonnie Brown

Good our Sian. thank all you Thank and morning, fourth joining year-end call. quarter for you, and XXXX earnings

call joining will note, us year-end this the are today the press section MODEX our on Robert our and with is Atlanta. website our from Operating Investors the Please our in Chief following is the and release days the President of Investors Panora, being Benjamin the who Officer, of call conference CEO; fourth our On is Locke, call. archived website. me recorded earnings copy be XX A in quarter also and regarding for and available of section

make factors, briefly our expectations, which Various the materially let on future on our XX-Q result Reform the annual Investors recent statements as annual harbor most company's file on from under Risk those various website the report available statements heading begin, plans, results prospects, me by in we discussed including XXXX. constitute forward-looking Litigation XX-K Securities caption differ Before Factors, the under reports of the on those under quarterly purposes Act SEC and Form of harbor and Filings. are with Form cover provision the of a safe the about Actual the of important section forward-looking Private the company's SEC we safe may for statement. remarks indicated that may

of forward-looking not date update to any today. statements so. future, specifically obligation we While on forward-looking do views representing to at our subsequent the in should you disclaim we statements as as may elect some any to point Therefore, any rely

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

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

Benjamin Locke

Thank you, Bonnie.

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

efficiently Heat, who new natural alternative clean, on sometimes like unreliable reliable syngas our cleanly power renewable I'd shown to distributed to buildings those electricity generation reliable. and an off cooling business that and systems Tecogen's is clean company natural efficient, or infrastructure. using model, gas expensive reminding Slide and propane, heat use and by power X. to may be gas, Tecogen's and core start about to as and

As to cost, and gas systems goals. large buildings strive after these are improve meet sought emissions Tecogen's greenhouse grid to become increasingly to outages, reduce operational resilient

technology; generation We magnet our near-zero inverter, are for only corporate new is system, variable speed markets features The our operating InVerde system longevity; opening by emission an Ultera; of differentiated generator other microgrid at with integrated proprietary comprehensive permanent clean from a presence. called us. that on-site onboard exclusive CHP ourselves have using service and factory technologies microgrid-enabled virtue the key

becoming electric facilities to have Ultimately, many a our the basis chillers other no the are for with competitors refrigeration Our alternative and Tecochill Tecofrost increasingly equipment reliable large grid. needs. cooling or design equivalent provides and natural gas

and about disruptions. mount electric concerns As grid our systems and resiliency provide cost, to reliability other outage power

energy due production $X.X the beginning $X.X X% million XXXX, fleet compared fourth quarter year. decrease is This of to of of saw the quarter of having a million XXXX Turning quarter-over-quarter. a production revenue of -- energy reduction quarter $XXX,XXX, at decline to Slide X. sold the a The the in portion in fourth revenues of to

mostly were was quarter-over-quarter. The at quarter-over-quarter service revenues product in flat, versus up overall and Our XX.X% X%. XX.X% margins quarter come saw

we the which we XXXX, XXXX, margins I improve over quarter improvements a manufacturing going to continued lower onetime third in adjustment where product resulted of discuss will expect margin saw Importantly, labor, I which margins. into had shortly.

fourth to the is turnkey had installation in projects -- overall which certain Another margins factor third contributing our wind-down margins. quarter of improving the gradual in challenging the

profit onetime includes a expect quarter turnkey result the the to end will we installations, $XX,XXX compared XXXX. these as quarter the $XX,XXX further. a compared of the of $XXX,XXX projects As quarter $XXX,XXX. to service quarter almost was of fourth fourth Included inventory net in fourth Adjusted which in the The for improve in quarter $XXX,XXX was these a close of the write-down for of loss was out, XXXX. margins, loss EBITDA

revenue some The year XXXX Slide X% reason Moving production this X. million, XXXX revenues decrease energy almost of drop result of million full in reduction to due the revenue as our assets. on energy is production The of to the for were $X.X from XXXX. in sale by $XX.X a a

For were the record both year, X%. both product the company, increasing highs and for service revenues

year full gross margins. XXXX lower Our than came full margin the slightly XX.X%, at year

XXXX about goal which in I our in service chip talk to and the the our well of to R&D X% As margins will XXXX G&A, call. our investments investments. reduction continue the later improve almost is discuss benefits our later an will as I our higher in R&D in at as despite saw away call, product

performance. maintenance shared of and also a profitability lower on to predetermined make total year. discussing energy-producing to wanted revenues Even while that energy assets, for improvements to still we were And margins, we're those baseline the -- we of profitability out the remember in above sold sites and point Tecogen. provide are sites site continue the increase sold I to these some production sites improvements Please we increase as the we by sold, in though margin we the

but revenue maximize in million in are as million just net a sharing $X loss not net year motivated also time was The to the XXXX. upside. we So to the loss our $X.X to run of to increase compared hours service

adjusted Importantly, to compared EBITDA XXXX. for we positive year of the $XXX,XXX $XXX,XXX in maintained

X. point from Moving I earnings where to the are wanted high-level and to few today. takeaways out we Slide a

is with most core importantly, both performance sales. record XXXX and services our strong, business in First and product

continue While and going chiller portion sales years, record chiller sales in a were XXXX, of expect our revenue chiller contribution product past our chillers over down product the increased over large forward. overall our sixfold X to to sales comprising we has

a a in With regard to decrease the result selling the third some expected party. projection, as energy of revenue of assets we to

projects value of the that a the by as mentioned remain more energy installation And get which gradually final turnkey service to portfolio as until that down are challenges few in impacted sites I higher our withheld we is incentive projects upside continue satisfied winding to out large out program our An margins. construction projects requirements. we payments, are However, adversely closing margins. receiving with have evidenced additional these production earlier,

improved We manufacturing our planning, of from business, implemented results, aspects controls. slot in margin inventory parts details, delving efficient Next, very XXXX enterprise service a to more or revenues, growth as system expect large of allows we all realized in profitability benefits our improving improvement business. attainable too full focus margins the be XXXX. well continued we in as to this as this as expect new sales and across of ERP, implementation and far Without a in integration management, our resource forecasting planning on financial system of into system. XXXX is with see our This we part effort product we of of good initially to system all the and

while that grow the XX company. additional feel continued it of Toronto, scaling And high-margin the will have help will of also turnkey from back with our projects, installation and sense makes projects service revenues construction We for manage we Florida from are a commencing rightsized both cash to perspective. months, growth portfolio we in where installation last centers always the flow a large

understand the our I'd like investment investors is takeaway last to in The future.

emission describe Mitsubishi developing in and give will show Bob exhibiting MCFA. is from forklift as Caterpillar a excellent progress currently or us of trade partner, this directly our the forklift Forklift made with Bob a will shortly. we've show First, minutes, at feedback America, a few near-zero Atlanta in

continue of for cooling markets line gas new and our expand our we develop products to cooling Next, technology.

currently Our as with pleased very first Tecofrost in an in last more and the Tecogen is rink unit sales Vilter's XXXX. we ice working are market operating operating side-by-side and in into U.S. are was Both Tecofrost Massachusetts. and to introduce marketing unit year broadly sold is expected, and Vilter, late partner, that our team this

and on the potential engaged have for partners with in sales also our the We side. production side Tecochill systems, both discussion

our partnership while order, to about as design of opportunities the our excited our center, new TecoFrost can manufacturer our Tecochill. is sales first Toronto in service products, of engine gas and/or new only the our very system be by we potentially we such additional and we the systems, and chiller either And chiller geographies. open are increase U.S. marketing outside expansion improve sales are to engineering that eventually see InVerde X.X-megawatt driving led that As

to Turning X. Slide

of as week. stands $XX.X backlog at Our this earlier currently million

of this the that downward. slight with chiller chart current in from when indoor products consisting XXXX be markets, in see is adjusted turnkey $XX.X we continue happy chillers, drop as backlog our $X such backlog we million million to in new despite and million last are backlog purposely our can driver our You installations. very strong late dropped backlog, $X the in a of sales, And for us growth year which But products cultivation. installation

is quarter. said of when contributor long-term I revenues, contribution recurring does revenues consists expected contain have our And our this Toronto each and is new service as revenue and the important consistent from contract Again, which a center lastly, this not year. installation previously, later considering backlog maintenance very product

I of want update think some Moving market our sales to XX. drive product to forward. going will I Slide that help conditions the

of the where economic in at has First, cogeneration projects mechanical option of and we geographies benefits Tecofrost the our an prices cooling low, switching CHP gas all-time not. natural continue Tecochill With traditional may to to systems, such products. demonstrate as compelling benefits gas

could cost almost to a $X in, $X.XX example, city in per but electric dekatherm only as incremental inconsequential. or Mid-Atlantic low all prices cooling hour, kilowatt rates For gas gas have as the be of may switching natural of making per the $X.XX region

in of We companies are to goal gas to electric currently switching outreach these a from areas cooling with loads renewing gas. common

in technology adoption report, enable to widespread investing, product are we advancing mentioned more products. as our earnings of chiller our And our

or are the more building with to management compatible which new we our higher controls redesigning IoT-enabled. with systems, addition and efficiency operations, In system emissions, Ultera relaunch are operational of BMO, to Tecofrost, be often

architecture. control will touchscreen monitoring Tecogen building the new controls cloud-based and BMO equipment sophisticated allow interface a system operation real-time within optimize to these systems Our large

expanding InVerde we proprietary functionality reliable functionality becoming recognized it as Next, the of an and are is system. our as microgrid affordable, technology microgrid

for in proposition are our sites CHP list United advanced microgrid operational proud of substantiates energy #XXst the of for quite provide capacity. the a systems This ranking of value #X in our puts that and microgrid can as the Tecogen same microgrid services large providers a We number in cost variety very and facilities. States U.S. modular overall in of effectively of

a our Because own effectively e+ power adapting increased manufacture the to we losses the a currently due can provide we our reliability. in to traditional AC to InVerde InVerde DC are adapt favorable circuit. to DC required control microgrids power and reduced needed microgrid. produce cost DC to microgrid transmission systems, circuits own DC are power We and

utility We good the develops. project I projects InVerde X as ideal currently it be DC the to for on on hope an fit with system. more would news that this have are working customer

on battery Moving to storage.

XXX the down This is power the battery of our the into ensuring facility directly there tied unscheduled is for facility. or savings the while in We the functionality enables control have the to kW demonstrated to continue of interruption scheduled maintenance, power InVerde. DC InVerde system no on circuit the cabinet for delivering engine

in such lastly, certifications this controlled be And as grid SA or frequency out. are participate support to essential correction, curtailment InVerde factor these inverter Ultimately, and we are smart utility. response certification rolled XXXX will services as the new UL certification from the certifying dispatch the power to

operators. power, the renewable nondispatchable grid energy dispatchable important to dominate for grid sources, as As wind such distributed generation becomes solar, more assets, such and the need InVerde, as begin to

are the We be microgrid part full of grid InVerde will technology confident the important programs of an functionality our resiliency that in very future.

our to of feel new markets cost. confidence at one by in evaluated technology, projects we as service we is advantage combined with forward, interconnect terms led selection create chiller look our inherent utility associated and very InVerde-based new this and certifications, interconnect And that capability instance, moving our cost-effective Canada. modular factory Tecogen. Tecogen's the for and encouraged advantages Toronto, success system approach of our we in in will for of In against for a Ultimately, are competitors competitive and area. were Toronto every record, technical service area our We in the the sustainable and cogeneration track customer technology

competitive maximize to engine systems, I growing obtain service Overall, think retrofit adjusted gas to chiller successfully our emissions advantages factory our have systems. our and cogeneration emission certification invested viability of the near-zero Ultera engines forklift focus demonstrated we our and segment to in in technology

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

Bonnie Brown

Ben. you, Thank

$X.X results. year-on-year the revenue compared a $X.X to decrease for was highlights million our some for contains quarter quarter of year-over-year. XXXX financial fourth XX the QX Total Slide X% XXXX, million So of of

the by vary by revenue sales X%, contracts a sales showing by installation was to $XXX,XXX. and flat period with by previous chiller sales revenue long-term revenue X%. to seasonality for the by increasing total decline once attributable from Service Revenue the product energy relatively a cogeneration the retained certain of the sold. is from year-over-year company XX%, period. quarter production reduction with the that from XX% assets those our decreasing and energy-producing Product increase was versus from with leading for quarter revenue of mix maintenance and those again can assets increased year's XXX% This $XXX,XXX, that increasing

XXXX Overall of gross period XX% same compared was margin for the XXXX. the fourth to quarter for XX% in

expenses R&D year-over-year by or X.X%, XX.X% goodwill or expenses by While G&A decreased operating to increased company increased overall to goodwill our the and was for of expenses, expenses impairment, excluding XX.X% $XX,XXX impairment, by invest selling our the by XXXX. attributable fourth quarter future. $XX,XXX technology to in $XXX,XXX the X%, decreased or as the and for $XX,XXX of our compared we Net quarter $XXX,XXX loss $XX,XXX the excluding income, -- or

XXXX. is XX Slide million for of of financial the the financial year to attributable of for contains million energy-producing assets results. to year-end year-end some This $XX.X earlier compared was the sale -- Revenue decline the revenue of directly highlights $XX.X in XXXX, Product of year-end sales $XX.X to from revenue XXXX XXXX year -- revenues increasing by to the and million an service as was decreasing increase both X%, cogeneration chiller XXXX XX% product $XX and increased for compared 'XX. by with million in sales XX%. in

XXXX. XX% growing Service margin year of for XXXX by year increased long-term for the the compared year. took of of million XXXX overall with for to $X compared of million, place in maintenance as compared the XXXX. sale the the maintained by revenue for gross $X.X year, XXXX Energy to when growing an year to year million revenue earlier the several for or as XX% of the $X.X sites year-end XX% XX% We $XX.X to for contracts production decreased million than by X% more to

goodwill and for impairment of may impairment the our costs goodwill by impairment XXXX, To selling after XXXX provide recorded decreased this or I'll year sale expenses compared of have loss. of XXXX, anyone energy-producing on or the In first year, expenses, increased sale remind $XXX,XXX certain $XXX,XXX loss a to an as assets, the we whereas the previous decreased the core gain Operating million. G&A R&D explanation $X.X the or calls, assets, and X%. for quarter Both of who by G&A, X%. of and missed differently, said of R&D selling exclusive

we what we The when The merger for as from in reporting fair our originally contracts, discounted determinations assets with comprised which fair case, that of merger for resulted become assets. of ADG XXXX, results reporting accounted the the in assets happened primarily impairment our was production than those energy a of stock-to-stock to the goodwill acquisition. an a unit. value acquired paid cash goodwill on Our value the factors. for less portion cash for other In our them. discounted among these on flows due -- sales based We those unit this

As time flows we recognize passes, cash in earnings. those

remaining accordingly, may causing remaining may become still loss. unit our under less, those impairment the decline shorten, assets the the and reporting contracts As terms may value fair or an flows of cash

presents fourth our EBITDA Adjusted adjusted earnings XX EBITDA that Slide non-GAAP metric. the throughout measure for quarter has of non-GAAP in comparatives a an a reconciliation period is important year-end XX/XX/XX and in with our and XXXX, the presentation referenced same uses as which management release. to been

back or on loss taxes, to was adding onetime expenses, of compared Slide negative $XXX,XXX stock-based we back XXXX after investment net and impairment EBITDA, adding million negative the arrive first compensation, adjustments, for attributable inventory and non-GAAP unrealized reach of merger-related shows, losses Tecogen, noncash before depreciation goodwill to chart the to we loss The amortization fourth interest, interest, fourth adjusted which depreciation amortization, XXXX. After quarter taxes, on XX $X.X EBITDA. nonrecurring earnings quarter and for a securities, adjustment, at

For QX quarter costs, and securities differences $XX,XXX add-backs and of compared the to $XXX,XXX loss was in XXXX. which XXXX, fourth XXXX, the for all primary were adjusted investment EBITDA larger of being merger-related amortization, positive on unrealized depreciation

As EBITDA to difference negative a for million for was the positive $X.X compared XXXX for year-end period EBITDA on was XXXX. XX/XX/XX negative the XXXX, $XXX,XXX. second $XXX,XXX million shown Adjusted for the for of $X.X and $XXX,XXX chart, same year-end

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

Robert Panora

let hope morning, Bonnie. can't. everybody you me Good can okay, you, I me hear and if thank know

which show, forklift want found to I show our and PERC today. disassembled Atlanta, featuring which to trade mentioning had forklift the begin Propane photos I'm were get that with work Ultera Let minute, in MODEX and increased represents Monday program, & system. Council the is show concludes to originally These the Research that the from which last Cat the activity taken which progress, began industry. propane our is update. begin they We our more will attending at encouraging. into booth I as updated prototype, since but funded MCFA that them the Recall truck very in recently has the domestic PERC partially Education the a me detail by

As a leading a to the in is discuss -- they're stepping MODEX say in used for their for systems result, lot to so the I'm technology commitment part bringing robots pleased the commercialization, parts trade But I'll which The up forum minute. warehouse show show a material technology and of main showcasing forklifts of picking and a forth. and see so handling, you conveyor factory show. understandably, to are

In the takeaway past days to have My directly speak been competitors is show to that had the days most from opportunity have major users forklift and of air indoor really, by amount X fair we trade a users of more operators. is the quality -- charge X.X the by magazines. durability the but and as are goes, prefer would management. a expensive, sophisticated concern require in also battery-powered as trucks Many have propane interviewed battery

was relevancy this in efforts. feedback me, of reinforces it For our gratifying that the

remarks. I'll prepared Slide with So XX, to start moving my

fork As MCFA, a you we well-known know, propane propane America, Americas both the in most and of electric with and Forklift have industry trucks. of been of working Caterpillar Mitsubishi manufacturer the

to emissions, Ultera human those would to criteria our been Our provide trucks. adapt objective If trucks health. has successful, directly answer impacting technology counterparts to with relative electric an their propane to forklift

indoor heightened various discussion As in with concern emissions are application during applications. week's reinforced this folks, of criteria the in

the the repeatability our last we repeated after Ultera heavy tests, operations. were touches demonstrated Mitsubishi supplier, engine affiliate, and finishing the the completed call, relative tuning in of a to by and treatment simulating effectiveness Recapping engine

of hour gram Resource the requirement energy project CO we by the about Board, CO engine. the hydrocarbons requirement X.X is per engine California output be From the XX.X of As put under hydrocarbon standard shown Ultera grams. X% CARB, to the forth and the for one. kilowatt near-zero the NOx the in per NOx of The certification combined Slide or our testing, X/X is and Air XX,

easily believe, we meet criteria. will the So that,

was well, After the initiated needed testing recommended to MCFA a and certification simulating process. reviewing a heavy engine, that process. the no to results program the plans in done is It MCFA, on shift to with validate prototype laboratory was the the start agreed, should we cycle of working and truck bare operation. the which of we engine further

in testing. industry the These quotation progress, we engine At our it testing the they bare tests. same the will At involve to was a translates time highly that with operation felt simulated promotion in impactful seek MCFA tuning protocol certification of and very laboratory that precertification the PERC, to was revised confirm financial pleased their Shortly operation the more support the per to our with would a and to time, to does, test after then aggressive in are can they successful which same If we we and Ultera what pretty happen, certification. a increase MCFA time, both committed propane additional it qualified way. from a updated for in very reengage are much know obtained perform will the be predictable, be certification. the components, which repeated used the

will in Institute in at test slot the be Texas. Southwest Research Our May

Returning But were with of and we for Today day as reduced provided is of trade show, display, the very provided the output as trade X the forward nevertheless, had their the show, propane. technology interest staff the from has complete the option about during the show, they to positive interviews trade market is representatives the their feedback centerpiece able their a for to attendance situation. week, to of coronavirus X low-emissions of firm. last PR MODEX truck to We because internal the of magazines the the has it well have PERC's which support articles. look and the for

Okay.

and of completed it design based approved X, X district. system Caterpillar and a additional previously district. from -- I engine, activities. we the XX, We order a approved the other will water and on emissions that be XXX-horsepower to SoCal scaled-up Ultera completed a mentioned approved purchase was on by received Phase them, we -- Moving X completed kits will updates Slide provide for

the few district at that phase, order within later. yesterday the happen themselves, may than kits, for pending has for a next correspondence same their second a approval. did I expected hear us second Ultera location is order The informed X that, and additional The different months, a kits is rather size internal of an sooner

system very it's We a early second still to but stages. district, this have also quoted

regarding finally, catalyst did twentyfold development, program, The and test earnings which from our And had, still back but automotive we that the to last about that results reduced we come technology reviewing. positive tuning talked need MCFA NOx are for later. evaluating this we success and this we're call, we contractor, receive the has decreased it may the for it

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

Benjamin Locke

Bob. Thanks,

some uniquely moving products of can I give meet greenhouse gas to our business core the savings. outlook more on to company resiliency, the Slide reduction and So our thoughts and for cost XX, wanted goals how good

expect continued will revenue. which we drive First, growth growth. in There this product several our factors are

that hadn't we at are equipment economic First, opportunities before. new with geographies we attractive for our economics prices in lows, record seen seeing with gas natural

Next, we certainly area expect a center we've additional established sales activity there. the service that Toronto now in

advantage e+ into meet the for with technology to incorporating taking growing flexibility We InVerde systems. microgrids, DC battery our storage are demand along of the

as reliable, cost-effective our refrigeration We Tecochill solution a have unaddressable brought for markets by Tecofrost back previously chillers.

abundant utility expect we of to projects product the controls our more service product our product as and continue improved the construction with are of Service regard in in we next our creates segment away Regardless service concerns in from expand installations sales. weather-related a of anticipate increase with to on which be compelling the improving shift of We commensurately economic also ERP natural all expected growth, our to expected to expansion, next presence manageable location geographies. our service resiliency electric center to to expansion alternative less new installation lastly, our to gas service And as timing the and larger we lead parts acute. segment, Mid-Atlantic to risk. center revenues to business, margins. our population to turnkey continue grow we margins improve are are the are region, will systems we With where

lastly, will industry gas the of supplement internationally. the that U.S. And our advantage for HVAC and taking improved market broader in sales identify we conditions within efforts cooling and marketing partnerships are to

forklift and the maintain upside near-zero and consists manufacturing, of on a forklift obtain emissions. platforms, engines the additional Mitsubishi improve viable, effective the GM to continue with engine technology and emissions and is partnership cost-effective engines our wide cell-like Ultera more starting as to products of same, the factory shape our demonstrate with our a partner, retrofits product service. of MCFA, fuel way generator expand Caterpillar to engine emissions our for variety on Generac to chiller from engines, The Vilter is on engines, recently our of project. engines result next the the foreign emissions plan and sales partnerships marketing our technology, I on these Our Tecofrost Ultera as steps And for shared envision take service. with markets to we

think our business, record I revenues and of Tecogen the prospects are XXXX for strength indicative our for XXXX. about I of enthusiastic am

like for to turn With that, it I'd over questions. the operator to

Operator

Instructions]. [Operator

Amit from from question H.C. first Dayal Wainwright. comes Your

Amit Dayal

quarter? to more on bit what any maybe line, with expect color this sales, you would in would the And there things penetration color sales chiller on adoption a little Could drive fourth the continue good seasonality to us is be you to product or respect from the helpful. still So previous softness give relative year?

Benjamin Locke

we XX they indoor -- other where chiller season, mean you'd market penetration Great see people areas our round. the I Sure. sales. to lot but like less quarter, run upcoming run anticipate was so more these typically cultivation, the there first these we've days increased the seasonality year year. In of In a into past, months all Sure. our things flat as a Amit, activity as out question. cooling

little so the there. way? I've by the taken can got... And Amit, bit me, hear still a gets out seasonality you

Amit Dayal

Yes.

Benjamin Locke

sure line works. Making our

good. Okay,

as XXXX, players cost overbuilding of So plans with the A the withstand. lot which competitive of as the a financially. is falling where little these We are of success I And anyways, XXXX. now of is there's was might very we place, saw, it in in going industry on and map Massachusetts. mind as yes, these certainly in softness XXXX. just a happy and know, There factors. a that in I in kind now long-term of setback the forces of that had have happened had a in operational about. was industry right we number consolidation indoor you Certainly, But think whole first off industry. They exuberance didn't a has players lot take cultivation the the could can't ran these tremendous table marijuana more be some facilities, lot

ones long-term gas have our in the keep that So a still in we're is bit mind. But are have the are electric projection. operational maybe with those to said, succeeding that more ones this realistic industry industry, starting I seeing ones a chillers, be are about bit -- they that chillers And cost can down. that because the indoor bills they little around, can less little think growing the the they

is expands what York So the bit our We're and a had softening as still U.S. mean I Jersey seeing New lot chiller states interest I I see still of don't But in cultivation any because segment. little of other other a really areas New XXXX our just backlog indoor mentioned. softening of in this like and strong. to --

it. I'm very So bullish on still

Amit Dayal

be this cetera, to is there where were the driven the from left by not perk maybe up you space gap is, the or where vertical expansion, cannabis other any So cannabis of filled? some think stay slowdown if it in indoor may et cultivation

Benjamin Locke

Oh, sure. Absolutely, yes. Sure.

indoor very there's very these -- growing under -- controlled some to High-value we that is -- way cucumbers, there that across cultivation the seeing and got -- in has we're there's lettuce not part conditions. fit that we has crop supplements said, facilities a in and I and as for a a and need to perfect have grown we're it's be just board. have cannabis, we be high controlled us, value of Anywhere type that's but of. crops, increases a a other So is organic even

that's and just -- So Tecochill. for

market a have processing, now for lined they industries many there compressor us have not ammonia but already brand-new systems coming for place they place already storage, a up, and us. systems, verticals have are these gas in with there The alternative. X a because wineries, Cold of Tecofrost, or X we're these for us, have they did of food

the has we're are very brand-new verticals our to new market for us into these Vilter, that's who segments. for to And So these going good fortunate partner visibility why we're Tecofrost have start peeling that at. away slowly

Amit Dayal

even you to for keep conservative. relative lower XXXX? Understood. I And XXXX OpEx similar we trying Should expect OpEx to XXXX, are or for know it

Benjamin Locke

we order XXXX our can way ordering, Yes. parts more -- we we're us of our revenue don't leverage, on, the levels. certainly, Well, across cetera. a rule it increase board up I But our in in G&A. as et goal requires that from to from could we could because fact payment want our keep is under that lot a go to that think getting improve something the how it, level vendor expand our is everything finding our terms, mentioned, control. out given it efficiencies And vendors, to I organization I the

going All bit. our little are those G&A a drive of down things to help

that away service increase keep think rule otherwise we're it. a expansion to I at I again, possibility to the of require us don't chipping of might But going revenue to want out an G&A. So or

Amit Dayal

from a mixed, a in XXXX improvements XXXX perspective. and could a Do was you just now XXXX out we forecast year-over-year was a for shape than at see terms So little to trying look little XXXX. XXXX? better little mixed I'm comps the comps of think

Benjamin Locke

so. think I

out could on, continue improving not it something aggressively think to. invest in works if energy we're be I focusing core are. we our have production importantly, the what provide have showing into assets. across, We and that more something and if our opportunistic. that production work is, other out. still We The energy on, opportunities I is Those are to visibility come our margin our to But It's flows for lot a capabilities. to asset an which successes XXXX is going are that's differentiation we're growth we're going production high things is the that us. on going service competitive you cash we're year products our think seeking. energy It's a what we're advantage to

we'll oftentimes, bear case partners. mentioned energy to we Amit, can Sometimes in the program, contract. of in -- got be long-term customer this partners that a if I in I've energy-producing think the We've bring brought several the past, financing long-term a wants

Operator

Your next question comes from Craig Irwin from Roth Capital.

Unidentified Analyst

is Craig. This for Andrew [ph] on

for that I the top guys US business. quick saw We done, Microgrid, a on are just study think showing question domestic by business. was it the you player in a Just microgrid you the guys,

there. congratulations So

Benjamin Locke

Thank you.

Unidentified Analyst

you Just any wanted provide and there. add and some the the color just to business if XXXX -- outlook see on on comments some could

Benjamin Locke

Absolutely. Sure.

microgrids you shown, extremely glad a study with be we've complicated these large what can projects. that, need not microgrid us, our cogen Oftentimes, represented think I get thoughtfully accurately enabled we're is that that and assets the tied done purposes equipment effectively tying so as -- facility. tied other into battery into the serve the can controls building the we cost and have in be very again, DG of well, very and

the in that that -- so And effectively that think sites done be -- to the -- come I can be operational don't by features with number we be really enabling or X-megawatt outlie. microgrid-capable not hopefully we showing of X- underpinned are X-megawatt of economics, with and X- smaller cost the tremendous it. industry X- we need that's of hundreds systems, terms that microgrid facility because and course, capital of That's this something or of think realistic can ROI. we X-, operate CHP lower, be capacity don't is It microsystems, something a a kind of is why or operate operate up in microgrid ones. again, terms were I So of high

that. of recognition more seeing we're So

indeed, I I on my and perfect this but think DC known circuit, more after DC I that's have DC about they -- operating engineering a us. losses for resiliency should days, certainly, microgrids, learned from for microgrid are sought transmission

inductors up if we that -- go on in can has that need we to anything Our InVerde DC load else swings there handle that match We cabinet, add can out and and swings, control can the swings. can pull accommodate load load we we to those circuit that as circuit. DC

more some lot utility DC these previously success, provide I'm hopeful can thought. we And than with projects, functionality working expand what that microgrid a two more these and that. we're on was to the systems So have on, will I can

Unidentified Analyst

question, call, missed cogeneration really was may divestitures of kind the That And two organic great. then of were quarter in do and parter second the out line. have but in earlier growth kind strong One, you you it an guys here on I have if the top sales annual year? the the earlier number were done an And secondly, that basis. backed on in

can would kind any forward just appreciated. be So moving there provide of you greatly commentary

Benjamin Locke

make it question Yes. I tell part me to answer first sure I Can you again? your of the want correctly.

Unidentified Analyst

Yes.

out growth there provided backing last sure miss I XXXX, didn't the number you earlier the on make just divestitures -- from guys Just year an from call? is like organic it. wanted I

Benjamin Locke

Yes, I understand.

which... to want the out had back you changes we in So the energy production,

Unidentified Analyst

Yes.

Benjamin Locke

business revenue product our doubt, Made to and mean, mean in that again, the growing. Yes. There's the is going that growth. these a of contracting where days. is certainly, in lot are had think great see I I comparison product it's businesses to Yes. a we XXXX service. good sales, I difficult. the you're without growth, Well,

core that business our So still happy is we're very growing.

We cogen. I great see year where growth. to you're cogen's is think the product, than going is a the normal Tecofrost, growth The higher for had chiller very good.

much growth virtue go of say. -- and as in assets But get going to production. numbers, energy we're where is probably tough to we going be in trying up that squeeze to I expect But -- going out static, Toronto product the terms that to can. in You're of see those you're again to somewhat sale. say the not cogen that the so you're of will to although the still year see exact I services, more this by

Operator

comes next question from Private Sim, Investor. George a Your

Unidentified Analyst

There And are Is production comparisons the I about EBITDA sold if the assets. roughly X/X year-over-year. as right? quarter-to-quarter moving of many parts as in understand energy you well correctly, that

Benjamin Locke

basis. right, about you're per that's it's about right. how Yes, many -- a on engine on half many basis, -- revenue essentially them. of a There's But how different you're basis,

Unidentified Analyst

assets? of sell other are any What to those plans the

Benjamin Locke

the -- found We The on, are currently. sell not a us flipping when quarter-to-quarter. found the revenues them we house. made for can them. decision We because -- were sites very keeping we it's that and that very already sites be was sites like fixed assets, the very needed No, that it was careful. we're could those steady And up that a to help, that sold good flow of beneficial earners we The to improvements and some nice, us. we have we

current to more plans have any of we don't them. any So sell

Unidentified Analyst

providing about sold keeping, obviously, the ones the you sold? well you you're how the that Are as for ones service ones for yes, as -- the ones but you

Benjamin Locke

very important Yes, absolutely. It's a piece.

anymore, So them. not the assets revenues we're because getting for are for just revenues servicing those getting energy-producing we

if upside. service our hours those we it. service the I And perform mentioned we a we them to make earlier, to as then compared out get as baseline, So motivation team share great more as units. us that's is for all in And servicing the run outperform again, of sites those

lot sold. a for contribution we there's still that So of assets those

Unidentified Analyst

thought, wanted I to just what That's but Good. I make sure.

Operator

comes from Your Joe from Vidich Capital. question Manalapan next Oracle

Joseph Vidich

forklifts. And great to I guess actually, emissions find of part products call. how news little the wanted is come and or when a I propane propane that would then that per there forklifts call, drill lot how the bit down there for many possible a how meaning are for more Quite market, your out of out conference on certification are big year? the many just sold And is

Benjamin Locke

crack do first you that? at to answering a Bob, take want Yes.

Robert Panora

Yes.

but clear quickly, to, and they later, can't X May certification when month I want for forward of will test way you lot we had have would, expensive I think two a if if proposition. out this frame. say would There's questions, it You the works path I of a the certain, a think very if type move come. not not they to is caught right, they could it's or that, in a and that uncertainty terribly do time it

hope. that So I my would some, would hope be that

The your sales. truck the fork second question domestic about part of was

you yesterday. My is trucks maybe I remember... this talking if were about ones, right? number XX,XXX Ben, Ben that -- think, I XX,XXX is that and propane got and you do I

Benjamin Locke

I've course, I forklifts U.S. that's got most upwards in than shipments yes. similar. is that. familiar what of that's And think higher ICE XX,XXX engine-driven Class -- are the of forklifts, Yes, X, international investors are something now the or Factory much X we're of number with,

Robert Panora

been but international, there's And Yes. who there, feedback pretty good interest could some good show. knows, got we'll too see. it the involve at so I international

Benjamin Locke

mentioned forklift number And one shipments. I mention that and that. I to The more about thing of just are, want new mentioned course, Bob

Our reinvest entire new owners don't here an and to fork truck go fleet. that in is notion have

they to is lay fork fleet whatever way fleets it a here to their can have not retrofitted and million new be emission, their cost-effective is mission existing in, and down can way another they $X retrofit or with then They get accomplished. buy be notion effectively their they cost Our can get in back near-zero trucks. on their to

much business is plan number. sales truck I higher forklifts retrofitted, number it's driving that able numbers be think to of are fork new which just a obviously are not it's the there forklifts our that that So the are here, and out much,

Joseph Vidich

Great, thinking be that was the after also what Right. going retrofit market, I that's too. you'd Right. really

that's It anyway, got. all like sounds actually So really coming along. things are I

Benjamin Locke

Thanks, you Joe. Glad could join us.

Operator

comes question Mike from Oppenheimer. next Your Zuk from

Michael Zuk

are What forklifts? retrofit the opportunities retrofit the on of market. in outside follow-up A

Benjamin Locke

Yes. That's great question. a

construction that are outside movers because an candidates making engine this of is same encouragement And But of the one engine as certified because -- forklifts building. doing retrofit. could engine the goal any of goes for the different engines program. because type engine's important into, and certified very again, that go a of proxy vehicle. important engine, emission or these Bob's support MCFA. may than and aren't as fork of the the honestly like that a really road -- for now airplane one We very truck that, as the to program vehicle PERC into the per airport that you fork see a the be again, mover Mitsubishi whether there are point, one much it's And out be anything are engine is with that an of into airport tremendous certified. the many, not getting seen of engine that any go obviously engine near-zero progress many I a mean going on just trucks is type or There it's that an of of be lift of vehicle truck that these it into or not well

retrofit the many, is the and many automobile big opportunity us requiring go there's Absolutely, question, yes. that So your applications to to for this for manufacturers answer get involved Mike, necessarily are engines in to not automobile. the

course, I to see I in on fleet, doing bus accomplishing the that, a retrofits see wonderful. as I with ourselves gas fleet would said retrofits a of our mentioned. and that us can natural fork us I past, as bus I with engines But see trucks. fleet. going be Now doing programs other

any All things this manufacturing with an of or have such able us manufacturer. without want a partnership type automobile having partnership. maybe complex of needing to We do to idealistic have these to to be happen without can

Michael Zuk

everywhere. And then Because of in engines stationary follow-up, status are the as stationary engines? a retrofit what's there

Benjamin Locke

Yes. Yes.

et stationary engines, on we're stationary Ultera yes, And irrigation, -- agricultural interest converting also engines in for furthermore and expressed few crop XXX-horsepower are huge to for there diligently California in working getting get We've big, on pumping mentioned, retrofit. quality Caterpillar these cetera. As a Bob pump water ask that away engines air even districts their management stations. are them other had there

those of us. things are applicable All to

to and as trying that effectively, to and cost ones our identify with PERC a move Mike, the have. I think good given we've we here. done needle the get MCFA enough what leveraging are good And resource resources pretty can job we is company carefully resource that as Of we're do course, our to far

Michael Zuk

emission is the engine? What's on factor controls? converting that the of efficiency the Or Is stationary driving engines?

Benjamin Locke

Bob, one? to take do that you want

Robert Panora

their It's compliance. It's impact emissions Sure. at efficiency simplify to trying controls. all. don't emissions the We people

that makes the of they was to to involves in of lot it it lot -- And got were you do original do have That So every you've retrofitted being paperwork, test it. you compliance, California keep lot and -- lot original They in were you tests time. all easier. to if it did an failing the in that, a people district. a engine what that a who water when fix their have they of a job

problem rid of So this compliance. they system sort of of them, really got is after, savings which were cost for that the what

force, Mike. So that's the driving

Michael Zuk

large other markets California have be any that standards could stringent that emission addressing? there besides we Are

Robert Panora

thing, But and that's is to -- them probably I asked and on pumping competitors, have us Massachusetts work and -- the had we've is us that to as and think California strict focus that right to for who well, problem. now. We water have need so other states. with come the noncompetitive a few really been people market Well, very

Michael Zuk

the It like roll for Appreciate XXXX. update. looks a on we're

Benjamin Locke

Thanks, Mike.

Robert Panora

Mike. Thanks,

Operator

[Operator Instructions].

next question from Your Harbor. comes Blanton Alex from Clear

Alexander Blanton

or to ahead project, further, and that which the looks forklift, it when go and time On a kind you hit just could bit in hard bottom see sales do from that might little look very to be meaningful impact seeing when promising? line. you a have But any of earnings frame it's

Benjamin Locke

payback mean my crack on investment, getting see Yes. I take some I'll we're to believe at that. But want too. I me, there. a Right, Mike,

I than think it's closer you think. might

does and we're that... what Bob going -- later certified go we're engine this May, if in to get indicated, think -- as I to able ahead this

Robert Panora

doing just actually We're a precertification.

Benjamin Locke

Oh, precertification, okay.

Robert Panora

making just trial basically, clear. It's ones, it

Benjamin Locke

Sure.

that be be. actually we it doing point not as identify to it Okay. retrofit. might for step clarification. helping is step a a the this work next start fleet to can with, be in the And assuming year, going fleet, it's plan Thanks us PERC's a MCFA engine an some might get PERC to that But certainly, it is fleet certified fleet. anyways, retrofitting next we a at and But

next numbers. trucks, type do number, big obviously, receive how fleet, not or that And if it. that will will fork many XX think of depend we could how Now happen, that this I the year that might happen could from -- XX, though. It we revenue a be XX, XX, whatever on that a absolutely --

I bit whether a come the size license but what try and might we're look the depending with the a costing that we revenue, fleet, going at be. I upgrades, contract we're to the model Now fleets of to replicate, the that's exactly in happen what up get and what manufacturer a or hope, my very develop of going ahead short Alex, to on we be again, going to to that's and to at, is facility a want after whether small technology going to other this, do that, that's directly least go to at is order, with plan to what

my start from that this seeing at and really fork this trucks is can hope, on So the not then next. Ultera, you revenue least year if Alex,

Alexander Blanton

What a retrofit is on you? the to per unit revenue

Benjamin Locke

that want to Yes. Alex. I don't too about talk much,

expensive. too want to don't control cheap. don't it give to being probably could guess, it we we're I want too it careful it. would how As about I this, you we want do very will sell it. how price to I want away. we to don't make sell sure I

It's as going to absolutely meaningful cost-effective can consider rolls this be actually less investment how a way do detail. out confidently, right? per existing going I in X trucks, to say buying cost retrofit But be expensive unit, expensive that than to it's be cetera, capital with And going it's truck. than to can fleet. less something fork buying electric their don't the that new a So get exactly new into it and to I again, fork et a want someone

just So but we careful important there, to answer I your so because this out. to sorry, got how you be us I a roll little bit it's want

Alexander Blanton

market, same Toronto? in the can dollar about And think of that? Okay. can order the of idea this X.XX-megawatt in us the building along we amount you an but lines, How give

Benjamin Locke

Yes.

Sorry, I'm so leave out, triangulate Alex. I won't piece pricing. go the to there. that There's equation, and competitors always can't our to like our pieces going three one

competitors So always can't we complexity out really are. make order and I'm leave just where I our very when careful triangulate order out order to where and size enough give information sure I cost

you'll hope understand I So that.

Alexander Blanton

didn't I think reasonable any competitors. you well, had Oh,

Benjamin Locke

work. Well, to have give always -- be advantages. advantage. to sometimes put our cost. that companies all these behind, expected people about on concerned not I first go But a time. any as they air-source or work. get And mistakes indoor as all like did split as XX XX are then the installed I roof cultivation technical was careful try not make more I know they That as went to course, much people a these mistake possible the of and competitors cost and of systems, don't we and And them of again, them

so customers look for do cost, And improvements. to our what going first on going make try we of to course, as they're might. that technology our or do And merits I they're try to

Alexander Blanton

don't These that on are building units go of work that top in... a

Benjamin Locke

cooling. Well, air little sell just source roof, office to do that the comfort is that are, chilling Alex, say, split some our just industrial -- processes. will a water-cooled building on A again, industrial systems, what no, Daikin part chillers, -- they we little cheap loops, throw of chilling unit I mean

accounted wishing integrated a are complexities, have may many of they loads it, for. these they're regretting are all enormous industrial to that particularly like and Tecochill. with to made, were they you it their to seeing are and You that indoor growing, you when will do can't can it, because be It's to be made, system cooling. use air-source went those several these little units so facilities do but electric do heat heat more have bills, you Mistakes the think there cheap and latent mistakes

and on up I cost. have overall to -- always make based people it catches people make be So the is make my with they going people to and technology do first to best them. try can ultimately, there's But decisions think operational cost to my that again, point right

I in is think cultivation now, good the seeing us. which that for we're indoor

Alexander Blanton

and related. more again, That's XXXX, end for you guidance Can question. any give earnings the on us it's And good. One sales numbers markets?

Benjamin Locke

-- of I give type yes. Alex, I I don't would not that not Yes, out, something give guidance. No, out something yes, typically

They're up. just last from year. up year. are every products Our about up They've end

reason continue. year, our why certainly product Our that no and have service to sales, up expect wouldn't every revenues I been see

Alexander Blanton

that And expect stock in corner growing, has profitability? turn one you but think reasons growth. mean is to weak you've do of I your it's of profitable terms the not been I been the

Benjamin Locke

Yes.

I our yes. Alex, product service revenues. That's So that my direct goal got We're I in way of We've got will most comes in improvements all the assets and on if can, is, still we've will add we own. We've to things XXXX, which energy-producing making contributions revenues. good that our got lead is together the margins, in these increasingly us these profitability from XXXX. to everything our

year We absolutely, books. clear lot So items the of took to out the Alex, end very we're at of close. our opportunity this a of

the we're XXXX inventory And clean with a of growth. our those are transaction all can focus nice, slate listings that hurt, product core service Now write-down And needed accounting. mostly over. now entering do to we but and we of on it. Weird business, the

Operator

comments. floor at closing turn to over no are There management time. I back to further like would the for questions this

Benjamin Locke

to participating first look quarter for forward again All in Thank call. talking our you again right. all and with earnings you

Operator

This concludes today's teleconference.

your You for you this may disconnect time. now at Thank your lines participation.

Tecogen (TGEN) 12 Mar 202019 Q4 Earnings call transcript