Tecogen Inc.

Greetings. Welcome to TECOGEN's second quarter 2023 conference call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If you'd like to ask a question at that time, please press star 1 from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Jack Whiting, General Counsel for TECAGEN. Mr. Whiting, you may now begin.

Good morning. This is Jack Whiting, General Counsel and Secretary of TECAGEN. Please note this call is being recorded and will be archived on the investor section of our website at tecagen.com. The press release regarding our second quarter 2023 earnings and the presentation provided this morning are available in the investor section of our website. I'd like to direct your attention to our safe harbor statement included in the earnings press release presentation. Various remarks that we may make about the company's future expectations, plans, and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q under the caption Risk Factors, which are on file with the Securities 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 at some point in the future, We specifically disclaim any obligation to do so. Therefore, you should not rely on any forward-looking statements as representing our views as of any date subsequent to today. During this call, we will refer to certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is provided in the press release regarding our second quarter 2023 earnings and in the investor section of our website. I'll now turn the call over to Abhinav Rangesh.

Thank you, Jack. Before I proceed, I'll just introduce everyone that is on the call with me today. Firstly, I'm Abhinayan Rangesh, the CEO of TicoGen. You also have with me Bob Tanora, who's our Chief Operating Officer and President. And you have Roger Deschêne, who's our Chief Accounting Officer. Firstly, welcome to our TicoGen second quarter 2023 earnings call. In the last couple of calls, I laid out our objectives and plan. In order of importance, the focus on cash flow followed by revenue and marketing, and lastly, margin and cost. I'll start by giving an update on where we are with regards to meeting these objectives. Roger will then take us through the financials, and then I will wrap up with our next steps. We saw tremendous growth toward the above objectives. Revenue has grown 25% since Q1 23 and 5% since Q2 22. We generated cash from operations and finished the quarter with $1.87 million in cash. We started the quarter with $1.6 million in cash. Our current cash position is presently approximately $1.2 million, but over the next 30 days we expect to collect more than $3 million in customer deposits in addition to our regular receivables. Our backlog has steadily increased and presently sits at $11.3 million. This backlog is predominantly CEA or indoor agriculture. As you may have seen from our press releases, we established some new sales relationships with companies that are selling complementary products in the same industry. We also received favorable write-ups and have begun advertising in the Vertical Farm Daily publication, which has helped increase our exposure to the CEA facility owners. We expect to take a similar targeted approach in other market segments, such as ice rinks and process cooling, where our equipment offers tremendous savings. We expect to turn this strong backlog into product shipments and reduce inventory levels in Q3 and Q4, further freeing up cash. We also completed the Aegis service contract acquisition and saw an increase in our services revenue of 29.6% quarter to quarter. The sites performed well, and the service technicians we took on as part of the transaction are well on their way to being integrated with our team. One thing to note is that the total present value of the consideration to be paid to AGES is accounted for as a liability on the balance sheet and amortized on the P&L over the life of the agreement. Roger will explain this further when he goes over the financials. Lastly, the air-cooled chiller marketing continues to progress with customer interest. Although we have not yet received purchase orders, we are specified on multiple projects and expect to start seeing orders for this product soon. We presently plan to focus on shipping our current backlog first before shipping air-cooled chillers. Now that our order backlog is increasing, our next steps are to start increasing margin so that we can move towards profitability. I'll talk more about what we are doing to increase margins after Roger reviews the financials. I'd like to do a quick recap of our products and our business before we go over financials. We have three value propositions for end customers. The first is power generation and resiliency. This is electrical cogeneration for energy savings and in some cases for backup power in the event of a blackout. We use a natural gas engine to generate electricity and use the engine heat to produce hot water for the building. We are twice as efficient as an equivalent fossil fuel power plant as we are able to use the heat so have a much lower greenhouse gas footprint. The second is our clean cooling products. These products generate chilled water and hot water simultaneously. In applications that require climate control, such as healthcare, CEA, et cetera, we are the cheapest source of producing cooling and humidity control. Typically, the highest cooling load occurs in the summertime when natural gas prices are lowest. So we also offer customers substantial energy savings. In addition to energy savings, our chillers require little to no electricity to operate. so are ideal for applications where utilities are unable to supply sufficient power. As with electrical cogeneration, our greenhouse gas footprint is cleaner than an equivalent electric chiller and boiler combination, since most fossil fuel power plants are not utilizing the waste heat. Both our electrical cogeneration and clean cooling products benefit from up to a 40% investment tax credit that reduces the payback substantially. Our last value proposition to customers is our long-term service contracts. Our service centers provide end-to-end maintenance and allow customers to maximize their energy savings. Our typical maintenance contracts run for longer than 10 years, and we optionally provide ancillary services to maintain balance of plant. This is an area that our strategy will focus heavily on. We plan to increase the range of services that we offer to customers and also increase the number of sites that we service. We have three revenue segments. Our product revenue consists of sales of cogeneration units, microgrid systems, and chillers to a range of markets and customers. Our services revenue primarily consists of our contracted operations and maintenance services. Our energy production revenue stream is from energy sales, including sales of electricity and thermal energy produced by our equipment onsite at customer facilities. At this point, I'll hand over to Roger to review the financials.