Tecogen Inc.

Greetings. Welcome to TECAGEN's third quarter 2023 conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. At this time, I'll turn the conference over to Jack Whiting, General Counsel and Secretary. 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 Investors section of our website at tecagen.com. The press release regarding our third quarter 2023 earnings and the presentation provided this morning are available in the Investors section of our website. I'd like to direct your attention to our Safed Harbor Statement included in the earnings press release and presentation. Various remarks that you 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 and Exchange Commission. and available in the investor 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. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is provided in the press release regarding our third quarter 2023 earnings and in the investor section of our website. I'll now turn the call over to Abhinav Rangesh, TKGEN's CEO, who will provide a review of the third quarter activity and results, and Roger Deschenes, TKGEN's CAO, who will provide additional information regarding Q3 financial results. Abhinav?

Thank you, Jack. Welcome to TKGEN's third quarter 2023 earnings call. In the last couple of calls, I laid out our objectives and plan. 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. Revenue is up every quarter this year. The adjusted EBITDA loss has also narrowed. In fact, if service margins were where they were last year, we would have shown a net profit. Inventory is also down compared to Q2, although we still have work to do to reduce this further. Service margin is down predominantly because a number of systems were put into service around the same time, and certain components such as engines and exhaust heat exchangers have had to be replaced all at the same time, significantly increasing expenses associated with service. This is expected to recover by Q2 next year. To strengthen our balance sheet, We established a $1.5 million credit facility with two of our board members. We received favorable terms on the credit facility, and it gives us additional working capital and cash needed for our factory move next year. Our present cash position is now over $1.1 million. We have drawn $500,000 into the credit facility. Our cash position is lower than anticipated due to delays in collecting customer deposits. In this high interest rate, conservative lending environment, customer financing is taking longer. We expect to collect more of these deposits over the upcoming months. Our backlog is slightly lower than at the end of Q2. I'll discuss our marketing efforts on the sales pipeline in the next slide. We believe that there are substantial orders that are in the pipeline, so we expect the backlog to increase again shortly. The backlog is still predominantly indoor agriculture, with a small mix of education and residential. The last item I want to mention is that our board has approved management to prepare the paperwork for shareholder approval for a reverse split with a view to up list on a national listed exchange. We will likely hold a special meeting of the shareholders in early 2024 to discuss the various reverse split options and have the shareholders vote on the matter. The board will then consider the various parameters, including the share price at the time, public float, and shareholder viewpoints before deciding to undertake a reverse split and an up list. Our marketing efforts have been focused on segments where we have a clear competitive advantage. Our objective is to find developers who can integrate our products into customer projects. The two key approaches we have taken are informational articles and targeted trade publications. These include Vertical Farm Daily, ice rink magazines, industrial process cooling magazines, et cetera. The aim is to educate end customers and attract developers to integrate our products into their projects. The second approach we have taken is a direct outreach to contractors and design-build firms that specialize in niches such as food and beverage plants. Our overall sales pipeline for the 10 months to date is 16% higher than last year. By year end, we expect it will be 20% higher. Although some key markets have a significant anti-gas sentiment, we believe that in some of the market niches we are targeting, we have a sufficient advantage that we should see conversion of the pipeline into sales. I'd like to do a quick recap of our products and our business before we before we continue to the 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 and 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, controlled environment, agriculture, etc., we are the cheapest source of producing cooling and humidity control. Typically, the highest cooling load occurs in summertime when natural gas prices are so we also offer customers substantial energy savings. In addition to energy savings, our chillers require very little 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. Our electrical cogeneration and clean cooling products benefit from up to a 40% investment tax credit that reduces the payback substantially. Our third value proposition to customers is our long-term service and asset management services. 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 sometimes 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 and increase the number of sites we service. We have three revenue segments. Our products revenue consists of sales of co-generation 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. I'll now hand over to Roger to summarize our financial results.