Tecogen Inc.

Greetings. Welcome to the TECO Gen Year End 2023 Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during this conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to Jack Whiting, General Counsel and Secretary. Thank you. You may begin.

Good morning. This is Jack Whiting, General Counsel and Secretary of TecaGen. This call is being recorded and will be archived on our website at tecagen.com. The press release regarding our fourth quarter and year-end 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 safe harbor statement included in our earnings press release and presentation. Various remarks that we make about the company's expectations, plans, and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by forward-looking statements as a result of various factors, including those discussed in the company's most recent annual and quarterly reports on Forms 10-K and 10-Q under the caption Risk Factors, filed with the Securities Exchange Commission and Available Investors section of our website under the heading SEC Violence. While we may elect to update forward-looking statements, we specifically disclaim any obligation to do so, so we should not rely on any forward-looking statements as representing our views as of any future date. During this call, we will refer to certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP. The reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is provided in the press release regarding our fourth quarter and year-end 2023 earnings and on our website. I will now turn the call over to Abhinav Rangesh, TKGN's CEO, who will provide an overview of fourth quarter and year-end 2023 activity and results, and Roger Deschenes, TKGN's CAO, who will provide additional information regarding fourth quarter and year-end financial results.

Thank you, Jack. Welcome to TKGN's fiscal year 2023 earnings call. I'd like to start by giving investors an update on changes to the business landscape and market, what has worked with our strategy, and what we need to do differently to reach profitability. As we've mentioned before, we need to move factory at the end of Q1 and early Q2. I will also talk briefly about this and how this will affect operations. Roger will then take us through the financial numbers and then I will wrap up with our 2024 plan. As many of our long-term shareholders know, One of the predominant markets has been large multifamily residential buildings in New York City. These projects typically have one or two unit cogeneration systems per building. We are facing significant headwinds in this market. We have seen multiple projects canceled after contractor selection over the last six months. However, we also have a big opportunity ahead of us that can give us significant tailwind. Increased electrification efforts, data centers consuming exponentially more power, and aging utility infrastructure leading to electrical capacity constraints nationwide. It is limiting customers' ability to expand, the time of day charges are becoming punitive, and there are only a few options that allow customers to address the problem. As a result, we are seeing more multiple unit cogeneration and chiller projects than ever before. In the case of our chillers, the customer completely avoids the need to connect to the utility grid. In the case of our electrical cogeneration product, the ease of interconnect with our modular inverter-based system is a huge benefit. These electrical capacity constraints are nationwide, so I believe we are just starting to see the beginning of this trend. There's also an opportunity to generate additional revenue from utility demand response programs because of these electrical capacity constraints. I'll talk a bit more about this later in the presentation. We've looked at the business carefully and feel that there is a pathway to having our recurring revenue stream cover the majority of our fixed costs. Product revenue can significantly fluctuate quarter to quarter due to the long project development cycles. We need a way to be cash flow positive and profitable irrespective of product revenue fluctuations. We increased the number of service contracts last year. As a result, we saw a 20% increase year on year in service revenue. We also took on another 48 service contracts earlier this year, 16 of those that are operating presently in the balance coming online over the next two quarters. We're currently working on more deals for service contracts that will significantly increase our service revenue and cash flow. We also made much needed investments last year to replace engines and heat exchangers. This reduced our service margin for the first three quarters, but we saw our recovery to greater than 50% in Q4. We also generated some cash in the fourth quarter. As we make further improvements to our service fleet by increasing service intervals, we expect to see margin expansion from present levels. On the other side of the equation, we need to cut operating costs. At present, we are focused on completing our factory move. We expect to see reduced rent after the move. We also expect to make other operational cost reductions to move us closer to profitability. We are specified on multiple large projects. As mentioned before, we've had to pivot the business to nationwide projects, especially those that have electrical constraints. These are multi-unit projects, and we expect to close a significant portion of these later in the year. As already mentioned, we need to move factory and reduce operating expenses. We expect OPEX reductions in Q2 and Q3. We have also started to work with customers to sign them up for demand response programs. At the moment, there appears to be significant interest in this offering. This will provide high margin revenue and utilize any excess cogeneration capacity that is available in our service suite. I will provide updates as we sign up customers. We are also working on securing more energy contracts in conjunction with development and finance partners. Backlog and cash. The backlog is presently at $5.25 million. We have additional purchase orders from orders we announced last August, but these are cannabis projects and there has been continued financing delays, so we have removed these from our backlog. As mentioned, we also have some great projects in the pipeline, one of which is a large chiller project we are exclusively specified for. This is not yet in the backlog. We hope to close this by June or July. The cash position was $1.35 million at the end of Q4 and is presently at $1.5 million. We drew $500,000 into the credit line provided by the board members. We expect to draw another $500,000 into this line for the factory move and fit-out. The timing of when we secured our recent 12-unit order and when our larger chiller order is likely to close is going to limit what we can produce in both Q1 and Q2, but we expect to be back to full capacity by Q3. Our revenue segments. 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. I'll now hand over to Roger to go over the financial numbers.