Tecogen Inc.

Thank you for standing by and welcome to the TCOGEN second quarter 2024 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again press the star one. Thank you. I'd now like to turn the call over to Mr. Jack Whiting, General Counsel and Secretary. 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 second quarter 2024 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 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 Form 10-K and 10-Q under the caption, Risk Factors Filed with the Securities Exchange Commission, an available investor section of our website under the heading SEC Filings. While we may elect to update forward-looking statements, we specifically disclaim any obligation to do so, so you 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. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is provided in the press release regarding our second quarter 2024 earnings and on our website. I will now turn the call over to Abhinav Rangesh, TECA GEN CEO, who will provide an overview of second quarter 2024 activity and results, and Roger Deschenes, TECA GEN CEO, who will provide additional information regarding second quarter 2024 financial results.

Thank you, Jack, and welcome to TECA GEN second quarter 2024 results. I'd like to talk briefly about some new areas that we are developing, and then I will hand over to Roger to go over the results, and then I will summarize. Over the last 15 months, we've faced many challenges as a company. We've had to move our factory and spend $675,000 to build test cells. Anti-fossil fuel regulation in New York City, Boston, and many high-rate areas has meant that we've had to find new markets for our products. However, today I'm feeling extremely optimistic about the future. We've made significant headway on operations and product improvement, which we will discuss later. I also believe many of the orders we've been fighting for will close by the end of Q3. When I summarize at the end of this presentation, I will recap the last year and a half, why we had no product revenue for Q2, and why we made the strategic choices that we did. I believe that there's a once-in-a-lifetime opportunity coming. Like the railroad boom, the oil boom, the PC and social media revolution, the new boom is coming. Data centers are going to fundamentally change the energy landscape and catapult the growth of certain companies. Today, I'm going to show you why I believe TicoGen is going to be one of them. We've been working on data center projects for the past six months. I didn't want to talk about this before since the projects were too early a stage. When everyone thinks of data centers, they think of the massive facilities Amazon and Google are building. Initially, I thought that our products were going to be too small for this market. I asked one of our engineering and project development partners why he was recommending our products for data centers. Why are you specifying TicoGen's equipment? Why aren't you specifying a large engine from Caterpillar or GE? What alternatives does the customer have? He walked me through the economics and the timeline that these customers are looking for. Now that we've made progress on multiple projects, I'd like to tell you about the needs of this market, why our solution is better than the alternatives, and when we should expect to see orders from this segment. There are three sizes of data centers. Hyperscale is what kept all the press. Most data centers, though, are smaller. Most are co-location data centers. Here, multiple companies rent a portion of a bigger data center. Then there are the enterprise data centers where a bank or a law firm has their own dedicated data center. In the past, data centers were built in the lowest utility rate areas and were primarily used for data storage. Today, with AI and distributed computing, the power draw is immense and liquid cooling is essential. If you're Google, Meta, or Amazon, you can afford to build your own power plant or negotiate directly with utilities for favorable power contracts. Others are left short of power. Utilities are no longer able to provide all the power a data center needs. Power plants aren't being built fast enough. Utilities are also behind on upgrading infrastructure. The biggest need for solutions is in the co-location and enterprise tiers. If you need eight megawatts of power, in many regions, the utility will tell you that you'll get five and you'll have to source the remaining power yourself. This has become such a constraint that space is no longer being rented in some data centers by square foot. It is being rented by required power for each tenant. If you're building a co-location or enterprise data center, what are your options if you don't have enough power? You could buy a backup diesel generator or a natural gas generator. Most generators, though, are only designed for 500 hours or so of annual operation. You may or may not have the appropriate service support for the uptime you'll need. Emissions compliance for continuous operation is also tricky. Solar and wind won't work at night, but the data center needs power 24-7. You could build your own three megawatt turbine power plant, but that might take you 36 months or more to come online. Also, for an engine or turbine, greater than one megawatt, lead times for certain components like electrical panels and switch gear are more than 24 months out. As more data centers are located closer to populated areas, neighboring buildings, noise restrictions, meeting regulatory and permitting also adds additional time. How does all this affect TicoGen? If you have a data center that needs one megawatt to three megawatts of power, we have two solutions that'll solve your problem. The first solution is our DTX engine-driven chillers. These can take all of the cooling load off electricity and move it to natural gas. They can be running onsite in six months or less. Five to six units can be packaged in a container with all the connections for quick install onsite. They can even be run with dry coolers to reduce onsite water usage from cooling towers. For an eight megawatt data center, this will immediately free up one to two megawatts, which might allow a customer to open on time or add additional tenants. Chiller modules can also be added as the data center expands. The second solution is to use our inverter to generate power. We use a proprietary 480-volt inverter-based system. It avoids many of the switchgear requirements as it has built-in electrical protection. We can also use electrical panels that are readily available. As multiple inverters can be daily chained together into a microgrid, you also have redundancy. If you used a large engine from GE or Caterpillar, you would need 13.2 kilovolt or higher voltage switchgear and panels. As mentioned, such switchgear lead times sometimes can exceed 24 months. You would also need specialist electrical contractors adding cost and complexity. Today, data centers are being built near cities and other buildings. Getting approval to put an on-site power plant near other buildings is not easy. We have hundreds of systems in residential buildings. Our units are quiet, and our patented Altera system allows us to meet emission standards everywhere. As the data center expands, more inverters can be added to the microgrid. Lastly, if a customer wants a zero-carbon option, we work with a carbon capture company to extract and store all the CO2 from the exhaust. We are presently working on three data centers in the Northeast and Mid-Atlantic. I hope to announce the first purchase orders later this year. We've also signed up distributors that specialize in data centers. Right now, TicoGen is valued at barely one times revenue for the service business. There are many startups right now that are raising money at premium valuations to try and solve the power problem for data centers. Data centers can accelerate their construction timeline by 12 months or more with our chillers and inverters. They have the flexibility to add capacity later as our equipment is modular. Best of all, our equipment will continue to save money on energy expenses going forward. Technology is only one piece of the solution, however. Data centers need 24-7 support, and not everyone can do that. We already have experience with off-grid power, process cooling, and other applications that need high uptight. I believe that if we can demonstrate our solution with the projects we're working on now, this could be a great opportunity for TecaGen long-term. Backlog and cash. The backlog is presently just shy of 6 million. This is up by 1.1 million from when we reported in Q1. We also have another $5 to $7 million of prospective orders where the customer has told us to expect a purchase order sometime before the end of September. We had positive cash flow from operations in H1. However, we had to spend 600,000 in factory fit out and move. So we finished with a cash position of 841,000. Today we have 1.1 million in cash. The movement that some customers were still sending payments to our old address, and this was adding 15 to 30 days to our cash collection cycle. So we decided to draw another $500,000 into our line of credit in July. As a quick recap, we have three revenue segments. Our product revenue consists of sales of cogeneration units, microgrid systems, and chill air store range of markets and customers. Our service 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'm now going to hand over to Roger to go over the financial numbers.