Tecogen Inc.

Greetings, and welcome to the TCOGEN Fiscal Year 2025 Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation, and you may be placed into question queue at any time by pressing star 1 on your telephone keypad. As a reminder, this conference is being recorded, and if anyone should require operator assistance, please press star 0. It's now my pleasure to turn the call over to Jack Whiting, General Counsel and Secretary. Please go ahead, Jack.

Morning, this is Jack Whiting, General Counsel and Secretary of TECOGEN. This call is being recorded and will be archived on our website at tecogen.com. The press release regarding our fourth quarter and year-end 2025 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, including in our earnings press release and presentation. Various remarks that we may make about the company's expectations, plans, and prospects are constitute forward-looking statements for purposes of 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 in the Investors 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 first release regarding our Q4 and year-end 2025 earnings and on our website. And I'll turn the call over to Abhinav Raigesh, TQGEN's CEO, who will provide an overview of fourth quarter year-end 2025 activity and results, and Roger Deschenes, TQGEN's CFO, who will provide additional information regarding Q4 and year-end 2025 financial results. Abhinav?

Thank you, Jack. Welcome to TQGEN's fiscal year 2025 call. I know many of you would like an update on how the data center cooling strategy is progressing. So today, I'm going to start with an update on the Vertiv Partnership. There have been some key positive developments that I'll share, including their opportunities for our chillers. Then I'm going to walk you through TicoGen's data center opportunity pipeline outside the Vertiv Partnership. After that, I will provide an update on the other avenues we are working on including expanding our manufacturing throughput, increasing service revenue and margin, and the non-data center pipeline. We have seen significant forward momentum with the Vertiv relationship. First, Vertiv has designed or is in the process of designing between 25 and 50 megawatts of our chillers into various projects. This is equivalent to 50 to 100 of our 150-ton dual power source air-cooled chillers. Second, we have been negotiating our master partnership agreement that expands the marketing agreement that we signed last year. Third, we have discussed bringing TECOGEN's hybrid drive technology to Vertiv's chillers. As the sales grow, This may allow TicoGen to scale manufacturing very quickly because we would focus on the dual power source and make this to the refrigeration system that is already built in volume in Vertiv's factories. Last and most exciting of all, we have secured a demonstration project with Vertiv. This is expected to ship sometime toward the end of Q2 for one megawatt of cooling or two times our 150 ton dual power source chillers. Our chiller will go to the Vertiv controlled environment test chamber where it will operate under simulated AI data center conditions and various outside ambient temperatures. This technology demonstration project gives prospective customers data on how the chiller will operate under real world data center conditions across a range of ambient temperatures. While we have been furthering the Vertiv partnership, we have also been expanding our own data center pipeline. In this list, we have only included opportunities where the end customer has told us they plan to use Tico Gentilers and have made significant progress on signing data center tenants. This list is sorted based on our current project confidence. Developers that have existing data center experience and financing are higher on the list. Based on past experience, customers typically want chiller equipment delivered six to nine months before the site needs to be operational. For sites that are expected to be operational in early 2027, this would suggest equipment orders no later than Q2 or Q3 this year. Timing is always difficult to predict because there are multiple moving pieces on the customer side but the timeline we have seen to date is completely consistent with our historic sales cycles. Projects can also go through stop-start cycles before closing. For example, in the past five months alone, we've had two instances where potential customers have told us they were ready to place the purchase order, but then hit unforeseen delays on their end. However, as you can see, we have multiple opportunities of various sizes thereby increasing the odds in our favor. One project is an expansion of an existing data center. They plan to use our dual power source chiller to handle new tenants. Another is in the final stages of tenant negotiations and expects to use our DTX chillers to maximize IT capacity. The same developer also has a second project of a similar size and another of a larger scale. Next, There is an opportunity for a demonstration project with an established data center owner for up to 40 chillers. This developer evaluated the cost of power from our chillers against the alternatives and found the value highly compelling. However, they were also looking for some independent validation of our chillers. We believe that the Vertiv demonstration project will be instrumental in unlocking this opportunity. The remaining projects have filed for environmental permits and are in active discussions with tenants. They represent 100 to 200 chillers collectively. We expect more clarity on construction timing as permits are granted and tenant negotiations progress. In our previous call, we had mentioned an opportunity where we have an LOI for six STX chillers. Although this opportunity is progressing, We have moved this further down the list because we believe the others outlined above are moving faster and have more near-term potential. In addition to this list, we also have ongoing discussions with multiple hyperscalers and multiple other data center developers. The current timeline on these projects are completely in line with projects in other industries. We also believe that closing the first few opportunities will unlock significant demand. Based on conversations with prospects, even if we have chillers and other critical cooling applications, many data center owners would still like to see our chillers in other data centers or cooling AI loads. We believe this concern will be addressed with the Vertiv demonstration project and some of the near-term opportunities. Aside from data center projects, we are expecting chiller orders from other segments, such as cannabis, hospitals, and comfort cooling. These represent at least another six DTX chillers. Expected delivery is the fall and winter of this year. We're also seeing a gradual resurgence in cogeneration leads as utility rates rise across the United States. Given the significant amount of interest in our dual power source chiller, we wanted to make sure we could handle a step change in order volume. We have now qualified a vendor for the sheet metal and refrigeration assembly. This vendor already built hundreds of similar refrigeration and sheet metal assemblies for a large chiller company. We have also qualified an electrical assembly vendor for the power electronics and are in the process of qualifying a second vendor. We're also presently building some inventory of both the dual power source chillers and DTX chillers. Our engineering team has been iteratively improving our design for manufacturability and to reduce build time. Given the cash usage over the last six months, I would like to provide some context and then the plan for the next nine months. Given the size of the pipeline, one of the concerns we had was being able to handle aggressive delivery schedules. As a result, we expended cash on several fronts simultaneously to get everything we needed to do done. Some of these uses of cash included manufacturing capacity expansion, performing the testing and improvements needed for our dual power source chiller to operate under data center conditions. We also hired a marketing firm that specializes in data centers. In addition to the above, in Q3, we invested significantly in the service group, especially in the greater Manhattan area. We have found over the last two years, despite increasing our service contract rates greater than inflation, we have found that margin on the cogeneration products has reduced in the greater Manhattan and Toronto service centers. The chiller product continues to maintain solid margins. The cost of labor and increased travel times between sites is one of the biggest contributors to this decline in margin. To counteract this, we invested in new engines in this territory with the latest performance improvements. This allows us to increase service intervals by at least 50%. We expect this to lower labor costs per hour of operation. In Q4, We saw an increase in both run hours and margin compared to Q3 in these territories. We will continue to monitor and, if needed, institute aggressive price increases or cost reductions where needed. Our current cash position is $10 million. By Q2, we plan to cut the cash burn down substantially. From 2023 to mid-2025, we managed with $2 million of cash, including a factory move. Roger will discuss the results on the financial plan going forward.