NASDAQ: TGEN
3Q 2017 Earnings
November 9, 2017
3Q 2017 Earnings Call 2
John Hatsopoulos
•Co-Chief Executive Officer, Director
Benjamin Locke
•Co-Chief Executive Officer
Robert Panora
• President & Chief Operating Officer
Bonnie Brown
• Chief Accounting Officer
Participants
3Q 2017 Earnings Call 3
This presentation This conference call and any accompanying documents, contain "forward-looking statements" within the meaning of the safe harbor provisions of the
U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek,"
"believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Examples of forward-looking
statements include, among others, statements we make regarding:
• Expected operating results, such as revenue growth, gross profit and backlog; and
• Strategy for growth, product development, and market position.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and
assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions.
Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and
many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements.
Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ
materially from those indicated in the forward-looking statements include, among others, the following:
• Decrease in interest in our products.
• The elimination of incentives and rebates related to our products.
• Competing technological developments.
• Issues in the research, development, and commercialization of new products.
• Tecogen’s inability to obtain sufficient funding. AND
• Such other factors as discussed throughout the "Risk Factors" section of Tecogen’s 10-K that was filed with the SEC on March 31, 2017 and can be found at
www.sec.gov.
Any forward-looking statement made by us in this conference call and any accompanying documents is based only on information currently available to us and speaks
only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from
time to time, whether as a result of new information, future developments or otherwise.
Safe Harbor Statement
3Q 2017 Earnings Call 4
Speaker Topic(s)
John Hatsopoulos Introduction
Benjamin Locke
Why Tecogen
3rd Quarter Review
Recent Achievements
Robert Panora Emissions Update
Bonnie Brown Financial Review
Benjamin Locke Opportunities and Outlook
Q&A
3Q Agenda
Heat, Power & Cooling that is Cheaper, Cleaner, & More Reliable
Tecogen’s compelling ROI proposition meets the needs of a diverse range of customers.
Hospitality Health Care Education Multi-Unit Residential Industrial Municipal Recreation
“Unregulated Utility”
CHP Modules
Electricity & Heat
Ilios Water Heaters
2-3x Heat
Efficiency
TECOCHILL
Cooling & Heat
Emissions Control
Ultra-Clean
Emissions
Ultera
On-Site Utility
American DG
ADGE
3Q 2017 Earnings Call 5
Why Tecogen?
REVENUE
▪ Total Revenues: $8.5M in 3Q17 vs. $6.6M in 3Q16 & $7.6M in 2Q17
▪ Products: $2.4M in 3Q17 vs. $2.9M in 3Q16 & $3.1M in 2Q17
− Cogeneration sales declined after four quarters of robust year-over-year growth
▪ Service: $4.5M in 3Q17 vs. $3.8M in 3Q16 & $3.7M in 1Q17
− Growth primarily due to strong sales of full turnkey installations
▪ Energy Production: $1.6M in 3Q17 vs $774K in 2Q17
− 3Q17 was the first full quarter ADGE was consolidated within Tecogen
PROFIT & Op. INCOME
▪ Gross Profit: $3.3M in 3Q17 vs. $2.8M in 3Q16 & $3.0M in 2Q17
▪ Earnings from Operations: $86K in 3Q17 vs $249K in 3Q16 and a loss of $246K in 2Q17
− Selling and R&D expenses increased $224K combined year-over-year
▪ Adjusted EBITDA: $296K in 3Q17 vs $383K in 3Q16 and $64K in 2Q17
− Merger related expenses totaled $37K in the third quarter
MARGIN
▪ Total Company gross margin of 38.3% in 3Q17 vs. 41.9% in 3Q16
▪ Product and services gross margin eased to 34.9% vs 41.9% in 3Q’16
− Lower margin full turnkey installations were a greater share of revenue
▪ Energy production gross margin from ADGE of 53.5% in 3Q17 vs 57.3% in 2Q17
NET INCOME $27,211 in 3Q17 vs $207,868 in 2Q16
3Q 2017 Earnings Call 6
3Q’17 Results
Performance
• Tecochill experiencing increasingly broad market penetration
• Growing interest in full turnkey installation
• Backlog sustained at near record levels
Groundwork for Continued Growth
• Expanding base of ESCO partnerships
• Tracking state approvals for indoor grow facilities
• Continued focus on improving ADGE fleet performance
• Identifying and implementing cost savings measures of
consolidated company
Emissions Development for Future Growth
• Completed prototype of fork truck emissions program
• Completed installation of emissions packages on stationary
generators seeking California air permit
• Developing next steps to commercialize technology for
automotive applications
3Q 2017 Earnings Call 7
Recent Achievements
Installed Base* Backlog
$14.5M 3Q17 backlog vs $11.9M 3Q16 backlog
$16.8M current Product and Installation Backlog as of November 8, 2017
Backlog growth driven by increasing demand for Chillers, InVerde e+, and Installation Services
*Approximate recently installed base by end market as of YE 2016.
3Q 2017 Earnings Call 8
Multi-Unit
Residential
41%
Hospitality
5%
Other
10%
Industrial &
Manufacturing
12%
Education
20%
Health Care
10%
Recreation
4%
Multi-Unit
Residential
55%Hospitality
11%
Other
16%
Industrial &
Manufacturing
8%
Education
4%
Health Care
5%
Recreation
1%
Backlog
3Q 2017 Earnings Call 9
As Delivered by Manufacturer
With Ultera installed
Tecogen Emissions Programs
• PERC research grant for application of Ultera process to
propane powered fork trucks
– Retrofit complete on donated fork truck
• As pictures to the right show, the technology fits well within existing
machine architecture
– Testing is now underway
– Tecogen visits planned by partner and sponsor in the December
timeframe
• Ultera standby generator retrofit project in Southern California
– All Ultera installations are complete following troubleshooting of
unrelated technical issues
– Third party “source testing” is anticipated to take place by year-end
– NOTE: recent CPUC decision prohibits the use of fossil fuels for
dispatchable demand response programs
• No apparent restriction on non-dispatchable distributed generation
capacity for peak shaving
Emissions Update
Ultera Adaption to Vehicle Emissions
• Dissolution of Ultratek pending
– Tecogen to receive $2 million in cash
– Transaction to acquire all the IP within
Ultratek for $400,000 to follow
• Initial conversations with investors in
new entity underway
• Goal is to have structure in place to
begin research & development
process in early 2018
3Q 2017 Earnings Call 10
Emissions Update
Financial Metrics
Revenues, Margins, Growth
▪ Four revenue streams
− Product sales
− Long-term service contracts provide
stable ongoing revenue
− Turnkey Installation through Tecogen
service operations
− Energy production through wholly-owned
subsidiary, ADGE, provides additional
source of stable ongoing revenue
▪ Maintain Gross Margins at 35% - 40%
▪ Quarterly Product Backlog >$10M
▪ Future energy revenues
(undiscounted) > $50M
Tecogen Revenue Model & Outlook
✓ Record quarter-end backlog
of $14.5 million
3Q 2017 Earnings Call 11
2017
Quarter Ended September 30 Y/Y % of Total
2017 2016 Growth Revenue
REVENUE
Cogeneration 1,842,185$ 2,639,713 21.7%
Chiller (includes HEWH) 583,431 211,188 6.9%
Total Product Revenue 2,425,616 2,850,901 -14.9% 28.5%
Service Contracts & Parts 2,109,654 2,113,295 24.8%
Installation Services 2,409,813 1,652,259 28.3%
Total Service Revenue 4,519,467 3,765,554 20.0% 53.2%
Energy Production 1,556,115 - 18.3%
Total Revenue 8,501,198$ 6,616,455$ 28.5% 100.0%
COST OF SALES
Products 1,538,515 1,715,462
Services 2,981,454 2,126,175
Energy Production 723,198 -
Total Cost of Sales 5,243,167$ 3,841,637$ 36.5%
Gross Profit 3,258,031$ 2,774,818$ 17.4% 38.3%
Net income attributable to Tecogen Inc 27,211$ 207,868$
GROSS MARGIN
Products 36.6% 39.8%
Services 34.0% 43.5%
Products & Services GM 34.9% 41.9%
Energy Production 53.5% N/A
Overall Gross Margin 38.3% 41.9%
3Q 2017 Earnings Call 12
Sustained Positive Results
Five Consecutive Quarters of
Positive Operational Results
▪ Adjusted EBITDA of $730K over the last four quarters
▪ Sustained step change in profitability that was first
achieved in 3Q’16
▪ Reinvesting profits back into the business
− $457K increase in selling and R&D expenses over the first nine
months of 2017 versus 2016
− Increased focus on product development and customer outreach
Non-GAAP f inancial disclosure Q3 2017 Q3 2016
Net Income (loss) attributable to Tecogen Inc. 27,211$ 207,868$
Interest expense, net 30,393 41,625
Depreciation & amortization, net 160,061 66,484
EBITDA 217,665 315,977
Stock based comp nsation 40,645 66,825
Merger related expense 37,445 -
Adjusted EBITDA 295,755$ 382,802$
-$1,500
-$1,000
-$500
$0
$500
20
14
Q1
20
14
Q3
20
15
Q1
20
15
Q3
20
16
Q1
20
16
Q3
20
17
Q1
20
17
Q3
Adjusted EBITDA
Quarterly with T4Q Average (dotted line) - $Thousands
Sustained step change to
profitability
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
20
14
Q
1
20
14
Q
3
20
15
Q
1
20
15
Q
3
20
16
Q
1
20
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Q
3
20
17
Q
1
20
17
Q
3
Revenues
Trailing 4 Quarters - $ Millions
Products Services Energy Production (ADGE)
3Q 2017 Earnings Call 13
Consistent Financial Progress
30%
32%
34%
36%
38%
40%
42%
20
14
Q
1
20
14
Q
3
20
15
Q
1
20
15
Q
3
20
16
Q
1
20
16
Q
3
20
17
Q
1
20
17
Q
3
Gross Margin
Trailing 4 Quarters (%)
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
De
c-1
4
Ma
r-1
5
Jun
-15
Se
p-1
5
De
c-1
5
Ma
r-1
6
Jun
-16
Se
p-1
6
De
c-1
6
Ma
r-1
7
Jun
-17
Se
p-1
7
Backlog - Product and Installation Services: $Millions
$0
$2
$4
$6
$8
$10
$12
$14
20
14
Q
1
20
14
Q
3
20
15
Q
1
20
15
Q
3
20
16
Q
1
20
16
Q
3
20
17
Q
1
20
17
Q
3
Op ating Expense
Trailing 4 Quarters - $Millions
Opportunities & Outlook
a growing company in a growing industry
•High ROI product
•Technological
innovation
•Relationships with key
partners
•Increasing
environmental and
regulatory pressures
•Resiliency and
Demand Response
concerns
Sales
•Turnkey installation
•Long term service
agreements
•Nationwide presence
•High margin revenue
stream
•Additional growth
anticipated
Service
•Predictable, annuity
type revenue
•Enhancing profitability
of existing fleet
•Reduced operational
costs through Tecogen
service
•Additional growth
possibility
American DG
•Double digit CAGR
•>$40B market potential
for CHP
•Margins 35% - 40%
•>$10M product and
installation backlog
•<50% manufacturing
capacity utilization
•Stable operating expense
profile
Growth &
Margins
3Q 2017 Earnings Call 14
NASDAQ: TGEN
3Q 2017 Earnings Call 15
Q & A
Company Information
Tecogen Inc.
45 First Avenue
Waltham, MA 02451
www.tecogen.com
Contact
John Hatsopoulos, Co-CEO
781.622.1122
John.Hatsopoulos@tecogen.com
Jeb Armstrong, Director of Capital Markets
781.466.6413
Jeb.Armstrong@tecogen.com
3Q 2017 Earnings Call 16
Contact Information