Energy Efficiency Reimagined
NASDAQ: TGEN
Year-End 2017 Earnings Review
March 21, 2018
Participants
Co-Chief Executive Officer, DirectorJohn Hatsopoulos
Co-Chief Executive OfficerBenjamin Locke
President & Chief Operating OfficerRobert Panora
Chief Accounting OfficerBonnie Brown
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Safe Harbor Statement
This presentation and accompanying documents contain “forward-looking statements” which may describe strategies, goals, outlooks or
other non-historical matters, or projected revenues, income, returns or other financial measures, that may include words such as
"believe," "expect," "anticipate," "intend," "plan," "estimate," "project," "target," "potential," "will," "should," "could," "likely," or "may" and
similar expressions intended to identify forward-looking statements. These statements are only predictions and involve known and
unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those expressed or implied by
such forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update or revise any
forward-looking statements.
In addition to those factors described in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q under “Risk Factors”,
among the factors that could cause actual results to differ materially from past and projected future results are the following:
fluctuations in demand for our products and services, competing technological developments, issues relating to research and
development, the availability of incentives, rebates, and tax benefits relating to our products and services, changes in the regulatory
environment relating to our products and services, integration of acquired business operations, and the ability to obtain financing on
favorable terms to fund existing operations and anticipated growth.
In addition to GAAP financial measures, this presentation includes certain non-GAAP financial measures, including adjusted EBITDA
which excludes certain expenses as described in the presentation. We use Adjusted EBITDA as an internal measure of business
operating performance and believe that the presentation of non-GAAP financial measures provides a meaningful perspective of the
underlying operating performance of our current business and enables investors to better understand and evaluate our historical and
prospective operating performance by eliminating items that vary from period to period without correlation to our core operating
performance and highlights trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures.
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Earnings Call Agenda
John Hatsopoulos
Introduction
Benjamin Locke
Why Tecogen
Year-End 2017 Review
Recent Achievements
Market and Regulatory Developments
Robert Panora
Emissions Update
Bonnie Brown
Financial Review
Benjamin Locke
Opportunities and Outlook
Q&A
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Heat, Power, and/or Cooling that is
Advanced Modular
Cogeneration Systems
Cheaper
Industry leading efficiency
Cleaner
Lower emissions thanks to efficiency and emissions technology
More reliable
Real time monitoring enables prompt service
All of Tecogen’s equipment is powered by internal combustion
engines that use clean, abundant natural gas and is equipped with
Tecogen’s patented Ultera emissions system
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Sustained Positive
Financial Results
Record annual revenue in 2017 of
$33.2 million
Sustained step change to profitability
achieved in 3Q’16
Six consecutive quarters of positive
operational results
Adjusted EBITDA of $1.1 million for
the year, $533K in 4Q’17
Adjusted EBITDA is defined as net income (loss) attributable to Tecogen
Inc, adjusted for interest, depreciation and amortization, stock based
compensation expense, and one-time merger related expenses.
-$1,500
-$1,000
-$500
$0
$500
$1,000
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Adjusted EBITDA
Quarterly with T4Q Average (dotted line) - $Thousands
Sustained step change
to profitability 6
$ in thousands 4Q’17 4Q’16 YoY Chg 2017 2016
YoY
Chg
Comments
Revenue
Products $ 4,642 $ 3,196 45.2% $ 12,991 $ 10,722 21.2% Chiller sales drive record product revenue
Service 4,118 3,915 5.2% 16,377 13,768 19.0% Gaining traction with turnkey installation
Energy Production 1,504 0 N/A 3,834 0 N/A Seasonality impacts 4Q results
Total Revenue 10,264 7,111 44.3% 33,203 24,490 35.6% Record core revenue plus energy production revenue
Gross Profit 3,795 2,704 40.4% 12,954 9,301 39.3%
Operating Earnings (Loss) 308 46 569.8% 225 (997) 122.6% Sustainable and growing business model
Adjusted EBITDA 533 160 232.9% 1,103 (503) 319.4%
Net Income (Loss) $ 269 $ 5 5803.9% $ 47 $ (1,096) 104.3% Record quarter drives full year to positive net income
Gross Margin: %
Products and Services 37% 38% 38% 38% Targeting sustained gross margin of 35-40%
Energy Production 35% N/A 47% N/A Results in-line with long term expectations of ~35%
Total Gross Margin 37% 38% 39% 38%
Positive Net Income
for FY 2017
Positive net income
for the full year
Consistently strong
core gross margin
Record quarterly
product revenue
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Record quarterly
net income
Recent Achievements
Over the last 18 months the core company has proven
itself to be a viable, profitable, and scalable business
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Self Sustaining
and growing
cash flow
Backlog at record
levels
Balance sheet
almost entirely
debt free
Acquisition of
American DG
Energy
Enables company to
reinvest in itself to
drive growth
Primary driver of
revenue growth
Provides opportunity
to pursue a working
capital line of credit
Source of stable high
margin revenue
Product and Installation
Backlog
Year-end 2017 Backlog by Customer
Record quarter-end backlog of $15.7 million on 12/31/17 versus $11.1
million on 12/31/16. Backlog as of 3/20/18 at $17.4 million
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Multi-Unit
Residential
50%
Hospitality &
Recreation
4%
Other
13%
Industrial &
Manufacturing
11%
Education
3%
Health Care
19%
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
2013 2014 2015 2016 2017
$ thousands
Backlog at Year-end
Backlog related Revenue
Market and Regulatory
Developments
Market Developments
Indoor agriculture important driver of near term
growth
Exhibiting potential to be a major long term market
Cultivating and deepening sales relationships across
industry channels
ESCOs, building management companies,
engineering companies, energy efficiency consultants
Third party interest in undertaking onsite utility
projects (OSUs) with Tecogen products
Low cost of capital
Ability to take advantage of depreciation tax shield
Increasing focus on microgrids for resiliency
Regulatory Developments
Incentive programs strongly supported
NYSERDA, NJ SmartStart
Federal tax policy
Renewal of investment tax credit (ITC) in recent
budget bill
Accelerated depreciation
Utilities improving views of cogeneration
Changing regulations for grid support capability of
CHP systems
Examples: frequency response, demand
management, battery storage charging and discharging
SCAQMD declares Ultera-level emissions to be best
available control technology (BACT) for stationary
non-emergency ICE-powered generators
Sets an example for other Air Districts to follow
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Emissions Update Topics
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Topics of Discussion
Fork trucks
Automotive
Stationary
Standby generator program
Best Available Control Technology
(BACT) in South Coast Air Quality
Management District (SCAQMD)
Potential new SoCal sale
Emissions Update: Fork Truck
Integration
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PERC research grant for application
of Ultera to propane fork trucks
Integrated under counterweight with
existing exhaust components
Exceptional test results
99% CO reduction
58% THC reduction
24% NOx reduction
Near Zero NOx levels achievable
with simple engine control tuning
(reprogramming)
Visit to Tecogen by manufacturer
planned for late April
Design fits well within existing architecture and
does not require significant reengineering
Emissions Update: Fork Truck
Test Results
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Post Ultera System
400 F (204 C) Ultera Temperature
Heavy Lift Test*
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Pre Ultera System
Post Ultera System
400 F (204 C) Ultera Temperature
*Note: THC reduction is 58% based on average concentration
Emissions Update: Fork Truck
Test Results
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Low NOx Tuning Test (low loading)
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Ultera Emissions Technology
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Mobile Emissions Applications
Dissolution of ULTRATEK joint venture is
complete
Tecogen now owns 100% of patents and other
intellectual property. Received $1.6 million in cash
Tecogen self-funding Phase 1 of three-phase
program with a major R&D institution
Testing of advanced catalyst formations
Four-month project expected to run until April / May
Optimistic about obtaining funds to continue with
Phases 2 and 3
Application underway for government grant
(California)
In discussions with several private sources
Stationary Emissions Applications
Regulatory update in southern California
New Best Available Control Technology (BACT) standard
adopted by South Coast Air Quality Management District
(SCAMQD)
Non-emergency engine-driven generators
Based on review of Ultera emission system by regulators
Potential for adoption by other regulatory bodies
Standby generator retrofit program
Retrofitted machines continue to be operational
Passing weekly / monthly compliance tests
Renewed interest in Ultera at water district
Increased activity in request for sales quotes
Year-End 2017 Financial Metrics:
Revenues, Margins, Growth
Four diverse revenue streams
Record product sales
Long term service contracts provide
steadily improving cash flow
Turnkey installation through Tecogen
service operations facilitates both
product sales and service revenue
Energy production via ADGE sites
provides stable and reliable cash flow
Maintained total gross margin near 40%
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$ in thousands 2017 2016
YoY
Growth
2017 % of
Total Rev
Revenue
Cogeneration $ 8,186 $ 7,795 5.0% 24.7%
Chiller (includes HEWH) 4,806 2,928 64.1% 14.5%
Total Product Revenue 12,991 10,722 21.2% 39.1%
Service Contracts and Parts 8,697 8,541 1.8% 26.2%
Installation Services 7,680 5,227 46.9% 23.1%
Total Service Revenue 16,377 13,768 19.0% 49.3%
Enery Production 3,834 0 N/A 11.5%
Total Revenue $ 33,203 $ 24,490 35.6% 100.0%
Cost of Sales
Products $ 8,012 $ 7,189 11.4%
Services 10,202 8,000 27.5%
Energy Production 2,035 0 N/A
Total Cost of Sales $ 20,248 $ 15,190 33.3%
Gross Profit $ 12,954 $ 9,301 39.3%
Net Income (Loss) attributable
to Tecogen Inc. $ 47 $ (1,096) 104.3%
Gross Margin
Products 38.3% 33.0%
Services 37.7% 41.9%
Aggregate Products and Services 38.0% 38.0%
Energy Production 46.9% N/A
Overall 39.0% 38.0%
>20% product
revenue growth
Record breaking
revenues
Contribution
from ADG sites
Consistent Financial Progress
*Adjusted EBITDA is defined as net income (loss) attributable to Tecogen Inc,
adjusted for interest, depreciation and amortization, stock based compensation
expense and merger related expenses.
Steady growth in the backlog
translates directly to revenue and
bottom-line growth
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Year Ended December 31
$ in thousands 2017 2016
Non-GAAP financial disclosure
Net income (loss) attributable to Tecogen Inc. $ 47 $ (1,096)
Interest expense, net 127 164
Depreciation & amortization, net 588 264
EBITDA 763 (668)
Stock based compensation 184 166
Merger related expenses 156 0
Adjusted EBITDA* $ 1,103 $ (503)
Quarter Ended December 31
$ in thousands 2017 2016
Non-GAAP financial disclosure
Net income attributable to Tecogen Inc. $ 269 $ 5
Interest expense, net 33 41
Depreciation & amortization, net 185 65
EBITDA 487 111
Stock based compensation 45 49
Merger related expenses 0 0
Adjusted EBITDA* $ 533 $ 160
$8,000
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Weekly BacklogData: Product and Installation Services
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Revenues: Trailing 4 Quarters
Products
Services
Energy Production (ADGE)
$ thousands
30%
34%
38%
42%
46%
50%
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Trailing 4 Quarters (%)
G&A and Selling Costs as % of Revenue
Gross Margin
Consistent Financial Progress
Energy production revenue
acquired in May, 2017
Declining operating costs as a percent
of revenue demonstrates scalability
with revenue growth 18
2018 Outlook
Continue to reinvest cash flow in the core
business to drive revenue and gross profit
growth
Consider various financing opportunities to
accelerate growth
Move forward with development of Ultera
technology, focusing initially on fork trucks
Open to opportunistic acquisitions
Take proactive advantage of evolving utility
environment
Energy Efficiency Reimagined
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Q&A
Company Information
Tecogen, Inc
45 First Ave
Waltham, MA 02451
www.Tecogen.com
Contact information
John Hatsopoulos, Co-CEO
781.622.1122
John.Hatsopoulos@Tecogen.com
Jeb Armstrong, Director of Capital Markets
781.466.6413
Jeb.Armstrong@Tecogen.com
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