Tecogen (NYSEAMERICAN:TGEN) reported higher third-quarter revenue and a narrower net loss as its service business improved, while unveiling a modular dual-power package aimed at data centers and other large facilities.
Revenue rose 9.6% to $7.9 million from $7.2 million a year earlier, and the net loss narrowed to $1.6 million from $2.1 million, Chief Financial Officer Roger Deschenes said on the company’s earnings call. Gross margin increased to 37.4% from 30.4%, helped by lower labor and material costs in services.
Chief Executive Officer Abinand Rangesh said Tecogen’s product backlog exceeded $8 million, excluding recurring service contracts and energy services. More than 70% of the backlog was with large property portfolio owners and energy services companies, he said.
Modular product targets data center power needs
R a n g e s h introduced a modular dual-power source package designed to be added to third-party chillers, dry coolers and other data center loads. The system can switch dynamically between electricity and natural gas, which he said could help customers free up electrical capacity for computing and maintain operations through outages.
Unlike Tecogen’s dual-power chiller, the module does not include the full refrigeration assembly. Rangesh said that makes it easier to produce in volume, requires less factory space and allows customers to use chillers already included in their designs. The package includes emissions controls, heat rejection and microgrid controls, he said.
The CEO said the approach was developed with feedback from hyperscalers and large data center developers concerned about whether Tecogen could deliver equipment quickly and at scale. The company expects the module to carry higher margins and require less incremental working capital, in part because customer deposits could fund a larger share of material costs.
Rangesh did not give a date for first customer shipments. Tecogen is working with partners and prospective customers to find initial deployments, he said. A prospect has specified the solution for a project, and the company is pursuing potential pilot sites both inside and outside the data center market.
Asked about manufacturing capacity, Rangesh said it was early to provide a precise figure, but output of the modules could be more than twice the roughly 100 chillers the company had previously discussed. Additional assembly space could be obtained by renting more factory capacity, he said.
Prospective customers may conduct smaller pilots while incorporating space for the modules into larger data center designs, Rangesh said. He added that the timing of such projects remained difficult to determine.
Service margins improve as product margins fall
Service revenue rose 13% to $4.5 million, driven by increased operating hours under existing and acquired contracts and price increases, Deschenes said. The segment’s gross margin climbed to 42.6% from 25.3%, reflecting lower labor and material costs, with notable improvement in the greater New York City area.
Product revenue increased 2% to $3.1 million, helped by higher chiller sales. Product gross margin fell to 27.1% from 36.8%, as the company incurred higher material costs for Hybrid-Drive air-cooled chillers and costs associated with reorganizing its factory floor. Deschenes said Tecogen expects unit material costs to decline as shipment volume increases.
Energy production revenue rose to $0.36 million from $0.26 million, while its gross margin increased to 60.2% from 34.4%, helped by lower maintenance costs.
Companywide operating expenses increased 5.3% to $4.5 million. Deschenes cited payroll, stock-based compensation, manufacturing expansion and development costs, among other items. The adjusted EBITDA loss narrowed to $1 million from $1.7 million.
Pipeline includes smaller data centers and larger facilities
Rangesh said smaller colocation data center opportunities in the company’s pipeline range from $1 million to $5 million. He characterized them as having a high likelihood of closing, though timing depends on customers’ expansion plans and tenant commitments. He also reported an influx of leads for industrial and healthcare projects in the $2 million to $5 million range.
The CEO said the company’s cash position had risen from its level at the end of the third quarter, supported by deposit collections and higher revenue. Tecogen also expected to collect more than $800,000 over the following week or two, he said, without providing a cash balance on the call.
Asked about Tecogen’s relationship with Vertiv, Rangesh declined to provide details, citing confidentiality agreements. “Things are in a great place, but just stay tuned,” he said.
About Tecogen (NYSEAMERICAN:TGEN)
Tecogen Inc. develops, manufactures, sells and services clean-energy equipment designed to improve energy efficiency and reduce emissions. The company’s products are primarily powered by natural-gas or propane-fueled engines and are used in distributed power-generation, heating and cooling applications. Its product portfolio includes combined heat and power systems, which generate electricity while capturing useful heat; natural-gas engine-driven chillers and heat pumps; and related energy systems for commercial, industrial, institutional and multifamily buildings.
