Tecogen Announces Third Quarter 2021 Results

Net Income of $3.6 million YTD 2021 and $1.5 million for Q3 2021
Diluted earnings per share of $0.14/share YTD 2021 and $0.06/share for Q3 2021

Waltham, MA - (NewMediaWire) - November 11, 2021 - Tecogen Inc. (OTCQX:TGEN), a leading manufacturer of clean energy products, reported net income of $1.5 million for the quarter ended September 30, 2021 compared to a net loss of $0.2 million in 2020, an improvement of $1.7 million. For the nine months ended September 30, 2021, net income was $3.6 million compared to a net loss of $2.1 million, an improvement of $5.7 million. The increase in net income for both periods was due to the benefit from the CARES Act payroll support programs. Our gross margin increased to 47.3% in the nine months ended September 30, 2021 compared to 37.5% for the same period in 2020. 

Key Takeaways

Earnings Per Share

• Net income (loss) per share, basic and diluted, was net income of $0.15 and $0.14 per share, respectively, in nine months ended September 30, 2021 compared to a loss of $0.08 and $0.08 per share in the nine months ended September 30, 2020.
• Net income (loss) per share, basic and diluted, was net income of $0.06 in the third quarter of 2021 compared to a loss of $0.01 in the third quarter of 2020.

Revenues

• Revenues for the quarter ended September 30, 2021 were $5.0 million compared to $7.2 million for the same period in 2020, a 30.3% decrease. 
  • Product revenue was $1.9 million in Q3 2021 compared to $2.7 million in the same period in 2020, a decline of 30.8%, primarily due to lower cogeneration and chiller unit volume. 
  • Services revenue was $2.8 million in Q3 2021 compared to $4.1 million in the same period in 2020, a decline of 31.4%, primarily due to reduced lower margin installation activity. Services contract revenue increased 5.9% to $2.8 million compared to $2.6 million in the third quarter of 2020. 
  • Energy Production revenue decreased by $53 thousand, or 14.5%, to $315 thousand in Q3 2021 compared to $369 thousand in the same period in 2020. 
• For the nine months ended September 30, 2021 revenues were $17.2 million compared to $22.6 million for the same period in 2020, a decrease of $5.4 million or 23.8% year over year. 
  • Product revenue was $6.4 million in the nine months ended September 30, 2021 compared to $9.5 million in the same period in 2020, a decline of 32.5%, primarily due to lower cogeneration unit volume. 
  • Services revenue was $9.4 million in the nine months ended September 30, 2021 compared to $11.7 million in the same period in 2020, a decline of 19.0%, primarily due to reduced lower margin installation activity. Services contract revenue increased 14.3% to $8.6 million compared to $7.5 million in the same period in 2020.
  • Energy production revenue in the nine months ended September 30, 2021 was $1,339 thousand, compared to $1,396 thousand for the same period in 2020, a decrease of $56 thousand, or 4.0%.

Gross Profit

• Gross profit for the third quarter of 2021 was $2.3 million compared to $2.8 million in the third quarter of 2020. Gross margin improved to 46.7% in the third quarter compared to 38.7% for the same period in 2020 due to higher Product margin which increased to 44.6% in Q3 2021 from 40.2% in Q3 2020 and Services margin which improved to 48.1% in Q3 2021 from 37.0% in Q3 2020.  
• Gross profit for the nine months ended September 30, 2021 was $8.1 million compared to $8.5 million for the same period in 2020, a decrease of $0.3 million, or 4.1%. During the nine months ended September 30, 2021 gross margin increased to 47.3% compared to 37.0% for the same period in 2020 due to higher Product margin which increased to 44.1% from 40.9% and higher Services margin which increased to 50.4% from 34.9%.

Operating Expenses

• Operating expenses increased by 8.6% to $3.3 million for the third quarter of 2021 compared to $3.0 million in the same period of 2020. Operating expenses increased due to increased payroll and payroll related expenses and sales commissions compared to Q3 2020.
• For the nine months ended September 30, 2021 operating expenses decreased $0.8 million, or 7.9%, to $9.5 million compared to $10.3 million in the same period in 2020. The decrease in operating expenses in the nine month period was primarily due to cost controls, resulting in decreased payroll and payroll related expenses and reductions in other operating expenses compared to the same periods in 2020. 

Loss from Operations

• Our loss from operations for the three months ended September 30, 2021 was $0.9 million compared to a loss of $0.2 million for the same period in 2020, an increase of $0.7 million. The increase in our loss from operations is due primarily to the lower revenue for our Products and Services Segment and our Energy Production Segment and an increase in operating expenses.
• For the nine months ended September 30, 2021, our loss from operations was $1.4 million compared to a loss of $1.8 million for the same period in 2020, a decrease of $0.5 million. The decrease in our loss from operations is due primarily to the $0.8 decrease in operating expenses.

Adjusted EBITDA(1) was a negative $197 thousand for the third quarter of 2021 compared to negative $67 thousand for the third quarter of 2020. For the nine months ended September 30, 2021 adjusted EBITDA was a positive $0.4 million compared to a negative $1.2 million for the nine months ended September 30, 2020. (Adjusted EBITDA is defined as net income or loss attributable to Tecogen, adjusted for interest, income taxes, depreciation and amortization, stock-based compensation expense, unrealized gain or loss on equity securities, goodwill impairment charges and other non-cash non-recurring charges or gains including abandonment of intangible assets and the extinguishment of debt. See the table following the Condensed Consolidated Statements of Operations for a reconciliation from net income (loss) to Adjusted EBITDA, as well as important disclosures about the company's use of Adjusted EBITDA).

“This quarter was challenging due to the significant supply chain impacts on our Product Segment. We have mitigated a majority of these impacts, but were unable to ship some product during Q3 due to supplier constraints. As a result our Product Segment revenue was significantly impacted,” commented Benjamin Locke, Tecogen's Chief Executive Officer. “We expect Product sales to rebound in the fourth quarter of 2021 and further into 2022. We are pleased with the recent announcement of an order for 12 Inverde E+ units and 3 chillers which are scheduled to be shipped during Q4 2021 and Q1 2022. Our Energy Production assets are gradually returning to normal operation as COVID related closures and restrictions are eased, and our Service maintenance revenues continue to grow each quarter. Our board and management team are cautiously optimistic regarding anticipated improvements to product sales as evidenced by one Board member's decision to acquire an additional 150,000 shares of equity in the company on October 27, 2021 at the current market price."  

Operational Highlights:

• Issued a press release on November 10, 2021 announcing an order for 12 InVerde E+ units and 3 Tecochill chillers which are scheduled to be shipped during Q4 2021 and Q1 2022.
• Recognized Employee Retention Credits of $0.6 million and $1.3 million, respectively, in the third quarter and in the nine months of 2021.
• Paycheck Protection Program Second Draw Loan forgiven in full on September 8, 2021.
• Sales backlog as of November 10, 2021 is $11.4 million, comprised of $11.2 million of products and $0.2 million of installation services.

Conference Call Scheduled for November 11, 2021 at 11:00 am ET

Tecogen will host a conference call on November 11, 2021 to discuss the third quarter results beginning at 11:00 am eastern time.  To listen to the call please dial (877) 407-7186 within the U.S. and Canada, or (201) 689-8052 from other international locations.  Participants should ask to be joined to the Tecogen Third Quarter 2021 earnings call.  Please begin dialing 10 minutes before the scheduled starting time.  The earnings press release will be available on the Company website at www.Tecogen.com in the "News and Events" section under "About Us." The earnings conference call will be webcast live. To view the associated slides, register for and listen to the webcast, go to https://ir.tecogen.com/ir-calendar.  Following the call, the recording will be archived for 14 days.

The earnings conference call will be recorded and available for playback one hour after the end of the call.  To listen to the playback, dial (877) 660-6853 within the U.S. and Canada, or (201) 612-7415 from other international locations and use Conference Call ID#: 13672659.

About Tecogen

Tecogen Inc. designs, manufactures, sells, installs, and maintains high efficiency, ultra-clean, cogeneration products including engine-driven combined heat and power, air conditioning systems, and high-efficiency water heaters for residential, commercial, recreational and industrial use. The company provides cost effective, environmentally friendly and reliable products for energy production that, through patented technology, nearly eliminate criteria pollutants and significantly reduce a customer’s carbon footprint.

In business for over 35 years, Tecogen has shipped more than 3,000 units, supported by an established network of engineering, sales, and service personnel across the United States. For more information, please visit www.tecogen.comor contact us for a free Site Assessment.

Tecogen, InVerde e+, Ilios, Tecochill, Tecopower, Tecofrost, Tecopack and Ultera are registered or pending trademarks of Tecogen Inc.

Forward Looking Statements

This press release and any 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, our Quarterly Reports on Form 10-Q and on our Form 8-K filed on November 10, 2021, 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 press release 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.

Tecogen Media & Investor Relations Contact Information:  

Benjamin Locke
P: 781-466-6402
E: Benjamin.Locke@tecogen.com

TECOGEN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)

TECOGEN INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

TECOGEN INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

(1) Non-GAAP Financial Measures
In addition to reporting net income, a U.S. generally accepted accounting principle (“GAAP”) measure, this news release contains information about Adjusted EBITDA (net income (loss) attributable to Tecogen Inc adjusted for interest, income taxes, depreciation and amortization, stock-based compensation expense, unrealized gain or loss on investment securities, goodwill impairment charges and other non-cash non-recurring charges including abandonment of certain intangible assets and extinguishment of debt), which is a non-GAAP measure.  The Company believes Adjusted EBITDA allows investors to view its performance in a manner similar to the methods used by management and provides additional insight into its operating results.  Adjusted EBITDA is not calculated through the application of GAAP.  Accordingly, it should not be considered as a substitute for the GAAP measure of net income and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure.  The use of any non-GAAP measure may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.

TECOGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)