Greetings, and welcome to the Tecogen Inc. Fiscal Year 2025 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Jack Whiting, General Counsel and Secretary. Please go ahead, Jack.

Good morning. This is Jack Whiting, General Counsel and Secretary of Tecogen Inc. 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 Investors section of our website. I would like to direct your attention to our Safe Harbor statement included in our earnings press release and presentation. Various remarks that we may make about the company's expectations, plans, and prospects constitute forward-looking statements for purposes of the 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 and Exchange Commission and available in the Investors section of our website under the heading SEC Filings. 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, to the most directly comparable GAAP measures. A reconciliation of non-GAAP financial measures is provided in the press release regarding our Q4 and year-end 2025 earnings and on our website. I will now turn the call over to Abinand Rangesh, Tecogen Inc.'s CEO, who will provide an overview of fourth quarter and year-end 2025 activity and results, and Roger Deschenes, Tecogen Inc.'s CFO, who will provide additional information regarding Q4 and year-end 2025 financial results.

Thank you, Jack. Welcome to Tecogen Inc.'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 am going to start with an update on the Vertiv partnership. There have been some key positive developments that I will share, including their opportunities for our chillers. Then I am going to walk you through Tecogen Inc.'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, 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 relations agreement that we signed last year. Third, we have discussed bringing Tecogen Inc.'s hybrid drive technology to Vertiv's chillers. As the sales grow, this may allow Tecogen Inc. to scale manufacturing very quickly because we would focus on the dual power source and mate 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 1 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…

Thank you, Abinand, and good morning, everybody. I will start with the fourth quarter results. Our revenues for the quarter decreased by $800,000 in the fourth quarter to $5,300,000 compared to $6,100,000 in 2024, and this is due to the decrease in product shipments and a reduction in energy production revenue. Our gross profit also decreased by 28% in the fourth quarter compared to the comparable period in the prior period, and this is due to the decrease in our products revenue and an increase in our service cost. The gross margin decreased 8.2% to 36.8% in the fourth quarter, from 45% in the comparable period in 2024. As Aminad touched upon earlier, our services margin was low compared to the same period last year but has increased compared to the third quarter of this year. The quarter-over-quarter changes in revenues and gross margin will be discussed further in our segment performance slide. Our operating expenses increased 57% in 2025 to $6,100,000 from $3,900,000 in 2024. This is due in part to a $900,000 increase in the asset impairment charge in our Energy Production segment, the increased operating costs in our Services segment, and increased costs in our Products segment, which we incurred for the manufacturing expansion that we are working towards. We also saw increases in our R&D costs, which were incurred to continue the development and refinement of our dual source chiller, which is focused on our entry into the data center market. Our net loss increased in the fourth quarter to $4,000,000 from $1,100,000 in the similar period in 2024, and this is due to the reduction in sales and gross margin, the asset impairment charge, and an overall increase in operating expenses. We will discuss expenses in more detail in our full-year 2025 numbers. Moving to…

Thank you, Roger. So I think the single biggest improvement that we have seen in the last five months is really the securing of the first demonstration project. I personally believe that this will be the catalyst for everything else that will come and will also unlock the much broader opportunity that we have been pursuing. In a world where AI tokens per unit of power is a new metric, we provide the simplest and most cost-effective way for a data center to obtain more power, which directly results in more compute and more revenue. We have a robust pipeline of opportunities, the demonstration project, and I think all the pieces are coming together to unlock the larger projects on the multibillion-dollar data center cooling opportunity. Thanks for listening, and I will open the floor for questions.

Thank you. We will now be conducting a question-and-answer session. Our first question is coming from Chip Moore from ROTH Capital. Your line is now live.

Hey, good morning. Thanks for taking the question.

Morning, Tim.

Hey, Evan. Maybe starting there where you finished on the Vertiv demonstration project. So I think you said expect this to ship later in Q2. Help us think about how quickly that should be up and running and, you know, real-world data, you know, when that should flow, and assume this plays a role in the 25 to 50 megawatts that you mentioned that they are in the process of designing. Just, you know, when could we conceivably see some of those move to orders, you know, once that demonstration project is up and running? So I think the two pieces will move concurrently.

So, the unit for chips in Q2 is actually going to go and get tested almost immediately in their thing. Because what typically happens in a lot of these projects that we have is the end customer would like to see, you know, how is this chiller going to run in, let us say, a 110-degree ambient at a certain, you know, out chilled water output. So what this does, because with our conventional DTX chiller, our own test cell, we can run a lot of those conditions here, but we cannot control for a 110-degree ambient or a 120-degree ambient. So the Vertiv test chamber allows us to do this. But it also acts as a way for a potential customer to come and see it as well. Right? That is usually a very good way to close projects. So the designing of the projects in the background, that happens concurrently, and they are going to continue marketing, and they are getting opportunities. I cannot talk very specifically on timing on their projects because at this point, it is either confidential or we do not yet have enough clarity on it. What I think it is going to do, this demonstration project, the hope is to have it actually running no later than the end of Q2. What we think it will do is act as both providing the feedback for some of the bigger projects that we have and also for some of the potential customers where they may want to use our chillers in, you know, certain environments, like, let us say, Texas. They want to know that this chiller would—how, you know, what output it will put out at different ambient temperatures. So that is also what you will get out of this, and it is really, I would say, an independent validation as well of our chiller. Right? And a massive load of support from Vertiv that they are essentially putting this together.

Understood. That is helpful. Appreciate that. And maybe for your own internal pipeline, that slide your highest think you have stacked them in a order that one where you are in final stages of negotiation and you could see orders here. I think you said Q2, Q3, for a 2027 type of project. Just any more you can expand on that on, you know, where that stands, what they want to see, you know, when that could move forward.

So I do not want to predict timing because I think it is extremely hard to predict the timing. What I will say is the smaller projects actually—firstly, the DTX is a—there is—we have already got the test data. A lot of these smaller ones, you know, they have seen our equipment in other places. The smaller projects also find it easier to get tenants. So the odds of it moving faster is much, much higher. And, also, things like financing and getting approvals for environmental permits tend to be much easier for the smaller projects. Because some of the, you know, greater than a 100 megawatt projects, you have got more hurdles to go through on the back end to make sure the local site approvals, all of that, that happens without an issue. And then also having the tenants. What we are seeing more broadly in the data center industry is, you know, you are getting a lot of the Neo Cloud on the, you know, as potential tenants. And there is quite a few of the smaller scale Neo Clouds that are interested in these kind of smaller scale projects, which makes it much more likely that these things will go through. But I do not want to predict timing. All I know is that in many of these cases, the customer expects to be operational by early next year. So to really be able to get equipment in order, get everything delivered in that time and actually constructed on-site, they need—they need to move quickly.

Helpful. Very helpful. And maybe a last one for me just on the manufacturing side. It sounds like you have made some good strides and you have got some potential with Vertiv as well. Just, you know, what is the highest priority? What, you know, what are you focused on? What do you need to do, you know, here to get prepared? Thanks.

I think we have gotten most of the key pieces together now, because a lot of that was getting the subcontractors qualified and really get first articles from them and then get the first article checked internally to make sure that meets our quality standards and that if we can get the different pieces from them to arrive at our factory, we can just do the final assembly, test it, get it out the door. So getting the subcontractors qualified was really the key. I think we have now done that, and also, these subcontractors have significant scale-up capability already. So there is—I believe, those pieces are now together, especially for the dual power source chiller. The DTX, I think, our supply chain was reasonably robust to start with. So, I think we have the ability because a lot of the bigger components on the DTX are built by some very large companies already. So we can get scale-up from them without too much of a problem. It was the dual power source chiller, really, with both the size of the machine as well as making sure that we were not having a lot of time on the floor in our factory here. To get some of the bigger components built outside and brought in. That was really the key. And I think we have now done that.

Got it. So, you know, maybe the follow-on, you know, with a lot of that heavy lifting done, it sounds like maybe you do not need to sacrifice non-data center orders, you know, if you start to see demand pick up in some of those other areas.

Correct. I think we are going to see quite a bit more in non-data center projects as well. We—on the sales efforts and the marketing efforts, we essentially split the sales team to have some people handling non-data center and some handling the data center. Part of the lumpiness on the product side is just what we have seen overall in the industry is we used to get a consistent amount of small multifamily, like one-unit, two-unit orders that were kind of steady flow. With the anti-gas sentiment in some of the bigger cities like New York and Boston, that portion had declined. It is starting to come back. But what we are—what we have a very good pipeline of is multi-unit larger projects that are going into bigger buildings. But the problem with those projects is that if one project gets even slightly delayed, you have basically moved out three or four units at a time. So there is a little bit of timing issues there, but I think the pipeline is very, very robust on that.

All right. Appreciate it. Thanks very much.

Thanks, Chip.

Thank you. Next question today is coming from Alexander Blanton from Clear Harbor Asset Management. Your line is now live.

Thank you. Good morning. I am interested in—yes. I am interested in your outsourcing strategy. Because, clearly, to get significant orders from data centers, you are going to have to be sure that you can deliver the quantities that you are talking about. So could you just go into a little more detail about how that is going to work, what things are going to be outsourced, and is—I take it, it is going to be these components will come to your factory and just be assembled. And so you have obviously changed your manufacturing process significantly in doing that. Little more detail.

Yep. No. That is a great question. So let me start with the end portion, which is we did not actually change our manufacturing process necessarily. When we designed the dual power source chiller, we always designed it with the option of being able to either do all of it in-house or have large portions of it built in subassemblies that then came internally. The other thing that we always did on that product was to use a lot of components that are built in larger volume to start with so that we could, with volume, also see an increase in margin. So, in other words, when you think about the dual power source chiller, right, I think of it in sort of certain blocks. You have one big block, which is really the refrigeration assembly. So that handles the—it is similar to an electric chiller. It has your compressors, it has your fans, it has your sheet metal assembly. Then you have the power assembly, which has the engine and the generator, and then we have the power conversion or the electronics, which is really the dual power source technology. A combination of the engine and the inverter and power electronics technology is very similar to our InVerde. The biggest challenge we have in our manufacturing space is just in terms of physical footprint on floor space. And also, we historically have built numerous InVerde units. So we can build those in volume very, very easily as they show up preassembled. We can mate it with our engine system, our generator, and essentially build that power electronics and engine package very quickly. The refrigeration assembly, you are dealing with a lot of sheet metal. It is not necessarily, you know, something that is best done in our factory here…

Well, given these constraints, what is your effective capacity then if you have your subcontractor do the assembly? It seems to me that it expands quite a bit.

Yeah. I mean, I would still say today, would use what I said in our, I think, the last call or the call before, where I would say about 100 units is where we are targeting. I believe it can be increased further from there. But that seems like, with a little bit of a ramp up, that is fully achievable. And then from there, with some optimization, it is likely that you can increase further from there.

A 100 units over what time period?

I would say per year.

I think it is possible to go higher than that, but I think this is something that we have looked at and looked at the details on what it takes to get there. And, you know, it is possible to scale up substantially from there. It is just this, I think, is a good starting point. It will allow us to get many of the opportunities that we have on that pipeline, and then from there, there are different ways to figure out how you would scale from there. And what is the dollar volume of 100 units?

I do not want to comment on exact dollar numbers since we do not put pricing out. But I would say it is three to four times what we have done in our highest year. So I would say, you know, at least $30,000,000 to $40,000,000 of product, likely more.

And that would be just for the data centers?

Correct.

It does not include the cogeneration and other products for other markets. Right?

That is correct.

Okay. Thank you.

Thank you. Next question today is coming from Barry Hymes from Sage Asset Management. Your line is now live.

Hi, thanks so much for taking my question. My question relates to the master agreement negotiation or renegotiation you are doing with Vertiv. Could you talk a little bit about what are your goals in doing that and what are their goals given that you already had an agreement? Thanks so much.

Yes. So if you look at the marketing agreement we have with Vertiv, right, the way it is structured, it says that this is kind of the placeholder while we go through the full master agreement. So if you look at the marketing agreement, it has various terms that are to do with supply and, you know, delivery, things like that, that currently are not binding terms within that agreement. And all it does is it takes that marketing agreement and expands it. So it has all those different portions. It was always designed from day one to go into that broader agreement so that we could actually supply as an approved supplier and have this marketing portion rolled in as part of this broader agreement.

Okay. Great. And what is the timing on when you expect that to get finalized and signed?

At this point, I cannot really comment on timing because it is ongoing.

Okay. Thanks. Appreciate it.

Thank you. Next question is coming from Chris Tuttle from Blue Caterpillar. Your line is now live.

Great. Thanks for taking a couple of questions from me. First of all, I know it is not the sexy part of the business, but I wanted to go back to what you were talking about in terms of some of the investments you have had to make on lowering your service cost. I mean, these are mechanical units, which, I guess, in most cases have a nonlinear graph of support and maintenance costs over time, and so I am a little—I wanted to understand more about how, you know, you are situated in terms of, you know, if you have older inventory out there, you know, how much are you still sort of on the hook for in terms of, you know, what would normally be kind of a customer cost? Seems like you guys, you know, had to, you know, spend some of your own money on that in Q4.

Yeah. So that is a great question. So it is—so the way the service contracts work, on the cogeneration units, we charge per run hour. You know? So for every unit that machine runs, we charge per run hour on those. And the service contract includes components, you know, everything inside the cogeneration path. So—and most contracts are either, you know, three year, five year, but they auto—in many cases, you know, the customers renew it. The reason the contracts were structured that way was so that the customer has some—it is actually predictable expenses, and it would allow the business to have a recurring stream of cash flow. But as the costs in places like New York have gone up, like the labor costs have gone up substantially, and the time to get from sites has gone up, the labor efficiency has gone way down. We have also seen material cost increases, but in the other territories, the material cost increases have been absorbed by any increases in service contract rates. So we had two choices. We could either turn around and say, you know what? These service contracts are no longer profitable. We either get out of that service contract or figure out a way to make those service contracts profitable. The concern we had with essentially walking away from some of these contracts was that over time, like, just as you are starting to get your data center side of things ramped up, the risk of a reputational hit, right, if you walk away from a number of service contracts, is high. So we felt, when we looked at the numbers, that with putting in new engines, we could substantially increase the service intervals. I mean, in our test cases, we got almost a 2x increase in service intervals. I commented about, you know, 50% increase on average. If you can do that and you do not have to go to the machine as often, the numbers suggested that we should get back up to, you know, our previous margins, which were somewhere around the 50% gross profit margin. That is kind of why—yes, it was very expensive in the short term, right? And it took us—I mean, it pulled our loss down. But at some stage, if the units—if we can increase that service interval, the numbers should play out. If for some reason that they are not happening, then we will go back and just raise our prices. In some cases, we will, you know, get rid of service contracts that are not profitable anymore. You know, that is—but in the short term, we felt that this was a better way to go, especially because you have got ongoing cash flow that comes from this. So it is much better to figure out a way to make them profitable than walk away from them.

Yeah. That makes a lot more sense now. Were those the territories where you feel like you had the problem to address?

Yeah. It is really been the urban environments, like, just actually, just predominantly Greater New York, and to a certain extent up in Toronto. Those are the two territories that really pulled it down. The chiller services in those territories continue to make good money. And part of that is just because, you know, the chiller product is billed a little differently. It tends to be a flat rate contract. And it also tends to have already very long—like, one of the reasons, actually, we did this was because the chiller service intervals are much longer to start with. And that is why we took some of those improvements from the chiller product, applied it to the power generation thing, and said, if the chiller can make money, we should be able to make the same things with the same kind of structures and same improvements to the cogeneration and get the cogeneration units making the same margins.

Okay. Two other quick ones for me. Just one of them, could you remind us in terms of when you—like, your pipeline of business with the data centers and all that, and we understand they have been delayed. They have been delayed for lots of other companies. It has been very topical. What are the terms in terms of the revenue recognition and payment terms? Are there any upfront payments involved, like deposits? Do you recognize revenue on deliveries or customer acceptance period? And then what are the typical payment terms where you would be getting that cash?

This is Roger. Typically, we require a down payment from customers. It can go from 25% to as much as 40%. And then revenue is recognized when title transfers. In most cases, it is ex-factory. Sometimes it is destination, but for the most part, we recognize revenue when the products ship. So, obviously, you know, there are some holdback on the revenue rec for startups and, you know, minor things like that. But for the most part, when we ship a unit, we will recognize the revenue at that point.

Okay. And payment terms, 30, 60, 90 of the balance?

Payment terms are generally 30 days upon, you know, customer acceptance.

Okay. So, usually, that would add another 30 days to it, but, you know, it—

Yeah. Generally between 30 and 60 days, I would say.

Okay. And then last question. You know, really helpful update on the pipeline. It sounds like, you know, things that got delayed from Q4, like, they got delayed, you know, a bit into, you know, like, not just slipping into March—in the March, I mean, we are now almost done, you know, with the March. It sounds like expectation should be, you know, we are going to see more deliveries really starting more in Q2. Am I—sort of—did I not hear that right? Or, you know, I know it is a little bit awkward in terms of timing, but, you know, it seems like more of these things are going to be flowing, starting in Q2, Q3.

There is two portions of it. So some of the projects there, that is non-data center related projects. Right? Those—there was some cannabis, some non-cannabis, like hospitals and comfort cooling and things. Those are the ones that pushed out a little bit. The data center pipeline, it has been, I think, within the range. Like, your typical sales cycle is longer than what we have seen already on the data center stuff. So I would say the two are likely to come together around the same time. With data center projects, it is very much—something could suddenly start moving equipment, like, close the projects as soon as they get a tenant, or a lot of pieces start to move very quickly after that. With the non-data center projects, usually, the timing is contingent on—if they are doing, let us say, air conditioning load, then they would usually do that off-season. So they would plan to take equipment deliveries in the fall and winter so that they could do the construction of the chiller plant in the off-season. So that typically moves that timing. Then with cannabis, a lot of it is just tied to their financing timing. You know, if they can get financing, the project moves.

Okay. So, therefore, you know, you can have some reasonable volume in Q1. Reasonable. But I think a lot of this, right now, right, I think some of the bigger projects will close. I think we have got enough over there.

The timing is very hard to predict.

Yeah. Understood. Understood. Alright. I have got some other technical questions, but those are best left for another time. Thanks a lot, fellas, for the answers.

Thanks, Chris.

Thank you. Our next question today is coming from Matt Swadden, GeoInvesting.com. Your line is now live.

Hi, good morning, I am Evinad. Quick question. I guess, just recall, I think, previous conversations with you, at least maybe during earnings calls, that you do not really see hyperscalers as an opportunity. But in the last few calls, you have kind of mentioned them. So I am trying to understand what has changed there. Is that from the cooling side or power side? And maybe you could touch on that a little bit for a few seconds.

Yeah. Hey. So that is a great question, Naj. So, originally, we felt that the hyperscalers—the validation process, and a lot of this thing might just be out of what we would be able to do. But as we have started to go after many of these projects on the colocation side of things, we found that we have gotten—you know, we have either met hyperscalers at trade shows or direct outreach has resulted in actually very positive engagement. And the—I think with a lot of this, I cannot really comment on specifics on any of them. But it does seem like there is significant interest from the hyperscale side of things. So we are kind of letting the hyperscale conversations continue, and we will see whether that leads into projects or pilot projects or what that leads to. We do not yet know. It is just they appear to be happening concurrently. So we are just—you know, we are going to pursue it. We have presented to a number of them, and there has been, you know, clear interest on the technology for, you know, for the chiller side. So—and I think the power side, at this point, we are not leading with it. But there may be interest on some of the ancillary loads. But that is something that, you know, the chiller seems to have significant interest.

Sure. Great. I have two more additional questions, real short. I will start with the service contracts. That business and the things you have done to decrease maintenance needs on-site, or increase in service intervals. Does it make sense to do that in other jurisdictions other than where you are at now to increase margins there too?

Yes. But we are—in other jurisdictions, we are doing those because one of the biggest costs on the service side of things is your oil change intervals and your, you know, engine component intervals. It is better to do that when you are replacing the whole engine rather than do it on an engine with higher time. So we typically, in other service territories, we are doing those changes, but we are doing them as we get rather than do it, you know, proactively on units. Because at some point, right, there is an expense associated with that. So it is better to do it where you are going to have the biggest return on that expense. In other territories, we are doing it on a much more gradual basis.

So at some point, you could see the overall gross margin on that business go up as places like New York catch up to being where they used to be, and other areas maybe even getting an improved gross margin profile? Am I understanding that correctly?

Correct. I mean, the target is across the whole service territory. We would like to have at least a 50% gross profit margin.

Okay. And finally, I just have a question on the modular data center space. I do not know—you have mentioned it in the past, like in fleeting comments, about that market kind of heating up a little bit. I was wondering if you could give us a little bit of color on what you are seeing there and if you are—if you can. And do you see opportunity for Tecogen Inc. to play in that growth potential there.

Yeah. So we have seen quite a few leads in that space. As yet, nothing has got far enough that they made it into that opportunity list that I presented. We believe, just looking at the broader picture, that there is going to be a lot more modular data centers being built, but also there is going to be a lot more smaller-scale data centers being built because we are seeing some of the really large data center campuses run into other hurdles such as, you know, local opposition from, you know, people that live in the area or permit problems on the really large data center. So I think there is going to be a push for these modular as well as the smaller-scale data centers being built in urban environments. And in that sense, our product is like a perfect fit for that market. That would—where we are ready. Cool and the cooling side. Right?

Sorry. Correct.

Okay.

That is all the questions I have. Thanks.

Thanks, Maj. Thank you. We have reached the end of our question-and-answer session. I would turn the floor back over for any further or closing comments.

Thank you very much for listening. And if anybody wants a further conversation on any of this, you know, management is available to have more in-depth discussions. Thank you.

Thank you. That does conclude today’s teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.