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TGEN earnings / call

TGEN Q3 2026 earnings call transcript, November 12, 2026

Tecogen Q3 2026 Conference Call

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  • Robert Panora 30%
  • Management 22%
  • Analysts 19%
  • Operator 1%

Management

  • Robert Panora

    COO and President

    10 min

Analysts · 3

Transcribed automatically by Lician from the company's public webcast; it can contain errors and speaker names are best effort.

  1. Prepared remarks0:00

  2. In terms of they're bringing in natural gas for other purposes that could be used by your equipment to be adopted.

  3. So definitely. So there are two categories that we're seeing. There are people that are going to do on-site power generation anyway, where they're bringing in, you know, big transmission line level natural gas. In those cases. We have multiple things that we can do for them. One is, you know, allow them to keep their big power gen equipment for the IT capacity. And so that they don't waste it on the cooling. Our equipment can help over there. There are other cases where. The site may not be planning on doing any power generation. And let's say, for example, they have 100 megawatts of. Utility power available. What in those cases you can still get. You don't need a transmission level. Amount of. Gas available to do what we're suggesting here. Because you would just use this to trim. As much you could get distribution level gas that you would find in any industrial facility or any. You know, most urban environments. You could use that to really just. Shave at the peak time, especially at the very, very peak of summer where the utility is the most constraint. So the one, if you can shed load quicker when the utility asks you to, they're more likely to give you whatever utility power you're asking for on the electric side. And number two, it also. It allows you to basically take every bit of electric utility power you have and use it for the chips. So that's a slightly different use case, but both of these are available. And the second case is much easier to really maximize, right? You don't need to think about.

  4. Can I get a pipeline level gas supply to the site? You only need distribution level gas to be able to do this.

  5. No, thank you. So is Elon Musk. Sites moving to natural gas that you know of and would you be involved in any of their work? I cannot comment on any specific customers or any specific things at this point. Pretty much everybody that we're talking to, we have confidentiality agreements with. On a more general case, we're seeing a lot of the bigger data centers looking to do onsite power generation, whether they do turbines or so on. And in those cases, we can definitely. support however it works, whether it's with turbine cooling, direct, the cooling equipment, dry coolers. But we are seeing quite a bit of a shift to power generation happening onsite. And that's happening at the hyperscaler level as well as the. the smaller entities. When you say dry cooling, what do you really mean? So some data centers, especially what they would do is they they take the the liquid cooling that's required for the chips and they basically just use a big fan. They may use a chiller for only a portion of the time, especially in the cooler climate. Sometimes they'll just use a big fan and they'll. Just let it run as hot as they can. There's a few data centers that do it. There's very few that are actually in practice doing it, but they may have both fans just on cooler conditions. They might just send the water through a big fan.

  6. Reject it to the atmosphere and not turn on the air conditioning. So they might have that running through a lot of the year and then turn on the mechanical chillers and so on just for the summer, the very peak. So they might have a combination of both. So those loads are still pretty large. Because you're talking, you know, massive sites here. So for a data center that could still just the fans alone could represent, you know, five, 10% of the 100 megawatt load. Right. So it can be it can be a large chunk of the overall power need of a data center.

  7. Okay, I'm going to just switch topics a little bit. As you know, there's a tremendous pushback against data centers that became an election issue during the recent election. Do you see any indication that that pushback could be lessening after the election as political needs of politicians diminish? And do you see any indication that any projects that you've been working with have been delayed or canceled because of the NIMBY objections to data centers and people?

  8. So there, I mean, I'll address that in two ways. The first one is the, our just general size compared to the overall. Market, right? That, that we have, we don't need to win at the same scale as somebody else to really have an impact on our financials. And the other piece is that our equipment can be deployed on sites that are already approved. And we're starting to see a lot more interest from people saying, we don't know if these big gigawatt scale power, purely onsite power generation projects are necessarily going to get approved. But we have, you know, hundreds of sites that might have 20 megawatts, 50 megawatts. That there is utility power. If we can take as much of that utility power and apply it to IT, that all adds up when you look at across the whole country. So for us, actually, it doesn't matter how the politics play out. I think we have enough opportunities of different. sizes that, and in particular, the ones where they have some utility power and we can help them get maximize that. That's something that's very unique, right? If you're going to do power generation, it's a much more involved process. Here, a customer puts this in, they can use as much gas as they. Like or not, and they just switch dynamically. And if the utility turns around and says, I'm not going to give you enough, or I need you to curtail power and peak time, you can do so. And you can still not have to turn down your computing on site.

  9. That's the play that we see it being. So the bigger politics is a little too hard right now to gauge. We're looking across the board at enough opportunities that we don't think it's going to be an impact that we need to worry about at our scale.

  10. Yes. Well, given the fact that the corporations using AI keep expanding their applications and their use, the demand for compute should keep going, and it does not look like the current anti-data center sentiment in the country, politically, will really restrict your growth. Is that correct? That is correct, yeah. I mean, the demand is there, right? They're going to find ways to do this that may not involve single large campuses. Like, the market could go either direction and either, like, we're seeing people look at a bunch of smaller sites that would then, in aggregate, turn around and become the, would provide the amount of AI compute, especially as more and more is moving towards inference. And so on, where it's the end application rather than training, there's many more ways that our products, especially of the size ranges that we're in, can do so. The market, I think, is definitely much, much, we're not going to be constrained on in terms of what's happening in the broader. market. But to a certain extent, that's also why we're looking at this modular dual power source approach, because it gives us a lot of flexibility also in terms of the size of the design of the data center. Like you could, if it's a small site, you could either put our current chiller as this or use our power modules. If it's a much larger site, whatever is on the reference design plus the power module gets us to the same goal.

  11. So thank you very much. I'll get back to you too.

  12. Thank you, Alex.

  13. Q&A10:17
  14. Operator

    Our next question is from the line of Barry Hames.

  15. Question

    ?
    Barry HamesAnalyst

    Thanks for taking my question.

  16. Could you talk a little bit more about the smaller colo market, the first segment that you mentioned, and just give us a little feel. You saw the press release, of course, you put out with the one who... I think it was in Connecticut who was using your unit quite successfully. But what does the pipeline look like there? Are there any discussions that are pretty far along where we might expect to see some orders over the next month? If you could just characterize that market for us. Thanks. So I cannot give you any specifics on order and when we expect orders to close on that. Again, for confidentiality reasons. What I can say is there are multiple projects. Everything from one or two inverted to multiple chillers to some that are as large as like, you know, 15, 20 megawatts right in size. And they're at various stages. Some of them are operational data centers that are expanding their capacity and they're just waiting on additional. tenants to sign so they can increase the load on site and hence they might add more piece of equipment. There are some that have existing sites that they're in final negotiations with tenants. They would need to build a data center on site, but as soon as they typically get the tenants there. They're able to start placing equipment orders. So there are things of different sizes in that range. And then we're also seeing new opportunities there where our sales team is going out and finding other sites where, again, there are operational data centers. They might be doing just.

  17. Cloud based colo type things where utility bills, especially in the Northeast and so on, are very high. We're adding some small scale, either power generation or our cooling can make a big difference to their energy bills. Great. Thank you. That's good luck.

  18. Management

    Thank you, Barry.

  19. Operator

    The next question is from the line of Robert Collings, private investor. Please receive your questions. Mr. Collings, your line is live for questions.

  20. Question

    ?
    Robert CollingsAnalyst

    Yes, thank you.

  21. Good morning.

  22. Two parts or two different questions. One is on the veritiv. I appreciate you can't comment on anything going forward, but wouldn't it be appropriate to be able to comment on the things that have happened during this quarter? That would be the first question.

  23. Management

    So, again, I'm covered by confidentiality agreements on that. I cannot comment right now on that.

  24. Management

    Okay. Thank you. And then the second question kind of comes back to what has been kind of suggested. But that is the political environment seems to be and the general environment seems to be much more concerned about people, about the amount of power these AI centers are using. And I think we can expect that the new administration tends to be more regulated oriented. Wouldn't that create even greater opportunities for alternate power, i.e. natural gas and then the opportunities that natural gas fits in with the TGEN strategy? Yes. So the natural gas side of things, right? There's two sides to that argument. So when you do the very large power generation projects, there's still quite a lot of pushback from local constituents. Because of the fact that the emissions, all of those other pieces. And in particular, when you're having to do those power generation projects, the utility is still having to support it. That's where I think we come in. Because there are two things that we bring to the table. One is the very, very clean emissions. So that allows you to mitigate much of that air quality issue. And number two, actually, you don't have to even use natural gas all the time. Because it really, the utility grid is constrained. for periods of time. But for a lot of the year, it does actually have capacity. So if you can avoid the peak time, many of these sites can actually have sufficient capacity without having to make substantial upgrades to the utility. That again, is where this dual power source and the ability to act.

  25. Management

    In a hybrid fashion, you choose when to use natural gas and when to use electric when there's sufficient. You can do that on the fly without having to shut down and switch. And the third piece, which is actually very unique to this approach, is we, in many cases, because you're powering a thermal load. Direct through this box, essentially, you avoid a lot of the utility hassles that you would need to actually deploy this. If you were doing conventional power generation, you'd have to get utility interconnects. You'd have to go through a lot of this here. You're essentially isolating. A load and avoiding some of that utility requirements that you would need. So there's multiple ways that our solutions impact this. The potential is there. I think right now what we're really focused on is how do we provide a pathway to get from here to actually. Getting these projects to close. And a lot of that is where we see this power module as a way to scale up output so that we can provide enough power for these data centers. That would then get us to that next next stage. Thank you. Linux. Questions from the line of Chip Moore with Roth MKM. Please proceed with your questions.

  26. Management

    Hey, morning.

  27. Question

    ?
    Robert CollingsAnalyst

    Thanks. Apologies at the start of the call. If you've covered any of this already, just curious on the retrofit opportunity and your comments. It would seem that your value proposition is only increasing with some of the political dynamics out there. Just curious, how much of this has been developed sort of in tandem with the discussions you've had ongoing? How much can you leverage the work you've already done? Around that, and how should we think about potential first proof points on that side? Would this be sort of a demonstration-type rollout at a smaller facility, or what's the scale of the conversations? So, we can pretty much use all of the existing discussions as, you know, this actually allows us to accelerate some of this, right? Because it means that an existing site or something that's in design today could have this. It doesn't require you to design around the full jiller. That's number one. Number two, in terms of the initial pilot or sites where this might go, I can't comment on it right at this point. There are multiple places both. Data center and non data center that we're pursuing right now for that. Stay tuned on that. We'll do our best to provide interim updates to shareholders. Fair enough. Fair enough. We'll look forward to that. And on the non data center. This sort of uptick you're seeing, you know, it feels like it's, it's got some legs to it. Just expand on, on that. And, you know, the ability, you know, I think you talked about, you know, for some larger business to come in through some of these larger type of clients. Well, what are you seeing on that side?

  28. Management

    So a large one with this political environment, people are looking to see how they can leverage every bit of available power on existing sites, right? Sites that have already been approved that have less risk of having. I'm shut down because they can't scale up or they can't get it into construction, right? So those are places where we're starting to see a bunch of new leads. A lot of this is really coming down in terms of getting these projects and actually securing the projects. It's coming down to. How much capacity can you deliver quickly within a period of time? That's what's going to drive those orders to close. And this approach allows us to really go back down to every piece of our supply chain and show the end customers that we can actually deliver these in volume and aggressive. timescales. And that's what's going to get those things these orders to close. And that's really what we're working on right now because the good thing with the summer demonstrations was it allowed us to build some pretty strong relationships with a lot of these sites and they've been very open in their feedback as to what they need to be able to see from. us to give us orders and this is kind of a little bit of a dynamic process without getting into specifics that's as much as I can say for the moment thanks and maybe just a last one up and on did the on the surface side the. TGEN margins you know very nice this quarter good good to see you know do you think you're past some of the challenges you've had there and any update there. Thanks.

  29. Management

    So consistently this year we've been running you know the revenue has gone up right so. Some of the investments we made last year seem to be working. So far three quarters in we've still been you know mid fours. Typically the two summer quarters have lower service revenue just because of less thermal load. And last year same period right we were 13 percent lower for in terms of service revenue. So some of that margin expansion is just as a function of just more runtime. And I think you know we're seeing things looking good so far. But we'll see how next quarter on the quarter after and we'll make refinements as needed. But it seems like so far three quarters in a row we've been running over four million in revenue on the service side.

  30. Management

    Thanks very much.

  31. Management

    Thanks, Jeff.

  32. Operator

    The next question is from the line of Madge Chudan with Geo Investing. Please receive your question.

  33. Question · Geo Investing

    G
    Madge ChudanAnalyst · Geo Investing

    Thank you.

  34. Management

    Hey, Evan.

  35. Management

    Thanks for taking my call.

  36. Management

    Hey, Madge.

  37. Question · Geo Investing

    G
    Madge ChudanAnalyst · Geo Investing

    A basic related question on the service. Maybe I missed it. Maybe you answered it earlier. But... Some of these new projects that you're talking about in your press release and your earnings call here, $2 to $5 million worth, or maybe $1 to $5 million, maybe imminent. Are those also going to have a component of service revenue to them? I'm just curious to understand if most of this project revenue that you'll be potentially getting over... Is there a potential where you've got that kind of 20% service revenue that we expect to get from those things? And on a related note, on the new kind of retrofit offering you're talking about, deploying here potentially, is there a service component related? to that at all? Yeah, so great questions. So first, our current backlog, right, our product backlog, which is over 8 million. A lot of that actually is chillers and so on. And they're going to industrial hospital. Commercial building. So definitely service revenue associated with that. Similar to, you know, every unit that goes into the field from that product side will increase service revenue. And in particular, chillers are great from a service standpoint because we offer 24-7 service on that. And that allows us to charge a premium for that as a result. So definitely a service component associated with that. Everything that we're selling right now, again, will have a service component to it.

  38. Robert PanoraCOO and President

    Power module and so on will, again, you would treat the service on that very similar to the chiller. Because, again, we're providing all the core portions that we add value on would come in there. So it would be similar type to what we would do. On our current chillers. Does that answer your question there, Mike?

  39. Yeah, it's perfect.

  40. I guess I'm trying to figure out, like, you know, when you first start talking about the data center, you know, potential. Maybe two years ago, maybe. Kind of hinting at it. A lot of the narrative was focused around holding it. That's the direction you got to go to build this company and do something as a public company. And you really didn't have that much kind of, I guess, expectations for the legacy business. And now you're seeing the legacy business start to get a little better here. I guess my first question really is, you know, given your cash position, and I think part of what you were saying back in the day was that you wanted to put all your, you know, CapEx and cash towards, you know, all your sales efforts all towards growing the data from the business. Current cash position, can you grow both? Now that you have the legacy stuff coming, you know, growing again to some degree, can you, do you have enough capital to get both going at the same time? And I'll have a, I'll have a follow-up question on the service revenue after you answer this one. Yeah. So that. Is a great question on that. So what part of the reason that we're looking at this from the, this module basis is if we can get, if we, if we basically focus on the pieces that we add the highest value on, we can expand margins because. The supply chain is already robust. As we grow the supply chain, as we grow volume on it, we should be able to get even better pricing on the more and some of that were already turning because of the service business.

  41. So the same components are being used. The turns will be faster. When you have faster turns, the amount of incremental working capital you need goes way down because we collect customer deposits. We collect pretty substantial customer deposits on each sale that we make. So the cash flow position gets way better if you can expand the margins on. The other piece that we're finding is even two or three years ago majority of our sales were based on just pure economic savings. What's happening today both through a combination of online marketing as well as just people facing power constraints. Is that we're seeing a lot of larger facilities coming to us and saying don't have enough power. So this package that we have can be used for both the larger base business type projects as well as. The data centers is pretty much the same problem. And therefore, it's not necessarily either or. Both could have the same requirements. Right. So you are not necessarily having to spend huge amounts of marketing dollars being spread in both directions. We've done to a certain extent is split the sales team a little bit to focus on some of the legacy business as well as the data centers. But a lot of it's also now coming in. A lot of what we've put in to the market over the last two years and continue to do it is generating a lot of inbound leads. So we think being able. We'll address some of the larger facilities with this module as well can can help us grow the dollar value per sale.

  42. OK, so I'm a little easier to understand. Perfect. But I still have a question related to all this stuff. But I think that, you know, there's there's two things here. Do you have. Have proven technology that can work out there that people that could solve the problems that we're talking about here. That's that's one thing kind of establishing your legacy business over the years. But one of the things you talked about, like, who wants to be the first one to get a data business to use your technology? Right. Or use your solution. And that's maybe some of the I'm assuming some of the kind of. challenge we've kind of faced here. Obviously, Vertiv believes in you guys to some degree, but that hasn't panned out yet. So I have a bunch more questions coming here. I'm sorry, but as I'm talking here, but the first thing really here is like as you're doing deploying this. This modular solution. Are you going to run this the same? Okay. Who's going to be the, who wants to be the first to take it? Or do you think it'll be an easier deployment? And then I still have a couple more questions after you answer this. So the first portion of who's going to be first. Actually, one of the reasons we put that press release out earlier was to actually show that this thing is working in a data center environment and it's working very, very well. Right. And to a large extent, the bridge between that and this modular solution is very easy because it is both the.

  43. The chiller as well as the inverter, they're all based on the same underlying technology and having that data center, being able to point to it is actually based on, again, not getting into specifics. It seems to be easing some of that angst from end customers about where is this operating in a data center. Today, a lot of that conversation is, this is great. Show me you can scale it. Because for us to actually go through the piloting process internally, we want to know that you can deliver enough volume over the course of the next two or three years that it's meaningful in terms of the amount of power freed up in a data center. So I'm not saying that the initial technology risk problem has gone away, but it's reduced substantially by having this, even the single site. And we have a couple of others that are actually that do power data center loads operational. Right now. So being able to point to those and show data from that is actually quite, has been quite helpful so far. Okay. And does this have any relevance to your relationship with Vertib? Does that, does this new product offering also kind of bring? Vertib into the mix to help, to bring them into this product offering or is it totally separate? And if it's not, you know, can you, can you kind of make it part of the conversation to include as part of what they might actually want to push out there? I mean, or could they, could they use it on their own, you know, their own?

  44. You know, products that are just to sell it as their own private label. All I'm going to say on this one again is stay tuned. We'll announce what we can when we can here. Okay. Okay. Great. Great. And I guess finally, like, you know, your service revenue, you're right about. About $4 million here, right? That's what kind of running. And I'm assuming the sooner you get that up, I mean, it would be nice to be able to tell us, hey, you can tell investors that, you know, you've gotten to a situation where you can break even just on service revenue and not have to worry about the volatility and the product revenue. I'm just wondering, just throwing that, I don't know if that's possible, you know, in a relatively short period of time, but I think that's an interesting goal kind of to like to aim for. So we're running, I mean, this quarter we ran 4.5, right, on service. And we ran. You know, 4.6 million on the first quarter, I believe, and then 4.3, I believe. Four and a half. Yeah, four and a half this year. So, yeah, so we're running substantially higher than we were last year and the year before. So the service is definitely growing. You probably want to be about three, you probably want to be about 70. A million dollars, I'm assuming, to get the break-even kind of conversation, the end of the conversation, right? So I guess that's what you had talked about in the past. Maybe it's a little higher now because you've got some more things going, but I'm figuring you need to double the service revenue probably to start getting comfortable with things.

  45. But you can break evens around the corner just on that part of it. I mean, there's different pathways there, right? And I think the service revenue is going to make bigger and bigger components of our pay. It's going to cover a larger chunk of our pay. It's growing exactly where that number stands. And I think we're not in a position right now to comment on what that number would look like today. But I think the pathway to profitability is getting closer, especially if we can get a couple of these additional projects. In addition to the base business, the breakeven point lowers substantially, right? Because the base product business, the backlog is relatively solid. It's going to increase. So we do think that it is lumpy, but as long as we can see two or three.

  46. Thanks, Abadad.

  47. Thank you.

  48. Thank you, Maj.

  49. Final questions from the line of Bobby Brooks with Northland Capital. Pleased to see if there's a question.

  50. Hey, I try to lower my hand. I'll just ask it on the callback. Okay. Sounds good.

  51. Question · Geo Investing

    G
    Madge ChudanAnalyst · Geo Investing

    Thank you, Bobby.

  52. Management

    Thank you. I'll now turn the floor back to management for closing remarks. Well, thank you all for listening to our Q3 2026 earnings call. We will update investors as things happen here. Part of the, there's a number of confidential discussions happening. Presently, which is why, you know, we may not provide as many announcements as people may necessarily want, but as anything substantial happens, you know, we will, we will definitely try to keep people updated between now and the next reporting period. Thank you. This now concludes our teleconference. You may disconnect your lines at this time. We thank you for your participation. Have a wonderful day.

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