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Tecogen Inc. (TGEN)

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Tecogen Inc. (TGEN)

Q3 2017 Earnings Conference Call

November 9, 2017 10:00 AM ET

Executives

Bonnie Brown - Chief Accounting Officer, Treasurer and Secretary

John Hatsopoulos - Co-Chief Executive Officer

Benjamin Locke - Co-Chief Executive Officer

Robert Panora - Chief Operations Officer

Jeb Armstrong - Director of Capital Markets

Analysts

Amit Dayal - Rodman & Renshaw Capital Group

Patrick Murphy - Maxim Group LLC

Roger Liddell - Clear Harbor Asset Management

Michael Zuk - Oppenheimer & Co. Inc.

Alexander Blanton - Clear Harbor Asset Management

Presentation

Operator

Greetings, and welcome to the Tecogen Third Quarter 2017 Results Conference Call. If you'd like to listen to the webcast and view the presentation, please go to the Investor Relations section of our website, and under News and Events, you'll find a link to the webcast. At this time, all participants are in a listen-only mode. A question-and-session will follow formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Bonnie Brown, CAO, Treasurer and Secretary. Thank you, Ms. Brown, you may begin.

Bonnie Brown

Thank you, Bob. Good morning and thank you all for joining our third quarter earnings call. On the call with me today are John Hatsopoulos and Ben Locke, our co-CEOs; Robert Panora, our President and Chief Operating Officer; and Jeb Armstrong, our Director of Capital Markets.

Before we begin, I'd like to read our Safe Harbor statement. This conference call and any accompanying documents contain forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Reform Act of 1995. Forward-looking statements can be identified by words such as anticipate, intend, plan, goal, seek, believe, project, estimate, expect, strategy, future, likely, may, should, will and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding expected operating results such as revenue growth, gross profit and backlog; and strategy for growth, product development and market position.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control.

Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include among others the following: decrease in interest in our products, the elimination of incentives and rebates related to our products, competing technological developments, issues in the research, development and commercialization of new products, Tecogen's inability to obtain sufficient funding and such other factors as discussed throughout the Risk Factors section of Tecogen's 10-K that was filed with the SEC on March 31, 2017 and can be found at www.sec.gov.

Any forward-looking statement made by us in this conference call and any accompanying documents is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

I'll now turn the call over to John Hatsopoulos for some opening remarks.

John Hatsopoulos

Good morning, ladies and gentlemen. As some of you that have been with us for a long time know, our business vacillates from quarter to quarter and day to day. And right now, today is one of the best periods of our short life. Not only is our backlog well over $16 million, and Ben Locke will give you the exact amount, but our cash in the bank is $2.8 million and we are expecting momentarily to receive from our - the dissolution of ULTRATEK on which, by the way, we have all the signatures of the shareholders and their approval, so we'll get another $1.6 million.

So, you add this up we'll have something like $4.4 million in cash, so that we can have enough money to fulfill all the orders that we're receiving. On our backlog, by the way, we don't include the backlog of ADG, which is many years to come.

With that, I'd like to ask the man that really runs the operations, Ben Locke.

Benjamin Locke

Thank you, John. The third quarter of 2017 was very important for Tecogen, and that it was the first full quarter integrating American DG financials into Tecogen's financials. As I will cover in a few minutes, we are realizing many of the benefits we expected from the acquisition.

As the agenda on Slide 4 indicates, I'll start by reviewing the company's performance and financial results for the quarter along with recent achievements and accomplishments. Bob will then give an overview of our emissions technology development, followed by Bonnie with more detail on the financials. I will then have some final remarks on future opportunities we expect to see as the year comes to an end and we look forward to 2018. Then we'll take questions.

But first, I would like to start off our call by reminding those who may be new to our company about Tecogen's core business model shown on Slide 5, heat, power and cooling that is cheaper, cleaner and more reliable. Our proprietary technology for improving efficiency, emissions and grid resiliency is truly disruptive to the traditional methods of heating, cooling and powering buildings and infrastructure.

And with the acquisition of American DG completed in Q2, we have added the on-site utility business to Tecogen, making us a completely vertically integrated clean technology company able to offer equipment design, manufacturing, installation, financing and long-term maintenance service. As the third quarter results show, the ADG fleet contributed solid revenues with good margins that supplemented Tecogen's earnings for the quarter.

Turning to Slide 6, we're quite pleased to see the financial benefit of a full quarter of ADG supplementing the performance of Tecogen. Total revenues were a record $8.5 million for the company as compared to $6.6 million in the third quarter of 2016 and $7.6 million last quarter, which only had about half of the quarter ADG revenues included in it.

Product sales dropped for the quarter as compared to the third quarter of 2016, which was a record quarter at the time, and last quarter. But this is mostly result of timing of shipments, where the customers were not ready to accept delivery of some equipment until after the quarter ended and is not indicative of any negative trends with sales. As John mentioned, this is reflected in our backlog growth, which I will talk about in just a few minutes.

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