10-Q: Tecogen Reports Increased Revenue but Continues to Face Losses in Q1 2025

Tecogen Inc. saw a revenue increase in Q1 2025 driven by product sales, but the company still reported a net loss due to rising operating expenses.

Summary

• Tecogen Inc. reported a 17.6% increase in total revenues for the three months ended March 31, 2025, reaching $7,277,770 compared to $6,186,097 in the same period of 2024.
• Product revenues increased by 69.9% to $2,533,809, driven by higher chiller and cogeneration system sales.
• Service revenues rose by 5.7% to $4,245,022, attributed to growth in existing service contracts.
• Energy Production revenues decreased by 26.7% to $498,939 due to contract expirations and temporary site shutdowns.
• The company's loss from operations decreased to $594,244 from $1,049,885 in the prior year, primarily due to higher revenues.
• Operating expenses increased by 5.2% to $3,815,284, driven by higher general and administrative, selling, and research and development costs.
• The net loss attributable to Tecogen was $659,922, compared to a net loss of $1,104,967 in the same period of 2024.
• As of March 31, 2025, Tecogen's backlog was $9,522,015, compared to $5,554,599 as of March 31, 2024.
• The company's cash and cash equivalents decreased to $4,066,793 from $5,405,233 at the end of 2024.
• Tecogen believes existing resources, including cash and cash flows from operations and the proceeds of related party notes will be sufficient to meet working capital requirements for the next twelve months.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company is still reporting losses, there are positive trends in revenue growth and backlog. The listing on the NYSE American and the Vertiv agreement are also positive developments. However, the reliance on related party loans and the decrease in cash warrant caution.

Positives

• Significant increase in product revenues, indicating strong demand for Tecogen's products.
• Improved operational performance, as evidenced by the decrease in the loss from operations.
• Substantial increase in backlog, suggesting future revenue growth.
• Listing on the NYSE American stock exchange, which could improve visibility and access to capital.
• Sales and Marketing Agreement with Vertiv Corporation relating to sales of Tecogen DTx chillers for data center cooling applications.
• The company has been making engineering improvements to increase service intervals to increase gross margins.

Negatives

• The company continues to report a net loss, indicating ongoing challenges with profitability.
• Energy Production revenues decreased, which could be a concern if this trend continues.
• Cash and cash equivalents decreased, which could limit the company's ability to invest in growth initiatives.
• The company is reliant upon financing provided by related parties to help fund our operations.
• Operating expenses increased, offsetting some of the gains from higher revenue.

Risks

• The company's reliance on related party loans to fund operations poses a risk if these loans become unavailable or more expensive.
• The decrease in Energy Production revenues could indicate challenges in maintaining or expanding this segment.
• The company's history of losses raises concerns about its ability to achieve sustained profitability.
• The company may require additional cash to fund operations and grow our business, including to fund the development of our hybrid-drive air-cooled chiller and our development of additional markets for our products.
• Changes in customer orders or lack of demand may also impact our profitability.

Future Outlook

Tecogen believes existing resources, including cash and cash flows from operations and the proceeds of related party notes will be sufficient to meet working capital requirements for the next twelve months. However, the company may require additional cash to fund operations and grow its business, including to fund the development of its hybrid-drive air-cooled chiller and its development of additional markets for its products. In such event, the company may be required to raise additional financing through one or more equity or debt financings.

Management Comments

• We believe that as regulations take into account scope 2 emissions and products like our hybrid chiller that can choose the cleanest fuel source will have a significant advantage in decarbonization efforts.
• Tecogen believes that these power constrained customers, in particular data centers and industrial facilities, represent a significant opportunity for growth.
• Tecogen believes that CEA offers an exciting opportunity to apply our expertise in clean cooling, power generation, and greenhouse gas reduction to address critical issues affecting food and energy security.

Industry Context

Tecogen is positioning itself to benefit from increasing demand for energy-efficient and environmentally friendly solutions, particularly in sectors like data centers and controlled environment agriculture. The company's focus on hybrid chillers and cogeneration systems aligns with the growing emphasis on reducing carbon emissions and improving energy resilience.

Comparison to Industry Standards

• Tecogen's systems are greater than 88% efficient compared to typical electrical grid efficiencies of 40% to 50%.
• Tecogen's greenhouse gas (GHG) emissions per KwH are typically half that of the electrical grid.
• Tecogen's chiller products can reduce the electrical capacity needed on-site by 30% or more.
• Comparable companies in the CHP and energy efficiency space include Clarke Energy, 2G Energy, and Veolia, but direct comparisons are difficult due to differences in product offerings and business models.

Legal Proceedings

• Tecogen and its insurers entered into a Settlement Agreement and Full and Final Release from any and all claims, obligations and liabilities, arising from the July 10, 2022 fire in the amount of CDN $400,000, of which Tecogen was responsible for CDN $100,000.

Related Party Transactions

• On October 9, 2023, Tecogen entered into note subscription agreements with John N. Hatsopoulos and Earl R. Lewis, III, each a director and shareholder of the Company.
• On May 1, 2025, Mr. Lewis elected to convert promissory note we had issued to him in connection with his loan to us in the principal amount of $500,000 together with $14,148 of accrued and unpaid interest into 240,256 shares of our common stock at a per share price of $2.14.

Stakeholder Impact

• Shareholders: The increased revenue and backlog are positive signs, but the continued losses and potential need for additional financing could be concerning.
• Employees: The company's growth initiatives and new partnerships could create opportunities for employees.
• Customers: The focus on energy-efficient and environmentally friendly solutions could benefit customers by reducing energy costs and carbon emissions.
• Suppliers: Increased product sales could lead to higher demand for components and materials from suppliers.

Next Steps

• Continue to execute the sales and marketing agreement with Vertiv.
• Focus on increasing service intervals to increase gross margins.
• Continue development of the hybrid-drive air-cooled chiller.
• Monitor the impact of geopolitical tensions on energy prices and supply chains.
• Manage expenses and cash flows to achieve profitability.

Key Dates

Keywords

Tecogen, revenue, chillers, cogeneration, energy production, NYSE American, Vertiv, hybrid-drive air-cooled chiller, loss, backlog