Tecogen Inc. (TGEN) Q3 2026 Earnings Call Transcript

Welcome to the Tecogen Third Quarter 2026 conference call. At this time, all participants are in a listen-only mode. Question and answer session will follow the formal presentation. If anyone should require operator assistance during today's conference, please press star zero from your telephone keypad. Please note that this conference is being recorded. At this time, I'll now turn the conference over to Jack Whiting, General Counsel Secretary. Thank you. You may now begin your presentation.

Good morning, this is Jack Whiting, General Counsel and Secretary of TKGEN. This call is being recorded and will be archived on our website at tkagen.com. The press release regarding our third quarter 2026 earnings and the presentation provided this morning are available in the investor 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 make about the company's expectations, plans, and prospects. Constitute forward-looking statements for purposes of the Safe Harbor Provision 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 10Q and 10K under the caption, Risk Factors Filed with the Securities and Exchange Commission. and available in the Investor section of our website under the heading SEC Violence. While we may elect to update forward-looking statements, we specifically disclaim any obligation to do so, so we 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. Reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures It's provided in the press release regarding our Q3-2026 earnings and on our website. I will now turn the call over to Avanan Rangesh, TKGN CEO, who will provide an overview of third quarter 2026 activity and results, and Roger Duchenne, TKGN CFO, who will provide additional information regarding Q3-2026 financial results. Avanan.

Thank you, Jack. Welcome to TKGN's Q3-2026 earnings call. Today, I'm going to start with the base business and then talk about where we stand with data centers and some of the larger projects. First, we saw a significant increase in revenue in the third quarter compared to the first and second quarters this year. We also saw an increase in revenue compared to the same period last year. The gross margin also increased by seven percentage points compared to the same period last year, showing that our operational improvements, especially in service, are having an effect. Our backlog is presently more than $8 million. As a reminder, this backlog does not include our recurring service contracts or our energy services. As a result of strong deposit collection and the increase in revenue, our cash position is now higher than it was at the end of the third quarter. We are also expecting to collect more than $800,000 in the next week or two. In 2024, we recognized that to increase product revenue, we needed to increase the average dollar value per project and build relationships with larger property owners. Successful initial projects would then lead to sales across the whole building portfolio, increasing sales efficiency. We have worked diligently on this strategy alongside the data center outreach. I'm pleased to say that this is finally coming to fruition. More than 70% of our backlog is now with large property portfolio owners and with large energy services companies. Some of these owners have already started to look at more properties in their portfolio to incorporate our equipment. Given the recent spikes in utility rates nationwide and increased power shortages, we are also seeing an influx of leads for projects in the $2 to $5 million range in industrial and healthcare segments. With regards to data centers, there are two categories of projects in our pipeline. The first category is the smaller co-location data centers. Electric bills are a big portion of the operating expenses for these smaller data centers. As you may have seen from our recent press release, one of our data center customers is saving significant amounts on their utility bills, and it is also giving them an edge against competitors. The projects in this pipeline are between 1 million and 5 million in size. We believe these smaller projects have a high likelihood of closing. The timing here is really a function of expansion plans being approved. The second category are the larger NeoCloud, Hyperscale, and Large Colocation Database. Since the summer demonstrations, The discussions have predominantly focused on how TECOGEN can provide a pathway to scale up production output. One of the challenges is that for bigger names to pilot and deploy any new technology, it needs to be deployable in volume quickly and hit aggressive delivery schedules. Given TECOGEN size, we needed a solution that allowed us to scale production quickly without large amounts of upfront capital and while, if possible, increasing margins. The good news, though, was that the hyperscalers in some of the larger data centers were excited enough about the dual power source technology that they wanted to see how it could be adapted for other applications within the data center in addition to just cooling. As we explored how this option would work in practice, this led us to an innovation that is highly scalable and that we're excited to announce today. We have designed a modular dual power source package. That can be retrofitted to third-party chillers, dry coolers, and any other data center load. It has all the advantages of the dual power source chiller and is protected by the same patents, but is much easier to scale up production. The supply chain is robust since we already buy much of the same material in volume for our service fleet and our inverter units. This approach allows us to focus on the areas that the customer values and that make us unique compared to conventional power generation. The first, of course, is the dual power source capability and the ability to blend power sources dynamically. This allows a customer to seamlessly switch to natural gas to maximize power for AI loads and to write through power outages, increasing resiliency. Our patented control algorithms Optimized part load efficiency. In many of these thermal applications in a data center, chillers and dry coolers may operate at part load for large periods of time. Most conventional power generation systems see significant reductions in efficiency during part load operation. Our system can keep constant efficiency through much of the power range. The last area we have patents is in our emission system. Most competing systems use consumables to maintain emissions. Ours is a catalyst-based system that is easy to maintain while providing near-zero NOx, CO, and VOCs. This dual power source module includes integrated heat rejection, emissions control, and microgrids control in a low-noise package from the factory, so it can also command premium pricing because it requires very little on-site installation time. As a result, we expect to maintain higher margins on this product and hence significantly reduce the need for incremental working capital as customer deposits can fund much more of the material costs. Last, focusing on the dual power source module means no specialized tooling or labor is needed beyond what we already use for the cogen production. Therefore, adding additional factory capacity when we run out of space in our current site is straightforward. From the customer standpoint, this is also an easy solution to approve internally, since they can use a chiller that is already on their drawings and add our package in parallel. Because this solution is fully modular, it can be applied to any chiller size or any dry cooler size. So it is fully adaptable to any future data center design, including the 800-volt architecture. This also means that if a data center has enough space, it could even be applied to a site that is already designed. The dual power source option means that the system has redundancy built in. Of course, this is not just applicable to data centers. Many of our existing customer base, such as hospitals and campuses, are very interested in this solution because it is fast to deploy. In fact, one prospect has already specified this solution into their project. The PowerDance building block also allows us to now address bigger industrial facilities that have power draws similar to a medium-sized data center. These facilities have similar issues as data centers. Where they would rather allocate scarce utility power to revenue-generating assets and cut operating costs at the same time. Although I cannot comment today on when we will ship the first units to customers, almost all the underlying components are already operating in our dual power source chiller and our inverter units today. We're working with our partners and end customers to find launch customers to deploy this solution. I will update shareholders as I have more news. I will now hand over to Roger to discuss the financials.

Thank you, Abhinad, and good morning, everybody. Being with the results, revenues for the quarter that just concluded increased 9.6% to $7.9 million, which compares to $7.2 million in the third quarter of 2025. And this is due mainly to increased services segment revenue and increases in products and energy production segments revenues as well. Our gross profit increased $800,000, or 35.3%, to just under $3 million in the third quarter of 2026, which compares to $2.2 million in the third quarter of 2025, and this is due to the increased revenues and the decreased material and labor costs in our services segment. Our gross margin increased 7% to 37.4% in the third quarter from 30.4% in the comparable period in 2025, and this is due largely to improve the services segment gross margin. Our operating expenses increased 5.3% in the third quarter to $4.5 million from $4.3 million in the third quarter of 2025, which we saw increases in operating costs in our product segment and a general increase in operating costs incurred for payroll, stock-based compensation, credit losses, and depreciation and amortization, And cost incurred for the manufacturing capacity expansion, along with the cost that we incurred for the continued development and refinement of our dual-source chiller and the design of a modular dual-power source package that Abena noted early in his remarks, all of which are continued cost or investment in our data center strategy. As a consequence of our services segment headcount reduction in the second quarter, we did see a reduction in our services segment OPEX in the third quarter of this year. Our net loss decreased in the third quarter to $1.6 million from $2.1 million in the comparable period of 2025. And this is, again, due to the increased services segment sales and gross margin, which was offset partially by the increase in operating expenses. Looking at the adjusted EBITDA, our adjusted EBITDA loss was $1 million in the third quarter, which is lower than when compared to the adjusted EBITDA loss of $1.7 million that was incurred in the same period last year, which is due to the increased services segment sales and gross margin. And again, this is partially offset by the increase in OPEX. We'll go into performance by segment. Products' revenues increased slightly 2% to $3.1 million from $3 million in the comparable period of last year. This is due to increased chiller sales. As we have discussed in the past, product revenue has a significant variability quarter to quarter. Products' gross margin decreased to 27.1% in the third quarter from 36.8% in the third quarter of 2025. This is due to material cost increases incurred on our hybrid drive air-cooled chillers and additional cost incurred as we continue to realign the factory floor to increase efficiency and productivity. As we increase the air shipment volume going forward, we would anticipate to see our unit material costs be reduced going forward. Our services revenue increased 13% in the third quarter of 2026 to $4.5 million, which compares to $3.9 million in the third quarter of 2025. And this is due to increased operating hours, whether our existing and existing service contracts and the Aegis-acquired contracts, as well as general price increases. Our services gross margin increased 17.3% to 42.6% in the third quarter of 2026, which compares to a gross margin of 25.3% in the same period of 2025, and this is due to decreased labor and material costs, and this has most notably occurred in the greater New York City area. And we've also seen improvements across the majority of our service centers in the most recent period. Our energy production revenues increased 42% in the third quarter of 2026 to 0.36 million from 0.26 million in this comparable period of 2025, and this is due to increased uptime at certain energy production sites. The energy production gross margins also increased during the period to 60.2% from 34.4% in the 2025 period, and this is due to decreased service maintenance costs incurred in the period. I'll now hand the caller with Javanagh for his closing remarks. Thank you, Roger.

First, our base business is picking up. The product backlog is increasing. The cash position is flat or actually slightly higher since we last reported, and we're expecting to collect $800,000 in the next week or two. The second is that our current product backlog has significant expansion potential because of the nature of the customers. Third, our services business is averaging more than $4.3 million per quarter so far this year, so the recurring cash flow has increased year on year. With regards to data centers, the solution we unveiled today wasn't developed in isolation. It was developed based on feedback and listening very closely to the needs of hyperscalers and some of the largest data center developers. Right now, we have multiple options beyond just our current dual power source chiller. This gives data centers substantial flexibility on how they choose to deploy our solution. It allows us to also bridge where we are today in size versus some of the projects with minimal risk for a data center to try the solution. Existing reference designs can be used with minor modification with this solution. It is also both future-proof and potentially retrofittable to operational sites. The route to ramp-up production also uses a supply chain that is not constrained, and it solves two key problems given much of the recent AI data center backlash. The first is the fuel cell-like emissions. We have continued to improve and tune our emissions technology. See the image on the slide. Near zero NOx and very, very low CO. Multiple large data center power projects have faced moratoriums due to air quality concerns. In our case, the customer can use gas strategically with very clean emissions. Second, as access to power has become more uncertain in the current climate, more data centers are interested in using every bit of available power at already approved sites. I'll now thank you for listening, and I'll open the floor for questions.

Thank you. We'll now be conducting the question and answer session. If you'd like to ask a question at this time, please press star 1 on your telephone keypad, and the confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you, and one moment please for our first question. Thank you, and our first question is from the line of Eric Stein with Craig Hallam. Please receive your questions. Hi, Abinanda.

Hi, Roger. Hey, Eric. Morning, Eric. Hey, good morning. Good morning. So I want to just start with this, your new technology, the dual power source modules. When we think about capacity, You know, obviously mixed dependent, and obviously you laid out the two categories of data center opportunities that you're going after. But I mean, is there, oh, is it too early to think about? Or what would it be if you allocated that entire facility to these modules?

So, it's a little early, but we've been asked some of that question, and it really depends on how you think about it, right? But I would say, just from an output standpoint, it'll be more than 2x of what we can do in terms of the chiller numbers. That kind of hopefully gives you a number in terms of, I would say we could, you know, when we were talking about the chillers, right, we were saying something like 100 units or so of chillers. This would basically double that easily, and adding additional capacity is also much, much more capable on this. And as I said earlier in the call, part of the reason also with this is to add additional, if we needed to just say, if we get a multiple unit data center order, or let's say a customer wants to expand onto multiple sites, for us to add additional assembly areas for this would really just require renting out. Additional factory capacity. A lot of the supply chain, a lot of what we already do, it's, you know, much, much more scalable. So it is mix dependent, but we think the potential, especially when you include the margin expansion that can come with this, it can fundamentally change the business.

Yep. No, absolutely. Well, then thinking about, obviously, you've been in active discussions with some of your customer prospects, and you mentioned that, you know, maybe it speeds things up a little bit, but what, you know, do you have an idea of what a potential customer might need to see in terms of testing this? I know it's, I guess, maybe simpler, but... I would assume they would still need to run these for a period of time to get comfortable before rolling them out more broadly.

So, yes, I definitely agree with that. I think part of the advantage is many of them have come and now seen the dual power source chiller technology, right? So I think the way they're, and a lot of this, unfortunately, there's a lot of confidential pieces here, so I cannot talk specifics. But what I can say is, the way they're viewing this is, okay, how do I design in the potential for this? Further down, right? So what they'll do at this point is they'll evaluate this as a cost benefit in terms of how much IT capacity gets added in, then they would potentially do a smaller pilot. I don't know how big that would be. But concurrently, they would basically, you know, start designing in into bigger data centers, the extra space and all the pieces that would be required to connect this up. To a certain extent, this module didn't just come out of nowhere, right? It came with the discussions with what they're trying to do here and also what they feel they can get approved the fastest way through. And the advantage here is they don't need to change any of their thermal design. And that's why we think it could happen. A lot of things can happen in parallel paths here. But again, the timing is pretty hard to determine based on. On this, because a lot of things typically happen in parallel in these kind of discussions.

Yep. No, I get that. All right. Maybe last one for me. How do we think about this in the context of the Vertiv relationship? And I know that, you know, last call you talked about getting close on the master partnership agreement. You haven't really mentioned Vertiv on this call. I mean, is this, should we think of Vertiv as still an active partner here? Is this outside of that or just maybe thoughts on that?

All I'm going to say on this one for the moment is stay tuned. I can't comment further on it at this juncture on the murder of stuff, but things are in a great place, but just stay tuned is all I'll say on that one.

Okay, I'll leave it there. Thank you.

The next questions are from the line of Bobby Brooks with Northland Capital. Please receive your question.

Hey, good morning, team, and thank you for taking my question. What I wanted to dig in a little bit deeper on is just like understanding how this, you know, modular retrofits, potential retrofit solution is quicker to scale production versus, you know, the, your Legacy dual-source chiller, because I thought the dual-source chiller was also relatively easy to scale in production, so just kind of wanted to understand the nuances that make this, you know, it seems like this would be a lot easier to scale, so just trying to get a sense on that.

Yeah, so there are two pieces to this, right? The first fundamental thing is with the dual power source module, the bit that we're really providing to the customer is all the power control, the engine, the emissions in a single box. With the chiller, you're providing that plus all the refrigeration assembly. So, here, you essentially are able to drop this on-site with just the box and connect it to a chiller the customer already says they're happy with. And it's a little more nuanced than that, but that's kind of, in a very simple way, that's kind of how it works. So the advantage that we have in today's climate with the dual power source box is kind of the engines that we have, we... So we already buy a lot of those engines in volume. So one, we're already getting volume pricing. And number two, the supply chain associated with the engines that we buy right now is very easy to scale up because you can get a lot of those engines. Some of the larger, single large reciprocating engines and so on, they're in short supply. So using our engine platform with the existing power electronics. One frees up, it uses a portion of the supply chain that isn't constrained today, so that one increases our odds that a data center will actually do this because they can get supply very quickly. We know that downstream, the supply of all of the components that we use on the product is available. The second piece is just space. When you're dealing with a bigger chiller, right, you're having to maneuver a much larger piece of equipment here. Whereas with the dual power source piece, you're only doing the power module, which means just from a factory space and layout standpoint, you can get a lot more units through the floor. And so the two put together allows you to scale up production much, much faster. But it's also this. Us being able to even show our prospects, look, we know and we can show you with the supply chain further upstream that all of these components are available and therefore we can deliver these on time with enough volume. So it's really also being able to show our end testament that will increase the odds that these orders will come through.

That's super helpful detail. I appreciate it, Abinan. And then just on your, you know, on the dual-source chillers, STX, DTX, right, it was, I know it's, you know, it can provide, I think the STX is 200 tons of cooling, the DTX is 400 tons of cooling. I know it's probably not an apples to apples comparison with this new module rolled out today, but could you maybe just help us sense, like, what one of these modules can provide in terms of, like, technical aspects to a data center on, like, the power usage or the cooling capacity or however might we should look at it?

So that's, again, that's a phenomenal question, Bobby. And, you know, that actually is the other reason we did this, because a lot of the data center design today that's on the, on the things may use a, you know, a 600 or 800 or even a 900 ton chiller. With this power module, we could power a 600 or 900-ton chiller without having to build a chiller that can... You know, do all the refrigeration design for the bigger chiller. We can actually power something that's already on the spec right now. So what this, the really unique thing about this is it, we could, think of it almost like building blocks, right? So you could use. What we have in our current dual power source chiller would have, you know, two of the building blocks to power a, you know, a 300-ton chiller. In this case, what we're doing is we're stacking the building blocks together so that whatever the customer is using on-site, the building blocks just get bigger, and you could power a 900-ton chiller with just a bigger box. So, it's... In that sense, that's what makes it very, very unique. You can just say, okay, if the customer is using a 300-ton chiller, use two of our little building blocks in one package. If the customer is using a 600-ton, you'd use four of the little building blocks to make the package. And that same way, you could do the same thing for other thermal loads, like a dry cooler. So if a customer turns around and says, I want to have a, I'm going to use. A lot more of the big fans and the other systems that we have in the data center, you do exactly the same. You would just power the same thing with that same package. So it's very, very adaptable to whatever they want to run on site.

That's really interesting to hear and super helpful color. I'll return to the queue. Thank you, Avanon.

Our next question is from the line of Alex Blanton with Clear Harbor Asset Management. Please receive your questions.

Oh, good morning. Good morning, Alex. Sounds like you're making good progress. And I have a question about the supply of natural gas to these sites. Are there any developments among the hyperscalers? That would help you do business with them in terms of their bringing in natural gas for other purposes that could be used by your equipment to be adopted.

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 constrained. 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 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, can I get a pipeline-level gas supply to the site? You only need distribution-level gas to be able to do this.

No, thank you. So, is... Elon Musk cites moving to natural gas that you know of, and would you be involved in any of their work?

So I cannot comment on any specific customers or any specific things at this point, right? Pretty much everybody that we're talking to, we have confidentiality agreements with. On a more general case, right, we're seeing a lot of the bigger data centers looking to do on-site power generation, whether they do turbines or so on. And in those cases, we can definitely support, however. It works, you know, whether it's with turbine cooling, direct, you know, the cooling equipment, dry coolers, but we are seeing quite a bit of a shift to power generation happening on site, and that's happening at the hyperscaler level as well as the smaller entities.

When you say dry cooling, what do you really mean?

So, some data centers, especially what they would do is they take 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, you know, as hot as they can. There's a few data centers that do it. There's very few. Um, that are actually in practice doing it. Um, but they may have a comp, uh, both fans just, you know, on cooler conditions, they might just send the water through a big fan and blow, you know, reject it to the atmosphere and not turn on the air conditioning. So they, they, 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, 5%, 10% of the 100 megawatt load, right? So, it can be a large chunk of the overall power need of a data center.

Okay. I'm going to just switch topics a little bit. As you know, there's a tremendous pushback against data setters that became an election issue during the recent election. Do you see any indication that that could be... That pushback could be lessening after the election as the political needs, the 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 this, of the NIMBY? Objections to data centers in people's communities around the country.

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 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 on-site 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. And in particular, the ones where they have some utility power and we can help them 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 in peak time. You can do so, and you can still not have to turn down your computing on site. So 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.

Uh, yes. 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 as the size ranges that we're in, can do so. The market, I think, is definitely much, much. You know, 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.

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

Thank you, Alex. Our next question is from the line of Barry Hames with Sage Asset Management. Please receive your question.

Thanks for taking my question. 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, you know, what does the pipeline look like there? Are there any discussions that are, you know, pretty far along where, you know, we might expect to see some orders, you know, over the next month or two? If you could just characterize that market for us. Thanks.

So, I cannot give you any specifics on, you know, order and when we expect orders to close on that, again, for confidentiality reasons. What I can say is there are multiple projects, some, 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 pieces 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, they're able to start placing equipment orders. So there are things of different sizes in that range. And then we're also seeing, you know, 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... Cloud-based, COLO-type things where utility bills, especially in the Northeast and so on, are very high, where adding some small-scale, either power generation or cooling, can make a big difference to their energy bills.

Great. Thank you. That's good luck. Thank you, Barry.

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

Yes, thank you. Good morning. Two parts are two different questions. One is on the veritif. 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 That's our first question.

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

Okay, thank you. And then the second question, it kind of comes back to what has been kind of suggested, but that is the political environment seems to be and the The general environment seems to be much more concerned 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 TECOGEN 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, right? 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 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. 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 have... 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, right? 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 stage.

Thank you. The next question is from the line of Chip Moore with Roth MKM. Please receive your questions.

Hey, morning. Thanks. Apologies at the start of the call. Hey, if you've covered any of this already. I'm just curious on the retrofit opportunity and your comments. It would seem that your value proposition is only increasing with some of the – I'm just curious, you know, how much of this has been developed sort of in tandem with the discussions you've had ongoing? You know, how much can you leverage the work you've already done around that? And how should we think about, you know, potential first proof points on that side? You know, would this be sort of a demonstration type? Roll out 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... It means that an existing site or something that's in design today could have this incorporated. It doesn't require you to design around the full filler. 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, you know, 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 side, this sort of uptick you're seeing, you know, it feels like it's got some legs to it. Just expand 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?

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, sites that have already been approved that have less risk of having them shut down because they can't scale up or they can't get it into construction. 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. In 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. On the service side, the margins, you know, very nice this quarter. Good to see. You know, do you think you're past some of the challenges you've had there and any update there? Thanks.

So consistently this year, we've been running, you know, the revenue has gone up. Right. So some of the investments we've made last year seem to be working. So far, three quarters in, we've still been, you know, mid-force. Typically, the two summer quarters have lower service revenue just because of less thermal load. And last year, same period, right, we were 13% 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 and 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 4 million in revenue on the service side.

Great. Thanks very much.

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

Thank you. Hey, Abinad. Thanks for taking my call. Based on a related question on the service, and 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. I'm just curious to understand if most of this project revenue that you'll be potentially getting over time, you know, is there pretension where, you know, that kind of 20% service revenue that we, you know, expect to get from those things or that any, and on a related note, on the new kind of retrofit kind of, you know, 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 into industrial, hospital, commercial buildings. So definitely service revenue associated with that, similar to 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. This 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? Yeah, it's perfect, perfect. 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, that's the direction you've 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 for the business. So with your current cash position, can you grow both, now that you have the legacy stuff growing again to some degree, do you have enough capital to get both going at the same time? And 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 part of the reason that we're looking at this from this module basis is 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 volume on it, we should be able to get even better pricing. The more and some of that were already turning because of the service business. 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 this. 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. It's pretty much the same problem. And therefore, it's not necessarily either or. Both could have the same requirements, right? So you're not necessarily having to spend huge amounts of marketing dollars being spread in both directions. What 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 into the market over the last two years and continue to do it is generating a lot of inbound leads. So we think being able to address some of the larger facilities with this module as well can help us grow the dollar value per sale.

Okay. So, perfect. So, thanks, Grant. It makes it a little easier to understand. Perfect. But I still have a question related to all this stuff. Like, I think that, you know, there's two things here. You have proven technology that can work out there that people, that they can solve the problems that we're talking about here. That's one thing. Kind of establishing your legacy business over the years. And one of the things you talked about, like, who wants to be the first one in the data center 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 challenges you'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 deploying this modular solution, Are you going to run this the same? Okay, 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 is 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. And to a large extent, the bridge between that and this modular solution is very easy because it is both 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 Vertiv? Does that, does this new product offering also kind of bring Vertiv into the mix to help, to bring it into this product offering, or is it totally separate? And if it's not, you know, 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 use it on their own, you know?

All I'm going to say on this one, again, is stay tuned. We'll announce what we can when we can here.

Okay, great, great. And I guess, finally, your service revenue, you're right about $4 million here, right? That's what you're 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 quarter. 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 seven, eight 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 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 saying that, you know, you can break evens around the corner just on that part of it.

There, I mean, there's different pathways there, right? And I think this is a, that's. The service revenue is going to make bigger and bigger components of our, you know, it's going to cover a larger chunk of our cost. 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, you know, projects in addition to the base business. The break-even 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 quarters out, it gives us some level of managing the cash flow there.

Right, okay. I guess if you sell more of the modular stuff, the break-even comes down, right, because there's less cost associated with that, right? That can get you to break-even faster than… That is the goal. Maybe. Yeah, yeah. Okay. That is the goal. All right. That is the goal.

Thanks, Abinam.

Thank you.

Thank you, Maj. Final questions from the line of Bobby Brooks with Northland Capital. Please just see what's your question.

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

Okay, sounds good. Thank you, Bobby.

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. 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 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.