8-K
TECOGEN INC. (TGEN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report: August 13, 2020
TECOGEN INC. (OTCQX: TGEN)
(Exact Name of Registrant as Specified in Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
| 001-36103 | 04-3536131 |
|---|---|
| (Commission File Number) | (IRS Employer Identification No.) |
| 45 First Avenue | |
| Waltham, Massachusetts | 02451 |
| (Address of Principal Executive Offices) | (Zip Code) |
(781) 466-6400
(Registrant's telephone number, including area code)
_______________________________________________
| Securities registered or to be registered pursuant to Section 12(b) of the Act. | Title of each class | Trading Symbol | Name of exchange on which registered |
|---|
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Section 2 - Financial Information
Item 2.02. Results of Operations and Financial Condition.
On August 13, 2020, the registrant issued a press release with earnings commentary and supplemental information for the three and six months ended June 30, 2020. The press release is furnished as Exhibit 99.01 to this Current Report on Form 8-K.
The information contained in this Item 2.02 and Exhibit 99.1 to this Form 8-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Section 7 - Regulation FD
Item 7.01. Regulation FD Disclosure.
On August 13, 2020, the registrant presented the attached slides online in connection with an earnings conference call. Those slides are being furnished as Exhibit 99.2 to this Current Report on Form 8-K.
The information contained in this Item 7.01 and Exhibit 99.2 to this Form 8-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Section 9 - Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
The following exhibits relating to Items 2.02 and 7.02 are furnished, and not filed, with this Current Report on Form 8-K:
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| TECOGEN INC. | ||
|---|---|---|
| By: /s/ Benjamin Locke | ||
| August 13, 2020 | Benjamin Locke, Chief Executive Officer |
Exhibit
Tecogen Announces Second Quarter 2020 Results
Increased Product Sales and Significantly Improved Cash Flow and Cash Balance
WALTHAM, Mass., August 13, 2020 - Tecogen Inc. (OTCQX: TGEN), a leading manufacturer of clean energy products, reported revenues of $7.44 million for the quarter ended June 30, 2020 compared to $7.87 million for the same period in 2019, a 5.5% decrease. Product revenues increased 37% to $3.34 million compared to $2.45 million in the same period in 2019. The decrease in revenue was primarily from curtailed installation activity due to the COVID-19 pandemic and reduced energy production revenue due to customer facility closures. Gross profit for the second quarter of 2020 was $2.91 million compared to $3.43 million in the second quarter of 2019. Net loss was $654 thousand for the second quarter of 2020, compared to $357 thousand for the same period in 2019.
Key Takeaways:
| • | Cash flow provided by operations of $2.66 million compared to cash flows used by operations of $2.10 million for the same period in 2019 |
|---|---|
| • | Cash and cash equivalents at the end of the second quarter 2020 of $2.86 million compared to $878 thousand at the end of 2019, an increase of 226% |
| --- | --- |
| • | Operating expenses decreased by 9.4% to $3.4 million for the second quarter of 2020 compared to the same period of 2019 |
| --- | --- |
Adjusted EBITDA^(1)^was negative $363 thousand for the second quarter of 2020 compared to negative $205 thousand for the second quarter of 2019. (Adjusted EBITDA is defined as net income or loss attributable to Tecogen, adjusted for interest, income taxes, depreciation and amortization, stock-based compensation expense, unrealized gain or loss on equity securities, goodwill impairment charges and other non-cash non-recurring charges due to the abandonment of certain intangible assets. See table following the statements of operations for a reconciliation from net loss to Adjusted EBITDA as well as important disclosures about the company's use of Adjusted EBITDA).
On April 17, 2020, the Company obtained a Paycheck Protection Program ("PPP") loan of $1,874,200 pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). The proceeds were used for payroll, rent and utilities and we anticipate requesting forgiveness of the loan.
“The second quarter saw many challenges for our business and our customers as a result of the COVID-19 pandemic,” commented Benjamin Locke, Tecogen's Chief Executive Officer. “We are pleased that our product sales in the second quarter remained strong despite these challenges. Installation revenues decreased as we close out several large construction projects and experienced COVID-19 related delays on other projects, and our energy production revenues decreased primarily due to customer facility closures. We are optimistic that our product revenues will continue strong for the rest of the year, and that closed energy production assets will resume operations as COVID-19 related restrictions are eased. Our cash position is now stronger than it has been for some time. We have also used this opportunity to improve efficiencies and reduce operating expenses so that we have adequate resources to maintain our business through the continuing pandemic and to take advantage of growth opportunities as they arise.”
Highlights:
Financial
| • | Product revenues grew 37% year over year |
|---|---|
| • | Services revenues decreased 21% due to lower installation revenue as several larger construction projects close out and construction activity was curtailed due to COVID-19 |
| --- | --- |
| • | Energy production revenues decreased 52% primarily due to COVID-19 related closures and other facility shutdowns |
| --- | --- |
| • | Gross margin was 39% compared to 44% for the same period in 2019 |
| --- | --- |
| • | Net loss for the three months ended June 30, 2020 was $654 thousand compared to $357 thousand for the same period in 2019, an increase of $297 thousand year over year |
| --- | --- |
| • | Net loss per share was $0.03 for the second quarter of 2020 and $0.01 for the second quarter of 2019 |
| --- | --- |
| • | Working capital increased by $575 thousand, a 4% increase since year-end 2019 |
| --- | --- |
| • | Operating expenses decreased by 9.4% to $3.4 million for the second quarter of 2020 compared to the same period of 2019 |
| --- | --- |
| • | Cash flow provided by operations was $2.66 million compared to cash flows used in operations of $2.10 million for the same period in 2019, primarily due to improved collections of accounts receivable |
| --- | --- |
| • | Cash and cash equivalents at end of second quarter was $2.86 million (including proceeds from the PPP loan received on April 17, 2020) |
| --- | --- |
| • | Terminated Credit Agreement with Webster Business Credit Corporation on May 11, 2020 |
| --- | --- |
Sales & Operations
| • | Executed teaming agreement with Ainsworth, a Toronto-based company providing high quality technical trade services, highlighting Tecogen as its preferred CHP partner |
|---|---|
| • | Released a white paper entitled "Building Electrification Policy and Combined Heat and Power Relevance" that provides an in-depth analysis of why electrification policy is generally counterproductive to its carbon reduction goals when compared to combined heat and power (CHP) |
| --- | --- |
| • | Current sales backlog of equipment and installations as of August 11, 2020 is $13.1 million, comprised of $10.4 million of products and $2.7 million of installation services |
| --- | --- |
Emissions Technology
| • | Planned work with MCFA (Mitsubishi Caterpillar Forklift America) delayed due to restrictions on travel between Japan and the United States |
|---|
Conference Call Scheduled for Today at 11:00 am ET
Tecogen will host a conference call today to discuss the first quarter results beginning at 11:00 am eastern time. To listen to the call dial (877) 407-7186 within the U.S. and Canada, or (201) 689-8052 from other international locations. Participants should ask to be joined to the Tecogen Second Quarter 2020 earnings call. Please begin dialing 10 minutes before the scheduled starting time. This earnings press release will be available on the Company website at www.Tecogen.com in the "News and Events" section under "About Us." The earnings conference call will be webcast live. To view the associated slides, register for and listen to the webcast, go to https://ir.tecogen.com/ir.calendar. Following the call, the recording will be archived for 14 days.
The earnings conference call will be recorded and available for playback one hour after the end of the call. To listen to the playback, dial (877) 660-6853 within the U.S. and Canada, or (201) 612-7415 from other international locations and use Conference Call ID#: 13672659.
About Tecogen
Tecogen Inc. designs, manufactures, sells, installs, and maintains high efficiency, ultra-clean, cogeneration products including engine-driven combined heat and power, air conditioning systems, and high-efficiency water heaters for residential, commercial, recreational and industrial use. The company provides cost effective, environmentally friendly and reliable products for energy production that, through patented technology, nearly eliminate criteria pollutants and significantly reduce a customer’s carbon footprint.
In business for over 35 years, Tecogen has shipped more than 3,000 units, supported by an established network of engineering, sales, and service personnel across the United States. For more information, please visit www.tecogen.com or contact us for a free Site Assessment.
Tecogen, InVerde e+, Ilios, Tecochill, Tecopower, Tecofrost and Ultera are registered or pending trademarks of Tecogen Inc.
Forward Looking Statements
This press release and accompanying documents contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. For example, statements in this press release regarding the potential future impact of the COVID-19 pandemic on the Company’s business and results of operations are forward-looking statements. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Such forward-looking statements include, among other things, fluctuations in demand for our products and services, competing technological developments, issues relating to research and development, the availability of incentives, rebates, and tax benefits relating to our products and services, changes in the regulatory environment relating to our products and services, integration of acquired business operations, and the ability to obtain financing on favorable terms to fund existing operations and anticipated growth. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as supplemented, and Part II, Item 1A of the Company’s Form 10-Q for the quarter ended June 30, 2020 (“Second Quarter Form 10-Q”), in each case under the heading “Risk Factors.” The following discussion should be read in conjunction with the Second Quarter Form 10-Q filed with the Securities and Exchange Commission (“SEC”) and the unaudited condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of the Second Quarter Form 10-Q. Any forward-looking statement in this release speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.
In addition to GAAP financial measures, this press release includes certain non-GAAP financial measures, including Adjusted EBITDA which excludes certain expenses as described in the presentation. We use Adjusted EBITDA as an internal measure of business operating performance and believe that the presentation of non-GAAP financial measures provides a meaningful perspective of the underlying operating performance of our current business and enables investors to better understand and evaluate our historical and prospective operating performance by eliminating items that vary from period to period without correlation to our core operating performance and highlights trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures.
Tecogen Media & Investor Relations Contact Information:
Benjamin Locke
P: 781-466-6402
E: Benjamin.Locke@tecogen.com
TECOGEN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
| June 30, 2020 | December 31, 2019 | |||||
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 2,859,922 | $ | 877,676 | ||
| Accounts receivable, net | 8,163,461 | 14,569,397 | ||||
| Unbilled revenue | 4,883,779 | 5,421,811 | ||||
| Inventory, net | 7,296,097 | 6,405,229 | ||||
| Prepaid and other current assets | 641,415 | 635,034 | ||||
| Total current assets | 23,844,674 | 27,909,147 | ||||
| Property, plant and equipment, net | 3,167,604 | 3,465,948 | ||||
| Right of use assets | 1,908,084 | 2,173,951 | ||||
| Intangible assets, net | 1,475,794 | 1,593,781 | ||||
| Goodwill | 5,281,867 | 5,281,867 | ||||
| Other assets | 195,430 | 691,941 | ||||
| TOTAL ASSETS | $ | 35,873,453 | $ | 41,116,635 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Current liabilities: | ||||||
| Revolving line of credit, bank | $ | — | $ | 2,402,384 | ||
| Note payable, current portion | 208,939 | — | ||||
| Accounts payable | 4,074,180 | 5,271,756 | ||||
| Accrued expenses | 2,896,530 | 2,599,366 | ||||
| Deferred revenue | 1,103,067 | 2,635,619 | ||||
| Lease obligations, current | 523,784 | 536,443 | ||||
| Total current liabilities | 8,806,500 | 13,445,568 | ||||
| Long-term liabilities: | ||||||
| Deferred revenue, net of current portion | 128,304 | 145,464 | ||||
| Note payable, net of current portion | 1,665,261 | — | ||||
| Lease obligations, long-term | 1,384,299 | 1,637,508 | ||||
| Unfavorable contract liability, net | 2,315,140 | 2,534,818 | ||||
| Total liabilities | 14,299,504 | 17,763,358 | ||||
| Commitments and contingencies (Note 11) | ||||||
| Stockholders’ equity: | ||||||
| Tecogen Inc. stockholders’ equity: | ||||||
| Common stock, $0.001 par value; 100,000,000 shares authorized; 24,850,261 and 24,849,261 issued and outstanding at June 30, 2020 and December 31, 2019, respectively | 24,850 | 24,849 | ||||
| Additional paid-in capital | 56,704,412 | 56,622,285 | ||||
| Accumulated deficit | (35,235,389 | ) | (33,379,114 | ) | ||
| Total Tecogen Inc. stockholders’ equity | 21,493,873 | 23,268,020 | ||||
| Noncontrolling interest | 80,076 | 85,257 | ||||
| Total stockholders’ equity | 21,573,949 | 23,353,277 | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 35,873,453 | $ | 41,116,635 |
TECOGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| Three Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2020 | June 30, 2019 | |||||||||||||
| Revenues | ||||||||||||||
| Products | $ | 3,342,794 | $ | 2,445,448 | ||||||||||
| Services | 3,815,923 | 4,843,649 | ||||||||||||
| Energy production | 276,341 | 578,299 | ||||||||||||
| Total revenues | 7,435,058 | 7,867,396 | ||||||||||||
| Cost of sales | ||||||||||||||
| Products | 2,037,786 | 1,546,752 | ||||||||||||
| Services | 2,285,405 | 2,530,175 | ||||||||||||
| Energy production | 205,876 | 364,554 | ||||||||||||
| Total cost of sales | 4,529,067 | 4,441,481 | ||||||||||||
| Gross profit | 2,905,991 | 3,425,915 | ||||||||||||
| Operating expenses | ||||||||||||||
| General and administrative | 2,637,479 | 2,683,252 | ||||||||||||
| Selling | 602,383 | 704,700 | ||||||||||||
| Research and development | 166,027 | 372,545 | ||||||||||||
| Total operating expenses | 3,405,889 | 3,760,497 | ||||||||||||
| Loss from operations | (499,898 | ) | (334,582 | ) | ||||||||||
| Other income (expense) | ||||||||||||||
| Interest income | 238 | 66 | ||||||||||||
| Interest expense | (56,253 | ) | (17,005 | ) | ||||||||||
| Unrealized gain (loss) on investment securities | (78,723 | ) | 19,681 | |||||||||||
| Total other income (expense), net | (134,738 | ) | 2,742 | |||||||||||
| Loss before provision for state income taxes | (634,636 | ) | (331,840 | ) | ||||||||||
| Provision for state income taxes | 13,171 | 15,955 | ||||||||||||
| Consolidated net loss | (647,807 | ) | (347,795 | ) | ||||||||||
| Income attributable to the noncontrolling interest | (6,081 | ) | (9,334 | ) | ||||||||||
| Net loss attributable to Tecogen Inc. | $ | (653,888 | ) | $ | (357,129 | ) | ||||||||
| Net loss per share - basic and diluted | $ | (0.03 | ) | $ | (0.01 | ) | ||||||||
| Weighted average shares outstanding - basic and diluted | 24,850,261 | 24,826,311 | Non-GAAP financial disclosure (1) | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||
| Net loss attributable to Tecogen Inc. | $ | (653,888 | ) | $ | (357,129 | ) | ||||||||
| Interest expense, net | 56,015 | 16,939 | ||||||||||||
| Income taxes | 13,171 | 15,955 | ||||||||||||
| Depreciation & amortization, net | 103,485 | 98,988 | ||||||||||||
| EBITDA | (481,217 | ) | (225,247 | ) | ||||||||||
| Stock based compensation | 39,494 | 39,898 | ||||||||||||
| Unrealized (gain) loss on investment securities | 78,723 | (19,681 | ) | |||||||||||
| Adjusted EBITDA | $ | (363,000 | ) | $ | (205,030 | ) |
TECOGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| Six Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2020 | June 30, 2019 | |||||||||||||
| Revenues | ||||||||||||||
| Products | $ | 6,093,273 | $ | 5,469,974 | ||||||||||
| Services | 8,277,294 | 8,754,945 | ||||||||||||
| Energy production | 1,027,191 | 1,819,108 | ||||||||||||
| Total revenues | 15,397,758 | 16,044,027 | ||||||||||||
| Cost of sales | ||||||||||||||
| Products | 3,705,250 | 3,490,214 | ||||||||||||
| Services | 5,304,070 | 5,004,708 | ||||||||||||
| Energy production | 690,280 | 1,164,431 | ||||||||||||
| Total cost of sales | 9,699,600 | 9,659,353 | ||||||||||||
| Gross profit | 5,698,158 | 6,384,674 | ||||||||||||
| Operating expenses | ||||||||||||||
| General and administrative | 5,326,941 | 5,338,663 | ||||||||||||
| Selling | 1,458,170 | 1,397,954 | ||||||||||||
| Research and development | 530,363 | 717,627 | ||||||||||||
| Gain on sale of assets | — | (1,081,049 | ) | |||||||||||
| Goodwill impairment | — | 3,693,198 | ||||||||||||
| Total operating expenses | 7,315,474 | 10,066,393 | ||||||||||||
| Loss from operations | (1,617,316 | ) | (3,681,719 | ) | ||||||||||
| Other income (expense) | ||||||||||||||
| Interest income | 11,965 | 598 | ||||||||||||
| Interest expense | (116,238 | ) | (45,031 | ) | ||||||||||
| Unrealized loss on investment securities | (98,404 | ) | (19,680 | ) | ||||||||||
| Total other expense, net | (202,677 | ) | (64,113 | ) | ||||||||||
| Loss before provision for state income taxes | (1,819,993 | ) | (3,745,832 | ) | ||||||||||
| Provision for state income taxes | 18,393 | 7,786 | ||||||||||||
| Consolidated net loss | (1,838,386 | ) | (3,753,618 | ) | ||||||||||
| (Income) loss attributable to the noncontrolling interest | (17,889 | ) | 116,412 | |||||||||||
| Net loss attributable to Tecogen Inc. | $ | (1,856,275 | ) | (3,637,206 | ) | |||||||||
| Net loss per share - basic and diluted | $ | (0.07 | ) | $ | (0.15 | ) | ||||||||
| Weighted average shares outstanding - basic and diluted | 24,850,256 | 24,822,555 | Non-GAAP financial disclosure (1) | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||
| Net loss attributable to Tecogen Inc. | $ | (1,856,275 | ) | $ | (3,637,206 | ) | ||||||||
| Interest & other expense, net | 104,273 | 44,433 | ||||||||||||
| Income taxes | 18,393 | 7,786 | ||||||||||||
| Depreciation & amortization, net | 193,637 | 267,232 | ||||||||||||
| EBITDA | (1,539,972 | ) | (3,317,755 | ) | ||||||||||
| Stock based compensation | 81,730 | 77,933 | ||||||||||||
| Unrealized loss on marketable securities | 98,404 | 19,680 | ||||||||||||
| Non-cash abandonment of intangible assets | 179,944 | — | ||||||||||||
| Goodwill impairment | — | 3,693,198 | ||||||||||||
| Adjusted EBITDA | $ | (1,179,894 | ) | $ | 473,056 |
TECOGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| Six Months Ended | ||||||
|---|---|---|---|---|---|---|
| June 30, 2020 | June 30, 2019 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
| Consolidated net loss | $ | (1,838,386 | ) | $ | (3,753,618 | ) |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||
| Depreciation, accretion and amortization, net | 193,637 | 267,232 | ||||
| Stock-based compensation | 81,730 | 77,933 | ||||
| Goodwill impairment | — | 3,693,198 | ||||
| Gain on sale of assets | — | (1,081,049 | ) | |||
| Provision for losses on accounts receivable | — | 29,849 | ||||
| Abandonment of intangible assets | 179,944 | — | ||||
| Non-cash interest expense | 50,775 | 12,087 | ||||
| Changes in operating assets and liabilities, net of effects of acquisitions | ||||||
| (Increase) decrease in: | ||||||
| Accounts receivable | 6,405,936 | 2,517,901 | ||||
| Unbilled revenue | 538,032 | (936,106 | ) | |||
| Inventory | (890,868 | ) | (695,835 | ) | ||
| Due from related party | — | 9,405 | ||||
| Prepaid expenses and other current assets | (6,382 | ) | (15,282 | ) | ||
| Other non-current assets | 532,293 | 40,003 | ||||
| Increase (decrease) in: | ||||||
| Accounts payable | (1,197,576 | ) | (918,484 | ) | ||
| Accrued expenses and other current liabilities | 284,506 | (380,351 | ) | |||
| Deferred revenue | (1,671,239 | ) | (966,776 | ) | ||
| Net cash provided by (used in) operating activities | 2,662,402 | (2,099,893 | ) | |||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Purchases of property and equipment | (53,674 | ) | (52,444 | ) | ||
| Proceeds from sale of assets | — | 5,000,000 | ||||
| Purchases of intangible assets | (123,254 | ) | (22,738 | ) | ||
| Unrealized loss on investment securities | 98,403 | 19,680 | ||||
| Payment of stock issuance costs | (802 | ) | (1,011 | ) | ||
| Distributions to noncontrolling interest | (23,070 | ) | (27,413 | ) | ||
| Net cash provided by (used in) investing activities | (102,397 | ) | 4,916,074 | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
| Proceeds (payments) on revolving line of credit, net | (2,453,159 | ) | (2,021,519 | ) | ||
| Proceeds from note payable | 1,874,200 | — | ||||
| Proceeds from the exercise of stock options | 1,200 | 20,756 | ||||
| Net cash used in financing activities | (577,759 | ) | (2,000,763 | ) | ||
| Change in cash and cash equivalents | 1,982,246 | 815,418 | ||||
| Cash and cash equivalents, beginning of the period | 877,676 | 272,552 | ||||
| Cash and cash equivalents, end of the period | $ | 2,859,922 | $ | 1,087,970 | ||
| Supplemental disclosures of cash flows information: | ||||||
| Cash paid for interest | $ | 36,326 | $ | 23,551 | ||
| Cash paid for taxes | $ | 5,222 | $ | 28,524 |
^(1)^Non-GAAP Financial Measures
In addition to reporting net income, a U.S. generally accepted accounting principles (“GAAP”) measure, this news release contains information about Adjusted EBITDA (net income (loss) attributable to Tecogen Inc adjusted for interest, income taxes, depreciation and amortization, stock based compensation expense, unrealized gain or loss on investment securities, goodwill impairment charges and other non-cash non-recurring charges due to abandonment of certain intangible assets), which is a non-GAAP measure. The Company believes Adjusted EBITDA allows investors to view its performance in a manner similar to the methods used by management and provides additional insight into its operating results. Adjusted EBITDA is not calculated through the application of GAAP. Accordingly, it should not be considered as a substitute for the GAAP measure of net income and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. The use of any non-GAAP measure may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.
q22020earningspresentati
OCTQX: TGEN SECOND QUARTER 2020 Earnings Call August 13, 2020
Participants Benjamin Locke Chief Executive Officer President & Chief Operating Robert Panora Officer Jack Whiting General Counsel & Secretary 2
Safe Harbor Statement This presentation and accompanying documents contain “forward-looking statements” which may describe strategies, goals, outlooks or other non- historical matters, or projected revenues, income, returns or other financial measures, that may include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," "target," "potential," "will," "should," "could," "likely," or "may" and similar expressions intended to identify forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statements. In addition to those factors described in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q under “Risk Factors”, among the factors that could cause actual results to differ materially from past and projected future results are the following: fluctuations in demand for our products and services, competing technological developments, issues relating to research and development, the availability of incentives, rebates, and tax benefits relating to our products and services, changes in the regulatory environment relating to our products and services, integration of acquired business operations, and the ability to obtain financing on favorable terms to fund existing operations and anticipated growth. In addition to GAAP financial measures, this presentation includes certain non-GAAP financial measures, including adjusted EBITDA which excludes certain expenses as described in the presentation. We use Adjusted EBITDA as an internal measure of business operating performance and believe that the presentation of non-GAAP financial measures provides a meaningful perspective of the underlying operating performance of our current business and enables investors to better understand and evaluate our historical and prospective operating performance by eliminating items that vary from period to period without correlation to our core operating performance and highlights trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures. 3
Earnings Call Agenda Agenda: Tecogen Overview Q2 2020 Results Earnings Takeaways • Product sales increase 37% YoY • Reduced OpEx 9.4% YoY • Cash inflow from operations of $2.7 million vs. cash outflow of $2.1 million YoY • Cash and equivalents balance 6/30/20 of $2.86 million vs. $878 thousand 12/31/19 Q&A 4
Tecogen Overview Clean and Efficient Energy Systems Leader in Distributed Generation Technology • Unmatched efficiency of air-conditioning and cooling systems • Ultera technology ensures emissions compliance in most stringent US districts • Enable black-start and off-grid power generation • Ranked 3rd in quantity of microgrids deployed in US Positioned For Low Carbon Future • High efficiency enables significant carbon reductions compared to heating and cooling systems dependent on grid Proprietary Ultera Emissions Technology • Demonstrated success across range of engine brands and sizes • Considering options to expand commercialization 5
2nd Quarter 2020 Results YoY $ in thousands 2Q'20 2Q'19 % Chg Change Revenue = $7.44 million Revenue • Compared to $7.87 million in 2Q’19, 5.5% decrease Products $ 3,343 $ 2,445 $ 897 Service 3,816 4,844 (1,028) • Product revenue up 37% Energy Production 276 578 (302) Total Revenue 7,435 7,867 (432) -5% • Service down 21% due to decreased installation Gross Profit activity Products 1,305 899 406 Service 1,531 2,313 (783) • Energy production down 52% due to facility closures Energy Production 70 214 (143) Total Gross Profit 2,906 3,426 (520) -15% Gross Margin: % Gross Margin = 39% Products 39% 37% 2% Service 40% 48% -8% Op Ex = $3.4 mm Energy Production 25% 37% -11% Total Gross Margin 39% 44% -4% • Reduced OpEx by 9% vs. 2Q’19 Operating Expenses General & administrative 2,637 2,683 (46) Selling 602 705 (102) Net loss of $654 thousand Research and development 166 373 (207) Total operating expenses 3,406 3,760 -355 -9% • Compared to $357 thousand loss in 2Q ’19 Net income (loss) $ (654) $ (357) $ (297) -83.2% Adjusted EBITDA (see $ (363) $ (205) $ (158) -77.0% Adjusted EBITDA = negative $363K reconciliation) *Adjusted EBITDA is defined as net income (loss) attributable to Tecogen Inc, adjusted for • Compared to negative $205K 2Q ’19 interest, depreciation and amortization, stock-based compensation expense, unrealized loss on investment securities, non-cash abandonment of intangible assets and goodwill impairment. 6
Adjusted EBITDA Reconciliation Reconciliation of Q2 2020 and 2019 Net loss to Adjusted EBITDA EBITDA: Earnings Before Interest, Taxes, Depreciation & Amortization EBITDA Non-cash adjustments • Stock based compensation • Unrealized loss on investment securities • Non-cash abandonment of intangible assets • Goodwill impairment Despite negative adjusted EBITDA, positive cash flows in the quarter • Generated $2.66 million cash from operations • Cash and cash equivalents balance of $2.86 million at the end of the quarter 7
2Q ’20 Performance by Segment Product Sales Remain Strong Service Contracts/Parts Energy Production Led by Cogeneration Expected to Recover Q3 Revenue Slowed by COVID Product revenue increased 37% YoY Q2 Revenue ($k) 2020 2019 % YoY % Tot. Rev Cogeneration $ 3,108 $ 1,414 120% 42% • Driven by cogeneration sales Chiller 235 1,032 -77% 3% • Reduced chiller sales mainly timing Total Product Revenue 3,343 2,445 37% 45% • Product backlog remains strong Q2 Revenue ($k) 2020 2019 % YoY % Tot. Rev Service revenue declined 21% YoY Service Contracts and Parts 2,455 2,553 -4% 33% • Service contracts/parts down 4% YoY Installation Services 1,361 2,291 -41% 18% Total Service Revenue 3,816 4,844 -21% 51% • Installation services down 41% YoY Q2 Revenue ($k) 2020 2019 % YoY % Tot. Rev Energy Production declined 52% YoY Energy Production 276 578 -52% 4% • COVID-19 setbacks and facility closures Q2 Gross Margin 2020 2019 Target Gross Margins on target at 39% Overall 39% 44% 35-40% 8
2Q ‘20 Earnings Takeaways Core Business Segments Performed Well Despite COVID Challenges SalesCustomer Backlog Segment • Product sales up YoY, Quarter over Quarter • Service contracts/parts revenue down only 4% despite COVID closures • Installations resuming as COVID restrictions dissipate 14.1% 39.7% Indoor Growing Multi-Unit • Energy production revenues slower to rebound Residential 18.5% Office Building Strong Cash Position 1.3% • $2.66 million cash provided by operations in quarter vs. $2.10 million Recreation 5.0% used by operations in 2Q’19 Health Care • Quarter-end cash and equivalent balance of $2.86 million Sustainable Corporate Improvements 12.6% Education • Reduced OpEx by 9% YoY, 13% Quarter over Quarter • Improved AR collections, payment schedules, vendor terms 7.2% Industrial & • More efficient and streamlined corporate functions Manufacturing Current Backlog = $13.1 million • Product backlog = $10.4 million • Installation backlog = $2.7 million 9
Q&A Company Information Tecogen, Inc 45 First Ave Waltham, MA 02451 www.Tecogen.com Contact information Benjamin Locke, CEO 781.466.6402 Benjamin.Locke@Tecogen.com 10