Attached files
| file | filename |
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| EX-99.01 - EXHIBIT 99.01 - TECOGEN INC. | earningsreleaseyearend2019.htm |
| 8-K - 8-K - TECOGEN INC. | form8-kre2019earnings.htm |
NASDAQ: TGEN FOURTH QUARTER & FISCAL YEAR END Earnings Call March 12, 2020
Participants Benjamin Locke Chief Executive Officer President & Chief Operating Robert Panora Officer Bonnie Brown Chief Accounting Officer 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 Benjamin Locke Tecogen Overview 2019 Financial Overview Strategic Achievements Market Update Bonnie Brown Financial Review Robert Panora Emissions & Technology Update Benjamin Locke 2020 Outlook Q&A 4
Advanced Modular Cogeneration Systems Heat, Power, and/or Cooling that is: Efficient Industry leading efficiency and reduced exposure to expensive electricity Clean Proprietary near-zero emissions technology, GHG reductions Reliable Real-time monitoring, blackout protection, and improved grid resiliency All of Tecogen’s equipment is powered by efficient natural gas equipped with Tecogen’s patented Ultera Emission Control 5
4th Qtr 2019 Adjusted EBITDA of $63K $ in thousands 4Q'19 4Q’18 YoY Change Revenues = $8.7 million Revenue • Compared to $9.3 million in 4Q’18, 6% decrease Products $ 3,718 $ 3,703 $ 15 Service 4,304 3,965 339 • Product revenue flat, Service up 9% Energy Production 690 1,649 (959) • Energy production down 58% Total Revenue 8,712 9,316 (604) -6% Gross Profit Products $ 1,338 $ 1,501 $ (163) Gross Margin = 37.5% Service 1,530 1,534 (3) • Compared to 39.8% in 4Q’18 Energy Production 395 676 (282) • Product margins improved over Q3 ‘19 Total Gross Profit 3,263 3,711 (449) -12% Gross Margin: % • Service margins gradually improving as turnkey Products 36.0% 40.5% -5% projects close-out Service 35.6% 38.7% -3% -8% Energy Production 57.2% 41.0% 16% Total Gross Margin 37.5% 39.8% -2% -6% Op Ex includes one-time $393K inventory write-down Operating Expenses General & administrative $ 2,707 $ 2,668 $ 39 Selling 618 759 (141) Net loss of $486K Research and development 377 305 72 • Compared to income of $19K for 4Q ’18 (excluding Operating Expenses w/o GW Impairment 3,702 3,731 -30 -1% Goodwill impairment - 4,391 (4,391) GW impairment) Net loss without goodwill impairment (486) 19 (504) Adjusted EBITDA $ 63 $ 502 $ (439) Adjusted EBITDA= $63K * Adjusted EBITDA is defined as net income (loss) attributable to Tecogen Inc, adjusted • Compared to EBITDA of $502K 4Q ‘18 for interest, depreciation and amortization, stock based compensation expense, one- time inventory adjustment, goodwill impairment and merger related expenses. 6
YE 2019 Adjusted EBITDA of $114K $ in thousands YE 2019 YE 2018 YoY Change FY ‘19 revenues = $33.4 million Revenue • Compared to $35.9 million in FY’18, 7% decrease Products $ 12,978 $ 12,625 $ 353 Service 17,308 16,859 448 • Product revenue up 3%, Service revenue up 3% Energy Production 3,141 6,400 (3,259) • Energy Production revenue down 51% Total Revenue 33,426 35,884 (2,457) -7% Gross Profit Products $ 4,592 $ 4,827 $ (235) Service 6,500 6,166 333 FY ‘19 Gross Margin = 37.3% Energy Production 1,387 2,598 (1,212) • Compared to 37.9% in FY’18 Total Gross Profit 12,479 13,592 (1,113) -8% Gross Margin: % • Product margins decreased 3% Products 35.4% 38.2% -3% • Service margins increased 1% Service 37.6% 36.6% 1% Energy Production 44.2% 40.6% 4% • Energy Production margins increased 4% Total Gross Margin 37.3% 37.9% -1% Operating Expenses General & administrative $ 10,380 $ 10,790 $ (410) FY ‘19 Net loss of $1.0 mm (excluding GW impairment) Selling 2,685 2,651 34 Research and development 1,460 1,298 162 • Compared to loss of $1.3 mm for FY ’18 Sub-total 14,525 14,739 (214) -1% Gain on sale of assets (1,081) 0 (1,081) Goodwill impairment 3,693 4,391 (698) FY ‘19 Adjusted EBITDA= $114K Net loss without goodwill impairment (1,016) (1,318) 302 Adjusted EBITDA $ 114 $ 217 $ (103) • Compared to FY ‘18 EBITDA of $217K Decline in revenue due to sale of Product and Service Goodwill impairment energy producing assets Revenue Growth losses, 2018 & 2019 7
Earnings Takeaways Core Business is Stable • YoY Product and Service Revenue increasing • Energy Production revenue drop due to sale of ADG assets, Growth in Core Business remaining assets producing high margins • Installation revenue decreasing as close out large turnkey projects 2020 Profitability Goal by Improving Margins • Improved efficiencies in all parts of the business – Parts, Improve Margins Manufacturing, Purchasing, Operations, G&A Reduce G&A • Improve, expand service center profitability – 11th Service Center established in Toronto, Canada • Remaining turnkey portfolio will focus on cost-effective installations Several Opportunities for Growth • Ultera Forklift Program Prospects For Growth • Expand Cooling Product Line/Partnership Opportunities • Expand to New Geographies 8
Product and Installation Backlog Backlog - Product and Installation Services Customer Segment $ Millions 12.3% $35.0 Indoor Growing 5.8% $30.0 Office Building 47.8% 1.3% $25.0 Multi-Unit Recreation Residential $20.0 $15.0 13.5% Health Care $10.0 $5.0 $- 11.9% Education Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 May-16 May-17 May-18 May-19 May-15 5.7% Industrial & Manufacturing Current Backlog of $18.4 mm Product backlog: $14.4 mm, Installation backlog $4.0 mm 9
Market Update Continue demonstrating benefits of Mechanical CHP • Renewed interest by gas companies to increase gas sales • Compelling economic advantages over electric chillers • Substantial growth opportunity both in US and International • Partnership opportunities with existing chiller manufacturers Expanding functionality of Inverde e+ • Alternative DC configuration for DC Microgrids • Integrated battery option to cover maintenance downtime • UL 1741 SA “Smart Inverter” certifications on-going Toronto Expansion creates new opportunities • Experienced territory manager in place, already exploring new projects • Local factory service instills customer confidence • Increased service revenues as units become operational Domino Building, Brooklyn, NY late 2020 into 2021 10
Q4 2019 Financial Results: Revenues, Margins and Profitability Quarter Ended December 31, YoY % of $ in thousands 2019 2018 Growth Total Rev Revenue Decrease in overall revenue, a result of the sale Cogeneration $ 2,185 $ 750 191% 25% of energy producing assets Chiller 1,533 2,952 -48% 18% Total Product Revenue 3,718 3,703 0% 43% Service Contracts and Parts 2,440 2,218 10% 28% Four diverse revenue streams Installation Services 1,864 1,747 7% 21% Total Service Revenue 4,304 3,965 9% 49% • 191% growth in cogeneration sales Energy Production 690 1,649 -58% 8% Total Revenue $ 8,712 $ 9,316 -6% 100% • Long term service contracts provide steady cash Cost of Sales flow, growing 10% Products $ 2,380 $ 2,201 8% Services 2,774 2,431 14% • Turnkey installation revenue, increased by 7%, Energy Production 296 973 -70% Total Cost of Sales $ 5,449 $ 5,605 -3% facilitates both product sales and service revenue Gross Profit $ 3,263 $ 3,711 -12% 37% • Energy production provided 57% gross margin in Net loss $ (486) $ (4,372) the quarter Net income (loss) excluding GW impairment $ (486) $ 19 Gross Margin Maintained 37% overall gross margin Products 36% 41% Services 36% 39% Aggregate Products and Services 36% 40% Energy Production 57% 41% Overall 37% 40% Decline in overall revenues due to Product revenues flat year Service revenues increase sale of energy producing assets over year 9% year over year 11
Year End 2019 Financial Results: Revenues, Margins and Profitability Year Ended December 31, YoY 2019 % of $ in thousands 2019 2018 Growth Total Rev Revenue Four diverse revenue streams Cogeneration $ 7,073 $ 5,467 29% 21% Chiller 5,905 7,158 -18% 18% • Product sales growth of 3% Total Product Revenue 12,978 12,625 3% 39% Service Contracts and Parts 9,802 8,762 12% 29% • Long term service contracts provide Installation Services 7,506 8,097 -7% 22% Total Service Revenue 17,308 16,859 3% 52% steadily improving cash flow, representing Enery Production 3,141 6,400 -51% 9% Total Revenue $ 33,427 $ 35,884 -7% 100% 29% of revenue and 12% growth Cost of Sales Products $ 8,386 $ 7,798 8% • Turnkey installation activities declined 7% Services 10,808 10,693 1% in the year Energy Production 1,754 3,801 -54% Total Cost of Sales $ 20,948 $ 22,292 -6% • Energy production revenue declined 51% Gross Profit $ 12,479 $ 13,592 -8% 37% due to sale of assets Net loss $ (4,709) $ (5,709) Net loss excluding GW Impairment $ (1,016) $ (1,318) Maintained total gross margin of 37% Gross Margin Products 35% 38% Services 38% 37% Aggregate Products and Services 37% 37% Energy Production 44% 41% Overall 37% 38% Revenue growth of 3% for both Decline in overall revenues due to Product and Service sale of energy producing assets 12
Adjusted EBITDA Reconciliation Adjusted EBITDA positive for the year and 4th quarter Non-GAAP financial disclosure 4Q 2019 4Q 2018 Q4 and YE Comparative Net loss to Adjusted Net loss attributable to Tecogen Inc. $ (485,564) $ (4,371,904) EBITDA Reconciliation Interest expense, net 38,161 63,716 Depreciation & amortization, net 74,254 202,934 Income tax expense (473) (9,931) EBITDA: Interest, taxes, depreciation & EBITDA (373,622) (4,115,185) amortization Stock based compensation 42,860 47,380 Unrealized loss on investment securities - 59,042 Non-cash adjustments Non-recurring inventory adjustment 393,449 - Merger related expenses - 120,333 • Stock based compensation Goodwill impairment - 4,390,590 Adjusted EBITDA* $ 62,687 $ 502,160 • Unrealized loss on investment securities Non-GAAP financial disclosure YE 2019 YE 2018 • One-time inventory adjustment Net loss attributable to Tecogen Inc. $ (4,709,019) $ (5,708,532) Interest expense, net 100,918 111,985 • Goodwill impairment Depreciation & amortization, net 437,102 789,123 Income tax expense 15,194 32,748 Non-recurring expenses EBITDA (4,155,805) (4,774,676) Stock based compensation 163,464 181,188 • Merger related expenses Unrealized loss on investment securities 19,680 118,084 Merger related expenses - 302,268 Non-recurring inventory adjustment 393,449 - Goodwill impairment 3,693,198 4,390,590 Adjusted EBITDA* $ 113,986 $ 217,454 Consistently reaching positive *Adjusted EBITDA is defined as net income (loss) attributable to Tecogen Inc, levels of adjusted EBITDA adjusted for interest, depreciation and amortization, stock based compensation expense, one-time inventory adjustment, goodwill impairment and13merger related expenses.
Emissions Technology Update 14
Forklift Update NOx +THC CO Forklift testing Successfully Concluded [g/kw-hr] [g/kw-hr] • CARB “Near Zero "certification attainable Requirements for Optional 0.1 20.6 based on projection of test results “Near Zero” Target Certification Requirements for 0.8 20.6 MCFA has arranged dyno certification StandardCertification test trial in May at Southwest Research Certification Test Results of 0.4 5.6 Institute MCFAEngine (reported from archive) Continued support from PERC Projected Certification Test 0.05 0.88 Result of Ultera-Equipped MCFA • Invited Tecogen/MCFA to two propane industry summits and MODEX tradeshow Engine(from Tecogen driving tests)1 • Providing funding support for certification expenses 1 Extrapolation includes the following: Drive cycle correction factor of 0.24 Assumed engine efficiency of 28% THC estimation from previous source test 15
Forklift Update MODEX Leading tradeshow for material handling technology • Forklift suppliers’ major exhibitors • March 9-12 Atlanta, Georgia MCFA Prototype featured in PERC booth First opportunity to expose technology to potential customers • Feedback positive • Interviewed by six reporters • Low emissions for improved air quality central issue for propane trucks 16
Other Emissions Activity Concluded Phase 1 of catalyst development program Test results promising • potential for improved NOx reduction • Evaluating next steps with research subcontractor Anticipate order for two large Ultera systems (800 hp) • Municipal water pumping • Design funded by water district • Provided quotation to second municipality 17
2020 Core Business Outlook Maintain Growth in Product Revenue • Very low gas prices creating new opportunities in US • Canada expansion will drive additional product sales • New functionality for Inverde e+ systems • Tecofrost backlog growing in new business segments • Increased awareness of mechanical CHP driving growth • Focus on improved product margins Maintain growth in Service Revenues • Service center expansion leads to revenue growth • Improved remote monitoring helps increase unit runtime, revenues Scaling back large turnkey installation projects • Gradually winding down large turnkey jobs • Product backlog continues to increase, install decrease Enable manufacturing partnerships • Tecogen/Vilter manufacturing/sales partnership for Tecofrost • Potential chiller manufacturing/sales partnership for Tecochill 18
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 19