Tecogen's Q3 2025: Contradictions Emerge on Pilot Timelines, Vertiv Collaboration, and Tenant Acquisition

Date of Call: None provided

Financials Results

• Revenue: $7.2M, up $1.6M YOY (from $5.6M in Q3 2024)
• Gross Margin: 30.4%, down 13.7 percentage points vs 44.1% in Q3 2024; down from 41.1% sequentially

Guidance:

• Expect to collect ~$2.5M in cash in the next few weeks
• Current cash ~ $14M and related-party note repaid; no debt on balance sheet
• Las Vegas Convention Center site expected to come online early next year
• First articles for contract-manufactured sheet‑metal assemblies / dual‑source chiller expected within ~1–1.5 months; other first articles before year‑end
• Scaling manufacturing via factory layout changes, contract manufacturing and a ramped Vertiv partnership

Business Commentary:

• Data Center Strategy and Market Interest:
• Tecogen's data center strategy has shown significant forward momentum, with growing interest from well-known colocation data center developers.
• The company has presented its solution to major players like NVIDIA, AMD, and hyperscale developers, with positive feedback indicating potential success in this market.
• 

• The interest is driven by the ability of Tecogen's chillers to reduce cooling costs and increase power availability for data centers.

• Financial Performance and Challenges:

• Tecogen's total revenue increased by $1.6 million in Q3 2025, reaching $7.2 million, compared to $5.6 million in Q3 2024, primarily due to a 115% increase in product revenue.
• The company's net loss increased to $2.13 million in Q3 2025, compared to $0.93 million in Q3 2024, mainly due to decreased service margins and increased operating expenses.

• The increase in costs was largely attributed to investments in new engines and increased R&D expenses.

• Manufacturing and Supply Chain Efforts:

• Tecogen is working on multiple pathways to increase manufacturing capacity to meet potential demand from data centers.
• The company is collaborating with Vertiv and contract manufacturers to handle increased production demands, aiming to satisfy validation requirements and scale up natural gas solutions.

• The focus is on enhancing throughput in existing facilities and leveraging Vertiv's expertise to ensure manufacturing capacity meets the scale of opportunities.

• Technological Advancements and Impact:

• Tecogen has made improvements to its engines, doubling service intervals and enhancing performance, leading to a significant reduction in service costs over time.
• These advancements include investing $700,000 in new engines for the service fleet, which is expected to reduce costs and improve profitability.
• The investments also generate data for continued R&D and are part of Tecogen's strategy to improve margins and capture the growing market for data center cooling solutions.
  

  Sentiment Analysis:

  Overall Tone: Neutral

  • Management: "I'm now very confident that Tecogen will be successful in this market" and cited "significant forward momentum" with large-data-center interest; counterbalanced by results: net loss increased to $2.13M and gross margin fell to 30.4% from 44.1% year-over-year.

Q&A:

• Question from Chip Moore (ROTH Capital Partners): Any update on timing for the initial pilot 6-unit LOI and the follow-on additional sites — are those additional sites in planning and how to think about scale?
  Response: All three projects are at similar planning stages; timing is tenant-dependent so could be quick or take months; Tecogen is included in engineering (high odds) and Vertiv can enable vendor approval for hyperscale tenants.

• Question from Chip Moore (ROTH Capital Partners): Progress on the Vertiv relationship and on validation/test data — what's changed and timing for detailed validation?
  Response: Vertiv reorganized the lead ~3–4 weeks ago (Head of U.S. chiller ops now leading), accelerating engagement; Tecogen is running units in factory test cells and preparing validation data requested by developers.

• Question from Chip Moore (ROTH Capital Partners): On contract manufacturing — is that for the dual‑source unit and how are you approaching it?
  Response: Outsourcing sheet‑metal and refrigeration assemblies to an overflow contract manufacturer while keeping powertrain and final assembly/test in-house; first article expected in ~1–1.5 months to validate fit and then scale.

• Question from Chip Moore (ROTH Capital Partners): How should we think about service margins and the new engines you introduced — near‑term timing for benefits?
  Response: New engines and extended oil/change intervals have shown initial promise to reduce site visits and should materially improve service margins medium‑term, but visibility over the next two quarters is limited until broader fleet data confirms improvements.

• Question from Chip Moore (ROTH Capital Partners): Feedback from NVIDIA/AMD/hyperscalers — receptivity and main concerns?
  Response: Broadly positive on economics and power constraints; customers validate chiller economics vs on‑site generation; main hurdle is derisking/validation (dual‑power capability helps), not the value proposition.

• Question from Alexander Blanton (Clear Harbor Asset Management): What is the dollar volume for a 200‑chiller data center example (you said ~half could be your type)?
  Response: Ballpark: if ~100 are Tecogen‑type chillers, that equates to roughly $30M–$50M depending on chiller size and spec.

• Question from Alexander Blanton (Clear Harbor Asset Management): Why would developers keep electric chillers if gas chillers save so much?
  Response: Early deployments favor a split for comfort/diversified supply chains and to derisk adoption; developers often keep some standard electric chillers while trialing gas chillers for portions of the load.

• Question from Alexander Blanton (Clear Harbor Asset Management): Status of the Las Vegas Convention Center chillers and revenue recognition?
  Response: Chillers have been shipped; site is under construction and expected to come online early next year; product revenue recognized and the prepaid 10‑year service contract will be recognized over time.

• Question from Alexander Blanton (Clear Harbor Asset Management): Timing of orders in the data center space — when might you see deliveries/orders?
  Response: Timing is unpredictable: some independent‑developer projects target online by 2027 (deliveries in 2026), while large developers could move faster once validation steps are completed or via smaller initial rollouts.

• Question from Alexander Blanton (Clear Harbor Asset Management): Opportunity to retrofit existing centers versus new builds?
  Response: Most early AI cooling demand is for new ground‑up builds; retrofit opportunities are limited today but may increase as power constraints push upgrades in smaller or converted sites.

• Question from Barry Hymes (Sage Asset Management): When was the Vertiv contact change, are you doing joint sales/teach‑ins, who handles service on orders via Vertiv, and what percent cost savings do you quote versus traditional?
  Response: Point of contact changed ~3–4 weeks ago; Tecogen has done teach‑ins and some joint calls and Vertiv has begun initial quoting, though many large leads came from Tecogen direct outreach; service arrangements were not specified; savings are framed as freeing IT power (revenue upside) rather than just OPEX — e.g., $150–$200/kW‑month equates to >$2M per MW in potential incremental revenue for colocation owners.

Contradiction Point 1

Pilot Project Timing and Scalability

It involves the timeline and feasibility of pilot projects, which are crucial for validating the company's technology and securing larger-scale adoption.

Can you update us on the 6-unit pilot’s progress and timeline? Can you elaborate on additional opportunities and their scalability? - Alfred Moore(ROTH Capital Partners)

20251113-2025 Q3: We feel that it would be worth doing some risk purchasing of materials for that opportunity. So we are planning on at least having some portion of that -- those units starting to be constructed in Q4. - [Responder's Name](CEO)

How quickly can delivery to the site occur after receiving a PO? How long does the evaluation phase typically last? - Alfred Shopland Moore(ROTH Capital Partners)

2025Q2: We feel that it would be worth doing some risk purchasing of materials for that opportunity. So we are planning on at least having some portion of that -- those units starting to be constructed in Q4. - [Responder's Name](CEO)

Contradiction Point 2

Vertiv Relationship and Supply Chain Support

It highlights changes in the company's relationship with Vertiv and the level of support expected from this partnership, which is pivotal for scaling production and meeting demand.

Can you update us on the progress of the Vertiv partnership and validation efforts? - Alfred Moore(ROTH Capital Partners)

20251113-2025 Q3: Vertiv has assigned their Head of U.S. Chilled Water Group to lead the partnership, accelerating progress. Significant test data and engineering support are provided to satisfy validation requirements. - [Responder's Name](CEO)

Can Vertiv assist with capacity needs? Is this practical? - Alexander M. Blanton(Clear Harbor Asset Management)

2025Q2: Yes. I can't really comment on anything -- any ongoing discussions with Vertiv because all of that covered by our confidentiality agreement. What I can say, though, is the original marketing agreement from day 1, always contemplated Vertiv helping us with the supply chain. - [Responder's Name](CEO)

Contradiction Point 3

Vertiv Support and Collaboration

It highlights the level of support and involvement of Vertiv in Tecogen's operations, which can impact project timelines and market penetration.

Can you provide an update on the progress of the Vertiv relationship and validation efforts? - Alfred Moore (ROTH Capital Partners)

20251113-2025 Q3: Vertiv has assigned their Head of U.S. Chilled Water Group to lead the partnership, accelerating progress. - [Responder's Name](CEO)

How is Vertiv supporting the company and helping with the supply chain? - Alexander Blanton (Clear Harbor Asset Management)

2025Q1: Vertiv has assigned a project manager to support our Tecochill product launch. - [Responder's Name](CEO)

Contradiction Point 4

Tenant Acquisition and Project Timelines

It affects the timeline for project commencement and revenue recognition, which is crucial for financial forecasting and investor expectations.

Can you update on the initial pilot for the 6 units and timing? - Alfred Moore (ROTH Capital Partners)

20251113-2025 Q3: The projects could start within a few months, but timelines depend on tenant acquisition. - [Responder's Name](CEO)

Over what period is the backlog to be delivered? - Alexander Blanton (Clear Harbor Asset Management)

2025Q1: The backlog is expected to be delivered within the next 9 to 12 months. - [Responder's Name](CEO)