GlobeNewswire Inc | Aug 12, 2021 09:04AM EDT

August 12, 2021

Net Income of $2.2 million for H1 2021 and $0.4 million for Q2 2021Earnings per share of $0.09/share for H1 2021 and $0.02/share for Q2 2021

WALTHAM, Mass., Aug. 12, 2021 (GLOBE NEWSWIRE) -- via NewMediaWire -- Tecogen Inc. (OTCQX:TGEN), a leading manufacturer of clean energy products, reported net income of $0.4 million for the quarter ended June30, 2021 compared to a net loss of $0.7 million in 2020, an improvement of $1.1 million. For the six months ended June 30, 2021, net income was $2.2 million compared to a net loss of $1.9 million, an improvement of $4.1 million. The increase in net income for both periods was primarily due to the benefit from the CARES Act payroll support programs, and to a lesser extent, from lower operating expenses and improved gross margin. Our gross margin increased to 47.5% in the six months ended June 30, 2021 compared to 37.0% for the same period in 2020.

Key Takeaways

Earnings Per Share

-- Net income (loss) per share, basic and diluted, was net income of $0.09 per share in the six months ended June 30, 2021 compared to a loss of $0.07 in the six months ended June 30, 2020. -- Net income (loss) per share, basic and diluted, was net income of $0.02 in the second quarter of 2021 compared to a loss of $0.03 in the second quarter of 2020.

Revenues

-- Revenues for the quarter ended June30, 2021 were $6.1 million compared to $7.4 million for the same period in 2020, a 17.3% decrease. Product revenue was $2.4 million in Q2 2021 compared to $3.8 million in the same period in 2020, a decline of 35.4%, primarily due to lower cogeneration unit volume. Services revenue was $3.3 million in Q2 2021 compared to $3.4 million in the same period in 2020, a decline of 1.3%, primarily due to reduced lower margin installation activity. Services contract revenue increased 25.6% to $3.1 million compared to $2.5 million in the second quarter of 2020. Energy Production revenue increased by $95 thousand, or 34.2%, to $371 thousand compared to the same period in 2020 due to the resumption of business operations at our energy production sites. -- For the six months ended June 30, 2021 revenues were $12.2 million compared to $15.4 million for the same period in 2020, a decrease of $3.2 million or 20.8% year over year. Product revenue was $4.6 million in the six months ended June 30, 2021 compared to $6.8 million in the same period in 2020, a decline of 33.2%, primarily due to lower cogeneration unit volume. Services revenue was $6.6 million in the six months ended June 30, 2021 compared to $7.5 million in the same period in 2020, a decline of 12.3%, primarily due to reduced lower margin installation activity. Services contract revenue increased 18.8% to $5.8 million compared to $4.9 million in the same period in 2020.Energy production revenue in the six months ended June 30, 2021 was $1.024 million, compared to $1.027 million for the same period in 2020, a decrease of $3 thousand, or 0.3%.

Gross Profit

-- Gross profit for the second quarter of 2021 was $2.8 million compared to $2.9 million in the second quarter of 2020. Gross margin improved to 46.3% in the second quarter compared to 39.1% for the same period in 2020 due to higher Product margin which increased to 43.1% in Q2 2021 from 41.4% in Q2 2020 and Services margin which improved to 49.5% in Q1 2021 from 37.7% in Q1 2020. -- Gross profit for the six months ended June 30, 2021 was $5.8 million compared to $5.7 million for the same period in 2020, an increase of $0.1 million, or 1.7%. During the six months ended June 30, 2021 gross margin increased to 47.5% compared to 37.0% for the same period in 2020 due to higher Product margin which increased to 43.9% from 41.2% and higher Services margin which increased to 51.3% from 33.8%.

Operating Expenses

-- Operating expenses decreased by 7% to $3.2 million for the second quarter of 2021 compared to $3.4 million in the same period of 2020. -- For the six months ended June 30, 2021 operating expenses decreased $1.1 million, or 14.7%, to $6.2 million compared to $7.3 million in the same period in 2020.

The decreased operating expenses in the quarter and six month periods were primarily due to cost controls, resulting in decreased payroll and payroll related expenses and reductions in other operating expenses compared to the same periods in 2020.

Adjusted EBITDA(1) was $567 thousand for the second quarter of 2021 compared to negative $363 thousand for the second quarter of 2020. (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 or gains including abandonment of intangible assets and extinguishment of debt. See the table following the Condensed Consolidated Statements of Operations for a reconciliation from net income (loss) to Adjusted EBITDA, as well as important disclosures about the company's use of Adjusted EBITDA).

Our core business areas continued to be negatively impacted by COVID-19, but despite the challenging economic environment, we achieved significant improvements in our gross margin and operations, commented Benjamin Locke, Tecogen's Chief Executive Officer. We expect Product sales to rebound as we move further into 2021. Our Energy Production assets are gradually returning to normal operation as COVID related closures and restrictions are eased, and our Service maintenance revenues continue to grow each quarter."

Operational Highlights:

-- Qualified for Employee Retention Credit and recognized a $713 thousand benefit in the second quarter of 2021. -- Continued sales growth in the Controlled Environment Agriculture (CEA) space with total capacity of Tecochill chillers sold to cannabis cultivation facilities now in excess of 10,000 tons. -- Current sales backlog of equipment and installations as of August12, 2021 is $10.4 million, comprised of $10.2 million of products and $0.2 million of installation services. -- Added two Manufacturers' Representatives to support Tecofrost sales in parts of western United States and Canada. -- Filed a provisional patent application titled "High Efficiency Hybrid Engine-Driven Variable Drive" with the United States Patent and Trademark Office.

Conference Call Scheduled for Today at 11:00 am ET

Tecogen will host a conference call today to discuss the second quarter results beginning at 11:00 am eastern time. To listen to the call please 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 2021 earnings call. Please begin dialing 10 minutes before the scheduled starting time. The 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 customers 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, Tecopack and Ultera are registered or pending trademarks of Tecogen Inc.

Forward Looking Statements

This press release and any 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, our Quarterly Reports on Form 10-Q and on our Form 8-K filed on August12, 2021, 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 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 LockeP: 781-466-6402E: Benjamin.Locke@tecogen.com

TECOGEN INC.CONDENSED CONSOLIDATED BALANCE SHEETS(unaudited)

June 30, 2021 December 31, 2020ASSETS Current assets: Cash and cash equivalents $ 3,185,478 $ 1,490,219 Accounts receivable, net 7,777,064 8,671,163 Unbilled revenue 3,899,499 4,267,249 Employee retention credit 713,268 ? Inventories, net 6,811,525 7,168,596 Prepaid and other current assets 839,732 597,144 Total current assets 23,226,566 22,194,371 Property, plant and equipment, net 2,025,334 2,283,846 Right of use assets 2,168,100 1,632,574 Intangible assets, net 1,244,373 1,360,319 Goodwill 2,406,156 2,406,156 Other assets 248,713 196,387 TOTAL ASSETS $ 31,319,242 $ 30,073,653 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Note payable $ ? $ 837,861 Accounts payable 2,597,737 4,183,105 Accrued expenses 2,138,931 1,993,471 Deferred revenue 1,119,943 1,294,157 Lease obligations, current 617,540 506,514 Total current liabilities 6,474,151 8,815,108 Long-term liabilities: Note payable, net of current portion 1,874,269 1,036,339 Deferred revenue, net of current portion 244,425 115,329 Lease obligations, long-term 1,642,801 1,222,492 Unfavorable contract liability, net 131,224 ? Total liabilities 1,438,278 1,617,051 11,805,148 12,806,319 Commitments and contingencies ? ? Stockholders? equity: Tecogen Inc. shareholders? equity: Common stock, $0.001 par value; 100,000,000shares authorized; 24,850,261 and 24,850,261 24,850 24,850 issued and outstanding at June 30, 2021 andDecember 31, 2020, respectivelyAdditional paid-in capital 56,908,194 56,814,428 Accumulated deficit (37,363,283) (39,529,621) Total Tecogen Inc. stockholders? equity 19,569,761 17,309,657 Non-controlling interest (55,667) (42,323) Total stockholders? equity 19,514,094 17,267,334 TOTAL LIABILITIES AND STOCKHOLDERS? EQUITY $ 31,319,242 $ 30,073,653

TECOGEN INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)

Three Months Ended June 30, 2021 June 30, 2020Revenues Products $ 2,445,927 $ 3,786,134 Services 3,328,314 3,372,583 Energy production 370,861 276,341 Total revenues 6,145,102 7,435,058 Cost of sales Products 1,390,725 2,220,456 Services 1,679,386 2,102,735 Energy production 232,353 205,876 Total cost of sales 3,302,464 4,529,067 Gross profit 2,842,638 2,905,991 Operating expenses General and administrative 2,438,452 2,637,479 Selling 580,871 602,383 Research and development 132,883 166,027 Total operating expenses 3,152,206 3,405,889 Loss from operations (309,568) (499,898) Other income (expense) Interest and other income (expense), net (1,125) 238 Interest expense (5,088) (56,253) Employee retention credit 713,268 ? Unrealized gain (loss) on investment securities 18,749 (78,723) Total other income (expense), net 725,804 (134,738) Income (loss) before provision for state income 416,236 (634,636) taxesProvision for state income taxes 7,933 13,171 Consolidated net income (loss) 408,303 (647,807) (Income) loss attributable to non-controlling (8,672) (6,081) interestNet income (loss) attributable to Tecogen Inc. $ 399,631 $ (653,888) Net income (loss) per share - basic $ 0.02 $ (0.03) Net income (loss) per share - diluted $ 0.02 $ (0.03) Weighted average shares outstanding - basic 24,850,261 24,850,261 Weighted average shares outstanding - diluted 25,125,210 24,850,261

Non-GAAP financial disclosure (1) Net income (loss) attributable to Tecogen Inc. $ 399,631 $ (653,888) Interest expense, net 6,213 56,015 Income taxes 7,933 13,171 Depreciation & amortization, net 117,404 103,485 EBITDA 531,181 (481,217) Stock based compensation 54,681 39,494 Unrealized (gain) loss on investment (18,749) 78,723 securitiesAdjusted EBITDA $ 567,113 $ (363,000)

TECOGEN INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)

Six Months Ended June 30, 2021 June 30, 2020Revenues Products $ 4,568,649 $ 6,837,894 Services 6,609,458 7,532,673 Energy production 1,024,156 1,027,191 Total revenues 12,202,263 15,397,758 Cost of sales Products 2,565,012 4,023,339 Services 3,216,989 4,985,981 Energy production 626,416 690,280 Total cost of sales 6,408,417 9,699,600 Gross profit 5,793,846 5,698,158 Operating expenses General and administrative 4,892,305 5,326,941 Selling 1,091,074 1,458,170 Research and development 259,033 530,363 Total operating expenses 6,242,412 7,315,474 Loss from operations (448,566) (1,617,316) Other income (expense) Interest and other income (expense), net (2,328) 11,965 Interest expense (9,728) (116,238) Gain on extinguishment of debt 1,887,859 ? Employee retention credit 713,268 ? Gain on sale of investment securities 6,046 ? Unrealized gain (loss) on investment securities 56,246 (98,404) Total other income (expense), net 2,651,363 (202,677) Income (loss) before provision for state income 2,202,797 (1,819,993) taxesProvision for state income taxes 15,991 18,393 Consolidated net income (loss) 2,186,806 (1,838,386) (Income) loss attributable to non-controlling (20,468) (17,889) interestNet income (loss) attributable to Tecogen Inc. $ 2,166,338 $ (1,856,275) Net income (loss) per share - basic $ 0.09 $ (0.07) Net income (loss) per share - diluted $ 0.09 $ (0.07) Weighted average shares outstanding - basic 24,850,261 24,850,256 Weighted average shares outstanding - diluted 25,102,470 24,850,256

Six Months Ended June 30, 2021 June 30, 2020Non-GAAP financial disclosure (1) Net income (loss) attributable to Tecogen Inc. $ 2,166,338 $ (1,856,275) Interest & other expense, net 12,056 104,273 Income taxes 15,991 18,393 Depreciation & amortization, net 241,470 193,637 EBITDA 2,435,855 (1,539,972) Gain on extinguishment of debt (1,887,859) ? Stock based compensation 93,766 81,730 Unrealized (gain) loss on marketable (56,246) 98,404 securitiesGain on sale of marketable securities (6,046) ? Non-cash abandonment of intangible assets 7,400 179,944 Adjusted EBITDA $ 586,870 $ (1,179,894)

(1) Non-GAAP Financial MeasuresIn addition to reporting net income, a U.S. generally accepted accounting principle (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 including abandonment of certain intangible assets and extinguishment of debt), 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.

TECOGEN INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)

Six Months Ended June 30, 2021 June 30, 2020CASH FLOWS FROM OPERATING ACTIVITIES: Consolidated net income (loss) $ 2,186,806 $ (1,838,386) Adjustments to reconcile net income (loss) tonet cash provided by (used in) operating activities:Depreciation and amortization 241,470 193,637 Gain on extinguishment of debt (1,887,859) ? Employee retention credit (713,268) ? Stock-based compensation 93,766 81,730 Gain on sale of investment securities (6,046) ? Unrealized (gain) loss on investment (56,246) 98,404 securitiesAbandonment of intangible assets 7,400 179,944 Non-cash interest expense ? 50,775 Changes in operating assets and liabilities (Increase) decrease in: Accounts receivable 894,100 6,405,936 Unbilled revenue 367,750 538,032 Inventory 357,072 (890,868) Prepaid assets and other current assets (242,588) (6,382) Other assets (537,197) 532,293 Increase (decrease) in: Accounts payable (1,585,368) (1,197,576) Accrued expenses and other current liabilities 290,342 284,506 Deferred revenue (45,118) (1,671,239) Other liabilities 531,335 ? Net cash provided by (used in) operating (103,649) 2,760,806 activitiesCASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (47,504) (53,674) Proceeds from the sale of investment 11,637 ? securitiesPurchases of intangible assets (5,682) (123,254) Payment of stock issuance costs ? (802) Distributions to non-controlling interest (33,812) (23,070) Net cash used in investing activities (75,361) (200,800) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable 1,874,269 1,874,200 Proceeds (payments) on revolving line of ? (2,453,159) credit, netProceeds from exercise of stock options ? 1,200 Net cash provided by (used in) financing 1,874,269 (577,759) activitiesNet increase in cash and cash equivalents 1,695,259 1,982,247 Cash and cash equivalents, beginning of the 1,490,219 877,676 periodCash and cash equivalents, end of the period $ 3,185,478 $ 2,859,923 Supplemental disclosures of cash flows information:Cash paid for interest $ ? $ 36,326 Cash paid for taxes $ 15,991 $ 5,222