GlobeNewswire Inc | Nov 11, 2021 09:00AM EST

November 11, 2021

Net Income of $3.6 million YTD 2021 and $1.5 million for Q3 2021Diluted earnings per share of $0.14/share YTD 2021 and $0.06/share for Q3 2021

WALTHAM, Mass., Nov. 11, 2021 (GLOBE NEWSWIRE) -- via NewMediaWire -- Tecogen Inc. (OTCQX:TGEN), a leading manufacturer of clean energy products, reported net income of $1.5 million for the quarter ended September30, 2021 compared to a net loss of $0.2 million in 2020, an improvement of $1.7 million. For the nine months ended September 30, 2021, net income was $3.6 million compared to a net loss of $2.1 million, an improvement of $5.7 million. The increase in net income for both periods was due to the benefit from the CARES Act payroll support programs. Our gross margin increased to 47.3% in the nine months ended September 30, 2021 compared to 37.5% for the same period in 2020.

Key Takeaways

Earnings Per Share

-- Net income (loss) per share, basic and diluted, was net income of $0.15 and $0.14 per share, respectively, in nine months ended September 30, 2021 compared to a loss of $0.08 and $0.08 per share in the nine months ended September 30, 2020. -- Net income (loss) per share, basic and diluted, was net income of $0.06 in the third quarter of 2021 compared to a loss of $0.01 in the third quarter of 2020.

Revenues

-- Revenues for the quarter ended September30, 2021 were $5.0 million compared to $7.2 million for the same period in 2020, a 30.3% decrease. Product revenue was $1.9 million in Q3 2021 compared to $2.7 million in the same period in 2020, a decline of 30.8%, primarily due to lower cogeneration and chiller unit volume. Services revenue was $2.8 million in Q3 2021 compared to $4.1 million in the same period in 2020, a decline of 31.4%, primarily due to reduced lower margin installation activity. Services contract revenue increased 5.9% to $2.8 million compared to $2.6 million in the third quarter of 2020. Energy Production revenue decreased by $53 thousand, or 14.5%, to $315 thousand in Q3 2021 compared to $369 thousand in the same period in 2020. -- For the nine months ended September 30, 2021 revenues were $17.2 million compared to $22.6 million for the same period in 2020, a decrease of $5.4 million or 23.8% year over year. Product revenue was $6.4 million in the nine months ended September 30, 2021 compared to $9.5 million in the same period in 2020, a decline of 32.5%, primarily due to lower cogeneration unit volume. Services revenue was $9.4 million in the nine months ended September 30, 2021 compared to $11.7 million in the same period in 2020, a decline of 19.0%, primarily due to reduced lower margin installation activity. Services contract revenue increased 14.3% to $8.6 million compared to $7.5 million in the same period in 2020.Energy production revenue in the nine months ended September 30, 2021 was $1,339 thousand, compared to $1,396 thousand for the same period in 2020, a decrease of $56 thousand, or 4.0%.

Gross Profit

-- Gross profit for the third quarter of 2021 was $2.3 million compared to $2.8 million in the third quarter of 2020. Gross margin improved to 46.7% in the third quarter compared to 38.7% for the same period in 2020 due to higher Product margin which increased to 44.6% in Q3 2021 from 40.2% in Q3 2020 and Services margin which improved to 48.1% in Q3 2021 from 37.0% in Q3 2020. -- Gross profit for the nine months ended September 30, 2021 was $8.1 million compared to $8.5 million for the same period in 2020, a decrease of $0.3 million, or 4.1%. During the nine months ended September 30, 2021 gross margin increased to 47.3% compared to 37.0% for the same period in 2020 due to higher Product margin which increased to 44.1% from 40.9% and higher Services margin which increased to 50.4% from 34.9%.

Operating Expenses

-- Operating expenses increased by 8.6% to $3.3 million for the third quarter of 2021 compared to $3.0 million in the same period of 2020. Operating expenses increased due to increased payroll and payroll related expenses and sales commissions compared to Q3 2020. -- For the nine months ended September 30, 2021 operating expenses decreased $0.8 million, or 7.9%, to $9.5 million compared to $10.3 million in the same period in 2020. The decrease in operating expenses in the nine month period was 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.

Loss from Operations

-- Our loss from operations for the three months ended September30, 2021 was $0.9 million compared to a loss of $0.2 million for the same period in 2020, an increase of $0.7 million. The increase in our loss from operations is due primarily to the lower revenue for our Products and Services Segment and our Energy Production Segment and an increase in operating expenses. -- For the nine months ended September 30, 2021, our loss from operations was $1.4 million compared to a loss of $1.8 million for the same period in 2020, a decrease of $0.5 million. The decrease in our loss from operations is due primarily to the $0.8 decrease in operating expenses.

Adjusted EBITDA(1) was a negative $197 thousand for the third quarter of 2021 compared to negative $67 thousand for the third quarter of 2020. For the nine months ended September 30, 2021 adjusted EBITDA was a positive $0.4 million compared to a negative $1.2 million for the nine months ended September 30, 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 the 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).

This quarter was challenging due to the significant supply chain impacts on our Product Segment. We have mitigated a majority of these impacts, but were unable to ship some product during Q3 due to supplier constraints. As a result our Product Segment revenue was significantly impacted, commented Benjamin Locke, Tecogen's Chief Executive Officer. We expect Product sales to rebound in the fourth quarter of 2021 and further into 2022. We are pleased with the recent announcement of an order for 12 Inverde E+ units and 3 chillers which are scheduled to be shipped during Q4 2021 and Q1 2022. 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. Our board and management team are cautiously optimistic regarding anticipated improvements to product sales as evidenced by one Board member's decision to acquire an additional 150,000 shares of equity in the company on October 27, 2021 at the current market price."

Operational Highlights:

-- Issued a press release on November 10, 2021 announcing an order for 12 InVerde E+ units and 3 Tecochill chillers which are scheduled to be shipped during Q4 2021 and Q1 2022. -- Recognized Employee Retention Credits of $0.6 million and $1.3 million, respectively, in the third quarter and in the nine months of 2021. -- Paycheck Protection Program Second Draw Loan forgiven in full on September 8, 2021. -- Sales backlog as of November10, 2021 is $11.4 million, comprised of $11.2 million of products and $0.2 million of installation services.

Conference Call Scheduled for November 11, 2021 at 11:00 am ET

Tecogen will host a conference call on November 11, 2021 to discuss the third 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 Third 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 November10, 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)

September 30, December 31, 2021 2020ASSETS Current assets: Cash and cash equivalents $ 3,351,231 $ 1,490,219 Accounts receivable, net 7,728,737 8,671,163 Unbilled revenue 3,842,282 4,267,249 Employee retention credit 1,276,021 ? Inventories, net 7,922,044 7,168,596 Prepaid and other current assets 572,783 597,144 Total current assets 24,693,098 22,194,371 Property, plant and equipment, net 1,917,483 2,283,846 Right of use assets 2,019,166 1,632,574 Intangible assets, net 1,234,047 1,360,319 Goodwill 2,406,156 2,406,156 Other assets 210,800 196,387 TOTAL ASSETS $ 32,480,750 $ 30,073,653 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Note payable $ ? $ 837,861 Accounts payable 3,546,950 4,183,105 Accrued expenses 2,216,673 1,993,471 Deferred revenue 1,850,371 1,294,157 Lease obligations, current 628,950 506,514 Total current liabilities 8,242,944 8,815,108 Long-term liabilities: Note payable, net of current portion ? 1,036,339 Deferred revenue, net of current portion 250,981 115,329 Lease obligations, long-term 1,479,495 1,222,492 Deferred payroll tax liability, net of 131,224 ? current portionUnfavorable contract liability 1,348,892 1,617,051 Total liabilities 11,453,536 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 September 30, 2021and December 31, 2020, respectivelyAdditional paid-in capital 56,965,083 56,814,428 Accumulated deficit (35,896,586) (39,529,621) Total Tecogen Inc. stockholders? equity 21,093,347 17,309,657 Non-controlling interest (66,133) (42,323) Total stockholders? equity 21,027,214 17,267,334 TOTAL LIABILITIES AND STOCKHOLDERS? EQUITY $ 32,480,750 $ 30,073,653

TECOGEN INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)

Three Months Ended September 30, September 30, 2021 2020Revenues Products $ 1,871,332 $ 2,705,422 Services 2,829,244 4,125,590 Energy production 315,292 368,695 Total revenues 5,015,868 7,199,707 Cost of sales Products 1,036,396 1,617,626 Services 1,467,019 2,597,729 Energy production 170,518 197,608 Total cost of sales 2,673,933 4,412,963 Gross profit 2,341,935 2,786,744 Operating expenses General and administrative 2,473,190 2,318,789 Selling 656,885 563,857 Research and development 122,031 111,253 Total operating expenses 3,252,106 2,993,899 Loss from operations (910,171) (207,155) Other income (expense) Interest and other income (expense), net (4,798) (12) Interest expense (3,855) (4,845) Gain on extinguishment of debt 1,885,655 ? Employee retention credit 562,253 ? Unrealized gain (loss) on investment (37,497) ? securitiesTotal other income (expense), net 2,401,758 (4,857) Income (loss) before provision for state 1,491,587 (212,012) income taxesProvision for state income taxes 3,000 9,397 Consolidated net income (loss) 1,488,587 (221,409) Income attributable to the non-controlling (21,890) (10,511) interestNet income (loss) attributable to Tecogen $ 1,466,697 $ (231,920) Inc. Net income (loss) per share - basic $ 0.06 $ (0.01) Net income (loss) per share - diluted $ 0.06 $ (0.01) Weighted average shares outstanding - basic 24,850,261 24,850,261 Weighted average shares outstanding - 25,154,905 24,850,261 diluted

Three Months Ended September 30, September 30, 2021 2020Non-GAAP financial disclosure (1) Net income (loss) attributable to Tecogen $ 1,466,697 $ (231,920) Inc.Interest expense, net 8,653 4,857 Income taxes 3,000 9,397 Depreciation & amortization, net 116,166 100,304 EBITDA 1,594,516 (117,362) Gain on extinguishment of debt (1,885,655) ? Stock based compensation 56,889 50,582 Unrealized loss on investment securities 37,497 ? Adjusted EBITDA $ (196,753) $ (66,780)

TECOGEN INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)

Nine Months Ended September 30, September 30, 2021 2020Revenues Products $ 6,439,981 $ 9,543,316 Services 9,438,702 11,658,263 Energy production 1,339,448 1,395,886 Total revenues 17,218,131 22,597,465 Cost of sales Products 3,601,408 5,640,965 Services 4,684,008 7,583,710 Energy production 796,933 887,888 Total cost of sales 9,082,349 14,112,563 Gross profit 8,135,782 8,484,902 Operating expenses General and administrative 7,365,495 7,645,729 Selling 1,747,959 2,022,027 Research and development 381,064 641,616 Total operating expenses 9,494,518 10,309,372 Loss from operations (1,358,736) (1,824,470) Other income (expense) Interest and other income (expense), net (7,127) 11,953 Interest expense (13,583) (121,084) Gain on extinguishment of debt 3,773,014 ? Employee retention credit 1,276,021 ? Gain on sale of investment securities 6,046 ? Unrealized gain (loss) on investment 18,749 (98,403) securitiesTotal other income (expense), net 5,053,120 (207,534) Income (loss) before provision for state 3,694,384 (2,032,004) income taxesProvision for state income taxes 18,991 27,791 Consolidated net income (loss) 3,675,393 (2,059,795) Income attributable to non-controlling (42,358) (28,400) interestNet income (loss) attributable to Tecogen $ 3,633,035 $ (2,088,195) Inc.Net income (loss) per share - basic $ 0.15 $ (0.08) Net income (loss) per share - diluted $ 0.14 $ (0.08) Weighted average shares outstanding - basic 24,850,261 24,850,257 Weighted average shares outstanding - 25,131,165 24,850,257 diluted

Nine Months Ended September 30, September 30, 2021 2020Non-GAAP financial disclosure (1) Net income (loss) attributable to Tecogen $ 3,633,035 $ (2,088,195) Inc.Interest & other expense, net 20,710 109,131 Income taxes 18,991 27,791 Depreciation & amortization, net 357,636 293,941 EBITDA 4,030,372 (1,657,332) Gain on extinguishment of debt (3,773,014) ? Stock based compensation 150,655 132,312 Unrealized (gain) loss on marketable (18,749) 98,403 securitiesGain on sale of marketable securities (6,046) ? Non-cash abandonment of intangible assets 7,400 179,944 Adjusted EBITDA $ 390,618 $ (1,246,673)

(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)

Nine Months Ended September 30, September 30, 2021 2020CASH FLOWS FROM OPERATING ACTIVITIES: Consolidated net income (loss) $ 3,675,393 $ (2,059,795) Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation and amortization 357,636 293,941 Gain on extinguishment of debt (3,773,014) ? Employee retention credit (1,276,021) ? Stock-based compensation 150,655 132,312 Provision for doubtful accounts 52,000 ? Gain on disposal of assets (9,787) ? Gain on sale of investment securities (6,046) ? Unrealized (gain) loss on investment (18,749) 98,403 securitiesAbandonment of intangible assets 7,400 179,944 Non-cash interest expense ? 51,190 Changes in operating assets and liabilities (Increase) decrease in: Accounts receivable 890,374 5,683,941 Unbilled revenue 424,967 51,389 Inventory (753,447) (737,570) Prepaid assets and other current assets 24,361 117,109 Other assets (387,847) 532,293 Increase (decrease) in: Accounts payable (636,156) (1,455,881) Accrued expenses and other current liabilities 378,970 145,848 Deferred revenue 691,867 (1,619,696) Other liabilities 379,440 ? Net cash provided by operating activities 171,996 1,413,428 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (84,160) (59,952) Proceeds from the sale of investment 11,637 ? securitiesPurchases of intangible assets (56,349) (123,252) Proceeds from sale of assets 9,787 ? Payment of stock issuance costs ? (1,951) Distributions to non-controlling interest (66,168) (41,740) Net cash used in investing activities (185,253) (226,895) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable 1,874,269 1,874,200 Payments on revolving line of credit, net ? (2,452,329) Proceeds from exercise of stock options ? 1,200 Net cash provided by (used in) financing 1,874,269 (576,929) activitiesNet increase in cash and cash equivalents 1,861,012 609,604 Cash and cash equivalents, beginning of the 1,490,219 877,676 periodCash and cash equivalents, end of the period $ 3,351,231 $ 1,487,280 Supplemental disclosures of cash flows information:Cash paid for interest $ ? $ 62,007 Cash paid for taxes $ 18,991 $ 27,791