Tecogen Announces Second Quarter 2016 Results

WALTHAM, Mass., Aug. 10, 2016 /PRNewswire/ -- Tecogen^® Inc. (NASDAQ: TGEN), a leading manufacturer of clean energy products which, through patented technology, nearly eliminate criteria pollutants and significantly reduce a customer's carbon footprint, reported revenues of $5,687,308 for the quarter ended June 30, 2016 compared to $6,383,831 for the same period in 2015.

Backlog of products and installations was $14.1 million as of second quarter end and currently stands at $15.9 million (as of August 5, 2016), over 70% growth in backlog when compared to the second quarter ended 2015.  Speaking about the backlog, Benjamin Locke, Tecogen Co-Chief Executive Officer noted, "The sales team has been executing well and closing orders, this strong backlog sets us up to deliver what we expect to be compelling results over the next several quarters."

Cost of sales improved dramatically in the period to $3,584,414, delivering a 15.5% cost reduction over the prior year.  This improvement generated 10.4% combined gross margin improvement in the quarter, bringing gross margin up to 37.0% compared to 33.5% in second quarter 2015.  Gross profit was $2,102,894 for the quarter ended June 30, 2016 compared to $2,140,890, a decrease of 1.8% versus the prior year.  Despite the decline in revenues, this small decrease in gross profit is a testament to the effectiveness of management's ongoing expense control initiatives.

Revenue results were helped by 7.9% growth in Services related revenues over the prior year period.  That improvement was partially offset by a year-on-year decline in product sales, although product sales improved sequentially when compared to first quarter 2016.  This positive Services momentum was primarily driven by improvements in installation related revenues as expected project delays abated.  Total Services revenue growth continues to steadily benefit from increasing penetration in service contracts and favorable operating metrics for the installed fleet. 

Product sales revenues were lower in the period, with a 28.0% reduction over the prior year comparable quarter.  This decline in total Product revenue was impacted by lower cogeneration sales that were partially offset by a 39.0%  improvement in chiller and heat pump sales versus second quarter 2015.  Variations in product mix are typical from quarter to quarter as customer orders for different products are not entirely predictable.

On a combined basis, operating expense was up 1.9% to $2,488,924 for the second quarter 2016 from $2,443,205 in the second quarter of 2015.  Despite the small increase, operating expense remains in line with management's goal to hold full year operating expense near $10 million.

Speaking about the results, Mr. Locke added, "The sales team had some notable wins in the quarter and is making material progress on building lasting relationships with partners that can produce long term repeat business for Tecogen.  Launched in May, TTcogen, our joint venture with Czech CHP manufacturer TEDOM a.s., is already seeing strong interest in the expanded product portfolio - as demonstrated by our recent announcement of the first sale of a Micro T35.  Taken as a whole, with the new expanded product portfolio of TTcogen alongside Tecogen's expert installation and long term service offerings, the sales team is well positioned to succeed.  On the downside, product margins were impacted by one-time transitional costs of closing out the first generation InVerde product line and introducing our new, more robust InVerde e+ product.  In the long term, the newer cogeneration product will deliver excellent margins for the company.  We have made great progress with current and new material suppliers to improve margins even further.  In addition, we continue to execute well on our cost control initiatives.  Looking ahead, we expect trends in energy efficiency, emissions control, and building resiliency all to grant significant competitive advantage to our portfolio of clean energy technologies and act as long term growth tailwinds."

Major Highlights:

Financial

• Gross profit for the second quarter of 2016 was $2,102,894 compared to $2,140,890, a near flat result when compared to the same period in 2015 as margin improvement offset the decline in revenues.
• Gross margin in the second quarter 2016 increased to 37.0% compared to 33.5% in 2015.  Margins benefited from a revenue mix shift and strong improvement in Services gross margin, partially offset by a decline in Product gross margin.
• Services gross margin improved to 44.6% in the period compared to the 33.6% Services gross margin reported in second quarter 2015.  Services gross margin was helped by a pick-up in Installation activity and installation efficiency improvements.
• Product gross margin was 26.6% for second quarter 2016 compared to 33.5% in second quarter 2015. Product gross margin was primarily impacted by the write-down of inventory and associated supplier-termination charges related to the retirement of the first generation InVerde.
• On a combined basis, operating expense grew to $2,488,924 for the first quarter 2016 from $2,443,205 in the first quarter of 2015, a 1.9% change but still in line with management's goal to deliver full year operating expense near $10 million.
• Consolidated net loss, attributable to Tecogen, for the three months ended June 30, 2016 was $415,539 compared to $362,839 for the same period in 2015.
• Net loss per share was $0.02 and $0.02 for the three months ended June 30, 2016 and 2015, respectively.

Sales & Operations

• Current sales backlog of equipment and installations as of Friday August 5, 2016 was $15.9 million, driven by strong traction in the InVerde product line and Installation services.  For the quarter ended June 30, 2016,  backlog was $14.1 million, significant growth over both the $11.5 million in backlog reported in the earnings release dated May 11, 2016 and well above the $9.3 million in backlog at second quarter-end 2015 - in line with the Company's goal of consistently delivering quarter-end product backlog greater than $10 million.
• Although total revenues were down on a year-on-year basis, sequentially revenues posted 12% growth over first quarter 2016; driven by a 6.3% improvement in Product revenue and Services revenue growth of 16.6%.
• In May Tecogen and TEDOM a.s. launched TTcogen LLC, a 50/50 joint venture that utilizes Tecogen's sales and service capabilities to bring TEDOM's efficient and versatile CHP products to the United States.  The new product portfolio quadruples Tecogen's potential addressable market for cogeneration and allows the sales team to offer efficient equipment powered by renewable biofuel, an important new market with significant growth potential.
• Chiller orders rebounded in the quarter helped by growing sales momentum in the indoor agriculture segment as well as by a repeat order from Stanley Black & Decker for their manufacturing facility in Mexico.
• Emissions development progress continued with rigorous analysis of ULTRATEK's Phase 1 automotive emissions testing results proving Ultera effective at delivering substantial emissions reductions in excess of currently available commercial automotive technology.  The ULTRATEK team has scheduled a second round of vehicle tests beginning later this month that will utilize a more refined design of the system applied to other gasoline powered models.  These models were selected as representing very advanced, high mileage models for which our industry assessment indicates are vehicle types of high importance but with inherent emissions challenges.
• The sales team continued to demonstrate progress toward management's plan to develop ongoing customer relationships with high level targets likely to produce repeat orders.  Repeat orders were won from several ESCO partners as well as a notable New Jersey property developer.

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 (888) 349-0103 within the U.S., (855) 669-9657 from Canada, or (412) 902-0129 from other international locations.  Participants should ask to be joined to the Tecogen Inc. call.  Please begin dialing at least 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 conference call will be recorded and available for playback one hour after the end of the call.  The earnings conference call will also be webcast live. To view the associated slides, register for and listen to the webcast, go to http://investors.tecogen.com/webcast.  Following the call, the webcast will be archived for 30 days.

The earnings conference call will be recorded and available for playback one hour after the end of the call through Wednesday, August 17^th, 2016.  To listen to the playback, dial (877) 344 7529 within the U.S., (855) 669-9658 from Canada, or (412) 317-0088 outside the U.S. and use Replay Access Code 10090426.

About Tecogen

Tecogen Inc. designs, manufactures, sells, installs, and maintains high efficiency, ultra-clean, cogeneration products including natural gas engine-driven combined heat and power, air conditioning systems, and high-efficiency water heaters for residential, commercial, recreational and industrial use. The company is known for cost efficient, 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 20 years, Tecogen has shipped more than 2,300 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, Ilios, Tecochill, Ultera, and e⁺, are registered trademarks or trademark pending registration of Tecogen Inc.

Forward Looking Statements

This press release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties.  Important factors could cause actual results to differ materially from those indicated by such forward-looking statements, as disclosed on the Company's website and in Securities and Exchange Commission filings.  The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its website or otherwise.  The Company does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

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SOURCE Tecogen Inc.

Related Links

http://www.tecogen.com

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