Greetings, and welcome to the Tecogen Year-End 2024 Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Jack Whiting, General Counsel. Please go ahead, sir.

Good morning. This is Jack Whiting, General Counsel and Secretary of Tecogen. This call is being recorded and will be archived on our website at tecogen.com. The press release regarding our fourth quarter and year-end 2024 earnings and the presentation provided this morning are available in the Investors section of our website as well. I would like to direct your attention to our safe harbor statement included in our earnings release and the presentation. Various remarks that we make about the company's expectations, plans and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by forward-looking statements as a result of various factors, including those discussed in the company's most recent annual and quarterly reports on Forms 10-K and 10-Q under the caption Risk Factors filed with the Securities and Exchange Commission and available in the Investors section of our website under the heading SEC Filings. While we may elect to update forward-looking statements, we specifically disclaim any obligation to do so, so you should not rely on any forward-looking statements as representing our views as of any future date. During this call, we will refer to certain financial measures not prepared in accordance with Generally Accepted Accounting Principles or GAAP. A reconciliation of non-GAAP financial measures to the most recently - excuse me, most directly comparable GAAP measures is provided in the press release regarding the fourth quarter and year-end 2024 earnings and on our website. I'll now turn the call over to Abinand Rangesh, Tecogen's CEO, who will provide an overview of fourth quarter and year-end 2024 activity and results. And then Roger Deschenes, Tecogen's CAO, who will provide additional information regarding fourth quarter and year-end 2024 financial results.

Thank you, Jack. Welcome to our 2024 earnings presentation. There are some exciting developments at Tecogen. As many of you have seen, we signed a sales and marketing agreement with Vertiv, the leader in thermal management for data centers. Before Roger gives us an overview of the financials for Q4 and fiscal year 2024, I'll provide more information on the data center market, what our target market segment is, why we signed this agreement with Vertiv and what data center sales could mean for the company. In addition to the data center market, sales prospects for our other market segments are also looking extremely favorable. We have many new leads. Our backlog is strong, a majority of which we expect to ship in the next nine to 12 months. We are also expecting to close more multiunit orders over the next few months. Our recurring revenue from service and energy has also grown to greater than $18 million for 2024. So with product revenue growth, we expect to see higher revenues in 2025 compared to previous years. Overall, Q4 revenues were in line with forecast. We had forecast $6 million for Q4 and higher from there. Our gross profit margin also increased by five percentage points to 45%. Although our operating expenses were higher than in past quarters, this contains a few onetime expenses such as a $109,000 increase to the credit loss reserve because a hospital customer that went into Chapter 11 and also a $217,000 goodwill impairment charge because a couple of energy contracts have reached end of life. We also expect to see increased manufacturing efficiencies and hence margins as the product revenue increases. Lastly, we collected significant customer deposits, so our cash at year-end was greater than $5 million. In order to understand why we think…

Thank you, Abinand, and good morning, everyone. Our total revenues in the fourth quarter of 2024 were $6.1 million, which compares to $5.9 million in the comparable period in 2023, which represents an increase of 3%. The net loss for the fourth quarter was $1.2 million, which compares to $1.9 million in the fourth quarter of 2023. Our gross profit increased 16% and operating expenses decreased by 7% quarter-over-quarter. The gross margin for the fourth quarter of 2024 rose by 5% to 45% from 40% in 2023. Included in the fourth quarter 2024 operating expenses are $109,000 credit loss provision for a hospital customer who filed for bankruptcy under Chapter 11 and the $217,000 goodwill impairment. The goodwill impairment was a result of certain ADG contracts that had reached end of life. And then we also need to point out in the fourth quarter of 2023, included in the operating expenses was a $744,000 credit loss provision for certain installation receivables, which were deemed uncollectible. For the full year, revenues were $22.6 million, which compares to $25.1 million in fiscal year 2023, a decrease of 10%. The decline in revenue was driven primarily by our factory move, which constrained production, reducing our products revenues and partially by a pause in sales activity driven by the anti-gas sentiment. The recurring revenue from services and energy production increased 10%, sorry, year-over-year. Given our current backlog, we believe we are poised for revenue growth in 2025. The net loss for fiscal year 2024 was $4.8 million, which compares to a net loss of $4.6 million in 2023. The increase in net loss in the current year is due to lower product revenues and which results in consequently lower gross margin dollars. Our overall gross profit margin increased 3% to 44% in the fiscal…

Thank you, Roger. I'd just like to recap by saying that we've made significant progress towards our strategic objectives. We couldn't have a better partner than Vertiv in the data center space. We also expect to see more data center activity from the projects we have been developing ourselves. Margins are also expanding across the board, especially in the service group, thereby increasing our recurring cash flow stream. Finally, our other market segments are looking strong, so I'm very optimistic about what the future brings. I'll now turn the floor over for questions.

[Operator Instructions] Our first question is coming from Alex Blanton from Clear Harbor Asset Management. Your line is now live.

Thank you very much. Well, I like the outlook having a - the backlog compared with what, last quarter?

So last quarter, when we reported, the backlog was $10.5 million. So we finished the year just over $12 million. Yes. Now we're at $12.2 million or so.

Okay. Fine. The $20 billion market, you mentioned, over what period is that?

So I estimated that over a 10-year period. So I just did a very simple calculation because I've seen various reports, but this - we just took the number of chips that are being shipped and said how much cooling does each one of those ships need, how much cooling equipment do you need if you put new equipment for all of that, assuming most of the center is not built. And it's about I think at least $20 billion.

And so right now, that market is being met primarily by electric-powered chillers. Is that correct?

Predominantly, yes.

And is there a competition in what you do in the natural gas chillers?

So as I mentioned, the only competing gas chiller technology that exists is called an absorption chiller. It's typically less than half the efficiency of our chiller. It's rarely used in this kind of critical cooling type application because it's not really designed for this kind of high reliability, constant uptime type scenario. And so I would say right now, there's no direct competition on the gas chiller market. What people are doing is just building the power plant on site much bigger and then using that to power an electrical chiller. But that means that you're giving up a huge portion of your potential revenue because you're not able to send that power to additional chips.

Now could you give us a background of the relationship Vertiv that developed. How did that happen?

So I recognized the potential for the market, but also I knew that we needed a partner that was going to be able to help us get some of these bigger sales. So I actually just called - e-mailed the Vertiv's CEO, and he introduced me to the key people on the thermal group. And we started discussing sometime last year, and they could see that there was a big potential in the gas - or potential to do cooling with gas. So we basically built - we started the relationship, built a key partnership with some of the thermal division at Vertiv, but getting the agreement in place just took a little longer. Now that we have the agreement in place, they can go full speed on the marketing.

And had they known anything about Tecogen before you called?

No, they had not.

Now what is the strategy that's going to be pursued with them? Are they going to market your product with their customers, is that what's going to happen?

Correct. I mean they have a broader marketing strategy, right, when it comes to any product, whether it's theirs or ours. I mean they have their existing channels that they put information out. They do various learning opportunities, plus they have relationships already with a large number of the bigger colocation owners. So they have various different ways that they approach that market. Some of the details of that are confidential, so I can't get into that. But that's because they have a lot of these existing relationships, they're in a very strong position to just present this, knowing which customers are building AI, which ones have power constraints, that kind of thing.

Well, they're a major supplier globally of equipment to data centers, correct?

Correct. They're arguably the largest data center supplier of everything from switchgear, thermal systems. I think there was a Dell study that voted them number one in terms of the thermal management for data centers. So they control everything from the cooling - or they have equipment that can handle everything inside the data center to distribute the cooling as well as the actual cooling equipment itself, and I believe they provide some of the design services to help customers make decisions on how the thermal system should look in a data center. They also have a partnership with Nvidia on designing cooling for some of the chips that Nvidia is launching.

Now you may not know the answer to this but their stock peaked last November at around $150 or so, and it's been going down, down about one-third since then. Meanwhile, the data center market has been expanding rapidly. Do you have any idea why that stock has been going down?

If you look at their actual financial results, their numbers have been getting stronger. I think that's just market sentiment. I think that's just the ups and downs of general market sentiment and people's approach to what they think AI is going to be in the future. I don't think the underlying fundamentals appear to still be very strong, and they continue to be growing in that space. But as far as we're concerned, right, it doesn't matter for us because just even as I showed, even one data center can mean a huge difference to our revenues and profitability and the scale of this company. So it shouldn't make much difference what happens on their business.

Absolutely. Now they're a global company. If there is a lot of new business flows into Tecogen, you might not have the capacity in your plant? Is there a thinking that you could use their plants because they got plants all over the place and you can supply Europe or from of their plants, for example. Is that part of the plan?

So if you look at the - again, part of this is confidential, so I won't go into the details of it. But if you look at the general structure of the sales and marketing agreement we signed with them, one of the first pieces that is included in there is that they will help us with some of our supply chain. And it does build in potentially the ability to license, although we haven't - that is - all those kind of details would be worked out as part of a broader supply agreement. I think the way we see it is that this is a true partnership where we figure out the best way to supply the market. And as long as both parties can make a good return on the time and energy required to do that, we see this as a way to grow together to supply these power constrained things. So I think there's not a final answer on any of that yet, but it's part of the overall discussions.

It would seem to me that what you have to offer as if it becomes part of their overall product offering for a data center, it's going to give them a competitive advantage. Is that correct?

That is definitely correct because it allows them to use this as a tool to sell a lot of their other equipment, whereas a competitor that might not have - might only have an electrical cooling system isn't going to be able to do that.

So they could actually improve on their growth rate, given what you have to offer them, correct?

I wouldn't - that's at a point where I think I would be speculating if I would hope that we could be meaningful to their growth rate, but I don't know if that would be the case.

Okay. Well, it just seems to me that you're giving them a competitive advantage because it's a cost reduction in supplying the data center. Okay. Very, very interesting. I will pass it along to the next person. Thank you.

Thank you, Alex.

Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Thank you very much for attending. If anybody has any further questions, feel free to send management an e-mail. We look forward to updating investors as we get further improvements in this space.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.