TECOGEN INC. SEC 10-K Report

• March 18, 2025

Tecogen Inc., a leading provider of industrial and commercial cogeneration systems, has released its 2024 10-K report, detailing the company's financial performance, business operations, strategic initiatives, and the challenges it faces. The report provides a comprehensive overview of Tecogen's efforts to navigate a complex market environment while focusing on growth and operational efficiency.

Financial Highlights

Total Revenue : $22.6 million, a decrease of 10.0% from 2023 due to decreased Products revenues.

Gross Profit : $9.9 million, representing a gross margin of 43.6%, an increase from 40.6% in 2023.

Loss from Operations : $4.5 million, an increase in loss from operations by $120,475 compared to 2023.

Consolidated Net Loss : $4.8 million, an increase of $162,130 from 2023, primarily due to lower Products revenue and goodwill impairment.

Net Loss Per Share : $0.19, consistent with the loss per share in 2023.

Business Highlights

Revenue Segments : Tecogen's business operations are divided into three segments: Products, Services, and Energy Production. The Products segment involves the design, manufacture, and sale of industrial and commercial cogeneration systems. The Services segment provides operations and maintenance services for Tecogen products under long-term contracts. The Energy Production segment sells energy in the form of electricity, heat, hot water, and cooling to customers under long-term agreements.

Geographical Performance : The majority of Tecogen's customers are located in regions with the highest utility rates, such as California, the Midwest, and the Northeast. These areas are targeted due to their high electricity rates, which make Tecogen's products more economically attractive.

Sales Units : Tecogen has shipped over 3,200 units, some of which have been operating for almost 35 years. As of December 31, 2024, the Services business provided maintenance for approximately 215 chillers and 1,046 cogeneration units.

New Product Launches : Tecogen introduced the Tecochill Hybrid-Drive Air-Cooled Chiller, which can take inputs from both the grid and a natural gas engine, optimizing operational cost savings and greenhouse gas benefits. This product was showcased at the AHR Expo in February 2023.

New Production Launches : In April 2024, Tecogen relocated its manufacturing operations and corporate offices to North Billerica, Massachusetts. This move was part of a strategic effort to enhance operational efficiency.

Future Outlook : Tecogen is focusing on expanding its market presence in data centers and industrial facilities facing power constraints. The company is also exploring opportunities in Controlled Environment Agriculture (CEA) to leverage its expertise in clean cooling and power generation. Additionally, Tecogen anticipates growth in the hybrid-drive air-cooled chiller market and plans to capitalize on the Inflation Reduction Act of 2022, which offers tax credits for projects incorporating low emission technologies.

Strategic Initiatives

Sales and Marketing Agreement : Tecogen Inc. has entered into a Sales and Marketing Agreement with Vertiv Corporation to expand its presence in the data center cooling market, granting Vertiv exclusive rights to market and sell DTx chillers outside the United States.

Service Segment Expansion : The company focused on expanding its service segment through the acquisition of Aegis Energy Services' maintenance agreements, which has contributed to increased service revenue.

Capital Management : The company has engaged in capital management activities by securing financing through note subscription agreements with directors John N. Hatsopoulos and Earl R. Lewis, totaling up to $2 million. This includes promissory notes with options for conversion into common stock. Tecogen has not declared or paid cash dividends and does not anticipate doing so in the foreseeable future. The company has also implemented stock incentive plans to align employee interests with shareholder value.

Future Outlook : Tecogen plans to continue its strategic focus on high-margin service segments and explore opportunities in the data center and Controlled Environment Agriculture markets. The company anticipates that its cash requirements will increase to support business growth and development of new products, such as the hybrid-drive air-cooled chiller. Tecogen may seek additional capital through debt or equity financing to fund these initiatives and respond to market opportunities.

Challenges and Risks

Regulatory Challenges : Tecogen Inc. faces significant challenges due to the regulatory push to eliminate fossil fuels in key markets like New York City, impacting cogeneration unit sales. The company is diversifying its sales activities to reduce reliance on such markets.

Operational Risks : The company faces risks related to supply chain issues, project deferrals, and reduced manufacturing capacity due to plant relocation. There is also a dependency on a limited number of third-party suppliers for key components, which could adversely affect operations if suppliers fail to deliver on time or meet quality standards.

Credit Risks : The company is exposed to credit risks with some customers, and any inability to collect outstanding receivables could materially affect financial results.

Market Risks : The economic viability of projects depends on the price spread between natural gas and electricity, which is subject to market volatility and geopolitical disruptions.

Management Strategies : Management has identified the need to raise additional financing if cash generated from operations is insufficient to fund ongoing operations. The company is also addressing the impact of anti-fossil fuel sentiment and utility power constraints by developing products like the Tecochill Hybrid-Drive Air-Cooled Chiller, which offers operational cost savings and greenhouse gas benefits. The company is also focusing on increasing service intervals and implementing service price increases to improve margins.

Market Risk Exposure : Tecogen is exposed to market risks related to fluctuations in natural gas and electricity prices, which could impact the competitiveness of its products. The company is also subject to risks from potential changes in government incentives for cogeneration equipment, which could affect demand. Additionally, geopolitical tensions and tariffs could impact supply chains and operational costs, although the company has limited exposure to international suppliers.

SEC Filing: TECOGEN INC. [ TGEN ] - 10-K - Mar. 18, 2025