Tecogen Inc.
Q2 2021 Earnings Call Transcript
Published:
- Operator:
- Greetings, and welcome to the Tecogen Second Quarter 2021 Earnings Call. . I will now turn the conference over to our host, Jack Whiting, General Counsel and Secretary. Thank you. You may begin.
- Jack Whiting:
- Hello. This is Jack Whiting, General Counsel and Secretary of Tecogen. Please note this call is being recorded and will be archived on the Investors section of our website at tecogen.com for two weeks. The press release regarding our second quarter 2021 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 the earnings press release and presentation. Various remarks that we may make about the company's future 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 these forward-looking statements as a result of various important factors, including those discussed in the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q under the caption Risk Factors, which are on file with the Securities and Exchange Commission and available on our Investors section of our website under the heading SEC filings. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim the obligation to do so. Therefore, you should not rely on any forward-looking statements as representing our views as of any date subsequent to today. During this call, we will refer to certain financial measures not prepared in accordance with Generally Accepted Accounting Principles or GAAP. A reconciliation of these GAAP to these non-GAAP financial measures to the most directly comparable GAAP measures is provided in the press release regarding our second quarter 2021 earnings and in the Investors section of our website. I will now turn the call over to Benjamin Locke.
- Benjamin Locke:
- Thank you Jack. First off, I'd like to welcome Abinand Rangesh to this call in his new role as CFO at Tecogen. Abinand has been a key contributor in our efforts to reduce costs, improve margins, and develop strategies to grow the business and shareholder value. I'm looking forward to his involvement as CFO, as we articulate our vision for growth, which we will discuss at the end of this call. As the agenda on Slide 4 indicates, we'll start with a brief company overview, followed by a detailed review of our second quarter results. We will then discuss the key takeaways from earnings, along with the discussion on our strategy for growth for the rest of 2021 and 2022. We will then turn the call over to the operator for questions. As a reminder, this presentation will be available for download in the Presentations section of our Investor page on our website. Turning to Slide 5. I'd like to provide a short overview of Tecogen. Tecogen sells and maintains clean and efficient energy systems to provide resiliency and energy savings to customers, while reducing greenhouse gas emissions for a cleaner environmental footprint. Our solutions help industries and facilities reach their environmental and social governance goals, while also providing resiliency to grid outages. As seen on this map, Tecogen has deployed thousands of these systems, and we have a steady recurring revenue stream through our 11 service centers that provide maintenance to these customers. Turning to Slide 6. Many of our distributed generation systems operate at microgrids with the ability to maintain operation during the grid outage. Tecogen is currently ranked third for the number of microgrid systems deployed in the United States, and that number has grown since the 2019 study was released in 2020. In addition to our distributed generation systems, Tecogen offers industrial scale chillers with lower operating costs and reduced greenhouse gas footprint than traditional electric chillers. These systems are sought after for process cooling and in healthcare applications. We have had particular success with our clean cooling products for use in controlled environment agriculture. These indoor grow operations use a tremendous amount of power in order to maintain the ideal growth conditions for the crop. Our chillers substantially reduced the amount of electric capacity needed to operate these facilities, while simultaneously providing heat for facility dehumidification. As our earnings press release indicated, we currently have over 10,000 tons of our clean chillers in controlled agriculture facilities. And lastly, our Ultera emissions technology, recognized as a cost-effective solution for reducing CO, NOx and hydrocarbon emissions across a wide range of engine platforms and sizes. Slide 7 shows some interesting facts about our clean energy systems we've deployed thus far. As I mentioned, with over 3,000 units shipped, we have saved roughly 97,000 tons of CO2, generating almost 2 billion kilowatt hours of electricity with over 52 million hours of run time. These numbers, of course, continue to increase as we deploy more of our clean energy systems to customers. Before I turn the call over to Abinand to review our second quarter results in more detail, I'd like to remind investors of our three main revenue streams shown on Slide 8. Our product sales consist of sales of cogeneration units, microgrid systems, and chillers to a range of markets, including multiunit residential buildings, hospitals, industrial processing and indoor cultivation. Our service revenue primarily consists of our contracted maintenance and parts with a small component of installation services. And our third revenue stream is from energy sales, whereby we sell electrical and thermal energy produced by our equipment on-site at the customers' facilities. With that, I'd like to turn the call over to Abinand to review our numbers in more detail, and then I'll have some additional comments on takeaways for the quarter. Abinand?
- Abinand Rangesh:
- Tecogen is pleased to report net income of $0.09 per share for the first half of 2021 and $0.02 for the second quarter of 2021. This was predominantly due to the employee retention credit and the forgiveness of the First Paycheck Protection loan. It was also helped by stronger gross profit margins across all revenue segments and lower operating costs. Revenue was $6.1 million compared to $7.4 million during the same period in 2020. This 17% decline was mostly due to the decline in product revenue. COVID-19 has impacted new business development activities, such as tradeshows and travel. In addition, slow resumption of construction activities has meant that product revenue has been lower than in the past. However, our backlog is increasing, and we are cautiously optimistic for the second half of 2021. Service revenue declined 1% due to a reduction in installation activities. Maintenance revenue increased 26% and will be discussed in more detail later. Energy production revenue increased 34% compared to the second quarter 2020, as many of the sites that were shutdown due to COVID have now resumed operations. Gross margin increased to 46% from 39%, as this was favorably impacted by our sales mix and continued product improvements have resulted in lower warranty costs. Operational expenses were 7% lower compared to 2020 at $3.2 million and have remained consistent for both quarters of 2021. Our operating loss was $310,000 compared to $500,000 during the same period last year, a 38% improvement. As product sales rebound, we expect to see our loss from operations reduce or turn positive. Net income was $400,000 compared to a loss of $650,000 in the same period last year. This was favorably impacted by the employee retention credit of $713,000. EBITDA was $531,000 compared to a loss of $481,000 during the same period in 2020. Our adjusted EBITDA was also positive at $567,000 compared to a loss of $363,000 during the same period in 2020. Performance by segment. Product revenue decreased by 35%. Cogeneration sales were adversely impacted by COVID-19, especially for multifamily projects. Chiller sales continue to be strong in the indoor cultivation industry. Our sales cycle is anywhere from 6 months to longer than a year. The impacts of restrictions on business development activity in the second half of 2020 are being seen presently. In addition, backlog in the construction industry as a whole has also delayed several projects and impacted our product revenue. We believe that this decline in product revenue is temporary and will return to pre-COVID levels. Service revenue declined 1% quarter-to-quarter. Installation services were down 73% as many of our larger turnkey projects are complete or close to complete. Over the last year and going forward, we have actively chosen to limit the number of new installation projects, so we can concentrate on the higher-margin segments of our business. Our service contracts and parts business increased 26% quarter-to-quarter with approximately 50 new systems that started up during the period. Services gross margin increased to 50% due to the reduced lower margin installation activities. Energy production grew 34%, as many of our existing sites that were shutdown during COVID resumed operation. The increases in gross profit margins across all segments resulted in an overall gross profit of 46%. I'll hand it now back to Ben.
- Benjamin Locke:
- Thanks, Abinand. So turning to Slide 12. I'll discuss what I feel are important takeaways from the quarter. First, we continue to see a gradual recovery from the economic challenges due to COVID in each of our business segments. As Abinand mentioned, while our product sales are still down from pre-COVID levels, we are seeing backlog continue to grow up 12% from year-end. Our service contracts revenue showed improvement this quarter, up 26% quarter-over-quarter. And importantly, we expect a meaningful increase to our service contracts revenue, as we initiated long-term maintenance service contracts with the management of a large residential complex in Toronto, Ontario for 31 InVerde e+ cogeneration systems. The 20-year contracts are all underway and will provide a steady, consistent stream of good margin revenue for the company, starting in the third quarter. The systems will be serviced out of Tecogen's Ontario service center established in March of 2020. And lastly, our energy production revenues continue to recover from COVID closures. Next, our cash position is stable, with our quarter-end cash balance at $3.2 million. We were helped by the PPP program and expect to meet all criteria for forgiveness under our second draw PPP loan later this year. An important takeaway is also our reduced OpEx and improved margins in all segments. We expect these operational and manufacturing improvements to be sustainable each quarter and put us in an excellent position to meet our profitability goal, as product sales pick up to pre-COVID levels. And as I mentioned, our backlog stands at $10.4 million, most of which is for product sales and our core market segments shown on the slide. Turning to Slide 10. I'd like to provide an update to our profitability and product development plan, which I discussed in last earnings call and in our shareholders letter earlier in the year. The plan is focused on operational optimization in our core business, expanding our Tecochill product line, taking advantage of new U.S. energy policy, as it relates to the distributed generation and microgrids and of course, creating value for our Ultera emissions technology. With regard to optimizing our core business, I am quite happy with the progress we've made, reducing OpEx and improving our margins. As product sales fully gradually get back to pre-COVID levels, combined with our steady increases in service revenues and gradual increases in energy sales, we feel this goal is very attainable. Next, we anticipate introducing a new air-cooled chiller product that will fill a gap in our Tecochill offering. Air-cooled chiller sales volumes are typically sold in larger volumes than water cooled systems in our size range. Our goal is to use our hybrid drive technology, which we filed a provisional patent for back in July to develop this air-cooled Tecochill products. This will substantially expand the sales potential for Tecochill in many of our markets, such as indoor cultivation and hospitals, where an air-cooled chiller system is needed. This chiller will have the same compelling economics as our existing Tecochill, but will have a lower greenhouse gas profile and be easier to install. We believe that this will open up new markets for Tecochill and could even be sold internationally. Our goal is to have the product ready for market by late 2022, and we are currently generating interest from gas companies to support the effort. Our goal is to work with the various gas companies to create a backlog of customers for the product once it's introduced. I will, of course, be providing updates on this effort, as we make progress. With regard to our Ultera emissions technology, we are supporting origin engines, as they work to obtain the first EPA certified near zero emissions fork truck engine with Ultera by mid-2022. Ultera has already been presented to many of origin's customers and once the engine is certified, we expect to see market penetration. We also are continuing to work with Southwest Research Labs on an improved catalyst for Ultera that could unlock even more potential. We expect to have the results from SwRI work later this year and will provide updates to investors as that work and the efforts of origin engines proceeds. And lastly, we are seeing a promising opportunity for our technology as it relates to the new U.S. vision for energy and infrastructure, where microgrids in combination with battery and solar have compelling economics in certain geographies such as California. Our proprietary inverter in microgrid controls are designed to manage multiple distributed energy resources, whether that source is our CHP systems, battery storage, solar or any other distributed resource. Our inverter can seamlessly integrate those sources and control the best operational strategy for integrating them together based on energy rates, time of day and/or fuel mix of the utility. I hope to have more details and milestones to announce, as we strive to meet these goals. Our overall strategy is to grow the company in a sustainable way in areas that are consistent with the changing energy trends in national policy and eventually scale our sales outside of North America. With that, I'd like to turn the call over to the operator for questions.
- Operator:
- . Our first question comes from Sameer Joshi with H.C. Wainwright. Please state your question.
- Benjamin Locke:
- Hi Sameer, you were able to get through?
- Sameer Joshi:
- Yes. Finally. Thank you.
- Benjamin Locke:
- Yeah. I apologize to the other callers and listeners, I think there was an issue with the dial-in number with our hosting service that I think got resolved at the last minute. So I'm glad you're able to get through Sameer.
- Sameer Joshi:
- Yes. Thanks. No, glad to be here. So it's good to learn about the air-cooled chiller product. Can you elaborate a little bit more on what kind of gas companies you're working with, and how does that help you in marketing this product?
- Benjamin Locke:
- Sure. Sure. Well, there's obviously many gas companies. But in the markets that we are interested in, we know who those gas companies are. It's no secret who the gas company is in Southern California -- there's TECO Gas and Peoples Gas and ONE Gas and Chesapeake Gas and all these in different geographies. And we're well aware of them. And I'm not sure if you knew us, but they all actually participate collectively in guiding some policy. They're all part of a gas technology institute, and they help do technology development. And the gas technology has been a part of our fabric of the company for many, many years going back to our Thermo Electron days. So we've got some good deep relationships with these gas companies. And of course, what we're articulating to them is we're having very good success with this gas engine driven chiller for all the reasons you know, Sameer. But this particular chiller, our Tecochill is really focused around this one cooling technology of water cool, where you have to have a cooling tower, et cetera. Not all business facilities want to go that route. They want to go a route where they have -- they don't need that kind of thing. It's an air-cooled chiller. And as I said, the market for those things is much larger. So the conversation we have with the different gas companies is, look, this is an opportunity for us to even expand your gas uptake. And it's real numbers, I mean, you talk about therms and gallons of natural gas that they can increase on their uptake. As you can imagine, they get interested. And so that's what we're doing. We're getting them understanding the concept, getting their business executive, their sales executives understanding the concept. And as I mentioned in my remarks, my goal is to -- if I can get a dozen of these gas companies all lining up maybe a few projects ahead of time, while I do this development, well, then I can be assured that when I got the product ready, it will find a home pretty quickly. And again, I think the shared vision with the gas company is a good one, because they're concerned about losing gas load, right. And this is a way for them to actually get more uptake for gas. So it's a good synergy between us and these gas companies.
- Sameer Joshi:
- Yes. Understood. Thanks for that clarification. In terms of product revenues, I think the backlog is slightly lower compared to what it was in May -- I think it was 10.9%, if I remember. But the outlook seems to be strong, like is the pipeline more promising, what is the cause for optimism for the rest of the year?
- Benjamin Locke:
- Yes, sure. Yes, it was 10.9% on last quarter, it went down a little bit, but mostly, again, product and first off, as you know, Sameer, I'm trying not to get too much installation backlog in there, I'll do some installations, but I'm trying to shy away from these big monster construction jobs. But even beyond the backlog, Sameer, the way our business works is it's very much a specification-type process, where a project will come up and you get specified and then the Johns go through and ta-da-ta-da and then people bid it, et cetera. And those projects don't make it into our backlog until that process is far enough along, where I feel we're going to get it, the PO is imminent, of course. But we have many, many projects that are already in that process of being specified, and it's just a matter of time before they seek out bids and then they get the bids and then make the bid selection and all that process. And it's that process that we've seen some frustrating delays, of course, with COVID. But we're seeing that pick up. And again, even though it's not reflected in our backlog, Sameer, we're seeing ourselves specifying these things. And eventually, that will make its way into backlog. So I'm feeling encouraged by that. I'm also feeling encouraged, Sameer, with -- we're taking an active look at our rep network. As you know, Sameer, we sell products a couple of different ways. We have our direct sales team, and then we have manufacturers representatives, which very much so are on the chiller side of the business. And we have some great reps that are doing a tremendous job in some states, and we have some reps that aren't doing so much of a good job in other areas. You saw a press release a few months ago, where we recently appointed two new reps on the West Coast. That was us recognizing, this is for the Tecofrost product, that was us recognizing that the folks that were doing there previously, the reps weren't really doing too much, so we got this new fresh rep firm out there. I think you're probably going to see more of that. It's indeed a focus of our company, of our sales effort, understanding how the sales channels are changing to go through our rep network and make sure that we have real good effective reps, like the ones on the East Coast that are doing really well for us. So I know I kind of went on a little diversion there, but I'm feeling confident because I'm seeing a lot of jobs get specified. They'll make its way into the backlog. And I think our reps -- getting our reps to be more productive is a singular goal for us this year.
- Sameer Joshi:
- Okay. No, this is a good clarification. So I will combine my next two questions. And based on this strong confidence in product growth and energy production being sequentially lower, but still looking prospectively better going forward. Do you think you will be able to achieve 2020 level revenues for 2021? I mean, I know I'm asking you to give an outlook, but just --
- Benjamin Locke:
- Yeah. I'll start the answer, and maybe I'll let Abinand chime in for any additional. But I think the answer is probably no, because we had some facilities that just up and closed, right. And so those aren't coming back. Abinand, you want to --
- Abinand Rangesh:
- Yeah. We look at just -- overall revenue or just specifically for energy services?
- Sameer Joshi:
- Yes. For overall as well, but for energy production, I saw that, of course, you're down from pre-COVID, but also sequentially, you were down a bit. So just wanted to understand that one as well.
- Abinand Rangesh:
- Correct. So to be more specific, right, mid-2020, we had pretty much every athletic facility and most hotels were shut down. What we have seen right now is some of the athletic facilities come back online, maybe not to full capacity but to a decent level of capacity. And then a lot of the hotels that we had under the energy services side are still either closed or only partially reopened. And as a result of that, I think as things go on through the rest of the year, depending on how those units reopen, we'll see -- we'll come back to -- we should come back to 2020 numbers. But if that's -- things don't reopen, then we're going to be down compared to 2020.
- Sameer Joshi:
- All right. Understood. And just -- can these be repurposed and moved to different locations, this is distributed generation, right?
- Abinand Rangesh:
- That's definitely the case. But what we have in some of these sites is we've actually negotiated deals, where we charge, even though the units are shutdown, we get some -- the revenue is a lot smaller, but we get something for those sites, because most of these sites are planning on reopening. So they understand that they're going to need us in the longer run. So they're actually paying something towards their energy services, even though some of those units might be down. So we wouldn't consider moving them in the short run, just because we think a lot of people will come back online.
- Sameer Joshi:
- Understood. Just one more housekeeping issue. Do you expect -- or what is the level of drawdown from the PPP and maybe employee retention credits that you would -- you may see it in the second half coming through?
- Benjamin Locke:
- Well, I think the PPP thing is already completed. Now, we submit our application for forgiveness. So the funding part of that is done. And now getting the forgiveness part of it and full closure is pending, again, for later this year. You talk about the affiliate retention credit there, Abinand.
- Abinand Rangesh:
- So the employee retention credit as of now, the cash from this quarter $713,000 that we booked as other income hasn't yet come in. We're filing the paperwork with the IRS to collect that money and we expect that to be received in various chunks over the course of the next six months or so. We're not sure how quick that will come through. We also expect that for next quarter, we may get some more employee retention credit money. Again, that will come in over the course of the next six months. In terms of drawdown generally in cash, I mean, as you saw, our cash position at the end of the quarter was very, very strong. And we expect it to remain relatively strong for the rest of the year, because of all these sources of cash coming in and as revenue recovers as well.
- Sameer Joshi:
- Yes. No, thanks for the clarification on the cash, but just wanted to check on the level, like is it going to be around the same $700,000 level for this current quarter as well?
- Abinand Rangesh:
- It will probably be a little lower for each of the next two quarters, because this $700,000 actually included for both Q1 and Q2 employee retention credit, because of the dates when the employee retention credit was -- the modifications for the CARES Act was passed. And by the time the IRS gave us the guidance, it was quite late. So it was actually booked into the second quarter numbers. And we also had to balance that against the Paycheck Protection fund, so that we could actually get full forgiveness on the PPP. So -- but next quarter, you're probably looking at somewhere around $600,000 -- probably about $500,000 or so on employee retention credit, but that's something that we'll just have to calculate as we get closer to the end of the quarter.
- Sameer Joshi:
- Yes. We are seeing that dynamic with some of the other companies we cover as well. So thanks for that clarification. And that's all I have right now. Thanks.
- Benjamin Locke:
- Okay. Thank you, Sameer.
- Operator:
- Thank you. Our next question comes from Michael Zuk Please go ahead with your question.
- Michael Zuk:
- Good morning, Ben. Two following questions.
- Benjamin Locke:
- Hi, Mike. Sure.
- Michael Zuk:
- Regarding the manufacturers network, what's the emphasis on that network? Is it CHP or is it chillers or both or are you emphasizing one over the other? How are you pursuing that?
- Benjamin Locke:
- It's mostly CHP, Mike -- I'm sorry, mostly chillers, the opposite I meant to say. Yes, it's mostly chillers, Mike. The channels for them to be sold. Yes, that's the natural course of events for many of these electric chillers, et cetera.
- Michael Zuk:
- And then as a follow-up, I know that we have a historic existing fleet, what's the potential for upgrading our aging in-service fleet? Are we trying to market that or trying to upgrade it, what's the status there?
- Benjamin Locke:
- Yes. That's a great question, Mike. And it's something that we've talked internally ourselves about. It is an opportunity. In fact, you might have even heard some of our chillers have been replacing chillers that we installed 20 years ago. And so on the chiller side of thing, we actually have a very systematic way of going through and saying, okay, your chiller is too old, it's time to replace it. And so that's ongoing, and it's good. On the Cogen side of things, the units tend to run a long time, because we maintain them so well, right. So it's kind of hard to walk in and say, you need to replace it when we've been doing such a good job maintaining it. But with that said, Mike, you're absolutely right. There is opportunity with our own customers, and we have kind of started some outreach to say, okay, do you want to get yourself to a larger system, do you want to get yourself to a black start enabled system. So you're on to something there, Mike, and I'm hoping that we'll have -- you'll hear more about that.
- Michael Zuk:
- And then there's another, I guess, a follow-up, with regard to the infrastructure bill that is coming down, do you foresee subsidies or tax credits being expanded for the CHP and for the low-emission chilling system?
- Benjamin Locke:
- Yes. Well, there's certainly going to be -- and again, we have to wait till the final version comes out. But from what I've seen, there's certainly going to be a tremendous amount of support for microgrid and associated infrastructure. And I think that makes its way into our CHP, meaning that, Mike, if you're able to -- our straight CHP economics may not win the project, but when we combine that CHP with battery and solar and make it meet the criteria for these microgrids, then you've got a lot better economic scenario there. And in fact, I think, again, what I've been reading about the infrastructure bill, a lot of these things aren't going to be tax cuts, as they're going to be downright refundables, the cash. So Abinand, do you want to add anything to that?
- Abinand Rangesh:
- Yes. I was just going to add that, at least, again, from the preliminary numbers, the tax credits for microgrids are large enough that it might even allow things like tax equity funding. As you might know, solar and other projects typically tend to be funded with tax equity, which allows these, you can scale pretty well, because you get an investor that has a tax burden that basically takes the tax credit and funds a portion of that project, and then the rest is funded by debt. In if -- one of the problems that we've always had with the investment tax credit for CHP on its own is that it's only been about 10%. So there's always been a shortfall in terms of making up that difference to basically do a tax equity deal there, whereas with the microgrid credits, it looks like it could be as high as 30% or more. So you might be able to actually do this kind of funding in a larger scale for some of our products.
- Michael Zuk:
- And then one final question. What's the situation with our New York City operations? I know that politically, it's still chaotic in New York City, but are we seeing some opening up of upgrades and installation of new facilities, where are we there?
- Benjamin Locke:
- Sure. Yes. It's funny how political climates change things the way they do. But the bottom line, Mike, is our stuff still saves a ton of money in New York. Abinand and I, we are looking at some of the sites that we own, right -- the energy production sites, so we know empirically what they're saving. And electric rates are as high as ever. Gas rates are still manageable. The greenhouse gas savings are there, whether or not Local Law 97 really changes people's behavior or not, not sure. Now the incentives aren't there anymore. But there are still good projects there. The incentive program created a context in a forum, by which we could do a lot of customer outreach. That was very nice, and that's disappeared. So it requires a little more leg work on our part. But I think the sales opportunity is still pretty strong. Do you want to add anything Abinand?
- Abinand Rangesh:
- Yes. I was just going to add that we're actually seeing a lot of projects that are being helped by the Local Law 97 carbon benefits. Some of the engineers are specking cogeneration projects purely based on the fact that when you've got limited square footage and you don't -- you have done all of your existing energy efficiency measures such as LED lighting, there's not a whole lot more you can do to get penalties down. And then -- so they're then considering cogeneration. The problem that we've had is with things like the NYSERDA incentive, it created an artificial deadline when customers have to find projects. And with this kind of local law, the thing -- the penalties only start kicking in in 2024, so sometimes customers defer capital expenditures as long as possible. So it's balancing those two pressures to get them to actually buy projects sooner and be ready for any kind of carbon taxes or penalties they might get.
- Michael Zuk:
- Well, congratulations on real progress so far this year, and I'm looking forward to a productive third and fourth quarter. Thanks for all your effort.
- Benjamin Locke:
- Thanks, Mike. All right. Good to hear from you.
- Operator:
- . Next question comes from Alex Blanton with Clear Harbor Asset Management. Please state your question.
- Benjamin Locke:
- Hi, Alex.
- Alexander Blanton:
- Hi. Thanks. It's Clear Harbor, CLEAR. Excuse me. By the way, I couldn't find your slides, I don't think they're posted on the website. We have related documents next to the webcast, didn't see the slides there.
- Benjamin Locke:
- If you go in the IR calendar, that's how you locate them, Alex, if you go in the IR calendar.
- Alexander Blanton:
- They're not next to the -- where you have the webcast, where it says related documents?
- Tristan Howell:
- Hi Alex, this is Tristan, I'm the office manager here. So the slides are available on the webcast and then I have -- after the call is over, we can add the PDF slide, but they are not downloadable until after the conference, but you can look at the slides currently as the webcast, which is on the calendar on our website.
- Alexander Blanton:
- Yes. But they're not next to the webcast.
- Tristan Howell:
- Right. They will be after the call is over.
- Alexander Blanton:
- Okay. Thank you.
- Tristan Howell:
- Yes, no problem.
- Alexander Blanton:
- The businesses that you have -- the business you've announced recently, several new -- several releases on new orders. Are those in the backlog?
- Benjamin Locke:
- Which one did you mention?
- Alexander Blanton:
- Well, the ones -- I don't have it right up here, but you put out a couple of releases on new orders.
- Benjamin Locke:
- Yes, yes, they're in the backlog. Yes.
- Alexander Blanton:
- Yes, because sometimes you get -- you announce something, but it's not in the backlog yet.
- Benjamin Locke:
- Yes. No, I think just about all of our announcements are orders. We've got a pretty rigid process to make sure I don't go blabbing about things that didn't really happen. So I think all of our press releases are orders in the backlog.
- Alexander Blanton:
- Okay. Thank you. All right. Looking ahead at 2022, taking into consideration everything you've said on this call, what are the sales going to look like in 2022 relative to 2021?
- Benjamin Locke:
- Yes. Well, Alex, of course, I can't tell you exactly what it would be, I wish I could. But what I can tell you is that our goal is to get the pre-COVID levels. Sales last year were, as we talked about, very much impacted by COVID. I think getting back to our sales level, our pre-COVID sales level is a very reasonable goal for us that I would hope to be able to attain. I'd like to be able to exceed it, but that's what our goal is.
- Alexander Blanton:
- Okay. The installation revenue, was that what someone was referring to and you said you were going to cut back on that. That's the construction. Is that right?
- Benjamin Locke:
- Yes, yes. And the cutback is probably the wrong word, Alex. Instead of doing these very large construction projects, we're doing all the contracting for mechanical and electrical and plumbing and rigging in the New York City and all that kind of stuff. What we're doing, and I think a better model for us is we sell our unit along with some accessories and some engineered things that go along with it. So that now, somebody else can do that installation and not run into any problems. And so that does two things, Alex, number one, that's nice for me because my product sales went up a little bit more, because I got to sell these extra accessories. But also, I'm not getting involved in this very low-margin installation. So while we're always going to have some installation activity there, it's just not going to be as dominant as it was, say two or three years ago.
- Alexander Blanton:
- Okay. So when you say you're going to get back to pre-COVID levels, that would be even --
- Benjamin Locke:
- Product sales -- product sales.
- Alexander Blanton:
- Not the installation revenue?
- Benjamin Locke:
- Yes. No, I don't think that might server rebate that I talked about earlier, that required us to actually carry -- required us to be the contractor for these things. And as you know, Alex, we are still awaiting money from NYSERDA to close the -- to button those things up. Now, I think we still have about $4 million of unbilled revenue, just under $4 million, I think it's $3.9 billion that we're expecting to get back from those things. But yes, I think it's more important for us to focus on our high-margin products and not get ourselves drawn into complex installations. Of course, I'll do reasonable installations if it's good margin for us, but that's the philosophy that we have.
- Alexander Blanton:
- So we can be looking for higher margins going forward.
- Benjamin Locke:
- Yes. Well, I think we've done -- if you look at our margins from a couple of years ago and look at our margins now, I think you're seeing it. I mean, our margins were in the 35% to 40% range and what were our margins this quarter, Abinand?
- Abinand Rangesh:
- 46%, actually 47%.
- Benjamin Locke:
- Yes. And the last quarter was -- yes, so I think you're seeing that higher margin stuff. And there's no disconnect there, and it is very much because we don't have so many of the -- well, first off, we made these improvements that Abinand mentioned, but we don't have this real low-margin construction stuff dragging us down.
- Abinand Rangesh:
- So if you look at a project, either a Cogen or a chiller project, usually, on that project, about a third to a little bit more than that is just purely the machine itself. Then you've got a bunch of other pieces of equipment that go with it to help either the chiller or the Cogen interface with the building. And then the rest of it is the labor to actually run the pipes to fit everything. What we're really focusing on is that first 50% to two-thirds of it, which is where our expertise comes in, where we build the machine, build all the interfaces that allow us to hook up with the building, and that's the high-margin portion of the business as well. So we do all the things that help us both maintain a margin and then service the machine afterwards. But we don't necessarily want to be involved in that, running the pipe, hooking it up to the building directly. People that are specialists in that can do that unless, in some cases, where we have certain clients that require us to do it, we'll do it. But it's not where we necessarily want to be going forward.
- Alexander Blanton:
- Okay. Yes. I've forgotten the last question here. But thank you very much for that.
- Benjamin Locke:
- Yes. Of course, Alex, not a problem. And I'll maybe send you a note just to make sure you got the right place to find the presentation when we're off the call here.
- Alexander Blanton:
- Okay. Thank you.
- Benjamin Locke:
- Okay.
- Operator:
- Thank you. There are no further questions at this time. I'll turn it back to Management for closing remarks.
- Benjamin Locke:
- Great. Thank you, operator. Well, I want to thank everyone for joining us on the second quarter earnings call. As I said, I think we've got a lot of things to be optimistic about and I expect to have some good meaningful announcements on these topics as the year goes on. So thank you again for your support with Tecogen, and we'll talk soon.
- Operator:
- Thank you. This concludes today's conference. All parties may disconnect. Have a good day.
Other Tecogen Inc. earnings call transcripts:
- Q1 (2024) TGEN earnings call transcript
- Q4 (2023) TGEN earnings call transcript
- Q3 (2023) TGEN earnings call transcript
- Q2 (2023) TGEN earnings call transcript
- Q1 (2023) TGEN earnings call transcript
- Q4 (2022) TGEN earnings call transcript
- Q3 (2022) TGEN earnings call transcript
- Q2 (2022) TGEN earnings call transcript
- Q1 (2022) TGEN earnings call transcript
- Q4 (2021) TGEN earnings call transcript