Tecogen Q2 2026 Earnings Call Transcript

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Provided by Quartr
August 13, 2026

Key Takeaways

  • Positive Sentiment: Management reported a base-business backlog exceeding $8 million, with another $2 million–$3 million of projects expected to close over the next few months, supporting anticipated product-revenue growth and higher deposits in Q3.
  • Positive Sentiment: Tecogen hosted 12 demonstrations for data-center customers, chip manufacturers, engineers, and partners representing more than 8 GW of operating capacity and multiple gigawatts under construction. Management said feedback was highly positive and is beginning to build inventory to shorten delivery times, though no major hyperscale orders were announced.
  • Neutral Sentiment: The company is targeting both new-build and retrofit data-center applications, positioning its dual-power-source chillers and power-generation systems as solutions for electricity constraints, water consumption, noise, emissions, and grid reliability.
  • Negative Sentiment: Q2 revenue fell 21% year over year to $5.8 million, while the net loss widened to $2.2 million and adjusted EBITDA loss increased to $1.7 million, primarily because of lower product sales and higher operating expenses.
  • Positive Sentiment: Service margins were temporarily pressured by approximately $300,000 of one-time costs, including a major electric-chiller failure; management expects the Q3 cost reductions and pricing adjustments to improve service margins and gross-profit dollars.
AI Generated. May Contain Errors.
Earnings Conference Call
Tecogen Q2 2026
00:00 / 00:00

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Operator

Greetings, and welcome to the Tecogen Q2 2026 Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jack Whiting, General Counsel. Thank you. You may begin.

Jack Whiting
Jack Whiting
General Counsel at Tecogen

Morning. This is Jack Whiting, the 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 second quarter 2026 earnings and the presentation provided this morning are available in the investor section of our website. I'd like to direct your attention to our safe harbor statement included in our earnings press release and 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 of the Private Securities Litigation Reform Act of 1995.

Jack Whiting
Jack Whiting
General Counsel at Tecogen

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 investor section of our website in the heading SEC Filings. While we may elect to update forward-looking statements, we specifically disclaim any obligation to do 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 directly comparable GAAP measures is provided in the press release regarding our Q2 2026 earnings and on our website.

Jack Whiting
Jack Whiting
General Counsel at Tecogen

I will now turn the call over to Abinand Rangesh, Tecogen's CEO, who will provide an overview of the second quarter 2026 activity and results, and Roger Deschenes, Tecogen's CFO, will provide additional information regarding Q2 financial results. Abinand?

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

Thank you, Jack. Welcome to Tecogen's Q2 2026 call. Today, I would like to start with the key question that many of you may be wondering about. Given that Tecogen has been working on the data center strategy for a while, and the product seems to make perfect sense for the market, what is taking so long for orders to close? Is there something missing in the story? To answer those questions, I believe we need to start with the objective. In my view, the objective is, what is the fastest way to maximize the value of Tecogen, given we have great technology but have resource constraints as a small company? Originally, our strategy was to target smaller data centers. We could then use that as a reference to get the bigger names interested.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

As we got bigger names interested, the company's technology starts to become incorporated by big brand data centers, and now we have technology that everyone wants, making Tecogen very valuable. Now, we may have an opportunity to go straight for the end goal, which is the hyperscale and big brand developers. In March this year, I shared an opportunity pipeline with you. Many of these opportunities were with data centers that were of smaller scale. While many of these projects will likely close, these projects are subject to external factors such as tenants, delays in construction permits, et cetera. The big brand data centers don't have the same limitations. In addition to these smaller opportunities, we have been simultaneously working on access to the larger names. It has taken an enormous amount of work on the part of our sales team to make inroads on some of the larger names.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

But now I believe we have managed to gain some serious traction. Over the last two months, we have hosted 12 product demonstrations, six in-person and six virtual. The in-person group included four data centers that are hyperscale or building hyperscale campuses and partners. The virtual visit group included chip manufacturers, engineers, and another four data centers. These data centers collectively represent greater than 8 GW of data center capacity operating today and multiple gigawatts in construction. Although I cannot tell you the names of the data centers that attended, I'm sure you will know many of them. To put this into perspective, the data centers that attended, either virtually or in person, collectively represent 15%-20% of present data center capacity in the U.S. The natural question at this point is, does attending this product demonstration show any real commitment or interest?

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

For the in-person group, given how busy data center engineers and senior-level people are, blocking off a whole day for multiple people is a significant commitment. It has taken many months of finding the right internal champions with influence at these larger companies and educating them on the value of our products before we got to this point. Second, beyond the list that attended, we are talking to other large and hyperscale data centers. The ones that are earlier in the process declined attending. This is consistent with our experience in other markets, where once a potential customer attends a site visit, our close rate is usually high, as they're serious about entering a business relationship. Lastly, I think the market has also evolved. In addition to power, there are some key challenges that the bigger data centers are facing that our products solve.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

As you may have read in the press, many data centers are facing opposition for on-site water use, noise, and air pollution. Here is where our products really shine. We solve all three problems. The dual power source chiller is closed loop, so there is no water evaporation. Our products already operate in noise-sensitive environments, such as on rooftops next to penthouse apartments. Recently, during the scorching July 4th weekend, black smoke could be seen in northern Virginia from continuous diesel generator usage from data centers. Diesel generators were being used to avoid a blackout as the utility grid was running out of power and forcing data centers to shed load. Therefore, unlike a diesel generator that attracts noise complaints and pollutes, data centers can install our products without worry. This is where seeing a product demo brings these benefits to life.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

There is a difference between seeing a data sheet with a decibel reading and hearing our products in person, or reading about near zero NOx and carbon monoxide emissions versus seeing the readout from an emissions analyzer in real time. There is also a big difference between saying you can add extra megawatts for compute during hot days versus watching in real time a jump in cooling load and seeing the electrical power remain capped, or saying you can provide uninterruptible cooling during a power outage versus watching someone shut off the electrical power to the chiller while it is running. These big name data centers have permitted projects, capital, and the ability to shape the whole industry.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

The feedback has been extremely positive across the board and specific projects, delivery dates, et cetera, have been discussed, so we feel confident enough to begin building some inventory of our dual power source chiller and power gen modules to get a head start. In addition to the data center push, our base business backlog now stands at greater than $8 million. In addition to what is already in backlog, we expect a further $2 million-$3 million in projects to close over the next few months. This means we expect product revenue to increase in Q3, and we expect to collect more deposits, improving cash flow. Although our focus has predominantly been on our data center strategy, during the last call, we mentioned that we expected to reduce expenses in our service group to increase margins.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

During Q2, these reductions were made mid-quarter, so the full impact will be seen beginning in Q3. One-time costs in Q2 reduced margin by around 7 percentage points. Without these one-time costs, margin is starting to recover in service. In addition to cost reductions, we have also started to make contract pricing adjustments where appropriate and are working with customers, especially on larger sites, to make improvements that would help them increase run hours and help us increase revenue and margin. Given that our service revenue was substantially higher year-over-year, this continuous improvement is expected to result in higher margins and therefore a significant increase in gross profit dollars. I will now hand over to Roger to talk about the financials.

Roger Deschenes
Roger Deschenes
CFO at Tecogen

Thank you, Abinand, and good morning, everyone. I will begin with the results for the second quarter. Our total revenues decreased 21% or $1.5 million in the second quarter to $5.8 million, compared to $7.3 million in the second quarter of 2025. This is due mainly to lower product segment revenue. As Abinand indicated just moments ago, we expect revenue to increase in the third quarter based on the recent increase in our backlog and the anticipation of expected projects that will close in the next few months. Our gross profit decreased 11.9% to $2.2 million in the second quarter of 2026, compared to $2.5 million in the comparable period in 2025. Again, this is due to products segment revenue. Our gross profit margin increased, excuse me, by 4% to 37.8% in the second quarter of this year, from 33.8% in 2025.

Roger Deschenes
Roger Deschenes
CFO at Tecogen

This is due to improved products segment gross margin. Operating expenses increased 11.6% in the second quarter to $4.3 million from $3.9 million in the second quarter of 2025. This is due to increased operating costs in both our products and services segments and the general increase in operating costs incurred for the manufacturing capacity expansion that we are undergoing and the continued development and refinement of our dual source chiller, which, as we all know, is focused on our entry into the data center market. During the just concluded quarter, we reduced headcount at a few of our service centers as we work to reduce our spend there. Overall, operating expenses decreased approximately $400,000 in the second quarter of this year compared to the first quarter. Our net loss for the quarter increased to $2.2 million from $1.5 million in the comparable quarter in 2025.

Roger Deschenes
Roger Deschenes
CFO at Tecogen

This is due to lower products segment sales and gross margin and an increase in operating expenses. Moving over to adjusted EBITDA for the quarter, the adjusted EBITDA loss was $1.7 million in the second quarter of this year, which was higher when compared to last year's loss of $1.2 million. This is due to lower products segment sales and gross margin and higher operating costs. Moving to performance by segment, Products revenue decreased 64% to $1.1 million in the second quarter of 2026 from $3.2 million in the second quarter of 2025. The revenue for product segment revenues last year benefited from the shipment of cogeneration systems during this period to customers seeking tax credits from the Inflation Reduction Act of 2022. As we have discussed in the past, product revenue has significant variability quarter to quarter.

Roger Deschenes
Roger Deschenes
CFO at Tecogen

Our products gross margin increased 19.2% to 48.5% in the second quarter of this year from 29.3% in the similar quarter of 2025. This is due to price increases and change in product mix. Our services revenue increased 10% quarter-over-quarter 2026 to $4.4 million, which compares to $4 million in the second quarter of 2025. This is due to higher billable activity and high operating hours of our equipment from both our existing service contracts and our Aegis-acquired contracts. Our service gross margin was essentially flat compared to last year. During the second quarter of this year, as Abinand indicated, we spent approximately $300,000 of one-time cost at a handful of sites that we serviced, which are electric chillers as part of the energy sites that we sold to SDCL Kyotherm in 2029.

Roger Deschenes
Roger Deschenes
CFO at Tecogen

In fact, one of these electric chillers had a catastrophic failure at the start of the cooling season and needed significant repairs and the additional cost of rental cooling during the time the systems were being repaired. Excluding this one-time cost, as Abinand indicated earlier, our gross margin from our service operations would have been 7% higher in the 2026 period. Our energy production revenue increased 35% in the second quarter of this year to $0.24 million from $0.17 million in the 2025 period. This is due to increased uptime at certain energy production sites. The energy production gross profit margin decreased 29% in the second quarter of 2026 from 25.2%, and this is due to the guaranteed shortfall of just under $100,000 that we recognized in the quarter. I will now hand the call back over to Abinand for closing remarks.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

Thank you, Roger. At this point, there are two conclusions you could reach. The first is that it has taken a long time today, so the company's prospects in the data center market are slim. Or the second, that it has taken a while to navigate the data center landscape and get access to the right champions of the largest data centers. Now that we have, the potential addressable market is massive. After all, why would some of the largest data centers bother to take a day out of their busy schedules to attend a product demonstration? Given that we now have a range of opportunities from small data centers to the largest players, what is the likelihood that nothing closes? Especially if we have some inventory on hand and delivery risk is eliminated.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

If we land even a pilot project with a big brand data center, what does it do to our prospects industry-wide? Management and the board have consistently bought stock because we believe the company has technology that solves some fundamental problems facing not just data centers, but a whole host of markets. You decide which conclusion makes the most sense. Thank you, and I will open for more questions.

Operator

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we pull for questions. Our first question comes from the line of Bobby Brooks with Northland Capital Markets. Please proceed with your question.

Bobby Brooks
Bobby Brooks
Analyst at Northland Capital Markets

Hey, good morning, team, and thank you for taking my question. Very exciting to hear about the 12 demonstrations, but wanted to unpack that a little bit more. Were all 12 demos with 12 different potential customers? You disclosed having those six demonstrations at the beginning of July, so had another six over the last month. Was there any acceleration in that? Just curious to hear more there.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

Great question, Bobby. Out of the 12, eight were potential direct end customers. The rest were engineers or other people, either designing data centers or partners that could help us accelerate some of that, so really that have key influence on the end result. One of them was one of the chip manufacturers. Generally it was all high-profile visitors. Definitely what we tried to do with regards to the scheduling was to schedule the most important ones towards the end, just so we got better practice with the demonstrations as well. It just so happened that's how the schedule worked. We gradually escalated in terms of size, which is why our press release earlier in July probably showed a lower installed capacity, and we had more towards the end.

Bobby Brooks
Bobby Brooks
Analyst at Northland Capital Markets

Got it. That's helpful. It was 12 different customers across the 12 visits.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

Yeah. Exactly, 12 different entities.

Bobby Brooks
Bobby Brooks
Analyst at Northland Capital Markets

Got it. When we spoke after the last print, you mentioned how the larger data center operators were split in two, both interested, but group one, let's say, would learn of the capacity limits you currently have and lose interest and say, "Call me when you can do more." But then interestingly, you had mentioned that second group were some who were seemingly willing to scale up with you. So I wanted to follow up there and hear is today's commentary on these larger potential customers a sort of evolution of that second cohort getting more comfortable on the technology or just any additional color you could share on that dynamic?

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

Yeah. No, that is a great question. I believe once again, when people come for demonstrations, there's generally a certain level of interest, right? The way, at least I think of the sales process, you've got two portions to it. The first part is getting the interest up to the point that somebody says, "This makes sense for me." The second part of it is, of course, reducing anything that might add friction to it or might act as a negative to them not closing the deal, right? Out of that capacity is one of them. That's part of why we're starting to build some inventory so we can cut the lead time and we can turn these things around without having to tell somebody, you need to give us an order right away and this is our lead time, right?

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

We can start getting a head start on some of that. Having said that, I believe based on all of the discussions that we had during these meetings, again, the advantage of having, especially the ones in person, is you get a decent amount of time to really probe their requirements and what they're looking for and where they're thinking. We're starting to find, I think, applications that we could essentially start small and grow with them. That is also one of the advantages of these bigger data centers that have existing locations, because you could either add almost as a retrofit, as a pilot, or you can do it as part of one phase of a bigger project. So there's ways to do this without having to have all that capacity upfront.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

We believe that the capacity issue, although is important, I think there's a way around it in this case. But we will see as further discussions go forward.

Bobby Brooks
Bobby Brooks
Analyst at Northland Capital Markets

That's really helpful color. Then maybe just on building capacity ahead of orders as the confidence has grown, was just curious to get a sense on the size of that and how much that might cost. Thank you.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

I'm not sure I can comment on that exact number, but I'll give you kind of how we think about it. What we're thinking about is what would people want, let's say, in the very end of this year towards the early part of next year, right? What sort of a rough number that. Then if we can, let's say, have three or four different potential customers saying, "I need roughly this amount of capacity," then we'll say, "Okay, our odds of if we build X amount, then we'll sell it to at least one out of the three or one out of the four," right? Our odds are good in terms of getting that sold. So that's how we're thinking about it in terms of risk, cash, and in terms of also timing.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

Because I think part of the issue I'm sure everybody is thinking about is what does this mean in terms of cash flow and inventory? If we time it right, in theory, we should be able to bridge. We won't necessarily need to put up all the capital up front, right? If you look at the timing of when these things could potentially be shipped or delivered, that's what we're hoping for. But even if it ends up slipping a little bit, it allows us to manage the risk versus the cash flow.

Bobby Brooks
Bobby Brooks
Analyst at Northland Capital Markets

Very helpful color. Appreciate it. I'll return to the queue.

Operator

Thank you. Our next question comes from the line of Eric Stine with Craig-Hallum. Please proceed with your question.

Eric Stine
Eric Stine
Analyst at Craig-Hallum

Hi, Abinand. Hi, Roger. Good morning.

Roger Deschenes
Roger Deschenes
CFO at Tecogen

Morning, Eric.

Eric Stine
Eric Stine
Analyst at Craig-Hallum

Hey. First, talking about those 12 demos, just curious, is there a way to think about that, which opportunities you may pursue under the Vertiv relationship or not? Or is that even the right way to think about this? I mean, is that kind of a separate path?

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

I'd say the two are parallel paths. Pretty much all the demos that came were arranged through us and our sales team and our marketing efforts. We, of course, if it makes sense in these projects, there are places where it may make sense to collaborate. But right now, those all came from our marketing efforts.

Eric Stine
Eric Stine
Analyst at Craig-Hallum

Got it. Then maybe sticking with Vertiv, I know you got the initial order. Just curious if you can speak to both the progress towards finalizing the MPA and then also, I know you've talked about in the past that Vertiv was speccing you into, I think, 25-50 MW of projects. Maybe if you could just give an update on where those specific projects stand.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

Yeah. So one thing on this particular call, as we've mentioned anything, of course, on either party, we have to get prior approval on both sides. In this particular case, I talked to my counterparties, and we decided that let something close so that we save the approval process with Vertiv for something that's more substantial. So at this point, I can't comment too much on that. So I think, stay tuned, let things happen, and we'll announce deals as they happen.

Eric Stine
Eric Stine
Analyst at Craig-Hallum

Okay. But beyond the deals, in terms of just progress towards the MPA, is that just still in process?

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

Yeah. I think things are in a very good place overall with them. I just cannot comment at this point because, again, I didn't this time around get-

Eric Stine
Eric Stine
Analyst at Craig-Hallum

Yep

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

specific permission for it.

Eric Stine
Eric Stine
Analyst at Craig-Hallum

Yep. Understood. Okay, last one. Building inventory, I know you've built some inventory over the last three quarters. When you're highlighting specifically building inventory, in your prepared remarks and now, is that saying that there is more inventory build to come? Then how do you kind of manage that versus some of your capital constraints that you've talked about?

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

Yeah. We had a little bit of inventory earlier, but as our backlog has increased for the non-data center projects, a lot of that inventory is going to get absorbed as part of that. We have to add additional. It's also, as I mentioned, we're trying to manage this in such a way that it's less a matter of total inventory, it's a matter of figuring out how do you compress the lead time. Because typically with some of these projects, right, there's a lot of things moving in the background, and you may get various progress and verbal approvals, but you may not get a purchase order for a while, even though we might know that things are progressing, things are happening. We don't want to have a delay at that point.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

We'd rather know that, okay, we feel very confident we're going to get these projects, in which case, let's get this. As soon as we get a purchase order and get a deposit, we can start shipping. That's how we're thinking about it. We're trying to balance the cash flow versus that. We also feel that it's important to be able to move quickly, especially because at this point, we have the interest of these bigger names. We want to make sure that we're able to respond quickly. Then hopefully once we get some units starting to ship, then we can start ramping up very quickly from there.

Eric Stine
Eric Stine
Analyst at Craig-Hallum

Yep. Okay. Thank you.

Operator

Thank you. Our next question comes from the line of Chip Moore with ROTH MKM. Please proceed with your question.

Chip Moore
Chip Moore
Analyst at ROTH MKM

Hey, morning. Thanks. I wanted to maybe follow up on-

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

Morning.

Chip Moore
Chip Moore
Analyst at ROTH MKM

Hey, morning, Abinand. I wanted to follow up maybe around the demos, and some of your comments which make sense around balancing working capital and compressing those lead times. Just the discussions you've had, I think you alluded to even talking about dates. Maybe just help frame that out, like a range of whether it's sort of those pilot early phases versus larger potential opportunities, just any sense of where those type of dates are panning out.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

Part of that is I can't comment too much on that. What we're trying to do is to have really work with the event customers to figure out how we can scale with them. We think at this point in the company's, like where we are, it's probably more important to get the right names in terms of the first projects, if we can do that. Just because if you get the right names, you end up shaping the whole, all the future development, right? Once you have the right brand name, everybody else is going to follow, hopefully, based on the right name using it. Because it's, I think reputationally, probably more important to get that done right than necessarily I mean, whichever order we get, of course, if we get a smaller data center first, we're going to take that.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

But our priority right now is to try to get the right brand names closed if we can.

Chip Moore
Chip Moore
Analyst at ROTH MKM

Understood. No, that's helpful and we'll look forward to hearing updates. Maybe just for my follow-up, the base business, right, with that backlog increasing, good to see, and it looks like you expect some more here. Just the trends you're seeing there and any changes in sort of base markets. Thanks.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

We are starting to see power constraints across the board all over the place, which in the past, a lot of our sale, whether it was chillers or cogeneration, was made predominantly based on economics. Now we are starting to see a lack of power, electrical equipment having long lead times, those kind of things affecting the ability for the non-data center type customers to have access to either cooling or power generation or all of that equipment. We are starting to see that driving some of this. We are also starting to see a little bit of the cogeneration and standard power generation side of things start to come back for a while.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

That had significantly reduced, but we are starting to see some of the larger multi-family buildings and other types of buildings that are seeing high utility rates and in some cases, not enough power that are looking to use our equipment. I think the base business is growing just as a result of some of what the data center space is also facing. Part of what we have seen in that base business, things like switchgear, things like that are having longer lead times is also what is making us feel like having some of that inventory on hand will also likely pick up potential customers that are trying to get other electrical equipment. They are not able to install electrical based equipment just because the switchgear and things like that might be longer than we could essentially pick up projects just that way as well.

Chip Moore
Chip Moore
Analyst at ROTH MKM

Yeah. No, that makes sense. Okay. No, I appreciate it. Thanks very much.

Operator

Thank you. Our next question comes from the line of Alex Blanton with Clear Harbor Asset Management. Please proceed with your question.

Alex Blanton
Analyst at Clear Harbor Asset Management

Good morning. I've got a question about how you

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

Good morning, Alex.

Alex Blanton
Analyst at Clear Harbor Asset Management

Oh, yes. I've got a question about the direction you see the market going for you. Is it going to be original data centers built from scratch or is it going to be retrofit of existing centers? And in those instances, would it be participating in expansions of existing data centers rather than just retrofitting what's already been built?

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

That's a great question. Actually, we both. Earlier, a lot of our opportunity pipeline was with newer types of projects, but we're starting to see more with existing data centers in a few different types of applications. One is, the AI side of it gets a lot of the press, right? But there's still a lot of existing cloud data centers that are supporting either the AI infrastructure, but also just regular web workloads. And many of those are running out of power. And their cooling load may not be quite as big as an AI data center, but it's still there. And if they can free up some of that, then there's benefits there. So we're starting to see some potential in those kind of applications.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

We're seeing some potential customers say we can incorporate this as part of a bigger campus where they do it in one phase or as they build it into a certain phase of an expansion. There's also the smaller data centers that might use it as a primary cooling source. So there's different applications that we're starting to see. There's also a push, I think, more broadly in the industry to start moving towards maybe smaller data centers that are closer to urban environments, just to where you can pick up pockets of power. In those areas, again, our cooling products could be a very, very good fit. But we're seeing a mix of different types of applications right now.

Alex Blanton
Analyst at Clear Harbor Asset Management

Do you see an opportunity to retrofit where someone has an electric chiller and they say, "Well, but let's take that out and install Tecogen instead." What is the opportunity there?

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

We are seeing some potential opportunities like that, but what is more likely to happen in those kind of applications is, because with an existing data center, the actual doing the retrofit tends to be because it's a live site. So they might add it to either as almost like an expansion into because many of these data centers typically have some additional space they set up for future expansion, where they may not necessarily remove the electric chiller. They might leave it in place and add us in and put the electric chiller now as a backup. So that's the more likely application than a pure remove electric chillers. But we are seeing some people that are looking to remove electric and put ours in.

Alex Blanton
Analyst at Clear Harbor Asset Management

Thank you. I'm interested in what you said earlier about solving the, or helping to solve the problems of pollution and noise, and there was a third one.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

The water usage?

Alex Blanton
Analyst at Clear Harbor Asset Management

Water. Water pollution and noise. How do you do that in your case?

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

Yeah. So there are two different ways you can do it. One is with the chiller, because typically when a utility wants you to shut down your, or reduce power from the grid, it is usually on the hottest days, just because that is when everybody else has their air conditioning system on. When the utility starts to get very constrained, they start asking large load users to drop load. In which case, your alternative, and what happened in Virginia, for example, was the diesel generators were turned off. What we would do in our case is just have that load either dynamically move to natural gas or have those chillers just be turned on in those applications so that that load moves over to natural gas.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

Because our equipment is designed for continuous usage, and originally our Ultera emission system was designed for Southern California, so we have very clean emissions. Our carbon monoxide NOx very low. So in that sense, substantially cleaner than a diesel generator. The other thing is because our machines have been designed for continuous usage, whether it is the InVerde product or the chillers, it is designed for pretty low noise urban environments. So you could be standing next to it and you would hear it, but it is not going to be bothersome, no more than ambient noise. So in that sense, it is substantially quieter than those diesel generators. So the first is the chiller application. The second application is also potentially the InVerde. It is not necessarily going to run all your loads, but there are certain standby loads.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

There are other loads, again, that you may not want to have your massive full data center load coming on smaller power systems like InVerde. But because it is modular, you essentially could add the InVerde in conjunction with the chillers to shed some of that load during that peak time and not turn on the generator and keep the diesel generator really just for emergency use.

Alex Blanton
Analyst at Clear Harbor Asset Management

Okay. Well, thank you very much.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

Thank you, Alex.

Operator

Thank you. We have reached the end of the question and answer session. I would like to turn the floor back to Abinand Rangesh for closing remarks.

Abinand Rangesh
Abinand Rangesh
CEO at Tecogen

Thank you very much everyone for attending our Q2 2026 conference call. I will keep everyone updated as things move forward. I believe we've gotten the interest. We're going to do everything in our power now to turn this interest into projects. I'll keep people posted and hopefully we'll have some interesting news over the next few months. Thank you.

Operator

Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.

Executives
    • Jack Whiting
      Jack Whiting
      General Counsel
    • Abinand Rangesh
      Abinand Rangesh
      CEO
    • Roger Deschenes
      Roger Deschenes
      CFO
Analysts
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