Tecogen OTCMKTS: TGEN reported lower first-quarter revenue and a wider loss as management said the company is investing in research, marketing and manufacturing capacity tied to its push into the data center market.
On the company’s Q1 2026 earnings call, Chief Executive Officer Abinand Rangesh said Tecogen is seeing growing interest in its dual-power source chiller technology from data center customers facing grid constraints, while also noting a pickup in non-data center chiller demand.
Chief Financial Officer Roger Deschenes said total revenue fell 12.9% to $6.4 million in the first quarter from $7.3 million in the prior-year period, driven by lower product revenue. Gross profit declined to $2.6 million from $3.2 million, while gross margin decreased to 40.9% from 44.3%.
Operating expenses rose to $4.7 million from $3.8 million a year earlier. Deschenes said the increase reflected higher service-segment operating costs, increased production segment costs, research and development spending, and expenses related to manufacturing expansion and continued development of the dual-power source chiller.
The company posted a net loss of $2.2 million, compared with a loss of $700,000 in the first quarter of 2025. Adjusted EBITDA loss widened to $1.7 million from a loss of about $400,000 a year earlier.
Vertiv Purchase Order Expected Imminently
Rangesh said Vertiv has approved the purchase of 1 megawatt of cooling and that the purchase order is “in process and expected imminently.” He described the planned Vertiv deployment as a permanent installation at one of Vertiv’s facilities, where the chillers will be used both for cooling needs and as part of a system that can be shown to prospective customers.
“This imminent PO from Vertiv is significant because it not only shows a financial commitment, but the willingness to find ways to showcase our chillers,” Rangesh said.
During the question-and-answer session, Rangesh said the units are expected to ship before the end of the second quarter, with the installation timeline dependent on Vertiv. He said the facility could be ready to demonstrate the system to customers sometime in the third quarter, assuming installation proceeds as expected. The company did not disclose the value of the Vertiv contract.
Rangesh said design work, marketing activities and negotiations of a master partnership agreement with Vertiv are proceeding concurrently and are not affected by the timing of the chiller installation.
Data Center Interest Centers on Grid Constraints and Backup Cooling
Rangesh said data center customers are increasingly focused on the ability to reduce grid demand during peak periods and to maintain cooling during outages. He cited recent research funded by Google indicating that a 500-megawatt data center committing to remove load from the utility for as little as 70 hours per year could reduce grid connection wait times by three to five years.
Rangesh said the issue applies to both new and existing data centers, particularly as tenants request expanded capacity at facilities that may not have additional power available. He said peak grid demand in much of the country coincides with summer cooling needs.
The CEO also highlighted the company’s chiller demonstration showing uninterrupted cooling during a simulated power outage. In that demonstration, he said, the chiller operated at full load with part of the power coming from the grid and the remainder from a natural gas engine. When grid power was cut, the natural gas engine immediately took the full load without a change in cooling output.
“A conventional electric chiller would have shut down,” Rangesh said, adding that diesel generators would then need to start before electric chillers could restart and return to full load.
Pipeline Includes Non-Data Center Projects and Site Visits
Rangesh said Tecogen has seen more than $8 million in non-data center projects approved by customers, in addition to the Vertiv opportunity. He said the company has already received purchase orders for $2.3 million and expects to receive remaining purchase orders and deposits within 30 to 45 days.
In response to an analyst question, Rangesh clarified that a large portion of the approved non-data center projects is tied to the healthcare sector, including hospitals, with some commercial buildings also included. He said many of those projects involve summertime cooling loads, meaning equipment would likely be needed in late fall or winter. Tecogen may ship some of that equipment toward the end of the year while preserving near-term capacity for potential data center projects.
The company is also preparing to host prospective data center customers at its headquarters for product demonstrations. Rangesh said the visitors include about two customers from the previously disclosed opportunity pipeline and at least three additional “bigger name” data centers. He said demonstrations are expected to begin in the near term and continue into mid-June, depending on customer schedules.
Rangesh said some of the potential customers are established developers, with possible interest from “Neoclouds” as well, though he declined to identify the companies.
Segment Performance Mixed
Product revenue fell 54% to $1.2 million from $2.5 million in the prior-year quarter. Deschenes said the company continued to experience delays in a couple of projects that management now expects to close in the coming months. He also noted that the first quarter of 2025 benefited from shipments of cogeneration systems to customers seeking to take advantage of Inflation Reduction Act tax credits.
Product gross margin improved to 44.9% from 41.3%, helped by price increases and allocation of manufacturing labor to factory-floor realignment.
Services revenue increased 9% to $4.6 million from $4.2 million, reflecting higher billable activity and more operating hours from existing service contracts. However, services gross margin fell to 41.8% from 46.8% because of higher labor and material costs, especially in the greater New York City area.
Energy production revenue rose 5% to $520,000 from about $500,000, driven by increased uptime at certain sites. Energy production gross margin declined to 23.9% from 37.9%, which Deschenes attributed to higher natural gas costs.
Cost Cuts and Capacity Plans
Rangesh said Tecogen has made cost reductions in some service territories to improve margins and expects the full impact to be visible by the third quarter. Deschenes said overall operating costs should begin to decrease in the second quarter and decline further in the third quarter.
Tecogen ended the quarter with about $9.3 million in cash and had approximately $8.5 million at the time of the call. Rangesh said customer deposits from upcoming projects should strengthen the company’s cash position.
On manufacturing capacity, Rangesh said Tecogen has qualified contract manufacturers to provide sheet metal assemblies, chiller shells and preassembled electronics cabinets. Tecogen’s facility performs final integration, adding the engine generator, connecting components, testing and shipping the units.
Rangesh said that with vendors fully ramped, Tecogen could build up to 100 chillers per year from its current facility. He said reaching that run rate would typically require a three- to six-month ramp. If orders exceed that level, he said the company is considering other ways to scale, including supplying power assemblies for integration with Vertiv’s chiller capacity.
About Tecogen OTCMKTS: TGEN
Tecogen Inc designs, manufactures and sells on‐site power generation and combined heat and power (CHP) systems for commercial, industrial and institutional markets. The company's natural gas–fueled cogeneration units produce electricity while capturing and reusing waste heat for space and water heating, providing enhanced energy efficiency over traditional utility‐supplied electrical systems. Tecogen's portfolio also includes ultra‐low NOx emission technologies, absorption chillers and ancillary equipment tailored to meet the specific demands of manufacturing facilities, hospitals, universities and other energy‐intensive customers.
Central to Tecogen's product lineup is its InVerde e+ series of cogeneration modules, which integrate internally developed low‐emission combustion systems with advanced controls to optimize performance and reliability.
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