Q & A Highlights

Q: Can you provide more details on the 12 product demonstrations, specifically whether they were with 12 different potential customers and if there was an acceleration in scheduling? A: Abinand Rangesh (CEO) confirmed that all 12 demonstrations were with 12 different entities. Of these, 8 were potential direct end customers, while the rest were engineers, partners, or a chip manufacturer with key influence. He noted that the company strategically scheduled the most important demonstrations towards the end to improve their pitch, which is why the earlier press release showed a lower installed capacity figure.

Q: Regarding the larger data center operators, is today's commentary an evolution of the second cohort that was previously willing to scale up with you, and can you provide additional color on that dynamic? A: Abinand Rangesh (CEO) explained that the sales process involves first generating interest and then reducing friction, such as capacity concerns. The company is starting to build inventory to cut lead times and eliminate delivery risk. He noted that they are finding applications where they can start small with these large data centers, either as a retrofit pilot or as part of a phase of a bigger project, which provides a way around the capacity issue.

Q: Can you give a sense of the size and cost of building inventory ahead of orders, given your confidence has grown? A: Abinand Rangesh (CEO) stated that they are managing inventory based on potential customer demand for late this year and early next year. If three or four potential customers indicate a need for a certain capacity, they will build enough to satisfy at least one, managing the risk and cash flow. The goal is to compress lead times so that upon receiving a purchase order and deposit, they can ship immediately, especially given the interest from larger names.

Q: Can you provide an update on the progress towards finalizing the Master Purchase Agreement (MPA) with Vertiv and the status of the 25 to 50 megawatts of projects they were speccing you into? A: Abinand Rangesh (CEO) said he could not comment on specifics without prior approval from both parties. He mentioned that they decided to save the approval process for a more substantial announcement. He confirmed that things are in a "very good place overall" but declined to provide further details at this time.

Q: When you highlight building inventory, does that mean there is more inventory build to come, and how do you manage that versus your capital constraints? A: Abinand Rangesh (CEO) explained that while they had some inventory earlier, it is being absorbed by the increased backlog for non-data center projects, so they need to add more. The strategy is to compress lead times, as projects may progress verbally but purchase orders can take time. They are balancing cash flow with the need to respond quickly to the interest from larger names, aiming to ramp up quickly once initial units start shipping.

Q: Can you frame out the range of discussions you've had, whether they are for pilot early phases or larger potential opportunities, and where those dates are panning out? A: Abinand Rangesh (CEO) stated that while he couldn't comment on specific dates, the priority is to work with end customers to scale with them. He emphasized that getting the right brand names is more important than the order size, as a reputable first project will shape future development and attract other customers.

Q: Can you provide an update on the trends in the base business, given the increased backlog and expected projects? A: Abinand Rangesh (CEO) noted that power constraints are becoming a broader issue, driving sales beyond just economics. Long lead times for electrical equipment like switchgear are pushing customers towards their products. He also mentioned that the cogeneration and standard power generation side is starting to recover, with larger multifamily buildings facing high utility rates and power shortages looking to use their equipment.

Q: Do you see the market direction for your products being original data centers built from scratch, or retrofits of existing centers, and would it involve expansions? A: Abinand Rangesh (CEO) said they see both opportunities. While the initial pipeline was with newer projects, they are now seeing more interest from existing data centers, particularly those supporting AI infrastructure or regular web workloads that are running out of power. He noted applications include incorporating the product into a phase of a campus expansion, using it as a primary cooling source for smaller data centers, and a push towards smaller, urban data centers where their cooling products are a good fit.

Q: Is there an opportunity to retrofit where someone has an electric chiller and replaces it with a Tecogen unit? A: Abinand Rangesh (CEO) confirmed there are some opportunities for pure retrofits, but it is more likely for existing live data centers to add their system as an expansion, leaving the electric chiller in place as a backup. He noted that some are looking to remove electric chillers entirely, but the more common application is additive.

Q: Can you elaborate on how your products solve the problems of water usage, pollution, and noise for data centers? A: Abinand Rangesh (CEO) explained that their dual-power source chiller is a closed-loop system with no water evaporation. During peak utility constraints, the load can dynamically move to natural gas, avoiding the need for diesel generators. Their Ultera emission system, designed for Southern California, produces very low NOx and carbon monoxide emissions, making it substantially cleaner than diesel. Additionally, the machines are designed for low-noise urban environments, so they are not bothersome compared to the noise from diesel generators. The InVerde product can also be used in conjunction with chillers to shed load during peak times, keeping diesel generators for emergency use only.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .