Q1 2026 Tecogen Inc Earnings Call

May 13, 2026

Speaker #1: Greetings and welcome to the Teacogen Q1 2026 conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

Speaker #1: If anyone should require operator assistance, please press *0 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 and secretary.

Speaker #1: Thank you. You may begin.

Speaker #2: Good morning. This is Jack Whiting, general counsel and secretary at Teacogen. This call is being recorded and will be archived on our website at teacogen.com.

Speaker #2: The press release regarding our first quarter 2026 earnings and the presentation provided this morning are available in the investor section of our website. I direct your attention to our safe harbor statement included in our earnings press release and presentation.

Operator 2: Greetings, welcome to the Tecogen Q1 2026 Conference Call. It is now my pleasure to introduce your host, Jack Whiting, General Counsel and Secretary. Thank you. You may begin.

Operator: Greetings, welcome to the Tecogen Q1 2026 Conference Call. It is now my pleasure to introduce your host, Jack Whiting, General Counsel and Secretary. Thank you. You may begin.

Speaker #2: Various remarks that we may make about the company's expectations, plans, and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the private securities litigation reform act of 1995.

Speaker #2: If anyone should require operator assistance, please press *0 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 and Secretary.

Speaker #2: Actual results may differ materially from those indicated by forward-looking statements, and will result in 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, "Missfactors Filed with Securities and Exchange Commission." And also available in the investor section of our website under the heading "SEC Files." While we may elect to update forward-looking statements, we specifically disclaim any obligation to do so so you should not rely on any forward-looking statements as represented in our views as of any future date.

Speaker #2: Thank you. You may begin. Good morning. This is Jack Whiting, General Counsel and Secretary of TECOGEN. This call is being recorded and will be archived on our website at tecogen.com.

Jack Whiting: Good morning. This is Jack Whiting, General Counsel and Secretary at Tecogen. This call is being recorded and will be archived on our website at tecogen.com. The press release regarding our Q1 2026 earnings and the presentation provided this morning are available in the investor section of our website. I direct your attention to our safe harbor statement included in our earnings press release and presentation. Various remarks that we may make about the company's expectations, plans, and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

Speaker #2: Various remarks that we may make about the company's expectation plans and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the private securities litigation reform act of 1995.

Speaker #2: During this call, we will refer to certain financial measures not prepared in accordance with general accepted accounting principles or GAAP. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures provided in the press release regarding our Q1 2026 earnings and on our website.

Speaker #2: Action results may differ materially from those indicated by forward-looking statements, and will result from 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 Securities and Exchange Commission." These are also available in the investor section of our website under the heading SEC Files.

Jack Whiting: Actual results may differ materially from those indicated by forward-looking statements and the 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 Securities and Exchange Commission and also available in the investor section of our website under the heading SEC Files. 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 Q1 2026 earnings and on our website.

Speaker #2: I'll now turn the call over to Alvin Anrangesh, Teacogen CEO, who will provide an overview of Teacogen's first quarter activity and results, and Roger Deschamps, Teacogen CFO, who will provide additional information regarding Q1 financial results.

Speaker #2: Alvin?

Speaker #2: While we may elect to update forward-looking statements, we specifically disclaim any obligation to do so so you should not rely on any forward-looking statements as represented in our views as of any future date.

Speaker #3: Thank you, Jack. Welcome to Teacogen's Q1 2026 call. On today's call, I will update shareholders on the imminent PO from Vertiv, the recent surge in demand for our shillers from non-data center customers, and the upcoming demonstrations we're hosting for some well-known data centers.

Speaker #2: During this call, we will refer to certain financial measures not prepared in accordance with general 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 Q1, 2026 earnings and on our website.

Speaker #3: First, I would like to comment on the financials. To where the third and fourth quarter of last year, our gross profit margin had dipped below our target of 40%, a lower gross profit margin, of course, means a higher break-even point for profitability.

Speaker #2: I'll now turn the call over to Abhinav Rangesh, TECOGEN CEO, who will provide an overview of TECOGEN's first quarter activity and results, and Roger Deschamps, TECOGEN CFO, who will provide additional information regarding Q1 financial results.

Jack Whiting: I'll now turn the call over to Abinand Rangesh, Tecogen's CEO, who will provide an overview of Tecogen's Q1 activity and results, and Roger Deschenes, Tecogen's CFO, who will provide additional information regarding Q1 financial results. Abinand?

Speaker #3: Therefore, I am pleased to see that our gross profit for Q1 2026 is now greater than 40%. Although operating expenses are higher in Q1 2026, this is because of essential investments in R&D and marketing to succeed in the data center market.

Speaker #2: Abhinav?

Speaker #3: Thank you, Jack. Welcome to TECOGEN's Q1, 2026 call. On today's call, I will update shareholders on the imminent PO from Vertiv, the recent surge in demand for our shillers from non-data center customers, and the upcoming demonstrations we're hosting for some well-known data centers.

Abinand Rangesh: Thank you, Jack. Welcome to Tecogen's Q1 2026 call. On today's call, I will update shareholders on the imminent PO from Vertiv, the recent surge in demand for our chillers from non-data center customers, and the upcoming demonstrations we're hosting for some well-known data centers. First, I would like to comment on the financials. Towards Q3 and Q4 of last year, our gross profit margin had dipped below our target of 40%. A lower gross profit margin, of course, means a higher break-even point for profitability. Therefore, I am pleased to see that our gross profit for Q1 2026 is now greater than 40%. Although operating expenses are higher in Q1 2026, this is because of essential investments in R&D and marketing to succeed in the data center market.

Speaker #3: There is also additional manufacturing headcount that is presently shown in the operating expense as product volume increases; this cost will transition into direct production costs.

Speaker #3: First, I would like to comment on the financials. Towards the third and fourth quarter of last year, our gross profit margin had dipped below our target of 40%, a lower gross profit margin, of course, means a higher break-even point for profitability.

Speaker #3: We have also made cost reductions in some of the service territories to increase margins. We expect to see the full impact of these cost reductions to likely hit in Q3 of this year.

Speaker #3: Therefore, I am pleased to see that our gross profit for Q1, 2026 is now greater than 40%. Although operating expenses are higher in Q1, 2026, this is because of essential investments in R&D and marketing to succeed in the data center market.

Speaker #3: Importantly, as several upcoming projects close, we expect to receive substantial customer deposits which should strengthen our cash position. Before I update shareholders, on projects, I'd like to address a question I have received multiple times.

Speaker #3: There is also additional manufacturing headcount that is presently shown in the operating expense as product volume increases; this cost will transition into direct production costs.

Abinand Rangesh: There is also additional manufacturing headcount that is presently shown in the operating expense. As product volume increases, this cost will transition into direct production costs. We have also made cost reductions in some of the service territories to increase margins. We expect to see the full impact of these cost reductions to likely hit in Q3 of this year. Importantly, as several upcoming projects close, we expect to receive substantial customer deposits, which should strengthen our cash position. Before I update shareholders, on projects, I'd like to address a question I have received multiple times. Many companies claim that they can provide power to data centers quickly. If that is the case, why should a data center choose Tecogen's chillers? Recently, I was speaking to a senior executive at one of the largest data center companies.

Speaker #3: Many companies claim that they can provide power to data centers quickly. If that is the case, why should a data center choose Teacogen's shillers?

Speaker #3: Recently, I was speaking to a senior executive at one of the largest data center companies. I asked him where he saw a market fit for our shillers given the alternatives for securing power.

Speaker #3: We have also made cost reductions in some of the service territories to increase margins. We expect to see the full impact of these cost reductions to likely hit in Q3 of this year.

Speaker #3: He called our shiller a game changer. For two reasons. First, he explained that electric utilities are now desperate for data centers to cut load from the grid during peak time.

Speaker #3: If a data center can do this, in many cases, they can jump the queue for grid power. Recent research funded by Google showed that a 500-megawatt data center is at 500-megawatt data center commits to removing load from the utility for as little as 70 hours of the year; they could cut three to five years in grid connection wait time.

Speaker #3: Many companies claim that they can provide power to data centers quickly. If that is the case, why should a data center choose TECOGEN's shillers?

Speaker #3: I'm including the link to the research here. This problem affects both new and existing data centers. Many existing data centers are being asked by tenants to expand capacity and they don't have any further power available.

Abinand Rangesh: I asked him where he saw a market fit for our chillers given the alternatives for securing power. He called our chiller a game changer for two reasons. First, he explained that electric utilities are now desperate for data centers to cut load from the grid during peak time. If a data center can do this, in many cases, they can jump the queue for grid power. Recent research funded by Google showed that a 500 MW data center commits to removing load from the utility for as little as 70 hours of the year, they could cut 3 to 5 years in grid connection wait time. I'm including the link to the research here. This problem affects both new and existing data centers.

Speaker #3: He called our shiller a game changer. For two reasons. First, he explained that electric utilities are now desperate for data centers to cut load from the grid during peak time.

Speaker #3: In most parts of the country, the peak time for the electrical grid is summertime. Precisely when cooling loads are the highest. A data center could add more power or use our shiller solution instead.

Speaker #3: The second reason is uninterrupted cooling in a blackout. As you would expect, data centers invest massive amounts of capital on complete redundancy. Backup generators, thermal storage, redundant cooling systems, and other infrastructure to prevent downtime.

Speaker #3: They could cut three to five years in grid connection wait time. I'm including the link to the research here. This problem affects both new and existing data centers.

Speaker #3: To fully appreciate the benefit our shiller offers, I encourage investors to watch the video of our shiller handling a power outage. I've included the link on this slide.

Speaker #3: Many existing data centers are being asked by tenants to expand capacity and they don't have any further power available. In most parts of the country, the peak time for the electrical grid is summertime.

Abinand Rangesh: Many existing data centers are being asked by tenants to expand capacity, and they don't have any further power available. In most parts of the country, the peak time for the electrical grid is summertime, precisely when cooling loads are the highest. A data center could add more power or use our chiller solution instead. The second reason is uninterrupted cooling in a blackout. As you would expect, data centers invest massive amounts of capital on complete redundancy, backup generators, thermal storage, redundant cooling systems, and other infrastructure to prevent downtime. To fully appreciate the benefit our chiller offers, I encourage investors to watch the video of our chiller handling a power outage. I've included the link on this slide. In this video, you will see our chiller operating at full load. Half the power is coming from the electric grid and the rest from the natural gas engine.

Speaker #3: In this video, you'll see our shiller operating at full load, half the powers coming from the electric grid, and the rest from the natural gas engine.

Speaker #3: Precisely when cooling loads are the highest. A data center could add more power or use our killer solution instead. The second reason is uninterrupted cooling in a blackout.

Speaker #3: Then we cut the electric power, the natural gas engine instantly takes the full load. No change in cooling output, no interruption. A conventional electric chiller would have shut down.

Speaker #3: As you would expect, data centers invest massive amounts of capital in complete redundancy—backup generators, thermal storage, redundant cooling systems, and other infrastructure to prevent downtime.

Speaker #3: Diesel generators would have to start. Then the electric chillers would have to restart and come to full load. A power outage represents a significant risk to a data center.

Speaker #3: To fully appreciate the benefit our chiller offers, I encourage investors to watch the video of our chiller handling a power outage. I've included the link on this slide.

Speaker #3: With our chiller, there's an extra layer of redundancy built right into the chiller. As you can see, the use cases go far beyond just access to more power.

Speaker #3: In this video, you'll see our chiller operating at full load, half the powers coming from the electric grid, and the rest from the natural gas engine.

Speaker #3: During the last call, I mentioned the demonstration project with Vertiv. This has now expanded substantially. I'm pleased to announce that Vertiv has approved purchasing one megawatt of cooling and the PO is in process and expected imminently.

Speaker #3: Then we cut the electric power; the natural gas engine instantly takes the full load. No change in cooling output, no interruption. A conventional electric chiller would have shut down.

Abinand Rangesh: We cut the electric power. The natural gas engine instantly takes the full load. No change in cooling output, no interruption. A conventional electric chiller would have shut down. Diesel generators would have to start, the electric chillers would have to restart and come to full load. A power outage represents a significant risk to a data center. With our chiller, there's an extra layer of redundancy built right into the chiller. As you can see, the use cases go far beyond just access to more power. During the last call, I mentioned the demonstration project with Vertiv. This has now expanded substantially. I'm pleased to announce that Vertiv has approved purchasing 1 MW of cooling, the PO is in process and expected imminently. Now, after going to the environmental chamber, Vertiv has found a permanent home for the chillers at one of their facilities.

Speaker #3: Diesel generators would have to start. Then the electric chillers would have to restart and come to full load. A power outage represents a significant risk to a data center.

Speaker #3: Now, after going to the environmental chamber, Vertiv has found a permanent home for the chillers at one of their facilities. This facility has a shortage of power and our chillers solve the power constraint.

Speaker #3: With our chiller, there's an extra layer of redundancy built right into the chiller. As you can see, the use cases go far beyond just access to more power.

Speaker #3: The chillers will be connected to other ancillary equipment at this facility so it can be showcased as a complete system 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.

Speaker #3: Design, marketing activities, and negotiations of the master partnership agreement are in process concurrently and are not affected by timing of this chiller installation. Over the upcoming month, we're also hosting some well-known prospective data center customers at our headquarters for in-depth product demonstration.

Abinand Rangesh: This facility has a shortage of power, and our chillers solve the power constraint. The chillers will be connected to other ancillary equipment at this facility so it can be showcased as a complete system 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. Design, marketing activities, and negotiations of the master partnership agreement are in process concurrently and are not affected by timing of this chiller installation. Over the upcoming month, we are also hosting some well-known prospective data center customers at our headquarters for in-depth product demonstration. Some of these are in addition to the opportunity pipeline I've already disclosed last quarter. As we have become better known in the data center industry, many more larger data centers are now interested in using our technology.

Speaker #3: Some of these are in addition to the opportunity pipeline I've already disclosed last quarter. As we have better become better known in the data center industry, many more larger data centers are now interested in using our technology.

Speaker #3: In my experience, when senior managers and executives take time out of their busy schedules for in-person site visits, the probability of converting discussions into purchase orders increases substantially.

Speaker #3: In the last two months, we have seen a surge in projects for non-data center customers. Many of these projects have been slow-moving until now, but as the reality of power constraints started to sink in, customers began accelerating approvals.

Speaker #3: We have seen more than $8 million in projects approved by customers. We've already received the purchase orders for 2.3 of this $8 million in hand and expect to receive the remaining POs and deposits within the next 30 to 45 days.

Abinand Rangesh: In my experience, when senior managers and executives take time out of their busy schedules for in-person site visits, the probability of converting discussions into purchase orders increases substantially. In the last 2 months, we have seen a surge in projects for non-data center customers. Many of these projects have been slow-moving until now, but as the reality of power constraints started to sink in, customers began accelerating approvals. We have seen more than $8 million in projects approved by customers. We've already received the purchase orders for $2.3 million in hand and expect to receive the remaining POs and deposits within the next 30 to 45 days. We ended the quarter with approximately $9.3 million in cash and presently have approximately $8.5 million. As these deposits are received, we expect our cash position to improve.

Speaker #3: We ended the quarter with approximately $9.3 million in cash and presently have approximately $8.5 million. As these deposits are received, we expect our cash position to improve.

Speaker #3: In the last two months, we have seen a surge in projects for non-data center customers. Many of these projects had been slow-moving until now, but as the reality of power constraints started to sink in, customers began accelerating approvals.

Speaker #3: I'll hand over to Roger to discuss the financials.

Speaker #2: Thank you, Abhinav. Good morning, everybody. I'll begin by revealing the first quarter results. Total revenues for the quarter decreased by $900,000 or $12.9% in the first quarter to $6.4 million which compares to $7.3 million in the preceding year quarter.

Speaker #3: We have seen more than $8 million in projects approved by customers. We've already received the purchase orders for $2.3 million of this $8 million in hand, and expect to receive the remaining POs and deposits within the next 30 to 45 days.

Speaker #2: This is due to a reduction in our product's revenue. Our gross profit decreased just under 20% to $2.6 million in the first quarter compared to $3.2 million in the first quarter of 2025.

Speaker #3: We ended the quarter with approximately 9.3 million in cash and presently have approximately 8.5 million. As these deposits are received, we expect our cash position to improve.

Speaker #2: This is due to lower product revenue and also to an increase in our services and energy production cost. Our gross margin decreased 3.4% to $40.9% in the first quarter of 2026 from $44.3% in 2025.

Speaker #3: I'll hand over to Roger to discuss the financials.

Abinand Rangesh: I'll hand over to Roger to discuss the financials.

Speaker #2: Thank you, Avinath. Good morning, everybody. I'll begin by revealing the first quarter results. Total revenues for the quarter decreased by $900,000 or 12.9% in the first quarter to $6.4 million which compares to 7.3 million in the preceding year quarter.

Roger Deschenes: Thank you, Abinand Rangesh, and good morning, everybody. I'll begin by reviewing the Q1 results. Total revenues for the quarter decreased by $900,000 or 12.9% in Q1 to $6.4 million, which compares to $7.3 million in the preceding year quarter. This is due to a reduction in our products revenue. Our gross profit decreased just under 20% to $2.6 million in Q1, compared to $3.2 million in Q1 of 2025. This is due to lower products revenue and also to an increase in our services and energy production cost.

Speaker #2: And this is due to increased services and energy production costs. Operating expenses increased just under 24% in the first quarter of 2026 to $4.7 million from $3.8 million in the comparable period in 2025.

Speaker #2: This is due to a reduction in our product's revenue. Our gross profit decreased just under 20% to 2.6 million dollars in the first quarter compared to 3.2 million dollars in the first quarter of 2025.

Speaker #2: And this is due to increased operating costs and our services segment and an increased cost in our production segment, research and development, and a general increase in operating costs incurred for the manufacturing expansion we're undertaking to realign the factory to increase capacity and efficiency.

Speaker #2: This is due to lower product revenue and also to an increase in our services and energy production costs. Our gross margin decreased 3.4% to 40.9% in the first quarter of 2026 from 44.3% in 2025.

Roger Deschenes: Our gross margin decreased 3.4% to 40.9% in Q1 2026, from 44.3% in 2025. This is due to increased services and energy production costs. Operating expenses increased just under 24% in Q1 2026 to $4.7 million, from $3.8 million in the comparable period in 2025. This is due to increased operating costs in our services segment and an increased cost in our production segment, research and development, and a general increase in operating costs incurred for the manufacturing expansion we are undertaking to realign the factory to increase capacity and efficiency, and to further fund the continued development and refinement of our dual-power source chiller. Both efforts focus on our entry into the data center market.

Speaker #2: And to further fund the continued development and refinement of our dual-source chiller. Both efforts focused on our entry into the data center market. As Abhinav suggested, we have recently taken steps to reduce our services OPEX and our overall OPEX.

Speaker #2: And this is due to increased services and energy production costs. Operating expenses increased just under 24% in the first quarter of 2026 to $4.7 million, from $3.8 million in the comparable period in 2025.

Speaker #2: And we expect costs to decrease beginning in the second quarter into further be reduced beginning in the third quarter of this year. Our net loss for the quarter increased to $2.2 million from $700,000 in 2025.

Speaker #2: And this is due to lower product sales and an overall reduction in gross margin and an increase in operating expenses. Moving over to the adjusted EBITDA for the quarter, the adjusted EBITDA loss for the first quarter was $1.7 million.

Speaker #2: Both efforts focused on our entry into the data center market. As Avinath suggested, we have recently taken steps to reduce our services OPEX and our overall OPEX.

Speaker #2: Which is higher when compared to the comparable loss in 2025 of just about $400,000. And this is due to lower sales in the lower gross margin and the increase in operating costs.

Roger Deschenes: As Abinand Rangesh suggested, we have recently taken steps to reduce our services OpEx and our overall OpEx. We expect costs to decrease beginning in Q2 and to further be reduced, beginning in Q3 of this year. Our net loss for the quarter increased to $2.2 million from $700,000 in 2025. This is due to lower product sales and an overall reduction in gross margin and an increase in operating expenses. Moving over to the adjusted EBITDA for the quarter. The adjusted EBITDA loss for Q1 was $1.7 million, which is higher when compared to the comparable loss in 2025 of just about $400,000.

Speaker #2: And we expect costs to decrease beginning in the second quarter and to further be reduced beginning in the third quarter of this year. On net loss for the quarter, increased to 2.2 million dollars from 700,000 dollars in 2025.

Speaker #2: Moving over to performance by segment, product revenues decreased 54% to $1.2 million in the first quarter of 2026 from $2.5 million in the first quarter of 2025.

Speaker #2: As we continue to experience a delay in a couple of projects, which, as Abhinav suggested, we are expected now to see these close in the next few months.

Speaker #2: The first quarter of 2025 product revenue benefited from the shipment of cogeneration systems that shipped during the quarter to customers seeking to take advantage of the tax credits from the Inflation Reduction Act of 2022.

Speaker #2: And this is due to lower sales in the lower gross margin and the increase in operating costs. Moving over to performance by segment, product revenues decreased 54% to 1.2 million dollars in the first quarter of 2026 from 2.5 million dollars in the first quarter of 2025.

Roger Deschenes: This is due to lower sales and the lower gross margin and the increase in operating costs. Moving over to performance by-

Speaker #2: As we have discussed in the past, product revenue has significant variability quarter to quarter. The product's gross margin increased 3.6% to $44.9% in the first quarter of 2026 from $41.3% in the quarter of 2025.

Speaker #2: As we continue to experience a delay in a couple of projects—which, as Avinath suggested, we now expect to see close in the next few months.

Speaker #2: This is due to increases in the allocation of I'm sorry. This is due to price increases and the allocation of manufacturing labor to the realignment of the factory floor again with the intent to increase capacity and efficiency.

Speaker #2: The first quarter of 2025 product revenue benefited from the shipment of code generation systems that shipped during the quarter to customers seeking to take advantage of the tax credits from the Inflation Reduction Act of 2022.

Speaker #2: Our services revenue increased 9% quarter over quarter in 2026 to $4.6 million compared to $4.2 million in Q1 2025. This is due to higher billable activity and higher operating hours of the equipment from our existing service contracts.

Speaker #2: As we have discussed in the past, product revenue has significant variability quarter to quarter. The product's gross margin increased 3.6% to 44.9% in the first quarter of 2026 from 41.3% in the quarter of 2025.

Speaker #2: The services gross margin decreased 5% to $401.8% in the first quarter of 2026 from $46.8% in the comparable quarter in 2025. And this is due to increased labor and material costs specifically in the greater New York City area.

Speaker #2: This is due to increases and the allocation of I'm sorry, this is due to price increases and the allocation of manufacturing labor to the again with the intent to increase capacity and efficiency.

Speaker #2: While our service margin continues to underperform, recent cost reduction initiatives should improve profitability going forward. Our energy production revenue increased 5% in the first quarter to $520,000 compared to approximately $500,000 in the first quarter of 2025.

Speaker #2: Our services revenue increased 9% quarter over quarter in 2026 to 4.6 million dollars compared to 4.2 million dollars in Q1, 2025. And this is due to higher billable activity and higher operating hours of the equipment from our existing service contracts.

Speaker #2: This is due to increased uptime in certain energy production sites. The energy production gross margins decreased to 23.9% in 2026 from 37.9% in 2025.

Speaker #2: The services gross margin decreased 5% to 40.8% in the first quarter of 2026 from 46.8% in the comparable quarter in 2025. And this is due to increased labor and material costs specifically in the greater New York City area.

Speaker #2: And this is due to the higher natural gas costs we've incurred during the period. I'll turn the call back over to Abhinav for a closing remarks.

Speaker #2: While our service margin continues to underperform, recent cost reduction initiatives should improve profitability going forward. Our energy production revenue increased 5% in the first quarter to 520,000 dollars compared to approximately 500,000 dollars in the first quarter of 2025.

Speaker #1: Thank you, Rajan. I'll leave you with the following concluding thoughts. Why would Vertiv choose to buy chillers when they could easily ask us to provide demonstration units for a performance test?

Speaker #1: And why now? Why would senior personnel from well-known data centers fly in to see product demonstrations? The existing solutions are sufficient. I've already shown you our opportunity pipeline as many hundreds of chillers.

Speaker #2: This is due to increased uptime and certain energy production sites. The energy production gross margins decreased to 23.9% in 2026 from 37.9% in 2025.

Speaker #1: This continues to progress forward. As we have just seen with the non-data center pipeline, slow-moving projects can rapidly get approved when alternatives get scarce.

Speaker #2: And this is due to the higher natural gas costs we've incurred during the period. I'll turn the call back over to Avinath for closing remarks.

Speaker #1: Management and directors of Decogen bought shares after we reported last quarter. We've seen some high-profile data centers have outages due to failures in their cooling, unredundancy systems, in recent times.

Speaker #1: Thank you, Roger. I'll leave you with the following concluding thoughts. Why would Vertiv choose to buy chillers when they could easily ask us to provide demonstration units for a performance test?

Speaker #1: I'd encourage you to watch the video of our chiller providing uninterrupted cooling when the power goes out and you decide if we have something game-changing or not.

Speaker #1: I'll now open the floor for questions.

Speaker #3: 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.

Speaker #1: This continues to progress forward. As we center pipeline, slow-moving projects can rapidly get approved when alternatives get scarce. Management and directors of TECOGEN bought shares after we reported last quarter.

Speaker #3: 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 their hands up before pressing the star keys.

Speaker #3: One moment, please, while we pull four questions. Our first question comes from the line of Eric Stein with Craig Hallam. Please proceed with your question.

Speaker #1: We've seen some high-profile data centers have outages due to failures in their cooling, unredundancy systems, in recent times. I'd encourage you to watch the video of our chiller providing uninterrupted cooling when the power goes out and you decide if we have something game-changing or not.

Speaker #4: Hi, Abhinav. Hi, Roger. Good morning.

Speaker #1: Good morning, Eric.

Speaker #5: Good morning.

Speaker #4: Hey, so I mean, I know the video that you're asking people to watch. I saw that in person and would concur. Quite impressive. I'm just curious I know you're hosting a number of people to witness this.

Speaker #1: I'll now open the floor for questions.

Speaker #3: 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.

Speaker #4: I mean, do you feel like people appreciate what your hybrid system can do now? Or do you believe that that in-person viewing is what is needed for the market to really understand the ability to seamlessly make this transition from the grid to the natural gas engine?

Speaker #3: One moment, please, while we pull four questions. Our first question comes from the line of Eric Stein with Craig Hallam. Please proceed with your question.

Speaker #4: Hi, Avinath. Hi, Roger. Good morning.

Speaker #1: So that's a great question. So some of the people that we're hosting right now are as I've mentioned briefly, are new bigger-name data centers that we have spoken to a few times, but we believe that they could be a massive advantage to the company if we can land some of those.

Speaker #1: Good morning, Eric.

Speaker #5: Good morning.

Speaker #4: Hey, so I mean, I know the video that you're asking people to watch. I saw that in person and would concur. Quite impressive. I'm just curious, I know you're hosting a number of people to witness this.

Speaker #4: I mean, do you feel like people appreciate what your hybrid system can do now, or do you believe that that in-person viewing is what is needed for the market to really understand the ability to seamlessly make this transition from the grid to the natural gas engine?

Speaker #1: But they have seen the video. And as soon as they saw the video, they wanted to see the real chiller, what they're really what we're going to be demonstrating in person is the performance of the chiller, showing them it running on both grid, basically capping the amount of power that the chiller can draw from the grid, and then pulling the rest from the natural gas engine.

Speaker #1: Showing them the uninterrupted cooling, and generally we found in the past that when we have taken potential customers on site tours and so on, one, just the commitment of them undertaking that shows the level of seriousness on both sides.

Speaker #1: So that's a great question. So some of the people that we're hosting right now are as I've mentioned briefly, our new bigger name data centers that we have spoken to a few times, but we believe that they could be a massive advantage to the company if we can land some of those.

Speaker #1: And number two, you get uninterrupted time with those customers, so you can progress discussions to the point where you might be able to get the purchase orders much faster doing that.

Speaker #1: So it's a combination of factors. When you get somebody in one room for a significant amount of time, plus a demonstration, we've always found that goes well in terms of securing orders.

Speaker #4: Yep. Okay. Thank you for that. Maybe just on the Vertiv project, so imminent, I mean, I guess that kind of starts the process. But do you have any thoughts?

Speaker #4: Maybe it's too early, but any thoughts about well, I guess it's a permanent deployment, right? So it's not necessarily something where it's set to run for a period of time?

Speaker #1: And number two, you get uninterrupted time with those customers, so you can progress discussions to the point where you might be able to purchase orders much faster doing that.

Speaker #4: I mean, it's permanent. I mean, am I thinking about that right? Or are there any things we should think about in terms of timing, next milestones, etc.?

Speaker #1: So as I mentioned, the continuing marketing and Vertiv actually generating projects and so on, that's happening concurrently. This essentially is a purchase order for a permanent installation.

Speaker #4: Yep. Okay. Thank you for that. Maybe just on the Vertiv project, so imminent, I mean, I guess that kind of starts the process, but do you have any thoughts?

Speaker #1: It is being approved by Vertiv management. It is just it's we're waiting on the physical paperwork to be provided in hand. I would still like it by Vertiv that I can mention that they've essentially approved the project.

Speaker #4: Maybe it's too early, but any thoughts about well, I guess it's a permanent deployment, right? So it's not necessarily something where it's set to run for a period of time.

Speaker #1: So it is going to one of their facilities. And it's going to be installed permanently there. There are other pieces of equipment that you would find in a data center in this building.

Speaker #4: I mean, it's permanent. I mean, am I thinking about that right, or are there any things we should think about in terms of timing, next milestones, etc.?

Speaker #1: And the chiller is essentially there, so they can show it to potential customers as well as use it for their own purposes within the building, where it's actually providing cooling for various systems in the building.

Speaker #1: So, as I mentioned, the continuing marketing and Vertiv actually generating projects and so on, that's happening concurrently. This essentially is a purchase order for a permanent installation.

Speaker #4: Got it. Okay. And so this is permanent. Yeah. No, this is permanent, but also can be used for demos as well, obviously, because it does apply to.

Speaker #1: It has been approved by Vertiv management. It's just that we're waiting on the physical paperwork to be provided in hand. I was told by Vertiv that I could mention they've essentially approved the project.

Speaker #1: Exactly.

Speaker #4: Okay. Well, maybe last one for me, then I'll turn it over. I mean, I get this question quite a bit. I know it's always hardest to get that first order.

Speaker #1: So it is going to one of their facilities. And it's going to be installed permanently there. There are other pieces of equipment that you would find in a data center in this building.

Speaker #4: In a new application, I mean, in your mind, you've just shared a lot of things that are happening on that side. In your mind, is there something that kind of makes the dam break in terms of orders?

Speaker #1: And the chiller is essentially there so they can show it to potential customers as well as use it for their own purposes within the building.

Speaker #4: I mean, or is it kind of more just blocking and tackling, getting through, showing the product, demonstrating the product, and then that's what kind of opens things up?

Speaker #1: Where it's actually providing cooling for various systems in the building.

Speaker #4: Got it. Okay. And so this is permanent. Yeah. No, this is permanent, but also can be used for demos as well, obviously, because it does apply to—

Speaker #1: So right now, as I mentioned in the last quarter, right, we have this list of opportunities that are there. And I had kind of ranked them based on, at the time, what I felt my which had the highest probability.

Speaker #1: Exactly.

Speaker #4: Okay. Well, maybe last one for me, then I'll turn it over. I mean, I get this question quite a bit. I know it's always hardest to get that first order.

Speaker #1: Those projects are still moving along. Right now, it is just a matter of at this stage, usually, it's just the customer trying to get their pieces lined up.

Speaker #1: I still continue to have pretty high confidence on at least a few of those projects coming through. I just don't want to comment on timing and so on because that's always difficult to predict.

Speaker #4: I mean, or is it kind of more just blocking and tackling, getting through, showing the product, demonstrating the product, and then that's what kind of opens things up?

Speaker #1: At this point, it's still many of those projects need to be operational, early part of next year. So typically, we start seeing purchase orders six months, nine months.

Speaker #1: So right now, as I mentioned in the last quarter, right, we have this list of opportunities that are there. And I had kind of ranked them based on at the time what I felt my which had the highest probability.

Speaker #1: Ahead of that, but sometimes there are delays on customer sides, and then they suddenly move very quickly. So there's nothing in that batch of projects that I find there's no big red flags or anything like that.

Speaker #1: Those projects are still moving along. Right now, it is just a matter of at this stage, usually, it's just the customer trying to get their pieces lined up.

Speaker #1: In addition to that, what we're starting to see right now is many of the bigger names are finding that there are reasons, as I mentioned, in terms of freeing up utility power or maybe doing a couple of swaps on existing data centers, where they're starting to look at, "Okay.

Speaker #1: At this point, it's still many of those projects need to be operational, early part of next year. So typically, we start seeing purchase orders six months, nine months ahead of that.

Speaker #1: How do we do pilot projects with this equipment?" And maybe even larger potential installations. So that is kind of what we're hosting right now here.

Speaker #1: In addition to we're likely to see more hosting happening as Vertiv starts to ramp up their design side, their pipeline as well. So it's not either/or.

Speaker #1: But sometimes there are delays on customer sides, and then they suddenly move very quickly. So there's nothing in that batch of projects that I find there's no big red flags or anything like that.

Speaker #1: It's both happening.

Speaker #4: Okay. Thank you very much.

Speaker #5: Thank you. Our next question comes from the line of Bobby Brooks with Northland. Please proceed with your question.

Speaker #6: Hi. This is Keaton Shoki on for Bobby. Could you provide some additional color around the $8 million pipeline of approved orders? Including maybe verticals that those opportunities are tied to, the size of the project, and maybe the timing on when you expect to see revenue.

Speaker #1: So that is kind of what we're hosting right now here. In addition to that, we're likely to see more hosting happening as Vertiv starts to ramp up their design side, their pipeline as well.

Speaker #1: Yeah. So great question, Keaton. So the as I mentioned about 2.3 of that, hand. And then the remaining they fall under the category where the customer has approved it.

Speaker #1: So it's not either/or. It's both happening.

Speaker #4: Okay. Thank you very much.

Speaker #5: Thank you. Our next question comes from the line of Bobby Brooks with Northland. Please proceed with your question.

Speaker #1: Right now, we're just, again, waiting on the physical paperwork. And many of these cases, it's just a matter of getting set up on their vendor systems and so on.

Speaker #1: So we can collect the deposits. Many a large chunk of that is actually in the healthcare sector, like hospitals and so on. And there's some commercial buildings in there that many of these are summertime cooling floats.

Speaker #1: Yeah. So great question, Keaton. So the as I mentioned about 2.3 of that, we already have purchase orders in hand. And then the remaining they fall under the category where the customer has approved it.

Speaker #1: So they typically are going to want equipment either late fall or the wintertime. We can usually ship equipment whenever we have them ready. At this point, it's likely that a lot of that equipment will ship towards the end of the year, primarily because we're trying to keep some capacity on hand for some of these especially some of the smaller potential data center projects.

Speaker #1: Right now, we're just, again, waiting on the physical paperwork. And many of these cases, it's just a matter of getting set up on their vendor systems and so on.

Speaker #1: Because we believe that from a shareholder standpoint, we have to prioritize that. So we will plan some of these bigger like the non-data center projects on, but because they're wintertime, like late fall wintertime type delivery requirements, it's likely that some of that will go towards the end of the year.

Speaker #1: And then the near term, we're going to keep some capacity available for that. We can land and have aggressive delivery timescales for these potential data center projects.

Speaker #6: Great. Thank you for that additional color. And then maybe could you span expand a bit more on your current data center opportunity pipeline? I know you referenced your 1Q or from last quarter, you putting out the pipeline.

Speaker #1: Because we believe that from a shareholder standpoint, we have to prioritize that. So we will plan some of these bigger like the non-data center projects on, but because they're re wintertime, like late fall wintertime type delivery requirements, it's likely that some of that will go towards the end of the year.

Speaker #6: But maybe how that has transitioned. And then maybe more specifically about how many customers you plan to host. And kind of what the mix is on those customers from new versus what was already disclosed last quarter.

Speaker #1: And then in the near term, we're going to keep some capacity available so that we can land and have aggressive delivery timescales for these potential data center projects.

Speaker #1: So in terms of the customers that we're hosting, I'd say there's a few of the ones that are in that opportunity pipeline. I'd say two or so from that opportunity pipeline.

Speaker #5: Great. Thank you for that additional color. And then maybe could you span expand a bit more on your current data center opportunity pipeline? I know you referenced your OneQ or from last quarter, you putting out the pipeline.

Speaker #1: And then we're expecting at least another three new bigger name data centers coming to our factory. We're still trying to lock down exact dates and so on, but we have that's kind of the range that we're looking at right now.

Speaker #5: But maybe how that has transitioned. And then maybe more specifically about how many customers you plan to host and kind of what the mix is on those customers from new versus what was already disclosed last quarter.

Speaker #6: Okay. Thank you for that. And I'll return to the Q.

Speaker #1: So in terms of the customers that we're hosting, I'd say there's a few of the ones that are in that opportunity pipeline. I'd say two were from that opportunity pipeline.

Speaker #5: Thank you. Our next question comes from the line of Chip Moore with Roth MGM. Please proceed with your question.

Speaker #4: Hey, good morning. Hey, everybody. Maybe just to follow up up there, on the customers coming to do a site visit, just you sort of alluded to this Avedon, but can you give us maybe a sense of scale of particularly these new potential customers?

Speaker #1: And then we're expecting at least another three new bigger name data centers coming to our factory. We're still trying to lock down exact dates and so on.

Speaker #4: I mean, should we be thinking about hyperscaler or NeoCloud type of clients or any help there?

Speaker #1: But we have that's kind of the range that we're looking at right now.

Speaker #5: Okay, thank you for that. I'll return to the queue.

Speaker #1: Yes. To I mean, they're well the couple of them are well established. People will know who they are. I can't comment on anything further than that at this point.

Speaker #6: Thank you. Our next question comes from the line of Chip Moore with Roth MGM. Please proceed with your question.

Speaker #1: And again, since some of these schedules are still up in the air until people confirm exactly who's coming because we're trying to get as many of the senior-level people as possible.

Speaker #4: Hey, good morning. Hey, everybody. Maybe just a follow-up there. On the customers coming to do a site visit—you sort of alluded to this, Abenan—but can you give us maybe a sense of scale, particularly of these new potential customers?

Speaker #1: And being as flexible as possible there. So they're definitely a significant size that we're hosting. And they're not we may get a couple of the NeoClouds, but they're definitely some established developers as well as part of the group.

Speaker #4: I mean, should we be thinking about hyperscaler or neocloud-type clients, or any help there?

Speaker #1: Yes. To I mean, they're well the couple of them are well established. People will know who they are. I can't comment on anything further than that at this point.

Speaker #4: Understood. Understood. And maybe for my follow-up, you talked about this a little bit, but capacity-wise, they're obviously going to see your capacity when they come to visit.

Speaker #4: You talked about keeping some capacity on hand, but some non-data center business picking up. Just maybe update us on behind-the-scenes how you're thinking about capacity and sort of that chicken-and-egg problem of some of those larger orders come through.

Speaker #1: And again, since some of these schedules are still up in the air until people confirm exactly who's coming, because we're trying to get as many of the senior-level people as possible and being as flexible as possible there.

Speaker #1: So there definitely a significant size that we're hosting. And they're not we may get a couple of the neoclouds, but they're definitely some established developers as well as part of the group.

Speaker #4: Thanks.

Speaker #1: Yeah. So one of the advantages with the much larger data centers is they've been at least from our discussions, they've been pretty open to finding potential ways to pilot it, but also looking further ahead.

Speaker #4: Understood. Understood. And maybe for my follow-up, you talked about this a little bit, but capacity-wise, they're obviously going to see your capacity when they come to visit.

Speaker #1: With many of these data centers, we've been pretty open in terms of, "Look, this is our capacity. This is how we plan to address it.

Speaker #4: You talked about keeping some capacity on hand, but some non-data center business picking up. Just maybe update us on behind the scenes how you're thinking about capacity and sort of that chicken-and-egg problem of some of those larger orders come through.

Speaker #1: And this is kind of the ramp-up time." Required to do it. And what the way we as I mentioned before, is we've got our contract manufacturers already qualified.

Speaker #1: And we treat it as such that the current location that we have is really the final integration of components coming from the contract manufacturers.

Speaker #4: Thanks.

Speaker #1: So we can increase our capacity out of here. So it is something that we address openly with them. And the goal really is to figure out a way to scale with them.

Speaker #1: With many of these data centers, we've been pretty open in terms of, 'Look, this is our capacity. This is how we plan to address it.'

Speaker #1: So if they can provide us a ramp-up, then we can put the resources and the ramp-up on our side to be able to actually address those larger opportunities.

Speaker #1: And this is kind of the ramp-up time." Required to do it. And what the way we as I mentioned before, is we've got our contract manufacturers already qualified.

Speaker #1: It's less because we have something quite unique. It's less a matter of how you see it in some of the traditional electric chiller sales where a data center would have a design for a certain size chiller and just say, "I have three different companies bid on it." In our case, both the delays associated with the projects because they design it in also acts as an advantage in these kind of cases because you can build in a ramp-up as part of that overall package.

Speaker #1: And we treat it as such that the current location that we have is really the final integration of components coming from the contract manufacturers.

Speaker #1: So we can increase our capacity out of here. So it is something that we address openly with them. And the goal really is to figure out a way to scale with them so they can provide us a ramp-up.

Speaker #1: Then we can put the resources and the ramp-up on our side to be able to actually address those larger opportunities. It's less because we have something quite unique.

Speaker #4: Understood. Thanks very much.

Speaker #5: Thank you. Our next question comes from the line of Alexander Blanton with Clear Harbor Asset Management. Please proceed with your question.

Speaker #1: It's less a matter of how you see it in some of the traditional electric chiller sales where a data center would have a design for a certain size chiller and just say, "I have three different companies bid on it." In our case, both the delays associated with projects because they design it in also acts as an advantage in these kind of cases because you can build in a ramp-up as part of that overall package.

Speaker #7: Good morning.

Speaker #1: Good morning, Alex.

Speaker #7: Yes. On this demonstration installation that you described in your press release, in your earnings release, and have talked about here, it's going to be located at your plant.

Speaker #7: Is that correct?

Speaker #1: So are you referring to the.

Speaker #7: The one that the imminent contract was virtued.

Speaker #4: Understood. Thanks very much.

Speaker #6: Thank you. Our next question comes from the line of Alexander Blanton with Clear Harbor Asset Management. Please proceed with your question.

Speaker #1: No, that one is after we demonstrate our to the various visitors, these this is actually going to one of Vertiv's facilities. So at this point, I can't tell you exactly where in the country it's going, but it's actually going to go to one of Vertiv's locations and it's going to be installed there permanently.

Speaker #7: Good morning.

Speaker #8: Good morning, Alex.

Speaker #7: Yes. On this demonstration installation that you described in your press release, in your earnings release, and have talked about here, it's going to be located at your plant.

Speaker #7: So that's going to be a demonstration project also?

Speaker #1: Correct.

Speaker #7: So you're going to have one at your plant and one at a Vertiv facility?

Speaker #7: Is that correct?

Speaker #1: Yes. So correct.

Speaker #1: So are you referring to the?

Speaker #7: Okay. Because I was going to ask, who's going to own the one in your plant? That was be you. And what is the timing on that?

Speaker #7: The one that the imminent contract was virtued.

Speaker #7: When will that when is your first demonstration going to be scheduled?

Speaker #1: Over the next so what we've told most of these visitors is starting mid well, actually, starting next week onwards to about mid-June. Is when we're hosting them.

Speaker #1: If there are some bigger names that want to come, we'll, of course, host them whenever they would like to visit. But we've tried to concentrate the number of visitors into a finite length of time so that we can provide internal resources such as our engineering staff and our sales team focused on basically providing that demonstration.

Speaker #7: So that's going to be a demonstration project also?

Speaker #1: Correct.

Speaker #7: So you're going to have one at your plant and one at a Vertiv plant?

Speaker #1: Yes. So correct.

Speaker #7: Okay. Because I was going to ask, who's going to own the one in your plant? That was be you. And what is the timing on that?

Speaker #1: The plan is still at this point for the units that are going to Vertiv to ship before the end of Q2. And then when they install it, kind of depends on their installation timeline.

Speaker #7: When will that—when is your first demonstration going to be scheduled?

Speaker #1: Over the next so what we've told most of these visitors is starting mid well, actually, starting next week onwards to about mid-June, is when we're hosting them.

Speaker #1: But the original expectation was that that would happen pretty quickly once the units shipped.

Speaker #7: Okay. So that would mean that perhaps sometimes the third quarter, they would be set up with a similar demonstration to show whoever they want to show it to.

Speaker #1: Correct.

Speaker #7: In the third quarter. Okay. Have you disclosed the value of that contract with Vertiv?

Speaker #1: The plan is still at this point for the units that are going to Vertiv to ship before the end of Q2. And then when they install it, kind of depends on their installation timeline.

Speaker #1: I have not. It is within the overall 8 million.

Speaker #1: But the original expectation was that that would happen pretty quickly once the units ship.

Speaker #7: I'm sorry. What did you just say?

Speaker #1: No, we have not disclosed it as a separate item in there. Again, partially because we've tried not to provide specific unit pricing if so it is within that 8 million that I mentioned in terms of approved projects.

Speaker #7: Okay. So that would mean that perhaps sometimes the third quarter, they would be set up with a similar demonstration to show whoever they want to show it to.

Speaker #1: But I have not disclosed it as a separate item.

Speaker #1: Correct.

Speaker #7: In the third quarter. Okay. Have you disclosed the value of that contract with Vertiv?

Speaker #7: Okay. So the imminent order from Vertiv that you mentioned in the press release is one of the 8 million.

Speaker #1: I have not. It is within the overall $8 million.

Speaker #1: Correct.

Speaker #7: Is that correct?

Speaker #7: I'm sorry. What did you just say?

Speaker #1: Yes, correct.

Speaker #7: Okay. Even though the 8 million was supposed to be non-data center projects.

Speaker #1: Yes. Sorry. Yes. Sorry. You're totally correct there, Alex. It is so let me clarify that a little bit because we have we actually have at least 8 million of non-data center projects.

Speaker #1: But I have not disclosed it as a separate item.

Speaker #7: Okay. So the imminent order from Vertiv that you mentioned in the press release, is one of the 8 million.

Speaker #1: And then we have the Vertiv on top. But because we only have 2.3 million in hand, we're likely to see if everything in this package of non-data center projects closes.

Speaker #1: Correct.

Speaker #7: Is that correct?

Speaker #1: We're likely to actually see at least 8 million of non-data center plus the Vertiv on top of that.

Speaker #1: Yes, correct.

Speaker #7: Okay. Even though the 8 million was supposed to be non-data center projects.

Speaker #7: Okay. Got it. All right. I'd just like to talk about the supply chain for a minute and your contractors. What is the delivery time that they have promised you?

Speaker #1: Yes, sorry. Yes, sorry. You're totally correct there, Alex. It is so let me clarify that a little bit because we have we actually have at least 8 million of non-data center projects, and then we have the Vertiv on top.

Speaker #7: And what are the specific things that they're going to supply?

Speaker #1: But because we only have 2.3 million in hand, we're likely to see if everything in this package of non-data center projects closes. We're likely to actually see at least 8 million of non-data center plus the Vertiv on top of that.

Speaker #1: So in terms of the dual power source chiller, the contract manufacturer that we have qualified is providing the sheet metal assemblies and the essentially that shell that goes for the air-cooled chiller.

Speaker #1: This is something that adds a lot of I mean, we can do it in-house. But it requires us to have significantly more labor force on hand to be able to do that.

Speaker #7: Okay. Got it. All right. I'd just like to talk about the supply chain for a minute and your contractors. What is the delivery time that they have promised you?

Speaker #1: And it slows down the production on our floor. The other piece that we're having in terms of a sub-assembly is also the electronic some of the inverter components that are pre-assembled into a cabinet.

Speaker #7: And what are the specific things that they're going to supply?

Speaker #1: So when it comes to our facility, we have essentially the shell. The electronic cabinet and then we add in the engine generator, connect all of those pieces together.

Speaker #1: Test it and ship it.

Speaker #1: This is something that adds a lot of I mean, we can do it in-house. But it requires us to have significantly more labor force on hand to be able to do that.

Speaker #7: Okay. And what is the delivery time they promised? In other words, if you get an order from a data center and you need this these things that you mentioned, how soon can they deliver those?

Speaker #7: What have they promised you?

Speaker #1: So I don't want to I can give you some high-level specifics on what they currently already do. So the reason we chose some of these manufacturers is they're already building similar-scale type of products for overflow capacity for other chiller manufacturers.

Speaker #1: So when it comes to our facility, we have essentially the shell, the electronic cabinet, and then we add in the engine generator, connect all of those pieces together, test it, and ship it.

Speaker #1: They build hundreds of units a year. So at this point, what I had disclosed, I think, to shareholders was that we could build with all the vendors spun up.

Speaker #7: Okay. And what is the delivery time they promised? In other words, if you get an order from a data center and you need these things that you mentioned, how soon can they deliver those?

Speaker #1: We could build up to 100 chillers a year. Out of this particular facility. If our order capacity or if our order book starts to exceed that, then there are other alternatives that we are looking at, including as I mentioned last time, providing just a power assembly for the air-cooled chiller and integrating with some of Vertiv's own chiller capacity.

Speaker #7: What have they promised you?

Speaker #1: So there are multiple ways to scale up after that point. I think at this juncture, right, the my focus is on getting those first few projects and then figuring out, "Okay.

Speaker #1: They build hundreds of units a year. So at this point, what I had disclosed, I think, to shareholders was that we could build with all the vendors spun up.

Speaker #1: How do we get if we start getting a backlog that exceeds 100 chillers, then we use some of these other methods to basically scale up?"

Speaker #1: We could build up to 100 chillers a year out of this particular facility. If our order capacity, or if our order book, starts to exceed that, then there are other alternatives that we are looking at, including—as I mentioned last time—providing just a power assembly for the air-cooled chiller and integrating with some of Vertiv's own chiller capacity.

Speaker #7: Okay. Right. That was not an answer to my question. But that's a good thing to know. That you have alternatives to go beyond that 100-unit capacity.

Speaker #7: But my question was, suppose that you want to order components for a data center to fill their order, can your contractor supply that quickly?

Speaker #1: So there are multiple ways to scale up after that point. I think at this juncture, right, the my focus is on getting those first few projects and then figuring out, "Okay, how do we get if we start getting a backlog that exceeds 100 chillers, then we use some of these other methods to basically scale up?"

Speaker #7: What are their delivery times? What are their backlogs?

Speaker #1: So some of that varies with time, right? And that is something that at this point, we're not in a position to be able to disclose.

Speaker #7: Okay. Right. That was not an answer to my question, but that's a good thing to know. That you have alternatives to go beyond that 100 unit capacity.

Speaker #1: And that's I typically tell data centers that we need a three-to-six-month ramp rate to be able to hit the full 100 per month. I mean, sorry, to hit the run rate of 100 per year.

Speaker #7: But my question was, suppose that you want to order components for a data center to fill their order, can your contractors supply that quickly?

Speaker #1: So that's typically what we're targeting. That seems to be well within acceptable numbers from what we've been told. But again, there's a lot of moving pieces here.

Speaker #7: What are their delivery times? What are their backlogs?

Speaker #1: And we can't both sides, we have to have those orders in place before we can get bigger commitments than that. So I cannot disclose anything further than that at this point, Alex.

Speaker #1: So some of that varies with time, right? And that is something that at this point, we're not in a position to be able to disclose.

Speaker #7: Okay. Yeah. I was just wondering whether you could order something, get it in a week, or a month, or six months, or?

Speaker #1: And that's, I typically tell data centers that we need a three-to-six-month ramp rate to be able to hit the full 100 per month. I mean, sorry, to hit the run rate of 100 per year.

Speaker #1: So it very much depends on volume. So it very much depends on volume. Right? We try to keep some inventory on hand at all times to be able to handle the ones, twos, threes.

Speaker #1: So that's typically what we're targeting. That seems to be well within acceptable numbers from what we've been told. But again, there's a lot of moving pieces here.

Speaker #1: In terms of chillers. As you start to get to 10, 15, 20 units, then you need to start building in additional planning with regards to that.

Speaker #1: And we can't both sides, we have to have those orders in place before we can get bigger commitments than that. So I cannot disclose anything further than that at this point, Alex.

Speaker #1: And that's very much a matter of balancing cash for us and all the other commitments in the to make sure that we can succeed in this space.

Speaker #7: Okay. Yeah. I was just wondering whether you could order something, get it in a week, or a month, or six months, or?

Speaker #7: Okay. Oh, thank you very much.

Speaker #1: So it very much depends on volume. So it very much depends on volume. Right? We try to keep some inventory on hand at all times to be able to handle the ones, twos, threes in terms of chillers.

Speaker #1: Thank you, Alex.

Speaker #2: Thank you. Our next question comes on the line of Bill Church with TGRA Capital. Please proceed with your question.

Speaker #8: Good morning. Thanks for taking my call. The residents of Denver in the last few weeks have received notices that they must reduce their water usage just as consumers below their winter intake.

Speaker #1: As you start to get to 10, 15, 20 units, then you need to start building in additional planning with regards to that. And that's very much a matter of balancing cash for us and all the other commitments in the to make sure that we can succeed in this space.

Speaker #8: And which is obviously causing some annoyance. Would your chillers be useful for corporations and utilities, so forth, that are using a lot of water from an industrial standpoint, which are then penalizing the consumers who are all very upset?

Speaker #7: Okay. Oh, thank you very much.

Speaker #8: Thank you.

Speaker #1: Thank you, Alex.

Speaker #1: So with the chiller, the dual power source chiller, it's what's called a air-cooled chiller. So you have a closed water loop inside the building.

Speaker #2: Thank you. Our next question comes on the line of Bill Church with TGRA Capital. Please proceed with your question.

Speaker #8: Good morning. Thanks for taking my call. The residents of Denver, in the last few weeks, have received notices that they must reduce their water usage just as consumers below their winter intake.

Speaker #1: And one of the reasons, actually, data centers preferred that in comparison to our DTX chiller, which was what you find in a lot of hospitals and other types of environments, is that it doesn't require a what they call a cooling tower, which usually sits outside the building and it's used to provide the heat rejection has an open loop in terms of water.

Speaker #1: So there is this water consumption in the building. Many data centers, in particular, were early on, were using much of this type significant amounts of water.

Speaker #8: Thank you.

Speaker #1: So with the chiller, the dual power source chiller, it's what's called a air-cooled chiller. So you have a closed water loop inside the building.

Speaker #1: Whereas they moved towards this kind of air-cooled solution. So if there's a cooling need in any location, and they are trying to reduce their water usage, definitely something like our dual power source chiller would reduce overall water consumption since it's got a closed loop.

Speaker #1: And one of the reasons, actually, data centers preferred that in comparison to our DTX chiller—which is what you find in a lot of hospitals and other types of environments—is that it doesn't require what they call a cooling tower, which usually sits outside the building and is used to provide the heat rejection. It has an open loop in terms of water.

Speaker #8: Okay. So you'd have products that would be useful for companies or anywhere where there's a drought issue and where there's both a PR going to the consumers and then you've got the industrial companies using water?

Speaker #1: So, there is this water consumption in the building. Many data centers, in particular, early on were using significant amounts of this type of water, whereas they have now moved toward this kind of air-cooled solution.

Speaker #1: Correct. It really depends on how they're integrating and what the equipment they have on site. But one of the reasons that we developed a larger version of our air-cooled chiller was that we were getting questions from potential customers on how do they avoid having to use any kind of open-loop water systems that would have constant consumption of water.

Speaker #1: So if there's a cooling need in any location, and they are trying to reduce their water usage, definitely something like our dual power source chiller would reduce overall water consumption since it's got a closed loop.

Speaker #8: Okay. So you'd have products that would be useful for companies, or anywhere where there's a drought issue, and where there's both a PR component going to the consumers, and then you've got the industrial companies using water?

Speaker #1: So that's why this product was designed.

Speaker #8: Okay. Thank you.

Speaker #1: Thank you.

Speaker #2: Thank you. And we have reached the end of the question-and-answer session. I'd like to turn the floor back over to Abhinav and Ranjesh for closed remarks.

Speaker #1: Correct. It really depends on how they're integrating and what the equipment they have on site on site. But one of the reasons that we developed a larger version of our air-cooled chiller was that we were getting questions from potential customers on how do they avoid having to use any kind of open-loop water systems that would have constant consumption of water.

Speaker #1: Thank you very much for attending the first quarter 2026 call. I will provide shareholders an update once all these projects have closed. As well as once the product demonstrations are complete.

Speaker #1: I look forward to updating shareholders. And thank you for your time.

Speaker #1: So that's why this product was designed.

Speaker #8: Okay. Thank you.

Speaker #1: Thank you.

Speaker #2: Thank you. And we have reached the end of the question-and-answer session. I'd like to turn the floor back over to Abhinav and Ranjesh for closing remarks.

Speaker #1: I look forward to updating shareholders. And thank you for your time.

Speaker #2: Thank you. And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.