Tecogen Inc’s Earnings Call: Growth Amid Challenges

Tecogen Inc ((TGEN)) has held its Q3 earnings call. Read on for the main highlights of the call.Meet Your ETF AI Analyst Discover how TipRanks' ETF AI Analyst can help you make smarter investment decisions Explore ETFs TipRanks' users love and see what insights the ETF AI Analyst reveals about the ones you follow. Tecogen Inc’s recent earnings call paints a picture of a company poised for growth in the data center cooling market, driven by significant interest from industry giants and a notable surge in product revenues. However, this optimistic outlook is balanced by challenges such as increased net losses, decreased margins, and rising operating expenses. Significant Forward Momentum in Data Center Strategy Tecogen has made impressive strides in its data center strategy, garnering substantial interest from renowned colocation data center developers. The company has presented its solutions to major players like NVIDIA and AMD, showcasing its confidence in capturing a significant share of the data center market. Product Revenue Surge The third quarter saw a remarkable 115% increase in product revenues, propelling total revenue to $7.2 million from $5.6 million in the same period of 2024. This surge underscores Tecogen’s ability to capitalize on market opportunities and drive growth. No Debt on Balance Sheet Tecogen’s financial health is bolstered by the absence of debt on its balance sheet, following the repayment of a related party note. The company maintains a robust cash position of approximately $14 million, providing a strong foundation for future investments and growth initiatives. Increased Net Loss Despite revenue growth, Tecogen reported a net loss increase to $2.13 million, up from $0.93 million in the third quarter of 2024. This was primarily attributed to decreased service margins and higher operating expenses, highlighting areas that require strategic attention. Decrease in Gross Profit and Margins The company’s gross profit decreased by 12%, with gross margins dropping from 44.1% in 2024 to 30.4% in the third quarter of 2025. This decline was largely due to increased costs in the Services segment, indicating a need for cost management strategies. Higher Operating Expenses Operating expenses rose by nearly 28% quarter-over-quarter, driven by increases in administrative and R&D payroll, benefits, recruitment costs, insurance premiums, depreciation, stock-based compensation, and sales commissions. Addressing these rising costs will be crucial for future profitability. Energy Production Revenue Decline Energy production revenue saw a decline of 34.2% quarter-over-quarter, primarily due to the expiration of contracts and temporary site shutdowns for repairs. This highlights the volatility in this revenue stream and the importance of contract renewals and site maintenance. Forward-Looking Guidance Tecogen’s forward-looking guidance is optimistic, particularly in its data center strategy. The company has received a letter of intent for six STX chillers and potential inclusion in three developer projects with significant IT capacity. Efforts to expand manufacturing capacity through partnerships with Vertiv and contract manufacturers are underway, aiming to meet the rising demand and capitalize on growth opportunities. In summary, Tecogen Inc’s earnings call reflects a company with strong growth potential in the data center cooling market, supported by significant interest from major industry players and a substantial increase in product revenues. However, challenges such as increased net losses, decreased margins, and rising operating expenses present areas for strategic focus. The company’s forward-looking guidance remains optimistic, with plans to expand its manufacturing capacity and capitalize on market opportunities.