Tecogen Inc (NASDAQ:TGEN) Q3 2018 Earnings Conference Call Transcript
Nov 13, 2018 • 11:00 am ET
Greetings, and welcome to the Tecogen Third Quarter 2018 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Bonnie Brown, CAO. We're having technical difficulties, please standby. Bonnie Brown, you're now live.
Thank you. Thank you, Omer. Good morning, and thank you all for joining our third quarter 2018 earnings call. On the call with me today are Benjamin Locke, our CEO; and Robert Panora, our President and COO.
(Forward-Looking Cautionary Statements)
In addition to GAAP financial measures, this presentation includes certain non-GAAP financial measures, including adjusted EBITDA, which excludes certain expenses as described in the presentation. We use adjusted EBITDA as an internal measure of business operating performance and believe that the presentation of non-GAAP financial measures provides a meaningful perspective of the underlying operation -- operating performance of our current business and enables investors to better understand and evaluate our historical and prospective operating performance by eliminating items that vary from period-to-period without correlation to our core operating performance and highlights trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures.
I'll now turn the call over to Ben for a business update.
Benjamin M. Locke
Thank you, Bonnie. Moving to slide four, I'd like to start by reviewing the company's performance and financial results for the quarter, along with recent achievements and accomplishments. Bob will then give an overview of our emissions technology development, followed by Bonnie with more detail on the financials. I'll then have some final remarks before we take questions.
As always, I'd like to start off by reminding those who may be new to our company about Tecogen's core business model, shown on slide five. Heat, power and cooling that is cheaper, cleaner and more reliable. Our proprietary technology for improving efficiency, emissions and grid resiliency is truly disruptive to the traditional methods of heating, cooling and powering buildings and infrastructure.
Turning to slide six, the third quarter of 2018 saw revenues of $7.9 million, a 6.6% decrease over the second quarter of 2017. This brings our trailing four quarters revenue to $37 million and resulting trailing four quarters gross profit to $13.7 million. Trailing four quarters adjusted EBITDA, which is more representative of cash flows, was almost $250,000. ADG Energy production revenues came in at about $1.45 million for the quarter, generating approximately $616,000 of profit.
Moving on to slide seven, in addition to the 14% increase in product sales, we achieved total gross margin of 36.3%, helped by strong product margins of 38.7%, but hindered by slightly lower installation margins for the quarter, which lowered the service margins. Our operating expenses for the quarter were also higher by 8.6% quarter-over-quarter. A number of factors drive our operational expenses. Notable increases are our R&D investment and selling expenses, which we feel are necessary to support