Greetings, welcome to the Tecogen Second Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to our host, Jack Whiting, General Counsel and Secretary. Thank you. You may begin.
Hello. This is Jack Whiting, General Counsel and Secretary of Tecogen. Please note this call is being recorded and will be archived on the investor section of our website at tecogen.com for two weeks. The press release regarding our second quarter 2021 earnings and the presentation provided this morning are available in the investor section of our website as well.
I would like to direct your attention to our safe harbor statement included in the earnings press release and presentation. Various remarks that we may make about the company's future expectations, plans, and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q under the caption Risk Factors, which are on file with the Securities and Exchange Commission and available on investor section of our website under the heading SEC Filings.
While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. Therefore, you should not rely on any forward-looking statements as representing our views as of any date subsequent to today. During this call, we will refer to certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP.
A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is provided in the press release regarding our second quarter 2021 earnings and in the investor section of our website. I'll now turn the call over to Benjamin Locke.
Thank you, Jack. First off, I'd like to welcome Abinand Rangesh to this call in his new role as CFO at Tecogen. Abinand has been a key contributor in our efforts to reduce costs, improve margins, and develop strategies to grow the business and shareholder value. I'm looking forward to his involvement as CFO as we articulate our vision for growth, which we will discuss at the end of this call.
As the agenda on slide four indicates, we'll start with a brief company overview, followed by a detailed review of our second quarter results. We will discuss the key takeaways from earnings, along with the discussion on our strategy for growth for the rest of 2021 and 2022. We will turn the call over to the operator for questions.
As a reminder, this presentation will be available for download in the presentation section of our investor page on our website. Turning to slide five, I'd like to provide a short overview of Tecogen. Tecogen sells and maintains clean and efficient energy systems that provide resiliency and energy savings to customers while reducing greenhouse gas emissions for a cleaner environmental footprint. Our solutions help industries and facilities reach their environmental and social governance goals while also providing resiliency to grid outages.
As seen on this map, Tecogen has deployed thousands of these systems, and we have a steady recurring revenue stream through our 11 service centers that provide maintenance to these customers. Turning to slide six. Many of our distributed generation systems operate as microgrids with the ability to maintain operation during a grid outage.
Tecogen is currently ranked third for the number of microgrid systems deployed in the U.S., and that number has grown since the 2019 study was released in 2020. In addition to our distributed generation systems, Tecogen offers industrial-scale chillers with lower operating costs and reduced greenhouse gas footprint than traditional electric chillers. These systems are sought after for process cooling and in healthcare applications.
We have had particular success with our clean cooling products for use in controlled environment agriculture. These indoor grow operations use a tremendous amount of power in order to maintain the ideal growth conditions for the crop. Our chillers substantially reduce the amount of electric capacity needed to operate these facilities while simultaneously providing heat for facility dehumidification. As our earnings press release indicated, we currently have over 10,000 tonnes of our clean chillers in controlled agriculture facilities.
Lastly, our Ultera emissions technology is recognized as a cost-effective solution for reducing CO, NOx, and hydrocarbon emissions across a wide range of engine platforms and sizes. Slide seven shows some interesting facts about our clean energy systems we've deployed thus far.
As I mentioned, with over 3,000 units shipped, we have saved roughly 97,000 tonnes of CO2, generating almost 2 billion kilowatt hours of electricity with over 52 million hours of runtime. These numbers, of course, continue to increase as we deploy more of our clean energy systems to customers. Before I turn the call over to Abinand to review our second quarter results in more detail, I'd like to remind investors of our three main revenue streams, shown on slide eight.
Our product sales consist of sales of cogeneration units, microgrid systems, and chillers to a range of markets, including multi-unit residential buildings, hospitals, industrial processing, and indoor cultivation. Service revenue primarily consists of our contracted maintenance and parts, with a small component of installation services.
Our third revenue stream is from energy sales, whereby we sell electrical and thermal energy produced by our equipment on-site at the customer's facilities. With that, I'd like to turn the call over to Abinand to review our numbers in more detail. Then I'll have some additional comments on takeaways for the quarter. Abinand?
Tecogen is pleased to report net income of $0.09 per share for the first half of 2021, $0.02 for the second quarter of 2021. This was predominantly due to the Employee Retention Credit and the forgiveness of the first Paycheck Protection Program loan. It was also helped by stronger gross profit margins across all revenue segments and lower operating costs. Revenue was $6.1 million compared to $7.4 million during the same period in 2020.
This 17% decline was mostly due to the decline in product revenue. COVID-19 has impacted new business development activities such as trade shows and travel. Slow resumption of construction activities has meant that product revenue has been lower than in the past. Our backlog is increasing, we are cautiously optimistic for the second half of 2021. Service revenue declined 1% due to a reduction in installation activities.
Maintenance revenue increased 26%. Will be discussed in more detail later. Energy production revenue increased 34% compared to the second quarter of 2020, many of the sites that were shut down due to COVID-19 have now resumed operations. Gross margin increased to 46% from 39%, this was favorably impacted by our sales mix.
Continued product improvements have resulted in lower warranty costs. Operational expenses were 7% lower compared to 2020 at $3.2 million, have remained consistent for both quarters of 2021. Our operating loss was $310,000 compared to $500,000 during the same period last year, a 38% improvement. As product sales rebound, we expect to see our loss from operations reduce or turn positive. Net income was $400,000 compared to a loss of $650,000 in the same period last year. This was favorably impacted by the Employee Retention Credit of $713,000.
EBITDA was $531,000 compared to a loss of $481,000 during the same period in 2020. Our adjusted EBITDA was also positive at $567,000 compared to a loss of $363,000 during the same period in 2020. Performance by segment. Product revenue decreased by 35%. cogeneration sales were adversely impacted by COVID-19, especially for multi-family projects. Chiller sales continue to be strong in the indoor cultivation industry.
Our sales cycle is anywhere from six months to longer than one year. The impacts of restrictions on business development activity from the second half of 2020 are being seen presently. Backlog in the construction industry as a whole has also delayed several projects and impacted our product revenue. We believe that this decline in product revenue is temporary and will return to pre-COVID-19 levels. Service revenue declined 1% quarter-to-quarter.
Installation services were down 73%, as many of our larger turnkey projects are complete or close to complete. Over the last year and going forward, we have actively chosen to limit the number of new installation projects so we can concentrate on the higher-margin segments of our business. Our service contracts and parts business increased 26% quarter-to-quarter, with approximately 50 new systems that started up during the period.
Services gross margin increased to 50% due to the reduced lower-margin installation activities. Energy production grew 34%, as many of our existing sites that were shut down during COVID resumed operation. The increases in gross profit margins across all segments resulted in an overall gross profit of 46%. I'll hand it now back to Ben.
Thanks, Abinand. Turning to slide 12, I'll discuss what I feel are important takeaways from the quarter. First, we continue to see a gradual recovery from the economic challenges due to COVID in each of our business segments. As Abinand's mentioned, while our product sales are still down from pre-COVID levels, we are seeing backlog continue to grow up 12% from year-end. Our service contracts revenue showed improvement this quarter, up 26% quarter-over-quarter.
Importantly, we expect a meaningful increase to our service contracts revenue as we initiated long-term maintenance service contracts with the management of a large residential complex in Toronto, Ontario for 31 InVerde e+ cogeneration systems. The 20-year contracts are all underway and will provide a steady, consistent stream of good margin revenue for the company, starting in the third quarter.
The systems will be serviced out of Tecogen's Ontario service center, established in March of 2020. Lastly, our energy production revenues continue to recover from COVID closures. Next, our cash position is stable with our quarter-end cash balance at $3.2 million. We were helped by the PPP program and expect to meet all criteria for forgiveness under our second draw PPP loan later this year. An important takeaway is also our reduced OpEx and improved margins in all segments.
We expect these operational and manufacturing improvements to be sustainable each quarter and put us in an excellent position to meet our profitability goal as product sales pick up to pre-COVID levels. As I mentioned, our backlog stands at $10.4 million, most of which is for product sales in our core market segments shown on the slide.
Turning to slide 10, I'd like to provide an update to our profitability and product development plan, which I discussed in last earnings call and in our shareholders letter earlier in the year. The plan is focused on operational optimization in our core business, expanding our Tecogen product line, taking advantage of new U.S. energy policy as it relates to distributed generation and microgrids, and of course, creating value for our Ultera emissions technology.
With regard to optimizing our core business, I am quite happy with the progress we've made, reducing OpEx and improving our margins. As product sales slowly, gradually get back to pre-COVID levels, combined with our steady increases in service revenues and gradual increases in energy sales, we feel this goal is very attainable. Next, we anticipate introducing a new air-cooled chiller product that will fill a gap in our Tecogen offering.
Air-cooled chiller sales volumes are typically sold in larger volumes than water-cooled systems in our size range. Our goal is to use our hybrid drive technology, which we filed a provisional patent for back in July, to develop this air-cooled Tecogen product. This will substantially expand the sales potential for Tecogen in many of our markets, such as indoor cultivation and hospitals, where an air-cooled chiller system is needed.
This chiller will have the same compelling economics as our existing Tecogen, Will have a lower greenhouse gas profile and be easier to install. We believe that this will open up new markets for Tecogen and could even be sold internationally. Our goal is to have the product ready for market by late 2022. We are currently generating interest from gas companies to support the effort.
Our goal is to work with the various gas companies to create a backlog of customers for the product once it's introduced. I will, of course, be providing updates on this effort as we make progress. With regard to our Ultera emissions technology, we are supporting Origin Engines as they work to obtain the first EPA-certified near-zero emissions fork truck engine with Ultera by mid 2022. Ultera has already been presented to many of Origin's customers.
Once the engine is certified, we expect to see market penetration. We also are continuing to work with Southwest Research Institute on an improved catalyst for Ultera that could unlock even more potential. We expect to have the results from SwRI work later this year. Will provide updates to investors as that work and the efforts of Origin Engines proceeds.
Lastly, we are seeing a promising opportunity for our technology as it relates to the new U.S. vision for energy and infrastructure, where microgrids, in combination with battery and solar, have compelling economics in certain geographies such as California. Our proprietary inverter and microgrid controls are designed to manage multiple distributed energy resources, whether that source is our CHP systems, battery storage, solar, or any other distributed resource.
Our inverter can seamlessly integrate those sources and control the best operational strategy for integrating them together based on energy rates, time of day, or fuel mix of the utility. I hope to have more details and milestones to announce as we strive to meet these goals. Our overall strategy is to grow the company in a sustainable way in areas that are consistent with the changing energy trends in national policy, Eventually scale our sales outside of North America. With that, I'd like to turn the call over to the operator for questions.
Thank you. At this time, we'll be conducting our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press the star key followed by the number two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, to ask a question, press star one on your telephone keypad. Our first question comes from Sameer Joshi with H.C. Wainwright. Please state your question.
Hi, Sameer. You were able to get through?
Yes, finally. Thank you.
Yes, I apologize to the other callers and listeners. I think there was an issue with the dial-in number with our hosting service that I think got resolved at the last minute. I'm glad you're able to get through, Sameer.
Yes. No, glad to be here. It's good to learn about the air-cooled chiller product. Can you elaborate a little bit more on what kind of gas companies you're working with and how does that help you in marketing this product?
Sure. There's obviously many gas companies, in the markets that we are interested in, we know who those gas companies are. It's no secret who the gas company is in Southern California. There's TECO Peoples Gas and ONE Gas and Chesapeake Gas, and all these in different geographies.
We're well aware of them. I'm not sure if you knew this, but they all actually participate collectively in guiding some policy. They're all part of a Gas Technology Institute, and they help do technology development. The gas technology has been a part of our fabric of the company for many, many years, going back to our thermoelectric days. We've got some good, deep relationships with these gas companies.
Of course, what we are articulating to them is, we're having very good success with this gas engine-driven chiller for all the reasons you know, Sameer. This particular chiller, our TECOCHILL, is really focused around this one cooling technology of water-cooled, where you have to have a cooling tower, et cetera. Not all business facilities want to go that route.
They want to go a route where they don't need that kind of thing. It's an air-cooled chiller. As I said, the market for those things is much larger. The conversation we have with the different gas companies is, look, this is an opportunity for us to even expand your gas uptake. It's real numbers. I mean, you talk about therms and gallons of natural gas that they can increase on their uptake. As you can imagine, they get interested.
That's what we're doing. We're getting them understanding the concept, getting their business executive, their sales agents, understanding the concept. As I mentioned in my remarks, my goal is if I can get a dozen of these gas companies all lining up maybe a few projects ahead of time while I do this development, then I can be assured that when I got the product ready, it'll find a home pretty quickly.
Again, I think the shared vision with the gas company is a good one because they're concerned about losing gas load, right? This is a way for them to actually get more uptake for gas. It's a good synergy between us and these gas companies.
Yeah, understood. Thanks for that clarification. In terms of product revenues, I think the backlog is slightly lower compared to what it was in May. I think it was $10.9 if I remember. The outlook seems to be strong. Is the pipeline more promising? What is the cause for optimism for the rest of the year?
Yeah, sure. It was $10.9 last quarter. Now it went down a little bit, but mostly, again, product. First off, as you know, Sameer, I'm trying not to get too much installation backlog in there. I'll do some installations, but I'm trying to shy away from these big monster construction jobs.
Even beyond the backlog, Sameer, the way our business works is it's a very much a specification type process where a project will come up, and you get specified, then the drawings go through and then people bid it, et cetera. Those projects don't make it into our backlog until that process is far enough along where I feel it's just we're going to get it, where the PO is imminent, of course.
We have many projects that are already in that process of being specified, and it's just a matter of time before they seek out bids, then they get the bids, then make the bid selection, and all that process. It's that process that we've seen some frustrating delays, of course, with COVID. We're seeing that pick up. Again, even though it's not reflected in our backlog, Sameer, we're seeing ourselves get specified in these things, and eventually that'll make its way in the backlog.
I'm feeling encouraged by that. I'm also feeling encouraged, Sameer, with we're taking an active look at our rep network. As you know, Sameer, we sell product a couple of different ways. We have our direct sales team, and then we have manufacturer's representatives, which very much so are on the chiller side of the business.
We have some great reps that are doing a tremendous job in some states, and we have some reps that aren't doing so much of a good job in other areas. You saw a press release a few months ago where we recently appointed two new reps on the West Coast. This is for the Tecofrost product. That was us recognizing that the folks that were doing that previously, the reps weren't really doing too much. We got this new fresh rep firm out there.
I think you're probably going to see more of that. It's indeed a focus of our company, of our sales effort, understanding how the sales channels are changing, to go through our rep network and make sure that we have real good, effective reps, like the ones on the East Coast that are doing real well for us.
I know I kind of went on a little diversion there, but I am feeling confident because I'm seeing a lot of jobs get specified. They'll make its way into the backlog. I think getting our reps to be more productive is a singular goal for us this year.
Oh, okay. No, this is a good clarification. I will combine my next two questions. Based on this strong confidence in product growth, and energy production being sequentially lower but still looking prospectively better going forward, do you think you will be able to achieve 2020 level revenues for 2021? I mean, I know I'm asking you to give an outlook.
Yeah.
Wonderful.
I'll start the answer, and maybe I'll let Abinand chime in for any additional. I think the answer is probably no, because we had some facilities that just up and closed, right? Those aren't coming back. Abinand.
Yeah. Are we looking just overall revenue or just specifically for energy services?
Yeah. For overall as well, but for energy production, I saw that, of course, you're down from pre-COVID, but also sequentially, you are down a bit. Just wanted to understand that nuance as well.
Correct. To be more specific, right? Mid 2020, we had pretty much every athletic facility and most hotels were shut down. What we've seen right now is some of the athletic facilities come back online, maybe not to full capacity, but t o a decent level of capacity. A lot of the hotels that we had under the energy services side are still either closed or only partially reopened. As a result of that, I think as things go on through the rest of the year, depending on how those units reopen, we should come back to 2020 numbers. If things don't reopen, then we're going to be down compared to 2020.
Understood. Can these be repurposed and moved to different locations? This is distributed generation, right?
That's definitely the case. What we have in some of these sites is we've actually negotiated deals where we charge, even though the units are shut down. The revenue is a lot smaller, but we get something for those sites, because most of these sites are planning on reopening. They understand that they're going to need us in the longer run. They're actually paying something towards their energy services, even though some of those units might be down. We wouldn't consider moving them in the short run, just because we think a lot of people will come back online.
Understood. Just one more housekeeping issue. What is the level of drawdown from the PPP and maybe Employee Retention Credits that you may see in the second half coming through?
Well, I think the PPP thing is already completed. Now, we submit our application for forgiveness. The funding part of that is done, and now the forgiveness part of it in full closure is pending, again, for later this year. Why don't you talk about the Employee Retention Credit there, Abinand?
The Employee Retention Credit as of now, the cash from this quarter, $713,000, that we booked as other income, hasn't yet come in. We're filing the paperwork with the IRS to collect that money, and we expect that to be received in various chunks over the course of the next six months or so. We're not sure how quick that'll come through.
We also expect that for next quarter, we may get some more Employee Retention Credit money. Again, that'll come in over the course of the next six months. In terms of drawdown, generally in cash, as you saw, our cash position at the end of the quarter was very strong, and we expect it to remain relatively strong for the rest of the year because of all these sources of cash coming in and as revenue recovers as well.
Thanks for the clarification on the cash. Just wanted to check on the level. Is it going to be around the same $700,000 level for this current quarter as well?
It'll probably be a little lower for each of the next two quarters because this $700,000 actually included for both Q1 and Q2 Employee Retention Credit because of the date when the modifications for the CARES Act was passed. By the time the IRS gave us the guidance, it was quite late. It was actually booked into the second quarter numbers.
Yeah.
We also had to balance that against the Paycheck Protection Program so that we could actually get full forgiveness on the PPP. Next quarter, you're probably looking at somewhere around probably about $500,000 or so on Employee Retention Credit, that's something that we'll just have to calculate as we get closer to the end of the quarter.
Yes. We are seeing that dynamic with some of the other companies we cover as well. Thanks for that clarification. That's all I have right now. Thanks.
Okay. Thank you, Sameer.
Thank you. Our next question comes from Michael Zuk. Please go ahead with your question.
Good morning, Ben.
Hi, Mike.
Two follow-up questions.
Sure.
Regarding the Manufacturers Rep network, what's the emphasis on that network? Is it CHP or is it chillers or both or are you emphasizing one over the other? How are you pursuing that?
It's mostly CHP, Mike. I'm sorry, mostly chillers. The opposite of what I meant to say. Yeah, it's mostly chillers, Mike, is the channels for them to be sold. Yeah, that's the natural course of events for many of these electric chillers, et cetera.
As a follow-up, I know that we have a historic existing fleet. What's the potential for upgrading our aging in-service fleet? Are we trying to market that or trying to upgrade it? What's the status there?
Yeah, that's a great question, Mike. It's something that we've talked internally ourselves about. It is an opportunity. In fact, you might have even heard some of our chillers have been replacing chillers that we installed 20 years ago. On the chiller side of things, we actually have a very systematic way of going through and saying, "Okay, your chiller's too old. It's time to replace it."
That's ongoing, and it's good. On the cogen side of things, the units tend to run a long time because we maintain them so well, right? It's kind of hard to walk in and say, "You need to replace it," when we've been doing such a good job maintaining it. With that said, Mike, you're absolutely right.
There is opportunity with our own customers, and we have kind of started some outreach to say, "Okay, do you want to get yourself to a larger system? Do you want to get yourself to a Blackstart-enabled system?" You're onto something there, Mike, and I'm hoping that you'll hear more about that.
There's another follow-up. With regard to the infrastructure bill that is coming down, do you foresee subsidies or tax credits being expanded for the CHP and for the low-emission chilling system?
Yeah. There's certainly going to be, and again, we have to wait till the final version comes out, but from what I've seen, there's certainly going to be a tremendous amount of support for microgrid, and associated infrastructure. I think that makes its way into our CHP, meaning that, Mike, our straight CHP economics may not win the project, but when we combine that CHP with battery and solar and make it meet the criteria for these microgrids, then you've got a lot better economic scenario there.
In fact, I think, again, what I've been reading about the infrastructure bill, a lot of these things aren't going to be tax credits. They're going to be downright refundables, the cash. Abinand, do you want to add anything to that?
Yeah, I was just going to add that, at least again, from the preliminary numbers, the tax credits for microgrids are large enough that it might even allow things like tax equity funding. As you might know, solar and other projects typically tend to be funded with tax equity, which You can scale pretty well because you get an investor that has a tax burden that basically takes a tax credit and funds a portion of that project, and then the rest is funded by debt.
If one of the problems that we've always had with the investment tax credit for CHP on its own, is that it's only been about 10%. There's always been a shortfall in terms of making up that difference to basically do a tax equity deal there. Whereas with the microgrid credits, it looks like it could be as high as 30% or more. You might be able to actually do this kind of funding in a larger scale for some of our products.
One final question. What's the situation with our New York City operations? I know that politically it's still chaotic in New York City, but are we seeing some opening up of upgrades and installation of new facilities? Where are we there?
Sure. Yeah. It's funny how political climates change things the way they do. At the bottom line, Mike, is our stuff still saves a ton of money in New York. Abinand and I, we were looking at some of the sites that we own. The energy production sites, so we know empirically what they're saving, and the electric rates are as high as ever. Gas rates are still manageable. The greenhouse gas savings are there. Whether or not Local Law 97 really changes people's behavior or not sure.
The incentives aren't there anymore, but there are still good projects there. The incentive program created a context and a forum by which we could do a lot of customer outreach. That was very nice. That's disappeared, so it requires a little more legwork on our part. I think the sales opportunity is still pretty strong. You want to add anything, Abinand?
Yeah, I was just going to add that we're actually seeing a lot of projects that are being helped by the Local Law 97 carbon benefits. Some of the engineers are spec-ing cogeneration projects purely based on the fact that when you've got limited square footage and you've done all of your existing energy efficiency measures, such as LED lighting, there's not a whole lot more you can do to get penalties down. They're then considering cogeneration.
The problem that we've had is with things like the NYSERDA incentive, it created an artificial deadline when customers had to find projects. With this kind of local law thing, the penalties only start kicking in in 2024. Sometimes customers defer capital expenditures as long as possible. It's balancing those two pressures to get them to actually buy products sooner and be ready for any kind of carbon taxes or penalties they might get.
Well, congratulations on real progress so far this year. I'm looking forward to a productive third and fourth quarter. Thanks for all your efforts.
Thanks, Mike. All right. Good to hear from you.
Thank you. Just a reminder, to ask a question, press star one on your telephone keypad. Our next question comes from Alex Blanton with Clear Harbor Asset Management. Please state your question.
Hi, Alex.
Hey, thanks. That's Clear Harbor. C-L-E-A-R.
Right.
Excuse me. By the way, I couldn't find your slides. I don't think they're posted on the website, where you have related documents next to the webcast. Didn't see the slides there.
If you go in the IR calendar, that's how you locate them, Alex. If you go in the IR calendar.
They're not next to where you have the webcast? Where it says, "Related documents"?
Hi, Alex. This is Tristan. I'm the office manager here. The slides are available on the webcast. After the call is over, we can add the PDF slides. They are not downloadable until after the conference. You can look at the slides currently as the webcast, which is on the calendar on our website.
Yeah. They're not next to the webcast.
Right. They will be after the call is over.
Okay, thank you.
Yeah, no problem.
The business you've announced recently, several releases on new orders. Are those in the backlog?
Which ones did you mention?
Well, the ones, I don't have it right up here. You put out a couple of releases on new orders?
Yes. They're in the backlog. Yes.
Sometimes you announce something, but it's not in the backlog yet.
Yeah. No, I think just about all of our announcements are orders. We've got a pretty rigid process to make sure I don't go blabbing about things that didn't really happen. I think all of our press releases are orders, in the backlog.
Okay, thank you. Looking ahead at 2022, taking into consideration everything you've said on this call, what are the sales going to look like in 2022 relative to 2021?
Well, Alex, of course, I can't tell you exactly what it'll be. I wish I could. What I can tell you is that our goal is to get to pre-COVID-19 levels. Sales last year were, as we talked about, very much impacted by COVID-19. I think getting back to a pre-COVID-19 sales level is a very reasonable goal for us that I would hope we'll be able to attain. I'd like to be able to exceed it. That's what our goal is.
Okay. The installation revenue. Was that what someone was referring to when they said you were going to cut back on that? That's the construction. Is that right?
Cut back is probably the wrong word, Alex. Instead of doing these very large construction projects these days, where we're doing all the contracting for mechanical and electrical and plumbing and rigging, and then New York City and all that kind of stuff. What we're doing, and I think a better model for us, is we sell our unit along with some accessories and some engineered things that go along with it, so that now somebody else can do that installation and not run into any problems.
That does two things, Alex. Number one, that's nice for me because my product sales went up a little bit more because I got to sell these extra accessories. Also, I'm not getting involved in this very low-margin installation. While we're always going to have some installation activity there, it's just not going to be as dominant as it was, say, two or three years ago.
Okay. When you say you're going to get back to pre-COVID levels, that would be even without-
Product sales
without the installation revenue.
Yeah, no. That NYSERDA rebate that I talked about earlier, that required us to be the contractor for these things.
Yeah.
As you know, Alex, we are still awaiting money from NYSERDA to button those things up. I think we still have about $4 million of unbilled revenue, just under $4 million, I think it's $3.9 million, that we're expecting to get back from those things. Yeah, I think it's more important for us to focus on our high-margin products and not get ourselves drawn into complex installations. Of course, I'll do reasonable installations if it's good margin for us. That's the philosophy that we have.
We can be looking for higher margins then, going forward.
Yeah. If you look at our margins from a couple of years ago and look at our margins now, I think you're seeing it. Our margins were in the 35%-40% range. What were our margin this quarter, Abinand?
46.
46.
48% to 47%.
Yeah. The last quarter was.
Yeah.
Yeah. I think you're seeing that higher margin stuff, and there's no disconnect there. It is very much because we don't have so many of Well, first off, we made these improvements that Abinand mentioned, but we don't have this real low-margin construction stuff dragging us down.
If you look at a project, either a cogen or a chiller project, usually on that project, about a third to a little bit more than that is just purely the machine itself. You've got a bunch of other pieces of equipment that go with it to help either the chiller or the cogen interface with the building. The rest of it is the labor to actually run the pipes to fit everything.
What we're really focusing on is that first 50% to two-thirds of it, which is where our expertise comes in, where we build the machine, build all the interfaces that allow us to hook up with the building, and that's the high-margin portion of the business as well. We do all the things that help us both maintain a margin and then service the machine afterwards.
We don't necessarily want to be involved in that running the pipe, hooking it up to the building directly. People that are specialists in that can do that, unless in some cases where we have certain clients that require us to do it, we'll do it, but it's not where we necessarily want to be going forward.
Okay. Yeah. That's gotten the last question here. Thank you very much for that.
Yeah. Of course, Alex. Not a problem. I'll maybe send you a note just to make sure you got the right place to find the presentation when we're off the call here.
Okay. Thank you.
Okay.
Thank you. There are no further questions at this time. I'll turn it back to management for closing remarks.
I want to thank everyone for joining us on this second quarter earnings call. As I said, I think we've got a lot of things to be optimistic about. I expect to have some good meaningful announcements on these topics as the year goes on. Thank you again for your support with Tecogen, and we'll talk soon.
Thank you. This concludes today's conference. All parties may disconnect. Have a good day.