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Financial report summary
?Competition
Southern • Waste Management • Emcor • ABM Industries • Waste Management • Sunpower • Schneider Electric SE • Comfort Systems USA • Exelon • FluorRisks
- If demand for our energy efficiency and renewable energy solutions does not develop as we expect, our revenues will suffer, and our business will be harmed.
- In order to secure contracts for new projects, we typically face a long and variable selling cycle that requires significant resource commitments and requires a long lead time before we realize revenues.
- We may not recognize all revenues from our backlog or receive all payments anticipated under awarded projects and customer contracts.
- If we are not able to complete, perform or operate our projects on a profitable basis or as we have committed to our customers, we could become subject to liquidated damages, and our reputation and our results of operations could be adversely impacted.
- A significant decline in the fiscal health of federal, state, provincial, and local governments could reduce demand for our energy efficiency and renewable energy projects.
- Provisions in our government contracts may harm our business, financial condition and operating results.
- The projects we undertake for our customers generally require significant capital, which our customers or we may finance through third parties, and such financing may not be available to our customers or to us on favorable terms, if at all.
- Project development or construction activities may require us to make significant investments without first obtaining project financing or having final customer contracts, which could increase our costs and impair our ability to recover our investments.
- We are exposed to the credit risk of some of our customers.
- Our business is affected by seasonal trends and construction cycles, and these trends and cycles could have an adverse effect on our operating results.
- Failure of third parties to manufacture quality products or provide reliable services in a timely manner or at prices that are acceptable to us could cause delays in the delivery of our services and completion of our projects, which could damage our reputation, have a negative impact on our relationships with our customers and adversely affect our growth.
- We may assume responsibility under customer contracts for factors outside our control, including, in connection with some customer projects, the risk that fuel prices will increase.
- Our business depends on experienced and skilled personnel and substantial specialty subcontractor resources, and if we lose key personnel or if we are unable to attract and integrate additional skilled personnel, it will be more difficult for us to manage our business and complete projects.
- We have been and may continue to be impacted by macroeconomic conditions such as supply chain challenges, a shortfall of certain products needed for our business, and inflationary pressures.
- Extreme weather events and other natural disasters, particularly those exacerbated by climate change, could materially affect our ability to complete our projects and develop our assets.
- A failure of our information technology (“IT”) and data security infrastructure or cyber or other security incidents, vulnerabilities or other deficiencies, could adversely impact our business, reputation or results of operation or could cause us to default under our contractual obligations.
- If we cannot obtain surety bonds and letters of credit, our ability to operate may be restricted.
- We operate in a highly competitive industry, and our current or future competitors may be able to compete more effectively than we do, which could have a material adverse effect on our business, revenues, growth rates, and market share.
- Our small-scale renewable energy plants may not generate expected levels of output.
- We have not entered into long-term offtake agreements for a portion of the output from our small-scale renewable energy plants and a portion of the related renewable identification numbers (“RINs”) are not subject to long term contracts.
- We may not be able to replace expiring offtake agreements with contracts on similar terms. If we are unable to replace an expired offtake agreement with an acceptable new contract, we may be required to remove the small-scale renewable energy plant from the site or, alternatively, we may sell the assets to the customer.
- Operation of energy assets involves significant risks and hazards customary to the energy industry and may be further impacted by the effects of climate change. We may not have adequate insurance to cover these risks and hazards, or other risks beyond our control.
- We plan to expand our business in part through future acquisitions and joint ventures, but we may not be able to identify or complete suitable acquisitions.
- We may be required to write-off or impair capitalized costs or intangible assets in the future, or we may incur restructuring costs or other charges, each of which could harm our earnings.
- Any future acquisitions that we may make could disrupt our business, cause dilution to our stockholders and harm our business, financial condition or operating results, and our use of joint ventures could expose us to additional risks and liabilities.
- International expansion is one of our growth strategies, and international operations will expose us to additional risks that we do not face in the United States, which could have an adverse effect on our operating results.
- Our business depends in part on federal, state, provincial and local government support for energy efficiency and renewable energy, and a decline in such support or the imposition of additional taxes, tariffs, duties, or other assessments on renewable energy or the equipment necessary to generate or deliver it, could harm our business.
- A substantial portion of our earnings are derived from the sale of renewable energy certificates (“RECs”) and other environmental attributes, and our failure to be able to sell such attributes could materially adversely affect our business, financial condition and results of operation.
- Changes in the laws and regulations governing the public procurement of ESPCs could have a material impact on our business.
- We need governmental approvals and permits, and we typically must meet specified qualifications, in order to undertake our energy efficiency projects and construct, own and operate our small-scale renewable energy projects, and any failure to do so would harm our business.
- Many of our small-scale renewable energy projects are, and other future projects may be, subject to or affected by U.S. federal energy regulation or other regulations that govern the operation, ownership, and sale of the facility, or the sale of electricity from the facility.
- Changes in utility regulation and tariffs could adversely affect our business.
- Compliance with environmental laws could adversely affect our operating results.
- Our senior credit facility, energy asset financing term loans and construction loans contain financial and operating restrictions that may limit our business activities and our access to credit, and they may not be sufficient to fund our capital needs and growth.
- If our subsidiaries default on their obligations under their debt instruments, we may need to make payments to lenders or to prevent foreclosure on the collateral securing the debt.
- If we fail to comply with the obligation in our Senior Credit Facilities to use commercially reasonable efforts to raise a minimum of $100 million equity or subordinated debt financing, we could be in default under the Senor Credit Facilities or if the terms of such financing are not favorable to us our financial condition may be adversely impacted
- The trading price of our Class A common stock is volatile.
- Holders of our Class A common stock are entitled to one vote per share, and holders of our Class B common stock are entitled to five votes per share. The lower voting power of our Class A common stock may negatively affect the attractiveness of our Class A common stock to investors and, as a result, its market value.
- For the foreseeable future, Mr. Sakellaris or his affiliates will be able to control the selection of all members of our board of directors, as well as virtually every other matter that requires stockholder approval, which will severely limit the ability of other stockholders to influence corporate matters.
- Though we may repurchase shares of our Class A common stock pursuant to our share repurchase program, we are not obligated to do so and if we do, we may purchase only a limited number of shares of Class A common stock.
Management Discussion
- Our results of operations for the year-ended December 31, 2023 reflect a year-over-year decline in terms of revenues, operating income, and net income attributable to common shareholders. All financial result comparisons are against the prior year period.
- •Revenue: total revenues decreased primarily due to a $480.0 million, or 32%, decrease in our project revenue attributed to the timing of revenue recognized based upon costs incurred to date relative to total expected costs on active projects, including our SCE battery storage project.
- •Cost of Revenues and Gross Profit: the decrease in cost of revenues is primarily due to the decrease in project revenues described above, however, our gross profit as a percent of revenues increased due to the lower revenue contribution from our lower margin, design-build SCE battery storage project.