

Class	New York Stock Exchange Symbol	Shares outstanding as of ~~April 30, 2019~~May 1 , 2020
Class A Common Stock, $0.0001 par value per share	AMRC	~~30,473,210~~29,567,741
Class B Common Stock, $0.0001 par value per share		18,000,000

AMERESCO, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~MARCH~~March 31, ~~2019~~2020

TABLE OF CONTENTS



	Page
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets at March 31 ~~2019~~, 20 20 (Unaudited) and December 31, ~~2018~~201 9		1

Condensed Consolidated Statements of Income for the three months ended March 31, 2020 and 2019 ~~and 2018~~ (Unaudited)		3

Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019 ~~and 2018~~ (Unaudited)		4

Condensed Consolidated ~~Statement~~Statements of Changes in Redeemable Non-Controlling Interests and Stockholders’ Equity for the three months ended March 31, 2020 and 2019 ~~and 2018~~ (Unaudited)		5

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 ~~and 2018~~ (Unaudited)		6

Notes to Condensed Consolidated Financial Statements (Unaudited)		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		3934

Item 3. Quantitative and Qualitative Disclosures About Market Risk		4642

Item 4. Controls and Procedures		4642

PART II - OTHER INFORMATION
Item 1. Legal Proceedings		4743

Item 1A. Risk Factors		4743

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		4743

Item 5. Other Information		43

Item 6. Exhibits		4748

Signatures	49

Exhibit Index	48

~~Table of Contents~~

~~PART I - FINANCIAL INFORMATION~~

~~Item 1. Condensed Consolidated Financial Statements~~

AMERESCO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)


	March 31,		December 31,				March 31,				December 31,
	2019		2018				2020				2019
	(Unaudited)						(Unaudited)
ASSETS	ASSETS				ASSETS
Current assets:					Current assets:
Cash and cash equivalents (including amounts in VIEs of $1,355 and $1,255, respectively)	$	25,487	$	61,397
Restricted cash (including amounts in VIEs of $156 and $156, respectively)	14,994		16,880
Accounts receivable, net (including amounts in VIEs of $272 and $374, respectively)	81,896		85,985
Cash and cash equivalents ⁽¹⁾					Cash and cash equivalents ⁽¹⁾		$	40,351			$	33,223
Restricted cash ⁽¹⁾					Restricted cash ⁽¹⁾		15,012				20,006
Accounts receivable, net of allowance of $2,120 and $2,260 respectively ⁽¹⁾					Accounts receivable, net of allowance of $2,120 and $2,260 respectively ⁽¹⁾		110,742				95,863
Accounts receivable retainage, net	14,762		13,516		Accounts receivable retainage, net		21,265				16,976
Costs and estimated earnings in excess of billings (including amounts in VIEs of $758 and $498, respectively)	92,264		86,842
Costs and estimated earnings in excess of billings ⁽¹⁾					Costs and estimated earnings in excess of billings ⁽¹⁾		189,566				202,243
Inventory, net	8,930		7,765		Inventory, net		9,229				9,236
Prepaid expenses and other current assets (including amounts in VIEs of $190 and $190, respectively)	14,437		11,571
Prepaid expenses and other current assets ⁽¹⁾					Prepaid expenses and other current assets ⁽¹⁾		28,052				29,424
Income tax receivable	1,727		5,296		Income tax receivable		7,135				5,033
Project development costs	25,834		21,717		Project development costs		16,740				13,188
Total current assets	280,331		310,969
Total current assets ⁽¹⁾					Total current assets ⁽¹⁾		438,092				425,192
Federal ESPC receivable	310,922		293,998		Federal ESPC receivable		239,156				230,616
Property and equipment, net	7,073		6,985
Energy assets, net (including amounts in VIEs of $123,092 and $122,641, respectively)	476,582		459,952
Property and equipment, net ⁽¹⁾					Property and equipment, net ⁽¹⁾		9,952				10,104
Energy assets, net ⁽¹⁾					Energy assets, net ⁽¹⁾		596,492				579,461
Deferred income taxes, net					Deferred income taxes, net		2,470				—
Goodwill	58,835		58,332		Goodwill		57,741				58,414
Intangible assets, net	2,310		2,004		Intangible assets, net		1,408				1,614
Operating lease assets (including amounts in VIEs of $6,124 and $0, respectively)	30,350		—
Other assets (including amounts in VIEs of $1,624 and $1,613, respectively)	32,273		29,394
Operating lease assets ⁽¹⁾					Operating lease assets ⁽¹⁾		32,444				32,791
Other assets ⁽¹⁾					Other assets ⁽¹⁾		35,828				35,821
Total assets(1)	$	1,198,676	$	1,161,634	$	1,413,583			$	1,374,013

LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY	LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY				LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
Current liabilities:					Current liabilities:
Current portions of long-term debt and financing lease liabilities (including amounts in VIEs of $2,263 and $1,712, respectively)	$	55,731	$	26,890
Accounts payable (including amounts in VIEs of $169 and $234, respectively)	102,432		134,330
Accrued expenses and other current liabilities (including amounts in VIEs of $3,672 and $4,146, respectively)	28,491		35,947
Current operating lease liabilities (including amounts in VIEs of $84 and $0, respectively)	5,082		—
Current portions of long-term debt and financing lease liabilities ⁽¹⁾					Current portions of long-term debt and financing lease liabilities ⁽¹⁾		$	69,282			$	69,969
Accounts payable ⁽¹⁾					Accounts payable ⁽¹⁾		182,354				202,416
Accrued expenses and other current liabilities ⁽¹⁾					Accrued expenses and other current liabilities ⁽¹⁾		32,528				31,356
Current portions of operating lease liabilities ⁽¹⁾					Current portions of operating lease liabilities ⁽¹⁾		5,360				5,802
Billings in excess of cost and estimated earnings	25,354		24,363		Billings in excess of cost and estimated earnings		25,350				26,618
Income taxes payable	1,196		1,100		Income taxes payable		1,205				486
Total current liabilities(1)	218,286		222,630		316,079				336,647
Long-term debt and financing lease liabilities, less current portions and net of deferred financing fees (including amounts in VIEs of $26,104 and $26,461, respectively)	197,014		219,162
Long-term debt and financing lease liabilities, net of current portions and deferred financing fees ⁽¹⁾					Long-term debt and financing lease liabilities, net of current portions and deferred financing fees ⁽¹⁾		285,553				266,181
Federal ESPC liabilities	321,954		288,047		Federal ESPC liabilities		276,177				245,037
Deferred income taxes, net	4,066		4,352		Deferred income taxes, net		—				115
Deferred grant income	6,499		6,637		Deferred grant income		6,682				6,885
Long-term portions of operating lease liabilities (including amounts in VIEs of $6,271 and $0, respectively)	27,305		—
Other liabilities (including amounts in VIEs of $1,336 and $2,131, respectively)	28,474		29,212
Long-term operating lease liabilities, net of current portion ⁽¹⁾					Long-term operating lease liabilities, net of current portion ⁽¹⁾		29,104				29,101
Other liabilities ⁽¹⁾					Other liabilities ⁽¹⁾		35,872				29,575
Commitments and contingencies (Note 9)					Commitments and contingencies (Note 9)

Redeemable non-controlling interests	13,341		14,719		Redeemable non-controlling interests		31,939				31,616

~~The accompanying notes are an integral part~~

⁽¹⁾ Includes restricted assets of ~~these condensed~~ consolidated ~~financial statements.~~

~~Table~~variable interest entities (“VIEs”) at March 31, 2020 and December 31, 2019 of ~~Contents~~

AMERESCO, INC.
CONSOLIDATED BALANCE SHEETS — (Continued)
(in thousands, except share amounts)
March 31, December 31,
2019 2018
(Unaudited)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2019 and December 31, 2018 $ —
$ —
Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 30,428,466 shares issued and 28,337,426 shares outstanding at March 31, 2019, 30,366,546 shares issued and 28,275,506 shares outstanding at December 31, 2018 3
3
Class B common stock, $0.0001 par value, 144,000,000 shares authorized, 18,000,000 shares issued and outstanding at March 31, 2019 and December 31, 2018 2
2
Additional paid-in capital 125,685
124,651
Retained earnings 274,170
269,806
Accumulated other comprehensive loss, net (6,485 ) (5,949 )
Less - treasury stock, at cost, 2,091,040 shares at March 31, 2019 and 1,873,266 shares at December 31, 2018 (11,638 ) (11,638 )
Total stockholders’ equity 381,737
376,875
Total liabilities, redeemable non-controlling interests and stockholders’ equity $ 1,198,676
$ 1,161,634
$163,019 and $158,912, respectively. Includes non-recourse liabilities of consolidated VIEs at March 31, 2020 and December 31, 2019 of $38,024 and $38,568, respectively. See Note 12.

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Table of Contents~~


AMERESCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
(in thousands, except share amounts)
	March 31,		December 31,
	2020		2019
	(Unaudited)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2020 and December 31, 2019	$	—	$	—
Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 31,611,956 shares issued and 29,510,161 shares outstanding at March 31, 2020, 31,331,345 shares issued and 29,230,005 shares outstanding at December 31, 2019	3		3
Class B common stock, $0.0001 par value, 144,000,000 shares authorized, 18,000,000 shares issued and outstanding at March 31, 2020 and December 31, 2019	2		2
Additional paid-in capital	136,591		133,688
Retained earnings	320,660		314,459
Accumulated other comprehensive loss, net	(13,291)		(7,514)

Treasury stock, at cost, 2,101,795 shares at March 31, 2020 and 2,101,340 shares at December 31, 2019	(11,788)		(11,782)
Total stockholders’ equity	432,177		428,856
Total liabilities, redeemable non-controlling interests and stockholders’ equity	$	1,413,583	$	1,374,013

~~AMERESCO, INC.~~

~~CONSOLIDATED STATEMENTS OF INCOME~~

~~(in thousands, except per share amounts)~~

~~(Unaudited)~~

Three Months Ended March 31,
2019 2018
Revenues $ 150,112
$ 167,410
Cost of revenues 117,480
131,937
Gross profit 32,632
35,473
Selling, general and administrative expenses 26,083
27,204
Operating income 6,549
8,269
Other expenses, net 3,421
3,544
Income before provision (benefit) for income taxes 3,128
4,725
Income tax provision (benefit) 257
(2,779 )
Net income 2,871
7,504
Net (income) loss attributable to redeemable non-controlling interests 1,276
(516 )
Net income attributable to common shareholders $ 4,147
$ 6,988
Net income per share attributable to common shareholders:

Basic $ 0.09
$ 0.15
Diluted $ 0.09
$ 0.15
Weighted average common shares outstanding:

Basic 46,293
45,373
Diluted 47,654
45,994

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Table of Contents~~

AMERESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE~~ INCOME

(in ~~thousands)~~thousands, except per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2020		2019
Revenues	$	212,413	$	150,112
Cost of revenues	173,967		117,480
Gross profit	38,446		32,632
Selling, general and administrative expenses	28,924		26,083
Operating income	9,522		6,549
Other expenses, net	5,389		3,421
Income before (benefit) provision for income taxes	4,133		3,128
Income tax (benefit) provision	(2,503)		257
Net income	6,636		2,871
Net loss (income) attributable to redeemable non-controlling interests	(435)		1,276
Net income attributable to common shareholders	$	6,201	$	4,147
Net income per share attributable to common shareholders:
Basic	$	0.13	$	0.09
Diluted	$	0.13	$	0.09
Weighted average common shares outstanding:
Basic	47,384		46,293
Diluted	48,497		47,654

Three Months Ended March 31,
2019 2018
Net income $ 2,871
$ 7,504
Other comprehensive income (loss):
Unrealized (loss) gain from interest rate hedges, net of tax (provision) benefit of $(325) and $389, respectively (1,142 ) 1,403
Foreign currency translation adjustments 606
437
Total other comprehensive income (loss) (536 ) 1,840
Comprehensive income 2,335
9,344
Comprehensive loss (income) attributable to redeemable non-controlling interests 1,276
(516 )
Comprehensive income attributable to common shareholders $ 3,611
$ 8,828

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Table of Contents~~3

AMERESCO, INC.

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)


	Three Months Ended March 31,
	2020		2019
Net income	$	6,636	$	2,871
Other comprehensive income (loss):
Unrealized loss from interest rate hedges, net of tax effect of $(1,187) and $(325), respectively	(3,465)		(1,142)
Foreign currency translation adjustments	(2,312)		606
Total other comprehensive loss	(5,777)		(536)
Comprehensive income	859		2,335
Comprehensive loss (income) attributable to redeemable non-controlling interests	(435)		1,276
Comprehensive income attributable to common shareholders	$	424	$	3,611

The accompanying notes are an integral part of these condensed consolidated financial statements.

AMERESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED ~~MARCH~~March 31, ~~2019~~2020 AND ~~2018~~2019

(in thousands except share amounts)

(Unaudited)


																																							Accumulated
																Accumulated											Redeemable								Additional				Other						Total
	Redeemable										Additional					Other							Total				Non-Controlling		Class A Common Stock				Class B Common Stock						Paid-in		Retained	Comprehensive		Treasury Stock			Stockholders’
	Non-Controlling			Class A Common Stock				Class B Common Stock			Paid-in		Retained			Comprehensive			Treasury Stock				Stockholders’				Interests		Shares	Amount		Shares	Amount		Capital		Earnings		Loss		Shares	Amount			Equity
Balance, December 31, 2018																										Balance, December 31, 2018	$	14,719	28,275,506	$	3	18,000,000	$	2	$	124,651	$	269,806	$	(5,949)	2,091,040	$	(11,638)		$	376,875
Cumulative impact from the adoptions of ASU-No. 2018-02 (Note 2)																										Cumulative impact from the adoptions of ASU-No. 2018-02 (Note 2)	—		—	—		—	—		—		217		(217)		—	—			—
	Interests			Shares		Amount		Shares	Amount		Capital		Earnings			Loss			Shares	Amount			Equity
Balance, December 31, 2017	$	10,338		27,533,049		$	3	18,000,000	$	2	$	116,196	$	235,844		$	(5,626	)	1,873,266	$	(9,799	)	$	336,620
Cumulative impact from the adoption of ASU No. 2014-09 (Note 2)	—			—		—		—	—		—		(4,454		)	—			—	—			(4,454		)
Cumulative impact from the adoption of ASU No. 2017-12 (Note 2)	—			—		—		—	—		—		432			(432		)	—	—			—
Exercise of stock options	—			146,435		—		—	—		691		—			—			—	—			691			Exercise of stock options	—		61,920	—		—	—		649		—		—		—	—			649
Stock-based compensation expense	—			—		—		—	—		355		—			—			—	—			355			Stock-based compensation expense	—		—	—		—	—		385		—		—		—	—			385

Unrealized loss from interest rate hedge, net																										Unrealized loss from interest rate hedge, net	—		—	—		—	—		—		—		(925)		—	—			(925)
Foreign currency translation adjustment																										Foreign currency translation adjustment	—		—	—		—	—		—		—		606		—	—			606

Distributions to redeemable non-controlling interests																										Distributions to redeemable non-controlling interests	(102)		—	—		—	—		—		—		—		—	—			—
Net (loss) income																										Net (loss) income	(1,276)		—	—		—	—		—		4,147		—		—	—			4,147
Balance, March 31, 2019																										Balance, March 31, 2019	$	13,341	28,337,426	$	3	18,000,000	$	2	$	125,685	$	274,170	$	(6,485)	2,091,040	$	(11,638)		$	381,737

Balance, December 31, 2019																										Balance, December 31, 2019	$	31,616	29,230,005	$	3	18,000,000	$	2	$	133,688	$	314,459	$	(7,514)	2,101,340	$	(11,782)		$	428,856

Exercise of stock options																										Exercise of stock options	—		280,611	—		—	—		2,474		—		—		—	—			2,474
Stock-based compensation expense																										Stock-based compensation expense	—		—	—		—	—		429		—		—��		—	—			429

Open market purchase of common shares	—			(212,131	)	—		—	—		—		—			—			212,131	(1,771		)	(1,771		)	Open market purchase of common shares	—		(455)	—		—	—		—		—		—		455	(6)			(6)
Unrealized loss from interest rate hedge, net	—			—		—		—	—		—		—			1,403			—	—			1,403			Unrealized loss from interest rate hedge, net	—		—	—		—	—		—		—		(3,465)		—	—			(3,465)
Foreign currency translation adjustment	—			—		—		—	—		—		—			437			—	—			437			Foreign currency translation adjustment	—		—	—		—	—		—		—		(2,312)		—	—			(2,312)

Distributions to redeemable non-controlling interests	(103		)	—		—		—	—		—		—			—			—	—			—			Distributions to redeemable non-controlling interests	(112)		—	—		—	—		—		—		—		—	—			—
Net income	516			—		—		—	—		—		6,988			—			—	—			6,988			Net income	435		—	—		—	—		—		6,201		—		—	—			6,201
Balance, March 31, 2018	$	10,751		27,467,353		$	3	18,000,000	$	2	$	117,242	$	238,810		$	(4,218	)	2,085,397	$	(11,570	)	$	340,269

Balance, December 31, 2018	$	14,719		28,275,506		$	3	18,000,000	$	2	$	124,651	$	269,806		$	(5,949	)	2,091,040	$	(11,638	)	$	376,875
Cumulative impact from the adoption of ASU No. 2018-02 (Note 2)	—			—		—		—	—		—		217			(217		)	—	—			—
Exercise of stock options	—			61,920		—		—	—		649		—			—			—	—			649
Stock-based compensation expense	—			—		—		—	—		385		—			—			—	—			385
Unrealized gain from interest rate hedge, net	—			—		—		—	—		—		—			(925		)	—	—			(925		)
Foreign currency translation adjustment	—			—		—		—	—		—		—			606			—	—			606
Distributions to redeemable non-controlling interests	(102		)	—		—		—	—		—		—			—			—	—			—
Net income (loss)	(1,276		)	—		—		—	—		—		4,147			—			—	—			4,147
Balance, March 31, 2019	$	13,341		28,337,426		$	3	18,000,000	$	2	$	125,685	$	274,170		$	(6,485	)	2,091,040	$	(11,638	)	$	381,737
Balance, March 31, 2020																										Balance, March 31, 2020	$	31,939	29,510,161	$	3	18,000,000	$	2	$	136,591	$	320,660	$	(13,291)	2,101,795	$	(11,788)		$	432,177

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Table of Contents~~

AMERESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Three Months Ended March 31,
	2020		2019
Cash flows from operating activities:
Net income	$	6,636	$	2,871
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation of energy assets	9,299		8,407
Depreciation of property and equipment	833		619
Amortization of debt discount and deferred financing fees	660		693
Amortization of intangible assets	179		213
Accretion of ARO and contingent consideration	21		51
Provision for bad debts	49		77

Gain on deconsolidation of VIE	—		(2,160)
Net gain from derivatives	(223)		(723)
Stock-based compensation expense	429		385
Deferred income taxes	(1,217)		—

Unrealized foreign exchange loss	212		(59)
Changes in operating assets and liabilities:

Accounts receivable	(14,161)		4,718
Accounts receivable retainage	(4,445)		(1,201)
Federal ESPC receivable	(39,946)		(26,986)
Inventory, net	7		(1,165)
Costs and estimated earnings in excess of billings	12,181		(1,027)
Prepaid expenses and other current assets	1,233		(2,939)
Project development costs	(3,224)		(3,688)
Other assets	8		549
Accounts payable, accrued expenses and other current liabilities	(17,241)		(40,976)
Billings in excess of cost and estimated earnings	(956)		809
Other liabilities	(586)		(228)
Income taxes payable, net	(1,388)		3,666
Cash flows from operating activities	(51,640)		(58,094)
Cash flows from investing activities:
Purchases of property and equipment	(724)		(1,287)
Purchases of energy assets	(28,497)		(23,334)


Acquisitions, net of cash received	—		(1,279)
Contributions to equity investment	(127)		(192)
Cash flows from investing activities	(29,348)		(26,092)



The accompanying notes are an integral part of these condensed consolidated financial statements.

Three Months Ended March 31,
2019 2018
Cash flows from operating activities:

Net income $ 2,871
$ 7,504
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation of energy assets 8,407
6,312
Depreciation of property and equipment 619
542
Amortization of debt issuance costs 693
419
Amortization of intangible assets 213
253
Accretion of ARO and contingent consideration 51
—
Provision for bad debts 77
64
Gain on deconsolidation of VIE (2,160 ) —
Net gain from derivatives (723 ) (12 )
Stock-based compensation expense 385
355
Deferred income taxes —
(3,027 )
Unrealized foreign exchange (gain) loss (59 ) 492
Changes in operating assets and liabilities:
Accounts receivable 4,718
(1,837 )
Accounts receivable retainage (1,201 ) (2,453 )
Federal ESPC receivable (26,986 ) (37,967 )
Inventory, net (1,165 ) (544 )
Costs and estimated earnings in excess of billings (1,027 ) 30,363
Prepaid expenses and other current assets (2,939 ) (4,578 )
Project development costs (3,688 ) (2,325 )
Other assets 549
540
Accounts payable, accrued expenses and other current liabilities (40,976 ) (33,309 )
Billings in excess of cost and estimated earnings 809
1,190
Other liabilities (228 ) (674 )
Income taxes payable 3,666
1,617
Cash flows from operating activities (58,094 ) (37,075 )
Cash flows from investing activities:
Purchases of property and equipment (1,287 ) (1,015 )
Purchases of energy assets (23,334 ) (34,161 )
Acquisitions, net of cash received (1,279 ) —
Contributions to equity investment (192 ) —
Cash flows from investing activities (26,092 ) (35,176 )
The accompanying notes are an integral part of these condensed consolidated financial statements.


AMERESCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
(in thousands)
(Unaudited)
	Three Months Ended March 31,
	2020		2019
Cash flows from financing activities:

Payments of financing fees	$	(155)	$	—
Proceeds from exercises of options and ESPP	2,473		649
Repurchase of common stock	(6)		—
Proceeds from senior secured credit facility, net	31,000		11,373

Proceeds from Federal ESPC projects	61,198		39,598
Proceeds for energy assets from Federal ESPC	1,541		1,732


Distributions to redeemable non-controlling interests, net	(103)		(103)

Payments on long-term debt	(12,019)		(5,716)
Cash flows from financing activities	83,929		47,533
Effect of exchange rate changes on cash	(509)		140
Net increase (decrease) in cash, cash equivalents, and restricted cash	2,432		(36,513)
Cash, cash equivalents, and restricted cash, beginning of period	77,264		97,914
Cash, cash equivalents, and restricted cash, end of period	$	79,696	$	61,401

Supplemental disclosures of cash flow information:
Cash paid for interest	$	4,917	$	3,391
Cash paid for income taxes	$	183	$	197
Non-cash Federal ESPC settlement	$	29,297	$	5,629
Accrued purchases of energy assets	$	34,308	$	16,247

~~Table of Contents~~

AMERESCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
(in thousands)
(Unaudited)
Three Months Ended March 31,
2019 2018
Cash flows from financing activities:

Payments of financing fees —
(575 )
Proceeds from exercises of options and ESPP 649
691
Repurchase of common stock —
(1,771 )
Proceeds from senior secured credit facility, net 11,373
17,404
Proceeds from long-term debt financings —
33,501
Proceeds from Federal ESPC projects 39,598
36,581
Proceeds for energy assets from Federal ESPC 1,732
717
Distributions to redeemable non-controlling interests (103 ) (103 )
Payments on long-term debt (5,716 ) (2,322 )
Cash flows from financing activities 47,533
84,123
Effect of exchange rate changes on cash 140
(180 )
Net (decrease) increase in cash, cash equivalents, and restricted cash (36,513 ) 11,692
Cash, cash equivalents, and restricted cash, beginning of period 97,914
60,105
Cash, cash equivalents, and restricted cash, end of period $ 61,401
$ 71,797
Supplemental disclosures of cash flow information:
Cash paid for interest $ 3,391
$ 1,402
Cash paid for income taxes $ 197
$ 442
Non-cash Federal ESPC settlement $ 5,629
$ 28,367
Accrued purchases of energy assets $ 16,247
$ 4,482

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the total of the same such amounts shown above:


	Three Months Ended March 31,
	2020		2019
Cash and cash equivalents	$	40,351	$	25,487
Short-term restricted cash	15,012		14,994
Long-term restricted cash included in other assets	24,333		20,920
Total cash and cash equivalents, and restricted cash	$	79,696	$	61,401

Three Months Ended March 31,
2019 2018
Cash and cash equivalents $ 25,487
$ 34,125
Short-term restricted cash 14,994
16,894
Long-term restricted cash included in other assets 20,920
20,778
Total cash and cash equivalents, and restricted cash $ 61,401
$ 71,797

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

AMERESCO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share amounts)

1. ~~DESCRIPTION~~BASIS OF ~~BUSINESS~~PRESENTATION

The accompanying condensed consolidated financial statements of Ameresco, Inc. (including its subsidiaries, the “Company”) was organized as a Delaware corporation on April 25, 2000. The Company is a provider of energy efficiency solutions for facilities throughout North America and Europe. The Company provides solutions, both services and products, that enable customers to reduce their energy consumption, lower their operating and maintenance costs and realize environmental benefits. The Company’s comprehensive set of solutions includes upgrades to a facility’s energy infrastructure and the construction and operation of small-scale renewable energy plants. It also sells certain photovoltaic (“PV”) equipment worldwide. The Company operates in the United States, Canada and Europe.

The Company is compensated through a variety of methods, including: 1) direct payments based on fee-for-services contracts (utilizing lump-sum or cost-plus pricing methodologies); 2) the sale of energy from the Company’s energy assets and the sale of energy assets; and 3) direct payment for PV equipment and systems.

~~The condensed consolidated financial statements as of~~ ~~March 31, 2019, and for the~~ ~~three months ended March 31, 2019~~ ~~and 2018,~~ are unaudited, pursuant to certain rules and regulations of the Securities and Exchange Commission, and include, in the opinion of the Company, normal recurring adjustments necessary for a fair presentation in conformity with accounting principles generally accepted in the United States (“GAAP”) of the results for the periods ~~indicated, which, however,~~indicated.

The results of operations for the three months ended March 31, 2020 are not necessarily indicative of results which may be expected for the full year. The December 31, ~~2018~~2019 consolidated balance sheet data was derived from audited financial statements, but certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The interim condensed consolidated financial statements, and notes thereto, should be read in conjunction with the audited consolidated financial statements for the year ended December 31, ~~2018,~~2019, and notes thereto, included in the Company’s annual report on Form 10-K for the year ended December 31, ~~2018~~2019 filed with the Securities and Exchange Commission on March ~~8, 2019.~~4, 2020.

SIGNIFICANT RISKS AND UNCERTAINTIES

~~2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

~~Principles~~In March 2020, the World Health Organization categorized Coronavirus Disease 2019 (“COVID-19”) as a pandemic, and the President of ~~Consolidation~~the United States declared the COVID-19 outbreak a national emergency.

The ~~accompanying~~Company’s condensed consolidated financial statements include the accounts of the Company, its subsidiaries in which the Company has a controlling financial interest and four investment funds formed to fund the purchase and operation of solar energy systems, which are consolidated with the Company as variable interest entities (“VIE”). The Company uses a qualitative approach in assessing the consolidation requirement for VIEs. This approach focuses on determining whether the Company has the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and whether the Company has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. For all periods presented, the Company has determined that it is the primary beneficiary in all but one of its operational VIEs. The Company evaluates its relationships with the VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary. All significant intercompany accounts and transactions have been eliminated. Gains and losses from the translation of all foreign currency financial statements are recorded in accumulated other comprehensive loss, net, within stockholders’ equity. The Company prepares its condensed consolidated financial statements in conformity with GAAP.

~~Use of Estimates~~

~~GAAP requires management to make~~reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities ~~the~~and disclosure of contingent assets and liabilities at the date of the condensed ~~consolidating~~consolidated financial statements and ~~the~~ reported amounts of revenue and expenses during the reporting ~~period.~~periods presented. The ~~most significant~~Company considered the impact of COVID-19 on the assumptions and estimates used and ~~assumptions used~~determined that there were no material adverse impact on the Company’s first quarter 2020 results of operations.

The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, delays in obtaining signed customer contracts for awarded projects, supply chain disruptions and uncertain demand. As of the date of issuance of these condensed consolidated financial statements, ~~relate~~the extent to ~~management’s estimates~~which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of ~~final construction contract profit in accordance with accounting for long-term contracts, allowance for doubtful accounts, inventory reserves, realization~~operations is uncertain.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which includes modifications to the limitation on business interest expense and net operating loss provisions, and provides a payment delay of ~~project development costs, fair value~~employer payroll taxes during 2020 after the date of derivative financial instruments, accounting for business acquisitions, stock-based awards, impairment of goodwill and long-lived assets, asset retirement obligations (“AROs”), leases, income taxes, self insurance reserves and potential liability in conjunction with certain commitments and contingencies. Actual results could differ from those estimates.

enactment. The Company ~~is self-insured for employee health insurance.~~estimates the payment of approximately $5,000 of employer payroll taxes otherwise due in 2020 will be delayed with 50% due by December 31, 2021 and the remaining 50% by December 31, 2022. The ~~maximum exposure~~CARES Act permits net operating losses from the 2018, 2019, and 2020 tax years to be carried back to the previous five tax years (beginning with the earliest year first). The Company estimates the discrete benefit associated with the net operating loss provisions of the CARES Act to be approximately $2,000 and an estimated refund of taxes paid in ~~fiscal year 2019 under~~prior years of approximately $1,300.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies of the plan was $150 per covered participant, after which reinsurance takes effect. The liability for unpaid claims and associated expenses, including incurred but not reported claims, is determined by management and reflectedCompany are set forth in Note 2 to the consolidated financial statements contained in the Company’s ~~condensed consolidated balance sheets~~2019 annual report on Form 10-K. The Company includes herein certain updates to those policies.

Accounts Receivable and allowance for Credit Losses

Accounts receivable are stated at the amount management expects to collect from outstanding balances. Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13) prospectively. This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables. The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in ~~accrued expenses and other~~earlier recognition of losses for receivables that are current ~~liabilities.~~or not yet due, which were not considered under the previous accounting guidance. The ~~liability is calculated based on historical data,~~Company

Table of Contents

AMERESCO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

(in thousands, except per share amounts)

~~which considers both the frequency and settlement amount~~performed an assessment of ~~claims. The Company’s estimated accrual for this liability could be different than~~ its ~~ultimate obligation if variables such as the frequency or amount of future claims differ significantly from management’s assumptions.~~

~~Cash and Cash Equivalents~~

Cash and cash equivalents includes cash on deposit, overnight repurchase agreements and amounts invested in highly liquid money market funds. Cash equivalents consist of short term investments with original maturities of three months or less. The Company maintains accounts with financial institutions and the balances in such accounts, at times, exceed federally insured limits. This credit risk is divided among a number of financial institutions that management believes to be of high quality. The carrying amount of cash and cash equivalents approximates its fair value measured using level 1 inputs per the fair value hierarchy as defined in Note 10.

~~Restricted Cash~~

Restricted cash consists of cash and cash equivalents held in an escrow account in association with construction draws for energy savings performance contracts (“ESPC”), construction of energy assets, operations and maintenance (“O&M”) reserve accounts and cash collateralized letters of credit as well as cash required under term loans to be maintained in debt service reserve accounts until all obligations have been indefeasibly paid in full. These accounts are primarily invested in highly liquid money market funds. The carrying amount of the cash and cash equivalents in these accounts approximates its fair value measured using level 1 inputs per the fair value hierarchy as defined in Note 10. Restricted cash also includes funds held for clients, which represent assets that, based upon the Company’s intent, are restricted for use solely for the purposes of satisfying the obligations to remit funds to third parties, primarily utility service providers, relating to the Company’s enterprise energy management services. As of March 31, 2019 and December 31, 2018, the Company classified the non-current portion of restricted cash of $20,920 and $19,637, respectively, in other assets on its condensed consolidated balance sheets.

~~Accounts Receivable~~

~~Accounts receivable are stated at the amount management expects to collect from outstanding balances. An~~ allowance for ~~doubtful accounts is provided for those accounts receivable considered to be uncollectible~~credit losses based upon historical experience, ~~and~~ management’s evaluation of outstanding accounts ~~receivable.~~receivable, consideration of its customers’ financial conditions and current macroeconomic and market conditions and determined that no adjustment was required to retained earnings upon adoption.

The Company’s methodology to estimate the allowance for credit losses includes quarterly assessments of historical bad debt write off experience, current economic and market conditions, management’s evaluation of outstanding accounts receivable, and the Company’s forecasts. Due to the short-term nature of its receivables, the estimate of credit losses is primarily based on aged accounts receivable balances and the financial condition of customers. In addition, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. Bad debts are written off against the allowance when identified. As part of its assessment, the Company also considered the current and expected future economic and market conditions due to the COVID-19 pandemic and determined that the estimate of credit losses was not significantly impacted as of March 31, 2020.

Changes in the allowance for ~~doubtful accounts are as follows:~~

Three Months Ended March 31,
2019
2018
Allowance for doubtful accounts, beginning of period $ 2,765
$ 3,315
Charges to costs and expenses 77
64
Account write-offs and other (29 ) (86 )
Allowance for doubtful accounts, end of period $ 2,813
$ 3,293

~~Accounts Receivable Retainage~~

Accounts receivable retainage represents amounts due from customers, but where payments are withheld contractually until certain construction milestones are met. Amounts retained typically range from 5% to 10% of the total invoice. The Company classifies as a current asset those retainages that are expected to be billed in the next twelve months. No amounts were determined to be uncollectible as of March 31, 2019 and December 31, 2018.

~~Inventory~~

Inventories, which consist primarily of PV solar panels, batteries and related accessories, are stated at the lower of cost (“first-in, first-out” method) or net realizable value (determined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation). Provisions have been made to reduce the carrying value of inventory to the net realizable value.

~~Prepaid Expenses~~

~~Prepaid expenses consist primarily of short-term prepaid expenditures that will amortize within one year.~~

~~AMERESCO, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

~~(in thousands, except per share amounts)~~

~~Federal ESPC Receivable~~

Federal ESPC receivable represents the amount to be paid by various federal government agencies for work performed and earned by the Company under specific ESPCs. The Company assigns certain of its rights to receive those payments to third-parties that provide construction and permanent financing for such contracts. Upon completion and acceptance of the project by the government, typically within 24 to 36 months of construction commencement, the assigned ESPC receivable from the government and corresponding ESPC liability are eliminated from the Company’s condensed consolidated financial statements.

~~Project Development Costs~~

The Company capitalizes as project development costs only those costs incurred in connection with the development of energy projects, primarily direct labor, interest costs, outside contractor services, consulting fees, legal fees and travel, if incurred after a point in time where the realization of related revenue becomes probable. Project development costs incurred prior to the probable realization of revenue are expensed as incurred. The Company classifies as a current asset those project development efforts that are expected to proceed to construction activity in the twelve months that follow. The Company periodically reviews these balances and writes off any amounts where the realization of the related revenue is no longer probable. Project development costs of $217 and $639 were included in other long-term assets at March 31, 2019 and December 31, 2018, respectively.

~~Property and Equipment~~

Property and equipment consists primarily of office and computer equipment, and is recorded at cost. Major additions and improvements are capitalized as additions to the property and equipment accounts, while replacements, maintenance and repairs that do not improve or extend the life of the respective assets are expensed as incurred. Depreciation and amortization of property and equipment are computed on a straight-line basis over the following estimated useful lives:



~~Asset Classification~~		~~Estimated Useful Life~~
~~Furniture and office equipment~~		~~Five years~~
~~Computer equipment and software costs~~		~~Three to five years~~
~~Leasehold improvements~~		~~Lesser of term of lease or five years~~
~~Automobiles~~		~~Five years~~
~~Land~~		~~Unlimited~~

~~Gains or~~credit losses ~~on disposal of property and equipment are reflected in selling, general and administrative expenses in the condensed consolidated statements of income.~~

~~Energy Assets~~

Energy assets consist of costs of materials, direct labor, interest costs, outside contract services, deposits and project development costs incurred in connection with the construction of small-scale renewable energy plants that the Company owns. These amounts are capitalized and amortized to cost of revenues in the Company’s condensed consolidated statements of income on a straight line basis over the lives of the related assets or the terms of the related contracts.

The Company capitalizes interest costs relating to construction financing during the period of construction. Capitalized interest is included in energy assets, net in the Company’s condensed consolidated balance sheets. Capitalized interest is amortized to cost of revenues in the Company’s condensed consolidated statements of income on a straight line basis over the useful life of the associated energy asset. There was $788 and $994 of interest capitalized for the three months ended March 31, 2020 and 2019 ~~and 2018, respectively.~~

~~Routine maintenance costs~~ are expensed in the current year’s condensed consolidated statements of income to the extent that they do not extend the life of the asset. Major maintenance, upgrades and overhauls are required for certain components of the Company’s assets. In these instances, the costs associated with these upgrades are capitalized and are depreciated over the shorter of the remaining life of the asset or the period until the next required major maintenance or overhaul.

Included in energy assets are financing lease assets and accumulated depreciation of financing lease assets. For additional information see the Sale-Leaseback section below. Financing leases were referred to as capital leases under previous guidance.

The Company evaluates its long-lived assets for impairment as events or changes in circumstances indicate the carrying value of these assets may not be fully recoverable. Examples of such triggering events applicable to the Company’s assets

~~AMERESCO, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

~~(in thousands, except per share amounts)~~

include a significant decrease in the market price of a long-lived asset or asset group or a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group.

The Company evaluates recoverability of long-lived assets to be held and used by estimating the undiscounted future cash flows before interest associated with the expected uses and eventual disposition of those assets. When these comparisons indicate that the carrying value of those assets is greater than the undiscounted cash flows, the Company recognizes an impairment loss for the amount that the carrying value exceeds the fair value.

The Company has applied for and received cash grant awards from the U.S. Treasury Department (the “Treasury”) under Section 1603 of the American Recovery and Reinvestment Act of 2009 (the “Act”). The Act authorized the Treasury to make payments to eligible persons who place in service qualifying renewable energy projects. The grants are paid in lieu of investment tax credits. All of the cash proceeds from the grants were used and recorded as a reduction in the cost basis of the applicable energy assets. If the Company disposes of the property, or the property ceases to qualify as specified energy property, within ~~five years~~ ~~from the date the property is placed in service, then a prorated portion of the Section 1603 payment must be repaid.~~

~~The Company last received a Section 1603 grant during the year ended December 31, 2014. No further Section 1603 grant payments are expected to be received as the program has expired.~~

For tax purposes, the Section 1603 payments are not included in federal and certain state taxable income and the basis of the property is reduced by 50% of the payment received. Deferred grant income of $6,499 and $6,637 recorded in the accompanying condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018, respectively, represents the benefit of the basis difference to be amortized to income tax expense over the life of the related property.

~~Leases~~

All significant lease arrangements are recognized at lease commencement. Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at commencement. An ROU asset and corresponding lease liability are not recorded for leases with an initial term of 12 months or less (short term leases) as the Company recognizes lease expense for these leases as incurred over the lease term.

ROU assets represent the Company’s right to use an underlying asset during the reasonably certain lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate, which is updated annually or when a significant event occurs that would indicate a significant change in rates, based on the information available at commencement date, in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments related to initial direct cost and prepayments and excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are generally accounted for as a single component. See Note 8 for additional discussion on the Company’s leases.

~~Deferred Financing Fees~~

Deferred financing fees relate to the external costs incurred to obtain financing for the Company. Deferred financing fees are amortized over the respective term of the financing using the effective interest method, with the exception of the Company’s revolving credit facility and construction loans, as discussed in Note 15, for which deferred financing fees are amortized on a straight-line basis over the term of the agreement. Deferred financing fees are presented on the condensed consolidated balance sheets as a reduction to long-term debt and financing lease liabilities.

~~Goodwill and Intangible Assets~~

The Company has classified as goodwill the amounts paid in excess of fair value of the net assets (including tax attributes) of companies acquired in purchase transactions. The Company has recorded intangible assets related to customer contracts, customer relationships, non-compete agreements, trade names and technology, each with defined useful lives. The Company assesses the impairment of goodwill and intangible assets that have indefinite lives on an annual basis (December 31^st~~) and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.~~

~~AMERESCO, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

~~(in thousands, except per share amounts)~~

Three Months Ended
March 31, 2019
Derivatives Designated as Hedging Instruments:
     Accumulated loss in AOCI at the beginning of the period $ (1,824 )
            Cumulative impact from the adoption of ASU No. 2018-02 (217 )
            Unrealized gain recognized in AOCI (949 )
            Gain reclassified from AOCI to other expenses, net 49
     Accumulated loss in AOCI at the end of the period $ (2,941 )

Table of Contents

AMERESCO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

(in thousands, except per share amounts)

In the third quarter of 2018, the Company adopted ASU 2017-12, which resulted in an increase to retained earnings and accumulated other comprehensive loss of $432 to remove the cumulative effect of hedging ineffectiveness previously recognized in earnings, as of January 1, 2018, for contracts designated as hedging instruments that were outstanding at the beginning of the third quarter 2018. Upon adoption of the ASU, the impact to reclassify the ineffectiveness of the Company’s hedge instruments in connection with prior periods was recorded. Accordingly, the Company’s condensed consolidated statement of changes in redeemable non-controlling interests and stockholders’ equity for the three months ended March 31, 2018 reflect the adoption of ASU 2017-12 .

The following tables present a listing of all the Company’s active derivative instruments as of March 31, ~~2019:~~

Active Interest Rate Swap Effective Date Expiration Date Initial Notional Amount ($) Status
11-Year, 5.77% Fixed
October 2018 October 2029 $ 9,200
Designated
15-Year, 3.19% Fixed June 2018 June 2033 10,000
Designated
3-Year, 2.46% Fixed March 2018 December 2020 17,100
Not Designated
10-Year, 4.74% Fixed June 2017 December 2027 14,100
Designated
15-Year, 3.26% Fixed February 2023 December 2038 14,084
Designated
7-Year, 2.19% Fixed February 2016 February 2023 20,746
Designated
8-Year, 3.70% Fixed March 2020 June 2028 14,643
Designated
8-Year, 3.70% Fixed March 2020 June 2028 10,734
Designated
8-Year, 1.71% Fixed October 2012 March 2020 9,665
Designated
8-Year, 1.71% Fixed October 2012 March 2020 7,085
Designated
15-Year, 5.30% Fixed February 2006 February 2021 3,256
Designated
15.5-Year, 5.40% Fixed September 2008 March 2024 13,081
Designated
2020:

Active Interest Rate Swap

Effective Date

Expiration Date

Initial Notional Amount ($)

Status

11-Year, 5.77% Fixed

October 2018

October 2029

9,200

Designated

15-Year, 5.24% Fixed

June 2018

June 2033

10,000

Designated

3-Year, 2.46% Fixed

March 2018

December 2020

17,100

Not Designated

10-Year, 4.74% Fixed

June 2017

December 2027

14,100

Designated

15-Year, 3.26% Fixed

February 2023

December 2038

14,084

Designated

7-Year, 2.19% Fixed

February 2016

February 2023

20,746

Designated

8-Year, 3.70% Fixed

March 2020

June 2028

14,643

Designated

8-Year, 3.70% Fixed

March 2020

June 2028

10,734

Designated

15-Year, 5.30% Fixed

February 2006

February 2021

3,256

Designated

15.5-Year, 5.40% Fixed

September 2008

March 2024

13,081

Designated

Active Commodity Swap

Effective Date

Expiration Date

Initial Notional Amount (Volume)

Commodity Measurement

Status

~~1-Year, $2.84 MMBtu Fixed~~

~~May 2018~~

~~April 2019~~

~~323,390~~

~~MMBtus~~

~~Not Designated~~

1-Year, $2.68 MMBtu Fixed

May 2019

April 2020

437,004

MMBtus

Not Designated

1-Year, $2.70 MMBtu Fixed

May 2020

April 2021

435,810

MMBtus

Not Designated

Other Derivatives Classification Effective Date Expiration Date Fair Value ($)
Interest make-whole provisions Liability June/August 2018 December 2038 $ 1,085

Other Derivatives

Classification

Effective Date

Expiration Date

Fair Value ($)

Interest make-whole provisions

Liability

June/August 2018

December 2038

733

12. INVESTMENT FUNDS AND OTHER VARIABLE INTEREST ENTITIES

Investment Funds

In each of September 2015, June 2017, June 2018, ~~and~~ October 2018, and December 2019, the Company formed an investment fund with a different ~~third party~~third-party investor which granted the applicable investor ownership interests in the net assets of certain of the Company’s renewable energy project subsidiaries. The Company currently has ~~four~~5 such investment funds each with a different ~~third party~~third-party investor.

The Company consolidates the investment funds, and all inter-company balances and transactions between the Company and the investment funds are eliminated in its condensed consolidated financial statements. The Company determined that the investment funds meet the definition of a ~~VIE.~~variable interest entity (“VIE”). The Company uses a qualitative approach in assessing the consolidation

~~Table of Contents~~

~~AMERESCO, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

~~(in thousands, except per share amounts)~~

requirement for VIEs that focuses on determining whether the Company has the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and whether the Company has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

The Company has considered the provisions within the contractual arrangements that grant it power to manage and make decisions that affect the operation of these VIEs, including determining the solar energy systems and associated long term customer contracts to be sold or contributed to the VIEs, and installation, operation and maintenance of the solar energy systems. The Company considers that the rights granted to the other investors under the contractual arrangements are more protective in nature rather than participating rights. As such, the Company has determined it is the primary beneficiary of the

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AMERESCO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

(in thousands, except per share amounts)

VIEs for all periods presented. The Company evaluates its relationships with VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary.

Under the related agreements, cash distributions of income and other receipts by the funds, net of agreed-upon expenses and estimated expenses, tax benefits and detriments of income and loss, and tax benefits of tax credits, are assigned to the funds’ investor and Company’s subsidiaries as specified in contractual arrangements. Certain of these arrangements have call and put options to acquire the investor’s equity interest as specified in the contractual agreements. See Note 13 for additional information on the call and put options.

A summary of amounts related to the investment funds in the Company’s condensed consolidated balance sheets is as follows:


	March 31,		December 31,
	2020⁽¹⁾		2019⁽¹⁾
Cash and cash equivalents	$	5,789	$	4,666
Restricted cash	586		586
Accounts receivable, net	462		532
Costs and estimated earnings in excess of billings	1,355		1,125
Prepaid expenses and other current assets	80		108
Total VIE current assets	8,272		7,017
Property and equipment, net	1,266		1,266
Energy assets, net	145,410		142,456
Operating lease assets	6,411		6,511
Other assets	1,660		1,662
Total VIE assets	$	163,019	$	158,912
Current portions of long-term debt and financing lease liabilities	$	2,234	$	2,252
Accounts payable	2,670		2,006
Accrued expenses and other current liabilities	1,623		2,203
Current portions of operating lease liabilities	106		102
Total VIE current liabilities	6,633		6,563
Long-term debt and financing lease liabilities, less current portions and net of deferred financing fees	24,214		24,654

Long-term portions of operating lease liabilities	6,173		6,180
Other liabilities	1,004		1,171
Total VIE liabilities	$	38,024	$	38,568

March 31, December 31,

2019⁽¹⁾

2018⁽¹⁾
Cash $ 1,355
$ 1,255
Restricted cash 156
156
Accounts receivable 272
374
Costs and estimated earnings in excess of billings 758
498
Prepaid expenses and other current assets 190
190
Energy assets, net 123,092
122,641
Operating lease assets 6,124
—
Other assets 1,624
1,613
Accounts payable 169
234
Accrued liabilities 3,672
4,146
Current operating lease liabilities 84
—
Current portions of long-term 2,263
1,712
Long-term debt, net of deferred financing costs 26,104
26,461
Long-term operating lease liabilities 6,271
—
Other long-term liabilities 1,336
2,131

⁽¹⁾The amounts in the above table are reflected in ~~parenthetical references~~Note 1 on the Company’s condensed consolidated balance ~~sheet.~~sheets. See the Company’s condensed consolidated balance sheets for additional information.

Other Variable Interest Entities

The Company follows guidance on the consolidation of VIEs that requires companies to utilize a qualitative approach to determine whether it is the primary beneficiary of a VIE. The process for identifying the primary beneficiary of a VIE requires consideration of the factors that indicate a party has the power to direct the activities that most significantly impact the joint ~~venture's~~ventures economic performance, including powers granted to the joint ~~venture's~~ventures program manager, powers contained in the joint venture governing board and, to a certain extent, a company's economic interest in the joint venture. The Company analyzes its joint ventures and classifies them as either:

•a VIE that must be consolidated because the Company is the primary beneficiary or the joint venture is not a VIE and the Company holds the majority voting interest with no significant participative rights available to the other partners; or

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

(in thousands, except per share amounts)

•a VIE that does not require consolidation and is treated as an equity method investment because the Company is not the primary beneficiary or the joint venture is not a VIE and the Company does not hold the majority voting interest.

The Company executes certain contracts jointly with third parties through various forms of joint ventures. Although the joint ventures own and hold the contracts with the clients, the services required by the contracts are typically performed by the Company and the Company’s joint venture partners, or by other subcontractors under subcontracting agreements with the joint ventures. Many of these joint ventures are formed for a specific project. The assets of the Company’s joint ventures generally consist almost entirely of cash and land, and the liabilities of our joint ventures generally consist almost entirely of amounts due to the joint venture partners. Many of the joint ventures are deemed to be VIEs because they lack sufficient equity to finance the activities of ~~the joint venture.~~

In January 2019, the Company entered into a joint venture with one other party to co-own an entity whose purpose is owning and leasing a parcel of land and attached structures to third-party entities. The joint venture has no employees and is controlled by the board of directors made up of representatives from both companies. Prior to January 2019, the Company had determined it was the primary beneficiary of the VIE and fully consolidated the entity. Upon the formation of the joint venture, the Company determined it was no longer the primary beneficiary, based on the assessment of considerations referenced above, and deconsolidated the VIE and recorded the Company’s investment in the joint venture as an equity method investment. With the deconsolidation of the VIE and the recognition of the equity method investment the Company recognized a gain of $2,160 in operating income and recorded an equity method investment of $1,361 in other assets. In addition, the Company has loaned the joint venture $1,506 and made an initial contribution at its formation in exchange for 50% of the shares in the joint venture.

Unconsolidated joint ventures are accounted for under the equity method. For those joint ventures, the Company's investment balances for the joint venture are included in other assets on the condensed consolidated balance ~~sheet~~sheets and the Company’s pro rata share of net income or loss is included in operating income. The Company’s investments in equity method joint ventures on the condensed consolidated balance sheets as of March 31, ~~2019~~2020 and December 31, ~~2018~~2019 was a net asset of ~~$1,361~~$1,448 and ~~$0,~~$1,292, respectively. During the three months ended March 31, 2020 and 2019, the Company recognized ~~no income or~~ expense of $53 and $0, respectively, from equity method joint ventures.

13. NON-CONTROLLING INTERESTS AND EQUITY

Redeemable Non-controlling Interests

The Company’s wholly owned subsidiary with a membership interest in the investment fund formed in the third quarter of 2015 has the right, beginning on the fifth anniversary of the final funding of the variable rate construction and term loans due 2023 and extending for six months, to elect to require the non-controlling interest holder to sell all of its membership units to the Company’s wholly owned subsidiary, ~~(the “Call Option”).~~a call option. The Company’s investment fund, which was formed in the third quarter of 2015, also includes a right, beginning on the sixth anniversary of the final funding and extending for one year, for the non-controlling interest holder to elect to require the Company’s wholly owned subsidiary to purchase all of its membership interests in the fund, ~~(the “Put Option”).~~a put option.

The Company’s wholly owned subsidiary with a membership interest in the investment fund formed in the second quarter of 2017 has the right, beginning on the fifth anniversary of the final funding of the non-controlling interest holder and extending for six months, to elect to require the non-controlling interest holder to sell all of its membership units to the Company’s wholly owned subsidiary, a call option. The Company’s investment fund formed in the second quarter of 2017 also includes a right, beginning on the sixth anniversary of the final funding and extending for one year, for the non-controlling interest holder to elect to require the Company’s wholly owned subsidiary to purchase all of its membership interests in the fund, a put option.

The Company’s wholly owned subsidiary with a membership interest in the investment fund formed in the second quarter of 2018 has the right, beginning on the fifth anniversary of the investment fund’s final project being placed into service and extending for six months, to elect to require the non-controlling interest holder to sell all of its membership units to the Company’s wholly owned subsidiary, a call option. The Company’s investment fund formed in the second quarter of 2018 also includes a right, upon on the expiration of the call option and extending for six months, for the non-controlling interest holder to elect to require the Company’s wholly owned subsidiary to purchase all of its membership interests in the fund, a put option.

The Company’s wholly owned subsidiary with a membership interest in the investment fund formed in the fourth quarter of 2018 has the right, beginning on the fifth anniversary on the last projects placed in-service date and extending for six months, to

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~~AMERESCO, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

~~(in thousands, except per share amounts)~~

elect to require the non-controlling interest holder to sell all of its membership units to the Company’s wholly owned subsidiary, a call option. The Company’s investment fund formed in the fourth quarter of 2018 also includes a right, upon the expiration of the call option and extending for six months, for the non-controlling interest partner to elect to require the Company’s wholly owned subsidiary to purchase all of its membership interests in the fund, a put option.

The Company’s wholly owned subsidiary with a membership interest in the investment fund formed in the fourth quarter of 2019 has the right, beginning on the fifth anniversary on the last projects placed in-service date and extending for six months, to elect to require the non-controlling interest holder to sell all of its membership units to the Company’s wholly owned subsidiary, a call option. The Company’s investment fund formed in the fourth quarter of 2019 also includes a right, beginningsix months after the fifth anniversary of the final funding and extending for one year, for the non-controlling interest partner to elect to require the Company’s wholly owned subsidiary to purchase all of its membership interests in the fund, a put option.

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AMERESCO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

(in thousands, except per share amounts)

The purchase price for two of the investment funds investors’ interests under the call options is equal to the fair market value of such interest at the time the option is exercised. The purchase price for two of the ~~other two~~ investment funds investor’s interests under the call options is equal to the greater of (i) the fair market value of such interests at the time the option is exercised or (ii) 7% of the investors’ contributed capital balance at the time the option is exercisable. The purchase price for the remaining investment fund investor’s interests under the call options is equal to the greater of (i) the fair market value of such interests at the time the option is exercised or (ii) 5% of the investors’ contributed capital balance at the time the option is exercisable.The call options are exercisable beginning on the date that specified conditions are met for each respective fund. None of the call options are expected to become exercisable prior to 2021.

The purchase price for two of the funds investors’ interests in the investment funds under the put options is the lessor of fair market value at the time the option is exercised and a specified amount, ranging from $659 - $917. The purchase price for the ~~other~~ two ~~of the fund~~remaining funds investors’ interest in the investment funds under the put options is the sum of (i) the fair market value at the time the option is exercised, and (ii) the closing costs incurred by the investor in connection with the exercise of the put option.The purchase price for the remaining fund investors’ interest in the investment funds under the put options is the lessor of fair market value at the time the option is exercised and the sum of (i) 5% of the investors’ contributed capital balance at the time the option is exercisable, and (ii) the fair market value of any unpaid tax law change losses incurred by the investor in connection with the exercise of the put option. The put options for the investment funds are exercisable beginning on the date that specified conditions are met for each respective fund. The put options are not expected to become exercisable prior to 2022.

Because the put options represents redemption features that are not solely within the control of the Company, the non-controlling interests in these funds are presented outside of permanent equity. Redeemable non-controlling interests are reported using the greater of their carrying value at each reporting date (which is impacted by attribution under the ~~HLBV~~hypothetical liquidation at book value method) or their estimated redemption value in each reporting period. At both March 31, ~~2019~~2020 and December 31, ~~2018~~2019 redeemable non-controlling interests were reported at their carrying value totaling ~~$13,341~~$31,939 and ~~$14,719,~~$31,616, respectively, as the carrying value at each reporting period was greater than the estimated redemption value.

14. EARNINGS PER SHARE AND OTHER EQUITY RELATED INFORMATION

Earnings Per Share

Basic earnings per share is calculated using the Company’s weighted-average outstanding common shares, including vested restricted shares. When the effects are not anti-dilutive, diluted earnings per share is calculated using the weighted-average outstanding common shares; the dilutive effect of convertible preferred stock, under the “if converted” method; and the treasury stock method with regard to warrants and stock options; all as determined under the treasury stock method.


	Three Months Ended March 31,
	2020		2019
Net income attributable to common shareholders	$	6,201	$	4,147
Basic weighted-average shares outstanding	47,384		46,293
Effect of dilutive securities:
Stock options	1,113		1,361
Diluted weighted-average shares outstanding	48,497		47,654

For the three months ended March 31, 2020 and 2019, the total number of shares of common stock related to stock options excluded from the calculation of dilutive shares, as the effect would be anti-dilutive, were 431 and 293, respectively.

Stock-Based Compensation Expense

For the three months ended March 31, 2020 and 2019, the Company recorded stock-based compensation expense, including expense related to the Employee Stock Purchase Plan (“ESPP”), of $429 and $385, respectively, in connection with the stock-based payment awards. The compensation expense is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of income. As of March 31, 2020, there was $10,757 of unrecognized

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

(in thousands, except per share amounts)

compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted-average period of 3.0 years.

No awards to individuals who were not either an employee or director of the Company occurred during the three months ended March 31, 2020 or during the year ended December 31, 2019.

Stock Option Grants

During the three months ended March 31, 2020, the Company granted 196 common stock options to certain employees and directors under its 2010 Stock Incentive Plan, which have a contractual life of ten years and vest over a five-year period.

Share Repurchase Program

In April 2016, the Company’s Board of Directors authorized the repurchase of up to $10,000 of the Company’s Class A common stock from time to time on the open market in privately negotiated transactions. The Company’s Board of Directors authorized an increase in the Company’s share repurchase authorization to $15,000 of the Company's Class A common stock in February 2017 and to $17,553 of the Company's Class A common stock in August 2019, in each case, from time to time on the open market or in privately negotiated transactions. The timing and amount of any shares repurchased will be determined by the Company's management based on its evaluation of market conditions and other factors. Any repurchased shares will be available for use in connection with its stock plans and for other corporate purposes. The repurchase program has and will be funded using the Company's working capital and borrowings under its revolving line of credit. The Company accounts for share repurchases using the cost method. Under this method, the cost of the share repurchase is recorded entirely in treasury stock, a contra equity account. During the three months ended March 31, 2020, the Company repurchased an immaterial amount of shares of common stock. During the three months ended March 31, 2019, the Company did 0t repurchase any shares of common stock.

15. BUSINESS SEGMENT INFORMATION

The Company reports results under ASC 280, Segment Reporting. The Company’s reportable segments are U.S. Regions, U.S. Federal, Canada and Non-Solar Distributed Generation (“DG”). The Company’s U.S. Regions, U.S. Federal and Canada segments offer energy efficiency products and services, which include the design, engineering and installation of equipment and other measures to improve the efficiency and control the operation of a facility’s energy infrastructure, renewable energy solutions and services, which include the construction of small-scale plants that the company owns or develops for customers that produce electricity, gas, heat or cooling from renewable sources of energy and O&M services. The Company’s Non-Solar DG segment sells electricity, processed renewable gas fuel, heat or cooling, produced from renewable sources of energy, other than solar, and generated by small-scale plants that the Company owns and O&M services for customer owned small-scale plants. The “All Other” category offers enterprise energy management services, consulting services and the sale of solar-PV energy products and systems which we refer to as integrated-PV.

These segments do not include results of other activities, such as corporate operating expenses not specifically allocated to the segments. Certain reportable segments are an aggregation of operating segments. The reports of the Company’s chief operating decision maker do not include assets at the operating segment level. The accounting policies are the same as those described in the summary of significant accounting policies in Note 2.

~~The reports of~~2 included in the Company’s ~~chief operating decision maker do not include assets at~~annual report on Form 10-K for the ~~operating segment level.~~

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~~AMERESCO, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)~~

~~(in thousands, except per share amounts)~~

year ended December 31, 2019 filed with the Securities and Exchange Commission on March 4, 2020.

An analysis of the Company’s business segment information and reconciliation to the condensed consolidated financial statements is as follows:

U.S. Regions U.S. Federal Canada Non-Solar DG All Other Total Consolidated
Three Months Ended March 31, 2019
Revenues $ 55,597
$ 43,057
$ 7,148
$ 21,230
$ 23,080
$ 150,112
Interest income 63
49
—
21
—
133
Interest expense 857
210
164
1,577
—
2,808
Depreciation and amortization of intangible assets 2,182
817
275
5,216
348
8,838
Unallocated corporate activity —
—
—
—
—
(8,008 )
Income (loss) before taxes, excluding unallocated corporate activity (278 ) 5,621
(289 ) 1,381
4,701
11,136
Three Months Ended March 31, 2018
Revenues $ 74,691
$ 47,785
$ 8,904
$ 18,117
$ 17,913
$ 167,410
Interest income 1
20
—
35
—
56
Interest expense 1,191
241
484
1,081
—
2,997
Depreciation and amortization of intangible assets 1,330
672
289
4,064
379
6,734
Unallocated corporate activity —
—
—
—
—
(6,869 )
Income (loss) before taxes, excluding unallocated corporate activity 4,618
5,817
(2,362 ) 2,610
912
11,595

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

(in thousands, except per share amounts)


	U.S. Regions		U.S. Federal		Canada		Non-Solar DG		All Other		Total Consolidated
Three Months Ended March 31, 2020
Revenues	$	84,727	$	68,745	$	11,392	$	22,724	$	24,825	$	212,413
Interest income	36		40		—		14		—		90
Interest expense	1,481		746		172		1,045		15		3,459
Depreciation and amortization of intangible assets	2,763		1,017		391		5,287		376		9,834
Unallocated corporate activity	—		—		—		—		—		(10,346)
Income before taxes, excluding unallocated corporate activity	3,723		7,094		(221)		1,669		2,212		14,477
Three Months Ended March 31, 2019
Revenues	$	55,597	$	43,057	$	7,148	$	21,230	$	23,080	$	150,112
Interest income	63		49		—		21		—		133
Interest expense	857		210		164		1,577		—		2,808
Depreciation and amortization of intangible assets	2,182		817		275		5,216		348		8,838
Unallocated corporate activity	—		—		—		—		—		(8,008)
Income before taxes, excluding unallocated corporate activity	(278)		5,621		(289)		1,381		4,701		11,136

~~15.~~

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

(in thousands, except per share amounts)

16. DEBT

As of March 31, 2020 and December 31, 2019, the Company’s debt comprised the following:


	Commencement Date	Maturity Date	Acceleration Clause⁽²⁾	Rate as of
								March 31, 2020		March 31, 2020	December 31, 2019
Senior secured credit facility, interest at varying rates monthly in arrears	June 2015	June 2024	NA	4.36	%	$	142,022	$	112,216
Variable rate term loan payable in semi-annual installments	January 2006	February 2021	Yes	3.70	%	625		625
Variable rate term loan payable in semi-annual installments	January 2006	June 2024	Yes	3.45	%	6,609		6,609
Term loan payable in quarterly installments	March 2011	March 2021	Yes	7.25	%	666		831
Term loan payable in monthly installments	October 2011	June 2028	NA	6.11	%	3,314		3,649
Variable rate term loan payable in quarterly installments	October 2012	May 2020	NA	4.95	%	27,617		28,217
Variable rate term loan payable in quarterly installments	September 2015	March 2023	NA	4.20	%	15,995		15,976
Term loan payable in quarterly installments	August 2016	July 2031	NA	4.95	%	3,392		3,769
Term loan payable in quarterly installments	March 2017	March 2028	NA	5.00	%	3,416		3,521
Term loan payable in monthly installments	April 2017	April 2027	NA	4.50	%	21,823		22,553
Term loan payable in quarterly installments	April 2017	February 2034	NA	5.61	%	2,487		2,706
Variable rate term loan payable in quarterly installments	June 2017	December 2027	NA	3.90	%	11,740		11,740
Variable rate term loan payable in quarterly installments	February 2018	August 2022	Yes	8.95	%	12,436		15,645
Term loan payable in quarterly installments	June 2018	December 2038	Yes	5.15	%	28,073		28,583
Variable rate term loan payable in semi-annual installments	June 2018	June 2033	Yes	3.50	%	9,003		9,003
Variable rate term loan payable in monthly/quarterly installments	October 2018	October 2029	Yes	3.94	%	8,923		9,092
Long term finance liability in semi-annual installments⁽³⁾	July 2019	July 2039	NA	0.28	%	3,785		3,841
Long term finance liability in semi-annual installments⁽³⁾	November 2019	November 2039	NA	—	%	6,970		8,794
Term loan payable in quarterly installments	December 2019	December 2021	Yes	6.500	%	24,167		27,226
Financing leases⁽¹⁾						28,378		28,497
						$	361,441	$	343,093
Less - current maturities						69,282		69,969
Less - deferred financing fees						6,606		6,943
Long term debt and financing lease liabilities						$	285,553	$	266,181

Commencement Date Maturity Date
Acceleration Clause⁽²⁾

Rate as of March 31, 2019 March 31, 2019 December 31, 2018
Senior secured credit facility, interest at varying rates monthly in arrears June 2015 June 2020 NA 4.85 % $ 52,972
$ 43,074
Variable rate term loan payable in semi-annual installments January 2006 February 2021 Yes 4.85 % 936
936
Variable rate term loan payable in semi-annual installments January 2006 June 2024 Yes 4.60 % 7,426
7,426
Term loan payable in quarterly installments March 2011 March 2021 Yes 7.25 % 1,464
1,464
Term loan payable in monthly installments October 2011 June 2028 NA 6.11 % 3,886
3,843
Variable rate term loan payable in quarterly installments October 2012 June 2020 NA 6.10 % 30,180
30,674
Variable rate term loan payable in quarterly installments September 2015 March 2023 NA 5.10 % 17,227
17,208
Term loan payable in quarterly installments August 2016 July 2031 NA 4.95 % 3,939
3,925
Term loan payable in quarterly installments March 2017 March 2028 NA 5.00 % 3,839
3,945
Term loan payable in monthly installments⁽³⁾
April 2017 April 2027 NA 4.50 % 22,081
22,081
Term loan payable in quarterly installments
April 2017 February 2034 NA 5.61 % 2,791
2,735
Variable rate term loan payable in quarterly installments June 2017 December 2027 NA 5.05 % 12,917
12,915
Variable rate term loan payable in quarterly installments February 2018 August 2022 Yes 10.10 % 18,042
21,475
Term loan payable in quarterly installments
June 2018 December 2038 Yes 5.15 % 30,138
30,069
Variable rate term loan payable in semi-annual installments
June 2018 June 2033 Yes 4.65 % 9,670
9,668
Variable rate term loan payable in monthly/quarterly installments October 2018 October 2029 Yes 4.995 % 9,077
9,072
Financing leases⁽¹⁾
33,337
33,363
$ 259,922
$ 253,873
Less - current maturities 55,731
26,890
Less - deferred financing fees 7,177
7,821
Long-term debt and financing lease liabilities $ 197,014
$ 219,162

⁽¹⁾Financing leases do not include approximately ~~$25,321~~$21,765 in future interest payments

⁽²⁾These agreements have acceleration causes that, in the event of default, as defined, the payee has the option to accelerate payment terms and make due the remaining principal and the required interest balance according to the agreement

⁽³⁾ These agreements are sale-leaseback arrangements that provides for the sale of solar PV projects to a third party investor and the simultaneous leaseback of the projects. In accordance with Topic 842, Leases, these transactions are accounted for as a

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

(in thousands, except per share amounts)

failed sale as the Company retains control of the underlying assets and as such, are classified as financing liabilities. The low interest rates are the results of tax credits which were transferred to the counterparty.

Senior Secured Credit Facility - Revolver and Term Loan

As of March 31, ~~2019, this construction~~2020, the Company amended the Company’s senior secured credit facility which increased the total funded debt to EBITDA covenant ratio to a maximum of 3.75 from 3.25 for the year ended December 31, 2020. The amendment also increased the Eurocurrency Rate floor to 1% from 0%. The total commitment under the amended credit facility (revolving credit, term loan ~~has an additional $2,742 commitment that could be drawn upon~~and swing line) remains unchanged, which is $185,000.

~~There were no new debt agreements in the three months ended~~At March 31, ~~2019.~~2020, funds of $20,736 are available for borrowing under the revolving credit facility.

Variable Rate Term Loan

In December 2019, the Company amended the variable rate term loan, revised certain debt service reserve requirements and certain distribution conditions under the loan agreement. During March 2020, the Company also amended the agreement to extend the date of the final principal payment to the maturity date of the loan, May 31, 2020. This amendment also revised certain distribution conditions under the loan agreement.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~You~~You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, ~~2018~~2019 included in our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 filed on March ~~8, 2019~~4, 2020 with the U.S. Securities and Exchange Commission (“SEC”). This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward looking statements include statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans, objectives of management, expected market growth and other characterizations of future events or circumstances. All statements, other than statements of historical fact, including statements that refer to our expectations as to the future growth of our business and associated expenses; our expectations as to revenue generation; the future availability of borrowings under our revolving credit facility; the expected future growth of the market for energy efficiency and renewable energy solutions; our backlog, awarded projects and recurring revenue and the timing of such matters; our expectations as to acquisition activity; the impact of any restructuring; the uses of future earnings; our intention to repurchase shares of our Class A common stock; the expected energy and cost savings of our projects; and the expected energy production capacity of our renewable energy plants; and other characterizations of future events or circumstances are forward-looking statements. ~~These~~Currently, one of the most significant factors, however, is the potential adverse effect of the current pandemic of the novel coronavirus, or COVID-19, on our financial condition, results of operations, cash flows and performance and the global economy and financial markets. The extent to which COVID-19 impacts us, suppliers, customers, employees and supply chains will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, you should interpret many of the risks identified in this report, as well as the risks set forth below, as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19. Forward looking statements are often, but not exclusively, identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” “target,” “project,” “predict” or “continue,” and similar expressions or variations. These forward-looking statements are based on current expectations and assumptions that are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially and adversely from future results expressed or implied by such forward-looking statements. Risks, uncertainties and factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors,” set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019 and elsewhere in this Quarterly Report on Form 10-Q. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. Subsequent events and developments may cause our views to change. However, while we may elect to update these ~~forward-looking~~forward looking statements at some point in the future, we have no current intention of doing so and undertake no obligation to do so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

Overview

Ameresco is a leading provider of energy efficiency solutions for facilities throughout North America and Europe. We provide solutions that enable customers to reduce their energy consumption, lower their operating and maintenance costs and realize environmental benefits. Our comprehensive set of services includes upgrades to a facility’s energy infrastructure and the construction and operation of small-scale renewable energy plants.

In addition to organic growth, strategic acquisitions of complementary businesses and assets have been an important part of our historical development. Since inception, we have completed numerous acquisitions, which have enabled us to broaden our service offerings and expand our geographical reach.

COVID-19 Update

In March 2020, the World Health Organization categorized Coronavirus Disease 2019 (“COVID-19”) as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how it will impact our suppliers, customers, employees and supply chains. While we did not incur significant disruptions during the three months ended March 31, 2020 from the COVID-19 pandemic, we are unable to predict the impact that the COVID-19 pandemic will have on our financial condition, results of operations and cash flows due to numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others.

Table of Contents

Further, the overall impact of COVID-19 on our condensed consolidated results of operations for the three months ended March 31, 2020 was not material. However, the impact that COVID-19 will have on our consolidated results of operations throughout 2020 remains uncertain. We expect to experience delays in our project award conversions and potential construction slowdowns as a result of known shelter-in-place restrictions. We will continue to evaluate the nature and extent of these potential impacts to our business, consolidated results of operations, segment results, liquidity and capital resources.

Effects of Seasonality

We are subject to seasonal fluctuations and construction cycles, particularly in climates that experience colder weather during the winter months, such as the northern United States and Canada, or at educational institutions, where large projects are typically carried out during summer months when their facilities are unoccupied. In addition, government customers, many of which have fiscal years that do not coincide with ours, typically follow annual procurement cycles and appropriate funds on a fiscal-year basis even though contract performance may take more than one year. Further, government contracting cycles can be affected by the timing of, and delays in, the legislative process related to government programs and incentives that help drive demand for energy efficiency and renewable energy projects. As a result, our revenues and operating income in the third and fourth quarter are typically higher, and our revenues and operating income in the first quarter are typically lower, than in other quarters of the year. As a result of such fluctuations, we may occasionally experience declines in revenues or earnings as compared to the immediately preceding quarter, and comparisons of our operating results on a period-to-period basis may not be meaningful.

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Our annual and quarterly financial results are also subject to significant fluctuations as a result of other factors, many of which are outside our control. See “Our business is affected by seasonal trends and construction cycles, and these trends and cycles could have an adverse effect on our operating results.” in Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 (“Annual Report”)., and the risks described in Item 1A. Risk Factors in this Quarterly Report on Form 10-Q.

Backlog and Awarded Projects

Total construction backlog represents projects that are active within our ESPC sales cycle. Our sales cycle begins with the initial contact with the customer and ends, when successful, with a signed contract, also referred to as fully-contracted backlog. Our sales cycle recently has been averaging 18 to 4254 months. Awarded backlog is created when a potential customer awards a project to Ameresco following a request for proposal. Once a project is awarded but not yet contracted, we typically conduct a detailed energy audit to determine the scope of the project as well as identify the savings that may be expected to be generated from upgrading the customer’s energy infrastructure. At this point, we also determine the sub-contractor, what equipment will be used, and assist in arranging for third party financing, as applicable. Recently, awarded projects have been taking an average of 12 to 24 months to result in a signed contract and convert to fully-contracted backlog. It may take longer, however, depending upon the size and complexity of the project. Historically, approximately 90% of our awarded backlog projects have resulted in a signed contract. After the customer and Ameresco agree to the terms of the contract and the contract becomes executed, the project moves to fully-contracted backlog. The contracts reflected in our fully-contracted backlog typically have a construction period of 12 to 36 months and we typically expect to recognize revenue for such contracts over the same period. Fully-contracted backlog begins converting into revenues generated from backlog over time using cost based input methods once construction has commenced. See “We may not recognize all revenues from our backlog or receive all payments anticipated under awarded projects and customer contracts” and “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” in Item 1A, Risk Factors in our Annual Report, and the risks described in Item 1A. Risk Factors in this Quarterly Report on Form ~~10-K.~~10-Q.

The overall impact of COVID-19 on our condensed consolidated results of operations for the three months ended March 31, 2020 was not material. However, the impact that COVID-19 will have on our consolidated results of operations throughout 2020 remains uncertain. We expect to experience delays in our project award conversions and potential construction slowdowns as a result of known shelter-in-place restrictions. We will continue to evaluate the nature and extent of these potential impacts to our business, consolidated results of operations, segment results, liquidity and capital resources. See “We may not recognize all revenues from our backlog or receive all payments anticipated under awarded projects and customer contracts” and “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” in Item 1A, Risk Factors in our Annual Report, and the risks described in Item 1A. Risk Factors in this Quarterly Report on Form 10-Q.

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As of March 31, 2020, we had fully-contracted backlog of approximately $1,049.9 million in expected future revenues under signed customer contracts for the installation or construction of projects; and we also had been awarded projects for which we had not yet signed customer contracts with estimated total future revenues of an additional $1,130.3 million. As of March 31, 2019, we had fully-contracted backlog of approximately $753.6 million in expected future revenues under signed customer contracts for the installation or construction of projects; and we also had been awarded projects for which we had not yet signed customer contracts with estimated total future revenues of an additional $1,283.0 million. As of March 31, 2018, we had fully-contracted backlog of approximately $595.6 million in expected future revenues under signed customer contracts for the installation or construction of projects; and we also had been awarded projects for which we had not yet signed customer contracts with estimated total future revenues of an additional $1,293.0 million.

We define our 12-month backlog as the estimated amount of revenues that we expect to recognize in the next twelve months from our fully-contracted backlog. As of March 31, ~~2019~~2020 and ~~2018,~~2019, our 12-month backlog was $514.4 million and $389.3 million, ~~and $360.3~~respectively.

As of March 31, 2020, we had O&M backlog of approximately $1,131.7 million ~~respectively.~~in expected future revenues under signed multi-year customer contracts for the delivery of O&M services. As of March 31, 2019, we had O&M backlog of approximately $917.9 million in expected future revenues under signed multi-year customer contracts for the delivery of O&M services.

Assets in development, which represents the potential design/build project value of small-scale renewable energy plants that have been awarded or for which we have secured development rights, ~~was $549.3~~were $658.6 million and ~~$221.4~~$549.3 million as of March 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expense and related disclosures. The most significant estimates with regard to these condensed consolidated financial statements relate to our estimates of ~~uninstalled materials~~final construction contract profit in accordance with accounting for long-term contracts under the revenue recognition requirements of contracts with our customers, allowance for ~~doubtful accounts,~~credit losses, inventory reserves, realization of project development costs, leases, fair value of derivative financial instruments, ~~leases,~~ accounting for business acquisitions, stock-based awards, impairment of long-lived assets and goodwill, income taxes, self insurance reserves and potential liability in conjunction with certain commitments and contingencies. Actual results could differ from those estimates.

Such estimates and assumptions are based on historical experience and on various other factors that management believes to be reasonable under the circumstances. Estimates and assumptions are made on an ongoing basis, and accordingly, the actual results may differ from these estimates under different assumptions or conditions.

The following are certain critical accounting policies that, among others, affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements:

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•Revenue Recognition;

•Energy Assets;

•Leases;

•Goodwill and Intangible Assets;

•Derivative Financial Instruments; and

•Variable Interest Entities.

Further details regarding our critical accounting policies and estimates can be found in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report. In addition, please refer to Note 2, “Summary of Significant Accounting Policies,” of our Notes to ~~Condensed Consolidated Financial Statements~~the audited consolidated financial statements for the year ended December 31, 2019, and notes thereto, included ~~under Part I, Item 1 of this Quarterly Report on Form 10-Q. Except for accounting policies related to our adoption of ASC 842, Management~~in the Company’s Annual Report. The Company has determined that no material changes concerning our critical accounting policies have occurred since December 31, ~~2018~~.2019.

Recent Accounting Pronouncements

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See Note 2, Summary of Significant Accounting Policies, of Notes to Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Results of Operations

The following tables set forth certain financial data from the condensed consolidated statements of income expressed as a percentage of revenues for the periods presented (in thousands):


	Three Months Ended March 31,										Three Months Ended March 31,
	2019				2018						2020						2019
	Dollar		% of		Dollar			% of			Dollar		% of		Dollar		% of
	Amount		Revenues		Amount			Revenues			Amount		Revenues		Amount		Revenues
Revenues	$	150,112	100.0	%	$	167,410		100.0	%	Revenues	$	212,413	100.0	%	$	150,112	100.0	%
Cost of revenues	117,480		78.3	%	131,937			78.8	%	Cost of revenues	173,967		81.9	%	117,480		78.3	%
Gross profit	32,632		21.7	%	35,473			21.2	%	Gross profit	38,446		18.1	%	32,632		21.7	%
Selling, general and administrative expenses	26,083		17.4	%	27,204			16.2	%	Selling, general and administrative expenses	28,924		13.6	%	26,083		17.4	%
Operating income	6,549		4.4	%	8,269			4.9	%	Operating income	9,522		4.5	%	6,549		4.4	%
Other expenses, net	3,421		2.3	%	3,544			2.1	%	Other expenses, net	5,389		2.5	%	3,421		2.3	%
Income before provision from income taxes	3,128		2.1	%	4,725			2.8	%	Income before provision from income taxes	4,133		1.9	%	3,128		2.1	%
Income tax provision (benefit)	257		0.2	%	(2,779		)	(1.7	)%	Income tax provision (benefit)	(2,503)		(1.2)	%	257		0.2	%
Net income	2,871		1.9	%	7,504			4.5	%	Net income	6,636		3.1	%	2,871		1.9	%
Net (income) loss attributable to redeemable non-controlling interest	1,276		0.9	%	(516		)	(0.3	)%
Net loss (income) attributable to redeemable non-controlling interest										Net loss (income) attributable to redeemable non-controlling interest	(435)		(0.2)	%	1,276		0.9	%
Net income attributable to common shareholders	$	4,147	2.8	%	$	6,988		4.2	%	Net income attributable to common shareholders	$	6,201	2.9	%	$	4,147	2.8	%

Revenues

The following tables set forth a comparison of our revenues for the periods presented (in thousands):

Three Months Ended March 31, Dollar Percentage
2019 2018 Change Change
Revenues $ 150,112
$ 167,410
$ (17,298 ) (10.3 )%


	Three Months Ended March 31,						Dollar		Percentage
	2020		2019		Change		Change
Revenues	$	212,413	$	150,112	$	62,301	41.5	%

Revenues ~~decreased $17.3~~increased $62.3 million, or ~~10.3%~~41.5%, to ~~$150.1~~$212.4 million for the three months ended March 31, ~~2019~~2020 compared to the same period of ~~2018~~2019 primarily due to a ~~$19.1~~$29.1 million ~~decrease~~increase in ~~revenues from~~ our U.S. Regions segment, a ~~$4.7~~$25.7 million ~~decrease~~increase in our U.S. Federal segment, a ~~$1.8~~$4.2 million ~~decrease~~increase in our Canada segment, ~~partially offset by~~ a ~~$3.1~~$1.7 million increase in our All Other segment and a $1.5 million increase in our Non-Solar DG ~~segment and a $5.2 million increase in our All Other~~ segment.

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Cost of Revenues and Gross Profit

The following tables set forth a comparison of our cost of revenues and gross profit for the periods presented (in thousands):


	Three Months Ended March 31,						Dollar			Percentage			Three Months Ended March 31,								Dollar		Percentage
	2019			2018			Change			Change			2020			2019			Change		Change
Cost of revenues	$	117,480		$	131,937		$	(14,457	)	(11.0	)%	Cost of revenues	$	173,967		$	117,480		$	56,487	48.1	%
Gross margin	21.7		%	21.2		%						Gross margin	18.1		%	21.7		%

Cost of revenues ~~decreased $14.5~~increased $56.5 million, or ~~11.0%~~48.1%, to ~~$117.5~~$174.0 million and gross margin percentage ~~increased~~decreased to ~~21.7%~~18.1%, from ~~21.2%~~21.7%, for the three months ended March 31, ~~2019~~2020 compared to the same period of ~~2018, respectively.~~2019. The ~~decrease~~increase in cost of revenues is primarily due to ~~a decrease~~the increase in project revenues from our U.S. Regions and U.S. Federal segment. The ~~increase~~decrease in gross

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margin is primarily due to ~~timing~~a mix of ~~revenue recognized as a result of the phase of active~~lower margin projects in our U.S. Regions and U.S. Federal segment and ~~an increase in higher~~lower margin energy and incentive revenue ~~from renewable gas assets the Company owns~~ in our Non-Solar DG segment.

Selling, General and Administrative Expenses

The following tables set forth a comparison of our selling, general and administrative expenses for the periods presented (in thousands):

Three Months Ended March 31, Dollar Percentage
2019 2018 Change Change
Selling, general and administrative expenses $ 26,083
$ 27,204
$ (1,121 ) (4.1 )%


	Three Months Ended March 31,						Dollar		Percentage
	2020		2019		Change		Change
Selling, general and administrative expenses	$	28,924	$	26,083	$	2,841	10.9	%

Selling, general and administrative expenses ~~decreased $1.1~~increased $2.8 million, or ~~4.1%~~10.9%, to ~~$26.1~~$28.9 million for the three months ended March 31, ~~2019,~~2020, compared to the same period of ~~2018,~~2019, primarily due to a gain of $2.2 million recognized on the deconsolidation of a variable interest ~~entity.~~entity during the first quarter of 2019.

Amortization expense of intangible assets related to customer relationships, non-compete agreements, technology and trade names is included in selling, general and administrative expenses in the condensed consolidated statements of income. For the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, we recorded amortization expense related to these intangible assets of $0.2 ~~million and $0.3 million, respectively.~~million.

Other Expenses, Net

Other expenses, net, includes gains and losses from derivatives and foreign currency transactions, interest income and expenses and amortization of deferred financing costs. Other expenses, net ~~decreased $0.1~~increased $2.0 million to ~~$3.4~~$5.4 million for the three months ended March 31, ~~2019~~2020 compared to the same period of ~~2018,~~2019, primarily due to ~~favorable~~higher interest expenses and unfavorable foreign exchange rate fluctuations realized.

Income Before Taxes

Income before taxes ~~decreased $1.6~~increased $1.0 million, or ~~33.8%~~32.1%, to ~~$3.1~~$4.1 million for the three months ended March 31, ~~2019~~2020 compared to the same period of ~~2018,~~2019, due to the reasons described above.

Provision from Income Taxes

The ~~provision~~benefit for income taxes was $2.5 million for the three months ended March 31, 2020, compared to a provision of $0.3 million for the three months ended March 31, ~~2019, compared to a benefit of $2.8 million for the three months ended March 31, 2018.~~2019. The estimated ~~annual~~ effective annualized tax rate impacted by period discrete items applied for the three months ended March 31, ~~2019~~2020 was ~~8.2%~~(60.6%) of benefit compared to ~~(58.8)%~~8.2% of provision for the three months ended March 31, ~~2018.~~ 2019.

The ~~increase in~~principal reason for the difference between the statutory rate ~~compared to~~and the ~~same period in the prior year was due primarily to the inclusion in the prior year of~~estimated annual effective rate for 2020 were the effects of ~~a $5.9 million discrete~~investment tax ~~benefit~~credits to which the Company is entitled from solar plants which have been placed into service or are forecasted to be placed into service during 2020, tax deductions related to ~~the 2017~~ Section 179D deduction, ~~which was extended in February 2018~~tax basis adjustments on certain partnership flip transactions and ~~as a result~~tax rate benefits associated with net operating loss carrybacks made possible by the passing of ~~the timing of the extension was included in 2018.~~

CARES Act on March 27, 2020. The principal reason for the difference between the statutory rate and the estimated annual effective rate for 2019 were the effects of investment tax credits to which the Company is entitled from solar plants which ~~have been~~were placed into service or ~~will~~were forecasted to be placed in

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into service induring 2019. The principle reasons for the difference between the statutory rate and the estimated annual effective tax rate for 2018 were the effects of a $5.9 million benefit of the 2017 Section 179D deduction, which was extended in February 2018 and was included as a tax deduction in 2018, and the use of investment tax credits to which the Company is entitled from owned plants.

The investment tax credits and production tax credits to which the Company may be entitled fluctuate from year to year based on the cost of the renewable energy plants the Company places or expects to place in service and production levels at ~~company~~Company owned facilities in ~~that~~the respective year. As part of the Tax Extender and Disaster Relief Act of 2019, signed into law December 20, 2019 Section 179D was extended through December 31, 2020.

Net Income and Earnings Per Share

Net income ~~decreased $4.6~~increased $3.8 million, or ~~61.7%~~131.1%, to ~~$2.9~~$6.6 million for the three months ended March 31, ~~2019~~2020 compared to ~~$7.5~~$2.9 million for the same period of ~~2018.~~2019.

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Basic ~~and~~earnings per share for the three months ended March 31, 2020 was $0.13, an increase of $0.04 per share compared to the same period of 2019. Diluted earnings per share for the three months ended March 31, ~~2019~~2020 was ~~$0.09, a decrease~~$0.13, an increase of ~~$0.06~~$0.04 per share, compared to the same period of ~~2018.~~2019.

Business Segment Analysis

We report results under ASC 280, Segment Reporting. Our reportable segments for the three months ended March 31, ~~2019~~2020 are U.S. Regions, U.S. Federal, Canada and Non-Solar ~~Distribution~~Distributed Generation (“DG”). Our U.S. Regions, U.S. Federal and Canada segments offer energy efficiency products and services, which include: the design, engineering and installation of equipment and other measures to improve the efficiency and control the operation of a facility’s energy infrastructure; renewable energy solutions and services, which include the construction of small-scale plants that we own or develop for customers that produce electricity, gas, heat or cooling from renewable sources of energy; and O&M services. Our Non-Solar DG segment sells electricity, processed renewable gas fuel, heat or cooling, produced from renewable sources of energy, other than solar, and generated by small-scale plants that we own; and O&M services for customer-owned small-scale plants. The “All Other” category offers enterprise energy management services, consulting services and integrated-PV. These segments do not include results of other activities, such as corporate operating expenses not specifically allocated to the segments.

U.S. Regions


	Three Months Ended March 31,						Dollar		Percentage
	2020		2019		Change		Change
Revenues	$	84,727	$	55,597	$	29,130	52.4	%
Income before taxes	$	3,723	$	(278)	$	4,001	1,439.2	%

Three Months Ended March 31, Dollar Percentage
2019 2018 Change Change
Revenues $ 55,597
$ 74,691
$ (19,094 ) (25.6 )%
(Loss) income before taxes $ (278 ) $ 4,618
$ (4,896 ) (106.0 )%

Revenues for our U.S. Regions segment ~~decreased $19.1~~increased $29.1 million, or ~~25.6%~~52.4%, to ~~$55.6~~$84.7 million for the three months ended March 31, ~~2019~~2020 compared to the same period of ~~2018,~~2019 primarily due to an increase in project revenues attributable to timing of revenue recognized as a ~~decrease~~result of the phase of active projects versus the prior year.

Income before taxes for our U.S. Regions segment increased $4.0 million, or 1,439.2%, from ($0.3 million) to $3.7 million for the three months ended March 31, 2020 and 2019, respectively, primarily due to an increase in revenues described above.

U.S. Federal


	Three Months Ended March 31,						Dollar		Percentage
	2020		2019		Change		Change
Revenues	$	68,745	$	43,057	$	25,688	59.7	%
Income before taxes	$	7,094	$	5,621	$	1,473	26.2	%

Revenues for our U.S. Federal segment increased $25.7 million, or 59.7%, to $68.7 million for the three months ended March 31, 2020 compared to the same period of 2019. The increase in revenues was due primarily to an increase in project revenue attributable to timing of revenue recognized as a result of the phase of active projects versus prior year.

Income before taxes for our U.S. Federal segment increased $1.5 million, or 26.2%, to $7.1 million for three months ended March 31, 2020 compared to $5.6 million for the same period of 2019, primarily due to the increase in revenues described above.

Canada


	Three Months Ended March 31,						Dollar		Percentage
	2020		2019		Change		Change
Revenues	$	11,392	$	7,148	$	4,244	59.4	%
Income before taxes	$	(221)	$	(289)	$	68	23.5	%

Revenues for our Canada segment increased to $11.4 million for the three months ended March 31, 2020 compared to $7.1 million the same period of 2019, primarily due to an increase in project revenues related to the progression of certain active projects.

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Loss before taxes for our Canada segment improved $0.1 million for the three months ended March 31, 2020 to $0.2 million of loss compared to a $0.3 million for the same period of 2019. The increase is due primarily to the increase in revenues described above partially offset by unfavorable exchange rate fluctuations versus the prior year.

Non-Solar DG


	Three Months Ended March 31,						Dollar		Percentage
	2020		2019		Change		Change
Revenues	$	22,724	$	21,230	$	1,494	7.0	%
Income before taxes	$	1,669	$	1,381	$	288	20.9	%

Revenues for our Non-Solar DG segment increased $1.5 million, or 7.0%, to $22.7 million for the three months ended March 31, 2020 compared to the same period of 2019, primarily due to an increase in project revenues related to the progression of certain active projects and higher energy and incentive revenue.

Income before taxes for our Non-Solar DG segment increased $0.3 million, or 20.9%, to $1.7 million for the three months ended March 31, 2020 compared to the same period of 2019 primarily due to lower interest expenses partially offset by lower profit margins project revenues.

All Other & Unallocated Corporate Activity


	Three Months Ended March 31,						Dollar		Percentage
	2020		2019		Change		Change
Revenues	$	24,825	$	23,080	$	1,745	7.6	%
Income before taxes	$	2,212	$	4,701	$	(2,489)	(52.9)	%
Unallocated corporate activity	$	(10,346)	$	(8,008)	$	(2,338)	(29.2)	%

Revenues for our All Other segment increased $1.7 million, or 7.6%, to $24.8 million for the three months ended March 31, 2020 compared to the same period of 2019 primarily due to an increase in project revenues attributable to timing of revenue recognized as a result of the phase of active projects versus the prior year.

~~(Loss) income~~Income before taxes for our ~~U.S. Regions~~All Other segment decreased ~~$4.9~~$2.5 million, or ~~106.0%~~52.9%, ~~from an income of $4.6 million~~ to ~~a loss of $0.3~~$2.2 million for the three months ended March 31, ~~2019 and 2018, respectively, primarily due to the decrease in revenues described above.~~

~~U.S. Federal~~

Three Months Ended March 31, Dollar Percentage
2019 2018 Change Change
Revenues $ 43,057
$ 47,785
$ (4,728 ) (9.9 )%
Income before taxes $ 5,621
$ 5,817
$ (196 ) (3.4 )%

~~Revenues for our U.S. Federal segment decreased $4.7 million, or 9.9%, to $43.1 million for the three months ended March 31, 2019~~2020 compared to the same period of ~~2018, primarily~~2019 due to ~~timing of revenue recognized as a result of the phase of active projects.~~

Income before taxes for our U.S. Federal segment decreased $0.2 million, or 3.4%, to $5.6 million for the three months ended March 31, 2019 compared to the same periods of 2018, primarily due to the decrease in revenues described above.

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~~Canada~~

Three Months Ended March 31, Dollar Percentage
2019 2018 Change Change
Revenues $ 7,148
$ 8,904
$ (1,756 ) (19.7 )%
Loss before taxes $ (289 ) $ (2,362 ) $ 2,073
87.8 %

Revenues for our Canada segment decreased $1.8 million, or 19.7%, to $7.1 million for the three months ended March 31, 2019 compared to the same periods of 2018, primarily due to a decrease in project revenues related to slower progression of certain active projects.

Loss before taxes for our Canada segment decreased $2.1 million to $0.3 million compared to $2.4 million for the same period of 2018. The decrease is primarily due to a mix of higher margin projects, lower project development costs and favorable foreign currency exchange rate fluctuations versus the prior year.

~~Non-Solar DG~~

Three Months Ended March 31, Dollar Percentage
2019 2018 Change Change
Revenues $ 21,230
$ 18,117
$ 3,113
17.2 %
Income before taxes $ 1,381
$ 2,610
$ (1,229 ) (47.1 )%

Revenues for our Non-Solar DG segment increased $3.1 million, or 17.2%, to $21.2 million for the three months ended March 31, 2019 compared to the same period of 2018, primarily due to an increase in energy and incentive revenue.

Income before taxes for our Non-Solar DG segment decreased $1.2 million, or 47.1%, to $1.4 million for the three months ended March 31, 2019 compared to the same period of 2018, primarily due to higher depreciation and interest expenses compared to the prior year attributed to the growth of our assets in operations.

~~All Other & Unallocated Corporate Activity~~

Three Months Ended March 31, Dollar Percentage
2019 2018 Change Change
Revenues $ 23,080
$ 17,913
$ 5,167
28.8 %
Income before taxes $ 4,701
$ 912
$ 3,789
415.5 %
Unallocated corporate activity $ (8,008 ) $ (6,869 ) $ (1,139 ) (16.6 )%

Revenues for our All Other segment increased $5.2 million, or 28.8%, to $23.1 million for the three months ended March 31, 2019 compared to the same period of 2018 primarily due to an increase in project revenues related to the size of active projects and integrated-PV revenues attributed to sales to customers for oilfield microgrid applications.

Income before taxes for our All Other segment increased $3.8 million, or 415.5%, to $4.7 million for the three months ended March 31, 2019 compared to the same periods of 2018 due to the increase in revenues described above, and a gain of $2.2 million recognized on the deconsolidation of a variable interest ~~entity.~~entity during the first quarter of 2019.

Unallocated corporate activity includes all corporate level selling, general and administrative expenses and other expenses not allocated to the segments. We do not allocate any indirect expenses to the segments.

Liquidity and Capital Resources

Sources of liquidity. Since inception, we have funded operations primarily through cash flow from operations, advances from Federal ESPC projects and various forms of debt. We believe that the cash and cash equivalents and availability under our revolving senior secured credit facility, combined with our access to credit markets, will be sufficient to fund our operations through the next twelve months and thereafter. See Note 2 of the audited consolidated financial statements for the year ended December 31, 2019, and notes thereto, included in the Company’s Annual Report.

We believe we have sufficient liquidity to satisfy our cash needs, however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate during these uncertain times. This includes limiting discretionary spending across the organization and re-prioritizing our capital projects amid the COVID-19 pandemic.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which includes modifications to the limitation on business interest expense and net operating loss provisions, and provides a payment delay of employer payroll taxes during 2020 after the date of enactment. We estimate the payment of approximately $5.0 million of employer payroll taxes otherwise due in 2020 will be delayed with 50% due by December 31, 2021 and the remaining 50% by December 31, 2022.

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Proceeds from our Federal ESPC projects are generally received through agreements to sell the ESPC receivables related to certain ESPC contracts to third-party investors. We use the advances from the investors under these agreements to finance the projects. Until recourse to us ceases for the ESPC receivables transferred to the investor, upon final acceptance of the work

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by the government customer, we are the primary obligor for financing received. The transfers of receivables under these agreements do not qualify for sales accounting until final customer acceptance of the work, so the advances from the investors are not classified as operating cash flows. Cash draws that we receive under these ESPC agreements are recorded as financing cash inflows. The use of the cash received under these arrangements to pay project costs is classified as operating cash flows. Due to the manner in which the ESPC contracts with the third-party investors are structured, our reported operating cash flows are materially impacted by the fact that operating cash flows only reflect the ESPC contract expenditure outflows and do not reflect any inflows from the corresponding contract revenues. Upon acceptance of the project by the federal customer the ESPC receivable and corresponding ESPC liability are removed from our condensed consolidated balance sheet as a non-cash settlement. ~~See Note 2,~~ ~~Summary of Significant Accounting Policies, to our Notes to Condensed Consolidated Financial Statements appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q.~~

Our service offering also includes the development, construction and operation of small-scale renewable energy plants. Small-scale renewable energy projects, or energy assets, can either be developed for the portfolio of assets that we own and operate or designed and built for customers. Expenditures related to projects that we own are recorded as cash outflows from investing activities. Expenditures related to projects that we build for customers are recorded as cash outflows from operating activities as cost of revenues.

The amount of interest capitalized relating to construction financing during the period of construction for the three months ended March 31, 2020 and 2019 was $0.9 million and ~~2018 was~~ $0.8 million, ~~and $1.0 million,~~ respectively.

Cash flows from operating activities. Operating activities used $51.6 million of net cash during the three months ended March 31, 2020. During that period, we had net income of $6.6 million, which is net of non-cash compensation, depreciation, amortization, accretion, contingent consideration, deferred income taxes, net gain on derivatives, unrealized foreign exchange loss and other non-cash items totaling $10.2 million. Increases in accounts receivable including retainage, project development costs, and decreases in accounts payable, accrued expenses and other current liabilities, billings in excess of cost and estimated earnings, and other liabilities income taxes payable used $42.0 million in cash. These were offset by inventory, costs and estimated earnings in excess of billings, prepaid expenses and other current assets and other assets, which provided for $13.4 million in cash. Increases in Federal ESPC receivables used an additional $39.9 million. As described above, Federal ESPC operating cash flows only reflect the ESPC expenditure outflows and do not reflect any inflows from the corresponding contract revenues, which are recorded as cash inflows from financing activities due to the timing of the receipt of cash related to the assignment of the ESPC receivables to the third-party investors.

Operating activities used $58.1 million of net cash during the three months ended March 31, 2019. During that period, we had net income of $2.9 million, which is net of non-cash compensation, depreciation, amortization, accretion, contingent consideration, deferred income taxes, gain on deconsolidation of a VIE, unrealized foreign exchange loss and other non-cash items totaling $7.5 million. Increase in accounts receivable retainage, inventory, costs and estimated earnings in excess of billings, prepaids, and project development cost, and decreases in accounts payable and accrued expenses, and other liabilities used $51.2 million in cash. These were offset by decreases in accounts receivable, other assets, and increases in billings in excess of costs and estimated earnings, and income tax payable, provided for $9.7 million in cash. Increases in Federal ESPC receivables used an additional $27.0 million. ~~As described above, Federal ESPC operating cash~~

Cash flows ~~only reflect the ESPC expenditure outflows and do not reflect any inflows~~ from ~~the corresponding contract revenues, which are recorded as cash inflows~~investing activities. Cash flows from ~~financing~~investing activities ~~due to the timing of the receipt of cash related to the assignment of the ESPC receivables to the third-party investors.~~

~~Operating activities used $37.1 million of net cash~~ during the three months ended March 31, ~~2018. During that period,~~2020 used $29.3 million. We invested $28.5 million on purchases of energy assets during the three months ended March 31, 2020. In addition, we had net income of $7.5 million, which is net of non-cash compensation, depreciation, amortization, deferred income taxes, gain on sale of assets, unrealized foreign exchange gain and other non-cash items totaling $5.4 million. Increase in accounts receivable, including retainage, prepaids, project development cost, inventory, and decreases in accounts payable and accrued expenses and other liabilities used $33.7invested $0.7 million in ~~cash. These were offset by decreases~~purchases of other property and equipment, and made contributions of $0.1 million in ~~other assets and costs and estimated earnings~~an equity investment. We currently plan to invest approximately $160.0 million to $210.0 million in ~~excess~~additional capital expenditures for the remainer of ~~billings and billings in excess~~2020, principally for the construction or acquisition of ~~costs and estimated earnings, net, and an increase in income taxes payable, provided for $45.7 million. An increase in Federal ESPC receivables used an additional $38.0 million.~~new renewable energy plants.

~~Cash flows from investing activities.~~ Cash flows from investing activities during the three months ended March 31, 2019 used $26.1 million. We invested $23.3 million on purchases of energy assets during the three months ended March 31, 2019. In addition, we invested $1.3 million in purchases of other property and equipment, $1.3 million related to acquisitions of businesses and made ~~contributions~~contribution of $0.2 million in an equity investment. ~~We currently plan to invest approximately $130.0 million to $180.0 million in capital expenditures in 2019, principally for the construction or acquisition of new renewable energy plants.~~

Cash flows from ~~investing~~financing activities. Cash flows from financing activities during the three months ended March 31, ~~2018 used $35.2~~2020 provided $83.9 million. ~~We invested $34.2 million on purchases of~~This was primarily due to proceeds received from Federal ESPC projects and energy assets ~~during the three months ended March 31, 2018. In addition, we invested $1.0~~ of $62.7

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million, ~~in purchases~~proceeds from exercises of ~~other property~~stock options and ~~equipment.~~ESPP of $2.5 million, and net proceeds from our senior secured credit facility of $31.0 million. This was partially offset by payments on long-term debt of $12.0 million, payments of financing fees of $0.2 million and net distribution to redeemable non-controlling interests of $0.1 millions.

~~Cash flows from financing activities.~~ Cash flows from financing activities during the three months ended March 31, 2019 provided $47.5 million. This was primarily due to proceeds received from Federal ESPC projects and energy assets of $41.3 million, proceeds from exercises of stock options and ESPP of $0.6 million and net draws on our revolving credit facility of $11.4 million. This was partially offset by payments on long-term debt of $5.7 million, and net distributions to redeemable non-controlling interests of $0.1 million.

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Cash flows from financing activities during the three months ended March 31, 2018 provided $84.1 million. This was primarily due to proceeds received from Federal ESPC projects and energy assets of $37.3 million, proceeds from project financings of $33.5 million, net draws on our revolving credit facility of $17.4 million, proceeds from exercises of options of $0.7 million and net draws on our revolving credit facility of $17.4 million. This was partially offset by payments on long-term debt of $2.3 million, net proceeds from redeemable non-controlling interests of $0.1 million, repurchase of common stock of $1.8 million, and including fees and payments of financing fees of $0.6 million.

We currently plan additional project financings of approximately ~~$100.0~~$150.0 million to ~~$110.0~~$200.0 million for the remainder of ~~2019~~2020 to fund the construction or acquisition of new renewable energy plants discussed above.

On March 31, 2020, the Company executed an amendment to its fourth amended and restated bank credit facility. The amendment increased the total funded debt to EBITDA covenant ratio from a maximum of 3.25 to 3.75 for the fiscal quarters ending March 31, 2020 through December 31, 2020. The amendment also increased the Eurocurrency Rate floor to 1% from 0% previously. The total commitment under the amended credit facility (revolving credit, term loan and swing line) remains unchanged, which is $185,000, and the amendment did not result in any restructured payments.

See Note ~~15,~~16, Debt,of Notes to Condensed Consolidated Financial Statements for additional discussion of items impacting the Company’s liquidity.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheet.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of March 31, ~~2019,~~2020, there have been no significant changes in market risk exposures that materially affected the quantitative and qualitative disclosures as described in Item 7A to our Annual Report.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this quarterly report, or the evaluation date. Disclosure controls and procedures are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management, after evaluating the effectiveness of our disclosure controls and procedures as of the evaluation date, concluded that as of the evaluation date, our disclosure controls and procedures were effective at a reasonable level of assurance.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We implemented internal controls to ensure we adequately evaluated our contracts and account for revenue recognition under the new accounting standard. There were no significant changes to our internal control over financial reporting due to the adoption of the new standard.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary conduct of our business we are subject to periodic lawsuits, investigations and claims. Although we cannot predict with certainty the ultimate resolution of such lawsuits, investigations and claims against us, we do not believe that any currently pending or threatened legal proceedings to which we are a party will have a material adverse effect on our business, results of operations or financial condition.

For additional information about certain proceedings, please refer to Note 9, Commitments and Contingencies, to our Condensed Consolidated Financial Statements ~~included~~ included under Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated into this item by reference.

Item 1A. Risk Factors

AsOur business is subject to numerous risks, a number of ~~March 31, 2019, there have been no material changes to the risk factors~~which are described below and under “Risk Factors” in ~~Item 1A to~~Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019 (“Annual Report”). We caution you that the following important factors, among others, could cause our actual results to differ materially from those expressed in forward-looking statements made by us or on our behalf in filings with the SEC, press releases, communications with investors and oral statements. Any or all of our forward-looking statements in this Quarterly Report on Form 10-Q and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in the discussion below and in our Annual Report will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may differ materially from those anticipated in forward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by applicable law. You should, however, consult any further disclosure we make in our reports filed with the SEC.

Public health threats or outbreaks of communicable diseases could have a material adverse effect on our operations and financial results.

We may face risks related to public health threats or outbreaks of communicable diseases. A widespread healthcare crisis, such as an outbreak of a communicable disease could adversely affect the global economy our ability to conduct business for an indefinite period of time. For example, the ongoing global Coronavirus Disease 2019 (COVID-19) pandemic, has negatively impacted global economy, disrupted financial markets and international trade, resulted in increased unemployment levels and significantly impacted global supply chains. In addition, Federal, state, and local governments have implemented various mitigation measures, including travel restrictions, border closings, restrictions on public gatherings, shelter-in-place restrictions and limitations on business. Although we are considered an essential business, some of these actions have adversely impacted the ability of our employees, contractors, suppliers, customers, and other business partners to conduct business activities, and could ultimately do so for an indefinite period of time. The COVID-19 impacts described above could have a material adverse effect on our results of operations, financial condition, and liquidity. In particular, the continued spread of COVID-19 and efforts to contain the virus could:

•impact the length of our sales cycle;

•cause us to experience an increase in delayed payments from customers and uncollectable accounts;

•cause delays and disruptions in the completion of certain projects;

•impact availability of qualified personnel; and

•cause other unpredictable events.

The situation surrounding COVID-19 remains fluid and the potential for a material impact on our results of operations, financial condition, and liquidity increases the longer the virus impacts activity levels in the United States and globally. For this reason, we cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on our results of operations, financial position, and liquidity. The extent to which the COVID-19 pandemic may impact our business, operating results, financial condition, or liquidity will depend on future developments, including the duration of the outbreak, travel restrictions, business and workforce disruptions, and the effectiveness of actions taken to contain and treat the disease.

Due to the COVID-19 pandemic, we have experienced a lengthening of our selling cycle and, if this slowdown continues, the timeline for realizing revenue on new projects may be further delayed.

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Historically, the sales, design and construction process for energy efficiency and renewable energy projects recently has been taking from 18 to 54 months on average, with sales to federal government and housing authority customers tending to require the longest sales processes. We have been experiencing a lengthening of our sales cycle as a result of the impacts of the COVID-19 pandemic, as customers move to adjust operations and conserve cash. We cannot predict the timeline of the COVID-19 pandemic and, therefore, cannot predict the timeline for our selling cycle in the current conditions. Our sales process continues to require the dedication of significant time by our sales and management personnel and our use of significant financial resources, with no certainty of success or recovery of our related expenses. A potential customer may go through the entire sales process and not accept our proposal. All of these factors can contribute to fluctuations in our quarterly financial performance and increase the likelihood that our operating results in a particular quarter will fall below investor expectations. These factors could also adversely affect our business, financial condition and operating results due to increased spending by us that is not offset by increased revenues.

We may be unable to complete or operate our projects on a profitable basis or as we have committed to our customers.

Development, installation and construction of our energy efficiency and renewable energy projects, and operation of our renewable energy projects, entails many risks, including:

•failure to receive critical components and equipment that meet our design specifications and can be delivered on schedule;

•failure to obtain all necessary rights to land access and use;

•failure to receive quality and timely performance of third-party services;

•increases in the cost of labor, equipment and commodities needed to construct or operate projects;

•permitting and other regulatory issues, license revocation and changes in legal requirements;

•shortages of equipment or skilled labor;

•unforeseen engineering problems;

•failure of a customer to accept or pay for renewable energy that we supply;

•weather interferences, catastrophic events including fires, explosions, earthquakes, droughts and acts of terrorism; and accidents involving personal injury or the loss of life;

•health or similar issues, such as a pandemic or epidemic, such as the novel coronavirus (COVID-19);

•labor disputes and work stoppages;

•mishandling of hazardous substances and waste; and

•other events outside of our control.

Any of these factors could give rise to construction delays and construction and other costs in excess of our expectations. This could prevent us from completing construction of our projects, cause defaults under our financing agreements or under contracts that require completion of project construction by a certain time, cause projects to be unprofitable for us, or otherwise impair our business, financial condition and operating results.

We may have exposure to additional tax liabilities and our effective tax rate may increase or fluctuate, which could increase our income tax expense and reduce our net income.

Our provision for income taxes is subject to volatility and could be adversely affected by changes in tax laws or regulations, particularly changes in tax incentives in support of energy efficiency. For example, certain deductions relating to energy efficiency have expiration dates which could significantly alter the existing tax code, including the removal of these credits prior to their scheduled expiration. The 30% investment tax credit (“ITC”) relating to the installation of solar power expired on December 31, 2019, after which it will fall to 26 percent in 2020, 22 percent in 2021, and 10 percent in 2022 and future years. If these or other deductions and credits expire without being extended, or otherwise are reduced or eliminated, our effective tax rate would increase, which could increase our income tax expense and reduce our net income.

Our tax rate has historically been significantly impacted by the IRC Section 179D deduction. This deduction is related to energy efficient improvements we provide under government contracts. Section 179D was extended through December 31, 2020 as part of the Tax Extender and Disaster Relief Act of 2019 which became law on December 20, 2019. There is no

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assurance that Section 179D will continue to be extended retroactively or otherwise and were the deduction not available it would significantly affect our tax rate.

More recently, on March 18, 2020, the Families First Coronavirus Response Act (“FFCR Act”), and on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) were each enacted in response to the COVID-19 pandemic. The FFCR Act and the CARES Act contain numerous income tax provisions, such as relaxing limitations on the deductibility of interest and the use of net operating losses arising in taxable years beginning after December 31, 2017. We are currently evaluating the impact of this legislation on our consolidated financial position, results of operations, and cash flows. Future regulatory guidance under the FFCR Act and the CARES Act remains forthcoming, and such guidance could ultimately increase or lessen their impact on our business and financial condition. It is also highly possible that Congress will enact additional legislation in connection with the COVID-19 pandemic, some of which could have an impact on us.

The determination of the benefit from (or provision for) income taxes requires complex estimations and significant judgments concerning the applicable tax laws. If in the future any element of tax legislation changes the related accounting guidance for income tax, it could affect our income tax position and we may need to adjust the benefit from (or provision for) income taxes accordingly.

In addition, like other companies, we may be subject to examination of our income tax returns by the U.S. Internal Revenue Service and other tax authorities; our U.S. federal tax returns for 2015 through 2018 are subject to audit by federal, state and foreign tax authorities. Though we regularly assess the likelihood of adverse outcomes from such examinations and the adequacy of our provision for income taxes, there can be no assurance that such provision is sufficient and that a determination by a tax authority will not have an adverse effect on our net income.

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.

A substantial portion of our earnings are attributable to our sale of renewable energy certificates (“RECs”) and other environmental attributes generated by our energy assets. These attributes are used as compliance purposes for state-specific or U.S. federal policy.

We own and operate solar PV installations which derive a significant portion of their revenues from the sale of solar renewable energy certificates (“SRECs”), which are produced as a result of generating electricity. The value of these SRECs is determined by the supply and demand of SRECs in the states in which the solar PV installations are installed. Supply is driven by the amount of installations and demand is driven by state-specific laws relating to renewable portfolio standards.

We also own and operate renewable natural gas plants that may deliver biofuels into to the nation’s natural gas pipeline grid. Such biofuel may qualify for certain environmental attribute mechanisms, such as renewable identification numbers (“RINs”) which are used for compliance purposes under the Renewable Fuel Standard (“RFS”) program. The RFS is a U.S. federal policy that requires transportation fuel to contain a minimum volume of renewable fuel. The U.S. Environmental Protection Agency (“EPA”) administers the RFS program and may periodically undertake regulatory action involving the RFS, including annual volume standards for renewable fuel.

We sometimes seek to sell forward a portion of our SRECs and other environmental attributes under contracts to fix the revenues from those attributes for financing purposes or hedge against future declines in prices of such environmental attributes. If our renewable energy facilities do not generate the amount of renewable energy attributes sold under such forward contracts or if for any reason the renewable energy we generate does not produce SRECs or other environmental attributes for a particular state, we may be required to make up the shortfall of SRECs or other environmental attributes under such forward contracts through purchases on the open market or make payments of liquidated damages.

RECs are created through state law requirements for utilities to purchase a portion of their energy from renewable energy sources and changes in state laws or regulation relating to RECs may adversely affect the availability of RECs or other environmental attributes and the future prices for RECs or other environmental attributes, which could have an adverse effect on our business, financial condition and results of operations.

The market price for renewable energy attributes fluctuates based on a variety of factors including, but not limited to, governmental and regulatory action, perceptions concerning the prospect for changes in the renewable fuels standards or renewable portfolio standards, the future supply of tradable environmental attributes, and other market dynamics. In particular, during the current COVID-19 pandemic, as restrictions on travel continue and there has been lower electricity and fuel

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consumption, we have observed increased volatility in the market prices for these renewable energy attributes, as well as price reductions in certain markets. As a result, we may not be able to sell our renewable energy attributes at a price that is favorable to us. Any significant or sustained decline in the market price of renewable energy attributes could have a material adverse effect on our business, financial condition and results of operations.

Item 2. Unregistered Sales of Equity and Use of Proceeds

Stock Repurchase Program

The following table provides information as of and for the quarter ended March 31, ~~2019~~2020 regarding shares of our Class A common stock that were repurchased under our stock repurchase program authorized by the Board of Directors on April 27, 2016, as increased from time to time (the “Repurchase Program”):


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Jan 1, 2020 - Jan 31, 2020	—	—		—	$	5,903,540
Feb 1, 2020 - Feb 29, 2020	—	—		—	$	5,903,540
March 1, 2020 - March 31, 2020	455	13.87		455	$	5,897,229
Total	455	$	13.87	455	$	5,897,229

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans
or Programs
January 1, 2019 - January 31, 2019 —
—
—
$ 3,447,027
February 1, 2019 - February 28, 2019 —
—
—
$ 3,447,027
March 1, 2019 - March 31, 2019 —
—
—
$ 3,447,027
Total —
$ —
—
$ 3,447,027

Under the Repurchase Program, we are authorized to repurchase up to ~~$15.0~~$17.6 million of our Class A common ~~stock, as increased by the Board of Directors in February 2017.~~stock. Stock repurchases may be made from time to time through the open market and privately negotiated transactions. The amount and timing of any share repurchases will depend upon a variety of factors, including the trading price of our Class A common stock, liquidity, securities laws restrictions, other regulatory restrictions, potential alternative uses of capital, and market and economic conditions. The Repurchase Program may be suspended or terminated at any time without prior notice, and has no expiration date.

Item 6. Exhibits

The exhibits listed in the Exhibit Index immediately preceding the exhibits are filed (other than exhibit 32.1) as part of this Quarterly Report on Form 10-Q and such Exhibit Index is incorporated herein by reference.

Exhibit Index



Exhibit Number			Description
10.1.1			Fourth Amended and Restated Credit and Security Agreement dated as of June 28, 2019 among Ameresco, Inc., certain guarantors party thereto, certain lenders party thereto from time to time and Bank of America, N.A. as Administrative Agent. Filed as Exhibit 10.1 to our Current Report on Form 8-k filed with the Commission on July 1, 2019 (file no. 001-34811) and incorporated herein by reference.
10.1.2*			~~Exhibit~~ ~~Number~~Amendment No. 1 to Fourth Amended and Restated Credit and Security Agreement dated March 31, 2020 among Ameresco, Inc., certain guarantors party thereto, certain lenders party thereto from time to time and Bank of America, N.A. as Administrative Agent.
~~Description~~10.2+			Ameresco, Inc. Executive Management Team Additional Annual Incentive Performance Program. Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2019 and filed with the Commission on August 8, 2019 (file no. 001-34811) and incorporated herein by reference.
10.3+			Stock Ownership Guidelines. Filed as Exhibit 10.1 to our Current Report on Form 8-k filed with the Commission on April 24, 2019 (file no. 001-34811) and incorporated herein by reference.
10.4+			Offer Letter between the Company and Doran Hole dated June 26, 2019. Filed as Exhibit 10.1 to our Current Report on Form 8-k filed with the Commission on July 1, 2019 (file no. 001-34811) and incorporated herein by reference.
31.1*			Principal Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*			Principal Financial Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**			Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*			The following condensed consolidated financial statements from Ameresco, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2019,~~2020, formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statement of Changes in Redeemable Non-Controlling Interests and Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements.
			*Filed herewith.
			+ Identifies a management contract or compensatory plan or arrangement in which an executive officer or director of Ameresco participates.
			**Furnished herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AMERESCO, INC.

Date: May ~~2, 2019~~5, 2020

By:

/s/ ~~Mark Chiplock~~Spencer Doran Hole

~~Mark Chiplock~~Spencer Doran Hole

Senior Vice President and ~~Interim~~ Chief Financial Officer

(duly authorized and principal financial officer)



Delaware						04-3512838
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)
111 Speen Street, Suite 410 Framingham, Massachusetts						01701
(Address of Principal Executive Offices)						(Zip Code)



	March 31,		December 31,
	2019		2018
Financing lease assets, net	$	37,731	$	38,263
Deferred loss, short-term, net	115		115
Deferred loss, long-term, net	1,888		1,917
Total deferred loss	$	2,003	$	2,032
Financing lease liabilities, short-term	4,958		4,956
Financing lease liabilities, long-term	28,379		28,407
Total financing lease liabilities	$	33,337	$	33,363
Deferred gain, short-term, net	345		345
Deferred gain, long-term, net	5,722		5,808
Total deferred gain	$	6,067	$	6,153


	US Regions		U.S. Federal		Canada		Non-Solar DG		All Other		Total
Line of Business
Three Months Ended March 31, 2020
Project revenue	$	71,493	$	56,114	$	8,864	$	2,371	$	5,587	$	144,429
O&M revenue	4,352		11,626		9		2,015		60		18,062
Energy assets	8,554		719		663		17,986		300		28,222
Other	328		286		1,856		352		18,878		21,700
Total revenues	$	84,727	$	68,745	$	11,392	$	22,724	$	24,825	$	212,413
Three Months Ended March 31, 2019
Project revenue	$	45,704	$	32,353	$	5,234	$	1,074	$	3,067	$	87,432
O&M revenue	3,318		9,858		—		2,035		—		15,211
Energy assets	6,021		643		320		17,699		302		24,985
Other	554		203		1,594		422		19,711		22,484
Total revenues	$	55,597	$	43,057	$	7,148	$	21,230	$	23,080	$	150,112



	March 31, 2018		January 1, 2018
Accounts receivable, net	$	93,622	$	85,121
Accounts receivable retainage, net	19,869		17,484
Contract Assets:
Costs and estimated earnings in excess of billings	64,064		95,658
Contract Liabilities:
Billings in excess of cost and estimated earnings	29,500		27,248


	As of March 31,		As of December 31,
	2020		2019
Gross Carrying Amount
Customer contracts	$	7,749	$	7,904
Customer relationships	12,449		12,749
Non-compete agreements	2,995		3,037
Technology	2,691		2,732
Trade names	539		544
	26,423		26,966
Accumulated Amortization
Customer contracts	7,711		7,844
Customer relationships	11,112		11,236
Non-compete agreements	2,995		3,037
Technology	2,669		2,704
Trade names	528		531
	25,015		25,352
Intangible assets, net	$	1,408	$	1,614



þ☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



o☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



AMERESCO, INC.
CONSOLIDATED BALANCE SHEETS — (Continued)
(in thousands, except share amounts)
	March 31,			December 31,
	2019			2018
	(Unaudited)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2019 and December 31, 2018	$	—		$	—
Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 30,428,466 shares issued and 28,337,426 shares outstanding at March 31, 2019, 30,366,546 shares issued and 28,275,506 shares outstanding at December 31, 2018	3			3
Class B common stock, $0.0001 par value, 144,000,000 shares authorized, 18,000,000 shares issued and outstanding at March 31, 2019 and December 31, 2018	2			2
Additional paid-in capital	125,685			124,651
Retained earnings	274,170			269,806
Accumulated other comprehensive loss, net	(6,485		)	(5,949		)
Less - treasury stock, at cost, 2,091,040 shares at March 31, 2019 and 1,873,266 shares at December 31, 2018	(11,638		)	(11,638		)
Total stockholders’ equity	381,737			376,875
Total liabilities, redeemable non-controlling interests and stockholders’ equity	$	1,198,676		$	1,161,634


	March 31, 2020		March 31, 2019
Allowance for credit loss, beginning of period	$	2,260	$	2,765
Charges to costs and expenses, net	49		77
Account write-offs and other	(189)		(29)
Allowance for credit loss, end of period	$	2,120	$	2,813



	March 31, 2019		December 31, 2018
Accounts receivable, net	$	81,896	$	85,985
Accounts receivable retainage, net	14,762		13,516
Contract Assets:
Costs and estimated earnings in excess of billings	92,264		86,842
Contract Liabilities:
Billings in excess of cost and estimated earnings	31,483		30,706


	Gross Unrecognized Tax Benefits
Balance, December 31, 2019	$	400
Additions for prior year tax positions	—
Settlements with tax authorities	—
Reductions of prior year tax positions	—
Balance, March 31, 2020	$	400



	Gross Unrecognized Tax Benefits
Balance, December 31, 2018	$	1,600
Additions for prior year tax positions	—
Settlements with tax authorities	—
Reductions of prior year tax positions	—
Balance, March 31, 2019	$	1,600


	As of January 1, 2019								As of January 1, 2019
	As Reported		842 Adjustment		Adjusted Balances				As Reported		842 Adjustment		Adjusted Balances
Operating Leases:								Operating Leases:
Operating lease right-of-use asset	$	—	$	31,639	$	31,639
Current portions of operating lease right-of-use liabilities	—		5,084		5,084
Operating lease assets								Operating lease assets	$	—	$	31,639	$	31,639
Current portions of operating lease liabilities								Current portions of operating lease liabilities	—		5,084		5,084
Long-term portions of operating lease liabilities	—		28,480		28,480			Long-term portions of operating lease liabilities	—		28,480		28,480
Total operating lease liabilities	$	—	$	33,564	$	33,564		Total operating lease liabilities	$	—	$	33,564	$	33,564
Weighted-average remaining lease term					10 years			Weighted-average remaining lease term					10 years
Weighted-average discount rate					6.0		%	Weighted-average discount rate					6.0		%

Financing Leases:								Financing Leases:
Energy assets, net	$	38,263	$	—	$	38,263		Energy assets, net	$	38,263	$	—	$	38,263
Current portions of long-term debt and financing lease liabilities	4,956		—		4,956
Long-term debt and financing lease liabilities, less current portions and net of deferred financing fees	28,407		—		28,407
Current portions of financing lease liabilities								Current portions of financing lease liabilities	4,956		—		4,956
Long-term financing lease liabilities, net of current portions and of deferred financing fees								Long-term financing lease liabilities, net of current portions and of deferred financing fees	28,407		—		28,407
Total financing lease liabilities	$	33,363	$	—	$	33,363		Total financing lease liabilities	$	33,363	$	—	$	33,363
Weighted-average remaining lease term					18 years			Weighted-average remaining lease term					18 years
Weighted-average discount rate					11.7		%	Weighted-average discount rate					11.7		%


	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Operating Lease:
Operating lease costs	$	1,826	$	1,838

Financing Lease:
Amortization expense	532		532
Interest on lease liabilities	801		949

Total lease costs	$	3,159	$	3,319


	Operating Leases		Financing Leases			Operating Leases		Financing Leases
Year ended December 31,					Year ended December 31,
2019	$	5,218	$	8,343
2020	6,476		7,881		2020	$	5,816	$	7,852
2021	5,403		6,775		2021	6,506		6,792
2022	4,938		5,173		2022	5,895		5,178
2023	3,711		3,686		2023	4,607		3,676
2024					2024	3,791		2,565
Thereafter	18,895		26,800		Thereafter	22,723		24,080
Total minimum lease payments	$	44,641	$	58,658	Total minimum lease payments	$	49,338	$	50,143
Less: interest	12,254		25,321		Less: interest	14,874		21,765
Present value of lease liabilities	$	32,387	$	33,337	Present value of lease liabilities	$	34,464	$	28,378


		Fair Value as of
		March 31,		December 31,
	Level	2020		2019
Assets:
Interest rate swap instruments	2	$	—	$	15
Commodity swap instruments	2	246		198
Total assets		$	246	$	213
Liabilities:
Interest rate swap instruments	2	$	10,882	$	6,236

Interest make-whole provisions	2	733		918
Contingent consideration	3	678		678
Total liabilities		$	12,293	$	7,832


	Three Months Ended		Three Months Ended
	March 31, 2020		March 31, 2019
Contingent consideration liabilities balance at December 31, 2019 and 2018	$	678	$	600

Changes in the fair value of contingent consideration obligation	—		25
Contingent consideration liabilities balance at March 31, 2020 and 2019	$	678	$	625



	As of March 31, 2019				As of December 31, 2018
	Fair Value		Carrying Value		Fair Value		Carrying Value
Long-term debt (Level 2)	$	219,678	$	219,408	$	211,823	$	212,687


	As of March 31, 2020						As of December 31, 2019
	Fair Value		Carrying Value		Fair Value		Carrying Value
Long-term debt (Level 2)	$	332,683	$	326,459	$	309,377	$	307,508



	Derivatives as of
	March 31, 2019			December 31, 2018
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives Designated as Hedging Instruments:
Interest rate swap contracts	Other assets	$	255	Other assets	$	703
Interest rate swap contracts	Other liabilities	3,990		Other liabilities	$	3,187
Derivatives Not Designated as Hedging Instruments:
Interest rate swap contracts	Other assets	$	30	Other assets	$	30
Commodity swap contracts	Other assets	33		Other assets	33
Commodity swap contracts	Other liabilities	70		Other liabilities	$	70
Interest make-whole provisions	Other liabilities	1,085		Other liabilities	1,808


	Location of (Gain) Loss Recognized in Net Income	Amount of (Gain) Loss Recognized in Net Income
		Three Months Ended March 31,
		2020		2019
Derivatives Designated as Hedging Instruments:
Interest rate swap contracts	Other expenses, net	$	99	$	(49)
Derivatives Not Designated as Hedging Instruments:
Interest rate swap contracts	Other expenses, net	$	10	$	—
Commodity swap contracts	Other expenses, net	(48)		—
Interest make-whole provision	Other expenses, net	(185)		(723)



	Location of Gain Recognized in Net Income	Amount of Gain Recognized in Net Income
			Three Months Ended March 31,
			2019			2018
Derivatives Designated as Hedging Instruments:
Interest rate swap contracts	Other expenses, net		$	(49	)	$	(102	)
Derivatives not Designated as Hedging Instruments:
Interest rate swap contracts	Other expenses, net		$	—		(12		)
Commodity swap contracts	Other expenses, net		$	—		—
Interest make-whole provision	Other expenses, net		$	(723	)	$	—