AMRC - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Q2 2018 Ameresco, Inc. Earnings Conference Call. Currently, at this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] Also as a reminder, this conference call is being recorded. would Gary turn Dvorchak. I to call time, host, your this like the to over At Sir, go please ahead.

Gary Dvorchak

XXXX Thank you, us quarter joining We appreciate conference [Dylan], and good for morning Ameresco's everyone. you earnings call. second

Officer; George is Officer. Chairman, Chief Chief today me and Sakellaris, Granara, Joining John President, Ameresco's and Executive Financial

information. will with that finally First, take we George John questions. will supplemental we of financials Keep operating the the review mind have will deck a the financial and in highlights review quarter, and

download from of deck can our website. section You Investor Relations that the

such Before our materially like events I management's on contains statement as remarks. George, financial caution differ turn the or statements expectations future results call risks current that may the call the and over a regarding are Actual to to I'd of predictions forward This of regarding We company's performance SEC brief based this make refer information result beliefs. actual obligation future that looking We you a the today's company. forward-looking you no materially pertain uncertainties results These to documents the any forward-looking filings. revise and statements on to morning forward-looking that discuss or contained We important statements. differ to could and company's in those factors to assume issued cause business. to call. release from made press projections our

call I'll non-GAAP in the over Appendix our release, and press to financial GAAP are use turn an the prepared A George. in not In addition, as Generally reconciliation George? we call. Accounting in explanation slides. will the be referring Principles. to prepared measures the the These accordance non-GAAP financial financial to measures as measures non-GAAP during Accepted well available of is with behind non-GAAP of remarks, now

George Sakellaris

good morning you, Gary Thank and everyone.

Revenue visibility and over outstanding, performance substantially. up demonstrating by adjusted and financial up XX%. team up XX%, share quarter our this was grew XX%, XX%, and per have earnings metrics profit in business. the grew key was gross momentum great we All our Our execution EBITDA

energy review visibility the total due are pilot portfolio assets was growth now the impact assets purchased last improved energy as XX% the and in growth well on addition operation, being as it the year. energy meaningful XXX for plants raising equivalent this of as I evolution through only renewable portfolio of We into profit of gas half years in operation is and rest nearly was agreements we megawatt this growing in model both, that will our solar. other high of and guidance by XX% arrangements. of business Furthermore, our year. operation but our revenue go Energy contributed the reflects year the gas have contractual Revenue from our Our is from are results Sales over the a year of total up this, Because contracts of well. XX% EBITDA. business of assets. two-thirds margin and to as our locked the which first product adjusted of recurring our asset gas revenue, have backlog renewable two to and want and maintenance electricity for many portfolio renewable time.

diversified major with in markets. good asset energy renewable geographically is portfolio our penetration Importantly, pipeline most

will develop coverage benefit Our country. extensive the more geographic us markets energy as across renewable

country. and to the it and we green from stations then our Meadows into for We use Woodland QX, quarter. the renewable sell gas a CNG the interstate of contribution late full to like discuss making would fueling converted gas landfill system more gas operations owner plant the reached in I in Michigan in Now, facility detail. pipeline the in landfill A buy in around

electricity for landfill gas environmental economic facility parties. generation, price represents DX piped win or RINs site revenue into for an value This awards. out sales and gas consumed the and Our the the of both all lower off. consists both Previously, simply the on applications, of flared was

We both We to we particularly This to transportation facility refined and natural wastewater important in the complete as fuel. expect RINs. for are plant to which August. our renewable commence which to create gas. injected RNG gas continue plant and quarter. for facility then system into renewable the from in develop awaiting pipeline. The converts operating. this a connected a will RNG robust is Meadows, -- final treatment is connect and plant to anticipate in Phoenix, Woodland distribution sales biogas inject is start Arizona operating operations DX into mechanically revenue gas permits is The us the we third gas start use

Texas plant in high We gas the gas. green upgrading are BTU lower to from quality landfill now

We Those megawatt facilities. early plant stages additional XX quarter's two not expect yet plant of in late the with or are development. our This assets megawatt in XXXX. megawatt addition the RNG XXXX equivalent equivalent commissioning two early this XX under we was under XXX development. alone Furthermore, in of this are of assets to

RNG the today. have But is also solar two-thirds opportunities eventually asset intend develop. delivering great energy have in development, two, over to are XXX that solar Renewable Of we portfolio even more we those megawatts results. Beyond we power. the gas drives

to I Solar. out lot give of a the One of encompass projects describe knowledge categories. a there. a opportunities a you with category sense of power solar couple activity Our will variety Community

over been we capacity deal In a We definite the When community signed sites solar the BlueWave XX will with solar active XX we five sites you we in to year our have acquire portfolio. close, megawatt in recall megawatts. have totaling acquisitions might agreements ago. four located megawatts these; announced quarter a second of this in Massachusetts

power our renewable efficiency assets, own and will project The is we federal general, will moment, are rooftop projects. developing I of solar solar Community Palm in associated In especially work megawatt and opportunities with category which six power includes Another project, our Island many own. a the in sectors. discuss that drives healthcare to core

visibility energy outstanding provides our the for portfolio Beyond profits. future contribution, current assets

investment is have This years, Looking worthy one and XX the million now. assets year in of out development assets. asset energy to alone, acquisition of the revenue estimated of from million $XXX coming expect invest we our we part. on business $XXX energy over and significant service Clearly, an

The of growth a faster is of our signed project and driving cash efficiency complex our mentioned complexity and asset more are advantage. emerging and of a advanced six technologies portfolio. upgrades as units. are is a housing for We These and business as microgrids, these Now, This of attention getting projects to delivered power to Communities, [Indiscernible], which in earlier. great value-add. mentioned Hawaii. representative solar let's are core outstanding our can also we megawatt visibility. water Palm quarter. will deal controls, battery we good that Island X,XXX our energy In It large and larger project often offer privatized generate supplied margins competitive turn modernization results This into projects invest generation. more multitude housing They deals. contract this type energy such encompass that complex I and plays also These $XXX military growing the million project includes that Ameresco by for distributor including storage, of projects

which will three and lighting, operation streetlights, to Our adds to includes total and in-homes upgrades and maintenance complete. will our years million HVAC, touch both a take housing maintenance backlog. project operation The envelope, $XXX work, and

by first venture this project Now, is I with believe joint developed our Lendlease.

backlog of puts future business. We awards. of growth backlog market this Lendlease, This expect I the especially our bullish the $X driven general, collaboration total In productive its our housing. XX% level at XX%, with are mentioned privatized in highest ever. billion, project in in key we for military was by which outlook growth

We see May. new operations. directs performance multiple agencies the markets federal agencies energy signing and Order Executive infrastructure also reduce this trend technological waste, Order contracts additional The with and healthcare. including use That number Executive a pursue that some should for to federal in large We actions continue that and and market federal, enhance higher savings to cut prioritize across of support to a advanced the funding. I and of note federal of Order got the costs, see directs resiliency Executive deals. education,

Order doing and efforts. the imperative is, we're course, the this As of Executive supports sales already all our but the this, deepens

turn me in encouraging the highlight we are Finally, progress call before Canada. making let the to John, I

we that can some large recall and there through Canada part. streetlight we project a which such You our of QX upgrades. work battery million innovative storage in This had utility signed momentum. a fixed includes contracts variety alone. challenges actions regaining ago, as We of of its couple there in are LED for $XX now a years a is

over comments now to growth optimistic We Canada. on in financial renewed performance. our John? about the are With turn cautiously for John call that, I will the

John Granara

everyone. morning, good and George, you, Thank

slides that and to all release on all. need, factors I'm that results. of going referring press Keep repeat the just figures that focus you the Our so to and the I comparisons say and all mind year-over-year. figures, we otherwise, are to QX influence Instead, supplemental comparisons the analysis it unless not we are in are going contain

we had quarter. great As a George mentioned,

contributing. which statement revenues. we growth anticipate the both growth Notably, projects gas asset revenue in greater starting favorable both driven accelerate. asset was but and service as to we the revenue half some project Phoenix from are than energy With contributing that energy renewable O&M growth due a Gross go should plant and second Let's had near solar We were through that core XX% in as higher balanced, fully that first. the contracts the in now the into In well work is XXXX, revenue of growth expected Woodland margin revenue. mix soon in half, Revenue XX% assets the of income the flat. new Meadows future. do not contrast, by was energy in by Michigan driven asset second finalized, placed was growth

was less business, expect were up, gross in grew This exactly than of our disciplined the would culture. you half reflects As pace but plan profit. a spending at operating and growing on expenses

visibility, especially best months, project is adjusted awards development backlog higher I'll grew of discuss which in by represents We annual XX through ever. for which Drilling last our project growth $XXX the million increased the driver new cost on period backlog awarded the backlog meaningfully, the EBITDA guidance, XX-month This tracking capped growth. is off XX%. down main which of continue shortly. to to invest Halfway the year, in

or revenue quarters. revenue future key few growth in backlog estimated of next contract assets was does Importantly, also include mentioned remain the over XX not On from reinforces a regions market that, energy renewals with representing in federal next top the this state the will balanced the that $XXX backlog and strength and in notable local, over George half million driver revenue our across years. of That development.

in Assets XX% up dollar development on a were basis.

Phoenix RNG in the quarter, the include green Texas. the still added plant, and gas development plant furthermore, in Assets during we

George metric. additional assets As there to in that plants we in add mentioned, are RNG the development early expect to later stages the

Looking construction where the revenue $XXX the not contracted million, Island contracts yet backlog alone million of to active added in complete. anticipate we growth $XXX is work so as of as backlog, now active. this, O&M revenue have those Because million we well. additional attributable $XXX O&M contracts O&M Palm nearly of is that of at active. solid million are become contracts $XXX

all long-term that there at few good believe these as revenue as companies ours. Looking visibility are we streams, very with

at and million review solid which $XX under are the includes balance $XXX Adjusted from million balance proceeds $XX Of sheet energy still on cash from the let's operations, remains quickly assets cash the construction. flow, million. Federal projects, sheet, the ESPC which strong. was of Now,

will year, second is into million the project $XX half to the incremental assets should be scheduled financing. in ahead, this come $XXX of to unfinished bring an Looking which, require million $XX operation. we of million spent from

large some sign fourth to to the of $XX now to full note the to that We now you do backlog. want $X.XX be $X.XX, guidance, range guidance to expect million in to outlook, growth to anticipated not that the while likely million, in deals, $XX timing be revenue in raising the making to remind are these want Also, the skewed and range Finally, guidance. million due EPS in are quarter. of is year-over-year to I the come we of to requires deals $XXX to expect that we to turning offer adjusted year do large EBITDA quarterly be of range the million. We we $XXX annual us should awarded

the we to line your Now, open back for turn coordinator, would like the Dylan call over run I'll Q&A to to session. our the [ph], questions,

Operator

Capital. ROTH Irvin Thank comes Instructions] you first sir. [Operator from question Question from Our please. Craig

Craig Irwin

for morning thanks taking questions. Good and my

another on congratulations George, John, strong say, really quarter should I First, here.

George Sakellaris

Thank you, Craig.

John Granara

Thank you, Craig.

Craig Irwin

-- the build in, there. in nice see the really awarded So, backlog to progress

as XX a increase? indicate build. past moved that momentum several -- federal Can XX% the you in gave contracted big contributed us to the it that and break to it if specific is far you continuing big that may for can into and be large that jump, think typical I maybe As have backlog said in might And that down any contracted us you see things huge if as the quarters, to is awarded continues your progression? has lead projects

John Granara

Sure.

I specifically our over project -- for and the so backlog XX%, So, would XX%. it was was was the backlog, -- awarded that

dependent trend our projects one but from see a backlog to So, George good and not project. it's mentioned, balanced solely as large of larger the is, quite we -- are about thing continuing on continue, the it's

at average awarded And a now, million about in right backlog. pace. adding project is So, steady say we projects size would been our the I $XX.X have

a see. we backlog and regions, it's significant federal of which last did where we're -- are upon as or just that seeing higher a or the than that growth the we're is the saw not and we although to -- of, two quarter. a some actually as And from well. we one composition regards dependent U.S. in as seeing across George said, not bit to nice growth significant Canada whole, is what little in the So, to components or both -- growth, Thanks. projects. jump the With But comparison the from

Craig Irwin

hear. to good really that's Great,

landfill color you may the recent little those would green the be two How expected gas contribution? upside quarter? we going most give gas projects had much attribute you be us on may the facilities, facilities. sequential during a the EBITDA in to better Can that EBITDA So, than of

John Granara

it expected. characterize are as would as going they I saying

ramp while to it So, to as we've past, take or about the to up a does optimization in talked efficiently. get operating full you in

as as say. we we've this on, QX. but three we good on regards anticipate based optimally, the to into take to now service them now would plants -- I it what to to seen get so it a and And had did get does six months recall bring putting operating them it's in may anticipated, quarter, Phoenix, delayed you we that originally it With be

So, there is some timing the fluctuation around there. with

but standpoint, in And plant, million then average, from on forward, It $XX just could $X.X from saying higher, into rate contribution, to anywhere EBITDA at I probably current think and to the think incremental that plants be levels, $XX million, comfortable the two say the that that I of looking this million of that be we're year. at size. in to looking in terms the that $XX a be million two moving in depending at terms could would for just the $XX lower, the I going probably somewhere In we're annualized of operation you're range. going million plants, an would you're be on

Craig Irwin

Okay.

So, mentioned, rate, today continue at stand that and of is you that annualized we course then reflecting of year? currently the we that's build shakedown the now full completed $XX million to as likely run the over where see is to sort to plants today or it's $XX the right million

John Granara

That to closer the run rate an this million year $XX rate would annualized $XX basis. be full probably The to full is million. contribution on --

Craig Irwin

perfect. that's okay, Okay,

performance its that see is seems the be housing bit there. It gears, whether for momentum? build out things across bit then us facilities and you continued the support federal is providing to So, little regulatory. ESPC actually see for we contracting building this may MUSH the changing a markets and strength Trump would overall likely of strong describe acceleration markets you if see line pretty may of public federal the little in to be economy? for expect federal the some Can that's an administration up upgrading like or of catch the across Or more country, other to a as

George Sakellaris

right. very that right years envision and up. to difficult and immediate It so with anticipate, U.S. education resiliency and think higher all now, getting their future, to traction, the the performance we come And they it country healthy. say administration good upgrades percentage and that the Executive we positive. a to pretty in up strength, support are much energy infrastructure we federal It to that's is get great care and the And win health more a are for faster let's good other was we very, up a technological there. was to federal is And it very regions, competitive we and we in growth couple for on quarter-to-quarter pretty across Order. very now contracts we the the new even And we very effort is encouraged can more are because comparison play activity through very getting go, Whether -- our that good the is on the where is are that the very and are have the implementing local and what through were facilities for I projects we the that see market; you a why But they the of picking savings advanced though, there. start how growth pace market the see out right of would pick the thing encouraging. encouraged it's contracts states than and see much governments facilities the administration

road. the So, we about that's project my going pretty two one that's future and why the business are immediate the probably for down bullish in said remarks, years I to

Craig Irwin

margins. last on if then gross I question And Great. may,

for are that that? any we Can of this the seeing company if us benefit think project was really a lifted there I you Or quarter. just are clarify this maybe record closeouts scale these move the last of some and tending projects, of couple the years? mix benefit smaller projects over historically projects of through of the larger larger the of versus to P&L sort

George Sakellaris

going with the level, would the because mix it it's because the it lot. project I margins on from that improvement like detail, because at project John asset the trend, all, rather mix, compare very answer greater higher but But question if lumpy see of very we up to moves a we're mix, from from John? basis let annual quarter-to-quarter, noisy particular quarter-to-quarter. be the than will a to and any

John Granara

George year I that through only head the revenues there, half gross the increase expansion on offset margin. do the of gross standpoint. average than project lower which that seeing brings we're we is dollar the in margins first gross half a is are second the hit the to as thing so have the margin would saying the larger in the contribute as we'll for nail but second consolidated the project margin. revenues as a decrease revenue down see from that obviously a significantly the the year, in being tend add don't the contributing Yes, the in it's asset projects they what the slightly But of year, natural by much half of But

Craig Irwin

Great. Thanks my the on again congratulations and again questions for strong quarter. taking really

George Sakellaris

you. Thank

John Granara

Thanks.

Operator

Thank you.

Chip Canaccord. next Moore comes question Please go Our ahead. from of

Chip Moore

Thanks. Morning.

Chip Moore

morning. Good

Chip Moore

could I Maybe can maybe about think, very great announcement, a you in continued my opportunities, about more more? expand and that military housing addressable Island strong congratulations Palm. little potential market bit Echo on you It for more on talked talk like visibility bit a here seems particularly a we market the momentum the guys.

George Sakellaris

in to and encouraged have we pipeline we the I business it continue get more are than will will are couple will and -- with the are part we that we them, ago great we we we very down three that a a you, coming projects great two substantial have it and took Lendlease. because of And the that working this this and right but we drawback potential But projects caution that years point, partnership us the of about from years working for very to market we on, now. more have with segment. actually it's this envisioned Lendlease, large is with hope partnership announced We deal only a

John Granara

come evaluating as is we so working in as come projects, same visibility And in you'll we and of them say awarded backlog expect size. But -- Yes, Palm said, awarded a and terms I -- for standpoint-- projects from project be to it's that be portfolio. have remaining in Island backlog identify George with awarded their so three -- see you'll larger, we to the able do see the you'll are the us entire I it would three the in Lendlease our backlog. don't our our and see

Chip Moore

that? could just a And do it. infrastructure look there that potential Got is you some like more partnerships Lendlease? for with you think looking out, further companies How about

George Sakellaris

as did [Indiscernible]. one for It's our opportunities to the project actually and develop client now, just at will other right primary it's their we But partnership, is that look we the with not particular well. Again, Lendlease sites with individual first. ones a focus

Chip Moore

good Okay, that's momentum some Canada be from back, getting last good. one in see. to May

You that utility called project. nice out

Beyond that, Canada? makes you see Thanks and more optimistic guys. in what you what

George Sakellaris

It's that we very in now, have especially and-- the federal in Canada right the sector is encouraging pipeline

John Granara

particular pretty that Yes, the in market Canada. we've quite now; traditionally is played market, well active federal in in I'd right say

optimistic. we're where that's So,

George Sakellaris

and see microgrids. combined heat And right streetlight technological we storage advanced and projects power, and more battery upgrades

that feel opportunities. market pretty a as So, in the the expands, good take to of good we advantage position we're

Chip Moore

Thanks great. right, and again guys. congrats All

George Sakellaris

Thank you.

John Granara

Thank you.

Operator

Please go ahead. Thank from you. comes Kaye [Operator Instructions] Noah Oppenheimer. of next Our question

Noah Kaye

Tennessee just demand. the because The in next economical baseload plus, of efficiency power a George morning much here; very a attractive is they weeks the for rise But going little downs around. trends project and you've the I and not good a any the Can seen the business more build said pull decade Authority speak for ago, ups back short-term years. It obviously there TVA, couple ESPC to disco of and they're so Thanks. that George, over for Valley feels see different, the don't themselves. John. second energy power are overall

next little differently of about energy to to of time? -- the over you being to talked longer a kind project might a years. period win in feel the business of business especially project two good sort visibility rates that this Does You sustain bit anything awards one before structurally

George Sakellaris

heat It distributed different, than the plants. the play of Energy going more like that's trail very it's years just that Noah into transforming of has company, it the an does the power No, power Performance and maintenance been be. solve before this of and very, opportunities that question, they it's last and become whatever has I power, And utility why there. can or bigger because good why are And It's to business, of whether what's or is that combined Savings industry very or advantage that's changing. market -- and be, good being is the the The and opportunities. whether solar, of and it's in are larger that's are, to have expanded. it they very in or you and the distributed company if sell generation basically heat the across solar Contracting more good very, -- look very evolved combined we than whatever operation very, feel take product take they to that I an we out they has a good in storage case optimistic position position battery I'm that beginning case projects utilities. it offering. or the Ameresco the all moved it -- what they that's the why it's are into the the no as the to more generation, otherwise microgrids, and many the happen going advantage may that hold build more That's market. not power ever a makes generation question general. country, I'm we've might at company, and to And in feel take across encouraged that to projects whether and battery you it the company a those as or is many centralized units couple storage, And said; microgrids, it, feel

look contracting were $X business, to you about If it's $X energy performance billion. just billion,

heat solar, and $XX opportunity. talking market you're put you billion $XX to microgrids distributed combined billion power, If so and on,

share, to So, the that take XX% down very large if we we'd road. market of company be were much

So, we that's where are.

Noah Kaye

that's us think I to terms in perspective for understand. really helpful

most similar, the in me Department utilities compromised Homeland of but years has thematic don't from increasingly upwards efforts over of grid topic question, I call and confirming the it Let ask a you've been the U.S. hundred news sort the cybersecurity been one, recently few foreign connected to that someone Security of by hackers countries. have with of penetration may electric several past

You've for in projects you that to on focus obviously, about that resiliency offerings talk a that to microgrid you cybersecurity or in? Can Do having, talked anything you there about just or your responsibilities value invest may you have O&M. that any security? your and partners have proposition beef-up is that may security around the you participating for and grid you're had have

George Sakellaris

and XX very to are up our we protect very into and issue our plants have color an for and are whatever try our and because our actually couple issue. our that customers. it's question; to then in question can maintain bigger we do now hired and we and grid might day that, add It's system, of outside But Board, consultants, can diligent concerned getting sometime. brought right this to good a and and say it's we country and our a very to cybersecurity and customers. top concerned see we issue whatever break several to anything operating might you have almost more very, we across a the and companies to ourselves we to It's we but assets, want a attempts help we do have, assets us of an security possibly we're level what, are And order doing good bigger John we

Noah Kaye

maybe and one. -- very then Yes, more more immediate one

that previously in in implied in guidance? energy update equivalents XX-megawatt you think assets guided to XX about placed service XXXX. to of I higher to this Any

George Sakellaris

John? Yes,

John Granara

so XX.X Yes, still the to that service the of have the still year-to-date, tracking XX, in to so we earlier. and year, planning about that, XX we're remainder to placed number we about no we're the we're place tracking guided to for

Noah Kaye

Okay, That's to for to Thank you hear. great great. Well, to the sounds upper questions. end taking the closer like much so that.

Operator

Thank like CEO, Please no turn you. Sakellaris to over the in time. at this George I [Operator closing Instructions] further queue the would for call ahead. questions I remarks. go the show to

George Sakellaris

our business companies hard [ph]. momentum Dylan you, is and and of new our believe can has and -- the to to of Thanks. will work quarters this support few we now level match call look been the To our better back Thanks this the shape. our Ameresco shareholders. operator. never Thank visibility. you conclude, a the of in your that and level Thank the I employees to ahead. turn strong attention maintaining for in We sustainable of forward morning. performance

Operator

and Thank concludes for attending you, you the ladies sir. today's gentlemen Thank conference. This program.

all may Good day. You disconnect.

Ameresco (AMRC) 7 Aug 182018 Q2 Earnings call transcript