Ameresco Q1 2025 Earnings Report

Ameresco EPS Results

• Actual EPS: -$0.11
• Consensus EPS: -$0.26
• Beat/Miss: Beat by +$0.15
• One Year Ago EPS: -$0.10

Ameresco Revenue Results

• Actual Revenue: $352.83 million
• Expected Revenue: $323.71 million
• Beat/Miss: Beat by +$29.12 million
• YoY Revenue Growth: +18.20%

Ameresco Announcement Details

• Quarter: Q1 2025
• Date: 5/5/2025
• Time: After Market Closes
• Conference Call Date: Monday, May 5, 2025
• Conference Call Time: 4:30PM ET

Ameresco (NYSE:AMRC), a clean technology integrator, provides a portfolio of energy efficiency and renewable energy supply solutions in the United States, Canada, Europe, and internationally. It operates through U.S. Regions, U.S. Federal, Canada, Europe, Alternative Fuels, and All Other segments. The company offers energy efficiency, infrastructure upgrades, energy security and resilience, asset sustainability, and renewable energy solutions for businesses and organizations. It designs, develops, engineers, and installs projects that reduce the energy, as well as operations and maintenance (O&M) costs of its customers' facilities; and projects primarily include various measures customized for the facility and designed to enhance the efficiency of building systems, such as heating, ventilation, cooling, and lighting systems. In addition, the company offers renewable energy solutions and services, such as 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; and electricity, processed renewable gas fuel, and heat or cooling produced from renewable sources of energy. Further, the company sells photovoltaic (PV) solar energy products and systems, as well as provides consulting, and enterprise energy management services; and operates wind farms. It serves the federal, state, local governments, healthcare and educational institutions, airports, public housing authorities and public universities, municipal utilities, and commercial and industrial customers. As of December 31, 2023, the company owned and operated 185 small-scale renewable energy plants and solar PV installations. Ameresco, Inc. was incorporated in 2000 and is headquartered in Framingham, Massachusetts.

Ameresco Q1 2025 Earnings Call Transcript

Key Takeaways

• Ameresco delivered a strong start to FY25 with 18% revenue growth, 32% adjusted EBITDA increase, a total project backlog up 22% to $4.9 billion and contracted backlog up 80% to $2.6 billion, providing nearly $10 billion of revenue visibility.
• Federal government work comprises ~30% of backlog; one previously canceled project was rescoped, two paused contracts have resumed, and no further disruptions have occurred, while new RFPs target resiliency and infrastructure on DOE and military lands.
• To mitigate tariff and inflation risk, most equipment for current projects was pre-purchased or sourced internationally, contracts include pass-through provisions for price increases, and a diversified vendor base shields near-term margins.
• Energy asset operations reached 742 MW, driving 31% revenue growth in that segment, with remaining 2025 RIN exposure hedged to 20% and IRA incentives largely safe-harbored for RNG and other assets.
• The business model remains diversified across technology (generation, storage, efficiency), geography and customers, with a majority of EBITDA from long-term recurring revenue, and management reaffirmed FY25 guidance of $1.9 billion revenue and $235 million adjusted EBITDA.

Presentation

[Operator]

Thank you for standing by. My name is Dustin and I will be your conference operator today. At this time, I would like to welcome everyone to the Ameresco Inc. First Quarter twenty twenty five Earnings Conference Call. Thank you.

[Operator]

I would now like to turn the conference over to Leila Dillon, senior vice president of marketing marketing and communications. Please go ahead.

[Leila Dillon, Senior Vice President of Marketing & Communications at Ameresco]

Thank you, Dustin, and good afternoon, everyone. We appreciate you joining us for today's call. Our speakers on the call today will be George Sakellaris, Ameresco's Chairman and Chief Executive Officer and Mark Chiplock, Chief Financial Officer. In addition, our Chief Investment Officer, Josh Barabow, will be available during Q and A to help answer questions. Before I turn the call over to George, I would like to make a brief statement regarding forward looking remarks.

[Leila Dillon, Senior Vice President of Marketing & Communications at Ameresco]

Today's earnings materials contain forward looking statements, including statements regarding our expectations. All forward looking statements are subject to risks and uncertainties. Please refer to today's earnings materials, the Safe Harbor language on slide two of our supplemental information, and our SEC filings for a discussion of the major risk factors that could cause our actual results to differ from those in our forward looking statements. In addition, we use several non GAAP measures when presenting our financial results. We have included the reconciliations to these measures and additional information in our supplemental slides that were posted to our website.

[Leila Dillon, Senior Vice President of Marketing & Communications at Ameresco]

Please note that all comparisons that will be discussed today are on a year over year basis unless otherwise noted. I will now turn the call over to George. George?

[George Sakellaris, Chairman, President & CEO at Ameresco]

Thank you, Lila, and good afternoon, everyone. First, I would like to thank the entire MRSCO team as we celebrate the company's twenty fifth year anniversary. It's been an amazing journey, establishing Ameresco as a leader in our industry and delivering over $16,000,000,000 in customer solutions dedicated to reducing energy consumption, enhancing energy infrastructure and resiliency, and developing proven pathways to decarbonization. While the current environment remains challenging, the drivers of our business remain strong. Global power demand grows, electricity costs continue to rise, and grid reliability is deteriorating as we saw in Europe a few days ago.

[George Sakellaris, Chairman, President & CEO at Ameresco]

All of this will increase the demand for distributed, diversified, resilient energy solutions. The team's outstanding execution led to a strong start to the year with results exceeding our expectations. First quarter revenue and adjusted EBITDA grew 1832%, respectively. These results also highlighted the strength of our diversified business model as we experienced material growth in both our projects and energy asset business, including strong performance in Europe and Canada. We also increased our total project backlog to almost $5,000,000,000 bringing our total revenue visibility across our businesses to almost $10,000,000,000 This was another quarter of significant contract execution conversion success resulting in a contracted project backlog of $2,600,000,000 representing a growth rate of almost 80% year over year.

[George Sakellaris, Chairman, President & CEO at Ameresco]

And these positive business trends have continued into the second quarter. I also wanted to comment on some of the well known challenges facing our industry and provide some insights into how the Ameresco team is working to overcome them. First, let me cover our work with the federal government. This business accounts for approximately 30% of our current total project backlog, with military related customers accounting for approximately two thirds and GSA or civilian agency related project work of approximately one third. We have provided a breakdown of our backlog by end market in our supplemental slides.

[George Sakellaris, Chairman, President & CEO at Ameresco]

Because these federal contracts have multiyear execution cycles, they are expected to account for less than 20% of our 2025 project revenue. We noted in our last conference call that we had encountered one cancellation on a project contracted earlier in January and a pause on two other contracts. We are pleased to report that the project that had been canceled has now been rescoped and the other two contracts have now been on post. Also, we have not encountered any additional cancellations or delays in our federal contracts. So, well, it is too early to say that there will be no additional future disruptions.

[George Sakellaris, Chairman, President & CEO at Ameresco]

We are cautiously optimistic. And, as the current administration's priorities come into focus, we believe our broad and deep technical expertise in our agnostic and budget neutral approach will help us promote our offerings. Interestingly, we are now seeing a significant number of recently issued federal RFPs focused on our core competencies of resiliency and increasing the power supply through new energy infrastructure. The government's recent release of a request for information about the possible use of DOE land to support growing demand for data centers. Following that, the DOE has identified 16 potential sites uniquely positioned for rapid data center construction, including in place energy infrastructure with the ability to fast track permitting for new energy generation.

[George Sakellaris, Chairman, President & CEO at Ameresco]

For example, we are seeing more opportunities to leverage federal lands for critical energy infrastructure projects. The Kopono Forty Four megawatt solar and 44 megawatt battery project is a perfect example of how this can work. We leveraged an enhanced use list with the Navy at Pearl Harbor to build this critical energy infrastructure that supports not only the base, but also the Hawaiian Electric Grid. We are also developing a 99 megawatt firm power plant, an advanced microgrid project on the same base. We are utilizing similar structures, including enhanced use leases to develop data center energy infrastructure projects with the Department of Defense.

[George Sakellaris, Chairman, President & CEO at Ameresco]

As we captured on another new slide on our supplemental deck detailing our project backlog by technology, and Maretsko is very well diversified in our expertise with efficiency, resiliency, and power production solutions. Approximately 50% of our total project backlog includes energy infrastructure projects using generation technologies such as gas turbines, engines, solar, hydroelectric, and technology such as large scale battery storage and microgrids. We believe our solutions are a good match for the evolving energy landscape, which is demanding ever increasing amounts of electricity and higher levels of resiliency. We are very excited about the opportunities ahead for our work with not only the federal government, but with all of our customers across our core markets, including utilities, data centers, co ops, and large C and I. I also wanted to discuss the dynamics tariff landscape that we, like every other company in our industry, are facing.

[George Sakellaris, Chairman, President & CEO at Ameresco]

First, I would like to point out that much of the equipment for current ongoing projects and energy assets in development has already been purchased and is in the country or already on the work sites, which we believe shields us from near term price increases. Longer term, we will work to mitigate price increases during contract negotiations and reprice where possible. It's important to note that the majority of our solar and battery projects are international and therefore not subject to US status. As many of our shareholders know, this is not the first time Ambarella's book has faced tariffs or inflation, and we have experienced overcoming similar difficult pricing dynamics. We have strong relationships with domestic and global vendors and a healthy backlog of projects, giving us a position of strength with our Velocity partners.

[George Sakellaris, Chairman, President & CEO at Ameresco]

I will now turn the call over to Mark to comment on our financial performance and 2025 outlook. Mark?

[Mark Chiplock, EVP, CFO & Chief Accounting Officer at Ameresco]

Thank you, George, and good afternoon, everyone. We delivered strong first quarter results with total revenue growing 18% and adjusted EBITDA growing 32%. Our projects business revenue grew 23% reflecting outstanding execution and our laser focus on the conversion of our backlog. Also, George mentioned, we did not encounter any additional delays or cancellations with the federal government and those contracts that we highlighted during our fourth quarter call, which have now been unpaused or rescoped. Beyond our federal project work, we also had a strong quarter in Europe, Canada and several U.

[Mark Chiplock, EVP, CFO & Chief Accounting Officer at Ameresco]

S. Regions. This performance speaks to the diversity of our customers, geographies and types of solutions that is a hallmark of the Ameresco business model. Energy asset revenue grew 31% driven largely by the growth of assets in operation compared to last year with our base of operating assets now standing at seven forty two megawatts. We have also taken steps to mitigate lower RIN prices for the year through our dynamic hedging strategy with our remaining twenty twenty five anticipated RIN exposure at only 20%.

[Mark Chiplock, EVP, CFO & Chief Accounting Officer at Ameresco]

The revenue decline in our other line of business is attributed directly to the divestiture of our AEG business at the end of twenty twenty four. Gross margin of 14.7% was largely in line with our expectations, reflecting a greater mix of revenue from large European EPC contracts. As a reminder, while these design build projects have a lower gross margin profile, they help to diversify our business as well as create strong operating leverage as they require very little incremental operating expense for the gross profit dollars they contribute. Net income attributable to common shareholders was a loss of $5,500,000 or $0.10 per share. Adjusted EBITDA of $40,600,000 increased 32% reflecting our strong revenue growth, tight cost controls and the power of our lean scalable business model.

[Mark Chiplock, EVP, CFO & Chief Accounting Officer at Ameresco]

We continue to see substantial growth in our total project backlog, which grew 22% to $4,900,000,000 Importantly, we converted $330,000,000 of awards to contracts during the quarter, driving our contracted project backlog up 80% to $2,600,000,000 Our project teams continue to deliver on contract conversion and execution to increase revenue and cash flow generation. We also added $367,000,000 of new project awards to our awarded backlog during the quarter. Turning to our balance sheet and cash flows. We ended the quarter in a solid cash position with approximately $72,000,000 in cash and total corporate debt of $270,000,000 During the first quarter, we successfully executed approximately $334,000,000 in financing commitments, which included extending and upsizing our senior secured credit facility to help fund our growth. With our strong first quarter results and forward visibility, we are pleased to reaffirm our guidance ranges for twenty twenty five revenue and adjusted EBITDA of $1,900,000,000 and $235,000,000 at the midpoints.

[Mark Chiplock, EVP, CFO & Chief Accounting Officer at Ameresco]

Our team's outstanding execution drove faster implementation during the first quarter of approximately $30,000,000 of project revenue. To assist with shaping for the remainder of the year, we are maintaining our expectation for the cadence of revenue in the second half of twenty twenty five to represent approximately 60% of our total revenue. Accounting for our strong Q1 results, we anticipate Q2 revenue will be in the range of approximately $400,000,000 to $425,000,000 Now I'd like to turn the call back to George for closing comments.

[George Sakellaris, Chairman, President & CEO at Ameresco]

Thank you, Mark. As you have heard, we had a very solid start to the year and we have seen this momentum continue into the second quarter. For over twenty five years, we have built an organization with unmanaged expertise in developing, structuring and delivering energy projects. Our business model is resilient with a majority of our adjusted EBITDA coming from our long term recurring revenue businesses, as well as from the strong multiyear visibility inherent in our project backlog. Furthermore, we believe our project business will continue to grow as we expect to capture more of the emerging infrastructure and resiliency build out.

[George Sakellaris, Chairman, President & CEO at Ameresco]

We are also a global business, diversified by end customer, technology, and geography, which would allow us to continually support change in policy in any geography will maximize our growth and earnings. In closing, I would like to once again thank our employees, customers, and stockholders for their continued support. Operator, we would like to open the call to questions.

[Operator]

Thank you. Before we open the floor for questions, as a quick reminder, if you'd like to ask a question, please press star and the number one on your telephone keypad. Thank you. And with our first question, this comes from the line of Noah Kaye from Oppenheimer. Your line is open.

[Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.]

Thanks for taking the questions. So clearly from 4Q to now, a nice turn of events around the federal business. I wonder if you could take us a little bit into of the transpiring that went on during the quarter to maybe kind of get the visibility in some of the contract situations into a better place. I think we start from the premise that these are energy saving and net positive for any assets that the projects are going into. But maybe talk a little bit about how it played out and maybe the nature of some of these new RFPs you're seeing.

[Mark Chiplock, EVP, CFO & Chief Accounting Officer at Ameresco]

Noah, hey, it's Mark. Maybe I'll just talk to the first part of that with respect to those federal contracts. I mean, again, I think we were fortunate that, again, the one contract that was canceled that has now been rescoped, we think will come back under a future mod. And so that will ultimately remain pretty neutral to where it started, which we think is a great outcome. And then on the other two that were paused, that are now unpaused, again, will ultimately be rescoped.

[Mark Chiplock, EVP, CFO & Chief Accounting Officer at Ameresco]

We feel that the rescoping probably will result in a small haircut on those. But again, certainly not the worst case, which we which could have been with those being canceled. So I think generally speaking, it was a good outcome for the three contracts that we talked about in the beginning. And

[George Sakellaris, Chairman, President & CEO at Ameresco]

the bottom line is the fact that these contracts, they are primarily energy efficiency, they are budget neutral, and all administrations, they like this particular project. And I think the fact that they would have signed in January probably had something to do with it, and that's why the people took them out and looked at it, and once they realized it's good for the government, they plan to move ahead. And because with the GSA, on the contract that was canceled, a couple of the buildings, they would be sold, so they took that amount of work and they put it in other buildings. So, that's why we feel very good where we are with this administration. And I think we can work with them that they like the budget approach and they like to, resiliency and, more power generation in federal facilities in order to have the resiliency required.

[George Sakellaris, Chairman, President & CEO at Ameresco]

The other thing, and that's why I tried to cover on my notes, how do they maximize the use and get more return from some of the land that's in the federal basis, it's unused. That's what's happening in Pearl Harbor and so on.

[Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.]

You know, Mark, I think last quarter you gave us some direction on how to think about the shape not only of revenue, but maybe even around sort of margins. Obviously, no things can move around a fair bit with project timing, but any color on sort of the shaping of margins either for 2Q or the balance of the year?

[Mark Chiplock, EVP, CFO & Chief Accounting Officer at Ameresco]

I mean, we feel really good about our full year guide on the, especially on the gross margin range, was 15.5% to 16%. Again, I think Q1 was a little bit lower than our expectations. But as I mentioned, we did see a heavier mix of European EPC contracts that do have a little bit lower margin profile. But I feel pretty good about the margin range for the rest of the year.

[George Sakellaris, Chairman, President & CEO at Ameresco]

Okay. Maybe last one to sneak in.

[Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.]

It's always hard to resist temptation to ask about recent events, and I think in this case it's quite appropriate. The blackouts in Southern Europe, I guess we're still figuring out what caused them, but it does go to a question around building infrastructure reliability on the grid. And I'm curious to think about how you see Ameresco's opportunity set when you look at events like that and kind of the type of project flow and opportunity you're seeing in Europe broadly.

[George Sakellaris, Chairman, President & CEO at Ameresco]

Yeah, and it happened not only in Spain, and a few days before that, it just happened partially in Greece. The fact that all these countries, they're getting so much solar renewable power, and it's intermittent, and you're going to see that happening more and more in The United States, what happened in Texas some time ago with the freeze, and now, as we put more and more renewables on the system, unless we get battery storage, or what I call twenty four to seven days, twenty four hours, seven days a week power, otherwise firm renewable power, it's going to happen. And what I think, I think the distributed generation is going to take much bigger piece of reaction than the large scale power plants and transmission lines, because I do not think that being able to build the transmission line necessarily improve the grid resiliency, because I remember when was with the utility for one large submission line from Massachusetts to Rhode Island, it took us ten years to get the right of way. So, it's very difficult. And the other thing that happens, once you build those submission lines, once you have one, an average, sometimes you lose two of them, you don't have the spinning reserve to back up what might happen.

[George Sakellaris, Chairman, President & CEO at Ameresco]

And that's how you have these outages. Back in the utility days when I used to do the long range planning, we used to get five to 10% spending reserve. You don't have it anymore.

[Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.]

Thank you very much.

[Operator]

Thank you. Our next question comes from the line of George Genericas from Canaccord Genuity. Your line is open.

[George Gianarikas, Managing Director and Senior Analyst at Canaccord Genuity Inc]

Hey, everyone. Thank you for taking my questions. Was wondering if you could give us an update on any projects are whose economics are sensitive to changes in the Inflation Reduction Act. What does the world look like there? I mean, what are those projects still moving forward?

[George Gianarikas, Managing Director and Senior Analyst at Canaccord Genuity Inc]

Are you seeing maybe a little bit of a delay to see the dust settle? I'm just curious if you can share any commentary there. Thank you.

[Mark Chiplock, EVP, CFO & Chief Accounting Officer at Ameresco]

I think for the projects that are coming online this year, especially on the RNG, we safe harbored the ITC related to those projects. So we feel pretty good about that. Even beyond that, for about three quarters of the projects in our asset development pipeline, we've safe harbored the ITC on that as well. I think we mentioned that last quarter around 200,000,000 of additional ITC. So, teams have done a great job to take the necessary steps to try and safe harbor that.

[Mark Chiplock, EVP, CFO & Chief Accounting Officer at Ameresco]

I think for assets outside of the RNG, again, I think we've done a pretty good job of safe harboring most of that. So, I don't expect any short term impact if there were something to happen with the IRA.

[George Gianarikas, Managing Director and Senior Analyst at Canaccord Genuity Inc]

Maybe as a follow-up, changing dynamics in the landscape impacted your decision tree around projects versus willingness to own assets? I mean, how's that, how's your philosophy changed there over the last, call it three to six months?

[George Sakellaris, Chairman, President & CEO at Ameresco]

Yeah, in the interest environment, you know, it's a little bit higher than what we would like it to be. And I think it goes without saying, and that's why you're seeing the growth in the project business a little bit more. We put a little bit more emphasis on the project. But, of course, they generate very good cash flow. And we have a pretty good niche in the marketplace there.

[George Sakellaris, Chairman, President & CEO at Ameresco]

And now, as the evolution happens with more resiliency and more power generation, we want to take a good piece of that action. And it's right up to our expertise. And, but on the other hand, I mean, have over 600 megawatts of assets in development, which it can take care of for us for the next two, three years. So, we are not taking our foot off the gas line there, but the, over the paddle. But we like the project business a lot.

[George Sakellaris, Chairman, President & CEO at Ameresco]

And we actually could see all those very well. So, are focusing on that a little bit more. Thank you.

[Operator]

Thank you. Our next question comes from the line of Kashy Harrison from Piper Sandler. Your line is open.

[Kashy Harrison, Senior Research Analyst at Piper Sandler Companies]

Good afternoon. Thanks for taking the questions and congrats on twenty five years. So nice to hear that the projects that had paused have now resumed. I was just wondering, have you seen any negative impacts from the reduced federal workforce on your business or is the approval process and just the day to day work with the federal government ongoing without any interruptions from less workers?

[Mark Chiplock, EVP, CFO & Chief Accounting Officer at Ameresco]

Yes, that's a good question. To be honest, we haven't seen anything yet, but we certainly could see a situation where the things that are happening, the personnel could have an impact on the timing of how awards can convert to contracts or just administrative challenges that could impact the timing of the progression of our projects. I think we've tried to build in some amount of conservatism into our guide and to the numbers for the year. But, you know, kind of near term, we haven't seen anything as of yet.

[George Sakellaris, Chairman, President & CEO at Ameresco]

On the long term, because of the budget mutual associated with our projects, And if you recall, the previous Trump administration, we executed more performance contracts under them than we did under the Biden administration. Because they like this concept. So, even though we might see, let's say, the movement from awards to contracted backlog delayed a little bit, but the number of contracts and proposals most likely will go

[Kashy Harrison, Senior Research Analyst at Piper Sandler Companies]

That that's that's a helpful additional color. May maybe just two more quick ones for me. George, I I think you you you discussed that you're in a good spot on storage and the exposure is not even that great, or it's not that high anyways, to The U. S, it's more international. And then you said demand it sounds like demand hasn't really been impacted by tariffs.

[Kashy Harrison, Senior Research Analyst at Piper Sandler Companies]

But I'm just curious, are there any other excuse me, are there any other implications to your business from tariffs that we need to be thinking about in any of the individual segments, that maybe weren't covered in the prepared remarks?

[George Sakellaris, Chairman, President & CEO at Ameresco]

I mean, the batteries, projects we are doing this year and next year. On this year, they were all pre purchased before any impact on the tariffs. On next year, I think half of them will be repurchased. The other half, what we've been able to do with some of our customers, dollar for dollar, it's closing the contracts that, you know, the purchase power agreements that whatever the tariff is, it will be a pass through. We'll recalculate the rate. It will be a pass through. So that's And is applied with some of the panels. But what, and the other thing that we have been trying to buy as much domestic as possible. But still, if you get tired, so the domestic prices go up as well. But so far, we have managed very, very well where we are, you know.

[Kashy Harrison, Senior Research Analyst at Piper Sandler Companies]

Appreciate the color. And then maybe just one final one for me. I was just curious whether you've observed any dislocations in valuations between private transactions or what your pieces of your portfolio may be able to get in the private market versus what you're seeing in the public markets and whether there's any appetite to show the public markets the value of your assets via transactions?

[George Sakellaris, Chairman, President & CEO at Ameresco]

Thank you.

[Joshua Baribeau, Senior Director of Finance & Corporate Treasury at Ameresco]

I think that's up to Josh Valley. Thanks, George. Hey, Kashy. So I think the answer is yes. We we do believe that there are, still robust private valuations for, the the types of projects and assets that we that we are implementing.

[Joshua Baribeau, Senior Director of Finance & Corporate Treasury at Ameresco]

Nothing we can really share now, but, you know, I think that the public valuations in our whole sector have definitely been, we'll call it, disproportionately impacted on maybe rational and irrational fears about changes in the government news cycle, etcetera. But fundamentals of our energy efficiency offerings, our RNG assets, our pipeline, our portfolio, and our platform, remain incredibly strong. And people that have the ability to to to look at these things, you know, from a project financing perspective or some of our develop and sell, those equity investors, those private equity investors still like what they see, and and we're still able to monetize the the value that we're creating.

[Operator]

Thank you. Our next question comes from the line of Eric Stine from Craig Hallum. Your line is open.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Hi, everyone. Just sticking with the tariffs, and I guess I'm great news on how things are set up for 2025 and for part of next year. But just thinking about this, if this period of uncertainty were to last for longer than that, just want to dig in a little bit on kind of the structure of the contracts. Is it pretty common to have that pass through language? Guess what I'm getting at is, I mean, this kind of a painstaking contract by contract renegotiation?

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Or is this something that's pretty standard, it's in the contracts, and it's pretty much accepted by your customers?

[George Sakellaris, Chairman, President & CEO at Ameresco]

Well, I, pretty much. I have told, our people that, new contracts, we we have the language that, we are protected against tariffs. And sometimes if we too much equipment is coming from abroad foreign exchange fluctuations as well. That's that's just become right now the the mark. But it goes from customer to customer.

[George Sakellaris, Chairman, President & CEO at Ameresco]

And, for example, this particular customer, it's a large contract. It's a battery storage project, and they get a certain deadline that they want to have the project up and running, and we get to put money down for the transformer, you know, to save up in order to save up the IPC and so on. And we said that's fine, but if the tariffs come and the prices goes up, you have to be on the hook for it as well for the transformer and so on. And they stepped up to the plate. And we've seen more and more some of the largest industrial customers looking for resiliency, battery storage, and so on.

[George Sakellaris, Chairman, President & CEO at Ameresco]

So, I think at the end of the day, they're willing to do what is necessary to protect

[Mark Chiplock, EVP, CFO & Chief Accounting Officer at Ameresco]

their operations. Yeah. No, think, know, look, I think beyond even the contracts, we continue to diversify the supply chain, right? I think we were taking quite a few learnings that we came out of COVID. And so we've been focused on bringing materials in faster on our projects, diversifying the supply chain, looking at domestic sources.

[Mark Chiplock, EVP, CFO & Chief Accounting Officer at Ameresco]

So, I think the combination building those protections into the contracts, as well as kind of maintaining that diversification is going to help us to mitigate most of the exposure to tariffs moving forward.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Got it. All right. That's helpful. And then maybe just back on the federal government work, and this is just a question that was just asked, but just wanted to clarify. In terms of the reduced workforce, I mean, it sounds like you are viewing this more as a delay know, potential delays, rather than just cancellations.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

And I know what you've seen to this point is you had the one which will be rescoped. You've got the two that have kind of come back. But I mean, so is it more from an approval process and a timing just to get through everything that's necessary to move forward rather than seeing a bigger risk that fewer buildings, housing that smaller workforce, and changing the overall scope?

[George Sakellaris, Chairman, President & CEO at Ameresco]

I mean, we have, I wouldn't say that we have potential delays. I mean, it would be immaterial because, and that's what I'm trying to point out, because of the power of the value proposition of our offerings is so strong, administration wants it so bad. They need this kind of work. Because at the end of the day, they get the infrastructure upgrade, and they don't have to use their budget in order to do it. They don't need to require any capital, so there will be more push to save money.

[George Sakellaris, Chairman, President & CEO at Ameresco]

So even if they have fewer people, at the end of the day, I would expect that we will see more contracts signed with these guys.

[Mark Chiplock, EVP, CFO & Chief Accounting Officer at Ameresco]

Yeah. But I think generally speaking, if, you know, if there is risk, we look at it being more administrative and just potentially slowing down the process around award conversions or contracting. So, and again, we haven't seen anything yet.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Okay. I'll just keep it to two. Thanks. Thanks, Sarah. Thanks, Steve.

[Operator]

Thank you. And our next question comes from the line of Craig Irwin from ROTH Capital Partners. Your line is open.

[Craig Irwin, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Hi, good evening and thanks for taking my questions. So George, Mark, everyone, thank you for the data point on your RIN hedging position. I'm sure you're well aware of some of the controversial forecasts that have been out there from different analysts about RINs possibly being cut in half, not something that you would expect one of the big oil desks to say. But can you just remind us what the processes you go through to evaluate the potential profitability on your on your assets before you go and deploy capital, how you structure these agreements as far as sharing of the RINs and other incentives, and how you sort of stress test these projects before you ever spend any money, breaking ground to build to ensure profitability across the cycle.

[George Sakellaris, Chairman, President & CEO at Ameresco]

I think Josh, you do line work. Have some money.

[Joshua Baribeau, Senior Director of Finance & Corporate Treasury at Ameresco]

Hey, Craig. So we a pretty thorough process of vetting the RNG projects throughout their development, including multiple steps with our investment committee. And we, of course, have some pretty well entrenched financing partners as well. And we run a lot of the projects through them early on to make sure that their expectations for the RIN curve match ours or match something that's reasonable in the market. And we layer in the financing assumptions in terms of the amount of debt, the cost of debt, the tenor, etcetera, in conjunction with what our models are showing us and what the development team is producing.

[Joshua Baribeau, Senior Director of Finance & Corporate Treasury at Ameresco]

And in a base case scenario and in a stress case scenario, if they meet our hurdle rates, which we've talked about as sort of a levered teens IRR on a risk adjusted basis, then we proceed throughout those next steps, those gates throughout development. So there's a lot in there, but we definitely aren't taking historical RIN rates or even current RIN rates. It really is a downward sloping curve based on forecasts that we have from all sorts of market parties, as well as our own proprietary analysis of supply and demand in the RVO, etcetera.

[Craig Irwin, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Understood. Thank you for that. So my next question is about the operating expenses. You had more than $50,000,000 in revenue growth, but you were down over the last couple of years for the first quarter for your operating expenses. Are you allocating personnel maybe to project execution from development activities?

[Craig Irwin, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Is there anything sort of going on as far as onetime expenses or rebudgeting on the operating expense line? And if there was maybe the move of personnel to execution, could you maybe quantify for us what that might have been on a margin basis?

[Mark Chiplock, EVP, CFO & Chief Accounting Officer at Ameresco]

Yeah, I mean, think that from an allocation, we are seeing probably slightly better utilization. I think as you look at OpEx, the trend. Remember also last year we had the additional OpEx from our AEG business, which was divested. So we're seeing a direct reduction from those costs no longer being in the P and L. But I think generally speaking, the cost controls around OpEx are really what is helping to keep OpEx steady even down as we are managing the timing of when we're bringing in new employees and only adding as we need to.

[Mark Chiplock, EVP, CFO & Chief Accounting Officer at Ameresco]

We still have pretty strong operating leverage with a lot of the larger projects that we're being brought on.

[Craig Irwin, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Cool. Well, congrats on a strong start to the year. Thank you.

[George Sakellaris, Chairman, President & CEO at Ameresco]

Thanks.

[Operator]

Thank you. Our next question comes from the line of Joseph Osha from Guggenheim. Your line is open.

[Joseph Osha, Senior Managing Director - Equity Research at Guggenheim Partners]

Hi there, guys. Thanks for all of the detail. Two questions. First, I mean, George, you alluded to non U. S.

[Joseph Osha, Senior Managing Director - Equity Research at Guggenheim Partners]

Exposure in your in particular, your solar and energy storage backlog. I'm just wondering if you can maybe put some rough numbers around that. Obviously, you've got 63% of your energy asset backlog in those two sectors. It's harder to tell what the number is for the project backlog. But help us understand how that might roughly break into U. S.

[George Sakellaris, Chairman, President & CEO at Ameresco]

And non U. S. Business? And then I have one other question. Most of the European and Canada work as we do, you know, so that's probably 1.5 gigawatts, but primarily though EPC, I think it's only a very small portion that we will hold, and that's up in Canada.

[George Sakellaris, Chairman, President & CEO at Ameresco]

In Europe, all the projects that we have, with exception of a small one, maybe 10 megawatts, it's EPC contracts.

[Joseph Osha, Senior Managing Director - Equity Research at Guggenheim Partners]

I guess I'm not understanding. You've got six eighteen megawatts of energy assets in construction, 63% of which are solar battery. I'm trying to understand what portion of those is US versus non US.

[George Sakellaris, Chairman, President & CEO at Ameresco]

Josh, give me the exact number.

[Joshua Baribeau, Senior Director of Finance & Corporate Treasury at Ameresco]

It's almost all exclusively US. Sorry, Joe, we were answering a question on the project backlog. I didn't realize you were

[Joseph Osha, Senior Managing Director - Equity Research at Guggenheim Partners]

answering on the Okay. That's quite helpful. So project backlog is more geographically diverse, but the energy asset backlog is more U. S.

[Joshua Baribeau, Senior Director of Finance & Corporate Treasury at Ameresco]

That's correct.

[Joseph Osha, Senior Managing Director - Equity Research at Guggenheim Partners]

Okay, great. Thanks. And next question, I heard some comments about diversifying procurement, which is great and there's you got a few options on the solar module side. Man, there's not a lot of LFP production in The United States right now and most of it is spoken for. When you look at your storage business, are there options for buying in The U.

[Joseph Osha, Senior Managing Director - Equity Research at Guggenheim Partners]

S? Are you going to buy nickel based cells? Or have you found a factory nobody knows about? Or I'm curious what your procurement strategy is for cells? I assume you're using mostly LFP.

[Joshua Baribeau, Senior Director of Finance & Corporate Treasury at Ameresco]

Hello? Joe Joe, it's Josh. Yeah. Sorry. We're we're we're volleying back and forth over who gets this one.

[Joshua Baribeau, Senior Director of Finance & Corporate Treasury at Ameresco]

The the the short the short answer the short answer is it is mostly traditional lithium ion, and, unfortunately, we don't have, any brand new factories that nobody knows about to announce on the call tonight. We are sourcing from the same kind of major global players that a lot of people are, especially as it pertains to bankability and performance because as as I think you know, and we've tried different solutions that hasn't been quite as successful. That being said, I think the key here is that the stuff we have at assets in development have for the for for this year, as George mentioned, have been safe harbored and or already delivered on-site for the most part. We have one big project that will be kind of midyear COD, which makes up the bulk of the assets and operations that we guided to last time. And then new projects, so less about procurement and more about contract structure.

[Joshua Baribeau, Senior Director of Finance & Corporate Treasury at Ameresco]

The new projects, we're inserting change in law provisions, as George mentioned, a dollar for dollar adjustment to tariff or IRA type of changes. So it's less about procurement and more about working with our customers to get a fair deal in this uncertain environment.

[Joseph Osha, Senior Managing Director - Equity Research at Guggenheim Partners]

Okay. And just as a last follow on to that, other people in this business have alluded to those pass throughs, but also indicated that there are brackets around that limiting exposure. So, let us suppose that we are paying 130% LFP tariffs a year from now. Is it your intention and your belief that you can pass all of that along to customers or would you bear some of it?

[George Sakellaris, Chairman, President & CEO at Ameresco]

We'll try to pass it all to our customers. Yeah. It's hard to say. Unless unless the project margin is such that we could absorb some, then then we would we look at economics very, very hard before we take on that kind of risk or cost. Yeah.

[George Sakellaris, Chairman, President & CEO at Ameresco]

At the end of the day, the economics are the price we will see.

[Joseph Osha, Senior Managing Director - Equity Research at Guggenheim Partners]

It is what it is. Yes. Thank you for your answers.

[George Sakellaris, Chairman, President & CEO at Ameresco]

Yep. Thanks, Joe.

[Operator]

Thank you. There are no further questions. This now concludes the question and answer session. This also concludes the conference call. Thank you all for joining. You may now disconnect.

Participants

Executives

• Leila Dillon, Senior Vice President of Marketing & Communications
• George Sakellaris, Chairman, President & CEO
• Mark Chiplock, EVP, CFO & Chief Accounting Officer
• Joshua Baribeau, Senior Director of Finance & Corporate Treasury

Analysts

• Noah Kaye, Senior Research Analyst at Oppenheimer & Co. Inc.
• George Gianarikas, Managing Director and Senior Analyst at Canaccord Genuity Inc
• Kashy Harrison, Senior Research Analyst at Piper Sandler Companies
• Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC
• Craig Irwin, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC
• Joseph Osha, Senior Managing Director - Equity Research at Guggenheim Partners