Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ameresco Inc (AMRC, Financial) reported a strong 45% growth in project revenue for Q2.
- The company increased its total backlog by 36% year-over-year to a record $4.4 billion.
- Ameresco Inc (AMRC) brought a record 155 megawatts of energy assets into operation.
- The company secured approximately $170 million in new project financing commitments in the quarter.
- Ameresco Inc (AMRC) raised $100 million in subordinated debt from Nuveen Energy Infrastructure Credit, enhancing its financial flexibility.
Negative Points
- Gross margin dipped to approximately 15% due to additional costs of $6.6 million related to SCE projects and a mix of lower-margin projects.
- The resignation of Chief Financial Officer Doran Hole may create some uncertainty during the transition period.
- The company faces potential risks and uncertainties related to the upcoming elections, which could impact market conditions.
- The revised 2024 guidance reflects a $10 million impact on gross margin due to cost budget revisions on SCE projects.
- There are concerns about potential further budget revisions and delays in the SCE projects, which could impact future financial performance.
Q & A Highlights
Q: The trend line here, especially in the last few quarters around the improving cash generation, is really encouraging. What has driven this improvement, and do you see it continuing?
A: (Mark Chiplock, Senior Vice President - Finance, Chief Accounting Officer) We are seeing improved cash flow due to front-loading billing milestones in contracts and proceeds from ITC transfers. We expect this trend to continue as we focus on timely billing and collections. (George Sakellaris, Chairman of the Board, President, Chief Executive Officer) Focusing on billing and collections has significantly improved our cash generation, and we believe there is still room for further improvement.
Q: Can you elaborate on the RNG contract with the California utility and its impact on your portfolio?
A: (Michael Bakas, Executive Vice President - Distributed Energy Systems) We aim to fix pricing for 50% of our RNG volume. This contract, starting in 2026, will represent about 12-13% of our supply, providing stable, long-term revenue. (Doran Hole, Executive Vice President and Chief Financial Officer) Fixed-price contracts are favorable for financing, offering stability and potentially better advance rates.
Q: What are the big positives and negatives as you look into 2025, especially with SCE rolling off?
A: (George Sakellaris, Chairman of the Board, President, Chief Executive Officer) The positives include a strong backlog with increasing gross profit margins and diversified projects. The only potential negative is the upcoming elections, but historically, our federal business has performed well under various administrations.
Q: How should we think about the seasonality in the back half of the year?
A: (Mark Chiplock, Senior Vice President - Finance, Chief Accounting Officer) Unlike last year, we expect Q3 and Q4 to be fairly similar, with maybe a small bump in Q3 due to normal seasonality.
Q: Can you clarify the revised revenue and EBITDA guidance, particularly the impact of SCE costs?
A: (George Sakellaris, Chairman of the Board, President, Chief Executive Officer) The revisions primarily reflect the impact of increased costs from the SCE projects. (Mark Chiplock, Senior Vice President - Finance, Chief Accounting Officer) The modifications were focused on the assumed costs for SCE, and we feel confident about our revised guidance.
Q: What is driving the significant growth in your backlog?
A: (Nicole Bulgarino, Executive Vice President and General Manager - Federal Solutions) The growth is driven by market demand for battery energy storage and resilient clean energy projects across federal and utility markets. We have a strong pipeline of projects integrating domestically sourced solutions.
Q: Can you update us on the RNG projects expected to commission in the second half of this year?
A: (Michael Bakas, Executive Vice President - Distributed Energy Systems) We have two projects, one 11.7 MW and another 15.6 MW, expected to go commercial in the coming months. These projects will significantly contribute to our portfolio.
Q: How are you structuring new energy storage contracts differently based on lessons learned from SoCal Edison?
A: (George Sakellaris, Chairman of the Board, President, Chief Executive Officer) We have improved contract protections and front-loaded milestones to enhance cash flow and minimize risks. Recent projects like United Power and Kapona have been executed efficiently, reflecting these improvements.
Q: How do you view the potential impact of tariffs on Chinese cells on your solar projects?
A: (Nicole Bulgarino, Executive Vice President and General Manager - Federal Solutions) We have been using domestic solutions for federal projects and expect this trend to continue. (George Sakellaris, Chairman of the Board, President, Chief Executive Officer) We primarily use domestic pricing in our project estimates to mitigate tariff impacts.
Q: Can you provide an update on your UK opportunities, especially with the new government?
A: (George Sakellaris, Chairman of the Board, President, Chief Executive Officer) The new government’s focus on clean projects is favorable for us. We are making good progress on projects like Bristol City and expect the environment in Europe to remain strong.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
