Q3 2021 Ameresco Inc Earnings Call

Good day, ladies and gentlemen, and thank you for standing by and welcome to the America, Inc. Third quarter 2021 earnings call. At this time, all participants are in a listen only mode.

We will conduct a question and answer session and instructions will follow at that time as a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host Ms. Leila Dillon Senior Vice President of marketing and communication. Mr. Dillon you may begin.

Thank you Justin and good afternoon, everyone. We appreciate you joining us for today's call. Joining me here are George <unk>, <unk>, Chairman, President and Chief Executive Officer, Doran Hole, Senior Vice President and Chief Financial Officer and <unk>.

Chip Clark, Vice President and Chief Accounting Officer.

Before I turn the call over to George I would like to make a brief statement regarding forward looking remarks.

This call contains forward looking information regarding future events and the future financial performance of the company. We caution you that such statements are based on management's current expectations or beliefs.

Actual results may differ materially as a result of risks and uncertainties that pertain to our business we.

We refer you to the company's press release issued this afternoon and to our SEC filings.

These documents discuss important factors that could cause actual results to differ materially from those contained in the company's projections or forward looking statements. We assume no obligation to revise any forward looking statements made on today's call.

In addition, we will be referring to non-GAAP financial measures. During this call. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles.

GAAP to non-GAAP reconciliation as well as an explanation behind the use of non-GAAP financial measures is available in our press release and in the appendix of the slides, which can be downloaded from our website I will now turn the call over to George George.

Linda and good afternoon, everyone.

Third quarter was another strong quarter for the more ethical as robust new business development activity yielded significant growth in both our project backlog and our energy assets in development.

Our results continued to benefit from our diversified business model.

As growth in our higher margin asset and O&M businesses, plus a favorable project mix drove an increase in profitability.

More than offset the impact of supply chain had COVID-19 related delays.

Our energy asset business had an exceptionally strong quarter.

With revenues up 29%.

And 35 megawatts added into our assets in development.

We're ongoing additions to our energy asset base to higher margin long term term revenue stream that together with our O&M business serve to smooth out the variability that we can experience from quarter to quarter in our project business.

Of note, we were very pleased to add an additional four R&D side and and innovative battery system to our assets in development during the quarter.

Given our deep and wide expertise and advanced energy technologies <unk> is able to pursue a very broad range of high yielding opportunities across our entire geographic footprint.

During the third quarter several projects and our off grid integrated solar business were impacted by interruptions and delays due to the industry wide supply chain issues and COVID-19 related disruptions.

It's important to point out that these issues primarily impact the timing of execution.

This delayed revenue will be recognized in later quarters.

Our project business proposal activity has been robust.

And as we expected we experienced a considerable increase in our Tulsa project.

Law.

Which was up 7% sequentially at the end of the third quarter.

At the same time, a significant increase in proposal activity is taking place across our customer base.

Which we see as a positive signal for MRI as opposed to growing business.

Several factors have started to come together that they are in fruition customer decision.

For many customers.

Attraction to budget neutral cost savings remains a key selling point.

But we are now seeing a significant increase in project has been driven by the demand for greater power and water is agency as well as advanced technology solutions that can lower our customers' carbon footprint.

<unk> ability to provide comprehensive solutions addressing all these elements puts us in a very strong competitive position.

And he has significantly expanded our addressable market.

The transformation.

5037, five megawatt battery energy storage contract that we announced 10 days ago. He is an excellent example of the growth potential we see on the horizon.

The contract is the largest in that <unk> 20 year history.

We will be designing and building three battery energy storage system for Southern California Edison.

In total the project will provide the California agreed with four hours of clean Brazilian power storage for a total of 2150 megawatt hours.

And the incredibly fast paced timetable for this project has been driven by the devastating impacts and higher frequency of extreme weather events, which continue to create energy supply emergencies in California.

California, though it is not the only state or region to be facing extreme weather events.

Over the last years few years, the grid has been disrupted by numerous wildfires extreme heat and cold as well as hurricanes in many regions of the country.

Many utilities and their customers are now looking at distributed energy resources, and micro grids to augment the grid and create a more reliable and resilient resilient system.

Is it larger percentage of our energy supply comps from this intermittent resources like solar and wind blackouts and energy shortages may become more likely.

We've continued to support these technologies as they are a very important part of the new energy mix and our economy.

However, they are intermittent nature does create a need for more backup power and resilience solutions, including firm supply of renewable energy resources.

Hey, more ethical portfolio of solutions perfectly complements this approach.

We are in the southern California battery contract is our first of this size.

We are actively engaged in numerous other discussions with similar solutions.

We believe the next decade will be month by dramatic changes in the domestic power system with resources shifting to more distributed assets and micro grid to increase overall reliability and resiliency I will now turn the call over to Doran to provide some comments on our.

Our financial performance and guidance Doran.

Thank you George and good afternoon, everyone.

Please refer to our press release and supplemental slides that have been posted to our website for additional financial information.

As George mentioned in the third quarter clearly demonstrated the resiliency of our business model as continued growth in our higher margin energy assets and O&M businesses.

<unk> offset softer project revenue driving another quarter of profit growth.

As we have noted before quarterly projects revenue can be uneven by nature.

Which has only been exacerbated by industry wide COVID-19 restrictions and supply chain disruptions.

This is one of the reasons the company has purposely built out our recurring revenue businesses since its founding which now account for over two thirds of our adjusted EBITDA.

Q3 revenue was $273 7 million compared to $282 $5 million the previous year.

Approximately $30 million worth of projects revenue was delayed and is expected to hit in subsequent quarters. We.

We anticipate the COVID-19, and supply chain challenges to continue into 2022.

We constantly monitor the availability and timely delivery of materials as well as the availability and cost of labor, especially given COVID-19 related restrictions and vaccine mandates.

Our increased guidance, which I will discuss later in the call. It takes all of this into consideration.

Energy asset revenue increased an impressive 29%, reflecting the continued growth of our operating portfolio improved performance of our existing operating assets and strength in RIN prices.

O&M revenue also had a robust quarter with growth of 12% as we continue to attach long term O&M contracts to our project work.

Our gross margin of 21, 5% benefited from a favorable project mix and generally continues to benefit from the growth in our higher margin energy assets and O&M businesses.

We had GAAP EPS of <unk> 33, and non-GAAP EPS of <unk> 41 says with adjusted EBITDA of $40 2 million, increasing 9% year over year.

During the quarter, we placed four megawatts of assets into operation. We also added an impressive 35 megawatts to our assets in development, including a battery energy storage system and four additional smaller R&D facilities.

With the addition of these four we now have 17 RMG assets in development with a total expected annual output of over 10 million <unk> to use the equivalent of approximately 129 megawatts.

Our 319 megawatts of operating assets have approximately $1 billion in long term contracted revenue and incentives.

Together with our $1 1 billion O&M backlog with <unk>.

Continue to have considerable long term visibility to these higher margin revenue streams.

Moving to our project backlog.

We were very pleased to have increased our total project backlog, 7% sequentially and 5% year over year to $2 36 billion.

As we continue to see a significant pickup in customer interest in bidding activity.

Our recently announced battery storage contract with SCE was not included in the Q3 backlog number but will hit our Q4 contracted project backlog.

And as a leading cleantech integrator, we are pursuing many other large complex projects with clients, who recognize our expertise and proven track record.

Let me add a little financial color to the SCE design build contract.

Work has already begun in the fourth quarter with anticipated completion by August one 2022.

As with other projects revenue will be recognized on a percentage of completion basis.

We expect a relatively uniform level of work throughout the life of the contract.

As we have stated.

Design build contracts typically yield gross margins in the high single digit range.

We have included the estimated impact from this contract for the remainder of this year and our raised 2021 guidance ranges.

We will not be commenting on the 2022 impact yet as it will be factored into our 2022 guidance ranges when we release that information early next year.

Given our strong year to date performance. The addition of the SCE contracts are lower than anticipated tax rate plus an increased investment in our people new resources and growth strategies.

We are pleased to be increasing our 2021 guidance as detailed in our press release with these factors we are increasing the revenue midpoint by $80 million and the EBITDA midpoint estimate by $5 million now I would like to turn the call back over to George for closing comments.

Thank you Doran.

I want to again take a moment to thank our employees for their dedication and outstanding execution as well as our customers and stockholders for their continued support.

I believe that the prospects, we see in front of us have never been more excited.

Our portfolio of innovative solutions, and our track record of execution and delivering top quality products make semi ESCO the industry's preferred partner for the most complex and comprehensive advanced energy projects.

Our recent battery storage contract win is a tremendous achievement for the company and we believe it's also indicative of the types of opportunities that are rapidly evolving in the market as we focus when they clean Brazilian future.

Finally, I am excited to announce that <unk> will be holding its first investor day in New York City on January 13th.

We will provide analysts and investors with an opportunity to gain better insights into our compelling long term opportunity.

Rachel.

Now to open the call to questions.

And thank you <unk>.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press. The pound key. We also please ask that you limit yourself to one question and one follow up again Thats. One question one follow up.

And our first question comes from Noah Kaye from Oppenheimer.

Your line is now good effort.

Good afternoon, and thanks, so much for taking the questions hi, everyone.

I know.

So first of all congrats on.

Contract wins with Socal Edison. This is very significant and so I'd like to ask a couple of questions related to it.

I guess number one is a housekeeping matter.

Is it possible to do a central fridge.

To the $80 million increase in revenue guidance, you mentioned that.

Do you expect revenue recognition of this project fairly rapidly over the life of contract, but maybe you could kind of help put a little bit of a finer point on it for us.

And I guess as long as we're at it we could also ask a little bit about your mentioning the increased investment in people with some to support growth Theres any details you can provide there.

Hey, Noah this is mark maybe I can start just talking about the guidance right. So on the <unk>.

80 million I don't think were going to talk about specifics there I mean, there are a number of puts and takes.

Going into those those increased estimates.

On the revenue side, we took into account.

An estimate of additional revenue coming from the battery contract.

But as we talked about in the prepared remarks and as we saw in Q3, we still are anticipating the impact.

Various supply chain and Covid related impact to the revenue I think we feel really confident in that and that revised range just given the visibility that we have coming out of our coming.

Coming out of our project backlog for sure.

We anticipate.

Greater than 85% coming from our contracted backlog.

On the project revenue line and certainly a high percentage overall coming from contracted revenue sources.

If we work our way down the P&L.

I think the expected contribution from that contract.

The adjustments we made to revenue when you combine those with some of the investments that we're going to make.

It's a combination certainly on the human capital side as we focus on retaining our people as well as the investments we're going to make in new resources to support the.

The growth.

We're also expecting to see some some increases on the project development side, we continue to focus on the robust pipeline of project. So we're going to see those investments continue to impact Opex and I think that's what's slowing down to the adjusted earnings guidance.

Hey, Mark Thanks for that Yeah go ahead. Please.

Hello, what I might add too.

As you might recall that.

During COVID-19, we did cut back a little bit on the expense side and focus a lot in executing the contracts that we had in place and I think thats. The way we came out through COVID-19.

Very good and we're feeling is by the way, but the last couple of months in this quarter.

Increase in Opex, otherwise hiring more people adding.

Adding additional resources.

And Thats what markets. Thank you pointed out and.

And we're doing it because we are shifting some resources for that matter because in order to actually because of this.

Expeditious time schedule of this.

Battery storage contract, we are shifting some resources Cenaeum manages the built in other projects to this particular project.

Our backlog is developing fast the opportunity set out there.

That's why you saw the considerable pickup in the projects awarded.

Over 31% year to date.

But we have to make the investment in order to maintain and probably.

Accelerated growth down the road.

Right and as you pointed out I think in your prepared remarks that increase and awarded backlog Didnt reflect those contracts. So you had significant growth.

And your other projects business.

Yes, we will see that.

And Thats, what got US excited about the performance of the third quarter of the effect it had.

Been waiting that we've seen.

The proposal activity is more than double what we had the previous years.

Are we beginning to see the results of the awards.

Our time and worked through.

The backlog get the awards within six months a year later.

You get the actual contracts, but if you go to southern Cal.

No to award the contract.

A few months into proposal stage, and then about 10 days and the award to contract stage.

Right.

Look contract by the way.

Thanks, George that feeds into my my last question, which is around I mean, obviously there was an urgency.

To this project, but I'd like to get a little bit of color on that.

How you effectively won the contract where you were able to differentiate whether you know it.

Around the service capabilities the technology, we're proposing and then what do you think that means in terms of other of other opportunities at the utility scale type nature, you are hinting at it in the prepared remarks, but it sounds like there's quite a robust opportunity out there.

Yes.

Sure.

Southern Cal that went out with another fee and we're monitoring the situation what they were doing with the PUC and so on.

Yes.

Among the first companies to respond to the RFP and there were a few others as well, but in addition to that we are doing another project for southern Cal smaller sized project, which is.

So we got to know them pretty good.

And they recognize as we have tremendous capabilities in that area.

To them I would say three months ago or so and.

So we went after it very aggressively we did.

Widen up suppliers and EPC contractors and so on because one of the key issues of course is getting into batteries.

And so on and so forth. So we have lined up suppliers for all of the key.

Equipment for the project Transformers and so on.

As well the somebody to rapid.

And both of those for us and the other thing I want to point out.

Everybody to know and investors as well as the analyst.

Yes.

When you take the contracts as a single contracts with very large sized contracts for us, but if you break it down three contracts.

Three different sites and if you think we did.

Back in 2000 Pan with one third of the size of the company and we did a $200 million.

Contract.

Yes.

There was biomass much more complicated, we'll just particularly one.

What makes it challenging is the schedule.

<unk>.

Some of the supply issues that we have.

We are developing contingency plans to make sure of that.

Everything is there a long time.

But the other ones.

The opportunities that's why.

I'll focus my remark a lot.

It's getting to be more and more of an issue micro grids and battery storage and so on it's going to be the new way of the future.

As I said in my remarks, more solar more wind.

And of course, they are intermittent and depends on weather.

Yet.

Or a hurricane or whatever all of those things that you're going to make up that difference on Paul So does the need for backup power energy storage or whatever it is.

Technology is down the road.

Right right.

<unk> you very much for the color I'll jump back in queue.

Thanks.

Yes.

And thank you <unk>.

Next question comes from Julien.

Smith from Bank of America. Your line is now open.

Hey, guys. This is <unk> stepping in for Julien.

Yes.

Hey, how are you.

My first question here is I was wondering if you could just elaborate a little bit more on the supply chain issues.

How much of that is driven by shortages matches cost inflation.

Our businesses are particularly effective.

Is there any risk I guess any impact at all tier annual cadence of data for R&D project Alright, do you think you can kind of.

I can make up that in quite a long time, just wanted to get your thoughts on that.

No.

We'll talk about it their beds and then mark convening into a day in and day out more.

The LNG project, we had the slight delays on.

The project that we were executing in order to then Rob but no major hiccups.

<unk> economics, but subsequently.

For example, some of the materials for the early deep controls, we gather from our factory in Vietnam into a shutdown for three weeks and so on so that's impacted pretty much all of our.

LNG project.

Good thing and that's why it doesn't impact us as much on the profitability of the company. So that's why I mentioned on my call. The project mix. Some of this project lower margin.

Project. So they didn't have as much impact the other thing that it is.

Surprise me a little bit with this.

<unk> does not vaccinated, especially in the northwest region.

All of our subcontractors because they had made to one or two employees and vaccinated.

They have access to some of the facilities.

Before we used the schools will not often or even in the past we used to do work at night and some of the schools and now because they will open and they were concerned in case somebody was whether there was other vaccinated. So that would not allow us to do nice work. So it doesn't seem to be seeing some roof tiles anyway.

Yeah, No I think you've hit on a lot of the examples I. The only thing I might add is that we're certainly wasn't unique to any particular business unit or a region. We saw it across really all of our project related businesses.

And so I think we even saw beyond that just sure it delivery of materials or our COVID-19 related impacts we saw contracts being delayed because COVID-19 wouldn't allow a certain officials to get into the same room and so again just impacted the timing.

On a contract that we probably would have expected to see in Q3. So.

We certainly ran the gamut.

Of different challenges across supply chain and Covid.

Okay awesome, Thanks that was a.

Great answer I think for clarity there and then.

And as a follow up I just wanted to ask about.

Just the guidance range.

Is that pretty much predominantly driven by this contract or how much of that is.

Impacted by.

I guess what are your thoughts on <unk> and how you're thinking what sort of expectations are factored into guidance I know last quarter. You said you were still relatively conservative on that.

Have you sort of impact.

I guess incorporated some of that positive pricing into your guidance.

Yes, yes for sure.

One of the one of the puts and takes I think.

Again without talking specifics about all the all the moving pieces in the guidance or estimates or just slightly below where the market is.

So I think that's certainly has to be a factor but.

But thats, probably what I'll say on that one that particular input.

Okay, great. Thanks, I'll jump back in the queue.

And thank you.

And our next question comes from Eric Stine from Craig Hallum.

Line is now open.

Hi, everyone.

Hi, Eric.

Hey, so just going back to the FTE.

Sure.

And arguably California has got the most urgency in this area, but obviously as you mentioned other areas as well I mean, you've talked about this.

This building pipeline of similar large projects just curious.

If you could expand on.

Maybe.

Size of those compared to the one that you just won.

Timing of when.

We could start to think about that obviously these are large and and maybe they move slowly but this one seems to have moved actually pretty fast given what's going on.

Well.

This one month pretty fast because like I said, it's an emergency situation Skipton and California, I will say this much.

We are working on quite a few of them generally they are smaller.

And in this particular.

And in this particular project.

<unk>.

Uh huh.

Yeah I think.

You will find out that the market is moving more and more battery storage micro grids and so on.

Got it okay.

Echo there.

Okay.

Okay.

Okay, Okay got it.

Alright, I guess, we'll stay tuned for that.

Obviously, a pretty positive environment.

Maybe maybe I'll just.

I'll stick with two questions just on R&D.

You mentioned, the four new ones that you added.

Any color on whether those are very RMG and then as you look at the pipeline how does that kind of breakdown between your traditional landfill versus dairy.

No.

Landfill sites.

All four of them, but I will say this much in the jewelry, we are working on it some sites and some other potential deals.

Still put them in that proposal category right now.

But I think in the near future you will see us moving more but we'll be able to put them in what I call.

Assets in development right now.

There is <unk>.

Medium stages I will call them.

But because of the.

Score much lower.

Value proposition is much better for them and so on.

We're looking at.

Very aggressively.

Okay I appreciate it.

Thank you and our next question comes from Chris Chris Souther from B Riley.

Thanks.

Thanks for taking my question here guys and congrats on this CEO.

Maybe to start for me.

Talk about the uptick in energy asset development pipeline.

Strong additions in both solar and storage and then also the renewable gas.

Can you talk about the types of solar and storage, where youre seeing strength, there and then it looked like.

Ed.

Peer kind of battery added too.

Yes.

During the quarter here I wanted to get a sense of within the pipeline and kind of current assets. How many are kind of pure.

Battery versus hybrid or solar only if you could kind of give us like a breakdown of where things stand in the momentum between those and then the timeframe for.

Renewable gas plants.

That were added before then.

Would be great as well.

Sure.

Ill.

Try to hit all of those questions and one one fell swoop. So you will notice that we were.

Kind of labeled.

Solar and battery in the supplemental slides now.

Out of the figure that you see for solar and battery 39 megawatts of that represents the battery capacity. Some of that is standalone. Some of that is combined with solar.

The one that's being added as a battery that's being added to an existing solar solar project.

So that we've already got in our operating portfolio.

So that's kind.

A great example of being able to go back and figure out how battery resiliency can be a supplement to the things that we already own and operate.

I think on the R&D side, there hasnt been really any change to the cadence of implementation. So we've talked in the past about.

2021.

The single assets placed in service already 2022 to three assets in 2023 four assets.

The four that have been added.

I think.

Clearly when we talk about 17 assets in development.

In the 'twenty one through 'twenty three don't add up to 17. So you can kind of see the timeframe is going to stretch beyond that 2023 Mark.

To get the rest of these in.

In operation.

Okay. That's very helpful. And then project delays, obviously, a challenge though space.

You talked about pushing about $30 million from some of these supply chain challenges. It sounded like that was stuff that you thought was going to be in the third quarter, but we've got pushed to the fourth quarter and beyond I'm. Just curious how many projects are being pushed into 2022 versus the prior guide and then kind of curious around the timing where you guys are.

There might be kind of a light at the end of the tunnel here too tough to call at this point.

Yes, Chris it's hard to say the number of actual projects being pushed right anywhere we're kind of looking at it from a total revenue standpoint.

Certainly we would see some of the some of the revenue that got pushed out of Q3.

Bill into Q4, but.

In terms of.

Pushing out in to next year I mean the network.

We continue to anticipate that we've got a PV challenges through Q4 and into <unk> and into next year and so we'll continue to pull revenue out out of this year and into 2022.

Any sense of how much was kind of pushed out for the full year.

For some of these.

I wouldn't say that.

I don't want to call them project delays.

Revenue delays for example, it takes not only the streetlight jobs and we couldnt get the controls, but we could do some do some other work.

So.

By the way as you delayed some of the revenue associated with a particular project.

And that's why I or my remark I said delaying that.

We were recognized with a little bit later time.

Understood. Okay. Thanks, guys.

Thank you.

And our next question comes from Tim Mulrooney familiar and Blair. Your line is now open.

Hey, this is Sam filling in for Tim Thanks for taking our questions here guys. Congrats on the quarter first of all.

Thanks, Sam Thank you.

You've discussed in the past the ongoing shift towards more comprehensive and complex projects.

I was curious if you have any stats to help us understand the magnitude of that shift like maybe the average size of the project five or 10 years ago versus the average size of the project today or even a range just anything to really kind of help frame the issue for us.

Yeah, Yeah, it's a.

Good question I mean, we go back to one of my favorite project was that use that its size changed dramatically.

Fairness Island, when we won that contract with through the RFP process. It was about $48 million contract and some of the measures it was changing out some boilers.

Killer worked some light.

Steam upgrades in the cost of water and sewer otherwise in a typical HVAC boiler retrofit.

And then the client the purchase because as you know we have many storms zone here, we need resiliency and also we can't requirement by the federal government to.

30%.

<unk>.

Renewables by I forget the here.

So we went back to the drawing boards and we design a project that he had the combined heat and power plant.

Eight megawatts.

An emergency generator.

Battery storage and solar plant and of course in order to match where load with the generation that.

You have on your system instantaneously once you get off the grid.

The micro grid, you need the computer in order to control and see what's going on.

<unk>.

That became a 98 million under a project that's been up and running very successfully Portsmouth Naval shipyard, that's where they've maintained the nuclear submarines similar situations in June and the ice storms that we had the last couple of winters winters.

Please go ahead Paula.

And the same with Venezuela, they had one of those storms.

Hello, English came by maintaining power.

And thats expanding more and more.

I think I said before back when I was at <unk> electric and we're doing that.

The planning for generation and transmission, we used to design the system for a loss of load probability of one in 101% otherwise.

We could come up.

To achieve that.

We needed about 10% of the outstanding lowered the spinning reserve.

And now I'll just spinning reserve.

It will be the very slow as you think we go as we go down the road and saying you have a 30, 40% between solar and wind are single event was weather can take out more.

So union some backup units micro grids in the data center out there the banks, they're beginning to realize Washington and of course, the federal government was the first to realize that we have to kind of a backup.

So.

The project has been expanded.

But San Jose and <unk>.

<unk>.

Yes.

All of our domestic loan yep.

Awesome I appreciate the color there.

Maybe pivoting back to the battery technology, a little bit, but more so on the distributed energy front.

When we look at led lighting technology, and just how would it have matured it and help lower the cost of the technology by 9% and that ushered in a wave of retrofits and mass adoption.

When we look at the state of distributed energy now and just the battery storage, where do you think we're at on the technology maturity curve here and then how much do costs need to come down from where they're currently at.

See maybe.

Similar mass adoption of it.

In <unk> case.

Cases that make economic sense, England right now.

Because.

They take into consideration an interruption of service. If you are a hospital for example.

Jonathan <unk> jewelry University on a data center or <unk>.

Good.

No.

You don't want to lose everybody what is about cyber security solution empowers, sometimes that can be much much worse than that.

So the cost I think they have come down some.

And that's why the market has expanded for example.

Sensors smart sensors on the LCD.

Of course, the solar panels and everything else when that's come down tremendously the batteries, we are making progress, but there's much.

<unk> I think we will be able to see and the micro grid, but.

We are getting to a point that they make good economic sense.

Got you I appreciate the answers here good luck in the next quarter.

And that's why that might have expanded from $10 billion to $20 billion market market Tonight because of the market. If you look at some of these studies by Novick I know those guys out there.

Perfect I appreciate it.

Thank you and our next question comes from Jed <unk> from Canaccord Genuity. Your line is now open.

Hi, Thanks.

I guess first question, just maybe an extension on the <unk>.

On the storage side.

It looks like that was.

<unk> four.

It wasn't for long duration.

Storage just doing the calculation of <unk>.

For our backup so I'm curious.

Maybe could you provide a bit more detail on that.

How that.

Hi came about in.

Because your comments around.

Micro grid would maybe suggest.

A combination of both long and.

In short duration.

George and so I'm, just trying to figure out sort of where we're at if this is the tip of a much larger iceberg or.

How to think about this.

Yes, I mean look at it this way.

The four hour battery storage for this particular application came from looking at the profile of the utility that's what basically they went out to the requested.

So what.

So in order to bid.

Thanks, Steve.

Good morning.

But the rewards allows about but.

Intimately.

With a micro grids, such thing and Thats why I said in my comments, we will meet.

Renewable supply.

And for example go back to the Parris Island as we use natural gas right now can you give us a combined.

And power and the battery storage has been used used to bridge the gap.

Because even though you have the older generation you cannot bring it up to back some lowest instantaneous the battery can you hear me.

Bridget.

It gives you up and running for the next two or three hours until youre load picks up but now <unk>.

20 years from now we wouldn't be a net zero that natural gas will have to fire. The turbine will see the hydrogen come clean fuel and Thats why I say ultimately we will need.

Renewable resources.

Yes.

Yeah.

Yes go ahead.

Ed.

Yes.

Along those same lines, we're seeing.

I think I'm not sure if it came from Charlie Baker or.

Somebody else, but I read that.

This state, Massachusetts.

Wanted from ever source plan that.

Without natural gas we're seeing.

Nat gas.

In California that that's.

Viewed somewhat fashion as oil now I completely disagree with with.

The logic in most of these people don't understand physics or failed their physics classes, but I'm curious with that exposure, how you're thinking about.

Positioning the.

George just mentioned hydrogen.

Im curious how youre thinking about the portfolio in the context of some of these.

Uh huh.

Political debates that are going on right now.

Well I think.

We when you look at the hydrogen and what's potentially coming there I think that we like the optionality that we have with the portfolio of operating landfill gas and renewable natural gas plants.

That are in development. So that's something that there is a reason why we're keeping our eyes on this you've mentioned a couple of technologies, which are coming and just kind of circle back to the fact that we're an integrator or cleantech integrator focus on the highest and best technologies, we're looking at new technologies.

Pretty continuously we start to pilot these in certain projects, sometimes it's on the EPC design build side sometimes.

On the energy asset side.

I can say that I've seen pilots on hydrogen as well as long duration storage flowing through into our backlog.

There are small, but they are small for a reason because we need to we need to test them out, but we need to make sure that we're comfortable with the technology because the customers that we have like us to stand behind our work and so we need to be able to stand behind the technologies.

But nevertheless, as these technologies advanced we're just going to position ourselves to have the technological capability to understand install operate maintain and if we like them on our own balance sheet loan them.

That's better suited for our customers then our customers will on them.

I think thats the way I see that alright, great.

That's helpful. Thanks, guys I'll jump back in the queue.

Sure.

And thank you.

And our next question comes from Stephen <unk> from Stifel. Your line is now open.

Thanks, Good afternoon everybody.

Hi, Steve.

Two things from me.

I'll start with the with this significant award that you guys announced.

Over and over in California can you talk about.

With a project of this size.

Sort of the safeguards you've put in place and the confidence you have on the execution front and there because thats the one thing.

We're a little bit about is it's obviously, a pretty large project and you've mentioned in gross margin ranges for similar projects.

Sort of what's the level of confidence and how do you think about execution here.

We are pretty confident that we will exit goods.

Execute well.

<unk>.

It's an extremely important.

<unk> for us.

We developed contingency up to to the contingency to make sure.

<unk> not been holes through the crux of the whole management team.

His focus on that but look.

If I go back to the management agreement it to my Board.

The quarterly breakdowns of three different projects and if you think about it.

What does it involve battery storage Transformers inverters.

And of course, they have the scale them up.

There are many of them, but then you've got to interface.

Yes.

I feel very comfortable.

The six 160 megawatt power plant in coal fire way way back when I started as an engineer.

Or the Savannah River, which is the biomass plant.

We think we can execute very very well.

Okay great.

Thanks for that color.

The other quick one for me.

When I think about and I know you are not going to give you an exact timeframe, but when I think about the energy assets under development.

I mean, it's obviously a.

Very healthy portfolio should we should we think about that sort of sort of becoming active over over a four year time period or is that a reasonable way.

Way to gauge, how they kind of unfold and come into operation.

I think thats, probably fair Steve.

We have talked before about a three to four year time horizon.

Based on the assets that are going in and coming out I don't think thats changing substantially in on some of those some of those assets can move a little bit more quickly than others, but three to four years is probably fair.

Okay, Great no. Thank you this is helpful.

Thanks, Steve.

Thank you.

And our next question comes from Ben Heelan from Piper Sandler Your line is now open.

Yes, Hey, thank you for taking my questions today. So in the past you guys have talked about the theme of increasing demand for resiliency solutions, which is leading to that larger ticket size or larger project size overall and I'm trying to figure out.

Just how that impacts your margin profile of your project business. So does this mean because youre taking larger projects.

It hurts your margin over time, because youre, giving customers discount or am I thinking of that incorrectly and then I have a follow up thanks.

Yes, I mean, I think we've we've probably said what we can about the margin profile associated with that big contract. The one thing that I would.

Kind of go back to is something that I pressed upon our own business units again, and again is about operating leverage.

Gross margin percentage may see impacts from project mix, but when you look at the contribution to the bottom line. If we're taking on lower margin design build contracts without the requirement to really boost up or increase our opex as a corresponding.

Response to taking on those projects then we're executing on improved operating leverage which I measure as gross margin dollars versus opex dollars.

That's kind of how I think about operating leverage and as long as we continue to improve that then we're doing the right thing even if it means going out and winning business that might have a lower gross margin percentage on that particular thing that might bring the project mix down again like we talked about in our comments.

Because we continue to invest in the energy assets and increase the O&M those higher margin recurring revenue businesses will continue to feed into that mix and temper any impact.

Temporary or otherwise that might be on our gross margin percentage.

Gotcha. That's helpful. Thank you for that and then switching gears a little bit here.

You update us on the acquisition front or on some of these inorganic growth opportunities that you have in front of you I think in the last earnings call you guys mentioned, possibly looking for an acquisition to expand your presence in the European markets is that something thats still on the table and then.

Could you providing insights into when you guys might might make an inorganic grow.

<unk> opportunity is that 2022 is that later this year.

So short answer we cant really tell you anything.

Sort of with any kind of certainty about the timing of any particular acquisition, we continue to evaluate things as they come along.

Okay. That's helpful. And then could you maybe comment on what Youre seeing in terms of like multiples you would have to pay for businesses is that what's keeping you on the sidelines right now is that.

Things are priced too aggressively and you want those prices to come down or whats keeping you guys from making a deal.

I wouldn't put it into any one thing.

<unk> has a strong track record of acquiring businesses over the last 20 years in integrating them appropriately and so it's not just about the multiple it's about is it the right business is it additive do we view it as financially accretive does it make strategic sense.

The multiple is one of those factors but.

I don't think that Thats.

Determinative.

Yes.

Alright, Thank you Allison.

I wouldn't assume that we're staying away from.

We are actively looking we haven't changed our outlook.

We're not on our side.

They have to fit our metrics we're looking for.

Thank you congrats on the quarter.

Thank you.

Thank you and our next question comes from Ben <unk> from Baird. Your line is now open.

Okay.

Hey, guys.

George.

You've been hiring people for a long time I just wanted to understand.

Market right now for for Paris.

Okay.

Yes.

Let's go from there.

Yes.

So we've been hiring in.

Once in a while we lose people and Thats why we have made some.

I would say strategic investments to make sure we keep.

Good employees.

But one of the good things about mrna, we always have been able to.

Higher that's elements that we need and.

For example.

All the units.

Maybe they are looking for people, but they are not short term people.

I don't know if we can disclose how many people we hired but.

We've been very very actively in the last two months.

Two months over the last quarter and this first month of this quarter, because we are building up and especially the.

Our LNG facility.

Unit.

Now the battery storage micro grid all of these advanced markets.

You'll recall back in 2018 19, we've made huge investments in order to get to this advanced technologies.

And now because were coming out of COVID-19, again, making some good investments.

I think it is going to help us very very well going down the road.

It hasn't been an issue.

Thank you.

And.

There's a lot of.

Ill talk to you in the marketplace software.

On to sort.

All types of technologies.

Smart meters whatever.

<unk>.

How are you thinking about that.

And what your ability.

The M&A question was already asked but how do you think about where software.

What what you could do.

Sure.

Sure Ben.

Software are critically important.

No we have a couple of software as a service businesses an hour.

What we've been doing.

Has been to continue to integrate the offerings and the capabilities of those businesses into our regular way origination of energy efficiency and renewable energy business and I think it is critically important and one of our.

All of our business units that users of software called asset planner.

Currently monitoring data collection on energy infrastructure from I think approximately $3 billion, a little bit more than 3 billion square feet of building space.

That gives us a tremendous database to provide benchmarking to our customers when we're talking to them about the.

The state of affairs in the state of play from their perspective, where they stand from a building infrastructure facility condition.

Carbon reduction opportunities you name it and I think that the software plays an important part there and we're continuing to develop that internally I don't see that as a.

M&A discussion.

And thank you.

Our next question comes from Chip Moore from Es Hutton you line is now open.

Hi, Thanks for taking the question folks.

Wanted to follow up on the utility scale energy storage opportunities as well I think you alluded to.

There are active discussions underway there.

Can you talk about sort of how advanced you are in some of those discussions or maybe how the overall pipeline needs, particularly some of those regions, but it may have a bit more sense of urgency.

No I mean, I think from a regional perspective, we probably don't even need to say because it's.

Pretty pretty clear, which which utility regions are facing the needs for resiliency.

And then Furthermore, because.

Much of what we're talking about here is at the proposal stage.

It's difficult to frame volumes quantities timelines et cetera for those particular opportunities I think it was just important for us to note that the proposal activity and the level of discussions is certainly on the rise in that sector.

Okay.

Just about every one of them we are in some kind of competitive process.

It's very hard to talk about specific yes, yes.

Yes.

And this is probably more for that January day right.

Sure.

Love to get your thoughts on for both funding and the reconciliation Bill.

It could be positioned there thanks guys.

Well that.

Of course.

The proof is in the pudding, depending on what ends up passing right.

However, our current read of.

This bill is that what remains is still extraordinarily constructive to the industry overall and hits directly with the number of the businesses, where we operate.

Whether it would be the biofuels.

Solar or the battery storage or what have you.

Energy efficiency energy efficiency.

<unk>.

The initial draft when it was still in the four range was pretty robust rate and so even when you see things fall by the wayside, there's still a lot in there that is quite meaningful for our business.

Thanks, guys.

And thank you.

And our next question comes from put down Marlin Challenge.

Marlin shutdown.

Raymond James Your line is now open.

Thanks for.

For taking the question.

Let me go back to actually the very last one about.

Build that better.

Given that one off.

I suppose high profile provisions of build back better is opening the investment tax credit to Standalone power storage for the very first time.

800, plus million dollar project that you're working on.

Well that.

Quantify.

For the tax credit if it is.

Already getting built.

And will presumably continue to be built after the bill passes.

Defense.

But.

One of the.

Impact us it will impact the utility.

Southern Cal because we will own.

That's the project.

The technical answer to your question is we don't know until the until the legislation is passed and we see the effective dates in the <unk>.

<unk> of how they view placed in service versus starting construction et cetera. When it comes to those ITC eligibility points on storage, but as George pointed out. This this isn't an energy asset.

<unk> balance sheet.

No.

That calculus is more relevant to our customer.

Right Okay.

Understood one more policy question.

I suppose back in July is when the EPA was supposed to release it.

RVO targets for 2021 and of course now we are in November and it still hasn't happened.

What is your understanding on.

When those numbers will come out for the current year.

R&D of state will come out at all.

Both the length of stay.

And the information we get from the people that we haven't even launched Sundance in December.

But before you click.

Yes.

But so we don't know at defense, but on the other hand, we know where the supply is I think the demand for <unk>.

<unk> will continue to be great because it is.

The market is under supplied.

Okay.

Last question.

Recognizing youre not.

Peaking about M&A or inorganic opportunities by.

Three months ago, I think you touched a little bit more about what youre going across the Atlantic on an organic basis in terms of new New project opportunities can you touch on what Youre seeing in Europe now that fit for 55 framework has come out and is starting to.

Get implemented.

We're seeing very very good activity, especially in our UK office and unions of UK office, we're looking at some opportunities.

And I would say the eastern part of.

South East part of Europe.

We are not disappointed that we can talk about it yet we are taking some additional leadership.

Two higher over there.

And.

And thats been the representatives many of them, but I wanted to focus a lot and pointed out.

The United States continues to have tremendous opportunity to add with the <unk>.

Makes me excited about the market is expanding.

Okay.

Yes.

The legislation.

It would be even better for us.

Yes, indeed, thank you.

Thank you.

Thank you and our next question comes from Greg Laskowski from Webber Research. Your line is now open.

Hey, good afternoon, everybody. Thanks for squeezing me in.

Sure Greg.

I know you guys have talked about it.

<unk> already but a couple of more questions on the SEC.

SCE deal.

First just when thinking about the pipeline for similar types of projects of similar size. Just curious how how is that going to work operationally maybe from a personnel perspective or doran to your point from an operating leverage perspective are you able to stack similar types of project on top of each other or is it more of a.

One at a time approach as of now.

Oh.

I think we're able to stack I mean interestingly, what we also have the ability to do and what was evident from the kind of implementing this one was that we actually.

Have quite a few people, we can tap to pull in on a consulting basis as well, we're not afraid to do that.

That that cost actually doesn't hit our opex because there are 100% utilized you know theres no real kind of overhead to think about with respect to those people.

And actually going through the process that we've gone through and staffing. This particular, one makes me even more confident in our capability to to.

Take on more because we're recognizing that there are people, there who really want to work with us.

Awesome, that's great to hear.

And then next just wanted to get a sense of the price variability if at all on that $892 million of revenue.

Is it is this something that would get firmed up and settled soon or is it. The idea is to remain variable in terms of scope throughout the life of the project.

I think that the $8 92 is based on the some of the kind of face price on each of the three contracts to the three projects each of those have standard traditional change order provisions that you would see in a design build contract. So.

<unk>.

That.

It's probably as good of an answer as I can give for that got it understood.

Alright, Thats all I got thanks, guys.

Thank you.

And thank you and I'm showing that as a last question. This concludes today's conference call. Thank you for participating and you may now disconnect.

Thank you Andrew Hall.

Yes.

Okay.

[music].

[music].

Good day, ladies and gentlemen, and thank you for standing by and welcome to the American Girl, Inc. Third quarter 2021 earnings call. At this time all participants are in a listen only mode. Later, we conduct a question and answer session and instructions will follow at that time as a reminder, this conference call is being recorded.

Good.

I would now like to turn the conference over to your host Ms. Leila Dillon Senior Vice President of marketing and communication. Mr. Dillon you may begin.

Thank you Justin and good afternoon, everyone. We appreciate you joining us for today's call. Joining me here are George talk Choleric, Mrf's goes chairman, President and Chief Executive Officer, Doran Hole, Senior Vice President and Chief Financial Officer and Mark.

Chip Clark, Vice President and Chief Accounting Officer.

Before I turn the call over to George I would like to make a brief statement regarding forward looking remarks.

This call contains forward looking information regarding future events and the future financial performance of the company. We caution you that such statements are based on management's current expectations or beliefs.

Actual results may differ materially as a result of risks and uncertainties that pertain to our business.

We refer you to the company's press release issued this afternoon and to our SEC filings.

These documents discuss important factors that could cause actual results to differ materially from those contained in the company's projections or forward looking statements. We assume no obligation to revise any forward looking statements made on today's call.

In addition, we will be referring to non-GAAP financial measures. During this call. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles.

GAAP to non-GAAP reconciliation as well as an explanation behind the use of non-GAAP financial measures is available in our press release and in the appendix of the slides, which can be downloaded from our website I will now turn the call over to George George Thank you.

And good afternoon, everyone.

Third quarter was another strong quarter for that matter as cool as robust new business development activity yielded significant growth in both our project backlog and our energy assets in development.

Our results continue to benefit from our diversified business model.

As growth in our higher margin asset and O&M businesses, plus a favorable project mix drove an increase in profitability.

More than offset the impact of supply chain and COVID-19 related delays.

Our energy asset.

Asset business had an exceptionally strong quarter.

With revenues up 29%.

And 75 megawatts added into our assets in development.

Our ongoing additions to our energy asset base create a higher margin long term term revenue stream that together with our O&M business served to smooth out the variability that we can experience from quarter to quarter in our project business.

Of note, we were very pleased to add an additional four R&D side and.

And.

<unk> battery system to our assets in development during the quarter.

Given our deep and wide the expertise and advanced energy technologies <unk> is able to pursue a very broad range of high yielding opportunities across our entire geographic footprint.

During the third quarter several projects and our off grid integrated solar business were impacted by interruptions and delays due to the industry wide supply chain issues and COVID-19 related disruptions.

It's important to point out that.

This issue is primarily impact the timing of execution.

This delayed revenue will be recognized in later quarters.

Our project business proposal activity has been robust.

And as we expected we experienced a considerable increase in our Tulsa project backlog.

Which was up 7% sequentially at the end of the third quarter.

At the same time, a significant increase in proposal activity is taking place across our customer base.

Which we see as a positive signal for mras first growing business.

Several factors have started to come together that they are in fruition customer decision.

For many customers.

Attraction to budget neutral cost savings remains a key selling point.

But we are now seeing a significant increase in projects being driven by the demand for greater power and water is agency as well as advanced technology solutions that can lower our customers' carbon footprint.

<unk> ability to provide comprehensive solutions addressing all these elements puts us in a very strong competitive position.

And he has significantly expanded our addressable market.

The transformational.

<unk> hundred 37, five megawatt battery energy storage contract that we announced 10 days ago is an excellent example of the growth potential we see on the horizon.

The contract is the largest in <unk> 20 year history.

We will be designing and building three battery energy storage systems for Southern California Edison.

In total the project will provide the California agreed with four hours of clean <unk>.

<unk> power storage for a total of 2150 megawatt hours.

The incredibly fast paced timetable for this project has been driven by the devastating impacts and higher frequency of extreme weather events, which continue to create energy supply emergencies in California.

California, though it is not the only state or region to be facing extreme weather events.

Over the last years few years, the grid has been disrupted by numerous wildfires extreme heat and cold as well as hurricanes in many regions of the country.

Many utilities and their customers are now looking at distributed energy resources, and micro grids to augment the grid and create a more reliable resilient resilient system.

As a larger percentage of our energy supply comps from this intermittent resources like solar and wind blackouts and energy shortages may become more likely.

We've continued to support these technologies as they are a very important part of the new energy mix and our economy.

However, they are intermittent nature does create a need for more backup power and resilient solutions included.

Supply of renewable energy resources.

<unk> portfolio of solutions perfectly complements this approach.

We are in the southern California battery contract is our first of this size.

We are actively engaged in numerous other discussions for similar solutions.

We believe the next decade will be marked by the dramatic changes in there.

The domestic power system with resources shifted to more distributed assets and micro grid to increase overall reliability and resiliency.

I'll now turn the call over to Doran to provide some comments on our financial performance and guidance Doran.

Thank you George and good afternoon, everyone.

Please refer to our press release and supplemental slides that have been posted to our website for additional financial information.

As George mentioned in the third quarter clearly demonstrated the resiliency of our business model as continued growth in our higher margin energy assets and O&M businesses.

<unk> offset softer projects revenue driving another quarter of profit growth.

As we have noted before quarterly projects revenue can be uneven by nature.

Which has only been exacerbated by industry wide COVID-19 restrictions and supply chain disruptions.

This is one of the reasons the company has purposely built out our recurring revenue businesses since its founding which now account for over two thirds of our adjusted EBITDA.

Q3 revenue was $273 7 million.

Compared to $282 $5 million the previous year.

Approximately $30 million worth of projects revenue was delayed and is expected to hit in subsequent quarters.

We anticipate the COVID-19, and supply chain challenges to continue into 2022.

We constantly monitor the availability and timely delivery of materials as well as the availability and cost of labor, especially given COVID-19 related restrictions and vaccine mandates.

Our increased guidance, which I will discuss later in the call. It takes all of this into consideration.

Energy asset revenue increased an impressive 29%, reflecting the continued growth of our operating portfolio improved performance of our existing operating assets and strength in RIN prices.

O&M revenue also had a robust quarter with growth of 12% as we continue to attach long term O&M contracts to our project work.

Our gross margin of 21, 5% benefited from a favorable project mix and generally continues to benefit from the growth in our higher margin energy assets and O&M businesses.

We had GAAP EPS of <unk> 33.

And non-GAAP EPS of <unk>, 41 says with adjusted EBITDA of $40 2 million, increasing 9% year over year.

During the quarter, we placed four megawatts of assets into operation. We also added an impressive 35 megawatts to our assets in development, including a battery energy storage system and four additional smaller R&D facilities.

With the addition of these four we now have 17 RMG assets in development with a total expected annual output of over $10 million <unk> the equivalent of approximately 129 megawatts.

Our 319 megawatts of operating assets have approximately $1 billion in long term contracted revenue and incentives.

Together with our $1 1 billion O&M backlog, we continue to have considerable long term visibility to these higher margin revenue streams.

Moving to our project backlog, we were very pleased to have increased our total project backlog, 7% sequentially and 5% year over year to $2 36 billion.

As we continue to see a significant pickup in customer interest in bidding activity.

Our recently announced battery storage contract with SCE was not included in the Q3 backlog number but will hit our Q4 contracted project backlog.

And as a leading cleantech integrator, we are pursuing many other large complex projects with clients, who recognize our expertise and proven track record.

Let me add a little financial color to the SCE design build contract.

Work has already begun in the fourth quarter with anticipated completion by August one 2022.

As with other projects revenue will be recognized on a percentage of completion basis, and we expect a relatively uniform level of work throughout the life of the contract.

As we have stated.

Design build contracts typically yield gross margins in the high single digit range.

We have included the estimated impact from this contract for the remainder of this year and our raised 2021 guidance ranges we.

We will not be commenting on the 2022 impact yet as it will be factored into our 2022 guidance ranges when we release that information early next year.

Given our strong year to date performance. The addition of the SCE contracts are lower than anticipated tax rate plus an increased investment in our people new resources and growth strategies, we're pleased to be increasing our 2021 guidance as detailed in our press release.

With these factors, we are increasing the revenue midpoint by $80 million and the EBITDA midpoint estimate by $5 million.

Now I'd like to turn the call back over to George for closing comments.

Thank you Doran in closing I want to again take a moment to thank our employees for their dedication and outstanding execution as well as our customers and stockholders for their continued support.

I believe that the prospects, we see in front of US he had never been more excited.

Our portfolio of innovative solutions, and our track record of execution and delivering top quality products make similar escrow the interest risk preferred partner for the most complex and comprehensive advanced energy projects.

Our recent battery storage contract win is a tremendous achievement for the company and we believe it's also indicative of the types of opportunities that are rapidly evolving in the market as we focus when again Brazilian future.

Finally, I am excited to announce that <unk> will be holding its first investor day in New York City on January 13th.

We will provide analysts and investors with an opportunity to gain better insights into our compelling long term opportunity.

Operator.

Like now to open the call to questions.

And thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press. The pound key. We also please ask that you limit yourself to one question and one follow up again Thats. One question one follow up.

And our first question comes from Noah Kaye from Oppenheimer.

Your line is now good effort.

Good afternoon, and thanks, so much for taking the questions hi, everyone.

I know.

Yes.

So first of all congrats on.

Contract wins with Socal Edison. This is very significant and so I'd like to ask a couple of questions related to it.

I guess number one is a housekeeping matter.

Is it possible to do a central switch to the $80 million increase in revenue guidance. I think you mentioned that you expect revenue recognition on this project fairly rapidly over the life of contract, but maybe you could kind of help put a little bit of a finer point on it for us.

Sure.

And I guess as long as we're at it we could also ask a little bit about your mentioning we will increase investment in people and systems to support growth Theres any details you can provide there.

Hey, Noah this is mark maybe I can start just talking about the guidance right. So on the 80 million I don't think were going to talk about specifics. There I mean, there are a number of puts and takes.

Going into those those increased estimates.

On the revenue side, we took into account.

An estimate of additional revenue coming from the battery contract.

But as we talked about in the prepared remarks and as we saw in Q3, we still are anticipating the impact.

Various supply chain and Covid related impact to the revenue I think we feel really confident in that in that revised range just given the visibility that we have coming out of our coming.

Coming out of our project backlog for sure.

We anticipate.

Greater than 85% coming from our contracted backlog.

On the on the project revenue line and certainly a high percentage overall coming from contracted revenue sources.

If we work our way down the P&L.

I think the expected contribution from that contract.

Adjustments made to revenue when you combine those with some of the investments that we're going to make.

It's a combination certainly on the human capital side as we focus on retaining our people as well as the investments we're going to make in new resources to support the.

The growth.

We're also expecting to see some some increases on that on the project development side, we continue to focus on the robust pipeline of project. So we're going to see those investments continue to impact Opex and I think that's what's flowing down to the adjusted earnings guidance.

Hey, Mark.

Yes go ahead please.

Hello, what I might add to that.

As you may recall that.

During COVID-19, we did cut back a little bit on the expense side and focus a lot in executing the contracts that we had in place and I think thats why we came out through COVID-19.

Very good and we are still in is by the way, but the last couple of months in this quarter.

We are increasing opex, otherwise hiring more people add.

Adding additional resources.

And Thats, what market trying to pointed out and we're doing it because we are shifting some resources for that math because in order to execute this.

Expeditious time schedule of this.

Storage contract, we are shifting some resources senior managers.

Built in other projects to this particular project.

Our backlog is.

Developing fast the opportunity set out there.

That's why you saw the considerable pickup in the projects awarded.

Over 31% year to date.

Yes.

But we have to make the investment in order to maintain and probably.

Accelerated growth down the road.

Right and as you pointed out I think in your prepared remarks that increase and awarded backlog didn't reflect the contracts. So you had significant growth.

And your other projects business.

Yes, we will see that.

Yes.

And that's what got US excited about the performance of the third quarter of the effect.

And awaiting Hussein.

The proposal activity is more than double what we had the previous years.

Finally, we are beginning to see the results of the awards.

<unk>.

Our timing works through.

The backlog get the awards within six months a year later.

You'll get the actual contracts.

If you are against the southern Cal.

The proposal to award to contract with them.

A few months into proposal stage, and then about 10 days and the award to contract stage.

Right.

Look contract by the way.

Thanks, George that feeds into my last question, which is around I mean, obviously there was an urgency.

To this project, but I would like to get a little bit of color on that.

How you effectively won the contracts, where you were able to differentiate whether.

Around the service capabilities the technology, we're proposing and then what do you think that means in terms of other of other opportunities at the utility scale type nature, you are hinting at it in these prepared remarks, but it sounds like there is quite a robust opportunity out there.

Yes.

Sure.

Southern Cal they went out with an RFP and we were monitoring the situation and what they were doing with the PUC and so on.

Among the first companies to respond to the RFP and there were a few others as well, but in addition to that we are doing another project for southern Cal smaller sized project.

So we got to know them very good.

The recognized is we have tremendous capabilities in that area actually I visited them I would say three months ago or so.

So we went after it very aggressively we did.

Our line up suppliers and EPC contractors and so on because one of the key issues of course as we get into better is there.

And so on and so forth. So we have lined up suppliers for all the key.

Equipment for the project Transformers and so on.

As well the somebody to rapid.

And both of those for us and the other thing I want to point out.

Everybody to know and investors as well as the analyst is the whole blood.

When do you think the contract as a single contract does have a very large sized contracts for us, but if you break it down three contracts.

Three different sites and if you think we did.

Back in 2001 third of the size of the company and we did a $200 million.

Contract.

Okay.

There was a biomass much more complicated this particular, one but what makes it challenging is the schedule.

<unk>.

Some of the supply issues.

Developing contingency plans to make sure that we've got everything there on time.

But the other ones.

That's why I focus my remark a lot.

It's getting to be more and more of an issue.

Hello, grids and battery storage and so on it's going to be the new way of the future.

I said in my remarks, more solar more wind.

And of course, they are intermittent.

And on the weather.

You get the growth.

A hurricane or whatever all of those things you got to make up that difference on Paul So does the need for backup power and energy storage what that technology is down the road.

Alright, well.

Thank you very much for the color I'll jump back in queue.

Thanks.

Sure.

Yeah.

And thank you <unk>.

Our next question comes from Julien Dumoulin Smith from Bank of America. Your line is now open.

Hey, guys. This is <unk> stepping in for Julien.

Yes.

Hey, how are you.

Last question here is I was wondering if you could just elaborate a little bit more on the supply chain issues.

How much of that is driven by shortages versus cost inflation.

Which of your businesses are particularly affected.

Is there any risk I guess any impact at all tier annual cadence of data for R&D project Alright.

Do you think you can kind of.

Thank you make up that in quite a long time.

And to get your thoughts on that.

I.

I will talk about adrenal beds, and then mark convenience into a day in and day out more.

The LNG project, we had the slight delays on the.

The project that we were executing in order to set are up but no major hiccups.

<unk> economics, but it's not that much.

For example, some of the materials for the Leds controls, we gathered from our factory in Vietnam into a shutdown for three weeks and so on so that's impacted pretty much all of our.

LNG project.

Good thing and that's why it didn't impact us as much on the profitability of the company. So that's why I mentioned on my call. The project mix some of those projects, we have a lower margin.

<unk> so they didn't have as much impact.

It surprises millennial beds with this.

<unk> does not vaccinated, especially in the northwest region.

I would love subcontractors, because they have made to one or two employees and vaccinated. They wouldn't have access to some of the facilities.

Or before we used the disposal not awful or even in the past we used to do work at night and some of the schools and now because they were open and they were concerned in case somebody was well aware that there was other vaccinated. So they would not allow us to do nice work. So it doesn't seem to be seeing some real styles integrated model yes.

I think you hit on a lot of the examples I think the only thing I might add is that we're certainly wasn't unique to any particular business unit or a region we thought.

Across really all of our project related businesses.

And so I think we even saw beyond that just share that delivery of materials or our COVID-19 related impacts we saw contracts being delayed because COVID-19 wouldn't allow certain officials to get into the same room and so again just impacted the timing.

On a contract that we probably would have expected to see in Q3. So.

We certainly ran the gamut.

Different challenges across supply chain and Covid.

Okay awesome, Thanks that was a great.

Great answer thanks for the clarity there.

And then.

Then as a follow up I just wanted to ask about.

Just the guidance range.

Is that pretty much predominantly driven by this contract or how much of that is impacted by.

I guess what are your thoughts on day, three of enticing and what sort of expectations are factored into guidance.

Last quarter, you said you were still relatively conservative on that.

Hi.

Have you sort of impact.

I guess incorporated some of that positive pricing into your guidance.

Yes, yes.

For sure.

One of the one of the puts and takes I think.

Again without talking specifics about all the all the moving pieces in the guidance or estimates or just slightly below where the market is.

So I think that's certainly has to be a factor but.

But thats, probably what I'll say on that on that particular input.

Okay, great. Thanks, I'll jump back in the queue.

And thank you.

And our next question comes from Eric Stine from Craig Hallum.

Your line is now open.

Hi, everyone.

Hi, Eric.

Hey, Thanks, So just going back to the FTE.

Ward.

And arguably California has got the most urgency in this area, but obviously as you mentioned other areas as well I mean, you've talked about this.

Building pipeline of of <unk>.

Similar large projects just curious.

If you could expand on.

Maybe.

Size of those compared to the one that you just won.

And timing of <unk>.

We could start to think about that obviously these are large and and maybe they move slowly but this one seems to have moved actually pretty fast given what's going on.

Well.

This one month pretty fast because like I said this is an emergency.

Did you mention scheduling in California, I will say this much.

We are working on quite a few of them generally they are smaller.

And in this particular.

Yeah.

Now in this particular project.

And.

Yes.

Yes.

Thank you.

You will find out that the market is moving more and more battery storage might increase since our one.

Yes.

Got it okay.

Echo there.

Yes.

Okay.

Okay, Okay got it.

Alright, I guess, we'll stay tuned for that but it's obviously a pretty positive environment.

Maybe maybe I'll, just I'll stick with two questions and just on R&D.

You mentioned, the four new ones that you added.

Any color on whether those are very R&D and then as you look at the pipeline how does that kind of breakdown between your traditional landfill versus dairy.

No.

Zero landfill sites.

All four of them, but I will say this much.

The jewelry, we are working on it some sites and some other potential deals.

Still put them in a proposal category right now.

I think in the near future you will see us moving more but we'll be able to put them in what I'll call.

Assets in development right now.

<unk>.

Medium stages I will call them.

But because of the.

Score much lower.

Value proposition is much better for them and so on.

We are looking at very very aggressively.

Okay I appreciate it.

Thank you and our next question comes from Chris Chris Souther from B Riley.

Yes.

Thanks for taking my question here guys and congrats on this CEO.

Maybe to start for me.

Talk about the uptick in energy asset development pipeline.

Our strong additions of both solar and storage and then also the renewable gas.

Can you talk about the types of solar and storage, where youre seeing strength, there and then it looks like you had.

Appear kind of battery added too.

<unk>.

Added during the quarter here I wanted to get a sense of within the pipeline and kind of current assets. How many are kind of pure <unk>.

Battery versus hybrid solar only if you could kind of give us like a breakdown of where things stand in the momentum between those men.

Timeframe for.

Renewable gas plants.

That were added before then.

It will be great as well.

Sure.

Ill.

Try to hit all of those questions and one one fell swoop. So you will notice that we.

We kind of labeled.

Solar and battery in the supplemental slides now.

Out of the figure that you see for solar and battery 39 megawatts of that represents the battery capacity. Some of that is standalone. Some of that is combined with solar the one the one that's being added.

Battery, that's being added to an existing solar solar project.

So that we've already got in our operating portfolio.

So that's kind.

A great example of being able to go back and figure out how battery resiliency can be a supplement to the things that we already own and operate.

I think on the R&D side, there hasnt been really any change to the cadence of implementation. So we've talked in the past about.

The 2021.

The single assets placed in service already 2022 to three assets in 2023 four assets.

The four that have been added.

I think.

Clearly when we talk about 17 assets in development.

In the 'twenty one through 'twenty three don't add up to 17. So you can kind of see the timeframe is going to stretch beyond that 2023 Mark.

To get the rest of these in.

In operation.

Okay, that's very helpful.

Project delays, obviously, a challenge lowest space you talked about pushing about $30 million from some of these supply chain challenges it sounded like that was.

Stuff that you thought was going to be in the third quarter, but we've got pushed to fourth quarter and beyond I'm. Just curious how many projects are being pushed into 2022 versus the prior guide and then kind of curious around the timing where you guys are seeing there might be kind of a light at the end of the tunnel here too tough to call at this point.

Yes, Chris it's hard to say the number of actual projects being pushed right anywhere we're kind of looking at it from a total revenue standpoint, and certainly we would see some of the some of the revenue that got pushed out of Q3.

Into Q4, but.

Terms.

Pushing out into next year.

Continue to anticipate that we're going to PV challenges through Q4 and into <unk> and into next year and so we'll continue to pull revenue out of this year and into 2022.

So any sense of how much was kind of pushed out for the full year.

For some of these.

I wouldn't say that.

Rather than colon project delays, but as I said revenue delays what extent, we'll take some of the streetlight jobs and we are going against the control, but we could do some do some other work.

So.

Otherwise you delayed some of the revenue associated with a particular project.

And Thats, why I or my remark I said delay.

We recognize but little bit later time.

Understood. Okay. Thanks, guys.

Yes.

Yes. Thank you.

And our next question comes from Tim Mulrooney familiar and Blair. Your line is now open.

Hey, this is Sam filling in for Tim Thanks for taking our questions here guys. Congrats on the quarter first of all.

Thanks Sam.

You've discussed in the past the ongoing shift towards more comprehensive and complex project I was curious if you have any stats to help us understand the magnitude of that shift like maybe the average size of the project five or 10 years ago versus the average size of the project today or even a range just.

Anything to really kind of help frame issue for us.

Yes, it's a good question.

We'll go back to one of my favorite project was a use that is.

<unk> changed dramatically.

Fairness Island, when we won that contract with through the RFP process is about $48 million contract.

And some of the measures it was changing out some boilers.

Killer worked some light.

Steam upgrades in the hot water and sewer otherwise its typical HVAC boiler retrofit.

And then the client the purchase because as you know we have many storms down here, we need to resiliency and also we have a requirement by the federal government to.

30%.

Now renewables by I forget the here right now.

So we went back to the drawing boards and we design a project that we had the combined heat and power plant.

Eight megawatts.

And then manage to generate.

Our battery storage and solar.

The plant and of course in order to match the loan with the generation that.

<unk> system instantaneously once you get off the grid there.

The micro grid unions, a computer in order to control and see what's going on.

<unk>.

That became a 98 million under a project that's been up and running very successfully Portsmouth Naval shipyard, that's where they maintain the nuclear submarines similar situations in June and the ice storms that we had the last couple of winters winters.

Please go head power.

And the same with Venezuela, they had one of those storms.

Hurricane that came by the maintain power.

Yes.

And thats expanding more and more.

I think I said it before back when I was at <unk> electric and we're doing that.

The planning for generation and transmission, we used to design the system for a loss of load probability of one in 101% otherwise.

We have come up.

To achieve.

We needed about 10% of the outstanding lowered the spinning reserve.

And I'll just finish.

It will be the varies so as you think out we go as we go down the road and say you have a 30, 40% between solar and wind are single event was weather can take us.

So engineering, some backup units and micro grids in the data center out there the banks. They are beginning to realize cost menthol and of course, the federal government was the first to realize that we have to kind of come back up.

So.

The project has been expanded.

So the smart sensors.

<unk>.

No.

All of our domestic model Yep.

Awesome I appreciate the color there.

Maybe pivoting back to the battery technology, a little bit, but more so on the distributed energy front.

When we look at led lighting technology, and just how that had matured at that helped lower the cost of the technology by 9% and that ushered in a wave of retrofits and mass adoption.

When we look at the state of distributed energy now and just the battery storage, where do you think we're at on the technology maturity curve here and then how much do costs need to come down from where they're currently at to kind of see maybe.

Similar mass adoption.

And quite a few cases that make economic sense, England right now.

Because.

<unk>.

They take into consideration an interruption of service. If you are a hospital for example.

Generally the FERC <unk> jewelry universe.

The data center, where they.

Good.

You don't want to lose.

Everybody was worried about cyber security solution powers. So sometimes we can do much much worse than that.

And of course, I think they have come down some.

And that's why the market has expanded for example.

Sensors smart sensors on the LGD.

Of course, the solar panels and everything us when those come down tremendously the batteries, we are making progress, but there's much.

<unk> I think we will be able to see and the micro grid, but.

We are going to a point that they make good economic sense.

Got you I appreciate the answers here good luck in the next quarter.

And that's why that might have expanded from $10 billion to $20 billion market market Tonight.

But if you look at some of these studies by Navigant of those guys out there.

Perfect I appreciate it.

Thank you and our next question comes from Jed <unk> from Canaccord Genuity. Your line is now open.

Hi, Thanks.

I guess first question just maybe an extension on the on the storage side.

It looks like that was.

Four.

It wasn't for long durations.

<unk> just doing the calculation for our backup so I'm curious.

Maybe could you provide a bit more detail on that.

How that.

Hi came about in.

Because your comments around.

Micro grid would maybe suggest.

Combination of both long.

In short duration.

Storage and so I'm, just trying to figure out sort of where we're at if this is the tip of a much larger iceberg or.

How to think about this.

Yes, I mean look at it this way.

The four hour battery storage for this particular application came from looking at the profile of the utility that's what basically there without requested.

So what's.

So in order to bid.

Thanks, Steve.

Good morning.

The Doe award allows about but.

Timidly.

With a micro grids, such thing and Thats why I said in my comments, we will meet.

Renewable supplies.

And for example go back to the Paris Island, as we use natural gas right now can you give us a combined.

And power and the battery storage has been used used to bridge the gap.

Because even though you had the older generation you cannot bring it up to maximum lowest instantaneous. The battery can then do you have the very it bridges us. It gets you up and running for the next two or three hours until youre load picks up but now.

20 years from now we want to be a net zero that natural gas would have to fire. The turbine will see the hydrogen come clean fuel and that's why I say ultimately we will need.

Renewable resources.

Yes, I'm curious.

Yes go ahead go right ahead.

Yes.

Along those same lines, we're seeing.

I think I'm not sure if it came from Charlie Baker or.

Somebody else, but I read that.

This state, Massachusetts.

Wanted from ever source a plan that.

Without natural gas we're seeing.

No.

Nat gas.

In California that.

Viewed somewhat fashion as oil now I completely disagree with with the logic in most of these people don't understand physics or failed their physics classes, but I'm curious with that exposure, how you're thinking about.

Positioning the.

George just mentioned hydrogen.

Im curious how youre thinking about the portfolio in the context of some of these.

Yes.

<unk>.

Political debates that are going on right now.

Well I think.

We when you look at the hydrogen and what.

<unk> coming there I think that we like the Optionality that we have with the portfolio of operating landfill gas and renewable natural gas plants that are in development. So that's something that there is a reason why we're keeping our eyes on this you've mentioned a couple of technologies, which are coming in.

Kind of circle back to the fact that we're an integrator, where our cleantech integrator and focus on the highest and best technologies, we're looking at new technologies.

Pretty continuously we start to pilot these in certain projects, sometimes it's on the EPC design build side sometimes.

On the energy asset side.

I can say that I've seen pilots on hydrogen as well as long duration storage flowing through into our backlog.

There are small, but they are small for a reason because we need to.

Test them out, but we need to make sure that we're comfortable with the technologies because the customers that we have like us to stand behind our work and so we need to be able to stand behind the technologies, but nevertheless, as these technologies advanced we're just going to position ourselves to have the technological capability to understand install opera.

<unk> maintained and if we like them on our own balance sheet loan.

If.

That's better suited for our customers then our customers will on them.

I think thats the way I see that alright, great.

That's helpful. Thanks, guys I'll jump back in the queue.

Sure.

And thank you.

And our next question comes from Stephen King Garro.

Your line is now open.

Thanks, Good afternoon everybody.

Okay.

Two things from me.

I'll start with the with this significant award that you guys announced.

Over and over in California can you talk about.

With a project of this size.

Sort of the safeguards you've put in place and the confidence you have on the execution for our now because thats. The one thing we're a little bit about is it's obviously a pretty large project and you've mentioned in gross margin ranges for similar projects.

Sort of what's the level of confidence in how you think about execution here.

We are fairly confident that we will exit goods.

Execute well.

<unk>.

It's an extremely important.

<unk> for us.

We develop contingency to the contingency to make sure that.

Now it's been closed through the products and the whole management team.

His focus on that but look.

If I go back to the management agreement it to my Board.

The quarterly breakdown for three different projects and if you think about it.

What does it involve battery storage Transformers inverters.

And of course, they have the scale them up.

Many of them, but then you have to interface to them.

Sure.

I feel very comfortable.

The six 150 megawatt power plant in coal fire way way back when I started as an engineer.

Or the Savannah River, which is the biomass plant.

We think we can execute very very well.

Okay, great. Thanks, Thanks for that color.

The other quick one for me.

When I think about and I know youre not going to give you an exact timeframe, but when I think about the energy assets under development.

I mean, it's obviously a very healthy portfolio should we should we think about that sort of sort of becoming active over over a four year time period or is that a reasonable way to gauge how they kind of unfold and come into operation.

I think thats, probably fair Steve.

We have talked before about a three to four year time horizon based on the assets that are going in and coming out I don't think thats changing substantially in some of the some of those assets can move a little bit more quickly than others, but three to four years is probably fair.

Okay, great. Thank you this is helpful.

Thanks, Steve.

Yes.

Thank you.

And our next question comes from Ben Heelan from Piper Sandler Your line is now open.

Yes. Thank you. Thank you for taking my questions today. So in the past you guys have talked about the theme of increasing demand for resiliency solutions, which is leading to that larger ticket size or larger project size overall and I'm trying to figure out.

Just how that impacts your margin profile of your project business. So does this mean because youre taking larger projects.

Hurts your margin over time, because youre, giving customers discount or am I thinking of that incorrectly and then I have a follow up thanks.

Yes, I mean, I think we've we've probably said what we can about the margin profile associated with that big contract. The one thing that I would kind.

Kind of go back to is something that I pressed upon our own business units again, and again is about operating leverage.

Gross margin percentage may see impacts from project mix, but when you look at the contribution to the bottom line. If we're taking on lower margin design build contracts without the requirement to really boost up or increase our opex as a corresponding.

Response to taking on those projects then we're executing on improved operating leverage which I measure as gross margin dollars versus opex dollars.

That's kind of how I think about operating leverage and as long as we continue to improve that then we're doing the right thing even if it means going out and winning business that might have a lower gross margin percentage on that particular thing that might bring a project mix down again like we talked about in our comments.

Because we continue to invest in the energy assets and increase the O&M those higher margin recurring revenue businesses will continue to feed into that mix and temporary or any impact.

Temporary or otherwise that might be on our gross margin percentage.

Gotcha. That's helpful. Thank you for that and then switching gears a little bit here could you update us on the acquisition front or on some of these inorganic growth opportunities that you have in front of you I think in the last earnings call you guys mentioned, possibly looking for an acquisition to expand your presence in the European markets is that something that.

Still on the table and then.

Could you provide any insights into when you guys might Mike making inorganic growth.

Growth opportunity is that 2020 twos that later this year you folks.

So short answer we cant really tell you anything.

Sort of with any kind of certainty about the timing of any particular acquisition, we continue to evaluate things as they come along.

Okay. That's helpful. And then could you maybe comment on what Youre seeing in terms of like multiples you would have to pay for businesses is that what's keeping you on the sidelines right now is that.

Things are priced too aggressively and you are those prices to come down or what.

What's keeping you guys from making a deal.

I wouldn't put it into any one thing <unk> has a strong track record of acquiring businesses over the last 20 years in integrating them appropriately and so it's not just about the multiple it's about is it the right business is it additive do we view it as financially accretive does it make strategic sense.

Multiple is one of those factors but.

I don't think that.

Determinative.

Yes.

Alright, Thank you Allison.

I wouldn't assume that we're staying away.

We are actively looking we haven't changed our outlook.

We're not on the slide.

They have to fit our metrics we're looking for.

Thank you congrats on the quarter.

Thank you.

Thank you and our next question comes from Ben <unk> from Baird. Your line is now open.

Hey, guys.

George.

You've been hiring people for a long time I just wanted to understand.

Market right now for for Paris.

Okay.

Yes.

Let's go from there.

Yes no.

So we've been hiring.

Once in a while we lose your people and Thats why we have made some.

I would say strategic investments to make sure we keep.

Good employees.

But one of the good things about <unk>, we always have been able to.

Higher that the elements that we need for.

For example.

All the units.

Maybe they are looking for people, but they are not short of people.

I don't know if we can disclose how many people we hired.

We've been very very active in the last two months.

One two months over the last quarter and in this first month of this quarter, because we are building up and especially <unk>.

Our LNG facility.

Unit.

Now the battery storage micro grid all of these advanced markets.

Recall that in $2018 19, we've made huge investments in order to get the <unk> advanced technologies.

And now because were coming out of COVID-19, again, making some good investments.

I think it is going to help us very very well going down the road.

So it hasn't been an issue.

Thank you.

Sure.

<unk>.

Talk to you in the marketplace software.

On too so.

So it all types of technologies.

Smart meters whatever.

Yes.

How are you thinking about.

What's your ability to.

John.

The M&A question was already asked but how do you think about it.

Software.

What you could do.

Thank you.

Sure Ben.

Those software critically important so as you know we have a couple of software as a service businesses.

Our.

We've been doing has been to continue to integrate the offerings and the capabilities of those businesses into our regular way origination of energy efficiency renewable energy business. So I think it is critically important and one of our one of our business units that users of software called asset planner is.

Currently monitoring data collection on energy infrastructure from I think approximately $3 billion, a little bit more than 3 billion square feet of building space.

That gives us a tremendous database to provide benchmarking to our customers when we're talking to them about the.

The state of affairs in the state of play from their perspective, where they stand from a building infrastructure facility condition.

Carbon reduction opportunities you name it and I think that the software plays an important part there and we're continuing to develop that internally I don't see that as a.

At M&A.

Discussion.

And thank you.

And our next question comes from Chip Moore from Es Hutton. Your line is now open.

Hi, Thanks for taking the question folks.

Wanted to follow up on the utility scale energy storage opportunities as well I think you alluded to.

The number of active discussions underway there.

Andy can you talk about sort of how advanced you are in some of those discussions.

The overall pipeline needs, particularly some of those regions, but it may have a bit more sense of urgency.

No I mean, I think from a regional perspective, we probably don't even need to say because it's.

Pretty pretty clear, which which utility regions are facing the needs for resiliency.

And then Furthermore, because.

Much of what we're talking about here is at the proposal stage.

It's difficult to frame volumes quantities timelines et cetera for those particular opportunities I think it was just important for us to note that the proposal activity and the level of discussions is certainly on the rise in that sector.

Okay.

Just about every one of them were in some kind of competitive process.

It's very hard to talk about specific yes, yes.

Yes.

And this is probably more for the January de rated.

But you are just love to get your thoughts on for both funding and the reconciliation Bill.

It could be positioned there thanks guys.

Well that.

Of course.

The proof is in the pudding, depending on what ends up passing right.

However, our current read of.

This bill is that what remains is still extraordinarily constructive to the industry overall and hits directly with the number of the businesses, where we operate.

Whether it be the biofuels.

Solar or the battery storage or what have you.

Energy efficiency energy efficiency.

<unk>.

The initial draft when it was still in the 4 billion range was pretty robust rate and so even when you see things fall by the wayside, there's still a lot in there that is quite meaningful for our business.

Thanks, guys.

And thank you.

And our next question comes from Padel Mullen Charles.

Marlin show now.

Raymond James Your line is now open.

Thanks for.

For taking the question.

Let me go back to actually the very last one about.

Build that better.

Given that one off.

I suppose high profile provisions of build back better is opening the investment tax credit to Standalone power storage for the very first time.

800, plus million dollar project that you're working on.

Well that.

Qualify.

For the tax credit if it is.

Already getting built.

And will presumably continue to be built after the bill passes.

The defense segment.

But.

Clearly impact us will impact that utility.

Southern Cal because they are alone.

The project.

The technical answer to your question is we don't know until the until the legislation is passed and we see the effective dates in the.

The nature of how they view placed in service versus starting construction et cetera. When it comes to those ITC eligibility points on storage, but as George pointed out. This this isn't an energy asset.

On <unk> balance sheet so.

That calculus is more relevant to our customer.

Right, Okay understood one more policy question.

I suppose back in July is when the EPA.

What's the pulse to release it.

RVO targets for 2021 and of course now we are in November and it still hasn't happened.

What is your understanding on when those numbers will come out for the current year or indeed, if they will come out at all.

Both the length of ethanol and the information we get from the people that we have been launched.

Sometimes in December.

But before.

Yes.

But so we don't know at defense, but on the other hand, we know where the supply is I think the demand for <unk> will continue to do great because the market is under supplied.

Okay.

Last question.

Recognizing youre not.

Speaking about M&A or inorganic opportunities by.

Three months ago, I think you touched a little bit more about what.

What youre going across the Atlantic on an organic basis in terms of new New project opportunities can you touch on what Youre seeing in Europe now that are fit for 55 framework has come out and is starting to get implemented.

We're seeing very good activity, especially in our UK office and unions of UK office, we're looking at some opportunities.

And I would say the eastern part of <unk>.

Southeast part of Europe, but we are not disappointed that we can talk about it yet we've taken some additional leadership.

Two higher over there.

And it's been the opposite as many of them, but I wanted to focus a lot and pointed out.

The United States continues to have tremendous opportunity to add what makes me excited about the market in expanding.

Okay.

Yes.

Fashion and legislation.

It will be even better for us.

Yes, indeed, thank you.

Thank you.

Thank you and our next question comes from Greg Laskowski from Webber Research. Your line is now open.

Hey, good afternoon, everybody. Thanks for squeezing me in.

Sure.

I know you guys have talked about it at length already but a couple of more questions on the SEC.

SCE deal.

First just when thinking about the pipeline for similar types of projects of similar size. Just curious how how is that going to work operationally and maybe from a personnel perspective or doran to your point from an operating leverage perspective are you able to stack similar types of project on top of each other or is it more of a.

One at a time approach as of now.

Oh.

I think we are able to stack I mean interestingly, what we also have the ability to do and what was evident from the kind of implementing this one was that we actually.

Have quite a few people, we can tap to pull in on a consulting basis as well, we're not afraid to do that.

That cost actually doesn't hit our opex because there are 100% utilized you know theres no real kind of overhead to think about with respect to those people and actually going through the process that we've gone through and staffing. This particular, one it makes me even more confident in our capability to take on more.

Because we're recognizing that there are people, there who really want to work with us.

Awesome, that's great to hear.

And then next I just wanted to get a sense of the price variability if at all on that $892 million of revenue.

Is it is this something that would get firmed up and settled soon or is it. The idea is to remain variable in terms of scope throughout the life of the project.

I think that the 892 is based on the some of the kind of face price on each of the three contracts to the three projects each of those have standard traditional change order provisions that you would see in a design build contract. So.

Yeah.

That.

It's probably as good of an answer as I can give for that got it understood.

Alright, Thats all I got thanks, guys.

Thank you.

And thank you and I am showing that as a last question. This concludes today's conference call. Thank you for participating and you may now disconnect.

Thank you Andrew Hall.