Q4 2024 Ameresco Inc Earnings Call
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Dan: Thank you for standing by my name is Dan and I'll be your conference operator today at this time I would like to welcome everyone to get them, Alaska, Inc. Fourth quarter and full year 'twenty 'twenty four earnings conference call.
Demi: My name is Demi and I'll be your conference operator today. At this time, I would like to welcome everyone to the Ameresco Inc. fourth quarter and full year 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to rejoin a question, press star 1 again.
All lines have been placed on mute to prevent any background night.
Dan: After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad if.
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Leila Dillon: I would now like to turn the conference over to Leila Dillon, Senior Vice President, Marketing and Communications. Please go ahead. Thank you, Demi. And good afternoon, everyone. We appreciate you joining us for today's call.
Lisa: I would now like to turn the conference over to Lisa <unk> Senior Vice President marketing and Communications. Please go ahead.
Lisa: Thank you Tammy and good afternoon, everyone. We appreciate you joining us for today's call.
Leila Dillon: Our speakers on the call today will be George Sakellaris, Ameresco's Chairman and Chief Executive Officer, Mark Chiplock, Chief Financial Officer, and Nicole Bulgarino, President of Federal and Utility Infrastructure. In addition, Mike Bakas and Josh Barabow will be available during Q&A to help answer questions.
Speaker Change: Our speakers on the call today will be George Sacco Lewis <unk>, Chairman and Chief Executive Officer, Mark Chip Block, Chief Financial Officer, and Nicola Guarino, President of federal and utility infrastructure.
Speaker Change: In addition, Mike Bacchus and Josh Baribeau will be available during Q&A to help answer questions before.
Leila Dillon: Before I turn the call over to George, I would like to make a brief statement regarding forward-looking remarks. Today's earnings materials contain forward-looking statements, including statements regarding our expectations. All forward-looking statements are subject to risks and uncertainties.
Speaker Change: Before I turn the call over to George I would like to make a brief statement regarding forward looking remarks.
Speaker Change: Today's earnings materials contain forward looking statements, including statements regarding our expectations.
Speaker Change: All forward looking statements are subject to risks and uncertainties.
Leila Dillon: Please refer to today's earnings materials, the Safe Harbor language on slide two of our supplemental information, and our SEC filings for a discussion of the major risk factors that could cause our actual results to differ from those in our forward-looking statements. In addition, we use several non-GAAP measures when presenting our financial results. We have included the reconciliations to these measures and additional information in our supplemental slides that were posted to our website.
Speaker Change: You can refer to today's earnings materials, the safe Harbor language on slide two of our supplemental information.
Speaker Change: And our SEC filings for a discussion of the major risk factors that could cause our actual results to differ from those in our forward looking statements.
Speaker Change: In addition, we use several non-GAAP measures when presenting our financial results.
Speaker Change: We have included the reconciliation to these measures and additional information in our supplemental slides that were posted to our website.
Leila Dillon: Please note that all comparisons that will be discussed today are on a year-over-year basis, unless otherwise noted.
Speaker Change: Please note that all comparisons that will be discussed today are on a year over year basis, unless otherwise noted.
George Sakellaris: I will now turn the call over to George. Thank you, Leila. And good afternoon, everyone. We ended 2024 on a strong note, which contributed to our annual revenue and adjusted EBITDA growth of 29% and 38% respectively. We also delivered a record project backlog and placed a record level of energy assets into operation. Fourth quarter results were highlighted by 21% revenue and 59% adjusted EBITDA growth. with particular strength in our projects and energy-added businesses, as well as the benefit from the successful sale of our non-core AEG business. Growth in our contracted backlog was a key highlight, increasing 92% year-over-year with a record of $1.1 billion in conversions during the fourth quarter.
Speaker Change: I will now turn the call over to George George Thank you Leila and good afternoon, everyone. We ended 2024 on a strong note, which contributed to our annual revenue and adjusted EBITDA growth.
Speaker Change: 29% and 38% respectively.
Speaker Change: We also delivered record projects backlog in place and a record level.
Speaker Change: Assets into operation.
Speaker Change: Fourth quarter results were highlighted by 21% revenue and 59% adjusted EBITDA growth.
Speaker Change: With particular strength in our projects and energy asset business it as.
Speaker Change: As well as the benefits from the successful sale of our noncore <unk>.
Speaker Change: GE business.
Speaker Change: We're always in our contracted backlog was a key highlight increasing 92% year over year with a record of $1 $1 billion in conversions during the fourth quarter.
George Sakellaris: This resulted in total project backlog growth of 24% year over year to a record $4.8 billion. During the quarter, we also brought an additional 31 megawatts of energy assets into operation, bringing our annual additions to a record 241 megawatts. Our total operating energy assets now stand at 731 megawatts, with another 637 megawatts in development.
Speaker Change: This resulted in total project backlog growth of 24% year over year to a record $4 $8 billion.
Speaker Change: During the quarter. We also brought an additional 31 megawatts of energy assets into operation.
Speaker Change: Bringing our annual additions directly dual continent 41 megawatts.
Speaker Change: Our total operating energy assets now stand at 771 megawatts with another 607 megawatts in development.
George Sakellaris: Well I'm very proud of our team's accomplishments. We did encounter challenges from two large legacy projects that significantly impacted our results during the fourth quarter and the full year. While we do our best to anticipate and mitigate these impacts, there are times when we experience scheduled delays and significant inflation, which result in an unrecoverable cost overrun. Over time, we have tightened our project review process and applied what we have learned to better mitigate this risk. We believe that the financial impact of those two projects is largely behind. Importantly, our team strength lies in our ability to successfully execute and deliver on hundreds of projects in a dynamically changing industry.
Speaker Change: Well I'm very proud of our team's accomplishments we gained encounter challenges from two large legacy projects that significantly impacted our results during the fourth quarter and the full year.
Speaker Change: Well, we do our best to anticipate and mitigate this impact.
Speaker Change: Our time, just wanted to experience schedule delays and significant inflation, which result in.
Speaker Change: Recoverable cost overruns.
Speaker Change: Overtime.
Speaker Change: Our project review process and apply what do we have learned to better mitigate these risks.
Speaker Change: We believe that the financial impact, although steel projects is largely behind us.
Speaker Change: Importantly, our team strength lies in our ability to successfully execute and deliver on hot drinks of projecting that dynamically changing industry.
Nicole Bulgarino: Now I would like to have Nicole comment on the impact of the new administration in Washington. Thank you, George, and good afternoon, everyone. We are working diligently to stay on top of all the information and changes coming out of DC that might impact the industry. As many of you are aware, federal policies play an important role in our business. The federal government is a significant customer representing approximately 20% of our 2024 revenue. This work includes a wide variety of federal entities, both civilian and military. While to date, the direct impact to Ameresco has been minimal, we have encountered one cancellation on a project contracted earlier in January and a pause on two other contracts.
Speaker Change: Now I would like to given the call comment on the impact of the New administration in Washington and call. Thank.
Thank you George and good afternoon, everyone. We are working diligently to stay on top of all the information and changes coming out of D. C that might impact the industry. As many of you are aware federal policies played an important role in our business.
Speaker Change: Federal government as a significant customer representing approximately 20% of our 2020 for revenue.
Speaker Change: This work includes a wide variety of federal entities, both civilian and military while to date the direct impact to aim a rescue has been minimal we have encountered one cancellation on a project contracted earlier in January and a pause on two other contracts.
Nicole Bulgarino: And given the recent changes in the federal workforce, we are anticipating the potential for additional delays. That said, the majority of our federal projects are continuing in their normal cadence and on schedule. I believe that our federal work, especially through the well-established Energy Savings Performance Contract Mechanism, is well aligned with the approach and goals of the current administration. ESPCs allow federal agencies to procure energy savings and facility improvements with no up-front capital costs or special appropriations from Congress. Federal agencies have been using the ESPC contract vehicle for over 25 years to significantly reduce energy and operating costs in a budget-neutral manner.
Speaker Change: And given the recent changes in the federal workforce, we are anticipating the potential for additional delays.
Speaker Change: That said the majority of our federal projects are continuing in their normal cadence and on schedule.
Speaker Change: I believe that our federal work, especially through the well established energy savings performance contract mechanism is well aligned with the approach and goals of the current administration.
Speaker Change: The FTC's allow federal agencies to procure energy savings and facility improvements with no upfront capital cost are special appropriations from Congress that'll.
Speaker Change: That'll agencies had been using the E. S. P. C contract vehicle for over 25 years to significantly reduce energy and operating costs in a budget neutral manner.
Nicole Bulgarino: As a reminder, the majority of our federal projects are focused on cost savings, resiliency, and upgrading critical infrastructure, which we believe will continue to be in great demand and is in line with the current administration's priorities, as shown through the large multimillion dollar military housing contract we announced just last week. In addition, these ESPC projects are often signed with long O&M contracts, as proven by our current contracted O&M backlog that stands at over $1 billion. In closing, we will continue to closely monitor the impacts of the changes in D.C.
Speaker Change: As a reminder, the majority of our federal projects are focused on cost savings resiliency and upgrading critical infrastructure, which we believe will continue to be in great demand and it's in line with the current administration's priorities as shown through the large multimillion dollar military housing contract we announced.
Speaker Change: Just last week.
Speaker Change: In addition, these ESP STC projects are often signed with long O&M contracts as proven by our current contracted O&M backlog that stands at over $1 billion.
Speaker Change: In closing, we will continue to closely monitor the impacts of the changes in D. C. However, we start we feel strongly that the fundamental drivers and benefits of our federal projects remain I'll now I'll turn the call back over to George George. Thank you Nicole and we mentioned in that first we expect to continue to see long.
Nicole Bulgarino: However, we feel strongly that the fundamental drivers and benefits of our federal projects remain.
George Sakellaris: I will now turn the call back over to George. George. Thank you, Nicole. As we have mentioned in the past, we expect to continue to see long term demand from our federal agency customers, given the need for secure, resilient and reliable power. But as always, we remain focused on policy changes that might impact our business and have incorporated the potential for delays and disruptions into our 2025 guidance, which Mark will discuss in his comments. And while we work through short-term challenges, we have built a diversified and resilient business model that we believe can manage through difficult environments.
Speaker Change: Demand from our federal agency customers, given the need for secure resilient and reliable power.
Speaker Change: As always we remain focused on policy changes that might impact our business.
Speaker Change: We've incorporated the potential for delays and disruptions into our top 25 guidance, which mark will discuss in his comments.
Speaker Change: And.
Speaker Change: We work through short term challenges, we have built a diversified and resilient business model that we believe can manage through difficult environments.
George Sakellaris: Beyond the multi-year visibility of our strong and growing project backlog, we have also purposely grown our recurring energy assets and O&M businesses, which now account for the majority of our annual adjusted EBITDA. These business lines generally have long-term contracts, providing annuity-like revenue visibility, helping us to mitigate short-term volatility in the project business.
Speaker Change: Beyond the multi year visibility.
Speaker Change: Our strong and growing project backlog.
Speaker Change: So purpose.
Speaker Change: We'll see growing our recurring energy assets and O&M businesses, which now accounts for the majority of our annual adjusted EBITDA.
Speaker Change: These business lines generally have long term contracts, providing an annuity like revenue visibility, helping us to mitigate short term volatility in the project business.
George Sakellaris: who also have deliberately expanded geography. Ameresco now has operations in every state, Canada, the UK, and loin footprint in continental Europe. 2024 marked a significant milestone for this region with over $250 million of revenue generated from our expanding European business.
Speaker Change: We also have deliberately expanded geographically and my escrow now has operations in every state Canada, the UK and logging slipping Brent in Continental Europe.
Speaker Change: Target 24 marked a significant milestone for the industry at June with over $250 million or revenue generated from our expanding European business.
Mark Chiplock: I will now turn the call over to Mark to comment on our financial performance in 2025 outlook. Thank you, George, and good afternoon, everyone. Strong execution across our business led to a record revenue finish to the year, with total revenues in the quarter growing over 20% to $533 million, and each of our four business lines experiencing solid growth. Our project's business revenue grew 21%, reflecting our consistent focus on execution and conversion of our backlog. Energy asset revenue grew 31%, driven largely by the greater number of operating assets compared to last year. We added another 31 megawatts of assets into operations this quarter, bringing our full year ads to a record 240 megawatts.
Speaker Change: I will now turn the call over to Mark to comment on our financial performance and taught it quantify it.
Speaker Change: Mark.
Mark: Thank you George and good afternoon, everyone.
Mark: <unk> execution across our business led to a record revenue finished to the year with total revenues in the quarter growing over 20% to $533 million in each of our four business lines experiencing solid growth.
Mark: Our projects business revenue grew 21%, reflecting our consistent focus on execution and conversion of our backlog.
Energy asset revenue grew 31% driven largely by the greater number of operating assets compared to last year.
Mark: We added another 31 megawatts of assets into operations this quarter, bringing our full year adds to a record 240 megawatts.
Mark Chiplock: Our base of operating assets now stands at 731 megawatts. O&M revenue grew 9% as we continue to win more long-term O&M business. while revenue from our other line of business grew 14% with strong performances from our off-grid PV and consulting businesses.
Mark: Our base of operating assets now stands at 731 megawatts.
Mark: O&M revenue grew 9% as we continue to win more long term O&M business, while revenue from our other line of business grew 14% with strong performances from our off grid PV and consulting businesses.
Mark Chiplock: Gross margin of 12.5% for the quarter was significantly lower than expected. As George mentioned, unanticipated cost overruns on two projects negatively impacted gross profit by approximately $20 million or 400 basis points. For the full year, the impact to gross profit from these two projects was approximately $38 million, or 260 basis points.
Mark: Gross margin of 12, 5% for the quarter was significantly lower than expected as George mentioned unanticipated cost overruns on two projects negatively impacted gross profit by approximately $20 million or 400 basis points for.
Mark: For the full year the impact of gross profit from these two projects was approximately $38 million or 260 basis points.
Mark Chiplock: We believe that the financial impact of these two projects is largely behind us. Operating income of $44.7 million, an increase of 31%, was bolstered by our revenue growth and the completed sale of our AEG business unit, which resulted in a gain recognized in the quarter of approximately $38 million. This increase was partially offset by non-cash acid impairment charges of $12 million, related primarily to the announced closing of one of our landfill gas sites by the county. We also saw higher depreciation expenses of $8 million directly related to the growth of our operating asset portfolio. Net income attributable to common shareholders was $37.1 million, increasing by 15%.
Mark: We believe that the financial impact of these two projects is largely behind us.
Mark: Operating income of $44 7 million.
Mark: An increase of 31% was bolstered by our revenue growth and the completed sale of our AEG business unit, which resulted in a gain recognized this quarter of approximately $38 million.
Mark: This increase was partially offset by noncash asset impairment charges of $12 million related primarily to the announced closing of one of our landfill gas sites by the county.
Mark: We also saw higher depreciation expenses of $8 million directly related to the growth of our operating asset portfolio.
Mark: Net income attributable to common shareholders was $37 1 million increasing by 15%.
Mark Chiplock: We continue to take advantage of clean energy tax incentives, which resulted in an effective tax rate benefit for 2024 of 59% compared to a benefit of 67% in 2023. Fourth quarter adjusted EBITDA of $87.2 million increased 59%. The growth of our project backlog continued to be outstanding, fueled by our business development activity, which remained very healthy, with over $700 million of new project awards in the quarter. Importantly, we added new awards at two times our 2024 project revenue. Total project backlog increased 24% to $4.8 billion.
Mark: We continued to take advantage of clean energy tax incentives, which resulted in an effective tax rate benefit for 2020 for a 59% compared to a benefit of 67% in 2023.
Mark: Third quarter, adjusted EBITDA of $87 $2 million increased 59%.
Mark: The growth of our project backlog continued to be outstanding fueled by our business development activity, which remains very healthy with over $700 million of New project awards in the quarter importantly.
Mark: Importantly, we added New awards at two times, our 2024 project revenue.
Mark: Total project backlog increased 24% to $4 8 billion.
Mark Chiplock: These metrics demonstrate our continued focus on execution and the strong demand for our project. Turning to our balance sheet and cash flows, we ended the quarter in a solid cash position with approximately $109 million in cash. Our total corporate debt declined to $243 million from $273 million as the cash proceeds from our sale of AEG were used to pay down a large portion of our outstanding term loans. During the fourth quarter, we successfully executed approximately $237 million in project financing commitments to help fund our asset business. Our adjusted cash from operations during the quarter was $54 million, bringing our full year total to $282 million.
These metrics demonstrate our continued focus on execution and a strong demand for our projects.
Turning to our balance sheet and cash flows we ended the quarter in a solid cash position with approximately $109 million in cash our total corporate debt declined to $243 million from $273 million has the cash proceeds from our sale of AEG were used to pay down a large portion of our outstanding term.
Mark: Well.
Mark: During the fourth quarter as we successfully executed approximately $237 million and project financing commitments to help fund our asset business.
Mark: Our adjusted cash from operations during the quarter was $54 million.
Mark: Our full year total to $282 million.
Mark Chiplock: Our eight quarter rolling average adjusted cash from operations was $46 million.
Mark: Our eight quarter Rolling average adjusted cash from operations was $46 million.
Mark Chiplock: Before turning to our 2025 guidance, I wanted to touch on some of the recent events impacting our R&G business. First, in December, Treasury finalized new rules governing the Section 48 Investment Tax Credit. These rules clarified that the ITC would apply to our R&G projects that began construction before the end of 2024 and were placed in service in 2023 or later. Importantly, we can choose to either use the tax credits internally or sell the credits to third-party investors under the transferability rules. Our R&G assets placed in service between 2023 and 2024 generated ITCs of approximately $100 million, part of which we recognized as a tax benefit in 2024, with the remainder expected to be sold for cash in 2025.
Mark: Before turning to our 2025 guidance I wanted to touch on some of the recent events impacting our R&D business.
Mark: First in December Treasury finalized new rules governing the section 48 investment tax credit.
Mark: These rules clarified that the ITC would apply to our R&D projects that began construction before the end of 2024 and were placed in service in 2023 or later.
Mark: Importantly, we can choose to either use the tax credits internally or sell the credits to third party investors under the transferability rules are.
Mark: Our R&D assets placed in service between 2023, and 2024 generated itc's of approximately $100 million.
Mark: Part of which we recognized the tax benefit in 2024 with the remainder expected to be sold for cash in 2025.
Mark Chiplock: In addition, we have safe harbored R&G projects expected to go COD between 2025 and 2027 with an estimated $200 million of additional potential credit.
Mark: In addition, we have safe harbored R&D projects expected to go.
Mark: Between 2025, and 2027 with an estimated $200 million of additional potential credits.
Mark Chiplock: Second, in January, the Treasury released its initial guidance on the Section 45Z Clean Fuels Production Tax Credit. 45Z, which takes effect this year, provides a tax credit for the production of transportation fuels sold from 2025 through 2027. All of our landfill RNG plans qualify for this credit, and like the ITC, we have the option to either use the credit ourselves, to lower our tax rate, or to sell them to third parties for cash. Once the guidance is finalized, we believe our total annual benefit from 45Z could be approximately $8 to $10 million.
Mark: Second in January the Treasury released its initial guidance on the section 45 Z clean fuels production tax credit.
Mark: <unk> 45, Z, which takes effect. This year provides a tax credit for the production of transportation fuels sold from 2025 through 2027.
Speaker Change: All of our landfill RMG plants qualify for this credit and like the ITC, we have the option to either use the credit ourselves.
Speaker Change: To lower our tax rate or to sell them to third parties for cash.
Once the guidance is finalized we believe our total annual benefit from 45%.
Speaker Change: Would be approximately $8 million to $10 million.
Mark Chiplock: Finally, DE3 RIN prices weakened at the end of last year, fueled by the EPA's proposed rule to partially waive the 2024 cellulosic biofuel volume requirement due to a forecasted shortfall in production. While the waiver has not yet been finalized, our guidance reflects the current market for We continue to deploy our dynamic hedging strategy to manage the risks associated with RIN price volatility and its impact on our earnings. As of today, less than 30 percent of our overall expected 2025 RIN generation is merchant.
Speaker Change: Finally D. Three RIN prices weakened at the end of last year fueled by the Epa's proposed rule to partially waived the 2020 for Cellulosic biofuel volume requirement due to a forecasted shortfall in production.
Speaker Change: While the waiver has not yet been finalized our guidance reflects the current market for Rins.
We continue to deploy our dynamic hedging strategy to manage the risks associated with RIN price volatility and its impact on our earnings as of today less than 30% of our overall expected 2025 RIN generation is merchant.
Mark Chiplock: Now turning to 2025 Guidance. We believe our guidance reflects the current, unpredictable political and regulatory environment. We are guiding revenue of $1.9 billion and adjusted EBITDA of $235 million at the midpoints of our ranges. Included in our EPS guidance is the anticipation of an estimated net tax benefit. But the benefit will likely be lower than last year as we optimize the mix of credits that we keep versus credits that we sell for cash. We anticipate placing approximately 100 to 120 megawatts of energy assets in service, including one to two RNG plants. Our expected CapEx is $350 million to $400 million, the majority of which we expect to fund with additional energy asset debt, tax equity, or tax credit sales.
Speaker Change: Now turning to 2025 guidance.
Speaker Change: We believe our guidance reflects the current unpredictable political and regulatory environment.
Speaker Change: We are guiding revenue of $1 9 billion.
Speaker Change: And adjusted EBITDA of $235 million at the midpoint of our ranges.
Speaker Change: Included in our EPS guidance is the anticipation of an estimated net tax benefit.
Speaker Change: But the benefit will likely be lower than last year as we optimize the mix of credits that we keep versus credits that we sell for cash.
Speaker Change: We anticipate placing approximately 100 to 120 megawatts of energy assets in service, including one to two RMG plants.
Speaker Change: Our expected Capex is $350 million to $400 million.
Speaker Change: The majority of which we expect to fund with additional energy asset that tax equity or tax credit sales.
Mark Chiplock: For additional clarity on our EPS guidance, I thought it would be helpful to provide more color on certain factors that have an impact on EPS, depreciation, interest expenses, and non-controlling interest. As our energy asset portfolio grows, we anticipate a corresponding increase in our depreciation expenses. Additionally, our strategic use of non-recourse debt to finance this growth will lead to higher interest expenses. And as we expand our global footprint, we will continue to use strategic joint venture arrangements, which allow us to leverage our partners' local expertise and resources. Our Ameresco Senel Energy JV in Europe is an example of such a partnership.
Speaker Change: For additional clarity on our EPS guidance I thought it would be helpful to provide more color on certain factors that have an impact on EPS depreciation interest expenses and noncontrolling interests.
Speaker Change: As our energy asset portfolio grows we anticipate a corresponding increase in our depreciation expenses. Additionally, our strategic use of non recourse debt to finance this growth will lead to higher interest expenses.
Speaker Change: And as we expand our global footprint, we will continue to use strategic joint venture arrangements, which allow us to leverage our partners local expertise and resources.
Speaker Change: Our <unk> energy JV in Europe is an example of such a partnership.
Mark Chiplock: When we have a majority stake and have control under these arrangements, we report 100% of the joint venture's revenue and expenses. However, our adjusted EBITDA and net income are reduced by the non-controlling interest of our JV partner, reflecting their ownership stake in the joint venture.
Speaker Change: When we have a majority stake and have control under these arrangements. We report 100% of the joint Venture's revenue and expenses.
Speaker Change: However, our adjusted EBITDA and net income are reduced by the Noncontrolling interest of our JV partner, reflecting their ownership stake in the joint venture.
Mark Chiplock: Given these factors have a significant impact on our EPS results, we've provided estimated ranges for them in our 2025 guidance as detailed in our press release.
Speaker Change: Given these factors have a significant impact on our EPS results. We've provided estimated ranges for them in our 2025 guidance as detailed in our press release.
Mark Chiplock: Also, I want to call out that our 2025 guidance does not include the potential impact of a change in accounting principle related to sale-leaseback arrangements that is currently being assessed. If implemented, this change could result in lower annual interest and other expenses, with an estimated impact of $20 million in 2025.
Speaker Change: Also I want to call out that our 2025 guidance does not include the potential impact of a change in accounting principle related to sale leaseback arrangements that is currently being assessed.
Speaker Change: If implemented this change could result in lower annual interest and other expenses with an estimated impact of $20 million in 2025.
Mark Chiplock: Finally, I will provide some shaping on 2025. We anticipate that first quarter revenue and adjusted EBITDA will be similar to Q1 last year. And because the first quarter is our seasonally lowest revenue quarter, and due to the linear nature of depreciation and interest expenses, we expect to have negative EPS. With respect to the cadence of revenue, we expect revenues in the second half of the year to represent approximately 60% of our total revenue for 2025. This is consistent with our performance from the past couple of years.
Speaker Change: Finally, I will provide some shaping on 2025.
Speaker Change: We anticipate that first quarter revenue and adjusted EBITDA will be similar to Q1 last year.
Speaker Change: And because the first quarter is our seasonally lowest revenue quarter and due to the linear nature of depreciation and interest expenses, we expect to have negative EPS.
Speaker Change: With respect to the cadence of revenue, we expect revenues in the second half of the year to represent approximately 60% of our total revenue for 2025. This is consistent with our performance from the past couple of years.
George Sakellaris: Now, I'd like to turn the call back over to George for closing comments. Thank you, Mark. As you have heard, we ended the year on a very solid footing with a record project backlog and O&M backlog and a record number of energy assets in operation.
Speaker Change: Now I'd like to turn the call back over to George for closing comments. Thank you Marc as you have heard we ended the year on a very solid footing with record project backlog and O&M backlog and a record number of energy assets in operation.
George Sakellaris: and we look to 2025. We are cautiously navigating the transition of the federal government. However, I am confident in our ability to execute in this dynamic environment. There is a strong demand for our budget-neutral solutions that provide customers with significant cost savings, resiliency, and much-needed infrastructure improvement. We remain focused on the profitable execution of our tremendous project backlog and asset chain development and the generation of cash flow.
Speaker Change: And we look to 2025.
Speaker Change: <unk> navigated that transition well the federal government.
Speaker Change: We are at.
Speaker Change: Im confident in our ability to execute in this dynamic environment.
Speaker Change: Maybe just strong demand.
Speaker Change: Our button is known to have solutions that provide customers with significant cost savings.
Speaker Change: Nancy and much needed infrastructure improvements.
Speaker Change: We remain focused on the profitable execution of our tremendous project backlog and assets in development and the generation of cash flow.
George Sakellaris: In closing, I would like to once again thank our employees, customers and stockholders for their continued support.
Speaker Change: Closing I would like to once again, thank all our employees.
Speaker Change: Stockholders for their continued support.
Operator: Operator, we would like to open the call to questions now. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the Q&A. To withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit to one question and one follow-up.
Speaker Change: Operator, we would like to open the call to questions.
Speaker Change: We will now begin the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad to Asia and join into Q.
Speaker Change: To withdraw your question simply press Star one again.
Speaker Change: If you are called upon to ask your question and listening via loud speakers on your device. Please pickup your handset and ensure that your phone is not on mute and asking your question. We do request for today's session that you. Please limit to one question and one follow up thank you.
Operator: Thank you.
Stephen Gengaro: And your first question comes from the line of Stephen Gengaro with Stiefel. Your line is open. Thanks. Good afternoon, everybody. Hi, Stephen. Hi, there. Hi, Sue. Hi.
Speaker Change: And your first question comes from the line of Steven <unk> with.
Speaker Change: Stifel. Your line is open.
Speaker Change: Thanks, Good afternoon everybody.
Speaker Change: Hi, Steve Hi, there.
Speaker Change: Hi, Ken.
George Sakellaris: Can you talk a little bit about, you know, you obviously talked about kind of where the backlog is, et cetera, but can you talk a little bit about what you are seeing in your conversations with customers over, you know, basically since January, as opposed to the back half of 24, and whether they're at all sort of paralyzed by the uncertainty around around the administration or sort of how those conversations are going and how you think customers are kind of reacting to that? Oh, I think the... Especially the last six months, and Nicole can add a little bit of color to it, or even the last month and a half or so, especially on the federal sector, the activity is still very good.
Speaker Change: Can you talk a little bit about.
Speaker Change: You, obviously talked about kind of where the backlog is et cetera, but can you talk a little bit about what you are seeing in your conversations with customers.
Speaker Change: Over basically since January as opposed to the back half of 'twenty four.
Speaker Change: Whether they're at all sort of paralyzed by the uncertainty around.
Speaker Change: Around the administration or sort of how those conversations are going and how do you think customers are kind of reacting to that.
Speaker Change: Well I think the.
Especially in the last six months and Nicole can add little bit color to it or even the last month and a software sale.
Speaker Change: Especially on the federal sector. The activity is still very good.
George Sakellaris: Actually, they just sent a couple RFPs out today. Yeah, I think it's, and certainly on our Department of Defense side, there's been still an active RFPs, as George stated, coming out when you're looking at microgrids and that type of work. I mean, there has been certainly some slowness with the entirety of the, like on the civilian side, like GSA, as example. But at this point, I think, you know, and even in our utility business, I mean, we're seeing several active RFPs because they're, you know, related for the need of energy. Okay, thanks.
Speaker Change: Just a couple of Rfps out today, Yeah, I think it's certainly on our department of defense side, there has been stellar.
Speaker Change: <unk>.
Speaker Change: Rfps as George stated coming out when Youre looking at micro grids and that type of work I mean, there has been certainly some slowness with him in charity is that icon civilian side like TSA as example.
Speaker Change: Yes at this point I think even in our utility business I mean, we're seeing several active rfps because there.
Speaker Change: Later for the need of energy.
Speaker Change: Okay. Thanks.
George Sakellaris: And the other question I want to ask quickly is when you when you think about the deployment of the energy assets business this year, and I appreciate you gave kind of some revenue guidance on sort of the quarterly cadence for 25. But is there any lumpiness or anything we should be aware of on sort of the deployment of energy assets throughout 25? No, no.
Speaker Change: The other question I wanted to ask quickly is when you when you think about.
Speaker Change: The deployment of any energy assets business. This year and I. Appreciate you gave kind of some revenue guidance on the quarterly cadence for 'twenty five but is there any lumpiness or anything we should be aware of on sort of the deployment of energy assets.
Speaker Change: Throughout 'twenty five.
Speaker Change: No no there wasn't anything that I would say on the energy assets is the supply of equipment.
George Sakellaris: The only thing that I would say on the energy assets is the supply of equipment, like transformers, especially the larger size of transformers with interconnection, utility interconnection, and then the renewable natural gas, sometimes the pipelines, getting the right ways and interconnections. But generally, as you can see, our development backlog of the assets is very, very, very good. And the financial markets, they're still very good, as you demonstrated for what we were able to do in the last quarter. So I...
Speaker Change: Like Transformers, especially with the larger size with John as far as the interconnection utility interconnection and then the renewable natural gas sometimes that FIFO.
Speaker Change: Again in the right ways and interconnections, but generally.
Speaker Change: As you can see our development backlog of the assets is very very very good.
Speaker Change: In the financial markets is still very good.
Speaker Change: As demonstrated for what we were able to do in the last quarter.
Speaker Change: Hi.
George Sakellaris: But, you know, because of the new administration, hiccups here and there, I think you will find them, even on the projects, as well as some of the assets. But the overall market environment is still very good. Okay, great.
Speaker Change: But.
Speaker Change: The new administration or hiccups here and there I think you will find them, even though the projects as well as some of the assets, but the overall market environment is still very good.
Speaker Change: Okay, great. Thank you for the details.
George Sakellaris: Now, thank you for the details.
Noah Kaye: Next question comes from the line of Noah Kaye with Oppenheimer. Your line is open. Thanks. The first one might be a Nicole question as well. No surprise. I guess given that ESPCs are a decades-long, time-tested way to save the government money up front and have always been kind of bipartisan, what should we make of...
Snow Lucky: Next question comes from the line of Snow Lucky with Oppenheimer. Your line is open.
Speaker Change: Okay.
Speaker Change: Thanks.
Speaker Change: First one.
Speaker Change: Might be a nucor question as well.
Speaker Change: No surprise.
Given that ESP fees are a decades long time tested way to save the government money upfront.
Speaker Change: And have always been kind of bipartisan what.
Speaker Change: What should we make of.
Nicole Bulgarino: The pause that you're seeing now around, I mean, I guess the better question is, what conversations with relevant counterparts is the company having on what's driving some of these decisions and how quickly might we see kind of a reversion to business as usual? So the pause that we mentioned just a few minutes ago is related to specifically GSA. And if you, I mean, everyone's seen the headlines, and they're looking at selling a lot of their assets. And so those projects in particular are paused as they're evaluating which buildings they may sell. So we don't we kind of expect that to be the this is a specific case to GSA and still expect that that same value to be appreciated by this administration on the SPC.
Speaker Change: The pause that you're seeing now around it I mean, I guess the better question is what conversations.
Speaker Change: With relevant counterparts is the company, having on whats driving some of these decisions and.
Speaker Change: How quickly might we see kind of a reversion to let's call it business as usual.
Speaker Change: The pause that we mentioned in just a few minutes ago, it's related to specifically GSA and.
Speaker Change: I mean everyone's seen the headlines and theyre looking at selling a lot of their assets and so those projects in particular, our pause as they are evaluating which buildings they may sell.
Speaker Change: Alright, so we kind of expect that to be the this is ed.
Speaker Change: Specific case to GSA and still expect about the same value to be appreciated.
Speaker Change: By this administration on the FTC.
Nicole Bulgarino: Very helpful. Thank you.
Speaker Change: Very helpful. Thanks, Mike.
George Sakellaris: Go ahead, George. No, please, please, I appreciate your thoughts. Yeah, well, what might happen is some of these GSA projects, let's say, might have a project, they get five, six or 10 buildings, they might want to decide to sell two or three or four of that. So we have to re-scope the project. and go ahead with the rest of the buildings. So most likely that's what you will see happening. But because you have an IDIQ that covers Thank you. And this administration likes this kind of project.
Speaker Change: Yes go ahead, George I'll go ahead.
Speaker Change: No. Please please.
Speaker Change: I appreciate your thoughts.
Speaker Change: Yes.
Speaker Change: What might happen to some of this.
Speaker Change: GSA projects, let's say might have a project that gets five six or 10 buildings. They might wanted to decide to sell two or three or four of that so we will have to re scope of the projects.
Go ahead with the rest of the business.
Speaker Change: So most likely that's what you'll see happening.
Speaker Change: But because you have an idea Q.
Speaker Change: Covers.
Speaker Change: <unk>.
Speaker Change: Sensibly the scope of.
Speaker Change: Whatever buildings are remaining theres still lots of opportunities to mine in terms of deep energy retrofit.
Speaker Change: That is correct.
Speaker Change: Okay.
Speaker Change: This administration likes these kinds of projects.
Speaker Change: Great.
Noah Kaye: A question on the guide. Mark, thank you for providing some guideposts around seasonality of revenues and 1Q. I guess when we think about at least the relative contribution from the different parts of the business, you put in a really good amount, as you said, a record amount of energy assets. You've got your RIN exposure pretty well handled, as you mentioned.
Speaker Change: A question on the guide.
Speaker Change: Yeah.
Speaker Change: And Mark Thank you for providing some guideposts around.
Speaker Change: Seasonality of revenues and <unk>.
Speaker Change: I guess, when we think about.
Speaker Change: At least the relative contribution from the different parts of the business you put in.
Speaker Change: A really good amount as you said a record amount of energy assets.
Speaker Change: You've got your RIN exposure pretty well handled as you mentioned so is there a way to think about sort of.
Mark Chiplock: So is there a way to think about... The EBITDA growth, at least from sort of projects and the O&M and then kind of thinking about the, you know, the project business being more of the swing variable, maybe you could just give us a little bit of color on, you know, how to bridge. Yeah, I mean, I think that, you know, we're coming into the year, and we talked a lot about the backlog, right? So we have, you know, a lot of our project backlog coming, our project revenue coming from from contracted revenues. So, you know, we'll expect to see a decent amount of contribution there.
Speaker Change: The EBITDA growth at least from sort of projects in the O&M and then kind of thinking about the.
Speaker Change: The project business being more of a swing variables, maybe you could just give us a little bit of color on.
Speaker Change: How to bridge.
Speaker Change: Yes, I mean, I think that we're coming into the year and we talked a lot about the backlog right. So we have.
Speaker Change: A lot of our project backlog coming.
Speaker Change: <unk> revenue coming from from contracted revenue so well.
Speaker Change: We will expect to see a decent amount of contribution there.
Mark Chiplock: And then obviously, you know, last year, with all of the megawatts of new assets will be placed in operations, you know, of course, that, you know, that's not going to be completely incremental to 2025, just given that, you know, a lot of that came on board throughout 2024. But we will see some additional contribution there. Just remember that, you know, when we put some of these assets online, they do still take some time to ramp up. We expect some amount of incremental contribution there. And the O&M, that always remains pretty linear. We would expect a little bit of growth there.
Speaker Change: Obviously last year with all of the megawatts of new assets will be placed in operations of course that that's not going to be completely incremental to 2025, just given that a lot of that came on board throughout 2024, but we will see some additional contribution there just remember that when we put some of these assets online they do still.
Speaker Change: It takes some time to ramp up.
Speaker Change: We expect some amount of incremental contribution there I don't O&M is that always remains pretty linear we would expect a little bit of growth there.
Mark Chiplock: But again, we've got some steady contribution from those recurring streams. So, I mean, I guess that's about the best color I can give you in terms of how those three lines of business will contribute to the growth.
Speaker Change: So, but again, we've got some steady contribution from those recurring stream so.
Speaker Change: I mean, I guess, that's about the best color I can give you in terms of how those will those three lines of business will contribute to the EBITDA growth.
Speaker Change: Okay I appreciate it thank you.
Noah Kaye: Appreciate it.
Noah Kaye: Thank you.
Noah Kaye: I'll turn it over. Thanks, Noah.
Speaker Change: I'll turn it over.
Joe: Thanks, Joe.
Craig Irwin: Next question comes from the line of Craig Irwin with the Roth Capital. Your line is open. Good evening and thank you for taking my questions. So George... I was hoping maybe you could give us a little bit more color on this sort of shift in the way you've put your guidance together. So I appreciate the conservatism around anticipating a change in the federal building footprint, right? Nobody knows these buildings better than you guys do, except for maybe the owners. But you're doing some very important work as far as managing the profile, the financials of these buildings.
Speaker Change: Next question comes from the line of Craig Irwin with Roth Capital. Your line is open.
Craig Irwin: Good evening and thank you for taking my questions.
Speaker Change: George.
Speaker Change: I was hoping maybe you could you could give us a little bit more color.
Speaker Change: On the on the on this sort of shift in the way you put your guidance together so I appreciate the.
Speaker Change: The conservatism around anticipating a change in the federal building footprint right Nobody knows these buildings better than you guys do.
Speaker Change: Or maybe maybe the owners that youre doing some very important work.
Speaker Change: As far as managing.
Speaker Change: The profile of the financials of these buildings.
George Sakellaris: Can you maybe scope out for us what the delta would have been or what the contribution could have been that if you'd have taken a straight line with what's in backlog today, what looks like it's ready to be executed, that you would expect if nothing changes in DC so that we can kind of estimate the... Put the adjustment down for your conservatism around changes that are going to happen over the next couple of years. Well, I think the most important impact that we will get is probably during the next six months until everything stabilizes and the new people in the federal government get their positions.
Speaker Change: Can you maybe scope out for us what the Delta.
Would have been or what the contribution could have been.
Speaker Change: If you would have taken a straight line with whats in backlog today.
Speaker Change: It looks like it's ready to be executed that would've been.
Speaker Change: You would expect if nothing changes in D. C. So that we can kind of estimate the.
Speaker Change: The adjustment down for for your conservatism around around changes that are going to happen over the next couple of years.
Speaker Change: Well I think the most important.
Speaker Change: The impact that we will get is probably during the next six months until everything stabilizes and the new people in the federal government to get their positions in the bottleneck is not.
George Sakellaris: And the bottleneck is not, the backlog is excellent right now. I mean, and if nothing had happened, I don't want to give a number out, but it could be a considerably better performance for this year than we have right now. So, and that's why we try to push out some projects, at least about six months, I would say, a rough estimate. But we have pushed out those particular projects and a couple of other ones that were in the execution stage. But if. You have new people, you know, it takes a little bit more time. And then if you have to re-scope this particular project, now you have to do the financing all over again and so on.
Speaker Change: The backlog is excellent right now.
If nothing happened.
Speaker Change: I don't want to give a number out but it couldnt be a considerably better performance for 2000.
Speaker Change: For this year.
Speaker Change: Right now.
Speaker Change: So that's why we tried to push out some projects.
Speaker Change: It is about six months I would say.
Speaker Change: Sure enough estimate.
Speaker Change: Do we have pushed out with those particular projects in a couple of other ones that.
Speaker Change: We are in the execution stage, but if.
Speaker Change: You have new people.
Speaker Change: More time, and then if you have to re scope in this particular projects now you have to do the financing all over again and so on and I know in one particular project that was cancelled actually we are negotiate they wanted to do the project, but we did negotiate the scope for the remaining buildings and it's going to take.
George Sakellaris: And I know in one particular project that was canceled. Actually, we are negotiating, they want to do the project, but we're negotiating the scope for the remaining buildings. And it's going to take a few months to do it. So, but.
Speaker Change: A few months to do it so but.
George Sakellaris: You're right that this administration, this energy savings, performance contracts, because they are budget neutral, they love them, in a year to two years from now, I guarantee you that the federal government, we will be picking up more business. And the other thing I want to point out that we have haircut a little bit the other part of the business, because some of the money, even though, let's say a school system or a college or hospitals, they do get some money from the IRA program, so they buy down the energy savings performance contracts. So we have seen a little bit slow down on that particular project, but we haven't lost any project either.
Speaker Change: Youre right.
Speaker Change: This administration of these energy savings performance contracts, because they have budget neutral.
Speaker Change: And a year to two years from now again and tell you that the federal government, we will be picking up more business and the other thing I wanted to point out that we have haircut a little bit.
Speaker Change: Other parts of the business because some of the money, even though let's say a school system or a college.
Speaker Change: Results.
Speaker Change: They can do get some money from the <unk> program. So they buy down the energy savings performance contracts. So we have seen a little slowdown in that particular project, but we haven't lost any projects either but.
Craig Irwin: But the time has been shifted a little bit. Excellent, excellent.
Speaker Change: The time it has been shifted a little bit.
Speaker Change: Excellent excellent. So then I guess I will ask the second question.
George Sakellaris: So then, I guess I will ask this second question. It's something I called you on privately this past quarter, so we've been hearing that because of the success in the ESPC program over the last many, many years and the outperformance of the portfolio projects that's been done versus typical federal construction, that the administration's actually looking at moving most federal contracting from roads to libraries to you name it, into a very similar ESPC-like vehicle. Obviously, it would not be an $80 billion IDIQ. It would be in the hundreds of billions. You know, given your leadership in developing the performance contracting industry and sort of helping set up the entire structure that's allowed this budget neutral investment to to be such an important contribution to the building stock.
Speaker Change: Yes.
Speaker Change: Something I called you on privately this past quarter. So we've been hearing that.
Speaker Change: Because of the success in the SPC program over the last many many years.
Speaker Change: And the outperformance of the portfolio of projects that's been done versus typical federal construction that the administration is actually looking at.
Speaker Change: Moving most federal contracting from roads to libraries to you name it into a very similar ESP see like vehicle, obviously, it would not be an $80 billion <unk> it would be in the hundreds of billions.
Speaker Change: Given your leadership in developing the performance contracting industry and sort of helping set up the entire structure thats allowed its budget neutral investment too.
Speaker Change: To be such an important contribution to the building stock have you been involved in those conversations at all does it make sense for you for non energy related projects to maybe have a similar contracting structure and would this be a growth opportunity. If we saw some similar type of contracting.
George Sakellaris: Have you been involved in those conversations at all? Does it make sense for you for non-energy related projects to maybe have a similar contracting structure? And would this be a growth opportunity if we saw some similar type of contracting mechanism brought to a much wider scope of projects across the country? Yeah, I would. I would love to do some of their ships. Some of the Air Force bombers and so on. I think there's tremendous potential. They have to apply this concept to many other areas. One of the areas that we are not, we could be talking about it down the road is the data center.
Speaker Change: <unk> brought to a much wider scope of projects across the country.
Speaker Change: Yes.
Speaker Change: I would love to do some of their ships.
Speaker Change: So.
Speaker Change: Airforce bombers and so on I think there's tremendous potential to apply this concept to meet the other areas one of the areas. That's the way it does.
Speaker Change: We could be talking about a down there always is the data centers.
George Sakellaris: And that's, we haven't talked about it yet. But because we wanted to have something concrete, and then we will start talking about it. And I think down the road, we'll probably hear something about that.
Speaker Change: And.
Speaker Change: We haven't talked about it yet but.
Speaker Change: Because we wanted to have something concrete and then we will start talking about it.
Speaker Change: I think down the road.
Speaker Change: Probably hear something about that.
Craig Irwin: Excellent. Well, we'll stay tuned. Thanks for taking my questions.
Speaker Change: Excellent well, we'll stay tuned thanks for taking my questions.
Speaker Change: Okay.
Speaker Change: Absolutely.
Operator: Again, if you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: Again, if you would like to ask a question. Please press star one on your telephone keypad.
Eric Stine: Next question comes from the line of Eric Stine with Greg Halliw, your line is Everyone, thanks for taking the questions. So, just sticking with the federal business, obviously the big focus today, you know, just curious, other than the GSA business, which you touched on, and think that that may change in scope, is it fair to say that what you are doing here is, by and large, it is simply saying you think there's a pause, you know, just curious, is that the way we should think about it? And then also, you mentioned the one cancellation, is that something you are factoring in for 2025, that that becomes more widespread, or do you think that that cancellation is kind of a one-off?
Speaker Change: Next question comes from the line of Eric Stine with Craig Hallum Your line.
Speaker Change: Okay.
Speaker Change: Hi, everyone. Thanks for taking the questions.
Speaker Change: Alright.
Speaker Change: So just sticking with the federal business, obviously, the big focus today.
Speaker Change: Just curious I mean other than the GSA business, which you touched on and think that that may change in scope is it fair to say that what you are doing here is by and large it is simply saying you think there is a pause.
Speaker Change: Just curious is that the way we should think about it and then also you mentioned the one cancellation is that something you're factoring in for 2025, if that becomes more widespread or do you think that that cancellation is kind of a one off.
George Sakellaris: The cancellation was a one-off, and we've already accounted for it in the numbers. And the other two are pauses, and we've accounted for that in our guidance, the delay in those as well. And it's been related to GSA.
Speaker Change: Insulation was a one off and we've already accounted for it in the numbers and that other <unk> are positive.
<unk> said that in our guidance the delay in that and that is as well.
Speaker Change: But I mean to me has been related to GSA, Yes, I think more broadly Eric right to be clear, we gave a lot of consideration to anything that could be exposed right by policy changes other project pauses potential cancellations, maybe tariff policies federal funding cutbacks, we gave consideration to all of it and <unk>.
Mark Chiplock: Yeah, I think more broadly, Eric, right, to be clear, we gave a lot of consideration to anything that could be exposed, right, by policy changes, other project pauses, potential cancellations, maybe tariff policies, federal funding cutbacks. We gave consideration to all of it and tried to smartly build that into our guidance ranges. So we definitely took that approach. Okay, and so there is the possibility, you know, not sitting here early in the year, but you know, it sounds like you have attempted to be very conservative. And maybe that's the best approach given where we're at right now.
Speaker Change: <unk>.
Speaker Change: Smartly build that into our guidance ranges so.
Speaker Change: We definitely took that approach.
Speaker Change: Okay, and so there is a possibility.
Speaker Change: No not sitting here early in the year, but.
Speaker Change: It sounds like you have attempted to be very conservative and maybe that's the best approach given where we're at right now but.
Eric Stine: But I mean, this is something that that could change as the year progresses, depending on how things play out. Certainly, yes. Okay. All right. Thank you.
Speaker Change: But I mean, this is something that that could change as the year progresses, depending on how things play out.
Speaker Change: Certainly yes.
Speaker Change: Alright, thank you.
Speaker Change: Sure.
William Grippin: Next question comes from the line of William Grippin with UBS. Your line is open. Great, thanks for the time and good evening. Just my first one, I wanted to come back to the guidance here, maybe to put a finer point on it. You know, if I look back over the last four years at your contracted projects backlog as of the end of the year, that's perfectly correlated to your reported project segment revenue in the following year, right, one-to-one basis consistently for the last four years.
Speaker Change: Next question comes from the line of <unk> with UBS. Your line is open.
Speaker Change: Great. Thanks for the time and good evening My first one I wanted to come back to the guidance here, maybe to put a finer point on it.
Speaker Change: If I look back over the last four years that you are contracted project backlog as of the end of the year.
Speaker Change: That's perfectly correlated to your reported project segment revenue in the following year right one to one basis consistently for the last four years.
Mark Chiplock: So, you know, I take your two and a half billion contracted projects backlog, you know, if I look at that relative to the 1.9 billion revenue guidance at the midpoint, you know, that seems to imply to me that you're actually not assuming any federal revenue in the 2025 guide. But just based on the conversation here on the call here, I feel like I'm probably missing something.
Speaker Change: So I take your $2 5 billion contracted project backlog.
Speaker Change: If I look at that relative to the $1 9 billion revenue guidance at the midpoint that seems to imply to me that you are actually not assuming any.
Speaker Change: Federal revenue.
Speaker Change: In 2025 guide, but just based on the conversation here on the call here I feel like I'm, probably missing something so maybe you could you elaborate a little bit more on what you are actually assuming as in versus out and what explains that pretty substantial gap between your contracted backlog there and then the actual overall revenue guidance that you've given.
Mark Chiplock: So maybe could you elaborate a little bit more on what you're actually assuming is in versus out and what explains that, you know, pretty substantial gap between your contracted backlog there and then the actual overall revenue guide here that you've given. Yeah, we're certainly assuming some federal revenue in the 2025 guide. I think, you know, what you probably have to look at is, you know, we have around $1.1 billion of 12-month contracted. That gives us, you know, very good line of sight into 2025 out of the contracted backlog. You know, the implementation period of this, of contracted, you know, can be over 12 to 36 months.
Speaker Change: Yes, yes.
Speaker Change: We are certainly assuming some federal revenue in the 2025 guide I think what you've heard.
Speaker Change: We have to look at is we probably have around $1 $1 billion of 12 month contracted that gives us very good line of sight into 2025 out of the contracted backlog.
Speaker Change: The limitation period of this are contracted.
Speaker Change: Over 12 months to 36 months.
Mark Chiplock: So, again, in our guide, you know, we're basing it off of our, you know, the best information, and what we see is our 12-month contracted, and that will, you know, that should, assuming we execute, directly, you know, directly run into the revenue line. So, yeah, we wouldn't expect to execute on 100% of the contracted, you know, in the very next year, because that implementation period, as these projects get larger, could, you know, could be over two, three years. Yeah, especially in the federal ones. Especially in the federal.
Speaker Change: So to get into our guide.
Speaker Change: We're basing it off of are in the best information and what we see is our 12 month contracted in and that will that should assuming we execute directly.
Speaker Change: Directly went into the revenue line. So yes, we wouldn't expect to execute on 100% of the contracted.
Speaker Change: In the very next year because of that implementation period as these projects get larger.
Speaker Change: Could be over two three years.
Speaker Change: Especially in the federal and especially in the federal.
William Grippin: Right, okay. And then just on the R&G side here, you know, last couple days, been some reports in the media about the EPA proposing potentially cutting up to 65% of staff. It was also reported, maybe that was just referring to a budget cut. But, you know, as I understand it, the EPA has to approve your ability to generate RINs at an R&G facility before you can actually start recognizing those. You know, so are you, are you, I guess, what are you assuming in the guide for contribution from the two R&G plants this year in terms of timing?
Speaker Change: Alright, Okay, and then just on the R&D side here.
Speaker Change: Last couple of days has been some reports in the media about.
Speaker Change: The EPA proposal potentially cutting up to 65% of SaaS and it was also reported maybe that was just referring to a budget cut.
Speaker Change: As I understand that the EPA has to approve.
Your ability to generate returns at at an R&D facility before you can actually start recognizing those.
Speaker Change: So are you are you I guess what are you assuming in the guide for contribution from the two R&D plants. This year.
Speaker Change: The timing and does it contemplate any potential delays in sort of the necessary regulatory approvals.
Michael Bakas: And does it contemplate any potential delays in sort of the necessary regulatory approvals?
Michael Bakas: Yeah, this is Mike Bakas. What I would say is just keep something in mind. And we went through this, this year, because you're probably familiar with the EPA change, it's the rules on certification. And we can no longer store the gas and how to sell it to the voluntary market. We, before our plants, like for example, our Keller plant and our Roxanna plant, two large facilities, I think about 26, 27 megawatt equivalent. Before I got certified, we were actually selling the environmental attributes at a pretty healthy rate, while we were waiting for certification. And considering it was first off the gate, we were able to get certification, I think within like a month or two for those facilities.
Mike Bacchus: Yes. This is Mike back us.
Mike Bacchus: What I would say is just keep something in mind and we went through this this year because as you're probably familiar with the EPA changed.
Mike Bacchus: The rules on certification and we can all walk a store of the gas.
Speaker Change: How to solve the voluntary market.
Speaker Change: We before our plants like for example, our Kellogg plants are not roxanna plant through large facilities I think about 'twenty six 'twenty seven megawatt equivalent before I got certified we were actually selling.
Speaker Change: Environmental attributes and a pretty healthy rate.
Speaker Change: While we are waiting for certification.
Speaker Change: And considering what is first off the gate, we were able to get certification I think we've been like a month or two.
Speaker Change: For those facilities.
Michael Bakas: So I think we're still pretty comfortable that certification will move along at a fairly good clip. We haven't seen any hiccups yet so far at the EPA. And if you look at some of the things that have been coming out from the administration, it seems to be very pro biofuel.
Speaker Change: I think we're still pretty comfortable certification will move along at a fairly good clip.
Speaker Change: We haven't seen any hiccups, yet so far at the EPA.
Speaker Change: And if you look at some of the things that have been coming out from the administration.
Speaker Change: Should be very pro Biofuels.
William Grippin: I appreciate the color. I'll talk to you guys later. Thanks, Will. Again, if you would like to ask a question, please press star 1 on your telephone keypad. There are no further questions at this time.
Speaker Change: Got it I appreciate the color I'll talk to you guys later.
Rob: Thanks, Rob.
Speaker Change: Again, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: There are no further questions at this time, ladies and gentlemen. This concludes today's conference call. Thank you all for joining you may now disconnect.
Operator: Ladies and gentlemen, this concludes this conference call. Thank you all for joining. You may now disconnect.
Operator: Please wait, the conference will begin shortly.
Speaker Change: Please wait the conference will begin shortly.
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