Q2 2025 Ameresco Inc Earnings Call

August 4, 2025

Demi: Thank you for standing by. At this time, I would like to welcome everyone to Ameresco Inc.'s second quarter 2025 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 one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. I would now like to turn the conference over to Leila Dillon. Please go ahead.

Thank you for standing by at this time. I would like to welcome everyone to Ameresco Inc.'s second quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. 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 1 on your telephone keypad. If you would like to withdraw your question again, press star 1. Thank you. I would now like to turn the conference over to Leela Dean. Please go ahead.

Leila Dillon: Thank you, Demi, and good afternoon, everyone. We appreciate you joining us for today's call. Our speakers on the call today will be George Sakellaris, Ameresco's Chairman and Chief Executive Officer, and Mark Chiplock, Chief Financial Officer. In addition, Nicole Bulgarino, President of Federal and Utility Infrastructure, and Josh Baribeau, our Chief Investment Officer, will be available during Q&A to help answer questions. Before I turn the call over to George, I would like to make a brief statement regarding forward-looking remarks. Today's earnings materials contain forward-looking statements, including statements regarding our expectations. All forward-looking statements are subject to risks and uncertainties. Please refer to today's earnings materials, the safe harbor language on slide two of our supplemental information, and our SEC filings for a discussion of the major risk factors that could cause our actual results to differ from those in our forward-looking statements.

Oh, our speakers on the call today will be George Sakellaris, Chairman and Chief Executive Officer; Mark Chiplock, Chief Financial Officer; Nicole Bulgarino, President of Federal and Utility Infrastructure; and Josh Baribeau, our Chief Investment Officer, who will be available during Q&A to help answer questions.

before I turn the call over to George, I would like to make a brief statement regarding forward-looking remarks

today's earnings materials contain forward-looking statements including statements regarding our expectations.

Leila Dillon: In addition, we use several non-GAAP measures when presenting our financial results. We have included the reconciliations of these measures and additional information in our supplemental slides that were posted to our website. Please note that all comparisons that we will be discussing today are on a year-over-year basis unless otherwise noted. I will now turn the call over to George. George.

All forward-looking statements are subject to risks and uncertainties. Please refer to today’s earnings materials, the Safe Harbor language on slide 2 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 of these measures and additional information in our supplemental slides that were posted to our website. Please note that all comparisons we will be discussing today are on a year-over-year basis unless otherwise noted.

George Sakellaris: Thank you, Leila, and good afternoon, everyone. We are very pleased to report that Ameresco Inc. delivered another quarter of strong financial and operational performance, building upon the momentum generated from our first quarter. Second quarter revenue and adjusted EBITDA grew 8% and 24%, respectively, coupled with very strong earnings per share growth. The Ameresco team continued to focus on profitable execution, leveraging our large project backlog and achieving higher profit margin growth than top line growth. In addition to the contracts awarded in our traditional core business, we also captured significant emerging opportunities to provide energy infrastructure solutions to a number of rapidly growing sectors in both the U.S. and Europe. We believe demand for our diverse portfolio of energy solutions is being driven by the increasing demand for electricity, significant increases in utility rates, and growing grid instability.

I will now turn the call over to George Sakellaris. Thank you, Leela, and good afternoon, everyone.

We are very pleased to report that Mrs. Good delivered. Another quarter of strong financial and operational performance building upon the momentum generated from our first quarter.

Second quarter revenue and adjusted Eva Crew 8 and 34% respectively.

Coupled with very strong earnings per share growth.

Continue to focus on profitable execution, leveraging our large project backlog and achieving higher profit margin growth than top line growth.

In addition to the contracts awarded in our traditional core business, we also captured significant emerging opportunities to provide energy and infrastructure solutions to a number of rapidly growing sectors in both the U.S. and Europe.

George Sakellaris: While we continue to execute on our traditional energy efficiency and renewable energy projects, we are very pleased to see an even broader need for comprehensive energy infrastructure and microgrid solutions. The increase in global electricity prices continues to be top of mind for many of our clients, along with reliability of supply. I wanted to make some quick comments on that topic. With prices projected to outpace overall inflation for many years to come, we believe this trend will be a meaningful catalyst for our continued growth. Higher power prices drive customer demand for both our core energy efficiency solutions and our integrated onsite generation offerings. This dynamic creates better economics and faster project paybacks for our customers. Diversification has been the foundation of our business model and positions us to take great advantage of the growth opportunities ahead. This comes in three key areas. First, our customer base.

We Believe demand for our diverse portfolio of energy solutions is being driven by the increase in demand for electricity significant increases in utility rates and growing grid instability.

Well, we continue to execute on our traditional energy efficiency and renewable energy projects.

We are very pleased to see and even broader need for comprehensive energy, infrastructure and micro Solutions.

The increase in global electricity prices continues to be.

Upon for our menu of our clients along with reliability of supply.

So I wanted to make some quick comments on that topic.

With prices projected to outpace overall inflation for many years to come, we believe this trend will be a meaningful Catalyst for our continued growth.

Higher power prices drive customer demand for both our core energy efficiency solutions and our integrated on-site generation offerings.

This Dynamic creates better, economics and faster and faster project paybacks for our customers.

Diversification has made the foundation of our business model.

And positions us to take great advantage of the growth opportunities ahead.

This come in 3, key areas.

George Sakellaris: We are well-diversified across a very broad range of public and private customers. Our expertise and focus on energy infrastructure solutions have enabled us to grow our business with both domestic and international utilities and international and independent power producers, which now account for over 20% of our total project backlog. We are also pursuing large and exciting opportunities with the CNI market, which we believe offers tremendous growth potential. CNI now represents over 10% of our total project backlog, and we anticipate continued growth in this segment. Second, our technology portfolio. We offer a complete suite of energy efficiency, storage, and generation solutions. Currently, almost half of our total project backlog is comprised of energy infrastructure solutions, including natural gas turbines and engines, core generation equipment, hydroelectric, and other power generation technologies, as well as battery energy storage systems and microgrid offerings.

First our customer base.

We are well diversified across a very broad range of public and private customers.

Our expertise and focus on energy. Infrastructure Solutions has enabled us to grow our business with both domestic and international utilities and international and independent power producers which now account for over 20% of our total project backlog.

We are also pursuing large and exciting opportunities with the cni market, which we believe offer tremendous growth potential.

Cni. Now represents over 10% of our total project backlog.

And we anticipate to continue to grow in this segment.

Second, our technology portfolio.

Operation Solutions.

George Sakellaris: Finally, in our geographic reach, we cover the U.S., Canada, the U.K., and many key growth markets in continental Europe. Driven by our continued expansion, Europe now accounts for approximately 20% of our total project backlog, and we see this as a good balance to the changing policies and regulations in the United States. In short, Ameresco Inc. continues to demonstrate that diversification is not just a hedge; it is our strategic advantage. As we prepare for this growth, we continue to stay ahead of the curve by investing in our most important asset, our human capital. Ameresco Inc. is well known for hiring and developing industry expertise in cutting-edge technologies well in advance of full commercial potential. Years ago, we demonstrated this with our investments in battery storage, renewable natural gas, and microgrids. Those investments have yielded incredible returns, as Ameresco Inc.

Currently or most half of our total project, backlog is comprised of energy infrastructure, Solutions, included, natural, gas turbines and engines for Generation equipment, hydroelectric and other power, generation Technologies, as well as battery battery energy storage systems and micro grid offerings.

and finally, in our Geographic reach

We covered the US Canada, the UK, and many key growth markets in Continental Europe.

Driven by a our continued expansion.

Europe now accounts for approximately 20% of our total project backlog.

And we see this as a good balance to the change in policies and regulations in the United States.

In short.

Mrso continues to demonstrate the diversification is not just a hedge. It's our strategic advantage.

And as we prepare for this growth, we continue to stay ahead of the curve by investing in our most important asset: our human capital.

Hey, Marasco is well-known for hiring and developing industry expertise in cutting-edge technologies. Well, in advance of full commercial potential,

Years ago, we demonstrate this with our investments in battery storage renewable, natural, gas and micro grids.

George Sakellaris: became a go-to provider for these solutions and they now account for a material part of our business. We are again looking ahead to technologies such as small modular reactors. We recently hired an executive to focus on developing exciting partnerships in this area of huge potential. We are also investing in our continued European expansion with the hire of a Q executive to manage the growing opportunities across continental Europe. Before I turn the call over to Mark Chiplock, I wanted to cover the policy and regulatory changes in D.C. and their impact on Ameresco Inc. At this point, we are pleased to have seen an improved business environment with the federal government compared to the beginning of the year.

Those Investments have yielded incredible Returns. The Moresco became a go-to provider for for the the solution and they now account for a material part of our business.

We are again looking at the technology such as small modular reactors and recently hired an executive to focus on developing exciting Partnerships Partnerships in this area of huge potential.

We're often investing in our continued European expansion with a higher or the Q executive to manage the growing opportunities across Continental Europe.

Before I turn the call over to Mark, I wanted to cover the policy and regulatory changes in D.C. and their impact on Everest.

At this point, we are pleased to have seen an improved business environment with a federal government compared to the beginning of the year.

George Sakellaris: Not only do we continue to execute on our many federal contracts, but we are also engaged in exciting new opportunities that leverage secure federal land for critical energy infrastructure projects. Along those lines, the White House recently announced an executive order aimed at accelerating the construction of data centers by removing some of the regulatory hurdles, primarily at the permitting level. Importantly, the order also opens the potential for federal land to be used for these sites. We are continuing to evaluate the One Big Beautiful Bill and its expected impact on our business, especially as additional details from the bill are worked out. At this time, however, we do not believe the bill will have a significant near-term impact on our business. Now, I would like to turn the call over to Mark to provide additional commentary on our excellent results and outlook. Mark.

Not only do we continue to execute on our many federal contracts but we are also engaged in exciting. New opportunities that leverage secure federal land for critical energy infrastructure projects.

Along those lines. The White House recently announced an executive order aimed at accelerating the construction of data centers by removing some of the regulatory hurdles primarily at the permitting level.

Importantly, the order also opens the potential for federal land to be used for these sites.

Or We are continuing to evaluate the 1 big beautiful bill and it's expected to pack impact on our business, especially as additional details from the bill are worked out at this time. However, we do not believe the bill will have a significant New York time impact on our business. Now, I would like to turn the call over to Mark to provide additional commentary on our excellent results and Outlook, mark.

Mark Chiplock: Thank you, George, and good afternoon, everyone. I will echo George's excitement around another solid quarter. We continue to deliver strong financial results, with second quarter revenue growing 8% and adjusted EBITDA growing 24%, supported by consistent execution, steady backlog conversion, and expanding contributions from Europe and our energy asset portfolio. Revenue in the quarter exceeded our expectations and reflects broad-based contributions across our business lines. Our projects' revenue grew 8%, reflecting strength across our geographies and customer base, with a notably strong performance from our European-based joint venture with Cineo. Europe continues to be an exciting growth market for us and is an important component of our revenue diversification strategy. Energy asset revenue grew 18%, driven largely by the growth of assets in operations compared to last year, with our base of operating assets now standing at almost 750 megawatts.

Thank you, George and good afternoon, everyone.

I'll Echo George's, excitement around another solid quarter. We continue to deliver strong financial results. With second quarter, Revenue growing 8% and adjusted IBA growing 24% supported by consistent execution, steady backlog conversion and expanding contributions from Europe and our energy asset portfolio.

Revenue in the quarter, exceeded our expectations, and reflects broad-based contributions across our business lines.

our projects Revenue grew 8% reflecting strength across our geographies and customer base with a notably strong performance from our european-based joint venture with SEL

Europe continues to be an exciting growth market for us and is an important component of our Revenue diversification strategy.

Mark Chiplock: Our recurring O&M revenue maintains steady growth as we continue to win more long-term O&M business. While revenue from our other line of business declined due to the divestiture of our AEG business at the end of 2024, the remaining businesses within our other revenue segment continue to experience growth. Gross margin of 15.5% for the quarter was in line with our expectations and reflected solid improvement both sequentially and year over year. Net income attributable to common shareholders was $12.9 million, or $0.24 per share, with non-GAAP EPS of $0.27, adjusted primarily for certain costs for restructuring activities related to our Canadian operations. Net income and EPS were positively impacted by $4.3 million in non-cash mark-to-market gains on certain unhedged derivatives and $3 million in foreign exchange translation gains. Excluding the impact of these factors, our earnings per share still grew by approximately 30% compared to last year.

Energy asset revenue grew 18%, driven largely by the growth of assets in operations, compared to last year, with our base of operating assets now standing at almost 750 megawatts.

Our recurring, onm Revenue maintains steady growth. As we continue to win more long-term onm business.

End of 2024. The remaining businesses within our Other Revenue segments continued to experience growth.

Gross margin of 15.5% for the quarter was in line with our expectations and reflected solid improvement, both sequentially and year-over-year.

With common shareholders, it was 12.9 million or $0.24 per share, with non-GAAP EPS of $0.27, adjusted primarily for certain costs related to restructuring activities for our Canadian operations.

Net income and EPS were positively impacted by 4.3 million in non-cash mark-to-market gains on certain unhedged derivatives and 3 million dollars in foreign exchange translation, gains.

Mark Chiplock: Adjusted EBITDA increased 24% to $56.1 million, with an adjusted EBITDA margin of nearly 12%, with this strong performance reflecting the contributions from our revenue growth, improved gross margins, and strong operating leverage. Our visibility of future revenues remains outstanding, and we believe the demand for a diverse portfolio of solutions remains strong. We continue to achieve substantial growth in our total project backlog, which increased 16% to a record $5.1 billion, the first time Ameresco Inc. has exceeded this milestone. We added over $550 million of new project awards during the quarter. As importantly, we continue to convert a significant amount of our awarded backlog into contracts, driving our contracted project backlog up 46% to $2.4 billion. Including the backlog from our recurring O&M and operating energy assets portfolio, our total revenue visibility now stands at almost $10 billion.

Excluding the impact of these factors, earnings per share still grew by approximately 30% compared to last year.

Adjusted EBITDA increased 24% to $56.1 million, with an adjusted EBIT margin of nearly 12%. This strong performance reflects the contributions from our revenue growth, improved gross margins, and strong operating leverage.

Our visibility a future revenues remains outstanding and we believe the demand for a diverse portfolio of solutions remains strong.

We continue to achieve substantial growth in our total project backlog which increased 16% to a record. 5.1 billion the first time ameresco has exceeded this milestone.

We added over 550 million of new project Awards during the quarter. And, as importantly, we continue to convert a significant amount of our awarded backlog into contracts.

Driving, our contracted project backlog up 46% to 2.4 billion.

Mark Chiplock: Turning to our balance sheet and cash flows, we ended the quarter with approximately $82 million in cash, with total corporate debt of $294 million. Our debt-to-EBITDA leverage ratio under our senior secured facility was 3.4% and remains below the covenant level of 3.5%. We continue to fuel our energy asset pipeline through the use of innovative financing solutions. During the quarter, the company raised approximately $170 million in new project financing proceeds, including a $78 million note issuance, which we are using to finance an energy storage asset currently under construction. The note purchase agreement also includes an uncommitted private shell facility to support the development of future solar and battery energy assets. Our cash generation continued to be positive, with adjusted cash flows from operations of approximately $50 million.

Including the backlog from our recurring, on-and operating energy assets portfolio, our total revenue visibility now stands at almost $10 billion.

Turning to our balance sheet and cash flows.

We ended the quarter with approximately $82 million in cash and total corporate debt of $294 million.

Our debt to EA leverage ratio under our senior secured facility was 3.4 and remains below the Covenant level of 3.5.

We continue to fuel our energy asset pipeline through the use of innovative financing solutions.

During the quarter, the company raised approximately $1 million in new project financing proceeds, including a $78 million note issuance, which we are using to finance an energy storage asset currently under construction.

The note purchase agreement also includes an uncommitted private shelf facility to support the development of future solar and battery energy assets.

Mark Chiplock: This included the successful sale of approximately $71 million in investment tax credits generated from three of our R&G projects. Our eight-quarter rolling average adjusted cash from operations was approximately $47 million. I want to briefly discuss an update we have made to our non-GAAP adjusted cash flows from operations metric. Historically, we classified the proceeds resulting from the sale of transferable ITCs as operating activities in our GAAP statement of cash flows. In 2025, to better align with current accounting interpretations, we are now classifying these proceeds as investing activities. We are adding these proceeds back to adjusted cash from operations because we believe it enhances comparability with prior periods and better reflects the economic substance of these transactions. I also wanted to quickly touch on an item that you will see in our Q2 10-Q. Battery supplier Powen recently filed for bankruptcy under Chapter 11. Ameresco Inc.

Our cash generation continued to be positive, with the adjusted cash flows from operations of approximately $50 million.

This included, the successful sale of approximately 71 million in investment tax credits generated from 3 of our RNG projects.

Our 8 quarter rolling average adjusted cash from operations was approximately 47 million.

I want to briefly discuss and update we have made to our non-gaap adjusted cash flows from operations metric.

historically, we classified the proceeds resulting from the sale of transferable itc's as operating activities in our Gap statement of cash flows,

In 2025, to better, align with current accounting interpretations. We are now classifying these proceeds as investing activities.

We are adding these proceeds back to adjusted cash from operations because we believe it enhances comparability with prior periods and better reflects the economic substance of these transactions.

I also wanted to quickly touch on an item that you will see in our second quarter, 10 Q.

Battery supplier power recently filed for bankruptcy under chapter 11.

Mark Chiplock: has a claim of approximately $27 million against Powen related to agreements signed beginning in 2022. We are actively monitoring the proceedings, which are in the early stages, and assessing any potential exposure. But importantly, this event will not impact the execution of any of our projects or energy assets. Now, let me spend a minute on our 2025 guidance. While we continue to evaluate the industry changes brought about by the One Big Beautiful Bill, we do not expect that these changes will have a material impact on Ameresco Inc. in the short term. With our strong first half results and excellent forward visibility, we are pleased to reaffirm our guidance ranges for 2025. Now, I'd like to turn the call back over to George for closing comments.

Ameresco has a claim of approximately 27 million against palen related to agreements signed beginning in 2022.

We are actively monitoring the proceedings which are in the early stages and assessing any potential exposure. But importantly this event will not impact the execution of any of our projects or energy assets.

Now, let me spend a minute on our 2025 guidance.

While we continue to evaluate the industry changes brought about by the big, beautiful bill.

We do not expect that these changes will have a material impact on Ameresco in the short term.

And with our strong first half results, and excellent forward. Visibility we are pleased to reaffirm our guidance ranges for 2025.

George Sakellaris: Thank you, Mark. The entire Ameresco team continues its excellent execution, delivering strong results. Over 25 years, we have built a unique energy solutions company which has evolved into the resilient business you see today and is well-positioned to serve the dynamic market opportunities of the future. In closing, I would like to once again thank our employees, customers, and stockholders for their continued support. Operator, we would like to open the call to questions.

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

Over the past 5 years, we have built a unique energy solutions company that has evolved into the resilient business you see today. We are well positioned to serve the dynamic market opportunities of the future. In closing, I would like to once again thank our employees, customers, and stockholders for their continued support. Operator, we would like to open the call to questions.

Demi: Question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. Your first question comes from the line of Noah Kaye with Oppenheimer. Your line is open.

And answer session. If you have dialed in and would like to ask a question, please press *1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press *1 again.

and your first question comes from the line of Noah key with open Hymer, your line is open

Analyst: Hey, good afternoon. Thanks for taking the questions, and great to see the business momentum. I would like to start with asking about cash generation in the back half here. There are always some puts and takes around project financing, but I just want to understand how you think about where we may end the year from a net leverage perspective and some of the things that you are watching for and we should be watching for related to finishing up some large projects and any incremental financing.

Hey, good afternoon. Uh, thanks for taking the questions and great to see the business momentum. Uh, I'd like to start with uh ask about cash generation uh kind of in the back half here. Um, there are always some puts and takes around, uh, I know project financing, um, but just want to understand, you know, how you think about, you know, where we may end the year from, uh, net leverage perspective and some of the things that, uh, you're watching for and we should be watching for uh, related to finishing up, uh, some large products.

Josh Baribeau: Sure, Josh.

Projects, uh, and any incremental financing.

Mark Chiplock: Thanks, Noah. This is Josh. We are not putting out a leverage guidance or a leverage target. I think we have said that we feel comfortable where we are now. Our lenders do as well, as evidenced by the 3-5 in the extension that we did back in January. But as EBITDA begins to grow or continues to grow in the second half of the year, and as you pointed out, as we collect things from projects that larger projects are outstanding, we have a lot of project financing still planned. We think we probably should get probably below that level. But again, if something comes up where we need a little bit more working capital to work on an interesting project or something else happens, it might be a little different than that. But either way, we feel very comfortable where we are from a leverage perspective.

Sure Josh thanks. No this is Josh. Um so we don't we we're not putting out a leverage guidance or leverage Target. Um I think we've said that we feel comfortable where we are now our lenders do as well as evidenced by the um the refi and extension that we get did back in January but as Evita begins to grow or continues to grow in the second half of the year and as you pointed out as we collect uh things from projects that larger projects are outstanding. We have a lot of project, financing still financed uh still planned. Um we think we probably should get probably below that level but again if something comes up where we need a little bit more work in capital to work on, um interesting project or something, something else happens, it it might be a little different than that. But either way, we feel very comfortable where we are from a leverage perspective.

Analyst: Thank you. I want to ask a little bit about the contracted backlog. I think a trend now for several quarters has been the accelerating conversion to contracted backlog. It was up again, very substantially. Can you talk a little bit about the driving factors there, maybe some of the factors that are helping the increase in conversion, and then also talk a little bit about the margin profile here, whether these could potentially be comparable to or better than the margins on the mix that is converting now.

Thank you. Um, I want to ask a little bit about, uh, the, uh, contracted backlog. I I think, uh, a trend. Now, for several quarters has been the the accelerating conversion, uh, to contracted backlog. It was up again, you know, very substantially, can you talk a little bit about the driving factors there? Um, maybe some of the, the factors that are are helping the increase in conversion and then also talk a little bit about the margin profile here. Um, whether it be could potentially be you know comparable to or better than um, you know the margins on the, on the mix of converting now.

George Sakellaris: Well, because the services that we are in and the expanded offerings for the infrastructure upgrades, there is more demand out there in the market. So you see people moving from the awarded category to the contracted category. That is why our contracted projects backlog now, year over year, is 46% up, which is unprecedented, but great position to be in. That is why we feel pretty good where we are for the end of the year numbers. As far as the margin, Mark Chiplock can comment to this with a bit more, but we are very pleased to see a slight uptick trend on the projects. Even in Europe, we started early on in order to establish a good footprint there. We had some lower margin projects, but we established great credibility in the marketplace.

George Sakellaris: Even there, we have established guidelines that we will not take projects below certain margins. We still continue to be very successful in getting projects. I do not know if you want to add something.

Yeah, uh well we because the services that we are in and the expanded offerings for the infrastructure upgrades, and um, there is more demand out there in the market. So you see people moving uh, from the awarded category to the contracted category. That's why our contracted back projects backlog. Now, for year over year is 46 percent, uh, which is the unprecedented, but great position to be in and that's why we still pretty good where we are for the end of the year numbers um as far as the margin and and marching comment to this is that there are more but we we are very pleased to see a slight uptick Trend uh on on the projects and um even in Europe we started and early on in order to establish a good footprint there. We had some lower margin projects but we established great uh uh credibility in the marketplace and even there. Um

Mark Chiplock: Yeah, no, that's great. I think we feel really good about the quality of gross margins in the project backlog. As George said, we have even seen a bit of an uptick. I think the diversity in that backlog helps to create a little bit of a stabilizer, but we are encouraged to see that they are actually trending slightly up. So that has been great. George mentioned the margins on the projects where we are seeing a lot of growth in Europe. Again, we are really pleased to see those margins heading in the right direction. I think the margins themselves, it is a reflection not only of the way we execute on our projects, but we also have taken a more disciplined approach to how we screen projects. We are obviously continuing to focus on developing projects that have better gross margins.

We have established guidelines that we will not take projects below certain uh margins. And uh we still continue to be very successful in in getting projects. I don't know if you want to add something. Yeah no that's great and you know I think no you know we feel really good about the quality of gross margins in the project backlog you know as George said that you know we've even seen a bit of a of an uptick. You know I think the diversity in that backlog, you know. It helps to create a little bit of a stabilizer, but we're encouraged to see that they're actually trending. Um, you know slightly,

Up. So that's been great. Uh, George mentioned the margins on um on the projects that we're seeing a lot of growth in Europe. Um and again we're we're really pleased to see those margins head in the right direction. So so yeah. I think you know the margins themselves it's it's a reflection. Not only of the way we execute on our projects but we also have taken a more disciplined approach to how we screen projects. Good. And we're obviously, you know, continuing to focus on developing projects that have uh that have better growth margins. So,

Analyst: Yep, yep. That's great to hear. I just got to ask one more as a tack on to this. You know, you highlighted the improving permitting environment for data center infrastructure. I think we'd all love to understand a little bit more how you see this playing out for Ameresco Inc. You know, talk a little bit about your exposure in data center, what may be in the backlog, what may be in the pipeline, and what do you think this means to you?

George Sakellaris: Nicole has been spearheading that particular effort. So I will let Nicole take this question.

I I just got to ask 1 more, uh, as a pack on to this, um, you know, you you highlighted the uh improving permitting environment for data center infrastructure. Uh, I think we'd all love to understand a little bit more. How you see this, uh, playing out for ameresco. Uh, you know, talk a little bit about your exposure and data center. Uh, what may be in the backlog, what may be in the pipeline and, uh, what this means here.

And Nicole has been spearheading that particular effort. So I will let the, uh, Nicole take this, uh, question.

Nicole Bulgarino: Sure. We've been working with a variety of players in the data center space, from data center developers, end users for data centers, commercial developers. Our role in this is certainly focused on the energy center for these data centers. You can be well aware of the power shortage across the country, especially for this new AI load that's presenting itself. We are well positioned to be able to provide services for the energy supply, similar to what we do for the federal government. We have several projects that we are working on, a lot of them are in the early stages and different types of projects or different sizes of projects. We are excited about the opportunity that it's for Ameresco Inc.

With a variety of uh, players in the data center space from data center, developers and users for data centers.

uh commercial developers and our role in this is certain focused on the energy center for these data centers as you can

Well aware of the power um shortage across the country and especially for this new AI load that's presenting itself. So we're well positioned to be able to provide services for the energy Supply similar to what we do for federal for the federal government.

So, all right, we've got several projects that we're working on, and a lot of them are in the early stages and are different. Um, different types of projects are different sizes of projects, and we're excited about the opportunity that it's for Ameresco.

Analyst: Great. I will follow up offline about that, but excited to hear it. Thanks so much.

Nicole Bulgarino: Great.

Wait, I I'll follow up online offline about that but uh, excited to hear it. Thanks so much.

Great.

Demi: Your next question comes from the line of George Gianarikas with Canaccord Genuity. Your line is open.

Your next question comes from the line of George Jenna with K. Jennetty. Your line is open.

Analyst: Hey, everyone. Good afternoon, and thank you for taking my questions.

Josh Baribeau: Hey, George.

Maybe 1, good afternoon and thank you for taking my questions.

Analyst: would like to ask about equipment supply, as it relates to either natural gas turbines or cell battery cells. How is that potentially impacting your growth trajectory over the next couple of few quarters to years?

Um, hey George, I’d like to ask about equipment.

Supply and, you know, as it relates to as a natural gas turbines or, or sell battery cells house that potentially impacting your growth trajectory over the next, you know, couple few quarters to to years.

George Sakellaris: I mean, we still, it is tight, especially on transformers. Electrical equipment is pretty tight. On gas turbines, I think, you know, much, much longer timelines. But some of the gas engines, reciprocating engines and so on, the timeline is not as long, and we have much better availability. Some of the clients that we work with, they already have some of the gas turbines in order, and they would just want us to basically implement the project, provide the turnkey installation of the project. Transformers, and again, even the transformers, they are bifurcated. The large ones, the really large ones, you know, we are talking long, long delivery schedules, a couple of years, and if you can get them. The smaller ones, which they are more suited for the smaller projects that we do, you know, the distributed generation projects, the 5, 10 to 15 megawatts and so on.

I mean, we still it's tight, especially on Transformers electrical equipment is pretty tight on gas turbines. I think, you know, much, much longer, uh, timelines, but some of the gas engines though reciprocating engines. And so on, uh, is not, uh, the time line is not as long and, uh, we have much better availability, but some of the clients that we work with the, they already have some of the gas turbines. Uh,

Uh, in order and and they just want us to basically implement the project, provide the turkey installation of the project. So uh, but

George Sakellaris: Sometimes we have to double up on the transformers to get the smaller size. Somehow, some way, we get into the other side, and we have been successful so far. We do not see any particular delays on projects that we have in the implementation schedule right now over the next 6 to 12 months.

Transformers and and they can even the Transformers, they are bifurcated, the large ones, the really large ones, you know, we talked in a long long delivery schedules, couple of years and if you can get them where the smaller ones which they are more suited for the smaller projects that we do, you know, they distribute the generation project, the 5 10 to 15 megawatts and so on and sometimes we have to double up the Transformers to get the smaller size but um somehow someway uh we get into the other to the other side and we have been successful so far. We don't see any particular delays on on projects that we have in the implementation schedule right now over the next 6 to 12 months.

Analyst: Thank you. Maybe as a follow-up, given the success you've had in Europe, can you just sort of talk about your strategy there to potentially beef up operations? Are there additional acquisitions you're looking at on the continent? Thank you.

George Sakellaris: All of the above. The person we hired is a great, very seasoned executive. He worked for various American companies, so it is very good from that perspective, especially public companies. His mission is to start hiring people, and he already has hired, I think, at least one. He has got a couple more to hire. Our strategy will be organic growth, and we have done very, very well so far as well, especially the markets that we picked up, like Greece, Italy, Spain, and some of the Balkans, like Romania and so on. We have a very, very good track record. The other thing that is emerging a lot that they have not done much with it, Greece, Italy, or wherever we are going, Germany, battery storage. They are in the very, very early stages of battery storage.

Thank you. And maybe as a follow-up given, the success you've had in Europe can just sort of talk about your strategy, there could potentially be beefed up operations. Other additional Acquisitions. You're looking at on the content. Thank you.

Also, the above, you know, the uh, the person we hire the great very seasoned executive, he worked for various American companies. So is is very good from that perspective, public companies. And uh his mission is to start hiring people and you already just got it. I think, at least 1 is get couple more to higher but our strategy.

He will be organic growth. And we have done very, very well so far as well, especially in the markets that we picked up, like Greece, Italy, Spain, and some of the Balkans like Romania and so on. We have a very, very good track record. And then the other thing that you're merging a lot that they haven't done much with is Greece, Italy, or whatever is Germany, very storage.

George Sakellaris: I think you will see us making a concerted effort to build up or develop a great reputation in Europe as we did over here on battery storage, other than the solar, of course. Acquisitions, we are always looking for good opportunities. If they present themselves, we will do it. But right now, the organic expansion that we have underway, it is working very, very well.

Of course and uh, acquisitions.

We always looking for good opportunities. If they present themselves, we will do it. But, uh, right now the organic expansion, uh, that we have underway, it's working work very, very well.

Analyst: Thank you.

Thank you.

Demi: Next question comes from the line of Stephen Gengaro with Stifel. Your line is open.

Next question comes from the line of Stephen Gengaro with Stifel. Your line is open.

Analyst: Thanks. Hi, everybody. I think two from me. If I could start, when we are thinking about the deployment of energy assets, can you talk about how we should think about the back half of the year and sort of energy asset deliveries and kind of where you think the energy assets, deployment assets look at year-end?

Uh thanks. Hi everybody.

um, I think too for me, if if I could start when we're thinking about the the deployment of energy assets, uh

Can you talk about how we should think about the back half of the year and sort of energy asset deliveries, and kind of where you think the energy assets—sure, deployed assets—look at your end?

Josh Baribeau: Yeah, Josh.

Mark Chiplock: Sure. Hey, Steve. So we guided, I think, 100 to 120 megawatts. That's still our guidance. It seems like that would be a little bit light given how many assets we've put in service for the first two quarters, but the next two will be pretty chunky. Mark indicated that we've got a battery asset that we just financed that's in construction. It's actually in very late stages of construction. We had the press release about the Lee County R&G facility, which went COD in July. So that was not in the June numbers. We still feel really good about that number, the 100 to 120. Does that answer the whole question, or do you have a question about the pipeline as well?

Yeah, Jess.

Sure. Hey Steve. So, uh, we got it. I think 10,020 megawatts. That's still our guidance. It seems that that would be a little bit light given to us, we've put into service the first two quarters. But, um, the next two will be pretty chunky. Mark indicated that we've got a battery asset that we just financed. That's in construction, it's actually in the very late stages of construction. And we had the press release about the Lee County RNG facility.

Which uh, which went to in July. So that was not in the June numbers. So we still feel really good about that. That number, the hundred to 120.

um,

Analyst: No, no, that was helpful. Just kind of how you, I imagine there was no change to the guide as far as the deployed assets for the year. That was what I was getting at. The other quick question I have, and I think this is a follow-up on one of the earlier questions. You talked about, in the last quarter, the success you are having in Europe on the project side from an order flow perspective. I believe that the margin profile in Europe was a little bit lighter. I am just curious how that is evolving and if you think we have got to ultimately get to parity there as operations scale up in Europe.

Was, was that that into the whole question? Or did you have a question about the pipeline as well? No, no, no. That, that, that was helpful just kind of how you. Yeah. And I, I imagine the there was no change to the guy as far as the deployed assets. Uh, figure. That was what I was getting at. Okay. Um, the other quick question I had this, I think this follow up on 1 of the earlier questions, you talked about, you know, last quarter, the success or have it in Europe on the project side from a from an order flow perspective. And I I believe that the margin profile in Europe was was a little bit lighter and I'm I'm just curious how that's evolving and and and if you think we've got a ultimately get the parity there as as operations scale up in Europe.

George Sakellaris: We started out, like you indicated, the margins were lower, but now the projects we have signed, let's say the last six months and going forward, the margins are considerably higher than when we started out with. We established the reputation there, and then we established the guidelines, and we brought in the talent in our group. The organic growth, the people that we have developed in projects, they are doing an excellent, excellent job. There is no shortage of responding to requests for proposals. Our effort, and that is why it is a good counterbalance to what is going on in the United States, is that we will put a special focus in Europe, especially in what I call high-growth areas in continental Europe, and to grow that particular unit to a good size.

Europe. Uh, we started out like you indicated, the margins were lower but now the projects we have signed and saying the last 6 months and I'm going forward, the margins are considerably higher than when we started out with when we established the reputation of their, then we established the guidelines and we brought in uh, the the the talent in our group. So, uh,

And the organic growth. The people that we have developed in projects are doing an excellent job. I mean, there's no shortage of responding to requests for proposals. It's, uh, but, uh,

Our efforts, and that's why it's a good counterbalance to what's going on in the United States, that we will put special focus in Europe, especially in what I call high growth areas on the Continental Europe, and to grow that particular,

Unit.

George Sakellaris: Basically, the strategy that we will use is not different than what we did in the United States. We start organically, and when we find a good acquisition, we take it in and grow from there. Especially when you go to a new country, you have to learn their culture and so on and so forth. Sometimes even if you buy a very small company, it helps you hit the ground running. The people that we have, that we have as partners, they know Romania very well because they worked there before. They know Italy very well, and they know Spain very well. Of course, Greece, because they are from Greece. So it has worked out very, very well with this particular team up with Cineo.

the good size and basically, the

is not different than what we did in the United States.

It's not organic, and when we find a good acquisition, we take it in a day.

And, uh, grow from there because especially when you go to a new country, you get to learn their culture and so on and so forth. But sometimes you've been inspired by a very small company; it helps you hit the ground running.

And the people that we have that we have as part of this, they they know Romania very well because they worked there before, they know Italy very well. And they know uh, Spain very well, and of course Greece, because they are from Greece. So it has worked out very, very well with this particular, uh, team up with. So now

Analyst: Great. Thanks. If I could just ask one other quick one. Have you had any proposals or looked at battery storage that is not lithium-ion and things that are more domestically sourced? I am thinking of one in particular, but has there been any progress outside of that as far as opportunities on a more U.S. manufactured product in the U.S. market?

George Sakellaris: We have. Josh, because he is working on the financing point of view of them, he might as well talk about it.

Mark Chiplock: We have, it was maybe two years ago that we had a pilot project up in Canada with a non-lithium technology. We got a little bit of experience with it back then. We are in active discussions with similar types of technologies and similar vendors for projects in the future as well, with some pretty large industrial CNI customers.

Analyst: Yep. Great. Thanks. Appreciate the color.

Great, thanks. And if I could just ask 1 other quick 1 have, you had any proposals or looked at battery storage? That's, that's not lithium ion. The things that are are more domestically sourced. And I'm thinking of 1 in particular, but is has there been any progress outside of that as far as opportunities on a more US manufactured product in the US market? Yeah we have just because he's working on the financing on quite a few of them you might as well talk about it. We have and there was it's maybe 2 years ago that we had a pilot project up in Canada with a um non- lithium technology. Yeah, and so we got a little bit of experience with it back then, and we're an active discussions with that, um, with similar types of, of Technologies, and similar vendors for projects in the future as well, with with some pretty large industrial. Cni customers. Yep.

Great. Thanks appreciate the color.

Demi: Next question comes from the line of Ryan Sims with BYD. Your line is open.

Friday, your line is open.

Mark Chiplock: Thanks for taking my questions. Not sure if Michael's on, but how are you thinking about the R&G business broadly following the legislation and the EPA's recent proposed role for cellulosic biofuel requirements over the next couple of years here?

George Sakellaris: We still feel very, very good about the R&G business, and we continue to be very excited about it, especially with the ITC being able to monetize it. It is important to note that 10 plants that we plan to put in service over the next two to three years, we already have a safe harbor in order to be able to, by the end of last year, 2024, in order to get the ITC from them. On the RVO, the way they established it recently, I think it is very much, it matches the growth of the industry, and that is why the ring prices, they have not moved that much. We are excited about it. I think that we started early. We did the first plant back in 2003, and we learned a lot, and here we are.

Thanks for taking my questions, not sure if Michael's on. But, um, how are you thinking about the RNG business? Broadly following the legislation and, and the epa's recent proposed rule for psychologic, biofuel requirements, uh, over the next couple years here.

Mark Chiplock: Yeah. The 45Z, the stealth package also, you know, creates another opportunity. We were really encouraged to see that extended, you know, as part of the Big Beautiful Bill. So, once we get clarity on that, I think that's going to be, you know, another great opportunity for us with the R&G.

I mean, we still, we still feel very, very good about the RNG business, and we continue to be very excited about it, especially with the ITC, uh, being able to monetize it, and it's important to note that that 10 plans that we plan to put in service over the next 2 to 3 years, we are already have a safe harbor in order to be able to, by the end of last year 24 in order to get the ITC, uh, uh, that from them. And then on the the rvo, the way they established it recently, I think it's very much it matches the growth of the industry and that's why the the ring prices. They have not moved that much. And, uh, so we, we are excited about it. And, uh, I think that we started early, but we did the first plan back in, uh, 2003. And we learned a lot and here we are.

Yeah, and the 45Z just also, you know, creates another opportunity. We were really encouraged to see that extended, you know, as part of the big, beautiful bill. So, you know, once we get clarity on that, I think that's going to be, um, you know, another great opportunity for us with the RNG.

Analyst: Appreciate that, guys. George, you mentioned the SMR opportunity, understanding it's very early days there. Could you talk about the partnership you announced with Terrestrial Energy and what Ameresco Inc.'s role might look like in potential projects there?

Appreciate that guys. And then George, uh, you mentioned the SMR opportunity, understanding its very early days there. But could you talk about the partnership you announced with terrestrial energy and what Amores goes role might look like in potential projects there?

Mark Chiplock: Terrestrial.

Dot terrestrial.

Leila Dillon: The SMR technology?

George Sakellaris: I will assume Nicole has been running that particular effort, so Nicole can talk about it.

The SMR technology I would, I would like to see Nicole has been running in that particular, uh, effort. So Nicole can talk about it.

Nicole Bulgarino: Yes, this is part of our kind of next-generation firm energy potential. One of the things with Terrestrial, we have been following their technology and working on part of like bridge solutions for, especially for in the data center energy, as we believe that in the later years, they will be able to provide a more answer to firm clean energy potential for these customers. This is, I mean, it is still a few years out. However, these projects take a while to get off the ground, large energy projects in general. So the collaboration needs to start now to be able to start getting us that and go through all the steps that we need to get there.

Yes. This is part of our uh yes. This is part of our kind of Next Generation, Um, firm energy, potential, and 1 of the things with terrestrial we are, we've been following their technology and working on part of a bridge solutions for the data center energy as we believe that in the later years. So be able to provide uh, a more answer to a firm clean energy potential for these customers. Uh, so this is, I mean, it's it's still a few years out. However, these projects take a while to get off the ground energy, large energy projects in general. So it's the collaboration needs to start now to be able to start

Getting us that and going through all the steps that we need to get there.

Analyst: Great. Appreciate it, guys. I will turn it back.

Great. Appreciate it guys. I'll turn it back.

Demi: Next question comes from the line of Ben Kalo with Beard. Your line is open.

Next question, comes from the line of Ben kallo with beard. Your line is open.

Ben Kalo: Hey, thank you, guys. Congratulations on the results. I am following up to George Gianarikas' question earlier about the turbine cells. I heard the turbine and the equipment piece, but just on the battery side, is there any kind of, do you have any thoughts in being able to get batteries? I saw that, in your owned assets pipeline, that also increased the percentage of batteries. So I am just wondering, with the new rules with tariffs, as well as the foreign entity of concern, if you are still able to, in the bankruptcy of someone like Powen, if you are still able to get batteries as my first question. Thank you.

Hey, thank you guys.

Congratulations on the

following up to,

Question earlier about tight turbines uh cells. Um, I I heard the turbine in the equipment piece but just on the battery side. Is there any kind? Do you have any thoughts and be able to get batteries? Um, I saw that, you know, in your own assets, um, pipeline that also increased, uh, the percentage of of batteries. So I'm just wondering with the with the new rules of tariffs as well as the affordances of concern. If uh if it's you're still able to uh in the bankruptcy of someone like power, you're still able to get batteries as my first question. Thank you.

George Sakellaris: Yeah, we can get the batteries, especially in the United States. But the broader question, I think Nicole can answer it because she knows the mix of the various particular assets that we are working on. Nicole?

Yeah, we we, we can get the batteries, especially in the United States. But, uh, the broader, uh, question I think Nicole can answer it because she she knows the mix of the various particular assets that we are working on.

Nicole Bulgarino: Yes. I am sorry, the first part of that is just you are asking if there is potential supply, the timeline on that. You were breaking up for the very first part of the question.

Ben Kalo: Yeah, sorry. Just more on being able to, you know, with tariffs and potentially impacting battery supply in the U.S., and then also around, you know, being able to get the ITC with foreign entity of concern. You know, people have supplied their foreign entity of concerns. If that is disrupted at all, you know, not this year, but out-year type of supply chain for you guys.

You guys.

Nicole Bulgarino: Sure. I think it is more where, I mean, first, we are closely monitoring what is going to come out related to the foreign entity and seeing how that impacts us. The first focus is really the ones that we have in construction right now that are being delivered still within this calendar year. We have not had issues on the ones that are currently in construction. Then just being strategic about the planning of the ones that we are starting ahead. We are confident that with the different battery suppliers that we are using now, there will be supply for those.

Sure, I think it's more where I mean first we're closely monitoring, what is going to come out related to the foreign entity uh, and seeing how that impacts us. The first focus is really the ones that we have in construction right now that are being delivered within still within this calendar year and we haven't had, you know, issues on the ones that are currently in construction and then just being strategic about the planning of the ones that were starting ahead.

Nicole Bulgarino: I am working through to see how we need to have adjustments for tariffs, like through our contracts with customers, making sure that the tariff adjustment language is in there on our contracts as well to protect us from different price impacts that we cannot capture at this point. Then just making sure that we are keeping that active in those contracts and on timing. At this point, the short outlook that we have is still trending in the right direction for us on timing and being able to protect their existing contract price adjustments.

You know, we're confident that, you know, the, with the different batteries that we're using now that there will be supply for those. Um, and then working through to see how we need to have adjustments for tariffs, like through our contracts with customers. Making sure that the Tariff adjustment language is in there on our contracts as well to protect us from different price impacts that we're, you know, that we can't uh capture at this point.

And then just making sure that we're keeping that active in those contracts and on timing. And at this point we're still, you know, that the short Outlook that we have is still trending in in the right direction for us on timing and, you know, being able to protect through existing contracts by adjustments.

Ben Kalo: Great.

Nicole Bulgarino: Does that answer your question?

Ben Kalo: Yes, thank you. On the reconciliation bill, creating a shorter timeline in some areas and longer timelines in other areas, could you talk about the tightness of the engineering construction market, and if that should be a positive benefit on margin, which you guys have already said margin is trending in the right direction? Could you also talk about how you can shift between the different areas of your diversification? Meaning, if you are going to do less mix in solar, can you move those employees more to energy efficiency or into another area? Maybe just talk about your ability to move your own employee force into the most lucrative areas. Thank you.

Great. So that answers your question.

Yeah. Yes. Thank you. Uh, and then just on on, uh, on the the bill, the reconciliation bill. Um, you know, creating a a, a shorter timeline in some areas and longer timelines in other areas. Could you just talk about, you know, the tightness of, uh, of engineering construction, the engineering construction market and the that's should be a positive benefit on margin. What you guys have already said, margin is trending in the right direction. Is it could you also talk about how, um, you can shift between the different, uh, areas of your diversification? So meaning like, if you're going to do less mix in solar, can you can you move those employees more to Energy Efficiency or into another area? Maybe just talk about, like, the, the, your ability to move your your own employee Force into the the most lucrative areas. Thank you.

Mark Chiplock: Yeah, I think I will take, you know, certainly on the point about maybe pivoting from solar, we are already proactively with some of that team that was developing more on the solar side, pivoting to more on the battery storage. You know, we can certainly do it there. You know, I think within the projects business, Nicole Bulgarino, you might be able to speak to that a little bit more, but again, I do not think we are seeing as much impact there, so we will not need to shift as much with respect to the labor resources there.

George Sakellaris: So far, we have been able to execute and execute very well, even though whether it is material supplies or labor constraints and so on, I cannot say that we have a particular project being delayed because of any shortages. That is what the numbers indicate. They are what they are.

Yeah, they call it, you know. So so certainly on the on the the point about maybe pivoting from solar, you know, we we we are already proactively with some of that team that was developing more on the solar side pivoting to uh, to more on the on the battery storage. So, you know, we can certainly, uh, do it there. You know, I think within the Project's business and the call, you might be able to speak to that a little bit more. But, you know, again, I don't think we're seeing as much impact there. So won't need to shift as much, um, with respect to to, you know, to the labor resources there. But, um, just I mean, so far, would you have been able to execute and execute very well even?

no, whether it's Material supplies or labor constraints and so on, um,

I cannot say that we have a particular pro project being delayed because of Any shortages.

Ben Kalo: Yes. Thank you very much.

And and that's why the numbers indicate. They are what they are.

George Sakellaris: Thank you.

Yes, thank you very much.

Thank you. And

Demi: Next question comes from the line of Eric Stine with Craig Hallum. Your line is open.

Analyst: Hi, everyone.

Next question comes from the line of Eric Stein with Craig how you your line is open.

Everyone.

George Sakellaris: Hi, Eric.

Analyst: Hey. Hey, so maybe we could just touch on the federal business. I know, if we go back to earlier in the year, you had called out the three projects. Then, fast forward a quarter, and two of them kind of were back to normal, and one, I think, was being rescoped. You clearly sound more optimistic about it, but it does not sound like you are necessarily ready to sound the all-clear. I mean, curious, would you agree with that characterization? If so, what do you kind of need to see to where you think, you know what, everything that was going on in late January and February was kind of noise, but in actuality, the business is kind of where it would have ended up all along?

Hi, hey, hey. So maybe we could just uh touch on the Federal Business. I know, you know, if we go back to earlier in the year

He called out the 3 projects then, you know, fast forward a quarter and, and 2 of them, you know, kind of were back to normal and 1, I think was being rescued. Um, you clearly sound more optimistic about it, but it doesn't sound like you're necessarily ready to sound the all clear. So I mean curious is that

Would you agree with that characterization? Um, and if so, I mean, what, what do you kind of need to see to where you think, you know what that everything that was going on in in late January, and February was, was kind of noise, but in actuality, the business is, you know, is kind of where it would have ended up all along.

George Sakellaris: Basically, I will let Nicole answer it, put a little more color to it, but we are very pleased where we are. You know, like I said, the federal government is moving much, much better than it was at the beginning of the year. We pretty much, I think we are at the level that we were under the previous administration, and probably a little bit better because of the larger projects and the data centers developing in the federal basis and so on. Nicole, do you want to add a little bit more to it?

Basically I let Nicole answer it that put put more color to it but we are very pleased where we are. You know like I said with the uh the federal government is moving much much better than it is uh that it was the beginning of the year. And we pretty much I think we are um at the level that we were under the previous administration and probably little bit better because of the larger projects and the data centers development in the federal basis and so on

Because you want to add a little bit more to it.

Nicole Bulgarino: Yeah, I think that's right, George. I think just to add to that, like we said earlier in the year, our value proposition of energy savings, especially in our energy savings performance contracting for the federal government, provides bipartisan value in that it's giving infrastructure upgrades at these military bases, at GSA buildings. We are working through, even with the GSA projects that we mentioned back earlier this year, and just rescoping some of those that may have had, for example, a solar looking at, you know, have been replacing with natural gas solutions. But the value that's still is still inherently there in the contract. So I think we're, you know, still, as new people come in with this administration, there's always an education that has to happen, and that advocacy.

Yeah, I think.

Nicole Bulgarino: That's certainly in a much better place than we were in January as they learn and become more familiar about these types of projects and the value they provide.

You and that it's it's getting infrastructure upgrades at these military bases at GSA buildings. And we are working through even with the GSA projects that we mentioned back, uh, earlier this year. And just resc some of those that may have had. For example, a solar looking at, you have been replacing with natural gas Solutions, uh, but the value that still is is still inherently there and it's contract. So I think we're, you know, still as new new people come in with this Administration. There's there's always an education that has to to go um, has to happen. And that advocacy and but certainly in a much better place than we were with January as they learn and become more familiar with about these types of projects and the value they provide

Analyst: Got it. Then, I guess in the context of early in the year, rescoping, many, including me, kind of took that as maybe less content, but it does not sound like that is the case. It might just be, as you said, just changing some of the characteristics of the project itself, not necessarily the value to Ameresco Inc.

Got it. And then I guess in the context of of early in the year rescue you know many including me kind of took that as maybe less content but it doesn't sound like that's the case. It might just be as you said just changing some of the characteristics of the project itself, not necessarily the value to ameresco.

Nicole Bulgarino: That's correct. That's exactly right. We are trying to, I guess, the money's still not there for the federal government. So it's still a very unique tool that can be used, and it's just how you're using it and what the scope actually will be.

Analyst: Yeah, got it. Okay. Thank you for that. Maybe last one for me, just when you think about high-level second half of the year, whether it is based on, you mentioned some assets coming online, the R&G plan, which will start to impact Q3, project backlog. Any thoughts on linearity of Q3 and Q4 relative to each other?

That's correct. I think it right. That's exactly right. We're trying to I guess the the Buddies still not there for the federal government so it's still a very unique tool that can be used and it's just what how you're using it and what the scope actually will be.

Yep, got it. Okay.

Thank you for that. And maybe last 1 for me, just um, when you think about just high level second half of the year, um, you know, whether it's based on

George Sakellaris: Mark here.

You me, mentioned some assets coming online. Um the RNG plant which will you know, start to impact third quarter project backlog. I mean any thoughts on kind of linearity um of third quarter and fourth quarter you know relatives to each other.

Mark Chiplock: Yeah. Hey, Eric. This is Mark. Yeah, I mean, I think, you know, with respect to the revenue, I would probably expect Q4 to be a bit heavier than Q3. You know, I think we've been, you know, with the strong execution, certainly in the first half, we've been able to execute a little bit faster on some projects. And we certainly saw that again in Q2 as we were able to pull some revenue ahead from Q3. So I would, you know, I would expect Q4 to be a bit heavier than Q3 just from a shaping standpoint.

Yeah. Hey, this is Mark. Yeah. I mean, I think, with respect to the revenue, I'd probably expect Q4 to be a bit heavier than Q3. You know, I think we've been.

You know, with the strong execution, certainly in the first half, we've been able to execute a little bit faster on some projects and, uh, we certainly saw that again in queue in Q2, um, as we were able to, um, to pull some Revenue ahead from Q3. So I I would, you know, I would expect Q4 to be a bit heavier than Q3, um, just from a shaping standpoint.

Analyst: Okay. Got it. But then, obviously, continued energy asset growth, especially since you are bringing on the R&G plant, which that will start to impact Q3.

Okay, got it. But then, I mean, obviously, continued energy asset growth, especially since you are bringing on the well in the RNG plant, which that'll start to impact Q3. Oh, that's...

George Sakellaris: Yeah, I mean, you know, remember, those plants take a little bit of time to ramp up. So we'll start to see some of that, but probably not as much of an impact in Q3. It'll start to, you know, really hit its stride in Q4 and beyond.

Yeah. I mean, you know that remember those plants take a little bit of time to ramp up, so we'll start to see some of that, but probably not as much of an impact in Q3. It'll start to, you know, to really hit its stride in Q4 and beyond.

Demi: Next question comes from the line of Joseph Osha with Guggenheim. Your line is open.

Next question comes from the line of Joseph OSHA with gag. Your line is open.

Analyst: Thank you. Hello, everybody. I wanted to return a little bit to the line of questioning on storage. Obviously, we are waiting for some resolution, but we do know it is going to be pretty hard to claim an ITC if you are using Chinese cells because of the fiat issue. I am just wondering, in your conversations with your customers, is the intention basically to tell them they have to eat that cost, or are there real plans to source cells from the U.S. or what? I am just trying to get a sense of what is happening here because we do have some decent level of understanding as to what the challenges are going to be here.

Mark Chiplock: Yeah. Hey, Jim, this is Josh. I will take the first stab. So you are right, there was, I think, a line of questioning about domestic supply, and we are investigating that from new suppliers as well as existing. One of the larger suppliers here in the U.S. is working on a domestic solution. You can probably figure out who it might be. So we are exploring domestic solutions. We have other places where our customers can absorb some cost. So it is really just a mix. I think we are going to do as much as we can to safe harbor responsibly projects that can start construction this year, of course, pending guidance of what that really means from Treasury. And then where we can get domestic supply, we will explore that.

Um, thank you. And hello everybody. I, I wanted to return a little bit to the, uh, hi. Um, the the line of questioning on on storage. Uh, you know, obviously, we're waiting for some resolution but you know, we do know it's going to be pretty hard to claim, uh, an ITC if you're using Chinese cells because of the the fiak issue. So I'm I'm just wondering, you know, in your conversations with your customers is, you know, is the intention, basically, to tell them, they, you know, they they have to eat that cost or are there real plans to Source cells from, from the US or, or what? Um, I'm just trying to get a, a sense of what's Happening here. Because, you know, we, we do have some decent level of understanding and to, to do what the challenges are going to be here.

Yeah. Hey, Hey, Joe, this is Josh. I I'll take the first step. Um, so you're right. There was I think a line of questioning about domestic Supply. And we are investigating that from new suppliers, as well, as existing, um, 1 of the larger suppliers here in the US is working on a domestic solution. Um, you can probably figure out who it might be. So, uh, so we are, we're exploring domestic Solutions, we have

Mark Chiplock: And where we can share or even pass on the full price increase to customers that are a little bit less price sensitive, we will do that as well. It is not really a one-size-fits-all. All of our projects are so different.

We have other places where, um, our customers can absorb some costs. Uh, so it's really, it's really just a mix. I think, um, we're going to do as much as we can to Safe Harbor. Uh, responsibly projects that can start construction this year, of course, pending guidance of what that really means from treasury. Um, and then where we can get domestic Supply, will explore that and where we can share or even pass on the full price, uh, increase to customers that are a little bit less price sensitive, we'll do that as well. It's not really a 1 size fit all uh, it's all of our projects are so, um, so different. Yeah.

Analyst: Thanks for that, Josh. I guess that latter point is the most interesting one. You are in such a strong position here and people need storage. It sounds like in some cases, there are situations where you're, are you saying you're simply just going to take Chinese cells and tell your customers, you know, deal with it? Is that part of the solution here?

Solution here.

Mark Chiplock: I don't think from a customer service perspective.

Speaker 1: we'd ever say deal with it. I think everything's a negotiation.

Demi: Yeah.

Speaker 1: We have good relations with our customers. I think if there are levers to pull on price, maybe we can add value somewhere else, or they can extend a contract. There are a hundred different things we can negotiate with customers in every deal, but that is one potential possibility, especially if it is time-sensitive. If we can get, let's call it, Chinese sales quicker, they might be willing to pay for that speed versus waiting for something domestic, right? Everything is a little bit different, but it is all very, we will call it, cordial, professional. I do not think we are taking any position with our customers. Take it, leave it, deal with it, anything like that. They are active negotiations, and we are in good standing with all the customers.

Demi: To follow up on that, we have a couple of customers that if this happens, this is the price. If that happens, this is the price. So it is a back and forth.

I I don't, I don't think from a customer service perspective we'd ever say deal with it. I think everything's negotiation, um, and we have good relations with our customers and I think if there are levers to pull on price, but maybe we can add value somewhere else or they can extend a contractor. I mean every there's there's a hundred different things we can negotiate with customers and every deal. Um, but that is 1 potential possibility. Um, especially if it's time-sensitive. If we can get, let's call it Chinese sales quicker but they might be willing to pay for that for that um for that speed versus waiting for something domestic. Right. Everything is a little bit different but it's it's all very we'll call it cordial. Professional. I don't think we're taking any position with our customers take it or leave it deal with it. Anything like that. It is they are active negotiations and, and we're in good standing with all the customers and follow up on that. And we have a couple of customers that if this happens, this is the price as if that happens, this is the price. So it's it's a back and forth.

Speaker 1: Excellent.

Demi: With a particular customer.

Speaker 1: Yeah. Thank you very much, guys. Thank you.

A particular customer.

Josh Baribeau: Thanks, Joe.

Leila Dillon: Next show.

No, thank you very much, guys. Thank you.

Thanks Joe.

George Sakellaris: Next question comes from the line of Craig Irwin with Roth Capital Partners. Your line is open.

Next question comes from the line of Craig sheer with 2. He Brothers your line is open.

Mark Chiplock: Good afternoon. Thanks for taking the question.

Demi: Hey.

Good afternoon. Thanks for taking the question.

Mark Chiplock: I understand the big beautiful bill is not impacting near-term guidance. I guess a two-part initial question. Do you see this potentially having a moderating influence on U.S. growth in light of the European, over multiple years? With the strength in Europe, could you envision the geographic mix moving over time more towards a 50-50 rather than a third or so?

Okay. Um, so uh, I understand, um, the big beautiful bill is not is is not impacting near-term guidance. Um, so I guess a 2-part initial question. Do do, do you, do you see this potentially having a moderating influence on on us growth and and in light of the European. I mean like over multiple years and uh with the strength in Europe could could you could you envision the geographic mix kind of moving over time more towards a 50/50 rather than you know, a third or so?

Demi: Look, Europe is 20% of the backlog right now, and most likely it is going to grow much faster than the United States, no question about it. But the market in the United States, because of the energy prices, the electric rates going up as they are doing, for the next several years, and the resiliency issues associated, especially with some of the commercial and industrial customers, what we have seen in the market, they are concerned about reliability. We have several heavy industrial customers that they are looking for battery storage combined with solar or some kind of a cogeneration. The markets in the United States have expanded. That is why we feel very good where we are.

The, the European is 20% of the backlog right now, and most likely it's going to grow much faster than the United States. No question about it, but

The market to the United States because of the energy prices, the electric rates going up as they they are doing uh, for the next several years and the resiliency issues associated especially with some of the commercial and Industrial customers when we seen in the market, they are concerned the budget. Reliability. So we have several heavy industrial customers that they're looking for better storage combined with solar or some kind of a core generation. So it's uh well, the markets in the United States he has expanded

and um, uh,

That's why we we feel very good to where we are.

Mark Chiplock: Great. I just wanted to dig a little more into the timing of SMR deployments and maybe your ideal size project there, both domestically and internationally. Do you see Ameresco Inc.'s role more of a supportive function, like transitional generation till the modular nuclear comes online? Or could you ultimately get into some EPC work around actual SMR infrastructure?

Great. And and and then I just wanted to dig a little more into um, the uh timing of SMR deployments and and maybe your ideal size project there. Uh, both domestically and internationally and do you do you see Mrs. Go's role more of a supportive function like transitional generation to the, the module or nuclear comes online or could you ultimately get into uh, some EPC work around actual SMR infrastructure.

Demi: We have been drawn into the actual infrastructure, and this is nothing new. If you go back to the Savannah River project, that was a $200 million infrastructure project, a cogeneration project with a good, cheap, factory there as well as a wood burning facility with fluidized boilers and so on. Many of the projects we have been doing with the federal government, they involve cogeneration, turbines, engines. If you look at the LNG, the renewable natural gas plants, it is about $100 million projects. Each one of them, they are more complex than anything else anybody can do. I think that the best projects for us will be in the $1 million to $2 million, maybe $300 million projects, especially on the battery size or the turbine or the engine size, projects. We will probably, on those projects, be the EPC contractor.

I mean, we we we we have been drawn into the actual infrastructure and this is nothing new. I mean if you go back to the Savannah, River project, that was a 200 million dollars, infrastructure project tip uh a generation project with a good cheap uh, Factory there as well as a a wood burning facility with fluidized boilers and so on. And

Many of the projects we've been doing with the federal government involve core generational turbines and engines. If you look at, um,

Uh, the LG renewable natural gas plants is about a $100 million project. Each one of them is more complex than anything else that anybody can do. So, uh, I think that the best projects for us will be in the $1 million to $2 million, maybe $300 million projects, and especially on the battery size, or the turbine or the engine size projects.

And and we will probably on those projects be the EPC contractor.

Mark Chiplock: Great. Thank you.

Great. Thank you.

George Sakellaris: Seeing no further questions at this time, that concludes our question and answer session and today's conference call. Thank you all for joining. You may now disconnect.

Seeing no further questions at this time that concludes our question and answer session and today's conference call thank you all for joining you may now disconnect

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Q2 2025 Ameresco Inc Earnings Call

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