Ameresco - Earnings Call - Q1 2025
May 5, 2025
Executive Summary
- Q1 2025 delivered double‑digit top-line and EBITDA growth: revenue $352.8M (+18% YoY) and Adjusted EBITDA $40.6M (+32% YoY); Non‑GAAP EPS was ($0.11) and GAAP EPS ($0.10).
- Clear beat vs S&P Global consensus: revenue $352.8M vs $310.9M*, EPS ($0.11) vs ($0.26), Adjusted EBITDA $40.6M vs $35.3M; gross margin was 14.7% and within expectations.
- Backlog and visibility strengthened: contracted project backlog $2.6B (+~80% YoY), total project backlog $4.9B (+22% YoY), total revenue visibility ~$9.6B; operating energy assets reached 742 MWe.
- FY2025 guidance reaffirmed (revenue $1.85–$1.95B; Adj. EBITDA $225–$245M) and Q2 revenue outlook set at $400–$425M; management cited limited near‑term tariff exposure and federal contract “unpause/rescope” as key positive catalysts.
What Went Well and What Went Wrong
What Went Well
- Strong execution across Projects and Energy Assets: Projects revenue +23% to $251.5M; Energy Assets revenue +31% to $56.7M; Adjusted EBITDA +32% to $40.6M.
- Contract conversion accelerated and backlog expanded: $334M of awards converted to contracts; contracted backlog $2.6B (+~80% YoY) driving total project backlog to $4.9B (+22% YoY).
- Management visibility/confidence: “We have not encountered any additional cancellations or delays in our Federal contracts… those that we highlighted… have now been ‘unpaused’ or modified and are progressing” (CEO George Sakellaris) and reiterated: “we have limited near‑term [tariff] exposure”.
What Went Wrong
- Bottom‑line loss and softer gross margin: Net loss attributable to common shareholders ($5.5M); gross margin 14.7% slightly impacted by lower‑margin European EPC mix.
- Adjusted cash from operations was $1.4M as working capital movements offset ESPC proceeds in the quarter.
- “Other” revenue fell to $19.8M due to year‑end divestiture of AEG; management reminded this was strategic focus realignment (AEG divested Jan 8).
Transcript
Operator (participant)
Thank you for standing by. My name is Dustin, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Ameresco Q1 2025 earnings conference call. If you'd like to ask a question, please press star and the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the conference over to Leila Dillon, Senior Vice President of Marketing and Communications. Please go ahead.
Leila Dillon (SVP of Marketing and Communications)
Thank you, Dustin, and good afternoon, everyone. We appreciate you joining us for today's call. Our speakers on the call today will be George Sakellaris, Ameresco's Chairman and Chief Executive Officer, and Mark Chiplock, Chief Financial Officer. In addition, our Chief Investment Officer, Josh Baribeau, 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. 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. Please note that all comparisons that will be discussed today are on a year-over-year basis unless otherwise noted. I will now turn the call over to George. George.
George Sakellaris (Chairman and CEO)
Thank you, Leila. Good afternoon, everyone. First, I would like to thank the entire Ameresco team as we celebrate the company's 25th year anniversary. It's been an amazing journey establishing Ameresco as a leader in our industry and delivering over $16 billion in customer solutions dedicated to reducing energy consumption, enhancing energy infrastructure and resiliency, and developing proven pathways to decarbonization. While the current environment remains challenging, the drivers of our business remain strong. Global power demand grows, electricity costs continue to rise, and grid reliability is deteriorating, as we saw in Europe a few days ago. All of this will increase the demand for distributed, diversified, resilient energy solutions. The team's outstanding execution lent a strong start to the year, with results exceeding our expectations. Q1 revenue and adjusted EBITDA grew 18% and 32%, respectively.
These results also highlighted the strength of our diversified business model as we experienced material growth in both our projects and energy asset business, including strong performance in Europe and Canada. We also increased our total project backlog to almost $5 billion, bringing our total revenue visibility across our businesses to almost $10 billion. This was another quarter of significant contract execution conversion success, resulting in a contracted project backlog of $2.6 billion, representing a growth rate of almost 80% year over year. These positive business trends have continued into the Q2. I also wanted to comment on some of the well-known challenges facing our industry and provide some insights into how the Ameresco team is working to overcome them. First, let me cover our work with the federal government.
This business accounts for approximately 30% of our current total project backlog, with military-related customers accounting for approximately 2/3 and GSA or civilian agency-related project work of approximately 1/3. We have provided a breakdown of our backlog by end market in our supplemental slides. Because these federal contracts have multi-year execution cycles, they are expected to account for less than 20% of our 2025 project revenue. We noted in our last conference call that we had encountered one cancellation on a project contracted earlier in January and a pause on two other contracts. We are pleased to report that the project that had been canceled has now been rescoped, and the other two contracts have now been unpaused. Also, we have not encountered any additional cancellations or delays in our federal contracts.
While it is too early to say that there will be no additional future disruptions, we are cautiously optimistic. As the current administration's priorities come into focus, we believe our broad and deep technical expertise and our agnostic and budget-neutral approach will help us promote our offerings. Interestingly, we are now seeing a significant number of recently issued federal RFPs focused on our core competencies of resiliency and increasing the power supply through new energy infrastructure. The government's recent release of a request for information about the possible use of DOE land to support growing demand for data centers. Following that, the DOE has identified 16 potential sites uniquely positioned for rapid data center construction, including in-place energy infrastructure with the ability to fast-track permitting for new energy generation. For example, we are seeing more opportunities to leverage federal lands for critical energy infrastructure projects.
The Kūpono 44MW solar and 44MW battery project is a perfect example of how this can work. We leveraged an enhanced use lease with an AV at Pearl Harbor to build this critical energy infrastructure that supports not only the base but also the Hawaiian Electric Grid. We are also developing a 99MW firm power plant and advanced microgrid project on the same base. We are utilizing similar structures, including enhanced use leases, to develop data center energy infrastructure projects with the Department of Defense. As we captured on another new slide on our supplemental deck detailing our project backlog by technology, Ameresco is very well diversified in our expertise with efficiency, resiliency, and power production solutions.
Approximately 50% of our total project backlog includes energy infrastructure projects using generation technologies such as gas turbines, engines, solar, hydroelectric, and resiliency technologies such as large-scale battery storage and microgrids. We believe our solutions are a good match for the evolving energy landscape, which is demanding ever-increasing amounts of electricity and higher levels of resiliency. We are very excited about the opportunities ahead for our work with not only the federal government but with all of our customers across our core markets, including utilities, data centers, co-ops, and large C&I. I also wanted to discuss the dynamic tariff landscape that we, like every other company in our industry, are facing.
First, I would like to point out that much of the equipment for current ongoing projects and energy assets in development has already been purchased and is in the country or already on the worksites, which we believe shields us from near-term price increases. Longer term, we will work to mitigate price increases during contract negotiations and reprice where possible. It's important to note that the majority of our solar and battery projects are international and therefore not subject to U.S. tariffs. As many of our shareholders know, this is not the first time Ameresco has faced tariffs or inflation, and we have experienced overcoming similar difficult pricing dynamics. We have strong relationships with domestic and global vendors and a healthy backlog of projects, giving us a position of strength with our partners.
I will now turn the call over to Mark to comment on our financial performance and 2025 outlook. Mark.
Mark Chiplock (CFO)
Thank you, George, and good afternoon, everyone. We delivered strong Q1 results with total revenue growing 18% and adjusted EBITDA growing 32%. Our project's business revenue grew 23%, reflecting outstanding execution and our laser focus on the conversion of our backlog. Also, as George mentioned, we did not encounter any additional delays or cancellations with the federal government and those contracts that we highlighted during our Q4 call, which have now been unpaused or rescoped. Beyond our federal project work, we also had a strong quarter in Europe, Canada, and several U.S. regions. This performance speaks to the diversity of our customers, geographies, and types of solutions that is a hallmark of the Ameresco business model. Energy asset revenue grew 31%, driven largely by the growth of assets in operation compared to last year, with our base of operating assets now standing at 742MW.
We have also taken steps to mitigate lower rent prices for the year through our dynamic hedging strategy, with our remaining 2025 anticipated rent exposure at only 20%. The revenue decline in our other line of business is attributed directly to the divestiture of our AEG business at the end of 2024. Gross margin of 14.7% was largely in line with our expectations, reflecting a greater mix of revenue from large European EPC contracts. As a reminder, while these design-build projects have a lower gross margin profile, they help to diversify our business as well as create strong operating leverage, as they require very little incremental operating expense for the gross profit dollars they contribute. Net income attributable to common shareholders was a loss of $5.5 million or $0.10 per share.
Adjusted EBITDA of $40.6 million increased 32%, reflecting our strong revenue growth, tight cost controls, and the power of our lean, scalable business model. We continue to see substantial growth in our total project backlog, which grew 22% to $4.9 billion. Importantly, we converted $330 million of awards to contracts during the quarter, driving our contracted project backlog up 80% to $2.6 billion. Our project teams continue to deliver on contract conversion and execution to increase revenue and cash flow generation. We also added $367 million of new project awards to our awarded backlog during the quarter. Turning to our balance sheet and cash flows, we ended the quarter in a solid cash position with approximately $72 million in cash and total corporate debt of $270 million.
During the Q1, we successfully executed approximately $334 million in financing commitments, which included extending and upsizing our senior secured credit facility to help fund our growth. With our strong Q1 results and forward visibility, we are pleased to reaffirm our guidance ranges for 2025 revenue and adjusted EBITDA of $1.9 billion and $235 million at the midpoints. Our team's outstanding execution drove faster implementation during the Q1 of approximately $30 million of project revenue. To assist with shaping for the remainder of the year, we are maintaining our expectation for the cadence of revenue in the H2 of 2025 to represent approximately 60% of our total revenue. Accounting for our strong Q1 results, we anticipate Q2 revenue will be in the range of approximately $400 million-$425 million. Now, I'd like to turn the call back to George for closing comments.
George Sakellaris (Chairman and CEO)
Thank you, Mark. As you have heard, we had a very solid start to the year, and we have seen this momentum continue into the Q2. For over 25 years, we have built an organization with unmatched expertise in developing, structuring, and delivering energy projects. Our business model is resilient, with a majority of our adjusted EBITDA coming from our long-term recurring revenue businesses, as well as from the strong multi-year visibility inherent in our project backlog. Furthermore, we believe our project business will continue to grow as we expect to capture more of the emerging infrastructure and resiliency build-out. We are also a global business, diversified by our customer, technology, and geography, which would allow us to continually support change in policy in any geography, while maximizing our growth and earnings.
In closing, I would like to once again thank our employees, customers, and stockholders for their continued support. Operator, we would like to open the call to questions.
Operator (participant)
Thank you. Before we open the floor for questions, as a quick reminder, if you'd like to ask a question, please press star and the number one on your telephone keypad. We would also like to ask you to kindly limit yourself to one question and one follow-up. Thank you. With our first question, this comes from the line of Noah Kay from Oppenheimer. The line's open.
Noah Kay (Analyst)
Thanks for taking the questions. Clearly, from 4Q to now, a nice turn of events around the federal business. I wonder if you could take us a little bit into some of the transpirings that went on during the Q2 maybe kind of get the visibility and some of the contract situations into a better place. I think we start from the premise that these are energy-saving and net positive for any assets that the projects are going into, but maybe talk a little bit about how it played out and maybe the nature of some of these new RFPs you're seeing.
Mark Chiplock (CFO)
Yeah. Noah, hey, it's Mark. Maybe I'll just talk to the first part of that with respect to those federal contracts. I mean, again, I think we were fortunate that, again, the one contract that was canceled that has now been rescoped, we think will come back under a future mod. That will ultimately remain pretty neutral to where it started, which we think is a great outcome. On the other two that were paused, that are now unpaused, those will ultimately be rescoped. We feel that the rescoping probably will result in a small haircut on those, but certainly not the worst case, which could have been with those being canceled. I think, generally speaking, it was a good outcome for the three contracts that we talked about in the beginning.
George Sakellaris (Chairman and CEO)
The bottom line is the fact that these contracts, they are primarily energy efficiency, they are budget neutral, and all administrations, they like this particular project. I think the fact that they were signed in January probably had something to do with it. That is why probably people took another look at it once they realized it is good for the government. They plan to move ahead. With the GSA, the contract that was canceled, a couple of the buildings, they would be sold. They took that amount of work and they put it in other buildings. That is why we feel very good where we are with this administration. I think we can work with them, that they like the budget neutral approach and they like resiliency and more power generation in federal facilities in order to have the resiliency required.
The other thing, and that's why I tried to cover on my notes, how do they maximize the use and get more return from some of the land that's in the federal bases? It's unused. That's what happened in Pearl Harbor and so on.
Noah Kay (Analyst)
Mark, I think last quarter you gave us some direction on how to think about the shape not only of revenue, but maybe even around sort of margins. Obviously, things can move around a fair bit with project timing. Any color on sort of the shaping of margins, either for 2Q or the balance of the year?
Mark Chiplock (CFO)
I mean, we feel really good about our full-year guide, especially on the gross margin range, which was 15.5-16%. Again, I think Q1 was a little bit lower than our expectations, but as I mentioned, we did see a heavier mix of European EPC contracts that do have a little bit lower margin profile. I feel pretty good about the margin range for the rest of the year.
Noah Kay (Analyst)
Okay. Maybe last one to sneak in. It's always hard to resist the temptation to ask about recent events. I think in this case, it's quite appropriate. The blackouts in Southern Europe, I guess we're still figuring out what caused them. It does go to a question around building infrastructure reliability on the grid. I'm curious to think about how you see Ameresco's opportunity set when you look at events like that and kind of the type of project flow and opportunity you're seeing in Europe broadly.
George Sakellaris (Chairman and CEO)
Yeah. It happened not only in Spain, a few days before that, it just happened partially in Greece. The fact that all these countries, they're getting so much renewable power, and it's intermittent. You're going to see that happening more and more in the United States, what happened in Texas some time ago with the freeze. Now, as we put more and more renewables on the system, unless you have battery storage or what I call 24 to 7 days, 24 hours, 7 days a week power, otherwise firm renewable power, it's going to happen. What I think, I think the distributed generation is going to take a much bigger piece of the action than the large-scale power plants and transmission lines because I do not think that being able to build the transmission lines necessarily improves the grid resiliency.
Because I remember when I was with the utility for one large transmission line from Massachusetts to Rhode Island, it took us 10 years to get the right of way. It is very difficult. The other thing that happens, once you build those transmission lines, once you have an average, and sometimes you lose two of them, you do not have the spinning reserve to back up what might happen. That is how you have these averages. Back in the utility days, when I used to do the long-range planning, we used to have 5%-10% spinning reserve. You do not have it anymore.
Noah Kay (Analyst)
Thank you very much.
Operator (participant)
Thank you. Our next question comes from the line of George Gianarikas from Canaccord Genuity. The line's open.
George Gianarikas (Managing Director)
Hey, everyone. Thank you for taking my questions. I was wondering if you could give us an update on any projects whose economics are sensitive to changes in the Inflation Reduction Act. What does the world look like there? I mean, are those projects still moving forward? Have you seen maybe a little bit of a delay to see the dust settle? I'm just curious if you can share any commentary there. Thank you.
Mark Chiplock (CFO)
Yeah. I mean, I think for the projects that are coming online this year, especially on the RNG, we safe harbored the ITC related to those projects. We feel pretty good about that. Even beyond that, for about three-quarters of the projects in our asset development pipeline, we've safe harbored the ITC on that as well. I think we mentioned that last quarter, around $200 million of additional ITC. The teams have done a great job to take the necessary steps to try and safe harbor that. I think for assets outside of the RNG, again, I think we've done a pretty good job of safe harboring most of that. I do not expect any short-term impact if there were something to happen with the IRA.
George Gianarikas (Managing Director)
Maybe as a follow-up, the changing dynamics in the landscape impacted your decision tree around projects versus willingness to own assets. I mean, how has your philosophy changed there over the last, call it, three to six months?
George Sakellaris (Chairman and CEO)
Yeah. As the interest environment, it's a little bit higher than what we would like it to be. I think it goes without saying, and that's why you're seeing the growth in the project business a little bit more. We put a little bit more emphasis on the project, but of course, they generate very good cash flow. We have a pretty good niche in the marketplace there. Now, as the evolution happens with more resiliency and more power generation, we want to take a good piece of that action. It's right up to our expertise. On the other hand, I mean, we have over 600MW of assets in development, which it can take care of for us for the next two, three years. We are not taking our foot off the gas line there, but on the paddle.
We like the project business a lot, and we execute on those very well. We are focusing on that a little bit more.
George Gianarikas (Managing Director)
Thank you.
Operator (participant)
Thank you. Our next question comes from the line of Kashy Harrison from Piper Sandler. The line's open.
Kashy Harrison (Analyst)
Good afternoon. Thanks for taking the questions. Congrats on 25 years. It is nice to hear that the projects that had paused have now resumed. I was just wondering, have you seen any negative impacts from the reduced federal workforce on your business, or is the approval process and just the day-to-day work with the federal government ongoing without any interruptions from less workers?
Mark Chiplock (CFO)
Yeah. No, it's a good question. To be honest, we haven't seen anything yet, but we certainly could see a situation where the things that are happening with the personnel could have an impact on the timing of how awards can convert to contracts or just administrative challenges that could impact the timing of the progression of our projects. I think we've tried to build in some amount of conservatism into our guide, into the numbers for the year. Kind of near term, we haven't seen anything as of yet.
George Sakellaris (Chairman and CEO)
On the long term, though, because of the budget neutral associated with our projects, if you recall, the previous Trump administration, we executed more performance contracts under them than we did under the Biden administration because they like this concept. Even though we might see, let's say, the movement from awards to contracted backlog delayed a little bit, the number of contracts and proposals most likely will go up.
Kashy Harrison (Analyst)
That's a helpful additional color. Maybe just two more quick ones for me. George, I think you discussed that you're in a good spot on storage and the exposure is not even that great, or it's not that high anyways to the U.S. It's more international. You said demand, it sounds like demand hasn't really been impacted by tariffs. I'm just curious, are there any other—excuse me—are there any other implications to your business from tariffs that we need to be thinking about in any of the individual segments that maybe weren't covered in the prepared remarks?
George Sakellaris (Chairman and CEO)
I mean, on the batteries, the projects we are doing this year and next year, on this year, they were all pre-purchased before any impact on the tariffs. On next year, I think half of them will be repurchased. The other half, what we've been able to do with some of our customers, dollar for dollar, it's closing the contracts that on the purchase power agreements that whatever the tariff is, it will be a pass-through. We'll recalculate the rate; it will be a pass-through. That's it. And the same thing.
Kashy Harrison (Analyst)
Both are good.
George Sakellaris (Chairman and CEO)
Yeah. The same thing is in play with some of the panels. The other thing that we have been trying to do, buying as much domestic as possible. Still, if you have tariffs, the domestic prices go up as well. So far, we have managed very, very well where we are.
Kashy Harrison (Analyst)
Appreciate the color. Maybe just one final one for me. I was just curious whether you've observed any dislocations in valuations between private transactions or what your pieces of your portfolio may be able to get in the private market versus what you're seeing in the public markets and whether there's any appetite to show the public markets the value of your assets via transactions. Thank you.
George Sakellaris (Chairman and CEO)
I think that's up to Josh Baribeau.
Josh Baribeau (Chief Investment Officer)
Thanks, George. Hey, Kashi. I think the answer is yes. We do believe that there are still robust private valuations for the types of projects and assets that we are implementing. Nothing we can really share now, but I think that the public valuations in our whole sector have definitely been, we'll call it, disproportionately impacted on maybe rational and irrational fears about changes in the government and news cycle, etc. The fundamentals of our energy efficiency offerings, our RNG assets, our pipeline, our portfolio, and our platform remain incredibly strong. People that have the ability to look at these things from a project financing perspective or some of our develop and sell, those equity investors, those private equity investors still like what they see. We are still able to monetize the value that we are creating.
Operator (participant)
Thank you. Our next question comes from the line of Eric Stein from Grey Cowell. The line's open.
Eric Stein (Analyst)
Hi, everyone. Hi, maybe just sticking with the tariffs. I guess great news on how things are set up for 2025 and for part of next year. Just thinking about this, if this period of uncertainty were to last for longer than that, I just want to dig in a little bit on kind of the structure of the contracts. Is it pretty common to have that pass-through language? I guess what I'm getting at is, I mean, is this kind of a painstaking contract-by-contract renegotiation, or is this something that's pretty standard, it's in the contracts, and it's pretty much accepted by your customers?
George Sakellaris (Chairman and CEO)
I have told our people that new contracts, we have the language that we are protected against tariffs. Sometimes, if too much equipment is coming from abroad, foreign exchange fluctuations as well. That has just become right now the mark. It goes from customer to customer. For example, this particular customer, it's a large contract, it's a battery storage project, and they had a certain deadline that they want to have the project up and running. We had to put money down for the transformer in order to save power to the ITC, and so on. We said, "That's fine. If the tariffs come and the price goes up, you have to be on the hook for it as well for the transformer and so on." They stepped up to the plate.
We have seen more and more some of the largest industrial customers looking for resiliency, battery storage, and so on. I think at the end of the day, they will need to do what is necessary to protect their operations.
Mark Chiplock (CFO)
Yeah. No, I think, and look, I think beyond even the contracts, we continue to diversify the supply chain, right? I think we're taking quite a few learnings that we came out of COVID. And we have been focused on bringing materials in faster on our projects, diversifying the supply chain, looking at domestic sources. I think the combination of building those protections into the contracts as well as kind of maintaining that diversification is going to help us to mitigate most of the exposure to tariffs moving forward.
Eric Stein (Analyst)
Got it. All right. That's helpful. Maybe just back on the federal government work, and this is just a question that was just asked, but just wanted to clarify. In terms of the reduced workforce, I mean, it sounds like you are viewing this more as a delay, potential delays rather than just cancellations. I know what you've seen to this point is you had the one which will be rescoped. You've got the two that have kind of come back. I mean, is it more from an approval process and a timing just to get through everything that's necessary to move forward rather than seeing a bigger risk that fewer buildings, housing, that smaller workforce and changing the overall scope?
George Sakellaris (Chairman and CEO)
I mean, I wouldn't say that we have potential delays. I mean, it would be immaterial because that's why I'm trying to point out because the power or the value proposition of our offerings is so strong. The administration wants it so bad or they need this kind of work because at the end of the day, they get the infrastructure upgrade and they don't have to use their budget in order to do it. They don't require any capital. There will be more push to save money. Even if they have fewer people, at the end of the day, I would expect that we will see more contracts signed with these guys.
Mark Chiplock (CFO)
Yeah. I think generally speaking, if there is risk, we look at it being more administrative and just potentially slowing down the process around award conversions or contracting. Again, we haven't seen anything yet.
Eric Stein (Analyst)
Yeah. Okay. I'll just keep it at two. Thanks.
Mark Chiplock (CFO)
Thanks, Eric.
Leila Dillon (SVP of Marketing and Communications)
Thank you.
Operator (participant)
Thank you. Again, if you'd like to ask a question, please press star and the number one on your telephone keypad. Again, that is star and the number one on your telephone keypad. Our next question comes from the line of Craig Irwin from Roth Capital Partners. The line's open.
Craig Irwin (Managing Director)
Hi, good evening, and thanks for taking my questions. George, Mark, everyone, thank you for the data point on your RIN hedging position. I'm sure you're well aware of some of the controversial forecasts that have been out there from different analysts about RINs possibly being cut in half. Not something that you would expect one of the big oil desks to say. Can you just remind us what the process is you go through to evaluate the potential profitability on your assets before you go and deploy capital, how you structure these agreements as far as sharing of the RINs and other incentives, and how you sort of stress test these projects before you ever spend any money breaking ground to build to ensure profitability across the cycle?
George Sakellaris (Chairman and CEO)
I think Josh, you do the line of work for us for a minute.
Josh Baribeau (Chief Investment Officer)
Hey, Craig. We have a pretty thorough process of vetting the RNG projects throughout their development, including multiple steps with our investment committee. We, of course, have some pretty well-entrenched financing partners as well. We run a lot of the projects through them early on to make sure that their expectations for the RIN curve match ours or match something that's reasonable in the market. We layer in the financing assumptions in terms of the amount of debt, the cost of debt, the tenor, etc., in conjunction with what our models are showing us and what the development team is producing. In a base case scenario and in a stress case scenario, if they meet our hurdle rates, which we've talked about as sort of a levered teens IRR on a risk-adjusted basis, then we proceed throughout those next steps, those gates throughout development.
There is a lot in there, but we definitely are not taking kind of historical RIN rates or even current RIN rates. It really is kind of a downward-sloping curve based on forecasts that we have from all sorts of market parties as well as our own proprietary analysis of supply and demand and the RVO, etc.
Craig Irwin (Managing Director)
Understood. Thank you for that. My next question is about the operating expenses. You had more than $50 million in revenue growth, but you were down over the last couple of years for the Q1 for your operating expenses. Are you allocating personnel maybe to project execution from development activities? Is there anything sort of going on as far as one-time expenses or rebudgeting on the operating expense line? If there was maybe the move of personnel to execution, could you maybe quantify for us what that might have been on a margin basis?
Mark Chiplock (CFO)
Yeah. I mean, I think that from an allocation, we are seeing probably slightly better utilization, I think, as you look at OpEx, the trend. Remember also, last year, we had the additional OpEx from our AEG business, which was divested. We are seeing a direct reduction from those costs no longer being in the P&L. I think, generally speaking, the cost controls around OpEx are really what is helping to keep OpEx steady or even down as we are managing the timing of when we are bringing in new employees and only adding as we need to. We still have pretty strong operating leverage with a lot of the larger projects that are being brought on.
Craig Irwin (Managing Director)
Cool. Congrats on a strong start to the year.
Josh Baribeau (Chief Investment Officer)
Thank you.
Leila Dillon (SVP of Marketing and Communications)
Thanks, Craig. Thanks.
Operator (participant)
Thank you. Our next question comes from the line of Joseph Oja from Guggenheim. The line's open.
Joseph Oja (Analyst)
Hi there, guys. Thanks for all of the detail. Two questions. First, I mean, George, you alluded to non-U.S. exposure and, in particular, your solar and energy storage backlog. I'm just wondering if you can maybe put some rough numbers around that. Obviously, you've got 63% of your energy asset backlog in those two sectors. It's harder to tell what the number is for the project backlog, but help us understand how that might roughly break into U.S. and non-U.S. business. I have one other question.
George Sakellaris (Chairman and CEO)
Most of the European and Canada workers are solid stock with 1.5GW, but primarily, though, EPC. I think it's only a very small portion that we will hold, and that's up in Canada. In Europe, all the projects that we have, with the exception of a small one, maybe 10MW, it's EPC contracts.
Joseph Oja (Analyst)
Right. I guess I'm not understanding. You've got 618MW of energy assets in construction, 63% of which are solar or battery. I'm trying to understand what portion of those is U.S. versus non-U.S.
George Sakellaris (Chairman and CEO)
Josh, give me the exact number.
Josh Baribeau (Chief Investment Officer)
It's almost all exclusively U.S. Sorry, Joe, we were answering a question on the project backlog. I didn't realize you were answering on the assets.
Joseph Oja (Analyst)
Okay. That is quite helpful. The project backlog is more geographically diverse, but the energy asset backlog is more U.S.
Josh Baribeau (Chief Investment Officer)
That's correct.
Joseph Oja (Analyst)
Okay. Great. Thanks. Next question, I heard some comments about diversifying procurement, which is great. You got a few options on the solar module side. Man, there's not a lot of LFP production in the United States right now, and most of it is spoken for. When you look at your storage business, are there options for buying in the US? Are you going to buy nickel-based cells, or have you found a factory nobody knows about? I'm curious what your procurement strategy is for cells. I assume you're using mostly LFP. Hello?
Josh Baribeau (Chief Investment Officer)
Joe, it's Josh. Yeah. Sorry. We're volleying back and forth over who gets this one. The short answer is it is mostly traditional lithium-ion. Unfortunately, we don't have any brand new factories that nobody knows about to announce on the call tonight. We are sourcing from the same kind of major global players that a lot of people are, especially as it pertains to bankability and performance because, as I think you know, and we've tried different solutions, it hasn't been quite as successful. That being said, I think the key here is that the stuff we have at Assets and Development for this year, as George mentioned, have been safe harbored and/or already delivered on site for the most part. We have one big project that'll be kind of mid-year COD, which makes up the bulk of the assets and operations that we guided to last time.
New projects were inserting change in law provisions, as George mentioned, kind of a dollar-for-dollar adjustment to tariff or IRA type of changes. It is less about procurement and more about working with our customers to get a fair deal in this uncertain environment.
Joseph Oja (Analyst)
Okay. Just as a last follow-on to that, other people in this business have alluded to those pass-throughs, but also indicated that there are brackets around that limiting exposure. Let us suppose that we are paying 130% LFP tariffs a year from now. Is it your intention and your belief that you can pass all of that along to customers, or will you bear some of it?
George Sakellaris (Chairman and CEO)
We'll try to pass it on to our customers.
Mark Chiplock (CFO)
Yeah. It's hard to say.
George Sakellaris (Chairman and CEO)
Unless the project margin is such that we could absorb some, then we look at the economics very, very hard before we take on that kind of risk or cost. At the end of the day, the economics of the project will say.
Joseph Oja (Analyst)
It is what it is. Yes. Thank you for your answers.
George Sakellaris (Chairman and CEO)
Yep. Thanks, Joe.
Operator (participant)
Thank you. There are no further questions. This now concludes the question-and-answer session. This also concludes the conference call. Thank you all for joining. You may now disconnect.