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Ameresco, Inc. (AMRC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered strong top-line growth: revenue up 20.7% YoY to $532.7M and adjusted EBITDA up 58.7% YoY to $87.2M, while gross margin fell to 12.5% due to ~$20M cost overruns on two legacy projects .
  • Record commercial momentum: $1.094B in Q4 new contracts, contracted backlog up 92% YoY to $2.544B, total project backlog reached $4.818B, and operating energy assets rose to 731 MWe .
  • Strategic portfolio actions: divested AEG, generating ~ $38M gain and using proceeds to reduce corporate term loan; corporate debt declined to $243.1M and leverage ratio at 3.2x .
  • FY 2025 guidance initiated at revenue $1.85–$1.95B and adjusted EBITDA $225–$245M; management expects Q1 2025 negative EPS and ~60% of revenue in H2; capex $350–$400M with 100–120 MWe COD planned .
  • Catalysts: resolution of federal pauses (GSA rescoping), RNG tax credits (Section 48 and 45Z), and conversion of a record pipeline into revenue; less than 30% of expected 2025 D3 RIN generation merchant mitigates price volatility .

What Went Well and What Went Wrong

What Went Well

  • Record contract conversion and backlog expansion: Q4 new contracts $1.094B; contracted backlog reached $2.544B and total backlog $4.818B (12‑month contracted backlog $1.146B) .
  • Energy assets growth: 31 MWe placed in service in Q4 (241 MWe in FY24), driving energy assets revenue up 31% YoY to $57.6M; adjusted EBITDA from energy assets was $31.1M in Q4 .
  • Portfolio simplification and balance sheet progress: sale of AEG produced ~$38M gain and enabled corporate term loan paydown, lowering corporate debt to $243.1M and leverage ratio to 3.2x .
  • Management quote: “The fourth quarter represented a strong and resilient finish… record revenue performance… record quarter in project contract conversions with over $1 billion… record 241 MWe of energy assets” — George Sakellaris .

What Went Wrong

  • Gross margin compression: Q4 gross margin of 12.5% was “significantly lower than expected” as two large-scale legacy projects incurred unanticipated cost overruns (~$20M; ~400 bps impact) .
  • Non-cash impairments and higher depreciation: ~$12.0M energy asset impairment and ~$8.0M higher depreciation weighed on operating results .
  • Higher financing burden: interest and other expenses rose 45.7% YoY to $23.4M; management guided to ongoing headwinds from depreciation/interest linked to asset growth .
  • Federal project uncertainty: one cancellation and pauses at two GSA contracts amid potential building footprint changes; management factored delays into 2025 guidance .

Financial Results

Consolidated performance vs prior quarters

MetricQ2 2024Q3 2024Q4 2024
Revenue ($M)$438.0 $500.9 $532.7
Gross Margin (%)14.9% 15.4% 12.5%
Operating Income ($M)$20.953 $35.159 $44.640
Net Income to Common ($M)$5.010 $17.599 $37.085
Diluted EPS ($)$0.09 $0.33 $0.70
Adjusted EBITDA ($M)$45.1 $62.2 $87.2
Adjusted EBITDA Margin (%)10.3% 12.4% 16.4%

Segment breakdown (Q4 YoY)

SegmentQ4 2023 Revenue ($M)Q4 2024 Revenue ($M)Q4 2023 Net Income ($M)Q4 2024 Net Income ($M)Q4 2023 Adj. EBITDA ($M)Q4 2024 Adj. EBITDA ($M)
Projects$346.5 $418.3 $27.2 $0.4 $26.3 $13.7
Energy Assets$43.9 $57.6 $1.3 $8.9 $23.3 $31.1
O&M$24.4 $26.5 $4.1 $1.7 $3.4 $2.6
Other$26.6 $30.2 $1.1 $26.2 $1.9 $39.8
Total$441.4 $532.7 $33.7 $37.1 $54.9 $87.2

KPIs and balance sheet trajectory

KPIQ2 2024Q3 2024Q4 2024
Total Project Backlog ($B)$4.413 $4.509 $4.818
Contracted Project Backlog ($B)$1.651 $1.853 $2.544
Awarded Project Backlog ($B)$2.762 $2.656 $2.274
12‑month Contracted Backlog ($B)$0.817 $0.977 $1.146
O&M Revenue Backlog ($B)$1.186 $1.421 $1.378
Energy Asset Visibility ($B)$2.736 $3.175 $3.325
Operating Energy Assets (MWe)661 715 731
Assets in Development (MWe, net)635 589 637
Adjusted Cash from Operations (Quarter, $M)$153.9 $34.4 $53.8
Cash & Equivalents ($M)$150.3 $113.5 $108.5
Corporate Debt ($M)$273.4 $272.5 $243.1
Corporate Leverage Ratio (Debt/EBITDA)2.9x 2.8x 3.2x
Energy Asset Debt ($B)$1.329 $1.388 $1.390
Energy Debt Advance Rate (%)73% 74% 73%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($B)FY 2025N/A$1.85–$1.95 New
Gross Margin (%)FY 2025N/A15.5–16.0 New
Adjusted EBITDA ($M)FY 2025N/A$225–$245 New
Depreciation & Amortization ($M)FY 2025N/A$103–$105 New
Interest Expense & Other ($M)FY 2025N/A$85–$90 New
Effective Tax Rate (%)FY 2025N/A(50)–(35) New
Income Attrib. to NCI ($M)FY 2025N/A($5)–($8) New
Non‑GAAP EPS ($)FY 2025N/A$0.70–$0.90 New
Q1 EPSQ1 2025N/ANegative EPS expected New
COD (MWe)FY 2025N/A100–120 MWe (incl. 1–2 RNG plants) New
Capex ($M)FY 2025N/A$350–$400 (funded via asset debt/tax equity/credit sales) New
Accounting Change (Sale‑leaseback)FY 2025N/APotential ~$20M reduction in interest/other if implemented New

Earnings Call Themes & Trends

TopicQ2 2024 (Q‑2)Q3 2024 (Q‑1)Q4 2024 (Current)Trend
SCE projects/margins$6.6M cost budget revisions; gross margin impacted; substantial completion progress Additional costs tied to SCE in GM; milestone payments and liquidated damages disputes; backlog maintained Legacy project overruns (~$20M) depress Q4 GM; overall impact “largely behind us” Improving execution post‑legacy overruns
Federal policy & GSA—Optimism on ESPC under any administration; prior Trump period strong One cancellation; two GSA pauses; rescoping expected; guidance conservative Near‑term pauses; medium‑term supportive
RNG fundamentals & creditsStronger RINs supported energy assets revenue Utility voluntary market growing; hedges; safe harbor equipment Section 48 ITC ~$100M (2023–24) with ~$200M potential; 45Z ~$8–$10M annual; <30% 2025 RINs merchant; D3 RIN weakness reflected in guide Structural tailwinds from tax credits; hedged exposure
Europe expansion—Europe revenue ~$250M; broadened footprint Additional battery/PV assets added to development; diversification emphasized Growing regional contribution
Balance sheet & financingRaised $100M subordinated debt; leverage 2.9x Leverage 2.8x; secured $237M project financing Credit facility upsized/extended Jan‑25; corporate debt reduced post AEG sale Enhanced flexibility for growth
Supply chain/interconnection—Transformer and utility interconnection bottlenecks persist Similar constraints noted; development backlog strong Persistent but manageable

Management Commentary

  • “Record revenue performance… record quarter in project contract conversions with over $1 billion… record 241 MWe of energy assets into service” — George Sakellaris .
  • “Gross margin of 12.5%… unanticipated cost overruns on two projects negatively impacted gross profit by ~ $20M or 400 bps… operating income included ~$38M gain on AEG sale, partially offset by ~$12M impairments and ~$8M higher depreciation” — Management summary .
  • “Our RNG assets placed in service between 2023 and 2024 generated ITCs of approximately $100 million… additional potential credits ~$200 million… 45Z annual benefit could be ~$8–$10 million; less than 30% of 2025 RIN generation merchant” — Mark Chiplock .
  • “Federal ESPC projects are budget-neutral and long‑standing… one cancellation and two pauses at GSA; majority of federal projects continuing” — Nicole Bulgarino .
  • “We expect first quarter revenue and Adjusted EBITDA similar to last year… expect negative EPS in Q1… H2 will represent ~60% of 2025 revenue” — Mark Chiplock .

Q&A Highlights

  • Federal pipeline and GSA: Management cited minimal direct impact to date, one cancellation, two pauses at GSA amid asset sale considerations; projects likely rescope rather than cancel; guidance conservatism incorporates potential policy/tariff/funding risks .
  • Backlog‑to‑revenue bridge: 12‑month contracted backlog of ~$1.1B provides line-of-sight; larger projects implement over 12–36 months, especially federal, explaining gap vs $2.544B contracted backlog .
  • RNG certification and RINs: EPA certification has proceeded within 1–2 months historically (Keller, Roxana); management comfortable with timelines; hedged exposures leave <30% merchant in 2025 .
  • Asset deployment cadence: Potential bottlenecks (transformers, interconnections) may cause lumpiness, but financing markets supportive; overall development backlog remains strong .
  • Strategic opportunities: ESPC framework potentially expanding; management noted future opportunities (e.g., data centers), and continued European expansion .

Estimates Context

  • S&P Global consensus data for Q4 2024 and FY 2025 was unavailable during this session due to provider limits; therefore, estimate comparisons could not be included. Values retrieved from S&P Global were unavailable.
  • Given the absence of consensus, investors should compare reported Q4 revenue $532.7M and GAAP EPS $0.70 against internal expectations and peer benchmarks .

Key Takeaways for Investors

  • Execution and visibility: Record backlog ($4.818B) and contracted backlog ($2.544B) position AMRC for sustained revenue conversion over the next 12–36 months, with 12‑month contracted backlog at $1.146B .
  • Asset‑driven earnings: Energy assets delivered $31.1M Q4 adjusted EBITDA and long‑term annuity‑like cash flows; recurring lines of business contributed the majority of FY24 adjusted EBITDA .
  • Near‑term margin/earnings caution: Q4 gross margin was pressured by ~$20M overruns; management expects Q1 negative EPS given seasonality and linear depreciation/interest, with H2 comprising ~60% of FY25 revenue .
  • Policy tailwinds: Section 48 ITC (~$100M realized; ~$200M potential) and prospective 45Z ($8–$10M/year) bolster RNG economics; dynamic hedging reduces RIN exposure (<30% merchant) .
  • Balance sheet flexibility: Post‑AEG sale deleveraging and Jan‑25 facility upsize/extension provide liquidity to fund capex ($350–$400M) and development pipeline (100–120 MWe COD) .
  • Federal/GSA risk manageable: Pauses/cancellation incorporated into guidance; ESPC’s budget‑neutral model historically resilient across administrations .
  • Watch items/catalysts: Finalization of 45Z guidance, resolution of SCE legacy impacts, GSA rescoping, continued European awards, and sale‑leaseback accounting change (~$20M potential benefit) .