Q4 2012 Earnings Call
March 18, 2013 8:30 am ET
George P. Sakellaris - Founder, Chairman, Chief Executive Officer and President
Andrew B. Spence - Chief Financial Officer and Vice President
John Quealy - Canaccord Genuity, Research Division
Chris Godby - Stephens Inc., Research Division
James Giannakouros - Oppenheimer & Co. Inc., Research Division
Craig E. Irwin - Wedbush Securities Inc., Research Division
» Ameresco's CEO Discusses Q2 2012 Results - Earnings Call Transcript
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Thank you, Frances, and good morning, everyone. Thank you for joining us for today's -- for Ameresco's Fourth Quarter and Full Year 2012 Earnings Conference Call. I'm joined today by George Sakellaris, Ameresco's Chairman, President and Chief Executive Officer; and Andrew Spence, the company's Chief Financial Officer.
On today's call, management will share brief highlights from the prepared remarks we published this morning, and then take questions from the audience.
Before I turn the call over to George and Andrew, I would like to make a brief statement regarding the forward-looking remarks. Today's call contains forward-looking information regarding future events and the future financial performance of the company. Ameresco cautions you that such statements are just predictions, and actual results may differ materially as a result of risks and uncertainties that pertain to our business. Ameresco refers you to the company's press release issued this morning and its annual report on Form 10-K filed with the SEC today, which discusses important factors that could cause actual results to differ materially from those contained in the company's projections or forward-looking statements. Ameresco assumes no obligation to revise any forward-looking statements made on today's call.
In addition, the company will be referring to non-GAAP financial measures during this call. These non-GAAP financial measures are not prepared in accordance with Generally Accepted Accounting Principles. A GAAP to non-GAAP reconciliation, as well as an explanation behind the use of non-GAAP financial measures, is available in our press release as well as our prepared remarks.
I will now turn the call over to George Sakellaris, Ameresco's President and CEO. George?
George P. Sakellaris
Thank you, Suzanne, and good morning, everyone. 2012 financial results were below our expectations, and we are -- we were very disappointed by the unprecedented and substantial market disruption.
Historically, we have benefited from customer diversification for energy efficiency projects from customer type to geography. Because of this, we did not anticipate the level of influence that federal fiscal uncertainty would have on nonfederal customers. We underestimated the level of dependency that state and local governments now have on federal programs and how this would influence our ability to get projects signed.
As a result, 2012 was the first year that we experienced sustained market disruption that was consistent among all customer segments and regions. While we were very disappointed by the market disruption caused by this fiscal uncertainty, we were encouraged by the progress we have made towards influencing longer-term trends.
For example, we experienced continued double-digit growth in revenue from our all other offerings. Awarded projects at year end increased by 50%, and we reached a new record level of total construction backlog of approximately $1.5 billion. We believe that backlog activity, driven by the increase in awarded projects, indicates that demand for performance contract remains strong and that we are gaining market share.
This leads us to remain confident about the long-term fundamentals of our business. We now believe though that current market conditions will persist into the future, which affects our backlog conversion timing assumption we make for 2013. The long sales cycles do not lend themselves to a lot of flexibility in terms of influencing customer behavior in the near term. However, we are working on fine-tuning our offerings as well as our approach. We expect this fine tuning to enhance our market position over the medium to long term so that we can continue to pursue our long-term goal of 15% to 20% net revenue and earnings growth.
And now I do like to turn the call over to Andrew, our Chief Financial Officer, to provide more details about our financial results.
Andrew B. Spence
Thank you very much, George, and good morning. The financial results from the quarter are as follows. Fourth quarter revenue declined 17% year-over-year. The decline was driven by a 19% decrease in energy efficiency revenue and a 12% decrease in renewable energy revenue. We had anticipated the decline in energy efficiency revenue related to the continued effects of lengthening conversion times in the U.S. federal, all other U.S. regions and Canada segments.
We had also expected fourth quarter renewable energy to be up slightly. However, we did not expect results to be impacted by a year-over-year revenue decrease in our integrated PV offering nor weather-related delays at 4 renewable energy facilities.
Full year revenue declined 13%. Full year energy efficiency revenue decreased 19% for the same reasons already mentioned. Full year renewable energy revenue increased 3%. We experienced increases related to renewable energy projects for customers and small scale infrastructure, which more than offset a decline in revenue related to the completion of the Savannah River Project in late 2011.
Gross margin for the fourth quarter increased to 21.1% in 2012. Full year gross margin increased to 20.3%. The energy efficiency gross margin for the fourth quarter improved to 26% and to 21% for the full year. The margin improvement was driven by higher-margin projects across a number of U.S. regions, project closeouts and an improved mix from our higher-margin offerings.