Ameresco, Inc. (AMRC)

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Ameresco (AMRC)

Q1 2013 Earnings Call

May 09, 2013 8:30 am ET


Suzanne Messere

George P. Sakellaris - Founder, Chairman, Chief Executive Officer and President

Andrew B. Spence - Chief Financial Officer, Vice President and Treasurer


John Quealy - Canaccord Genuity, Research Division

Chris Godby - Stephens Inc., Research Division

Craig E. Irwin - Wedbush Securities Inc., Research Division

James Giannakouros - Oppenheimer & Co. Inc., Research Division



Good day, ladies and gentlemen and welcome to the Q1 2013 Ameresco Incorporated Earnings Conference Call. My name is Jo and I will be your operator for today. [Operator Instructions] As a reminder, the call is being recorded for training purposes.

Now I'd like to turn the call over to Suzanne Messere, Director, Investor Relations. Please proceed.

Suzanne Messere

Thank you, Jo, and good morning, everyone. Thank you for joining us today for Ameresco's First Quarter 2013 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. Please note that the prepared remarks include information pertaining to the previously restated financial results for 2012. Following the brief highlights from the quarter, management will take questions from the audience.

Before I turn the call over to George and Andrew, I would like to make a brief statement regarding 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 on March 18, 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. George?

George P. Sakellaris

Thank you, Suzanne, and good morning, everyone. We had expected a more challenging quarter than the typical first quarter. While revenue was below our expeditions, stronger than anticipated gross profit and better management of operating expenses led to bottom line results ahead of our plan. We remain encouraged by the continued demand of our energy efficiency solutions as shown by a 34% increase in awarded projects. We believe the continued increase in awarded projects indicates that we are gaining market share. This leads us to remain confident about our leadership position within the industry, as well as the long-term fundamentals of our business.

We are reaffirming our 2013 guidance. Our continued expectations for 2013 assume that the first half of 2013 remains challenging from the revenue and profitability perspective, with only a small profit in the second quarter. We also assume that our seasonal backlog, along with the continued focus on converting awarded projects to signed contracts, should start to yield results later in the second quarter, with a more meaningful improvement in the second half of the year.

In addition, our guidance expectations also include the following assumptions: modest revenue growth in the central region; strong revenue growth in Canada and the Northwest region; a revenue decline in the Eastern and Southwest regions; a gradual improvement in the market conditions; also, a 10% year-over-year revenue growth from our all other offerings; and that we maintain operating expenses at the current run rate.

We feel confident that we can still maintain our 2013 guidance range even if few of the above assumptions do not come to fruition. As for the ongoing initiatives, we're fine-tuning our offering and approach mentioned in our last call. We have begun to realign our goals to position the company for future growth. For example, we have included business units' goals for cross-selling a wider range of products and services that emphasize our overall comprehensive solutions. We expect to implement additional initiatives going forward as we continue to focus on behavior that creates shareholder value.

And now, I do like to turn the call over to Andrew, our Chief Financial Officer, who can provide more details about our financial results.

Andrew B. Spence

Thank you very much, George, and good morning. The financial highlights from the quarter are as follows. We had expected a decline in energy efficiency revenue related to the continued effects of lengthening conversion times from awarded projects to signed contracts in all segments. The impact was slightly more than anticipated in the U.S. federal segment.

We experienced strong growth in renewable energy due to increased revenue from small-scale infrastructure and O&M, as well as a very strong increase in renewable energy projects. The increases were partially offset by a greater-than-expected decline in integrated PV and a few unexpected delays in the Southwest region.

Energy efficiency gross margin decreased slightly from 21% to 20.6% in 2013. A mix of lower margin projects across several regions compared to last year was partially offset by project closeouts within our U.S. federal segment. Renewable energy gross margin increased from 16.5% to 17.7%. The margin improvement was primarily due to a renewable energy project closeout.

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