Table of Contents


 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________.
Commission File Number: 001-34811
Ameresco, Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
04-3512838
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
111 Speen Street, Suite 410
Framingham, Massachusetts
 
01701
(Address of Principal Executive Offices)
 
(Zip Code)
(508) 661-2200
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer o
Accelerated Filer  þ
Non-accelerated filer  o
Smaller reporting company o
Emerging growth company o
 
(Do not check if a smaller reporting company)
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
New York Stock Exchange Symbol
Shares outstanding as of July 31, 2019
Class A Common Stock, $0.0001 par value per share
AMRC
28,412,894
Class B Common Stock, $0.0001 par value per share
 
18,000,000
 
 



AMERESCO, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019
TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents


PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
AMERESCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
 
June 30,
 
December 31,
 
2019
 
2018
 
(Unaudited)
 
 
ASSETS
 
 
Current assets:
 
 
 
Cash and cash equivalents (1)
$
38,343

 
$
61,397

Restricted cash (1)
13,530

 
16,880

Accounts receivable, net of allowance of $2,843 and $2,765, respectively (1)
109,332

 
85,985

Accounts receivable retainage, net
15,383

 
13,516

Costs and estimated earnings in excess of billings (1)
120,686

 
86,842

Inventory, net
9,219

 
7,765

Prepaid expenses and other current assets (1)
16,717

 
11,571

Income tax receivable
1,622

 
5,296

Project development costs
23,849

 
21,717

Total current assets (1)
348,681

 
310,969

Federal ESPC receivable
133,850

 
293,998

Property and equipment, net (1)
7,871

 
6,985

Energy assets, net (1)
492,681

 
459,952

Goodwill
58,129

 
58,332

Intangible assets, net
2,052

 
2,004

Operating lease assets (1)
32,051

 

Other assets (1)
34,579

 
29,394

 Total assets (1)
$
1,109,894

 
$
1,161,634

 
 
 
 
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
Current portions of long-term debt and financing lease liabilities (1)
$
54,351

 
$
26,890

Accounts payable (1)
117,188

 
134,330

Accrued expenses and other current liabilities (1)
29,259

 
35,947

Current portions of operating lease liabilities (1)
5,807

 

Billings in excess of cost and estimated earnings
24,380

 
24,363

Income taxes payable
138

 
1,100

Total current liabilities (1)
231,123

 
222,630

Long-term debt and financing lease liabilities, less current portions and net of deferred financing fees (1)
224,025

 
219,162

Federal ESPC liabilities
163,856

 
288,047

Deferred income taxes, net (1)
3,677

 
4,352

Deferred grant income
6,361

 
6,637

Long-term portions of operating lease liabilities (1)
28,308

 

Other liabilities (1)
30,179

 
29,212

Commitments and contingencies (Note 9)

 


 
 
 
 
Redeemable non-controlling interests
32,037

 
14,719

(1) Includes restricted assets of consolidated variable interest entities (“VIEs”) at June 30, 2019 and December 31, 2018 of $134,848 and $126,727, respectively. Includes non-recourse liabilities of consolidated VIEs at June 30, 2019 and December 31, 2018 of $40,217 and $34,684, respectively. See Note 12.
The accompanying notes are an integral part of these condensed consolidated financial statements.

1

Table of Contents


AMERESCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
(in thousands, except share amounts)
 
June 30,
 
December 31,
 
2019
 
2018
 
(Unaudited)
 
 
Stockholders’ equity:
 
 
 
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding at June 30, 2019 and December 31, 2018
$

 
$

Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 30,503,934 shares issued and 28,412,894 shares outstanding at June 30, 2019, 30,366,546 shares issued and 28,275,506 shares outstanding at December 31, 2018
3

 
3

Class B common stock, $0.0001 par value, 144,000,000 shares authorized, 18,000,000 shares issued and outstanding at June 30, 2019 and December 31, 2018
2

 
2

Additional paid-in capital
126,693

 
124,651

Retained earnings
283,386

 
269,806

Accumulated other comprehensive loss, net
(8,118
)
 
(5,949
)
Treasury stock, at cost, 2,091,040 shares at June 30, 2019 and December 31, 2018
(11,638
)
 
(11,638
)
Total stockholders’ equity
390,328

 
376,875

Total liabilities, redeemable non-controlling interests and stockholders’ equity
$
1,109,894

 
$
1,161,634

The accompanying notes are an integral part of these condensed consolidated financial statements.













2

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AMERESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenues
$
198,183

 
$
196,982

 
$
348,295

 
$
364,392

Cost of revenues
155,044

 
154,206

 
272,524

 
286,143

Gross profit
43,139

 
42,776

 
75,771

 
78,249

Selling, general and administrative expenses
30,082

 
28,801

 
56,165

 
56,005

Operating income
13,057

 
13,975

 
19,606

 
22,244

Other expenses, net
3,746

 
3,966

 
7,167

 
7,510

Income before provision (benefit) for income taxes
9,311

 
10,009

 
12,439

 
14,734

Income tax provision (benefit)
804

 
1,307

 
1,061

 
(1,472
)
Net income
8,507

 
8,702

 
11,378

 
16,206

Net loss (income) attributable to redeemable non-controlling interests
709

 

 
1,985

 
(516
)
Net income attributable to common shareholders
$
9,216

 
$
8,702

 
$
13,363

 
$
15,690

Net income per share attributable to common shareholders:
 

 
 
 
 
 
 
Basic
$
0.20

 
$
0.19

 
$
0.29

 
$
0.35

Diluted
$
0.19

 
$
0.19

 
$
0.28

 
$
0.34

Weighted average common shares outstanding:
 

 
 

 
 
 
 
Basic
46,387

 
45,470

 
46,340

 
45,469

Diluted
47,681

 
46,406

 
47,666

 
46,272

The accompanying notes are an integral part of these condensed consolidated financial statements.




3

Table of Contents


AMERESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(Unaudited)
 
Three Months Ended June 30,
 
2019
 
2018
Net income
$
8,507

 
$
8,702

Other comprehensive loss:
 
 
 
Unrealized (loss) gain from interest rate hedges, net of tax (provision) benefit of $(573) and $20, respectively
(1,672
)
 
(274
)
Foreign currency translation adjustments
39

 
(435
)
Total other comprehensive loss
(1,633
)
 
(709
)
Comprehensive income
6,874

 
7,993

Comprehensive loss (income) attributable to redeemable non-controlling interests
709

 

Comprehensive income attributable to common shareholders
$
7,583

 
$
7,993

 
 
 
 
 
Six Months Ended June 30,
 
2019
 
2018
Net income
$
11,378

 
$
16,206

Other comprehensive (loss) income:
 
 
 
Unrealized (loss) gain from interest rate hedges, net of tax (provision) benefit of $(898) and $409, respectively
(2,814
)
 
1,129

Foreign currency translation adjustments
645

 
2

Total other comprehensive (loss) income
(2,169
)
 
1,131

Comprehensive income
9,209

 
17,337

Comprehensive loss (income) attributable to redeemable non-controlling interests
1,985

 
(516
)
Comprehensive income attributable to common shareholders
$
11,194

 
$
16,821

The accompanying notes are an integral part of these condensed consolidated financial statements.





4

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AMERESCO, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(in thousands except share amounts)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
Redeemable
 
 
 
 
 
 
 
 
 
Additional
 
 
 
Other
 
 
 
 
 
Total
 
 
Non-Controlling
 
Class A Common Stock
 
Class B Common Stock
 
Paid-in
 
Retained
 
Comprehensive
 
Treasury Stock
 
Stockholders’
 
 
Interests
 
Shares
 
Amount
 
Shares
 
Amount
 
Capital
 
Earnings
 
Loss
 
Shares
 
Amount
 
Equity
Balance, March 31, 2018
 
$
10,751

 
27,467,353

 
$
3

 
18,000,000

 
$
2

 
$
117,242

 
$
238,810

 
$
(4,218
)
 
2,085,397

 
$
(11,570
)
 
$
340,269

Exercise of stock options
 

 
239,183

 

 

 

 
1,410

 

 

 

 

 
1,410

Stock-based compensation expense
 

 

 

 

 

 
392

 

 

 

 

 
392

Employee stock purchase plan
 

 
26,075

 

 

 

 
213

 

 

 

 

 
213

Open market purchase of common shares
 

 
(100
)
 

 

 

 

 

 

 
100

 
(1
)
 
(1
)
Unrealized gain from interest rate hedge, net
 

 

 

 

 

 

 

 
158

 

 

 
158

Foreign currency translation adjustment
 

 

 

 

 

 

 

 
(435
)
 

 

 
(435
)
Contributions from redeemable non-controlling interests
 
1,673

 

 

 

 

 

 

 

 

 

 

Distributions to redeemable non-controlling interests
 
(102
)
 

 

 

 

 

 

 

 

 

 

Net income
 

 

 

 

 

 

 
8,702

 

 

 

 
8,702

Balance, June 30, 2018
 
$
12,322

 
27,732,511

 
$
3

 
18,000,000

 
$
2

 
$
119,257

 
$
247,512

 
$
(4,495
)
 
2,085,497

 
$
(11,571
)
 
$
350,708

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, March 31, 2019
 
$
13,341

 
28,337,426

 
$
3

 
18,000,000

 
$
2

 
$
125,685

 
$
274,170

 
$
(6,485
)
 
2,091,040

 
$
(11,638
)
 
$
381,737

Exercise of stock options
 

 
53,344

 

 

 

 
306

 

 

 

 

 
306

Stock-based compensation expense
 

 

 

 

 

 
397

 

 

 

 

 
397

Employee stock purchase plan
 

 
22,124

 

 

 

 
305

 

 

 

 

 
305

Unrealized loss from interest rate hedge, net
 

 

 

 

 

 

 

 
(1,672
)
 

 

 
(1,672
)
Foreign currency translation adjustment
 

 

 

 

 

 

 

 
39

 

 

 
39

Contributions from redeemable non-controlling interests
 
19,508

 

 

 

 

 

 

 

 

 

 

Distributions to redeemable non-controlling interests
 
(103
)
 

 

 

 

 

 

 

 

 

 

Net (loss) income
 
(709
)
 

 

 

 

 

 
9,216

 

 

 

 
9,216

Balance, June 30, 2019
 
$
32,037

 
28,412,894

 
$
3

 
18,000,000

 
$
2

 
$
126,693

 
$
283,386

 
$
(8,118
)

2,091,040

 
$
(11,638
)
 
$
390,328

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

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Accumulated
 
 
 
 
 
 
 
 
Redeemable
 
 
 
 
 
 
 
 
 
Additional
 
 
 
Other
 
 
 
 
 
Total
 
 
Non-Controlling
 
Class A Common Stock
 
Class B Common Stock
 
Paid-in
 
Retained
 
Comprehensive
 
Treasury Stock
 
Stockholders’
 
 
Interests
 
Shares
 
Amount
 
Shares
 
Amount
 
Capital
 
Earnings
 
Loss
 
Shares
 
Amount
 
Equity
Balance, December 31, 2017
 
$
10,338

 
27,533,049

 
$
3

 
18,000,000

 
$
2

 
$
116,196

 
$
235,844

 
$
(5,626
)
 
1,873,266

 
$
(9,799
)
 
$
336,620

Cumulative impact from the adoption of ASU No. 2014-09
 

 

 

 

 

 

 
(4,454
)
 

 

 

 
(4,454
)
Cumulative impact from the adoption of ASU No. 2017-12
 

 

 

 

 

 

 
432

 
(432
)
 

 

 

Exercise of stock options
 

 
385,618

 

 

 

 
2,101

 

 

 

 

 
2,101

Stock-based compensation expense
 

 

 

 

 

 
747

 

 

 

 

 
747

Employee stock purchase plan
 

 
26,075

 

 

 

 
213

 

 

 

 

 
213

Open market purchase of common shares
 

 
(212,231
)
 

 

 

 

 

 

 
212,231

 
(1,772
)
 
(1,772
)
Unrealized gain from interest rate hedge, net
 

 

 

 

 

 

 

 
1,561

 

 

 
1,561

Foreign currency translation adjustment
 

 

 

 

 

 

 

 
2

 

 

 
2

Contributions from redeemable non-controlling interests
 
1,673

 

 

 

 

 

 

 

 

 

 

Distributions to redeemable non-controlling interests
 
(205
)
 

 

 

 

 

 

 

 

 

 

Net income
 
516

 

 

 

 

 

 
15,690

 

 

 

 
15,690

Balance, June 30, 2018
 
$
12,322

 
27,732,511

 
$
3

 
18,000,000

 
$
2

 
$
119,257

 
$
247,512

 
$
(4,495
)
 
2,085,497

 
$
(11,571
)
 
$
350,708

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2018
 
$
14,719

 
28,275,506

 
$
3

 
18,000,000

 
$
2

 
$
124,651

 
$
269,806

 
$
(5,949
)
 
2,091,040

 
$
(11,638
)
 
$
376,875

Cumulative impact from the adoptions of ASU -No. 2018-02 (Note 2)
 

 

 

 

 

 

 
217

 
(217
)
 

 

 

Exercise of stock options
 

 
115,264

 

 

 

 
955

 

 

 

 

 
955

Stock-based compensation expense
 

 

 

 

 

 
782

 

 

 

 

 
782

Employee stock purchase plan
 

 
22,124

 

 

 

 
305

 

 

 

 

 
305

Unrealized loss from interest rate hedge, net
 

 

 

 

 

 

 

 
(2,597
)
 

 

 
(2,597
)
Foreign currency translation adjustment
 

 

 

 

 

 

 

 
645

 

 

 
645

Contributions from redeemable non-controlling interests
 
19,508

 

 

 

 

 

 

 

 

 

 

Distributions to redeemable non-controlling interests
 
(205
)
 

 

 

 

 

 

 

 

 

 

Net (loss) income
 
(1,985
)
 

 

 

 

 

 
13,363

 

 

 

 
13,363

Balance, June 30, 2019
 
$
32,037

 
28,412,894

 
$
3

 
18,000,000

 
$
2

 
$
126,693

 
$
283,386

 
$
(8,118
)
 
2,091,040

 
$
(11,638
)
 
$
390,328

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Table of Contents


AMERESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
Six Months Ended June 30,
 
2019
 
2018
Cash flows from operating activities:
 

 
 

Net income
$
11,378

 
$
16,206

Adjustments to reconcile net income to cash flows from operating activities:
 
 
 
Depreciation of energy assets
17,495

 
12,946

Depreciation of property and equipment
1,351

 
1,072

Amortization of debt issuance costs
1,218

 
838

Amortization of intangible assets
457

 
502

Accretion of ARO and contingent consideration
62

 

Provision for bad debts
124

 
303

Gain on deconsolidation of VIE
(2,160
)
 

Net gain from derivatives
(888
)
 
(63
)
Stock-based compensation expense
782

 
747

Deferred income taxes
152

 
9,174

Unrealized foreign exchange loss
10

 
900

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(22,744
)
 
(23,750
)
Accounts receivable retainage
(1,784
)
 
2,704

Federal ESPC receivable
(61,849
)
 
(69,276
)
Inventory, net
(1,454
)
 
(125
)
Costs and estimated earnings in excess of billings
(18,848
)
 
29,824

Prepaid expenses and other current assets
(5,199
)
 
3,490

Project development costs
(1,703
)
 
(5,331
)
Other assets
(1,005
)
 
(1,380
)
Accounts payable, accrued expenses and other current liabilities
(26,560
)
 
(24,365
)
Billings in excess of cost and estimated earnings
(664
)
 
(1,421
)
Other liabilities
(137
)
 
508

Income taxes payable
2,712

 
(10,640
)
Cash flows from operating activities
(109,254
)
 
(57,137
)
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(2,810
)
 
(2,056
)
Purchases of energy assets
(46,466
)
 
(58,341
)
Acquisitions, net of cash received
(1,279
)
 
(1,900
)
Contributions to equity investment
(191
)
 

Cash flows from investing activities
(50,746
)
 
(62,297
)
 
 
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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Table of Contents


AMERESCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
(in thousands)
(Unaudited)
 
Six Months Ended June 30,
 
2019
 
2018
Cash flows from financing activities:
 

 
 

Payments of financing fees
$
(447
)
 
$
(2,285
)
Proceeds from exercises of options and ESPP
1,260

 
2,314

Repurchase of common stock

 
(1,772
)
Proceeds from senior secured credit facility, net
41,365

 
6,100

Proceeds from long-term debt financings
2,742

 
58,634

Proceeds from Federal ESPC projects
82,787

 
69,664

Proceeds for energy assets from Federal ESPC
1,842

 
690

Contributions from redeemable non-controlling interests, net of distributions
19,301

 
1,468

Payments on long-term debt
(13,187
)
 
(10,776
)
Cash flows from financing activities
135,663

 
124,037

Effect of exchange rate changes on cash
100

 
(231
)
Net (decrease) increase in cash, cash equivalents, and restricted cash
(24,237
)
 
4,372

Cash, cash equivalents, and restricted cash, beginning of period
97,914

 
60,105

Cash, cash equivalents, and restricted cash, end of period
$
73,677

 
$
64,477

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Cash paid for interest
$
8,194

 
$
5,183

Cash paid for income taxes
$
1,807

 
$
1,903

Non-cash Federal ESPC settlement
$
214,444

 
$
66,798

Accrued purchases of energy assets
$
18,694

 
$
10,586

Conversion of revolver to term loan
$
25,000

 
$
25,000


The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the total of the same such amounts shown above:

 
Six Months Ended June 30,

 
2019
 
2018
Cash and cash equivalents
 
$
38,343

 
$
27,952

Short-term restricted cash
 
13,530

 
15,103

Long-term restricted cash included in other assets
 
21,804

 
21,422

Total cash and cash equivalents, and restricted cash
 
$
73,677

 
$
64,477

The accompanying notes are an integral part of these condensed consolidated financial statements.


8

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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands, except per share amounts)



1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Ameresco, Inc. (including its subsidiaries, the “Company”) are unaudited, pursuant to certain rules and regulations of the Securities and Exchange Commission, and include, in the opinion of the Company, normal recurring adjustments necessary for a fair presentation in conformity with accounting principles generally accepted in the United States (“GAAP”) of the results for the periods indicated.
The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of results which may be expected for the full year. The December 31, 2018 consolidated balance sheet data was derived from audited financial statements, but certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The interim condensed consolidated financial statements, and notes thereto, should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2018, and notes thereto, included in the Company’s annual report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission on March 8, 2019.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the Company are set forth in Note 2 to the consolidated financial statements contained in the Company’s 2018 annual report on Form 10-K. The Company includes herein certain updates to those policies.
Restricted Cash
Restricted cash consists of cash and cash equivalents held in an escrow account in association with construction draws for energy savings performance contracts (“ESPC”), construction of energy assets, operations and maintenance (“O&M”) reserve accounts and cash collateralized letters of credit as well as cash required under term loans to be maintained in debt service reserve accounts until all obligations have been indefeasibly paid in full. These accounts are primarily invested in highly liquid money market funds. The carrying amount of the cash and cash equivalents in these accounts approximates its fair value measured using level 1 inputs per the fair value hierarchy as defined in Note 10. Restricted cash also includes funds held for clients, which represent assets that, based upon the Company’s intent, are restricted for use solely for the purposes of satisfying the obligations to remit funds to third parties, primarily utility service providers, relating to the Company’s enterprise energy management services. As of June 30, 2019 and December 31, 2018, the Company classified the non-current portion of restricted cash of $21,804 and $19,637, respectively, in other assets on the accompanying condensed consolidated balance sheets.
Leases
All significant lease arrangements are recognized at lease commencement. Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at commencement. An ROU asset and corresponding lease liability are not recorded for leases with an initial term of 12 months or less (short term leases) as the Company recognizes lease expense for these leases as incurred over the lease term.
 ROU assets represent the Company’s right to use an underlying asset during the reasonably certain lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate, which is updated annually or when a significant event occurs that would indicate a significant change in rates, based on the information available at commencement date, in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments related to initial direct cost and prepayments and excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are generally accounted for as a single component. See Note 8 for additional discussion on the Company’s leases.
As of January 1, 2019, the Company adopted Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842) and, along with the standard, elected to take the practical expedient that the Company will not reassess lease classifications at adoption. Accordingly, the Company’s sales-leaseback arrangements entered into as of December 31, 2018 will remain under the previous guidance. See Note 8 for additional information on these sale-leasebacks.

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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


Variable Interest Entities
The Company generally aggregates the disclosures of its variable interest entities (“VIEs”) based on certain qualitative and quantitative factors including the purpose and design of the underlying VIEs, the nature of the assets in the VIE, and the type of involvement the Company has with the VIE including its role and type of interest held in the VIE. As of June 30, 2019, all of the fully consolidated VIEs that make up the Company’s investment funds are similar in purpose, design, and the Company’s involvement and, as such, are aggregated in one disclosure. See Note 12 for additional disclosures.
Equity Method Investment
The Company has entered into a joint venture that the Company has determined it is not the primary beneficiary of the VIE using the methodology previously described for variable interest entities. The Company does not consolidate the operations of this joint venture and treats the joint venture as an equity method investment. See Note 12 for additional information on the Company’s equity method investment.
Recent Accounting Pronouncements
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, the Company is electing to only recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the condensed consolidated statements of income. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
On January 1, 2019, the Company adopted ASU No. 2016-02 using the modified retrospective approach of applying the new standard at the adoption date. See Note 8 for the impact of the adoption and the new disclosures required by this standard.
In March 2019, the FASB issued ASU No. 2019-01, Leases (Topic 842): Codification Improvements, which provides clarification and improvements to the previous issued guidance. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company is currently evaluating the impact of ASU 2019-01 on its condensed consolidated financial statements, but does not expect that the adoption of this guidance will have a significant impact on its condensed consolidated financial statements.
Intangibles-Goodwill and Other
In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use-Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which clarifies the accounting for implementation, setup, and upfront costs and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new standard is effective interim and annual periods beginning after December 15, 2019, with early adoption permitted, and can be applied either retrospectively or prospectively. The Company adopted this guidance as of January 1, 2019 and the adoption did not have an impact on the Company’s condensed consolidated financial statements.
Derivatives and Hedging
In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which, among other things, clarifies some areas around partial-term fair value hedges interest rate risk, the amortization of fair value hedge basis adjustments and their disclosure, and some clarification of some matters related to transitioning to ASU No. 2017-12, which was adopted by the Company during the year ended December 31, 2018. For those that have already adopted ASU No. 2017-12, the new standard is effective the first annual period beginning after the issuance date of ASU No. 2019-04, with early adoption permitted. The Company is currently evaluating the impact of ASU No. 2019-04 on its condensed consolidated financial statements, but does not expect that the adoption of this guidance will have a significant impact on its condensed consolidated financial statements.

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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


Fair Value Measurement
In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of ASU 2018-13 on its condensed consolidated financial statements, but does not expect that the adoption of this guidance will have a significant impact on its condensed consolidated financial statements.
Accumulated Other Comprehensive Income
In February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, to allow entities to reclassify the income tax effects of tax reform legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) on items within accumulated other comprehensive income to retained earnings. ASU 2018-02 is effective for fiscal years and interim periods within those years beginning after December 15, 2018, and early adoption is permitted. The Company adopted the guidance as of January 1, 2019. Upon adoption, the Company recognized an increase to retained earnings and a corresponding increase to accumulated other comprehensive loss of $217.
Consolidations
In October 2018, the FASB issued ASU No. 2018-17, Consolidation (Topic 810), Targeted Improvements to Related Party Guidance for Variable Interest Entities, which aligns the evaluation of whether a decision maker's fee is a variable interest with the guidance in the primary beneficiary test by requiring the decision maker to consider an indirect interest in a VIE held by related party under common control on a proportionate basis. The new standard is effective interim and annual periods beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of ASU 2018-17 on its condensed consolidated financial statements, but does not expect that the adoption of this guidance will have a significant impact on its condensed consolidated financial statements.

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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue
The following table provides information about disaggregated revenue by line of business, reportable segments, and geographical region for the three and six months ended June 30, 2019 and 2018.
 
US Regions
 
U.S. Federal
 
Canada
 
Non-Solar DG
 
All Other
 
Total
Line of Business
Three Months Ended June 30, 2019
Project revenue
$
77,913

 
$
44,402

 
$
5,498

 
$
2,185

 
$
3,159

 
$
133,157

O&M revenue
3,982

 
9,389

 
5

 
2,406

 
21

 
15,803

Energy assets
5,343

 
976

 
938

 
18,492

 
280

 
26,029

Other
982

 
255

 
1,442

 
182

 
20,333

 
23,194

Total revenues
$
88,220

 
$
55,022

 
$
7,883

 
$
23,265

 
$
23,793

 
$
198,183

Three months ended June 30, 2018
Project revenue
$
80,877

 
$
47,437

 
$
5,317

 
$
1,201

 
$
4,200

 
$
139,032

O&M revenue
4,069

 
9,566

 

 
2,258

 

 
15,893

Energy assets
3,799

 
1,140

 
1,017

 
16,501

 
335

 
22,792

Other
33

 
71

 
1,624

 
(39
)
 
17,576

 
19,265

Total revenues
$
88,778

 
$
58,214

 
$
7,958

 
$
19,921

 
$
22,111

 
$
196,982

Six Months Ended June 30, 2019
Project revenue
$
123,617

 
$
76,755

 
$
10,732

 
$
3,259

 
$
6,226

 
$
220,589

O&M revenue
7,300

 
19,247

 
5

 
4,441

 
21

 
31,014

Energy assets
11,364

 
1,619

 
1,258

 
36,191

 
582

 
51,014

Other
1,536

 
458

 
3,036

 
604

 
40,044

 
45,678

Total revenues
$
143,817

 
$
98,079

 
$
15,031

 
$
44,495

 
$
46,873

 
$
348,295

Six Months Ended June 30, 2018
Project revenue
$
146,317

 
$
85,275

 
$
12,253

 
$
2,100

 
$
4,770

 
$
250,715

O&M revenue
7,964

 
18,744

 
19

 
4,254

 

 
30,981

Energy assets
8,780

 
1,909

 
1,383

 
31,615

 
599

 
44,286

Other
408

 
71

 
3,207

 
69

 
34,655

 
38,410

Total revenues
$
163,469

 
$
105,999

 
$
16,862

 
$
38,038

 
$
40,024

 
$
364,392


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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)



 
US Regions
 
U.S. Federal
 
Canada
 
Non-Solar DG
 
All Other
 
Total
Geographical Regions
Three Months Ended June 30, 2019
United States
$
88,220

 
$
55,022

 
$
556

 
$
23,265

 
$
19,469

 
$
186,532

Canada

 

 
7,327

 

 
42

 
7,369

Other

 

 

 

 
4,282

 
4,282

Total revenues
$
88,220

 
$
55,022

 
$
7,883

 
$
23,265

 
$
23,793

 
$
198,183

Three Months Ended June 30, 2018
United States
$
88,778

 
$
58,214

 
$
648

 
$
19,921

 
$
17,543

 
$
185,104

Canada

 

 
7,310

 

 
173

 
7,483

Other

 

 

 

 
4,395

 
4,395

Total revenues
$
88,778

 
$
58,214

 
$
7,958

 
$
19,921

 
$
22,111

 
$
196,982

Six Months Ended June 30, 2019
United States
$
143,817

 
$
98,079

 
$
1,258

 
$
44,495

 
$
38,116

 
$
325,765

Canada

 

 
13,773

 

 
107

 
13,880

Other

 

 

 

 
8,650

 
8,650

Total revenues
$
143,817

 
$
98,079

 
$
15,031

 
$
44,495

 
$
46,873

 
$
348,295

Six Months Ended June 30, 2018
United States
$
163,469

 
$
105,999

 
$
1,168

 
$
38,038

 
$
33,891

 
$
342,565

Canada

 

 
15,694

 

 
228

 
15,922

Other

 

 

 

 
5,905

 
5,905

Total revenues
$
163,469

 
$
105,999

 
$
16,862

 
$
38,038

 
$
40,024

 
$
364,392

Contract Balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers:
 
 
June 30, 2019
 
December 31, 2018
Accounts receivable, net
 
$
109,332

 
$
85,985

Accounts receivable retainage, net
 
15,383

 
13,516

Contract Assets:
 
 
 
 
Costs and estimated earnings in excess of billings
 
120,686

 
86,842

Contract Liabilities:
 
 
 
 
Billings in excess of cost and estimated earnings
 
30,209

 
30,706

 
 
June 30, 2018
 
January 1, 2018
Accounts receivable, net
 
$
115,596

 
$
85,121

Accounts receivable retainage, net
 
14,669

 
17,484

Contract Assets:
 
 
 
 
Costs and estimated earnings in excess of billings
 
64,656

 
95,658

Contract Liabilities:
 
 
 
 
Billings in excess of cost and estimated earnings
 
27,254

 
27,248


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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


Accounts receivable retainage represents amounts due from customers, but where payments are withheld contractually until certain construction milestones are met. Amounts retained typically range from 5% to 10% of the total invoice. The Company classifies as a current asset those retainages that are expected to be billed in the next twelve months. Unbilled revenue, presented as costs and estimated earnings in excess of billings, represent amounts earned and billable that were not invoiced at the end of the fiscal period.
Contract assets represent the Company’s rights to consideration in exchange for services transferred to a customer that have not been billed as of the reporting date. The Company’s rights to consideration are generally unconditional at the time its performance obligations are satisfied.
At the inception of a contract, the Company expects the period between when it satisfies its performance obligations, and when the customer pays for the services, will be one year or less. As such, the Company has elected to apply the practical expedient which allows the Company to not adjust the promised amount of consideration for the effects of a significant financing component, when a financing component is present.
When the Company receives consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract, the Company records deferred revenue, which represents a contract liability. Such deferred revenue typically results from billings in excess of costs incurred and advance payments received on project contracts. As of June 30, 2019 and December 31, 2018, the Company classified $5,829 and $6,343, respectively, as a non-current liability, included in other liabilities on the condensed consolidated balance sheets, for those performance obligations expected to be completed beyond the next twelve months.
The increase in contract assets for the six months ended June 30, 2019 was primarily due to revenue recognized of approximately $220,062, offset in part by billings of approximately $201,908. The decrease in contract liabilities was primarily driven by recognition of revenue as performance obligations were satisfied exceeding increases from the receipt of advance payments from customers, and related billings. For the six months ended June 30, 2019, the Company recognized revenue of $38,854, and billed customers $35,172, that was previously included in the beginning balance of contract liabilities. Changes in contract liabilities are also driven by reclassifications to or from contract assets as a result of timing of customer payments.
The decrease in contract assets for the six months ended June 30, 2018 was primarily due to billings of approximately $285,321, offset in part by revenue recognized of $236,327. The increase in contract liabilities was primarily driven by the receipt of advance payments from customers, and related billings, exceeding reductions from recognition of revenue as performance obligations were satisfied. For the six months ended June 30, 2018, the Company recognized revenue of $60,492, and billed customers $50,119, that was previously included in the beginning balance of contract liabilities. Changes in contract liabilities are also driven by reclassifications to or from contract assets as a result of timing of customer payments.
Contracts are often modified for a change in scope or other requirements. The Company considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of the Company’s contract modifications are for goods or services that are not distinct from the existing performance obligations.  The effect of a contract modification on the transaction price, and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase or decrease) on a cumulative catchup basis.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Performance obligations are satisfied as of a point in time or over time and are supported by contracts with customers. For most of the Company’s contracts, there are multiple promises of goods or services. Typically, the Company provides a significant service of integrating a complex set of tasks and components such as design, engineering, construction management, and equipment procurement for a project contract. The bundle of goods and services are provided to deliver one output for which the customer has contracted. In these cases, the Company considers the bundle of goods and services to be a single performance obligation. The Company may also promise to provide distinct goods or services within a contract, such as a project contract for installation of energy conservation measures and post-installation O&M services. In these cases the Company separates the contract into more than one performance obligation. If a contract is separated into more than one performance obligation, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation.

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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


Backlog - The Company’s remaining performance obligations (hereafter referred to as “backlog”) represent the unrecognized revenue value of the Company’s contract commitments. The Company’s backlog may vary significantly each reporting period based on the timing of major new contract commitments and the backlog may fluctuate with currency movements. In addition, our customers have the right, under some circumstances, to terminate contracts or defer the timing of the Company’s services and their payments to us. At June 30, 2019, the Company had backlog of approximately $1,695,300. Approximately 29% of our June 30, 2019 backlog is anticipated to be recognized as revenue in the next twelve months and the remaining, thereafter.
The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed.
Contract Acquisition Costs
The Company accounts for certain acquisition costs over the life of the contract, consisting primarily of commissions when paid. Commission costs are incurred commencing at contract signing. Commission costs are allocated across all performance obligations and deferred and amortized over the contract term and each performance obligations’ completion period.
For contracts that have a duration of less than one year, the Company follows a practical expedient and expenses these costs when incurred. During the six months ended June 30, 2019 and 2018, the amortization of commission costs related to contracts were not material and have been included in the accompanying condensed consolidated statements of income.
The Company capitalizes costs incurred related to the development of projects prior to contract signing as it is partial fulfillment of its performance obligations.  Capitalized project development costs include only those costs incurred in connection with the development of energy projects, primarily direct labor, interest costs, outside contractor services, consulting fees, legal fees and travel, if incurred after a point in time where the realization of related revenue becomes probable. Project development costs incurred prior to the probable realization of revenue are expensed as incurred. The Company classifies as a current asset those project development efforts that are expected to proceed to construction activity in the twelve months that follow. The Company periodically reviews these balances and writes off any amounts where the realization of the related revenue is no longer probable. Project development costs of $211 and $639 were included in other long-term assets as of June 30, 2019 and December 31, 2018, respectively.
During the six months ended June 30, 2019 and 2018, $11,033 and $6,010, respectively, of project development costs were recognized in the condensed consolidated statements of income on projects that converted to customer contracts.
No impairment charges in connection with the Company’s commission costs or project development costs were recorded during the periods ended June 30, 2019 and 2018.
4. BUSINESS ACQUISITIONS AND RELATED TRANSACTIONS
The Company accounts for acquisitions using the acquisition method in accordance with ASC 805, Business Combinations. The purchase price for each has been allocated to the net assets based on their estimated fair values at the date of each acquisition as set forth in the table below. The excess purchase price over the estimated fair value of the net assets, which are calculated using level 3 inputs per the fair value hierarchy as defined in Note 10, acquired has been recorded as goodwill. Intangible assets, if identified, have been recorded and are being amortized over periods ranging from one to fifteen years. See Note 5 for additional information.
Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions. Certain amounts below are provisional based on our best estimates using information available as of the reporting date. The Company is waiting for information to become available to finalize its valuation of certain elements of these transactions. Specifically, the assigned values for energy assets, intangibles, and goodwill are provisional in nature and subject to change upon the completion of the final valuation of such elements.
In January 2019, the Company completed an acquisition of a Massachusetts based solar operations and maintenance firm for consideration of $1,279. The final purchase price is subject to a net working capital adjustment, dependent on the level of working capital at the acquisition date, that has not yet been finalized. The pro-forma effects of this acquisition on our operations are not material. During the six months ended June 30, 2019, the Company had a measurement period adjustment of $91, which was recorded as a reduction to goodwill in connection with this acquisition.

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AMERESCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
(in thousands, except per share amounts)


A summary of the cumulative consideration paid and the allocation of the purchase price of all of the acquisitions in each respective period is as follows:
 
June 30, 2019
 
December 31, 2018
Accounts receivable
$
150

 
$
1,015

Prepaid expenses and other current assets
2

 
12

Property and equipment and energy assets
315

 

Intangibles
500

 
680

Goodwill
315

 
2,845

Accounts payable
(32
)
 
(67
)
Billings in excess of cost and estimated earnings
(62
)
 

Purchase price
$
1,188

 
$
4,485

Total, net of cash received
$
1,188

 
$
4,485

Debt assumed
$

 
$

Total fair value of consideration
$
1,188

 
$
4,485

The results of the acquired assets since the dates of the acquisitions have been included in the Company’s operations as presented in the accompanying condensed consolidated statements of income, condensed consolidated statements of comprehensive income and condensed consolidated statements of cash flows.
During the six months ended June 30, 2019, the Company had an additional measurement period adjustment of $628 related to a 2018 acquisition which was recorded as a reduction to goodwill and included a $398 reduction in the hold back contingency discussed further in Notes 5 and 9.
During the six months ended June 30, 2019, in order to expand its portfolio of energy assets, the Company acquired 4 solar projects from a developer and is under definitive agreement to acquire 3 additional solar projects. The Company has concluded that in accordance with ASC 805, Business Combinations, these acquisitions did not constitute a business as the assets acquired in each case are considered a single asset or group of similar assets that made up substantially all of the fair market value of the acquisitions. See Note 6 for additional disclosures on these asset acquisitions.
5. GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying value of goodwill attributable to each reportable segment are as follows:
 
U.S. Regions
 
U.S. Federal
 
Canada
 
Non-solar DG
 
Other
 
Total
Balance, December 31, 2018
$
26,370

 
$
4,609

 
$
3,217

 
$

 
$
24,136

 
$
58,332

Goodwill acquired during the year
406

 

 

 

 

 
406

Re-measurement adjustment
(91
)
 
(628
)
 

 

 

 
(719
)
Currency effects

 

 
132

 

 
(22
)
 
110

Balance, June 30, 2019
$
26,685

 
$
3,981

 
$
3,349</