amrc-20200930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020


☐						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 ☑ No ☐

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 ☑ No ☐

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 ☑	Non-accelerated filer o	Smaller reporting company ☐
Emerging growth company ☐		(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 ☐ No ☑

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 November 2, 2020
Class A Common Stock, $0.0001 par value per share	AMRC	29,866,075
Class B Common Stock, $0.0001 par value per share		18,000,000

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						Page
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets at September 30, 2020 (Unaudited) and December 31, 2019						1

Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2020 and 2019 (Unaudited)						3

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2019 (Unaudited)						4

Condensed Consolidated Statements of Changes in Redeemable Non-Controlling Interests and Stockholders’ Equity for the three and nine months ended September 30, 2020 and 2019 (Unaudited)						5

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (Unaudited)						7

Notes to Condensed Consolidated Financial Statements (Unaudited)						9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						35

Item 3. Quantitative and Qualitative Disclosures About Market Risk						46

Item 4. Controls and Procedures						46

PART II - OTHER INFORMATION
Item 1. Legal Proceedings						47

Item 1A. Risk Factors						47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						47

Item 5. Other Information						47

Item 6. Exhibits						49

Signatures						50

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Part I - Financial Information

Item 1. Condensed Consolidated Financial Statements

AMERESCO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


	September 30, 2020		December 31, 2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents (1)	$	45,351	$	33,223
Restricted cash (1)	15,598		20,006
Accounts receivable, net of allowance of $980 and $2,260, respectively (1)	121,672		95,863
Accounts receivable retainage, net	24,359		16,976
Costs and estimated earnings in excess of billings (1)	179,909		202,243
Inventory, net	9,081		9,236
Prepaid expenses and other current assets (1)	34,775		29,424
Income tax receivable	10,263		5,033
Project development costs	15,571		13,188
Total current assets (1)	456,579		425,192
Federal ESPC receivable	330,607		230,616
Property and equipment, net (1)	9,545		10,104
Energy assets, net (1)	670,139		579,461

Goodwill, net	58,172		58,414
Intangible assets, net	1,072		1,614
Operating lease assets (1)	36,336		32,791
Other assets (1)	22,247		35,821
Total assets (1)	$	1,584,697	$	1,374,013

LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portions of long-term debt and financing lease liabilities (1)	$	61,521	$	69,969
Accounts payable (1)	205,536		202,416
Accrued expenses and other current liabilities (1)	30,059		31,356
Current portions of operating lease liabilities (1)	6,010		5,802
Billings in excess of cost and estimated earnings	35,320		26,618
Income taxes payable	221		486
Total current liabilities (1)	338,667		336,647
Long-term debt and financing lease liabilities, net of current portion and deferred financing fees (1)	278,127		266,181
Federal ESPC liabilities	385,386		245,037
Deferred income taxes, net	3,994		115
Deferred grant income	7,007		6,885
Long-term operating lease liabilities, net of current portion (1)	32,509		29,101
Other liabilities (1)	39,529		29,575
Commitments and contingencies (Note 9)

Redeemable non-controlling interests, net	36,421		31,616

(1) Includes restricted assets of consolidated variable interest entities (“VIEs”) at September 30, 2020 and December 31, 2019 of $166,678 and $158,912, respectively. Includes non-recourse liabilities of consolidated VIEs at September 30, 2020 and December 31, 2019 of $35,334 and $38,568, respectively. See Note 12.

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AMERESCO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts) (Continued)


	September 30, 2020		December 31, 2019
	(Unaudited)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2020 and December 31, 2019	$	—	$	—
Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 31,967,870 shares issued and 29,866,075 shares outstanding at September 30, 2020, 31,331,345 shares issued and 29,230,005 shares outstanding at December 31, 2019	3		3
Class B common stock, $0.0001 par value, 144,000,000 shares authorized, 18,000,000 shares issued and outstanding at September 30, 2020 and December 31, 2019	2		2
Additional paid-in capital	141,599		133,688
Retained earnings	344,936		314,459
Accumulated other comprehensive loss, net	(11,695)		(7,514)

Treasury stock, at cost, 2,101,795 shares at September 30, 2020 and 2,101,340 shares at December 31, 2019	(11,788)		(11,782)
Total stockholders’ equity	463,057		428,856
Total liabilities, redeemable non-controlling interests and stockholders’ equity	$	1,584,697	$	1,374,013

See notes to condensed consolidated financial statements.

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AMERESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share amounts) (Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues	$	282,507	$	212,026	$	717,956	$	560,321
Cost of revenues	231,133		167,333		588,628		439,857
Gross profit	51,374		44,693		129,328		120,464
Selling, general and administrative expenses	26,859		31,231		82,403		87,396
Operating income	24,515		13,462		46,925		33,068
Other expenses, net	3,726		4,192		13,167		11,359
Income before income taxes	20,789		9,270		33,758		21,709
Income tax provision	3,100		939		597		2,000
Net income	17,689		8,331		33,161		19,709
Net loss (income) attributable to redeemable non-controlling interests	2,313		539		(2,593)		2,524
Net income attributable to common shareholders	$	20,002	$	8,870	$	30,568	$	22,233

Net income per share attributable to common shareholders:
Basic	$	0.42	$	0.19	$	0.64	$	0.48
Diluted	$	0.41	$	0.19	$	0.62	$	0.47
Weighted average common shares outstanding:
Basic	47,788		46,555		47,597		46,413
Diluted	49,101		47,693		48,785		47,675

See notes to condensed consolidated financial statements.

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AMERESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands) (Unaudited)


	Three Months Ended September 30,
	2020		2019
Net income	$	17,689	$	8,331
Other comprehensive income (loss):
Unrealized gain (loss) from interest rate hedges, net of tax effect of $199 and $(410)	638		(1,135)
Foreign currency translation adjustments	861		(356)
Total other comprehensive income (loss)	1,499		(1,491)
Comprehensive income	19,188		6,840

Comprehensive loss attributable to redeemable non-controlling interests	2,313		539
Comprehensive income attributable to common shareholders	$	21,501	$	7,379

	Nine Months Ended September 30,
	2020		2019
Net income	$	33,161	$	19,709
Other comprehensive (loss) income:
Unrealized loss from interest rate hedges, net of tax effect of $(1,209) and $(1,308)	(3,412)		(3,949)
Foreign currency translation adjustments	(769)		289
Total other comprehensive loss	(4,181)		(3,660)
Comprehensive income	28,980		16,049

Comprehensive (income) loss attributable to redeemable non-controlling interests	(2,593)		2,524
Comprehensive income attributable to common shareholders	$	26,387	$	18,573

See notes to condensed consolidated financial statements.

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AMERESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY

For the Three Months Ended September 30, 2020 and 2019

(In thousands, except share amounts) (Unaudited)


			Class A Common Stock			Class B Common Stock									Treasury Stock
	Redeemable Non-controlling Interests		Shares	Amount		Shares	Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Shares	Amount		Total Stockholders’ Equity
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


Exercise of stock options	—		630,220	—		—	—		4,005		—		—		—	—		4,005
Stock-based compensation expense	—		—	—		—	—		413		—		—		—	—		413

Open market purchase of common shares	—		(10,000)	—		—	—		—		—		—		10,000	(139)		(139)
Unrealized loss from interest rate hedges, net	—		—	—		—	—		—		—		(1,135)		—	—		(1,135)
Foreign currency translation adjustment	—		—	—		—	—		—		—		(356)		—	—		(356)
Contributions from redeemable non-controlling interests	974		—	—		—	—		—		—		—		—	—		—
Distributions to redeemable non-controlling interests	(364)		—	—		—	—		—		—		—		—	—		—
Net (loss) income	(539)		—	—		—	—		—		8,870		—		—	—		8,870
Balance, September 30, 2019	$	32,108	29,033,114	$	3	18,000,000	$	2	$	131,111	$	292,256	$	(9,609)	2,101,040	$	(11,777)	$	401,986

Balance, June 30, 2020	$	36,303	29,718,102	$	3	18,000,000	$	2	$	139,625	$	325,025	$	(13,194)	2,101,795	$	(11,788)	$	439,673

Exercise of stock options	—		147,813	—		—	—		1,450		—		—		—	—		1,450
Stock-based compensation expense	—		—	—		—	—		522		—		—		—	—		522
Employee stock purchase plan	—		160	—		—	—		2		—		—		—	—		2

Unrealized gain from interest rate hedges, net	—		—	—		—	—		—		—		638		—	—		638
Foreign currency translation adjustment	—		—	—		—	—		—		—		861		—	—		861
Contributions from redeemable non-controlling interests, net of tax equity financing fees of $635	2,865		—	—		—	—		—		—		—		—	—		—
Distributions to redeemable non-controlling interests	(525)		—	—		—	—		—		—		—		—	—		—
Accretion of tax equity financing fees	91		—	—		—	—		—		(91)		—		—	—		(91)
Net (loss) income	(2,313)		—	—		—	—		—		20,002		—		—	—		20,002
Balance, September 30, 2020	$	36,421	29,866,075	$	3	18,000,000	$	2	$	141,599	$	344,936	$	(11,695)	2,101,795	$	(11,788)	$	463,057

See notes to condensed consolidated financial statements.

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AMERESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY

For the Nine Months Ended September 30, 2020 and 2019

(In thousands, except share amounts) (Unaudited)


			Class A Common Stock			Class B Common Stock									Treasury Stock
	Redeemable Non-controlling Interests		Shares	Amount		Shares	Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Shares	Amount		Total Stockholders’ Equity
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 adoption of ASU No. 2014-09	—		—	—		—	—		—		217		(217)		—	—		—

Exercise of stock options	—		745,484	—		—	—		4,960		—		—		—	—		4,960
Stock-based compensation expense	—		—	—		—	—		1,195		—		—		—	—		1,195
Employee stock purchase plan	—		22,124	—		—	—		305		—		—		—	—		305
Open market purchase of common shares	—		(10,000)	—		—	—		—		—		—		10,000	(139)		(139)
Unrealized loss from interest rate hedges, net	—		—	—		—	—		—		—		(3,732)		—	—		(3,732)
Foreign currency translation adjustment	—		—	—		—	—		—		—		289		—	—		289
Contributions from redeemable non-controlling interests	20,482		—	—		—	—		—		—		—		—	—		—
Distributions to redeemable non-controlling interests	(569)		—	—		—	—		—		—		—		—	—		—
Net (loss) income	(2,524)		—	—		—	—		—		22,233		—		—	—		22,233
Balance, September 30, 2019	$	32,108	29,033,114	$	3	18,000,000	$	2	$	131,111	$	292,256	$	(9,609)	2,101,040	$	(11,777)	$	401,986

Balance, December 31, 2019	$	31,616	29,230,005	$	3	18,000,000	$	2	$	133,688	$	314,459	$	(7,514)	2,101,340	$	(11,782)	$	428,856

Exercise of stock options	—		608,063	—		—	—		6,088		—		—		—	—		6,088
Stock-based compensation expense	—		—	—		—	—		1,380		—		—		—	—		1,380
Employee stock purchase plan	—		28,462	—		—	—		443		—		—		—	—		443
Open market purchase of common shares	—		(455)	—		—	—		—		—		—		455	(6)		(6)
Unrealized loss from interest rate hedges, net	—		—	—		—	—		—		—		(3,412)		—	—		(3,412)
Foreign currency translation adjustment	—		—	—		—	—		—		—		(769)		—	—		(769)
Contributions from redeemable non-controlling interests, net of tax equity financing fees of $635	3,353		—	—		—	—		—		—		—		—	—		—
Distributions to redeemable non-controlling interests	(1,232)		—	—		—	—		—		—		—		—	—		—
Accretion of tax equity financing fees	91		—	—		—	—		—		(91)		—		—	—		(91)
Net income	2,593		—	—		—	—		—		30,568		—		—	—		30,568
Balance, September 30, 2020	$	36,421	29,866,075	$	3	18,000,000	$	2	$	141,599	$	344,936	$	(11,695)	2,101,795	$	(11,788)	$	463,057

See notes to condensed consolidated financial statements.

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AMERESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)


	Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities:
Net income	$	33,161	$	19,709
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation of energy assets	28,496		26,338
Depreciation of property and equipment	2,492		2,115
Amortization of debt discount and deferred financing fees	1,849		1,734
Amortization of intangible assets	528		681
Accretion of ARO and contingent consideration	64		98
Recoveries of bad debts	(1,089)		(134)
Loss on disposal / impairment of long-lived assets	2,146		—
Gain on deconsolidation of VIE	—		(2,160)
Net loss (gain) from derivatives	971		(1,072)
Stock-based compensation expense	1,380		1,195
Deferred income taxes	5,146		152

Unrealized foreign exchange (gain) loss	(43)		149
Changes in operating assets and liabilities:

Accounts receivable	(21,178)		(4,468)
Accounts receivable retainage	(7,422)		(3,079)
Federal ESPC receivable	(160,231)		(110,374)
Inventory, net	155		(2,137)
Costs and estimated earnings in excess of billings	24,824		(23,130)
Prepaid expenses and other current assets	3,916		(11,084)
Project development costs	(2,557)		(5,641)
Other assets	1,050		(698)
Accounts payable, accrued expenses and other current liabilities	(2,942)		(8,931)
Billings in excess of cost and estimated earnings	9,019		(952)
Other liabilities	1,972		(1,602)