amrc-20240331

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 March 31, 2024


☐						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)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of exchange on which registered
Class A Common Stock, par value $0.0001 per share	AMRC	New York Stock Exchange

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 every Interactive Data File required to be submitted 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 ☑	Accelerated Filer o	Non-accelerated filer o	Smaller reporting company ☐
Emerging growth 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			Shares outstanding as of May 1, 2024
Class A Common Stock, $0.0001 par value per share			34,338,602
Class B Common Stock, $0.0001 par value per share			18,000,000

TABLE OF CONTENTS


						Page
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at March 31, 2024 (Unaudited) and December 31, 2023						1
Condensed Consolidated Statements of (Loss) Income for the three months ended March 31, 2024 and 2023 (Unaudited)						3
Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended March 31, 2024 and 2023 (Unaudited)						4
Condensed Consolidated Statements of Changes in Redeemable Non-Controlling Interests and Stockholders’ Equity for the three and nine months ended March 31, 2024 and 2023 (Unaudited)						5
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (Unaudited)						6
Notes to Condensed Consolidated Financial Statements (Unaudited)						8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						28
Item 3. Quantitative and Qualitative Disclosures About Market Risk						37
Item 4. Controls and Procedures						37

PART II - OTHER INFORMATION
Item 1. Legal Proceedings						38
Item 1A. Risk Factors						38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						38
Item 5. Other Information						38
Item 6. Exhibits						39
Signatures						40

Table of Contents

Part I - Financial Information

Item 1. Condensed Consolidated Financial Statements

AMERESCO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


	March 31, 2024		December 31, 2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents (1)	$	77,681	$	79,271
Restricted cash (1)	57,737		62,311
Accounts receivable, net of allowance of $898 and $903, respectively (1)	146,836		153,362
Accounts receivable retainage, net	32,158		33,826
Costs and estimated earnings in excess of billings (1)	652,428		636,163
Inventory, net	13,076		13,637
Prepaid expenses and other current assets (1)	118,813		123,391
Income tax receivable	4,836		5,775
Project development costs, net	22,907		20,735
Total current assets (1)	1,126,472		1,128,471
Federal ESPC receivable	577,651		609,265
Property and equipment, net (1)	17,170		17,395
Energy assets, net (1)	1,788,569		1,689,424
Deferred income tax assets, net	25,677		26,411
Goodwill, net	75,311		75,587
Intangible assets, net	6,197		6,808
Operating lease assets (1)	69,348		58,586
Restricted cash, non-current portion (1)	12,553		12,094
Other assets (1)	104,318		89,735
Total assets (1)	$	3,803,266	$	3,713,776
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portions of long-term debt and financing lease liabilities, net (1)	$	539,201	$	322,247
Accounts payable (1)	437,240		402,752
Accrued expenses and other current liabilities (1)	109,954		108,831
Current portions of operating lease liabilities (1)	14,220		13,569
Billings in excess of cost and estimated earnings	61,267		52,903
Income taxes payable	398		1,169
Total current liabilities (1)	1,162,280		901,471
Long-term debt and financing lease liabilities, net of current portion, unamortized discount and debt issuance costs (1)	1,011,576		1,170,075
Federal ESPC liabilities	504,689		533,054
Deferred income tax liabilities, net	4,584		4,479
Deferred grant income	6,737		6,974
Long-term operating lease liabilities, net of current portion (1)	50,710		42,258
Other liabilities (1)	88,619		82,714
Commitments and contingencies (Note 10)
Redeemable non-controlling interests, net	43,908		46,865

(1) Includes restricted assets of consolidated variable interest entities (“VIEs”) at March 31, 2024 and December 31, 2023 of $194,752 and $312,701, respectively. Includes liabilities of consolidated VIEs at March 31, 2024 and December 31, 2023 of $45,878 and 199,063, respectively. See Note 13.

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AMERESCO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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


	March 31, 2024		December 31, 2023
	(Unaudited)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2024 and December 31, 2023	$	—	$	—
Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 36,421,956 shares issued and 34,320,161 shares outstanding at March 31, 2024, 36,378,990 shares issued and 34,277,195 shares outstanding at December 31, 2023	3		3
Class B common stock, $0.0001 par value, 144,000,000 shares authorized, 18,000,000 shares issued and outstanding at March 31, 2024 and December 31, 2023	2		2
Additional paid-in capital	327,367		320,892
Retained earnings	592,947		595,911
Accumulated other comprehensive loss, net	(3,592)		(3,045)
Treasury stock, at cost, 2,101,795 shares at March 31, 2024 and December 31, 2023	(11,788)		(11,788)
Stockholders’ equity before non-controlling interest	904,939		901,975
Non-controlling interests	25,224		23,911
Total stockholders’ equity	930,163		925,886
Total liabilities, redeemable non-controlling interests, and stockholders’ equity	$	3,803,266	$	3,713,776

See notes to condensed consolidated financial statements.

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AMERESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME

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


	Three Months Ended March 31,
	2024		2023
Revenues	$	298,406	$	271,042
Cost of revenues	251,413		221,094
Gross profit	46,993		49,948
Earnings from unconsolidated entities	555		450
Selling, general and administrative expenses	39,555		41,301
Operating income	7,993		9,097
Other expenses, net	14,171		8,043
(Loss) income before income taxes	(6,178)		1,054
Income tax provision (benefit)	—		(503)
Net (loss) income	(6,178)		1,557
Net loss (income) attributable to non-controlling interests and redeemable non-controlling interests	3,241		(455)
Net (loss) income attributable to common shareholders	$	(2,937)	$	1,102

Net (loss) income per share attributable to common shareholders:
Basic	$	(0.06)	$	0.02
Diluted	$	(0.06)	$	0.02
Weighted average common shares outstanding:
Basic	52,289		51,963
Diluted	52,289		53,261

See notes to condensed consolidated financial statements.

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AMERESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands) (Unaudited)


	Three Months Ended March 31,
	2024		2023
Net (loss) income	$	(6,178)	$	1,557
Other comprehensive income (loss):
Unrealized gain (loss) from interest rate hedges, net of tax	539		(868)
Foreign currency translation adjustments	(1,162)		282
Total other comprehensive loss	(623)		(586)
Comprehensive (loss) income	(6,801)		971
Comprehensive (loss) income attributable to non-controlling interests and redeemable non-controlling interests:
Net loss (income)	3,241		(455)
Foreign currency translation adjustments	76		(8)
Comprehensive loss (income) attributable to non-controlling interests and redeemable non-controlling interests	3,317		(463)
Comprehensive (loss) income attributable to common shareholders	$	(3,484)	$	508

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 March 31, 2024 and 2023

(In thousands, except share amounts) (Unaudited)


	Redeemable Non-controlling Interests		Class A Common Stock			Class B Common Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Loss		Treasury Stock			Non-controlling Interests		Total Stockholders’ Equity
			Shares	Amount		Shares	Amount				Retained Earnings				Shares	Amount
Balance, December 31, 2022	$	46,623	33,948,362	$	3	18,000,000	$	2	$	306,314	$	533,549	$	(4,051)	2,101,795	$	(11,788)	$	49,002	$	873,031


Exercise of stock options	—		82,000	—		—	—		571		—		—		—	—		—		571
Stock-based compensation expense	—		—	—		—	—		4,037		—		—		—	—		—		4,037


Unrealized loss from interest rate hedges, net	—		—	—		—	—		—		—		(868)		—	—		—		(868)
Foreign currency translation adjustment	—		—	—		—	—		—		—		274		—	—		8		282

Distributions to redeemable non-controlling interests	(178)		—	—		—	—		—		—		—		—	—		—		—

Accretion of tax equity financing fees	27		—	—		—	—		—		(27)		—		—	—		—		(27)
Investment fund call option exercise	196		—	—		—	—		(196)		—		—		—	—		—		(196)
Contributions from non-controlling interest	—		—	—		—	—		—		—		—		—	—		16,417		16,417
Net income	32		—	—		—	—		—		1,102		—		—	—		423		1,525
Balance, March 31, 2023	$	46,700	34,030,362	$	3	18,000,000	$	2	$	310,726	$	534,624	$	(4,645)	2,101,795	$	(11,788)	$	65,850	$	894,772

Balance, December 31, 2023	$	46,865	34,277,195	$	3	18,000,000	$	2	$	320,892	$	595,911	$	(3,045)	2,101,795	$	(11,788)	$	23,911	$	925,886

Exercise of stock options	—		31,889	—		—	—		183		—		—		—	—		—		183
Stock-based compensation expense	—		—	—		—	—		3,026		—		—		—	—		—		3,026

Restricted stock units released	—		11,077	—		—	—		—		—		—		—	—		—		—
Unrealized gain from interest rate hedges, net	—		—	—		—	—		—		—		539		—	—		—		539
Foreign currency translation adjustment	—		—	—		—	—		—		—		(1,086)		—	—		(76)		(1,162)

Distributions to redeemable non-controlling interests	(129)		—	—		—	—		—		—		—		—	—		—		—
Accretion of tax equity financing fees	27		—	—		—	—		—		(27)		—		—	—		—		(27)

Contributions from non-controlling interests	—		—	—		—	—		3,040		—		—		—	—		25,824		28,864
Distributions to non-controlling interest	—		—	—		—	—		—		—		—		—	—		(63)		(63)
Purchase of shares from non-controlling interest	—		—	—		—	—		226		—		—		—	—		(23,986)		(23,760)
Net loss	(2,855)		—	—		—	—		—		(2,937)		—		—	—		(386)		(3,323)
Balance, March 31, 2024	$	43,908	34,320,161	$	3	18,000,000	$	2	$	327,367	$	592,947	$	(3,592)	2,101,795	$	(11,788)	$	25,224	$	930,163

See notes to condensed consolidated financial statements.

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AMERESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net (loss) income	$	(6,178)	$	1,557
Adjustments to reconcile net (loss) income to net cash flows from operating activities:
Depreciation of energy assets, net	17,124		13,341
Depreciation of property and equipment	1,175		644
Increase in contingent consideration	—		121
Accretion of ARO liabilities	66		66
Amortization of debt discount and debt issuance costs	982		790
Amortization of intangible assets	539		302
Provision for bad debts	1		93
Loss on write-off of long-lived assets	—		18

Non-cash project revenue related to in-kind leases	(775)		—
Earnings from unconsolidated entities	(555)		(450)
Net (gain) loss from derivatives	(2,359)		163

Stock-based compensation expense	3,026		4,037
Deferred income taxes, net	687		(7,142)

Unrealized foreign exchange loss (gain)	806		(29)
Changes in operating assets and liabilities:
Accounts receivable	5,899		58,954
Accounts receivable retainage	1,580		2,439
Federal ESPC receivable	(26,395)		(33,736)
Inventory, net	561		608
Costs and estimated earnings in excess of billings	(7,842)		85,748
Prepaid expenses and other current assets	104		929
Income taxes receivable, net	180		6,380
Project development costs	(1,728)		(1,812)
Other assets	(1,413)		(1,903)
Accounts payable, accrued expenses and other current liabilities	23,849		(82,266)
Billings in excess of cost and estimated earnings	9,160		9,398
Other liabilities	2,323		522
Cash flows from operating activities	20,817		58,772
Cash flows from investing activities:
Purchases of property and equipment	(962)		(1,657)
Capital investment in energy assets	(105,633)		(89,787)
Capital investment in major maintenance of energy assets	(5,355)		(589)

Net proceeds from equity method investment	12,956		—
Contributions to equity method investments	(4,776)		—
Acquisitions, net of cash received	—		(9,182)
Loans to joint venture investments	—		(38)
Cash flows from investing activities	(103,770)		(101,253)


See notes to condensed consolidated financial statements.

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AMERESCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited) (Continued)

	Three Months Ended March 31,
	2024		2023
Cash flows from financing activities:

Payments of debt discount and debt issuance costs	$	(590)	$	(366)
Proceeds from exercises of options and ESPP	183		571

Proceeds from senior secured revolving credit facility, net	20,100		—
Proceeds from long-term debt financings	89,321		58,188
Proceeds from Federal ESPC projects	19,581		42,309
Net proceeds from energy asset receivable financing arrangements	4,748		4,438

Contributions from non-controlling interests	28,864		16,308
Distributions to non-controlling interest	(63)		—
Distributions to redeemable non-controlling interests, net	(133)		(161)
Payment on seller's promissory note	(29,441)		—
Payments on long-term debt and financing leases	(55,196)		(15,159)
Cash flows from financing activities	77,374		106,128
Effect of exchange rate changes on cash	(126)		42
Net (decrease) increase in cash, cash equivalents, and restricted cash	(5,705)		63,689
Cash, cash equivalents, and restricted cash, beginning of period	153,676		149,888
Cash, cash equivalents, and restricted cash, end of period	$	147,971	$	213,577

Supplemental disclosures of cash flow information:
Cash paid for interest	$	26,911	$	13,135
Cash paid for income taxes	$	59	$	323
Non-cash Federal ESPC settlement	$	49,926	$	—
Accrued purchases of energy assets	$	88,447	$	97,542
Non-cash contributions from non-controlling interest	$	—	$	109
Non-cash financing for energy asset project acquisition	$	32,500	$	—

See notes to condensed consolidated financial statements.

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AMERESCO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands) (Unaudited)

1. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements of Ameresco, Inc. (including its subsidiaries, the “Company,” “Ameresco,” “we,” “our,” or “us”) are unaudited, according to certain rules and regulations of the Securities and Exchange Commission, and include, in our opinion, 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 months ended March 31, 2024 are not necessarily indicative of results which may be expected for the full year. The December 31, 2023 consolidated balance sheet data was derived from audited financial statements, but certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. The interim condensed consolidated financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2023, included in our annual report on Form 10-K (“2023 Form 10-K”) filed with the Securities and Exchange Commission on February 29, 2024.

Reclassification and Rounding

Certain prior period amounts were reclassified to conform to the presentation in the current period. We round amounts in the condensed consolidated financial statements to thousands and calculate all percentages and per-share data from the underlying whole-dollar amounts. Thus, certain amounts may not foot, crossfoot, or recalculate based on reported numbers due to rounding.

Significant Risks and Uncertainties

Global factors have continued to result in global supply chain disruptions and inflationary pressures.

We have considered the impact of general global economic conditions on the assumptions and estimates used, which may change in response to this evolving situation. Results of future operations and liquidity could be adversely impacted by a number of factors including supply chain disruptions, varying levels of inflation, payments of outstanding receivable amounts beyond normal payment terms, workforce disruptions, and uncertain demand. As of the date of issuance of these condensed consolidated financial statements, we cannot reasonably estimate the extent to which macroeconomic conditions may impact our financial condition, liquidity, or results of operations in the foreseeable future. The ultimate impact of the pandemic and general global economic conditions on our business is highly uncertain and will depend on future developments, and such impacts could exist for an extended period of time, even after the pandemic subsides.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our accounting policies are set forth in Note 2 to the consolidated financial statements contained in our 2023 Form 10-K. We have included certain updates to those policies below.

Accounts Receivable and Allowance for Credit Losses

Changes in the allowance for credit losses are as follows:


	Three Months Ended March 31,
	2024		2023
Allowance for credit losses, beginning of period	$	903	$	911
Charges to (recoveries of) costs and expenses, net	1		93
Account write-offs and other	(6)		(33)
Allowance for credit losses, end of period	$	898	$	971

Accounts Receivable Factoring

Ameresco’s wholly-owned subsidiary in Italy entered into factoring agreements to sell certain receivables to unrelated third-party financial institutions on a non-recourse basis. These transactions are accounted for in accordance with ASC Topic 860, Transfers and Servicing and result in a reduction in accounts receivable because the agreements transfer effective control over the receivables, and related risk, to the buyers. Our Italian subsidiary does not retain any interest in the underlying accounts

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AMERESCO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands) (Unaudited) (Continued)

receivable once sold. Trade accounts receivables balances sold are removed from the condensed consolidated balance sheets, and cash received is reflected in operating activities in the condensed consolidated statements of cash flows. Factoring fees during the three months ended March 31, 2024 and 2023 were $169 and $0, respectively, and are included in other expense, net in the condensed consolidated statements of income. See Note 18. Other Expenses, Net.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist primarily of other receivables, deferred project costs, and other short-term prepaid expenditures that will be expensed within one year.

Prepaid expenses and other current assets comprised of the following:


	March 31, 2024		December 31, 2023
Other receivables	$	44,014	$	74,454
Deferred project costs	65,020		38,240
Prepaid expenses	9,779		10,697
Prepaid expenses and other current assets	$	118,813	$	123,391

Recent Accounting Pronouncements

Business Combinations— Joint Venture Formations

In August 2023, the FASB issued ASU 2023-05, Business Combinations— Joint Venture Formations (Subtopic 805-60) Recognition and Initial Measurement, which addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture’s separate financial statements. ASU 2023-05 is effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. We are currently evaluating the impact that adopting this new accounting standard would have on our condensed consolidated consolidated financial statements.

Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which updates the disclosure or presentation requirements for a variety of topics in the codification. ASU 2023-06 is effective from the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K, with early adoption prohibited. We will monitor the removal of the requirements from the current regulations and adopt the related amendments, but we do not anticipate this new guidance will have a material impact on our condensed consolidated financial statements as we are currently subject to SEC requirements.

Segment Reporting (Topic 820) - Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 820) - Improvements to Reportable Segment Disclosures, which improves reportable segment disclosures by requiring enhanced disclosures for significant segment expenses and other segment items. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We are currently evaluating the impact that adopting this new accounting standard would have on our condensed consolidated financial statements.

Income Taxes (Topic 740) - Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance the income tax disclosures, including disaggregation of information in the rate reconciliation table and disaggregated information related to income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. We are currently evaluating the impact that adopting this new accounting standard would have on our condensed consolidated financial statements.

Compensation—Stock Compensation (Topic 718) - Scope Application of Profits Interest and Similar Awards

In March 2024, the FASB issued ASU 2024-01, Compensation—Stock Compensation (Topic 718) - Scope Application of Profits Interest and Similar Awards, to clarify how to determine if a profits interest or similar award is within the scope of ASC 718 or is not a share-based payment arrangement and is within the scope of other guidance. ASU 2024-01 is effective for fiscal years

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AMERESCO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands) (Unaudited) (Continued)

beginning after December 15, 2024. We are currently evaluating the impact that adopting this new accounting standard would have on our condensed consolidated financial statements.

Codification Improvements—Amendments to Remove References to the Concepts Statements

In March 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements, to remove references to various FASB Concepts Statements based on suggestions received from stakeholders on the Accounting Standards Codification and other incremental improvements to GAAP. ASU 2024-02 is effective for fiscal years beginning after December 15, 2024. We are currently evaluating the impact that adopting this new accounting standard would have on our condensed consolidated financial statements.

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

Our reportable segments for the three months ended March 31, 2024 were North America Regions, U.S. Federal, Europe, Alternative Fuels and All Other. On January 1, 2024, we changed the structure of our internal organization, and our U.S. Regions and Canada are now included in North America Regions. Additionally, our Asset Sustainability Group was formerly included in Canada, but is now included in “All Other”. As a result, previously reported amounts have been reclassified for comparative purposes.

The following table presents our revenue disaggregated by line of business and reportable segment for the three months ended March 31, 2024:


	North America Regions		U.S. Federal		Europe		Alternative Fuels		All Other		Total
Project revenue	$	116,211	$	43,479	$	41,424	$	3,163	$	7	$	204,284
O&M revenue	6,933		15,278		747		2,377		—		25,335
Energy assets	13,754		1,929		171		27,300		—		43,154

Other	1,387		204		1,780		19		22,243		25,633
Total revenues	$	138,285	$	60,890	$	44,122	$	32,859	$	22,250	$	298,406

The following table presents our revenue disaggregated by line of business and reportable segment for the three months ended March 31, 2023:


	North America Regions		U.S. Federal		Europe		Alternative Fuels		All Other		Total
Project revenue	$	119,231	$	45,549	$	17,200	$	—	$	1,250	$	183,230
O&M revenue	5,539		12,700		333		3,686		—		22,258
Energy assets	14,407		1,076		519		24,653		117		40,772

Other	1,365		231		1,044		—		22,142		24,782
Total revenues	$	140,542	$	59,556	$	19,096	$	28,339	$	23,509	$	271,042

The following table presents information related to our revenue recognized over time:


	Three Months Ended March 31,
	2024	2023
Percentage of revenue recognized over time	94%	93%

The remainder of our revenue is for products and services transferred at a point in time, at which point revenue is recognized.

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We attribute revenues to customers based on the location of the customer. The following table presents information related to our revenues by geographic area:


	Three Months Ended March 31,
	2024		2023
United States	$	239,099	$	233,084
Canada	15,180		17,234
Europe	44,127		20,724
Total revenues	$	298,406	$	271,042

Contract Balances

The following tables provide information about receivables, contract assets and contract liabilities from contracts with customers:


	March 31, 2024		December 31, 2023
Accounts receivable, net	$	146,836	$	153,362
Accounts receivable retainage, net	32,158		33,826
Contract Assets:
Costs and estimated earnings in excess of billings	$	652,428	$	636,163
Contract Liabilities:
Billings in excess of cost and estimated earnings	$	61,267	$	52,903
Billings in excess of cost and estimated earnings, non-current (1)	19,883		18,688
Total contract liabilities	$	81,150	$	71,591


	March 31, 2023		December 31, 2022
Accounts receivable, net	$	130,940	$	174,009
Accounts receivable retainage, net	35,625		38,057
Contract Assets:
Costs and estimated earnings in excess of billings	$	497,762	$	576,363
Contract Liabilities:
Billings in excess of cost and estimated earnings	$	39,326	$	34,796
Billings in excess of cost and estimated earnings, non-current (1)	12,510		7,617
Total contract liabilities	$	51,836	$	42,413

(1) Performance obligations that are expected to be completed beyond the next twelve months and are included in other liabilities in the condensed consolidated balance sheets.

The increase in contract assets for the three months ended March 31, 2024 was primarily due to billings of $210,475 offset by revenue recognized of $203,216. Contract assets are also affected by reclassifications, primarily from contract liabilities as a result of timing of customer payments. The increase in contract liabilities was primarily driven by the receipt of advance payments from customers, and related billings, as well as reclassifications from contract assets as a result of timing of customer payments. The advance payments and reclassifications exceeded the recognition of revenue as performance obligations were satisfied. For the three months ended March 31, 2024, we recognized revenue of $60,748 and billed $46,306 to customers that had balances which were included in contract liabilities at December 31, 2023.

The decrease in contract assets for the three months ended March 31, 2023 was primarily due to billings of $286,203 offset by revenue recognized of $190,415. Contract assets also decreased due to reclassifications, primarily from contract liabilities as a result of timing of customer payments. The increase in contract liabilities was primarily driven by the receipt of advance payments from customers, and related billings, as well as reclassifications from contract assets as a result of timing of customer payments. The advance payments and reclassifications exceeded the recognition of revenue as performance obligations were satisfied.. For the three months ended March 31, 2023, we recognized revenue of $34,715 and billed $39,082 to customers that had balances which were included in the beginning balance of contract liabilities.

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Performance Obligations

Our remaining performance obligations (“backlog”) represent the unrecognized revenue value of our contract commitments. At March 31, 2024, we had contracted backlog of $2,658,592 of which approximately 32% is anticipated to be recognized as revenue in the next twelve months. The remaining performance obligations primarily relate to the energy efficiency and renewable energy construction projects, including long-term operations and maintenance (“O&M”) services related to these projects. The long-term services have varying initial contract terms, up to 25 years.

Project Development Costs

Project development costs of $3,120 and $2,612 were recognized in our condensed consolidated statements of (loss) income on projects that converted to customer contracts during the three months ended March 31, 2024 and 2023, respectively.

No impairment charges in connection with our project development costs were recorded during the three or three months ended March 31, 2024 and 2023.

4. BUSINESS ACQUISITIONS AND RELATED TRANSACTIONS

We account for acquisitions using the acquisition method in accordance with ASC 805, Business Combinations. The purchase price for each acquisition is allocated to the assets based on their estimated fair values at the date of acquisition. The excess purchase price over the estimated fair value of the net assets acquired, which is calculated using level 3 inputs per the fair value hierarchy as defined in Note 11, is recorded as goodwill. Intangible assets, if identified, are also recorded. See Note 5 for additional information.

Enerqos Energy Solutions S.r.l. (“Enerqos”)

On February 24, 2023, we signed a definitive purchase and sale agreement to acquire Enerqos, a renewable energy and energy efficiency company headquartered in Milan, Italy. The acquisition closed on March 30, 2023 and the total purchase consideration was $13,445, of which $9,535 has been paid. There is no contingent consideration related to this acquisition. Cash acquired was $353, debt assumed was $3,951, and a deferred tax liability, net of $931 was recorded. In accordance with the SEC’s Regulation S-X and GAAP, we evaluated and determined that Enerqos is not deemed to be a significant subsidiary, therefore, we are not presenting the pro-forma effects of this acquisition on our operations.

The estimated goodwill of $6,855 from the Enerqos acquisition consists largely of expected benefits, including the combined entities experience and the acquired workforce. This goodwill is not deductible for income tax purposes. The estimated fair value of tangible and intangible assets acquired and liabilities assumed are based on management's estimates and assumptions that are preliminary and subject to adjustments. Any measurement period adjustments made within one year from acquisition date, are recorded as adjustments to goodwill. Any adjustments made beyond the measurement period will be included in our condensed consolidated statements of income.

The results of the acquisition since the date of the acquisition have been included in our operations as presented in the accompanying condensed consolidated statements of (loss) income, condensed consolidated statements of comprehensive (loss) income and condensed consolidated statements of cash flows. For the quarter ended March 31, 2024, we recognized $4,178 of revenue and $740 of net loss relating to Enerqos.

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A summary of the cumulative consideration paid and allocation of the purchase price for the Enerqos acquisition are presented in the table below:


	Preliminary March 31, 2023		Measurement Period Adjustment		As Adjusted December 31, 2023
Cash	$	9,535	$	—	$	9,535
Long-term debt assumed, net of current portions	3,951		—		3,951
FX adjustment	(41)		—		(41)
Fair value of consideration transferred	$	13,445	$	—	$	13,445

Cash and cash equivalents	$	190	$	—	$	190
Accounts receivable	6,230		—		6,230
Costs and estimated earnings in excess of billings	8,985		—		8,985
Prepaid expenses and other current assets	16,504		—		16,504
Project development costs	5,140		—		5,140
Property and equipment and energy assets	1,234		—		1,234
Intangible assets	4,438		—		4,438
Long-term restricted cash	163		—		163
Accounts payable	(15,480)		—		(15,480)
Accrued expenses and other current liabilities	(4,510)		165		(4,345)
Current portions of long-term debt	(15,165)		—		(15,165)
Deferred income tax liabilities, net	(931)		—		(931)
Other liabilities	(208)		—		(208)
Recognized identifiable assets acquired and liabilities assumed	$	6,590	$	165	$	6,755
Goodwill	$	6,855	$	(165)	$	6,690

5. GOODWILL AND INTANGIBLE ASSETS, NET

Due to the change in the structure of our internal organization, a portion of our goodwill was allocated to two new reporting units based on their relative fair values as of January 1, 2024. See Note 3 for additional information about the organizational changes. The changes in the carrying value of goodwill balances by reportable segment were as follows:


	North America Regions		U.S. Federal		Europe		Alternative Fuels		Other		Total
Carrying Value of Goodwill
Balance, December 31, 2023	$	40,681	$	3,981	$	13,034	$	—	$	17,891	$	75,587
Goodwill acquired during the year	—		—		—		—		—		—
Fair value allocation	(1,474)		—		—		—		1,474		—
Currency effects	(70)		—		(206)		—		—		(276)
Balance, March 31, 2024	$	39,137	$	3,981	$	12,828	$	—	$	19,365	$	75,311

Definite-lived intangible assets, net consisted of the following:


	As of March 31, 2024		As of December 31, 2023
Gross carrying amount	$	36,960	37,147
Less - accumulated amortization	(30,763)		(30,339)
Intangible assets, net	$	6,197	$	6,808

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The table below sets forth amortization expense:


		Three Months Ended March 31,
Asset type	Location	2024	2023

All other intangible assets	Selling, general and administrative expenses	539	302

6. ENERGY ASSETS, NET

Energy assets, net consisted of the following:


	March 31, 2024		December 31, 2023
Energy assets (1)	$	2,170,223	$	2,054,145
Less - accumulated depreciation and amortization	(381,654)		(364,721)
Energy assets, net	$	1,788,569	$	1,689,424

(1) Includes financing lease assets (see Note 7), capitalized interest and asset retirement obligations (“ARO”) assets (see tables below). Also includes the energy asset projects acquired in January 2024. See section below for additional information.

August 2023 Purchase and Sale Agreement

On August 4, 2023, we entered into a purchase and sale agreement to acquire an energy asset project and to acquire 100% of the stock of Bright Canyon Energy Corporation (“BCE”) in a two-phased transaction. Phase 1, the purchase of the energy asset project, closed on August 4, 2023 and did not constitute a business in accordance with ASC 805-50, Business Combinations.

The purchase price for phase 1 was $87,964, of which $5,000 was paid in cash, $46,694 was financed through a seller’s note, and we assumed a construction loan on the energy asset project for $36,270. We also acquired cash of $11,206. During the year ended December 31, 2023, we paid $18,400 in principal on the sellers note. In January 2024, the purchase price was increased by $1,147 and we paid off the seller’s note in the amount of $29,441. We also assumed a land lease for the energy asset project.

On December 28, 2023, we executed an amended and restated purchase and sale agreement, which primarily revised the timing of payments on phase 2. In the second phase, which closed on January 12, 2024, we acquired BCE, including its interest in a consolidated joint venture and its interests in project subsidiaries developing or with rights to develop solar, battery, and microgrid assets for an adjusted purchase price of $47,956, of which $9,839 was paid in cash and $32,500 was financed through a seller’s note. The remaining balance due of $5,617 is included in accrued expenses and other current liabilities at March 31, 2024. We also assumed four land leases for the energy asset projects.

Phase 2, the purchase of the energy asset projects did not constitute a business in accordance with ASC 805-50, Business Combinations.

See Note 8 for additional information about these loans, Note 7 for information on the leases and Note 10 for potential additional commitments.

Depreciation and Amortization Expense

The following table sets forth our depreciation and amortization expense on energy assets, net of deferred grant amortization:


	Three Months Ended March 31,
Location	2024		2023
Cost of revenues (2)	$	17,124	$	13,341

(2) Includes depreciation and amortization on financing lease assets (see Note 7).

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Capitalized Interest

The following table presents the interest costs relating to construction financing during the period of construction, which were capitalized as part of energy assets, net:


	Three Months Ended March 31,
	2024		2023
Capitalized interest	$	14,872	$	6,376

The following tables sets forth information related to our ARO assets and ARO liabilities:


	Location	March 31, 2024		December 31, 2023
ARO assets, net	Energy assets, net	$	4,619	$	4,800


ARO liabilities, non-current	Other liabilities	$	5,886	$	5,960


	Three Months Ended March 31,
	2024		2023
Depreciation expense of ARO assets	$	44	$	55
Accretion expense of ARO liabilities	$	66	$	66

7. LEASES

The table below sets forth supplemental condensed consolidated balance sheet information related to our leases:


	March 31, 2024			December 31, 2023
Operating Leases:
Operating lease assets	$	69,348		$	58,586

Current portions of operating lease liabilities	$	14,220		$	13,569
Long-term portions of operating lease liabilities	50,710			42,258
Total operating lease liabilities	$	64,930		$	55,827
Weighted-average remaining lease term	19 years			18 years
Weighted-average discount rate	6.6		%	6.6		%

Financing Leases:
Energy assets	$	26,736		$	27,262

Current portions of financing lease liabilities	$	1,027		$	871
Long-term financing lease liabilities, net of current portion, unamortized discount and debt issuance costs	12,871			13,057
Total financing lease liabilities	$	13,898		$	13,928
Weighted-average remaining lease term	13 years			13 years
Weighted-average discount rate	12.05		%	12.05		%

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The costs related to our leases were as follows:


	Three Months Ended March 31,
	2024		2023
Operating Leases:
Operating lease costs	$	3,056	$	2,120

Financing Leases:
Amortization expense	526		526
Interest on lease liabilities	392		444

Total lease costs	$	3,974	$	3,090

Supplemental cash flow information related to our leases was as follows:


	Three Months Ended March 31,
	2024		2023
Cash paid for amounts included in the measurement of operating lease liabilities	$	4,932	$	1,852
Right-of-use assets (“ROU”) obtained in exchange for new operating lease liabilities (1)	$	12,736	$	1,319

(1) Includes non-monetary lease transactions of $10,378. See disclosure below for additional information.

The table below sets forth our estimated minimum future lease obligations under our leases:


	Operating Leases		Financing Leases
Year ended December 31,
2024	$	12,766	$	2,207
2025	12,403		2,213
2026	7,093		2,054
2027	6,006		1,922
2028	5,061		1,955
Thereafter	61,421		15,935
Total minimum lease payments	104,750		26,286
Less: interest	39,820		12,388
Present value of lease liabilities	$	64,930	$	13,898

We have a future lease commitment for a ground lease which does not yet meet the criteria for recording a ROU asset or ROU liability. The net present value of this commitment totals $10,500 as of March 31, 2024 and relates to lease payments to be made over a 20-year period. We are in process of modifying the terms of this agreement such that the criteria to record a ROU asset and ROU liability may not be met.

Non-monetary Lease Transactions

We have six lease liabilities consisting of obligations that will be settled with non-monetary consideration. The lease liabilities relating to non-monetary consideration were recorded during the three months ended March 31, 2024 based on the fair market value of the project services or back up power expected to be provided, which approximate the cash payments.

Sale-leasebacks

These facilities are accounted for as failed sale leasebacks and are classified as long-term financing facilities.

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August 2018 Master Sale-leaseback

We enter into amendments to our August 2018 master lease and participation agreement from to time to time, which may extend the maturity date, increase the availability, or modify other covenants.

We sold and leased back one energy assets for $4,444 in cash proceeds under this facility during the three months ended March 31, 2024. As of March 31, 2024, we have available funds remaining under this lending commitment.

Net gains from amortization expense recognized in cost of revenues relating to deferred gains and losses in connection with our sale-leaseback agreements were $57 and $57 for the three months ended March 31, 2024 and 2023, respectively.

December 2020 Master Sale-leaseback

We enter into amendments to our December 2020 master lease and participation agreement from to time to time, which may extend the maturity date, increase the availability, or modify other covenants. As of March 31, 2024, we were in default under this agreement as we had failed to satisfy the insurance requirements and historical coverage ratio under this agreement. On May 3, 2024, we received a waiver of this default.

8. DEBT AND FINANCING LEASE LIABILITIES

Our debt and financing lease liabilities are comprised of the following:


	March 31, 2024		December 31, 2023
Senior secured revolving credit facility (1)	$	160,000	$	140,000
Senior secured term loans	108,750		139,900
Energy asset construction facilities (2)	469,904		470,248
Energy asset term loans (2)	632,883		564,530
Sale-leasebacks (3)	185,863		185,698
Financing lease liabilities (4)	13,898		13,928

Total debt and financing lease liabilities	1,571,298		1,514,304
Less: current maturities	539,201		322,247
Less: unamortized discount and debt issuance costs	20,521		21,982
Long-term debt and financing lease liabilities, net of current portion, unamortized discount and debt issuance costs	$	1,011,576	$	1,170,075

(1) At March 31, 2024, funds of $27,269 were available for borrowing under this facility.
(2) Most of these agreements are now using the Secured Overnight Financing Rate (“SOFR”) as the primary reference rate used to calculate interest.
(3) These facilities are accounted for as failed sale leasebacks and are classified as long-term financing facilities. See Note 7 for additional disclosures.
(4) Financing lease liabilities are sale-leaseback arrangements under previous guidance. See Note 7 for additional disclosures.

Senior Secured Term Loans

On April 10, 2024, we entered into amendment number five to the fifth amended and restated senior secured credit facility to extend the maturity date of the delayed draw term loan A (“DDTLA”) from March 4, 2025 to August 15, 2024. The amendment also included the following modifications:

•principal installments on the DDTLA of $5,000 at closing of the amendment and $7,500 each on or before May 15, 2024, June 15, 2024, and July 15, 2024, with the balance of $7,500 due on August 15, 2024,

•the date by which we shall use commercially reasonable efforts to raise $100,000 in equity or subordinated debt financing was changed from April 15, 2024 to May 15, 2024.

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October 2022, Financing Facility, 6.70%, due August 31, 2039

During the three months ended March 31, 2024, we drew down an additional $35,448 and at March 31, 2024, $376,836 was outstanding under this facility, net of unamortized debt discount and issuance costs.

April 2023, Construction Credit Facility, 6.80%, due July 31, 2024

During the three months ended March 31, 2024, we drew down an additional $5,001 and at March 31, 2024, $138,260 was outstanding under this facility, net of unamortized debt discount. At March 31, 2024, there was no availability remaining.

August 2023, Construction Credit Facility, 9.32%, due August 31, 2026

During the three months ended March 31, 2024, we drew down an additional $31,204 and at March 31, 2024, $296,931 was outstanding under this facility, net of unamortized debt discount and issuance costs. We were in default on this credit facility due to administrative errors, for which a waiver was received on April 5, 2024.

Debt Instruments - Energy Project Asset Acquisitions

As discussed in Note 6, on August 4, 2023, we acquired an energy asset project. The purchase price for phase 1 was $87,964, of which $5,000 was paid in cash, $46,694 was financed through a seller’s note, and we assumed a construction loan on the energy asset project for $36,270. During the year ended December 31, 2023, we paid $18,400 in principal on the seller’s note. In January 2024, the purchase price was increased by $1,147 and we paid off the seller’s note in the amount of $29,441.

On February 26, 2024, the construction loan in the amount of $36,270 was converted into a term loan and has a maturity date of April 2030. The term loan bears a base SOFR interest rate of 5.33% at March 31, 2024, and an applicable margin of 1.635% per annum for four years after the term conversion date and 1.76% per annum for the following two years. The interest and principal is paid quarterly commencing on March 31, 2024. We failed to achieve the final conditions required to convert the term loan on or prior to March 31, 2024, however, a waiver was obtained on May 1, 2024 and the deadline of achieving the final conditions was extended to May 31, 2024.

In the second phase, which closed on January 12, 2024, we acquired BCE, including its interest in a consolidated joint venture and its interests in project subsidiaries developing or with rights to develop solar, battery, and microgrid assets for an adjusted purchase price of $47,956, of which $9,839 was paid in cash and $32,500 was financed through a seller’s note. The note bears interest at fixed rate of 5.0% per annum and the principal and interest is due on August 2024.

April 2024, Senior Secured Notes, due June 30, 2042

On April 5, 2024, an Omnibus Amendment and Reaffirmation Agreement was executed with reference to the Note Purchase and Private Shelf Agreement, dated as of July 27, 2021, and two new series B notes (first lien and second lien) were authorized in the amounts of $92,512 and $12,657, with a maturity date of June 30, 2042. Gross proceeds from the initial issuance on April 5, 2024 were $83,282 and $12,292 with the remainder to be issued upon achieving certain permitting-related and other administrative conditions. The notes bear interest at fixed rates of 6.20% and 8.00%, respectively, per annum and the interest is payable quarterly commencing September 30, 2024. At closing, we incurred $1,052 in lenders fees and debt issuance costs. Proceeds from these notes in the amount of $86,462 were used to pay a portion of the August 2023 construction credit facility.

9. INCOME TAXES

We recorded a provision for income taxes of $0 and benefit of $503 for the three months ended March 31, 2024 and 2023, respectively.

The effective tax rate was 0.0% for the three months ended March 31, 2024, compared to a benefit of 47.7% for the three months ended March 31, 2023. The principal reasons for the higher effective rate for 2024 is due to the effects of a smaller Section 179D Energy Efficient Building deduction, offset by higher investment tax credits from solar, and storage plants placed into service or are forecasted to be placed into service during 2024, state taxes, and foreign earnings.

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10. COMMITMENTS AND CONTINGENCIES

From time to time, we issue letters of credit and performance bonds with our third-party lenders, to provide collateral.

Legal Proceedings

We are involved in a variety of other claims and other legal proceedings generally incidental to our normal business activities. When we conclude that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, it is accrued through a charge to earnings and, if material, disclosed below. When only a range of amounts is reasonably estimable and no amount within the range is more likely than another, the low end of the range is recorded. While the ultimate amount of liability incurred in any of these matters is dependent on future developments, in our opinion, the recorded liability is adequate to cover the future payment of such liability and claims. However, the final outcome of any of these claims and legal proceedings cannot be predicted with certainty, and unfavorable or unexpected outcomes could result in additional accruals that could be significant to results of operations in a particular year or quarter. Any adjustments to the recorded liability will be reflected in earnings in the periods in which such adjustments become known. For any other claims where a loss may be reasonably possible, but not probable, or is probable but not reasonably estimable, no accrual is established, but the matter, if potentially material, is disclosed below. We routinely review relevant information with respect to our matters and update our accruals, disclosures and estimates of reasonably possible loss based on such reviews. While the outcome of any of these matters cannot be accurately predicted, we do not believe the ultimate resolution of any of these existing matters would have a material adverse effect on our financial condition or results of operations.

In October 2021, we entered into a contract with SCE to design and build three grid scale battery energy storage system (“BESS”) at three sites near existing substation parcels throughout SCE’s service territory in California with an aggregate capacity of 537.5 megawatt (“MW”) (“the SCE Agreement”). As previously disclosed, due to supply chain delays, weather and other events, we were unable to complete the projects by August 1, 2022 (the “Guaranteed Completion Date”) and made related force majeure claims. In late 2022, SCE also instructed us to adjust the completion of the sites into 2023. Under the SCE Agreement, a failure to reach the Guaranteed Completion Date could, under certain circumstances, result in liquidated damages up to a maximum amount of $89 million being applied. We have been working with SCE to analyze the applicability and scope of force majeure relief based on our force majeure claims. In February 2024, in response to us issuing an invoice to SCE for one of the sites, SCE notified us that they intend to withhold liquidated damages for that project. Our view is that liquidated damages should not be applied. It is at least reasonably possible we may incur an obligation to pay liquidated damages up to the maximum amount.

Commitments as a Result of Acquisitions

In December 2021, we completed our acquisition of Plug Smart which provided for an earn-out based on future EBITDA targets beginning with EBITDA performance for the month of December 2021 and each fiscal year thereafter, over a five-year period through December 31, 2026. The maximum cumulative earn-out is $5,000 and we evaluated financial forecasts of the acquired business and concluded that the fair value of this earn-out was approximately $1,465 upon acquisition and as of December 31, 2023. At March 31, 2024, the fair value of the contingent consideration remained consistent at $1,465 and is included in accrued expenses and other current liabilities, and other liabilities on the condensed consolidated balance sheets. See Note 11 for additional information.

The August 4, 2023 purchase and sale agreement with BCE includes a potential earn-out that could be earned if the projects achieve specified value thresholds in certain phase 2 projects, each of which is very early in development, or if milestones are achieved on other future projects that are not yet started. The total earn-out is limited to $40,000 over a seven-year period beginning on January 12, 2024. We shall record a liability for the phase 2 earn-out payments when the amounts are probable and estimable. As of March 31, 2024, none of the earn-out amounts are considered probable and estimable.

11. FAIR VALUE MEASUREMENT

We recognize our financial assets and liabilities at fair value on a recurring basis. Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or

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liability in an orderly transaction between market participants on the measurement date. Three levels of inputs that may be used to measure fair value are as follows:

Level 1: Inputs are based on unadjusted quoted prices for identical instruments traded in active markets.

Level 2: Inputs are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

The following table presents the input level used to determine the fair values of our financial instruments measured at fair value on a recurring basis:


		Fair Value as of
	Level	March 31, 2024		December 31, 2023
Assets:
Interest rate swap instruments	2	$	5,172	$	3,970


Liabilities:
Interest rate swap instruments	2	$	—	$	629

Make-whole provisions	2	4,755		6,012
Contingent consideration	3	1,465		1,465
Total liabilities		$	6,220	$	8,106

The following table sets forth a summary of changes in the fair value of contingent consideration liability classified as level 3:


	Fair Value as of
	March 31, 2024		December 31, 2023
Contingent consideration liability balance at the beginning of period	$	1,465	$	4,158

Changes in fair value included in earnings	—		347
Payment of contingent consideration	—		(3,040)

Contingent consideration liability balance at the end of period	$	1,465	$	1,465

The following table sets forth the fair value and the carrying value of our long-term debt, excluding financing leases:


	As of March 31, 2024				As of December 31, 2023
	Fair Value		Carrying Value		Fair Value		Carrying Value
Long-term debt (Level 2)	$	1,527,006	$	1,536,879	$	1,466,458	$	1,478,394

The fair value of our long-term debt was estimated using discounted cash flows analysis, based on our current incremental borrowing rates for similar types of borrowing arrangements which are considered to be level two inputs. There have been no transfers in or out of level two or three financial instruments for the three months ended March 31, 2024 and the year ended December 31, 2023.

We are also required to periodically measure certain other assets at fair value on a nonrecurring basis, including long-lived assets, goodwill and other intangible assets. We calculated the fair value used in our annual goodwill impairment analysis utilizing a discounted cash flow analysis and determined that the inputs used were level 3 inputs. There were no assets recorded at fair value on a non-recurring basis as of March 31, 2024 or December 31, 2023.

Table of Contents

AMERESCO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands) (Unaudited) (Continued)

12. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The following table presents information about the fair value amounts of our cash flow derivative instruments:


		Derivatives as of
		March 31, 2024		December 31, 2023
	Balance Sheet Location	Fair Value		Fair Value
Derivatives Designated as Hedging Instruments:
Interest rate swap contracts	Other assets	$	1,752	$	1,023

Derivatives Not Designated as Hedging Instruments:
Interest rate swap contracts	Other assets	$	3,420	$	2,947
Interest rate swap contracts	Other liabilities	$	—	$	629


Make-whole provisions	Other liabilities	$	4,755	$	6,012

As of March 31, 2024 and December 31, 2023, all but 3 of our freestanding derivatives were designated as hedging instruments.

The following table presents information about the effects of our derivative instruments on our condensed consolidated statements of income and condensed consolidated statements of comprehensive income:


		Amount of (Gain) Loss Recognized in Net (Loss) Income
	Location of (Gain) Loss Recognized in Net (Loss) Income	Three Months Ended March 31,
		2024		2023
Derivatives Designated as Hedging Instruments:
Interest rate swap contracts	Other expenses, net	$	(276)	$	11