Ameresco, Inc. (AMRC) Earnings Call Transcript

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 2026 Amoresco Incorporated Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and your session. To ask a question, press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please limit questions to one and one follow-up. And we do ask that you limit questions to one-on-one follow-up and then rejoin the queue. It is now my pleasure to turn the call over to Leila Dillon, Chief Marketing Officer. Please go ahead.

Thank you, Tina, and good afternoon, everyone. We appreciate you joining us for today's call. Our speakers on the call today will be George Sakolaris, Amoresco's Chairman and Chief Executive Officer, Nicole Bulgarino, and Mark Chiplock, Chief Financial Officer. In addition, Josh Barabo, our Chief Investment Officer, will also be available during Q&A to help answer questions. Before I turn the call over to George, I would like to make a brief statement regarding forward-looking remarks. Today's earnings materials contain forward-looking statements, including statements regarding our expectations. All forward-looking statements are subject to risks and uncertainties. Please refer to today's earnings materials, the safe harbor language, on your basis unless otherwise noted. now turn the call over to George. George? Thank you, Leila, and good afternoon, everyone.

Q2 was a transformational quarter for Amoresco, highlighted by exceptional execution and strong financial performance. First, we had a record of $1.8 billion of new awards. driven by $1.2 billion for data centers and $600 million for our other key markets. Second, we closed our new Janix joint venture with HACI, providing us with significant external capital to accelerate growth in all of our business lines. And we announced our first successful delivery of RNG into the European compliance system. markets. Third, positioned MRSQ into two core pillars and we are releasing a new rebranded corporate identity to reflect the updated position. And finally, we successfully brought online the 250 megabits NAPONI battery energy storage system. one of the largest energy storage projects in Canada. And we energize the 560 megawatt solar project in Greece, one of the largest projects in Europe. Many of you have been anticipating updates on our involvement in the data center market. There is a growing demand for reliable power infrastructure and increasingly favorable policy for on-site power infrastructure, encouraging hyperscale customers to secure dedicated on-site power solutions. Combined with MRSCO's integrated capabilities, we are well positioned to deliver solutions that provide speed, reliability, and the energy independence that these customers need. During the Quora, several opportunities advanced to the point where they met our criteria for inclusion in our awarded backlog. Importantly, the projects we added to our backlog represent only a portion of our broader pipeline. As we continue to advance additional data center opportunities, we will remain highly selective in our partnerships and disciplined in our approach. We expect the amount of backlog added from these opportunities to increase as development progresses, project scopes are finalized, and they convert to contracted backlog. As you will see in our updated corporate presentation, the company is well positioned to flourish in the current market environment. With our recent promotions of Nicole Polgarino and Lou Maltesos to co-presidents, we have positioned the company to address two core market pillars. power infrastructure, and building and public infrastructure. This strategic positioning reinforces MRS's standing as one of the world's leading energy infrastructure companies, focused on delivering integrated solutions to provide reliable power and modernize infrastructure. With a powerful combination of market catalysts and a robust pipeline of opportunities, we are confident in our ability to drive exceptional long-term profitable growth. With that, I would like to turn the call over to Nicole to provide some additional details about the exciting data center activities as well as other notable project wins and business opportunities. Nicole?.

Thank you, George, and good afternoon, everyone. As George highlighted, Amoresco made significant progress with our power infrastructure business during the quarter. The backlog additions we announced today are the result of months of working to secure, develop, and advance opportunities with leading partners across the data center ecosystem. system. Our strategy remains highly focused and selective, partnering with experienced developers, operators, hyperscalers, and capital providers, while concentrating exclusively on on-site power data solutions. This landscape is dynamic and often requires persistence and flexibility with solutions due to permitting, gas supply, and specific tenant needs. This is where Amoresco's decades of experience developing, delivering, owning, and operating critical energy infrastructure provides us with a clear, advantage. During this quarter, we added three new data center projects to our awarded backlog, bringing our total to five data center projects in addition to the Lelore data center in our energy assets portfolio. These projects further expand our presence in the nation's most active data center markets, adding both Texas and Arizona to our existing footprint of data center projects. Collectively, they will represent more than one gigawatt of power generation and showcase the breadth of Amoresco's capabilities. The solutions we are providing include a combination of reciprocating engines, gas turbines, fuel cells, battery energy storage systems, and integrated microgrids designed to deliver deliver the reliability required by today's most demanding data center customers. These awarded projects also only represent a portion of the opportunities we are actively developing. We continue to see exceptional demand for on-site power solutions and are encouraged by both the scale and the quality of our growing pipeline. We are engaged with many of the industry's leading data center partners, and we believe our differentiated capabilities position us extremely well to capitalize on the significant opportunities ahead. We look forward to sharing additional developments as we continue to convert this momentum into backlog and long-term profitable growth. While the data center activity was certainly a highlight of the quarter, it is also important to note that our momentum extends well beyond this market. We also secured a significant amount of new project awards across a broad range of geographies, customers, and in-market, underscoring the strength and diversity of our business. These wins reflect continued demand for Amoresco's comprehensive energy infrastructure solution and demonstrate our ability to capitalize on the opportunities across multiple verticals while maintaining a balanced and resilient growth profile. I'll now turn the call over to Mark to cover our strong Q2 final.

financial performance. Mark. Thank you, Nicole, and good afternoon, everyone. Q2 was a strong quarter across the board. We delivered revenue of $515 million and made meaningful progress on the priorities that matter most, executing well, expanding our growth visibility through record awards, and strengthening our capital position to support the opportunities ahead. Q2 demonstrated the strength of our current operating model and the increasing visibility we are building as we work to execute the next phase of our growth strategy. Our total revenues grew by 9%, while project revenue increased 6% to $381 million. This reflects solid execution across our core project business with strength in Federal and North America and continued strong performance from our European JV. This was not just a strong quarter financially. It was also an outstanding business development quarter. As always, the timing and extent of conversion of our backlog will depend on commercial, permitting, procurement, financing, and execution milestones. backlog provides tremendous long-term visibility as we expect to convert over the next three to four years. Q2 energy asset revenue was a clear highlight, increasing 21% to $76 million as we continue to expand the operating portfolio. During the quarter, we placed an additional 32 megawatts into operation. Our operating energy asset base now stands at 822 megawatts, with another 513 megawatts in development or construction. These figures reflect Amoresco's 70% ownership interest in the Neogenix JV. O&M also had a very strong quarter with revenue up 29%. This remains an important part of the model for us because it builds naturally from successful project execution and creates long-term recurring revenue. continue to see solid growth in our third-party O&M business, which expands the opportunity set beyond just Amoresco-executed projects. We now provide service for over 2.5 gigawatts of third-party solar and battery storage. With long-term O&M backlog now exceeding $1.5 billion, this business continues to provide strong visibility, recurring revenue, and durability across cycles. Gross margin was 17.7%, a meaningful improvement both sequentially and year-over-year, reflecting a favorable business mix and strong execution. Net income attributable to common shareholders was $9.7 million or 18 cents per diluted share, while non-GAAP EPS was 20 cents. Adjusted EBITDA increased 12% to $62.8 million, outpacing revenue growth and reflecting strong operating execution, improved business mix, and the continued expansion of our higher margin recurring businesses. EPS reflected higher depreciation and interest expense associated with the continued growth in our energy asset portfolio, along with a lower tax benefit and the non-controlling interest impact from the neogenics transaction. Turning to our balance sheet, unrestricted cash increased to $138 million, with corporate debt of $385 million. Our corporate leverage was 3.2 times, comfortably below our 3.5 times covenant. We also strengthened our capital position in Q2, securing $471 million of new financing commitments, including the $400 million related to the Neogenix transaction. That capital gives us added flexibility to fund growth, support our working capital needs, and continue scaling the energy assets portfolio in a disciplined way. Adjustment of operations was impacted in Q2 by the timing of project execution, billings, and collections. a strong revenue quarter included significant work performed ahead of contractual billing milestones, resulting in more cash being temporarily absorbed in working capital. Cash conversion remains a key priority for the second half. Given our strong first half performance, the visibility provided by our backlog, and the financing progress achieved in Q2, we remain confident in our 2026 outlook. As a result, we are reaffirming our full-year guidance across all metrics and increasing our non-GAAP EPS guidance. increasing our non-GAAP EPS guidance range to be $1.15 to $1.35 as we now expect a tax benefit rate in the range of 25% to 40%. The additional expected tax benefit is supported by our planned transition to a new accounting policy for transferable tax credits in the second half of the year. This methodology better aligns earnings recognition with the period in which the investment tax credits are generated rather than assets. entire period results will be recast to enhance comparability once we make this change. Looking ahead, we expect the second half to follow our normal seasonal cadence with activity weighted somewhat more towards Q4, supported by continued project execution, backlog conversion, and disciplined cost management. Now I'd like to turn the call back to George for closing comments. Thank you, Mark.

This is a transformative time for Amoresco as we continue to execute our growth strategy. in some of the fastest growing and most attractive energy infrastructure markets. Our twin market pillars of power infrastructure and built-in and public infrastructure not only continue to drive our growth, but also provide greater diversification of the company's customers and solutions. and our decades of experience delivering reliable on-site power solutions uniquely positioned us to capitalize on the significant opportunities ahead.

We look forward to questions. Our first question is from the line of George Generegas with Canaccord Genuity. Please go ahead.

Hi everyone, thank you for taking my questions and congratulations on the data center wins. Thank you. But regarding those wins, how are project delivery commitments structured from a risk-sharing perspective? Specifically, what's the financial exposure or liquidated, excuse me, does the Amoresco bear of completion timeline slip due to equipment supply chain bottlenecks, surrogate clinician cues, or local permit? As you can imagine, it's very complex.

sensitive to our customers and to the agreements that we're in. But be assured, as Amoresco and all of our projects would be very mindful and diligent about what commitments we're being signed up to or that we're signing up to.

Thank you. And maybe a question for Mike, any update on what's happening with Neogenics, a project.

project updates, etc. Thank you. My my my key is not here, but you know, since we did. but maybe some project acquisitions that they are coming to us. So the relationship is very, very good. It gives a lot of flexibility, great capital contribution into the company, and of course, we can use the capital to grow not only that unit, but as well as the other lines of our.

I appreciate it. Thank you. Thanks, Dr. Your next question comes from the line of Steven Gingaro with Stifo. Please go ahead. Thanks. Good afternoon, everybody. Hi, Steve. Hi.

Maybe following up on George's question, does this with awards of this size, is it any different than kind of what we've become accustomed to? Yes, yes.

No, it's a great question. It's not different than the other projects that we have in the backlog, especially the federal government projects. It will say that, A, by putting these projects into the award, we have done a great, great diligence to make sure they meet the criteria that we put a particular project into the award category. They've been some kind of customers RFP. So there's some kind of exclusivity agreement between us and that base, and they have achieved certain milestones in their development process. So that's, and then if you look at it, that's how we move from the award to the, the contracts in the data centers would probably see awards will move to contracted. And then of course, once they move to contracted, you're talking 12 to three years, well actually implement the implementation schedule. But, The awards are solid and sooner or later, the time scheduled, they will move into the contracted category then of course in implementation.

Great. Thank you. And just as a quick follow-up to that is, if I assume the margin profile is similar to the legacy, activity, is that a fair place to start?.

Excellent questions. And the margin of this particular project is basically what we get for the EPC project for the federal government, which is really in the high teens.

Okay, great. Thank you. Your next question is from Eric Stein with Craig Hallam. Please go ahead.

Everyone thanks for taking the questions yes, hey, so hey so obviously a big highlight on on the awards the 1.2 billion But it sounds like pretty optimistic in terms of the pipeline so you know wondering if you know maybe not specifics But just talk in more detail of the size of that pipeline versus versus the awards that you have now pulled in, that 1.2, and if there's a way to think about where those are in their various life cycle in terms of getting to the point where you could think about pulling those into awarded background.

And Nicole basically said that what we put on the award category right now is part of what the ultimate size of this particular award will be. So we'll see that it will probably increase. I wouldn't be surprised that we will get up to $2 billion associated with this particular award that we have right now.

If you want to add any more. Sure. And we're continuing. I mean, we're in this business hourly, daily, and continuing to vet opportunities every day and being very strategic and diligent about how we are partnering with new opportunities. So we looked at hopefully adding additional projects.

as we continue to develop in this market. And to live with more clarity, as Nicole pointed out in her script, there are five opportunities in exploring the LIMORB, which is an asset base. And we're looking at at least that many more.

Got it. And then maybe for my follow up just obviously Neogenics a very successful up and structure there and maybe not exact but you know if you think about these data center opportunities and that they are very sizable is there some structure you know.

know kind of more along those lines that could help maybe speed up or you know just increase the amount that you can handle.

from a financing perspective? You're right on track. We were very successful with Neogenics and we learned a lot too in the process of doing them. The data center opportunity is very, very large and it will require a substantial amount of capital. We will be looking into the opportunity, and if the multiples are right, the right part comes along, and so on, we will do it. It is not specific to announce at this point in time, but it could be a great, great opportunity for us. between another vehicle like Neogenics. Okay, thank you.

Thank you. Your next question is from the line of Noah Kay with Oppenheimer & Company. Please go ahead.

Hi folks, good afternoon. George, now this transformational and I just need to take a step back for a bit and recognize that I believe this quarterly award is almost double any of your previous quarters in your history. It's remarkable. So congratulations. Congratulations. And I want to kind of ask a high level question, which is obviously behind the meter, you know, in time, the power becoming a key consideration for a lot of developers. I can see that's really the solution that you're architecting here. But can you just take us through how you won these awards? who the customers are. Obviously, we're not expecting you to name them, but are they hypers? Are they neos? Are they government? You know, and with the understanding that as you build these critical relationships, there's opportunity for a lot of future. Nicole worked very hard in order to get them, so I will let Nicole. No, no.

I mean, thanks. And as we shared in the previous earnings calls, I mean, our reputation with the federal government has been served as well as a great entry point into this market because we've been basically serving as the utility and the federal government's base for decades now and now getting in there. And we're working with, you know, not only data center operators, but also hyperscalers, neoclouds, and also just getting in through commercial real estate developers that had played in this market before, just now having the added power side to this, which was different than what maybe they had done before. So we like what our delivery model is and that we are bringing integrated energy solutions to it. So we're integrating different types of assets together and being able to have the ability to microgrid these. And that's been a unique offering for us. So that's a little bit more into what we're doing. And I just think that the opportunity with our experience and our flexibility and what we're offering has served us well.

the difference. Thanks, Nicole. And so just to confirm that I heard you correctly, so the customers for these data center projects, they now include hypers and neoclouds, is that correct? They are part of the deals, yes. All right. And just last follow up, you know, I guess maybe help us understand where you're at in the process of securing supply for some of those long lead items. And have you already placed orders for the receipts and some of the key equipment?.