Ameresco, Inc.

Good day, ladies and gentlemen, and welcome to the fourth quarter and full year 2018 AmeriSkill Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Lela Dillon, Vice President of Marketing. You may begin.

Thank you, and good morning, everyone. We appreciate your joining us for today's call. Joining me here are George Sakolaris, Ameresco's Chairman, President, and Chief Executive Officer, and Mark Chiplock, Interim Chief Financial Officer. Before I turn the call over to George, I would like to make a brief statement regarding forward-looking remarks. This call contains forward-looking information regarding future events and the future financial performance of the company. We caution you that such statements are predictions based on management's current expectations or beliefs. Actual results may differ materially as a result of risks and uncertainties that pertain to our business. We refer you to the company's press release issued this morning and to our SEC filings. These documents discuss important factors that could cause actual results to differ materially from those contained in the company's projections or forward-looking statements. We assume no obligation to revise any forward-looking statements made on today's call. In addition, we will be referring to non-GAAP financial measures during this call. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. A gap to non-gap reconciliation, as well as an explanation behind the use of non-gap financial measures, is available in our press release and in the appendix of the slides, which can be downloaded from our website. I will now turn the call over to George. George?

Thank you, Lila, and good morning, everyone. Q4 was another outstanding, profitable quarter. We expanded gross margin by 300 basis points to over 22%. When you exclude the one-time benefit in 2017 due to the tax cuts and JABS Act, net income grew by 33%. We grew adjusted EBITDA by 35%. We placed 14 megawatts of solar projects in service and added 59 megawatts to our assets in development. The strong performance concluded another outstanding year. We again achieved our objective of growing profit faster than revenue. For the full year, we grew revenue by 10%, gross profit by 20%, net income by 8%, and adjusted EBITDA by 44%. Important to note, Excluding the Q4 2017 one-time tax benefit, net income growth was closer to 80%. And we generated adjusted cash from operations of over $100 million, including the proceeds from federal ESPC liabilities. Furthermore, we increased project backlog by 11% to $2 billion and more than doubled energy assets in development to 178 megawatts. As we look back on the accomplishments of 2018, I want to share key elements that we think make Maresco a remarkable business and an attractive investment for you, our shareholders. The first element is resiliency, a quality we discuss in the context of microgrids, but rarely in the context of our business model. Our performance this year highlights why resiliency is so important. As in any business, something usually goes wrong. In general, we can now absorb those unexpected challenges because we have a large, diversified backlog of projects underpinned by notably stable and high-margin recurring revenue streams. At the start of 2018, we anticipated EPS in the range of 55 to 65 cents and adjusted EBITDA in the range of 75 to 85 million dollars. The midpoint of that range represented an increase of 17 million dollars in adjusted EBITDA. We expected the vast majority of that incremental EBITDA to come from our renewable gas plants in Michigan and Arizona. As it turned out, our 16 MW Michigan plant only started contributing meaningfully to earnings in the second half of the year, and the 6 MW Arizona plant just started generating revenue in the first quarter of 2019. In the project business, we also encountered some normal disruptions. For instance, We had budgeted revenue from a large Convention Center project for the second half of 2018. However, we did not convert this award to contract by the end of the year. We expect this contract to be signed in the first half of this year. Another large contract is the ongoing Chicago Street Light project. Implementation and revenue recognition. slowed down in the second half due to shortages of parts. In addition, the New York City Housing Authority requested that our focus was to make sure that the residents had no disruption in heat during the winter season. As a result, other originally scheduled measures were pushed further out in the implementation schedule. These types of delays are normal in our project business, especially when you retrofit in buildings that they are in use. These are the types of challenges we have dealt with regularly for years. To counteract these challenges, we now have a broad set of revenue opportunities with other projects, services, and activities that can absorb the shortfall. During the year, our federal group demonstrated outstanding execution. converting very large projects, such as island-bound communities and Joint Bay San Antonio. Our geographic expansion strategy, with a focus on under-penetrated parts of the country, like the Southwest, is also bringing in new revenues. The Southwest region topped $100 million of revenue in 2018, the first time ever for that region. This team is actively driving activity, notably in repeat business, including a large Texas university system and multiple streetlight projects across the region. So, despite the project setbacks I mentioned, solid execution enabled us to deliver net income of $38 million and adjusted EBITDA of $91 million. The second important element of our business is visibility. Our visibility is measured in years and in billions of dollars. The leading edge of our pipeline is filled with revenue that will be recognized two or three years from now. This level of visibility is uncommon and is critically differentiating MResco as an investment. We improved. our visibility in 2018 across all dimensions. The most important is recurring revenue. For years, we have focused on building a portfolio of long-term recurring revenue streams. We have now reached a critical mass in that portfolio, which gives us an outstanding foundation for stability and high margins. Our portfolio of operating energy assets now stands at 229 megawatts. Based on contracted power purchase agreements and incentive revenue, this portfolio has solid visibility on $900 million of revenue over the next 20 years. Important note, this figure does not include merchant revenue and also does not include any contributions from our extensive pipeline of assets in development and construction. If we include those likely sources, we have a line of sight of at least $3 billion of revenue. The energy revenue visibility is complemented by contracted operations and maintenance, where we will realize revenue of $930 million over 15 years. Importantly, we are accelerating the build-out of energy asset portfolio. We are exiting the year with an outstanding development pipeline, which is well distributed throughout the U.S. These assets should be placed into service over the next 12 to 30 months. Renewable natural gas, also known as RNG or green gas, is an important new opportunity in our energy portfolio. RNG is incremental to our extensive historical activity in solar and landfill gas. The Michigan and Arizona RNG plants are now in service, and we have a strong pipeline of additional green gas opportunities. We have talked about one plant in Texas entering our assets and development metric In Q3, we are now happy to report that we have formally added two additional plants to this metric in Q4. Of the 178 megawatts of assets in development, approximately 23% are green gas projects. Beyond that, we still have five to six additional green gas opportunities we are actively pursuing. All of these projects are approximately 10 to 12 megawatts each. We are identifying creative new approaches to energy sales. For instance, in Canada, we are implementing a battery storage asset that will help balance the grid, storing energy during low demand hours and selling it back to the grid at peak demand. This asset is based in Ontario and will consist of two facilities, with a capacity of two megawatts each. Of course, visibility is not limited to recurring revenue streams. We ended the year with total project backlog of almost $2 billion, including contracted backlog of $727 million. As we often mention, project sizes are getting larger, and we are being We are seeing more and more repeat business. For instance, we have signed contracts for two phases of the New York City Housing Authority, and we are in good position to pursue additional work there. NYCHA is the biggest housing authority in the country, and our strategic relationship with them has produced revenue for over two years now. The third quality that makes Amoresco an attractive investment is our large and growing market opportunity. First of all, we are transforming our business model. Market demand is shifting from simple energy conservation measures to sophisticated infrastructure upgrades that reflect the new smart energy economy. Efficiency is always part of the plan, since cost savings finally work. but projects are getting larger and more comprehensive. So as our traditional efficiency customers, we have leveraged HVAC upgrades, water reclaimed and advanced building controls are now adding resiliency, distributed energy, battery storage, microgrid controls and more. According to Navigant research, These technologies expand our total addressable market from approximately $6 to $8 billion per year to between $20 to $30 billion per year. A few years ago, for example, the Joint Base San Antonio or Island Pound project might have been half the size that they are today without microgrids, infrastructure upgrades, resiliency, distributed generation, and the additional advanced technologies in our portfolio. Our opportunity is also growing as we penetrate new geographies. We continue to target the Southwest and now the Southeast, which have been underserved by us historically. In Canada, we're beginning to see positive performance from the new team and structure we put in place in 2017. Finally, we are also gaining meaningful traction in the UK. To take full advantage of the growing market opportunities, we are stepping up our investments. We are expanding our team with more people that have in-depth technical expertise. Also, we are adding more people with deep expertise in project and energy asset development. To conclude, We are optimistic about 2019 and the years beyond. As we have stated before, we plan on a three-year basis and see revenue growing in high single digits and even growing high double digits. As we exit 2019 with the strategic resource investments that we have made, the additional PV assets and the Texas RNG plan coming online, We are well-positioned for strong growth in 2020 and 2021. With that, I will now turn the call over to Mark for comments on our financial performance and outlook. Mark?