Doran Hole: And Steve, this is the importance of controlling OpEx here because we’re focusing on earnings generation, you’re going to control OpEx and continue to generate the EBITDA that we expect to generate. And frankly, we’re still working to execute contracts with our vendors and our suppliers prior to executing our customer contract to derisk margin. We’re still working toward that. It’s just that we’ve had a few of these adjustments come with some of the projects that have been in the backlog for a bit with the kind of lengthening of the cycle.
Operator: Our next question or comment comes from the line of Eric Stine from Craig-Hallum.
Eric Stine : So I just want to dig in here a little bit more, just to try to understand the I mean I know supply chain issues in labor, it’s been a pretty consistent challenge. I mean, is this something where you saw that intensify? Or is it where you just had a number of larger projects, things you are counting on contributing to the back half of the year that it was just a greater impact from those headwinds?
George Sakellaris: Great question. Especially that’s exactly what happened, especially some of the larger projects. They were already scheduled and you say this bio contract, so now it’s going to do XYZ, and all of a sudden that contract or whether there or this is the key. She could get the qualified workers to show up at the work site at the site. And some of them we used to go out with an RF to 12 to 16 vendors and sometimes we’ll get 1 or 2 responses. And you will find out that one of them is not even qualified. So it’s labor original has become a huge concern.
Eric Stine : Got it. And then, I mean, you’ve had great growth in your project business. I mean the — you mentioned permitting and that sort of thing. But I mean is this the area of business where you can simply say, interest rate — higher interest rates that, that is having a tangible impact, negative impact?
Doran Hole: Not really. No, no. We haven’t really seen that on the project business.
Eric Stine : Okay. And then —
Doran Hole: I think — yes, go ahead.
Eric Stine : No, I was just going to say, so the $250 million that you’re talking about for the early look at 2024, just to confirm, you’re not really expecting necessarily improvement in these areas, right? You’re kind of expecting status quo from where things stand now, playing that out through 2024 rather than anticipating that there’s improvement in a lot of these areas.
George Sakellaris: That’s what we did. And Mark, there’s a great due diligence on that. You can make a comment. But that’s exactly what we try to do and — and we think we have represented very accurately.
Operator: Our next question or comment comes from the line of Tim Mulrooney from William Blair & Company.
Tim Mulrooney : My question is on your 2023 guide. The midpoint of your guide is suggesting, I think, still a nice ramp up in fourth quarter revenue, up more than 20% sequentially, I think, from the third quarter at the midpoint. Can you talk about the primary factors contributing to that acceleration? Is it collection of unbilled revenue at SCE or other things?
Mark Chiplock: Yes. Tim, this is Mark. It’s mostly — it’s contracted. I mean it’s assuming good execution on our contracted backlog. It assumes very little awarded revenue. And we took a look at that, and we have to take into consideration the slippage that we’re seeing. But with the active projects that we currently are working on, we feel like the contracted revenue is a number that we can deliver on in Q4.
Tim Mulrooney : Okay. My follow-up, I just wanted to ask about the administrative bottlenecks that you listed as being a factor impacting third quarter results. Can you just talk in a little more detail about what those were? If they were specific to 1 or 2 projects or if it’s a broader issue that you expect will carry into the fourth quarter and beyond?
George Sakellaris: Well, I know a couple of the assets that were delayed because whether it’s solar plants that they were not connected goof the utility. We didn’t get out there to connect the project or some of the renewable. The gas plants that we were built in, we got delayed because I think was 3 months before somebody when they are to review the applications. So that delayed that particular project for about 3 months.
Mark Chiplock: And I think the administrative delays really that are impacting the timing of awards converting to contract. It’s something that we really started to see a little bit towards the end of Q2 with some awards that we expected to convert. We really felt the impact in Q3. And so to your question, yes, we do expect that to continue through Q4 and as these are all really just kind of pushing out to the right. So — but we’ve taken that into account in our revised guidance.
George Sakellaris: Say what happened, the fact is that everybody has it turned back to work, it does impact in the implementation of our work, and I think many other people.
Operator: Our next question or comment comes from the line of Joseph Osha from Guggenheim.
Joseph Osha : I figure we might shift gears a little bit here. When I look at where we stand in the current quarter and then your deck you point out that a lot of business is nonrecourse. But if you annualize Q3, we’re now standing at about 8.3 debt-to-EBITDA. And on your new guide, it’s about 8x likely debt-to-EBITDA for 2024. The business hasn’t generated even wrapping in hasn’t generated any free cash flow since 2020 and it’s generated $80 million since the beginning of 2019. So I guess I’m just asking, we can talk about the growth in the energy assets business here. But at what point does this business begin to generate cash? And how are you thinking about that as we go into 2024?
Doran Hole: Okay. Joe, the first thing I’d point out is that the adjusted cash from operations was positive, right? As we’ve talked about, we have the discretion to work on the cadence of asset investment as necessary if we need to effectively catch up with our operating cash flow. Understand that the higher leverage numbers that you’re talking about, you pointed out yourself, that EBITDA multiples is not a metric that’s used when determining advance rates under nonrecourse debt. I think we can all kind of agree on that point. And therefore, those figures will end up looking higher than what you would think about from normal corporate credit facility. As far as cash flow is concerned, I think that, that is something, and we’ve discussed this.
We are going to be looking at how we can start to talk about the company’s history of generating cash and what that looks like versus how much is being invested into assets. However, broadly speaking, the only other thing I would say about the leverage overall is that it does remain a bit inflated on the basis of the delayed kind of so-called projects and wrapping those up, getting that cash in. We’ve actually used quite a bit of our own operating cash flow to pay down the debt — the corporate debt. And so we’ve got quite a bit of unbilled there that you’ll see kind of turnaround, call it, Q1-ish to kind of show the cash coming out of the SCE project, so that will help us in terms of delevering the corporate facility. At this stage, I don’t know how much more I can say to address your question.
