Ameresco, Inc. (NYSE:AMRC) Q4 2023 Earnings Call Transcript

Ameresco, Inc. (NYSE:AMRC) Q4 2023 Earnings Call Transcript February 28, 2024

Ameresco, Inc. beats earnings expectations. Reported EPS is $0.69, expectations were $0.6. Ameresco, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Ameresco Incorporated Fourth Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to turn the conference over to your host, Ms. Leila Dillon, Senior Vice President, Marketing and Communications. Ms. Dillion, you may begin.

Leila Dillon: Thank you, Lisa, and good afternoon, everyone. We appreciate you joining us for today’s call. Joining me here are George Sakellaris, Ameresco’s Chairman, President and Chief Executive Officer; Doran Hole, Executive Vice President and Chief Financial Officer and Mark Chiplock, Senior Vice President and Chief Accounting Officer. 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 slide 2 of our supplemental information and our SEC filings for a discussion of the major risk factors that could cause our actual results to differ from those in our forward-looking statements.

In addition, we use several non-GAAP measures when presenting our financial results. We have included reconciliations to these measures in our supplemental information. I will now turn the call over to George. George?

George Sakellaris: Thank you, Leila, and good afternoon, everyone. Fourth quarter results marked a strong finish to a challenging year for the renewable industry and for Ameresco. We not only achieved very positive revenue, adjusted EBITDA and net income growth but also our business development execution remained very strong. We exited 2023 with a record backlog and asset development metrics. These metrics together with our intense focus on execution point to 2024 being a year of achievable growth. Demand for energy efficiency and renewable solutions remains robust, and Ameresco ability to effectively compete and win new business demonstrates how well aligned our capabilities and offerings are with our clients’ priorities. At the same time, we are also growing our assets in development at a strong pace, which together with our project backlog give us excellent multiyear visibility.

This supports our 2024 midpoint guidance for revenue and adjusted EBITDA growth of 20% and 38% respectively, and provides us with over $7 billion in multiyear visibility and of profitable revenue. Ameresco total project backlog was a record $3.9 million at the end of 2023, up approximately 50% versus 2022 with new awards for the year of $2.2 billion and proposal activity remains at record levels. During the year, we also placed 118 megawatts of assets into operation, bringing our operating energy assets to over 500 megawatts. We also added other 98 megawatts of assets in development in 2023, ending the year with 669 megawatts of Ameresco own assets in development and construction. Now, I would like to make some comments on the industry environment and what Ameresco is doing to address current challenges.

First and foremost, as I stated before, industry demand remains very healthy and elevated power prices, greater demand for electricity and green resiliency combined with attractive incentives have created a very favorable demand backdrop for renewable energy and energy efficiency solutions. This robust industry demand alone has also strained some parts of the system. The industry continues to experience some lengthening in award conversions interconnection and permitting delays supply chain disruptions and shortages of critical equipment and skilled labor with a focus on execution and cost efficiencies Ameresco continues to take steps to adapt to this new environment. We are optimizing our operational structure to bring more uniformity and scalability across all of our geographies in business units, taking a more conservative approach to our construction schedules, promoting knowledge sharing and increasing best practices across our teams and focusing our business development efforts on larger opportunities in our core markets and areas of expertise.

We also remain very focused on our working capital levels and liquidity. As part of this, we are prioritizing the timely conversion and execution of our tremendous project backlog. These actions are already yielding results. Our 40% project revenue growth in the fourth quarter was stop by the conversion of awards to contracts that had been previously doing. Our focus on conversion also helped drive a 32% year-over-year increase in our contracted backlog, which ended the year at $1.3 billion giving us good visibility into our 2024 revenue. Demand for our services remains very strong and Ameresco is well positioned for 2024 and beyond. As I mentioned before, there are a number of very favorable macro factors driving the strong demand. One of these is the IRA legislation.

Looking at the Ameresco history, one can see that we have performed quite well regardless of the party in office. The main reason for this it is the diversity of our business model and the fact that our solutions are driven by economic returns and cost savings to our customers many without additional government incentives, especially in our project business. We also see tremendous support for our resiliency solutions from utility government and military customers. Again regardless of the administration. Therefore, we continue to see strong demand and great opportunities ahead. I will now turn the call over to Doran to comment on our financial performance and outlook. Doran?

Doran Hole: Thank you, George, and good afternoon everyone. For additional financial information, please refer to the press release and especially our supplemental information that was posted to our website after the market closed today and which contains some new financial content that I will describe in more detail. We ended the year on a high note with total revenue for the quarter of $441 million, up 33% from the previous year. Each of our four business lines experienced double digit revenue growth. Our projects business had a particularly strong quarter as the company executed on a number of large contract conversions, some that had slipped from the previous quarter and benefited from increased overall activity. We also saw a benefit of approximately $40 million from faster implementation of active contracts.

We continue to make great strides in growing our European footprint. You will notice in our upcoming 10-K that our European revenue now accounts for over 10% of our total revenue and is therefore now separately disclosed going forward. We experienced strong revenue growth of over 150% this year with solid organic growth and the significant contribution from our very successful Enerqos acquisition. We believe the European market remains highly fragmented and very economically attractive to Ameresco. Energy asset revenue grew 12% largely due to the greater number of operating assets compared to last year as well as higher RIN prices experienced during the quarter. We continue to bring assets into operation growing this important recurring revenue stream.

Our O&M business and other lines of business grew 13% and 12% respectively. Gross margin of 17% dipped during the quarter, as project mix impacted this quarter’s results. Like in other quarters, our gross margins can be impacted by the mix of projects we are executing during the quarter ranging from higher margin performance contracts to lower margin design-build revenue. While gross margin can vary from quarter-to-quarter and year-to-year we are not seeing any fundamental changes in the margins of our projects. As always, we remain focused on driving incremental gross margin dollars and operating leverage, over gross margin percentages. Adjusted EBITDA grew 33% to $54.9 million in the quarter, with non-GAAP EPS almost doubling last year’s results of key — a key driver of tax benefits.

We expect to continue to take advantage of a number of tax incentives, which we’ve accounted for in our 2024 guidance. Q4 was not only an excellent quarter for execution, but also for business development with other over $500 million of new project awards in the quarter. Our project backlog represents a very well balanced mix of performance contracts and design-build work with particular strength from the federal government sector. During the quarter we also placed 63 megawatts of energy assets into operation and added 198 megawatts to assets in development and construction, with a diversified mix of solar, battery, RNG and biofuel assets, supported by our recent awards in Hawaii. Turning to our balance sheet and liquidity, I’ll draw your attention to some additional metrics we are providing in our press release and supplemental information, both available on our website.

First let me spend a few minutes on our debt. As many of you are already aware, Ameresco carries two distinct types of debt: Corporate Debt and Energy Asset Debt. The vast majority of our debt is energy asset debt, supported by our large and growing portfolio of profitable energy assets. As most of our assets are backed by multiyear offtake agreements, banks are willing to lend a high portion of the cost of these assets, at competitive rates. Given the long-term nature of contracted cash flows, they’re expected to generate. As of year end, our energy asset debt represents only 72% of the bookvalue of the related energy assets, a fairly conservative level. It is also important to note that the majority of our energy asset debt for our operating assets is fully amortizing over the 15 to 20 year term of the Offtake contracts.

Matching our debt with our contracted revenue flows for these assets. And for a significant portion of our assets in construction and development we have already lined up long-term debt financing through our existing sale leaseback, RNG and other portfolio financing facilities. In addition, given the strength of our asset development efforts, we are continuing to pursue a, develop and sell business model for a portion of our assets in development. This allows us to convert assets that would otherwise require cash equity into EPC and O&M contracts which instead, generate project revenue and more immediate positive operating cash flow. Even with these develop and sell transactions, we will continue to target long-term operating energy asset portfolio growth of 20% plus.

Lenders and investors have continued to fund these attractive assets at competitive rates, allowing us to minimize the use of the company’s own equity. Our corporate debt, which includes our term-loans and revolving line of credit, is the minority of our total debt. At year end, our corporate debt was $280 million with a leverage ratio of 3.3 times, below our bank covenant level of 3.75 times. It is important to note that our corporate debt covenants do not include energy asset debt, as part of the leverage ratio calculation. In the end, the vast majority of our debt is covered by our strong and profitable energy asset business, backed by multiyear contracted revenue streams. And our corporate debt should decline, as we bill and collect on the SoCalGas projects.

Another consistent topic of discussion with investors and analysts is, our cash flow generation. Our quarterly cash flows can be quite volatile, given the variations in the timing of collections and outlays on our contracts. Because of this, we are providing a quarterly moving average of adjusted cash flow from operations over an eight quarter period, which is broadly representative of our implementation cycle. In our supplemental information, we have provided a longer term chart of this metric, over the past several years, which clearly shows, the temporary impact of the working capital we needed for the SoCalGas contract. We expect this metric to improve back towards its historical positive trend, as we bill and collect from SoCalGas. Now turning to 2024, we are guiding to revenue and adjusted EBITDA growth of 20% and 38% at the midpoints of our ranges, respectively.

Included in our non-GAAP EPS guidance is the anticipation of a likely net tax benefit. Our ranges are slightly wider than in prior years. Given the operating environment, we believe the primary variables that can impact our results this year will include the timing of converting project awards, the execution of develop and sell transactions, as well as the pace of implementation of our contracted back project backlog. Other important variables include the timing of bringing our new energy assets into operation, realized written pricing and tax benefits. We anticipate placing approximately 200 megawatts of energy assets in service during 2024 including our large component asset and united power battery assets. Our 2024 asset guidance also includes placing three RNG plants in operation, one of which went COD already in January.

Our expected CapEx for 2024 is $350 million to $400 million, the majority of which we expect to fund with energy asset debt and tax equity. As we look to the first quarter, we estimate revenue and adjusted EBITDA to be in the range of $225 million to $275 million and $20 million to 30 million, respectively with negative non-GAAP EPS. As we noted, we saw approximately $40 million of project revenues from faster implementation of active contracts in the fourth quarter impacting our Q1 guidance. We expect the remainder of the year to follow a more normal quarterly seasonal cadence. Now, I’d like to turn the call back over to George for closing comments.

George Sakellaris: Thank you Doran. We ended the year on a high note even in light of a difficult industry environment in that positive momentum has continued into the New Year and whereas with outlook for 2024 reflects a strong visibility from our backlog, recovery energy asset, and O&M revenue streams. And focus for 2024 is the execution of our tremendous project backlog and assets in development and the generation of cash flow. In closing, I would like to once again thank our employees, customers and stockholders for their continued support. Operator, we would like to open the call to questions now.

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question today will be coming from Noah Kaye of Oppenheimer & Co. Your line is open.

Noah Kaye: Good afternoon and thanks for taking the questions. Can you talk about the energy asset portfolio planning for 2024; you indicated expectations for 200 megawatts placed in service on. So Doran picking up on the comments in your prepared remarks around developing portfolio growth, but also doing develop themselves, how much of the 200 megawatts do you kind of envision retaining? And then the $350 million to $400 million CapEx, how much of that do we see an immediate turnaround on in terms of monetization and sales of assets ?

Doran Hole: Yeah. So, no, the short answer to that is the entire 200 is what we’re retaining on balance sheet, the CapEx figures or what we’re retaining on balance sheet. So the develop and sell is — we follow that develop and sell into our financial plan under the project business because it becomes EPC, but we do not included in the asset metrics.

Noah Kaye: All right. Very helpful. Yeah, it’s a very substantial growth versus what’s in operations today. So I guess talk to us a little bit about your guide posts for develop and sell versus retaining on balance sheet how much of that is unique to the assets and the nature of the offtakes versus an overall philosophy of managing diversification of resources and portfolio?

Doran Hole: Yeah I think we know that the primary feature is based on returns, obviously, customer relationships will feed into that sometimes when we’re making those decisions. But that’s essentially it. We’ve just got a tremendous backlog of development going on. We want to grow the portfolio 20% plus. That gives us a lot of a lot of room to convert those into projects.

Noah Kaye: Great. And if I could sneak one more in just on the up the project side of the business — really strong awards and backlog to close out the year here. Give us a sense of what’s happening with the conversion cycle around awarded to it too firmly contracted and how that’s sort of flowing in is it have you have you noticed a material improvement? I guess I would ask in terms of the pace of conversion and if so what are you driving by?

George Sakellaris: Going from the awards the awarded contracts to execute that it has. It’s a conversion has not changed what we used before the 12 months to 18 months steel and sometimes for example like now we’re talking about the government shutdown then you have delays and all of a sudden from 18 months you got 24 months. But I mean there was that the timing has changed a little bit is that design built, the EPC work that we’re doing and that’s helping. Another thing I wanted to give you a bit of perspective on the color of the backhaul that the branded via what I call the performance contracts we’re going to keep seeing a very healthy increase.

Noah Kaye: All right. Excellent. I’ll turn it over. Thank you.

Operator: Thank you. One moment for our next question. And our next question will be coming from George Gianarikas of Canaccord. Your line is open.

George Gianarikas: Hi. Good afternoon, everyone. Thank you for taking my questions.

George Sakellaris: Hi, George.

George Gianarikas: I’d like to ask about the 2024 EBITDA guidance which I know you just gave an initial look last quarter that was a little bit higher than what you’re talking about now. Can you just maybe discuss anything impacting your profitability for 2024? Thank you.

Doran Hole: Yes I’ll just start with the fact that we’re building a little more conservatism in to the forecast out to what we’re guiding. And in addition you know as I talked about in my comments, in my prepared remarks that we had some revenue $40 million bucks worth of revenue pull into Q4. So I think the combination of those two things really put us where a where we are in despite the wider ranges. You know this is a set of figures that we feel very good about.

George Gianarikas: Great. And maybe just to clear any confusion. Can you just remind us what the quote unquote “normal quarterly cadence” of your business is — for year so for modeling purposes? Thank you.

Mark Chiplock: Yes, Sure. This is Mark. Yes, I think we can sort of the normal quarterly cadence that we’ve talked about. Q1 is seasonally our lowest quarter and then it tends to be a steady ramp on generally with Q3 and Q4 being our heavier quarter. So it will definitely — the shape will definitely have a heavier back half. I mean Q1 is always our unless something unusual comes into the mix. It is generally our lowest seasonal quarter.

George Gianarikas: Thank you.

George Sakellaris: For all the other and although we may add on that the comment. Thanks mark that is shorter heavily weighted average was 2023 to the last quarter.

George Gianarikas: Thank you, George.

Operator: Thank you. One moment for our next question. Our next question will be coming from Eric Stine of Craig Hallum. Your line is open.

Eric Stine: Good morning. Thanks for taking the questions. Maybe we could just start on Europe. I mean obviously a pretty a great story there. The growth that you have seen, seems like it’s a pretty wide-open opportunity. Maybe just talk about how you see it playing out going forward. I mean do you see that acquisition organic combination of bolus partnering with people that are just maybe your thoughts on that part of the business going forward?

Doran Hole: I mean I think in the near term you’re going to see a lot more organic. I’m thinking about this acquisition. That’s — you know it’s a relatively small company that we bought. They have overperformed based on our own expectations and we expect to use that platform that local content to actually help them grow organically and actually help us grow organically throughout the continent. So I think that’s one thing. The other thing is that a lot of the yes new technologies battery, EV charging systems, you name it, those things are starting to really come into play in the UK. And so I think we’re expecting some really good organic growth there from some of the new technologies. So it’s kind of. Yes it is across the major jurisdictions you know, Greece, Italy and the UK, where we’re focusing the most but there’s other opportunities in other markets where we haven’t been yet that we see coming as well. So it’s actually really exciting.

Eric Stine: Thanks for that. And then maybe just a follow up on the Bristol opportunity. Can you just talk about where things stand with that? I mean I would assume that that is some of the growth but that also is just starting so maybe how that plays into it and do you see other projects out there or opportunities out there like that?

George Sakellaris: It’s a great, great question. Actually about the beginning of the year. I spent a couple of weeks in Europe in the Bristol’s City. I spent some time and that we had the Board meeting. It’s beginning to have traction right now. Where we are in the implementation phase and we’re beginning to do more projects as we did in the last year. So in addition to that we are working with the mayor of Bristol and we’re going to have a conference very soon that we will buy quite a few other series that are thinking of going down this particular route. So it’s a great opportunity for us and that’s in this right up to our toolbox because the reason they picked us because we provide a comprehensive services across the full spectrum of the Greek debts have acknowledged.

So soon it’s a great project and I think we will see more coming down the pipe. And the other thing I might just say normal organic growth. So we’re growing a lot in Europe but we do if the market is fragmented and don’t be surprised that you will see some small tuck-in acquisitions in in the near future. But we have not commented right now in our forecast for that but we will be aggressively looking for them.

Eric Stine: Okay. Thank you.

Operator: Thank you. One moment for the next question. Our next question will be coming form William Grippin of UBS. Your line is open.

William Grippin: Great. Thanks very much. Just wanted to ask first about the debt raise pursuant to your creditor requirements and what is the plan and timing there? And then following completion of the SCE. project in accordance with their requirements, what would the that inflows and outflows? The cash look like there?

Doran Hole: And so we outlined a bit of this in the press release. There’s not much more we can say beyond what we put in the press release, the process is underway. We’ve got a strong interest will come. We’ll obviously, be talking about that deal as it comes to fruition. But I think you would kind of have to stick with the info that we put in the press release and you know that the timing of that deal the you know, the overall parameters not really directly linked to when we expect to collect cash from Sou Cal? Not to be honest.

William Grippin: Fair enough. And then on tax credits maybe a bit of a technical question here but what is the main process you intend to use for realizing the benefit of the tax incentives? Are you doing ITC transfers here and how much are you embedding in the guide?

Doran Hole: So we’ll have a figure to give you how much we’re embedding in the guide. But we’ve got a combination of strategies. So we’ve got ITCs that we take directly that benefit our tax line. We have 179D deductions that we take directly that impacted our tax line. We have and we will employ the sale of tax credits in tax credit transfer transactions. Those in fact don’t go on the tax line may be a subject of a future Professor Doran commentary, but we have we actually reduced the book basis of the assets when we sell those credits. And then we will continue to do traditional tax equity financing as well for the solar and battery assets. We have not included anything related to investment tax credits on the RNG plants, in our guidance. So to the extent that, that material changes based on the recent hearings in some of the recent guidance changes, that would be that would be upside for us.

William Grippin: Okay. So just to put a final point on that, what I’m hearing is you don’t need IRA sorry IRS clarity on any points of the IRA to from just sort of if the guide with respect to whatever is embedded for tax incentive?

Doran Hole: That’s correct. Yes, that’s correct. We’re I mean the stuff is still outstanding impacts what might be upside to our figures [indiscernible] make sure we get cash we get the clarification in order to be able to use it down a little bit.

William Grippin: Great. Thank you.

Operator: Thank you. One moment for the next question. Our next question is coming from Christopher Souther of B. Riley. Your line is open.

Q – Christopher Souther: Hey guys, thanks for taking my question here. Just any clarity, you can provide on the expected timing around those first two Sou Cal projects? And then any color, you can provide on expectations around how long after completion, you’d expect the cash flow and from that I think would be helpful.

Doran Hole: So look, I’m I mean, I don’t think we’re going to put specific time frames out there. We’re continuously constantly daily, hourly, working on it getting these substantial check substantial completion checklists completed with Sou Cal. As you know obviously, there will be announcements when the time comes. The terms of the contract remain 60 day payment terms after we have substantial completion, kind of fully declared and agreed by Sou Calas it relates to the timing of the cash flows.

Q – Christopher Souther: Okay great. And then just on the develop and sell wanting the timing in the development cycle where you’d be looking to sell is the I’m just kind of curious, how much working capital or project debt, we’d be expecting to commence now close through to that? Or is it kind of earlier before you start substantial kind of spending on a on a project that you’d be looking to sell? And just how much I guess of that is baked into your EBITDA guidance next year. If there’s kind of a more concerted effort towards that space?

Doran Hole: Yes, we’re not breaking out how much of the EBITDA guidance comes from the develop and sell business model. But the strategy of course, is to get those assets identified and transacted before we start construction. I wouldn’t say, that that happens 100% of the time and certainly are circumstances where we may transact after we’ve started construction or maybe you ordered some long lead time equipment. As you guys know, we’ve talked about switchgear and transformers. And since this is pretty much just battery and solar assets those types of CapEx are particularly relevant here. But beyond that, that’s really in, as we’ve disclosed in the past we’ve got to have a solid construction and development financing facility that we use for those assets as we go through the process of executing those develop and sell transactions.

Q – Christopher Souther: Got Okay. So it would probably be near or maybe a little bit of CapEx related to that have been kind of flat mostly just through backlog on your project side into how we can kind of watch that space?

Doran Hole: Yes, I think it does.

Operator: Thank you. One moment for the next question please. Next question is coming from Kashy Harrison of Piper Sandler. Your line is open

Q – Kashy Harrison: Hi. Good afternoon and thanks for taking my questions. So, yes the first one I guess just around the guidance. If we look at Q1, revenues it’s about 15% of the full year. And if we think back at the 2023, the original Q1 guidance was also 15% before you guys were forced to walk that back due to project delays. And so I guess my question is, what what’s the difference between 2024 and 2023? What gives you the confidence that you can actually it meet expectations this time just given the similarity in the really low Q1 as a percentage of the full year? And I have a follow-up.

Mark Chiplock: Yeah. Hey, Kashy, this is Mark I’ll just take that again. I think the simple answer there is just visibility. And I think what we what we see in terms of Q1, what’s available what’s coming out of our which is pretty much all contracted backlog now. It’s just really our confidence in our ability to execute on that contracted backlog during Q1. So there’s but we’re not expecting and much of anything from conversion of awards that we would then need to execute on the implementation. So we feel pretty good about although, it’s no it’s lower than normal because we have the visibility gives us the confidence in Q1.

George Sakellaris: Yeah. What I might add there too is that, last year at this particular time, we were counting more projects to move from the awarded to the contracted category. And that this year about over 75% of our total revenue is already contracted. And that’s why it was important to execute on the contracted backlog that we have. And the other ones don’t forget that, we did it take off $40 million from this quarter to last year for the acceleration was we started focusing there accelerating the construction of some projects. It began to happen and that’s helped the last quarter. And I think it’s going to help as we go through this year. But the most important thing is we do not have we don’t count for as many contracts to go from the award of the category to contract it would in order to make our plan this year.

Kashy Harrison: Got it. I appreciate the color there. And then my follow-up question is surrounding BFE projects. I imagine you guys are frustrated that it’s taken so long, but it is now I think 18 months now delayed just based on the potential summer COD versus I want to say the original or late 2022 COD. And so similar question of what gives you the confidence that it is a summer date in fact and we won’t see additional delays?

Doran Hole: If I did I would only, I would only jump in with because I kind of personally involved and make all of the costs that are taking place. So we’ve got a lot of heavy attention being paid to the day-in, day-out commissioning efforts going on, on the site. That not only is it the team on the ground from Ameresco, and our major subcontractors. But also at the executive level of each of those subcontractors, as well as the executive level. So SoCal Ed, there’s a tremendous amount of momentum on getting those two projects through the testing through — the through the open items on the checklist for substantial completion as the visibility is definitely there. And I mean, I think we feel — we do feel comfortable that that those are — those are really close to being completed and being completed safely.

Kashy Harrison: Appreciate it.

Operator: Thank you. One moment for next question. Julien Dumoulin of Bank of America. Your line is open.

Julien Dumoulin: Hey, good afternoon, team. Thank you guys very much for the time. I appreciate it. Hopefully you guys can hear me.

George Sakellaris: Welcome.

Julien Dumoulin: Look — hey, thank you, George. Thank you, George. Look, I just talked about the debt, right? You mentioned in the prepared remarks talking about them being roughly at three times below the covenant of 375. You also talked about effectively deleveraging through the course of receiving some of these SoCal payments here. How do you think about the cadence of that leverage through the course of the year? How do you think about where you want to end the year? And then related, how do you think about the force majeure related to SCE, the decisions you can offer up? Any comments about that $90 million dynamic? I mean, again, I appreciate that this might be a little tricky, but really focusing on that deleveraging commentary.

George Sakellaris: Yeah, sure. I mean, I think the deleveraging, so we’ve all kind of circled around the amount of unbilled that’s sort of still sitting there. We’ve got to get these projects to substantial completion, collect the amounts after 60 days, and see those go to pay down that corporate leverage, especially our revolver. The third project finishing later in the year. Obviously, you’ll see that substantial completion payment the final acceptance payments coming in. I don’t think I’m putting a particular no time period on it. I’m not going to say it’s going to happen in Q2 or Q3 or Q4. I think it’s going to kind of spread itself across the rest of the year as we delever over the course of the year. That’s the way that I would answer that.

And then frankly on the liquidated damages and the force majeure claims, there’s not really any new information. We’re continuing to exchange information with. So Cal Ed and that’s what we’ve been doing. And we’re continuing to do it in the and the hard yards and that will probably come after we finish after we finish the projects.

Julien Dumoulin: Yeah, got it. So right. So really don’t expect any updates until after the summer or something like that on the force majeure on liquidity and burn payments here? And then on the specifics of where you’re targeting leverage to be just, are there a bunch of puts and takes here by the end of the year? Any specific metric that you would offer up relative to three today at three times today that you would kind of aspire to?

Doran Hole: So the short answer Julian is, no. I probably won’t put that metric out there. And the primary reason is because George talked about being opportunistic in Europe, right? If something pops up and we will fund us and we want to go make a small acquisition in Europe or something else happens then you know we want to be able to use the corporate resources to actually go after transactions and ideas that will help us grow the business. So I don’t I don’t think it’s appropriate for us to kind of put a target out there. We’ve — the numbers are pretty clear as far as the weighted the So Cal will reduce that leverage. If there’s anything that we do that we’ll increase the leverage, it’s going to be something we’d be talking about right, whether it’s asset opportunities or M&A opportunities or something along those lines but no particular target Julien.

Operator: Thank you. And one moment for the next question. Our next question is coming from Craig Irwin of Roth MKM. Please go ahead.

Craig Irwin : Thanks for taking my question. So George, looking back to the time of COVID where you very successfully pulled forward execution it was a large part of the significant appreciation in your stock, right? Looking back to that time, a lot of this success is your ability to move your resources away from prioritizing pipeline, backlog, contracted backlog towards execution in a quarter? Can you maybe explain for us whether or not this was a factor in your fourth quarter upside? And how are your employees positions in the current quarter compared to historical? Are you leaning in a little bit maybe something could see some upside over the course of this year, given that the pipeline and backlog and everything is still incredibly healthy there? Or is this sort of more of an even distribution like you’ve seen over the last 10 years?

George Sakellaris: It’s a great question Craig, but this year to the management team and to the Board I told them look guys, the development and redevelopment business a very good clip. We have to execute, execute and execute. And when we reorganize the company a little bit in order to take advantage of the people that we have over 100 around the company. We reduced it by a couple of units. So we have more interaction between the management teams right now done taking advantage of some of the expertise we have in the company by having less units we can transfer that knowledge from one group to another or more purchasing being done through their headquarters. So we save money the purchasing of equipment. And then the other thing sometimes lot of people they focused on smaller projects and maybe they are not in our wheelhouse within our wheelhouse.

So I’d say we got a focus in larger projects and to the ones that we have a competitive advantage and those are the ones that are on our expertise. And that’s why particularly I mention these in the federal government and we have over a $1 billion backlog on that, but alone and each additional is that accounts again the backlog is very good. So, the bread-and-butter business when the project backlog which is the energy efficiency which is our core business I think here we have the organization. We focus a lot on that because what happens once you pivot in some of these new strategies, new technologist, everybody is rushing to that. So, we wanted to if you take a look back and say hey guys this is what brought us here. And I want you to start focusing this this particular project.

It has an impact already. We started that process I would say late last summer and we’ve seen some good results coming out of it.

Doran Hole: I would only add Craig as I think that the comparison to COVID is an interesting one. It’s probably not quite as and drastic in terms of the reallocation of resources of what we saw in COVID because of the fact that the business development, world hasn’t kind of come to a halt like it did early in COVID. And for that reason what we’re focusing on is making the business development process much more efficient and then the operational efficiency of getting proposals into awards, five hit rate projects, and then and then converting awards to contracts. And certainly you’ll see some more resources being going into execution because we’ve got the management team focused on execution and reducing OpEx and so on and so forth. But it’s a good comparison, it’s not quite as extreme.