Ameresco Reports Backlog Growth, but Canadian Unit Weighs on Profits

Ameresco is helping Arizona State University reduce its environmental impact and lower costs. Image source: Ameresco.

Ameresco (AMRC 1.92%) reported its second-quarter financial results on Aug. 9, delivering 7% revenue growth, 43% growth in new project awards, and reported a $1.6 billion backlog, 16% bigger than one year ago. But the company continues to work through efforts to get its Canadian business back on track, with $2 million in restructuring charges keeping profits flat from last year. 

Yet even with those costs -- and potentially $3 million more in losses the company may have to take related to SunEdison's ongoing bankruptcy before year-end -- management is sticking to its guns on expectations for the full year. Here's a closer look at Ameresco's second-quarter earnings report.

Ameresco results: The raw numbers

Data source: Ameresco.

As mentioned above, profits came in flat over last year's quarter, primarily because of $2 million in restructuring charges related to Canadian operations. Adjusting for those charges, which inflated sales, general, and administrative expenses to $27.1 million versus $25.8 million last year, and Ameresco's earnings would have been $3.9 million, or $0.08 per share. 

And while it's probably not a good idea to ignore these one-time charges -- after all, Ameresco's struggling Canadian segment has cost the company more than $5 million in losses and restructuring charges over the past two years -- parsing these costs out of operating results can give investors a clearer picture of how the business is performing as a whole. 

Ameresco's backlog also continues to expand. At the end of the quarter, the company reported $1.12 billion in awarded but not yet contracted projects, up 18% from last year, and $435.1 million in fully contracted projects, up 9%. That gives Ameresco $1.55 billion in total backlog, a 9% increase from last year. The company also has $157 million in projects it is developing, such as renewable energy generation projects, that it will either maintain ownership of to generate long-term cash flows, or sell after completion. 

Latest on SunEdison and Canadian segment

The company has made some major changes in its Canadian operations in recent quarters, following an ugly 2015 that saw the Canadian business report $6.6 million in project losses. When it comes to the $2 million in restructuring charges, founder and CEO George Sakellaris said the following on the earnings call:

So in Q4 when we implemented and announced the restructuring or reorganization of Canada, we had taken an initial reserve for amount that we believe we're not going to be collectible based on the fact that we are winding down operations in a certain locations. So there's about 10 to 15 projects there we are working on and addressing to basically wind down a transition. And so, over the last few months, in negotiations with customers and discussions with them it became apparent that we needed to reserve the additional $2 million this quarter, so that's what we had done.

Ameresco has also already taken $1 million in write-offs related to projects tied to SunEdison, and management has said that SunEdison's bankruptcy could potentially cost as much as $3 million more. Sakellaris explained:

And so, at some point over the next three to six months, we'll probably get more visibility. But I can say that we have been contacted, and they are very much interested in the assets that we're working on, some of which are pretty much close to completion. So, we believe that there are assets that SunEdison or someone else would want and there will be some value to the assets there. So we're still hoping that we're going to be able to recover a good amount of that.

Looking ahead

Even with the Canadian segment restructuring costing more and taking longer than expected, management reaffirmed full-year guidance of $645 million to $680 million in revenue, and earnings per share of $0.25 to $0.30. For the third quarter, revenue is expected to be $170 million to $180 million, and earnings of $0.09 to $0.13 per share. Guidance for both the full year and third quarter exclude any potential impact related to SunEdison. 

Looking at the longer-term outlook, Ameresco's backlog growth offers hope. The total construction backlog is up more than $200 million from one year ago, and showed strong sequential growth as well. The big question? Whether this recent uptick the first sign of an increase in infrastructure spending, or just a short-term boost. While even a small bounce in contract activity is good for Ameresco, a sustained period of investment would be a boon.