Ameresco Inc (AMRC) 2016 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ameresco Incorporated Q2 2016 earnings conference call. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to turn the call over to Gary Dvorchak. You may begin.

Thank you, Destiny, and good morning, everyone. Thank you for joining us for Ameresco's second-quarter 2016 earnings conference call. I am joined today by George Sakellaris, Ameresco's Chairman, President and Chief Operating Officer, and John Granara, the Company's Chief Financial Officer. On the call, management will review the operating and financial highlights of the second quarter of 2016. Following the highlights, we will take questions from the audience.

Before I turn the call over to George and John, I'd 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. Ameresco cautions you that such statements are just predictions, and actual results may differ materially as a result of risks and uncertainties that pertain to our business. Ameresco refers you to the Company's press release issued this morning and its SEC filings, specifically our annual report on Form 10-K and our quarterly report on Form 10-Q filed on May 5, 2016. Those documents discuss important factors that could cause actual results to differ materially from those contained in the Company's projections or forward-looking statements. Ameresco assumes no obligation to revise any forward-looking statements made on today's call.

In addition, the Company will be referring to non-GAAP financial measures during this call. These non-GAAP financial measures are not prepared in accordance with the Generally Accepted Accounting Principles. A GAAP to non-GAAP reconciliation as well as an explanation behind the use of non-GAAP financial measures is available in our press release as well as our prepared remarks.

I will now turn the call over to George Sakellaris. George?

Thank you, Gary, and good morning, everyone. In the second quarter, we continued to build on our solid start to the year. Revenue was up 6.6%, gross margin was stable, and we again kept operating expenses under control. This resulted in a flat net income and a 15% improvement in adjusted EBITDA.

Because the quarter results are often lumpy, we also measure our progress by the year-to-date performance. This can smooth out timing differences and other fluctuations that we believe do not completely reflect our long-term performance.

Year-to-date, our revenue is up 10.6%. Net income is $3 million, up $5.2 million against a loss of $2.2 million last year. And adjusted EBITDA is up 29.9%.

This quarter was outstanding in terms of selling activity, so I want to discuss that first. We have been investing heavily to create the business development infrastructure necessary to accelerate pipeline build. This effort is a key element of the four-point strategy we are executing this year to drive growth. And we are seeing immediate results. Demand has been building steadily in our core project business. New award and signed contract activity this quarter extended that trend.

Awarded backlog was up 18%, contracted backlog up 9% and total backlog up 16% year-over-year to $1.6 billion. We had over $270 million of new contracts, an amount that was 43% higher than the new awards we booked in the second quarter of 2015. That was our best performance since the third quarter of 2012.

We converted $188 million of awards into contracts, an amount that was 67% higher than our conversions at this time last year. So, in terms of being awarded new business and then converting it to contracted work, we are performing quite well. We expect to see the revenue impact in 2017 and beyond.

The new award performance was driven by federal and the Eastern US, each of which was awarded approximately $100 million of new projects. Three projects in particular drove further awards -- one, a project for Veterans Affairs; two, a project for the Navy; and, three, we were able to increase scope of an existing awarded prison project that went to contract in July. Based on our federal group's outstanding selling efforts, we now have at least three years of revenue visibility for this business.

In the Eastern US, we increased our awarded backlog by over 40% from Q1, an increase of $83 million to $280 million. This is a net number, of course.

Our gross new awards in the Eastern US were $106 million. The $106 million was driven by a $20 million urban community college project as well as winning Phase 2 work at the large northeastern city Housing Authority we mentioned last quarter.

In general, housing is an active market for us. In addition to this very large object, we have identified other housing opportunities. Efficiency upgrades solve a real problem for housing authorities, namely how to upgrade aging housing work at low cost. Our upgrades are a self-funding mechanism that results in refreshed homes that operate less expensively in a more environmentally friendly manner.

I should point out that the federal and Eastern US were not alone in doing an excellent job in driving business. Around the country, the majority of regions grew their awarded backlog by double digits. The US overall grew awarded backlog by 28% during the quarter. We are encouraged that these results reflect effort being undertaken to achieve greater penetration in areas of the country in which we are underrepresented, especially the Southwest. This effort is another of the four elements of our growth strategy for this year.

The pipeline started with awards, of course, but we make an equally intense effort to convert them into contracts. And during the quarter, we performed well. Our net contracted backlog increased over 20% sequentially. The biggest contributor to this growth was the federal group, which doubled its contracted backlog. Assureds and conversions came from two large awarded projects that were part of the GSA National Deep Energy Retrofit Program. We believe that we can deliver excellent results under that program.

For example, as part of this program, the GSA is partnering with Ameresco to upgrade four federal buildings in D.C., including the EPA headquarters. The project is designed to reduce electricity consumption by 40% and water consumption by over 50%. The deep retrofit program is intended to be quite large and will stretch out over many years. We look forward to more bid opportunities under this program.

Of course, the federal group was not the only one to grow its contracted backlog. The US regions grew contracted backlog 2% during the quarter and two regions in particular posting substantial percentage gains. As you can see, our visibility and outlook are very good.

Let's now turn back to revenue and earnings. Our core project business performed well in the quarter with revenue up 11%. As we regularly highlight projects are the core growth driver, but we are also focused on building our higher-margin recurring revenue sources. Specifically, over the long-term, we want to drive more revenue from operations and maintenance and energy sales. Especially in 2016, building the portfolio of energy producing assets is another focus area of our four-point strategy.

Fourth, energy sales and O&M show a double-digit increase over a year-to-date basis. What is important is that these revenue streams are meaningful contributors to our profitability. In fact, those two lines of business generally contribute over half of our earnings.

In that regard, at this time, market trends are in our favor. The project work we are pursuing usually includes an increasing amount of renewable energy as part of the comprehensive solution. So we are installing more solar. We are developing assets to sell power under long-term contracts to credit-worthy customers. We placed 5.2 megawatts of solar into service in the quarter and invested another $16 million in energy producing assets. John will provide more details on our operation asset portfolio.

In addition to the assets we are developing to own and operate, we are continuing to see the integration of distributed generation into our core projects. Especially in federal, the bids are now what we call "fence to fence". Not only do they want us to provide solutions to reduce power usage, they want a renewable energy supply and better reliability via storage, load shedding and cogeneration. This is driving up the average size of projects we are pursuing and winning.

Other end markets are equally interested in distributed generation. We have done a number of projects in Massachusetts; installed solar in Minneapolis/St. Paul Airport; in Knox County, Tennessee municipal business and schools; and are working on installations of hospitals and community solar gardens across the country.

At this point, I want to address innovation because it's such an important driver of our industry leadership. All across the US, customers are choosing Ameresco for not only traditional energy solutions. We are also chosen for our innovative offering and proven expertise in solar power, landfill gas, water reclamation, LED street lighting, smart metering, intelligent micro-grids, battery storage, and central plant optimization.

LED street lighting is blossoming as a market opportunity. We have meaningful expertise in this type of project from working on LED street lighting upgrades in Washington state, Arizona and others. The value to the customer of this upgrade is easy to quantify, and we are detecting growing interest around the country. To more effectively we pursue this opportunity, we have created a national LED business development position and appointed one of our leaders from the Washington state project. We believe this will result in a more focused and coordinated effort to win these opportunities.

We are also doing far more in water, which is important since sustainable use of resources extends beyond just energy. We are currently working on several water reclamation and wastewater treatment projects across the nation. Water reclamation and conservation is more often included as part of our comprehensive solutions such as the deep retrofit project in D.C. that I mentioned earlier. These examples clearly demonstrate the basis of our industry leadership. We are a resource efficiency company that is a true sustainability partner for our customers.

Now, let me turn the call over to John to provide more details about our financial results and guidance. John?

Thank you, George. Good morning, everyone.

As we get started with the financials, please note that, unless otherwise stated, all the amounts I reference relate to Q2 2016 and the comparisons are for the year-over-year changes. In reviewing results, our prepared remarks on our website offer both lines of business and our traditional segment reporting. This will keep the time series comparable for you.

Total revenues of $162.6 million were up 6.6%. Solid growth in revenue was due primarily to the federal segment. The total revenue performance matched our expectation that Canada and integrated PV would be flat and down, respectively. Optimizing Canada and other underperforming business units is one of our four strategies we are implementing in 2016.

Gross margin was 19.6%, down from 20.3% last year. The 70-basis-point reduction resulted from the timing of revenue recognition in a federal project and the timing of sales of solar renewable energy certificates.

SG&A expense was $27.1 million. That amount included $2 million of charges related to the restructuring reorganization of our Canadian operations. We elected to reserve additional amounts of accounts receivables that we believe may not be collectible due to the restructuring and wind down of certain operations in Canada. Without this reserve, SG&A would have been $25.1 million and 15.4% of revenue, lower than last year on both a dollar and percent of revenue basis.

As a result of the additional charge in the quarter, we are revising our estimate of restructuring charges in Canada to $2.5 million to $3.5 million for the year. In addition, the restructuring actions related to our enterprise energy management software business are substantially complete with that group integrated into our core business.

Operating income was $4.7 million which compares to operating income of $5.1 million last year. The decline was due to the slightly lower gross margin and impact of the reserve.

Below the operating line, other expenses were $1.9 million. This includes approximately $1.6 million of interest expenses. Our effective tax rate in the quarter was approximately 27%.

Net income was $2 million, and earnings per diluted share were $0.04, both essentially flat. Non-GAAP diluted earnings per share were $0.08.

Adjusted EBITDA was $13.2 million, up 15%. Adjusted EBITDA margin in the quarter was 8.1% compared to 7.5% in the same quarter last year. Keep in mind that we continue to invest meaningfully to expand into and strengthen our presence in new areas of the US, especially the West and Southwest.

Now let's turn to our balance sheet. I will describe what happened during the quarter so all of the comparisons are sequential, meaning against figures as of the end of Q1.

Cash and cash equivalents, including restricted cash, was $27.7 million, down $569,000. Accounts receivable, including retainage, increased by $10 million to $102.4 million. Project assets were up $8.8 million net to $256.6 million. We invested $16 million of CapEx into projects that we plan to own and operate.

As George mentioned, we placed 5.2 megawatts of solar assets into service during the quarter, adding to our portfolio of distributed generation assets. That revenue is recurring and high-margin and creates a great foundation for the Company. As of the end of the quarter, we have 162 megawatt equivalent of assets in operation consisting of approximately 122 megawatts equivalent of landfill gas plants and approximately 40 megawatt of solar assets.

The majority of the portfolio is backed by long-term PPA contracts with creditworthy offtakers. This provides high visibility of revenue and earnings for many years. The weighted average remaining term for our solar PPAs is nearly 22 years, while the non-solar PPAs are just over 13.5 years. Only 5.75 megawatt equivalent of assets are operated on a merchant basis.

Consolidated debt of $119.7 million was up $14.9 million. The increase was due to draws on the line of credit that we use to fund assets in development and construction. The line is used before we close on permanent financing, which normally occurs after the assets are placed into commercial operation. Nonrecourse project debt is $96 million, representing most of our total debt.

During the quarter, we repurchased 418,000 shares of common stock for $1.95 million. We have approximately $8 million still authorized in this program.

At the halfway point of the year, our solid results underpin our continued confidence in our annual guidance. For the full year, we continue to expect revenues to be in the range of $645 million to $680 million. This outlook reflects growth in our core project business coupled with solid growth in energy sales. We continue to expect Canada to be at least flat and integrated PV revenue to be down approximately $10 million for the year. We expect gross margin in the range of 19% to 20% and operating expenses to be around 15.5% to 16.5% of revenue. We expect EPS in the range of $0.25 to $0.30 and adjusted EBITDA to be in the range of $51 million to $57 million.

For the third quarter of 2016, we expect revenues to be within the range of $170 million to $180 million and EPS in the range of $0.09 to $0.13. This revenue guidance reflects the fact that some of the revenue we expected in Q3 was recognized in Q2. Despite the shift in revenue, we expect to improve our profitability in Q3.

Finally, the guidance we provide excludes the impact of any non-controlling interest activity and any additional charges related to the SunEdison bankruptcy or our restructuring activities.

So with that, we would now like to open the line for questions. I'll turn the call back over to our coordinator, Destiny, to run the Q&A session.

(Operator Instructions). Noah Kaye, OPCO.

This is Noah Kaye from Oppenheimer & Company. So the federal segment just continues to look very strong for you guys. Understanding that this business is somewhat lumpy but kind of given commentary from some competitors, you are clearly taking share here. I guess what would be very helpful to understand is we are approaching an administration turnover heading into 2017. In these awards, was there any sense that there was some sort of a flush of awards? Or as you look at what might be in queue and what's being talked about in the pipeline for federal, how sustainable do you think this level of growth is?

We think the federal market is quite sustainable because their program, whether it's the GSA or other federal agencies, they have developed a program right now where they have X amount of RFPs that they will be issuing this year and next year and so on. So that's one of the good things that has happened in the federal government in the last couple of years, especially the last year or so, that they have identified which projects are going to go out for request for proposals. They have developed a schedule. So we are actively pursuing the opportunity associated with the federal facilities. And as well, we feel very strong. And we are working very closely with the various agencies to make sure that the program is continuing if, let's say, we have a change in the administration.

But we feel that, whatever the changes in the administration might be, based on what we hear from the agencies that we are working with, that there is a sustainability to the federal program because they have realized that it's a great, great program for them. The federal government does not have to put up the money; somebody else provides the guarantee that the savings will be there and performance will be there. So the less capital appropriations that the government has for these kind of programs, the better these programs are because they are self-funded. And they are expanding them because they view them as a mechanism not only to upgrade their facilities, in addition to that to provide resiliency and security. And that's why you see the projects expand where they include core generation and storage and micro-grids. We have done several projects already for the federal government right now that pretty much they can be 100% off the grid, if necessary. And they do that for a lot of reasons.

Okay, thank you. So, the second question for you is around the recurring revenue from the operating assets and the O&M. As I compare these year-over-year, it looks to me like you are up significantly, in those businesses combined, something on the order of 30% or more, a 35% revenue jump. And I guess it would just be helpful to understand how you are able to move the needle a little bit on -- I'm sorry, not 35%, maybe double digits. But how are you getting higher O&M revenues? What has changed, if anything, about the nature of your negotiations to get those O&M contracts? And how should we think about the margin profile on those?

I will talk a little bit, but I will let John provide more details regarding the annuity-based revenue. But the O&M, they generally come behind contracts that we have executed, performance contracts we have executed for the customers. In addition to that, we might build a solar plant or we might build a landfill gas plant or somebody else. And even though we don't own it, we have an operation and maintenance contract or some cogeneration facilities for some C&Is, which lately we have taken over to operate and maintain their plants. And that's an integral part of our -- or one of the key strategic elements that focus this year. And I'll let John talk a little bit more about the assets. But the O&M generally comes behind the performance contracts or the plants that we build for others. And especially the Eastern and the federal because we had started the process a long time ago is growing at a pretty good clip.

So I'll just follow up on a couple of points. On the revenues, we are double-digit year-over-year for both the O&M and energy assets. You can get that from the prepared remarks. It's not as high as the amounts that you had stated, Noah; it's actually --

Yes, it's double-digits. Yes, yes.

It's double-digit growth. I mean the more meaningful part of that is that the earnings profile for that revenue is a lot higher than our tradition core projects. So each incremental amount of revenue we get from O&M will result in 25% to 30% EBITDA. And the projects or the assets are going to be in the 40% to 50% range with the landfill gas closer to 40% and the solar assets closer to 50%, due to the fact that it's a lighter-touch asset. So when we are looking ahead, by shifting and having a higher proportion of revenue related to those two lines of business, that's what we think we're going to get our margin expansion for earnings.

With relation to the current year, we have been saying that we expect energy assets and O&M to both be up double digits year-over-year. And that is driving the EBITDA expansion that we are expecting for the year.

Yes, yes. And can you update us on the selling progress that you are seeing in solar? I know that you had been making an effort to train the region to build that out. How is that translating so far from a leads to pipeline basis?

We have -- and John can talk more specifically about the numbers to the extent we can disclose them. But all regions have been trained, and all developers, they have been trained. And we are seeing some pretty good activity across the board.

Yes, I would say we have a pretty -- the portfolio is more diverse than it has been historically. Looking out, we have projects in Canada, California, New Jersey, Connecticut, so a good amount of non-Massachusetts-related projects that are in the development pipeline.

The Massachusetts solar PV is still about half of what we are developing, but I think it's more diverse that it has been historically. And more importantly, our pipeline is more diverse than it has been.

Okay, thanks. And you mentioned that you have been starting to add storage to some of the projects as they grow more complex. Right now, is that storage incremental to pay-back in a federal EFPC? Is that supportive of the average payback, or how should we think about payback there? It should be very helpful to understand because there's obviously a lot of talk about how to make energy storage (technical difficulty) work.

It depends. It depends which utility territory you are and what kind of rates, especially demand reduction credits you will get associated with the battery storage. But in several cases that we have incorporated, it's part of what I call a micro-grid. There is some cogeneration. There is some solar, and there is some storage. And we were able to take the facilities, especially nuclear based, totally off the grid as part of the test. And we have a couple of applications even on commercial buildings where the owners, they would like to have some storage. And the payback, depending, again, on the territory that we work, the economics, they were reasonable. And actually the owner of the facility is funding the project.

And Pennsylvania is another state, a PJM territory. We have a couple of projects there. Again, the paybacks are reasonable. It depends where you are and how you incorporate the storage with other things rather than that being by itself. We have a couple of places that it's just storage, but primarily it's incorporated as part of the offering.

All right. Thank you.

And we've seen the costs coming down considerably. And we even have, actually, a couple of contracts that we have won with a particular utility that will be installing them and selling back the output during -- when they need it for demand reduction under a long-term, you might say, PPA contract.

Okay, thank you. And the last one from me, you have invested, as you said, in your regions. You have invested selling efforts in renewable assets. You are taking on additional competencies now with naturality representatives. What is the -- is there a best use of cash right now, as you see it, George, across the business, or best uses? Where are your priorities just from a studying perspective?

The priorities are assets, own assets. But on the other hand, because the performance contracts, it's a lower risk business and generates pretty good cash flow and we want to make the cash flow there an investment in assets. And we were underrepresented in some key regions, and we did make some very good investments, you might call it expense side where you expense them. But we do see the traction. We do see the traction, and that's why we feel pretty good where we are.

The awards, especially the backlog in the Southeast region, it grew by 17%. And that's the first time it grew for the last three years. That's what we -- the leadership we have in California and Texas. We have several contracts that we have won in those particular regions. And that's a move. And we have two to three other states in the Midwest that we try to develop, again, reinvestment. And in one of them, we already have one win.

Okay. Great. Thank you very much for taking the questions.

John Quealy, Canaccord Genuity.

A couple of questions for you. I'll get the detailed quantitative ones out of the way first. Maybe for you, John, the reserve you bumped up -- I know the range in the guidance -- to about $3 million, just break that out again for me. That was additional receivables in Canada you might not recoup? Does that include Sun Edison? Or just clear that up, if you wouldn't mind.

Sure. So, in Q4, when we implemented and announced the restructuring and reorganization of Canada, we had taken an initial reserve for amounts that we believed were not going to be collectible based on the fact that we were winding down operations in a certain location. So there's about 10, 15 projects there we are working on and addressing to basically wind down and transition.

So over the last few months, in negotiations with customers and in discussions with them, it became apparent that we needed to reserve the additional $2 million this quarter. So that's what we had done. That amount does not include a potential $3 million that we have of exposure for Sun Edison. So in Q1, we did write off $1 million for Sun Edison but we were holding the remaining $3 million until it became a little bit more clear in terms of the recoverability. So there hasn't been any additional information that came out this quarter that would provide us any more clarity as to what the potential exposure there is on the $3 million. And so at some point over the next three to six months, we probably will get more visibility.

But I can say that we have been contacted and they are very much interested in the assets that we are working on, some of which are pretty much close to completion. So we believe that they are assets that Sun Edison or someone else would want, and there will be some value to the estate there. So we are still hoping that we're going to be able to recover a good amount of that.

Okay. And then, whatever the net amount is, to your point, three to six to maybe even nine months with the bankruptcy on the debtor side, we will just call that out in the P&L when you charge it off, right?

We well, just for comparison purposes --

Right.

-- I think, to make it meaningful. The $1 million in Q1, that in it, by itself, wasn't enough. But certainly I think if we had additional $3 million, I think that would make it meaningful and that we would at least let you know what those amounts are when we break them out.

Okay, that's fine. And then I don't know if for you or George -- so fully contracted backlog popped up nicely over the $400 million mark in Q3, up sequentially. That's just normal cadence and timing, obviously supports the back-half outlook, as you guys mentioned. But can you comment on that? We haven't seen that figure up there for a while.

Yes. So a lot of that was driven by the federal group that converted close to $100 million of projects from awarded backlog to contracted. And they also backfilled $100 million of new awards. So they kept their backlog flat, which was nice to see sequentially. But yes, normal cadence, I would say, John.

So, just to provide a quick refresher, I think typically we expect to convert projects from awarded in 12 to 18 months. I think the average this quarter was about 17 months, so we are still in line with that estimate. And so we would expect to continue to convert along those timelines in the near future. So that's what we are expecting.

Okay, thanks. And now, perhaps, George, so I think, yesterday, Massachusetts formalized their new energy legislation, a lot of infrastructure in hydro and offshore wind, but they also -- I think they tightened up some commercial PACE requirements and efficiencies. Can you comment? Do you guys play in that area? Is that an opportunity for you? How did you think that worked out for Ameresco?

We will see how it truly evolves, but we did like the old program better than the one, I might say, but I think we will take advantage of it. And as the market shakes out and I think the expectations from whether it's the customers or the municipalities, whatever they might be, the pricing would be adjusted otherwise. I'd say, because of our relationship and the strong presence in the area, we will take great advantage of this program or programs.

And then, George, how do you think -- you guys gave a good outlook. Canada seems to be a special situation that is now coming back to a baseline business. LED, solar, some of the newer initiatives, we see so many different competitors looking at that market. Can you talk about -- are we not done yet with competitive shake outs, or how do you think the competition is vis-a-vis Ameresco?

Well, on the energy services side, I would say the performance contracts I think are very, very strong, especially in the federal sector. That's why we are winning a good percentage of the projects. And across the country, whether it's the Eastern or the Central or Southwest, we win in a good percentage of projects when we respond to the RFPs. But it also is happening because of our strong presence on the performance contracts, and we have very good relationships with other potential customers. And we integrate the solar as part of our offering or an extension of our offering, you might say. And I think we have a better chance of being successful in the long term than somebody that might be doing, let's say, industrial or for the C&I. You might see a great bump for a while but not sustainable, like what happened, for example, for the lightning installers. They spike for a short-term and then the business goes away. So I think the broad expertise that we have is an advantage.

Okay. And --

And the fact that we have a cash flow generating business now, whether it's the projects or the existing assets that are in operation, again, it has helped us from the capital point of view, otherwise having our own capital to deploy in projects or assets that we may own.

And so the last question I have, back to the assets and the return on assets. And I know in the past you don't like to give exact figures on what your target and hurdles are. But for the most part, are you seeing enough opportunities. Obviously, with all this competition going towards asset-based recurring revenues, are you seeing pricing there where you can hit your hurdles that you want, George? I know you buy -- you always buy right. So I'm interested in your thoughts.

I don't know about that. I have made enough mistakes in buying. But look -- and that's why maybe some people, they say, well, you should be growing the solar business much faster than you are because there are some returns that we will not go to. We will chase when people go down and write 6% IRR investments (technical difficulty) we will not go to those levels. And sometimes we lose because of pricing. But on the other hand, we win a lot of projects because of execution because many people, they will win projects and then they cannot fund it. And I can tell you of several projects that we have where we were the second. But after the projects didn't happen, we went back and got the projects.

And the other thing that is happening, for example, the landfill gas to energy projects, they have considerably higher IRR than the solar.

I gave you pretty much -- how can I quote it? All off the answer. But there are some levels of IRR that we will not go at. We will not compete at that sort of level.

Okay. And then for you, so the bigger picture, are you happy with returns right now, net-net margins in the back half of the year that can be 3%, 4%, 5%, and then they get skinnier as you guys contract out and try to win proposals in the first half of the year. But generally, for the whole entity, George, are you happy with the financial performance? Are you more focused on share versus cash flow? Big picture, how do you think about the next couple of years?

No. Our goal that we set before, we want to get to EBITDA about 10% of our topline. And we went from 7.5% to 8.1%. So until we get it up to 10% I'm not happy and -- or better. And I think it will probably take us another year, maybe two, to get to that level, a couple of years.

But what I feel good about is that the momentum is beginning to turn, that maybe we have seen the bottom of the down of the business, you might say, for us, cleaning up the underperformance in the Company and start growing again. And I think that's where we are. I think this was -- you might call it an inflection point, but I'd like to see a couple, two three more quarters of it. But the last two, three quarters that we have seen, we are continuously improving. And that's a good trend.

All right. Thank you, guys.

(Operator Instructions). I am showing no further questions at this time. I'd like to turn it back for closing remarks.

Thank you, Destiny. To summarize, I want to relate our results back to the four growth strategies we presented at the beginning of the year. Our results show clearly that we are executing the strategy and driving profits.

The first strategic element was investing to accelerate our pipeline. You can see the results in our backlog growth. We are starting to see substantial rates of growth in new awards and contracts.

The second element was growth in under-represented areas in the US, especially California and Texas. You can see the results here by considering our new award performance in the Southwest, where the backlog grew 17%. We intend to further accelerate growth in the region and we have hired leadership and staff to drive it.

The third strategy is to continue to help our higher-margin recurring revenue streams, specifically energy producing assets and operations and maintenance. We placed 5.2 megawatts of solar into service in the quarter, invested $16 million in renewable energy, and grew our operation and maintenance revenue. We believe these numbers will continue to grow.

The final strategic element was to optimize underperforming business units. We are well along in Canada, and the software business is now fully integrated an operating selling effort.

Before we end, though, I want to thank our employees for their hard work and dedication in providing industry-leading services to our customers. I want to thank our customers for choosing Ameresco as their trusted sustainability partner.

With that, we will close the call. Thank you for your attention and interest. We look forward to updating you on our progress again in November.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone have a great day.