Ameresco Inc (AMRC) 2017 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q4 2017 Ameresco, Inc. Earnings Conference Call. (Operator Instructions) As a reminder, this conference call may be recorded.

I would now like to introduce your host for today's conference, Mr. Gary Dvorchak. You may begin.

Thank you, Crystal, and good morning, everyone. We appreciate you joining us for Ameresco's Fourth Quarter 2017 Earnings Conference Call. On today's call are George Sakellaris, Ameresco's Chairman, President and Chief Executive Officer; and Executive Vice President and Chief Financial Officer, John Granara. George and John will review the operating and financial highlights of the quarter and the year, and then we'll take questions.

Keep in mind that we have a deck with supplemental financial information. You can download that deck from the Investor Relations section of our website.

Before I turn the call over to George, 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. 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 also assume no obligation to revise any forward-looking statements made on today's call.

In addition, we'll be referring to non-GAAP financial measures during the call. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. The GAAP to non-GAAP reconciliation as well as an explanation behind the use of non-GAAP financial measures is available on our press release, prepared remarks and in the appendix to the slides.

I'll now turn the call over to George Sakellaris. George?

Thank you, Gary, and good morning, everyone. Fourth quarter results were outstanding. Revenue was up 21%, adjusted EBITDA grew 47%, and net income more than doubled. This performance completed the robust year that continued the acceleration of our business. Full year revenue was up 10%, adjusted EBITDA grew 13%, and net income also more than doubled.

For the quarter and year, we achieve 2 of our key objectives. We grew profits faster than revenues, and we increased our visibility by growing our backlog, which is at a record high.

Our strong performance comes in the context of steady improvement in performance over the past 5 years. While we intend, every year, to be better, we make business decisions with a view towards the long-term impact. We have done an excellent job over the past few years. Our adjusted EBITDA more than doubled from 5 years ago. We intend to continue to grow both revenue and profit at an attractive rate in the years ahead.

We believe Ameresco's strong momentum is a result of our focused effective strategy. We told you at the beginning of the year that we plan to accelerate our growth through 3 strategies: first, we upped our investment in project development in order to build our pipeline; second, we focused on increasing our geographic expansion; and third, we aggressively built the energy asset portfolio. Execution against this strategy was particularly sharp this year, as demonstrated by our results.

Let me review each of these strategies, and how they drove our results in 2017. First, investment in the sales pipeline. We incur additional costs for project development, which are all the activities around securing projects. We increased our spending by 19% in 2017, in response to a growing number of opportunities. You can see the result of this effort in our backlog growth. We ended the year with a total backlog of $1.8 billion, up 19%. Within this, our awarded backlog was $1.2 billion, up 25%.

The awarded backlog is important, because it is the best indicator of future contracts and revenues.

We see some clear trends in efficiency projects that, we believe, work in our favor. So we think we can maintain or accelerate our backlog growth in 2018. Projects are getting larger, more complex and comprehensive and are incorporating more resources than just energy. Those large projects incorporate savings across a wide spectrum: electricity, heating, water and more. They incorporate more infrastructure, such as [central] power plants than renewable energy sources. Further, many projects need energy resiliency. Those projects are now incorporating microgrids with redundant power sources, such as CHP and battery storage. Not surprisingly, these large projects take long to bid, win and negotiate, but they give us great visibility into growing revenue.

The federal government, which has vast facilities in need of infrastructure upgrades, is a prime example of the customer driving our large project. Our Federal group posted revenue growth of 29% and grew its backlog 21% this year.

Throughout 2017, we highlighted to you several projects that fit this profile of high-complexity, high-value add. For instance, we discussed a massive project we are implementing for a housing authority, which involves the retrofit of 1,000 of apartments for energy and water efficiency. We are only working on Phase 1 of the project, so there is the potential for follow-on business.

We completed an energy infrastructure project for the military that entailed a site-wide microgrid, incorporating on-site generation and battery storage for resiliency. They also encompass energy and water efficiency upgrades for 121 buildings and a new CHP plant to provide both power and steam.

We completed a huge upgrade at the college that entailed campus-wide energy and water efficiency retrofits, new power sources, including geothermal and solar, and electric vehicle charging infrastructure.

At the Philadelphia real estate development, we installed one of the largest microgrids in the country, which include 6 megawatts peaker plant. And in Q4, we secured additional work to add another 2 megawatts of generating capacity at this location. But we are also pursuing work that is adjacent to our core type of business and thus, further expanding our addressable market.

We have completed several street light upgrade projects, which involved the replacement of tens of thousands of fixtures, but more importantly, include a city-wide smart control network that later can be used for different functions. We are now pursuing large projects that include this sort of smart functionality, even including wireless network infrastructure.

With more and more of these large complex and high value-add projects on our radar screen, we believe that we can continue to grow our backlog at a solid rate while accelerating our revenue and profit growth. Furthermore, we expect the strength in the Federal business to continue in 2018, due to the natural benefit of gaining substantial infrastructure upgrades at no upfront capital cost.

The second strategy that drove our acceleration in 2017 was geographic expansion. We executed well on this, although we plan to do even better in the years ahead.

At the start of last year, we told you that we were underrepresented in some states in a key region of the U.S., the Southwest. We also told you, we would put greater resource into building our presence there. For instance, during the year, we increased headcount in the region by 16%.

Texas performed well with contracted sales growth of 89%. One sales volume example of our successful Texas is our expanding work within a major state university system. Of the contracts executed in Texas this year, 5 were for a complex efficiency project within a higher education environment, spanning multiple campuses. Our traction in Texas is now translated into more work nearby. We secured 2 awards in New Mexico and 3 in Oklahoma. Many of the awards are for our most technically advanced work, such as smart city networks, LED roadway lights, CHP and microgrids.

Another smaller example of geographic expansion is our emerging traction in the U.K. We are starting from a small base, but we have put in place the foundation to grow this market over time. We generated $9 million of revenue in 2017, and ended the year with $18 million of contracted backlog and $31 million of awards. We signed contracts for over $8 million in the fourth quarter and expanded our footprint with our first award in Wales.

Even with this success in expanding our geographical footprint, we can do better. In the Southwest, we have not seen the results we expected in California. We continue to invest in the state and expect to see better results.

The third strategy in 2017 was to aggressively expand our portfolio of energy assets. Not only is this critical to growth, it greatly improves our business model. With each passing year, we have a larger and larger base of high-margin recurring revenue. Including operational maintenance, our recurring revenue is now up to 18% of total revenue. More importantly, recurring revenue now contributes 58% of adjusted EBITDA. We started the year with 164 megawatt equivalents of assets in operation and ended the year with 191. The majority of our energy sales are derived from renewable gas sources, and we expect that to increase considerably in 2018. We have already mentioned 2 major renewable gas projects that are set to start operation in 2018 in Arizona and Michigan. We anticipate that these 2 plants will help increase our EBITDA by more than 20% this year.

Outside of those plants, the majority of our development pipeline is solar. We currently have approximately 30 megawatts equivalent assets that we expect to place in service this year, including those renewable gas plants. This will result in 16% growth in our asset portfolio in 2018.

At the federal level, regulatory issues could cause a minor disruption in our solar power development efforts, but we do not foresee any substantial lasting impact. The level of tariffs in Section 201 trade case is making imported panels modestly more expensive for a while. We remain disciplined in our develop -- in deployment of capital and anticipate good growth in the years ahead. Fortunately, the new tax law maintains a solar investment tax credit, which removed one source of uncertainty over the past few months.

Looking at 2018, we remain bullish on our business and our ability to grow our energy asset portfolio. Along with O&M, it will underpin the business model transformation we are driving. With each passing year, we expect to have more recurring revenue, greater visibility and higher margins.

With that, now I will turn the call over to John for comments on our financial performance. John?

Thank you, George, and good morning, everyone. Our press release and supplemental slides contain all the figures and comparisons you need, so I'm not going to repeat all the numbers. Instead, we are going to focus on the analysis of the factors that influenced results.

We are pleased to report strong financial performance, including double-digit revenue expansion, even faster growth and profitability and increased visibility from record backlog and growing recurring revenue. More importantly, we expect further improvement in all these metrics in 2018.

Seeing our results that the transformation of our business model over the past few years is working, our recurring revenue streams have delivered greater profits, greater visibility, and they balanced the impact of the natural lumpiness of the project business.

I'll start with some brief comments about our Q4 results before turning to full year 2017 and 2018 outlook. All figures refer to Q4 2017, and all the comparisons are for the year-over-year changes, unless I say otherwise.

It is worth noting upfront that we recorded a tax benefit in Q4 as a result of the Tax Cuts and Jobs Act. The benefit was approximately $14 million or $0.30 per diluted share as a result of our initial remeasurement of our deferred income taxes. Even excluding the impact of this onetime benefit and the noncontrolling interest, EPS was $0.18.

Revenues also exceeded expectations, coming in above the upper end of our guidance range due to higher-than-expected project revenues.

Project revenue growth was broad-based, with all of our core groups contributing.

Revenues from the U.S. Regions rebounded, and Federal continued its strong growth.

Energy sales were also up. Let me point out that the Q4 results did not include any contribution from our renewable natural gas plant we originally expected to place in service in Q4. The plant came online recently and should be operating at full capacity and efficiency within a couple of months. We are pleased that our energy sales performance was strong even with this delay in planned revenue. Energy sales made a meaningful profit contribution.

Now let's look at the year. These figures, all, refer to the full year 2017, and all comparisons are with 2016, unless I state otherwise. The 10% revenue growth was driven by growth in all lines of business except O&M, which was down slightly. We mentioned earlier this year that a contract amendment accelerated some revenue in 2016, making that year higher than usual. More importantly, we expect O&M to resume growth in 2018. We expect to add over $100 million of O&M backlog this year, based on the current project pipeline.

Gross margin of 20.1% was slightly lower than last year due to the increase in project revenues. Going forward, we expect gross margin to be stable in the 20% to 21% range.

Turning to operating expenses. Let me remind you that the 2016 operating expenses included $6.2 million of restructuring and other charges. Excluding the impact of those items, operating expenses increased approximately $2.9 million, primarily due to our strategic investment in project development, as George noted earlier. Despite the increase, we demonstrated the operating leverage in our model by reducing operating expenses, as a percent of revenue, by 100 basis points.

Excluding the $14 million tax benefit and effects of the noncontrolling interest, net income and earnings per share were each up around 25%.

Adjusted EBITDA was up 13%, achieving one of our primary objectives to grow profit faster than revenue. Since 2013, we've grown adjusted EBITDA 20% annually. As important, over this period, our source of EBITDA was transformed. Now nearly 60% of EBITDA comes from recurring revenue. Over time, as recurring revenue grows, we expect the recurring EBITDA contribution to approach 70%.

Because our business model has evolved, we want to provide the EBITDA margin profile for each line of business. The core project business was 6%. It's a bit below our target range of 7% to 9%, but we do expect improvement, as we realize the benefits of our investments in project development and geographic expansion.

All the other lines were within our target ranges. Energy assets were 55%, operations and maintenance was 21%, and other was 8%. These numbers reinforce the attractiveness of our model, with so much of our profit coming from visible, recurring sources.

Turning to the balance sheet. We ended the year with $20 million in cash. Our total debt, only -- of our total debt, only 26% is corporate, with the rest being nonrecourse that finances the energy assets.

Looking at energy assets, we placed 31 megawatts, all solar, into service in 2017. Our energy assets started the year at $320 million and ended at $357 million. At the year-end, we had 78 megawatt equivalents in development carried on the balance sheet at $69 million. That includes the Michigan R&G plant that is now online and thus, will exit the development pipeline in Q1. We will incur an estimated $100 million of additional CapEx to get the rest of our development pipeline into service. Most of that will be funded with project finance.

We expect to invest $60 million to $85 million in 2018.

We intend to continue our balanced capital allocation strategy, investing in our core business, energy assets and share repurchases.

Turning to our cash flow performance. Adjusted cash from operations was $28.5 million, down slightly due to working capital changes. This related mostly to investing in project development and higher revenue, which increased receivables.

Now let's turn to guidance. As George discussed, we are confident in our ability to achieve accelerating revenue and profit growth in the coming year. We expect 2018 revenue to be in the range of $765 million to $800 million. We expect EPS in the range of $0.55 to $0.65, adjusted EBITDA should be in the range of $75 million to $85 million, and we expect the quarterly cadence to be similar to 2017.

Net income and adjusted EBITDA reflect a significant contribution from the Michigan and Arizona renewable gas plants. As I mentioned earlier, Michigan was delayed from Q4, but is online now and will ramp to normal capacity in the next few months. Arizona is expected to come online in late Q2 and should ramp to capacity during the second half of the year.

I want to point out that our visibility is outstanding. We believe the long-term predictability of our business is among the best of any business out there. Our $1.8 billion project backlog gives us strong indications of revenue potential up to 4 years. On top of that, we have visibility on $788 million of O&M revenue contracted out for a weighted average of 14 years. Finally, we have visibility on an estimated $800 million of energy revenue with a weighted average of 13 years, and that is just from the assets in operation at year-end.

Now we would like to open the line for your questions. I'll turn the call back over to our coordinator, Crystal, to run the Q&A session.

(Operator Instructions) And our first question comes from Craig Irwin from Roth Capital Partners.

So George, with the guidance being stronger than what analysts' consensus was looking for, you've quite clearly seen an acceleration in the EBITDA growth, the overall growth at Ameresco. Your contracted backlog has fairly, consistently grown over the last number of quarters, and you've got the 2 landfill gas projects coming online that you've been talking about for a while. Can you maybe talk about the business that you're bidding on, the broader pipeline that's not yet captured? Is this something that you see as potentially supportive of similar growth through 2018? And do you see a portfolio of projects on the green gas, the cellulosic renewable natural gas that you could start putting into service, maybe, in the back end of '18 or '19, that can allow the profit uplift on that side of the house as well?

Okay. First, the general activity in the marketplace about projects. We see very good activity, and even though some of the U.S. regions -- they were slower to come back than the federal government. The federal government, as you see, the growth has been fixed -- very, very good, and we anticipate it will be good this year and next year. But the activity in all -- in the rest of the country, in the regions, it seems to have picked up, especially the last, I would say, 6 months. We see more projects, larger projects and more comprehensive, and the type of projects that they play to our strengths. So and -- I feel, that's why I make the statement, we -- I did that we see our business, top line and bottom line, accelerating. As far as the renewable gas plants, the 2 that they are coming online this year, and I think that I did say on the last call that we have several other ones, 2 to 3 of 5 that we think, they will end up being built. And most likely, those plants, they will not come into service in late 2019. One of them and the other one's probably in 2020. So -- but the activity in that market is very good. The only drawback, and we are a little bit cautious as how we explain that business, is what's going on in Washington. And you saw -- you see some of the meetings that they had at the White House, and various individuals are lobbying for various things to happen. So we are monitoring that situation very, very closely. But as far as the potential in the marketplace, we do have the assets that we can develop down the road. So we feel very good. And the other thing, don't forget, that development of the solar business. Even though we did get impacted by the tariff, and we did little bit confusion in the marketplace for a while, and the prices went up in the short term, then they started coming down little bit for the solar panels. So we still feel very good about that section of the market. And also, what makes me feel little bit better, is we develop -- the business is changing in the marketplace, and one of the leverages that we can achieve in Ameresco, having all units be able to market all of our offerings. And some of the regions, they were slower to adopt, I would say, to the new business model, and are otherwise going after solar assets or -- on distribution generation, whatever the case might be. But we have been successful in the last couple of quarters, getting those people aboard, and I think you will see the level of business coming out from the other regions, other than the east and the federal, will accelerate.

Great. And then one question specifically about the U.S. Federal. In the last year, your revenue mix has shifted little bit towards U.S. Federal. And I know that Federal has been a very nice chunk of your backlog growth. And since it's one of your higher-margin services business lines, is this something that can potentially help margins a little bit in 2018? And do you expect this to continue mixing up at a similar pace to what we've seen over the last year?

We have a couple of things working there. The performance contracts, as we know, the margins at those have actually gone down a little bit in all market segments, whether it's the U.S. or the Federal. But the operation and maintenance business, the margin has held steady, and the more complex the projects get, the better margin we can achieve. So the overall mix -- and that's why we are not forecasting the margin to go up. We say it will stay relatively constant, because the performance contracts, as we used to know, they're getting to be a little bit more commoditized, the margins getting pushed down. But the complexity of the projects bring them up, and then the operation and maintenance. And then, of course, having the assets in our portfolio, it helps us. And we feel pretty good that we will maintain the overall rate of margin in -- around 20% to [21%].

And our next question comes from Noah Kaye from Oppenheimer.

Maybe we can just start with a question on free cash flow profile. John, I think, in your remarks, you talked a little bit about the timing of some of the cash flows around working capital. If I step back and kind of look at the conversion of adjusted EBITDA to free cash flow, over the last couple of years, it's probably been, I guess, between 50% to 60% on a full year basis. This year, it looks like it's coming in closer to 40%. So can you maybe comment to, kind of, some of timing of some of these capital swings, -- working capital swing? And then, really, what I wanted to get to here is how to think about a free cash flow conversion profile for '18. If we take what you're getting to, $75 million to $85 million in EBITDA. If I take just 50% of that, that puts me at $40 million in free cash flow, adjusted free cash flow for '18. Is that the right way to be thinking about it here?

It is. Couple of things that happened, though, that drove that -- drove the number down a little bit, was that, if you look at our detailed balance sheet, you'll see that our unbilled revenue, which is revenue we've recognized but not yet billed contractually, that went up year-over-year from $56 million to $105 million and went up steadily. We did get -- we were able to bill a good portion of that in Q1 just due to hitting milestones. And so I would expect an influx of cash, as we bill and collect that money. So it isn't going to be an even amount, and it's going to be lumpy, much like our project business is, but I think you're thinking about it the right way at that amount, because what will happen is, it's going to continuously be a cycle. And right now, that project business, which is -- make -- which comprises of 70% of our revenues, the DSOs related to that business are in the 90 to 120 days. So what you're seeing is a little bit of a delay in the second half revenues, which is the stronger performance from the project revenue side.

Okay. That's very helpful. And then just, some housekeeping. I noticed there was some reclassification of the segments. It looks like some of the solar SREC revenue got taken out of the regions. Can you just, sort of, help us understand how you are reorganizing the reporting here a little bit and kind of, what's motivating that? Clearly, I think you're trying to showcase the true generating performance of the energy assets. But just a little clarification would be helpful.

Yes. And George referenced this in his prepared remarks that we -- that we want all of our lines -- we want all of our segments and reporting units to sell all of our lines of businesses. And so if you looked at our historical numbers, the Federal group is developing assets for our own balance sheet. Canada has been doing that as well. We had 1 outlier with our East group was still being reported separately within the small-scale infrastructure. But that group primarily concentrates on the east, primarily concentrates on the state and local customers in that mush market. And so really what -- when we changed our strategy in 2014, instead of building the projects for others, which would have ended up in the East region, it was ending up in the small-scale infrastructure. So what you're seeing is, this is really a continuation of the evolving of our business in that we want all business units going after all lines of business, including assets and O&M for the recurring revenues. So big picture, when you look at the year-over-year performance, and the way I think about our segments now is more on the market basis, the state and local market, in particular, we're developing and owning a lot of assets for that market.

Okay. And so the segment that's now nonsolar DG, that is which asset? That will just be the landfill gas asset?

So landfill gas are -- and it is anything nonsolar, because we will have some operations and maintenance, some cogeneration plants and things in there as well. So that -- and our segments are really a result of -- it's really a GAAP -- it's a U.S. GAAP of how we report our numbers internally up through George, and how he sees and allocates the assets. So all of our groups develop -- have solar development teams within them. The nonsolar group is more of a national practice, and they operate more as a vertical and actually work with all of the other business units in developing nonsolar DG assets, and whether they're -- we're building them for customers or whether we're owning and operating them. So that is a more distinct business that just focuses on nonsolar.

Okay, great. And then maybe one for me. Certainly, as we see rising interest rates, we'd really like to understand what kind of impact that may be having on the business in multiple segments, right? You've got the ESPC project, so curious about any impact you may be seeing on project scope and size so far, or on the margin profile there you can get? And then certainly, as you think about putting $60 million plus of CapEx to work on the asset side, whether that's affecting the IRRs, how much should we be thinking about the impact rates on the business?

First, let's look at the energy's -- the performance contract businesses, because most of projects, they give -- the goal is to self-fund them, especially, the federal government and states and so on. And as the interest rates rise, it will have some minor impact. It will not be that substantial impact. What usually happens, let's say, if you get 50 basis points increase on the interest rate, it might reduce the overall scope of the project. It might be $50 million project, it might become $45 million. Or the other thing that we might do, extend the term of the financing. Let's say, the project it was cash flowing at 15 years, now it might cash flow at 20 years. And if you recall, back in -- we were doing projects when self -- because that question came up before when interest rates were 8% and 10%, but the project size was considerably lower, and the length of the contracts were longer. So it does impact it, but not as much as you would think. As far as the IRR on the investment that we are making as for -- on the equity, we're still looking for similar IRRs. And if the debt is going up, that means maybe we have to do the deal little bit differently, or some deals might not make the cut. That's why we say we are disciplined in our approach in allocating capital. So we look at the IRR with increased rates, if that's the case, it is -- if it's a -- especially if it's a levered project.

Great. And just one last one on the guidance that you put out. What kind of increase in interest rates are you assuming in your outlook for 2018?

Yes. So a couple of things, John. On our nonrecourse project financing, that is all fixed. And so we're not point out. The only -- the variable debt that we have right now is on our corporate line. And -- so that's about $20 million of our total debt. So if you are looking at this from a modeling perspective, and you were to look at it, maybe, 25 to 50 basis point improvement, you might see a small uptick there. But based on our total debt profile, I wouldn't expect it to have a material impact.

And the same goes for the overall business, otherwise the contract we have forecasted and put together the backlog at the end of the year. Basically, we had assumed what people are talking on the street, maybe another 50 basis points to 75 increase.

And our next question comes from Chip Moore from Canaccord Genuity.

I guess, on sales investments, you've seen some nice results there. Looking forward, obviously, Texas momentum is continuing; U.K., you've got some early success; and California's got a lot of potential. How are you thinking about those investments next year and beyond? And where you think you can prioritize some of those?

We will continue expansion in Texas and now in the neighboring states, Oklahoma and New Mexico, since we had some pretty good successes there to start with. California has been a challenge. I think we've made some personnel changes. And we feel pretty good. The potential there is tremendous. And we got to crack that state. We've been at it for some time, but we think in -- and that's why I made the statement, this year and following on, that we will develop. We see the light at the end of the tunnel, I would say, in that particular state. The other one, we're still a little bit weak in the Southeast, especially Georgia and Florida, and we are making some efforts to grow in that part of the country as well. And on that one -- rather than call it geographic expansion, I will call it the increased market penetration, because we are doing projects there, but not as much as I would like.

Got it, got it. Okay, that's helpful. And just one, I guess, on the model, maybe you talked about it, and I apologize if you did. But, tax rate, where does that shake out next year?

Yes. I didn't mention it, and good question. So what I would say for now is, one is about 10% to 15% for now. It is -- there 179D was extended for 2017, and that will have an impact in Q1. But frankly, we haven't fully vetted what we think the impact's going to be. But I would say, for modeling now, 10% to 15%, and to the extent, we need to -- that 179D results in a material change, we will let you know.

Got it. So but Q1 potential for a benefit on the retroactive stuff, and then 10% to 15%, sort of, the go-forward rate?

That's correct.

(Operator Instructions) And our next question comes from Carter Driscoll from B. Riley.

Talk about maybe the biogas opportunity by region and maybe by type of source, whether it's the agricultural waste or water recovery or landfill gas, particularly by region. And is that have any -- is the competitive landscape in California more pronounced for some of those projects? And then maybe as a follow-up, any worries at all about some of the rhetoric coming from current EPA you had about the RVO being changed? And does that have any impact on your thoughts about where you allocate investment?

All right. That's 2, 3 questions there. I will start with the regions. No question about it. California is the best marketplace to be in. I think you will see more focus from us in that particular state than any other state in the country and -- as far as the renewable gas projects. But there are opportunities in other states, and we are working on, actually, 1 asset that we own in Texas that we might convert to renewable gas, existing plant that already own -- site that we already own -- rights to the gas. And where you get most of the opportunities for our projects that we are developing, it's landfill gas or wastewater treatment plants, like the Phoenix plant that we're doing. Those are the 2 primary focus rather than the other [cultural] aspect. As far as what's going on in Washington, and I will be a bit cautious about it, expanding this market opportunity, we're watching to see what's going on. And depending on what they do -- it might impact the reprice of the RINs, the D3s that we use in [coming out] of the -- of our projects. So it's -- we'll just wait and see. But -- and the renewable volume obligation, of course, it will make tremendous, tremendous difference as to what that level has been set in the future. But I -- based on the legislation that we have today and the statement that we -- they have made, we are, I will say, cautious optimistic about this potential business and market segment.

Okay. I mean, just -- and really...

We wouldn't bet the farm on it either.

No, no, absolutely. And particularly, California, obviously, being the largest opportunity, can you just talk about the competitive landscape? I mean, does that have any -- was that at all part of the decision to change up some of the personnel? Was it just underperformance specifically within that region? Or was there a ramping up of the competitive bidding for certain projects? Just trying to a sense of that, particularly in California.

It's a competitive landscape. Some of the people that we're trying to -- we are competing with, they've been there for a very, very long time. And look, that's why I said the value, the franchise of Ameresco is great, because we have the 72 offices around the country. People that were there from the beginning, they have great traction, great leverage and over 50% of the time, it's the relationship that you have in this business and the track record in that particular state. I don't care how good of a company you are, coming in from another state, you are not going to be as effective, or if you decide to bring people from other parts of the country. Again, we don't like to stay it, but states continue to be very parochial.

(Operator Instructions) And I am showing no further questions coming from our phone lines. I would now like to turn the conference back over to George Sakellaris for any closing remarks.

Thank you, Crystal. To conclude, I first want to thank our employees. Without their hard work and dedication, we could not have delivered such outstanding performance. I also want to thank our customers, who drive us to innovate in everything we do. I also want to thank our shareholders for their support. As we look ahead to 2018, we are very confident in our prospects. We have spent several years building a strong foundation for growth and profitability. Our revenue growth is accelerating due to the strength in the energy efficiency projects and expansion of our energy asset portfolio. Growing energy sales and O&M work is improving our visibility and profitability. We intend to continue to execute on our strategy in 2018 and beyond and look forward to another year of solid results. Thank you for your attention this morning. I would now turn the call back to the operator, Crystal?

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