Ameresco Inc (AMRC) 2018 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q3 2018 Ameresco, Inc. Earnings Conference Call. (Operator Instructions) As a reminder, today's conference is being recorded. I would now like to turn the call over to Gary Dvorchak. Sir, you may begin.

Thank you, Mark, and good morning, everyone. We appreciate you joining us for today's call.

Joining me here are George Sakellaris, Ameresco's Chairman, President and Chief Executive Officer; and Mark Chiplock, Interim Chief Financial Officer.

First, George will review the operating highlights and Mark will review the financials of the quarter, and finally, we will take questions.

Note 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 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. 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, prepared remarks and in the appendix of the slides.

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

Thank you, Gary, and good morning, everyone. Before we begin, I want to quickly introduce Mark. Mark has been with us since 2014, playing an important senior role in the finance team as Vice President of Finance and Controller. His experience and familiarity with our operations enabled him to step in quickly to manage our financials after John's departure. We have a search underway for a permanent CFO, and we look forward to reporting progress on the search in the months ahead.

Now let's discuss Q3 results, which were very strong, especially in profitability growth and development of our backlog. The growing business momentum continued this quarter. As you know, we focus on growing profits faster than revenue. Net income was up 26% and adjusted EBITDA was up 23%. Earnings per share also had outstanding growth, up 21%.

Revenue grew only slightly due to the shortage of control equipment for the Chicago streetlight project as well as the slippage of a large project into Q4. Nevertheless, the growing contribution from operation and maintenance and energy sales, combined with a better mix of project revenue, enabled gross margin to exceed 22%.

Our visibility continued to improve. Total project backlog grew to over $2 billion, up 18%. Awarded backlog is solid, up 11% to $1.2 billion, while contracted backlog was a record high of $819 million, up 30%.

We also grew the energy asset portfolio, adding 23-megawatt equivalent to development and putting 4-megawatt of solar into service.

Performance this quarter reflected 2 themes we emphasize constantly because they are important to our business model. The first is the growing size and technical complexity of the energy infrastructure projects in our backlog. Complexity plays to our competitive strength in development, design and construction and financing of these projects.

The second theme is our continuous success in winning repeat business. As you know, for several years now, we have been driving Ameresco towards a business model with emphasis on recurring revenue, specifically renewable energy sales and operation and maintenance.

In addition, Ameresco is thoroughly winning more repeat business in energy and infrastructure projects.

I want to highlight 2 major contracts we signed this quarter that exemplify our progress towards this attractive business model. The first is Phase 2 of the New York City Housing Authority project, which we call NYCHA. The second is the Joint Base San Antonio ESPC project.

NYCHA Phase 2 will deliver over $100 million in revenue to Ameresco over the next 28 months of design and implementation, with addition of operation and maintenance revenue over 18 years.

As with Phase 1 project, Ameresco and its subcontractors including organizations employing residents, will be installing a number of resource-saving measures. Once complete, the improvements are expected to impact close to 15,000 apartments in 15 developments, and to save NYCHA an average of over $8.6 million annually.

Managing this project will be complex as it needs to be implemented while minimizing any disruption to the life business of NYCHA residents. NYCHA is an excellent repeat customer opportunity for Ameresco.

Phase 1 will be substantially complete by year-end and will have produced $54 million of revenue for Ameresco.

In aggregate, the initial 2 phases will deliver over $156 million in revenue, and our successful track record position us well for future work with NYCHA.

The Joint Base San Antonio ESPC is an even larger and more complex project. This joint base consists of 3 centrally administered Air Force and Army bases in Central Texas. The project includes significant energy infrastructure improvements as well as a critical energy security system. The energy security infrastructure includes 20 megawatts of on-site generation, backup generation asset and 8-megawatt hour of battery storage. All of this is managed via an integrated control system. In total, there will be 17 energy-conservation measures implemented across 900 buildings.

Other conservation measures include 140,000 LED upgrades, enhanced central plant controls, upgraded distribution systems with enhanced controls, extended thermal storage capacity and an upgraded direct digital control system. This project will be implemented over the next 2.5 years and should generate revenue of over $133 million to Ameresco. Furthermore, the project includes approximately $35 million of operation and maintenance over 22 years, adding to our long-term visibility.

Joint Base San Antonio is another great example of repeat business for us with the Department of Defense. We were awarded this project under the Department of Energy IDIQ framework. This framework has produced many attractive projects for us, such as the Marine depot at Parris Island and the recent VA projects that closed earlier this year.

Of course, our repeat business extends beyond these 2 projects. We are also winning repeat business in one of our strategic focus regions, the Southwest. In Texas, we were just awarded our third project with a higher education client as well as the second phase of an LED streetlight project. We also were awarded Phase 2 of an LED streetlight project in California.

On that subject, I'm proud to tell you that based on a recently published report, Ameresco is the largest energy services company in terms of streetlight projects in the U.S. According to the report, we buy more LED streetlights than any other nonutility purchaser in the U.S.

The trend to larger, more comprehensive and more complicated projects extends beyond the United States as well. As we have noted in the past, we are gaining traction in the United Kingdom. Those projects are getting larger as well. We were recently awarded a project with the National Health Services [Basilla] complex valued at $15 million. We were also awarded the initial phase of a project with the City of Manchester that is valued at $10 million. Manchester has a potential for additional phases.

As a follow-on to our implementation project with the National Health Services' Wexham facility, we secured our first operation and maintenance contracts in the U.K.

Consistent with our project portfolio in the U.S., we are focused on building our U.K. business with both project and recurring revenue sources.

On the subject of recurring revenue, let's review renewable energy sales. We placed 4-megawatt of solar into service during Q3, which includes 2.5-megawatt for the Drug Enforcement Administration facility located at Fort Bliss, Texas.

However, we did not start operations at the renewable gas plant in Phoenix, as we had originally planned. We announced some -- we encountered some additional administrative delays, and now we expect to commence operations before year-end.

Naturally, we are a bit disappointed in these delays, but these issues are not unusual for these types of projects.

Our energy asset portfolio is in very solid shape. We estimate that our current portfolio of operating assets can produce at least $850 million of revenue over the next 20 years. This number consists of energy sales plus revenue from incentives during the contract periods. Of course, we expect to sell energy beyond the contracted periods, which is not reflected in this number.

Furthermore, this revenue estimate will grow materially as it does not yet include any current or future assets under development. In fact, let me elaborate on our development pipeline, which is healthy and getting healthier.

During Q3, we added 23-megawatt equivalent to the pipeline and now have 183-megawatt equivalent that we expect to be operational in the next 12 to 24 months.

In addition to Phoenix, we have one green gas project that we anticipate to start operations in that time frame. We also have 5 to 7 more of these projects in various early stages that are not yet in our 4-month development metric.

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

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 influence results. Keep in mind that we are referring to Q3 figures, unless I say otherwise, and all the comparisons are year-over-year.

As George mentioned, the quarter was solid. Gross margin performance was excellent and profitability exceeded expectations. We also strengthened the balance sheet. We believe we are set up for a strong finish to the year.

So let's go through the income statement first. Revenue was up slightly, supported by higher O&M and energy sales. The recurring revenue from these lines of business offset the natural variability in project revenue.

Gross margin performance was excellent, driven by high-margin energy sales, better project mix and strong execution that resulted in higher-than-average product close-outs. Over time, as energy sales and O&M continue to grow, they will give some lift to corporate gross margin. In contrast, project margins are a bit more variable from quarter-to-quarter.

Similarly, operating margin was also higher as we controlled OpEx, which grew far slower than gross profit. The strong operating profitability flowed through to solid growth in net income, EPS and adjusted EBITDA, continuing our long-term theme of growing earnings faster than revenue.

Now let's quickly review the balance sheet and cash flow, which remain strong. Our cash balance more than doubled sequentially. GAAP cash from operations was $25 million, while adjusted operating cash flow was approximately $70 million. Cash flow was most impacted by operating income and ongoing efforts to optimize working capital. The principal change in that regard was receivables, which we brought down meaningfully.

Turning to funding. We raised gross proceeds of $30 million in nonrecourse financing for our energy assets, including the first 2 transactions under our brand-new $100 million committed master sale-leaseback facility. We paid down our corporate revolver in Q3 and have ample liquidity available to fund the development and construction of energy assets.

Our project finance team is outstanding, and we are confident we will have no issues in raising future project financing.

Finally, turning to the outlook, we are raising our 2018 earnings guidance. EPS is now anticipated in the range of $0.71 to $0.79, while adjusted EBITDA should come in, in the range of $81 million to $89 million. We still expect full year revenue in the range of $780 million to $820 million.

I want to give you a couple of reminders. First, achieving the annual guidance requires us to convert some of our awarded backlog to contracts so that we can begin recognizing revenue. Second, we anticipate fourth quarter gross margin to revert to our historical norm of around 20%, based on our anticipated revenue mix.

While we are not providing detailed 2019 guidance at this point, I do want to share some color on how the year should shape up based on our current forecast. We expect revenue to grow somewhat faster than our recent compound average. We also remain committed to growing earnings faster than revenue through continued operating leverage and the contributions from high-margin recurring lines of business.

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

(Operator Instructions) And our first question comes from the line of Noah Kaye of Oppenheimer.

This is Luis Amadeo for Noah. You're keeping your revenue guidance intact but raising your profit outlook. Can you better help us understand the key drivers for the outperformance on the EBITDA margin line? Where are you getting better cost control?

Yes, sure. So let me talk about the guidance on the revenue first. So with respect to keeping that range the same, we considered the projects that we still need to convert from awarded backlog and the sensitivities around that. We also had to consider the delays, which were impacting revenues in Q3, and how much of that revenue could be recovered during Q4. Keep in mind, as we mentioned, we're still impacted by the equipment shortages on our Chicago streetlight project, and seasonality is going to come into play into Q4. So all of those went into our sensitivities for revenue. Additionally, our Phoenix RNG plant, which we had anticipated coming on in Q3, once that comes online in Q4, it's still going to need time to ramp up production. So with respect to revenue, that's where we came out and felt comfortable with unchanging those ranges. With respect to the earnings guidance, we certainly considered the strong performance in Q3. But part of that upside, we saw with some project close-outs, as we mentioned that really came from Q4. I guess, we would have expected those close-outs to be a bit more balanced across Q3 and Q4. And the Chicago streetlighting delay is going to push some lower-margin revenue into Q4. So we've run some sensitivities to see where the mix of revenue was going to land as well as where we could see operating expenses come in. So I think, again, we use some of the strong performance to raise the ranges, but I think some of those sensitivities kind of helped to temper that, and that's how we got comfortable with the ranges where we came up with.

Okay, that's helpful. And we also saw another sizable increase in project assets on the balance sheet. Can you update us on the megawatts of solar you expect to place in service this year? And how are you thinking about total capacity additions for fiscal 2019?

I can start that. Originally, we had estimated that we will install about 40 to 50 megawatts of new asset projects in our balance sheet, and so far, we have got 35 as we have installed -- in this quarter we installed 4 megawatts of solar. The original plan was that we would install the 6 megawatts associated with the Phoenix plant, but that slipped into the next quarter. In addition to that, we have about 15 megawatts to 20 megawatts -- actually 20 megawatts, 15 megawatts of which are already constructed for the last 6 months, and we anticipate that it will be interconnected to the utility by the end of the year. We have encountered some delays in the interconnection on those particular plans. So by the end of the year, we will have in the range of 40 megawatts to 50 megawatts. And then, as I pointed out in my remarks, we have a pretty good pipeline going forward to next year. Then Mark, you might want to add something to it.

Yes. I mean, I think as we're looking forward, we certainly would expect to put some additional megawatt equivalents into operations. We haven't set a specific guidance on that, but we certainly expect that to grow.

Okay. And then lastly, with the interest rates tight -- getting tighter, how much movement are you seeing seeing in ESPC project finance rates?

Every time we're going to finance a particular project, we have very good sources of capital. People are competing for our projects. The rates kept going up little bit, but it has not yet impacted materially the projects. Sometimes, let's say, if it's a $100 million project, maybe it would have been $105 million or $110 million in order to get self-funded, and maybe it will come down a few million bucks. But overall, they have not impacted our business materially. And looking forward, looking at our backlog and the kinds of projects that we have, and what they will require to finance it, we feel we're in very, very good shape.

And our next question comes from the line of Craig Irwin of Roth Capital Partners.

So George, in your prepared remarks, you mentioned 5 additional green gas projects in some state of development. Can you maybe give us color on these projects as far as the gas supply agreements from different landfills or other green gas sources, the potential status on permitting? Any other items that you see as key for these projects to make a go versus no go move over the next number of years?

Well, good question. We have those 5 projects, and I think I mentioned 5 to 7, 2 of which, I will say that they're in advanced stage of development, and we will see them entering our awarded backlog probably before the end of the year. And we see those 2 plants be up and running within the next 24 months. Both of them are located in California. As you can understand, that permitting -- that's why we're not giving specific dates as to how long it will take us to get these plants up and and running. It takes anywhere from 1 year to 18 months to get the permits. But these particular 2, they're very well advanced that we feel very good where we are. Then in addition to that, the other plants, they're in the early stage of development. So if you were to develop a business plan, we will see like the Texas plant probably coming up next year, late next year, early the year after. Otherwise, it won't have any material impact on the earnings next year, but it will 2019 -- would have 2020. And then 2020, you'll probably get another -- late 2020, 2021, the other 2 plants up and running. And the other plants, they're further behind. As far as where we stand with getting long-term agreements, the market has moved to being able to get longer-term contracts than we have in the past, especially, in California. But the prices though that we will get for RINs, of course, they will be lower than what you would otherwise get if you were in merchant. In the plants that we have to date, especially in WOODLAND, 50% of the output is on a fixed term contract, the rest of it is on merchant. And as you probably know, the RIN prices have come down considerably on the merchant side, and we will see where they end up. But I will say this much on the business, it's a great business. It continues to be a great business, even with the reduced prices of the RINs. And we think we have a very good development pipeline when it comes to the green gas plants. And of course, we have excellent relationships with the various people that own those landfill sites, and we will develop more. But I try to balance. We try to balance how much capital we will put in green gas and how much capital we will put in the renewable -- other renewable assets such as solar. We wanted to maximize the amount of solar that we get over the next couple of years because pretty much we -- the capital required on the solar plants that we own is minimal because we monetize the ITC and the accelerated depreciation. So I hope I answered your question, but the business -- the development pipeline is very healthy.

Yes, that was very helpful. So my next question is about the plants that you've brought on over the last 12 months, the green gas plants that have come online. My understanding is that the EBITDA contribution of these plants increases incrementally over time as shakedown is completed and the operating efficiency of the plants goes up. Can you maybe give us color on the sequential EBITDA contribution? How much greater was the EBITDA contribution in your September quarter versus in your June quarter?

Yes. So Craig, this is Mark, I can answer that. I mean, I think, sequentially from Q2, Q3, we probably saw an incremental tick up of about $3 million, $3.5 million for the 1 green gas plant that we have in operations. Then as I think we spoke about we had expected originally for our Phoenix plant to come online in Q3. That did not happen. That's going to slide to Q4. So I think from the one that we have, we probably saw about a $3 million to $3.5 million incremental pickup in the quarter.

And the historic -- the other one that you have, the historic one, that's much smaller, was that basically flat actually?

Craig, yes. That's how (inaudible)

So then, my last question is, on the last couple of calls, you've talked about project sizes trending larger, and that kind of has an interesting dynamic where, I guess, the potential margin of risk earned on individual project goes higher, but then the potential earnings could also see some sort of a benefit. Can you maybe give us a little bit of color on how the character of the backlog is shifting now versus maybe 1 year or 2 years ago? Any update as far as what you see as the time line to convert the backlog versus what we're looking at maybe 1 year or 2 years ago?

Yes, I put -- the projects are trending larger. No question about it. And I will put them in 2 classes. Ones are larger but not as complex, and those projects generally, they have lower margin than the projects that I put in the complex category, and they have a higher margin. But the overall profitability, though, to the company for both projects, for either project, the complex or the not so complex, they contribute to the profitability of the company, because we leverage. Otherwise for less operation and maintenance -- operation and expenditures, you get more EBITDA on a per employee or per project manager, per development engineer and so on. So it helps the leverage of the company, those projects. As far as the mix looking forward, and we do have an analysis, it doesn't materially change the overall project margin, let's say, of what we have in the backlog. Maybe there is 1 point, plus or minus, but not substantially different. And I think Mark made it on his remark to even for the fourth quarter, our gross profit margin, we will pivot back towards we were normally around 20% -- 20% to 21%. So we don't anticipate major changes to our gross profit margin primarily because of the larger and more complex projects. And then, of course, the asset and annuity-based revenues, the higher margin than overall, the company looks better from that perspective.

(Operator Instructions) Our next question comes from the line of Carter Driscoll of B. Riley FBR.

The first one is on -- maybe on the solar side. So we're seeing, obviously, a lot of price degradation or resumption of component pricing pressure. Are you seeing any benefit from that? And then, maybe just the characterized return environment in solar has it been fairly steady. Are you seeing any pressure from the installers to bring down those project returns? And then I have a couple of follow-ups.

On the cost -- the implementation cost, bringing the cost down, I think we're doing a pretty good job. We've been competitive in the marketplace because we hire subcontractors in order to build those particular solar plants, but we have our own group and sometimes we execute ourselves. And the prices are coming down, and that helps the overall return on the projects. The panels for a while like, we will buy them at 38. When the tariffs came in, they went up to 60. Now they're back down to 38, which is very good. So the trend in that business is very good. But the competition for good projects, especially from the large houses and what's the return of capital they are looking for, it's very large. But -- it's very competitive, and they're bringing those returns down. And that's why we are growing it to what I will say in a balanced way and measured. We will not change the returns to where some of the large houses will go. We have a limited amount of capital and we want to make a wise investment. And the infrastructure we have across Ameresco, where we have got good customer relationships, it lends itself for us to self-develop projects and, thereby, get the returns that we are looking for.

Yes. So no real fundamental change because the costs are coming down at least relatively commensurate with the pressure on the returns?

The costs are coming down, which means the projects really have competition on the other side from the financial house wanting to own a little bit of assets themselves. We'll be able to get hopefully higher returns. But the competition is such that it balances out. On the other hand, though, what happens is it expands the market though.

It does expand the market, and solar and battery storage coming down the pipe, projects that before did not pencil out, they do pencil out now.

Can talk about the magnitude of the reduction you need to see on battery prices to really drive greater attach rates to solar? Particularly for, say, microgrid opportunities?

It depends on where you are and what the demand charges are and so on and so forth. In some applications, I will say even 20% drop from where they are right now, between your installation, it will make sense without it. But what we find in a great application, is that the people are looking for resiliency and security. That's going to be a bigger and bigger part of the need for battery storages. But on the other hand, though, there are some other applications and we have a couple of battery installations, where they cancel out because of the various incentives or the demand reductions or the frequency regulation or the utility is what they pay for, particularly installation on batteries. Otherwise, we want a contract from particular utility to install X amount of battery storage and they will pay us Y per KW installed -- per KW hour.

Maybe a higher level question. If you look at the -- I mean, obviously, you had a project that slipped a little in this quarter, and that's just a natural part of your business in terms of when it falls. Is there any way to quantify and maybe in some range, the amount of backlog that is subject to this type of variability? Maybe say 1 to 2 quarter availability, maybe not just the single quarter, whether it's by size or the type of project? Is there any way to quantify that?

It's very hard. And that's why I try to guide people to look at us in that year-to-date or 12 months to date because it's a very lumpy business. I tell you, for example, this particular project would -- which gets slipped for 3 months because a board meeting, it's supposed to get approval. Then something happened. It didn't go to the agenda, and then it will get moved by at least 3 months. I can tell you even on this past quarter, we had some delays in some projects. They were out of construction, but we had nothing to do with that. But access to the building wasn't available for various reasons, so that took a certain portion of our revenues out. So it's a lumpy business. That is why I tell people and I try to put the year-to-date, especially, after 3 quarters and we feel very good where we are, that the revenues have grown 13% and the historical revenue growth was 7%, but so far year-to-date, we're at 13%. So we know exactly -- we know the amount of dollars that we lost to quarterly delay, but to do it on a normal way and being able to determine it is impossible.

I'm going to -- I mean, the only thing I would add there. I mean, again, there's going to be the variability in terms of the length of time it's taking to convert some of these projects. We're still seeing kind of the average conversion in our awarded backlog of about 18 months. As we've talked about in the past, larger projects can take anywhere upwards of 24 months and even longer. So again, that's definitely going to create some variability.

And to bring up -- to bring a very interesting point, why I accent the fact that we have $819 million of contracted backlog right now, because that's a good driver. Where we sometimes -- when we make our forecast for the year, we have fallen short. When we estimate various contracts when from the awarded category, they will flip over to the executed category, and that has been very difficult to predict. That's why the less we depend, let's say, for next year, on awarded moving to contracted, the better off the company is. And that's why we feel very good where we are today on the contracted backlog. And hopefully, we can build the next quarter and then we'll be in very good shape.

Maybe I'll ask in a slightly different way. Are there any component shortages or other equipment shortages you envision that -- whether you're seeing lead times extend that could contribute to maybe the 18 months extending longer? Or is that a natural part of what you built in, in terms of your forecast there?

Other than the streetlighting job, and that's had to do with the controllers, capacitors and resistors, we were getting delivered in 4 weeks and then it went to not being available at all. And now it's 20 weeks of delivery schedule. So basically, we stretched out the schedule of that particular project. That's why it impacted the revenues in the third quarter and it's going to impact the revenues on the fourth quarter. Other than that, we have seen some extension of delivery of step-up transformers in some of the solar plants. And the other one, that we have total no control of and it has been a challenge, is utility interconnections. The utilities, especially in Massachusetts, they are overwhelmed. And those 2 projects that I mentioned, the 15 megawatts, they have been actually mechanically complete for 8 months now.

Oh, nothing you could do there. Any pressure on employee hiring? I mean, have you lost any -- not necessarily key employees, but have you lost any of your attracted staff to simply a tight job market? Have there been any pressures there?

Not really. We are doing pretty good. Actually, our turnover is relatively -- it's good. And in fact, I think that the company is doing well, and we challenge our people to get familiar with all, what I call, advanced technologies. And that challenges engineers and development engineers and business developers and so on because not only the market opportunity for them has grown, but they get to do more than just change lights, chillers and boilers and so on. So, yes, it's more fun with the job. And that's what we're trying to do. And so far, so good. Cross your fingers. But it is getting harder and harder to get good people.

(Operator Instructions) Our next question comes from the line of Chip Moore of Canaccord.

George, maybe you can talk a bit about the project pipeline in the U.K. It sounded like you were a little more positive there. Talking about similar trends that you've see here in the U.S. and maybe a little bit more about the outlook for O&M activities there.

The last 6 months, actually, it took us quite a while to get traction in that particular market, but the last 6 months or so, we've been very, very successful in winning new awards. And we're developing a very good brand name in that region. So what can I say? The business is getting to be better. And the O&M contract that we won, again, we think there's tremendous potential. There's more potential in some of the buildings and the infrastructure in the U.K. than there is in the United States because there's much older infrastructure than we have in the United States. But moving them to getting to do the energy savings performance contracts, it's taking some longtime and you have to win certain frameworks. And I think we are qualifying about 5 frameworks for the various cities, towns and agencies. And now under those frameworks, we are able to win new contracts. So the market is developed, and it took some time, and we feel very good where we are right now for the next 12 to 24 months and beyond that.

That's great. And maybe just one more from me. You offered a little bit of color on the outlook for next year. Maybe you can talk a little bit more about -- when you talk about recent CAGR, how we should think about that.

Yes. I mean, look, our goal, we always said that we want to grow faster than the competition, the 7% to 8% growth that they have. And if you look at our compound annual rate for the last 6 years, it's about 7%. And the closer I get that to 10%, the better I will feel. And I think that will be a target that we'll be trying to shoot. So that's what we're talking about higher, somewhere between 8% to 10%, somewhere in that range. And for the EBITDA, I want to get it as close to 20% as possible growth. And I think based on where we are, I think it's doable for the foreseeable future.

And I'm showing no further questions at this time, I would now like to turn the call back to George Sakellaris for closing remarks.

Thank you. To conclude, our strong results this quarter confirms the momentum we are building and set us up for a strong finish for the year. We are well positioned for another very good year in 2019 due to our healthy backlog in both projects and assets. Long term, we benefit from this trend to more advanced technologies like distributed generation, microgrids and battery storage. These more complex projects and infrastructure upgrades give us confidence in the long-term prospects for Ameresco. With accelerating growth, high visibility and a growing portion of high-margin, recurring revenue, we are confident in the strength of our business model. Thank you very much, and have a good day.

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