Ameresco's EPS Miss: A Blip or a Trend?

Ameresco, Inc. (AMRC), a leading clean technology integrator specializing in energy efficiency and renewable energy, recently reported its full-year 2024 earnings, missing analysts' expectations. The company's EPS came in at $1.20, falling short of the forecasted $1.35. Despite the miss, Ameresco's revenue grew by 29% year-over-year, reflecting strong operational performance and strategic project execution. Let's dive into the factors contributing to the EPS miss and explore the opportunities for improvement.

Unanticipated Cost Overruns and Impairment Charges
One of the primary factors contributing to Ameresco's EPS miss was the impact of unanticipated cost overruns on large-scale legacy projects. Gross margin for the quarter was significantly lower than expected, at 12.5%, due to these cost overruns, which negatively impacted gross profit by approximately $20 million, or 400 basis points. Additionally, operating income was partially offset by non-cash impairment charges of approximately $12.0 million taken on certain energy assets and higher depreciation expenses of $8.0 million. These factors combined to weigh heavily on Ameresco's EPS.

Record Contract Conversions and Energy Asset Deployments
Despite the EPS miss, Ameresco's record revenue performance was driven by growth across its business lines, reflecting robust demand for cost-effective projects that provide energy savings and resilience. The company achieved record contract conversions of over $1.1 billion in Q4 2024, bringing its contracted project backlog to over $2.5 billion at year-end, approximately twice the 2023 levels. Additionally, Ameresco placed a record 241 MWe of energy assets into service during the year, adding considerably to its total multiyear revenue visibility, which now stands at almost $10 billion.

Divestment of AEG Business Unit
Ameresco successfully divested its AEG business unit during the quarter, allowing it to remain focused on its core businesses and the exciting growth opportunities within its target markets. The gain recognized on the sale of the AEG business unit was approximately $38.0 million, partially offsetting the impact of cost overruns and impairment charges on operating income.



Looking Ahead: Opportunities for Improvement
To improve EPS and maintain its long-term growth trajectory, Ameresco should focus on enhancing project management, optimizing the mix of energy assets, improving operational efficiency, and diversifying revenue streams within the "Other" segment. By addressing these areas, Ameresco can work towards improving its EPS and overall financial performance.

In conclusion, Ameresco's EPS miss in the full year 2024 earnings report can be attributed to unanticipated cost overruns on large-scale legacy projects, impairment charges, and higher depreciation expenses. Despite these challenges, the company's record revenue performance, driven by growth across its business lines, reflects robust demand for cost-effective projects and energy asset deployments. By focusing on enhancing project management, optimizing energy asset mix, improving operational efficiency, and diversifying revenue streams, Ameresco can work towards improving its EPS and maintaining its long-term growth prospects. As investors and stakeholders, it's essential to monitor Ameresco's progress and remain optimistic about its potential for future growth.