Press release

Ameresco Reports First Quarter 2021 Financial Results

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Ameresco, Inc. (NYSE:AMRC), a leading cleantech integrator specializing in energy efficiency and renewable energy, today announced financial results for the fiscal quarter ended March 31, 2021. The Company has also furnished supplemental information in conjunction with this press release in a Current Report on Form 8-K. The supplemental information includes non-GAAP financial metrics and has been posted to the “Investor Relations” section of the Company’s website at www.ameresco.com.

“Our first quarter results were excellent and exceeded our expectations across all major metrics,” said George P. Sakellaris, President and Chief Executive Officer. “Business conditions improved progressively throughout the period and our employees rose to overcome the challenges presented during the quarter. This was another strong quarter for the Projects business, particularly within our Federal group. Our Energy Asset business also posted a meaningful pickup in revenue and profit. We were also pleased to see a considerable increase in project and asset proposals during the quarter, indicating a return to a more normalized activity level post-COVID-19 and leading to significant sequential and year-over-year growth in our awarded backlog.”

“In the first quarter, we completed our first public equity offering since Ameresco’s IPO in 2010, raising over $120 million for the company, positioning us to accelerate the growth of our recurring revenue Energy Asset business. Specifically, we will be taking advantage of strong demand and opportunity in the emerging RNG space, where we now plan to construct and commission three RNG facilities in 2022 and four additional sites in 2023. These developments will be in addition to our continued buildout of other energy technologies, including solar, energy storage, microgrids and EaaS.”

First Quarter Financial Results

(All financial result comparisons made are against the prior year period unless otherwise noted.)

Total revenue increased 19% to $252.2 million, compared to $212.4 million year-over-year. The projects business saw 25% growth led by another strong quarter in the Federal group which benefited from favorable timing of certain approvals and progress on customized equipment. Energy Assets revenue increased 18% as the company continues to grow its assets in operation, improved production from existing assets and realized favorable RIN prices during the quarter. Gross margin of 18.6% increased 10 basis points sequentially and 50 basis points year-over-year. Operating income increased 92% to $18.3 million and operating margin was 7.3%. Operating income growth significantly exceeded revenue growth as a result of continued expense controls, higher utilization and the leverage inherent in our scalable business model. Net income attributable to common shareholders increased 80% to $11.2 million and GAAP EPS increased 69% to $0.22 compared to $0.13. Adjusted EBITDA, a non-GAAP financial measure, increased 40% to $29.7 million.

(in millions)

1Q 2021

1Q 2020

 

Revenue

Net Income

Adj. EBITDA

Revenue

Net Income (Loss)

Adj. EBITDA

Projects

$180.7

$4.4

$8.3

$144.4

$(0.7)

$1.7

Energy Assets

$33.3

$5.9

$18.7

$28.2

$4.3

$15.5

O&M

$18.5

$0.6

$1.8

$18.1

$1.2

$2.4

Other

$19.7

$0.2

$0.9

$21.7

$1.3

$1.6

Total

$252.2

$11.2

$29.7

$212.4

$6.2

$21.2

(in millions)

 

At March 31, 2021

Awarded Project Backlog

 

$1,521

Contracted Project Backlog

 

$788

Total Project Backlog

 

$2,309

 

 

 

O&M Revenue Backlog

 

$1,127

Energy Asset Visibility *

 

$940

Operating Energy Assets

 

287 MWe

Assets in Development

 

386 MWe

* estimated contracted revenue and incentives throughout PPA term on our operating energy assets

Project Highlights

In the first quarter of 2021:

  • Our recently announced construction start of the Norfolk Naval Shipyard (NNSY) in Portsmouth, Virginia highlights our total solutions capabilities utilizing clean advanced technologies. The $173 million project includes a new 17.3 megawatt (MW) combined heat and power (CHP) plant, a 3 MW battery energy storage system, and a microgrid control system. These will provide the site with long-term energy security while reducing the electricity imported from the grid by 68 percent and mission critical steam. After construction is completed in 2022, Ameresco will operate and maintain the CHP plant, IWTP (industrial waste water treatment plant), and microgrid until January 2044 providing a long-term recurring O&M revenue stream.
  • We anticipate continued demand from the C&I market as more forward-looking companies look to save money while also lowering their carbon footprint. Our recently announced solar project with Wells Fargo to develop and install approximately 30 MW of new, onsite solar generation assets at corporate and retail locations in seven states is a great example of the growing opportunities in the C&I market. Construction of the nearly 100 solar arrays will go into 2022.

Asset Highlights

In the first quarter of 2021:

  • Ameresco brought 5 MWe into operation while adding 40 MWe to our development backlog, bringing our total to 386 MWe.
  • Asset additions in the quarter included the award of Energy as a Service for a C&I customer and awards of distributed solar installations in our East, Central and West regions.

Summary and Outlook

“The first quarter represented a strong start to the year and has laid the foundation for 2021 to be another year of strong growth for Ameresco. Additionally, we see substantial opportunities ahead as our customers prioritize cost savings and resiliency, combined with reducing their carbon footprints. Ameresco’s services are well aligned with the new Administration’s overarching goal of decarbonizing the U.S. economy and its mandate that climate change be considered in major decisions across all government agencies,” Mr. Sakellaris noted.

Based on visibility from our project backlog and our increased levels of recurring revenues, the Company is increasing its 2021 guidance ranges detailed in the table below, representing year-over-year revenue and adjusted EBITDA growth of 10% and 23%, respectively, at the midpoints, and Non-GAAP EPS growth of 20% at the midpoint, excluding the impact of approximately $0.13 of one-time tax benefits realized in 2020. The Company anticipates commissioning a further 55 to 75 MWe of energy assets and plans to invest approximately $165 million to $215 million in additional energy asset capital expenditures during the remainder of 2021, the majority of which will be funded with project finance debt.

FY 2021 Guidance Ranges

Revenue

$1.11 billion

$1.16 billion

Gross Margin

18.5%

19.5%

Adjusted EBITDA

$140 million

$150 million

Interest Expense & Other

$20 million

$22 million

Effective Tax Rate

12%

18%

Non-GAAP EPS

$1.22

$1.30

Conference Call/Webcast Information

The Company will host a conference call today at 4:30 p.m. ET to discuss results. The conference call will be available via the following dial in numbers:

  • U.S. Participants: Dial +1 (877) 359-9508 (Access Code: 5664848)
  • International Participants: Dial +1 (224) 357-2393 (Access Code: 5664848)

Participants are advised to dial into the call at least ten minutes prior to register. A live, listen-only webcast of the conference call will also be available over the Internet. Individuals wishing to listen can access the call through the “Investor Relations” section of the Company’s website at www.ameresco.com. An archived webcast will be available on the Company’s website for one year.

Use of Non-GAAP Financial Measures

This press release and the accompanying tables include references to adjusted EBITDA, Non- GAAP EPS, Non-GAAP net income and adjusted cash from operations, which are Non-GAAP financial measures. For a description of these Non-GAAP financial measures, including the reasons management uses these measures, please see the section following the accompanying tables titled “Exhibit A: Non-GAAP Financial Measures”. For a reconciliation of these Non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP, please see Other Non-GAAP Disclosures and Non-GAAP Financial Guidance in the accompanying tables.

About Ameresco, Inc.

Founded in 2000, Ameresco, Inc. (NYSE:AMRC) is a leading cleantech integrator and renewable energy asset developer, owner and operator. Our comprehensive portfolio includes energy efficiency, infrastructure upgrades, asset sustainability and renewable energy solutions delivered to clients throughout North America and the United Kingdom. Ameresco’s sustainability services in support of clients’ pursuit of Net Zero include upgrades to a facility’s energy infrastructure and the development, construction, and operation of distributed energy resources. Ameresco has successfully completed energy saving, environmentally responsible projects with Federal, state and local governments, healthcare and educational institutions, housing authorities, and commercial and industrial customers. With its corporate headquarters in Framingham, MA, Ameresco has more than 1,000 employees providing local expertise in the United States, Canada, and the United Kingdom. For more information, visit www.ameresco.com.

Safe Harbor Statement

Any statements in this press release about future expectations, plans and prospects for Ameresco, Inc., including statements about market conditions, pipeline and backlog, as well as estimated future revenues and net income, and other statements containing the words “projects,” “believes,” “anticipates,” “plans,” “expects,” “will” and similar expressions, constitute forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward looking statements as a result of various important factors, including the timing of, and ability to, enter into contracts for awarded projects on the terms proposed; the timing of work we do on projects where we recognize revenue on a percentage of completion basis, including the ability to perform under recently signed contracts without unusual delay; demand for our energy efficiency and renewable energy solutions; our ability to arrange financing for our projects; changes in federal, state and local government policies and programs related to energy efficiency and renewable energy; the ability of customers to cancel or defer contracts included in our backlog; the effects of our recent acquisitions and restructuring activities; seasonality in construction and in demand for our products and services; a customer’s decision to delay our work on, or other risks involved with, a particular project; availability and costs of labor and equipment; the addition of new customers or the loss of existing customers; market price of the Company’s stock prevailing from time to time; the nature of other investment opportunities presented to the Company from time to time; the Company’s cash flows from operations; and other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the U.S. Securities and Exchange Commission (SEC) on March 2, 2021. Currently, one of the most significant factors, however, is the potential adverse effect of the current pandemic of the novel coronavirus, or COVID-19, on our financial condition, results of operations, cash flows and performance and the global economy and financial markets. The extent to which COVID-19 impacts us, suppliers, customers, employees and supply chains will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, you should interpret many of the risks identified in our Annual Report and Quarterly Report as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19. In addition, the forward-looking statements included in this press release represent our views as of the date of this press release. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

 

AMERESCO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

 

March 31,

 

December 31,

 

2021

 

2020

 

(Unaudited)

 

 

ASSETS

Current assets:

 

 

 

Cash and cash equivalents

$

80,971

 

 

$

66,422

 

Restricted cash

24,869

 

 

22,063

 

Accounts receivable, net

113,095

 

 

125,010

 

Accounts receivable retainage, net

32,071

 

 

30,189

 

Costs and estimated earnings in excess of billings

179,474

 

 

185,960

 

Inventory, net

8,527

 

 

8,575

 

Prepaid expenses and other current assets

26,753

 

 

26,854

 

Income tax receivable

5,446

 

 

9,803

 

Project development costs

14,573

 

 

15,839

 

Total current assets

485,779

 

 

490,715

 

Federal ESPC receivable

459,347

 

 

396,725

 

Property and equipment, net

8,804

 

 

8,982

 

Energy assets, net

765,122

 

 

729,378

 

Goodwill

58,812

 

 

58,714

 

Intangible assets, net

847

 

 

927

 

Operating lease assets

41,484

 

 

39,151

 

Restricted cash, non-current portion

10,507

 

 

10,352

 

Other assets

18,047

 

 

15,307

 

Total assets

$

1,848,749

 

 

$

1,750,251

 

 

 

 

 

LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY

Current liabilities:

 

 

 

Current portion of long-term debt and financing lease liabilities

$

71,770

 

 

$

69,362

 

Accounts payable

202,123

 

 

230,916

 

Accrued expenses and other current liabilities

40,297

 

 

41,748

 

Current portion of operating lease liabilities

5,680

 

 

6,106

 

Billings in excess of cost and estimated earnings

30,211

 

 

33,984

 

Income taxes payable

1,501

 

 

981

 

Total current liabilities

351,582

 

 

383,097

 

Long-term debt and financing lease liabilities, net of current portion and deferred financing fees

268,411

 

 

311,674

 

Federal ESPC liabilities

473,882

 

 

440,223

 

Deferred income taxes, net

4,474

 

 

2,363

 

Deferred grant income

8,167

 

 

8,271

 

Long-term portions of operating lease liabilities, net of current

37,718

 

 

35,300

 

Other liabilities

35,992

 

 

37,660

 

Redeemable non-controlling interests, net

39,668

 

 

38,850

 

 

 

 

 

Stockholders’ equity:

 

 

 

Preferred stock, $0.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2021 and December 31, 2020

$

 

 

$

 

Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 35,367,720 shares issued and 33,265,925 shares outstanding at March 31, 2021, 32,326,449 shares issued and 30,224,654 shares outstanding at December 31, 2020

3

 

 

3

 

Class B common stock, $0.0001 par value, 144,000,000 shares authorized, 18,000,000 shares issued and outstanding at March 31, 2021 and December 31, 2020

2

 

 

2

 

Additional paid-in capital

267,864

 

 

145,496

 

Retained earnings

379,533

 

 

368,390

 

Accumulated other comprehensive loss, net

(6,759

)

 

(9,290

)

Treasury stock, at cost, 2,101,795 shares at March 31, 2021 and December 31, 2020

(11,788

)

 

(11,788

)

Total stockholders’ equity

628,855

 

 

492,813

 

Total liabilities, redeemable non-controlling interests and stockholders’ equity

$

1,848,749

 

 

$

1,750,251

 

 

AMERESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts) (Unaudited)

 

 

Three Months Ended March 31,

 

2021

 

2020

Revenues

$

252,202

 

 

$

212,413

 

Cost of revenues

205,293

 

 

173,967

 

Gross profit

46,909

 

 

38,446

 

Selling, general and administrative expenses

28,601

 

 

28,924

 

Operating income

18,308

 

 

9,522

 

Other expenses, net

3,672

 

 

5,389

 

Income before income taxes

14,636

 

 

4,133

 

Income tax provision (benefit)

2,205

 

 

(2,503

)

Net income

12,431

 

 

6,636

 

Net income attributable to redeemable non-controlling interests

(1,257

)

 

(435

)

Net income attributable to common shareholders

$

11,174

 

 

$

6,201

 

Net income per share attributable to common shareholders:

 

 

 

Basic

$

0.23

 

 

$

0.13

 

Diluted

$

0.22

 

 

$

0.13

 

Weighted average common shares outstanding:

 

 

 

Basic

48,975

 

 

47,384

 

Diluted

50,357

 

 

48,497

 

 

AMERESCO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)

 

 

Three Months Ended March 31,

 

2021

 

2020

Cash flows from operating activities:

 

 

 

Net income

$

12,431

 

 

$

6,636

 

Adjustments to reconcile net income to cash flows from operating activities:

 

 

 

Depreciation of energy assets, net

9,686

 

 

9,299

 

Depreciation of property and equipment

833

 

 

833

 

Accretion of ARO liabilities

24

 

 

21

 

Amortization of debt discount and debt issuance costs

747

 

 

660

 

Amortization of intangible assets

80

 

 

179

 

Provision for bad debts

3

 

 

49

 

Net gain from derivatives

(377

)

 

(223

)

Stock-based compensation expense

766

 

 

429

 

Deferred income taxes

1,410

 

 

(1,217

)

Unrealized foreign exchange loss

19

 

 

212

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

15,535

 

 

(14,161

)

Accounts receivable retainage

(1,844

)

 

(4,445

)

Federal ESPC receivable

(65,973

)

 

(39,946

)

Inventory, net

48

 

 

7

 

Costs and estimated earnings in excess of billings

6,544

 

 

12,181

 

Prepaid expenses and other current assets

(726

)

 

1,233

 

Project development costs

1,259

 

 

(3,224

)

Other assets

(538

)

 

8

 

Accounts payable, accrued expenses and other current liabilities

(19,333

)

 

(17,241

)

Billings in excess of cost and estimated earnings

(3,973

)

 

(956

)

Other liabilities

(226

)

 

(586

)

Income taxes payable

4,881

 

 

(1,388

)

Cash flows from operating activities

(38,724

)

 

(51,640

)

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

(656

)

 

(724

)

Purchases of energy assets

(55,823

)

 

(28,497

)

Contributions to equity investment

 

 

(127

)

Cash flows from investing activities

(56,479

)

 

(29,348

)

Cash flows from financing activities:

 

 

 

Proceeds from equity offering, net of offering costs

120,216

 

 

 

Payments of financing fees

(850

)

 

(155

)

Proceeds from exercises of options and ESPP

1,386

 

 

2,473

 

Repurchase of common stock

 

 

(6

)

(Payments on) proceeds from senior secured credit facility, net

(53,073

)

 

31,000

 

Proceeds from long-term debt financings

30,811

 

 

 

Proceeds from Federal ESPC projects

33,520

 

 

61,198

 

Proceeds for energy assets from Federal ESPC

(59

)

 

1,541

 

Distributions to redeemable non-controlling interests, net

(495

)

 

(103

)

Payments on long-term debt

(19,073

)

 

(12,019

)

Cash flows from financing activities

112,383

 

 

83,929

 

Effect of exchange rate changes on cash

330

 

 

(509

)

Net increase in cash, cash equivalents, and restricted cash

17,510

 

 

2,432

 

Cash, cash equivalents, and restricted cash, beginning of period

98,837

 

 

77,264

 

Cash, cash equivalents, and restricted cash, end of period

$

116,347

 

 

$

79,696

 

 

Non-GAAP Financial Measures (In thousands) (Unaudited)

 

Three Months Ended March 31, 2021

Adjusted EBITDA:

Projects

Energy

Assets

O&M

Other

Consolidated

Net income attributable to common shareholders

$

4,426

 

$

5,910

 

$

617

 

$

221

 

$

11,174

 

Impact from redeemable non-controlling interests

 

1,257

 

 

 

1,257

 

Plus: Income tax provision

1,119

 

981

 

82

 

23

 

2,205

 

Plus: Other expenses, net

1,193

 

2,068

 

177

 

235

 

3,673

 

Plus: Depreciation and amortization

1,012

 

8,405

 

828

 

354

 

10,599

 

Plus: Stock-based compensation

554

 

98

 

57

 

58

 

767

 

Plus: Restructuring and other charges

20

 

5

 

22

 

2

 

49

 

Adjusted EBITDA

$

8,324

 

$

18,724

 

$

1,783

 

$

893

 

$

29,724

 

Adjusted EBITDA margin

4.6

%

56.3

%

9.6

%

4.5

%

11.8

%

 

 

Three Months Ended March 31, 2020

Adjusted EBITDA:

Projects

Energy

Assets

O&M

Other

Consolidated

Net (loss) income attributable to common shareholders

$

(669)

 

$

4,329

 

$

1,211

 

$

1,330

 

$

6,201

 

Impact from redeemable non-controlling interests

 

435

 

 

 

435

 

Less: Income tax benefit

(904)

 

(951)

 

(296)

 

(352)

 

(2,503)

 

Plus: Other expenses, net

1,430

 

3,283

 

663

 

13

 

5,389

 

Plus: Depreciation and amortization

842

 

8,344

 

753

 

372

 

10,311

 

Plus: Stock-based compensation

293

 

55

 

37

 

44

 

429

 

Plus: Restructuring and other charges

712

 

19

 

59

 

186

 

976

 

Adjusted EBITDA

$

1,704

 

$

15,514

 

$

2,427

 

$

1,593

 

$

21,238

 

Adjusted EBITDA margin

1.2

%

55.0

%

13.4

%

7.3

%

10.0

%

 

 

Three Months Ended March 31,

 

2021

2020

Non-GAAP net income and EPS:

 

 

Net income attributable to common shareholders

$

11,174

 

$

6,201

 

Adjustment for accretion of tax equity financing fees

(31

)

 

Impact from redeemable non-controlling interests

1,257

 

435

 

Plus: Restructuring and other charges

48

 

976

 

Less: Income tax effect of Non-GAAP adjustments

(12

)

(212

)

Non-GAAP net income

$

12,436

 

$

7,400

 

 

 

 

Diluted net income per common share

$

0.22

 

$

0.13

 

Effect of adjustments to net income

0.03

 

0.02

 

Non-GAAP EPS

$

0.25

 

$

0.15

 

 

 

 

Adjusted cash from operations:

 

 

Cash flows from operating activities

$

(38,724

)

$

(51,640

)

Plus: proceeds from Federal ESPC projects

33,520

 

61,198

 

Adjusted cash from operations

$

(5,204

)

$

9,558

 

 

 

Three Months Ended March 31,

 

2021

2020

New contracts and awards:

 

 

New contracts

$

73,000

 

$

86,000

 

New awards (1)

$

275,000

 

$

55,000

 

(1) Represents estimated future revenues from projects that have been awarded, though the contracts have not yet been signed

Non-GAAP Financial Guidance

Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA):

Year Ended December 31, 2021

 

Low

High

Operating income(1)

$89 million

$97 million

Depreciation and amortization

$47 million

$48 million

Stock-based compensation

$4 million

$5 million

Adjusted EBITDA

$140 million

$150 million

(1) Although net income is the most directly comparable GAAP measure, this table reconciles adjusted EBITDA to operating income because we are not able to calculate forward-looking net income without unreasonable efforts due to significant uncertainties with respect to the impact of accounting for our redeemable non-controlling interests and taxes.

Exhibit A: Non-GAAP Financial Measures

We use the Non-GAAP financial measures defined and discussed below to provide investors and others with useful supplemental information to our financial results prepared in accordance with GAAP. These Non-GAAP financial measures should not be considered as an alternative to any measure of financial performance calculated and presented in accordance with GAAP. For a reconciliation of these Non-GAAP measures to the most directly comparable financial measures prepared in accordance with GAAP, please see Other Non-GAAP Disclosure and Non-GAAP Financial Guidance in the tables above.

We understand that, although measures similar to these Non-GAAP financial measures are frequently used by investors and securities analysts in their evaluation of companies, they have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for the most directly comparable GAAP financial measures or an analysis of our results of operations as reported under GAAP. To properly and prudently evaluate our business, we encourage investors to review our GAAP financial statements included above, and not to rely on any single financial measure to evaluate our business.

Adjusted EBITDA and Adjusted EBITDA Margin

We define adjusted EBITDA as operating income before depreciation, amortization of intangible assets, accretion of asset retirement obligations, contingent consideration expense, stock-based compensation expense, and restructuring and asset impairment charges. We believe adjusted EBITDA is useful to investors in evaluating our operating performance for the following reasons: adjusted EBITDA and similar Non-GAAP measures are widely used by investors to measure a company’s operating performance without regard to items that can vary substantially from company to company depending upon financing and accounting methods, book values of assets, capital structures and the methods by which assets were acquired; securities analysts often use adjusted EBITDA and similar Non-GAAP measures as supplemental measures to evaluate the overall operating performance of companies; and by comparing our adjusted EBITDA in different historical periods, investors can evaluate our operating results without the additional variations of depreciation and amortization expense, accretion of asset retirement obligations, contingent consideration expense, stock-based compensation expense, and restructuring and asset impairment charges. We define adjusted EBITDA margin as adjusted EBITDA stated as a percentage of revenue.

Our management uses adjusted EBITDA and adjusted EBITDA margin as measures of operating performance, because they do not include the impact of items that we do not consider indicative of our core operating performance; for planning purposes, including the preparation of our annual operating budget; to allocate resources to enhance the financial performance of the business; to evaluate the effectiveness of our business strategies; and in communications with the board of directors and investors concerning our financial performance.

Non-GAAP Net Income and EPS

We define Non-GAAP net income and earnings per share (“EPS”) to exclude certain discrete items that management does not consider representative of our ongoing operations, including restructuring and asset impairment charges, gain or loss upon deconsolidation of a VIE and impact from redeemable non-controlling interest. We consider Non-GAAP net income and Non-GAAP EPS to be important indicators of our operational strength and performance of our business because they eliminate the effects of events that are not part of the Company’s core operations.

Adjusted Cash from Operations

We define adjusted cash from operations as cash flows from operating activities plus proceeds from Federal ESPC projects. Cash received in payment of Federal ESPC projects is treated as a financing cash flow under GAAP due to the unusual financing structure for these projects. These cash flows, however, correspond to the revenue generated by these projects. Thus we believe that adjusting operating cash flow to include the cash generated by our Federal ESPC projects provides investors with a useful measure for evaluating the cash generating ability of our core operating business. Our management uses adjusted cash from operations as a measure of liquidity because it captures all sources of cash associated with our revenue generated by operations.