A very good morning to you, ladies and gentlemen, and welcome to the Third Quarter 2012 Ameresco Earnings Conference Call. My name is Nancy, and I'm your operator for today. [Operator Instructions] I would now like to turn the call over to Suzanne Messere, Director of Investor Relations. Please go ahead.

Thank you, Nancy, and good morning, everyone. Thank you for joining us today for Ameresco's third quarter 2012 earnings conference call. I'm joined today by George Sakellaris, Ameresco's Chairman, President and Chief Executive Officer; and Andrew Spence, the company's Chief Financial Officer. On today's call, management will share brief highlights from the prepared remarks we published this morning, and then take questions from the audience. Before I turn the call over to George and Andrew, I would like to make a brief statement regarding forward-looking remarks. Today's call contains forward-looking information regarding future events and the future financial performance of the company. Ameresco cautions you that such statements are just predictions and actual results may differ materially as a result of risks and uncertainties that pertain to our business. Ameresco refers you to the company's press release issued this morning and its annual report on Form 10-K, filed with the SEC on March 15, 2012, which discusses important factors that could cause actual results to differ materially from those contained in the company's projections or forward-looking statements. Ameresco assumes no obligation to revise any forward-looking statements made on today's call. In addition, the company will be referring to non-GAAP financial measures during this call. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. A GAAP to non-GAAP reconciliation, as well as an explanation behind the use of non-GAAP financial measures is available in our press release, as well as our prepared remarks. I will now turn the call over to George Sakellaris, Ameresco's President and CEO. George?

Thank you, Suzanne, and good morning, everyone. We had expected third quarter 2012 financial results to be less than last year. However, we did not anticipate that market conditions will deteriorate further. We believe that uncertainty regarding the political environments in which our customers operate, the pending financial cliff and perceptions towards debt has caused our customers to behave more cautiously. There is also added pressure from their respective committees or boards that are responsible for approving energy efficiency projects. The result is that our customers have been proceeding with greater care and diligence, which further extended conversion times from awarded projects to signed contracts during the quarter. However, we continued to execute well on projects in construction and revenue from all other offerings increased by 20%, helped by annuity-based revenues. Further, awarded projects increased 46% year-over-year to $1.1 billion, a new record, as gross additions to backlog was $280 million for the quarter, also a new record. This more than offset a 27% decline in fully-contracted backlog. In addition, total construction backlog reached a new record at nearly $1.5 billion. Project delays persist to an extent that is unprecedented in our experience. In response, we have reevaluated and updated our project timing conversion estimates. Based upon these updated estimates, we are revising our revenue and net income guidance for fiscal 2012. We remain confident about the long-term fundamentals of our business, as well as the demand for energy efficiency. In addition, the trends in our pipeline and backlog growth, along with the strength within our other finance offerings continued to be encouraging. We believe that as customers gain greater clarity going forward and as market uncertainties, including the elections and the fiscal cliff, are resolved, awarded projects will begin to convert at a pace more consistent with historical trends. In the meantime, we continue to focus on achieving our long-term strategic plan, improving our competitive position and offering innovative budget-neutral energy services for customers looking to cut operating costs while addressing their aging infrastructure needs. And now, I do like to turn the call over to Andrew, our Chief Financial Officer, who can provide more detail about our financial results. Andrew?

Thank you very much, George, and good morning, everyone. The financial highlights from the quarter are as follows. Third quarter revenue was down 28%. While we had expected 2012 third quarter revenue to decline year-over-year, we observed even more cautious customer behavior when committing to performance contracting solutions, which more than offset revenue performance from our annuity-based revenue offerings. Year-to-date revenue was down 12.1%. Revenue from energy efficiency decreased 42.5% and decreased 18.4% year-to-date. Declines in Canada, federal, central and other U.S. regions during the third quarter driven by a lengthening of project conversion times offset an increase from organic and inorganic growth related to AIS. Revenue from renewable energy increased 42% and increase 9.9% year-to-date. Strong contributions during the quarter came from renewable projects being developed for customers, small-scale infrastructure and O&M. Gross margin was 21.2% compared to 17.5% a year ago. The lower gross margin in the third quarter of 2011 reflected approximately $650,000 in onetime charges to direct expenses related to payments made to an energy efficiency customer and a renewable energy customer. Year-to-date gross margin increased to 20.1% compared to 18.5% last year. Energy efficiency gross margin improved from 17.4% in 2011 to 18.9% this year. The margin improvement was driven by higher margin projects across a number of U.S. regions, project closeouts and contribution from our higher gross margin offerings at AEG and AIS. Energy efficiency gross margin year-to-date was 19.4% compared to 17.7% a year ago. The improvement was driven by the reason stated for the third quarter as well as project closeouts during the first quarter of 2012. Renewable energy gross margin increased from 18% last year to 25.7% this year. The improvement was driven by Savannah River O&M as well as contributions from small-scale infrastructure and integrated PV. Year-to-date renewable energy gross…

Thank you, Andrew. Revenue from other offerings increased approximately 20% to $43 million. Revenue from small scale infrastructure also increased by approximately 20%, due primarily to a new LFG plant going into operation. We expect another LFG plant to be going into operation in the fourth quarter. Renewable Energy Certificates, or RECs, associated with renewable energy facility that we own added revenue to small scale infrastructure as well. Revenue from integrated-PV increased approximately 3%. While we were expecting integrated-PV to grow in excess of 20% in 2012, we are now expecting growth of approximately 10% in 2012. The market has become more challenging over the past few months due to fiscal and election uncertainty. We would expect a gradual return to the growth rates we have experienced in the past once the uncertainties have diminished. Revenue from O&M offerings increased approximately 32%. The increase is primarily related to federal O&M revenue associated with the Savannah River project. In addition to the new record set within gross additions to backlog -- awarded backlog and total construction backlog, our pipeline also increased by 8.5% to $2.9 billion. The 3 largest contributors to the increase in new awarded projects represented more than 60%, and those are the U.S. federal, the northeast and the southeast regions. With longer-term trends remain -- while longer-term trends remain encouraging for pipeline activity, awarded projects are converting at a much slower pace than we have seen before. This resulted in a revenue shortfall of $15 million during the third quarter. Please refer to our prepared remarks for additional detail. For the fourth quarter, we expect an additional revenue shortfall of approximately $16 million to $36 million compared to the current consensus estimate of $201 million, primarily due to project conversion timing adjustments. Again, please refer to our prepared…

[Operator Instructions] We have a first question from the line of Zach Larkin from Stephens.

First off, George, I wondered if you can give a little bit more color on some of the discussions that you might be having with customers. Obviously, fiscal cliff concerns and other things are making people a lot slower to sign on the dotted line. But as you look at some of the customers and regions that are being particularly slower, are they giving any indications that once the issues with the fiscal cliff get resolved that they'll be coming back fairly strong? I'm just kind of trying to gauge how quickly you expect demand to potentially pick up once the issues are resolved?

Well, now that the election is over, we'll probably wait a little bit to see what happens, especially with the fiscal cliff that's coming up. The bottom line is that what we have been seeing in the last couple of months, I will say that's a little bit encouraging from our point of view -- that some of the delays that we've been seeing in the past, they seem to be abating somewhat. But the customers feel -- still, they're a little bit reluctant to sign to the bottom line. And the other thing that we did in order to guide that in the future -- before, we used to assume a range once that we get an awarded contract of 6 to 12 months until it gets to the executed portion. Now because of what was happening in the market we review that and that's what I meant when I said we basically extended the estimates over the conversion times from awarded to executed contracts between 10 to 18 months. And that's why you see these changes in the numbers basically. So I am a little bit optimistic about the future, I will say, but a little bit cautious as well though and based what we learned the last couple of years.

Right. And then if you look at that kind of new 10- to 18-month conversion window, is there a difference between federal and the MUSH markets? Or is it fairly consistent in the conversion between those 2 buckets?

You see what has happened, all of our markets were impacted at one time or another during the last couple of years. If you recall, it started out with the federal markets and their budget issues that they had and then the federal market pretty much shut down for almost 18 months. And the good thing about the federal market now, especially on the request proposal is substantially up, and our reward is they are very good. And it seems our competitive position has held up very well in the federal markets. So we're winning our share of the projects and this is what -- and going forward, we have done in basically determining when projects get executed. The local markets, what we call it right now, let's say the Midwest, the southeast and the northeast and with the Canadian markets. Each and every one of them have been impacted one way or another. And if you recall, the Midwest started first and then it went last year to northeast and now more impacted than the southeast. In the Canadian market, it seems like it's stabilized and the same with the northeast, it seems it's stabilized. And the Midwest, it's stabilized. That's why I say I am a little bit cautiously optimistic that we are coming back from what I call a perfect storm that we have seen in the last couple of years.

All right. One final question if I may. Andrew, just on the operating expense comment, it seems like you've indicated that they feel fairly mature. Should we look at the levels that we saw in 3Q kind of as a reasonable run rate, give or take, going forward then on kind of all 3 lines on the OpEx. Is that an appropriate way to think about things?

I think that is, yes. I think we'll see some good consistency there over the next several quarters.

[Operator Instructions] We have our next question in the queue from the line of Dale Pfau from Cantor Fitzgerald. Dale Pfau - Cantor Fitzgerald & Co., Research Division: I see proposal activity continues to be strong and you say the biggest issue is conversion. And this is kind of across-the-board. Is it -- is there any issue here with funding allocations? Or is this all just concern about the general trend out there? And could you give us any kind of any indication about how much of your awarded is pending actual funding?

It's -- because we don't rely on funding. The financing -- we finance the projects through third parties and -- like the banks, and that's very, very, very good. The issue is on the customer side, taking that extra, what I will call, much, much more cautious than what they have been in the past. Taking that extra step. And many of them, they hire consultants in order to evaluate the various proposals and then some of those people, they are not very familiar with this kind of business, and then once they do that, right away you added at least 3 months. And we use -- this is what actually tripped us a lot on the last guidance. We assumed 3 months in many of them, they get delayed as much as 6 months. And it's a customer concern with what's going on in the industry, especially on their budgets. And as I mentioned in the last call, some of them, they were concerned about the perception. They were trying to -- they were laying off people in some communities and they say, "How can we sign a $15 million contract when we have this particular announcement to make? So why don't we wait for the forecast later on this year to sign that particular contract?" And again, I can go -- look, why I said unprecedented, we have -- just this last quarter alone, I cannot mention the contracts -- over 33 projects that they moved. We thought that all these projects will be signed this last third quarter and they all moved from one customer concern to another. And each and every one of them is some customer issue, but not that they don't want the project to go ahead in the long term, they do want to go ahead in the long term, but it takes more time to get there. Dale Pfau - Cantor Fitzgerald & Co., Research Division: Okay. And Andrew, should we expect fewer project closeouts in your fourth quarter this year than we've historically seen? And could we see some of those moved to first quarter with this change in conversion?

No, no. Those project closeouts relate to projects that are in construction and we do anticipate strong typically seasonal activity in Q4, which will have a positive effect on the overall gross margins. So I think what we've been referring to here is conversion of awarded projects into construction projects, but the project closeouts relate to those that are wrapping up construction and we should see some good activity, some strong activity in Q4. Dale Pfau - Cantor Fitzgerald & Co., Research Division: And so there's -- you haven't seen any impact on the contracts that are fully funded and moving forward? The only issue is the conversion, is that correct?

That's correct. I think we've actually been able to accelerate the projects in construction somewhat. So our issues with revenue forecast has been on getting the conversions from awarded into the construction period. Dale Pfau - Cantor Fitzgerald & Co., Research Division: And one more final question. Last quarter, George, you mentioned that in some cases people threw an additional step and you just mentioned the outside consultants and so on. Is that the biggest issue or is there just a general sort of concern, a delaying tactic until people see how the tea leaves are going here in the economy?

Yes, because they are concerned about getting additional debt especially since what 1.5 years ago now when the Washington issues surface. But they know that they have to do this work anyway. And now, they have to -- they do more due diligence, I will say, because now they have to go up to their boards or wherever or the school committees, whatever the case may be, or the Board of Trustees, let's say, in the University. And the projects are getting larger and larger and before they get that, they want to make sure they have lined up all their dots. And I can tell you couple of contracts that they were delayed this last quarter in Midwest, very large contracts and they ended up being bigger size than what the customer had originally anticipated. And they said, "Listen guys, we got to do a little bit more homework before I take it up to the Board of Trustees. They approved it before, but they approved it at a lower level. Now it's a bigger project, we got to line up more dots before we get there." And that's happening. So what do you -- in the short way [indiscernible] -- and some of the people around the organization described it as, is that people are doing more due diligence of the project because the concern about taking additional debt.

We have a next question in the queue from the line of Craig Irwin from Wedbush Securities.

It's David in for Craig. I'd like to get a little sense of -- when these projects slip, is it simply another quarter? Or is it -- does it turn into one of those perpetual slips? And then the second question is, if you could talk to us a little bit more about the opportunities you see in the renewables, particularly for your own book?

Okay. Internally, we will say it will take couple of quarters before we see a more smoothing. And the effect now that we have $1.5 billion of backlog, our -- there are many, many more projects that -- they have been delayed for so long that they are much more mature now. I will say they have aged, so they will be moving into the execution stage. So I will say most likely we are couple of quarters. But on the other hand, you never know what might happen in the future. We cannot predict the future. But basically, where we are right now, we see that we should be able to get pretty good growth, what we indicated on my preliminary indication of a 10% for next year. As far as the renewables are concerned, we still see opportunities even if the 1603, which is going away, we are not counting on it, but there are not as many on the landfill gas to energy projects opportunity as in the past because the electric rates have come down on the buyouts by the utilities or buybacks of the power. They have come down substantially. So -- but the applications, as you know, we use quite a few renewables where we sell, convert to clean gas, you may say. And that's very -- and we burn it directly on the boiler installation of a particular customer. So those applications, we see some more opportunities. In some other projects like the one we did in San Antonio or Dallas or Philadelphia, the wastewater sewage treatment plants to energy. The biogas, again, we see some good opportunity there. So the one that gets impacted the most in the short term was the integrated PV renewable portion of our business, and that I think is based on the general economic conditions in the marketplace right now.

Great. And just a follow-up for that, could you please remind everybody about the timing for the federal 1603s that you mentioned going away?

I think we're starting -- program for new projects, it's wrapping up this year. There is a period of time that will run through 2013. But the time is pretty much up for new projects that want to apply under the new -- for any new grants. We have some projects that are already grandfathered and we'll be able to apply for the grants when they're in commercial operation.

And then that would imply that 30% of the qualifying investment that you made in the project, you get it back cash from the government.

It's cash in lieu of the IT sales, yes.

We have our next question from the line of Amir Rozwadowski from Barclays.

So George, just trying to understand sort of this timing issue. I know you've addressed it in some of the prior questions but perhaps taking in another way. Obviously, if we look at your total backlog, it continues to grow on a year-over-year basis. From an awarded perspective, we're continuing to see pretty healthy year-over-year growth and even sequential growth. What is the risk of that the awarded backlog ultimately doesn't get converted and we start to have sort of a pullback in some of these contracts? Is there some sort of risk there?

That's a great question. No. And I tell you why I say that. We got together with all of our people and we've identified only about $5 million to $10 million projects that over the last couple of years that they went away, they were in the backlog and went away. And on the other hand, many of the awarded projects, we say that there might be $20 million projects and then after we do the detailed energy work and so on, the projects grow, like the one I indicated in the central region. It gets doubled from what we had originally as an awarded project. So that is not my concern that a good chunk of their $1.5 billion might go away.

Okay. Well, that's helpful. And then in thinking about sort of a pickup in sort of this conversion time cycle, I mean, it does seem like there's some pretty near-term concerns with respect to budgeting process, the election and the federal environment. And I was wondering if you could comment -- do you expect a recovery? It seems like the challenges have been pretty quick to emerge over the last 1 to 2 quarters, could we see a recovery as quick once we move past these types of issues?

We cross our fingers that we will see a quick recovery. And that's why I said, 1 to 2 quarters is not that long of a time. And now that the elections were -- they are over at least we know that the federal programs will continue the way they were. And so it will not be a time like that because we were a little bit concerned if new administration came in, that you will most likely take at least 6 months before you see any movement again. At least now in the federal market after 18 months of total delay it's moving ahead. So I did a question a little bit in my remarks saying that even though the awards are happening at a very, very good pace that until they move to the execution -- even the federal government, they have now a special agency that evaluates all these projects once they get awarded. So by the time they get signed, they do take some time. I think we are cautiously optimistic and from where the company is right now, that we -- if you remember we started with what I call, back in 2010, pent-up backlog because of what happened in 2008 and 2009. And we worked through that, and now, again, we're growing the backlog and usually that's what happens. You grow the awarded projects and I think you will see over the next couple of quarters that a good chunk of these awarded projects will go to executed contracts and will be -- the company will be at a better pace that we were in the past, otherwise, and the growth in the backlog we will pretty much be a good indicator of the growth in the company.

That's very helpful. And lastly, if I may, we saw earlier this year an anticipation of improving demand. You folks -- they've notched up some of your spending internally to build out the resources needed in order to meet that demand. Obviously, the demand hasn't necessarily played out as expected and it also seems like you guys have been taking an active approach towards managing your costs. In this interim period, how should we think about sort of your focus on cost management? I mean, are you still going to look to spend in order to capture the opportunity when it converts or you going to take sort of a more wait-and-see approach in terms of the timing?

No, we are very proactive. We were very proactive. Even on the cost structure, we did make some fine-tuning over the last couple of quarters. But on the other hand, we've made sure that we did not go that far. Some of our competitors, as you probably have seen in the marketplace, they did some rightsizing as well. And we were able, I would say, to upgrade. And the fact that we are keeping up a good pace of the award and our percentage of winning contracts, it is a fact that we did not go too far. So -- and as we go forward and we move more contracts from the awarded to the execution, I wouldn't be surprise that you will see us hire more what I call construction managers and some development engineers. But the salary of those people, they are pretty much allocated to projects either in construction or in moving them from the awarded to the executed contracts. So it's not -- it's a variable cost associated with the growth, the top line growth. And then on the other hand, and that's why the metrics -- I'm not quite happy where we are as far as the overall percentage of course to the EBITDA. Although the bottom line, what I call the fixed structure of the company right now, we probably can do more throughput and I will say 15% to 20%. And I think I indicated that in the last call as well. So -- and that's why on my -- Andrew remarks, I said, we feel very good where the -- how we have positioned the company for the future.

[Operator Instructions] We have one more question in the queue from the line of John Quealy from Canaccord. [Technical Difficulty]

So 3 questions, please. First, George, the delay, does it factor -- does financing factor all into this? Is it more a customer decision process to move forward or is it a lack of acceptable financing terms or availability? That's my first question. My second question is in this period of sort of sluggish growth, would you accelerate M&A at all or is that just a separate issue regardless of underlying business conditions? And then my last question is, I know in the last quarter that you had some small exposure to this PV module solar tariff. Now that, that's finalized, can you talk about what ultimate exposure or resolution of that would be?

Andrew will address the third question, and I will address the first 2. On the delays, they are not finance-related. As I indicated earlier, customer delays for one reason or another. The financing is still very, very, very good out in the marketplace, so that's not a problem. Unless, if you recall, we are trying to find a financing mechanism for the commercial and industrial sector, and we are working and we have couple of things that we are working on some customers on that. But the MUSH market, the other market that we are addressing, the financing is very good. Once in a while you might get some issues, particular customer wants 20- or 25-year financing and the banks they're willing to do 17. But so far, we've been able to bridge those gaps, one way or another, and it might add few months in the process, but at the end of the day, that we are able to finance. And so it's not the driver of the delay, maybe it contributes here and there, but it's not the driver. The driver is the customer anxiety is taking additional debt and the additional hoops that they have to go through. As far as the accelerated M&A, we took a little breather because we did a couple of big acquisitions, 3 big acquisitions last year. But we are actively back out in the market and we are looking to see what we can do. But I will not accelerate it because we do not have the growth in the other areas. But I will very carefully look at if somebody else gets in bigger trouble than we did, that might be a good opportunity for us to buy somebody at a very decent price. So we are very -- our team is very actively looking for new opportunities. But it will not -- we always look to make sure that they are accretive and make strategic sense and they add value to our company. So...

Okay. And then getting back to your question, the ITC announcement was very good news for us in terms of the -- how they were going to look back, the retroactive period. That -- their decision yesterday effectively reduced the potential exposure that we could have. We never -- we didn't believe it would -- that it would actually be that high, but our absolute exposure dropped from about $8.8 million down to somewhere a little over $3 million. However, we still believe that ultimately whatever tariffs apply will be much more modest than that. And so we have a small reserve set aside, and we believe that reserve is adequate to cover any potential liability.

At this time, we don't seem to have any further questions. [Operator Instructions] Okay. Ladies and gentlemen, I would now like to turn the call over to management for closing remarks. Please go ahead.

Thank you, Nancy. And with that, I do like to thank you for joining us at today's call and we will talk to you next time. Thank you very much. Have a good day.

Thank you. Thank you for your participation in today's conference. Ladies and gentlemen, this concludes the presentation. You may now disconnect. Thank you all for joining.