Good day, ladies and gentlemen, and welcome to the Quarter 2 2013 Ameresco Incorporated Earnings Conference Call. My name is Cathy, and I will be your operator for today. [Operator Instructions] I would like to turn the call over to Suzanne Messere, Director of Investor Relations. Please proceed, ma'am.

Thank you, Cathy, and good morning, everyone. Thank you for joining us today for Ameresco's second quarter 2013 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. Please note that the prepared remarks include information pertaining to the previously restated financial results for 2012. Following the brief highlights from the quarter, management will 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 18, 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 on our press release, as well as our prepared remarks. I will now turn the call over to George Sakellaris. George?

Thank you, Suzanne, and good morning, everyone. Second quarter revenues were below our expectations by approximately $12 million, due to 9 project delays and 1 project cancelation. These delays had a significant impact on revenue and profitability for the quarter. We experienced 2 delays within the Federal Group, one of which was subsequently signed and other one is expected to be signed in the third quarter. As a result, we expect to recognize the associated revenue in the second half of the year. After a rather protracted disruption in the federal market, we believe that several awarded projects appear to be nearing the contracted stage. We have also experienced delays for 7 renewable energy projects. The reasons for the delays range from finalizing financing and scope to customer negotiations with local unions and local communities and municipalities. While there is an opportunity to recognize the majority of the associated revenue during the second half of the year, it's very likely that a portion will be pushed into 2014. For the first time in our history, we experienced a renewable energy project cancellation after construction had already commenced on an LFG plant. Our customer did not receive the favorable permitting terms that they were anticipating from the local community, and therefore, determined that the economics of the project were no longer attractive. However, our customer has already compensated us for all equipment and work completed to date. We see this as an isolated event and do not anticipate any further cancellations from this particular customer. We have a strong, long-standing relationship with this customer that spans many years and several projects. For example, 3 other projects are currently in development and continue to move forward. Based upon our year-to-date performance and visibility into the second half of 2013, we are narrowing…

Thank you very much, George. Good morning, everyone. The financial highlights from the quarter are as follows. Energy efficiency revenue declined 29% in the quarter and 34% year-to-date. We had expected a decline related to the continued effects of lengthening conversion times from awarded projects and signed contracts in all segments during the first half of 2013. The decline during the second quarter was more than anticipated in the Federal Group in the Southwest region. Renewable energy revenue declined 7% in the quarter and increased 5% year-to-date. The 22% increase in the first quarter was offset primarily by declines in integrated-PV and unexpected delays for renewable energy projects already mentioned. Energy efficiency gross margin for the quarter decreased slightly from 18.3% to 18.2%. Year-to-date gross margin decreased from 19.6% to 19.3%. The declines are primarily due to a mix of lower margin projects across several regions. Renewable energy gross margin for the quarter decreased from 20.8% to 19.2%. Year-to-date gross margin decreased from 18.9% to 18.5%. The decrease in the quarter is primarily related to additional project costs in excess of budget combined with lower revenue. For the year-to-date, the second quarter decrease more than offset the positive effects of a project closeout during the first quarter. Operating expenses for the second quarter increased 10%. Salary and benefit expenses for the quarter decreased 7%. Lower salary and benefits reflect better utilization rates and fine-tuning of the organization during 2012. Project development costs for the quarter increased 32%. Higher PDC reflects our continued efforts to increase proposal activity and finalize awarded projects. G&A expenses for the quarter increased 26%. Higher G&A reflect an increase in professional fees and other expenses. We believe the primary drivers of the increase are a matter of timing and expect an improvement in the second half of the year. Due to the net loss for the second quarter, we had an income tax benefit as opposed to a provision. However, as we anticipate a return to profitability in the second half, we expect full year -- a full year effective tax rate of approximately 25%. We generated $6.9 million of cash from operations during the quarter compared to $6.3 million a year ago. We invested $18.8 million in renewable energy project assets during the quarter. And our balance sheet remains strong as of June 30. Total corporate debt was $43.6 million, and the federal ESPC receivable financing liability was $61.5 million. And with that, I will turn the discussion back to George.

Thank you, Andrew. Revenue from our all other offerings increased 3% year-over-year. Due to slower growth than anticipated in a few of our other offerings, we are now expecting revenue for the group to increase by more than 5% in 2013. Revenue from small-scale infrastructure for the quarter increased approximately 19% year-over-year. The increase was related to an LFG plant and solar assets that went into operation in 2012, and another LFG plant that went into operation in the second quarter of this year. We are in the process of designing, permitting and constructing 4 more renewable energy plants, which we plan to begin generating meaningful revenue in late 2013. We continue to expect small-scale infrastructure revenues to increase by approximately 10% in 2013. Integrated-PV revenue decreased by approximately 8% year-over-year. We have been experiencing a more competitive pricing environment from alternative modules. Assuming current trends continue, we expect integrated-PV revenues to be flat in 2013. O&M and other revenues increased approximately 3% year-over-year. Strong revenue growth in operation and maintenance were offset by declines in enterprise energy management and AEG. We expect enterprise energy management and AEG to return to revenue growth in the second half of the year. As a result, we now expect more than 5% revenue growth in 2013 from this group. Our pipeline increased by 9% year-over-year. Our total construction backlog as of June 30 increased over 10% year-over-year to more than $1.4 billion, driven by a 22% increase in awarded projects. In closing, we expect a return to revenue growth and profitability in the second half of the year. We believe that energy efficiency represents an attractive and cost-effective sustainability theme within the broader economy. As a result, we remain confident about the medium and long-term opportunities for our business. Now we would like to answer your questions, and I will turn the call back over to our coordinator, Cathy.

[Operator Instructions] Your first question comes from the line of Craig Irwin of Securities.

That's Wedbush Securities. So I wanted to ask about your landfill gas power plants. I'm sure you're aware of a NOPR or procedural rulemaking at EPA reevaluating whether landfill gas should be included as a RIN-eligible fuel. I know that the proposed rule left the RIN generation to the owners of the plants, and you obviously have a very nice fleet with the 20 plants and the 4 you're building. Can you update us on what your thought process is regarding this rule, and whether or not you think there's potential to modify your contracts or restructure necessary in a way where these plants could actually start generating cellulosic ethanol RINs?

Well, a couple of things that -- on the rulemaking is now under a renewable energy identification number that the Environmental Protection Agency has put out. Again, their rules are not quite clear. However, though, we -- as you pointed out, we do have a very good fleet of operating renewable landfill gas projects. Most -- the better part of, essentially, all of our projects there are under long-term purchase power agreements with the various local, I would say, municipalities or utilities. And generally -- and the better part, which tends to be all of those plants, they are located in states where they have the renewable energy credits available. And so the company -- so the utilities, they acquire the output, they pay us an extra, you may say, because they want to take credit of those renewable energy credits themselves. However, though, if these rules come to reality, and we understand them a little bit better, they might create opportunities in probably 2/3 of the states right now in the United States that do not have the renewable energy credits. And as far as on the existing plants, we want to see whether the RINs, what they're called, or the renewable energy credit, they are mutually exclusive. And if that's the case, then we might take some advantage of those credits. In addition to that, some of our assets we have long-term contracts, but they're becoming -- some of them over the next few years, to term, you might say. And at that point in time, we will be able to -- for those particular plants, to definitely analyze and see what the opportunity is and take full advantage of it. And in some other cases, if it's only a few years left on the contracts, we might go back to the utilities and you might be right, we might -- if the economics are such, we might renegotiate the contracts. We might have to give some money to the local utilities or whoever we negotiate in amending the contract with, but let me reassure you that if the opportunity is there for us to have some additional value extracted from those assets, we will be there to do that.

Great. And then just as a follow-up, given that Ameresco has built more than 100 of these facilities nationally over the last many years, and the fact that there were a number of the owners of those facilities that actually commented in the EPA NOPR, have you seen any indications of interest or any -- have there been discussions initiated on potential construction of facilities in these other states that you mentioned?

Right now, we have not seen much activity. And actually, we do have some signs ourselves as we've been trying to market the output. But in states without the regs, there's not attractive pricing, I will say. And that's why I feel that if RINs come into play, I think you will see some potential in those other states.

The next question comes from John Quealy of Canaccord.

So, George, the visibility again, keeping the guidance intact is a great sign, and the guidance about contracted backlog going up. But that's a pretty massive ramp in the back half of the year from the front half. We've had a lot of delays on the Fed side of things. It's just where the market is right now. Remind us again why you feel confident that this guidance is doable with such a steep ramp in the back half?

I agree with you, and it's very steep. And that's why we went -- if you recall, we -- in a couple of calls before that, we said what we are doing now, we're drilling down into the various projects that we expect to be signed over the next few months in that they will realize revenues over the next 6 months or a year for that matter. And we identified, there were about 57 contracts that they will have to contribute to be executed and contribute to the rest of the year. And I will say, those contracts now, they are fairly seasoned contracts, and we have identified what some of the hurdles would have been in the past and how many of them we have passed and where we are right now in relation to the closing date. And we scrubbed them very, very, very carefully, and we identified what I will call the $50 million of softness in the potential revenues that we have forecasted from that particular projects. And on the other hand, working with the various groups throughout the company, we identified a $20 million upside. So -- and that's why you saw the shrinking, what I will call, or the range -- the net of between 50 minus the 2030 [ph] And that's why we shrunk our range. And I might add this: they -- after doing all that scrubbing and all that analysis, we feel pretty good where the Street is right now for the next 6 months or so. And it is a very deep curve that we have to climb, but we think we feel pretty good that we should be able to do it. And the other thing, I know we said this in the past, but a couple of things that happened to us on this last quarter, especially this cancellation on one particular project that was in construction, and another one with the same customer by the way, was contracted -- contracted, and he said to us, "We want you to delay it to next year." Between those 2 projects, it's about $14 million that we lost from this year to next, well, half -- the $6 million totally lost, and the other $8 million moved to next year. So I hope that answered your question, but it's basically the aging of those contracts, which I will call they are well seasoned, and we have identified what the bottlenecks will be. And so we feel pretty good. Could something happen that will totally surprise us? It's always possible. But at this point in time, we are betting that we have very good control of it.

And if you could characterize the backlog for us, and -- when you're talking about fully-contracted backlog going up, can you remind us what the split is, renewable energy versus energy efficiency? And -- or relative strength and weakness of those 2 backlog numbers in the back half of the year?

The better part of the numbers for the second half of the year, the contracts that we're talking here, the 57 mostly, is on energy efficiency projects. And the other thing, I might give you a little bit color. Historically, the average project size that we have in our -- it's about $5 million in our backlog. And that 57 projects that we have identified, the average size now is between $8.5 million to $9 million, which we have quite a few projects, well over $10 million in the Energy Services -- in the efficiency group. And that's what brings the average up.

Okay. That's helpful. And then lastly, in terms of the margin profile, clearly, the operating margins are going up significantly, or they're projected to in the back half of the year. We've had this conversation before, what do you think the pathway is to get Ameresco back to sort of a high-single digit, potentially low double-digit operating margin for the full year? What sort of environment improvement needs to happen, do you think, George, for that to happen, if it can?

I said that before, that the capacity of the company is pretty much do 15% to 20% more volume business that we are doing right now. So if you work the numbers that we are now, and if you were to do 20% more business that we are right now, I think you will see us having the margin and the EBITDA profit margin that we've all been accustomed to. And that's our goal, and that's how we plan to create shareholder value by getting too close to that 10% EBITDA margin. And you saw one of my assumptions was that the operating expenditures will be slightly below the run rate that we are right now, and we have introduced a program through the -- all the key managers around the company to have additional cuts, especially in discretionary expenditures, and doing more targeting as to which projects we go after so the development expenses doesn't take off on us.

So, ma'am, you have no questions at this time. [Operator Instructions] We do have a question. It comes from the line of Jim Giannakouros of Oppenheimer. James Giannakouros - Oppenheimer & Co. Inc., Research Division: Just a quick one on your OpEx. You said that your second half is -- you're planning on slightly below the current run rate. What does that exactly reflect?

Well, as we said in our comments, we did -- we ended up pulling some costs, some expenses into second quarter that we had originally anticipated would be incurred later in the year. So we expect that we'll return to the level that we had previously forecast, kind of in the neighborhood of what Q1 looked like, maybe a little bit better than that. That's what we're expecting to see in third and fourth quarter. James Giannakouros - Oppenheimer & Co. Inc., Research Division: Got it. Okay. Yes, so I missed that. And I apologize if I missed comments on this one. On your U.S. Federal, can you quantify in any way percentage of your -- of what's in your backlog, or just absolute dollar amount, how much is close to converting and/or what the average length is of the projects that you see that are pretty close?

I will -- the average size that we see over the federal sector right now is well over $10 million. And I think as to what's on the backlog on the pipeline, it's probably well over $0.25 billion. But over the -- it's close to probably 25% on the top of pipeline. As far as what we anticipate though to be executed over the next 6 to 12 months, it's about $120 million plus. That answered your question, Jim? James Giannakouros - Oppenheimer & Co. Inc., Research Division: It certainly does.

I would now like to turn the call over to George Sakellaris for closing remarks.

So now, with that, I would like to thank everyone for joining us in today's call, and I will talk to you -- everyone in the next quarter. Thank you very much for listening to us today.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

Thank you.