Ameresco, Inc. (AMRC) Q2 2020 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and thank you for standing by, and welcome to the Ameresco, Inc. Second Quarter Earnings call. [Operator Instructions]. I would now like to turn the conference over to your host, Ms. Leila Dillon, Vice President of Marketing and Communications. Ms. Dillon, you may begin.

Thank you, Kevin, and good afternoon, everyone. We appreciate you joining us for today's call. Joining me here are George Sakellaris, Ameresco's Chairman, President and Chief Executive Officer; Doran Hole, Senior Vice President and Chief Financial Officer; and Mark Chiplock, Vice President and Chief Accounting Officer. Before I turn the call over to George, I would 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 afternoon 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 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 and in the appendix of the slides, which can be downloaded from our website. I will now turn the call over to George. George?

Thank you, Leila, and good afternoon. I hope everyone is staying healthy and safe. First, I would like to state how proud I am of the entire Ameresco family. Across our broad geographic footprint, our employees quickly transitioned to the new working environment and performed their jobs extremely well with no significant interruptions. Also, our robust corporate technology infrastructure, build over many years, has enabled many of our employees to continue to work remotely. With strong job performance by our team comes strong financial results. Our exceptional second quarter results have kept us on track for a record year, and we continue to have very good visibility for 2021 and beyond. In the second quarter, Ameresco experienced broad-based revenue growth across our project, renewable assets, and operational and maintenance businesses as we continued to focus on executing on our backlog. Our business improved throughout the quarter due to strong execution, less restrictive work environments, and favorable weather conditions. We have not only executed efficiently on contracted projects, but also worked hard to grow our strong contracted backlog year-over-year while our smart solution projects continue to yield cost savings, provide resiliency, and measurable environment benefits for our customers. I would like to highlight a couple of areas where communities are yielding other tangible benefits. Since our inception, public housing authorities serving low-income populations across Ameresco's footprint have been an important market for us. Energy efficiency, renewables, and improved built-in infrastructure are all examples of the type of work we have done for these communities. This includes improvements to HVAC, hot water, building envelopes, lighting systems, energy-efficient windows, and even roof-mounted solar PV. This work not only saves energy, but it also improves residents' overall quality of life, especially comfort, health, safety, and security. These benefits have become notably important in the caring environment as residents are spending more time at home. Ameresco has developed and deployed specific COVID-19-related project management and construction protocols which have enabled us to execute on these projects with no major slowdowns. Given ongoing budget constraints, worsened by COVID-19 municipalities across the country are looking for quick payback, money-saving projects. In response to this, Ameresco launched a customer-focused initiative promoting health and safety in the workplace, passive controls, updated HVAC systems, automated entry and access systems are just a few of the energy conservation measures that can be -- can make an immediate impact on reopening offices, schools, campuses, and facilities. These measures can be often implemented as part of the overall energy efficiency project with zero upfront costs. In addition, Ameresco continued our extensive work with LED streetlight conversions. With decades of experience and many large deployments under our belt, Ameresco is now the nation's largest ESCO provider of municipal LED streetlight conversion services. Dramatic cost reclines in LED technology has created a rapid payback for LED conversion projects, providing energy savings of 60% to 70% compared with legacy lighting solutions. In addition to immediate energy savings, LED conversions also substantially reduce expensive ongoing maintenance costs, given the much longer life span of LED technology. This is especially true for lights on high-speed roadways, given the extra requirement for expensive traffic control. Even though the savings are clear, only about half of existing municipal streetlights and traffic signals have been converted to LEDs. We expect the additional financial pressures from COVID-19 on municipalities will only accelerate the historic conversion rate and adoption of advanced technology controls. Ameresco is not only able to perform the conversion work, but we also can provide or assist in financing these projects creating an extra incentive requiring no upfront capital. Ameresco's household business continued to show strong momentum in the quarter. We signed a comprehensive contract for the installation and operation with $38 million energy infrastructure project as the Marine Corps air session Cherry Point. The project supports the investments we have made in development and expanding our advanced technology portfolio. Features of the project include wastewater treatment optimization, airfield lighting modernization, electrical distribution upgrades, smart mirrors and cybersecurity network improvements, a new measure growing in importance. Ameresco was also one of five awardees on a 5-year, large design-built construction contract vehicle with a capacity of $975 million. The project at the Naval Facilities Command Mid-Atlantic will support recovery efforts founded in the aftermath of Hurricanes Florence at Marine Corps facilities in North Carolina. Our long-term strategy of increasing the mix of recurring revenue streams continue to strengthen our business model providing a high level of visibility during periods of uncertain economic conditions. During the quarter, our Ameresco asset and operational and maintenance businesses saw only minor impacts due to COVID-19-related disruptions, demonstrating the great resiliency of these business units. We continue to grow our assets in development pipeline, including green gas and solar and win additional operation and maintenance contracts. In summary, the COVID-19 situation remains top priority. We continue to follow the highest safety standards and protocols to protect our customers, our partners, and our employees. While this presents many challenges, we expect to once again achieve record results for the year. We believe that our critical cost-saving services and flexible financing capabilities will be in even greater demand in post-COVID-19 environment. Our aggressive investments over the years in our people and capabilities put us in an excellent position to execute in this greatly expanding market opportunity. I will now turn the call over to Doran to provide some comments on our financial performance. Doran?

Thank you, George, and good afternoon everyone. I'm pleased to review the company's second quarter financial performance. Please refer to our press release and supplemental slides for additional financial information. Second quarter revenue demonstrated strong double-digit growth across our major business lines, up 13% year-over-year. While Ameresco continued to navigate a challenging work environment because of various COVID-19-related restrictions, we did see sequential improvements in our ability to execute project work throughout the quarter. The less restrictive access to work sites and favorable weather conditions that George mentioned contributed to strong performance in many of our key geographies. As we have noted previously, we have seen meaningful growth in design-build projects. We strengthened our capabilities in the design-build business over a year ago with a small acquisition. We have rapidly grown this offering which represents quick turnaround projects with limited or no upfront auditing work and no ongoing performance guarantees. Importantly, we are able to leverage our existing project and operational infrastructure as the actual work performed is closely aligned with our traditional performance contract work. While these projects carry lower gross margins, they are additive to our EBITDA, given this operating leverage. I did want to touch on our gross margins during the quarter, which were 17.7% compared to last year's 21.8%. In our first quarter press release, we gave specific details on the factors which we anticipated would impact our second quarter results, including incremental expenses related to COVID-19 that we would occur -- incur in executing on our projects. While this did occur, the overall impact was below our original cost expectations, given better-than-expected execution. However, there were increased levels of design-build work, along with other lower-margin projects as part of the project revenue mix during the quarter. We also incurred some unplanned maintenance costs in our O&M business above our expected quarterly maintenance expense levels. These were quarter-specific items, and we expect gross margins to improve in the second half of the year. Operating expenses were $26.6 million, 12% below last year's level. The company reacted very quickly to the COVID-19 operating environment, implementing tight cost controls across the organization. Net income attributable to common shareholders was $4.4 million compared to $9.2 million due to the impact from noncontrolling interest activities during the quarter of $4.5 million. We note, these are noncash accounting adjustments made to results. Non-GAAP net income was $9 million compared to $8.6 million. Adjusted EBITDA, a non-GAAP financial measure, was $24.1 million compared to $23.6 million, an increase of 2%. EPS was $0.09 compared to $0.19 and non-GAAP EPS was $0.19 compared to $0.18, an increase of 3%. Despite our previously anticipated slowdown in new business development activity, our awarded backlog increased 6% quarter-over-quarter, representing a surprisingly strong quarter for new awards. Our contracted project backlog of over $1 billion grew 29% year-over-year, providing us with substantial visibility. Our recurring revenue businesses, which accounted for approximately 78% of our year-to-date EBITDA, have over $2 billion in long-term contracted revenue and incentives, giving us annuity quality revenue streams for years to come. Ameresco's liquidity remains strong, with ample cash and available credit to execute our asset development pipeline plans. We ended the quarter with cash on hand of $42 million after paying down $15 million on our line of credit. Increased focus on cash collections during the quarter reduced our DSOs to under 100 days from 122 at the end of Q1. During the quarter, we executed on many nonrecourse financings, further shoring up our liquidity position and providing the company with additional capacity for future investments in renewable energy assets. As George pointed out, our assets in development are increasing. The availability of financing, combined with our ability to monetize development assets, provide us with the confidence to execute on this development pipeline with conviction. Turning to our outlook. We are pleased to reaffirm our 2020 full year guidance as detailed in our earnings press release. Now I would like to turn the call back over to George for closing comments.

Thank you, Doran. Ameresco is not only well prepared to wear the near-term challenges that the current business environment presents, but we have the people and resources in place to take advantage of the numerous exciting growth opportunities in front of us. Before we take your questions, I would like to again thank our employees, our customers and our partners for making Ameresco a great success stories and for their extra hard work during these challenging times. The entire Ameresco team hopes you and your families stay safe. Kevin, I will now like to open the call to questions.

[Operator Instructions]. Our first question comes Noah Kaye with Oppenheimer.

And I guess, just to start with the energy assets. It looks like the megawatts of development increased by 25 megawatts sequentially, which is good to see. The value of energy assets and development went up sequentially by, it looks like, almost $100 -- sorry $100 million. And you added 11 megawatts of RNG sequentially. So just what drove the jump in the value of the energy assets in development? Did you reach some major project milestones? What can you share with us?

Yes. It's because we have a good green gas plan coming into the pipeline that it went to the award category. And as you know, the value of those assets is considerably higher than the value of the PV. And Doran, do you want to add something?

Noah, thanks. I think the dollar value, like George mentioned, of renewable natural gas plants is quite a bit higher, and those pipeline adds did include a good amount of RNG. I think that's what's driving it. The PV, as you know, can be sort of all over the place in terms of carport versus ground mount, but nevertheless RNG is the higher value assets.

And that's any new project in addition to the three you've mentioned, McCarty Road and the two others that you're looking to bring online by the end of next year?

This is in addition to the projects that we had announced before, and that's what we figured out.

Terrific. And then can you just update us on your current expectations for this year megawatts placed in service. Are you still looking around 50 megawatts, and does that include McCarty Road?

Yes. We still keep that number around 50 megawatts. And as you know, because of the COVID-19 situation and some of the utility interconnections, we might have some delays, but the number right now, we're selling firm on it.

Okay. Great. And just switching to the project business, I guess how sustainable -- based on your activity and conversations with customers, how sustainable is this current pace of contracting in the traditional project business? And I asked because in times past, obviously, you did see, at times a slower contracting environment as the economy was recovering. But here, you're mentioning municipalities looking for cost savings. Obviously, the pandemic adds a new set of dimensions to customers' consideration. So, just curious to see your thoughts on the sustainability of the current contracting pace.

We think that the pace, especially on the awards and looking at the pipeline and what's going on, is beginning to pick up. So, I will say that it's very good. It's sustainable. No question about it. And as I said in my remarks, I think that the fact that we bring the financing to the table and a positive budget-neutral situation with positive cash flow to the ultimate customers, in addition to that incorporating some of the health and safety measures associated with COVID-19, we're going to see an acceleration of our business. It's going to take some time, but I think it's going to happen.

Our next question comes from Jed Dorsheimer with Canaccord Genuity.

And congratulations on the quarter through a difficult period. First question, I guess just digging in deeper on the project side of the business. I guess in the near term, we're still dealing with the COVID and limitations. But it would seem that longer term, the -- the work-from-home phenomenon is likely to stick at least somewhat. And so, in that context, I'm wondering if you could talk about your expectations of municipalities and the -- where the stretchers are coming from, particularly in an environment where pressure on -- there's going to be pressure on taxes, but there's a massive availability of capital in the markets.

Yes. We see the activity on the projects continue. And even if it's a work-for-home environment as far as we are concerned, we've been able to adapt to that environment very, very well. So, it's not going to affect us. As far as the customers -- and because of the need on the infrastructure upgrade that they might have, whether it's a boiler, whether it's a chiller that might need replacement, and they do not have the funds to do that replacement. And that's when we are approaching them and saying, "Look, you can get those boilers, you can get those chillers replaced, and the financing will come from us." It was very good. And that's why we feel very optimistic is the financing of this project, it continues to be very, very strong.

Exactly. That's why I was asking, George. I mean, I wasn't asking from a negative, I would assume that this is -- you should be seeing an acceleration in your -- on the project side and that it's not a short-term phenomenon, but something that even if you assume that there's a 50% or 30% attached to this being kind of the new normal, it should continue for a while.

I agree with you, but I don't want to be over-optimistic, but on my comments, as you saw it, basically, we feel strongly that the COVID-19 situation, on the other hand, we will see an acceleration of the business. Now how much impact we'll have? The fact that they are working from their homes that they cannot get their Boards together or they cannot get the school committees together to approve the projects, and that's where you might see some challenges. But I think as every -- and I think I mentioned that from the last call, as people get used to it, and we were able last time to get some school committees together and get some presentations whenever some project evaluations in the RFP process. People are beginning to adopt not only us and our employees, but on the other side, our customers. And that's why what I said on the pipeline, we see pretty good activity. And we were surprised that the awards for the quarter went up because originally if you remember last call, I said that we will pretty much see flattish business development. But on the other hand, we saw some business pick up. We think on the other side, it will accelerate. But we want to be cautious. We don't want to sound over-optimistic. But the trend -- we think that the offering, the flexibility in the financing, sometimes people underestimate how powerful that impact is to the customers. And I've been in the business for 30 years, the concept, the last 5 years is beginning to get better and better traction in the marketplace. And that's why you see our business is accelerating across the board, not just us, but all of our competitors. And then in addition to that, what's happened, all the advanced technologies, the cost of those have come down, so the projects are getting larger and much better for the clients.

Got it. That's helpful. Just, I guess, from a metric perspective, I would assume head count might be the best way to measure that. Could you talk a little bit about head count now and what we should expect that to grow, stay flat, decline? How should we think about that? Is it overlays with your comments on the higher front?

I will think the head count will continue to grow, but we have some leverage, operating leverage. But in order to get more projects' construction, you need more project managers. You need more design engineers. It is very hard to duplicate people or get much more productivity out of them. So you will see us adding more people but administrative stuff or maybe more accounting, more billing and so on. But you will see some growth, but the top line will grow faster than what the OpEx line grows at.

Great. One last question for Doran. Last quarter, I asked about credit markets and just in the time of turmoil with respect to yields. Yields have come down, but the availability of capital seems to be as full as we've ever seen it. And I'm just wondering if you could provide any comments in terms of what you're seeing in the credit markets at this point. Yes. And that's it.

Sure. Well, I mean, I think we mentioned some nonrecourse financings in the -- in my comments about liquidity. And I think that we're still continuing to see inquiries on the nonrecourse side and the asset-based financing. That market continues to be quite active. With respect to other capital markets, I think it is fair to say that the market is very active right now. I think we consider ourselves to have multiple alternative ways to go to raise capital currently. And it doesn't seem to be slowing down. And specifically to George's comments about some of these municipal and even federal contracts, the funds that are pouring into -- ESPC contracts, the rates continue to come in, the interest in the projects continues to go up. So I think we're feeling fairly confident right now on where our capabilities are in terms of raising capital.

Our next question comes from Craig Irwin with ROTH Capital Partners.

Congratulations on another really solid quarter here. Impressive.

Thank you, Craig.

One of the things that I notice sort of going through the P&L is your operating expenses seem to be tracking a little bit lower than what the revenue upside would have maybe have suggested, I think we're down $2.3 million sequentially and $3.5 million year-over-year despite nice growth. Can you maybe comment about where the reduction in operating expenses is coming from? Is this something that may be sustainable? Or is it related to new project development? What can you share with us about the reduction in expenses here?

Yes. As Doran pointed out, we did -- very careful to make some wise cuts, you might say, reducing expenses and so on. But what's helping us the most right now is this shift from putting a lot of effort in the development and to the execution side. And because if you recall, we said that we might slow down on the development and the sales side. So some of the people will be working in development. They've been working through actual projects so that their salaries have been charged to actual direct costs. And that's why as we get spending more and more dollars into the development in order to increase our business and grow the top line. And on the awards as well as the contracted backlog, you will see some of the expenses come back up. And Doran might want to add a little bit more color to that.

Craig, I think, not surprisingly, still not a whole lot of travel going on. I think we will continue to focus on controlling costs. We aren't really changing the way we're guiding OpEx because we feel like, as George mentioned, as business activity and business development activity picks up, then we potentially could have more of these salaries and benefits allocated to pre-award costs that go to OpEx as opposed to cost of goods sold in contract execution or capitalized costs when we're going through awards. So I think that, that's a pattern that we're going to continue to keep our eyes on. And at the same time, of course, like I mentioned, we're looking at controlling costs in all the ways that we can adjusted to the COVID working environment, thinking about real estate. We are not blind to ideas about ways to keep our cost base down as long as we can remain productive, like we have.

Excellent. Just maybe a little color around that. Can you maybe share with us approximately how many employees were moved from business development over to operating execution?

Yes, Craig. So it's actually not a number of employees, and there's not a specific assignment. We have staff who cover multiple responsibilities. In essence, what happens is that portions of their time are tracked to particular projects as opposed to being tracked to business development activities, and that's simply it. It's not a head count shift equation.

I mean, for example, we have about 100 development engineers. And a good part of those engineers, they work in developing new projects. And now we have a good part of them, charging some of the time based -- working on projects during the design-build of the various projects that we have in the pipeline.

Understood. So one thing that really surprised me this quarter is both the awarded backlog and the total backlog were up sequentially. In an environment where I understood the customers were awarding less as far as total contracts out there. Can you maybe share with us if you feel you outperform the market here? Do you think that there is potential for similar momentum to continue in the third and fourth quarters of the year. What else should we be paying attention to here as far as Ameresco's competitive position on new project capture?

Now I will start from the last one and then up. On the competitive position, I think we feel very, very good where we are. Our market position is very good, and we're winning a good chunk of the projects that we go after, especially the ones that we say, okay, this is the one that we want to win. We're going to make the investment. And we're doing very, very well. Look, I think our people they have surprised me a lot. They have done an outstanding job, not only executing the projects, but engaging the customers. We have -- we started the program about a couple of months ago, we said, listen, we have to go out there and reengage the customers. And we implemented also a program where we have direct access to the Chief Executive Officers who have been working with developers and so on. And it's helping our business. And what I will say, and I said -- we said it before, we think that it has some momentum, but how much and how long will it take? It takes time. And that's why we are a little bit cautious to make sure that we deliver what we promise. But the business trend is good. And I think that's a good message that we have that we feel better about. And that's why I said exciting growth opportunities coming down the pipe. Because we see is that, basically, our market is expanding rather than contracting because of the new things that we can add into our offering and the customers can take advantage of it.

Great. And then last question, if I may. A lot of investors out there are excited about the stair-step addition of additional R&D plants over the next few years, 1, 2, 3. It's a great progression. What's very difficult to quantify from someone outside the company is how big are these stairs were stepping up? Can you maybe share with us approximately what we're looking at as far as the size of these stairs, some megawatts gallon equivalents and the other factors that will impact the incremental EBITDA, such as LCFS eligibility, RIN lock agreements and then offtake agreements necessary with the parties where you're citing the landfill caps or the new generating facilities?

Yes. Right now, again, I'm going to start with your last part of your question right there because we are working on some potential long-term agreements for the off-takers. And we have 2, 3 potential clients that we are working with them. But as you understand, because the RIN prices were down, those guys, they wanted to get the good deals. And now they are coming up because the RIN prices have come up. But in the long -- to make a long story short, I do definitely believe that many of the gas utility companies because we were talking to them, ultimately, they will execute long-term contracts for those green gas projects. As far as their sizes, I don't think we have spent too much time. The only thing I think we did disclose before that McCarty is about half of the size of Woodland and the one that we have up in Michigan. The other 2, I don't think we have come back with any specifics on it. But they are smaller. I will give you that kind of color at this point in time. But ultimately, we will come up with some numbers for them.

Excellent. Excellent. So then another question on this line. It appears from analyzing some of the other companies and talking to people involved with private companies in the space that Ameresco has outperformed many of its peers that own green gas generating facilities. And one of the reasons, I believe, is due to your conservative gas hedging practices. Can you maybe explain those a little bit for investors on this call and if you could share any color about the typical average duration of your hedge agreements? And what sort of protection you have at this point for the three existing facilities?

I would say that firstly, there are two aspects on the performance that I have seen some analysis on the Street about our business, especially on the landfill gas to energy or green gas performance. If you recall, we were one of the first companies to get into this space, and we have developed what I call a top-quality team, all the way from assessing how much landfill gas there are in those store sites. We have our own people that they do the analysis, how to extract it, how to refine it and build the power plants or the electric or the green gas plant. So we have our own teams, and we do our own EPC. And I would say this much, too. We spent a little bit more dollars than some other people in building the plants. But they operate better than some other plants in the industry. As far as the hedging, I would say that 50%, a little bit less than 50% of our output is hedged for about three years right now. And about 70% of the output is hedged for the rest of the year for this particular year. So that's where we are. And we look at the market daily, and I make at least one call myself, and we watch it. And if the market is right, we increase the amount of hedges we have in place. And the last time, I think we were 55% to 60% hedged for the balance of this year, and now we are up to 70% at relative prices than what you have seen them going on right now.

Excellent. And congratulations again on the very strong quarter.

Thank you, Craig.

Thanks very much.

Our next question comes from Eric Stine with Craig Hallam.

So most have been touched on, but just maybe on the M&A side, I mean, I know you've had a history of opportunistic acquisitions. Just curious as you think about your offering, whether it's geographic expansion, product capabilities, project capabilities, thoughts there that you might want to fill in. And then also just thoughts on whether COVID-19 might present the opportunity that you can be a bit opportunistic here.

So Eric, I think it's fair to say, I don't have anything specific to talk about. However, you do have a point about COVID-19. I would say the level of discussion and opportunity just as we look out into the market to see what we might think about is increasing, but we're not -- we're not going to go on some sort of blast of acquisitions just because it's something that bankers like to talk about. We're being very, very thoughtful, and we're considering what our options are and I think that we're going to continue to be opportunistic, the same way that George always was from when he founded the company. I think that's...

That's opportunistic, if I may add, and disciplined. At the end of the day, if we acquire a company, we want to make sure it's accretive. And in addition to that, it serves what I call some strategic purpose. But I wouldn't pay for it as it has to maybe be in a geography that we are not very strong in. We think the market is developing in that particular place. And that particular company might be undervalued for what we think we can do with it. Or it might be a product offer in this new environment that we think is going to help us. But we have a very good footprint across the United States. We have very good capabilities. For us, we do not have to overspend to acquire any company. We're going to be very disciplined and very careful because we are growing organically, and it's been very good for us, and we have pretty good pace. But if a great opportunity comes along, we will not let it go by.

No. Understood. And then maybe last 1 for me, just kind of high level. Well, first of all, to confirm, I know on last call, you thought that you'd have about $10 million that would get pushed at the third quarter because of COVID and given the strong results, is it fair to say that did not happen and that did get done in the second quarter? And then maybe, I mean, from a high level, is there a way to think about maybe linearity of results just based on what you're seeing from your project schedules today?

So the short answer is we did experience some of those revenues slipping out, but then there were other projects where we actually did some more pulling in so -- and you saw the results from the quarter. So I think that's probably the best way to describe that. As far as looking through the rest of the year, I think that we'll continue to just kind of stick with the way we talk about our expectations for the year. We still believe there's -- because of the case rises going on, there's still uncertainty with respect to COVID. It's still very hard to tell kind of how things might take shape. But based on what we see in front of us, we still feel good about the year, and that's why we reaffirmed guidance.

Okay. Next question comes from Chris Souther with B. Riley FBR.

On the solar piece, looks like you added 7 megawatts of the operation that grew the development pipeline nicely. Can you talk through the pipeline from regional type of customer perspective? Where are you seeing the bulk of those opportunities on how the competitive market is looking for these types of new projects?

Sure. I don't think we've really given much information in terms of detailed geographic breakdown, but I would say that we have development groups, strong development groups in the East Coast, in the Midwest, Central as well as in the Southwest. So these assets are coming from each of those areas. I think if you look back to the company's history, several years back, you would have seen a lot of those assets here in the Northeast. However, I think now we're doing a good job of kind of spreading that around. We do have a mix of some community solar development here in the East. We have, of course, our traditional market customer, the MUSH market, which is allowing us the opportunity to do solar on landfills, solar on carports as well as rooftop work, both in MUSH market and in the C&I space. So the only thing that I didn't mention is kind of your traditional large 200-megawatt, utility-scale, ground-mounted solar project, that's not a particular market that we're in. Otherwise, it's fairly evenly balanced.

Yes. And where I might add to that on the competitive side, what you saw this a lot and we think is going to continue to help us as a lot of -- many projects, the solar projects that we have, they are behind, let's say, customers that we have done business with like Wayland School system. And we did the energy-saving performance contract, then we did the solar and [indiscernible] school system and so on. And this is why we feel very excited about the market opportunities that distributed energy resources. And of course, solar is one of them. The economics have come down, and people want to reduce their carbon footprint. You see substantial amount of solar installations in the municipalities, school systems and now colleges, universities, hospital systems and so on. And that's where we have the competitive advantage in the marketplace because, a, we have the distribution channels across the country and whereas the East, the Central or the Southwest; and b, we have the relationships. And all the developers out there that they can start talking to the customer, where you're talking to solar developer, okay, because [indiscernible] in Massachusetts was a great program. They come to Massachusetts. And then that is not as good. They have to pick up and go somewhere else. We don't have to do that. And that gives us a great competitive advantage in the marketplace. Plus, that's how we leverage the organization. We have a great, great platform, and that's why I feel excited about where we are. And we see all these opportunities emerge, we will take advantage of the performance we have in place.

Understood. That's very helpful color. You've called out strength in a lot of different end markets you're playing in. Are there any that have been kind of more impacted during COVID and are seeing slowdowns? Or it seems like there are a lot of opportunities to capitalize on folks looking at their budgets and looking for ways to save. But I was just curious if there were any kind of softer spots?

I think just glancing around the room here, maybe uniformly, people think the hospital sector is probably one where site access might be a little bit more difficult and as you -- as we talked about with the warrant cycle and award to contract cycle, you need the attention of senior executives at some of these institutions. And they have a lot on their minds right now. Go ahead.

If I may add on a couple of jobs that we had some close, as they told us, we cannot work. And there were a couple of hospitals. But as the number of patients went down, then they told us and we went back in. And that's why on the last call, we had mentioned that we had to shut down the sites, sanitize a place and then start all over again, remobilize and so on. And we had that happened. And on the other hand, some of the exclusives seem to be shut down. They said -- they kicked us out first, and then they say, "Oh, now that we don't have anybody here, come back." So it's -- but hospitals, I would say that it's probably the ones that are most challenging.

Understood. And then just heading into kind of the election, are there -- should we expect any impact on federal contract cycle ahead of that? Or is that not really a factor for most of the stuff you guys are kind of looking at?

I will say this much, the federal sector continues to be very strong and one of the things that makes us feel very, very good. They are pivoting a little bit more of design-build contracts, and we have won a good chunk of those projects in the past. And it seems like based on the activity that I see that track record is continuing. And we signed one contract this last quarter. We anticipated that we will have another good year in the federal market.

Our last question comes from Pavel Molchanov of Raymond James.

Given your skillset in developing RNG project, I'm curious what you think about green hydrogen. This is something that we're seeing more and more headlines about, probably not as much actual build-out, at least yet. But I'm curious if that's something that you would look at participating in given the adjacency to what you have done for a long time?

Look, we knew, it's an area that we are looking at it very carefully. And sometimes, if you want to talk a little bit -- much more about it, as you talk to Michael Bakas, who is running that business for us. But -- and we're talking to some people that they are in that business. And I think you will see us be in an area that we will be doing something down the road. Until I have some specific things, I won't talk too much about it. But it's a technology that we are looking at it. I think having the assets, for example, the green gas plant, we can go to hydrogen after that and have tremendous upside value in those plants that we have. So it's something that we are cognizant. And I think, by the way, the market -- the hydrogen will develop. Now it might be 1 or 2 years down the road, but it's coming.

Okay. That's helpful. Can I also get a comment from you on the European opportunity? I think since your last call, we saw a lot more headlines coming out of Brussels about the climate law and the European Green Deal. Of course, you have a footprint, but curious if you're looking at opportunities within the EU itself?

Yes. As we pointed out last time, our U.K. operations, they are picking up, and we are very excited about the backlog that they have over there. And they are in a very good position right now. And because we've been reading the same articles that you have, and I have asked our staff to see if we can take -- develop a plan and how we can take advantage of what's coming down the pike. So we are very cognizant of the opportunity, and we will look at it very, very carefully. And I wouldn't be surprised that we'll develop a plan that is going to make that unit in Europe grow for us.

Appreciate it.

Yes. And look, I mean, we have what I will call, good -- the wind behind our sales. And based on what's happening in COVID-19 and across the globe, I think the opportunities are growing rather than shrinking. And then for us, though, we have to be careful that we develop plans, and we move into especially new markets very, very carefully. Because we are in a very good track right now, we're doing very well, and we are growing very well. But on the other hand, these opportunities they come and they go. So take advantage of them where you can, wisely.

Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.

Thank you very much.