Ameresco, Inc.: Form 10-Q for the period ended Sep 30, 2025

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the notes related thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2024 included in our Annual Report on Form 10-K (“2024 Form 10-K”) for the year ended December 31, 2024 filed on February 28, 2025 with the U.S. Securities and Exchange Commission (“SEC”). This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward looking statements include statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans, objectives of management, expected market growth, the impact of changes in the U.S. administration and the federal shutdown and other characterizations of future events or circumstances. All statements, other than statements of historical fact, including statements that refer to our expectations as to the future growth of our business and associated expenses; our expectations as to revenue generation; the future availability of borrowings under our revolving credit facility; the expected future growth of the market for energy efficiency and renewable energy solutions; our backlog, awarded projects and recurring revenue and the timing of such matters; our expectations as to financing and acquisition activity; the impact of any restructuring; the uses of future earnings; the expected energy and cost savings of our projects; the expected energy production capacity of our renewable energy plants; the impact of supply chain disruptions, shortage and cost of materials and labor, the impact of U.S. federal shutdowns and other macroeconomic and geopolitical challenges; our expectations related to our agreement with SCE including the impact of any delays; the imposition of tariffs, and other characterizations of future events or circumstances are forward-looking statements. Forward looking statements are often, but not exclusively, identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” “target,” “project,” “predict” or “continue,” and similar expressions or variations. These forward-looking statements are based on current expectations and assumptions that are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially and adversely from future results expressed or implied by such forward-looking statements. Risks, uncertainties, and factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors,” set forth in Part I, Item 1A of our 2024 Form 10-K. Subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so and undertake no obligation to do so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

Overview

Ameresco is a leading energy solutions provider dedicated to helping customers navigate the energy transition. Our comprehensive portfolio includes implementing smart energy efficiency solutions, upgrading aging infrastructure, and developing, constructing, and operating distributed energy resources.

Drawing from decades of experience, Ameresco reduces energy use and delivers diversified generation solutions to Federal, state and local governments, utilities, educational and healthcare institutions, housing authorities, and commercial and industrial customers.

We provide solutions primarily throughout North America and Europe, and our revenues are derived principally from energy efficiency projects, which entail the design, engineering, and installation of equipment and other measures that incorporate a range of innovative technology and techniques to improve the efficiency and control the operation of a facility’s energy infrastructure; this can include designing and constructing a central plant or cogeneration system for a customer providing power, heat and/or cooling to a building, or other small-scale plant that produces electricity, gas, heat or cooling from renewable sources of energy. We also derive revenue from long-term O&M contracts, energy supply contracts for renewable energy operating assets that we own, integrated-PV, and consulting and enterprise energy management services.

In addition to organic growth, strategic acquisitions of complementary businesses and assets, and joint venture arrangements have been an important part of our growth enabling us to broaden our service offerings and expand our geographical reach.

Key Factors and Trends

Regulatory Environment and Federal Policies

Federal policies play an important role in our business and we benefit from regulatory measures and various clean energy tax incentives, including those implemented under the Inflation Reduction Act (the “IRA”). These credits were modified by the One Big Beautiful Bill Act (the “OBBB”), which was enacted on July 4, 2025.

Among other provisions, the OBBB introduces new timing requirements for solar-only projects seeking eligibility for Investment Tax Credits (the “ITC”) under Section 48 of the Internal Revenue Code (the “Code”). To qualify, such projects must commence construction by July 4, 2026, and be placed in service by December 31, 2027. The OBBB also phases down ITCs for energy storage projects beginning in 2034, with a complete phase-out by 2036. Additionally, it increases the requirements for the domestic content bonus credit and introduces new compliance obligations under the Foreign Entity of Concern (“FEOC”) provisions for solar and energy storage projects beginning construction in 2026.

These legislative and regulatory developments may adversely impact our eligibility for certain tax credits, the attractiveness of our solar and energy storage system offerings, and overall demand for our products. If we are unable to meet the revised domestic content or FEOC requirements, our ability to qualify for these incentives could be impaired, which may adversely affect our revenue, gross margins, business operations and competitive position.

On October 1, 2025, the U.S. government shut down due to the failure of the U.S. Congress to pass an appropriations bill, or any continuing resolutions to maintain funding at existing levels, for the U.S. government’s current fiscal year. While we have not experienced a notable slowdown in our government work even with the shutdown, a prolonged government shutdown could delay our ability to convert project awards into contracts and as such could have an adverse impact on our financial results. We continue to monitor the impacts of this shut down. The government shutdown has also delayed the government providing guidance regarding the “beginning of construction” criteria applicable to clean energy projects and final FEOC restrictions under the OBBB Act.

See “Our business depends in part on federal, state, provincial and local government support or the imposition of additional taxes, tariffs, duties, or other assessments on renewable energy or the equipment necessary to generate or deliver it, for energy efficiency and renewable energy, and a decline in such support could harm our business” and “Compliance with environmental laws could adversely affect our operating results” in Item 1A, Risk Factors in our 2024 Form 10-K.

Supply Chain Disruptions and Other Global Factors

We continue to monitor the impact of global economic conditions on our operations, financial results, and liquidity, such as the impact of tariffs, supply chain challenges, the wars in Ukraine and the Middle East, evolving relations between the U.S. and China, and other geopolitical tensions. Import duties, tariffs and other import restrictions, including the Uyghur Forced Labor Protection Act, restrict the global supply of, and raise prices for, supplies needed for our business. In addition, tariffs and trade restrictions that have been introduced and may be introduced as part of the 'America First' trade policy may further increase the cost of components needed for our offerings and may strain trade relations, create inflationary pressures and cause additional supply chain disruptions. The impact to our future operations and results of operations as a result of these global trends remains uncertain and the challenges we face, including increases in costs for logistics and supply chains, intermittent supplier delays, and shortages of certain components needed for our business, such as electrical equipment, steel and aluminum as well as BESS equipment or components required for our projects and clean energy solutions may continue or become more pronounced.

These tariffs, restrictions, and strained trade relations may affect our ability to source materials and products, potentially leading to increased costs, supply chain disruptions and operational challenges, and decreased demand for our offerings. We are closely monitoring the regulatory environment and actions of the current administration that could impact our business.

During the nine months ended September 30, 2025, we continued to face supply chain disruptions and varying levels of inflation driven by macroeconomic conditions. This caused some delays in the timely delivery of material to customer sites and in the timely completion of certain projects and increased shipping, transportation, component and labor costs, negatively impacting our results of operations during the nine months ended September 30, 2025. We expect these challenges will persist and they may intensify. We continue to monitor macroeconomic conditions to remain flexible and to optimize and evolve our business as appropriate to address the challenges presented from these conditions.

We believe the increasing demand for electricity, rising utility rates, and growing grid instability, are driving demand for our energy infrastructure and other solutions. This increased demand may increase the competition we face and we may also face an increased risk in completing larger more complex projects.

Climate Change and Effects of Seasonality

Global emphasis on climate change and reducing carbon emissions has created opportunities for our industry. Sustainability has been at the forefront of our business since its inception, and we are committed to staying at the leading edge of innovation taking place in the energy sector. We believe the next decade will be marked by dramatic changes in the power infrastructure with resources shifting to more distributed assets, storage, and microgrids to increase overall reliability and resiliency.

Climate change also brings risks, as the impacts have caused us to experience more frequent and severe weather interferences, and this trend is expected to continue. We are subject to seasonal fluctuations and construction cycles, particularly in climates that experience colder weather during the winter months, such as the northern United States and Canada, and climates that experience extreme weather events, such as wildfires, storms or flooding, hurricanes, or at educational institutions, where large projects are typically carried out during summer months when their facilities are unoccupied. In addition, government customers, many of which have fiscal years that do not coincide with ours, typically follow annual procurement cycles and appropriate funds on a fiscal-year basis even though contract performance may take more than one year. Further, government contracting cycles can be affected by the timing of, and delays in, the legislative process related to government programs and incentives that help drive demand for energy efficiency and renewable energy projects. As a result, our revenues and operating income in the third and fourth quarter are typically higher, and our revenues and operating income in the first quarter are typically lower, than in other quarters of the year, however, this may become harder to predict with the potential effects of climate change. As a result of such fluctuations, we may occasionally experience declines in revenues or earnings as compared to the immediately preceding quarter, and comparisons of our operating results on a period-to-period basis may not be meaningful.

Our annual and quarterly financial results are also subject to significant fluctuations as a result of other factors, many of which are outside our control. See “Our business is affected by seasonal trends and construction cycles, and these trends and cycles could have an adverse effect on our operating results” and “Extreme weather events and other natural disasters, particularly those exacerbated by climate change, could materially affect our ability to complete our projects and develop our assets” in Item 1A, Risk Factors in our 2024 Form 10-K.

The Southern California Edison (“SCE”) Agreement

In October 2021, we entered into a contract with SCE to design and build three grid scale BESS at three sites near existing substation parcels throughout SCE’s service territory in California with an aggregate capacity of 537.5 MW (the “SCE Agreement”). The engineering, procurement and construction price is approximately $892.0 million in the aggregate, including two years of O&M revenues, subject to customary potential adjustments for changes in the work. As previously disclosed, due to supply chain delays, weather and other events, we were unable to complete the projects by August 1, 2022 (the “Guaranteed Completion Date”). On August 30, 2024, we reached an agreement with SCE on the substantial completion of two out of three battery energy storage system projects. We received approximately $110 million on September 5, 2024 as milestone payments, reflecting both an offset of liquidated damages which are still in dispute and $3 million that SCE withheld for additional work SCE required. Upon final acceptance of these two projects, we will invoice SCE for the remaining final acceptance milestone payments for these projects. We have provided SCE notice for substantial completion of the third project and are in discussions with SCE to reach agreement on the achievement of this milestone. We continue to expect all three projects to be finalized this year.

The August 2024 agreement with SCE confirmed that the final resolution related to our obligation to pay the liquidated damages withheld and the applicability and scope of any force majeure relief as well as any cost recovery we may be entitled to remain subject to dispute. We are continuing discussions with SCE on these matters, and our view continues to be that liquidated damages should not be applied. If we fail to come to an agreement with SCE about the applicability and scope of force majeure relief and liquidated damages, we may be required to pay liquidated damages up to an aggregate maximum of $89 million and may not be able to recover costs associated with the force majeure events.

A majority of our revenues under this contract were recognized in 2022 based upon costs incurred in 2022 relative to total expected costs on this project.

Stock-based Compensation

During the nine months ended September 30, 2025, we granted 1,416,000 common stock options and 136,770 restricted stock units (“RSUs”) to certain employees under our 2020 Plan. Our unrecognized stock-based compensation expense was $23.9 million at September 30, 2025, compared to $28.0 million at December 31, 2024, and is expected to be recognized over a weighted-average period of three years. See Note 16 “Stock-based Compensation” for additional information.

Backlog and Awarded Projects

Backlog is an important metric for us because we believe strong order backlogs indicate growing demand and a healthy business over the medium to long term, conversely, a declining backlog could imply lower demand.

The following table presents our backlog:

(In Thousands)

Total project backlog represents energy efficiency projects that are active within our sales cycle. Our sales cycle begins with the initial contact with the customer and ends, when successful, with a signed contract, also referred to as fully-contracted backlog. Our sales cycle averages 18 to 42 months. Awarded backlog is created when a potential customer awards a project to Ameresco following a request for proposal. Once a project is awarded but not yet contracted, we typically conduct a detailed energy audit to determine the scope of the project as well as identify the savings that may be expected to be generated from upgrading the customer’s energy infrastructure. At this point, we also determine the subcontractors, what equipment will be used, and assist in arranging for third party financing, as applicable. It takes an average of 12 to 24 months to convert our awarded backlog to fully-contracted backlog. It may take longer, as it depends on the size and complexity of the project. Historically, approximately 90% of our awarded backlog projects have resulted in a signed contract. After the customer and Ameresco agree to the terms of the contract and the contract is executed, the project moves to fully-contracted backlog. The contracts reflected in our fully-contracted backlog typically have a construction period of 12 to 36 months and we typically expect to recognize revenue for such contracts over the same period.

Our O&M backlog represents expected future revenues under signed, multi-year customer contracts for the delivery of O&M services, primarily for energy efficiency and renewable energy construction projects completed by us for our customers.

We define our 12-month backlog as the estimated amount of revenue that we expect to recognize in the next twelve months from our fully-contracted backlog. See “We may not recognize all revenues from our backlog or receive all payments anticipated under awarded projects and customer contracts” and “In order to secure contracts for new projects, we typically face a long and variable selling cycle that requires significant resource commitments and requires a long lead time before we realize revenues” in Item 1A, Risk Factors in our 2024 Form 10-K.

Assets in Development

Assets in development, which represents the potential design/build project value of renewable energy plants that have been awarded or for which we have secured development rights, were estimated at $2.2 billion and $2.3 billion, net of amount attributable to a non-controlling interest at September 30, 2025 and 2024, respectively. This is another important metric because it helps us gauge our future capital expenditure needs and develop-and-sell opportunities as well as our capacity to generate electricity or deliver renewable gas fuel, which contributes to our recurring revenue stream.

Results of Operations

All financial result comparisons made below are against the same prior year period unless otherwise noted.

The following tables set forth certain financial data from the condensed consolidated statements of income for the periods indicated:

(In Thousands)

Our results of operations for the three months ended September 30, 2025 are due to the following:

• Revenues: total revenues for the three months ended September 30, 2025 increased over 2024 primarily due to a $24.6 million, or 6%, increase in our project revenues attributed to the timing of revenue recognized based upon costs incurred to date relative to total expected costs on active projects, and a $3.4 million, or 6% increase in energy asset revenue resulting from the continued growth of our operating portfolio.
• Cost of Revenues and Gross Profit: the increase in cost of revenues is primarily due to the increase in project revenues described above and higher depreciation expenses from the continued growth in our operating assets portfolio. Gross profit as a percentage of revenues increased primarily due to a more favorable mix of higher-margin projects.
• Selling, General and Administrative Expenses (“SG&A”): SG&A expenses for the three months ended September 30, 2025 increased from 2024 primarily due to increases in professional fees and payroll and related benefits, partially offset by lower project development, travel and insurance expenses.
• Other Expenses, Net: Other expenses, net for the three months ended September 30, 2025 increased over 2024 primarily due to increase in loss from foreign currency transactions of $0.3 million compared to gains of $2.2 million last year and higher net interest expenses of $2.1 million related to an increase in the amount of energy asset financings and corporate debt outstanding and higher interest rates partially offset by decrease in losses from derivatives transactions of $2.9 million.
• Income Tax Benefit: the benefit for income taxes is based on various rates set by federal, state, provincial and local authorities and is affected by differences between financial accounting and tax reporting requirements. We expect the effective tax rate benefit will be lower in 2025 as compared to 2024 primarily due to the effects of lower Section 179D Energy Efficient Building deductions and effects of foreign earnings, offset by higher investment tax credits from solar, and storage plants placed into service or are forecasted to be placed into service during 2025.
• Net Earnings Per Share: Net income increased due to the reasons described above. Basic and diluted earnings per share for the three months ended September 30, 2025 were $0.35, an increase of $0.01 per share basic and $0.02 diluted compared to the same period of 2024.

(In Thousands)

Our results of operations for the nine months ended September 30, 2025 are due to the following:

• Revenues: total revenues for the nine months ended September 30, 2025 increased over 2024 primarily due to a $99.1 million, or 11%, increase in our project revenues attributed to the timing of revenue recognized based upon costs incurred to date relative to total expected costs on active projects, and a $26.4 million, or 17% increase in energy asset revenue resulting from the continued growth of our operating portfolio.
• Cost of Revenues and Gross Profit: the increase in cost of revenues is primarily due to the increase in project revenues described above and higher depreciation expenses from the continued growth in our operating assets portfolio. Gross profit as a percentage of revenues remained consistent.
• SG&A: SG&A expenses for the nine months ended September 30, 2025 remained consistent compared to the prior year.
• Other Expenses, Net: Other expenses, net for the nine months ended September 30, 2025 increased over 2024 primarily due to higher interest expenses, net of $11.4 million related to an increase in the amount of energy asset financings and corporate debt outstanding and higher interest rates, partially offset by increased gains from foreign currency transactions of $3.6 million compared to last year.
• Income Tax Benefit: the benefit for income taxes is based on various rates set by federal, state, provincial and local authorities and is affected by differences between financial accounting and tax reporting requirements. We expect the effective tax rate benefit will be lower in 2025 as compared to 2024 primarily due to the effects of lower Section 179D Energy Efficient Building deductions and effects of foreign earnings, offset by higher investment tax credits from solar, and storage plants placed into service or are forecasted to be placed into service during 2025.
• Net Earnings Per Share: Net income increased due to the reasons described above. Basic and diluted earnings per share for the nine months ended September 30, 2025 were $0.49, an increase of $0.12 per share compared to the same period of 2024.

Business Segment Analysis

Our reportable segments three and nine months ended September 30, 2025 are North America Regions, U.S. Federal, Europe, Renewable Fuels, and All Other. These segments do not include results of other activities, such as corporate operating expenses not specifically allocated to the segments. See Note 17 “Business Segment Information” for additional information about our segments.

All financial result comparisons made below relate to the three and nine-month period and are against the same prior year period unless otherwise noted.

Revenues

(In Thousands)

• North America Regions: revenues decreased versus the prior year primarily due to lower project revenue attributed to the timing of revenue recognized based upon costs incurred to date relative to total expected costs on active projects, partially offset by increased energy assets revenue resulting from the continued growth of our operating portfolio, higher O&M and consulting revenue.
• U.S. Federal: the increase in revenue during the three months ended September 30, 2025 is primarily due to increased energy assets revenue resulting from the continued growth of our operating portfolio, partially offset by lower project revenue attributed to the timing of revenue recognized based upon costs incurred to date relative to total expected costs on active projects. The decrease in revenue during the nine months ended September 30, 2025 is primarily due to lower project revenue attributed to the timing of revenue recognized based upon costs incurred to date relative to total expected costs on active projects and the reversal of previously recognized revenue as it was determined that the closing of a sale of a solar photovoltaic energy project was no longer probable, partially offset by increased energy assets revenue resulting from the continued growth of our operating portfolio.
• Renewable Fuels: revenues decreased during the three months ended September 30, 2025 primarily due to decreased project revenues resulting from the timing of revenue recognized based upon costs incurred to date relative to total expected costs. The decreased revenues during the nine months ended September 30, 2025 is primarily due to lower project revenue partially offset by an increase in energy asset revenues resulting from the continued growth of our operating portfolio and increased production levels.
• Europe: revenues increased primarily due to higher project revenues resulting from the timing of revenue recognized based upon costs incurred to date relative to total expected costs on active projects primarily related to increased activity under our joint ventures in Greece and Romania compared to the prior period.
• All Other: All other revenues decreased year-over-year primarily due to the divestiture of an energy technology and advisory services company in the fourth quarter of 2024.

Income (Loss) before Taxes and Unallocated Corporate Activity

(In Thousands)

• North America Regions: the increase is primarily from our energy asset operations, resulting from the continued growth of our operating portfolio.
• U.S. Federal: the increase during the three months ended September 30, 2025 is primarily due to higher earnings from unconsolidated entities and lower net interest compared to the prior period. The decrease during the nine months ended September 30, 2025 is primarily due to the lower revenues noted above, partially offset by lower net interest compared to the prior period.
• Renewable Fuels: the decrease is primarily due to higher interest expenses and increased depreciation expense.
• Europe: the increase is primarily due to the increased revenues noted above, partially offset by higher SG&A expenses.
• All Other: the decrease is primarily due to the divestiture of an energy technology and advisory services company in the fourth quarter of 2024.
• Unallocated corporate activity includes all corporate level selling, general and administrative expenses and other expenses not allocated to the segments. We do not allocate any indirect expenses to the segments. Corporate activity during the three months ended September 30, 2025 increased primarily due to higher interest expense and foreign currency transaction losses this year versus gains last year. During the nine months ended September 30, 2025 corporate activity increased primarily due to higher interest expense offset by higher foreign currency transaction gains this year and an additional gain of $1.4 million recognized in 2025 from the sale of an energy technology and advisory services company late in 2024.

Liquidity and Capital Resources

Overview

Since inception, we have funded operations primarily through cash flow from operations, advances from Federal ESPC projects, our senior secured credit facility, second lien term loan and various forms of other debt. See Note 8 “Debt and Financing Lease Liabilities” for additional information.

Working capital requirements can be susceptible to fluctuations during the year due to timing differences between costs incurred, the timing of milestone-based customer invoices and actual cash collections. Working capital may also be affected by seasonality, growth rate of revenue, long lead-time equipment purchase patterns, advances from Federal ESPC projects, and payment terms for payables relative to customer receivables.

We expect to incur additional expenditures in connection with the following activities:

• equity investments, project asset acquisitions, and business acquisitions that we may fund from time to time
• capital investment in current and future energy assets
• material, equipment, and other expenditures for large projects

We regularly monitor and assess our ability to meet funding requirements. We believe that cash and cash equivalents, working capital and availability under our revolving senior secured credit facility, combined with our right (subject to lender consent) to increase our revolving credit facility by $100.0 million, plus develop and sell asset transactions, sales of tax attributes, and our general access to credit and equity markets, will be sufficient to fund our operations through at least November 2026 and thereafter.

We continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate and that we can meet our capital and debt service requirements. This may include limiting discretionary spending across the organization and re-prioritizing our capital projects amid times of political unrest, the duration of supply challenges, and the rate and duration of the inflationary pressures, and other events affecting our liquidity. For example, recent increases in inflation and interest rates have impacted overall market returns on assets. We have therefore been particularly prudent in our capital commitments over the past few quarters, ensuring that our assets in development continue to align with our hurdle rates.

Senior Secured Corporate Credit Facility

On January 23, 2025, we refinanced our term loan and revolving credit facility by entering into a sixth amended and restated senior secured credit agreement (“Restated Credit Agreement”) with the group of lenders thereto. The interest rate for borrowings is based on, at our option, either the Base Rate plus a margin of 0.75% to 1.75%, depending on our core leverage ratio; or the Term SOFR plus a margin of 1.75% to 2.75%, depending on our core leverage ratio. A commitment fee of between 0.25% and 0.375%, depending on our core leverage ratio, is payable quarterly on the undrawn portion of the revolver. At closing we paid $2.3 million in lenders fees and debt issuance costs. Proceeds from this agreement in the amount of $180.0 million and $13.0 million were used to pay the balance of our revolving credit facility and the outstanding portion of the senior secured term loan, respectively, at closing. As of September 30, 2025, the interest rates were 7.06% and 7.71% per annum for the term loan and revolving credit facility, respectively.

The Restated Credit Agreement replaced and extended the prior credit agreement dated March 4, 2022, and subsequently amended (the “Original Credit Agreement”). The Restated Credit Agreement refinanced the credit facilities under the Original Credit Agreement and replaced it with the following facilities:

• a $225.0 million revolving credit facility, maturing on December 28, 2028, and
• a $100.0 million term loan, maturing on December 28, 2028.

The revolver may be increased by up to an additional $100.0 million at our option if lenders are willing to provide such increased commitments, subject to certain conditions.

As of September 30, 2025, the balance on the senior secured term loans was $96.3 million, the balance on the senior secured revolving credit facility was $110.0 million, and we had funds available of $26.6 million.

Energy Asset Financing

Energy Asset Construction Facilities, Financing Facilities, and Term Loans

We have entered into a number of construction and term loan agreements for the purpose of constructing and owning certain renewable energy plants. The physical assets and the operating agreements related to the renewable energy plants are generally owned by wholly owned, single member “special purpose” subsidiaries of Ameresco. These construction and term loans are structured as project financings made directly to a subsidiary, and upon commercial operation and achieving certain milestones in the credit agreement, the related construction loan converts into a term loan. While we are required under generally accepted accounting principles (“GAAP”) to reflect these loans as liabilities on our condensed consolidated balance sheets, they are generally non-recourse and not direct obligations of Ameresco, Inc., except to the extent of completion guarantees and EPC contracts and certain equity contribution obligations under our August 2023 Construction Credit Facility.

Our project financing facilities contain various financial and other covenant requirements which include debt service coverage ratios and total funded debt to EBITDA, as defined in the facilities. Any failure to comply with the financial or other covenants of our project financings would result in inability to distribute funds from the wholly-owned subsidiary to Ameresco, Inc. or constitute an event of default in which the lenders may have the ability to accelerate the amounts outstanding, including all accrued interest and unpaid fees.

On April 30, 2025 we entered into a note purchase agreement and private shelf agreement which includes committed proceeds under series A notes of $78.0 million to finance a battery energy storage asset in development, with a maturity date of September 30, 2045, and a fixed interest rate of 6.72% per annum. Gross proceeds from the initial issuance on April 30, 2025 were $67.7 million and the remaining balance of $10.3 million was issued on June 27, 2025. The agreement also includes a 20-year term $300.0 million private shelf facility as well as the ability to issue series B notes on or before December 31, 2025. As part of this transaction, we signed a tax credit transfer agreement for the investment tax credits associated with the BESS asset. Upon the asset achieving commercial operations, we will receive payment for the ITC transfer and a $30.0 million prepayment on the note purchase agreement will be required.

On May 27, 2025 we entered into an omnibus amendment as part of a tax credit transfer agreement for investment tax credits. The agreement required a $7,000 principal payment, which was made during the nine months ended September 30, 2025. On September 26, 2025 we entered into an amendment to modify the May 27, 2025 omnibus amendment. The amendment included advances of $25,500 related to an expansion project and $15,653 related to a true-up payment in connection to the removal of an IRR residual income requirement. Prior to this amendment, the loan bore interest at a rate of 6.70% with a residual percentage of distributable cash flows payable after the maturity date of the loan, until the earlier of the lender achieving an 8.51% internal rate of return (“IRR”) on funds borrowed under the facility, or the facility discharge date. The interest rate is now fixed at 8.75% and the maturity date changed from August 31, 2039 to September 26, 2040. At September 30, 2025, $348,182 was outstanding under this facility, net of unamortized debt discount and issuance costs.

During the nine months ended September 30, 2025, we drew an additional $171.4 million, paid down $75.3 million, and at September 30, 2025, $408.5 million was outstanding under our August 2023 Construction Credit Facility, net of unamortized debt discount and issuance costs. The Powin bankruptcy triggered a default under this facility, requiring us to move the project associated with the battery payment deposits we made to Powin out of this facility. There were other administrative errors which resulted in defaults under this facility. We received the appropriate waivers for these defaults. In addition, we received a waiver to temporarily increase our maximum commitment of $400,000 to $415,000 until November 30, 2025.

On October 31, 2025 we entered into a note purchase agreement and private shelf agreement which includes committed proceeds under series A notes and second lien notes of $34,356 and $15,129, with maturity dates of December 31, 2043 and September 30, 2040, and fixed interest rates of 5.71% and 7.40% per annum, respectively. At closing, we incurred $763 in lenders fees and debt issuance costs. The agreement also includes a 20-year term $80,000 private shelf facility.

We also paid off our October 2012, Term Loan in the amount of $31.1 million, partially with $8.3 million in proceeds from our new $12.2 million May 2025, Term Loan and the remainder from working capital.

Other Financing Facilities and Financing Leases

During the nine months ended September 30, 2025, we sold and leased back eight energy assets for $28.6 million in cash proceeds under our August 2018 Master Sale-leaseback. During the nine months ended September 30, 2025, we were in default of certain lien provisions of this agreement. On June 30, 2025, we received a waiver of this default which is valid until December 31, 2025.

Federal ESPC Liabilities

We have arrangements with certain third-parties to provide advances to us during the construction or installation of projects for certain customers, typically federal governmental entities, in exchange for our assignment to the lenders of our rights to the long-term receivables arising from the ESPCs related to such projects. These financings totaled $499.1 million as of September 30, 2025. Under the terms of these financing arrangements, we are required to complete the construction or installation of the project in accordance with the contract with our customer, and the liability remains on our condensed consolidated balance sheets until the completed project is accepted by the customer.

We are the primary obligor for financing received, but only until final acceptance of the work by the customer. At this point recourse to us ceases and the ESPC receivables are transferred to the investor. The transfers of receivables under these agreements do not qualify for sales accounting until final customer acceptance of the work, so the advances from the investors are not classified as operating cash flows. Cash draws that we received under these ESPC agreements were $82.0 million during the nine months ended September 30, 2025, and are recorded as financing cash inflows. The use of the cash received under these arrangements is to pay project costs classified as operating cash flows and totaled $59.7 million during the nine months ended September 30, 2025. Due to the manner in which the ESPC contracts with the third-party investors are structured, our reported operating cash flows are materially impacted by the fact that operating cash flows only reflect the ESPC contract expenditure outflows and do not reflect any inflows from the corresponding contract revenues. Upon acceptance of the project by the federal customer the ESPC receivable and corresponding ESPC liability are removed from our condensed consolidated balance sheets as a non-cash settlement.

Other

We issue letters of credit and performance bonds, from time to time, with our third-party lenders, to provide collateral.

Cash Flows

The following table summarizes our cash flows from operating, investing, and financing activities:

(In Thousands)

Our service offering also includes the development, construction, and operation of small-scale renewable energy plants. Small-scale renewable energy projects, or energy assets, can either be developed for the portfolio of assets that we own and operate or designed and built for customers. Expenditures related to projects that we own are recorded as cash outflows from investing activities. Expenditures related to projects that we build for customers are recorded as cash outflows from operating activities as cost of revenues.

Cash Flows from Operating Activities

Our cash flows from operating activities during the nine months ended September 30, 2025 decreased over the same period last year primarily due to increases in cash outflows of $188.5 million in unbilled revenue due to the timing of when certain projects are invoiced compared to the prior year period, $40.3 million in deferred revenue, and $56.8 million in prepaid expenses and other current assets, partially offset by increases in cash inflows of $82.6 million in accounts receivable, $51.1 million in Federal ESPC receivable, and higher net income of $15.7 million.

Cash Flows from Investing Activities

During the nine months ended September 30, 2025 we made capital investments of $283.4 million in new energy assets and $16.6 million in major maintenance of energy assets compared to $341.8 million and $13.6 million, respectively, in 2024.

We currently plan to invest approximately $50 million to $100 million in additional capital expenditures during the remainder of 2025, principally for the construction or acquisition of new renewable energy plants, the majority of which we expect to fund with project finance debt.

Cash Flows from Financing Activities

Our primary sources of financing for the nine months ended September 30, 2025 were proceeds from energy asset financings of $367.3 million, proceeds from long-term corporate debt financings of $100.0 million, net proceeds received from Federal ESPC projects and energy asset receivable financing arrangements of $81.6 million, partially offset by payments on long-term debt and debt fees of $216.6 million, and net payments on our senior secured revolving credit facility of $25.0 million.

Our primary sources of financing for the nine months ended September 30, 2024 were proceeds from energy asset financings of $563.6 million, proceeds from long-term corporate debt financings of $100.0 million, net proceeds received from Federal ESPC projects and energy asset receivable financing arrangements of $134.6 million, contributions from a non-controlling interest of $33.8 million, partially offset by payments on long-term debt and debt fees of $451.7 million, net payments on our senior secured revolving credit facility of $33.4 million, and payments on seller’s promissory note of $41.9 million.

We currently plan additional project financings of approximately $50 million to $100 million during the remainder of 2025 to fund the construction or the acquisition of new renewable energy plants as discussed above.

Critical Accounting Estimates

Preparing our condensed consolidated financial statements in accordance with GAAP involves us making estimates and assumptions that affect reported amounts of assets and liabilities, net sales and expenses, and related disclosures in the accompanying notes at the date of our financial statements. We base our estimates on historical experience, industry and market trends, and on various other assumptions that we believe to be reasonable under the circumstances. However, by their nature, estimates are subject to various assumptions and uncertainties, and changes in circumstances could cause actual results to differ from these estimates, sometimes materially.

There have been no material changes in our critical accounting estimates from those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2024 Form 10-K. In addition, refer to Note 2 “Summary of Significant Accounting Policies” for updates to critical accounting policies.

Recent Accounting Pronouncements

See Note 2, “Summary of Significant Accounting Policies” for a discussion of recent accounting pronouncements.

As of September 30, 2025, there have been no significant changes in market risk exposures that materially affected the quantitative and qualitative disclosures as described in Item 7A to our 2024 Form 10-K.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this quarterly report, or the evaluation date. Disclosure controls and procedures are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management, after evaluating the effectiveness of our disclosure controls and procedures as of the evaluation date, concluded that as of the evaluation date, our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our business is subject to numerous risks, a number of which are described below and under “Risk Factors” in Part I, Item 1A of our 2024 Form 10-K.

You should carefully consider these risks together with the other information set forth in this report, which could materially affect our business, financial condition and future results. The risks described in Part I, Item 1A of our 2024 Form 10-K are not the only risks we face. Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and operating results.