Ameresco, Inc. (AMRC) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Ameresco, Inc. Second Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mrs. Leila Dillon, Senior Vice President, Marketing and Communications. Ms. Dillon, you may begin.

Thank you, Catherine, 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, Executive Vice President and Chief Financial Officer; and Mark Chiplock, Senior 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. Today's earnings materials contain forward-looking statements, including statements regarding our expectations, all forward-looking statements are subject to risks and uncertainties. Please refer to today's earnings materials, the safe harbor language on Slide 2 and our SEC filings for a discussion on the major risk factors that could cause our actual results to differ from those in our forward-looking statements. In addition, we use several non-GAAP measures when presenting our financial results. We have included the reconciliations to these measures in our supplemental financial information. I will now turn the call over to George. George?

Thank you, Leila, and good afternoon, everyone. We had another solid quarter, and I'm particularly pleased that our positive momentum continued with a strong growth in project backlog and assets in development, supporting both our 2023 guidance and our long-term financial targets. Second quarter revenue was well above our guidance and adjusted EBITDA was at the higher end of our range. Importantly, we ended the quarter with a record total project backlog of $3.2 billion, which was up 9% sequentially. During the quarter, we added $493 million of new project awards, bringing the total adds for the first half of the year to almost $1 billion. This growth is even more impressive, and we now have surpassed the total backlog reached when we signed the almost $1 billion Southern California Edison battery contracts at the end of 2021. We also added 113 megawatts of assets in development in the second quarter, which is the largest amount added in a single quarter in our company's history. This represents an impressive 26% sequential growth in assets in development which we expect will provide substantial EBITDA contributions for many years once brought into operation. Together, our project and asset wins continues to add to our multiyear visibility for profitable revenues while supporting our confidence in Ameresco's long-term growth. Large battery energy storage contract wins represented a major component of this quarter's growth in both, our project backlog and assets in development. In our supplemental slides, you will see that battery assets now comprise 41% of our assets in development compared to under [ 5% ] our existing operating assets. Large battery storage systems are a critical component in the replacement of fossil fuel-generated electricity, playing a key role in the storage of renewable energy during times of peak production. Batteries most importantly though, make the electric grid far more resilient and flexible, quickly providing power when needed due to higher demand, weather-related events and a number of other unplanned outages. These factors are driving tremendous growth in battery storage, supported by the mass commercialization of battery technologies, which help to drive down costs. In the United States, the Inflation Reduction Act has been a significant catalyst for the rapid adoption of this technology. Before the passage of the IRA, Federal tax credits were only available for battery storage when it was paired with a renewable generation technology, such as solar or wind. Now under the IRA and similar incentives in Canada, stand-alone battery storage systems will be eligible for a 30% or greater investment expert, significantly enhancing the value proposition of this system for our customers, thus driving greater adoption. While the ITC is helpful here in North America, we are also proposing and winning stand-alone battery projects in Europe where the need is just as great. Given our deep technical knowledge, engineering expertise and supplier relationships, Ameresco has become a recognized leader in the implementation of battery systems. From the transformational Southern California Edison projects to the recently announced United Power, Middle River Power, and Atura Power joint venture wins and Ameresco's expertise and financially flexible business model allows us to drive both battery project and asset opportunities for many years to come. Another very positive long-term development for Ameresco which occurred during the quarter with the EPA's ruling concerning the Renewable Fuel Standard targets for 2023 through 2025. In its final ruling, the EPA significantly increased the volume obligation for RNG. This ruling had an immediate impact on the price of the D3 RINs which we generate from our RNG operations and prices quickly moved from the low $2 range to above $3. As importantly, the EPA also changed how they calculate the RNG industry average rate of growth, which could support volume calculations even beyond the 3-year period of this ruling. We were very pleased with the ruling which increases our long-term visibility into this important line of business. Additionally, we are anticipating the forthcoming guidance from the EPA on eRINS, which could also provide a tailwind to our existing biogas to electricity projects. Before turning the call over to Doran, I want to highlight the publication of our third annual ESG report entitled, Doing Well by Doing Good, Transformation and Purpose. We are very proud of the fact that our operations have had a significant positive impact on the global environment as our renewable energy assets and customer projects combined have delivered a cumulative carbon emissions reduction of over 95 million metric tons since going public in 2010. Our ongoing asset and project growth will continue to drive this important number even higher. Looking ahead, we have also set a target of achieving net zero from our internal operations for both Scope 1 and Scope 2 emissions by 2040. In support of this target, we have pledged to establish emission reduction targets through the Science-Based Targets initiative by 2025. I will now turn the call over to Doran to comment on our financial performance and outlook. Doran?

Thank you, George, and good afternoon, everyone. For additional financial information, please refer to the press release and supplemental slides that were posted to our website after the market closed today. Total second quarter revenue was $327.1 million about $37 million above the midpoint of our guidance with faster-than-expected execution on certain projects. Energy Asset revenue grew 17%, largely based on the increased number of operating assets year-over-year, while our O&M business delivered another solid quarter with 9% growth. In addition, our Other line of business was up 4% driven by increased demand for our utility, SaaS and consulting businesses. Gross margin expanded to 17.9% as the lower-margin SoCal Ed contract declined as a percentage of our total revenue. We generated adjusted EBITDA of $37.4 million in the quarter at the higher end of our guidance range. We ended the quarter with approximately $49 million of unrestricted cash while executing on a record $285 million in financing activity. As George mentioned, we ended the quarter with a record total project backlog of $3.2 billion, a 9% sequential increase as we added nearly $0.5 billion in new project awards during the quarter. Our energy asset visibility is approximately $2.3 billion an operating asset revenue backlog metric that includes both contracted revenue as well as a conservative estimate of the lifetime uncontracted RNG revenues. These metrics, together with our O&M backlog give Ameresco visibility to over $6.7 billion of future revenue. This metric does not include any contribution from the 545 megawatts of energy assets in development and construction. As George mentioned, we experienced record adds of 113 megawatts during the quarter. Our assets in development and construction remain well above our current operating energy assets, giving us additional visibility into our long-term growth. The timing of placing these assets into operation can be anywhere from under a year for small, more simple assets to 4-plus years for more complex assets such as RNG facilities. Listeners will remember that an asset has to meet very strict criteria to be included in this metric, which is much stricter than what most companies consider a pipeline. Historically, approximately 90-plus percent of our energy assets in development and construction are placed into service and either carried on our balance sheet as an operating asset, primarily with nonrecourse financing, or monetize through a sale to a third party. With the changing interest rate environment, we have been fielding many questions on the impact of increasing interest rates on our energy asset business and our expectations for how this business might evolve. As many of you are aware, we use a risk-adjusted levered internal rate of return as a key metric when evaluating energy asset opportunities. We continue to target a mid-teens risk-adjusted levered IRR on our assets. We've been able to achieve this high yield in the solar and battery space by carefully selecting assets that are with repeat or new customers that value our flexible financing approach, vertical integration and technical expertise, which means we're not always competing solely on price. Or because we are developing larger, more technically complex assets such as RNG, where Ameresco's 20-plus years in the market, give us a significant advantage in winning and executing on the opportunities. We are experiencing a meaningful increase in asset development opportunities, including some assets that may not meet our risk-adjusted return targets or meaningfully contribute to our net income. That being said, they are still high-quality assets and we can, therefore, generate value for Ameresco by developing and selling them to third parties with lower yield targets. In this case, we recycle capital and earn a profit through an EPC contract where the assets convert to projects upon a sale. We will also look to extract additional value by bundling these converted projects with an O&M contract. Even with maintaining our historic mid-teens IRR hurdle rates, we believe there are ample opportunities to continue to grow our owned assets on average by approximately 20% per year. A growth target we've discussed before, while selectively monetizing our origination efforts in other ways. This strategy isn't new to Ameresco, but in the current environment, it may become more prominent. In the end, we believe that our flexible corporate model with both project and asset business lines allows us to continue to benefit from the rapid growth of renewables by developing assets which continued to hit our mid-teens IRR target mentioned earlier or developing and selling them as profitable projects. Moving back to our operating assets. These assets are funded by fixed or hedged debt, therefore, rising interest rates have little to no meaningful impact on this part of our business. Thus, even in an increasing interest rate environment, the flexibility of Ameresco's business model and our opportunistic approach to the asset business should allow us to continue to benefit from the tremendous demand for renewable energy solutions. We are pleased to reaffirm our 2023 guidance, which anticipates adjusted EBITDA growth of 5% at the midpoint, noteworthy considering the difficult year-on-year comparisons associated with the wind-down and completion of the large SCE projects. We have also provided a more detailed mix of our expected Q3 and Q4 results in the press release. We continue to expect to place between 80 and 100 megawatts of energy assets in service in 2023, including 2 RNG plants. A third plant we originally anticipated to be placed in service in 2023 is expected to be at mechanical completion by the end of the year and fully commissioned in Q1 2024. Several additional RNG assets are in the late stages of development and construction, and we continue to expect that 4 or 5 of these will come online during 2024. Now I'd like to turn the call back over to George for closing comments.

Thank you, Doran. As we discussed in detail during this call. which have continued to extend our long-term line of sight to significant growth ending the second quarter with over $6.5 billion in revenue visibility and 545 megawatts of assets in development and construction. Our first half performance, together with our backlog and business development pipeline, supports our confidence in our long-term growth targets. This is an exciting time to be leading a clean tech solution provider. And I know we have the technical talent and business acumen to support the energy transition and drive meaningful change. In closing, I would like to once again thank our employees, customers and stockholders for their continued support. Operator, we would like to open the call to questions.

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

Thank you, by the way, for the granular outlook for the back half. I guess, this is a couple of quarters in a row now of faster-than-expected revenue conversion and so my first question, I'm just trying to kind of reconcile that outlook and the full year. I mean just taking the midpoint of 3Q and 4Q, you'd be at the high end of the full year revenue range. I mean you're kind of implicitly raising the low end of the full year revenue guidance. Am I missing something? Or is there something that I'm not doing correctly? Or is that correct?

Yes. No, it's Mark Chiplock, how it is going? Yes, I mean I don't think that we're -- we didn't want to change the overall guidance. I mean, I think we are seeing some better performance on the top line because we have seen some of that acceleration. But we're also seeing a shift in some of our awards and the timing of signing those to contracts. So yes, I mean it's not a perfect science. I think we're trying to put these ranges together. I think we still expect to be within the original ranges. Could we do better? Sure. But I think we're trying to use the best visibility that we have particularly on the project stuff to shape Q3 and Q4. I think the good news on the second half of the year with the visibility is that over 90% of that project revenue is coming out of awarded and contracted. So again, we have good visibility. The timing, as we've talked about in the past, is always kind of the variable that can impact anything from a quarter-to-quarter basis.

Yes. And I want to ask about project margins in the quarter. It's a little light. Was that just mix? And the corollary is what drives the improved operating leverage in the back half? And I mean even better operating leverage in the back half from a seasonality perspective, I'm just talking about a better than typical improvement in operating leverage. That's in the guidance.

Yes. I mean if you look at those net income and EBITDA margins. I think the challenge is, again, when you're looking last year, you've got certainly higher revenue, higher net income from the SCE projects. We do the line of business reporting, remember, we're doing an allocation of corporate expenses based on revenue share. And so I think our project margins year-over-year, they were going to decline because of the allocation of those corporate expenses, essentially a large fixed allocation of costs on significantly lower revenue year-over-year. We did see some cost overruns on certain projects in the quarter that had a little bit of an impact on our gross margins but we are -- we would expect to see margins continue to expand in the second half of the year, certainly as SCE cycles out, and we'd expect to continue to see the trend of the expanding gross margins throughout the second half of the year.

Fantastic. If I could just sneak one more in, that's RFS decision, obviously, very positive for RNG assets and I was just curious to what extent the higher RINs we're seeing now factored into the reiteration of the guidance. And there was no impact maybe help us understand would that just be due to hedging or really to kind of conservatism in your assumptions for the back half?

Yes. I think certainly, we're pleased to see the RIN prices coming up, it has some impact kind of in our -- in the second half of our numbers, but I wouldn't call it significant or meaningful. It's -- I mean, we've always kind of tried to carry our assumptions somewhere where the market is going and where we would anticipate the market going. So while it has some benefit, nothing that would -- nothing that was kind of put us in a position to want to change the guidance that we provided.

And you got to remember, Noah, that [ 55% ] -- actually, as of today, we are 55% hedged instead of the end of the quarter, actually. So it's only 45% of the future production that can benefit a little bit from the higher prices. But the ones we used in the forecast, it's pretty much a little bit where the market is right now.

We have a question from Stephen Gengaro with Stifel.

So two for me. The first, when you think about the projects and the bidding activity and the orders and backlog build, any insights into kind of what that pricing environment is like currently? And how we should think about the impact that has on project margins over time?

I mean the activity is very, very good, and that's why you see our awards and the backlog is developing very, very nicely, which we like to see, and that's why I extended a little bit on my -- in my discussion. The projects are indeed to get a little bit larger. The margins, if it's an EPC design-build otherwise project, like we said before, they are lower than the performance contracts margins. But on the other hand, they contribute more in the profitability because we -- they're all going to -- their leverage in the company. The other thing that has happened a little bit, and that's why the OpEx is a little bit higher. Since after COVID, we wanted to push the organization, and spend a little bit more money in development -- in order to develop a good pipeline and capture a good market share. And I'm glad to say that the proposal activity and the win rate is very, very good. So I would say the environment is good in at least the last couple of quarters that we had.

Great. And just as a follow-up to that, anything on the order flow flowing out of Europe yet? And just what's the quick update on how your traction is in Europe?

This is very, very good. The activity is very well. We have a hard time keeping up with it. And that's why we spend a little bit more dollar. When a company grows, sometimes it's very hard to control our OpEx. But on the other hand, the opportunities are very large. Our Italian group that we acquired, we are very, very pleased with the way they have turned out. They're doing very, very well. In Greece, we have done a couple of projects. And I think the likelihood that we will have someone there is very, very good. In the U.K., again, there are a few things down the pipeline that are coming along that it's going to help us a lot. So the activity over there and, Doran, you've spent some time as you might want to say a few words, and I've been going back and forth. It's -- I'm pleasantly surprised how active that market is.

Yes, I think I would only add that it's coming from all technologies. And a lot of the project business, of course, we're getting utility-scale EPC opportunities. And like George said, Greece is looking very strong for us. In the U.K., we've come through with some really good wins in advanced technologies that is allowing that business to move beyond traditional energy efficiency into the advanced technologies, just like we've done here in the United States.

Thank you. And our next question comes from Joseph Osha from Guggenheim.

Some questions on this storage business, which is growing so robustly. First, wondering if you can talk a little bit about what it's been like handling cell procurement. I know there were some learnings from SCE. So I'm just wondering if you can update us on how those learnings inform how you're handling the procurement process for all of these new storage products -- projects. And then I do have another question.

Yes, I'll start with the first one, Joe. So the procurement, we're continuing to expand our number of relationships with battery suppliers. As you know, that market remains fragmented. And so we've got to be very selective when it comes to who our partners are with the integration side of that, the software side of that. It's not just the cells, it's really everything. And so while we took a kind of -- took a close look and did a competitive process when we were putting together the SCE project, given the time line constraints, we went with who was going to be able to deliver on time. Now I think it's fair to say we can be more picky. And we are running competitive processes more or less in all of the projects that we announced that George talked about in his script. And we're ensuring that our suppliers are stepping up to the plate in terms of pricing, quality, degradation, [ natural], you name it, schedule, delivery time lines, everything. And I'm excited about the market because there's more and more companies kind of come into the fray. Yes, there is still a limited number of battery cell manufacturers. However, they're continuing to supply more different types of companies. And it's those skill sets in terms of their ability to execute, deliver on time, commission projects, everything soup to nuts, it's not just the batteries.

Certainly. Okay. And then I'm actually going to switch my follow-up then in response to that. So is it fair to say then that as you addition companies like STEM or FlexGen or whoever that then it's their job to go find cells? Or are you still involved in that procurement process? I just want to understand how exactly this is working now?

Yes, we're directly involved, but I'd be quite honest. I mean some of them like to work with certain manufacturers more than others, but some of them are actually a little bit more flexible like we are and want to get the best solution for the customers. So we remain heavily involved in that process.

Our next question is from George Gianarikas from Canaccord Genuity.

I'd like to ask about your focus on free cash flow generation. I know you've only guided to 2024 EBITDA, but there was a lot of discussion around potentially selling assets or concentrating a little bit more on projects. I'm curious as to whether that becomes more of a focus as we move into 2025 and 2026 in free cash flow?

So George, I'll just take a stab at that. My gut reaction was, as you look forward past '24 into '25 is that there is not a prescriptive strategic move on our part to move toward project revenue and cash flow. We maintain this flexibility when we approach customers. So if the customers happen to be looking for more project business, that's the direction our company will go for the customer. And if they're looking for more asset business, that's the direction we will go. As we said, with the asset business, we've got a little bit of a regulator here where we can actually monetize the development pipeline and convert those into projects as needed based whether it's on return criteria or the risk adjustments that are part of the determination of the return of criteria. But we're not making a strategic move toward or away from the project business.

No. No, we'll continue to emphasize the project business as much as possible. And I don't know if you saw in terms of the International Energy Agency in the paper today, they announced that the least cost alternative to net zero is energy efficiency. Number one, clean fuel is energy efficient. So we'll continue that. But we'll try to take advantage of the full spectrum of the clean tech sector. And I think that's helping us a lot. And then as far as the asset is concerned, it's selling some of the assets, we are very pleased that we are signing much more than we should really. And that's why we will take some that maybe not have the rate of return that we would like to, but somebody else likes it. So we say, great, we will flip them to them. But -- no, we're not getting away from the business. Actually, we will focus as much as we possibly can.

And as a follow-up, I'd like to ask about this RNG asset that's moved to being fully commissioned in the first quarter of '24. You reiterated you've 4 or 5 that will come online in '24. Are those in addition to this other one that's been pushed into the first quarter?

Go ahead. Yes.

Listen, what happened on this one, originally they were supposed to deliver some of the equipment in April, then it was June, then it was late July, I think it was delivered - it just got delivered. So that's why some of the projects they move either due to the weather or to delivery schedule. That's what we see in the biggest bottleneck. And then we have some problems with the transformers and electrical switch gear and so on. But at the end of the day, it's one of the energy business [ for sale ]. We've been in it for about 20 years now. And I think the team that we have is the best in the business, and we might miss a quarter or 2 here and there. But overall, we will deliver top quality projects in a timely fashion.

We have a question from William Grippin from UBS.

My first question here was just, wanted to ask how you're thinking about your approach to RIN monetization now just given the final EPA RVO and we have 3 years of visibility and obviously, pricing has been a lot better. So how are you thinking about hedging versus open market?

I think the strategy that we've been using in the past that hedging 50% of the output and then the rest of it in the open market. Now that we have a 3-year visibility, we feel even much better with this strategy. But we're always very optimistic about the RNG market from the beginning because not only the RINs that they have a great value. But in the long term, I think the voluntary market for renewable natural gas, we have a great place. And we have seen, by the way, the 3- to 5-year contracts that we signed on 50% of the output, the prices are coming up. So I wouldn't be surprised over the next as we develop more and more of these RNG facilities that we will not have as much as risk, I would say, down the road. You would see us executing longer-term contracts as soon as the economics dictate. And every year, by the way, we're doing an analysis for the Board and we determined very good analysis, what will the cost will be for us if we were to hedge more than what we have done in the past. But look, it's a very, very important part of our business line, and we pay a lot of attention to it. We think we develop great assets. We want to maximize the value of those assets.

Well, sorry, just -- if you want to get micro between now and the end of the year, the sort of dynamics of hedging versus waiting, we're kind of watching the market. We knew that right after the RVO, that came out as we expected, there would be a lot of people going to sell. So we didn't go straight in to liquidate all the stuff. We'll continue to keep our ear to the ground in terms of production estimates and see what we think is going to happen with the market. We've got our feelers out everywhere in this market. And so we'll continue to hedge dynamically and opportunistically for the rest of the year on these 2023 production. And I know that you're relatively new to the coverage. We generally don't go over 90% in the current year, generally speaking, to leave a little bit of gap for production variability.

Got it. And just my follow-up here. Just on the implied fourth quarter earnings ramp in the guidance, that's outside of the range of kind of seasonality that we've seen over the last several years, could you just speak to the drivers of that? Is it really just projects coming online in the fourth quarter that are contributing?

I think a large part of the revenue is a part of some seasonality, but we are -- we have a little bit of a shift on the awarded timing. So again, I mentioned that we have some real good visibility of revenue coming out of the project backlog between awarded and contracted. But I think some of the timing that we're seeing that's maybe pushing something out from Q3 into Q4 as the timing when we anticipate some awards converting to contracts. What I think is important to remember with that is that we're capitalizing on the projects in the awarded state, we are capitalizing project development costs for that project. As soon as it converts to a contract, there's an immediate pickup in revenue as we move those costs into the construction phase and as part of that cost budget because we -- our revenue is on a percentage completion basis. So I think Q4 looks a bit heavier than it normally would, part of that is going to be shifting a couple of awards converting to contracts. And then the rest of it is just the visibility we have coming out of our contracted backlog. Obviously, we still need to execute on that, but we feel pretty good based on that visibility.

Our next question comes from Kashy Harrison with Piper Sandler.

So maybe just a follow-up to the last question. Can you maybe -- it sounds like you -- Mark, it sounded like you suggested maybe there is a little bit of the awarded conversion taking a bit longer than you expected. Can you speak to maybe what's the driver behind there? And then I have a follow-up question.

Yes. I mean it's a good question because, quite honestly, I think the trend that we're seeing is our awards are actually converting a bit faster, particularly on the design build and so -- generally, those take anywhere from 12 to 24 months to convert. We're actually seeing it a bit on the lower side. It's just some larger projects that have taken a little bit longer that we see shifting out. It could very well be that, that pulls back in. But I think in terms of just providing the shaping we're trying to maintain a little bit of a conservative view in terms of when those will convert, but still give us confidence in being able to achieve the full year numbers.

Got it. And my follow-up question is on the RNG side. Can you discuss just the progress on the 4 or 5 RNG projects that are expected to come online in 2024, how are those -- how is construction tracking to a relative -- tracking relative to expectations? What's the risk of delays on those 4 or 5 projects? And then finally, just in light of the RVO ruling, can you give us some sensitivities for 2024 from the higher D3 RIN pricing?

We'll start on the construction progress, the development progress actually feeling very good about the 4 or 5. We're -- as we've talked about, those are in relatively late stages of development or already in construction. And therefore, we have a couple of them that we feel very good about the time lines and the others are moving along in the pace where we expected them to move, right? So I think we feel pretty good about that piece of it. As with the RIN and the 2024, I think the point here is that we're not selling our 2024 RINs, yes, right? We are watching where that market sits vis-a-vis what we expect production to look like overall across the market. But that falls straight into the category where I talked before about we're keeping our ear to the ground. We're going to see where those numbers come out in terms of the supply and what we see finishing in the market and what we see not finishing in the market, and then we'll hedge accordingly. But I don't think we're prepared to start providing sensitivities to the overall business as you know we're a very diversified business. RNG is one piece of it. I don't think we're ready to start providing sensitivities on RIN prices for 2024.

Our next question comes from Julien Dumoulin-Smith with Bank of America.

Look, I wanted to follow up on a couple. Look, just I wanted to flag a couple of things. So on '23, if we go back to that really quickly. I'm hearing a couple of things from you guys. But first, can we talk about the SCE and just understanding the full extent of the impact. The Edison 10-Q had some commentary about some shifting time lines. So I want to make sure we understood, and you guys had kind of a clear definitive view about what that financial impact was. And then also just on '23 altogether, it sounds like given the 3Q and 4Q dynamic, we started talking about it at the top of the call here, it sounds like you're still on balance, net quite comfortable on '23 and the reason why you wouldn't raise '23 is more about a timing issue that things could slip into 1Q. Is that the right interpretation?

I'll start with SoCal and then maybe kick the other piece to Mark, Julien. As far as SoCal is concerned, because we're 95-plus percent complete with that project. The financial impact of the movement in the substantial completion dates is not anything that we're concerned about for 2023. As you might expect, we're heavily focused on finishing the projects. And therefore, we don't have any updates as far as negotiation of open items with SoCal Ed, but the revenue amounts are kind of down to the wire, and we're just in the final commissioning of 2 out of the 3 projects, as we mentioned in our disclosure. Mark, maybe I'll throw it to you about those all.

Yes, sure. I think the answer to your question on -- it is, yes, like I feel like we have really good visibility on to the second half of the year with respect to revenue because a large percentage of it is coming from our awarded and contracted backlog -- project backlog. There is still a portion that we still would need to, what I'll say, book and burn, but it's a relatively small piece. And yes, I think the -- we talk about the projects business can be heavily impacted by timing. And so I think some of the awards we anticipate signing in Q4 because the timing shift absolutely. But I think right now, based on the visibility that we have, we're maintaining confidence in the -- in our original estimates for the year.

Got it. And then on '24 itself, I mean, just to understand, I mean, with the mark-to-market increase in the RINs prices, et cetera, I mean, and the open position that you guys alluded to here earlier, I think 45%. I mean, why not be more constructive on '24? Again, I get timing issues that clearly seem to be part of this. But can you explain a little bit more of the puts and takes there as to why it would not be overall more constructive? Or again, is this just you guys holding back, if you will, in some respects?