Ladies and gentlemen, thank you for standing by, and welcome to the Q4 2020 Ameresco, Inc. earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. Please be advised that today's conference is being recorded. Thank you. Without further ado, I'd like to hand the conference over to Ms. Leila Dillon, Senior Vice President, Corporate Marketing. Ma'am, you may begin. Thank you, Paul. 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. 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. Good afternoon. I hope everyone is staying healthy and safe. First, I would like to thank our employees, customers, and partners as we all continue to effectively manage through these complex times. 2020 was a year filled with both difficulties and opportunities, and our people rose to the challenge, delivering outstanding results. This year, we increased revenues by 19% and EPS by 42%. I would also like to quickly comment on the recent changes in administration in Washington, D.C. While we work hard to make sure that Ameresco thrives regardless of the person or party in charge, we are very pleased with some of the early steps taken by the new administration, including rejoining the Paris Agreement and the emphasis placed on a low-carbon future. We believe this leadership and direction from the top will create significant additional business opportunities, not only with the federal government but also with our client base, as climate considerations become a key element of their decision-making process. While environmental initiatives have been a strong project driver for some of the markets we serve, we are now seeing significant interest from the commercial and industrial market segment as companies prepare their strategies to achieve carbon neutrality. The fourth quarter capped a year of record performance driven by our comprehensive advanced technology solutions across our regions and markets, delivering results above expectations. Despite the challenging business environment due to COVID-19, our team came together and executed across all levels, pulling in construction where possible, securing opportunistic work when available, and focusing squarely on the dynamic needs of our customers. Even with the particularly strong fourth quarter in 2019, we were able to continue to show year-over-year revenue growth led by our Federal Solutions group. As in previous quarters, this year, we took advantage of continued improved access to work sites to execute on our contracted backlogs. Our energy assets and operation and maintenance businesses continued to provide Ameresco with predictable long-term recurring revenue, which is especially important during these economically uncertain times. These two businesses support our visibility with operation and maintenance contracted backlog of $1.1 billion and estimated energy asset contracted revenues and incentives of $900 million. We were particularly pleased to have increased our energy assets in development and construction to over 350 MW. Notably, we added two new RNG opportunities with a line of sight to additional projects in this fast-growing sector. I would also like to point out that we are utilizing Energy-as-a-service, a contract structure to implement comprehensive solutions. We're seeing increasing interest, not only with our existing much more customers, but also with the larger under-penetrated commercial and industrial markets. As corporate ESG mandates and economics have aligned. Under our Energy-as-a-service offering, Ameresco delivers energy infrastructure improvements and related technologies directly to an end-use customer under a long-term service agreement, much like many of our long-term federal energy savings performance contracts. Our customers have no upfront capital costs, and Ameresco is paid by the customer out of the energy savings and other deliverables determined by each contract. Our Energy-as-a-service offering is flexible in order to accommodate a broad range of customer needs. Projects may include a full spectrum of energy conservation measures and renewable assets, while others may only include one or two technologies. Our customers benefit from reduced pressure on their borrowing capacity, credit metrics, and balance sheets, while Ameresco gains another profitable long-term recurring revenue stream. We also achieved another important milestone during the quarter with the publication of our first Environmental, Social, and Governance, ESG report, entitled Doing Well by Doing Good. This report highlights 20 years of ESG achievements and importantly defines a comprehensive list of ESG goals for the future. ESG has always been part of the DNA of Ameresco, with over 60 million metric tons of CO2 offset by our projects and assets. Objectivity in our solutions and diversity in our team are key components of who we are as a company. Ensuring we have the best talent at Ameresco is always our top priority. We will continue to invest heavily in social programs and focus on the policies that create a healthy and diverse workplace for our employees. We are reinforcing our commitment to the communities in which we operate, further focusing on our volunteerism month and expanding regional scholarship programs for entrepreneurial students. Our management is aligned to achieve our ambitious ESG goals, and we look forward to updating everyone on our ESG achievements. This year, we continue to build our contracted and awarded backlog with clean technology solutions for our clients. With a growing need for green power balanced with the need for grid stability, we continue to integrate smart infrastructure, battery storage, and other clean technology solutions in many projects. The Fort Bragg project is a great example, with floating solar, battery storage, and a microgrid. We also announced our first wind farm in County Kerry, Ireland. We completed several solar installations across the U.S., including San Joaquin County's Foothill Landfill in California, Wappingers School District in New York, and 11 sites within the New Bedford Housing Authority in Massachusetts. We worked with several smart cities on LED lighting conversions, including the Oregon Department of Transportation and the City of Medford in Oregon, the City of Phoenix in Arizona, the City of Virginia in Minnesota, and the City of Lawrence in Massachusetts. In addition, many smart cities focused on North American water metering infrastructure upgrades, including our project with the City of Gainesville and The Woodlands water project in both in Texas. All of these projects demonstrate Ameresco's evolution into a comprehensive clean tech integrator and renewable asset developer, owner, and operator. The energy industry is going through a great transformation. Distributed energy resources, microgrids and renewables are becoming more and more prevalent as we move towards resiliency, carbon neutrality, and as the economics become even more compelling. 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 will now go through the company's fourth quarter financial performance and our 2021 outlook. Please refer to our press release and supplemental slides posted on our website for additional financial information. During the fourth quarter, we saw continued revenue growth and increased operating leverage, which contributed to another quarter of strong EBITDA growth. As you may recall, Q4 of 2019 had particularly strong revenue due to the large federal contract slippage, so we were very pleased to have achieved year-over-year growth. Revenue grew 3% year on year and over 11% sequentially, with growth across our core businesses, again, led by the strong performance of our Federal Solutions Group. We continued to prioritize contracted backlog execution, taking advantage of improved access to sites across our footprint as we navigated the COVID-19 work environment. Gross margin remained consistent as the growth of higher margin O&M and asset revenue continued to offset the increase in our growing design-build work. Ameresco benefited from our past investments and the highly scalable nature of our business model. Revenue growth, higher utilization, and reduced spending levels, including travel-related expenses, were key drivers of our net income and EBITDA performance. While SGA expenses will increase in a post-pandemic environment, we believe a portion of the savings are permanent and will benefit our operating leverage in the future. Net income attributable to common shareholders was $23.5 million, an increase of 5%. Adjusted EBITDA, a non-GAAP measure, was $35.7 million, a 21% increase year-over-year. As mentioned above, during the quarter, we focused on executing on our contracted backlog, converting a significant amount to revenue. Our year-over-year decline in contracted backlog was due to four large federal contracts signed in Q4 last year. We had a very strong new awards this quarter, as our awarded backlog saw 14% year-over-year growth, increasing to approximately $1.3 billion at year-end. Our total project backlog stands at $2.2 billion. Our assets in development grew to over 350 MW, with strong contributions across several business units and representing multiple technologies, a figure that exceeds our 282 MW of operating energy assets. We have approximately $2 billion in long-term contracted revenue and incentives between O&M and our operating energy assets. These higher-margin, recurring revenue businesses accounted for approximately 2/3 of our 2020 EBITDA, and we believe will provide us with high-quality, recurring revenue streams for years to come. Ameresco's cash flows and liquidity remain strong, with ample cash and available credit to support our growing project business and execute our asset development pipeline. We ended the quarter with over $66 million of cash on hand. Adjusted cash flow from operations was $35 million for the quarter and $146 million for the year. In addition to strong working capital, we have broad access to project financing and tax equity, and we also have the ability to monetize development assets. During the quarter, we secured over $70 million in project financing and generated $16 million from energy asset sales. Before turning to our full year 2021 outlook, I'd like to make a quick comment on Q1 2021. During the first quarter last year, we saw a discrete tax benefit from the CARES Act, favorable weather conditions, and a proactive revenue pull forward in response to the onset of the COVID-19 pandemic. This year, first quarter weather patterns have impacted production and commissioning of some of our energy assets, which may result in less favorable comparisons. All of this has been factored into our annual guidance. With that, let's now turn to our full-year outlook. We expect 2021 total revenue to be in the range of $1.1 billion- $1.15 billion, representing 9% year on year growth at the midpoint. We are forecasting Adjusted EBITDA to be between $135 million and $145 million, representing 19% growth at the midpoint. Non-GAAP EPS is expected to be in the range of $1.18- $1.26, which, after adjusting for 2020 EPS for one-time tax items realized, represents 16% growth at the midpoint. We expect a higher effective tax rate of approximately 12%-18% for the year. During 2021, we anticipate commissioning between 60 MW and 80 MW of energy assets and expect total capital expenditures to be $200 million-$250 million. The bulk of this investment will be funded through project financing. Now, I would like to turn the call back over to George for closing comments. Thank you, Doran. In closing, I want to again take a minute to thank our customers, partners, and employees for their exceptional efforts in 2020. During a time of unprecedented challenges, we were fortunate to safely execute on the work we set out to do. Together with our customers, we demonstrated resiliency at its finest. We are in the early stages of this great energy transformation. Ameresco is well-positioned to take advantage of the evolving opportunities. I look to the future with tremendous excitement. Investing in the health of our environment has become a focus for so many of our current and prospective customers. Our backlog and our new proposals are full of advanced technologies, including distributed energy resources, solar, batteries, energy storage, microgrids, smart buildings, smart cities, and more. The economics have shifted, enabling us to integrate and implement game-changing environmentally transformative clean technology projects. We believe Ameresco is very well-positioned for 2021 and beyond. Operator, I would now like to open the call to questions. Thank you, sir. As a reminder, ladies and gentlemen, if you have a question, please press star one on your telephone keypad. Again, it is star one on your telephone keypad. Please stand by while we compile the Q&A roster. Our first question is from Noah Kaye with Oppenheimer. Your line is open. Hi, good afternoon, everyone. Thank you for taking the questions. To start, appreciate the commentary in your remarks around the backlog dynamics, some puts and takes year-over-year. First of all, do you expect to exit 2021 with higher backlog, in particular on the contracted side? Can you comment around any contracting dynamics associated with the transition in administration? Then just broadly, what you're seeing in terms of the pipeline, given the dynamics you pointed about around broad-based sustainability drivers. Sure. Good to talk to you. It's Doran. I'll try to take this first one. The contracted backlog, the key element of that has to do with conversion timing, right? We have an awarded backlog that's built up quite substantially. I think that I mentioned this in prior quarters, where the awarded backlog was actually building and increasing, and we weren't really expecting it to be so because of the COVID-19 crisis. As people shifted and adjusted to that working environment, the RFPs and the awards kept going. Now, the contract negotiation is something that it's a lot of hard work to get all the way through to converting awards to contracts. I think there's not an overarching theme to the way that we see this year going in terms of contract conversion. We expect it to kind of continue at pace. As we discussed, executing on the contracted backlog has emptied the contracted backlog out going into revenue. The awarded backlog is building, and I think that our expectation is we'll see those conversions come through throughout the year at what I would call an ordinary pace. I think, again, hard to look at on a quarter by quarter basis, of course, because of the lumpiness of execution. Sorry, lumpiness of converting awards to contracts. Other than that, I think it should be pretty well normalized. Yeah. Yeah. From a high level, the activity is picking up. The market, of course, is expanding, and thereby, I think you will see it first in the awards, then ultimately in executing contracts. It does take some time. Everything that's going on with the administration, I'd like to point out, it creates a great environment, and you will see probably the federal sector moving. It does take two to three years to see the impact and you execute those contracts. That's why I pointed out the C&I markets, because of the themes are changing, and it comes from the top. We see more activity in that level. I wouldn't be surprised that you'll see more of those contracts coming to fruition sooner than any other contracts. Very helpful. Thank you. Turning to the energy assets and the growth trajectory there. I think one point worth considering is you put a very high probability of completion on your assets in development. You've added two RNG projects to the pipeline here. We should assume you've got a pretty good line of sight to getting those done. What is sort of reasonable to expect now in terms of the run rate on getting new projects, RNG projects done? How many do you think you can add to the portfolio per year, say, over the next two to three years? What does the run rate look like? Look, we've been trying to grow our asset portfolio at least 20% per year, a little bit better. What is happening, and that's what this year we said 60 MW-80 MW installed on service, because we had about 20 MW that slipped because of the interconnection with the utilities. As you can understand that with the COVID-19 situation, that's very hard to interconnect them. We have about 20 MW that shifted from last year to this year, which most likely will be up and running in the middle of the second quarter or so. In that business, we transformed the whole company now to be able to develop assets across the country, where before we only had the east group and the Federal. I think one of our people put it best. I think we are getting to what I will call a little bit of an inflection point when we place one point where we developing some of these assets. We gain pretty good traction in the marketplace, and you see a very good pickup. I was very happy to see the addition of two RNG assets into the development on this last quarter. Doran, you might want to add. No, I think that you're correct. The funnel is actually pretty healthy on both the RNG side as well as other energy asset technologies. I think we mentioned that we're expecting to spend, call it $200 million-$250 million in CapEx on assets this year. I would say that the cadence we're expecting is perhaps two plants being placed into service in 2022. After that, call it two to three more a year is the cadence that we're aiming for. Beyond that, I don't think we can give a whole lot more color. Right. You're getting two plants done this year and then another two in 2022? Are you actually going to do. One this year. One this year. Okay. Yeah. One that hit mechanical completion in December, but we're commissioning now. Yep. Very good. It'll be two next year. All right. Great. Thanks. I'll turn it over. Thank you. Thank you. You're welcome. Our next question is from Eric Stine with Craig-Hallum. Your line is open. Hi, everyone. Hi, Eric. Hi, Eric. Hey. Maybe just following up on the RNG question or line of questioning there. When you think about it going forward, is there any way to break down the pipeline or how you think things might play out, landfill versus dairy RNG, just thinking about how much more valuable the credits are, especially LCFS? Yeah, sure. I think it's fair to say that on the dairy side, what the activity we've been seeing is early-stage, and we're evaluating opportunities there. We've got a couple of interesting things that we're looking at, nothing that's included in our 351 MW. Our focus is based on the historical relationship we have with landfill companies. We have the expertise on the development, the construction, the operation, and maintenance for these plants at the wastewater treatment plants and landfills. We're obviously trying to capitalize on that, and that's where the bulk of our pipeline will come from. I think, however, on the ag side, we're evaluating it for sure. Got it. Okay. Then maybe just back to results. In the previous questions, you were talking about backlog expectations for the year. Just as you think about 2021, pretty impressive that you continue to pull work forward, but yet you gave a guidance for pretty substantial growth year-over-year. You called out C&I, but just wondering, what are some of the other areas that you think will lead results in 2021? Well, 2021, as a starting point, our 12-month contracted backlog is sitting around $600 million. Right. Which is better than it was last year. Yeah. We have contracted O&M, contracted PPA revenue, et cetera, which helps us build up that revenue projection there. The rest of it, I can't say that it's a particular sector that will bring in the additional growth. However, I think the broad-based momentum behind the industry and the business and what we see in our funnel is what drives us to believe in the numbers that we put forward. George, I don't know if you have No, basically, it's uniform across the regions and across the customer segments. The only one that I would say it's picking up at a little bit faster pace than the rest of the segments is the C&I market. Of course, we were starting with a smaller base to begin with. The activity level is very good. The only drawback with those people is that they move fast, but most of the projects, they end up being design-build. They move faster through the pipeline and thereby, of course, they help a lot the top line as well as the profitability of Ameresco, Inc., otherwise the organization. Yeah. You mentioned administrative backdrop. You mentioned some improvement as things recovering as we come out of COVID-19. Other thoughts about why now? Is it that C&I customers, you focused on it more, they realize increasingly Ameresco's capabilities? Just curious why, because it sounds like 2021 is really going to be an inflection point in that business. Many of those companies now, they are worried, they're talking about sustainability and their ESG reports themselves. They're beginning to talk about it, and once a message is driven from the top, I mean, the administration, people listen and react to it. In addition to that, and as I was trying to point out in my remarks, the economics. For example, solar, the distributed energy resources, solar installations across the country right now on some of the largest commercial industrial customers, it makes economic sense for them. You take that, the battery storage. Many of them, they're concerned about resiliency. That's becoming a big issue, and I think as we move forward in this market, that might become one of the dominant issues, because distributed energy resources and resiliency will probably be the driving force behind having a reliable energy resource in the future. I think a lot of people, industrial commercial customers, are getting concerned and they're developing projects. In economics, they end up canceling out. I can tell you situations where customers, they're saving a lot of money while they're installing some reliability. Got it. Thank you very much. Welcome. Thanks, sir. Our next question is from the line of Chris Souther with B. Riley. Your line is open. Hey, guys. Thanks for taking my question here, and congrats on the results and outlook here. Maybe you could just touch quickly on, I guess, the cadence for the year. It sounds like the first quarter is going to be a bit weaker. Would you be able to provide just a bit more color on what the cadence you think will be for the year at this point based on what's contracted and how the visibility might have been improving with some of the weather stuff starting to improve over the last week or two here? Yeah. I think the bit that I can talk about is that as you may have appreciated from prior years, the business does tend to be a little bit back-ended toward the latter half of the year. In terms of energy assets, yes, of course, weather will impact production, et cetera. As we look at completing the RNG plant this year, obviously that will result in a pickup that's going to be back-ended. Furthermore, I think the installation, the commercial operation date of a lot of the energy assets, the other energy assets we're going to be putting in service, will also be somewhat back-ended. You might see some additional pickup there later in the year. Kind of beyond that, I'm not sure, Mark, if you have any additional comments on seasonality. No. I think we would expect it to follow a normal seasonal pattern. Like I said, I think we identified some of the unusual items in Q1 just from a year-over-year. Yeah. The cadence of the year should play out over a normal seasonal pattern. Got it. Okay. Looking at the backlog being kind of down year-over-year, obviously the moving pieces with the large contracts last year, and having more of the contracted backlog for this year compared to a year ago. Maybe you can kind of just walk through mix within the contracted backlog between commercial, Federal, any kind of color you could provide there. I'm kind of curious if in the fourth quarter, based on the election there, was any kind of slowdown in the Federal, just awards, just kind of waiting to see what the new administration wanted to do or anything like that where we could see kind of a pickup from the Federal side over the next couple of weeks, months here- Yeah. Executive order, different things like that. Wanted to see what your thoughts were there. A good couple of things on that. Last quarter, last year, the fourth quarter, we had the huge three large federal contracts that got to be signed. Actually, Mark is pointing out there were four contracts, large contracts that were signed. By the way, those contracts by themselves, they contributed, as soon as they were signed, $30 million to the top line and a very good profitability. This year, because of COVID-19, we had a couple of large federal contracts. We were expecting them to be executed last quarter, but now most likely they will be executed this quarter. We do some slippage on the executed contracts because of the COVID-19 situation. It indicates even though we had all those constraints, the awarded backlog did pick up. The 12-month, the driving force for the numbers for this year is the 12-month contracted backlog, and we started the quarter at a higher level than we started last year. That, I think, that's very telling. In addition to that, of course, we have higher backlog on the O&M, higher revenues coming from the assets we operate. We are forecasting a pretty good year. I think as time goes on and we get out of the COVID-19, I think the market drivers are strong enough that you will see a pickup, let's say, if COVID-19 goes away by the middle of the year or later. Okay. No, that's very helpful. Maybe just, are you seeing any impacts from the recent activity in Texas, obviously, bringing to the forefront some of the solutions you might be able to provide around resiliency, things like that? I'm just curious, are you seeing increased interest, Texas, California, other places that have been? No question about it. As Doran pointed out on his remarks, the cold weather, the weather affected us this year. We lost the San Antonio plant for a few weeks. Actually, we lost The Woodlands project due to cold weather for, I think, a few days, but we had a hard time getting some of the equipment there delivered to the site. We had some impact because of the weather, but we took into account that by the end of the year, we will catch up in our metrics. We are not worrying about that. This is why I am so excited about the distributed energy resources and where the market is going. For example, you see what happens, what I call a single contingency, which is the weather, can take out a whole grid. Just picture when we have all the wind farms up and down the East Coast, which are estimated to be 30,000 MW. If we do not have some kind of backup through distributed generation and some kind of distributed energy storage, we're going to be in big trouble. The 1965 blackout east of the Mississippi will be reduplicated. That's why you see more. Look, every base that we do right now has resiliency. That's one of the driving forces. Some of the hospitals, some of the colleges, universities, and so on, they are all concerned about resiliency. Because what we saw in Texas, we saw the fires in California, and don't forget, we saw the Sandy storm up here in New Jersey and New York a few years back. I think you're going to see those occurrences come to pass more often unless we do something about it. That's very helpful commentary. I'll hop in the queue. Thanks, guys. Thank you, Chris. Our next question is from Jed Dorsheimer from Canaccord. Your line is open. Hey, guys. Congratulations on just a fantastic quarter and year. Nice to see. Thank you. Just a couple questions. A lot have been asked, but I guess, maybe just in a different way, the COVID redundancies, Doran, in terms of OpEx. How should we think about that in terms of duplicative work that needs to occur to keep your employees safe once we kind of get through the virus and on the other side? Jed, to be honest, I haven't really been thinking about it in terms of duplication of any particular element. I think that when I look at OpEx and I look at productivity, as we kind of emerge and we start to see potentially more people at the offices and certainly more people in the field, there is an element of productivity associated with the continued, what I'll call hyper-engagement of employees who work from home. All of the technological savviness that's come with everybody kind of reacting the way that they have is going to carry through, and frankly, I think is going to make the company, not just our company, but businesses as a whole, more productive. I think that we'll see some creep back up in the travel budgets, which will be necessary. Nevertheless, I think that it's not something that I'm necessarily putting my finger on a number. I think it gives me comfort in terms of the stability of our OpEx. Got it. I'm assuming guidance was done post the ERCOT issue in Texas. I'm just wondering, as you think about, and George, maybe for both of you, as you think about 2021, you were probably just on the heels of kind of seeing that, or you're still in process in terms of the fallout and exactly what went on in that market. Is that fair to say? I'm just trying to figure out how much of that is probably baked into the expectations. Well, I think as you might expect, we did a pretty deep dive. Right. We figured out where we are, where we're going to be, and because we have people on the ground, we get a pretty quick reaction in terms of finding out all the different elements, the puts and takes of operating these plants, what was impacted, what wasn't impacted, how quickly it's going to come online. We did a pretty quick deep dive. We've taken all of that into account here. Got it. George. Yeah. You mentioned probably my favorite topic, which is resiliency versus efficiency. The two are paradoxically opposed. We've been talking so much about efficiency and the move to more efficient systems. I think many mistake the idea that that move is at the cost of resiliency. In essence, any of these systems we want to think about what the trade-off is on how we're moving to efficiency and what that means in terms of the cost of the resiliency. You bring up a great point in terms of centralized versus distributed, which has a major role in that. Our policies right now don't reflect that level of understanding. I'm just wondering, I'm assuming as kind of a trusted partner, as you go through in the discussions, that you're able to really help those customers and I guess my question is, how much do you see sort of start of project versus what the customer thinks they want, versus the value that you're able to create in terms of where they end up? Yeah. Very good questions. I will agree with you that some of the energy policies and some of the state programs and so on, that they continue to favor what I would call large renewable asset development. For example, the great resource to develop all those wind farms along the up and down the East Coast, which they estimate 30,000 MW. Every time we have a hurricane or an ice storm, whatever, all of those will be out. At the end of the day, I think that people will realize that the distributed energy resources with the battery storage will make much more economic sense. You will see more policies. That's why I started bringing it up, because not too many people think about it, and I think we will see a change on the attitude of the distributed energy resources. On the other thing, though, with the energy efficiency and resiliency, they are very well related. Actually, if you tackle a particular facility with the energy efficiency, you reduce their consumption by 30% and thereby the demand by 30%. Now, you have to back up 30% less of load that you would otherwise have to back up. In addition to that, with the smart controls that we have today, that's why the microgrids are so important. Now, you can shut off some of the loads that are not as critical. What you have to back up is even less than that. They are very interrelated. I agree with you, people are not focusing yet. Before, when I used to be a planner for the New England Electric System, we used to plan the system for a single contingency, otherwise lose one of the largest power plants, which 1,200 MW back then, Seabrook unit. After what happened, a couple of outages that we had, we went to double contingency. Now, a single contingency, you take 30% of the load off. That's a great point. It's a market that's going to develop. It's a market that's going to evolve and develop much faster than people anticipated because of resiliency. Great point. The only way it's going to work. Yep. Go ahead. That's why I've been saying, the missing puzzle that's going to put this energy transformation to work is effective storage, energy storage. Great. I'll jump back in queue. Thank you, guys. Thank you, Jed. Our next question is from Craig Irwin with Roth Capital. Your line is open. Good evening, and thanks for taking my questions. Hi, Craig I wanted to discuss the operating expenses a little bit. In 2020, on a full-year basis, you were actually down couple hundred thousand over 2019 levels. I imagine COVID, a lot of the travel, and some of the other business development expenses probably coming off. Can you maybe describe what contributed to that and the 220-basis point leverage you saw in revenue for operating expenses? Well, Craig, I think the COVID-related travel savings were definitely a portion of it. The other thing, when you look at all the line items across our operating expenses, one of the largest items has to do with the utilization of staff. When you look at our utilization, when we have folks working on proposals, that kind of human capital cost ends up in OpEx. If folks are working on awarded projects or contracted projects, those costs actually end up being capitalized into the projects. In 2020, because of COVID, I think as we all know, proposal activity was down, but construction and contracted backlog execution was up. You kind of saw a little bit of a shift on that number. I would suspect that that accounts for most of that, with the exception of maybe the reduced travel expenses. Oh, yeah. Of course. The primary driver is the shift. Yeah. Look, when the COVID-19 came to pass, we said, okay, we did see a slowdown on basically having access to the customers, and they didn't evolve into the internet and the Zoom calls and so on until about 6- 10 months into the COVID-19. We said, okay, we will shift some of those people that work in developing projects to executing projects. That's why you saw the pickup in our revenue last year, the way we did, and the execution that we had. It helped a lot refocusing good chunk of the people. I don't know if Mark wants to add any more color on. I think that's right. Yep. Just to follow up on that, is it fair that that obviously continues in 2021, as we see a similar dynamic, some very strong work activity out there and most of us working from home or at least social distancing at work? Yeah. Okay. You know, we thought about that when we were developing the plan about a couple of months ago for this year and beyond. But we felt that we have to start refocusing again in developing the pipeline and the awards, and that's why we saw a little bit of a pickup this last quarter, and we continue that. Look, we want to become a dominant player in this marketplace, and we have to make the investments in developing the pipeline and the business. Understood. This quarter, if we looked at your implied guidance, right, for the quarter, you were $32 million above the top end of the range or $52 million above the middle of the range. Very nice finish to the year. You actually saw a gross margin improvement sequentially up 30 basis points. Last year, you were sort of middle of the range, and you saw gross margin deterioration sequentially in the fourth quarter. Can you talk about the contributions? What's different this year versus last year? Is this really business mix or is there maybe an execution component? Were there any project changeouts in this 18.5% gross margin number that you printed? No, it wasn't project changeouts. It was partly because last year. Go ahead, Mark. Yeah. Last year, if you remember, at the very end of the year in Q4, margins deteriorated because we had some adjustments related to the RIN prices. I think, Q4 obviously looks quite low. I think if you look through 2020, I think the margins, there were no, what I would characterize as one-time unusual items. It was really just a function of the mix of the projects that we had. I think that as we've been talking about, there's a pretty good mix of design-build in our projects, but some of that is offset by some of the advanced technology projects and some of our federal projects. Yeah, I think when you come into 2020, it was a little bit more normalized coming out of the end of last year, just simply because of the RIN prices. Of course, during 2020, there was certainly some improvement in the RIN prices that helped contribute to a gradual improvement over time with the margins. Okay, excellent. My last question, everybody wants to talk about renewable gas, and I, too, should express my congratulations for the new projects in the pipeline. I guess the most important question is, where are you hedged, right? Can you maybe update us on whether or not you've taken the opportunity with the nice rebound in D3 RIN prices to go ahead and lock away more of your longer-term exposure? Do you have much exposure to the spot RIN market, if you could approximate that? What other key items on the risk side, either to the plus or minus, do you think we need to look at for those three projects that are operating? I will give it a shot, then Doran can probably add some more color to it. Look, RIN prices are up to $250 right now. They're way up. We should point out that we have hedged almost 40%. As we came into last quarter of last year, if you recall, we had hedged up to 78%. We try to be a little bit conservative and have sufficient hedging. The long-term contract opportunities are out there, but the discounts are so large that at this point in time, I think we will wait for a few more months to see what happens. We're watching the market very closely. We still think it's a great market, and it contributes much more to the profitability of the overall business than the other assets that we are doing. We watch it very carefully. The market, I think, is developing, it's evolving. One of the immediate impacts because of this new administration were the RIN prices. Of course, it's going to help a lot this year. We're watching it very carefully because we want, at the end of the day, to hedge or have longer-term contracts, hopefully seven years plus, and thereby we'll be able to get better project financing for those particular projects. That way, we leverage our equity. It takes us a little bit further than we would otherwise go. Doran might want to add some more color to that. It's a key issue that we address every day. Yeah. I think the pattern that we've had over the last couple of years, I think we're likely to continue it because of what George mentioned about the gap between the kind of the discounts that the long-term contracts are looking for. I think we'll continue to be partially hedged, partially on some sort of medium-term offtake contracts, and the rest of it we'll continue to monetize or hedge on a short-term or one-year basis as we go. Watching, you can imagine not just the RIN prices, but also the activity in Washington to see what the next move might be for the RVO, et cetera. Excellent. Well, very happy to hear you're only 40% hedged. The closing number today was $260 for 2021 RINs. That is a robust price after where we started last year. Congratulations on a really solid closeout for 2020. Your team really executed. Thanks, Craig. Thank you very much, Craig. Our next question is from Shahriar Pourreza with Guggenheim Partners. Your line is open. Hey, guys. Hey, Shahriar. Hi. How you doing? Good. Just on the follow-up on the energy assets and sort of the cadence of new projects, any thoughts sort of about using your own currency to kind of speed this up, given where shares are trading right now? I mean, what's sort of the governor with not increasing that cadence given the opportunity set that's out there, both on the solar and RNG side, especially as we're thinking about beyond 2021 COVID-19 impacts? On the energy asset side, this is Doran- Hey, Doran. Speaking for a second. On the energy asset side, as you probably have seen some market activity, one thing that we don't want to do is overpay for assets. I don't think that the company has gotten to where it is today without the strong ability to actually develop projects on a greenfield basis. We're going to continue to do that, and that allows us to map out our CapEx as needed on development as well as construction as we actually develop these things ourselves. That's kind of first and foremost what I would say is, particularly on the solar side, you have to be very careful when you're looking at inorganic situations, right? In terms of financing, look, we have obviously the multitude of financing sources that we can tap. We talked about project financing, we talked about tax equity. Certainly, the capital markets are friendly. We consider ourselves to have a lot of options, but we're not being impatient. Got it. Just lastly, the Newport News project and the O&M opportunity look like a strong win. How do we sort of think about maybe the cadence for other DoD opportunities like Norfolk heading into the new year, and maybe just the general shaping of the RFPs over the course of the year? Very healthy. It will pick up even more. I think what you will see, in the previous administration, resiliency has become the number one issue, and the infrastructure upgrades, where I think it's going to happen with this administration, not only will it continue on that, but you will see more and more projects having more renewable aspect in the request for proposals. Because in order to achieve the carbon neutrality, with energy efficiency, maybe we get you up to 50%. Otherwise, carbon reduction. The rest of that, you need some kind of renewable resource. The bases and the federal government, they are ideal for locating, whether it's solar, biomass, biogas, battery storage, and so on. I think they can establish a great example and drive the market in that way. I don't think that there's any particular pattern that we can point to in terms of the way that the year is going to go. The good thing about Ameresco is that they're a very highly diversified business, and we're operating in a multitude of regions, including Canada, the U.K., across the United States, plus the Federal Government business. There's energy asset opportunities being generated out of all of those regions. There's energy-as-a-service opportunities being generated out of all of those regions. When you look at the way that the proposal funnel is and the backlog funnel kind of illustrates itself, the projects large and small, and a diverse pool of opportunities. It just means, on the whole, we're going to see kind of steady progression throughout the year with what you might appreciate from looking at past years is, occasionally you will have, whether it's Federal or otherwise, a lumpy project that moves one quarter to the next quarter or what have you. Looking over the long term, I think that we're comfortable with a pretty smooth cadence and growing. Yeah. Terrific. Thanks, guys. Questions were answered. Appreciate it. Thanks, Shahriar. Thank you. Our last question is from Pavel Molchanov with Raymond James. Your line is open. Thanks for taking the question. One more about RNG. Traditionally, of course, California has been the epicenter of the RNG landscape because of the LCFS. I guess the headlines recently is Washington State may be next in establishing an LCFS. I'm curious how you evaluate that opportunity and if you've started to scope out any potential locations in Washington, if indeed that legislation were to pass. No, it's a good question. Yeah, I mean, it's a good question. I mean, I don't think we can go specific on what's not in the 351 MW to talk about particulars here. The move in Washington by the House there, great news, obviously. Watching very closely the other markets where we anticipate similar moves to be made. It's fair to say that the development funnel is looking at LCFS markets and non-LCFS markets for potential development opportunities. We scope, we run pro formas, and we consider everything in multiple jurisdictions. An LCFS is certainly a great add-on to the revenue stack. In many of these circumstances, if the design is right, if the distance to the pipeline is right- It is. If the distance to the landfill is right, you might not need the LCFS. We're developing kind of across the board. I think that situates us quite nicely to take advantage of these situations when they arise or when they come to their conclusion, which I think we're all hoping Washington will. Yeah, it's pretty exciting, to be honest. This is where we take great advantage of the platform that we have developed in Ameresco. Let's say that particular state opens up, we do have the resources, we have the local presence, and so on. That's what gives Ameresco a great leverage. Basically, when a good solar program comes, let's say, out in Colorado, we have the local presence, we can deliver. The same with green gas and so on. In order to be effective in getting those projects, you have to get local presence. That's why I keep telling our organization, we have a great platform right now. Let's maximize its use as these various, I call them incentives, develop across the country. Having asked about Washington State, I'll also ask about the other Washington. Congress, back in December, extended the Section 179D efficiency deduction. I realize it is a little more obscure compared to the solar and wind credits, but I'm curious, do you guys recognize Section 179D in your financials? Or do your corporate customers recognize that on their financials? How does it work? No, it's a great question. This is Mark. Well, yeah, we do for our municipal and federal customers, where they have allocated the benefit, since they cannot realize the benefit of that as a non-taxpayer. We work with them to get that benefit allocated on certain projects. We, yeah, we most certainly recognize that within our provision and have for some time. I think we've been fortunate to see, over time, that deduction be extended and now having it be a permanent deduction, yeah, it's certainly nice to have going forward. Yeah, that has certainly moved into our tax rate. Yep. We were very pleased to see it happen. Let's put it that way. Thank you, guys. Thank you. Thank you. That's the end of our Q&A session. Ladies and gentlemen, thank you for your participation today. This concludes today's conference call. You may now disconnect. Have a great day and stay safe. Thank you. Thank you. Great. Okay, now.