Ameresco, Inc. (AMRC)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included in Item 8 of this Report. Some of the information contained in this discussion and analysis are set forth elsewhere in this Report, including information with respect to our plans and strategy for our business and related financing, and includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” included in Item 1A of this Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

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 our business benefits from regulatory measures and various tax credits, such as the Investment Tax Credit (“ITC”) and the Production Tax Credit (“PTC”) and funds appropriated through the IRA and the IIJA. The scope of these tax credits and the availability of funding through the IRA and IIJA may evolve with the new U.S. administration. Recent presidential executive orders that directed a review and potential termination of funds appropriated through the IRA and the IIJA have resulted in some pauses and cancellations of our projects. We also anticipate that federal workforce reductions and other cost savings initiatives may cause additional delays, extend our sales cycles and impact new award activity. However, we continue to believe there is a long-term demand for our budget neutral, cost-saving solutions.

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 any 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

28

Table of Contents

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.

During the year ended December 31, 2024, we were impacted by supply chain disruptions and varying levels of inflation, as a result macroeconomic conditions, causing delays in the timely delivery of material to customer sites and delays and disruptions in the completion of certain project, and increased shipping and transportation costs, as well as increased component and labor costs. This negatively impacted our results of operations during the year ended December 31, 2024. We expect to experience continued supply chain challenges beyond this year. 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.

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

Climate Change and Effects of Seasonality

The 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. The sustainability efforts are impacted by regulations, and changes in the regulatory climate may impact the demand for our products and offerings. 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.

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.

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. The SCE Agreement also 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

29

Table of Contents

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 year ended December 31, 2024, we granted 791,503 common stock options to certain employees and 122,366 restricted stock units (“RSUs”) to our employees and non-employee directors under our 2020 Stock Incentive Plan. Our stock-based compensation expense increased from $10.3 million for the year ended December 31, 2023 to $14.1 million for the year ended December 31, 2024. Stock-based compensation increased in 2024, primarily due to the increase in options and RSUs granted, partially offset by a decrease in the weighted average fair value of stock options and RSUs granted.

In addition, our unrecognized stock-based compensation expense decreased from $30.1 million at December 31, 2023 to $28.0 million at December 31, 2024, and is expected to be recognized over a weighted-average period of two years. See Note 14 “Stock-based Compensation and Other Employee Benefits” 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:

Total project backlog represents energy efficiency projects that are active within our sales cycle, either full-contracted or awarded. 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 recently has been averaging 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 subcontractor, what equipment will be used, and assist in arranging for third party financing, as applicable. Recently, awarded projects have been taking an average of 12 to 24 months to result in a signed contract and convert 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 becomes 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 revenues that we expect to recognize in the next twelve months from our fully-contracted backlog. See Note 2 “Summary of Significant Accounting Policies” for our revenue recognition policies. See

30

Table of Contents

“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.

Assets in Development

Assets in development, which represents the potential design/build project value of small-scale renewable energy plants that have been awarded or for which we have secured development rights, were estimated at $2.3 billion as of December 31, 2024, and $2.4 billion, including $90 million attributable to a non-controlling interest, as of December 31, 2023. The portion related to spending for EaaS assets was approximately $538.4 million and $399.8 million at December 31, 2024 and 2023, respectively. These are also important metrics because they help us gauge our future capacity to generate electricity or deliver renewable gas fuel which contributes to our recurring revenue stream.

Results of Operations

The following table sets forth certain financial data from the consolidated statements of income for the periods indicated (1):

Our results of operations for the year-ended December 31, 2024 reflect a year-over-year increase in terms of revenues, operating income, and net income attributable to common shareholders. All financial result comparisons are against the prior year period.

•Revenue: total revenues increased primarily due to a $337.4 million, or 34%, increase in our project revenue attributed to the timing of revenue recognized based upon costs incurred to date relative to total expected costs on active projects.

•Cost of Revenues and Gross Profit: the increase in cost of revenues is primarily due to the increased project revenues described above, however, our gross profit as a percent of revenues decreased primarily due to cost overruns on two large-scale legacy projects and a mix of lower-margin projects.

•Earnings from Unconsolidated Entities: the decrease in earnings from unconsolidated entities is due to the sale of one of our equity method investments during the first quarter of 2024.

•Gain on Sale of Business, Net: in 2024, we divested an energy technology and advisory services company and recognized a gain of $38.0 million, net of transaction expenses.

31

Table of Contents

•Selling, General and Administrative Expenses: the increase is primarily due to higher net salaries and benefits of $8.3 million, of which $3.8 million is from increased non-cash stock-based compensation expense, higher insurance of $1.6 million and occupancy costs of $1 million, partially offset by a decrease in professional fees of $2.0 million.

•Asset Impairments: This year includes long-lived asset impairment charges of $12.4 million recorded in 2024 primarily related to one of our landfill gas to energy assets and solar panels purchased under the IRS safe harbor provisions for renewable energy projects. Last year included long-lived asset impairment charges of $1.6 million related to two of our landfill gas to energy assets, and a goodwill impairment charge of $1.6 million, which was $2.2 million after taking into account the effect of deferred income taxes related to one of our reporting units.

•Interest and Other Expenses, Net: Interest and other expenses, net, includes gains and losses from derivatives transactions, foreign currency transactions, interest expense, interest income, amortization of financing costs and certain government incentives. Interest and other expenses, net increased primarily due to higher interest expenses, net of interest income of $28.9 million related to increased levels of project debt and higher rate paid on our second lien term loan, and foreign currency transaction losses of $3.8 million versus gains of $0.6 million 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 generated tax credits and differences between financial accounting and tax reporting requirements. The tax benefit was lower in 2024 as compared to 2023 because we incurred additional tax expense from the deferred effect of an increase in our future effective state tax rates resulting from apportionment changes and the Section 179D Energy Efficient Commercial Buildings Deduction available for 2024 was lower due to the timing of project completions, offset by higher tax credits generated as a result of new U.S. Treasury regulations related to renewable gas projects. The tax benefit for 2023 was favorable, primarily due to higher deductions under Section 179D and deferred state tax benefits resulting from reduced state tax rates.

•Net Income and Earnings Per Share: Net income attributable to common shareholders decreased due to the reasons described above. Basic earnings per share for 2024 was $1.08, a decrease of $0.12 per share compared to 2023. Diluted earnings per share for 2024 was $1.07, a decrease of $0.10 per share, compared to 2023.

Business Segment Analysis

Our reportable segments for the year ended December 31, 2024 were North America Regions, U.S. Federal, Europe, and Renewable Fuels (formerly Alternative Fuels). On January 1, 2024, we changed the structure of our internal organization, and our U.S. Regions and Canada are now included in North America Regions. Additionally, our Asset Sustainability Group was formerly included in Canada, but is now included in “All Other”. As a result, previously reported amounts have been reclassified for comparative purposes. See Note 20 “Business Segment Information” for additional information about our segments.

Revenues

•North America Regions: the increase is primarily due to a $243.3 million, or 47%, increase in project revenues attributable to the timing of revenue recognized based upon costs incurred to date relative to total expected costs on active projects.

•U.S. Federal: the decrease is primarily due to a $48.2 million, or 14%, decrease in project revenue attributable to the timing of revenue recognized as a result of the phase of active projects compared to the prior year, partially offset by increases of $11.1 million in energy asset revenue and $6.6 million in O&M revenue.

•Renewable Fuels: the increase is primarily due to higher project revenues of $43.4 million and a $15.6 million increase in energy asset revenues resulting from the continued growth of our operating portfolio, increased production levels and stronger pricing on renewable identification numbers (“RIN’s”) generated from our renewable natural gas facilities.

32

Table of Contents

•Europe: revenues increased primarily due to higher project revenue of $100.1 million, or 72%, resulting from the timing of revenue recognized based upon costs incurred to date relative to total expected costs on active projects in the United Kingdom compared to the prior period.

•All Other: All other revenues were higher primarily due to increased consulting revenue.

Income (Loss) before Income Taxes and Unallocated Corporate Activity

•North America Regions: the increase is primarily due to the higher revenues described above, offset by lower gross profit as a percent of revenues primarily due to cost overruns on two large-scale legacy projects and increased depreciation and intangible amortization and interest expense, and a loss on derivatives this year versus a gain last year.

•U.S. Federal: the decrease is due primarily to the decreased revenues described above, higher interest expense, net of $3.6 million and lower earnings from unconsolidated entities of $1.1 million.

•Renewable Fuels: the decrease is primarily due to higher asset impairment charges of $7.6 million on one of our landfill gas to energy assets and higher interest expense of $9.5 million, partially offset by the higher revenues described above.

•Europe: the decrease is primarily due to a higher mix of lower-margin projects, increased salaries and benefits, net, and higher interest expense, partially offset by decreased bank discount fees.

•All Other: the increase is primarily due to a gain of $38.0 million on the sale of business, net and increased consulting revenue.

•Unallocated corporate activity includes all corporate level selling, general and administrative expenses and other expenses not allocated to the reportable segments. We do not allocate any indirect expenses to the segments. Corporate expenses increased primarily due higher interest expense, net of $11.1 million, higher net salaries and benefit costs of $7.6 million, including an increase in non-cash stock-based compensation expense of $3.8 million, and foreign currency transaction losses of $2.5 million versus gains of $0.5 million last year.

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 “Energy Asset Financing” below).

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 February 2026.

33

Table of Contents

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.

Divestiture of a Business

On December 31, 2024, we completed the sale of a business. As a result of this transaction, we received net proceeds of $54.2 million, and recorded a gain of $38.0 million, net of transaction costs of $2.2 million, from this disposition. At closing we prepaid $57.0 million towards our senior secured term loan.

August 2023 Purchase and Sale Agreement

On August 4, 2023, we entered into a purchase and sale agreement to acquire an energy asset project and the right to acquire 100% of the stock of BCE in a two-phased transaction, exclusive of each other. Phase 1, the purchase of the energy asset project, closed on August 4, 2023 and did not constitute a business in accordance with ASC 805-50, Business Combinations.

The adjusted purchase price for phase 1 was $88.0 million, of which $5.0 million was paid in cash, $46.7 million was financed through a seller’s note, and we assumed a construction loan on the energy asset project for $36.3 million. The construction loan was converted to a term loan in February 2024 and has a maturity date of April 2030. We also received cash of $11.2 million. In January 2024 we paid off the remaining balance on the seller’s note in the amount of $29.4 million. We sold back to the seller ITCs for the project acquired as part of this transaction for the fair market value of these credits and we received $21.0 million in early 2024 for the transfer of these credits. In addition, we assumed a land lease for the energy asset project. See Note 8 “Leases” for additional information on the lease.

In the second phase, which closed on January 12, 2024, we acquired BCE, including its interest in one of our consolidated joint venture and its interests in project subsidiaries developing or with rights to develop solar, battery, and microgrid assets for a purchase price of $39.1 million, of which $6.6 million was paid at the closing. The remaining $32.5 million was financed by a seller’s note accruing interest of 5.0%, through August 2024 and was adjusted to 9% per annum until the note was paid off in full in November 2024. We may be required to make additional contingent payments for this acquisition based on certain projects achieving commercial operation and if the projects qualify for higher energy tax credits than expected.

Senior Secured Credit Facility — Revolver and Term Loans

During the year ended December 31, 2024, we entered into a number of amendments to our fifth amended and restated senior secured credit facility (the “Senior Secured Credit Facility”) , which extended the maturity date of our delayed draw term loan A (“DDTLA”). The overall rate table for all loans under the agreement was also increased by 0.25%. The amendments increased the total funded debt to EBITDA covenant ratio from a maximum of 3.50 to 3.75 for the quarter ending December 31, 2024, and 3.50 thereafter. On June 28, 2024, we entered into amendment number six to the fifth amended and restated senior secured credit facility to modify certain of the covenants and other terms to permit us to enter into the second lien credit agreement (as defined below) and to incur indebtedness and make certain other conforming changes in connection with our entry into the second lien credit agreement. The remaining balance on the DDTLA of $15 million was paid off with the proceeds from the second lien credit agreement.

As of December 31, 2024, the balance on the senior secured credit facility was $148.0 million and we had funds available of $21.1 million.

On January 23, 2025, we refinanced our Senior Secured Credit Facility by entering into a sixth amended and restated senior secured credit agreement (“Restated Credit Agreement”). At closing we paid approximately $2.0 million in lender’s fees.

The restated credit agreement amended and restated the Senior Secured Credit Facility to provide for the following facilities:

•a $225 million revolving credit facility, maturing on December 28, 2028, and

•a $100 million term loan A, maturing on December 28, 2028.

Second Lien Term Loan

On June 28, 2024, we entered into a second lien credit agreement which provided a term loan in a principal amount of $100 million with a maturity date of June 28, 2029. The term loan bears an interest rate of Secured Overnight Financing Rate (“SOFR”) (4.692% at December 31, 2024), plus an applicable margin of 5.875% per annum. Interest is payable quarterly and unpaid interest

34

Table of Contents

and principal is due in the aggregate on June 28, 2029.

Energy Asset Financing

Energy Asset Construction and Operating Facilities, Sale-leasebacks, and Financing Leases

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 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 as described in more detail below.

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. 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.

Other than what is included above, significant financings during the year ended December 31, 2024 were as follows:

•April 2023, 6.82%, due July 31, 2024 - one of our consolidated joint venture subsidiaries (“JV”) entered into a construction loan agreement with two lenders for a principal amount of up to $140.8 million under an energy asset credit facility. We acquired the remaining interest in this JV in January 2024 when we closed on the acquisition of BCE. In August 2024, this construction loan was repaid through a sale-leaseback financing under lease agreements entered into between the same parties, as part of the original closing. See “August 2024 Master Sale-leaseback” below.

•August 2023, 8.53%, due August 31, 2026 - we entered into a construction and development loan agreement, which provides a loan in a principal amount of up to $300.0 million. At the closing, we drew down $200.0 million under this facility, of which approximately $187.0 million was used to reimburse Ameresco for development and construction costs. On December 18, 2024, we amended the loan agreement to increase the principal amount up to $400.0 million, extend the maturity date to December 15, 2027, and set a minimum rate of interest at 6.00% and a Term SOFR Floor of 2.00%. Additionally, an accordion option providing for an option to increase the principal amount to $500.0 million, for which we paid a $0.3 million fee. The accordion option can be exercised no later than June 18, 2026 and only if certain circumstances are met. At closing, we incurred $3.2 million in lenders fees and debt issuance costs. The obligations under the loan are guaranteed by all the subsidiaries that are part of the loan portfolio and are secured by the subsidiaries’ assets as well as Ameresco Inc.'s equity interest in the subsidiary which is the borrower entity. In the case of default under the facility, a default under our Senior Secured Credit Facility or a change in control of Ameresco, Inc., we are required to make capital contributions to the borrower entity who then would be required to use the proceeds from the capital contributions to repay the construction and development loan.

As of December 31, 2024, our total energy asset construction and operating facilities outstanding was $1.0 billion. See Note 9 “Debt and Financing Lease Liabilities” for additional information about these loans.

Sale-leasebacks and Financing Leases

We have entered into sale-leaseback arrangements for solar PV energy assets with multiple investors and in accordance with Topic 842, Leases, all sale-leaseback transactions that occurred after December 31, 2018, were accounted for as failed sales and the proceeds received from the transactions were recorded as long-term financing facilities.

During the year ended December 31, 2024, we discovered a defect in a Battery Energy Storage System (“BESS”) that we installed for a customer under a long-term power purchase agreement for a project financed under the August 2018 master sale-leaseback agreement. As a result, the BESS had to be removed. Our financing partner has agreed to temporarily waive any events of default and refrain from pursuing remedies available under the master sale-leaseback associated with the BESS failure until December 31, 2025 to allow remediation of the issue (subject to certain conditions). We have fully funded lease payments due under the master lease agreement through December 31, 2025 into a reserve account from which lease payments will be made.

August 2024 Master Sale-leaseback - On April 18, 2023 we entered into lease agreements with two investors and on August 14, 2024 we sold and leased back an energy asset for $234.8 million, of which 50% was allocated to each investor under these agreements. One lease has an expiration date of August 14, 2034 with an option to extend to August 14, 2044 while the other has

35

Table of Contents

an expiration date of August 14, 2044. At closing, we used $140.8 million of the proceeds to pay off the April 2023 construction credit facility and made rent prepayments of $60.1 million.

As of December 31, 2024, our total sale-leasebacks classified as long-term financing facilities outstanding was $399.4 million.

As of December 31, 2024, our total financing leases outstanding was $12.9 million. These are our sale-leaseback arrangements entered into as of December 31, 2018 which remain under the previous guidance.

See Notes 8 “Leases” and 9 “Debt and Financing Lease Liabilities” for additional information on these financing facilities.

While we are required under GAAP to reflect these lease payments as liabilities on our consolidated balance sheets, they are generally non-recourse and not direct obligations of Ameresco Inc., except that we have guaranteed certain obligations relating to taxes and project warranties, operation, and maintenance.

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 $555.4 million in principal amounts as of December 31, 2024 and $533.1 million as of December 31, 2023. 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 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 $164.8 million during the year ended December 31, 2024 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 $158.9 million during the year ended December 31, 2024. 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 consolidated balance sheets as a non-cash settlement. See Note 2, “Summary of Significant Accounting Policies”, to our consolidated financial statements in this Report.

Other

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

Selected Measures of Liquidity and Capital Resources

Cash Flows

The following table summarizes our changes in cash, cash equivalents, and restricted cash:

36

Table of Contents

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 flow from operating activities in 2024 improved over 2023 primarily due to a decrease in the use of cash from Federal ESPC receivables of $101.4 million, increase in cash flows of $90.5 million from accounts payable, accrued expenses, and other current liabilities, $68.2 million from unbilled revenue, and $63.7 million from prepaid expenses and other current assets which includes the sale of ITCs on energy assets for $47.5 million. These were partially offset by decreased cash flows of $149.5 million from accounts receivable.

Cash Flows from Investing Activities

During 2024, we made capital investments of $417.0 million in new energy assets and $17.1 million in major maintenance of energy assets, compared to $538.4 million and $7.6 million, respectively, in 2023. As noted above, we sold a business in December 2024 and received net proceeds of $54.2 million,

We currently plan to invest approximately $350.0 million to $400.0 million in capital investments in 2025, principally for the construction or acquisition of new renewable energy plants.

Cash Flows from Financing Activities

Our primary sources of financing during 2024 were proceeds of $643.5 million from energy asset debt financings, $170.8 million from advances on Federal ESPC projects and energy assets, proceeds from the second lien term loan of $100.0 million, contributions from non-controlling interest of $35.4 million, partially offset by repayments of energy asset debt and financing leases totaling $424.4 million, repayments of long-term corporate debt of $127.0 million, and payments on the seller’s promissory note of $61.9 million.

During 2023, we received net proceeds of $843.5 million from long-term energy asset debt financings, $168.9 million from advances on Federal ESPC projects and energy assets, partially offset by repayments of long-term corporate debt of $155.0 million, repayments of energy asset debt totaling $148.1 million, and net payments on our senior secured revolving credit facility of $43.0 million.

We currently plan additional financings of $300.0 million to $350.0 million in 2025 to fund the construction or acquisition of new renewable energy plants as discussed above.

We may also, from time to time, finance our operations through issuance or offering of equity or debt securities.

Critical Accounting Policies and Estimates

Preparing our 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.

We believe that our policies and estimates that require our most significant judgments are considered our critical accounting policies and are discussed below. In addition, refer to Note 2 “Summary of Significant Accounting Policies” for further details.

Revenue Recognition

As described in Note 2, we recognize revenue from the installation or construction of projects over time using the cost-based input method. We use the total costs incurred on the project relative to the total expected costs to satisfy the performance obligation. When the estimate on a contract indicates a loss or claims against costs incurred reduce the likelihood of recoverability of such costs, we record the entire estimated loss in the period the loss becomes known. In addition, some contracts contain an element of variable consideration, including liquidated damages and/or penalties, which requires payment to the customer in the event that construction timelines or milestones are not met. We estimate the total consideration payable by the customer when the contracts contain variable consideration provisions, based on the most likely amount anticipated to be recognized for transferring the

37

Table of Contents

promised goods or services. As a result, we may constrain revenue to the extent that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

To the extent a contract is deemed to have multiple performance obligations, we allocate the transaction price of the contract to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract.

Significant judgement is required to estimate the total expected costs and variable consideration for projects that typically have a construction period of 12 to 36 months. Any increase or decrease in estimated costs to complete a performance obligation without a corresponding change to the contract price could impact the calculation of cumulative revenue to date and gross profit on the project. Similarly, if we recognize revenue based upon our current estimate of variable consideration, and our estimate is later adjusted, we may be required to increase or decrease cumulative revenue to date and gross profit on the project. Factors that may result in a change to our estimates include unforeseen engineering problems, construction delays, the performance of contractors and major material suppliers, and unusual weather conditions, among others.

We have a long history of working with multiple types of projects and preparing cost estimates, and we rely on the expertise of key personnel to prepare what we believe are reasonable best estimates given available facts and circumstances. Due to the nature of the work involved, however, judgment is involved to estimate the costs to complete and the amounts estimated could have a material impact on the revenue we recognize in each accounting period. We cannot estimate unforeseen events and circumstances which may result in actual results being materially different from previous estimates.

Impairment Assessments

We evaluate our long-lived assets, including goodwill and intangible assets, for impairment as events or changes in circumstances indicate the carrying value of these assets may not be fully recoverable, and at least annually (fourth quarter) for goodwill and intangible assets that have indefinite lives. In 2023, we changed the assessment date from December 31st to October 31st. Examples of such triggering events applicable to our assets include a significant decrease in the market price of a long-lived asset or asset group, a current-period operating or cash flow loss combined with a history of operating or cash flow losses, a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group, or adverse industry or economic trends.

We evaluate recoverability of long-lived assets and definite-lived intangible assets by estimating the undiscounted future cash flows associated with the expected uses and eventual disposition of those assets. When these comparisons indicate that the carrying value of those assets is greater than the undiscounted cash flows, we recognize an impairment loss for the amount that the carrying value exceeds the fair value.

The process of evaluating the potential impairment of long-lived assets, goodwill and intangible assets requires significant judgment. For goodwill, we estimate the reporting unit’s fair value and compare it with the carrying value of the reporting unit, including goodwill. If the fair value is greater than the carrying value of its reporting unit, no impairment is recorded. Fair value is determined using both an income approach and a market approach. The estimates and assumptions used in our calculations include revenue growth rates, expense growth rates, expected capital expenditures to determine projected cash flows, expected tax rates and an estimated discount rate to determine present value of expected cash flows. These estimates are based on historical experiences, our projections of future operating activity and our weighted-average cost of capital. Unforeseen events and changes in circumstances or market conditions could adversely affect these estimates, which could result in an impairment charge.

We had no goodwill impairments for the year ended December 31, 2024 and reporting units with goodwill had estimated fair values that exceeded their carrying values by at least 49%. During the year ended December 31, 2023, one reporting unit had a fair value that was 2% less than the carrying value and we recorded a $1,644 goodwill impairment, which was $2,222 net of tax and was primarily driven by a decline in projected cash flows, including revenues and profitability. One reporting unit with goodwill had an estimated fair value that exceeded its carrying value by 16%. All other reporting units with goodwill had estimated fair values that exceeded their carrying values by at least 65% as of December 31, 2023.

Derivative Financial Instruments

We account for our interest rate swaps and our make-whole provisions as derivative financial instruments which are carried on our consolidated balance sheets at fair value.

The fair value of our interest rate swaps are determined based on observable market data in combination with expected cash flows for each instrument. Among the key drivers of value are interest rates, since the future floating rates are unknown. The value of our interest rate swaps will change in subsequent periods as counterparty credit risk and forward expectations of the floating rate

38

Table of Contents

change. Therefore, depending on how the yield curve changes in subsequent measuring periods, a swap can become an asset or a liability for us. In addition, model inputs used in swap analyses can also substantially affect the fair value of the swaps.

Our make-whole provisions fulfill the requirements of embedded derivative instruments that were required to be bifurcated from the host agreement. The fair value of these make-whole provisions are determined based on available market data and a with and without model. There are several assumptions and estimates used in the calculation of the fair value of derivatives, such as discount rate and risk premium.

Any changes in the fair value of our derivatives designated as hedging instruments are recorded as adjustments to other comprehensive (loss) income and any changes in fair value of our derivatives not designated hedging instruments are recorded in interest and other expenses, net in our consolidated statements of income. See Note 19 “Derivative Instruments and Hedging Activities” for more information.

Income Taxes

We are subject to income taxes in the U.S. and six foreign jurisdictions. Significant judgment is required in determining income tax expense, deferred tax assets and liabilities and uncertain tax positions. The underlying assumptions are also highly susceptible to change from period to period. We took advantage of the Safe Harbor commence-construction provisions contained in IRS Notice 2018-59 by pre-purchasing solar equipment in 2019 thereby preserving the ability to take 30% ITC for projects placed in service before 2024. However, the IRA signed by the President on August 16, 2022 increased the ITC rate back to 30% for projects placed in service after January 1, 2022 and before January 1, 2033. If these or other deductions and credits expire without being extended, or otherwise are reduced or eliminated, our effective tax rate would increase, which could increase our income tax expense and reduce our net income. In addition, our tax rate has historically been significantly impacted by the IRC Section 179D deduction. This deduction is related to energy-efficient improvements we provide under government contracts. The Consolidated Appropriations Act, 2021 made permanent the Section 179D Energy Efficient Commercial Building Deduction. That Act made changes to the way the deduction is calculated. If those changes result in lower levels of energy efficiency improvements, it could impact the deduction available and the tax rate. On December 12, 2024, the U.S. Department of the Treasury and IRS issued final regulations regarding ITCs for Section 48 of the Internal Revenue Code, including the ITCs for energy generation, energy storage technology, qualified biogas property, and interconnection property. We are taking additional ITCs on our renewable gas projects consistent with the regulation language permitting separate ownership.

We accrue for the estimated additional tax and interest that may result from tax authorities disputing uncertain tax positions. We believe we have made adequate provisions for income taxes for all years that are subject to audit based upon the latest information available. We operate within multiple taxing jurisdictions and are subject to tax audits in these jurisdictions. These audits can involve complex issues and may require an extended period of time to resolve. We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different. We adjust these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences may affect the provision for income taxes in the period in which such determination is made and could have an impact on our results of operations.

On a quarterly basis, we assess our current and projected earnings by jurisdiction to determine whether or not our earnings during the periods when the temporary differences become deductible will be sufficient to realize the related future tax benefits. Should we determine that we would not be able to realize all or part of our net deferred tax asset in a particular jurisdiction in the future, a valuation allowance to the deferred tax asset would be charged to income in the period such determination was made. This valuation allowance is maintained for deferred tax assets that we estimate are more likely than not to be unrealizable based on available evidence at the time the estimate is made. The determination of whether a valuation allowance for deferred tax assets is appropriate is subject to considerable judgment and requires an evaluation of all positive and negative evidence, including our historical financial results, the source and consistency of those results, whether they should be adjusted for certain one-time or nonrecurring items, whether losses cumulatively exceed income over a reasonable period of time, the availability of tax planning strategies, availability of carryback and carryforward periods, and other factors, including our expectations of future taxable income. Adjustments to income tax expense to the extent we establish a valuation allowance or adjust this allowance in a period could have a material impact on our financial condition and results of operations.

Recent Accounting Pronouncements

See Note 2 of the “Notes to Consolidated Financial Statements” for a discussion of recent accounting standards.

39

Table of Contents

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included in Item 8 of this Report. Some of the information contained in this discussion and analysis are set forth elsewhere in this Report, including information with respect to our plans and strategy for our business and related financing, and includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” included in Item 1A of this Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

Ameresco is a leading clean technology integrator with a comprehensive portfolio of energy efficiency and renewable energy supply solutions. We help organizations meet energy saving and energy management challenges with an integrated, comprehensive approach to energy efficiency and renewable energy. Leveraging budget neutral solutions, including ESPCs and PPAs, we aim to eliminate the financial barriers that traditionally hamper energy efficiency and renewable energy projects.

Drawing from decades of experience, Ameresco develops tailored energy management projects for its customers in the commercial, industrial, local, state and federal government, K-12 education, higher education, healthcare, public housing sectors, and utilities.

We provide solutions primarily throughout the U.S., Canada, 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. During 2022, we entered into joint venture arrangements in Greece and California and acquired an operating wind farm in Ireland. During 2023, we acquired Enerqos Energy Solutions S.r.l. (“Enerqos”) a renewable energy and energy efficiency company headquartered in Milan, Italy and entered into a joint venture agreement with Bristol City, U.K. to transform the way the city generates, distributes, stores and uses energy.

On August 4, 2023, we entered into a purchase and sale agreement to acquire an energy asset project and the ability to acquire 100% of the stock of Bright Canyon Energy Corporation (“BCE”) in a two-phased transaction, exclusive of each other. Phase 1, the purchase of the energy asset project, closed on August 4, 2023. In the second phase, which closed on January 12, 2024, we acquired BCE, including its interest in one of our consolidated joint ventures and its interests in project subsidiaries developing or with rights to develop solar, battery, and microgrid assets.

Key Factors and Trends

The Inflation Reduction Act

The IRA was signed into law on August 16, 2022. The bill invests nearly $369 billion in energy and climate policies. The provisions of the IRA are intended to, among other things, incentivize domestic clean energy investment, manufacturing, and deployment. The IRA incentivizes the deployment of clean energy technologies by extending and expanding federal incentives such as the ITC and the Production Tax Credit (“PTC”). We view the enactment of the IRA as favorable for the overall business climate for the renewable energy industry. However, there is uncertainty related to the applicability of the IRA to our current and planned projects and the scope of the IRA and its interpretations may change if there is a change in the U.S. administration or if government agencies’ authority to interpret federal law is restricted as a result of the Supreme Court’s review of the Chevron doctrine under which federal government agencies have been awarded board authority to interpret broad or ambiguous legislation. We may also continue to experience a delay in our sales cycles and new award activity as our customers consider the applicability of the IRA and as financing projects may take longer as result of this uncertainty. The IRA may increase the competition in our industry and as such increase the demand and cost for labor, equipment and commodities needed for our projects.

29

Table of Contents

Supply Chain Disruptions and Other Global Factors

We continue to monitor the impact of global economic conditions on our operations, financial results, and liquidity, including the result of supply chain challenges, war in Ukraine and the Middle East, evolving relations between the U.S. and China, and other geopolitical tensions. 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 lithium-ion battery cells, semiconductors, and other components required for our clean energy solutions may continue or become more pronounced.

During the year ended December 31, 2023, we were impacted by supply chain disruptions and varying levels of inflation, as a result macroeconomic conditions, causing delays in the timely delivery of material to customer sites and delays and disruptions in the completion of certain projects, including those pursuant to the SCE Agreement, and increased shipping and transportation costs, as well as increased component and labor costs. This negatively impacted our results of operations during the year ended December 31, 2023. We expect the trends of supply chain challenges to continue beyond this year. 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.

In August 2023, the U.S. Department of Commerce issued a final ruling in the Auxin Solar trade case related to solar tariff imports that will lead to higher tariffs on certain imported solar products from Malaysia, Vietnam, Thailand, and Cambodia beginning in June 2024. Similarly, other changes in trade regulations and the enforcement of the Uyghur Forced Labor Prevention Act, could disrupt the solar panel supply chain, increase the cost for solar cells and panels, and ultimately impact the demand for clean energy solutions. We are closely monitoring the investigation and any regulations issued in connection with it.

Climate Change and Effects of Seasonality

The 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. The sustainability efforts are impacted by regulations, and changes in the regulatory climate may impact the demand for our products and offerings. 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.

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.

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

30

Table of Contents

supply chain delays, weather and other events, we were unable to complete the projects by August 1, 2022 (the “Guaranteed Completion Date”) and made related force majeure claims. In late 2022, SCE also instructed us to adjust the completion of the sites into 2023. Under the SCE Agreement, a failure to reach the Guaranteed Completion Date could, under certain circumstances, result in liquidated damages up to a maximum amount of $89 million being applied. We have been working with SCE to analyze the applicability and scope of force majeure relief based on our force majeure claims. In February 2024, in response to us issuing an invoice to SCE for one of the sites, SCE notified us that they intend to withhold liquidated damages for that project. Our view is 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.

We are working closely with SCE on the final steps toward substantial completion for two of the three projects. Construction activities and preparation for commissioning have begun for the third project, which was significantly impacted by the heavy rainfall in California in 2023. This last site is expected to reach substantial completion in the summer of 2024.

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 year ended December 31, 2023, we granted 170,000 common stock options to certain employees and 66,247 restricted stock units to our employees and non-employee directors under our 2020 Stock Incentive Plan. Our stock-based compensation expense decreased from $15.0 million for the year ended December 31, 2022 to $10.3 million for the year ended December 31, 2023. Stock-based compensation decreased in 2023, primarily due to the reversal of previously recognized expense of approximately $5.1 million related to performance-based option grants as the estimated probability of such awards vesting was reduced to zero based on the expected attainment of certain performance targets due to revised results in 2023.

In addition, our unrecognized stock-based compensation expense decreased from $46.7 million at December 31, 2022 to $30.1 million at December 31, 2023, and is expected to be recognized over a weighted-average period of two years. See Note 14 “Stock-based Compensation and Other Employee Benefits” 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:

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 recently has been averaging 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 subcontractor, what equipment will be used, and assist in arranging for third party financing, as applicable. Recently, awarded projects have been taking an average of 12

31

Table of Contents

to 24 months to result in a signed contract and convert 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 becomes 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 revenues that we expect to recognize in the next twelve months from our fully-contracted backlog. See Note 2 “Summary of Significant Accounting Policies” for our revenue recognition policies. 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.

Assets in Development

Assets in development, which represents the potential design/build project value of small-scale renewable energy plants that have been awarded or for which we have secured development rights, were estimated at $2,445.9 million as of December 31, 2023, including $89.8 million attributable to a non-controlling interest, and $1,625.7 million as of December 31, 2022. The portion related to spending for EaaS assets was approximately $399.8 million and $36.4 million at December 31, 2023 and 2022, respectively. These are also important metrics because they help us gauge our future capacity to generate electricity or deliver renewable gas fuel which contributes to our recurring revenue stream.

Results of Operations

The following table sets forth certain financial data from the consolidated statements of income for the periods indicated (1):

Our results of operations for the year-ended December 31, 2023 reflect a year-over-year decline in terms of revenues, operating income, and net income attributable to common shareholders. All financial result comparisons are against the prior year period.

•Revenue: total revenues decreased primarily due to a $480.0 million, or 32%, decrease in our project revenue attributed to the timing of revenue recognized based upon costs incurred to date relative to total expected costs on active projects, including our SCE battery storage project.

32

Table of Contents

•Cost of Revenues and Gross Profit: the decrease in cost of revenues is primarily due to the decrease in project revenues described above, however, our gross profit as a percent of revenues increased due to the lower revenue contribution from our lower margin, design-build SCE battery storage project.

•Selling, General and Administrative Expenses: the increase is primarily due to higher professional fees of $2.5 million, higher project development fees of $2.1 million, partially offset by lower net salaries and benefits of $4.6 million as a result of a decrease in non-cash stock-based compensation expense.

•Asset Impairments: This year includes impairment charges of $1.6 million recorded in 2023 related to two of our landfill gas to energy assets, and a goodwill impairment charge of $2.2 million related to one of our reporting units.

•Other Expenses, Net: Other expenses, net, includes gains and losses from derivatives transactions, foreign currency transactions, interest expense, interest income, amortization of financing costs and certain government incentives. Other expenses, net increased primarily due to higher interest expenses, net of interest income of $9.7 million related to increased levels of project debt, a higher average balance on our senior secured debt facility, factoring fees in Italy of $5.8 million, and a decrease in government incentives received of $2.0 million.

•Income before Income Taxes: the decrease is due to reasons described above.

•Income Tax Expense (Benefit): the provision for income taxes is based on various rates set by federal, state, provincial, and local authorities and is affected by permanent and temporary differences between financial accounting and tax reporting requirements. The effective tax rate was lower in 2023 as compared to 2022 primarily due to higher deductions under the Section 179D Energy Efficient Commercial Buildings Deduction for both 2023 under the IRA and for prior periods which were documented and claimed on amended tax returns during 2023, deferred state tax benefits resulting from reduced state tax rates in future periods. The tax benefit rate for 2022 was favorable, primarily due to increases in the benefits associated with energy efficiency tax incentives, including Section 48 Solar Investment Tax Credits, deductions associated with the Section 179D Commercial Buildings Energy Efficiency Tax Deduction, and compensation deductions resulting from employee stock option disqualifying dispositions.

•Net Income and Earnings Per Share: Net income attributable to common shareholders decreased due to the reasons described above. Basic earnings per share for 2023 was $1.20, a decrease of $0.63 per share compared to 2022. Diluted earnings per share for 2023 was $1.17, a decrease of $0.61 per share, compared to 2022.

Business Segment Analysis

Our reportable segments for the year ended December 31, 2023 were U.S. Regions, U.S. Federal, Canada, Alternative Fuels, and Europe. The remaining amounts are included in “All Other”. Europe was formerly included in “All Other” but was disaggregated due to growth in the segment in 2023. As a result, previously reported amounts have been reclassified for comparative purposes. See Note 20 “Business Segment Information” for additional information about our segments.

Revenues

•U.S. Regions: the decrease is primarily due to a $584.1 million, or 56%, decrease in project revenues attributable to the timing of revenue recognized based upon costs incurred to date relative to total expected costs on active projects, including our SCE battery storage project, versus the prior year partially offset by a $13.1 million, or 28%, increase in revenue from the growth of our energy assets in operation.

•U.S. Federal: the increase is primarily due to a $8.4 million, or 3%, increase in project revenue attributable to the timing of revenue recognized as a result of the phase of active projects compared to the prior year and a $1.6 million, or 3%, increase in O&M revenue.

•Canada: the increase is primarily due to higher project revenues which were partially offset by unfavorable foreign exchange rates.

33

Table of Contents

•Alternative Fuels: the increase is primarily due to a $2.3 million, or 2%, increase in energy asset revenues resulting from the continued growth of our operating portfolio, increased production levels and more favorable pricing on renewable identification numbers (“RIN’s”) generated from our renewable natural gas facilities.

•Europe: revenues increased year-over-year primarily due to higher project revenue of $85.1 million, or 158%, resulting from increased overall activity which included revenues of $52.2 million related to the acquisition of Enerqos earlier in 2023 and increased revenues in Greece of $28.3 million.

•All Other: All other revenues is consistent with the prior year.

Income before Income Taxes and Unallocated Corporate Activity

•U.S. Regions: the decrease is primarily due to the lower revenues described above, partially offset by lower salaries and benefit costs and lower project development costs.

•U.S. Federal: the decrease is due primarily to higher interest expense.

•Canada: the increase is primarily due to the increase in project revenues described above partially offset by higher project development costs.

•Alternative Fuels: the decrease is primarily due to higher direct costs related to unplanned downtime, higher interest expense, higher depreciation expense related to the timing of assets placed in operations and impairment charges recorded in 2023 related to two of our landfill gas to energy assets.

•Europe: the decrease is primarily due to factoring fees of $5.8 million, increased salaries and benefits, net, and depreciation and amortization as a result of the acquisition of Enerqos, partially offset by the increased revenues noted above.

•All Other: the decrease is primarily due to increased salaries and benefits, net.

•Unallocated corporate activity includes all corporate level selling, general and administrative expenses and other expenses not allocated to the reportable segments. We do not allocate any indirect expenses to the segments. Corporate activity improved primarily due to lower net salaries and benefit costs of $4.7 million, related to a decrease in non-cash stock-based compensation expense, and higher interest income partially offset by higher interest expense of $3.2 million.

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, and various forms of other debt (see “Project Financing” below). In addition, in March 2021, we completed an underwritten public offering of 2,875,000 shares of our Class A Common Stock, for total net proceeds of $120.1 million. See Note 13 “Equity and Earnings per Share” 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, energy project asset acquisitions and business acquisitions that we may fund from time to time

34

Table of Contents

•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 transactions, tax equity transfers, and our general access to credit and equity markets, will be sufficient to fund our operations through at least February 2025. With the adjustments to the anticipated timeline for completing the SCE battery storage projects, we requested an additional extension to the maturity date for the remaining principal amount of the delayed draw term loan A under our senior secured credit facility, which is scheduled to mature April 15, 2024.

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. 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.

August 2023 Purchase and Sale Agreement

On August 4, 2023, we entered into a purchase and sale agreement to acquire an energy asset project and the right to acquire 100% of the stock of BCE in a two-phased transaction, exclusive of each other. Phase 1, the purchase of the energy asset project, closed on August 4, 2023 and did not constitute a business in accordance with ASC 805-50, Business Combinations.

The adjusted purchase price for phase 1 was $88.0 million, of which $5.0 million was paid in cash, $46.7 million was financed through a seller’s note, and we assumed a construction loan on the energy asset project for $36.3 million. We are in process of converting the construction loan to a term loan. We also received cash of $11.2 million. During the year ended December 31, 2023, we paid $18.4 million in principal on the seller’s note, the balance of which was paid in January 2024. We also agreed to sell back to the seller investment tax credits for the project acquired as part of this transaction for the fair market value of these credits and we received $21.0 million in January 2024 for the transfer of these credits. In addition, we assumed a land lease for the energy asset project. See Note 8 Leases for additional information on the lease.

In the second phase, which closed on January 12, 2024, we acquired BCE, including its interest in one of our consolidated joint venture and its interests in project subsidiaries developing or with rights to develop solar, battery, and microgrid assets for a purchase price of $39.1 million, of which $6.6 million was paid at the closing. The remaining $32.5 million was financed by a seller’s note accruing interest of 5.0% and is payable in August 2024. We may be required to make additional contingent payments for this acquisition based on certain projects achieving commercial operation and if the projects qualify for higher energy tax credits than expected.

Senior Secured Credit Facility — Revolver and Term Loans

During the year ended December 31, 2023, we entered into three amendments to our fifth amended and restated senior secured credit facility, which extended the maturity date of our delayed draw term loan A, resulted in $155.0 million paid for the year ended December 31, 2023, $10.0 million due and paid on January 31, 2024 and February 14, 2024, and $10.0 million due on March 31, 2024. The remaining principal amount of our delayed draw term loan is $35.0 million which is due on April 15, 2024. The overall rate table for all loans under the current agreement was also increased by 0.25%. The amendment increased the total funded debt to EBITDA covenant ratio from a maximum of 3.50 to 3.75 for the quarter ending December 31, 2023, and 3.50 thereafter.

As of December 31, 2023, the balance on the senior secured credit facility was $279.9 million and we had funds available of $37.5 million.

After the end of the year, we announced that we had engaged an investment bank to raise subordinated debt as required by the December 2023 amendment to our senior secured credit facility. The debt raise, if successful, would be used to repay outstanding amounts on the senior secured credit facility.

35

Table of Contents

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 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 as described in more detail below.

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. 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.

Material energy asset construction and term loan financings during the year ended December 31, 2023 were as follows:

•March 2023 Construction Credit Facility, 2.00% - we entered into a credit agreement for a construction facility with a total commitment of CAD$100.0 million and as of December 31, 2023, no funds were drawn under this facility.

•April 2023 Construction Credit Facility, 6.82%, due July 1, 2024 - one of our consolidated joint venture subsidiaries (“JV”) entered into a construction loan agreement with two lenders for a principal amount of up to $140.8 million under an energy asset credit facility. At the closing, the JV drew down $90.9 million for construction of an energy asset and subsequently drew down an additional $43.5 million. The loan will be repaid after the energy asset project achieves provisional acceptance, through a sale-leaseback financing under lease agreements entered into between the same parties, as part of the closing documents. We acquired the remaining interest in this JV in January 2024 when we closed on the acquisition of BCE.

•August 2023 Construction Credit Facility, 9.34%, due August 31, 2026 - we entered into a construction and development loan agreement which provides a loan in a principal amount of up to $300.0 million. At the closing, we drew down $200.0 million under this facility, of which approximately $187.0 million was used to reimburse Ameresco for development and construction costs. Subsequent to closing, we drew down an additional $78.9 million. The loan contains a one-year extension option that can be exercised if certain circumstances are met, including payment of a $3.0 million extension fee. The obligations under the loan are guaranteed by all the related subsidiaries and are secured by the subsidiaries’ assets as well as our equity interest in the borrower entity and in the case of default under the facility, a default under our Senior Secured Credit Facility or a change in control of Ameresco, Inc., we are required to make capital contributions to the borrower entity who then would be required to use the proceeds from the capital contributions to repay the construction and development loan.

•October 2022 Financing Facility, 6.70%, due August 31, 2039 - during 2023, we entered into an amendment and an amended and restated loan agreement that increased the original commitment of $125.0 million to $500.0 million, increased the interest rate to 6.70% and changed the maturity date to August 31, 2039. The loan also provides for 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 which was extended to August 31, 2049. During 2023, we drew down a total of $276.7 million under this facility.

As of December 31, 2023, our total construction and term loans outstanding was $1.0 billion. See Note 9 “Debt and Financing Lease Liabilities” for additional information about these loans.

Sale-leasebacks and Financing Leases

We have entered into sale-leaseback arrangements for solar PV energy assets with multiple investors and in accordance with Topic 842, Leases, all sale-leaseback transactions that occurred after December 31, 2018, were accounted for as failed sales and the proceeds received from the transactions were recorded as long-term financing facilities.

As of December 31, 2023, our total sale-leasebacks classified as long-term financing facilities outstanding was $185.7 million.

As of December 31, 2023, our total financing leases outstanding was $13.9 million. These are our sale-leaseback arrangements entered into as of December 31, 2018 which remain under the previous guidance.

36

Table of Contents

See Notes 8 “Leases” and 9 “Debt and Financing Lease Liabilities” for additional information on these financing facilities.

While we are required under GAAP to reflect these lease payments as liabilities on our consolidated balance sheets, they are generally non-recourse and not direct obligations of Ameresco Inc., except that we have guaranteed certain obligations relating to taxes and project warranties, operation, and maintenance.

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 $533.1 million in principal amounts as of December 31, 2023 and $478.5 million as of December 31, 2022. 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 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 $154.3 million during the year ended December 31, 2023 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 $260.4 million during the year ended December 31, 2023. 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 consolidated balance sheets as a non-cash settlement. See Note 2, “Summary of Significant Accounting Policies”, to our consolidated financial statements in this Report.

Other

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

Selected Measures of Liquidity and Capital Resources

Cash Flows

The following table summarizes our changes in cash, cash equivalents, and restricted cash:

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.

37

Table of Contents

Cash Flows from Operating Activities

Our cash flow from operating activities in 2023 improved over 2022 primarily due to a $259.4 million and $49.2 million increase in cash flows from unbilled revenue (costs and estimated earnings in excess of billings) and accounts receivable, respectively, due to the timing of when certain projects are invoiced, including our SCE battery storage project, partially offset by a decrease of $34.6 million in net income.

Cash Flows from Investing Activities

During 2023, we made capital investments of $538.4 million in new energy assets and $7.6 million in major maintenance of energy assets, compared to $304.6 million and $18.0 million, respectively, in 2022. This year we paid $9.2 million, net of cash received, for an acquisition and also contributed $6.0 million to joint venture investments.

We currently plan to invest approximately $350.0 million to $400.0 million in capital investments in 2024, principally for the construction or acquisition of new renewable energy plants.

Cash Flows from Financing Activities

Our primary sources of financing during 2023 were proceeds of $843.5 million from long-term debt financings and construction revolvers, $168.9 million from advances on Federal ESPC projects and energy assets, partially offset by repayments of long-term debt totaling $303.1 million, net payments on our senior secured revolving credit facility of $43.0 million, and distributions to non-controlling interests of $21.8 million.

During 2022, we received net proceeds of $468.5 million from long-term debt financings, $252.7 million from advances on Federal ESPC projects and energy assets, partially offset by repayments of long-term debt totaling $161.9 million.

We currently plan additional financings of $300.0 million to $350.0 million in 2024 to fund the construction or acquisition of new renewable energy plants as discussed above.

We may also, from time to time, finance our operations through issuance or offering of equity or debt securities.

Critical Accounting Policies and Estimates

Preparing our 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.

We believe that our policies and estimates that require our most significant judgments are considered our critical accounting policies and are discussed below. In addition, refer to Note 2 “Summary of Significant Accounting Policies” for further details.

Revenue Recognition

As described in Note 2, we recognize revenue from the installation or construction of projects over time using the cost-based input method. We use the total costs incurred on the project relative to the total expected costs to satisfy the performance obligation. When the estimate on a contract indicates a loss or claims against costs incurred reduce the likelihood of recoverability of such costs, we record the entire estimated loss in the period the loss becomes known. In addition, some contracts contain an element of variable consideration, including liquidated damages and/or penalties, which requires payment to the customer in the event that construction timelines or milestones are not met. We estimate the total consideration payable by the customer when the contracts contain variable consideration provisions, based on the most likely amount anticipated to be recognized for transferring the promised goods or services. As a result, we may constrain revenue to the extent that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

To the extent a contract is deemed to have multiple performance obligations, we allocate the transaction price of the contract to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract.

Significant judgement is required to estimate the total expected costs and variable consideration for projects that typically have a construction period of 12 to 36 months. Any increase or decrease in estimated costs to complete a performance obligation without a corresponding change to the contract price could impact the calculation of cumulative revenue to date and gross profit on the

38

Table of Contents

project. Similarly, if we recognize revenue based upon our current estimate of variable consideration, and our estimate is later adjusted, we may be required to increase or decrease cumulative revenue to date and gross profit on the project. Factors that may result in a change to our estimates include unforeseen engineering problems, construction delays, the performance of contractors and major material suppliers, and unusual weather conditions, among others.

We have a long history of working with multiple types of projects and preparing cost estimates, and we rely on the expertise of key personnel to prepare what we believe are reasonable best estimates given available facts and circumstances. Due to the nature of the work involved, however, judgment is involved to estimate the costs to complete and the amounts estimated could have a material impact on the revenue we recognize in each accounting period. We cannot estimate unforeseen events and circumstances which may result in actual results being materially different from previous estimates.

Impairment Assessments

We evaluate our long-lived assets, including goodwill and intangible assets, for impairment as events or changes in circumstances indicate the carrying value of these assets may not be fully recoverable, and at least annually (fourth quarter) for goodwill and intangible assets that have indefinite lives. In 2023, we changed the assessment date from December 31, 2023 to October 31, 2023. Examples of such triggering events applicable to our assets include a significant decrease in the market price of a long-lived asset or asset group, a current-period operating or cash flow loss combined with a history of operating or cash flow losses, a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group, or adverse industry or economic trends.

We evaluate recoverability of long-lived assets and definite-lived intangible assets by estimating the undiscounted future cash flows associated with the expected uses and eventual disposition of those assets. When these comparisons indicate that the carrying value of those assets is greater than the undiscounted cash flows, we recognize an impairment loss for the amount that the carrying value exceeds the fair value.

The process of evaluating the potential impairment of long-lived assets, goodwill and intangible assets requires significant judgment. For goodwill, we estimate the reporting unit’s fair value and compare it with the carrying value of the reporting unit, including goodwill. If the fair value is greater than the carrying value of its reporting unit, no impairment is recorded. Fair value is determined using both an income approach and a market approach. The estimates and assumptions used in our calculations include revenue growth rates, expense growth rates, expected capital expenditures to determine projected cash flows, expected tax rates and an estimated discount rate to determine present value of expected cash flows. These estimates are based on historical experiences, our projections of future operating activity and our weighted-average cost of capital. Unforeseen events and changes in circumstances or market conditions could adversely affect these estimates, which could result in an impairment charge.

Based on our assessment during the year ended December 31, 2023, one reporting unit had a fair value that was 2% less than the carrying value and we recorded a $1,644 goodwill impairment, which was $2,222 net of tax and was primarily driven by a decline in projected cash flows, including revenues and profitability. One reporting unit with goodwill had an estimated fair value that exceeded its carrying value by 16%. All other reporting units with goodwill had estimated fair values that exceeded their carrying values by at least 65% as of December 31, 2023.

Income Taxes

We are subject to income taxes in the U.S. and five foreign jurisdictions. Significant judgment is required in determining income tax expense, deferred tax assets and liabilities and uncertain tax positions. The underlying assumptions are also highly susceptible to change from period to period. We took advantage of the Safe Harbor commence-construction provisions contained in IRS Notice 2018-59 by pre-purchasing solar equipment in 2019 thereby preserving the ability to take 30% ITC for projects placed in service before 2024. However, the IRA signed by the President on August 16, 2022 increased the ITC rate back to 30% for projects placed in service after January 1, 2022 and before January 1, 2033. If these or other deductions and credits expire without being extended, or otherwise are reduced or eliminated, our effective tax rate would increase, which could increase our income tax expense and reduce our net income. In addition, our tax rate has historically been significantly impacted by the IRC Section 179D deduction. This deduction is related to energy-efficient improvements we provide under government contracts. The Consolidated Appropriations Act, 2021 made permanent the Section 179D Energy Efficient Commercial Building Deduction. That Act made changes to the way the deduction is calculated. On December 23, 2022, the IRS issued Announcement 2023-1 which clarified the energy efficiency standards which will be applied to projects placed in service for 2021 and 2022. If those changes result in lower levels of energy efficiency improvements, it could impact the deduction available and the tax rate.

We accrue for the estimated additional tax and interest that may result from tax authorities disputing uncertain tax positions. We believe we have made adequate provisions for income taxes for all years that are subject to audit based upon the latest information available. We operate within multiple taxing jurisdictions and are subject to tax audits in these jurisdictions. These audits can

39

Table of Contents

involve complex issues and may require an extended period of time to resolve. We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different. We adjust these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences may affect the provision for income taxes in the period in which such determination is made and could have an impact on our results of operations.

On a quarterly basis, we assess our current and projected earnings by jurisdiction to determine whether or not our earnings during the periods when the temporary differences become deductible will be sufficient to realize the related future tax benefits. Should we determine that we would not be able to realize all or part of our net deferred tax asset in a particular jurisdiction in the future, a valuation allowance to the deferred tax asset would be charged to income in the period such determination was made. This valuation allowance is maintained for deferred tax assets that we estimate are more likely than not to be unrealizable based on available evidence at the time the estimate is made. The determination of whether a valuation allowance for deferred tax assets is appropriate is subject to considerable judgment and requires an evaluation of all positive and negative evidence, including our historical financial results, the source and consistency of those results, whether they should be adjusted for certain one-time or nonrecurring items, whether losses cumulatively exceed income over a reasonable period of time, the availability of tax planning strategies, availability of carryback and carryforward periods, and other factors, including our expectations of future taxable income. Adjustments to income tax expense to the extent we establish a valuation allowance or adjust this allowance in a period could have a material impact on our financial condition and results of operations.

Recent Accounting Pronouncements

See Note 2 of the “Notes to Consolidated Financial Statements” for a discussion of recent accounting standards.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included in Item 8 of this Report. Some of the information contained in this discussion and analysis are set forth elsewhere in this Report, including information with respect to our plans and strategy for our business and related financing, and includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” included in Item 1A of this Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

Ameresco is a leading clean technology integrator with a comprehensive portfolio of energy efficiency and renewable energy supply solutions. We help organizations meet energy saving and energy management challenges with an integrated, comprehensive approach to energy efficiency and renewable energy. Leveraging budget neutral solutions, including ESPCs and PPAs, we aim to eliminate the financial barriers that traditionally hamper energy efficiency and renewable energy projects.

Drawing from decades of experience, Ameresco develops tailored energy management projects for its customers in the commercial, industrial, local, state and federal government, K-12 education, higher education, healthcare, public housing sectors, and utilities.

We provide solutions primarily throughout the U.S., Canada, the United Kingdom, 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. In December 2021, we completed the acquisition of Plug Smart, an Ohio-based energy services company that specializes in the development and implementation of budget neutral capital improvement projects including building controls and building automation systems, which is included in our U.S. Regions segment. The pro forma effects of this acquisition were not material to our operations for the fiscal years presented. During 2022, we entered into joint venture arrangements in Greece and California and acquired an operating wind farm in Ireland.

Key Factors and Trends

The Inflation Reduction Act

The IRA was signed into law by President Biden on August 16, 2022. The bill invests nearly $369 billion in energy and climate policies. The provisions of the IRA are intended to, among other things, incentivize domestic clean energy investment, manufacturing, and deployment. The IRA incentivizes the deployment of clean energy technologies by extending and expanding federal incentives such as the ITC and the Production Tax Credit (“PTC”). We view the enactment of the IRA as favorable for the overall business climate for the renewable energy industry, however, we are continuing to evaluate the overall impact and applicability of the IRA to our current and planned projects, and we may experience a delay in our sales cycles and new award activity as our customers consider the applicability of the IRA. The IRA may increase the competition in our industry and as such increase the demand and cost for labor, equipment and commodities needed for our projects.

Supply Chain Disruptions and Other Global Factors

We continue to monitor the impact of global economic conditions on our operations, financial results, and liquidity, including the result of supply chain challenges, development of the COVID-19 pandemic, war in Ukraine, evolving relations between the U.S. and China, and other geopolitical tensions. 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 challenges and increases in costs for logistics and supply chains, such as increased port congestion, and intermittent supplier delays as well as shortage of certain components needed for our business, such as lithium-ion battery cells, semiconductors, and other components required for our clean energy solutions may continue or become more pronounced.

28

Table of Contents

During the year ended December 31, 2022, we were impacted by supply chain disruptions and varying levels of inflation, as a result of COVID-19 and macroeconomic conditions, causing delays in the timely delivery of material to customer sites and delays and disruptions in the completion of certain projects, including those pursuant to the SCE Agreement, and increased shipping and transportation costs, as well as increased component and labor costs. This negatively impacted our results of operations during the year ended December 31, 2022. We expect the trends of supply chain challenges and inflationary pressures to continue beyond this year. 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.

On April 1, 2022, the U.S. Department of Commerce initiated an investigation to determine whether imports of crystalline silicon photovoltaic cells and modules which are manufactured in Cambodia, Thailand, Vietnam, or Malaysia using components from China are circumventing existing anti-dumping (“ADD”) and countervailing duties (“CVD”) on solar cells and modules from China. The full investigation is estimated to take 365 days. In June 2022 President Biden announced an executive action which guaranteed that any duties that could be levied as a result of this investigation, will not be imposed on imports by U.S importers between June 2022 and June 2024.

While the Biden executive action will prevent new duties stemming from this investigation from being applied during this period, the Commerce Department investigation continues. In December 2022, the Department issued a preliminary determination which found that certain solar products from these four countries were, in fact, circumventing existing Chinese tariffs. The final results of the investigation are expected to be issued by May 1, 2023. If the Department upholds it preliminary ruling, new tariffs could be applied beginning June 2024. Additionally, legislation has been introduced in both the U.S. Senate and U.S. House of Representatives seeking to overturn President Biden’s executive action that suspended solar import duties.

Given that the Biden policy remains in place and that we have an existing inventory of solar panels from a large purchase several years ago, we do not expect that this investigation will have a material impact on our business in the near term. However, any resulting duties or other trade restrictions imposed may disrupt the solar panel supply chain, increase the cost for solar cells and panels, and ultimately impact the demand for clean energy solutions. We are closely monitoring the investigation and any regulations issued in connection with it.

Climate Change and Effects of Seasonality

The 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. The sustainability efforts are impacted by regulations, and changes in the regulatory climate may impact the demand for our products and offerings. 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..

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” in Item 1A, Risk Factors.

29

Table of Contents

The 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. The SCE Agreement required substantial completion of all facilities, subject to extension for specified force majeure events and customer-caused delays, to be completed no later than August 1, 2022 (the “Guaranteed Completion Date”) and provided for availability and capacity guarantees. We have made force majeure claims under the SCE Agreement as battery supply delays resulting from COVID-19 lockdowns in several regions around China, newly implemented Chinese transportation safety policies and related supply chain delays impacted our ability to achieve the Guaranteed Completion Date on August 1, 2022. In 2022, SCE also instructed us to adjust the project schedule into 2023 and in early 2023 we made further weather-related force majeure claims. Under the terms of the SCE Agreement, we are entitled to recover costs associated with schedule changes requested by SCE. We are working with SCE to analyze and estimate these costs as well as the applicability and scope of force majeure relief based on our force majeure claims. If we fail to come to an agreement with SCE about extensions to the Guaranteed Completion Date and the applicability of force majeure relief, 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 schedule changes, and under certain circumstances SCE may have a right to terminate the agreement.

Despite the delays, the SCE projects progressed further during the quarter ended December 31, 2022. Considering the schedule adjustments requested by SCE and the delays disclosed earlier, we anticipate the projects to be in service and achieve substantial completion prior to the summer of 2023. However, 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 year ended December 31, 2022, we granted 1,605,000 common stock options to certain employees and 12,978 restricted stock units to our non-employee Directors’ under our 2020 Stock Incentive Plan. As a result, our stock-based compensation expense increased from $8.7 million for the year ended December 31, 2021 to $15.0 million for the year ended December 31, 2022. The increase in the number of stock options granted and higher grant date fair value resulted in the increased stock-based compensation in 2022. In addition, our unrecognized stock-based compensation expense increased from $41.1 million at December 31, 2021 to $46.7 million at December 31, 2022, and is expected to be recognized over a weighted-average period of three years. See Note 14 “Stock-based Compensation and Other Employee Benefits” 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:

Our $892 million SCE Agreement was entered into in October 2021 and increased our fully-contracted backlog at December 31, 2021 compared to December 31, 2022, and the majority of our revenues under this contract were recognized in 2022.

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.

30

Table of Contents

Our sales cycle recently has been averaging 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 subcontractor, what equipment will be used, and assist in arranging for third party financing, as applicable. Recently, awarded projects have been taking an average of 12 to 24 months to result in a signed contract and convert 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 becomes 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 revenues that we expect to recognize in the next twelve months from our fully-contracted backlog. See Note 2 “Summary of Significant Accounting Policies” for our revenue recognition policies. 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.

Assets in Development

Assets in development, which represents the potential design/build project value of small-scale renewable energy plants that have been awarded or for which we have secured development rights, were estimated at $1,625.7 million as of December 31, 2022, including $98.8 million attributable to a non-controlling interest, and $1,247.5 million as of December 31, 2021. The portion related to spending for EaaS assets was approximately $36.4 million and $70.0 million at December 31, 2022 and 2021, respectively. These are also important metrics because they help us gauge our future capacity to generate electricity or deliver renewable gas fuel which contributes to our recurring revenue stream.

Results of Operations

The following table sets forth certain financial data from the consolidated statements of income for the periods indicated (1):

Our results of operations for the year-ended December 31, 2022 reflect year-over-year growth in terms of revenues, operating income, and net income attributable to common shareholders. All financial result comparisons are against the prior year period.

31

Table of Contents

Our strong operating results are due to the following:

•Revenue: total revenues increased primarily due to a $577.3 million, or 64%, increase in our project revenue attributed to the timing of revenue recognized based upon costs incurred to date relative to total expected costs on active projects, including our SCE battery storage project.

•Cost of Revenues and Gross Profit: the increase in cost of revenues is primarily due to the increase in project revenues described above, however, our gross profit as a percent of revenues decreased due to the higher revenue contribution from our lower margin, design-build SCE battery storage project.

•Selling, General and Administrative Expenses: the increase is primarily due to higher net salaries and benefits of $13.4 million as a result of increased headcount and an increase in non-cash stock-based compensation expense and higher insurance costs related to the continued growth of the business.

•Other Expenses, Net: Other expenses, net, includes gains and losses from derivatives transactions, foreign currency transactions, interest expense, interest income, amortization of financing costs and certain government incentives. Other expenses, net increased primarily due to higher interest expenses, net of interest income of $12.1 million related to a higher average balance on our senior secured debt facility, partially offset by an increase in government incentives of $1.6 million.

•Income before Income Taxes: the increase is due to reasons described above.

•Income Tax Expense (Benefit): the provision for income taxes is based on various rates set by federal, state, provincial, and local authorities and is affected by permanent and temporary differences between financial accounting and tax reporting requirements. The effective tax rate was higher in 2022 as compared to 2021 primarily due to higher domestic income resulting in higher state taxes, lower levels of compensation deductions related to employee stock option exercises, and less favorable tax adjustments related to partnership flip transactions, partially offset by the availability of additional Section 179D deductions for 2021 and 2022. The tax benefit rate for 2021 was favorable, primarily due to increases in the benefits associated with energy efficiency tax incentives, including Section 48 Solar Investment Tax Credits, deductions associated with the Section 179D Commercial Buildings Energy Efficiency Tax Deduction, and compensation deductions resulting from employee stock option disqualifying dispositions.

•Net Income and Earnings Per Share: Net income attributable to common shareholders increased due to the reasons described above. Basic earnings per share for 2022 was $1.83 an increase of $0.45 per share compared to 2021. Diluted earnings per share for 2022 was $1.78, an increase of $0.43 per share, compared to 2021.

Business Segment Analysis

Our reportable segments for the year ended December 31, 2022 were U.S. Regions, U.S. Federal, Canada, Alternative Fuels (formerly Non-Solar Distributed Generation (“Non-Solar DG”)), and All Other. On January 1, 2022, we changed the structure of our internal organization, and our “All Other” segment now includes our U.S.-based enterprise energy management services previously included in our U.S Regions segment and our U.S. Regions segment now includes U.S. project revenue and associated costs previously included in our former Non-Solar DG segment. As a result, previously reported amounts have been reclassified for comparative purposes. See Note 20 “Business Segment Information” for additional information about our segments.

Revenues

•U.S. Regions: the increase is primarily due to a $561.0 million, or 115%, increase in project revenues attributable to the timing of revenue recognized based upon costs incurred to date relative to total expected costs on active projects, including our SCE battery storage project, versus the prior year and a $7.9 million, or 20%, increase in revenue from the growth of our energy assets in operation.

•U.S. Federal: the decrease is primarily due to a $6.8 million, or 2%, decrease in project revenue attributable to the timing of revenue recognized as a result of the phase of active projects compared to the prior year, partially offset by an

32

Table of Contents

increase of $4.8 million in O&M revenue and a $0.9 million, or 19%, increase in revenue from the growth of our energy assets in operation.

•Canada: the increase is primarily due to higher project revenues which were partially offset by unfavorable foreign exchange rates.

•Alternative Fuels: the increase is primarily due to a $2.3 million, or 2%, increase in energy asset revenues resulting from the continued growth of our operating portfolio and increased renewable gas production levels.

•All Other: the increase is due to a $15.7 million increase in project revenues primarily in the United Kingdom related to an increase in volume and progression of certain active projects and a $8.5 million increase in integrated-PV revenues resulting from increased activity in the oil and gas market.

Income before Income Taxes and Unallocated Corporate Activity

•U.S. Regions: the increase is primarily due to the higher revenues described above, partially offset by higher salaries and benefit costs, and other expenses which included a non-cash adjustment to recognize additional contingent consideration related to one of our acquisitions.

•U.S. Federal: the decrease is due primarily to the decrease in revenues described above, partially offset by a decrease in operating expenses attributed to an increase in earnings recognized from an unconsolidated equity investment.

•Canada: the increase is primarily due to the increase in project revenues described above.

•Alternative Fuels: the decrease is primarily due to higher direct costs related to unplanned downtime, higher depreciation expense related to the timing of assets placed in operations, and higher interest expense, partially offset by lower mark to market losses on our unhedged commodity gas swaps, and lower other expenses which included an impairment charge in the prior year.

•All Other: the increase is primarily due to higher revenues noted above.

•Unallocated corporate activity includes all corporate level selling, general and administrative expenses and other expenses not allocated to the reportable segments. We do not allocate any indirect expenses to the segments. Corporate activity increased primarily due to higher salaries and benefit costs of $9.8 million, which includes a $6.3 million increase in non-cash stock-based compensation expense due to increased option grants with a higher grant date fair value, and increased insurance costs and interest expenses described above.

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, and various forms of other debt (see “Project Financing” below). In addition, in March 2021, we completed an underwritten public offering of 2,875,000 shares of our Class A Common Stock, for total net proceeds of $120.1 million. See Note 13 “Equity and Earnings per Share” 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.

33

Table of Contents

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

•equity investments, energy 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, and our general access to credit and equity markets, will be sufficient to fund our operations for twelve months from filing this Report and thereafter. We funded a significant portion of the contract expenditures for our SCE battery storage project in advance of customer receipts during the year ended December 31, 2022. With the schedule adjustment requested by SCE and the anticipated timeline for completing the projects, we expect to continue to incur and fund capital expenditures for the SCE battery project into the first half of 2023, net of any cash collected on amounts invoiced.

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 requirements during these uncertain times. This may include limiting discretionary spending across the organization and re-prioritizing our capital projects amid times of political unrest, the evolution of the COVID-19 pandemic, the duration of supply challenges, and the rate and duration of the inflationary pressures. For example, 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 Credit Facility — Revolver and Term Loans

On March 4, 2022, we entered into the fifth amended and restated senior secured credit facility, which increased the aggregate amount of total commitments from $245.0 million to $495.0 million. This amendment increased the aggregate amount of the revolving commitments from $180.0 million to $200.0 million, increased the existing term loan A to $75.0 million, and extended the maturity date of the revolving commitment and term loan A from June 28, 2024 to March 4, 2025. In addition, it added a delayed draw term loan A for up to $220.0 million through a September 4, 2023 maturity date, increased the total funded debt to EBITDA covenant ratio from a maximum of 3.50 to 4.50 for the quarter ended March 31, 2022; 4.25 for the quarter ended June 30, 2022; 4.00 for the quarters ended September 30, 2022 and December 31, 2022; and 3.50 thereafter. The amendment also specified the debt service coverage ratio to be less than 1.5 and increased our limit under an energy conservation project financing to $650.0 million, which provides us with flexibility to grow our federal business further. At December 31, 2022, our senior secured credit facility outstanding was $477.9 million, we had funds of $0.3 million available under the revolving credit facility, and had $16.8 million in letters of credit outstanding.

On June 9, 2022, we entered into the first amendment to the fifth amended and restated senior secured credit facility, which temporarily increased the maximum indebtedness incurred under an energy conservation project financing from $650.0 million to $725.0 million from and after April 1, 2022 to and including December 30, 2022. As of December 31, 2022, the maximum indebtedness incurred under an energy conservation project financing reverted back to $650,000.

Project Financing

Non-recourse Construction Revolvers 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 consolidated balance sheets, they are generally non-recourse and not direct obligations of Ameresco, Inc.

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. 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.

34

Table of Contents

Material non-recourse construction revolvers and term loan financing during the year ended December 31, 2022 was our Non-recourse Fixed Rate Note, 6.50%, due October 2037.

As of December 31, 2022, our total construction and term loans outstanding was $300.8 million. See Note 9 “Debt and Financing Lease Liabilities” for additional information about these loans.

Non-recourse Sale-leasebacks and Financing Leases

We have entered into sale-leaseback arrangements for solar PV energy assets with multiple investors and in accordance with Topic 842, Leases, all sale-leaseback transactions that occurred after December 31, 2018, were accounted for as failed sales and the proceeds received from the transactions were recorded as long-term financing facilities.

As of December 31, 2022, our total sale-leasebacks classified as long-term financing facilities outstanding was $120.9 million.

As of December 31, 2022, our total financing leases outstanding was $16.1 million. These are our sale-leaseback arrangements entered into as of December 31, 2018 which remain under the previous guidance.

See Notes 8 “Leases” and 9 “Debt and Financing Lease Liabilities” for additional information on these financing facilities.

While we are required under GAAP to reflect these lease payments as liabilities on our consolidated balance sheets, they are generally non-recourse and not direct obligations of Ameresco Inc., except that we have guaranteed certain obligations relating to taxes and project warranties, operation, and maintenance.

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 $478.5 million in principal amounts as of December 31, 2022 and $532.3 million as of December 31, 2021. 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 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 $238.4 million during the year ended December 31, 2022 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 $259.5 million during the year ended December 31, 2022. 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 consolidated balance sheets as a non-cash settlement. See Note 2, “Summary of Significant Accounting Policies”, to our consolidated financial statements in this Report.

Other

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

Selected Measures of Liquidity and Capital Resources

35

Table of Contents

Cash Flows

The following table summarizes our changes in cash and cash equivalents:

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 flow from operating activities in 2022 decreased over 2021 primarily due to a $159.4 million increase in unbilled revenue (costs and estimated earnings in excess of billings) due to the timing of when certain projects are invoiced, including our SCE battery storage project, a decrease of $47.3 million in accounts payable, accrued expenses and other current liabilities, and an increase of $9.8 million in Federal ESPC receivables, partially offset by an increase of $18.4 million in net income.

Cash Flows from Investing Activities

During 2022, we made capital investments of $304.6 million in new energy assets and $18.0 million in major maintenance of energy assets, compared to $170.3 million and $8.6 million, respectively, in 2021. Last year we paid $14.9 million, net of cash received, for an acquisition and also contributed $9.0 million to an equity investment.

We currently plan to invest approximately $325.0 million to $375.0 million in capital investments in 2023, principally for the construction or acquisition of new renewable energy plants.

Cash Flows from Financing Activities

Our primary sources of financing during 2022 were proceeds of $468.5 million from long-term debt financings and construction revolvers, $252.7 million from advances on Federal ESPC projects and energy assets, and net proceeds from our senior secured revolving credit facility of $137.9 million, partially offset by repayments of long-term debt totaling $161.9 million.

During 2021, we received net proceeds of $186.0 million from long-term debt financings, $161.2 million from advances on Federal ESPC projects and energy assets, and net proceeds of $120.1 million from our equity offering, partially offset by repayments of long-term debt totaling $98.2 million.

We currently plan additional financings of $250.0 million to $300.0 million in 2023 to fund the construction or acquisition of new renewable energy plants as discussed above.

We may also, from time to time, finance our operations through issuance or offering of equity or debt securities.

Critical Accounting Policies and Estimates

Preparing our 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.

We believe that our policies and estimates that require our most significant judgments are considered our critical accounting policies and are discussed below. In addition, refer to Note 2 “Summary of Significant Accounting Policies” for further details.

36

Table of Contents

Revenue Recognition

As described in Note 2, we recognize revenue from the installation or construction of projects over time using the cost-based input method. We use the total costs incurred on the project relative to the total expected costs to satisfy the performance obligation. When the estimate on a contract indicates a loss or claims against costs incurred reduce the likelihood of recoverability of such costs, we record the entire estimated loss in the period the loss becomes known. In addition, some contracts contain an element of variable consideration, including liquidated damages and/or penalties, which requires payment to the customer in the event that construction timelines or milestones are not met. We estimate the total consideration payable by the customer when the contracts contain variable consideration provisions, based on the most likely amount anticipated to be recognized for transferring the promised goods or services. As a result, we may constrain revenue to the extent that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

To the extent a contract is deemed to have multiple performance obligations, we allocate the transaction price of the contract to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract.

Significant judgement is required to estimate the total expected costs and variable consideration for projects that typically have a construction period of 12 to 36 months. Any increase or decrease in estimated costs to complete a performance obligation without a corresponding change to the contract price could impact the calculation of cumulative revenue to date and gross profit on the project. Similarly, if we recognize revenue based upon our current estimate of variable consideration, and our estimate is later adjusted, we may be required to increase or decrease cumulative revenue to date and gross profit on the project. Factors that may result in a change to our estimates include unforeseen engineering problems, construction delays, the performance of contractors and major material suppliers, and unusual weather conditions, among others.

We have a long history of working with multiple types of projects and preparing cost estimates, and we rely on the expertise of key personnel to prepare what we believe are reasonable best estimates given available facts and circumstances. Due to the nature of the work involved, however, judgment is involved to estimate the costs to complete and the amounts estimated could have a material impact on the revenue we recognize in each accounting period. We cannot estimate unforeseen events and circumstances which may result in actual results being materially different from previous estimates.

Impairment Assessments

We evaluate our long-lived assets, including goodwill and intangible assets, for impairment as events or changes in circumstances indicate the carrying value of these assets may not be fully recoverable, and at least annually (December 31st) for goodwill and intangible assets that have indefinite lives. Examples of such triggering events applicable to our assets include a significant decrease in the market price of a long-lived asset or asset group, a current-period operating or cash flow loss combined with a history of operating or cash flow losses, a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group, or adverse industry or economic trends.

We evaluate recoverability of long-lived assets and definite-lived intangible assets by estimating the undiscounted future cash flows associated with the expected uses and eventual disposition of those assets. When these comparisons indicate that the carrying value of those assets is greater than the undiscounted cash flows, we recognize an impairment loss for the amount that the carrying value exceeds the fair value.

The process of evaluating the potential impairment of long-lived assets, goodwill and intangible assets requires significant judgment. For goodwill, we estimate the reporting unit’s fair value and compare it with the carrying value of the reporting unit, including goodwill. If the fair value is greater than the carrying value of its reporting unit, no impairment is recorded. Fair value is determined using both an income approach and a market approach. The estimates and assumptions used in our calculations include revenue growth rates, expense growth rates, expected capital expenditures to determine projected cash flows, expected tax rates and an estimated discount rate to determine present value of expected cash flows. These estimates are based on historical experiences, our projections of future operating activity and our weighted-average cost of capital. Unforeseen events and changes in circumstances or market conditions could adversely affect these estimates, which could result in an impairment charge.

Based on our goodwill impairment assessment, all of our reporting units with goodwill had estimated fair values that exceeded their carrying values by at least 20% as of December 31, 2022 and 61% as of December 31, 2021. During the year ended December 31, 2021, we recognized a long-lived asset impairment charge of $1.9 million on one of our energy asset groups. See Note 7 “Energy Assets” for additional information.

37

Table of Contents

Income Taxes

We are subject to income taxes in the U.S. and five foreign jurisdictions. Significant judgment is required in determining income tax expense, deferred tax assets and liabilities and uncertain tax positions. The underlying assumptions are also highly susceptible to change from period to period. We took advantage of the Safe Harbor commence-construction provisions contained in IRS Notice 2018-59 by pre-purchasing solar equipment in 2019 thereby preserving the ability to take 30% ITC for projects placed in service before 2024. However, the IRA signed by the President on August 16, 2022 increased the ITC rate back to 30% for projects placed in service after January 1, 2022 and before January 1, 2033. If these or other deductions and credits expire without being extended, or otherwise are reduced or eliminated, our effective tax rate would increase, which could increase our income tax expense and reduce our net income. In addition, our tax rate has historically been significantly impacted by the IRC Section 179D deduction. This deduction is related to energy-efficient improvements we provide under government contracts. The Consolidated Appropriations Act, 2021 made permanent the Section 179D Energy Efficient Commercial Building Deduction. That Act made changes to the way the deduction is calculated. On December 23, 2022, the IRS issued Announcement 2023-1 which clarified the energy efficiency standards which will be applied to projects placed in service for 2021 and 2022. If those changes result in lower levels of energy efficiency improvements, it could impact the deduction available and the tax rate.

We accrue for the estimated additional tax and interest that may result from tax authorities disputing uncertain tax positions. We believe we have made adequate provisions for income taxes for all years that are subject to audit based upon the latest information available. We operate within multiple taxing jurisdictions and are subject to tax audits in these jurisdictions. These audits can involve complex issues and may require an extended period of time to resolve. We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different. We adjust these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences may affect the provision for income taxes in the period in which such determination is made and could have an impact on our results of operations.

On a quarterly basis, we assess our current and projected earnings by jurisdiction to determine whether or not our earnings during the periods when the temporary differences become deductible will be sufficient to realize the related future tax benefits. Should we determine that we would not be able to realize all or part of our net deferred tax asset in a particular jurisdiction in the future, a valuation allowance to the deferred tax asset would be charged to income in the period such determination was made. This valuation allowance is maintained for deferred tax assets that we estimate are more likely than not to be unrealizable based on available evidence at the time the estimate is made. The determination of whether a valuation allowance for deferred tax assets is appropriate is subject to considerable judgment and requires an evaluation of all positive and negative evidence, including our historical financial results, the source and consistency of those results, whether they should be adjusted for certain one-time or nonrecurring items, whether losses cumulatively exceed income over a reasonable period of time, the availability of tax planning strategies, availability of carryback and carryforward periods, and other factors, including our expectations of future taxable income. Adjustments to income tax expense to the extent we establish a valuation allowance or adjust this allowance in a period could have a material impact on our financial condition and results of operations.

Recent Accounting Pronouncements

See Note 2 of the “Notes to Consolidated Financial Statements” for a discussion of recent accounting standards.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included in Item 8 of this Report. Some of the information contained in this discussion and analysis are set forth elsewhere in this Report, including information with respect to our plans and strategy for our business and related financing, and includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” included in Item 1A of this Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

Ameresco is a leading clean technology integrator with a comprehensive portfolio of energy efficiency and renewable energy supply solutions. We help organizations meet energy saving and energy management challenges with an integrated, comprehensive approach to energy efficiency and renewable energy. Leveraging budget neutral solutions, including ESPCs and PPAs, we aim to eliminate the financial barriers that traditionally hamper energy efficiency and renewable energy projects.

Drawing from decades of experience, Ameresco develops tailored energy management projects for its customers in the commercial, industrial, local, state and federal government, K-12 education, higher education, healthcare, public housing sectors, and utilities.

We provide solutions primarily throughout North America and the U.K. 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 have been an important part of our growth enabling us to broaden our service offerings and expand our geographical reach. In December 2021, we completed the acquisition of Plug Smart, an Ohio-based energy services company that specializes in the development and implementation of budget neutral capital improvement projects including building controls and building automation systems. This acquisition allows us to expand our existing pipeline and solution offerings in the smart buildings sector. The pro forma effects of this acquisition were not material to our operations for the fiscal years presented.

Key Factors and Trends

The SCE Agreement

In October 2021, we entered into a contract with SCE to design and build three grid scale battery energy storage systems at existing substation parcels throughout SCE’s service territory in California. 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.

We are obligated under the SCE Agreement to achieve substantial completion of all facilities, subject to extension for customary force majeure events and customer-caused delays, no later than August 1, 2022 (the “Guaranteed Completion Date”). If we fail to achieve substantial completion of any of the facilities by the Guaranteed Completion Date, as extended, we are obligated to pay liquidated damages. In addition, we provided availability and capacity guarantees under the SCE Agreement, failure of which entitles the customer to liquidated damages. We expect a material portion of our revenue for 2022 will be generated from this SCE Agreement, and expect a material portion of the contract expenditures under this agreement will be incurred during the first half of 2022. If we fail to achieve the milestone dates or fail to meet the availability and capacity guarantees, we may be subject to liquidated damages and under certain circumstances SCE may have a right to terminate the agreement. See “The loss of SCE, which is one of our most significant customers or our failure to perform our contract with that customer in accordance with its terms could adversely affect us” in Item 1A, Risk Factors for further discussion.

COVID-19

Fiscal year 2020 was marked with unrivaled global challenges, including the public health and economic downturn caused by the COVID-19 pandemic. During the first half of 2020, after COVID-19 was declared a pandemic by the World Health Organization, we experienced some delays in our project award conversions and some construction slowdowns due to shelter-in-place

29

Table of Contents

restrictions, however, the opportunities to reduce emissions and limit the effects of climate change remained. We responded to the pandemic by ensuring the health and safety of our employees. We implemented a seamless transition to remote operations for many months, and, while following all CDC guidelines, continued front-line work at our essential facilities.

The resurgence of COVID-19 and its variants during the latter part of 2021 has caused some governments to extend travel and other restrictions. On September 9, 2021, President Biden issued an Executive Order requiring COVID-19 vaccinations for Federal employees. As a result, we implemented this mandate for our employees and subcontractors who work in our Federal business segment. This vaccine mandate was blocked by a federal district court in Texas in January 2022 and the directive is now on hold pending a Justice Department appeal of the ruling. Future vaccine requirements could result in a potential loss of employees or subcontractors who have not been vaccinated or impact our ability to retain and recruit critically skilled workforce. See “The Covid-19 pandemic has had and may continue to have an adverse effect on our business and future public health threats or outbreaks of communicable diseases could have a material adverse effect on our operations and financial results” in Item 1A. Risk Factors in this Form 10-K, for discussion of this risk.

We continue to monitor the impact of COVID-19 on our operations, financial results, and liquidity. The impact to our future operations and results, however, remains uncertain and will depend on a number of factors, including, but not limited to, the emergence and spread of more transmissible variants, the overall duration and severity of the pandemic and its impact on the global economy, our customers, and business and workforce disruptions.

Supply Chain Disruptions

During the second half of the year ended December 31, 2021, we experienced supply chain disruptions resulting in delays in the timely delivery of material to customer sites and delays and disruptions in the completion of certain projects. This negatively impacted our results of operations during this time. We expect this trend to continue into 2022. See “We may be unable to complete or operate our projects on a profitable basis or as we have committed to our customers”, “Failure of third parties to manufacture quality products or provide reliable services in a timely manner could cause delays in the delivery of our services and completion of our projects, which could damage our reputation, have a negative impact on our relationships with our customers and adversely affect our growth”, and “The COVID-19 pandemic has had and may continue to have an adverse effect on our business and future public health threats or outbreaks of communicable diseases could have a material adverse effect on our operations and financial results” in Item 1A. Risk Factors..

The Energy Act of 2020

On December 27, 2020, the President signed the Consolidated Appropriations Act, 2021 into law, a legislative package that included the Energy Act of 2020, reauthorizing a number of U.S. Department of Energy programs, with a $2.3 trillion spending bill containing appropriations for fiscal year 2021, COVID-19 relief funds, and extensions of a number of expiring tax incentives important to the energy sector. It includes $35 billion in energy research and development programs, a two-year extension of the 26% Investment Tax Credit (“ITC”) rate for solar power that will retain the current 26% credits for solar projects that begin construction through the end of 2022. In addition, the Section 179D Energy Efficient Commercial Building Deduction, which historically has impacted our tax rate significantly, was made permanent under the tax code.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

On March 27, 2020, the U.S. government enacted the CARES Act which includes modifications to the limitation on business interest expense and net operating loss provisions and provides a payment delay of employer payroll taxes during 2020 after the date of enactment. The payment of $2.3 million of employer payroll taxes otherwise due in 2020 was paid in December 2021 and the remaining $2.3 million is due by December 31, 2022. The CARES Act permitted net operating losses from the 2018, 2019, and 2020 tax years to be carried back to the previous five tax years (beginning with the earliest year first). We received a federal income tax refund of approximately $4.0 million as a result of the CARES Act which permitted us to carry our 2018 operating loss back to previous years and utilize Alternative Minimum Tax Credits.

Climate Change and Effects of Seasonality

The 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. The sustainability efforts are impacted by regulations, and changes in the regulatory climate may impact the demand for our products and offerings. See “Our business depends in part on federal, state, provincial and local government support for energy efficiency

30

Table of Contents

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..

Climate change also brings risks, as the impacts have caused us to experience more frequent and severe weather interferences, and this trend may 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, 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” in Item 1A, Risk Factors.

Stock-based Compensation

During the year ended December 31, 2021, we granted 1,341,500 common stock options to certain employees under our 2020 Stock Incentive Plan. As a result, our stock-based compensation expense increased from $1.9 million for the year ended December 31, 2020 to $8.7 million for the year ended December 31, 2021. The increase in the number of stock options granted and higher grant date fair value resulted in the increased stock-based compensation in 2021. In addition, our unrecognized stock-based compensation expense increased from $12.1 million at December 31, 2020 to $41.1 million at December 31, 2021, and is expected to be recognized over a weighted-average period of three years. See Note 14 “Stock-based Compensation and Other Employee Benefits” 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:

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 recently has been averaging 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 subcontractor, what equipment will be used, and assist in arranging for third party financing, as applicable. Recently, awarded projects have been taking an average of 12 to 24 months to result in a signed contract and convert to fully-contracted backlog. It may take longer, as it depends on the size

31

Table of Contents

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 becomes 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 revenues that we expect to recognize in the next twelve months from our fully-contracted backlog. See Note 2 “Summary of Significant Accounting Policies” for our revenue recognition policies. 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.

Assets in Development

Assets in development, which represents the potential estimated design/build construction value of small-scale renewable energy plants that have been awarded or for which we have secured development rights, was $1,247.5 million as of December 31, 2021 and $1,021.8 million as of December 31, 2020. This is another important metric because it helps us gauge our future capacity to generate electricity or deliver renewable gas fuel which contributes to our recurring revenue stream.

Results of Operations

The following table sets forth certain financial data from the consolidated statements of income for the periods indicated (1):

Our results of operations for the year-ended December 31, 2021 reflect year-over-year growth in terms of revenues, operating income, and net income attributable to common shareholders. All financial result comparisons are against the prior year period.

Our strong operating results are due to the following:

•Revenue: total revenues increased primarily due to a $139.4 million, or 18%, increase in our project revenue attributed to the timing of revenue recognized as a result of the phase of active projects versus the prior year, including our SCE battery storage project, a $33.1 million, or 28%, increase in our energy asset revenue attributed to the continued growth of our operating portfolio, strong renewable gas production and higher pricing on RINs generated from certain non-solar distributed generation assets in operation, and a $6.3 million increase in O&M revenue.

•Cost of Revenues and Gross Profit: the increase in cost of revenues is primarily due to the increase in project revenues described above. The increase in gross profit as a percentage of revenue increased as our revenue mix continued to shift towards our higher margin recurring Energy Assets and O&M businesses.

32

Table of Contents

•Selling, General and Administrative Expenses: the increase is primarily due to higher net salaries and benefits of $18.4 million as a result of increased headcount and an increase in non-cash stock-based compensation expense.

•Other Expenses, Net: Other expenses, net, includes gains and losses from derivatives transactions, foreign currency transactions, interest expense, interest income, amortization of deferred financing costs and certain government incentives. Other expenses, net increased primarily due to a foreign currency transaction loss of $0.9 million compared to a foreign currency transaction gain of $0.5 million in 2020, a loss on derivatives of $0.2 million compared to a gain of $0.7 million in 2020, and a decrease in government incentives of $0.8 million, partially offset by lower interest expenses of $1.1 million related to a lower average balance on our senior secured debt facility and lower interest rates on this facility.

•Income before Income Taxes: the increase is due to reasons described above.

•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 permanent and temporary differences between financial accounting and tax reporting requirements. The effective tax benefit rate was lower in 2021 as compared to 2020 primarily due to increases in the benefits associated with energy efficiency tax incentives including Section 48 Solar Investment Tax Credits, deductions associated with the Section 179D Commercial Buildings Energy Efficiency Tax Deduction and compensation deductions resulting from employee stock option disqualifying dispositions. The tax benefit rate for 2020 was favorable, which was affected by the release of a previously established valuation allowance on the Canadian tax assets and the benefit of employee stock option compensation. We additionally realized tax rate benefits associated with net operating loss carrybacks made possible by the passing of the CARES Act on March 27, 2020 and tax basis adjustments on certain partnership flip transactions.

•Net Income and Earnings Per Share: Net income attributable to common shareholders increased due to the reasons described above. Basic earnings per share for 2021 was $1.38 an increase of $0.25 per share compared to 2020. Diluted earnings per share for 2021 was $1.35, an increase of $0.25 per share, compared to 2020. The equity offering in March 2021 increased the weighted average shares outstanding by approximately 2,333,000 shares, which lowered basic and diluted earnings per share by $0.07 and $0.06 per share, respectively.

Business Segment Analysis

Our reportable segments for the year ended December 31, 2021 were U.S. Regions, U.S. Federal, Canada, Non-Solar Distributed Generation (“Non-Solar DG”), and All Other. On January 1, 2021, we changed the structure of our internal organization, and our U.S. Regions segment now includes our U.S.-based enterprise energy management services previously included in our “All Other” segment. As a result, previously reported amounts have been reclassified for comparative purposes. See Note 20 “Business Segment Information” for additional information about our segments.

Revenues

•U.S. Regions: the increase is primarily due to a $116.0 million, or 33%, increase in project revenues attributable to the timing of revenue recognized as a result of the phase of active projects, including our SCE battery storage project, versus the prior year and a $5.1 million, or 15%, increase in revenue from the growth of our energy assets in operation.

•U.S. Federal: the increase is primarily due to a $13.1 million, or 4%, increase in project revenue attributable to the timing of revenue recognized as a result of the phase of active projects compared to the prior year.

•Canada: the increase is primarily due to favorable foreign exchange rates.

•Non-Solar DG: the increase is primarily due to a $26.7 million, or 35%, increase in energy asset revenues resulting from the continued growth of our operating portfolio, increased renewable gas production levels and higher pricing on RINs generated from certain non-solar distributed generation assets in operation.

•All Other: the increase is primarily due to an increase in project revenues in the U.K. related to an increase in volume and progression of certain active projects, partially offset by a decrease in project revenues in Greece.

33

Table of Contents

Income before Taxes and Unallocated Corporate Activity

•U.S. Regions: the increase is primarily due to the increase in revenues described above, a $1.8 million decrease in project development costs, a $1.5 million decrease in bad debt expense, partially offset by an increase of $3.8 million in salary and benefit costs resulting from increased headcount and higher health insurance costs.

•U.S. Federal: the increase is due to the increase in revenues described above, partially offset by an increase in salaries and benefits of $2.3 million resulting from increased average salaries and higher health insurance costs.

•Canada: the decrease is primarily due to a $0.5 million increase in salaries and benefits, a $0.8 million increase in project development costs, partially offset by an increase in revenues described above.

•Non-Solar DG: the increase is primarily due to the higher contribution attributed to the increase in higher margin energy asset revenue described above, partially offset by higher mark to market losses on our unhedged commodity gas swaps, and higher interest expense.

•All Other: the decrease is due to higher operating expenses, primarily salaries and benefits and project development costs, partially offset by higher revenues noted above.

•Unallocated corporate activity includes all corporate level selling, general and administrative expenses and other expenses not allocated to the reportable segments. We do not allocate any indirect expenses to the segments. Corporate activity increased primarily due to higher salaries and benefit costs of $9.3 million, which includes a $6.8 million increase in non-cash stock-based compensation expense due to increased option grants with a higher grant date fair value.

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 and various forms of other debt (see “Project Financing” below). In addition, in March 2021, we completed an underwritten public offering of 2,875,000 shares of our Class A Common Stock, for total net proceeds of $120.1 million. See below, Note 9 “Debt and Financing Lease Liabilities”, and Note 13 “Equity and Earnings per Share” for additional information.

Working capital requirements, which can be susceptible to fluctuations during the year due to seasonal demands, generally result from revenue growth, our solar equipment purchase patterns, the timing of funding under various contracts, or advances from Federal ESPC projects, and payment terms for receivables and payables.

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 our SCE battery storage project, particularly during the first half of 2022

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, and our general access to credit and equity markets, will be sufficient to fund our operations for twelve months from filing this Report and thereafter. However, we consistently 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 requirements during these uncertain times. This may include limiting discretionary spending across the organization and re-

34

Table of Contents

prioritizing our capital projects amid times of international political unrest and for the time periods we expect to fund significant capital expenditures for our SCE battery storage project and depending on the evolution of the COVID-19 pandemic.

Equity Offering

On March 9, 2021, we closed on an underwritten public offering of 2,500,000 shares of our Class A common stock at a public offering price of $44.00 per share. Net proceeds from the offering were $104.3 million, after deducting offering costs of $5.7 million. On March 15, 2021, we closed on the underwriters’ option to purchase 375,000 additional shares of our Class A common stock from us at $44.00 per share, resulting in net proceeds of $15.8 million after deducting offering costs of $0.7 million. In the offering, selling shareholders sold 805,000 shares of our Class A Common Stock at a public offering price of $44.00 per share, less the underwriting discount. We did not receive any proceeds from the sale of the shares by the selling stockholders. We used $80.0 million of the net proceeds to repay in full the outstanding U.S. dollar balance under our senior secured revolving credit facility and used the remaining proceeds for general corporate purposes.

Senior Secured Credit Facility — Revolver and Term Loan

In June 2021, we entered into an amendment to our senior secured revolving credit facility with three banks which increased the amount of the revolving commitment by the lenders under the credit facility from $115.0 million to $180.0 million. The amendment also increased the total funded debt to EBITDA covenant ratio from a maximum of 3.25 to 3.50, and decreased the Eurocurrency rate floor from 1% to 0%. At December 31, 2021, our senior secured credit facility outstanding was $97.8 million, and we had funds of $121.2 million available under the revolving credit facility.

Project Financing

Construction 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 consolidated balance sheets, they are generally non-recourse and not direct obligations of Ameresco, Inc. As of December 31, 2021, our construction and term loans outstanding were $249.8 million.

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. 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.

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 $532.3 million in principal amounts as of December 31, 2021 and $440.2 million as of December 31, 2020. 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 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 $159.2 million during the year ended December 31, 2021 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 $249.7 million during the year ended December 31, 2021. 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 consolidated balance sheets as a non-cash settlement. See Note 2, “Summary of Significant Accounting Policies”, to our consolidated financial statements in this Report.

35

Table of Contents

Sale-Leaseback and Financing Liabilities

We have entered into sale-leaseback arrangements for solar PV energy assets with multiple investors and in accordance with Topic 842, Leases, all sale-leaseback transactions that occurred after December 31, 2018, were accounted for as failed sales and the proceeds received from the transactions were recorded as long-term financing facilities. See Notes 8 “Leases” and 9 “Debt and Financing Lease Liabilities” for additional information on these financing facilities. As of December 31, 2021, our financing leases and financing liabilities outstanding were $123.8 million, and $228.6 million remained available under these lending commitments, although this full amount is not expected to be used.

While we are required under GAAP to reflect these lease payments as liabilities on our consolidated balance sheets, they are generally non-recourse and not direct obligations of Ameresco Inc., except that we have guaranteed certain obligations relating to taxes and project warranties, operation, and maintenance.

Other

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

Selected Measures of Liquidity and Capital Resources

Cash Flows

The following table summarizes our changes in cash and cash equivalents:

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 flow from operating activities in 2021 decreased over 2020 primarily due to a $132.7 million increase in unbilled revenue (costs and estimated earnings in excess of billings) due to the timing of when certain projects are invoiced, including our SCE battery storage project, and an increase of $22.7 million in Federal ESPC receivables, partially offset by an increase of $54.4 million in accounts payable, accrued expenses and other current liabilities and an increase of $23.3 million in net income.

Cash Flows from Investing Activities

During 2021, we paid $14.9 million, net of cash received, for the acquisition of Plug Smart and also contributed $9.0 million to an equity investment. We also spent $4.9 million related to purchases of other property and equipment, which is $2.7 million more than last year and made capital investments, net of grant proceeds, of $178.1 million related to the development and acquisition of renewable energy plants, which is comparable to last year.

We currently plan to invest approximately $225.0 million to $275.0 million in capital investments in 2022, principally for the construction or acquisition of new renewable energy plants.

36

Table of Contents

Cash Flows from Financing Activities

Our primary sources of financing during 2021 were proceeds of $186.0 million from long-term debt financings, $161.2 million from advances on Federal ESPC projects and energy assets and net proceeds of $120.1 million from our equity offering. These proceeds were partially offset by repayments of long-term debt totaling $98.2 million.

During 2020, proceeds from Federal ESPC projects and energy assets provided $250.3 million in cash and received long-term debt financing proceeds of $116.1 million. These proceeds were partially offset by repayments of long-term debt totaling $73.6 million.

We currently plan additional financings of $175.0 million to $225.0 million in 2022 to fund the construction or acquisition of new renewable energy plants as discussed above.

We may also, from time to time, finance our operations through issuance or offering of equity or debt securities.

Critical Accounting Policies and Estimates

Preparing our 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.

We believe that our policies and estimates that require our most significant judgments are considered our critical accounting policies and are discussed below. In addition, refer to Note 2 “Summary of Significant Accounting Policies” for further details.

Revenue Recognition

As described in Note 2, we recognize revenue from the installation or construction of projects over time using the cost-based input method. We use the total costs incurred on the project relative to the total expected costs to satisfy the performance obligation. When the estimate on a contract indicates a loss or claims against costs incurred reduce the likelihood of recoverability of such costs, we record the entire estimated loss in the period the loss becomes known. In addition, some contracts contain an element of variable consideration, including liquidated damages and/or penalties, which requires payment to the customer in the event that construction timelines or milestones are not met. We estimate the total consideration payable by the customer when the contracts contain variable consideration provisions, based on the most likely amount anticipated to be recognized for transferring the promised goods or services. As a result, we may constrain revenue to the extent that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

To the extent a contract is deemed to have multiple performance obligations, we allocate the transaction price of the contract to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract.

Significant judgement is required to estimate the total expected costs and variable consideration for projects that typically have a construction period of 12 to 36 months. Any increase or decrease in estimated costs to complete a performance obligation without a corresponding change to the contract price could impact the calculation of cumulative revenue to date and gross profit on the project. Similarly, if we recognize revenue based upon our current estimate of variable consideration, and our estimate is later adjusted, we may be required to increase or decrease cumulative revenue to date and gross profit on the project. Factors that may result in a change to our estimates include unforeseen engineering problems, construction delays, the performance of contractors and major material suppliers, and unusual weather conditions, among others.

We have a long history of working with multiple types of projects and preparing cost estimates, and we rely on the expertise of key personnel to prepare what we believe are reasonable best estimates given available facts and circumstances. Due to the nature of the work involved, however, judgment is involved to estimate the costs to complete and the amounts estimated could have a material impact on the revenue we recognize in each accounting period. We cannot estimate unforeseen events and circumstances which may result in actual results being materially different from previous estimates.

Impairment Assessments

We evaluate our long-lived assets, including goodwill and intangible assets, for impairment as events or changes in circumstances indicate the carrying value of these assets may not be fully recoverable, and at least annually (December 31st) for goodwill and

37

Table of Contents

intangible assets that have indefinite lives. Examples of such triggering events applicable to our assets include a significant decrease in the market price of a long-lived asset or asset group, a current-period operating or cash flow loss combined with a history of operating or cash flow losses, a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group, or adverse industry or economic trends.

We evaluate recoverability of long-lived assets and definite-lived intangible assets by estimating the undiscounted future cash flows associated with the expected uses and eventual disposition of those assets. When these comparisons indicate that the carrying value of those assets is greater than the undiscounted cash flows, we recognize an impairment loss for the amount that the carrying value exceeds the fair value.

The process of evaluating the potential impairment of long-lived assets, goodwill and intangible assets requires significant judgment. For goodwill, we estimate the reporting unit’s fair value and compare it with the carrying value of the reporting unit, including goodwill. If the fair value is greater than the carrying value of its reporting unit, no impairment is recorded. Fair value is determined using both an income approach and a market approach. The estimates and assumptions used in our calculations include revenue growth rates, expense growth rates, expected capital expenditures to determine projected cash flows, expected tax rates and an estimated discount rate to determine present value of expected cash flows. These estimates are based on historical experiences, our projections of future operating activity and our weighted-average cost of capital. Unforeseen events and changes in circumstances or market conditions could adversely affect these estimates, which could result in an impairment charge.

Based on our goodwill impairment assessment, all of our reporting units with goodwill had estimated fair values that exceeded their carrying values by at least 61% as of December 31, 2021 and 67% as of December 31, 2020. During the year ended December 31, 2021, we recognized a long-lived asset impairment charge of $1.9 million on one of our energy asset groups. See Note 7 “Energy Assets” for additional information.

Income Taxes

We are subject to income taxes in the U.S. and five foreign jurisdictions. Significant judgment is required in determining income tax expense, deferred tax assets and liabilities and uncertain tax positions. The underlying assumptions are also highly susceptible to change from period to period. We took advantage of the Safe Harbor commence-construction provisions contained in IRS Notice 2018-59 by pre-purchasing solar equipment in 2019 thereby preserving the ability to take 30% ITC for projects placed in service before 2024. If these or other deductions and credits expire without being extended, or otherwise are reduced or eliminated, our effective tax rate would increase, which could increase our income tax expense and reduce our net income. In addition, our tax rate has historically been significantly impacted by the IRC Section 179D deduction. This deduction is related to energy-efficient improvements we provide under government contracts. The Consolidated Appropriations Act, 2021 made permanent the Section 179D Energy Efficient Commercial Building Deduction. That Act made changes to the way the deduction is calculated. If those changes result in lower levels of energy efficiency improvements, it could impact the deduction available and the tax rate.

We accrue for the estimated additional tax and interest that may result from tax authorities disputing uncertain tax positions. We believe we have made adequate provisions for income taxes for all years that are subject to audit based upon the latest information available. We operate within multiple taxing jurisdictions and are subject to tax audits in these jurisdictions. These audits can involve complex issues and may require an extended period of time to resolve. We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different. We adjust these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences may affect the provision for income taxes in the period in which such determination is made and could have an impact on our results of operations.

On a quarterly basis, we assess our current and projected earnings by jurisdiction to determine whether or not our earnings during the periods when the temporary differences become deductible will be sufficient to realize the related future tax benefits. Should we determine that we would not be able to realize all or part of our net deferred tax asset in a particular jurisdiction in the future, a valuation allowance to the deferred tax asset would be charged to income in the period such determination was made. This valuation allowance is maintained for deferred tax assets that we estimate are more likely than not to be unrealizable based on available evidence at the time the estimate is made. In 2020 we determined that it was more likely than not that the non-capital net operating loss carryforwards at our Canadian parent company would be realized before they expire. In 2020 we reversed the previously established valuation allowance on the tax assets associated with the carryforwards. The determination of whether a valuation allowance for deferred tax assets is appropriate is subject to considerable judgment and requires an evaluation of all positive and negative evidence, including our historical financial results, the source and consistency of those results, whether they

38

Table of Contents

should be adjusted for certain one-time or nonrecurring items, whether losses cumulatively exceed income over a reasonable period of time, the availability of tax planning strategies, availability of carryback and carryforward periods, and other factors, including our expectations of future taxable income. Adjustments to income tax expense to the extent we establish a valuation allowance or adjust this allowance in a period could have a material impact on our financial condition and results of operations.

Recent Accounting Pronouncements

See Note 2 of the “Notes to Consolidated Financial Statements” for a discussion of recent accounting standards.