EX-99.1 2 meg-ex99_1.htm EX-99.1 EX-99.1

 

Exhibit 99.1

img136747062_0.jpg

 

Montrose Environmental Group Reports Record Third Quarter and First Nine Months 2024 Results, Reaffirms Guidance, and Updates Strategic Capital Allocation Priorities

Third Quarter 2024 Highlights (comparisons to third quarter 2023)

Highest-ever total revenue of $178.7 million, an increase of $10.8 million, or 6.4%
Net loss of $10.6 million, or $0.39 net loss per diluted share attributable to common stockholders (LPS), and Adjusted Net Income1 of $19.1 million, or $0.41 Diluted Adjusted Net Income per share1 (Adj EPS)
Record Consolidated Adjusted EBITDA1 of $28.3 million, an increase of $5.0 million, or 21.5%
Consolidated margin expansion
Reaffirms full-year 2024 guidance for total revenue of $690 million to $740 million, and Consolidated Adjusted EBITDA1 of $95 million to $100 million

First Nine Months 2024 Highlights (comparisons to first nine months 2023)

Record total revenue of $507.4 million, an increase of $48.9 million, or 10.7%
Net loss of $34.1 million, or $1.30 LPS, and Adjusted Net Income1 of $38.6 million, or $0.80 Adj EPS1
Record Consolidated Adjusted EBITDA1 of $68.5 million, an increase of $7.5 million, or 12.2%
Received five patents in 2024, bringing total patent portfolio to 23, which enhance differentiated capabilities across multiple contaminants, including PFAS

Strategic Capital Allocation Priorities

Long-term capital allocation strategy unchanged
Near-term priority is redemption of preferred equity and subsequent deleveraging; concurrently de-emphasizing acquisitions
Continued focus on cash flow generation

Little Rock, Arkansas (November 6, 2024) – Montrose Environmental Group, Inc. (the “Company,” “Montrose” or “MEG”) (NYSE: MEG) today announced results for the third quarter and first nine month periods ended September 30, 2024.

Montrose Chief Executive Officer and Director, Vijay Manthripragada, commented, “We are pleased to report another quarter of strong performance with record results driven by continued demand for our comprehensive suite of integrated solutions. Record quarterly revenues and Consolidated Adjusted EBITDA1, as well as the 190 basis points of margin improvement, evidence the alignment of our in-demand, higher-margin offerings with our strategic and financial goals. Our strong track record of organic growth, including ongoing cross-selling success, alongside the successful integration of recent acquisitions, continue to demonstrate the strategic advantages provided by our business model.”

_______________________________

(1)
Consolidated Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Share are non-GAAP measures. See the appendix to this release for a discussion of these measures, including how they are calculated and the reasons why we believe they provide useful information to investors, and a reconciliation for historical periods to the most directly comparable GAAP measures.

 

Mr. Manthripragada continued, “Our long-term capital allocation strategy is unchanged. In the near-term, we will prioritize redemption of the preferred equity and subsequent deleveraging. This provides an opportunity for the underlying organic growth potential of our business to shine. And, we remain steadfast in our commitment to strong cash flow generation. We believe these combined efforts will demonstrate to our employees, clients, colleagues and shareholders the true value creation afforded by our Company."

 

"As we look ahead, we remain confident in our growth trajectory, supported by overall favorable regulatory tailwinds and resilient client demand. The increasing complexity of environmental regulations, coupled with escalating private sector commitments to environmental stewardship, continue to drive demand for our integrated services across our operations in North America, Australia, and Europe.”

Third Quarter 2024 Results

Total revenue in the third quarter of 2024 was $178.7 million compared to $167.9 million in the prior year quarter, an increase of 6.4%. The increase in revenue was primarily comprised of strong organic growth in our Assessment, Permitting and Response and Measurement and Analysis segments, and $15.4 million from acquisitions, partially offset by a $12.8 million reduction in environmental emergency response revenue and lower treatment technology revenue.

Net loss was $10.6 million, or $0.39 of LPS, in the third quarter of 2024, compared to net loss of $7.5 million, or $0.39 LPS, in the prior year quarter. The year-over-year change in net loss was primarily attributable to higher interest in the current year quarter, partially offset by improved loss from operations. The flat comparative period LPS was due to lower dividends on our Series A-2 Preferred Stock (Series A-2) and a higher weighted average outstanding share count, partially offset by a Net loss increase.

In the third quarter of 2024, Adjusted Net Income1 and Adj EPS1 were $19.1 million and $0.41, respectively, increases compared to the prior year quarter Adjusted Net Income1 and Adj EPS1 of $15.7 million and $0.31, respectively. Adjusted Net Income1 in the current year period was higher than the prior year period primarily resulting from the improvement in operating income before amortization expense and acquisition costs, partially offset by higher interest expense. In the current year period, Adj EPS1 was higher than the prior year period primarily due to the increase in Adjusted Net Income and the lower dividends on our Series A-2, partially offset by a higher weighted average outstanding share count in the quarter.

 

Third quarter 2024 Consolidated Adjusted EBITDA1 was $28.3 million, or 15.8% of revenue, compared to $23.3 million, or 13.9% of revenue, in the prior year quarter. The increase in Consolidated Adjusted EBITDA1 was due to higher revenue driven by organic growth and acquisitions. The increase in Consolidated Adjusted EBITDA1 as a percentage of revenue resulted primarily from organic growth, the benefits from recent acquisitions, and lower corporate expenses, partially timing related.

First Nine Months 2024 Results

Total revenue in the first nine months of 2024 increased 10.7% to $507.4 million compared to $458.5 million in the prior year period. The increase in revenue was primarily comprised of strong organic growth in our Measurement and Analysis and Assessment, Permitting and Response segments, and $63.6 million from acquisitions, partially offset by a $34.9 million reduction in environmental emergency response revenue and lower treatment technology revenue.

Net loss was $34.1 million, or $1.30 LPS, in the first nine months of 2024 compared to a net loss of $29.4 million, or $1.39 LPS, in the prior year period. The year-over-year increase in net loss was primarily attributable to higher interest and income tax expenses in the current year period, partially offset by an improved loss from operations. Improved LPS was a result of lower dividends on the Series A-2 and a higher weighted average outstanding share count, partially offset by a higher net loss.

In the first nine months of 2024, Adjusted Net Income1 and Adj EPS were $38.6 million and $0.80, respectively, compared to prior year period Adjusted Net Income1 and Adj EPS1 of $40.9 million and $0.78, respectively. Adjusted Net Income1 in the current year period was lower than the prior year period primarily resulting from increases in interest and income tax expenses, partially offset by the improved operating loss. In the current year period, Adj EPS1 was higher than the prior year period primarily from the lower dividends on our Series A-2, partially offset by lower Adjusted Net Income1 and a higher weighted average outstanding share count in the year-to-date period.

 


 

Consolidated Adjusted EBITDA1 for the first nine months of 2024 was $68.5 million, or 13.5% of revenues, compared to $61.1 million, or 13.3% of revenues, in the prior year period. The increase in Consolidated Adjusted EBITDA1 was primarily due to higher revenues driven by organic growth and acquisitions.

Operating Cash Flow, Liquidity and Capital Resources

Cash used in operating activities for the first nine months ended September 30, 2024, was $9.7 million compared to cash provided by operating activities of $41.5 million in the prior year period. The year-over-year decrease was primarily due to an increase in accounts receivable and contract assets associated with higher revenues. The previously discussed temporary invoicing delays associated with the integration of Matrix are substantially addressed and collections are returning to a normal cadence. In addition, slower payments on a single, large, U.S. government funded project are expected to be resolved by year end. Excluding the impact of Matrix and the U.S. government funded project, days sales outstanding were unchanged compared to the prior year period.

As of September 30, 2024, Montrose had $139.8 million of liquidity, including $13.0 million of cash and $126.7 million of availability on its revolving credit facility.

As of September 30, 2024, Montrose’s leverage ratio under its credit facility, which includes the impact of recently completed acquisitions of Spirit Environmental and Origins Laboratory, was 2.6x.

Recent Acquisitions

In July 2024, Montrose acquired Spirit Environmental, LLC. ("Spirit"), a leading environmental consultant specializing in air permitting and compliance services across the central U.S. Spirit is included within the Company’s Assessment, Permitting & Response segment.

In September 2024, Montrose acquired substantially all the assets of Origins Laboratory, Inc. ("Origins"), an accredited environmental analytical testing laboratory. Origins is included within the Company’s Measurement and Analysis segment.

Full Year 2024 Outlook

The Company reaffirms its full year 2024 Revenue and Consolidated Adjusted EBITDA1 outlook. The Company expects Revenue to be in the range of $690 million to $740 million. Consolidated Adjusted EBITDA1 is expected to be in the range of $95 million to $100 million for the full year 2024.

Our Revenue and Consolidated Adjusted EBITDA1 outlook does not include any benefit from future acquisitions.

 


 

Webcast and Conference Call

The Company will host a webcast and conference call on Thursday, November 7, 2024, at 8:30 a.m. Eastern time to discuss third quarter financial results. The prepared remarks will be followed by a question-and-answer session. A live webcast of the conference call will be available in the Investors section of the Montrose website at www.montrose-env.com. The conference call will also be accessible by dialing 1-844-826-3035 (Domestic) and 1-412-317-5195 (International). For those who are unable to listen to the live broadcast, an audio replay of the conference call will be available on the Montrose website for 30 days.

About Montrose

Montrose is a leading environmental solutions company focused on supporting commercial and government organizations as they deal with the challenges of today and prepare for what's coming tomorrow. With ~3,400 employees across 100+ locations worldwide, Montrose combines deep local knowledge with an integrated approach to design, engineering, and operations, enabling Montrose to respond effectively and efficiently to the unique requirements of each project. From comprehensive air measurement and laboratory services to regulatory compliance, environmental emergency response, permitting, engineering, and remediation, Montrose delivers innovative and practical solutions that keep its clients on top of their immediate needs – and well ahead of the strategic curve. For more information, visit www.montrose-env.com.

Forward‐Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may be identified by the use of words such as “intend,” “expect”, and “may”, and other similar expressions that predict or indicate future events or that are not statements of historical matters. Forward-looking statements are based on current information available at the time the statements are made and on management’s reasonable belief or expectations with respect to future events, and are subject to risks and uncertainties, many of which are beyond the Company’s control, that could cause actual performance or results to differ materially from the belief or expectations expressed in or suggested by the forward-looking statements. Additional factors or events that could cause actual results to differ may also emerge from time to time, and it is not possible for the Company to predict all of them. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update any forward-looking statement to reflect future events, developments or otherwise, except as may be required by applicable law. Investors are referred to the Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2023, for additional information regarding the risks and uncertainties that may cause actual results to differ materially from those expressed in any forward-looking statement.

 

Contact Information:

Investor Relations:

Adrianne D. Griffin

(949) 988-3383

ir@montrose-env.com

Media Relations:

Sarah Kaiser

(225) 955-1702

pr@montrose-env.com

 

 

 


 

MONTROSE ENVIRONMENTAL GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS

(In thousands, except per share data)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenues

 

$

178,687

 

 

$

167,937

 

 

$

507,337

 

 

$

458,466

 

Cost of revenues (exclusive of depreciation and amortization shown below)

 

 

105,596

 

 

 

102,155

 

 

 

306,239

 

 

 

281,984

 

Selling, general and administrative expense

 

 

60,869

 

 

 

56,901

 

 

 

177,182

 

 

 

161,761

 

Fair value changes in business acquisition contingencies

 

 

143

 

 

 

459

 

 

 

385

 

 

 

414

 

Depreciation and amortization

 

 

13,240

 

 

 

11,863

 

 

 

37,408

 

 

 

33,816

 

Loss from operations

 

 

(1,161

)

 

 

(3,441

)

 

 

(13,877

)

 

 

(19,509

)

Other income (expense), net

 

 

(3,898

)

 

 

(671

)

 

 

(4,314

)

 

 

(1,560

)

Interest expense, net

 

 

(4,137

)

 

 

(2,089

)

 

 

(11,420

)

 

 

(5,507

)

Total other income (expense), net

 

 

(8,035

)

 

 

(2,760

)

 

 

(15,734

)

 

 

(7,067

)

Loss before expense from income taxes

 

 

(9,196

)

 

 

(6,201

)

 

 

(29,611

)

 

 

(26,576

)

Income tax expense

 

 

1,368

 

 

 

1,324

 

 

 

4,480

 

 

 

2,842

 

Net loss

 

$

(10,564

)

 

$

(7,525

)

 

$

(34,091

)

 

$

(29,418

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity adjustment from foreign currency translation

 

 

(70

)

 

 

(198

)

 

 

(70

)

 

 

(304

)

Comprehensive loss

 

 

(10,634

)

 

 

(7,723

)

 

 

(34,161

)

 

 

(29,722

)

Convertible and redeemable Series A-2 Preferred Stock dividend

 

 

(2,750

)

 

 

(4,100

)

 

 

(8,314

)

 

 

(12,300

)

Net loss attributable to common stockholders

 

 

(13,314

)

 

 

(11,625

)

 

 

(42,405

)

 

 

(41,718

)

  Weighted average common shares outstanding— basic and diluted

 

 

34,242

 

 

 

30,143

 

 

 

32,647

 

 

 

30,016

 

Net loss per share attributable to common stockholders— basic and diluted

 

$

(0.39

)

 

$

(0.39

)

 

$

(1.30

)

 

$

(1.39

)

 

 


 

MONTROSE ENVIRONMENTAL GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(In thousands, except share data)

 

 

September 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

13,045

 

 

$

23,240

 

Accounts receivable, net

 

 

152,849

 

 

 

112,360

 

Contract assets

 

 

65,553

 

 

 

51,629

 

Prepaid and other current assets

 

 

15,489

 

 

 

13,695

 

           Total current assets

 

 

246,936

 

 

 

200,924

 

Non-current assets

 

 

 

 

 

 

Property and equipment, net

 

 

66,096

 

 

 

56,825

 

Operating lease right-of-use asset, net

 

 

40,923

 

 

 

32,260

 

Finance lease right-of-use asset, net

 

 

17,242

 

 

 

13,248

 

Goodwill

 

 

482,607

 

 

 

364,449

 

Other intangible assets, net

 

 

144,652

 

 

 

140,813

 

Other assets

 

 

8,437

 

 

 

8,267

 

Total assets

 

$

1,006,893

 

 

$

816,786

 

Liabilities, Convertible and Redeemable Series A-2 Preferred Stock and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable and other accrued liabilities

 

$

57,579

 

 

$

59,920

 

Accrued payroll and benefits

 

 

31,556

 

 

 

34,660

 

Business acquisitions contingent consideration, current

 

 

6,423

 

 

 

3,592

 

Current portion of operating lease liabilities

 

 

11,696

 

 

 

9,963

 

Current portion of finance lease liabilities

 

 

4,232

 

 

 

3,956

 

Current portion of long-term debt

 

 

16,753

 

 

 

14,196

 

           Total current liabilities

 

 

128,239

 

 

 

126,287

 

Non-current liabilities

 

 

 

 

 

 

Business acquisitions contingent consideration, long-term

 

 

27,924

 

 

 

2,448

 

Other non-current liabilities

 

 

6,355

 

 

 

6,569

 

Deferred tax liabilities, net

 

 

8,274

 

 

 

6,064

 

Conversion option related to Series A-2 Preferred Stock

 

 

20,054

 

 

 

19,017

 

Operating lease liability, net of current portion

 

 

31,543

 

 

 

25,048

 

Finance lease liability, net of current portion

 

 

9,378

 

 

 

8,185

 

Long-term debt, net of deferred financing fees

 

 

233,007

 

 

 

148,988

 

           Total liabilities

 

$

464,774

 

 

$

342,606

 

Commitments and contingencies

 

 

 

 

 

 

Convertible and redeemable Series A-2 Preferred Stock $0.0001 par value

 

 

 

 

 

 

Authorized, issued and outstanding shares: 11,667 and 17,500 at September 30, 2024 and December 31, 2023, respectively; aggregate liquidation preference of $122.2 million and $182.2 million at September 30, 2024 and December 31, 2023, respectively

 

 

92,928

 

 

 

152,928

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.000004 par value; authorized shares: 190,000,000 at September 30, 2024 and December 31, 2023; issued and outstanding shares: 34,296,493 and 30,190,231 at September 30, 2024 and December 31, 2023, respectively

 

 

 

 

 

 

Additional paid-in-capital

 

 

693,931

 

 

 

531,831

 

Accumulated deficit

 

 

(244,447

)

 

 

(210,356

)

Accumulated other comprehensive (loss) income

 

 

(293

)

 

 

(223

)

Total stockholders’ equity

 

 

449,191

 

 

 

321,252

 

Total liabilities, convertible and redeemable Series A-2 Preferred Stock and Stockholders’ Equity

 

$

1,006,893

 

 

$

816,786

 

 

 


 

MONTROSE ENVIRONMENTAL GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

For the Nine Months Ended September 30,

 

 

 

2024

 

 

2023

 

Operating activities:

 

 

 

 

 

 

Net loss

 

$

(34,091

)

 

$

(29,418

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

37,408

 

 

 

33,816

 

Amortization of right-of-use asset

 

 

8,423

 

 

 

7,667

 

Stock-based compensation expense

 

 

34,866

 

 

 

35,609

 

Fair value changes in financial instruments

 

 

4,851

 

 

 

1,814

 

Deferred income taxes

 

 

4,931

 

 

 

2,842

 

Other operating activities, net

 

 

315

 

 

 

2,403

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts receivable and contract assets

 

 

(45,898

)

 

 

(9,538

)

Accounts payable and other accrued liabilities

 

 

(2,192

)

 

 

(772

)

Accrued payroll and benefits

 

 

(4,936

)

 

 

6,092

 

Payment of contingent consideration

 

 

 

 

 

(611

)

Change in operating leases

 

 

(9,233

)

 

 

(7,525

)

Other assets

 

 

(4,165

)

 

 

(907

)

Net cash (used in) provided by operating activities

 

 

(9,721

)

 

 

41,472

 

Investing activities:

 

 

 

 

 

 

Proceeds from corporate owned and property insurance

 

 

182

 

 

 

311

 

Purchases of property and equipment

 

 

(19,086

)

 

 

(24,969

)

Proceeds from the sale of property and equipment

 

 

401

 

 

 

 

Proprietary software development and other software costs

 

 

(2,052

)

 

 

(2,763

)

Purchase price true ups

 

 

(3,413

)

 

 

(1,027

)

Minority investments

 

 

(210

)

 

 

(2,347

)

Cash paid for acquisitions, net of cash acquired

 

 

(113,012

)

 

 

(66,187

)

Net cash used in investing activities

 

 

(137,190

)

 

 

(96,982

)

Financing activities:

 

 

 

 

 

 

Proceeds from line of credit

 

 

326,468

 

 

 

 

Repayment of the line of credit

 

 

(278,335

)

 

 

 

Proceeds from the aircraft loan

 

 

 

 

 

10,935

 

Repayment of aircraft loan

 

 

(796

)

 

 

(335

)

Proceeds from term loan

 

 

50,000

 

 

 

 

Repayment of term loan

 

 

(11,094

)

 

 

(8,785

)

Payment of contingent consideration and other purchase price true ups

 

 

(363

)

 

 

(1,535

)

Repayment of finance leases

 

 

(4,384

)

 

 

(3,378

)

Payments of deferred financing costs

 

 

(348

)

 

 

 

Proceeds from issuance of common stock for exercised stock options

 

 

1,973

 

 

 

4,529

 

Proceeds from issuance of common stock in follow-on offering

 

 

121,776

 

 

 

 

Dividend payment to the series A-2 stockholders

 

 

(8,314

)

 

 

(12,300

)

Repayment to the series A-2 stockholders

 

 

(60,000

)

 

 

 

Net cash provided by (used in) financing activities

 

 

136,583

 

 

 

(10,869

)

Change in cash, cash equivalents and restricted cash

 

 

(10,328

)

 

 

(66,379

)

Foreign exchange impact on cash balance

 

 

133

 

 

 

(265

)

Cash, cash equivalents and restricted cash:

 

 

 

 

 

 

Beginning of year

 

 

23,240

 

 

 

89,828

 

End of period

 

$

13,045

 

 

$

23,184

 

 

 


 

SEGMENT REVENUES AND ADJUSTED EBITDA

(In thousands)

(Unaudited)

 

 

Three Months Ended September 30,

 

 

2024

 

 

2023

 

 

 

 

Segment Revenues

 

 

Segment Adjusted EBITDA(1)

 

 

Segment Revenues

 

 

Segment Adjusted EBITDA(1)

 

 

Assessment, Permitting and Response

 

$

52,019

 

 

$

11,188

 

 

$

57,009

 

 

$

14,878

 

 

Measurement and Analysis

 

 

58,583

 

 

 

13,370

 

 

 

50,468

 

(2)

 

10,352

 

 

Remediation and Reuse

 

 

68,085

 

 

 

11,655

 

 

 

60,460

 

 

 

7,446

 

 

Total Operating Segments

 

$

178,687

 

 

$

36,213

 

 

$

167,937

 

 

$

32,676

 

 

Corporate and Other

 

 

 

 

 

(7,901

)

 

 

 

 

 

(9,373

)

 

Total

 

$

178,687

 

 

$

28,312

 

 

$

167,937

 

 

$

23,303

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

2024

2023

 

 

 

 

Segment Revenues

 

 

Segment Adjusted EBITDA(1)

 

 

Segment Revenues

 

 

Segment Adjusted EBITDA(1)

 

 

Assessment, Permitting and Response

 

$

164,043

 

 

$

40,088

 

 

$

170,634

 

 

$

42,977

 

 

Measurement and Analysis

 

 

158,889

 

 

 

32,233

 

 

 

143,050

 

(2)

 

27,528

 

 

Remediation and Reuse

 

 

184,405

 

 

 

25,594

 

 

 

144,782

 

 

 

18,767

 

 

Total Operating Segments

 

$

507,337

 

 

$

97,915

 

 

$

458,466

 

 

$

89,272

 

 

Corporate and Other

 

 

 

 

 

(29,367

)

 

 

 

 

 

(28,175

)

 

Total

 

$

507,337

 

 

$

68,548

 

 

$

458,466

 

 

$

61,097

 

 

_____________________________________

(1)
For purposes of evaluating segment profit, the Company’s chief operating decision maker reviews Segment Adjusted EBITDA as a basis for making the decisions to allocate resources and assess performance.
(2)
Includes revenue of $2.0 million and $5.9 million from the Discontinued Specialty Lab for the three and nine months ended September 30, 2023, respectively.

 


 

Non-GAAP Financial Information

In addition to our results under GAAP, in this release we also present certain other supplemental financial measures of financial performance that are not required by, or presented in accordance with, GAAP, including, Consolidated Adjusted EBITDA, Adjusted Net Income and Basic and Diluted Adjusted Net Income per Share. We calculate Consolidated Adjusted EBITDA as net income (loss) before interest expense, income tax expense (benefit) and depreciation and amortization, adjusted for the impact of certain other items, including stock-based compensation expense and acquisition-related costs, as set forth in greater detail in the table below. We calculate Adjusted Net Income as net income (loss) before amortization of intangible assets, stock-based compensation expense, fair value changes to financial instruments and contingent earnouts, discontinued specialty lab, and other gain or losses, as set forth in greater detail in the table below. Basic and Diluted Adjusted Net Income per Share represents Adjusted Net Income attributable to stockholders divided by the fully diluted number of shares of common stock outstanding during the applicable period.

Consolidated Adjusted EBITDA is one of the primary metrics used by management to evaluate our financial performance and compare it to that of our peers, evaluate the effectiveness of our business strategies, make budgeting and capital allocation decisions and in connection with our executive incentive compensation. Adjusted Net Income and Basic and Diluted Adjusted Net Income per Share are useful metrics to evaluate ongoing business performance after interest and tax. These measures are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. Further, we believe they are helpful in highlighting trends in our operating results because they allow for more consistent comparisons of financial performance between periods by excluding gains and losses that are non-operational in nature or outside the control of management, and, in the case of Consolidated Adjusted EBITDA, by excluding items that may differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments.

These non-GAAP measures do, however, have certain limitations and should not be considered as an alternative to net income (loss), earnings (loss) per share or any other performance measure derived in accordance with GAAP. Our presentation of Consolidated Adjusted EBITDA, Adjusted Net Income and Basic and Diluted Adjusted Net Income per Share should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items for which we may make adjustments. In addition, Consolidated Adjusted EBITDA, Adjusted Net Income and Basic and Diluted Adjusted Net Income per Share may not be comparable to similarly titled measures used by other companies in our industry or across different industries, and other companies may not present these or similar measures. Management compensates for these limitations by using these measures as supplemental financial metrics and in conjunction with our results prepared in accordance with GAAP. We encourage investors and others to review our financial information in its entirety, not to rely on any single measure and to view Consolidated Adjusted EBITDA, Adjusted Net Income and Basic and Diluted Adjusted Net Income per Share in conjunction with the related GAAP measures.

Additionally, we have provided estimates regarding Consolidated Adjusted EBITDA for 2024. These projections account for estimates of revenue, operating margins and corporate and other costs. However, we cannot reconcile our projection of Consolidated Adjusted EBITDA to net income (loss), the most directly comparable GAAP measure, without unreasonable efforts because of the unpredictable or unknown nature of certain significant items excluded from Consolidated Adjusted EBITDA and the resulting difficulty in quantifying the amounts thereof that are necessary to estimate net income (loss). Specifically, we are unable to estimate for the future impact of certain items, including income tax (expense) benefit, stock-based compensation expense, fair value changes and the accounting for the issuance of the Series A-2 Preferred Stock. We expect the variability of these items could have a significant impact on our reported GAAP financial results.

In this release we also reference our organic growth. We define organic growth as the change in revenues excluding revenues from i) our environmental emergency response business, ii) acquisitions for the first twelve months following the date of acquisition, and iii) businesses held for sale, disposed of or discontinued. Management uses organic growth as one of the means by which it assesses our results of operations. Organic growth is not, however, a measure of revenue growth calculated in accordance with U.S. generally accepted accounting principles, or GAAP, and should be considered in conjunction with revenue growth calculated in accordance with GAAP. We have grown organically over the long term and expect to continue to do so.

 

In a given reporting period, when we refer to revenue changes driven by acquisitions, we are referring to the revenue contribution from any acquisition from its closing date through the first 12 months of that acquisition, at which point any subsequent contribution therefrom would be organic.

 


 

Montrose Environmental Group, Inc.

Reconciliation of Net Loss to Adjusted Net Income

(In thousands)

(Unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net loss

 

$

(10,564

)

 

$

(7,525

)

 

$

(34,091

)

 

$

(29,418

)

Amortization of intangible assets (1)

 

 

10,055

 

 

 

7,922

 

 

 

24,621

 

 

 

22,512

 

Stock-based compensation (2)

 

 

11,763

 

 

 

11,484

 

 

 

34,866

 

 

 

35,609

 

Acquisition costs (3)

 

 

2,764

 

 

 

1,499

 

 

 

6,371

 

 

 

4,970

 

Fair value changes in financial instruments (4)

 

 

3,946

 

 

 

806

 

 

 

4,851

 

 

 

1,814

 

Expenses related to financing transactions (5)

 

 

41

 

 

 

3

 

 

 

280

 

 

 

7

 

Fair value changes in business acquisition contingencies (6)

 

 

143

 

 

 

459

 

 

 

385

 

 

 

414

 

Discontinued Specialty Lab (7)

 

 

96

 

 

 

1,302

 

 

 

692

 

 

 

5,321

 

Other (gains) losses and expenses (8)

 

 

1,378

 

 

 

(1

)

 

 

1,886

 

 

 

215

 

Tax effect of adjustments (9)

 

 

(565

)

 

 

(213

)

 

 

(1,286

)

 

 

(514

)

Adjusted Net Income

 

$

19,057

 

 

$

15,736

 

 

$

38,575

 

 

$

40,930

 

Series A-2 Preferred Stock dividends

 

 

(2,750

)

 

 

(4,100

)

 

 

(8,314

)

 

 

(12,300

)

Adjusted Net Income attributable to stockholders

 

$

16,307

 

 

$

11,636

 

 

$

30,261

 

 

$

28,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss per share attributable to stockholders

 

$

(0.39

)

 

$

(0.39

)

 

$

(1.30

)

 

$

(1.39

)

Basic Adjusted Net Income per share (10)

 

$

0.48

 

 

$

0.39

 

 

$

0.93

 

 

$

0.95

 

Diluted Adjusted Net Income per share (11)

 

$

0.41

 

 

$

0.31

 

 

$

0.80

 

 

$

0.78

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

34,242

 

 

 

30,143

 

 

 

32,647

 

 

 

30,016

 

Fully diluted shares

 

 

40,006

 

 

 

36,952

 

 

 

37,892

 

 

 

36,640

 

___________________________________

(1)
Represents amortization of intangible assets.
(2)
Represents non-cash stock-based compensation expenses related to (i) option awards issued to employees, (ii) restricted stock grants issued to directors and selected employees, (iii) and stock appreciation rights grants issued to selected employees.
(3)
Includes financial and tax diligence, consulting, legal, valuation, accounting and travel costs and acquisition-related incentives related to our acquisition activity.
(4)
Amounts relate to the change in fair value of the interest rate swap instruments and the embedded derivative attached to the Series A-2 Preferred Stock.
(5)
Amounts represent non-capitalizable expenses associated with refinancing and amending our debt facilities.
(6)
Amounts reflect the difference between the expected settlement value of acquisition related earn-out payments at the time of the closing of acquisitions and the expected (or actual) value of earn-outs at the end of the relevant period.
(7)
Amounts consist of operating losses before depreciation related to the Discontinued Specialty Lab.
(8)
Amount in 2024 consists of costs associated with a lease abandonment. Amount in 2023 consists of costs associated with an aviation loss.
(9)
The Company applied the estimated effective tax rate on portions of the adjustments related to our significant foreign entities, and determined the US portion of the adjustments do not have any tax impact since we are in a full deferred tax asset valuation allowance as of September 30, 2024.
(10)
Represents Adjusted Net Income attributable to stockholders divided by the weighted average number of shares of common stock outstanding.
(11)
Represents Adjusted Net Income attributable to stockholders divided by fully diluted number of shares of common stock.

 

 


 

Montrose Environmental Group, Inc.

Reconciliation of Net Loss to Consolidated Adjusted EBITDA

(In thousands)

(Unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net loss

 

$

(10,564

)

 

$

(7,525

)

 

$

(34,091

)

 

$

(29,418

)

Interest expense

 

 

4,137

 

 

 

2,089

 

 

 

11,420

 

 

 

5,507

 

Income tax expense (benefit)

 

 

1,368

 

 

 

1,324

 

 

 

4,480

 

 

 

2,842

 

Depreciation and amortization

 

 

13,240

 

 

 

11,863

 

 

 

37,408

 

 

 

33,816

 

EBITDA

 

$

8,181

 

 

$

7,751

 

 

$

19,217

 

 

$

12,747

 

Stock-based compensation (1)

 

 

11,763

 

 

 

11,484

 

 

 

34,866

 

 

 

35,609

 

Acquisition costs (2)

 

 

2,764

 

 

 

1,499

 

 

 

6,371

 

 

 

4,970

 

Fair value changes in financial instruments (3)

 

 

3,946

 

 

 

806

 

 

 

4,851

 

 

 

1,814

 

Expenses related to financing transactions (4)

 

 

41

 

 

 

3

 

 

 

280

 

 

 

7

 

Fair value changes in business acquisition contingencies (5)

 

 

143

 

 

 

459

 

 

 

385

 

 

 

414

 

Discontinued Specialty Lab (6)

 

 

96

 

 

 

1,302

 

 

 

692

 

 

 

5,321

 

Other (gains) losses and expenses (7)

 

 

1,378

 

 

 

(1

)

 

 

1,886

 

 

 

215

 

Consolidated Adjusted EBITDA

 

$

28,312

 

 

$

23,303

 

 

$

68,548

 

 

$

61,097

 

___________________________________

(1)
Represents non-cash stock-based compensation expenses related to (i) option awards issued to employees, (ii) restricted stock grants issued to directors and selected employees, (iii) and stock appreciation rights grants issued to selected employees.
(2)
Includes financial and tax diligence, consulting, legal, valuation, accounting and travel costs and acquisition-related incentives related to our acquisition activity.
(3)
Amounts relate to the change in fair value of the interest rate swap instruments and the embedded derivative attached to the Series A-2 Preferred Stock.
(4)
Amounts represent non-capitalizable expenses associated with refinancing and amending our debt facilities.
(5)
Reflects the difference between the expected settlement value of acquisition related earn-out payments at the time of the closing of acquisitions and the expected (or actual) value of earn-outs at the end of the relevant period.
(6)
Amounts consist of operating losses before depreciation related to the Discontinued Specialty Lab.
(7)
Amount in 2024 consists of costs associated with a lease abandonment. Amount in 2023 consist of costs associated with an aviation loss.