In line with the Company’s strategic growth initiatives, the Company acquired several businesses during the years ended December 31, 2022, 2021 and 2020. The results of each of those acquired businesses are included in the consolidated financial statements beginning on the respective acquisition dates. Each transaction qualified as an acquisition of a business and was accounted for as a business combination. All acquisitions resulted in the recognition of goodwill. The Company paid these premiums resulting in such goodwill for a number of reasons, including expected synergies from combining operations of the acquiree and the Company while also growing the Company’s customer base, acquiring assembled workforces, expanding its presence in certain markets and expanding and advancing its product and service offerings. The Company recorded the assets acquired and liabilities assumed at their acquisition date fair value, with the difference between the fair value of the net assets acquired and the acquisition consideration reflected as goodwill.

The identifiable intangible assets for acquisitions are valued using the excess earnings method discounted cash flow approach for customer relationships, the relief from royalty method for trade names, the patent, external proprietary software and developed technology, the “with and without” method for covenants not to compete and the replacement cost method for the internal proprietary software by incorporating Level 3 inputs as described under the fair value hierarchy of ASC 820. These unobservable inputs reflect the Company’s own assumptions about which assumptions market participants would use in pricing an asset on a non-recurring basis. These assets will be amortized over their respective estimated useful lives.

Other purchase price obligations (primarily deferred purchase price liabilities and target working capital liabilities or receivables) are included on the consolidated statements of financial position in accounts payable and other accrued liabilities, other non-current liabilities or accounts receivable-net in the case of working capital deficits. Contingent consideration outstanding from acquisitions are included on the consolidated statements of financial position in business acquisition contingent consideration, current or in business acquisitions contingent consideration, long-term. The contingent consideration elements of the purchase price of the acquisitions are related to earn-outs which are based

on the expected achievement of revenue or earnings thresholds as of the date of the acquisition and for which the maximum potential amount is limited.

The Company considers several factors when determining whether or not contingent consideration liabilities are part of the purchase price, including the following: (i) the valuation of its acquisitions is not supported solely by the initial consideration paid, (ii) the former stockholders of acquired companies that remain as key employees receive compensation other than contingent consideration payments at a reasonable level compared with the compensation of the Company’s other key employees and (iii) contingent consideration payments are not affected by employment termination. The Company reviews and assesses the estimated fair value of contingent consideration at each reporting period.

The Company may be required to make up to $9.5 million in aggregate earn-out payments between the years 2023 and 2026 in connection with certain of its business acquisitions, up to $4.0 million of which may be paid in cash.

Transaction costs related to business combinations totaled $1.9 million, $2.1 million and $4.3 million for the years ended December 31, 2022, 2021, and 2020, respectively. These costs are expensed within selling, general and administrative expense in the accompanying consolidated statements of operations.

Environmental Standards, Inc. (“Environmental Standards”)—In January 2022, the Company completed the acquisition of Environmental Standards, Inc. by acquiring 100.0% of its common stock. Environmental Standards is a provider of environmental consulting and data validation services. Environmental Standards is based in Valley Forge, PA with satellite locations nationwide.

Industrial Automation Group, Inc. (“IAG”)—In January 2022, the Company completed the acquisition of Industrial Automation Group, Inc. by acquiring certain of its employees and a covenant not to compete. IAG is based in Atlanta, GA. IAG provides highly specialized engineering services which are additive to the Company’s water treatment and renewable energy technology implementations.

TriAD Environmental Consultants, Inc. (“TriAD”)—In August 2022, the Company completed the acquisition of TriAD Environmental Consultants, Inc. by acquiring 100.0% of its common stock. TriAD is a provider of environmental consulting services. TriAD is based in Nashville, TN.

AirKinetics, Inc. (“AirKinetics”)—In September 2022, the Company completed the acquisition of AirKinetics, Inc. by acquiring 100.0% of its common stock. AirKinetics is a provider of emissions testing services. AirKinetics is based in Anaheim, CA.

Huco Consulting, Inc. (“Huco”)—In November 2022, the Company completed the acquisition of Huco Consulting, Inc. by acquiring 100.0% of its common stock. Huco primarily specializes in the implementation of environment, health and safety software for industrial, commercial and government clients. Huco is based in Houston, TX.

The upfront cash payment made to acquire all of these acquisitions was funded through cash on hand.

The following table summarizes the elements of the purchase price of the acquisitions completed during 2022:


	Cash		Common Stock		Other Purchase Price Components		Contingent Consideration		Total Purchase Price
Environmental Standards	$	14,473	$	—	$	544	$	1,166	$	16,183
All other 2022 acquisitions		15,271		—		1,134		1,500		17,905
Total	$	29,744	$	—	$	1,678	$	2,666	$	34,088

The other purchase price components of the Environmental Standards purchase price consist of a surplus working capital amount and a seller make-whole for taxes related to a 338(h)(10) election. The other purchase price components of all the other acquisitions purchase price

The preliminary purchase price attributable to the 2022 acquisitions was allocated as follows:


	Environmental Standards		All Other 2022 Acquisitions		Total(1)
Cash	$	295	$	824	$	1,119
Accounts receivable and contract assets		5,200		2,646		7,846
Other current assets		456		116		572
Current assets		5,951		3,586		9,537
Property and equipment		168		15		183
Operating lease right-of-use asset—net		2,895		215		3,110
Customer relationships		5,807		5,812		11,619
Trade names		1,010		639		1,649
Covenants not to compete		269		650		919
Goodwill		4,131		8,412		12,543
Total assets		20,231		19,329		39,560
Current liabilities		1,720		1,314		3,034
Operating lease liability—net of current portion		2,328		110		2,438
Total liabilities		4,048		1,424		5,472
Purchase price	$	16,183	$	17,905	$	34,088

______________________________

(1) The Company is continuing to obtain information to complete the valuation of certain of these acquisitions' assets and liabilities.

For the acquisitions completed during the year ended December 31, 2022, the results of operations since the acquisition dates have been combined with those of the Company. The Company’s consolidated statement of operations for the year ended December 31, 2022 includes revenue and pre-tax income of $20.2 million and $2.9 million, respectively, related to these acquisitions.

Environmental Standards and Huco are included in the Company’s Assessment, Permitting and Response segment, IAG and TriAD are included in the Remediation and Reuse segment and AirKinetics is included in the Measurement and Analysis segment.

Goodwill associated with the Environmental Standards acquisition is deductible for income tax purposes.

MSE Group, LLC (“MSE”)—In January 2021, the Company completed the acquisition of MSE Group, LLC by acquiring 100.0% of its membership interests. MSE is a provider of environmental assessment, permitting and remediation services primarily to the U.S. federal government. MSE is based in Orlando, FL with additional offices in Tampa, Orlando, Jacksonville, San Antonio, TX, and Wilmington, NC, and satellite locations nationwide. The upfront cash payment made to acquire MSE was funded through cash on hand and the common stock portion of the purchase price was funded through the issuance of 71,740 shares of common stock.

Vista Analytical Laboratory, Inc. (“Vista”)—In June 2021, the Company completed the acquisition of Vista Analytical Laboratory, Inc. (“Vista”) by acquiring 100.0% of its common stock. Vista provides specialty analytical services related to Per- and polyfluoroalkyl substances (“PFAS”) and other semi-volatile organic compounds. Vista is based in Dorado Hills, CA. The upfront cash payment made to acquire Vista was funded through cash on hand and the common stock portion of the purchase price was funded through the issuance of 9,322 shares of common stock.

Environmental Intelligence, LLC (“EI”) —In July 2021, the Company completed the acquisition of Environmental Intelligence, LLC (“EI”) by acquiring 100.0% of its membership interests. EI provides environmental consulting services and is recognized for its innovative work in wildlife mitigation and biological assessments. EI is based in Laguna Beach, CA and enhances Montrose’s ecological planning and service

capabilities in California and the US West Coast. The upfront cash payment made to acquire EI was funded through cash on hand and the common stock portion of the purchase price was funded through the issuance of 43,100 shares of common stock.

SensibleIoT, LLC (“Sensible”) —In August 2021, the Company completed the business acquisition of SensibleIoT, LLC (“Sensible”) by acquiring 100.0% of its membership interests. Sensible is a technology platform that connects sensors and sources of environment data to a central, proprietary database that enables real-time client interaction. Sensible provides Montrose with an advanced ability to integrate environmental services and enhance environmental data analytics for clients. The upfront cash payment made to acquire Sensible was funded through cash on hand and the common stock portion of the purchase price was funded through the issuance of 19,638 shares of common stock.

Environmental Chemistry, Inc. (“ECI”) —In October 2021, the Company completed the business acquisition of Environmental Chemistry, Inc. (“ECI”) by acquiring 100.0% of its common stock. ECI provides a full suite of environmental laboratory analytical services to industrial, governmental, and engineering/consulting clients. Combined with the Company’s existing Houston, TX laboratory, ECI (located also in Houston, TX) will enable Montrose to provide air, water and soil analytical services in the gulf coast region. The upfront cash payment made to acquire ECI was funded through cash on hand.

Horizon Water and Environment, LLC (“Horizon”)— In November 2021, the Company completed the business acquisition of Horizon Water and Environment, LLC (“Horizon”) by acquiring 100.0% of its membership interests. Horizon is an environmental consulting firm specializing in planning, watershed science, and environmental compliance for water and natural resource projects. The upfront cash payment made to acquire Horizon was funded through cash on hand and the common stock portion of the purchase price was funded through the issuance of 34,921 shares of common stock.

The following table summarizes the elements of purchase price of the acquisitions completed during 2021:


	Cash		Common Stock		Other Purchase Price Components			Contingent Consideration		Total Purchase Price
MSE	$	9,082	$	2,271	$	10,701		$	1,804	$	23,858
EI		20,721		2,274		(63	)		—		22,932
All other 2021 acquisitions		29,683		3,775		1,228			5,600		40,286
Total	$	59,486	$	8,320	$	11,866		$	7,404	$	87,076

The other purchase price components of the MSE purchase price consist of a surplus working capital amount, a seller make-whole for taxes related to a 338(h)(10) election, an integration payment liability and a purchase price true up related to MSE’s financial performance in the fourth quarter of 2020. The other purchase price components of the EI purchase price consist of a surplus working capital amount. The other

purchase price components of all the other acquisitions purchase price mainly consist of working capital amounts and 338(h)(10) election liabilities.

The purchase price attributable to the 2021 acquisitions was allocated as follows:


	MSE		EI		All Other 2021 Acquisitions		Total
Cash	$	2,810	$	250	$	693	$	3,753
Accounts receivable and contract assets		2,980		4,675		4,133		11,788
Other current assets		31		84		289		404
Current assets		5,821		5,009		5,115		15,945
Property and equipment		513		32		1,168		1,713
Operating lease right-of-use asset—net		740		106		2,233		3,079
Customer relationships		8,720		10,073		12,830		31,623
Trade names		521		996		1,958		3,475
Covenants not to compete		922		511		1,248		2,681
Acquired technology		—		—		321		321
Goodwill		8,176		8,960		19,569		36,705
Total assets		25,413		25,687		44,442		95,542
Current liabilities		1,007		2,719		2,351		6,077
Operating lease liability—net of current portion		548		36		1,805		2,389
Total liabilities		1,555		2,755		4,156		8,466
Purchase price	$	23,858	$	22,932	$	40,286	$	87,076

For the acquisitions completed during the year ended December 31, 2021, the results of operations since the acquisition dates have been combined with those of the Company. The Company’s consolidated statement of operations for the year ended December 31, 2021 includes revenue and pre-tax income of $33.7 million and $0.8 million, respectively, related to these acquisitions. MSE is included in the Company’s Remediation and Reuse segment, Vista, Sensible and ECI are included in the Company’s Measurement and Analysis segment and EI and Horizon are included the Company’s Assessment, Permitting and Response segment.

Goodwill associated with all of these acquisitions is deductible for income tax purposes.

The Center for Toxicology and Environmental Health, L.L.C.—In April 2020, the Company completed the acquisition of The Center for Toxicology and Environmental Health, L.L.C. (“CTEH”) by acquiring 100.0% of its membership interests. CTEH is an environmental consulting company headquartered in Arkansas that specializes in environmental response and toxicology. The cash payment made to acquire CTEH was funded through the issuance of the Convertible and Redeemable Series A-2 Preferred Stock (Note 18) and the common stock portion of the purchase price was funded through the issuance of 791,139 shares of common stock.

Leed Environmental Inc.— In September 2020, the Company acquired certain testing assets, and operations from Leed Environmental Inc. (“LEED”). LEED provides environmental project management and coordination services. LEED expands the Company’s remediation capabilities in the Northeast region of the United States. The cash payment made to acquire LEED was funded via cash on hand.

American Environmental Testing Co.— In September 2020, the Company acquired certain assets and operations of American Environmental Testing Co. (“AETC”), a stack testing company in Utah. AETC expands the Company’s air measurement and analysis capabilities in the West Coast region. The cash payment made to acquire AETC was funded via cash on hand.

The following table summarizes the elements of purchase price of the acquisitions completed during 2020:

CTEH first year earnout was calculated at twelve times CTEH’s 2020 EBITDA (as defined in the purchase agreement) in excess of $18.3 million, with a maximum first year earn-out payment of $50.0 million, which was fully achieved. The second year earn-out was calculated at ten times CTEH’s 2021 EBITDA in excess of actual 2020 EBITDA (with actual 2020 EBITDA subject to a minimum of $18.3 million and a maximum of $22.5 million), with a maximum second year earn-out payment of $30.0 million, which was fully achieved. The 2020 earn out was initially payable 100.0% in common stock, but as a result of the completion of the Company’s IPO (Note 1), at the Company’s election, 50.0% was payable in cash. In April 2021, the 2020 earn-out payment was made with 50.0% paid in cash and the remaining 50.0% paid in common stock of the Company (Notes 15 and 19). The 2021 earn-out was 100.0% paid in cash in March 2022.

The purchase price attributable to the 2020 acquisitions was allocated as follows:


	CTEH		All Other 2020 Acquisitions		Total
Cash	$	1,527	$	—	$	1,527
Accounts receivable and contract assets		17,059		—		17,059
Other current assets		1,265		—		1,265
Current assets		19,851		—		19,851
Property and equipment		7,042		75		7,117
Customer relationships		56,000		—		56,000
Trade names		4,200		—		4,200
Covenants not to compete		4,000		109		4,109
Proprietary software		14,700		—		14,700
Goodwill		146,983		626		147,609
Total assets		252,776		810		253,586
Current liabilities		9,721		—		9,721
Total liabilities		9,721		—		9,721
Purchase price	$	243,055	$	810	$	243,865

For the acquisitions completed during the year ended December 31, 2020, the results of operations since the acquisition dates have been combined with those of the Company. The Company’s consolidated statement of operations for the year ended December 31, 2020 includes revenue and pre-tax income of $82.4 million and $11.7 million, respectively, related mainly to the CTEH acquisition. CTEH, LEED and AETC are included in the Company’s Assessment, Permitting and Response, Remediation and Reuse and Measurement and Analysis segments, respectively.

The weighted average useful lives for the CTEH acquired customer relationships, internal proprietary software, acquired tradenames, covenants not to compete and external proprietary software are 15 years, 3 years, 5 year, 5 years and 5 years, respectively. The weighted average useful lives for the acquired covenants not to compete for the other acquisitions is 4 years.

Goodwill associated with all of these acquisitions is deductible for income tax purposes.

Supplemental Unaudited Pro-Forma—The unaudited consolidated financial information summarized in the following table gives effect to the 2022, 2021, and 2020 acquisitions assuming they occurred on January 1, 2020. These unaudited consolidated pro forma operating results include results from certain acquired companies that have not been audited and whose accounting policies prior to acquisition may differ from those of the Company. As a result, these unaudited consolidated pro forma operating results may not be comparable to revenues and earnings had these consolidated pro forma results been audited and consistent accounting policies applied. These unaudited consolidated pro forma operating

results do not assume any impact from revenue, cost or other operating synergies that are expected or may have been realized as a result of the acquisitions. These unaudited consolidated pro forma operating results include the results from Discontinued Service Lines and Discontinued O&M Contracts through the applicable date of discontinuance. These unaudited consolidated pro forma operating results are presented for illustrative purposes only and are not indicative of the operating results that would have been achieved had the acquisitions occurred on January 1, 2020, nor does the information project results for any future period.


	As reported			Acquisitions Pro-Forma (Unaudited)		Consolidated Pro-Forma (Unaudited)
2022
Revenues	$	544,416		$	9,912	$	554,328
Net (loss) income		(31,819	)		1,899		(29,920	)
2021
Revenues	$	546,413		$	50,808	$	597,221
Net (loss) income		(25,325	)		6,860		(18,465	)
2020
Revenues	$	328,243		$	114,293	$	442,536
Net (loss) income		(57,949	)		23,176		(34,773	)

During the first quarter of 2020, the Company determined to reduce the footprint of its environmental lab in Berkeley, California, and to exit its non-specialized municipal water engineering service line and its food waste biogas engineering service line, the Discontinued Service Lines. Furthermore, during the second quarter of 2022, the Company determined to exit all legacy water treatment and biogas operations and maintenance contracts, collectively, the Discontinued O&M Contracts. Revenues from Discontinued Service Lines and Discontinued O&M Contracts included in as reported revenues in the above table were $3.6 million, $12.1 million and $17.1 million in the years ended December 31, 2022, December 31, 2021 and 2020, respectively.