Montrose Environmental Group Announces Fourth Quarter and Full Year 2023 Results
- None.
- None.
Insights
The recent financial results disclosed by Montrose Environmental Group, Inc. highlight a substantial increase in year-over-year revenue, which is indicative of robust growth within the company's operational segments. The record revenue and cash flow from operations reflect strong demand for the company's integrated solutions, which is a positive signal for investors looking for companies with solid operational performance. Moreover, the impressive customer revenue retention rate of 96% suggests a stable customer base, reducing the risk associated with client turnover.
However, the reported net loss of $30.9 million alongside the basic and diluted net loss per share of $1.57 warrants a closer examination. While net losses can be a concern, it's important to consider the context, such as the company's significant investments in R&D and acquisitions, which may explain the short-term financial impact but could lead to long-term gains. The expansion in segment-level and consolidated Adjusted EBITDA as a percentage of revenue is a key indicator of improving profitability and operational efficiency, which could be a promising sign for future earnings potential.
Montrose's strategy of consolidating a fragmented industry through highly accretive acquisitions is noteworthy. This approach has likely contributed to the company's revenue growth and could position it as a more dominant player in the environmental services market. The acquisition of Matrix and the subsequent improvement in its margins post-integration are particularly interesting, as they demonstrate Montrose's ability to enhance the value of its acquisitions.
The company's forward-looking statements regarding expected low double-digit organic revenue growth and continued margin expansion for the full year of 2024 suggest confidence in its business model and market position. This outlook may be bolstered by the robust acquisition and patent development pipelines, which signal ongoing innovation and expansion efforts. Investors may find the company's proactive stance on emerging environmental regulations, such as those concerning PFAS treatment, to be a strategic advantage that could lead to new market opportunities.
Montrose's emphasis on expanding its IP and technology portfolio, including the filing for nine unique patents, is a strategic move that could provide competitive advantages and create barriers to entry for competitors. The focus on PFAS treatment technologies is particularly relevant, given the evolving regulatory landscape surrounding environmental standards. As U.S. environmental regulations become more stringent, Montrose's investment in technologies that address wastewater and landfill challenges could position the company favorably to meet new compliance demands.
Additionally, the company's voluntary redemption of outstanding Convertible and Redeemable Series A-2 Preferred Stock and the amendment of its Senior Secured Credit Agreement to increase credit availability demonstrate proactive financial management. These actions could improve the company's capital structure and provide it with the flexibility to pursue further growth opportunities or weather potential market downturns.
- Record Full Year Revenue and Cash Flow from Operations -
- Net Loss of
- Significant Increase in Diluted Adjusted Net Income Per Share1 -
- Record Full Year Consolidated Adjusted EBITDA1 -
- Expansion in Segment Level and Consolidated Adjusted EBITDA1 as Percent of Revenue for Full Year -
- Continued Success Consolidating Fragmented Industry with Highly Accretive Acquisitions -
- Advanced R&D Initiatives and Expanded IP and Technology Portfolio -
- Provides Full Year 2024 Revenue and Consolidated Adjusted EBITDA1 Outlook -
Montrose Chief Executive Officer and Director, Vijay Manthripragada, commented, “Our record full year results reflect continued strength across our business. Demand for our unique, integrated solutions remains at all-time highs given another year of exceptional customer revenue retention2 at
“We are particularly proud of the continued success of our R&D efforts, which help solve major environmental challenges and create value for our stockholders. Our team filed for nine unique patents in 2023 addressing several emerging and potentially significant market opportunities. We expanded our portfolio of PFAS treatment technologies to meet the needs of our clients with wastewater and landfill challenges given pending
“Building on our strong momentum, we believe we are well positioned to achieve another year of outstanding performance in 2024. Our 2024 expectation is for low double-digit organic revenue growth, continued margin expansion, and continued strong cash flow generation given substantive end-market tailwinds and increased predictability in our business.”
“In addition, both our acquisition pipeline and patent development pipeline remain very robust. Two accretive acquisitions have already been completed this year. Collectively, we believe these expected results and sustained execution will help us continue to deliver stellar shareholder value.”
| _______________________________________ | |||||
| (1) | Consolidated Adjusted EBITDA, Adjusted Net Income and Diluted Adjusted Net Income 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. |
||||
| (2) | Customer revenue retention defined as the percentage of revenue excluding CTEH from customers in 2022 that recurred in 2023. Environmental emergency response revenue is excluded from the calculation in light of episodic nature of emergency response work. |
||||
| (3) | Cross-selling activity defined as the percentage of total revenue from customers purchasing two or more Montrose services within the same fiscal year. |
||||
Fourth Quarter 2023 Results
Total revenue in the fourth quarter of 2023 was
Net loss was
Adjusted Net Income1 was
Fourth quarter 2023 Consolidated Adjusted EBITDA1 was
Full Year 2023 Results
Total revenue in the full year 2023 increased
Net loss was
Adjusted Net Income1 was
Consolidated Adjusted EBITDA1 for the full year 2023 was
Operating Cash Flow, Liquidity and Capital Resources
Cash provided by operating activities for the full year ended December 31, 2023 was
As of December 31, 2023, we had total debt, before debt issuance costs, of
As of December 31, 2023, Montrose’s net leverage ratio under its credit facility, which includes recently completed acquisitions and acquisition-related contingent earnout payments that may become payable in cash, was 1.9 times.
In January 2024, Montrose voluntarily redeemed
In February 2024, the Company amended its Senior Secured Credit Agreement, to provide for an additional
Acquisitions
In January 2024, Montrose acquired Epic Environmental Pty Ltd, a leading environmental consultancy in
In February 2024, Montrose acquired Two Dot Environmental Consulting, LLC, a leading environmental consultancy focused on energy and renewable energy clients in the Rocky Mountain region of the
Full Year 2024 Outlook
The Company is initiating its full year 2024 outlook for Revenue to be in the range of
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, February 29, 2024 at 8:30 a.m. Eastern time to discuss fourth quarter and full year financial results. Their 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 over 3,100 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, 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.
MONTROSE ENVIRONMENTAL GROUP, INC.
|
||||||||||||||||
|
|
(Unaudited) |
|
|
|
|
||||||||||
|
|
For the Quarter Ended
|
|
For the Year Ended
|
||||||||||||
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
REVENUES |
|
$ |
165,742 |
|
|
$ |
139,514 |
|
|
$ |
624,208 |
|
|
$ |
544,416 |
|
COST OF REVENUES (exclusive of
|
|
|
101,919 |
|
|
|
90,833 |
|
|
|
383,903 |
|
|
|
351,882 |
|
SELLING, GENERAL AND ADMINISTRATIVE
|
|
|
61,100 |
|
|
|
45,175 |
|
|
|
222,861 |
|
|
|
176,295 |
|
FAIR VALUE CHANGES IN BUSINESS
|
|
|
(330 |
) |
|
|
245 |
|
|
|
84 |
|
|
|
(3,227 |
) |
DEPRECIATION AND AMORTIZATION |
|
|
11,964 |
|
|
|
11,551 |
|
|
|
45,780 |
|
|
|
47,479 |
|
LOSS FROM OPERATIONS |
|
|
(8,911 |
) |
|
|
(8,290 |
) |
|
|
(28,420 |
) |
|
|
(28,013 |
) |
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
||||||||
Other income (expense) |
|
|
5,934 |
|
|
|
(935 |
) |
|
|
4,374 |
|
|
|
3,683 |
|
Interest expense—net |
|
|
(2,286 |
) |
|
|
(1,229 |
) |
|
|
(7,793 |
) |
|
|
(5,239 |
) |
Total other income (expense)—net |
|
|
3,648 |
|
|
|
(2,164 |
) |
|
|
(3,419 |
) |
|
|
(1,556 |
) |
LOSS BEFORE (BENEFIT) EXPENSE
|
|
|
(5,263 |
) |
|
|
(10,454 |
) |
|
|
(31,839 |
) |
|
|
(29,569 |
) |
INCOME TAX (BENEFIT) EXPENSE |
|
|
(3,822 |
) |
|
|
358 |
|
|
|
(980 |
) |
|
|
2,250 |
|
NET LOSS |
|
$ |
(1,441 |
) |
|
$ |
(10,812 |
) |
|
$ |
(30,859 |
) |
|
$ |
(31,819 |
) |
EQUITY ADJUSTMENT FROM FOREIGN
|
|
|
73 |
|
|
|
(45 |
) |
|
|
(231 |
) |
|
|
(28 |
) |
COMPREHENSIVE LOSS |
|
|
(1,368 |
) |
|
|
(10,857 |
) |
|
|
(31,090 |
) |
|
|
(31,847 |
) |
CONVERTIBLE AND REDEEMABLE
|
|
|
(4,100 |
) |
|
|
(4,100 |
) |
|
|
(16,400 |
) |
|
|
(16,400 |
) |
NET LOSS ATTRIBUTABLE TO
|
|
|
(5,541 |
) |
|
|
(14,912 |
) |
|
|
(47,259 |
) |
|
|
(48,219 |
) |
WEIGHTED AVERAGE COMMON SHARES
|
|
|
30,185 |
|
|
|
29,720 |
|
|
|
30,058 |
|
|
|
29,688 |
|
NET LOSS PER SHARE ATTRIBUTABLE
|
|
$ |
(0.18 |
) |
|
$ |
(0.50 |
) |
|
$ |
(1.57 |
) |
|
$ |
(1.62 |
) |
MONTROSE ENVIRONMENTAL GROUP, INC.
|
||||||||
|
|
December 31,
|
|
December 31,
|
||||
ASSETS |
|
|
|
|
||||
CURRENT ASSETS: |
|
|
|
|
||||
Cash, cash equivalents and restricted cash |
|
$ |
23,240 |
|
|
$ |
89,828 |
|
Accounts receivable—net |
|
|
112,360 |
|
|
|
94,711 |
|
Contract assets |
|
|
51,629 |
|
|
|
52,403 |
|
Prepaid and other current assets |
|
|
13,668 |
|
|
|
10,292 |
|
Income tax receivable |
|
|
27 |
|
|
|
694 |
|
Total current assets |
|
|
200,924 |
|
|
|
247,928 |
|
NON-CURRENT ASSETS: |
|
|
|
|
||||
Property and equipment—net |
|
|
56,825 |
|
|
|
36,045 |
|
Operating lease right-of-use asset—net |
|
|
32,260 |
|
|
|
26,038 |
|
Finance lease right-of-use asset—net |
|
|
13,248 |
|
|
|
9,840 |
|
Goodwill |
|
|
364,449 |
|
|
|
323,868 |
|
Other intangible assets—net |
|
|
140,813 |
|
|
|
142,107 |
|
Other assets |
|
|
8,267 |
|
|
|
6,088 |
|
TOTAL ASSETS |
|
$ |
816,786 |
|
|
$ |
791,914 |
|
LIABILITIES, CONVERTIBLE AND REDEEMABLE SERIES A-2
|
|
|
|
|
||||
CURRENT LIABILITIES: |
|
|
|
|
||||
Accounts payable and other accrued liabilities |
|
$ |
59,920 |
|
|
$ |
63,412 |
|
Accrued payroll and benefits |
|
|
34,660 |
|
|
|
20,528 |
|
Business acquisitions contingent consideration, current |
|
|
3,592 |
|
|
|
3,801 |
|
Current portion of operating lease liabilities |
|
|
9,963 |
|
|
|
7,895 |
|
Current portion of finance lease liabilities |
|
|
3,956 |
|
|
|
3,775 |
|
Current portion of long-term debt |
|
|
14,196 |
|
|
|
12,031 |
|
Total current liabilities |
|
|
126,287 |
|
|
|
111,442 |
|
NON-CURRENT LIABILITIES: |
|
|
|
|
||||
Business acquisitions contingent consideration, long-term |
|
|
2,448 |
|
|
|
4,454 |
|
Other non-current liabilities |
|
|
6,569 |
|
|
|
13 |
|
Deferred tax liabilities—net |
|
|
6,064 |
|
|
|
5,742 |
|
Conversion option |
|
|
19,017 |
|
|
|
25,731 |
|
Operating lease liability—net of current portion |
|
|
25,048 |
|
|
|
19,437 |
|
Finance lease liability—net of current portion |
|
|
8,185 |
|
|
|
6,486 |
|
Long-term debt—net of deferred financing fees |
|
|
148,988 |
|
|
|
152,494 |
|
Total liabilities |
|
|
342,606 |
|
|
|
325,799 |
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
||||
CONVERTIBLE AND REDEEMABLE SERIES A-2 PREFERRED STOCK
|
|
|
|
|
||||
Authorized, issued and outstanding shares: 17,500 at December 31, 2023
|
|
|
152,928 |
|
|
|
152,928 |
|
STOCKHOLDERS’ EQUITY: |
|
|
|
|
||||
Common stock, |
|
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
|
531,831 |
|
|
|
492,676 |
|
Accumulated deficit |
|
|
(210,356 |
) |
|
|
(179,497 |
) |
Accumulated other comprehensive (loss) income |
|
|
(223 |
) |
|
|
8 |
|
Total stockholders’ equity |
|
|
321,252 |
|
|
|
313,187 |
|
TOTAL LIABILITIES, CONVERTIBLE AND REDEEMABLE SERIES A-2
|
|
$ |
816,786 |
|
|
$ |
791,914 |
|
MONTROSE ENVIRONMENTAL GROUP, INC.
|
||||||||
|
|
For the Year Ended
|
||||||
|
|
|
2023 |
|
|
|
2022 |
|
OPERATING ACTIVITIES: |
|
|
|
|
||||
Net loss |
|
$ |
(30,859 |
) |
|
$ |
(31,819 |
) |
Adjustments to reconcile net loss to net cash
|
|
|
|
|
||||
Provision for bad debt |
|
|
3,142 |
|
|
|
(1,097 |
) |
Depreciation and amortization |
|
|
45,780 |
|
|
|
47,479 |
|
Amortization of right-of-use asset |
|
|
10,194 |
|
|
|
9,289 |
|
Stock-based compensation expense |
|
|
47,267 |
|
|
|
43,290 |
|
Fair value changes in financial instruments |
|
|
(4,129 |
) |
|
|
(3,396 |
) |
Fair value changes in business acquisition
|
|
|
84 |
|
|
|
(3,227 |
) |
Deferred income taxes |
|
|
(980 |
) |
|
|
2,250 |
|
Other |
|
|
(84 |
) |
|
|
349 |
|
Changes in operating assets and liabilities—net of acquisitions: |
|
|
|
|
||||
Accounts receivable and contract assets |
|
|
(2,923 |
) |
|
|
4,394 |
|
Prepaid expenses and other current assets |
|
|
(918 |
) |
|
|
(1,763 |
) |
Accounts payable and other accrued liabilities |
|
|
(8,912 |
) |
|
|
(9,878 |
) |
Accrued payroll and benefits |
|
|
9,464 |
|
|
|
(6,830 |
) |
Payment of contingent consideration |
|
|
(611 |
) |
|
|
(19,457 |
) |
Change in operating leases |
|
|
(10,493 |
) |
|
|
(8,935 |
) |
Net cash provided by operating activities |
|
$ |
56,022 |
|
|
$ |
20,649 |
|
INVESTING ACTIVITIES: |
|
|
|
|
||||
Proceeds from corporate owned and property insurance |
|
|
573 |
|
|
|
329 |
|
Purchases of property and equipment |
|
|
(29,578 |
) |
|
|
(9,583 |
) |
Proceeds from the sale of property and equipment |
|
|
971 |
|
|
|
174 |
|
Proprietary software development and other software costs |
|
|
(3,352 |
) |
|
|
(593 |
) |
Payment of purchase price true ups |
|
|
(1,425 |
) |
|
|
(389 |
) |
Minority investments |
|
|
(2,626 |
) |
|
|
— |
|
Cash paid for acquisitions—net of cash acquired |
|
|
(66,187 |
) |
|
|
(28,625 |
) |
Net cash used in investing activities |
|
$ |
(101,624 |
) |
|
$ |
(38,687 |
) |
FINANCING ACTIVITIES: |
|
|
|
|
||||
Repayment of term loans |
|
|
(12,211 |
) |
|
|
(8,750 |
) |
Proceeds from the aircraft loan |
|
|
10,935 |
|
|
|
— |
|
Repayment of aircraft loan |
|
|
(591 |
) |
|
|
— |
|
Payment of contingent consideration and
|
|
|
(1,949 |
) |
|
|
(11,107 |
) |
Repayment of finance leases |
|
|
(4,584 |
) |
|
|
(3,967 |
) |
Payments of deferred offering costs |
|
|
— |
|
|
|
(183 |
) |
Proceeds from issuance of common stock for exercised
|
|
|
4,690 |
|
|
|
1,643 |
|
Dividend payment to the series A-2 shareholders |
|
|
(16,400 |
) |
|
|
(16,400 |
) |
Net cash used in financing activities |
|
$ |
(20,110 |
) |
|
$ |
(38,764 |
) |
CHANGE IN CASH, CASH EQUIVALENTS AND
|
|
$ |
(65,712 |
) |
|
$ |
(56,802 |
) |
Foreign exchange impact on cash balance |
|
|
(876 |
) |
|
|
(111 |
) |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH: |
|
|
|
|
||||
Beginning of year |
|
|
89,828 |
|
|
|
146,741 |
|
End of period |
|
$ |
23,240 |
|
|
$ |
89,828 |
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: |
|
|
|
|
||||
Cash paid for interest |
|
$ |
8,059 |
|
|
$ |
6,514 |
|
Cash paid for income tax, net |
|
$ |
997 |
|
|
$ |
789 |
|
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
||||
Accrued purchases of property and equipment |
|
$ |
1,098 |
|
|
$ |
2,261 |
|
Property and equipment purchased under finance leases |
|
$ |
8,298 |
|
|
$ |
5,061 |
|
Accrued lease surrender liability |
|
$ |
5,947 |
|
|
$ |
— |
|
Common stock issued to acquire new businesses |
|
$ |
2,598 |
|
|
$ |
— |
|
Acquisitions unpaid contingent consideration |
|
$ |
6,040 |
|
|
$ |
8,255 |
|
Acquisitions contingent consideration paid in shares |
|
$ |
1,000 |
|
|
$ |
— |
|
Promissory note receivable issued in connection
|
|
$ |
4,348 |
|
|
$ |
— |
|
MONTROSE ENVIRONMENTAL GROUP, INC.
|
|||||||||||||||||
|
|
(Unaudited)
|
|
|
|||||||||||||
|
|
2023 |
|
|
2022 |
|
|
||||||||||
|
|
|
|
|
Segment |
|
|
|
|
|
Segment |
|
|
||||
|
|
Segment |
|
|
Adjusted |
|
|
Segment |
|
|
Adjusted |
|
|
||||
|
|
Revenues |
|
|
EBITDA(1) |
|
|
Revenues |
|
|
EBITDA(1)(5) |
|
|
||||
Assessment, Permitting and Response |
|
$ |
50,093 |
|
|
$ |
9,171 |
|
|
$ |
45,183 |
|
|
$ |
7,206 |
|
|
Measurement and Analysis |
|
|
54,045 |
|
(2) |
|
9,689 |
|
|
|
46,693 |
|
(2) |
|
9,736 |
|
(4) |
Remediation and Reuse |
|
|
61,604 |
|
|
|
8,320 |
|
|
|
47,638 |
|
|
|
8,557 |
|
|
Total Operating Segments |
|
|
165,742 |
|
|
|
27,180 |
|
|
|
139,514 |
|
|
|
25,499 |
|
|
Corporate and Other |
|
|
— |
|
|
|
(9,701 |
) |
|
|
— |
|
|
|
(8,386 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
For the Year Ended
|
|
|
|||||||||||||
|
|
2023 |
|
|
2022 |
|
|
||||||||||
|
|
|
|
|
Segment |
|
|
|
|
|
Segment |
|
|
||||
|
|
Segment |
|
|
Adjusted |
|
|
Segment |
|
|
Adjusted |
|
|
||||
|
|
Revenues |
|
|
EBITDA(1) |
|
|
Revenues |
|
|
EBITDA(1)(5) |
|
|
||||
Assessment, Permitting and Response |
|
$ |
220,727 |
|
|
$ |
52,148 |
|
|
$ |
187,234 |
|
|
$ |
37,458 |
|
|
Measurement and Analysis |
|
|
197,095 |
|
(3) |
|
37,217 |
|
|
|
172,432 |
|
(3) |
|
31,588 |
|
(4) |
Remediation and Reuse |
|
|
206,386 |
|
|
|
27,087 |
|
|
|
184,750 |
|
|
|
30,616 |
|
|
Total Operating Segments |
|
|
624,208 |
|
|
|
116,452 |
|
|
|
544,416 |
|
|
|
99,662 |
|
|
Corporate and Other |
|
|
— |
|
|
|
(37,876 |
) |
|
|
— |
|
|
|
(31,212 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
________________________________________ |
||
| (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 |
|
| (3) |
Includes revenue of |
|
| (4) |
Includes Adjusted EBITDA of |
|
| (5) |
Includes the add back of start-up (credit) losses and investment in new services of |
|
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 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 (Loss) 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. Diluted Adjusted Net Income (Loss) per Share represents Adjusted Net Income (Loss) attributable to stockholders divided by the weighted average number of diluted 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 (Loss) and Adjusted Net Income (Loss) 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 (Loss) and Adjusted Net Income (Loss) 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 (Loss) and Adjusted Net Income (Loss) 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 (Loss) and Adjusted Net Income (Loss) 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. As a result of the growth in CTEH non-emergency response work, which is similar to services provided in our advisory businesses, we are including CTEH revenues from non-emergency response work in organic growth. This change did not impact previously reported organic growth. 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
Montrose Environmental Group, Inc.
|
||||||||||||||||||
|
|
For the Quarter Ended
|
|
For the Year Ended
|
||||||||||||||
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
2023 |
|
|
|
2022 |
|
|
Net loss |
|
$ |
(1,441 |
) |
|
$ |
(10,812 |
) |
|
|
$ |
(30,859 |
) |
|
$ |
(31,819 |
) |
|
Amortization of intangible assets(1) |
|
|
7,621 |
|
|
|
8,474 |
|
|
|
|
30,130 |
|
|
|
36,053 |
|
|
Stock-based compensation (2) |
|
|
11,658 |
|
|
|
10,915 |
|
|
|
|
47,267 |
|
|
|
43,290 |
|
|
Acquisition costs (3) |
|
|
1,960 |
|
|
|
537 |
|
|
|
|
6,930 |
|
|
|
1,891 |
|
|
Fair value changes in financial instruments (4) |
|
|
(5,943 |
) |
|
|
1,268 |
|
|
|
|
(4,129 |
) |
|
|
(3,396 |
) |
|
Expenses related to financing transactions (5) |
|
|
28 |
|
|
|
— |
|
|
|
|
35 |
|
|
|
7 |
|
|
Fair value changes in business acquisition contingencies (6) |
|
|
(330 |
) |
|
|
245 |
|
|
|
|
84 |
|
|
|
(3,227 |
) |
|
Discontinued Specialty Lab (7) |
|
|
791 |
|
|
|
— |
|
|
|
|
6,112 |
|
|
|
— |
|
|
Other losses or expenses (8) |
|
|
328 |
|
|
|
2,494 |
|
|
|
|
543 |
|
|
|
4,459 |
|
|
Tax effect of adjustments (9) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
Adjusted Net Income |
|
$ |
14,672 |
|
|
$ |
13,121 |
|
|
|
$ |
56,113 |
|
|
$ |
47,258 |
|
|
Preferred Dividend Series A-2 |
|
|
(4,100 |
) |
|
|
(4,100 |
) |
|
|
|
(16,400 |
) |
|
|
(16,400 |
) |
|
Adjusted Net Income attributable to
|
|
$ |
10,572 |
|
|
$ |
9,021 |
|
|
|
$ |
39,713 |
|
|
$ |
30,858 |
|
|
Net loss per share attributable to
|
|
$ |
(0.18 |
) |
|
$ |
(0.50 |
) |
|
|
$ |
(1.57 |
) |
|
$ |
(1.62 |
) |
|
Basic Adjusted Net Income per Share (10) |
|
$ |
0.35 |
|
|
$ |
0.30 |
|
|
|
$ |
1.32 |
|
|
$ |
1.04 |
|
|
Diluted Adjusted Net Income per Share (11) |
|
$ |
0.27 |
|
|
$ |
0.25 |
|
|
|
$ |
1.07 |
|
|
$ |
0.86 |
|
|
Weighted average common shares outstanding |
|
|
30,185 |
|
|
|
29,720 |
|
|
|
|
30,058 |
|
|
|
29,688 |
|
|
Fully diluted shares |
|
|
38,589 |
|
|
|
35,686 |
|
|
|
|
37,128 |
|
|
|
35,997 |
|
|
________________________________________ |
(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, which include |
(8) In 2023, amounts are primarily comprised of lease abandonment charges and expenses related to an aircraft accident, partially offset by a gain on the surrender of a lease and an aircraft insurance gain. In 2022, amounts include costs associated with the closing of a lab and severance costs related to a restructuring within our soil remediation business. |
(9) The Company determined none of the adjustments have any tax impact since we are in a full deferred tax asset valuation allowance due to being in a cumulative 3-year pre-tax loss position as of December 31, 2023. Prior period amounts have been recalculated from amounts originally disclosed using the current methodology. |
(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.
|
||||||||||||||||
|
|
For the Quarter Ended
|
|
For the Year Ended
|
||||||||||||
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net loss |
|
$ |
(1,441 |
) |
|
$ |
(10,812 |
) |
|
$ |
(30,859 |
) |
|
$ |
(31,819 |
) |
Interest expense |
|
|
2,286 |
|
|
|
1,229 |
|
|
|
7,793 |
|
|
|
5,239 |
|
Income tax (benefit) expense |
|
|
(3,822 |
) |
|
|
358 |
|
|
|
(980 |
) |
|
|
2,250 |
|
Depreciation and amortization |
|
|
11,964 |
|
|
|
11,551 |
|
|
|
45,780 |
|
|
|
47,479 |
|
EBITDA |
|
$ |
8,987 |
|
|
$ |
2,326 |
|
|
$ |
21,734 |
|
|
$ |
23,149 |
|
Stock-based compensation (1) |
|
|
11,658 |
|
|
|
10,915 |
|
|
|
47,267 |
|
|
|
43,290 |
|
Acquisition costs (2) |
|
|
1,960 |
|
|
|
537 |
|
|
|
6,930 |
|
|
|
1,891 |
|
Fair value changes in financial instruments (3) |
|
|
(5,943 |
) |
|
|
1,268 |
|
|
|
(4,129 |
) |
|
|
(3,396 |
) |
Expenses related to financing transactions (4) |
|
|
28 |
|
|
|
— |
|
|
|
35 |
|
|
|
7 |
|
Fair value changes in business acquisition
|
|
|
(330 |
) |
|
|
245 |
|
|
|
84 |
|
|
|
(3,227 |
) |
Discontinued Specialty Lab (6) |
|
|
791 |
|
|
|
— |
|
|
|
6,112 |
|
|
|
— |
|
Other losses or expenses (7) |
|
|
328 |
|
|
|
2,494 |
|
|
|
543 |
|
|
|
4,459 |
|
Consolidated Adjusted EBITDA |
|
$ |
17,479 |
|
|
$ |
17,785 |
|
|
$ |
78,576 |
|
|
$ |
66,173 |
|
___________________________________ |
(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, which include |
(7) In 2023, amounts are primarily comprised of lease abandonment charges and expenses related to an aircraft accident, partially offset by a gain on the surrender of a lease and an aircraft insurance gain. In 2022, amounts include costs associated with the closing of a lab and severance costs related to a restructuring within our soil remediation business. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240229592306/en/
Investor Relations:
Rodny Nacier
(949) 988-3383
ir@montrose-env.com
Media Relations:
Sarah Kaiser
(225) 955-1702
pr@montrose-env.com
Source: Montrose Environmental Group, Inc.
FAQ
What was Montrose Environmental Group, Inc.'s (MEG) net loss for the full year 2023?
What is the outlook for MEG's revenue in 2024?
What acquisitions did MEG complete in January and February 2024?
What were MEG's diluted adjusted net income per share and consolidated adjusted EBITDA for the fourth quarter of 2023?
What percentage of revenue was Montrose's consolidated adjusted EBITDA for the full year 2023?
