Montrose Environmental Group Reports Record Third Quarter and First Nine Months 2024 Results, Reaffirms Guidance, and Updates Strategic Capital Allocation Priorities
Montrose Environmental Group (MEG) reported record Q3 2024 results with total revenue of $178.7 million, up 6.4% year-over-year. The company posted a net loss of $10.6 million ($0.39 per share) but achieved record Consolidated Adjusted EBITDA of $28.3 million, increasing 21.5%. For the first nine months of 2024, revenue grew 10.7% to $507.4 million with a net loss of $34.1 million. The company reaffirmed its full-year 2024 guidance of $690-740 million in revenue and $95-100 million in Adjusted EBITDA. MEG announced a shift in capital allocation priorities, focusing on preferred equity redemption and deleveraging while de-emphasizing acquisitions.
Il Montrose Environmental Group (MEG) ha riportato risultati record per il terzo trimestre del 2024, con un fatturato totale di 178,7 milioni di dollari, in aumento del 6,4% rispetto all'anno precedente. L'azienda ha registrato una perdita netta di 10,6 milioni di dollari (0,39 dollari per azione), ma ha raggiunto un EBITDA Consolidato Rettificato record di 28,3 milioni di dollari, aumentando del 21,5%. Nei primi nove mesi del 2024, il fatturato è cresciuto del 10,7%, raggiungendo 507,4 milioni di dollari, con una perdita netta di 34,1 milioni di dollari. L'azienda ha confermato le sue previsioni per l'intero anno 2024, con un fatturato previsto tra 690 e 740 milioni di dollari e un EBITDA rettificato tra 95 e 100 milioni di dollari. MEG ha annunciato un cambiamento nelle priorità di allocazione del capitale, concentrandosi sul rimborso del capitale preferenziale e sul deleveraging, mentre ha ridotto l'accento sulle acquisizioni.
Montrose Environmental Group (MEG) reportó resultados récord para el tercer trimestre de 2024, con ingresos totales de 178.7 millones de dólares, un aumento del 6.4% interanual. La empresa tuvo una pérdida neta de 10.6 millones de dólares (0.39 dólares por acción), pero logró un EBITDA Ajustado Consolidado récord de 28.3 millones de dólares, lo que representa un incremento del 21.5%. Durante los primeros nueve meses de 2024, los ingresos crecieron un 10.7% hasta alcanzar 507.4 millones de dólares, con una pérdida neta de 34.1 millones de dólares. La empresa reafirmó su guía de ingresos para todo 2024, que se espera esté entre 690 y 740 millones de dólares, y un EBITDA ajustado de entre 95 y 100 millones de dólares. MEG anunció un cambio en sus prioridades de asignación de capital, enfocándose en el reembolso de acciones preferentes y la reducción de deuda, mientras disminuye la importancia de las adquisiciones.
몬트로즈 환경 그룹 (MEG)은 2024년 3분기 실적이 기록적이라고 보고하며, 총 수익이 1억 7,870만 달러로, 전년 대비 6.4% 증가했다고 밝혔습니다. 회사는 1억 6백만 달러(주당 0.39달러)의 순손실을 기록했지만, 2천 8백만 달러의 기록적인 조정된 EBITDA를 달성하며 21.5% 증가했습니다. 2024년 첫 9개월 동안 수익은 10.7% 증가한 5억 740만 달러에 도달했으며, 순손실은 3천 410만 달러에 달했습니다. 회사는 2024년 전체 수익 목표를 6억 9천만에서 7억 4천만 달러, 조정된 EBITDA는 9천 500만에서 1억 달러로 재확인했습니다. MEG는 자본 배분의 우선 순위를 변경하여 우선주 환매와 부채 감소에 집중하고 인수합병의 중요성을 줄이기로 했습니다.
Montrose Environmental Group (MEG) a annoncé des résultats records pour le troisième trimestre 2024, avec un chiffre d'affaires total de 178,7 millions de dollars, en hausse de 6,4 % par rapport à l'année précédente. L'entreprise a enregistré une perte nette de 10,6 millions de dollars (0,39 dollar par action), mais a atteint un EBITDA consolidé ajusté record de 28,3 millions de dollars, en hausse de 21,5 %. Pour les neuf premiers mois de 2024, le chiffre d'affaires a augmenté de 10,7 % pour atteindre 507,4 millions de dollars, avec une perte nette de 34,1 millions de dollars. L'entreprise a confirmé ses prévisions de chiffre d'affaires pour l'année 2024, qui se situent entre 690 et 740 millions de dollars, et un EBITDA ajusté entre 95 et 100 millions de dollars. MEG a annoncé un changement de priorités dans l'allocation du capital, se concentrant sur le remboursement des actions privilégiées et le désendettement, tout en réduisant l'accent sur les acquisitions.
Die Montrose Environmental Group (MEG) hat für das dritte Quartal 2024 rekordverdächtige Ergebnisse mit einem Gesamtumsatz von 178,7 Millionen Dollar gemeldet, was einem Anstieg von 6,4% im Jahresvergleich entspricht. Das Unternehmen verzeichnete einen Nettoverlust von 10,6 Millionen Dollar (0,39 Dollar pro Aktie), erreichte jedoch ein rekordverdächtiges konsolidiertes bereinigtes EBITDA von 28,3 Millionen Dollar, was einem Anstieg von 21,5% entspricht. In den ersten neun Monaten des Jahres 2024 wuchs der Umsatz um 10,7% auf 507,4 Millionen Dollar bei einem Nettoverlust von 34,1 Millionen Dollar. Das Unternehmen bestätigte seine Umsatzprognose für das gesamte Jahr 2024 von 690 bis 740 Millionen Dollar und ein bereinigtes EBITDA von 95 bis 100 Millionen Dollar. MEG gab eine Änderung der Prioritäten bei der Kapitalallokation bekannt, indem es sich auf die Rückzahlung von Vorzugsaktien und das Deleveraging konzentrierte, während der Schwerpunkt auf Akquisitionen reduziert wurde.
- Record Q3 revenue of $178.7 million, up 6.4% YoY
- Record Consolidated Adjusted EBITDA of $28.3 million, up 21.5% YoY
- Margin expansion of 190 basis points
- Strong organic growth in Assessment, Permitting and Response segment
- Successful integration of recent acquisitions
- Net loss increased to $10.6 million in Q3 2024 from $7.5 million in Q3 2023
- Operating cash flow declined to -$9.7 million from +$41.5 million YoY
- Higher interest expenses impacting bottom line
- $12.8 million reduction in environmental emergency response revenue
- Slower payments on large U.S. government funded project
Insights
The Q3 2024 results show mixed performance with some positive developments and challenges. Revenue grew 6.4% to a record
However, there are concerning aspects: The net loss widened to
The 2.6x leverage ratio and reaffirmed guidance suggest stability, but working capital management needs improvement. The strategic pivot could strengthen the balance sheet but might slow growth momentum.
The environmental services sector fundamentals remain strong, supported by increasing regulatory complexity and private sector environmental commitments. Montrose's organic growth in core segments and successful cross-selling demonstrate market leadership, though the
The acquisition of Spirit Environmental and Origins Laboratory enhances geographic presence and service capabilities, particularly in air permitting and analytical testing. However, the pause in acquisition strategy could impact competitive positioning as industry consolidation continues.
The margin improvement indicates successful integration of recent acquisitions and pricing power, but working capital challenges need monitoring as they could affect future growth investments.
Third Quarter 2024 Highlights (comparisons to third quarter 2023)
- Highest-ever total revenue of
, an increase of$178.7 million , or$10.8 million 6.4% - Net loss of
, or$10.6 million net loss per diluted share attributable to common stockholders (LPS), and Adjusted Net Income1 of$0.39 , or$19.1 million Diluted Adjusted Net Income per share1 (Adj EPS)$0.41 - Record Consolidated Adjusted EBITDA1 of
, an increase of$28.3 million , or$5.0 million 21.5% - Consolidated margin expansion
- Reaffirms full-year 2024 guidance for total revenue of
to$690 million , and Consolidated Adjusted EBITDA1 of$740 million to$95 million $100 million
First Nine Months 2024 Highlights (comparisons to first nine months 2023)
- Record total revenue of
, an increase of$507.4 million , or$48.9 million 10.7% - Net loss of
, or$34.1 million LPS, and Adjusted Net Income1 of$1.30 , or$38.6 million Adj EPS1$0.80 - Record Consolidated Adjusted EBITDA1 of
, an increase of$68.5 million , or$7.5 million 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
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."
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
_______________________________ | |
(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. |
Third Quarter 2024 Results
Total revenue in the third quarter of 2024 was
Net loss was
In the third quarter of 2024, Adjusted Net Income1 and Adj EPS1 were
Third quarter 2024 Consolidated Adjusted EBITDA1 was
First Nine Months 2024 Results
Total revenue in the first nine months of 2024 increased
Net loss was
In the first nine months of 2024, Adjusted Net Income1 and Adj EPS were
Consolidated Adjusted EBITDA1 for the first nine months of 2024 was
Operating Cash Flow, Liquidity and Capital Resources
Cash used in operating activities for the first nine months ended September 30, 2024, was
As of September 30, 2024, Montrose had
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
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
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 | Nine Months Ended | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Revenues | $ | 178,687 | $ | 167,937 | $ | 507,337 | $ | 458,466 | ||||||||
Cost of revenues (exclusive of depreciation and | 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 | 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 | (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— | 34,242 | 30,143 | 32,647 | 30,016 | ||||||||||||
Net loss per share attributable to common | $ | (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 | ||||||||
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 | ||||||||
Authorized, issued and outstanding shares: 11,667 and 17,500 at September 30, | 92,928 | 152,928 | ||||||
Stockholders' equity: | ||||||||
Common stock, | — | — | ||||||
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 | $ | 1,006,893 | $ | 816,786 |
MONTROSE ENVIRONMENTAL GROUP, INC. | ||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(In thousands) | ||||||||
For the Nine Months Ended | ||||||||
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 | Segment | Segment | Segment | ||||||||||||||
Assessment, Permitting and | $ | 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 | Segment | Segment | Segment | ||||||||||||||
Assessment, Permitting and | $ | 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 |
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
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 | Nine Months Ended | |||||||||||||||
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 | 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 | Nine Months Ended | |||||||||||||||
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. |
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SOURCE Montrose Environmental Group, Inc.
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