管理層發言
Good morning. And welcome to the Montrose Environmental Group’s First Quarter 2025 Earnings Call. All participants will be in listen-only mode. The operator provided instructions regarding the conference call. After today’s remarks, there will be an opportunity to ask questions. The operator provided additional instructions. Please note this event is being recorded. I would now like to turn the conference over to Adrianne Griffin, Senior Vice President, Investor Relations and Treasury. Please go ahead.
Thank you, Operator. Welcome to our first quarter 2025 earnings call. Joining me on the call are Vijay Manthripragada, our President and Chief Executive Officer; and Allan Dicks, our Chief Financial Officer. During our prepared remarks today, we will refer to our earnings presentation, which is available on the Investor section of our website. Our earnings release is also available on the website. Moving to Slide 2, I would like to remind everyone that today’s call will include forward-looking statements subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to known and unknown risks and uncertainties that should be considered when evaluating our operating performance and financial outlook. We refer you to our recent SEC filings, including our annual report on Form 10-K for the fiscal year ended December 31, 2024, which identify the principal risks and uncertainties that could affect any forward-looking statements and our future performance.
We assume no obligation to update any forward-looking statements. On today’s call, we will discuss or provide certain non-GAAP financial measures, such as consolidated adjusted EBITDA, adjusted net income and adjusted net income per share. We provide these non-GAAP results for informational purposes and they should not be considered in isolation from the most directly comparable GAAP measures. Please see the appendix to the earnings presentation or our earnings release for a discussion of why we believe these non-GAAP measures are useful to investors, certain limitations of using these measures and a reconciliation to their most directly comparable GAAP measures. With that, I would now like to turn the call over to Vijay, beginning on Slide 4.
Thank you, Adrianne, and welcome to everyone joining us today. I will provide you with an update on the health of our business, explain our strengthened outlook and raised guidance, and speak generally about the first quarter presentation shared on our website. Allan will provide the financial highlights, and following our prepared remarks, we will host a question-and-answer session. Before I begin, I’d like to acknowledge the exceptional work of our approximately 3,400 colleagues around the world. The Montrose team’s dedication to leading environmental science and technology furthered our mission of helping to protect the air we breathe, the water we drink, and the soil that feeds us. Montrose continues to demonstrate that we can protect our environment while simultaneously driving economic value and development. As we discuss our results today, I want to remind everyone that our business is best evaluated on an annual basis, since demand for environmental science-based solutions does not follow consistent quarterly patterns.
This is how we manage our operations and how we recommend viewing our performance. With that, I’m extremely pleased to discuss our outstanding first quarter. In the first quarter, we achieved revenue of $177.8 million, consolidated adjusted EBITDA of $19 million and operating cash flow of $5.5 million. These record results mark our highest-ever performance metrics for a first quarter, setting new standards for our future achievements. These accomplishments underscore a growing universal demand for clean air, clean water and clean soil, an opportunity that spans across all of our geographies. There are differing opinions on how to achieve these essential goals and we believe that such market dislocations create opportunities for us. Our team is strategically positioned to navigate these complexities and capture a disproportionate share of growth which will further our leadership position in the environmental industry.
In November 2024, we announced the temporary pause on an acquisition to focus on consistent high-single-digit organic revenue growth, enhanced EBITDA margins, improved cash flow generation and balance sheet optimization with ample liquidity. I am pleased to report on our progress. Given our strong first quarter results and confidence in our 2025 outlook, we are increasing our full year 2025 EBITDA guidance. We now expect consolidated adjusted EBITDA to be in the range of $103 million to $110 million, an increase from $101 million to $108 million. We are reaffirming our full year revenue range of $735 million to $785 million. This updated guidance represents continued consolidated adjusted EBITDA margin expansion. We further reiterate our organic growth expectation of 7% to 9%. This demand outlook is supported by strong tailwinds. First, our private sector clients are increasing domestic industrial activity, a trend supported by President Trump’s administration.
This drives demand for our solutions. As one example, a public multinational energy company recently selected Montrose to support its emissions monitoring needs at scale. Montrose will deploy one of the largest air quality teams in North America across multiple operating basins in three U.S. states. Our ability to provide this service is because of our unique strategy of integrated services and capabilities, and the project also highlights how our clients continue to stay the course despite federal U.S. regulatory volatility. Our clients are staying the course because of the longer-term nature of their planning and because of the continued influence and consistency of state regulations. Second, state governments in the United States are gaining more influence, which presents incremental opportunities for our success. We are actively collaborating with several states and clients to tackle some of the most challenging contamination issues in soil and the plumes affecting drinking water sources.
We anticipate EPA Administrator Zeldin’s recent PFAS policy announcement will further support these initiatives. Montrose invested in innovative PFAS treatment solutions long before PFAS was this widely recognized. Our proven patent-protected technology and our subject matter experts have successfully reduced contamination levels to meet various state and local requirements, including to non-detect levels, which means for all PFAS the state was monitoring, they could no longer detect it. Because our technology can be dialed up or dialed down as needed, we are well-positioned regardless of where thresholds settle, and we are encouraged that this remains a priority for the current administration and for the states in which we operate. We are proud to report five consecutive quarters of revenue growth from our PFAS services from across our diverse offerings. Third, our international operations continue to thrive.
We recently announced an award from a major public mining company in Australia supporting the world’s growing demand for steel. This announcement reflects our expanding global footprint, our commitment to helping our industry partners transition to more sustainable practices, and continued demand for our services. Our long-term success fundamentally hinges on our ability to serve our over 6,000 clients. In discussions with many of our clients, one consistent theme emerges. The overwhelming majority are not changing course at this time, though they are closely monitoring policy and trade developments. We view our clients as embedded partners and aim to strengthen our relationships with them through our integrated business model, emphasis on cross-selling, commitment to technology and our focus on innovation. These elements are essential to our continued organic growth. As we think about the opportunities and risks that could drive us to either end of the guidance range, we wanted to provide some additional context.
We have considered the anticipated impacts of recent announcements from the U.S. EPA, changes in tariff policy and broader macroeconomic and geopolitical factors. We do not expect tariffs to meaningfully affect our margins, and our clients have been very constructive in discussions related to tariff policy. Additionally, our exposure to fluctuations in currency and interest rates is significantly hedged. Also, the impact of political dynamics on our international client relationships has been minimal and is expected to remain so, thanks to our strong local presence and domestic workforce with unique technical capabilities. Based on our current visibility into 2025, we believe our guidance appropriately reflects all of these considerations. Transitioning now to prioritizing balance sheet optimization, in April, we redeemed $60 million of the Series A-2 Preferred as we said we would and we anticipate completing the redemption of the remaining $62 million in 2025.
Last night, we announced Montrose’s inaugural stock repurchase program. Considering the ongoing disconnect between the company’s strong financial and operating performance, near- and long-term outlook, and public stock valuation, the Board has approved up to $40 million in stock repurchases. We will continue to carefully evaluate options for deploying capital to maximize returns to our stockholders. Next, I want to address our commitment to enhancing margins and our expectation for EBITDA margin improvement this year. Our approach has three primary components. First, we expect to leverage our existing back-office infrastructure to support continued growth. Second, by optimizing processes and implementing automation, we expect to improve operating efficiency. Third, we expect segment margins to align with our stated long-term targets, with most of the benefit coming from the Remediation and Reuse segment.
In short, we delivered what we said we would. We reported strong first quarter results. We progressed our capital allocation strategy. We improved operating and cash flow generation. We are well on track for high single-digit organic revenue growth. And we continue to enhance EBITDA margins, which is evident from our raised EBITDA guidance. All this while remaining true to our vision for planet and for progress. 2025 is off to an excellent start, and we do expect momentum to continue. With that, I’ll hand it over to Allan. Thank you.
Thanks, Vijay. We delivered an exceptional performance in the first quarter as we continue to maintain our focus and deliver on our stated objectives. Our strong results were driven by robust organic growth from cross-selling momentum and expanding customer relationships, along with the positive contributions from our highly accretive M&A activities in the prior year. Moving to our revenue performance. Our first quarter revenue increased to a first quarter record of $177.8 million, a 14.5% increase, compared to $155.3 million in the prior year period. The primary drivers of growth in the first quarter were strong organic growth in our Remediation and Reuse and Measurement and Analysis segments, plus contributions from acquisitions. Partially offset by a reduction in Assessment, Permitting and Response segment revenue due to several larger projects in the prior year period that did not repeat, and lower environmental emergency response revenues.
The consolidated revenue increase resulted in our highest ever first quarter consolidated adjusted EBITDA of $19 million, a 12.5% increase, compared to $16.9 million in the prior year period. Consolidated adjusted EBITDA as a percent of revenue in the current year quarter was 10.7%, compared to 10.9% in the prior year period. The 20 basis point difference was associated with normalized project margins in the AP&R segment, offset by improved operating leverage in the M&A segment, and the benefit of acquisitions in 2024. I’ll note that despite being lower in Q1, full year 2025 consolidated adjusted EBITDA as a percentage of revenue is expected to be above full year 2024 due to operating leverage in our Measurement and Analysis segment and continued margin improvement in the Remediation and Reuse segment. In the first quarter of 2025, diluted adjusted net income per share was $0.07, compared to $0.16 in the prior year period.
This was primarily due to higher interest and tax expenses and a higher weighted average diluted outstanding share count in the current quarter, partially offset by improved operating income before non-cash items. Please note that our adjusted net income per diluted share attributable to common stockholders is calculated using adjusted net income attributable to stockholders divided by fully diluted shares. We believe this net income methodology is the most helpful net income metric for Montrose and common equity investors. I will now discuss our first quarter performance by segment. In our Assessment, Permitting and Response segment, first quarter revenue was $53.1 million, compared to $58.6 million in the prior year period. AP&R segment adjusted EBITDA was $10.6 million or 19.9% of revenue, compared to 27.8% in the prior year period. Prior year results included several larger high margin projects that did not repeat in the current year and approximately $2 million lower emergency response revenue, which were partially offset by a $3 million contribution from an acquisition in 2024.
Revenue and EBITDA comparisons normalized in subsequent quarters, and accordingly, we expect AP&R revenue and adjusted EBITDA to be up year-over-year in the remaining quarters of the year. We expect long-term and 2025 AP&R segment adjusted EBITDA margins to remain within a normalized 20% to 25% range. Turning to our Measurement and Analysis segment, revenue for the quarter increased 29.8% to $59 million. We continue to experience strong organic growth across lab and field services in addition to contributions from an acquisition in 2024. M&A segment adjusted EBITDA increased to $13.7 million or 23.3% of revenue, a 900-basis-point margin improvement over the prior year period due to operating leverage across all business lines driven by significantly higher revenue and contributions from an acquisition in 2024. We expect long-term M&A segment adjusted EBITDA margins to remain within a normalized 18% to 22% range, with 2025 annual segment margins expected to remain elevated above the high end of the range, primarily due to business mix, project timing and contributions from acquisitions.
In our Remediation and Reuse segment, first quarter revenue increased 28.2% to $65.7 million, benefiting from strong organic growth in treatment technology revenue and contributions from acquisitions in 2024 of $5.1 million. This segment’s adjusted EBITDA increased to $5.9 million, though adjusted EBITDA margin declined 80 basis points to 9%, primarily driven by business line mix, in part driven by Q1 seasonality in our Canadian operations. We expect long-term R&R segment adjusted EBITDA margins to be within a 20% to 25% range, and are confident that R&R segment adjusted EBITDA margin will deliver year-over-year improvement for the balance of this year. Moving to our cash flow and capital structure. We achieved our highest ever first quarter net cash provided by operating activities of $5.5 million, compared to net cash used in operating activities of $22 million in the prior year period.
The significant $27.5 million increase related to improvements in working capital primarily accounts receivable and contract assets. I am pleased to report that we are on track to significantly outperform 2024 and expect to achieve cash flow from operations greater than 50% of consolidated adjusted EBITDA in 2025. We were also pleased with the strength of our balance sheet at quarter end, reporting a leverage ratio of 2.2 times and substantial liquidity of $294.2 million, following the refinancing of our senior credit facility in Q1, which, as you recall, is larger and on more favorable terms than the previous credit facility. Last quarter, we provided an update on the previously disclosed delayed receivables from a large project related to a U.S. Navy-owned facility fire for the city of Tustin, California. As of yesterday, the remaining amount Tustin owes Montrose is approximately $7.5 million, compared to $13.5 million as reported in February of this year, with the difference of $6 million being collected after the first quarter end, and therefore was not included in the reported first quarter operating cash flow.
We continue working collaboratively with Tustin and remain confident in the full collectability of the outstanding balance. Subsequent to quarter end, we redeemed $60 million of the Series A-2 Preferred Stock in cash, funded with cash on hand and borrowings under our credit facility. In the near-term, we will continue to prioritize balance sheet simplification through the redemption of the remaining Series A-2 Preferred Stock and subsequent deleveraging, while balancing potential stock repurchases. Optimizing our capital structure and leverage are integral parts of our strategy to maximize our financial flexibility. Looking forward, we will be measured in how we allocate capital to stock repurchases, investments to drive organic growth and future M&A, which remains a core part of our long-term growth story. Overall, we are very pleased with the momentum across our business and our strong start to the year.
We remain focused on our strategic objectives to enhance our margin profile, generate strong cash flows and continue to simplify our capital structure through the redemption of the remaining $62 million of our outstanding preferred stock. Our increased guidance for the year reflects the confidence in our ability to continue driving value in our business and the many tailwinds we see. Thank you all for joining us today and for your continued interest in Montrose. We look forward to the opportunities we see ahead and updating you on our progress next quarter. Operator, we are ready to open the lines to questions.
分析師問答
Thank you. The operator provided instructions. Our first question comes from Tim Mulrooney from William Blair. Please go ahead.
Vijay, Allan, good morning.
Hey, Tim. How are you?
Doing well. Thank you. So a couple questions for me. The first one is just want to have a broader conversation on this topic of deregulation. We recently saw Lee Zeldin’s list of top priorities for environmental deregulation at the EPA. I guess I’m curious if you’ve had a chance to review those 31 proposed actions as well, things like reconsidering the QUOTA regulations or the MATS regulations, for example. How do you think about the potential risks and maybe opportunities associated with this list of priorities?
Yes. Tim, that’s a great question. Why don’t I take that and Allan can certainly jump in. I think there are two dynamics I want to highlight. The first is understanding and predicting where the administration is going with the deregulatory agenda. The word "reconsider," which is embedded in much of that release, is critical because it suggests there is a significant amount of statutory support for many of these regulations, and to unwind that is going to be quite challenging. From a legal perspective, we don’t believe that any of this will be quick. I would pivot to a more impactful dynamic we are seeing, which is that as we engage with our clients who are intimately tied to understanding and interpreting the deregulatory agenda, they are largely staying the course. The reason for that, Tim, is planning cycles tend to be longer, there’s a clear understanding that the regulations remain the law, and from a compliance and liability perspective, it remains important.
State regulations are increasingly meaningful. This is consistent with what we discussed at the end of last year following the election of President Trump. Our general belief is that the demand cycle will sustain and that any changes, even with a strong deregulatory emphasis, will take time. What’s encouraging is that this is manifesting: even with announcements, demand remains strong and our clients are staying the course. It’s not just us saying it; it’s showing up in the financials. As we look through the rest of 2025, we expect that demand cycle to continue.
That’s really helpful color. Thanks, Vijay. And it is good to hear that what you were expecting when Trump was first elected is manifesting through the first four or five months of the year. I’m going to pivot to your T&M business, which came in quite a bit stronger than I expected for the first quarter on both a revenue and a margin front. I’m curious if there’s anything to call out here, like any particular business line or end market that’s really picked up lately. We’d love to hear more about what’s going on in this business.
You’re talking about our Measurement and Analysis segment, correct? That is very much in line with what I mentioned about regulation and how our clients—primarily private sector—think about compliance, risk and the long-term nature of our relationships. There is no singular driver. We are seeing strong demand across multiple lines of the business, particularly the higher-margin parts, and you’re starting to see that in our Measurement and Analysis segment. Over a five- to six-year outlook, we’ve always expected that segment to be around 20% of the business, plus or minus depending on service line mix, and that long-term outlook still holds. The current performance is a function of continued operating efficiency and sustained demand across effectively all levers within that business. So there isn’t one single driver—this is sustained tailwind across multiple business lines.
Okay. Thanks so much. I’ll hop back in queue.
The next question comes from Jim Ricchiuti from Needham. The operator provided instructions. Please go ahead.
Hi. Good morning. You had mentioned a few drivers of the margin expansion that you expect for the balance of the year. Just wondering if you could elaborate on those and get a little bit more specific about which operational improvements, makes and trends you anticipate to drive that projected margin expansion for the balance of 2025.
As we think about long-term margins and the outperformance in Q1, there are two broad dynamics to highlight. One, demand cycles across multiple lines of our business remain strong. Whether it’s our Assessment, Permitting and Response consulting, our Measurement and Analysis testing, or Remediation and Reuse treatment, increased regulatory clarity at the federal level, state responses, and clients taking firmer planning positions all contribute to sustained demand. Two, we are seeing improved operating effectiveness: continued cross-sell success, pricing optimization, operating leverage, and the normalization of segment margins toward long-term run rates. All of these together create a multi-faceted benefit cycle. That is why we feel good about the rest of the year and why we’re projecting higher EBITDA and higher margins.
Got it. Thank you. That’s very helpful. And then you had also mentioned that you’re having constructive dialogue with your clients around their potential tariff exposure. I’m just curious, which areas of the business or where—in the areas where clients are interfacing with you—do they see the potential for tariffs to impact that interface the most?
We expect tariffs to have a minimal, de minimis impact on our business at this time, and our guidance already incorporates our expectations on any potential impact. Clients in industries like automotive, industrial and energy are closely watching policy changes, and their constructive stance has helped our dialogue. They understand the pressures around price and cost and have been open to the idea that pricing adjustments or pass-throughs could be required, which preserves optionality for us if costs change. So tariffs are on our radar, but we do not expect them to meaningfully affect our results.
Great. Thanks. I’ll hop back in the queue.
Our next question comes from Andrew Obin from Bank of America. The operator provided instructions. Please go ahead.
Good morning. This is David Ridley Lane on for Andrew Obin. Measurement and Analysis historically has had pretty pronounced seasonality, with a weaker first quarter. That didn’t happen this year—the results were very strong. I’m wondering if there was something unusual this year in that segment?
That’s a great question. What we are seeing is some unwind of the reticence following the election. As we entered the back half of 2024, there was a pause-and-wait dynamic as clients tried to understand the election outcome and implications. Now that clarity has increased, we’re effectively back to business as usual. Some of Q1 strength was catch-up from that pause, which is atypical and we don’t expect the same unwind to repeat soon. Think of the segment running around the mid-20% margin area for the year depending on mix, but yes, we’re pleased with the sustained demand and Q1 performance.
Thank you. And then you mentioned that your PFAS-related revenue, which is 10% to 15% of total, continued to grow in the quarter—that’s the fifth consecutive quarter. Was that additive to the organic growth of the total company? And would you say it is additive to your organic growth for the foreseeable future?
Yes, it was additive to our organic growth, and we believe it will remain additive for the foreseeable future. EPA Administrator Zeldin’s April 28th PFAS announcement shows continued conviction in regulating this family of compounds. There may be variance in thresholds, but the conviction to regulate is supportive. Across consulting (risk, toxicology, permitting), testing (water and air), and treatment—which historically garnered most market attention—we are seeing tailwinds. We expect PFAS-related demand to continue growing over the next couple of years. I would caution against extrapolating from a single quarter, but the long-term trends are encouraging and the recent federal announcement increases our optimism and conviction.
Understood. One last question for me: Remediation and Reuse is very project-based and could be sensitive to broader macro uncertainty. Have you seen any project delays or is that a consideration?
No, we have not seen meaningful project delays tied to macro uncertainty in that segment. Given the nature of our work to address known contaminants and community needs for clean air, water and soil, macro conditions generally have less impact on the desire to address those issues. We expect solid growth in Remediation and Reuse for 2025, and margins to be at or above 2024 levels. Client conversations and dynamics continue to show they aren’t changing course, so exposure to economic or political fluctuations remains limited.
A follow-up question from Tim Mulrooney from William Blair. The operator provided instructions. Please go ahead.
Thanks for fitting me back in. I wanted to build on the earlier conversation around the EPA. It was good to see the comments they made on PFAS, but I was wondering if you’ve seen any impacts from efforts to reduce the workforce at the EPA. Has this affected environmental compliance behavior at any of your clients? Also, the White House budget proposal included a 50% cut to the EPA budget. How would such workforce reductions and potential budget cuts translate into impacts on your business?
Good question. It’s always hard to predict hypotheticals, but we have very little exposure to U.S. federal government spend; it represents low single-digit percentages of our revenue. Reductions in EPA staff can slow the pace of regulatory changes, because fewer staff makes it harder to promulgate changes and follow statutory processes. Private sector clients, which make up most of our activity, are watching state-level dynamics and federal changes, but they’re taking longer-term views to ensure compliance and manage liability. The EPA’s reduced workforce tends to slow regulatory change, which has not resulted in client behavior changes for us, and we don’t expect much change in behavior for the remainder of this year or next.
Okay. Thank you. Maybe since we haven’t heard from Allan very much, a question for him: After you pay off the remainder of the preferred instrument later this year, what do you expect the leverage ratio to be at the end of the year, and what leverage ratio target would you like to achieve before returning to the M&A market?
Thanks, Tim. We expect to be at or under a 3.0x leverage ratio by year end after redemption of the final $62 million of preferred stock—likely under 3.0x. Looking longer term, our preference is to be below 3.25x while continuing acquisitions. We are willing to go up to around 3.5x for a larger strategic deal, but that is not our ongoing target. We will target under 3.25x with acquisitions. Cash flow generation should be strong this year and in coming years, enabling us to keep leverage low while pursuing M&A when appropriate.
Okay. Thank you, guys.
Thanks, Tim.
Thanks.
There are no more questions in the queue. This concludes our question-and-answer session. I would like to turn the conference back over to Vijay Manthripragada for any closing remarks.
Thank you very much. And thank you to all of you for your interest in Montrose and for your continued support. We’re feeling really good about the year and we’re quite excited about continuing to share our progress, and we look forward to the next quarterly update. Thanks again and be well.
Conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.