Q3 2023 Montrose Environmental Group Inc Earnings Call

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Speaker 1: Good morning and welcome to the Montrose Environment Group Inc. 3rd quarter, 2023, early school. All participants will pay an illizinal remote. Should you need assistance please signal a conference specialist by pressing star at the zero on your telephone g-tests.

Good morning, and welcome to the Montrose Environment Group, Inc. Third quarter 2023 earnings call.

All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.

Speaker 1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you will repress StarBin1 on your telephone keypad. To withdraw your question, please press StarBin2. Please note, this event is being recorded. I would like now to turn a conference over to Rodney Nielcier from investor relations. Please go ahead.

So today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.

Please note this event is being recorded.

I would like now to turn the conference over to Rodney Bell.

From Investor Relations. Please go ahead.

Thank you and welcome to our third quarter 2023 earnings call joining.

Speaker 2: Thank you and welcome to our third quarter 2020 Green Ernie's call.

Speaker 2: Joining me on the call are VJ and 3Pregada, our president and chief executive officer, and Alan Dix, chief financial officer. During our discussion today, we will be referring to the earnings presentation which is available on the investor's section of our website. Our earnings release is also available on the website. Moving.

Joining me on the call are B J, Threep Regatta, our president and Chief Executive Officer, and Allen <unk>, Chief Financial Officer. During our discussion today, we will be referring to the earnings presentation, which is available on the investors section of our website. Our earnings release is also available on the website.

Moving to slide two.

Speaker 2: I would like to remind everyone that today's call will include forward-looking statements that are subject to the space hardware visions of the private security's litigation reform act of 1995. Actual results may differ in a material way due to known and unknown risks and uncertainties that should be considered in evaluating our operating performance and financial outlook.

I would like to remind everyone that today's call will include forward looking statements that are subject to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 actual results may differ in a material way due to known and unknown risks and uncertainties that should be considered in evaluating our operating performance and financial outlook.

Speaker 2: We refer you to our recent SEC filings, including our annual report on Form 10K to the fiscal year ended December 31st, 2022, which identify the principal risk and uncertainties that could affect any forward-looking statement as well as future performance. We assume no obligation to update any folks.

Refer you to our recent SEC filings, including our annual report on Form 10-K for the fiscal year ended December 31, 2022, which identify the principal risks and uncertainties that could affect any forward looking statements as well as future performance.

We assume no obligation to update any forward looking statements.

Speaker 2: In addition, we will be discussing or providing certain non- GAAP financial measures today, including validated adjustity, but the adjusted net income and adjusted net income for share.

In addition, we will be discussing or providing certain non-GAAP financial measures today, including consolidated adjusted EBITDA adjusted net income and adjusted net income per share.

Speaker 2: We provide these non-gap 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 or a discussion of why we believe these non- GAAP measures are useful to investors. Certain limitations of using these measures and a reconciliation thereof they're most directly comparable gap measure.

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.

The limitations of using these measures and a reconciliation there are their most directly comparable GAAP measure.

Speaker 2: With that, I would now like to turn the call over to Vijay, beginning on slide 4.

With that I would now like to turn the call over to Vijay beginning on slide four.

Speaker 3: Thank you, Rodney, and welcome to all of you joining us today. I will provide you with business highlights. Alan will provide you with financial highlights, and we will then open it up to Q&A.

Thank you Rodney and welcome to all of you joining us today I will provide you with business highlights Alan will provide you with financial highlights and we will then open it up to Q&A.

Speaker 3: I will speak generally to the third quarter earnings presentation shared on our website.

I'll speak generally to the third quarter earnings presentation shared on our website.

Speaker 3: As we have noted each quarter, I would like to emphasize that our business is best assessed on an annual basis, given demand for environmental solutions is typically not driven by quarterly patterns. We manage our business on an annual basis, and it is how we recommend you view our results as well.

As we have noted each quarter I would like to emphasize that our business is best assessed on an annual basis.

Demand for environmental solutions is typically not driven by quarterly patterns.

We manage our business on an annual basis and it is how do we recommend you view our results as well.

Speaker 3: Before we dive into the quarters performance, I would like to thank our approximately 3,500 colleagues around the world for whom I am very grateful.

Before we dive into the quarter's performance I would like to thank our approximately 3500 colleagues around the world for whom I am very grateful.

Speaker 3: Through their efforts, we were able to produce another quarter of the record results, and further our leading position in the environmental industry.

Through their efforts, we were able to produce another quarter of record results and further our leading position in the environmental industry.

Speaker 3: As for our financial results, we had another quarter of exceptional performance due to reasons consistent with those discussed during the first half of this year.

As for our financial results, we had another quarter of exceptional performance.

Consistent with those discussed during the first half of this year.

Speaker 3: First, we focused 2023 on delivering on our adjusted EBITDA targets and increasing our adjusted EBITDA margins.

First we focused in 2023 on delivering on our adjusted EBITDA targets and increasing our adjusted EBITDA margins as.

Speaker 3: As you can see from our results, we are achieving both goals.

As you can see from our results we are achieving both goals.

Speaker 3: Second, we continue to see strong organic growth in most of our business lines and our long-term organic growth outlook remains as attractive as ever. Our objectives and strategy have not changed in this regard.

Second we continue to see strong organic growth in most of our business lines and our long term organic growth outlook remains as attractive as ever our objectives and strategy have not changed in this regard.

Speaker 3: During the third quarter of 2023, operating segment adjusted EBITDA and consolidated adjusted EBITDA margins were approximately 20% and 14% respectively, which represents an increase in margins versus the prior year for both.

During the third quarter of 2023 operating segment adjusted EBITDA and consolidated adjusted EBITDA margins were approximately 20% and 14%, respectively, which represents an increase in margins versus the prior year for both.

The improvement in our adjusted EBITDA margins as a result of organic revenue growth in most of our business lines and our pivot away from lower margin revenue, particularly within R. E. T T. Two biogas services.

Speaker 3: The improvement in our adjusted EBITDA margins is a result of organic revenue growth in most of our business lines and our pivot away from lower margin revenue, particularly within our ECT2 biogas services.

Speaker 3: The third theme I will highlight is the strength and tailwinds from new and anticipated regulations, as well as our clients' voluntary focus on environmental stewardship.

The third theme I will highlight is the strengthening tailwind from new and anticipated regulations as well as our clients voluntary focus on environmental stewardship.

Speaker 3: from new regulations affecting PFAS disposal and tightened methane leak detection protocols.

From new regulations affecting P thoughts disposal and tightened methane leak detection protocols.

Speaker 3: Depending on rules on climate disclosures and changes in air emissions standards, we are seeing regulatory tailwinds across our business.

The pending rules on climate disclosures and changes in air emission standards, we are seeing regulatory tailwind across our business.

The fourth theme underscores the sustained advantages from our acquisition.

Speaker 3: The fourth theme underscores the sustained advantages from our acquisition.

Speaker 3: Our acquisitions are driving scale benefits, technology access, and widening our geographical reach, including the recent addition of Matrix in the Canadian market.

Our acquisitions are driving scale benefits technology access and widening our geographical reach including the recent addition of matrix in the Canadian market.

Speaker 3: We have closed five acquisitions this year and our acquisition pipeline remains very attractive.

We have closed five acquisitions this year and our acquisition pipeline remains very attractive.

Finally, our balance sheet and cash flow remained strong.

Speaker 3: Finally, our balance sheet and cash flow remain strong.

Speaker 3: Year-to-date adjusted cash flow from operations of $42.1 million increased 52% compared to the prior year period, providing us with ample flexibility to continue investing in our business.

Year to date adjusted cash flow from operations of $42 1 million increased 52% compared to the prior year period, providing us with ample flexibility to continue investing in our business.

Speaker 3: Our balance sheet capacity remains very robust, and our debt is hedged against rising interest rates, insulating us from the current uncertain rate environment.

Our balance sheet capacity remains very robust.

Our debt is hedged against rising interest rates insulating us from the current uncertain rate environment.

I will next discuss our third quarter performance by segment.

Speaker 3: I will next discuss our third quarter performance by segment.

Speaker 3: Within our assessment permitting and response segment, we were pleased to see continued strong organic revenue growth in our advisory services, which excludes BTEH.

Within our assessment permitting in response segment. We were pleased to see continued strong organic revenue growth in our advisory services, which exclude B T H.

Speaker 3: We also saw positive contributions from our acquisition.

We also saw positive contributions from our acquisitions.

Speaker 3: DTEH, our environmental response business, performed above run rate levels year-to-date, given several high-profile environmental response projects that continued from earlier this year.

B T H R. Environmental responsive business performed above run rate levels year to date, given several high profile environmental response projects that continued from earlier this year.

Speaker 3: The increase in margins for this segment was driven by strong organic revenue growth in our advisory services and CTEH outperformance.

The increase in margins for this segment was driven by strong organic revenue growth in our advisory services and C. T H outperformance.

Speaker 3: We remain bullish on the outlook for our advisory services through the rest of 2023 and beyond.

We remain bullish on the outlook for our advisory services through the rest of 2023 and beyond.

Speaker 3: Within the measurement and analysis segment, strong organic revenue growth continues in this segment as well.

Within the measurement and analysis segment strong.

Strong organic revenue growth continues in this segment as well.

We are especially pleased with the positive performance from our new data platform.

Speaker 3: We are especially pleased with the positive performance from our new data platform, methane and leak detection and measurement services, and PFAS lab search.

Methane leak detection and measurement services and pithos lobster.

Given the building regulatory pipeline, we remain upbeat about continued performance in this segment.

Speaker 3: Given the building regulatory pipeline, we remain upbeat about continued performance in this segment.

Speaker 3: Though quarterly margins remain elevated and are higher than the prior year, we expect annual margins to remain in the high teens to 20% range.

So quarterly margins remain elevated at or higher than the prior year, we expect annual margins to remain in the high teens, 20% range.

Speaker 3: And finally, within our remediation and reuse segment, revenue growth in this segment was primarily due to our acquisition of matrix, partially offset by the expected moderation in our ECT2 technology services, which includes our water and biogad service.

And finally within our remediation and reuse segment revenue growth in this segment was primarily due to our acquisition of matrix.

Actually offset by the expected moderation in our E. C. T. Two technology services, which includes our water and biogas service.

Speaker 3: Margins during the quarter were lower, primarily given the impact of the matrix acquisition, and moderated revenues at ECT2, which saw triple-digit organic growth last year.

Margins during the quarter were lower primarily given the impact of the matrix acquisition.

And moderated revenues at ECP to which saw triple digit organic growth last year.

Speaker 3: A previously communicated shift towards higher margin biogas services.

Our previously communicated shifts towards higher margin biogas services.

Speaker 3: and improvements we are making within Matrix will enhance our margin profile in this segment.

And the improvements we are making within matrix will enhance our margin profile in this segment.

Speaker 3: Next, I will discuss recent regulatory updates and industry trends that support our long-term growth outlook.

Next I will discuss recent regulatory updates and industry trends that support our long term growth outlook.

Speaker 3: The U.S. EPA continues to focus on PFAS and in September finalized an important rule under the Toxic Substances Control Act.

The U S E. T E continues to focus on people and in September finalized an important rule under the toxic substances control Act.

Speaker 3: This rule requires reporting from companies in a wide variety of industries that have manufactured or imported PFAS chemicals.

This rule requires reporting from companies did a wide variety of industries that are manufactured or imported paphos chemicals.

Speaker 3: With regards to methane emissions, the U.S. EPA and Bureau of Land Management have implemented new rules targeting methane emissions, such as flares, vents, and leaks, supporting incremental demand for our measurement and assessment services.

With regards to methane emissions.

C P E and Bureau of land management have implemented new rules targeting methane emissions such as players at Ensign leagues supporting incremental demand for our measurement and assessment services.

Speaker 3: And finally, regarding demand for our environmental consulting services in October , the US EPA pledged significant funding to states to support projects aimed at advancing environmental justice.

And finally regarding demand for our environmental consulting services in October the U S. EPA pledge significant funding to states to support projects aimed at advancing environmental Justice.

Speaker 3: We anticipate these campaigns will drive increased demand for advisory and our testing service.

We anticipate these campaigns will drive increased demand for our advisory and our testing services.

Speaker 3: These recent regulatory developments, in addition to those we've highlighted over the past several quarters, demonstrate that macro tailwinds for integrated environmental solutions remain very robust.

These recent regulatory developments in addition to those we've highlighted over the past several quarters demonstrate that macro tailwind as far integrated environmental solutions remains very robust.

Speaker 3: Entrows remains very well positioned to benefit from the rapidly evolving environmental industry and regulatory landscape.

On <unk> remains very well positioned to benefit from the rapidly evolving environmental industry.

And regulatory landscape.

Speaker 3: So in summary, I remain incredibly grateful to the entire Montrose team. Our continued app performance is attributable to the hard work and execution of our colleagues around the world.

So in summary.

I remain incredibly grateful to the entire Montrose team are.

Continued outperformance is attributable to the hard work and execution of our colleagues around the world.

Speaker 3: Given this continued momentum in our business, we are reiterating our full year 2023 revenue and consolidated adjusted EBITDA guidance.

Given this continued momentum in our business, we are reiterating our full year 2023 revenue and consolidated adjusted EBITDA guidance.

Speaker 3: remain very optimistic about our outlook and our opportunity to create more shareholder value. With that, I will hand it over to

We remain very optimistic about our outlook and our opportunity to create more shareholder value.

With that I will hand, it over to Alan Thank you.

Speaker 3: Thanks, Vijay. We are very pleased to have delivered strong third quarter results. Our resilient performance throughout the year thus far reflects the themes we've discussed since becoming a public company over three years ago, as new environmental regulations and corporate mandates continue to drive demand for our unique environmental solutions.

Thanks Vijay.

Very pleased to have delivered strong third quarter results.

Our resilient performance throughout the year, thus far reflects the themes, we've discussed since becoming a public company over three years ago, as new environmental regulations and corporate mandates continue to drive demand for our unique environmental solutions.

Our business remains strong and continues to grow given how successful execution of attractive M&A ongoing cross selling successes and expanding customer relationships.

Moving to our revenue performance on slide eight.

Speaker 3: We saw organic growth across many of our service lines help drive revenues to record levels in the third quarter. Our third quarter revenues increased 28.9 percent to $167.9 million compared to the prior year quarter.

Organic growth across many of our service lines.

<unk> revenues to record levels in the third quarter.

Third quarter revenues increased 28, 9% to 100.

$67 9 million compared to the prior year quarter.

Speaker 3: Your today revenues were up 13.2% versus the prior year period of 458.5 million.

To date revenues were up 13, 2% versus the prior year period to $458 5 million.

Speaker 3: The primary driver of revenue growth in both periods was the positive contributions from acquisitions, including matrix, strong organic growth in our assessment, permitting and response, and measurement and analysis segments, and an increase in CCH revenue.

Primary driver of revenue growth in both periods was the <unk>.

Positive contributions from acquisitions, including matrix.

Strong organic growth and I was just been permitting in response and measurement and analysis segments and an increase in C. T H revenues.

Speaker 3: This was partially offset by lower revenues in a specialty lab that is being discontinued and the change in our remediation and reuse segment given the timing of projects and the strategic shift in our biogas business to focus on higher margin, lower revenue services.

This was partially offset by lower revenues in our specialty lab that is being discontinued.

The change in our remediation segment, given the timing of projects and a strategic shift in our biogas business to focus on higher margin lower revenue services.

Speaker 3: Growth in our year-to-date revenue was also impacted by our planned exit from legacy O&M contracts in 2022.

Growth in our year to date revenue was also impacted by a planned exit from legacy O&M contracts in 2022.

Speaker 3: excluding revenue from discontinued businesses, revenue was up 32%, through 165.9 million in the third quarter, and was up 16.4% to 452.6 million here today.

Excluding revenue from discontinued businesses revenue was up 32%.

$65 9 million in the third quarter and was up 16, 4% to $452 6 million year to date.

Speaker 3: Looking at our consolidated adjuster EBITDA performance on slide 9. Third quarter consolidated adjuster EBITDA for a record 23.3 million or 13.9% of revenue. This compares to consolidated adjuster EBITDA of 17.1 million or 13.1% of revenue in the prior year quarter.

Looking at our consolidated adjusted EBITDA performance on slide nine.

Third quarter consolidated adjusted EBITDA was a record $23 3 million or 13, 9% of revenue. This compares.

Consolidated adjusted EBITDA of $17 1 million or 13, 1% of revenue in the prior year quarter.

Speaker 3: The year of the year improvement was driven by higher revenues and higher operating margins driven in part by the benefit of Prints.

The year over year improvement was driven by higher revenues and higher operating margins driven impart by the benefit of pricing.

Speaker 3: here today, consolidated adjusted EBITDA was $61.1 million, or 13.3% of revenue, compared to consolidated adjusted EBITDA of $48.4 million, or 12% of revenue in the prior year.

Year to date consolidated adjusted EBITDA was $61 1 million or $13 three potential revenue compared to a consolidated adjusted EBITDA of $48 4 million or 12% of revenue in the prior year.

Speaker 3: With that said, I will re-emphasize that Montrose's performance needs to be assessed annually, as quarterly results are not always indicative of annual performance.

With that said I'll reemphasize that mantra as its performance needs to be assessed annually quarterly results are not always indicative of annual performance.

Turning to our business segments on slides 10 and 11.

Speaker 3: As we previously highlighted, we remain primarily focused on meeting or exceeding our targets for adjusted EBITDA dollars and operating cash flow generation with the longer-term goal of optimizing our margin profile. To that end, we were pleased to see the impacts of shifts through our service portfolio, which helped contribute to the increase in operating segments adjusted EBITDA margin to 19.5%.

As we've previously highlighted.

The main primarily focused on meeting or exceeding our targets.

Adjusted EBITDA dollars and operating cash flow generation with a longer term goal of optimizing our margin profile.

Did that and we were pleased to see the impacts of shifts to our service portfolio, which helped contribute to the increase in operating segments adjusted EBITDA margin to 19, 5%.

Speaker 3: In our assessment, permitting and response segment, revenues increase 22.8% year of a year to 57 million. The year of a year increase was driven primarily by organic growth, worth in revenues from CTH and to a lesser extent, the positive contributions from acquisition.

And our assessment of permitting in response segment revenues increased 22, 8% year over year to $57 million.

The year over year increase was driven primarily by organic growth.

Growth in revenues from C T H and to a lesser extent the positive contributions from acquisitions.

Speaker 2: BTH is entirely in this segment, so that business's increase in environmental response revenues are fully captured here.

E T. H is entirely in this segment so that business has increased and environmental response revenues up fully captured here.

Speaker 3: AP&R segment adjusted EBITDA increased 51.5% year of a year to 14.9 million for 26.1% of revenue, but from 21.2% in the prior year quarter. Reflecting the benefits of organic growth, favorable CGH revenue mix, and higher aggregate margins across our other businesses within the segment.

A PNR segment adjusted EBITDA increased 51, 5% year over year to $14 9 million or 26, 1% of revenue.

From 21, 2% in the prior year quarter, reflecting the benefits of organic growth.

Favorable T T H revenue mix and higher aggregate margins across our other businesses within the segment.

Speaker 3: In our measurement and analysis segment, revenue increased 15.3% to $50.5 million, primarily attributable to double-digit organic growth, as well as the benefits from acquisitions completed subsequent to the end of the prior year quarter.

And our measurement and analysis segment.

Revenue increased 15, 3% to $55 million, primarily attributable to double digit organic growth as well as the benefits from acquisitions completed subsequent to the end of the prior year quarter.

Speaker 4: M&A segments adjusted EBITDA increase 22% to 10.4 million or 20.5% of revenue, up from 19.4% in the prior year quarter, reflecting strong demand for our testing services and the benefits from our pricing acts.

M&A segments, adjusted EBITDA increased 22% to $10 4 million or 25% of revenue up from 19, 4% in the prior year quarter, reflecting strong demand for our testing services and the benefits from our pricing actions.

Speaker 4: In our remediation and reuse segment, revenues increased 50.6% to 60.5 million, from early due to the acquisition of matrix, and partially offset by the anticipated decline in revenues, from certain large water treatment projects, and the recent pivot in our buyer gas business, to focus on higher margin lower revenue projects.

And our remediation and reuse segment revenues increased 56% to $65 million, primarily due to the acquisition of matrix and partially offset by the anticipated decline in revenues from certain large water treatment projects and the recent pivot and a biogas business the focus on higher margin lower revenue.

Yeah.

Speaker 4: The decrease in our north segments adjusted deep at the top as a potential revenue was due to lower water treatment revenues and that a dilutive impact of matrix, partially all set by the higher contribution margins within our biogas business.

The decrease in R&R segment, adjusted EBITDA as a percentage of revenue was due to lower water treatment revenues and the dilutive impact of matrix, partially offset by the higher contribution margins within our biogas business.

Speaker 4: Our margin optimization efforts are well on track at matrix, and we expect to see low to mid-teens adjusted either to margins by the end of 2024, up from low single digits at the time of acquisition. Moving to our...

Our margin optimization efforts are well on track at matrix and we expect to see low to mid teens adjusted EBITDA margin by the end of 2024 up from low single digits at the time of acquisition.

Moving to our capital structure on slide 12.

Speaker 4: Year-to-date cash flow from operating activities was 41.5 million, which improved compared to cash provided by operating activities of 8.2 million in the prior year period.

Year to date cash flow from operating activities was $41 5 million, which improved as compared to cash provided by operating activities of $8 2 million in the prior year period.

Speaker 4: Cash flow from operations includes the payment of acquisition-related contingent consideration of 0.6 million in the current year and 19.5 million in the prior year respectively.

Cash flow from operations includes the payment of acquisition related contingent consideration of the airports $6 million in the current year and $19 5 million in the prior year respectively.

Speaker 4: excluding these acquisition later payments, cash from operating activities was 42.1 million. In the first nine months of 2023, compared to cash from operating activities of 27.7 million. In the first nine months of 2022, an increase of 14.4 million. And representing an adjusted EBITDA to operating cash flow conversion of 69 percent.

Excluding these acquisition related payments cash from operating activities was $42 1 million in the first nine months of 2023 compared to cash from operating activities of $27 7 million in the first nine months of 'twenty to 'twenty, two an increase of $14 4 million and representing an adjusted EBITDA operating cash flow conversion.

About 69%.

Speaker 4: The Euroview increase in operating cash flows was driven from hourly by a lower working capital build and higher earnings before non-cash items compared to the prior year period.

The year over year increase in operating cash flows was driven primarily by a lower working capital build and higher earnings before noncash items compared to the prior year period.

Speaker 4: These strong operational cash flows reflect our ongoing focus on balancing the generation of cash with investments in technology, R&D and corporate infrastructure to ensure continued scalability.

These strong operational cash flows reflect our ongoing focus on balancing the generation of cash with investments in technology, R&D and corporate infrastructure to ensure continued scalability.

Speaker 4: A leverage ratio as of September 30, 2023, which includes the impact of acquisition related contingent or not obligations available in cash, was at a healthy 1.9 times.

Our leverage ratio as of September 32023, which includes the impact of acquisition related contingent earn out obligations payable in cash was at a healthy one nine times.

Speaker 4: At our current leverage ratio, an inclusive of our fixed rate on 170 million of debt under our interest rate swaps, our weighted average interest rate under our credit facility was 4.4% as of September 30, 2023, with no exposure to rising interest rates at current borrowing level.

And our current leverage ratio and inclusive of our fixed rate on the 170 million of debt under our interest rate swaps.

Weighted average interest rate under our credit facility was four 4% as of September 32023, with no exposure to rising interest rates at current borrowing levels.

Speaker 4: Our Series A2 preferred stock has no maturity date, and we have the option, but not the obligation, to redeem the preferred shares at any time for cash.

Our series H preferred stock has no maturity date.

You have the option, but not the obligation to redeem the preferred shares at any time for cash.

Speaker 4: The whole has the option to convert up to 60 million to common equity in April of next year.

<unk> has the option to convert up to $60 million of common equity in April of next year.

Speaker 4: Review this preferred equity instrument is favorable to the value creation potential in the business, given it's flexible dynamics, and the fixed nature of the dividend in a rising interest rate environment.

We view this preferred equity instrument is favorable to the value creation potential in the business given its flexible dynamics.

Fixed nature of the dividend in a rising interest rate environment.

Speaker 4: If you include the $182 million of the Series A2 equity in our market cap, our total equity capitalization stands at approximately $948 million.

If you include the 182 million of excuse me day to equity and our market cap at total equity capitalization stands at approximately 948 million.

Speaker 4: Moving to our reiterated for your outlook on slide 14.

Moving to our reiterated full year outlook on slide 14.

Speaker 4: Based on our strong performance of FAR in 2023, and the expectation for our TPH business to return to run rate levels during the fourth quarter, we reiterate our outlook for four year 2023 revenues to be in the range of 590 to 640 million. That will consolidate in adjusted EBITDA to be in the range of 75 to 81 million.

Based on our strong performance so far in 2023, and the expectation for a th business to return to run rate levels during the fourth quarter.

We reiterate our outlook for full year 2023 revenues to be in the range of 590 $640 million and for consolidated adjusted EBITDA to be in the range of $75 million to $81 million.

Speaker 4: Our revenue and consolidated adjust to be the outlook for the full year continues to represent double-digit growth and margin expansion over the prior year.

Our revenue and consolidated adjusted EBITDA outlook for the full year continues to represent double digit growth and margin expansion over the prior year.

Speaker 4: As we begin to look ahead to next year, we anticipate strong organic growth in 2024 and will provide a more full-sem outlook next course. In summary, the month for our environmental solutions remains robust and our reaffirmed outlook for 2023 represents our optimism in the positive trajectory of our business.

As we begin to look ahead to next year, we anticipate strong organic order in 'twenty 'twenty four and we'll provide a more fulsome outlook next quarter in summary demand for environmental solutions remains robust and our reaffirmed outlook for 2023 represents our optimism in the positive trajectory of our business.

Speaker 4: We remain as confident as ever in our ability to deliver shareholder value through our best and plus tweet of environmental solutions and to capitalize on end-market and regulatory tailwind.

We remain as confident as ever in our ability to deliver shareholder value through our best in class suite of environmental solutions and to capitalize on end market and regulatory tailwind.

Speaker 4: 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.

Thank you all for joining us today and for your continued interest in mantras.

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.

Speaker 1: Thank you very much. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone.

Thank you very much well now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

Speaker 1: If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our

A speaker phone please pickup your handset before pressing the keys.

If at any time. Your question has been addressed to me would like to withdraw your question. Please press Star then two.

At this time, we'll pause momentarily to assemble our roster.

Oh yeah.

No.

Uh huh.

Speaker 1: The first question comes from Tim Mulroney with William Blair. Please go ahead.

The first question comes from Tim Mulrooney with William Blair. Please go ahead.

Speaker 5: VJ, Alan, good morning. Hey Tim, how are you?

Vijay Alan good morning.

Hey, Tim how are you.

Speaker 6: Doing all right, thank you. Just a couple questions. So I know.

Alright. Thank you just a couple of questions.

I know.

I completely agree with you that the business should be analyzed on an annual basis and that's certainly how we think about it but some times talking about the quarters can help folks understand what's happening in the business. So so my.

Speaker 6: I completely agree with you that the business should be analyzed on an annual basis and that's certainly how we think about it. But sometimes talking about the quarters can help folks understand what's happening in the business. So my question is just on the adjusted EBITDA margin, which was very strong.

One is just on the adjusted EBITA margin, which was very strong and.

Speaker 6: Great to see in the third quarter. implied guidance for the fourth quarter is showing that it would be down sequentially in Europe year. I'm sure there's a good reason for that. If you look at it on a second half, 2023 basis, you guys are right in line with doing what you said you were gonna do. So it's not so much about...

Great to see in the third quarter implied guidance for the fourth quarter is showing that it would be down sequentially and year over year I'm sure. There's a good reason for that if you look at it on a second half 2023 basis. You guys are right in line with doing what you said you were going to do so it's not so much about you know.

Are you hitting numbers, you're clearly hitting numbers I'm, just curious, what's causing that change in the margin profile from quarter to quarter, if there's a specific project or something like that.

Speaker 7: Are you hitting numbers? You're clearly hitting numbers. I'm just curious, what's causing that change in the margin profile from quarter to quarter if there's a specific project or something like that?

Speaker 8: Yeah, it's a great, it's a great point, Tim. Why don't I start and Alan can jump in. So you're exactly right. This is an annual business.

Yeah, It's a great. It's a great point, Tim why don't I start and Alan can jump in so you're exactly right. This is an annual business and so the quarterly comparisons aren't as meaningful.

Speaker 8: and so the quarterly comparisons aren't as meaningful. But if we step back just to kind of answer your question explicitly, we've taken guidance up twice this year, Tim. And so we're feeling really good about the business.

But if we step back just to kind of answer your question explicitly we've taken guidance up twice this year, Tim and so we're feeling really good about the business.

Speaker 8: And for at the midpoint, yes, but for half the range we could very easily be flat to up quarter on quarter, so it's not necessarily down.

And four at the midpoint, yes, but perhaps the range are we oh could very easily be flat to up quarter on quarter. So its not necessarily down the one wildcard for US is C. T H, which is unpredictable and as you know from Q4 of last year.

Speaker 8: The one wild card for us is CTH, which is unpredictable, and as you know from Q4 of last year, you know, that was the one variable that we had a tough time predicting. And so that's the only reason why we're maintaining, and we still feel really bullish on kind of how this year has been panning out and what Q4 could potentially look like.

You know that was the one variable that we had a tough time predicting them and so that's the only reason why we're maintaining our and we still feel really bullish on kind of how this year has been panning out and what Q4 could potentially look like.

Speaker 8: Yeah, that does that answer your question, Tim? The other part of that on the margin question, Tim, is remember Matrix being a Canadian business, is very seasonal. There already a low margin business, Q4, is at or below their average. So that's certainly going to be deteriorative to margin percentage in the fourth.

Does that answer your question to the other part of that on the margin question Tim.

As you remember matrix being a Canadian business is very seasonal there already a low margin business our Q4.

<unk> is at or below their average so that's certainly going to be deteriorated to margin percentage in the fourth quarter.

Speaker 7: Okay, yeah, that is helpful. And that does answer my question. A follow up on that.

Oh, Okay. Yeah that is helpful and that does answer my question.

Follow up on that.

Speaker 7: might be, you guys usually do call out how CTEH performed in a quarter, which is helpful for us for modeling purposes.

The you guys, usually do call out how <unk> performed in the quarter, which is helpful for us for modeling purposes.

Speaker 7: especially as we modeled back towards normalization. How did PTEH perform in the quarter, third quarter, 23? I know in the press release you said it was up.

Especially as we model back towards normalization, how did E. T. H performed in the quarter or third quarter of 'twenty three I know in the press release, you said it was up but can you quantify that for us for a while yeah, yeah and all of this will be in the Q that gets filed Atlanta today Tim.

Speaker 4: But can you quantify that for us? Yeah, and all of this will be in the queue that gets filed later today, Tim. So they remained elevated in the quarter. Their large response has now tailed off, but did have an impact on the third quarter. So they did $33.8 million.

So they they remained elevated in the quarter. They're large response has now tailed off but did have an impact on the third quarter. So they did $33 8 million in Q3 and that puts them at 103 million year to date.

Speaker 4: in Q3, and that puts him at $103 million year-to-date.

Speaker 7: Got it, but expecting normalization.

Got it but expecting normalization.

Speaker 7: Thank you for your help. In the fourth quarter and that's 75 to 95 million dollar range is still relevant. Yeah, they are.

In Q4 it yet.

In the fourth quarter.

And that $75 million to $95 million range, it's still relevant.

Yeah.

Speaker 8: Yeah, when we say normalization to him, I mean, we always talk about quarterly averages.

Yeah, when we say normalization, Tim I mean, we always talk about quarterly averages right. So six to seven of EBITDA and you know call. It 20 to 25 of revenue a quarter. There D. Mobilizing in Q4, so they will be below their normalized levels, if that makes sense still an incredible year.

Speaker 8: So 6 to 7 of EBITDA and call it 20 to 25 of revenue a quarter, they're demobilizing in Q4, so they will be below their normalized levels, if that makes sense. Still an incredible year and a home run by any set of circumstances, but Q4 will be materially lighter, we expect, than the rest of the year has been so far.

In a homerun by by any set of circumstances, but Q4 will be materially lighter, we expect that in the room.

Rest of the year has been so far.

Got it together I'll hop back.

Speaker 8: Yeah, Tim, sorry, just to add to that, the other point that is worth noting here in the context of CT-H.

Tim sorry, just to add to that the other point that is worth noting here in the context of C. T. H given that this is likely to come up not just with you but with your peers.

Speaker 8: given that this is likely to come up, not just with you, but with your peers. They've done a really nice job bundling Montrose capabilities, right? So kind of some of the air monitoring and the remediation work.

They've done a really nice job bundling Montrose capabilities right. So kind of some of the air monitoring in the remediation work that.

Speaker 8: that the rest of the platform brings to the table, which has had a positive impact on their performance. And so a lot of credit to that team, where this is not just an episodic response portfolio anymore. It's much broader than that. And so next year, Alan and I will work to separate the pure response part of that business.

The rest of the platform brings to the table, which has had a positive impact on their performance and so a lot of credit to that team where this is not just an episodic response.

Portfolio anymore, it's much broader than that and so next year, Alan and I will work to separate the pure response part of that business because the rest of it is a much more sustained and predictable if that makes any sense.

Speaker 8: Because the rest of it is much more sustained and predictable, if that makes sense.

Speaker 7: It does make sense. It makes me wonder if that 75 to 95 is even relevant anymore. DJ, if you're growing another part of it, that's what's variable is it perhaps structurally higher than that. I know you've already raised it from 55 to 65 at the IPO. Now we're talking 75 to 95. Perhaps it's even different. We can take into that more next quarter.

It does make sense. It makes me wonder if that 75 to 95 is even relevant anymore P. J, if you're growing another part of it that's what's variable is it perhaps structurally higher than that.

I know you've already raised it from 55 to 65 at the IPO now we're talking about 25 to 95, perhaps that's even it's even different than we can dig into that more next quarter.

Speaker 8: Yeah, I think we've got some great news that the team deserves a lot of credit on that. And so we'll separate that out and be a little bit more transparent with you as we begin to forecast 2024 for you. Look forward.

Yeah, Yeah, I think we've got some great news on the team deserves a lot of credit on that and so we'll separate that out and be a little bit more transparent with you as we begin to forecast 2024 for you.

Look forward to that thanks, guys.

Thanks, Dan.

Speaker 1: Thank you. The next question comes from Jim Ricciuti with Neath Hammond Company. Please go ahead.

Thank you.

The next question comes from Jim Ricchiuti with Needham <unk> Company. Please go ahead.

Hi, good morning.

Speaker 9: Good morning. Hey, Jim. Are you guys doing it?

Hey, Jim how are you.

He is doing.

Yeah.

Speaker 9: Matrix. I wonder if you could talk a little bit about how the integration is going. And Alan, you may have given it. I apologize if I missed it. What the revenue contribution was, why a similar seat in the queue, and maybe some color on the adjusted EBITDA margins in the business. And maybe lastly, just relating to that question about the implied.

Good to hear matrix I Wonder if you could talk a little bit about how the integration is going and Alan you may have given it and I apologize if I missed it.

You know what the revenue contribution was similar.

In Q and maybe some color on the adjusted EBITDA margins in the business and maybe lastly.

Just relating to that question about the implied Q4 guidance that Tim just had it.

Speaker 9: Thank you for guidance that Tim just had.

Speaker 9: It's a little bit wider range, not a whole lot, than you normally do. And I'm wondering if some of that might be due to the seasonality of the Matrix business in the December quarter.

It's a little bit wider range not not a whole lot than you normally do.

And I'm wondering if there's some of that might be due to the seasonality of the matrix business in the December quarter.

Yeah, why don't I start with the first part of that question and then Alan can talk about the contribution and then we can talk about the range.

Speaker 8: Yeah, why don't I start with the first part of that question, and then Alan can talk about the contribution, and then we can talk about the range.

Speaker 8: Jim, so the matrix integration is going really well. If you recall.

So the matrix integration is going really well.

If you recall that business at at acquisition was around 75 of revenue in four and a half ish percent EBITDA margins are those margins have been nicely.

Speaker 8: That business at acquisition was around 75 of revenue and 4.5 ish percent EBITDA margins.

Speaker 8: Those margins have been nicely accreting up on the back of the team's efforts not just with integration but with pricing discipline, higher utilization, and operating performance. And so we're looking forward to sharing a case study with you and others.

Creating up on the back of the team's efforts not just with integration, but with pricing discipline higher utilization.

And operating performance and so we're looking forward to sharing our case study with you and others about how well that's been going in the very near future. We are well on track to achieve our goal of mid teens or higher EBITDA by the end of next year. So a short answer is going really well it is a seasonal business, but if you look at it on an.

Speaker 8: about how well that's been going in the very near future, we are well on track to achieve our goal of mid-teens or higher EBITDA by the end of next year. So the short answer is going really well. It is a seasonal business.

Speaker 8: But if you look at it on an annual basis, it's going to be a really nice year-on-year comparison, 23 to 24.

Basis, it's going to be a really nice year on year comparison 23 to 24.

Speaker 8: Why don't I let Alan answer kind of the numbers part of that question and then we can jump to the range.

Why don't I, let Allen answer kind of the the numbers part of that question and then we can jump to the range.

Speaker 8: Yeah, we don't break out individual business line revenues, but again, you'll see in the queue that in the third quarter, acquisition contributed 27.6 million to revenue. The majority of that was matrix. Just to remind you, matrix does about $75 million.

Yeah, So Joe we don't break out individual.

Business line revenues, but again, you'll see in the Q.

That in the third quarter acquisitions contributed $27 6 million to revenue.

The majority of that was matrix just remind you matrix does about $75 million.

Speaker 4: of revenue, but very seasonal, right? So about 55% of that is in the back off of the year. And a large chunk of that is in Q3. Their margin profile follows that seasonality, and again, averages in the low-to-mid single digits currently. So although seasonally, the matrix margins

Revenue a year.

But very seasonal right. So about 55% of that is in the back half of the year.

And a large chunk of that is in Q3 are their margin profile follows that seasonality and again averages in the low to mid single digits are currently so although seasonally the matrix margins were better than average in Q3 they were.

Speaker 4: were better than average in Q3. There was still margin deteriorative to operate margins in the port.

So margin deteriorated to operating margins in the quarter.

Speaker 8: And Jim, so to wrap up the last part of your question around range, this is the first time Montrose has had Matrix in our portfolio, which is Q4, in Q4 of a year. So that plus the CTH variability is exactly why we're keeping the range wide, even though we're feeling really good about how the business is performing so far.

And Jim so to wrap up the last part of your question around range. This is the first time mantra has had matrix in our portfolio, which is Q4 in Q4 of a year or so that that plus the C. Th variability is exactly why we're keeping the range wide, even though we're feeling really good about how the business is performing.

So far.

Speaker 9: Yeah, that makes sense. And you'll be talking, I guess, about this early next year. But yeah, I'm just wondering, as you look out over the next couple of quarters, how we should be thinking about the PFAS, water treatment business, the biogas business, particularly on the biogas side, where you've made some adjustments in terms of the way you're pursuing that market.

That makes sense.

And you'll be talking I guess about this early next year, but yeah I'm just wondering as you look out over the next couple of quarters.

How we should be thinking about the pizza as water treatment business, the biogas business, particularly on the biogas side.

You've made some adjustments in terms of.

So what you are pursuing that market.

Speaker 8: Yeah, we're bullish on it. We're bullish on it, Jim. So, you know, this goes back to some of the discussions we've had with you around organic.

Yeah, we're we're bullish on it we're bullish on the Jim So you.

This goes back to some of the discussions we've had with you around organic you know other than the remediation reuse segment. The rest of our business is seeing double digit organic growth in that.

Speaker 8: You know, other than the remediation reuse segment, the rest of our business is seeing double digit organic growth and that...

Speaker 8: A lot of what you're alluding to is that is the conscious pivot we made this year to focus on margins and cash flow and to pivot away from some of the lower margin work in our biogas business following our investment in what we think is very compelling.

A lot of what you are alluding to is that is the conscious pivot. We made this year to focus on margins and cash flow and to pivot away from some of the lower margin work in our biogas business. Following our investment in what we think is very compelling early stage technology.

Speaker 8: early-stage technology. So next year, as we think about not only harvesting all the margin success we've had this year, but then getting back to our historical cadence.

So next year as we think about not only harvesting all the margin success. We've had this year, but then getting back to our historical cadence.

Speaker 8: of double digit organic. We feel really good about that. We think that will be part of our story next year as it's been so far.

Double digit organic we feel really good about that and we think that will be part of our story next year as it's been so far.

Good.

Thanks, very much guys.

Thanks Chip.

Okay.

Speaker 1: Thank you. The next question comes from Andrew Open with Bank of America. Please go ahead.

Thank you. The next question comes from Joe Oh Pardon Me with Bank of America. Please go ahead.

Speaker 2: David Rithley Lane on for Andrew Open. Hey David.

Hi, This is David Ridley Lane on for Andrew Open Hey, David.

Good morning.

Just a follow up on that last comment on the remediation and reuse.

Speaker 2: Just to follow up on that last comment on the remediation and reuse, so is first quarter 24 kind of when you'd fully lap those portfolio optimization efforts, is that a good like for like comparison or does it, some of these lower margin projects have a bit of a longer term impact? Yeah. Yeah.

It is first quarter 'twenty four kind of when you fully lap those portfolio optimization efforts.

Good like for like comparison or where it does it.

Some of these lower margin projects have a bit of a longer tail.

Speaker 8: Yeah, it's really, I would think of it more as a second, third, quarter lap. It's that the tail is coming off now.

Yeah, It's really I would think of it more of the second and third quarter lap at the tail is coming off the shelf.

Got it and then.

Speaker 2: because your gross margin progression was quite strong it looks like

Just because your gross margin progression.

It's quite strong it looks like.

Speaker 2: Nature might have pretty good roast margins relative to the EBITDA margin. And I kind of...

Matrix might have pretty good gross margins relative to.

The EBITDA margin.

And I kind of.

Speaker 10: I'm sort of reading into the results here. But.

I'm sort of reading and into our into the results here.

But is some of the margin improvement less about gross margin and more about sort of the cost structure.

Speaker 10: some of the margin improvement less about gross margin and more about sort of the cost structure.

The matrix does have good gross margins, but they're less of a contributor to the year over year increase the again the biogas pivot.

Speaker 8: The matrix does have good gross margins, but they're less of a contributor to the the Euro-year increase. Again, the biogas pivot, that was very low gross margins given the law equitable for sale and components, etcetera.

That was very low gross margins given the large equipment sale component.

And then.

Speaker 8: We're seeing really strong utilization across the business, and that's certainly helping. Yeah, Dave.

We're seeing a really strong utilization.

Cross the business and that's certainly helping.

Yeah, David we.

Speaker 8: When we say pivot, if you think about some of the advantages we have on the water technology side, right, so intellectual property, high barriers to entry, strong moats, we've effectively moved our renewable energy, so it's the biogas.

When we say pivot if you think about some of the advantages we have on the water technology side right. So intellectual property a high barriers to entry.

Strong moats, we've effectively moved our renewable energy since the biogas.

Speaker 8: side of the business more into that type of model, which means it's more anchored on technology implementation and the the engineering associated with it and less around the The part that Alan just talked about so that that's really when we say pivot

Side of the business more into that type of model, which means it's more anchored on technology implementation.

And the engineering.

The engineering associated with it and less around the.

Part that Alan just talked about so that that's really when we say pivot the margin flow through not only on the gross margin side, but also on the EBITDA margin side and cash flow ultimately was heavily impacted by that pivot, which we did.

Speaker 8: The margin flow through, not only on the gross margin side, but also on the EBITDA margin side, and cash flow ultimately, was heavily impacted by that pivot, which we did consciously, and you're seeing it in the results.

Consciously and you're seeing it in the results.

Yes.

And then last one for me I know you don't normally talk about kind of bookings or backlog or those metrics part of the reason you have the confidence to reiterate your guidance for the full year.

Speaker 10: And then last one for me, I know you don't normally talk about kind of bookings or backlog, but are those metrics part of the reason you have the confidence to reiterate your guidance for the full year and any update on...

And.

Any update on sort of the European piece as pilots.

Speaker 8: Yeah, Europe is going really well and the acquisition of Van Dransening has been very additive to that portfolio. We still have a small footprint, David, but that's going to be a really nice story that we'll share with you as we talk through 2024. The war notwithstanding, the continued momentum in that market is quite positive.

Yeah, Europe is going really well and the acquisition of vend rents Ning has been very additive to that portfolio. We still have a small footprint, David but that's going to be a really nice story that we'll share with you as we talk through 2024.

The the war notwithstanding.

The continued momentum in that market is quite positive.

Speaker 8: And so we're really happy that we made the investments that we did. As it relates to our Q4, yes, we don't really talk about bookings and backlog. It's not relevant to every part of our business, but we do have strong visibility on an annualized basis, and given the trajectory of the company so far, we're feeling quite good about the Q4 outlook.

And so we're really happy that we made the investments that we did.

But as it relates to our Q4, yes, we don't we don't really talk about bookings and backlog, it's not relevant to every part of our business.

But we do have strong visibility on an annualized basis and given the trajectory of the company. So far we're feeling quite good about the Q4 outlook.

Alright, Thank you very much.

Thanks.

Speaker 1: The next question comes from Wade Suki with Capital One. Please go ahead.

The next question comes from weight with capital one. Please go ahead.

Speaker 3: Good morning, everyone. Thanks for taking my questions.

Good morning, everyone. Thanks for taking my question.

Anyway right.

Speaker 11: Just to follow up, I think it was on Tim's question earlier, and I hate to put you all on the spot, but as we think about margins heading into 24,

Just a follow up I think it was on the.

Tim's question earlier, and I hate to I hate to put you on the spot but.

We think about margins heading into 'twenty four.

Speaker 11: Maybe you could walk us through why margins in 24 might be lower than, let's say, the, you know, Q2, Q3 average. I mean, is it just a function of CTEH normalizing or?

Maybe you could walk us through why margins in 'twenty four might be lower than let's say the Q2 Q3 average I mean is it just the function of C T H normalizing or.

Speaker 11: Or am I thinking about it the wrong way? Yeah, why not? That's it.

Or am I thinking about it the wrong way.

Yeah why not.

Yeah.

Speaker 8: You heard that, that's not what we're saying. We're not ready to guide margins or EBITDA next year. We're very bullish on the top line, given the momentum in the business.

You heard that that's not what we're saying we're not ready to guide to margins or EBITDA next year, where we're very bullish on the on the top line.

Given the momentum in the business.

Speaker 8: But we're feeling pretty good about where margins are and the ability of a time to continue to move us up. So yeah, wait, I would say it's the opposite. We are not calling for lower margins and we haven't guided to 2024. But what I was saying earlier is that the work we've done this year with the conscious focus on improving margin and cash flow, we think that we will continue to harvest that.

Well, we're we're feeling pretty good about where margins are and the ability over time to continue to move those up so yeah I would say, it's the opposite we are not calling for a lower margins and we haven't guided to 2024, but what I was saying earlier is that the work. We've done this year with a conscious focus on improving margins and cash flow.

We think that we will continue to harvest that the benefits of that into 2024, and we'll couple that with getting back to our accelerated organic growth trajectory.

Speaker 8: the benefits of that into 2024 and we'll couple that with getting back to our accelerated

Speaker 12: very helpful. Thank you. And then again, just to kind of follow up, I want to say a question earlier. On water treatment, you know, last quarter, you discuss some of the sort of uncertainties related to the low contaminant thresholds that were being proposed. And I'm wondering if you could give us an update on what, if any change you're seeing in customer behavior along those lines. And maybe just taking a step back, I mean, it's a business that's been

Very helpful. Thank you and then again just to kind of follow up.

Question earlier.

On water treatment, you know last quarter, you discussed some of the sort of uncertainty related to the low contaminant thresholds that were being proposed and I'm wondering if you could give us an update on what if any change you're seeing in customer behavior, along those lines and maybe just taking a step back I mean is this a business that's been pushed out maybe a cut.

A couple of quarters.

Speaker 12: when do you expect sort of a major inflection point in this part of the business?

When do you expect sort of a major inflection point in this.

Part of the business.

Speaker 8: Yeah, we, it's a great question, Wade. We, you know, we just met with some of our large clients and they are also looking for a little bit more clarity from the regulatory agencies before they really jump into this, but they're certainly prepared to do so. So we've seen, I think what we would consider forward progress on the projects, but not yet ready to pull the trigger, which is why we say that as we kind of think about

Yeah, we yeah. It's a great question weighed we we just met with some of our large clients and they are also.

Looking for a little bit more clarity from the regulatory agencies before they really jump into this but there are certainly prepared to do so so we've seen I think what we would consider forward progress on the projects, but not yet ready to pull the trigger which is why we say that as we kind of think about our.

Speaker 8: Our ECT2 business, which is a combination of our water and biogas business, but really in the Q2-Q3 timeframe of next year is when we think you'll start to see some of this.

Our <unk> business, which is a combination of our water and biogas business that really into Q2 Q3 timeframe of next year is when we think you'll start to see some of this.

Speaker 8: uncertainty unwind and get them back to a positive foot.

Uncertainty unwind and getting getting back to a positive foot with the one caveat there being it is dependent.

Speaker 8: with the one caveat there being it is dependent on the regulatory confirmations which are expected towards the end of this year and early part of next year. Gotcha, great. Thank you.

On the regulatory confirmations, which are expected.

Towards the end of this year and early part of next year.

Got you great. Thank you all very much that's all I had.

Okay.

Yeah.

Okay.

Speaker 1: Once again, if you wish to ask a question, please press star then one.

Once again, if you wish to ask a question. Please press Star then one.

Speaker 1: Next question comes from Stephanie E. with JP Morgan. Please go ahead. Hi, good morning.

The next question will come from Stephanie He was at J P. Morgan. Please go ahead.

Hi, good morning.

Hey, Stephanie.

Speaker 13: Um, could I ask about, um, you had made a comment about how the EPA finalized the rules about the toxic chemicals and requires additional reporting from companies that manufacture PFAS. Um, can you kind of talk about Montrose's role in that regulation? Like, are you working with companies like Dow and 3M to help them in measuring and reporting those requirements?

Can I ask about yeah.

Comment about how the EPA finalized rules about what toxic chemicals and acquire additional appointing from companies that manufacture spot.

Can you kind of talk about mantra, that's full and that regulation like are you working with companies like gallon through on to help them in measuring and reporting requirements.

Requirements.

Yeah. So yes, we we don't talk about our specific clients and Stephanie, but yes, we are working with many of the Fortune 100 Fortune 1000. The rule effectively goes back I think the 2011 and if you've transfer.

Speaker 8: Yeah, so yes, we don't talk about our specific clients, Stephanie, but yes, we are working with.

Speaker 8: many of the Fortune 100, Fortune 1000. The rule effectively goes back, I think, to 2011. And if you've transported, manufactured.

Transported manufactured or sold.

Speaker 8: or sold products with PFAS in it, you have to report on the potential impact and the potential toxicity of it.

<unk> with P. Fasten. It you have to report on the potential impact on the potential toxicity of it and that requires a combination of our advisory services and so youll see a positive impact on our consulting part of the business and it does require.

Speaker 8: and that requires a combination of our advisory services. And so you'll see a positive impact on our consulting part of the business and it does require some of the reporting and testing sides of it as well. So it is a broad...

Some of the reporting and testing sides of it as well so it is a broad.

Speaker 8: incremental tailwind over time for both of our measurement analysis and our APNR segments.

Incremental tailwind over time for both of our measurement analysis and our a pea in our segments.

Okay that is helpful. Thank you.

Speaker 13: Okay, that is helpful. Thank you. And can I just ask on how you're pricing, or how do you feel you're pricing is aligned with your cost structure at this point in time, and as we kind of head into 2024.

Can I just ask on how your price or how do you feel your pricing is aligned with their cost structure at this point in time.

And that will kind of heading into 2024.

So I.

Speaker 8: So I think we spoke about this with you earlier. Our pricing has been very disciplined, credit to Alan Todd, Josh and the team for that. We have a lot of the margin benefits you're seeing this year are a combination of both the organic growth. And that organic growth is partially driven by the pricing solutions that we've implemented over the last year.

I think we spoke about this with you earlier, our pricing has been very disciplined.

Credit to Alan Todd, Josh and the team for that.

We have a lot of the margin benefits Youre seeing this year are a combination of both of the organic growth and that organic growth is partially driven by the pricing.

The solutions that we've implemented over the last.

Speaker 8: actually 18 months. And we expect that that trend will continue into 2024. So some of our bullishness, Stephanie, on our ability to continue margin accretion is partially predicated on the impact of pricing on our overall performance.

Actually 18 months and.

And we expect that that trend will continue into 2024, so some of our bullishness Stephanie.

Our ability to continue margin accretion is partially predicated on the impact of pricing on our overall.

Performance.

Okay I appreciate the color. Thank you.

Thanks, Stephanie.

Thank you all very much. This concludes our question and answer session.

Speaker 1: Thank you all very much. This concludes our question-and-answer session. I would like to turn the conference back over to CEO Vijay Mantrip Bhargava for any closing remarks. Please go ahead, sir.

Like to turn the conference back over to see L. E. K Mantooth Borgata for any closing remarks. Please go ahead Sir.

Speaker 8: Thank you and thank you all for joining us today. We were thrilled to spend the time with you and we're excited to share how the rest of the year unfolds and to speak with you again as we look forward to a stellar 2024. Thank you.

Thank you and thank you all for joining US today, we were thrilled to spend the time with you and we're excited to share how the rest of the year unfolds and to speak with you again as we look forward to a stellar 2024. Thank you.

Yes.

Speaker 1: This conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines. Have a good day.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines have a good day.

Yeah.

Speaker 14: The.

Yeah.

Yeah.

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Yeah.

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