Q3 2024 Montrose Environmental Group Inc Earnings Call
Good day and welcome to the Montrose Environmental Group INC third quarter 2024 earnings call.
Speaker Change: All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touchtone phone.
To withdraw your question, please press star then 2.
Please note that this event is being recorded.
Speaker Change: I would now like to turn the conference over to Adrian Griffin, Senior Vice President in Western Relations and to his treasury. Please go ahead.
Adrian Griffin: Thank you, and welcome to our third quarter 2024 earnings call. Joining me on the call are Vijay Manthripragada, our President and Chief Executive Officer, and Allan Dicks, our Chief Financial Officer.
Adrian Griffin: 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.
Adrian Griffin: Moving to slide two, 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.
Adrian Griffin: 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.
Adrian Griffin: We refer you to our recent SEC filings, including our annual report on Form 10-K for the fiscal year ended December 31, 2023, which identify the principal risks and uncertainties that could affect any forward-looking statements, as well as our future performance.
We assume no obligation to update any forward-looking statements.
Adrian Griffin: 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.
Adrian Griffin: We provide these non-GAP results for informational purposes and they should not be considered in isolation from the most directly comparable GAP measures.
Adrian Griffin: 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.
Speaker Change: certain limitations of using these measures, and a reconciliation to their most directly comparable gap measure. With that, I would now like to turn the call over to Vijay, beginning on slide 4.
Allan Dicks, Rodny Nacier, Vijay Manthripragada
Vijay Manthripragada: Thank you, Adrienne, and welcome to all of you who are joining us today. I will start with an update on our business and our outlook, and I will then speak generally to the third quarter earnings presentation shared on our website.
Speaker Change: Allan will provide the financial highlights, and following our prepared remarks, we will host a question and answer session.
Adrian Griffin: While today's call will highlight third quarter performance, it is important to reiterate that our business is best assessed on an annual basis.
Adrian Griffin: Demand for environmental solutions does not consistently follow quarterly patterns and we manage our operations using annual perspective.
Adrian Griffin: Before we dive into the quarter's performance, I would like to welcome our new colleagues from Origins Laboratory, an environmental lab serving Colorado and the U.S. Mountain States who joined us in September.
Adrian Griffin: I would also like to take a moment to express my gratitude for the approximately 3,500 Montrose colleagues around the world.
Adrian Griffin: Through their continued dedication and service to our customers, in many instances, despite the personal and community challenges caused by two major hurricanes,
Adrian Griffin: We were able to produce another quarter of record results and further our position as a leader in the environmental industry.
Adrian Griffin: As for Q3 2024, we are very pleased to report another period of record results.
Adrian Griffin: Our quarterly revenue reached $178.7 million and our consolidated adjusted EBITDA reached $28.3 million.
Adrian Griffin: Our consolidated EBITDA margin was 15.8% which was a hundred and ninety basis point improvement over the prior year quarter.
Adrian Griffin: This exceptional performance was driven by robust organic growth across most of our business lines as well as positive impacts from recent acquisitions.
Adrian Griffin: During the third quarter, we were particularly encouraged by the progress of Matrix in Canada, which is set to achieve our targeted mid-teen EBITDA margin, an impressive improvement from their 4.6% EBITDA margin prior to joining Montrose in June of 2023.
Adrian Griffin: As is evident from our strong performance in Q3, we continue to benefit from healthy end market demand as clients prepare for and respond to environmental regulations on a host of topics ranging from PFAS to methane leak detection and new air emissions standards.
Adrian Griffin: These tailwinds are further bolstered by growing public and private sector focus on environmental stewardship.
Adrian Griffin: Growing demand and industry tailwinds have supported the continued execution of our strategy and our cross-selling initiatives which continue to drive our organic growth opportunities.
Adrian Griffin: With this backdrop, we remain committed to our long-term strategy which has been in place since our inception and has facilitated significant shareholder and stakeholder value creation.
Adrian Griffin: However, in the near term, our priority over the coming quarters will be the redemption of our Series A2 preferred stock and subsequent deleveraging.
Adrian Griffin: We expect to fund this redemption via cash flow generation and incremental borrowing under our current credit facility.
Adrian Griffin: We do not intend to issue equity as a source of funds for the preferred redemption.
Adrian Griffin: Given this near-term prioritization, our team will focus on organic growth opportunities and will temporarily de-emphasize acquisitions, though the pipeline and medium to long-term acquisition opportunities remain very robust.
Adrian Griffin: We also confirm our annual target of converting 50 plus percent of consolidated adjusted EBITDA into operating cash flow, which coupled with our low maintenance CapEx needs of approximately 1% of annual revenue generate attractive cash flow opportunities and as a result enables us to invest in our business, our strategy, and our people.
Adrian Griffin: Regarding cash flow, we were pleased to report significant improvement in our operating cash flow conversion.
to 40% of consolidated adjusted EBITDA in our third quarter.
Adrian Griffin: We expect operating cash flow to increase materially in the fourth quarter of this year through continued working capital improvement.
Adrian Griffin: And finally, we are reiterating our full year 2024 guidance ranges for revenue of $690 million to $740 million and consolidated adjusted EBITDA of $95 million to $100 million.
Adrian Griffin: We continue to see strong organic growth across most business lines and positive contributions from acquisitions, despite the delay earlier this year in the promulgation of the U.S. EPA's PFAS rules.
Adrian Griffin: It is important to note that since the US EPA announced its drinking water PFAS rules in April 2024, our quarterly treatment technology revenue has increased each quarter.
Adrian Griffin: That positive trend continued with third quarter revenue growth over the second quarter.
Adrian Griffin: As we have discussed on prior calls, Montrose benefits from PFAS opportunities across all of our segments, not just within treatment technology.
Adrian Griffin: PFAS-related revenue in our laboratories is expected to increase approximately 30% in 2024 versus 2023.
Adrian Griffin: and PFAS related consulting services are expected to increase approximately 75% in 2024 compared to 2023.
Adrian Griffin: This growth has been driven by market expansion and our successful cross-selling initiatives, and we remain confident in solid growth in total PFAS-related revenue in 2025.
Adrian Griffin: It is important to note that our segments are benefiting from multiple newly regulated and emerging contaminants, not just PFAS, though PFAS remains a significant near-term opportunity for us.
Adrian Griffin: Shifting now, I'd like to discuss a few recent key regulatory developments and some of the trends we are seeing in our business.
Adrian Griffin: As we discussed last quarter, we have seen very little impacts to Montrose from the U.S. Supreme Court's decision in Loper-Bright, which overruled the longstanding Chevron doctrine allowing federal agencies to interpret ambiguous federal statutory provisions.
However,
Adrian Griffin: This complexity and resulting short-term uncertainty from the Chevron decision drove increased demand for our advisory and consulting services.
So our short and long-term business outlook remains unchanged.
regarding the political landscape
and the outcome of the U.S. presidential election.
We remain confident in our ability to perform per plan.
Adrian Griffin: As we've demonstrated historically, we grew rapidly during the Obama, Trump, and Biden administrations.
Adrian Griffin: as our business model is designed to be resilient and largely insulated from the political swings at the federal level.
Adrian Griffin: We expect this trend to hold true going forward given our limited exposure to any one end market and the higher relative influence of state and local environmental regulations on our customer activity.
Adrian Griffin: In addition, the approximately 20% of our business in Canada, Australia and Europe continues to perform, in aggregate and in each geography, very well.
Adrian Griffin: Overall, the fundamental drivers of demand for our environmental solutions remain strong, and the relative strategic advantages offered by our business model and our technology portfolio continue to prove out.
as one example.
Adrian Griffin: Our recent selection by the U.S. Army Corps of Engineers for our participation in a major environmental contract validated our approach and positions us well within the growing U.S. federal sector.
Adrian Griffin: In summary, I am extremely proud of our team's exceptional performance this quarter, delivering record revenue and profitability while advancing our strategic priorities.
in the near term.
Adrian Griffin: We look forward to delivering on our core organic growth opportunities and allowing our cash flow generation capabilities to shine as we focus on the redemption of the Series A2 preferred instrument, and we de-emphasize acquisitions.
Adrian Griffin: As we look to 2025 and beyond, we remain very optimistic about our ability to drive shareholder value with a proven and consistent long-term strategic thesis, which remains unchanged. With that, I will hand it over to Allan. Thank you.
Thanks, Vijay.
Allan Dicks: We were pleased to deliver another quarter of strong financial performance as we continue to execute our growth strategy.
Allan Dicks: Our solid results during the third quarter were driven by organic momentum from cross-selling activity and expanding customer relationships, and the positive contributions of acquisitions.
Adrian Griffin: Our focus on higher margin services and operational efficiency continues to benefit our business, reflected in a notable improvement in our overall profitability to record levels.
Adrian Griffin: Moving to our revenue performance. Our third quarter revenue increased to a record $178.7 million, or a 6.4% increase compared to the prior year quarter.
Adrian Griffin: Revenue for the first nine months of $507.4 million was a 10.7% increase versus the prior year period.
Adrian Griffin: The primary drivers of growth in the third quarter were strong organic growth in our assessment, permitting, and response, and measurement and analysis segments, as well as positive contributions from acquisitions, partially offset by lower environmental emergency response revenue.
Adrian Griffin: The drivers of revenue growth in the first nine months were solid organic growth of 7% compared to the prior year-to-date period and the positive contributions from acquisitions, partially offset by lower environmental emergency response and treatment technology revenues.
Adrian Griffin: Our consolidated adjusted EBITDA performance in the third quarter reached a record $28.3 million or 15.8% of revenue.
Adrian Griffin: This compares favorably to consolidated adjusted EBITDA of $23.3 million or 13.9% of revenue in the prior year quarter.
Adrian Griffin: The significant increase in quarterly profitability, despite a substantial reduction in high-margin emergency response activity, was driven by organic growth, the impact of acquisitions, and lower corporate expenses, which is partially timing related.
Adrian Griffin: First nine months 2024 consolidated adjusted EBITDA was $68.5 million or 13.5% of revenue compared to consolidated adjusted EBITDA of $61.1 million or 13.3% of revenue.
Adrian Griffin: Diluted adjusted net income per share of 41 cents in the third quarter of 2024 increased from 31 cents in the prior year quarter.
Speaker Change: Yesterday, diluted adjusted net income per share of $0.80 increased compared to $0.78 in the prior year period.
Speaker Change: The improvement in both periods was mainly driven by improved loss from operations and lower dividends following the partial redemption of a Series A2 preferred stock earlier this year.
Speaker Change: are key offset by higher interest expense and higher average share count.
Speaker Change: Please note, 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.
Speaker Change: We believe this net income methodology is the most helpful net income metric to Montrose and to common equity investors.
I will now discuss our third quarter performance by segment.
Speaker Change: In our assessment, permitting, and response segment, third quarter revenue was $52 million compared to $57 million in the prior year quarter.
Speaker Change: AP&R's segment-adjusted EBITDA was $11.2 million, or 21.5% of revenue, compared to 26.1% in the prior year.
Speaker Change: Results during the third quarter reflect a 12.8 million dollar reduction in high margin environmental emergency response revenue, partially offset by strong organic growth in the rest of the segment and the positive impact of the SPIRT acquisition.
Speaker Change: Given the segment includes our environmental emergency response business, associated revenue does not follow a regular quarterly or seasonal pattern.
Adrian Griffin: In our measurement and analysis segment, revenues for the quarter increased 16.1% to $58.6 million.
Adrian Griffin: We continue to experience strong organic revenue growth, particularly in our lab and field services businesses, as well as the positive contribution from our acquisition of origins.
Adrian Griffin: M&A segment adjusted EBITDA increased 29.2% to $13.4 million, or 22.8% of revenue, a 230 basis point improvement over the prior year quarter due to revenue growth and operating leverage.
Adrian Griffin: In our remediation and reuse segment, third quarter revenue increased 12.6% to $68.1 million, benefiting from acquisitions and solid organic growth in our remediation services, which more than offset the decline in our treatment technology revenue due to the temporary customer project delays that Vijay discussed earlier.
Adrian Griffin: This segment suggested EBITDA and margin benefited from the impact of acquisitions and higher organic revenues in our remediation services, resulting in a 480 basis point margin improvement to 17.1% in the quarter.
Moving to our cash flow and capital structure.
Adrian Griffin: Year-to-date cash flow used in operating activities was $9.7 million compared to cash generated of $41.5 million in the prior year.
Adrian Griffin: Lower cash flow from operations was driven primarily by the previously discussed invoicing delays associated with the integration of matrix and delays in payment on a single large U.S. government-funded project.
Adrian Griffin: The invoicing delays of Matrix are substantially addressed and collections are returning to a normal cadence.
Adrian Griffin: We have received payment confirmations from key clients, which includes the U.S. government.
Adrian Griffin: Excluding these two temporary and isolated issues, day sales outstanding as of September 30, 2024 were unchanged versus September 30, 2023, and DSOs at the end of 2024 are expected to be in line with DSOs at the end of 2023.
Adrian Griffin: Cash flow from operating activities is expected to improve significantly in the fourth quarter, mainly attributable to these working capital improvements.
Adrian Griffin: At the end of the quarter, we had $139.8 million of liquidity, including $13 million of cash on hand and $126.7 million of availability on our credit facility.
Adrian Griffin: Our leverage ratio as of September 30, 2024 was 2.6 times, which includes the impact of the acquisitions of Spurt and Origins, and is well within our preferred level of below 3 times.
Adrian Griffin: Our balance sheet simplification will continue to be a near-term priority of our capital allocation strategy.
Adrian Griffin: Historically, our capital deployment has been focused on accretive acquisitions and investments to drive organic growth.
Adrian Griffin: while acquisitions remain a key part of our long-term capital allocation.
Adrian Griffin: We are evolving our near-term capital allocation priorities to focus on balance sheet simplification.
Adrian Griffin: particularly as it relates to the redemption of a Series A2 preferred stock, while maintaining a focus on organic growth.
Adrian Griffin: As of September 30, 2024, we had $122 million of Series A2 outstanding with repayment in cash at our election.
Moving to our reiterated full year outlook.
Adrian Griffin: Based on our performance through the first nine months and our visibility into the fourth quarter, we are reaffirming our full year 2024 guidance ranges.
Adrian Griffin: For the full year, we expect revenues of $690 to $740 million and consolidated adjusted EBITDA of $95 to $100 million.
Adrian Griffin: We continue to expect environmental emergency response revenue to be in the range of $50-$70 million this fiscal year.
Adrian Griffin: As we evaluate the final quarter of 2024 and compare it with the prior Q4 period,
Adrian Griffin: Revenue is expected to increase 10-15% and consolidated adjusted EBITDA margin is expected to increase 350-400 basis points.
Adrian Griffin: Our expectation of ongoing margin improvement reflects meaningfully enhanced profitability and demonstrates alignment of our strategic and financial goals.
Adrian Griffin: Overall, our reiterated outlook reflects the service offering and geographic diversification of our revenue, strength of our business year-to-date, and the continued benefits from our margin expansion initiatives, despite the temporary timing shifts in certain project work.
Adrian Griffin: We remain confident in our ability to execute through the remainder of the year and continue building momentum into 2025 given the increasing demand for our services.
Speaker Change: 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.
Thank you very much.
We will now begin the question and answer session.
Anyone who wishes to ask a question?
may press star and one on their touch tone phone.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.
Adrian Griffin: If at any time your question has been addressed and you would like to withdraw your question, please press star then two.
and many more. Thank you. Thank you.
Our first question comes from Tim.
Maruni from William Blair, please go ahead.
and many more. Thank you. Thank you.
Vijay, Allan, good morning.
Speaker Change: Hey Dylan, how are you? Doing well, thank you. You actually addressed a lot of the questions I had in the chamber.
Speaker Change: for the call today. You actually addressed a lot of them in your prepared remarks. So I'm actually going to move to a couple, just more targeted questions. The first one is just on the Trump election win. You know, I was wondering if you could...
you know which of your businesses
Speaker Change: did well under his prior administration. If you could highlight some of those and what business lines would you expect to continue to perform well and thrive in this type of environment?
Speaker Change: Tim, why don't I start with that, and Allan, you can certainly jump in, and just as a quick reminder, we've been through our prior Trump administration before, as you alluded to, Tim.
Speaker Change: and we doubled in size, and we went public during the Trump administration. So our business is by definition designed to grow and go through these political cycles.
Speaker Change: As it relates to our revenue mix, where we saw a significant uptick in demand was in our consulting and our treatment side of our business last time, Tim, and some modulation on the testing side.
Speaker Change: and the reason for that is that the Trump EPA de-emphasized new regulations and de-emphasized certain forms of enforcement.
Speaker Change: And as a result, as we kind of look across our business mix...
Speaker Change: We are feeling quite optimistic about the opportunity to continue our organic growth cadence.
Speaker Change: that we've kind of talked about with you in the past.
and our outlook is largely unchanged.
Speaker Change: The other dynamic that I think is important, that is different from where we were in the prior Trump administration is that approximately 20% of our revenue is now ex-U.S.
Speaker Change: And as we think about Canada, Europe, and Australia, we're seeing exceptional performance across all of those geographies, and we certainly don't expect that to change all that much either. So we're feeling quite upbeat, Tim, and I don't know if that answers all of your questions.
Speaker Change: No, it did answer my question. Thank you, Vijay. Another one I wanted to ask about was,
In your AK, I noticed in your AK that
Speaker Change: The COO, Joshua Marie, is leaving the organization. I was just curious if you could share any more details about that decision and how that kind of impacts the organization.
Speaker Change: Yeah, I know Josh is still part of the organization. He's a friend and an exceptional colleague For personal reasons, he's going to be stepping down from the COO role, but he's going to stay with us
help us transition.
Speaker Change: with the new leader, both selecting and onboarding the new leader, Tim. And we're likely going to focus on someone with a deep bench of industry experience.
Speaker Change: But he's still part of Montrose, he was a core part of the founding team, and he's going to be working closely with me and Allan and the rest of the team going forward. So we're actually really thankful for everything Josh has done, and we're really proud of him.
Speaker Change: and we're excited to kind of see what his next chapter looks like for him.
Speaker Change: Got it. Okay. Thank you for the color on that. That's helpful. Just one more from me. I know you're pausing acquisitions, but would just love to hear how some of these recent ones are going. Could you comment on origins and spirits in a little more detail? How are those going? Thank you, Vijay.
Thank you.
Speaker Change: Yeah, both are actually going very well. Origins is a lab that really focuses in on Colorado and the mountain states, Tim, and the recent regulatory regime in those states.
Speaker Change: has created a really nice set of tailwinds for that business.
Speaker Change: and it is performing exceptionally well. The team is excellent and the integration has gone well. And what's been really encouraging for us is that some of our cross-selling.
Speaker Change: of our clients into their business is progressing really nicely. So we're really pleased with that. And then the same goes for Spirit. They've been very additive as a air-permitting powerhouse.
Speaker Change: with an exceptional team. They've really been additive to our broader consulting and testing footprint and have already really hit stride with working across our service lines and our clients. And so I couldn't be more pleased with both of those.
Speaker Change: and even with some of the earlier transactions, Tim, like EPIC and 2DOT.
Speaker Change: They are going incredibly well as well. So we're kind of, as we look across our portfolio of acquisitions from this year,
Speaker Change: notwithstanding some of the things we talked about earlier, which are normal as you integrate acquisitions. We're really happy, and all of those transactions in aggregate have been really accretive to our growth profile, to our margin profile, and we think we'll stay that way long-term.
Help of color. Thank you, Vijay.
Thank you.
Speaker Change: The next question comes from Durgesh Chopra from Evaco ISI, please go ahead.
Hey team, good morning. Thanks for giving me time.
Hey, Durgesh, how are you?
Vijay Manthripragada: Hey Vijay, good morning, Allan, good morning. Hey, just on this, you know, de-anthesizing acquisitions and no equity, can you just kind of help us with time? You know, like, is this for a, you know, what time period is that over where I'm trying to go with this? Is this first half of 2025, no equity, all of 2025?
at Gatineau 2026, how should we think about that?
Speaker Change: Yeah, Durgesh, we're, you know, we're going to be de-emphasizing acquisitions and really focusing on the redemption of the oak tree pref.
Speaker Change: and on organic growth. We're excited to kind of demonstrate the kind of the engine that drives our organic growth profile and our cash flow profile. We're in aggregate just to kind of step back
Speaker Change: Our thesis is unchanged, so there is still a very robust pipeline.
Speaker Change: of Creative Transactions that we think will be very additive long-term. And so we're going to let the business over the next couple of quarters demonstrate the power of the organic engine and allow us to repay the prep. And then we're going to try to... we're going to target...
Speaker Change: kind of that three-ish times leverage, right, for select transactions where you may pop up above three to three, three and a half.
Speaker Change: and we're kind of well in the twos right now. And so we're gonna keep it to kind of those parameters, Durgesh. It's a little tough to predict exactly what deal flow looks like, but our intent over the next couple of quarters.
Speaker Change: is to de-emphasize the acquisitions. And as it relates to the equity issuance and our specific focus on repaying the PREF, we do not intend to issue any equity to repay that.
Speaker Change: And Allan, I don't know if there's anything else you would add as it relates to the balance sheet.
Allan Dicks: No, that's exactly right. We've got certainly the leverage capacity and the financing capacity to take out the PREF.
Speaker Change: The next 60 is due in April anyway, so you'll see us take that out before that.
Speaker Change: and then the final $62 million likely shortly after that, again, depending on how the year is progressing, but that would be our expectation.
Speaker Change: That's helpful, guys. But just to be clear, though, you're not saying no acquisitions. All you're saying is you'll probably, you know, kind of manage within that leverage metrics. There could be still more acquisitions, but you're not tapping the equity market. Is that fair?
and many more. Thank you. Thank you.
Speaker Change: That's the broad thesis, Durgash, and just to be clear, for the immediate future, we will likely not.
transact.
Speaker Change: but it doesn't mean we never will. And going back to my earlier point...
Speaker Change: A core part of our strategy is to consolidate select parts of this market given our business model.
Speaker Change: and use that consolidation to drive accelerated organic growth. And that thesis is unchanged. It's just where our focus is going to be through Q4, Q1, and Q2.
Okay, perfect. Thank you. Appreciate the time.
Thanks for this.
Thank you.
Speaker Change: A reminder to the participants, if you would like to register for a question, please press star and 1 on your touchtone phone.
The next question.
I am Ricky Adi from Neeram Hand Company.
Please go ahead.
Speaker Change: Good morning. Hey, Jim. Question, Vijay, just a question on the decision regarding M&A. You know, I'm just wondering, is there any risk that this
Speaker Change: decision, you know, potentially could represent lost opportunities for you guys.
Speaker Change: No, Jim, we're staying very close to our core target opportunities and at this time there is absolutely no risk to us losing anything that we really want.
Okay, and look I know that this decision
Speaker Change: was obviously something that preceded the election. But I'm also wondering, does this perhaps reinforce the decision on M&A deleveraging, just until there's more clarity on how the regulatory environment might evolve if there's any change at all, and it doesn't sound like you think there is. But do you feel more comfortable with this decision now?
Thank you.
Speaker Change: I mean, we're certainly in a, we want to see how the new Trump administration and President Trump and his EPA
progress
Speaker Change: Jim and when we want to see kind of what the state decisions are. We don't expect honestly with what we currently do much to change.
Speaker Change: and we know folks that were in the prior Trump administration that are involved with a lot of the planning processes now. So we don't expect much to change, but yes, I think the the focus on driving organic and harvesting what we already have in hand is
Speaker Change: while we wait to see what the next couple of months look like. We made the decision independent of that, but we certainly think it's going to be very additive given the current circumstances, yes.
Got it. And just final question from me.
Speaker Change: I'm wondering how we should be thinking about your selection by the Army Corps of Engineers. You know, regarding that announcement, are there any expected milestone awards that you're tracking?
Speaker Change: that are in the line of sight for the next year or two. I'm just wondering how we should think about the announcement.
Speaker Change: Thank you. Yeah, it's a, it was, it was great because it kind of validated
Speaker Change: Jim, as we've talked about with you, in the public sector, our strategic thesis, and it enabled us to kind of leverage both our advisory testing capabilities and our engineering and remediation capabilities.
Speaker Change: And so, yes, there will be milestones as that contract process progresses.
Speaker Change: and we'll certainly keep all of you abreast of that. And obviously, that's not the only one.
Speaker Change: There's others that we're quite optimistic about, so we'll stay close to you as that progresses. I think the only point of highlighting that is that the broader opportunity set is incredibly strong and our relative advantage to harvest that broader opportunity set, which has expanded.
Speaker Change: also seems to be manifesting really nicely. So we'll stay very close to you as those awards start to come to fruition and translate into revenue.
Got it. Thank you.
Thank you.
Speaker Change: The next question comes from Adit Shrestha from Stifel. Please go ahead.
Hi Abbott. Hi, good morning. Thanks for taking my questions.
Speaker Change: Just going to sort of the outlook for 4Q24, I think you talked about revenue growth being 10 to 15%. Could you just elaborate about how much of that is from acquisitions and emergency response? I think your guidance kind of infers ER is likely up 20% plus, so for a strong quarter. And then acquisitions, it looks like at around 9% in 3Q24. Does this temper down slightly in 4Q?
Speaker Change: Yeah, let me let me speak about kind of 4Q in the year a little bit more broadly a bit because I want to make sure we're kind of keeping in line with all of the publicly disclosed information.
Speaker Change: Most of our business lines are seeing double-digit organic growth, which we're really excited about, and the two variables that are swinging Q4 in the numbers you just referenced are one, the temporary delays in some of the treatment technology projects, and two, the relative magnitude of the responsiveness.
Speaker Change: And so despite those two, right, the response is we kind of think about year on year, as Allan alluded to in his comments, are down.
Speaker Change: The core organic plus the impact of acquisitions is driving similar optimism into Q4 and 2024.
Speaker Change: And so that's the reason we're maintaining our guidance. On the response side specifically...
Speaker Change: The team has done an exceptional job this year. We're still expecting that to be in the $50 million to $70 million range.
Speaker Change: It was a little lighter in Q3. We expect, given the hurricane and recent events, that it may be on the higher end of that 50 to 70.
Speaker Change: in Q4, but it's very tough to predict, as you know. And so that's the one reason for that range that you saw in the public comments that Allan provided.
Does that make sense of it?
Speaker Change: Yeah, thanks a lot. And maybe if you just elaborate on matrix margins, how did that perform in 3Q24? I know you discussed, you know, you remain on track of attaining mid-teens margin. Do you actually see that in 4Q24?
Speaker Change: Yeah, they ran at mid-team margins, so really solid Q3 performance year-over-year. They are expected to have tripled their margins from the time of acquisition that team is performing.
Speaker Change: exceptionally, and all of the initiatives to drive that margin, which is pricing.
Speaker Change: and the cost savings through the integration activities are all going to the plan and that is resulting in us being exactly where we would have hoped at this time.
Speaker Change: And just as a follow-up, are you seeing strong organic growth within Matrix too?
Speaker Change: We are seeing really solid organic growth. We had expected that with the pricing that was taken that we would not see much growth, that there would be some volume attrition. We have not seen that, and credit again to the metric team. So they're seeing really nice organic growth.
Speaker Change: For them, now not all of that counts in our organic growth, right, because the first five months was still considered acquisition growth, but certainly in the back half of the year they're seeing really nice organic growth.
Alright, thanks a lot.
Thanks a bit.
Thank you.
Speaker Change: This concludes our question and answer session. I would now like to turn the conference back over to Vijay Manthripragada, CEO, for any closing remarks.
Thank you.
Speaker Change: Thank you and thank you all for taking the time this morning. We really appreciate your continued support. Allan and I and the Montrose team are really excited about the year, the quarter, and our outlook into 2025 and so we certainly look forward to sharing more with you in the very near future. Thank you and take care.
Thank you.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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Speaker Change: M. G. Uderwood, V. FIm angle Kung Fu Papa Matthew Hicks, Richard M. Webber check was in the year 1871 and not after the French bombing. M. G. Uderwood is also obtimally the first to take part in the exhibition 빠� Absolutely – he survided nine-months-in-prison, using post professional courtship skills to defend against and undergrounded forces in the original Revolutionary Union.
Speaker Change: F Bom Influenza When the enemy forces return after the evacuation of telematics signals Thank you for watching!
Speaker Change: A film by J.R.R. Tolstoy Screenplay by J.R.R. Tolstoy Directed by J.R.R. Tolstoy Cinematography by J.R.R. Tolstoy Music by J.R.R. Tolstoy THE END
Speaker Change: Produced by Lincoln Center for Contemporary Arts Day 13 Lincoln Center for Contemporary Arts
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