LITTLE ROCK, Ark.--(BUSINESS WIRE)--Montrose Environmental Group, Inc. (NYSE: MEG) is on a mission to enhance environmental stewardship and support economic development by helping communities unlock federal funding for brownfields restoration and community revitalization. In 2025, Montrose assisted with over 20 EPA Grant applications totaling more than $45 million in potential awards—many for communities that didn't even know they qualified for funding or had a compelling story to tell. These g. ...

Group 1 - Robert F. Abbott has been managing family investments since 1995 and incorporated options trading in 2010, focusing on covered calls and collars with long stocks [1] - Abbott is a freelance writer with a project aimed at providing information for new and intermediate-level mutual fund investors [1] - He holds a Bachelor of Arts and a Master of Business Administration (MBA) degree [1]

Group 1 - Montrose Environmental Group (MEG) has achieved profitability for two consecutive quarters [1] - MEG services are experiencing increased demand, with a 5-year average growth rate [1]

Financial Performance - Revenues for the three months ended September 30, 2025, increased by $46.2 million or 25.9% compared to the same period in 2024, driven by strong organic growth and acquisitions [158]. - Revenues for the nine months ended September 30, 2025, increased by $129.9 million or 25.6% compared to the same period in 2024, with significant contributions from all segments and emergency response revenue [159]. - Total revenues for the nine months ended September 30, 2025, were $637.3 million, representing a 25.7% increase from $507.3 million in the same period of 2024 [175]. - Total reportable segment revenues for the three months ended September 30, 2025, increased by 25.9% to $224.9 million compared to $178.7 million for the same period in 2024 [176]. - For the nine months ended September 30, 2025, total reportable segment revenues increased by 25.6% to $637.3 million from $507.3 million in 2024 [176]. Segment Performance - Total revenue from emergency response related services was $11.5 million for the three months ended September 30, 2025, compared to $12.0 million in 2024, while for the nine months, it increased to $73.9 million from $40.6 million [154]. - Assessment, Permitting and Response segment revenues increased by 75.1% to $91,081,000 for the three months ended September 30, 2025 compared to $52,019,000 in 2024 [176]. - Measurement and Analysis segment revenues increased by 7.5% to $62,958,000 for the three months ended September 30, 2025 compared to $58,583,000 in 2024 [176]. - Remediation and Reuse segment revenues increased by 4.1% to $70,849,000 for the three months ended September 30, 2025 compared to $68,085,000 in 2024 [176]. - The Assessment, Permitting, and Response segment saw organic growth of $39.6 million and $45.0 million for the three and nine months ended September 30, 2025, respectively [176]. - Measurement and Analysis segment revenues increased by $2.6 million and $16.0 million for the three and nine months ended September 30, 2025, respectively, driven by strong organic growth [177]. - Remediation and Reuse segment revenues increased by $2.8 million and $12.4 million for the three and nine months ended September 30, 2025, respectively, with additional revenue from acquisitions of $7.6 million [179]. Expenses and Costs - Cost of revenues for the three months ended September 30, 2025, increased by $30.7 million or 29.1%, with a cost of revenue as a percentage of revenue at 60.6% [161]. - Selling, general and administrative expenses for the three months ended September 30, 2025, increased by $4.8 million or 7.9%, with a decrease in expenses as a percentage of revenues to 29.2% [165]. - Amortization expense for the three months ended September 30, 2025, was $7.3 million, down from $9.0 million in 2024, while for the nine months, it decreased to $23.0 million from $24.6 million [144]. - Corporate and other costs increased by $1,570,000 for the three months ended September 30, 2025 compared to the same period in 2024, primarily due to higher bonus accruals [183]. Income and Earnings - Net income for the three months ended September 30, 2025, was $8.4 million, compared to a net loss of $10.6 million in the same period in 2024 [157]. - Net income per share attributable to common stockholders for the three months ended September 30, 2025, was $0.24, compared to a loss of $0.39 in the same period in 2024 [157]. - Segment Adjusted EBITDA for total reportable segments was $47,131,000 for the three months ended September 30, 2025, a 30.1% increase from $36,213,000 in 2024 [180]. Cash Flow and Financing - For the nine months ended September 30, 2025, net cash provided by operating activities was $55.5 million, a significant increase of $65.3 million compared to a net cash used of $9.7 million for the same period in 2024 [190]. - Net cash used in investing activities for the nine months ended September 30, 2025, was $12.6 million, significantly lower than $137.2 million for the same period in 2024, which included multiple acquisitions [193][194]. - Net cash used in financing activities for the nine months ended September 30, 2025, was $49.2 million, driven by repayments of borrowings totaling $495.6 million [195]. - As of September 30, 2025, the company had $191.7 million available under the 2025 Credit Facility and $6.7 million in cash on hand [185]. Interest and Tax Expenses - Interest expense for the three months ended September 30, 2025, was $5.0 million, compared to $4.1 million in the same period of 2024, indicating an increase in financing costs [151]. - Interest expense, net for the nine months ended September 30, 2025, increased by 30.2% to $14.9 million compared to $11.4 million for the same period in 2024, primarily due to higher interest rates and debt balances [172]. - Income tax expense for the three months ended September 30, 2025 was $7,281,000, a 432.2% increase from $1,368,000 in the same period of 2024 [175]. - Income tax expense for the nine months ended September 30, 2025, increased by 148.7% to $11.1 million compared to $4.5 million for the same period in 2024 [174]. Acquisitions and Future Outlook - During the three months ended September 30, 2025, no acquisitions were completed, while two acquisitions were completed in the same period of 2024, generating revenues of $4.3 million, representing 2.4% of total revenues [144]. - The company expects revenue growth to continue to be driven significantly by acquisitions, despite a temporary pause in acquisition activities [144]. - The company anticipates that amortization of identifiable intangible assets and other acquisition-related costs will continue to be significant as it pursues further acquisitions [144]. - The company anticipates making up to $23.4 million in aggregate earn-out payments between 2025 and 2027 related to acquisitions [185]. - The company announced a stock repurchase program of up to $40.0 million on May 7, 2025, although no repurchases were made in the nine months ended September 30, 2025 [199].

Financial Data and Key Metrics Changes - The company achieved a record third quarter performance with a 26% year-over-year revenue growth and a 19% increase in consolidated adjusted EBITDA [8][9] - Year-to-date revenue increased by 25.6% to $637.3 million, while year-to-date consolidated adjusted EBITDA rose by 35% to $92.3 million [26][27] - Positive GAAP net income of $8.4 million was reported, marking a significant turnaround from a net loss of $10.6 million in the prior year [27][28] Business Line Data and Key Metrics Changes - The Assessment, Permitting, and Response segment saw a 75% revenue increase to $91.1 million, driven by strong demand for non-response consulting and advisory services [31] - The Measurement and Analysis segment's revenue grew by 7.5% to $63 million, with adjusted EBITDA rising to $17.3 million, reflecting a 460 basis point margin improvement [32] - The Remediation and Reuse segment's revenue increased to $70.8 million, although adjusted EBITDA declined to $9.4 million due to losses from the wind-down of the renewables business [32] Market Data and Key Metrics Changes - The company noted that state and local governments are stepping in to fill gaps left by the U.S. Federal government, creating unexpected growth opportunities [12] - Increased industrial activity, particularly in the energy and mining sectors, is driving demand for the company's services [73] Company Strategy and Development Direction - The company plans to exit its renewable service line by the end of the year, reallocating resources to higher return opportunities [20][21] - Future growth is expected to be driven by organic growth of 7 to 9% annually, with EBITDA growth anticipated to outpace revenue growth [24] - The company aims to restart acquisitions in 2026, focusing on strategic fit and potential for outsized financial returns [24][62] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business's prospects, citing strong client demand and the resilience of the business model amid external economic factors [10][13] - The company is well-positioned to capture growth from regulatory changes and increased industrial activity, particularly in the U.S., Canada, and Australia [73] Other Important Information - The company achieved a leverage ratio of 2.7 times and reported substantial available liquidity of $198.5 million [34] - Operating cash flow for the first nine months of 2025 improved by $65.3 million compared to the prior year, representing a 60.2% conversion of consolidated adjusted EBITDA [33] Q&A Session Summary Question: What drove the strong growth in the APNR business? - The growth was largely attributed to excellent cross-selling following emergency responses, with both structural and one-time sales contributing to the performance [36][39] Question: Can you elaborate on the water treatment business's positive outlook? - The water treatment business is experiencing healthy organic growth and margin accretion, driven by advanced technology applicable across multiple contaminants, not just PFAS [41][45] Question: What is the impact of the wind-down of the renewable services business? - The wind-down is expected to significantly reduce revenue, but excluding this impact, segment margins would be up year-to-date [51][55] Question: How will the acquisition strategy evolve moving forward? - The company plans to focus on larger assets with strong cash flow generation and is evaluating opportunities in international markets [62][63]

Financial Performance - Revenue increased by 25.9% to $224.9 million in 3Q25 compared to 3Q24[12, 17] - YTD25 revenue increased by 25.6% to $637.3 million compared to YTD24[19] - Net income increased to $8.4 million, resulting in $0.21 EPS in 3Q25[12, 22] - Consolidated Adjusted EBITDA grew by 18.9% to $33.7 million in 3Q25, representing 15% of revenue[12] - YTD25 Consolidated Adjusted EBITDA increased by 34.6% to $92.3 million, representing 14.5% of revenue[29] Guidance and Outlook - The company increased FY25 revenue guidance, expecting 18% growth over FY24[12] - The company increased FY25 Consolidated Adjusted EBITDA guidance, expecting 20% growth over FY24[12] - The company expects FY26 Consolidated Adjusted EBITDA to be at or above $125 million[12] Segment Performance - Assessment, Permitting & Response (AP&R) segment revenue increased to $91.1 million in 3Q25[56] - Measurement & Analysis segment revenue increased to $63.0 million in 3Q25[65] - Remediation & Reuse segment revenue increased to $70.8 million in 3Q25[71] Strategic Priorities - The company redeemed the remaining $122.2 million Series A-2 Preferred Stock ahead of schedule[30] - The company exceeded its leverage objective, delivering 2.7x leverage as of 3Q25[33] - The company achieved 60.2% of Operating Cash Flow as a percentage of Consolidated Adjusted EBITDA YTD25[33, 49] - The company generated $38.8 million in Free cash flow YTD25, representing 42% of Consolidated Adjusted EBITDA[33]

Core Insights - Montrose Environmental (MEG) reported revenue of $224.89 million for Q3 2025, marking a year-over-year increase of 25.9% and exceeding the Zacks Consensus Estimate of $195.85 million by 14.83% [1] - The company's EPS for the quarter was $0.36, down from $0.41 a year ago, but still above the consensus estimate of $0.33, resulting in an EPS surprise of 9.09% [1] Revenue Breakdown - Revenues from Assessment, Permitting and Response reached $91.08 million, significantly higher than the estimated $58.51 million, reflecting a year-over-year increase of 75.1% [4] - Revenues from Remediation & Reuse were reported at $70.85 million, slightly above the average estimate of $68.55 million, with a year-over-year change of 4.1% [4] - Revenues from Measurements & Analysis totaled $62.96 million, surpassing the estimated $61.29 million, and showing a year-over-year increase of 7.5% [4] Stock Performance - Over the past month, shares of Montrose Environmental have declined by 11.6%, contrasting with a 2.1% increase in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Core Insights - Montrose Environmental (MEG) reported quarterly earnings of $0.36 per share, exceeding the Zacks Consensus Estimate of $0.33 per share, but down from $0.41 per share a year ago, indicating an earnings surprise of +9.09% [1] - The company achieved revenues of $224.89 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 14.83% and up from $178.69 million year-over-year [2] - Montrose Environmental shares have increased approximately 35.3% year-to-date, outperforming the S&P 500's gain of 16.5% [3] Earnings Outlook - The future performance of Montrose Environmental's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4] - Current consensus EPS estimate for the upcoming quarter is $0.30 on revenues of $204.02 million, and for the current fiscal year, it is $1.29 on revenues of $812.67 million [7] Industry Context - The Waste Removal Services industry, to which Montrose Environmental belongs, is currently ranked in the top 38% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Financial Performance - Revenue for Q3 2025 was $224.9 million, a 25.9% increase from $178.7 million in Q3 2024, driven by strong organic growth and acquisitions[4] - Net income for Q3 2025 improved to $8.4 million, or $0.21 EPS, compared to a net loss of $10.6 million, or $0.39 LPS, in the prior year[4] - Adjusted Net Income for Q3 2025 was $14.2 million, with an Adj EPS of $0.36, down from $19.1 million and $0.41 in Q3 2024, primarily due to higher income tax expenses[10] - Consolidated Adjusted EBITDA for Q3 2025 was $33.7 million, a 18.9% increase from $28.3 million in Q3 2024, with a margin of 15.0%[11] - Revenue for the first nine months of 2025 reached $637.3 million, a 25.6% increase from $507.3 million in the prior year[12] - Net income for the first nine months of 2025 was $7.4 million, or $0.08 EPS, compared to a net loss of $34.1 million, or $1.30 LPS, in the prior year[14] - Adjusted Net Income for the first nine months of 2025 was $45.0 million, with an Adj EPS of $1.03, up from $38.6 million and $0.80 in the prior year[15] - Total revenues for the three months ended September 30, 2025, were $224.888 million, an increase from $178.687 million in the same period of 2024, representing a growth of 25.8%[31] - Adjusted EBITDA for the three months ended September 30, 2025, was $47.131 million, with a margin of 21.0%, compared to $36.213 million and a margin of 20.3% in 2024[31] - For the nine months ended September 30, 2025, total revenues reached $637.265 million, up from $507.337 million in 2024, indicating a year-over-year increase of 25.6%[31] Guidance and Expectations - The company increased its full-year 2025 revenue guidance to a range of $810.0 million to $830.0 million, representing an 18% growth at the midpoint compared to 2024[6] - Full-year 2025 Consolidated Adjusted EBITDA guidance was raised to a range of $112.0 million to $118.0 million, indicating a 20% growth at the midpoint compared to 2024[6] - The company expects to continue organic growth, excluding revenues from environmental emergency response and acquisitions for the first twelve months following acquisition[39] - The company anticipates variability in certain items impacting future GAAP financial results, including stock-based compensation and income tax expenses[38] Balance Sheet and Liquidity - As of September 30, 2025, Montrose's leverage ratio was 2.7x, with $198.5 million of available liquidity[19] - Total assets as of September 30, 2025, were $985.7 million, slightly down from $990.4 million at the end of 2024[27] - Cash and cash equivalents decreased to $6.7 million from $12.9 million at the end of 2024[27] - Total liabilities increased to $527.0 million as of September 30, 2025, compared to $451.2 million at the end of 2024[27] - The company’s total stockholders' equity increased to $458.7 million as of September 30, 2025, from $446.3 million at the end of 2024[27] Operational Performance - Net cash provided by operating activities for the nine months ended September 30, 2025, was $55.5 million, a significant recovery from a net cash used of $9.7 million in the same period of 2024[29] - EBITDA for the nine months ended September 30, 2025, increased to $72,402,000, up from $19,217,000 in 2024, reflecting a significant improvement in operational performance[48] - Free cash flow for the nine months ended September 30, 2025, was $38,794,000, a turnaround from a negative free cash flow of $38,590,000 in 2024[52] - Net cash provided by operating activities for the nine months ended September 30, 2025, was $55,548,000, a significant increase from a cash outflow of $9,721,000 in 2024[52] Income Statement Details - The company reported a basic net income per share of $0.24 for Q3 2025, compared to a loss of $0.39 per share in Q3 2024[25] - The company’s accumulated deficit improved to $(265.3) million as of September 30, 2025, from $(272.7) million at the end of 2024[27] - The company reported a net income of $8.378 million for the three months ended September 30, 2025, compared to a net loss of $10,564 million in the same period of 2024[42] - The Adjusted Net Income for the three months ended September 30, 2025, was $14.212 million, compared to $19.057 million in 2024, reflecting a decrease of 25.0%[42] - The Adjusted Net Income attributable to stockholders for the nine months ended September 30, 2025, was $40.835 million, an increase from $30.261 million in 2024, representing a growth of 35.0%[42] Expenses and Costs - Interest expense for the three months ended September 30, 2025, was $5,039,000, compared to $4,137,000 in 2024, reflecting an increase in borrowing costs[48] - Income tax expense for the three months ended September 30, 2025, was $7,281,000, significantly higher than $1,368,000 in the same period of 2024[48] - Depreciation and amortization for the nine months ended September 30, 2025, totaled $39,015,000, compared to $37,408,000 in 2024, indicating a slight increase in asset depreciation[48] - Acquisition costs for the three months ended September 30, 2025, were $754,000, down from $2,764,000 in 2024, suggesting a reduction in acquisition-related expenses[48] - The company reported a fair value change in financial instruments of $(10,354,000) for the three months ended September 30, 2025, compared to a gain of $3,946,000 in 2024, indicating volatility in financial instruments[48]

Core Viewpoint - Montrose Environmental Group, Inc. (MEG) is preparing to release its third-quarter 2025 earnings, with investors focused on its financial performance amid competition in the environmental services industry [1] Financial Performance - Wall Street's consensus for MEG's earnings per share (EPS) is $0.32, while the company's own projection is slightly higher at $0.33, reflecting a 19.5% decline from the previous year [2][5] - MEG has a history of outperforming earnings expectations, with an average earnings surprise of 80.3% over the last four quarters [2] - Revenue expectations for MEG are approximately $201.5 million, with the company's forecast at $196 million, indicating a 9.6% increase from the previous year across all business segments [3][5] Financial Ratios - The company has a debt-to-equity ratio of 0.66, indicating a moderate level of debt, and a current ratio of 1.78, suggesting it is well-positioned to cover short-term liabilities [4] - The price-to-sales ratio of 1.12 reflects investor confidence in MEG's revenue generation capabilities [3] Market Implications - The upcoming earnings report is crucial for MEG's stock performance, with potential price increases if expectations are surpassed, and declines if they are not met [4]