PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements detail the company's financial position, operations, equity, and cash flows for the periods ended June 30, 2025, and December 31, 2024 [Unaudited Condensed Consolidated Statements of Financial Position](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Financial%20Position) Condensed Consolidated Statements of Financial Position (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Total Assets | $998,084 | $990,353 | +$7,731 | | Total Liabilities | $494,024 | $451,161 | +$42,863 | | Convertible and Redeemable Series A-2 Preferred Stock | $33,792 | $92,928 | -$59,136 | | Total Stockholders' Equity | $470,268 | $446,264 | +$24,004 | - Current assets increased by **$22.9 million**, primarily driven by increases in accounts receivable, net, and contract assets[8](index=8&type=chunk) - Long-term debt, net of deferred financing fees, significantly increased by **$59.7 million**, from $204.8 million to $264.6 million[8](index=8&type=chunk) [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) Condensed Consolidated Statements of Operations (Three Months Ended June 30, 2025 vs. 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $234,543 | $173,325 | +$61,218 | +35.3% | | Income (loss) from operations | $14,941 | $(2,651) | +$17,592 | N/A | | Net income (loss) | $18,356 | $(10,170) | +$28,526 | N/A | | Net income (loss) attributable to common stockholders | $16,956 | $(12,920) | +$29,876 | N/A | | Basic EPS | $0.48 | $(0.39) | +$0.87 | N/A | | Diluted EPS | $0.42 | $(0.39) | +$0.81 | N/A | Condensed Consolidated Statements of Operations (Six Months Ended June 30, 2025 vs. 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | YoY Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $412,377 | $328,650 | +$83,727 | +25.5% | | Income (loss) from operations | $4,366 | $(12,716) | +$17,082 | N/A | | Net income (loss) | $(1,003) | $(23,527) | +$22,524 | N/A | | Net income (loss) attributable to common stockholders | $(5,153) | $(29,091) | +$23,938 | N/A | | Basic EPS | $(0.15) | $(0.91) | +$0.76 | N/A | | Diluted EPS | $(0.15) | $(0.91) | +$0.76 | N/A | [Unaudited Condensed Consolidated Statements of Convertible and Redeemable Series A-2 Preferred Stock and Stockholders' Equity](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Convertible%20and%20Redeemable%20Series%20A-2%20Preferred%20Stock%20and%20Stockholders'%20Equity) - The balance of Convertible and Redeemable Series A-2 Preferred Stock decreased significantly from **$92.9 million** at December 31, 2024, to **$33.8 million** at June 30, 2025, primarily due to a **$60.0 million redemption** in April 2025[12](index=12&type=chunk)[101](index=101&type=chunk) - Total stockholders' equity increased from **$446.3 million** at December 31, 2024, to **$470.3 million** at June 30, 2025, driven by net income and stock-based compensation, partially offset by preferred stock dividends and other comprehensive loss[8](index=8&type=chunk)[12](index=12&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30, 2025 vs. 2024) | Activity | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $27,398 | $(21,127) | +$48,525 | | Net cash used in investing activities | $(7,932) | $(87,937) | +$80,005 | | Net cash provided by (used in) financing activities | $(21,261) | $102,829 | -$124,090 | | Change in cash, cash equivalents and restricted cash | $(1,795) | $(6,235) | +$4,440 | - Operating cash flow significantly improved, shifting from a net outflow of **$21.1 million** in H1 2024 to a net inflow of **$27.4 million** in H1 2025, primarily due to increased cash earnings and improved working capital management[180](index=180&type=chunk) - Cash used in investing activities decreased substantially from **$87.9 million** in H1 2024 to **$7.9 million** in H1 2025, mainly due to fewer business acquisitions in the current period[182](index=182&type=chunk)[183](index=183&type=chunk) - Financing activities shifted from providing **$102.8 million** in H1 2024 to using **$21.3 million** in H1 2025, driven by higher debt repayments and preferred stock redemption, partially offset by new borrowings[184](index=184&type=chunk)[185](index=185&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Detailed disclosures explain the financial statements, covering accounting policies, revenue, assets, liabilities, debt, equity, and segment performance [1. Description of the Business and Basis of Presentation](index=8&type=section&id=1.%20DESCRIPTION%20OF%20THE%20BUSINESS%20AND%20BASIS%20OF%20PRESENTATION) The company is a global environmental services provider with three operating segments, and its unaudited financial statements conform to U.S. GAAP - Montrose Environmental Group, Inc. is an environmental services company with over **120 offices** and approximately **3,500 employees** as of June 30, 2025[18](index=18&type=chunk) - The company operates through three segments: Assessment, Permitting and Response; Measurement and Analysis; and Remediation and Reuse, providing scientific advisory, environmental testing, and engineering services[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) - The unaudited condensed consolidated financial statements are prepared in conformity with U.S. GAAP and SEC regulations for interim periods, including all recurring adjustments and normal accruals[22](index=22&type=chunk) [2. Summary of New Accounting Pronouncements](index=8&type=section&id=2.%20SUMMARY%20OF%20NEW%20ACCOUNTING%20PRONOUNCEMENTS) Recently issued accounting pronouncements not yet adopted are not expected to have a material impact on the company's financial statements - ASU 2023-09, effective for fiscal years beginning after December 15, 2024, requires greater disaggregation of income tax disclosures but is **not expected to materially impact** the consolidated financial statements[24](index=24&type=chunk)[26](index=26&type=chunk) - ASU 2024-03, effective January 1, 2027, aims to improve expense disclosures by requiring more detailed information about expense captions, with the Company currently evaluating its impact[27](index=27&type=chunk) [3. Revenues and Accounts Receivable](index=10&type=section&id=3.%20REVENUES%20AND%20ACCOUNTS%20RECEIVABLE) Revenue is derived from three service segments, with a significant increase in contract assets and the allowance for doubtful accounts in H1 2025 - Main revenue sources are multidisciplinary environmental consulting, emissions sampling/testing, and engineering/design/implementation services, mostly under fixed-fee or time-and-materials contracts[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) Contract Balances (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Contract assets | $75,313 | $52,091 | +$23,222 | | Contract liabilities | $12,511 | $9,297 | +$3,214 | Accounts Receivable, Net (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Accounts receivable, invoiced | $166,715 | $160,976 | +$5,739 | | Allowance for doubtful accounts | $(6,711) | $(2,093) | -$4,618 | | Accounts receivable, net | $160,004 | $158,883 | +$1,121 | - The allowance for doubtful accounts increased significantly from **$2.1 million** at December 31, 2024, to **$6.7 million** at June 30, 2025, with a bad debt expense of **$5.5 million** for the six months ended June 30, 2025[39](index=39&type=chunk) [4. Prepaid and Other Current Assets](index=12&type=section&id=4.%20PREPAID%20AND%20OTHER%20CURRENT%20ASSETS) Prepaid and other current assets increased slightly due to higher prepaid expenses and supplies Prepaid and Other Current Assets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Deposits | $1,113 | $1,073 | +$40 | | Prepaid expenses | $10,851 | $10,223 | +$628 | | Supplies | $3,153 | $2,794 | +$359 | | Total | $15,117 | $14,090 | +$1,027 | [5. Property and Equipment, Net](index=13&type=section&id=5.%20PROPERTY%20AND%20EQUIPMENT,%20NET) Net property and equipment decreased as accumulated depreciation outpaced new asset additions Property and Equipment, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Gross Property and Equipment | $133,360 | $126,943 | +$6,417 | | Land | $1,089 | $1,089 | $0 | | Construction in progress | $1,526 | $3,993 | -$2,467 | | Less: Accumulated depreciation | $(74,853) | $(68,249) | -$6,604 | | Total Property and Equipment—Net | $61,122 | $63,776 | -$2,654 | - Total depreciation expense for the six months ended June 30, 2025, was **$6.4 million**, a decrease from $7.0 million in the prior year period[42](index=42&type=chunk) [6. Leases](index=13&type=section&id=6.%20LEASES) Lease expenses increased year-over-year, and the company entered into a new $15.0 million equipment leasing facility - The Company's operating and finance leases generally have original terms between **1 and 15 years**, with some renewal options considered reasonably certain to be exercised[43](index=43&type=chunk) Total Lease Cost (in thousands) | Period | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $6,415 | $5,033 | +$1,382 | | Six Months Ended June 30, | $12,361 | $9,956 | +$2,405 | - In May 2024, the Company entered into a **$15.0 million** equipment leasing facility, with unused capacity expiring on February 25, 2026, and leases financed under this facility are accounted for as finance leases[49](index=49&type=chunk)[51](index=51&type=chunk) Weighted Average Lease Terms and Discount Rates (June 30, 2025) | Lease Type | Remaining Lease Term (years) | Discount Rate | | :--- | :--- | :--- | | Operating Leases | 4.3 | 4.9% | | Finance Leases | 3.6 | 6.6% | [7. Business Acquisitions](index=17&type=section&id=7.%20BUSINESS%20ACQUISITIONS) No acquisitions occurred in H1 2025, but potential earn-out payments for prior acquisitions total up to $24.6 million - **No business acquisitions** were completed during the six months ended June 30, 2025, but acquisitions remain a core growth strategy[54](index=54&type=chunk) - The Company may owe up to **$24.6 million** in aggregate earn-out payments for past acquisitions between 2025 and 2027, with specific portions payable in cash, common stock, or at the Company's option[55](index=55&type=chunk) Transaction Costs Related to Business Combinations (in thousands) | Period | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $300 | $1,100 | -$800 | | Six Months Ended June 30, | $1,000 | $3,600 | -$2,600 | - Acquisitions completed in 2024 included Epic Environmental Pty LTD (Australia), Two Dot Consulting, LLC (US), Engineering & Technical Associates, Inc (US), Paragon Soil and Environmental Consulting Inc (Canada), Spirit Environmental, LLC (US), and Origins Laboratory, Inc (US)[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) [8. Goodwill and Intangible Assets](index=19&type=section&id=8.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) Goodwill increased slightly due to measurement period adjustments, while other intangible assets decreased due to amortization Goodwill by Segment (in thousands) | Segment | December 31, 2024 | June 30, 2025 | Change | | :--- | :--- | :--- | :--- | | Assessment, Permitting and Response | $205,231 | $206,327 | +$1,096 | | Measurement and Analysis | $118,860 | $119,080 | +$220 | | Remediation and Reuse | $143,698 | $143,574 | -$124 | | Total Goodwill | $467,789 | $468,981 | +$1,192 | Other Intangible Assets, Net (in thousands) | Category | December 31, 2024 | June 30, 2025 | Change | | :--- | :--- | :--- | :--- | | Customer relationships | $125,690 | $115,079 | -$10,611 | | Covenants not to compete | $7,860 | $6,319 | -$1,541 | | Trade names | $2,564 | $1,372 | -$1,192 | | Proprietary software | $4,939 | $5,919 | +$980 | | Patent | $11,703 | $11,155 | -$548 | | Total | $152,756 | $139,844 | -$12,912 | - Amortization expense for the six months ended June 30, 2025, was **$15.7 million**, an increase from $14.6 million in the prior year period[69](index=69&type=chunk) [9. Accounts Payable and Other Accrued Liabilities](index=20&type=section&id=9.%20ACCOUNTS%20PAYABLE%20AND%20OTHER%20ACCRUED%20LIABILITIES) Accounts payable and other accrued liabilities grew due to increases in accounts payable and contract liabilities Accounts Payable and Other Accrued Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Accounts payable | $35,638 | $33,424 | +$2,214 | | Accrued expenses | $13,570 | $16,190 | -$2,620 | | Contract liabilities | $12,511 | $9,297 | +$3,214 | | Total | $66,647 | $63,704 | +$2,943 | [10. Accrued Payroll and Benefits](index=21&type=section&id=10.%20ACCRUED%20PAYROLL%20AND%20BENEFITS) Accrued payroll and benefits increased, driven primarily by higher accrued bonuses Accrued Payroll and Benefits (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Accrued bonuses | $16,580 | $14,433 | +$2,147 | | Accrued paid time off | $4,238 | $4,214 | +$24 | | Accrued payroll | $12,215 | $11,969 | +$246 | | Accrued other | $4,272 | $3,632 | +$640 | | Total | $37,305 | $34,248 | +$3,057 | [11. Income Taxes](index=21&type=section&id=11.%20INCOME%20TAXES) The company's effective tax rate was 135.1% for H1 2025, driven by disallowed items and a full valuation allowance on deferred tax assets Income Tax Expense (in thousands) | Period | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $988 | $2,619 | -$1,631 | | Six Months Ended June 30, | $3,859 | $3,112 | +$747 | Effective Tax Rate (ETR) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended June 30, | 5.1% | (45.3)% | | Six Months Ended June 30, | 135.1% | (16.8)% | - A **full valuation allowance** is maintained on U.S. federal, state, and various foreign net deferred tax assets as their realization is not more-likely-than-not[74](index=74&type=chunk) - The recently enacted One Big Beautiful Bill Act (OBBB Act) on July 4, 2025, which includes provisions for bonus depreciation and R&E expenditures, is currently being evaluated for its impact on financial results[76](index=76&type=chunk) [12. Debt](index=21&type=section&id=12.%20DEBT) Total debt increased to $273.2 million following the refinancing of the company's credit facility in February 2025 Debt (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Term loan facility | $200,000 | $189,218 | +$10,782 | | Revolving line of credit | $66,545 | $25,191 | +$41,354 | | Aircraft loan | $8,709 | $9,272 | -$563 | | Less deferred debt issuance costs | $(2,011) | $(997) | -$1,014 | | Total Debt | $273,243 | $222,684 | +$50,559 | | Long-term debt, net of current portion | $264,555 | $204,818 | +$59,737 | - The Company entered into a new **$500.0 million 2025 Credit Facility** on February 26, 2025, comprising a $200.0 million term loan and a $300.0 million revolving line of credit, which replaced the 2021 Credit Facility[81](index=81&type=chunk) - The 2025 Credit Facility term loan amortizes at **1.25% per quarter** starting December 31, 2025, and matures on February 26, 2030[82](index=82&type=chunk) - As of June 30, 2025, the consolidated total leverage ratio was **2.5 times**, and the Company was in compliance with all covenants under the 2025 Credit Facility[86](index=86&type=chunk) [13. Fair Value of Financial Instruments](index=26&type=section&id=13.%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) Total liabilities measured at fair value decreased, primarily due to a significant reduction in the fair value of the preferred stock conversion option Financial Instruments Measured at Fair Value (Level 3, in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Interest rate swap (Assets) | $0 | $1,544 | -$1,544 | | Business acquisitions contingent consideration, current | $17,284 | $26,872 | -$9,588 | | Business acquisitions contingent consideration, long-term | $7,346 | $6,255 | +$1,091 | | Conversion option related to Series A-2 Preferred Stock | $10,552 | $20,224 | -$9,672 | | Interest rate swap (Liabilities) | $(88) | $0 | -$88 | | Total Liabilities | $35,094 | $53,351 | -$18,257 | - The fair value of the Series A-2 preferred stock conversion option decreased by **$9.7 million** for the six months ended June 30, 2025, recorded as a gain in other income (expense)[94](index=94&type=chunk)[103](index=103&type=chunk) [14. Commitments and Contingencies](index=26&type=section&id=14.%20COMMITMENTS%20AND%20CONTINGENCIES) The company has various lease, debt, and equipment purchase commitments, while legal proceedings are not expected to be material - The Company leases office facilities and equipment with terms expiring through **2034 and 2030**, respectively[95](index=95&type=chunk) - Commitments include obligations under the 2025 Credit Facility, Aircraft Loan, and an equipment line of credit[96](index=96&type=chunk) - A purchase contract for **$4.9 million** of equipment over seven years includes minimum spending requirements of $0.2 million for 2025, $0.4 million for 2026, and $0.9 million for 2027[96](index=96&type=chunk) - Legal proceedings are **not expected to have a material effect** on the Company's financial position or results of operations[98](index=98&type=chunk) [15. Convertible and Redeemable Series A-2 Preferred Stock](index=28&type=section&id=15.%20CONVERTIBLE%20AND%20REDEEMABLE%20SERIES%20A-2%20PREFERRED%20STOCK) A $60.0 million redemption significantly reduced the outstanding balance of Series A-2 Preferred Stock, which is classified as mezzanine equity - On April 1, 2025, the Company redeemed **$60.0 million** of Series A-2 Preferred Stock, reducing the outstanding principal balance to **$62.2 million** (5,834 shares) as of June 30, 2025[101](index=101&type=chunk) Series A-2 Preferred Stock Dividends (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended June 30, (accrued) | $1,400 | $2,750 | | Six Months Ended June 30, (paid) | $2,800 | $5,600 | - The Series A-2 Preferred Stock is classified as **mezzanine equity** because it is redeemable upon a change of control and the Company cannot assert it would have sufficient authorized shares to settle all future variable conversion requests[102](index=102&type=chunk) Fair Value of Conversion Option (in thousands) | Date | Fair Value | | :--- | :--- | | June 30, 2025 | $10,552 | | December 31, 2024 | $20,224 | *Change in fair value for the six months ended June 30, 2025: $(9,672) thousand (recorded as other income/expense)* [16. Stockholders' Equity](index=30&type=section&id=16.%20STOCKHOLDERS'%20EQUITY) The company maintains two equity incentive plans with 1.9 million shares available for grant under the 2017 Plan as of June 30, 2025 Shares Authorized and Available for Grant (in thousands) | Plan | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | 2017 Plan (Authorized) | 8,911,649 | 7,538,276 | | 2013 Plan (Authorized) | 2,035,219 | 2,036,219 | | Total Authorized | 10,946,868 | 9,574,495 | | 2017 Plan (Available for Grant) | 1,902,947 | 1,677,508 | | 2013 Plan (Available for Grant) | — | — | | Total Available for Grant | 1,902,947 | 1,677,508 | - The Board of Directors ratified the addition of **1,372,373 shares** to the 2017 Plan in January 2025, pursuant to its annual increase provision[106](index=106&type=chunk) [17. Net Income (Loss) Per Share](index=30&type=section&id=17.%20NET%20INCOME%20(LOSS)%20PER%20SHARE) Net income per share improved significantly year-over-year, with potentially dilutive shares excluded from H1 2025 calculations due to anti-dilutive effects Net Income (Loss) Per Share Attributable to Common Stockholders | Period | Basic EPS (2025) | Basic EPS (2024) | Diluted EPS (2025) | Diluted EPS (2024) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $0.48 | $(0.39) | $0.42 | $(0.39) | | Six Months Ended June 30, | $(0.15) | $(0.91) | $(0.15) | $(0.91) | - For the six months ended June 30, 2025, common stock equivalents (stock options, restricted stock, and Series A-2 Preferred Stock) totaling **12.1 million** were excluded from diluted EPS calculation because their effect would have been anti-dilutive[108](index=108&type=chunk)[109](index=109&type=chunk) [18. Stock-Based Plans and Compensation](index=31&type=section&id=18.%20STOCK-BASED%20PLANS%20AND%20COMPENSATION) Stock-based compensation expense increased to $24.6 million in H1 2025, with $65.1 million in unrecognized expense remaining Total Stock-Based Compensation Expense (in thousands) | Period | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $10,834 | $11,831 | -$997 | | Six Months Ended June 30, | $24,557 | $23,103 | +$1,454 | - As of June 30, 2025, there was **$65.1 million** of total unrecognized stock-based compensation expense related to unvested options, restricted stock, and SARs, expected to be recognized over a weighted-average **2.1-year period**[111](index=111&type=chunk) - The 2021 Performance SARs were cancelled effective December 31, 2024, resulting in **no related expense** for the three and six months ended June 30, 2025[111](index=111&type=chunk)[113](index=113&type=chunk) [19. Segment Information](index=34&type=section&id=19.%20SEGMENT%20INFORMATION) The company's three segments delivered a 25.5% increase in H1 2025 revenue and a 39.6% increase in Segment Adjusted EBITDA - The Company has three reportable segments: Assessment, Permitting and Response, Measurement and Analysis, and Remediation and Reuse, which are monitored separately by management[115](index=115&type=chunk) Total Reportable Segments Revenues and Adjusted EBITDA (in thousands) | Period | Revenues (2025) | Revenues (2024) | Change (%) | Adjusted EBITDA (2025) | Adjusted EBITDA (2024) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $234,543 | $173,325 | 35.3% | $55,883 | $33,909 | 64.8% | | Six Months Ended June 30, | $412,377 | $328,650 | 25.5% | $86,155 | $61,704 | 39.6% | Segment Revenues (Six Months Ended June 30, in thousands) | Segment | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Assessment, Permitting and Response | $157,063 | $112,024 | +$45,039 | 40.2% | | Measurement and Analysis | $121,825 | $100,306 | +$21,519 | 21.5% | | Remediation and Reuse | $133,489 | $116,320 | +$17,169 | 14.8% | | Total | $412,377 | $328,650 | +$83,727 | 25.5% | Segment Adjusted EBITDA (Six Months Ended June 30, in thousands) | Segment | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Assessment, Permitting and Response | $38,127 | $28,901 | +$9,226 | 31.9% | | Measurement and Analysis | $32,071 | $18,863 | +$13,208 | 70.0% | | Remediation and Reuse | $15,957 | $13,940 | +$2,017 | 14.5% | | Total | $86,155 | $61,704 | +$24,451 | 39.6% | [20. Related-Party Transactions](index=37&type=section&id=20.%20RELATED-PARTY%20TRANSACTIONS) The company did not engage in any material related-party transactions during the recent reporting periods - **No material related-party transactions** occurred during the three and six months ended June 30, 2025, and June 30, 2024[123](index=123&type=chunk) [21. Defined Contribution Plan](index=37&type=section&id=21.%20DEFINED%20CONTRIBUTION%20PLAN) Employer contributions to the company's 401(k) plan decreased significantly in H1 2025 compared to the prior year - The 401(k) Savings Plan allows participants to defer up to **85% of eligible wages**, up to IRS limits[124](index=124&type=chunk) - Employer matching contributions are **100% of the first 3%** of compensation and **50% of deferrals** exceeding 3% but not 5%[124](index=124&type=chunk) Employer Contributions to 401(k) Savings Plan (in thousands) | Period | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $2,400 | $8,900 | -$6,500 | | Six Months Ended June 30, | $5,200 | $11,600 | -$6,400 | [22. Subsequent Events](index=37&type=section&id=22.%20SUBSEQUENT%20EVENTS) The company redeemed the remaining Series A-2 Preferred Stock on July 1, 2025, using cash and credit facility borrowings - On July 1, 2025, the Company redeemed the remaining **$62.2 million** of Series A-2 Preferred Stock and paid **$1.4 million** in accrued dividends[125](index=125&type=chunk) - The redemption was funded using cash on hand and borrowings from the 2025 Credit Facility[125](index=125&type=chunk) - The remaining **$10.6 million** fair value of the conversion option was recorded as other income[125](index=125&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, liquidity, and key performance factors for the recent quarter and half-year [Overview](index=41&type=section&id=Overview) The company operates within a $1.6 trillion global environmental industry, providing services through its three core segments - The global environmental industry is estimated at **$1.6 trillion**, with **$540.0 billion** concentrated in the United States[133](index=133&type=chunk) - Montrose provides environmental services through three business segments: Assessment, Permitting and Response, Measurement and Analysis, and Remediation and Reuse[134](index=134&type=chunk) [Our Segments](index=41&type=section&id=Our%20Segments) The company's three operating segments are structured to align with client needs and regulatory frameworks - Assessment, Permitting and Response provides scientific advisory and consulting services for environmental assessments, emergency response, and permits[135](index=135&type=chunk) - Measurement and Analysis offers environmental testing and laboratory services for air, water, and soil contaminants[136](index=136&type=chunk) - Remediation and Reuse delivers engineering, design, and implementation services for contaminated water treatment, soil remediation, and renewable energy from waste[137](index=137&type=chunk) [Key Factors that Affect Our Business and Our Results](index=43&type=section&id=Key%20Factors%20that%20Affect%20Our%20Business%20and%20Our%20Results) Financial performance is influenced by acquisitions, organic growth, revenue mix, financing costs, infrastructure investments, seasonality, and earnings volatility [Acquisitions](index=43&type=section&id=Acquisitions) Acquisitions remain a key growth driver despite a temporary pause in H1 2025, with related costs continuing to be significant - The Company temporarily paused acquisitions in H1 2025 but expects them to continue driving revenue growth[140](index=140&type=chunk) Acquisition-Related Financial Impacts (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Amortization expense | $7,326 | $7,137 | $15,716 | $14,566 | | Acquisition-related costs | $325 | $1,082 | $1,036 | $3,607 | | Fair value changes in business acquisition contingencies | $(354) | $(136) | $(831) | $(242) | - Contingent consideration payments of **$10.6 million** were made in H1 2025 for Epic and Sensible, with **$4.0 million** in cash and **$6.6 million** in common stock[142](index=142&type=chunk) [Organic Growth](index=43&type=section&id=Organic%20Growth) Organic growth, a key metric excluding emergency response and recent acquisitions, is expected to continue contributing to long-term revenue growth - Organic growth excludes revenues from emergency response, acquisitions for the first 12 months, and businesses held for sale/discontinued[143](index=143&type=chunk) - The Company has a history of long-term organic growth and expects this trend to continue[143](index=143&type=chunk) [Revenue Mix](index=44&type=section&id=Revenue%20Mix) Shifts in revenue mix between segments with varying profitability levels can impact consolidated financial results - Different segments and business lines have varying profitability, causing revenue mix shifts to impact consolidated financial results[144](index=144&type=chunk) - Revenue changes are attributed to organic growth (businesses over 12 months) and recent acquisitions (first 12 months)[145](index=145&type=chunk) [Financing Costs](index=45&type=section&id=Financing%20Costs) Total debt increased to $273.2 million, and interest expense remains a significant and growing cost for the company - Total debt increased by **$50.6 million** to **$273.2 million** at June 30, 2025, driven by increased revolving line of credit usage and a refinanced term loan[146](index=146&type=chunk) Interest Expense, Net (in thousands) | Period | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $(4,768) | $(3,976) | $(792) | | Six Months Ended June 30, | $(9,833) | $(7,282) | $(2,551) | - The Company refinanced its 2021 Credit Facility with a new 2025 Credit Facility in February 2025[148](index=148&type=chunk) [Corporate and Operational Infrastructure Investments](index=45&type=section&id=Corporate%20and%20Operational%20Infrastructure%20Investments) The company continues to invest in its corporate infrastructure to support ongoing growth and improve long-term margins - Ongoing investments in corporate infrastructure (logistics, quality, risk management, sales, marketing, safety, HR, R&D, finance, IT) are expected to support continued growth and improve margins[148](index=148&type=chunk) [Seasonality](index=45&type=section&id=Seasonality) Quarterly results vary, particularly in the Measurement and Analysis and Remediation and Reuse segments, due to weather impacts on field operations - Operating results in Measurement and Analysis and Remediation and Reuse segments show quarterly variability, with generally lower revenues and earnings in **Q1 and Q4** due to weather impacts on field-based teams[149](index=149&type=chunk) - As the Company expands, quarterly variability in these segments may deviate from historical trends[149](index=149&type=chunk) [Earnings Volatility](index=45&type=section&id=Earnings%20Volatility) Earnings volatility is driven by unpredictable emergency response projects, which generated significantly higher revenue in H1 2025 - Earnings volatility is influenced by unpredictable emergency response projects, timing of large projects in the Remediation and Reuse segment, and acquisitions[150](index=150&type=chunk) Emergency Response Related Services Revenue (in thousands) | Period | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $48,500 | $12,900 | +$35,600 | | Six Months Ended June 30, | $62,400 | $28,600 | +$33,800 | - The higher emergency response revenue in Q2 2025 was primarily due to **one large project**, making future period comparisons difficult[150](index=150&type=chunk) [Results of Operations](index=47&type=section&id=Results%20of%20Operations) The company achieved significant revenue growth and improved profitability, driven by emergency response, organic growth, and acquisitions [Revenues](index=47&type=section&id=Revenues) Revenues grew 35.3% in Q2 and 25.5% in H1 2025, driven by higher emergency response revenue, strong organic growth, and acquisitions Revenues (in thousands) | Period | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $234,543 | $173,325 | +$61,218 | 35.3% | | Six Months Ended June 30, | $412,377 | $328,650 | +$83,727 | 25.5% | - The increase in Q2 2025 revenues was primarily due to **$35.6 million** higher emergency response revenue, **$17.1 million** strong organic growth, and **$9.1 million** from acquisitions[152](index=152&type=chunk) - The increase in H1 2025 revenues was primarily due to **$33.8 million** higher emergency response revenue, **$28.4 million** strong organic growth, and **$22.5 million** from acquisitions[153](index=153&type=chunk) [Cost of Revenues](index=48&type=section&id=Cost%20of%20Revenues) Cost of revenues as a percentage of revenue improved due to high-margin emergency response projects and operating leverage Cost of Revenues (exclusive of depreciation and amortization, in thousands) | Period | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $132,802 | $104,086 | +$28,716 | 27.6% | | Six Months Ended June 30, | $241,208 | $200,643 | +$40,565 | 20.2% | Cost of Revenue as a % of Revenue | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended June 30, | 56.6% | 60.1% | | Six Months Ended June 30, | 58.5% | 61.1% | - The improvement in cost of revenues as a percentage of revenue was driven by high-margin emergency response revenues in the Assessment, Permitting and Response segment and operating leverage in Measurement and Analysis[156](index=156&type=chunk)[157](index=157&type=chunk) [Selling, General and Administrative Expense](index=48&type=section&id=Selling,%20General%20and%20Administrative%20Expense) SG&A expense increased due to higher labor and bad debt costs, but decreased as a percentage of revenues Selling, General and Administrative Expense (in thousands) | Period | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $73,683 | $59,239 | +$14,444 | 24.4% | | Six Months Ended June 30, | $139,915 | $116,313 | +$23,602 | 20.3% | - The increase in SG&A was primarily due to an **$8.9 million** increase in labor costs (including a **$6.0 million** bonus accrual) and a **$4.8 million** increase in bad debt expense for the three months ended June 30, 2025[159](index=159&type=chunk) Selling, General and Administrative Expense as a % of Revenues | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended June 30, | 31.4% | 34.2% | | Six Months Ended June 30, | 33.9% | 35.4% | [Depreciation and Amortization](index=48&type=section&id=Depreciation%20and%20Amortization) Depreciation and amortization expense increased moderately due to higher property and equipment balances Depreciation and Amortization (in thousands) | Period | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $12,763 | $12,515 | +$248 | 2.0% | | Six Months Ended June 30, | $26,057 | $24,168 | +$1,889 | 7.8% | - The increase was primarily driven by higher property and equipment balances during the respective periods[162](index=162&type=chunk) [Other Income (Expense), Net](index=50&type=section&id=Other%20Income%20(Expense),%20Net) Other income improved significantly due to a large fair value gain on the Series A-2 preferred stock conversion option Other Income (Expense), Net (in thousands) | Period | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $9,171 | $(924) | +$10,095 | (1093%) | | Six Months Ended June 30, | $8,323 | $(417) | +$8,740 | (2096%) | - The positive change was primarily due to a **$10.0 million** fair value gain on the Series A-2 preferred stock conversion option for the three months, and a **$9.7 million** gain for the six months ended June 30, 2025[163](index=163&type=chunk)[164](index=164&type=chunk) - This gain was partially offset by losses related to fair value adjustments on interest rate swaps[163](index=163&type=chunk)[164](index=164&type=chunk) [Interest Expense, Net](index=50&type=section&id=Interest%20Expense,%20Net) Interest expense increased due to higher interest rates and debt balances, including a write-off of deferred debt issuance costs Interest Expense, Net (in thousands) | Period | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $(4,768) | $(3,976) | $(792) | 19.9% | | Six Months Ended June 30, | $(9,833) | $(7,282) | $(2,551) | 35.0% | - The increase was primarily driven by higher interest rates and increased debt balances[165](index=165&type=chunk) - Interest expense for the six months ended June 30, 2025, included a **$0.9 million write-off** of deferred debt issuance costs due to the refinancing of the senior credit facility[165](index=165&type=chunk) - Weighted average interest rates were **6.2%** as of June 30, 2025, compared to **7.4%** as of June 30, 2024[166](index=166&type=chunk) [Income Tax Expense](index=50&type=section&id=Income%20Tax%20Expense) Income tax expense increased for the six-month period due to a higher net deferred tax liability and pretax book income Income Tax Expense (in thousands) | Period | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, | $988 | $2,619 | $(1,631) | (62.3%) | | Six Months Ended June 30, | $3,859 | $3,112 | +$747 | 24.0% | - The six-month increase was primarily due to an overall increase in the net deferred tax liability and pretax book income as of June 30, 2025, compared to the prior year[167](index=167&type=chunk) [Segment Results of Operations](index=51&type=section&id=Segment%20Results%20of%20Operations) All three segments reported increased revenues and Segment Adjusted EBITDA, with notable growth in Assessment, Permitting and Response [Revenues (Segment)](index=51&type=section&id=Revenues%20(Segment)) All segments grew, with Assessment, Permitting and Response showing the largest increase due to emergency response projects Segment Revenues (in thousands) | Segment | Q2 2025 | Q2 2024 | Q2 Change ($) | Q2 Change (%) | H1 2025 | H1 2024 | H1 Change ($) | H1 Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Assessment, Permitting and Response | $103,943 | $53,444 | +$50,499 | 94.5% | $157,063 | $112,024 | +$45,039 | 40.2% | | Measurement and Analysis | $62,795 | $54,812 | +$7,983 | 14.6% | $121,825 | $100,306 | +$21,519 | 21.5% | | Remediation and Reuse | $67,805 | $65,069 | +$2,736 | 4.2% | $133,489 | $116,320 | +$17,169 | 14.8% | - Assessment, Permitting and Response revenue growth was driven by environmental emergency responses (**$35.6 million** for Q2, **$33.8 million** for H1) and organic growth in consulting services[169](index=169&type=chunk) - Measurement and Analysis revenue growth was a result of strong organic growth (**$4.9 million** for Q2, **$13.4 million** for H1) and additional revenue from acquisitions[170](index=170&type=chunk) [Segment Adjusted EBITDA](index=53&type=section&id=Segment%20Adjusted%20EBITDA) Segment Adjusted EBITDA increased across all segments, with Measurement and Analysis showing significant margin improvement Segment Adjusted EBITDA (in thousands) | Segment | Q2 2025 | Q2 2024 | Q2 Change ($) | Q2 Margin % (2025) | Q2 Margin % (2024) | H1 2025 | H1 2024 | H1 Change ($) | H1 Margin % (2025) | H1 Margin % (2024) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Assessment, Permitting and Response | $27,555 | $12,621 | +$14,934 | 26.5% | 23.6% | $38,127 | $28,901 | +$9,226 | 24.3% | 25.8% | | Measurement and Analysis | $18,298 | $12,359 | +$5,939 | 29.1% | 22.5% | $32,071 | $18,863 | +$13,208 | 26.3% | 18.8% | | Remediation and Reuse | $10,030 | $8,929 | +$1,101 | 14.8% | 13.7% | $15,957 | $13,940 | +$2,017 | 12.0% | 12.0% | | Corporate and Other | $(16,298) | $(10,593) | $(5,705) | (6.9)% | (6.1)% | $(27,540) | $(21,466) | $(6,074) | (6.7)% | (6.5)% | - Measurement and Analysis Segment Adjusted EBITDA margin improved due to higher revenues and improved operating performance[173](index=173&type=chunk) - Corporate and other costs increased primarily due to higher bonus accruals (**$5.1 million** for Q2, **$6.0 million** for H1) and **$0.9 million** in outside service costs for an IT migration[174](index=174&type=chunk) [Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity improved with a significant increase in operating cash flow, supported by its credit facility and cash on hand - Principal liquidity sources include credit facility borrowings, other arrangements, common/preferred stock issuance proceeds, and cash from operating activities[176](index=176&type=chunk) - As of June 30, 2025, the Company had **$232.3 million** available under the 2025 Credit Facility and **$10.5 million** of cash on hand[176](index=176&type=chunk) - The Company expects to fund liquidity requirements, including cash earn-out payments, through cash from operations and credit facility borrowings[177](index=177&type=chunk) [Cash Flows](index=55&type=section&id=Cash%20Flows) Cash flow from operations turned positive, while investing and financing activities resulted in net cash outflows for H1 2025 Summary of Cash Flows (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Operating activities | $27,398 | $(21,127) | | Investing activities | $(7,932) | $(87,937) | | Financing activities | $(21,261) | $102,829 | | Change in cash, cash equivalents and restricted cash | $(1,795) | $(6,235) | [Operating Activities](index=55&type=section&id=Operating%20Activities) Net cash from operating activities improved by $48.5 million due to higher cash earnings and better working capital performance - Net cash provided by operating activities was **$27.4 million** for H1 2025, a **$48.5 million** increase from the $21.1 million net cash used in H1 2024[180](index=180&type=chunk) - The increase was primarily due to a **$22.5 million** increase in cash earnings before non-cash items and a **$21.9 million** lower cash outflow from improved working capital performance[180](index=180&type=chunk) [Investing Activities](index=55&type=section&id=Investing%20Activities) Net cash used in investing activities decreased significantly due to lower cash paid for acquisitions compared to the prior year - Net cash used in investing activities was **$7.9 million** for H1 2025, a substantial decrease from **$87.9 million** in H1 2024[182](index=182&type=chunk)[183](index=183&type=chunk) - H1 2025 uses were primarily for purchases of property and equipment (**$5.1 million**) and proprietary software development (**$2.8 million**)[182](index=182&type=chunk) - H1 2024 uses included **$70.3 million** for acquisitions and **$17.9 million** for property and equipment[183](index=183&type=chunk) [Financing Activities](index=55&type=section&id=Financing%20Activities) Financing activities shifted to a net cash use, driven by debt repayments and preferred stock redemption - Net cash used in financing activities was **$21.3 million** for H1 2025, compared to **$102.8 million** provided in H1 2024[184](index=184&type=chunk)[185](index=185&type=chunk) - H1 2025 cash uses included **$364.5 million** in debt repayments, **$60.0 million** for Series A-2 preferred stock redemption, and **$4.4 million** for contingent consideration, partially offset by **$416.0 million** in credit facility borrowings[184](index=184&type=chunk) - H1 2024 cash provided included **$121.8 million** from common stock issuance and **$50.0 million** from an additional term loan, partially offset by **$60.0 million** for Series A-2 preferred stock redemption[185](index=185&type=chunk) [Credit Facilities](index=55&type=section&id=Credit%20Facilities) Details regarding the company's credit facilities are provided in Note 12 of the financial statements - Details regarding the Company's credit facilities are provided in Note 12[186](index=186&type=chunk) [Series A-2 Preferred Stock](index=55&type=section&id=Series%20A-2%20Preferred%20Stock) Information regarding the Series A-2 Preferred Stock is provided in Notes 15 and 22 of the financial statements - Details regarding the Series A-2 Preferred Stock are provided in Notes 15 and 22[186](index=186&type=chunk) [Stock Repurchase Program](index=57&type=section&id=Stock%20Repurchase%20Program) A $40.0 million stock repurchase program was approved in May 2025, but no shares were repurchased during the quarter - The Board of Directors approved a stock repurchase program of up to **$40.0 million** on May 7, 2025, with no set expiration date[188](index=188&type=chunk) - **No stock repurchases** were made during the three months ended June 30, 2025[188](index=188&type=chunk) [Critical Accounting Policies and Estimates](index=57&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) There have been no material changes to the critical accounting policies and estimates disclosed in the company's 2024 Form 10-K - No material changes to critical accounting policies and estimates from the 2024 Form 10-K, except as noted in Note 2 of the current financial statements[189](index=189&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rates, inflation, and foreign exchange, with established mitigation strategies [Interest Rate Risk](index=57&type=section&id=Interest%20Rate%20Risk) The company is exposed to interest rate risk on its variable-rate debt, with a 1.0% rate change impacting pre-tax income by $0.8 million - A **1.0% increase or decrease** in interest rates on variable rate debt (factoring in interest rate swaps on $200.0 million of debt) would impact annual income (loss) before income taxes by approximately **$0.8 million**[190](index=190&type=chunk) [Inflation Risk](index=57&type=section&id=Inflation%20Risk) Inflation has increased costs, but the company has largely offset these effects by raising prices and does not expect a material long-term impact - The Company experienced higher labor, travel, and direct costs due to inflation in H1 2025, particularly in Measurement and Analysis and Remediation and Reuse segments[191](index=191&type=chunk) - **Price increases** on short-term and medium-term contracts have largely offset inflationary effects, and the Company expects this strategy to continue[191](index=191&type=chunk) - Management believes inflation will **not have a material long-term effect** on the business, but an inability to offset future cost increases could adversely affect financial results[191](index=191&type=chunk) [Foreign Exchange Risk](index=57&type=section&id=Foreign%20Exchange%20Risk) Increased international operations have heightened foreign exchange risk, with a 1.0% change in the U.S. dollar exchange rate impacting revenues by $1.6 million - Foreign exchange risk exposure has increased due to operations in **Canada, Australia, and Europe**[192](index=192&type=chunk) - A **1.0% increase or decrease** in the U.S. dollar exchange rate would impact revenues by approximately **$1.6 million**, with a negligible impact on annual net (loss) income[192](index=192&type=chunk) [Item 4. Controls and Procedures](index=57&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls [Evaluation of Disclosure Controls and Procedures](index=57&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period - The CEO and CFO concluded that disclosure controls and procedures were **effective at the reasonable assurance level** as of June 30, 2025[193](index=193&type=chunk) [Internal Control Over Financial Reporting](index=59&type=section&id=Internal%20Control%20Over%20Financial%20Reporting) No material changes to the company's internal control over financial reporting occurred during the most recent fiscal quarter - **No material changes** in internal control over financial reporting occurred during the quarter ended June 30, 2025[194](index=194&type=chunk) [Limitations on Effectiveness of Controls](index=59&type=section&id=Limitations%20on%20Effectiveness%20of%20Controls) Management acknowledges that control systems provide reasonable, not absolute, assurance due to inherent limitations - Management acknowledges that control systems provide only **reasonable, not absolute, assurance** against errors and fraud[195](index=195&type=chunk) - Inherent limitations include resource constraints, faulty judgments, simple errors, and potential circumvention by intentional acts, collusion, or management override[195](index=195&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=60&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal proceedings which are not expected to have a material adverse effect on its financial position - The Company is subject to various legal proceedings in the normal course of business, including labor, employment, anti-discrimination, and commercial disputes[198](index=198&type=chunk) - Management does **not expect current litigation to have a material adverse effect** on the Company's results of operations or financial position[198](index=198&type=chunk) [Item 1A. Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors from those previously disclosed - **No material changes** to risk factors from the 2024 Form 10-K and Q1 2025 Form 10-Q[199](index=199&type=chunk) - Additional unknown or currently immaterial risks may still adversely affect the business, financial condition, and operating results[199](index=199&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=60&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued common stock as purchase price consideration for prior acquisitions, exempt from registration under the Securities Act - On May 1, 2025, **2,888 shares** and **29,176 shares** of common stock were issued to former owners of Epic and ETA, respectively[200](index=200&type=chunk) - These shares were issued as purchase price consideration for earnout and deferred payments[200](index=200&type=chunk) - The issuances were **exempt from registration** requirements under Section 4(a)(2) of the Securities Act[200](index=200&type=chunk) [Item 3. Defaults Upon Senior Securities](index=60&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - There were **no defaults** upon senior securities[201](index=201&type=chunk) [Item 4. Mine Safety Disclosures](index=60&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - This item is **not applicable**[202](index=202&type=chunk) [Item 5. Other Information](index=60&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item for the period - **No other information** is reported[203](index=203&type=chunk) [Item 6. Exhibits](index=61&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the quarterly report, including officer certifications and Inline XBRL documents - Exhibits include certifications (31.1, 31.2, 32.1, 32.2) from the Principal Executive Officer and Principal Financial Officer[205](index=205&type=chunk) - Inline XBRL documents (101.INS, 101.SCH, 104) are also filed[205](index=205&type=chunk)

Financial Data and Key Metrics Changes - The company achieved a record performance in Q2 2025 with a 35% year-over-year revenue growth, reaching $234.5 million, and a 70% increase in consolidated adjusted EBITDA to $39.6 million, representing a 16.9% margin [7][20] - Year-to-date revenues increased by 25.5% to $412.4 million, with year-to-date consolidated adjusted EBITDA rising 46% to $58.6 million, or 14.2% of revenue [20][21] - The company reported positive GAAP net income of $18.4 million, or $0.42 per diluted share, compared to a net loss of $10.2 million in the prior year [21][22] Business Line Data and Key Metrics Changes - In the Assessment, Permitting and Response segment, Q2 revenue nearly doubled to $103.9 million, with adjusted EBITDA of $27.6 million, or 26.5% of revenue [23] - The Measurement and Analysis segment saw a revenue increase of nearly 15% to $62.8 million, with adjusted EBITDA rising to $18.3 million, or 29.1% of revenue [24][25] - The Remediation and Reuse segment's revenue increased to $67.8 million, with adjusted EBITDA growing to $10 million and a margin of 14.8% [26] Market Data and Key Metrics Changes - 80% of 2024 revenue was generated from U.S. clients, primarily in the private sector, indicating strong demand across various industries [13] - The company noted increased regulatory influence from local and state governments in the U.S., which is expected to drive continued demand for its services [14][15] Company Strategy and Development Direction - The company is focused on driving strong organic growth, generating solid cash flow, and simplifying its balance sheet, with a long-term organic revenue growth expectation of 7% to 9% annually [11][12] - The strategic priorities include capital allocation to high-return opportunities, emphasizing scalable profitability, and increasing operating and free cash flow generation [17][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about current and future business prospects, citing ongoing client demand for environmental science-based solutions [17] - The company anticipates minimal impact from regulatory uncertainties related to greenhouse gas regulations, as most clients operate in states with active regulations [15][16] Other Important Information - The company completed the redemption of remaining preferred shares, bringing leverage below three times pro forma [11] - The company raised its guidance for 2025, expecting revenue to surpass 2024 by 17% and adjusted EBITDA to grow 19% [12] Q&A Session Summary Question: Margins across business lines - Management indicated that margins in the Measurement and Analysis segment are expected to remain in the 18% to 22% range long-term, despite current strong performance due to operating leverage and project mix shifts [30][31] Question: Emergency response business outlook - Management noted that emergency response work is seen as an upside opportunity, with core business growth continuing independently [45][46] Question: Customer concerns - Management acknowledged that customers are dealing with macroeconomic factors but noted that planning cycles remain stable, sustaining demand for services [59][60] Question: Acquisition strategy - Management confirmed that while acquisitions are currently paused, there is a robust opportunity for future consolidation in the market [62][63] Question: PFAS activity and treatment - Management expressed optimism about the PFAS treatment business, noting regulatory developments and a growing patent portfolio that expands service offerings [39][94] Question: Organic growth drivers - Management attributed organic growth to deepening relationships with existing clients and regulatory shifts, rather than acquiring new clients [100][101]

Financial Performance - Revenue increased by 35.3% to $234.5 million in 2Q25 compared to 2Q24[12] - YTD25 revenue increased by 25.5% to $412.4 million compared to YTD24[14] - Net income improved by $28.5 million to $18.4 million in 2Q25[19] - Consolidated Adjusted EBITDA increased by 69.8% to $39.6 million in 2Q25[26] - Consolidated Adjusted EBITDA as a percentage of revenue increased by 340 bps to 16.9% in 2Q25[26] Strategic Priorities and Guidance - The company increased expected FY25 revenue range, expecting 17% growth over FY24[11] - The company increased expected Consolidated Adjusted EBITDA range, expecting 19% growth over FY24[11] - The company expects organic growth at or above 7% to 9% range in 2025[29] Segment Performance - Assessment, Permitting & Response segment revenue increased to $103.9 million in 2Q25[65] - Measurement & Analysis segment revenue increased to $62.8 million in 2Q25[68] - Remediation & Reuse segment revenue increased to $67.8 million in 2Q25[76]

Core Insights - Montrose Environmental (MEG) reported a revenue of $234.54 million for the quarter ended June 2025, reflecting a year-over-year increase of 35.3% [1] - The company's EPS was $0.63, significantly higher than the $0.20 reported in the same quarter last year [1] - The revenue exceeded the Zacks Consensus Estimate of $186.61 million by 25.68%, while the EPS surpassed the consensus estimate of $0.25 by 152% [1] Revenue Breakdown - Revenues from Assessment, Permitting and Response reached $103.94 million, exceeding the two-analyst average estimate of $54.72 million, marking a year-over-year increase of 94.5% [4] - Revenues from Remediation & Reuse were reported at $67.81 million, slightly above the average estimate of $67.54 million, representing a 4.2% year-over-year change [4] - Revenues from Measurements & Analysis totaled $62.8 million, surpassing the estimated $58.91 million, with a year-over-year increase of 14.6% [4] Stock Performance - Over the past month, shares of Montrose Environmental have returned -3.7%, contrasting with the Zacks S&P 500 composite's +0.5% change [3] - The stock currently holds a Zacks Rank 2 (Buy), suggesting potential for outperformance in the near term [3]

[Earnings Highlights & CEO Commentary](index=1&type=section&id=Earnings%20Highlights%20%26%20CEO%20Commentary) Montrose Environmental Group reported strong Q2 and H1 2025 results, leading to increased full-year guidance and strategic capital structure simplification [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) Montrose Environmental Group reported a record second quarter in 2025, driven by significant revenue growth, a shift from net loss to net income, and substantial increases in Adjusted Net Income and Consolidated Adjusted EBITDA Second Quarter 2025 Key Financial Highlights (YoY) | Metric | 2025 Value | 2024 Value | Change | Growth % | | :-------------------------------- | :--------- | :--------- | :----- | :------- | | Revenue | $234.5M | $173.3M | +$61.2M | 35.3% | | Net Income (Loss) | $18.4M | ($10.2M) | +$28.6M | N/A | | EPS (Diluted) | $0.42 | ($0.39) | +$0.81 | N/A | | Adjusted Net Income | $27.4M | $10.8M | +$16.6M | 153.7% | | Adj EPS | $0.63 | $0.20 | +$0.43 | 215.0% | | Consolidated Adjusted EBITDA | $39.6M | $23.3M | +$16.3M | 69.8% | | Consolidated Adjusted EBITDA % of Revenue | 16.9% | 13.5% | +340 bps | N/A | [First Half 2025 Highlights](index=1&type=section&id=First%20Half%202025%20Highlights) The first half of 2025 also demonstrated strong performance with significant revenue growth, a substantial reduction in net loss, and robust increases in Adjusted Net Income and Consolidated Adjusted EBITDA, alongside improved operating cash flow and leverage First Half 2025 Key Financial Highlights (YoY) | Metric | 2025 Value | 2024 Value | Change | Growth % | | :-------------------------------- | :--------- | :--------- | :----- | :------- | | Revenue | $412.4M | $328.7M | +$83.7M | 25.5% | | Net Loss | ($1.0M) | ($23.5M) | +$22.5M | N/A | | LPS (Diluted) | ($0.15) | ($0.91) | +$0.76 | N/A | | Adjusted Net Income | $32.7M | $19.3M | +$13.4M | 69.4% | | Adj EPS | $0.73 | $0.37 | +$0.36 | 97.3% | | Consolidated Adjusted EBITDA | $58.6M | $40.2M | +$18.4M | 45.7% | | Consolidated Adjusted EBITDA % of Revenue | 14.2% | 12.2% | +200 bps | N/A | | Operating Cash Flow | $27.4M | ($21.1M) | +$48.5M | N/A | | Leverage Ratio (as of June 30, 2025) | 2.5x | N/A | N/A | N/A | [Increased Full-Year 2025 Guidance](index=1&type=section&id=Increased%20Full-Year%202025%20Guidance) Montrose has raised its full-year 2025 guidance for both Consolidated Adjusted EBITDA and revenue, reflecting strong year-to-date performance Increased Full-Year 2025 Guidance | Metric | New Range | Midpoint Growth (vs. FY2024) | | :----------------------------- | :-------------------------- | :--------------------------- | | Consolidated Adjusted EBITDA | $111.0M - $117.0M | 19% | | Revenue | $795.0M - $835.0M | 17% | [Strategic Capital Allocation Highlights](index=1&type=section&id=Strategic%20Capital%20Allocation%20Highlights) The company successfully redeemed the remaining Series A-2 Preferred Stock, simplifying its capital structure and eliminating future dividends ahead of schedule due to strong financial results - Redeemed remaining **$62.2 million of Series A-2 Preferred Stock** on July 7, 2025, simplifying capital structure and eliminating future Series A-2 dividends six months earlier than expected[3](index=3&type=chunk) [CEO Commentary](index=3&type=section&id=CEO%20Commentary) CEO Vijay Manthripragada expressed strong satisfaction with the company's exceptional performance, highlighting record client engagement, momentum across all segments, and exceeding goals for organic revenue, earnings growth, margin expansion, cash flow, and balance sheet simplification - Business continues to perform exceptionally well with client engagement at all-time highs[5](index=5&type=chunk) - Strong momentum across all three segments and lines of business[5](index=5&type=chunk) - Exceeding goals for organic revenue and earnings growth, margin expansion, and cash flow, achieving balance sheet simplification and leverage objectives six months ahead of schedule[5](index=5&type=chunk) [Financial Performance Review](index=3&type=section&id=Financial%20Performance%20Review) This section reviews Montrose's financial performance, including the updated full-year outlook, detailed Q2 and H1 2025 results, and operating cash flow [Full Year 2025 Outlook](index=3&type=section&id=Full%20Year%202025%20Outlook) Montrose increased its full-year 2025 guidance for Consolidated Adjusted EBITDA and revenue, reflecting confidence in continued strong performance, with these projections not including any benefits from future acquisitions Updated Full-Year 2025 Outlook | Metric | Previous Midpoint | New Midpoint | Increase at Midpoint | | :----------------------------- | :---------------- | :----------- | :------------------- | | Consolidated Adjusted EBITDA | N/A | $114.0M | +$8.0M | | Revenue | N/A | $815.0M | +$45.0M | - The Consolidated Adjusted EBITDA and revenue outlook does not include any benefit from future acquisitions[6](index=6&type=chunk) [Second Quarter 2025 Detailed Results](index=3&type=section&id=Second%20Quarter%202025%20Detailed%20Results) The second quarter of 2025 saw robust financial improvements across all key metrics, driven by strong revenue growth from emergency responses, organic expansion, and acquisitions, coupled with significant margin expansion [Revenue Performance (Q2)](index=3&type=section&id=Revenue%20Performance%20(Q2)) Second quarter revenue increased significantly by 35.3% year-over-year, primarily fueled by a surge in environmental emergency responses, strong organic growth across all segments, and contributions from acquisitions Q2 2025 Revenue Performance | Metric | 2025 Value | 2024 Value | Change | Growth % | | :-------------------------------- | :--------- | :--------- | :----- | :------- | | Total Revenue | $234.5M | $173.3M | +$61.2M | 35.3% | | Incremental Revenue from Environmental Emergency Responses | $35.6M | N/A | N/A | N/A | | Organic Revenue Growth (all segments) | $17.1M | N/A | N/A | N/A | | Contributions from Acquisitions | $9.1M | N/A | N/A | N/A | | Revenue from Environmental Emergency Responses | $48.5M | $12.9M | +$35.6M | 275.9% | [Net Income & EPS (Q2)](index=3&type=section&id=Net%20Income%20%26%20EPS%20(Q2)) Montrose achieved a significant turnaround in Q2 2025, moving from a net loss to a net income, with a substantial improvement in EPS, primarily due to strong revenue growth, margin expansion, and a fair value gain from preferred stock redemption Q2 2025 Net Income & EPS | Metric | 2025 Value | 2024 Value | Change | | :-------------------------------- | :--------- | :--------- | :----- | | Net Income (Loss) | $18.4M | ($10.2M) | +$28.5M | | Diluted EPS (LPS) | $0.42 | ($0.39) | +$0.81 | - Improvement primarily resulted from revenue growth (including organic growth), margin expansion, and a **$10.0 million fair value gain** related to the Series A-2 redemption[8](index=8&type=chunk) [Adjusted Net Income & Adj EPS (Q2)](index=3&type=section&id=Adjusted%20Net%20Income%20%26%20Adj%20EPS%20(Q2)) Adjusted Net Income and Adj EPS saw significant increases in Q2 2025, driven by strong revenue growth, margin expansion, and the Series A-2 redemption, with additional benefits from lower preferred stock dividends Q2 2025 Adjusted Net Income & Adj EPS | Metric | 2025 Value | 2024 Value | Change | | :-------------------- | :--------- | :--------- | :----- | | Adjusted Net Income | $27.4M | $10.8M | +$16.6M | | Adj EPS | $0.63 | $0.20 | +$0.43 | - Increases primarily due to strong revenue growth, margin expansion, and the Series A-2 redemption, with Adj EPS also benefiting from lower dividends on outstanding Series A-2[9](index=9&type=chunk) [Consolidated Adjusted EBITDA (Q2)](index=3&type=section&id=Consolidated%20Adjusted%20EBITDA%20(Q2)) Consolidated Adjusted EBITDA for Q2 2025 grew substantially by 69.8%, with a 340 basis point increase in margin, attributed to higher revenue, organic growth, and significant operating performance improvements across all segments Q2 2025 Consolidated Adjusted EBITDA | Metric | 2025 Value | 2024 Value | Change | Growth % | | :-------------------------------- | :--------- | :--------- | :----- | :------- | | Consolidated Adjusted EBITDA | $39.6M | $23.3M | +$16.3M | 69.8% | | Consolidated Adjusted EBITDA % of Revenue | 16.9% | 13.5% | +340 bps | N/A | - Increase primarily due to higher revenue, including higher organic growth, and margin expansion in all three segments[10](index=10&type=chunk) [First Six Months 2025 Detailed Results](index=3&type=section&id=First%20Six%20Months%202025%20Detailed%20Results) The first six months of 2025 showcased strong financial results, marked by significant revenue growth, a substantial reduction in net loss, and robust increases in Adjusted Net Income and Consolidated Adjusted EBITDA, driven by operational leverage and strategic capital actions [Revenue Performance (H1)](index=3&type=section&id=Revenue%20Performance%20(H1)) First half revenue increased by 25.5% year-over-year, primarily driven by incremental revenue from environmental emergency responses, strong organic growth across all segments, and contributions from acquisitions H1 2025 Revenue Performance | Metric | 2025 Value | 2024 Value | Change | Growth % | | :-------------------------------- | :--------- | :--------- | :----- | :------- | | Total Revenue | $412.4M | $328.7M | +$83.7M | 25.5% | | Incremental Revenue from Environmental Emergency Responses | $33.8M | N/A | N/A | N/A | | Organic Revenue Growth (all segments) | $28.4M | N/A | N/A | N/A | | Contributions from Acquisitions | $22.5M | N/A | N/A | N/A | | Revenue from Environmental Emergency Responses | $62.4M | $28.6M | +$33.8M | 118.2% | [Net Loss & LPS (H1)](index=3&type=section&id=Net%20Loss%20%26%20LPS%20(H1)) Montrose significantly reduced its net loss in H1 2025, improving LPS, primarily due to strong revenue growth, margin expansion, and a fair value gain from the Series A-2 preferred stock redemption, partially offset by increased interest and tax expenses H1 2025 Net Loss & LPS | Metric | 2025 Value | 2024 Value | Change | | :-------------------- | :--------- | :--------- | :----- | | Net Loss | ($1.0M) | ($23.5M) | +$22.5M | | Diluted LPS | ($0.15) | ($0.91) | +$0.77 | - Improvement primarily resulted from revenue growth (including strong organic growth), margin expansion, and a **$9.7 million fair value gain** related to the Series A-2 preferred stock redemption, partially offset by incremental interest and tax expenses[12](index=12&type=chunk) [Adjusted Net Income & Adj EPS (H1)](index=4&type=section&id=Adjusted%20Net%20Income%20%26%20Adj%20EPS%20(H1)) Adjusted Net Income and Adj EPS for the first six months of 2025 increased substantially, driven by strong revenue growth, margin expansion, and the Series A-2 redemption, with Adj EPS also benefiting from lower preferred stock dividends H1 2025 Adjusted Net Income & Adj EPS | Metric | 2025 Value | 2024 Value | Change | | :-------------------- | :--------- | :--------- | :----- | | Adjusted Net Income | $32.7M | $19.3M | +$13.4M | | Adj EPS | $0.73 | $0.37 | +$0.36 | - Increases primarily due to strong revenue growth, margin expansion, and the Series A-2 redemption, with Adj EPS also benefiting from lower dividends on outstanding Series A-2[14](index=14&type=chunk) [Consolidated Adjusted EBITDA (H1)](index=4&type=section&id=Consolidated%20Adjusted%20EBITDA%20(H1)) Consolidated Adjusted EBITDA for H1 2025 grew by 45.7%, with a 200 basis point increase in margin, primarily due to higher revenue across all segments and strong operating performance in the Measurement & Analysis segment H1 2025 Consolidated Adjusted EBITDA | Metric | 2025 Value | 2024 Value | Change | Growth % | | :-------------------------------- | :--------- | :--------- | :----- | :------- | | Consolidated Adjusted EBITDA | $58.6M | $40.2M | +$18.4M | 45.7% | | Consolidated Adjusted EBITDA % of Revenue | 14.2% | 12.2% | +200 bps | N/A | - Increase primarily due to higher revenue in all three segments and strong operating performance in the Measurement & Analysis segment[15](index=15&type=chunk) [Operating Cash Flow, Liquidity and Capital Resources](index=4&type=section&id=Operating%20Cash%20Flow%2C%20Liquidity%20and%20Capital%20Resources) Montrose demonstrated significant improvement in operating cash flow for the first six months of 2025, alongside a healthy liquidity position and a reduced leverage ratio, further enhanced by the full redemption of Series A-2 Preferred Stock Operating Cash Flow & Liquidity (H1 2025) | Metric | 2025 Value | 2024 Value | Change | | :-------------------------------- | :--------- | :--------- | :----- | | Net Cash Provided by Operating Activities | $27.4M | ($21.1M) | +$48.5M | | Leverage Ratio (as of June 30, 2025) | 2.5x | N/A | N/A | | Available Liquidity (as of June 30, 2025) | $242.8M | N/A | N/A | | Cash and Cash Equivalents | $10.5M | N/A | N/A | | Availability on Revolving Line of Credit | $232.3M | N/A | N/A | - The **$48.5 million improvement in operating cash flow** was primarily due to a **$22.5 million increase in earnings** before non-cash items and a **$21.9 million reduction in cash outflow** from improved working capital performance[16](index=16&type=chunk) - Voluntarily fully redeemed all remaining **$62.2 million of Series A-2 Preferred Stock** on July 1, 2025, using cash on hand and borrowings, resulting in a pro forma leverage ratio of **2.99x**[18](index=18&type=chunk) [Segment Performance](index=9&type=section&id=Segment%20Performance) This section details the revenue and Adjusted EBITDA performance across Montrose's three reportable segments for both the second quarter and first half of 2025 [Segment Revenues and Adjusted EBITDA Analysis](index=9&type=section&id=Segment%20Revenues%20and%20Adjusted%20EBITDA%20Analysis) Montrose's three reportable segments—Assessment, Permitting and Response; Measurement and Analysis; and Remediation and Reuse—all contributed to strong revenue growth and Adjusted EBITDA expansion in both Q2 and H1 2025, with notable margin improvements in Measurement and Analysis Segment Revenues and Adjusted EBITDA (Q2 2025 vs. Q2 2024) | Segment | Q2 2025 Revenue ($ thousands) | Q2 2024 Revenue ($ thousands) | Q2 2025 Adj EBITDA ($ thousands) | Q2 2024 Adj EBITDA ($ thousands) | Q2 2025 Adj EBITDA Margin | Q2 2024 Adj EBITDA Margin | | :-------------------------------- | :---------------------------- | :---------------------------- | :------------------------------- | :------------------------------- | :------------------------ | :------------------------ | | Assessment, Permitting and Response | $103,943 | $53,444 | $27,555 | $12,621 | 26.5% | 23.6% | | Measurement and Analysis | $62,795 | $54,812 | $18,298 | $12,359 | 29.1% | 22.5% | | Remediation and Reuse | $67,805 | $65,069 | $10,030 | $8,929 | 14.8% | 13.7% | | **Total Reportable Segments** | **$234,543** | **$173,325** | **$55,883** | **$33,909** | **23.8%** | **19.6%** | Segment Revenues and Adjusted EBITDA (H1 2025 vs. H1 2024) | Segment | H1 2025 Revenue ($ thousands) | H1 2024 Revenue ($ thousands) | H1 2025 Adj EBITDA ($ thousands) | H1 2024 Adj EBITDA ($ thousands) | H1 2025 Adj EBITDA Margin | H1 2024 Adj EBITDA Margin | | :-------------------------------- | :---------------------------- | :---------------------------- | :------------------------------- | :------------------------------- | :------------------------ | :------------------------ | | Assessment, Permitting and Response | $157,063 | $112,024 | $38,127 | $28,901 | 24.3% | 25.8% | | Measurement and Analysis | $121,825 | $100,306 | $32,071 | $18,863 | 26.3% | 18.8% | | Remediation and Reuse | $133,489 | $116,320 | $15,957 | $13,940 | 12.0% | 12.0% | | **Total Reportable Segments** | **$412,377** | **$328,650** | **$86,155** | **$61,704** | **20.9%** | **18.8%** | [Non-GAAP Financial Measures & Reconciliations](index=10&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Reconciliations) This section defines Montrose's non-GAAP financial measures and provides detailed reconciliations to their most directly comparable GAAP measures [Explanation of Non-GAAP Measures](index=10&type=section&id=Explanation%20of%20Non-GAAP%20Measures) This section defines Montrose's non-GAAP financial measures, including Consolidated Adjusted EBITDA, Adjusted Net Income, and Basic/Diluted Adj EPS, explaining their purpose for management and investors while also outlining their inherent limitations and the importance of reviewing them alongside GAAP results - **Consolidated Adjusted EBITDA** is calculated as net income (loss) before interest, income tax, depreciation, and amortization, adjusted for stock-based compensation and acquisition-related costs[35](index=35&type=chunk) - **Adjusted Net Income** is net income (loss) before amortization of intangible assets, stock-based compensation, fair value changes in financial instruments and contingent earnouts, discontinued specialty lab, and other gains/losses[35](index=35&type=chunk) - These non-GAAP measures are used by management to evaluate financial performance, compare to peers, assess business strategies, and make budgeting decisions, but have limitations and should not be considered alternatives to GAAP measures[36](index=36&type=chunk)[37](index=37&type=chunk) [Reconciliation of Net Income (Loss) to Adjusted Net Income](index=11&type=section&id=Reconciliation%20of%20Net%20Income%20(Loss)%20to%20Adjusted%20Net%20Income) This section provides a detailed reconciliation of GAAP Net Income (Loss) to Adjusted Net Income for the three and six months ended June 30, 2025 and 2024, outlining specific adjustments made for non-cash and non-recurring items Reconciliation of Net Income (Loss) to Adjusted Net Income (In thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $18,356 | ($10,170) | ($1,003) | ($23,527) | | Amortization of intangible assets | 7,326 | 7,137 | 15,716 | 14,566 | | Stock-based compensation | 10,834 | 11,831 | 24,557 | 23,103 | | Acquisition costs | 325 | 1,082 | 1,036 | 3,607 | | Fair value changes in financial instruments | (9,256) | 1,202 | (8,040) | 905 | | Expenses related to financing transactions | 297 | 95 | 274 | 239 | | Fair value changes in business acquisition contingencies | 354 | 136 | 831 | 242 | | Discontinued Specialty Lab | — | — | — | 596 | | Other losses and expenses | 156 | 30 | 1,211 | 511 | | Tax effect of adjustments | (1,018) | (543) | (1,873) | (922) | | **Adjusted Net Income** | **$27,374** | **$10,800** | **$32,709** | **$19,320** | | Preferred dividends Series A-2 | (1,400) | (2,750) | (4,150) | (5,564) | | **Adjusted Net Income attributable to stockholders** | **$25,974** | **$8,050** | **$28,559** | **$13,756** | | Diluted Adjusted Net Income per share | $0.63 | $0.20 | $0.73 | $0.37 | [Reconciliation of Net Income (Loss) to Consolidated Adjusted EBITDA](index=12&type=section&id=Reconciliation%20of%20Net%20Income%20(Loss)%20to%20Consolidated%20Adjusted%20EBITDA) This section presents a detailed reconciliation of GAAP Net Income (Loss) to Consolidated Adjusted EBITDA for the three and six months ended June 30, 2025 and 2024, highlighting adjustments for non-cash expenses and other non-operating items Reconciliation of Net Income (Loss) to Consolidated Adjusted EBITDA (In thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $18,356 | ($10,170) | ($1,003) | ($23,527) | | Interest expense | 4,768 | 3,976 | 9,833 | 7,282 | | Income tax expense | 988 | 2,619 | 3,859 | 3,112 | | Depreciation and amortization | 12,763 | 12,515 | 26,057 | 24,168 | | **EBITDA** | **$36,875** | **$8,940** | **$38,746** | **$11,035** | | Stock-based compensation | 10,834 | 11,831 | 24,557 | 23,103 | | Acquisition costs | 325 | 1,082 | 1,036 | 3,607 | | Fair value changes in financial instruments | (9,256) | 1,202 | (8,040) | 905 | | Expenses related to financing transactions | 297 | 95 | 274 | 239 | | Fair value changes in business acquisition contingencies | 354 | 136 | 831 | 242 | | Discontinued Specialty Lab | — | — | — | 596 | | Other losses and expenses | 156 | 30 | 1,211 | 511 | | **Consolidated Adjusted EBITDA** | **$39,585** | **$23,316** | **$58,615** | **$40,238** | [Corporate Information](index=5&type=section&id=Corporate%20Information) This section provides essential corporate details, including webcast information, company overview, forward-looking statements disclaimer, and contact information [Webcast and Conference Call Details](index=5&type=section&id=Webcast%20and%20Conference%20Call%20Details) Montrose Environmental Group will host a webcast and conference call on August 7, 2025, to discuss its second quarter results, providing access details for live participation and replay - Webcast and conference call scheduled for **Thursday, August 7, 2025, at 8:30 a.m. Eastern Time**[20](index=20&type=chunk) - Live webcast available in the Investors section of www.montrose-env.com; dial-in options provided for live call **(800) 715-9871 or +1 (646) 307-1963, Conference ID: 8690520**[20](index=20&type=chunk) - Audio replay will be available on the Montrose website for 30 days[20](index=20&type=chunk) [About Montrose Environmental Group](index=5&type=section&id=About%20Montrose%20Environmental%20Group) Montrose is a leading environmental solutions company dedicated to helping organizations address current and future environmental challenges, offering integrated design, engineering, and operational services globally - Montrose is a leading environmental solutions company focused on supporting commercial and government organizations[21](index=21&type=chunk) - Employs approximately **3,500 individuals across 120 locations worldwide**, combining local knowledge with an integrated approach[21](index=21&type=chunk) - Services include air measurement, laboratory services, regulatory compliance, environmental emergency response, permitting, engineering, and remediation[21](index=21&type=chunk) [Forward-Looking Statements Disclaimer](index=5&type=section&id=Forward-Looking%20Statements%20Disclaimer) This section serves as a standard disclaimer, informing readers that the press release contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update them - Press release contains forward-looking statements identified by words like 'intend,' 'expect,' and 'may'[22](index=22&type=chunk) - Statements are based on current information and management's expectations, subject to risks and uncertainties beyond the Company's control[22](index=22&type=chunk) - The Company undertakes no obligation to update any forward-looking statement, except as required by applicable law[22](index=22&type=chunk) [Investor and Media Contacts](index=5&type=section&id=Investor%20and%20Media%20Contacts) Contact information is provided for investor relations and media inquiries - Investor Relations Contact: Adrianne D. Griffin, Senior Vice President, Investor Relations and Treasury, **(949) 988-3383, ir@montrose-env.com**[23](index=23&type=chunk) - Media Relations Contact: Tammy Hovey, Director, Corporate Communications, **(917) 520-2751, pr@montrose-env.com**[23](index=23&type=chunk) [Condensed Consolidated Financial Statements](index=6&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents Montrose Environmental Group's unaudited condensed consolidated statements of operations, financial position, and cash flows for the specified periods [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Statements%20of%20Operations%20and%20Comprehensive%20Loss) This section presents the unaudited condensed consolidated statements of operations and comprehensive loss for Montrose Environmental Group, Inc. for the three and six months ended June 30, 2025 and 2024, detailing revenues, expenses, and net income (loss) Condensed Consolidated Statements of Operations and Comprehensive Loss (In thousands) | | | | Three Months Ended June 30, | | | | Six Months Ended June 30, | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2025 | | 2024 | | 2025 | | 2024 | | Revenues | $ | 234,543 | $ | 173,325 | $ | 412,377 | $ | 328,650 | | Cost of revenues (exclusive of depreciation and amortization | | 132,802 | | 104,086 | | 241,208 | | 200,643 | | shown below) | | | | | | | | | | Selling, general and administrative expense | | 73,683 | | 59,239 | | 139,915 | | 116,313 | | Fair value changes in business acquisition contingencies | | 354 | | 136 | | 831 | | 242 | | Depreciation and amortization | | 12,763 | | 12,515 | | 26,057 | | 24,168 | | Income (loss) from operations | | 14,941 | | (2,651) | | 4,366 | | (12,716) | | Other income (expense), net | | 9,171 | | (924) | | 8,323 | | (417) | | Interest expense, net | | (4,768) | | (3,976) | | (9,833) | | (7,282) | | Total other income (expense), net | | 4,403 | | (4,900) | | (1,510) | | (7,699) | | Income (loss) before expense from income taxes | | 19,344 | | (7,551) | | 2,856 | | (20,415) | | Income tax expense | | 988 | | 2,619 | | 3,859 | | 3,112 | | Net income (loss) | $ | 18,356 | $ | (10,170) | $ | (1,003) | $ | (23,527) | | Equity adjustment from foreign currency translation | | (1,258) | | 35 | | (1,611) | | — | | Comprehensive income (loss) | | 17,098 | | (10,135) | | (2,614) | | (23,527) | | Convertible and redeemable series A-2 preferred stock dividend | | (1,400) | | (2,750) | | (4,150) | | (5,564) | | Net income (loss) attributable to common stockholders | | 16,956 | | (12,920) | | (5,153) | | (29,091) | | Weighted average common shares outstanding | | | | | | | | | | Basic | | 35,206 | | 33,318 | | 34,855 | | 31,850 | | Diluted | | 43,455 | | 33,318 | | 34,855 | | 31,850 | | Net income (loss) per share attributable to common stockholders | | | | | | | | | | Basic | $ | 0.48 | $ | (0.39) | $ | (0.15) | $ | (0.91) | | Diluted | $ | 0.42 | $ | (0.39) | $ | (0.15) | $ | (0.91) | [Condensed Consolidated Statements of Financial Position](index=7&type=section&id=Statements%20of%20Financial%20Position) This section presents the unaudited condensed consolidated statements of financial position for Montrose Environmental Group, Inc. as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Statements of Financial Position (In thousands) | | | June 30, | | December 31, | | --- | --- | --- | --- | --- | | | | 2025 | | 2024 | | Assets | | | | | | Current assets | | | | | | Cash, cash equivalents and restricted cash | $ | 10,484 | $ | 12,935 | | Accounts receivable, net | | 160,004 | | 158,883 | | Contract assets | | 75,313 | | 52,091 | | Prepaid and other current assets | | 15,117 | | 14,090 | | Total current assets | | 260,918 | | 237,999 | | Non-current assets | | | | | | Property and equipment, net | | 61,122 | | 63,776 | | Operating lease right-of-use asset, net | | 37,706 | | 39,755 | | Finance lease right-of-use asset, net | | 23,825 | | 19,643 | | Goodwill | | 468,981 | | 467,789 | | Other intangible assets, net | | 139,844 | | 152,756 | | Other assets | | 5,688 | | 8,635 | | Total assets | $ | 998,084 | $ | 990,353 | | Liabilities, Convertible and Redeemable Series A-2 Preferred Stock and Stockholders' | | | | | | Equity | | | | | | Current liabilities | | | | | | Accounts payable and other accrued liabilities | $ | 66,647 | $ | 63,704 | | Accrued payroll and benefits | | 37,305 | | 34,248 | | Business acquisitions contingent consideration, current | | 17,284 | | 26,872 | | Current portion of operating lease liabilities | | 11,355 | | 11,345 | | Current portion of finance lease liabilities | | 5,483 | | 4,627 | | Current portion of long-term debt | | 8,688 | | 17,866 | | Total current liabilities | | 146,762 | | 158,662 | | Non-current liabilities | | | | | | Business acquisitions contingent consideration, long-term | | 7,346 | | 6,255 | | Other non-current liabilities | | 7,052 | | 5,550 | | Deferred tax liabilities, net | | 16,414 | | 13,312 | | Conversion option related to Series A-2 Preferred Stock | | 10,552 | | 20,224 | | Operating lease liability, net of current portion | | 28,853 | | 30,880 | | Finance lease liability, net of current portion | | 12,490 | | 11,460 | | Long-term debt, net of deferred financing fees | | 264,555 | | 204,818 | | Total liabilities | $ | 494,024 | $ | 451,161 | | Commitments and contingencies | | | | | | Convertible and redeemable series A-2 preferred stock $0.0001 par value | | | | | | Authorized, issued and outstanding shares: 5,834 and 11,667 at June 30, 2025 and December 31, | | | | | | 2024, respectively; aggregate liquidation preference of $62.2 million and $122.2 million June | | 33,792 | | 92,928 | | 30, 2025 and December 31, 2024, respectively | | | | | | Stockholders' equity: | | | | | | Common stock, $0.000004 par value; authorized shares: 190,000,000 at June 30, 2025 and | | | | | | December 31, 2024; issued and outstanding shares: 35,272,236 and 34,309,788 at June 30, | | — | | — | | 2025 and December 31, 2024, respectively | | | | | | Additional paid-in-capital | | 747,685 | | 721,067 | | Accumulated deficit | | (273,673) | | (272,670) | | Accumulated other comprehensive loss | | (3,744) | | (2,133) | | Total stockholders' equity | | 470,268 | | 446,264 | | Total liabilities, convertible and redeemable series A-2 preferred stock and stockholders' equity | $ | 998,084 | $ | 990,353 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Statements%20of%20Cash%20Flows) This section presents the unaudited condensed consolidated statements of cash flows for Montrose Environmental Group, Inc. for the six months ended June 30, 2025 and 2024, detailing cash flows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (In thousands) | | | | For the Six Months Ended June 30, | | | --- | --- | --- | --- | --- | | | | 2025 | | 2024 | | Operating activities: | | | | | | Net loss | $ | (1,003) | $ | (23,527) | | Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | Provision (recovery) for credit loss | | 5,482 | | (659) | | Depreciation and amortization | | 26,057 | | 24,168 | | Non-cash leases expense | | 6,119 | | 5,429 | | Stock-based compensation expense | | 24,557 | | 23,103 | | Fair value changes in financial instruments | | (8,040) | | 905 | | Write off of deferred financing costs | | 913 | | — | | Deferred income taxes | | 3,557 | | 3,152 | | Other operating activities, net | | 1,671 | | 723 | | Changes in operating assets and liabilities, net of acquisitions: | | | | | | Accounts receivable and contract assets | | (27,379) | | (38,021) | | Prepaid expenses and other current assets | | (1,124) | | (1,152) | | Accounts payable and other accrued liabilities | | (793) | | (938) | | Accrued payroll and benefits | | 3,057 | | (7,940) | | Change in operating leases | | (5,676) | | (6,306) | | Other assets | | — | | (64) | | Net cash provided by (used in) operating activities | $ | 27,398 | $ | (21,127) | | Investing activities: | | | | | | Proceeds from corporate owned and property insurance | | — | | 120 | | Purchases of property and equipment | | (5,117) | | (17,928) | | Proceeds from the sale of property and equipment | | 39 | | 2,069 | | Proprietary software development and other software costs | | (2,804) | | (1,736) | | Purchase price true ups | | (50) | | — | | Minority investments | | — | | (210) | | Cash paid for acquisitions, net of cash acquired | | — | | (70,252) | | Net cash used in investing activities | $ | (7,932) | $ | (87,937) | | Financing activities: | | | | | | Proceeds from revolving line of credit | | 216,025 | | 202,771 | | Repayment of the revolving line of credit | | (174,671) | | (199,119) | | Repayment of aircraft loan | | (564) | | (526) | | Proceeds from term loan | | 200,000 | | 50,000 | | Repayment of term loan | | (189,219) | | (3,906) | | Payment of contingent consideration and other purchase price true ups | | (4,400) | | (525) | | Repayment of finance leases | | (6,070) | | (3,105) | | Payments of deferred financing costs | | (2,189) | | (348) | | Proceeds from issuance of common stock for exercised stock options | | 77 | | 1,375 | | Proceeds from issuance of common stock in follow-on offering, net of issuance costs | | — | | 121,776 | | Proceeds from building sale leaseback | | 2,500 | | — | | Dividend payment to the series A-2 stockholders | | (2,750) | | (5,564) | | Redemption of series A-2 preferred stock | | (60,000) | | (60,000) | | Net cash provided by (used in) financing activities | $ | (21,261) | $ | 102,829 | | Change in cash, cash equivalents and restricted cash | | (1,795) | | (6,235) | | Foreign exchange impact on cash balance | | (656) | | (100) | | Cash, cash equivalents and restricted cash: | | | | | | Beginning of year | | 12,935 | | 23,240 | | End of period | $ | 10,484 | $ | 16,905 |

Our latest available data shows that MEG has returned about 10.9% since the start of the calendar year. Meanwhile, the Business Services sector has returned an average of -1.2% on a year-to-date basis. This shows that Montrose Environmental is outperforming its peers so far this year. One other Business Services stock that has outperformed the sector so far this year is Nomura Research Institute (NRILY) . The stock is up 38.4% year-to-date. The Business Services group has plenty of great stocks, but investo ...

Group 1 - Montrose Environmental (MEG) shares have increased by 2.1% over the past four weeks, closing at $22.39, with a mean price target of $29.4 indicating a potential upside of 31.3% [1] - The mean estimate consists of five short-term price targets with a standard deviation of $4.83, where the lowest estimate is $24.00 (7.2% increase) and the highest is $35.00 (56.3% increase) [2] - Analysts show a consensus that MEG will report better earnings than previously estimated, which is a positive indicator for potential stock upside [4][11] Group 2 - The Zacks Consensus Estimate for MEG has increased by 4.7% due to two upward revisions in earnings estimates over the last 30 days, with no negative revisions [12] - MEG holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate factors, suggesting strong potential for near-term upside [13] - While consensus price targets may not be reliable for predicting the extent of MEG's gains, they can provide a directional guide for price movement [14]

Core Viewpoint - Montrose Environmental (MEG) has shown a slight increase in share price, but analysts suggest there is significant upside potential based on price targets and earnings estimates [1][11]. Price Targets - The mean price target for MEG is $28.83, indicating a potential upside of 25.4% from the current price of $22.99 [1]. - Price targets from analysts range from a low of $18.00 to a high of $35.00, with a standard deviation of $6.55, reflecting variability in estimates [2]. - The lowest estimate suggests a decline of 21.7%, while the highest indicates a potential upside of 52.2% [2]. Analyst Consensus and Earnings Estimates - Analysts have shown increasing optimism regarding MEG's earnings prospects, with a strong agreement in revising EPS estimates higher [11]. - Over the last 30 days, the Zacks Consensus Estimate for the current year has increased by 4.7%, with one estimate moving higher and no negative revisions [12]. - MEG holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates [13]. Caution on Price Targets - Solely relying on consensus price targets for investment decisions may not be prudent, as analysts' ability to set accurate targets has been questioned [3][10]. - Analysts often set optimistic price targets influenced by business relationships, which can lead to inflated estimates [8]. - A low standard deviation among price targets indicates a high degree of agreement among analysts, which can be a starting point for further research [9].

Core Viewpoint - Montrose Environmental (MEG) has been upgraded to a Zacks Rank 1 (Strong Buy), indicating a positive outlook driven by an upward trend in earnings estimates [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system emphasizes the importance of earnings estimate revisions, which are strongly correlated with near-term stock price movements [4][6]. - Institutional investors often rely on earnings estimates to determine the fair value of stocks, leading to significant buying or selling actions that affect stock prices [4]. Company Performance Indicators - Montrose Environmental is projected to earn $0.94 per share for the fiscal year ending December 2025, showing no year-over-year change [8]. - Over the past three months, the Zacks Consensus Estimate for Montrose Environmental has increased by 143%, reflecting a positive trend in earnings outlook [8]. Zacks Rating System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - Only the top 5% of Zacks-covered stocks receive a "Strong Buy" rating, indicating superior earnings estimate revisions and potential for market-beating returns [9][10].

Core Viewpoint - Strathcona Resources Ltd. has successfully closed its Montney asset sales for a total value of approximately $2.86 billion, transitioning to a pure-play heavy oil company with plans for significant production growth by 2031 [1][2]. Group 1: Asset Sales and Financial Position - The total value of the Montney asset sales is approximately $2.86 billion, including closing adjustments, with the Groundbirch asset sale closing on June 1, 2025, and the Kakwa and Grande Prairie assets closing on July 2, 2025 [1][6]. - Strathcona is now producing approximately 120 Mbbls/d (100% oil) and aims to grow production to 195 Mbbls/d by 2031, supported by a 50-year 2P reserves life index [2][20]. - The company currently holds approximately $200 million in positive net cash and marketable securities after debt deductions, which includes shares in Tourmaline Oil Corp. and MEG Energy Corp. [2][13]. Group 2: Strategic Alternatives and Engagement with MEG - Strathcona expressed disappointment over the MEG Board's lack of dialogue regarding its original offer submitted on April 28, 2025, despite the board's decision to pursue a strategic alternatives process [3][4]. - Feedback from MEG shareholders indicates a desire for the MEG Board to engage with Strathcona to explore mutually beneficial outcomes [4][20]. - Strathcona remains committed to engaging with MEG shareholders ahead of the September 15 tender deadline for its offer to acquire MEG shares [4][7]. Group 3: Company Overview - Strathcona is recognized as one of North America's fastest-growing oil and gas producers, focusing on thermal oil and enhanced oil recovery through innovative growth strategies [5]. - The company's common shares are listed on the Toronto Stock Exchange under the symbol SCR [5].