Montrose Environmental Group Q4 Earnings Call Highlights

Core Insights - Montrose Environmental Group reported a record year in 2025 with revenue of $830.5 million and consolidated adjusted EBITDA of $116.2 million, marking a 19.3% revenue increase compared to 2024, driven by 12.7% organic growth, exceeding the long-term target of 7% to 9% [3][4][7] Financial Performance - Fourth-quarter revenue rose to $193.3 million from $189.1 million a year earlier, with consolidated adjusted EBITDA at $23.9 million, or 12.4% of revenue, down from 14.4% in the prior-year quarter due to lower margins in specific segments and expenses related to the renewables business [1] - Consolidated adjusted EBITDA increased 21.3% year over year, with the adjusted EBITDA margin expanding to 14% in 2025, representing an improvement of 180 basis points since 2022 [2] Segment Performance - The Assessment, Permitting and Response (APR) segment saw revenue increase by 43% to $307.4 million, with adjusted EBITDA rising to $68.5 million, maintaining a margin of 22.3% [10][11] - The Measurement and Analysis segment's revenue grew 9.6% to $245.9 million, with adjusted EBITDA improving to 26.2% of revenue, a 370 basis point margin expansion [20] - The Remediation and Reuse segment's revenue increased by 7.8% to $277.3 million, although adjusted EBITDA declined to $36.3 million due to losses associated with the renewables wind-down [20] Cash Flow and Balance Sheet - Montrose generated $107 million in operating cash flow, representing a 93% conversion of consolidated adjusted EBITDA, significantly above the long-term target of 50% [6][8] - The company fully redeemed $122 million of preferred stock early, simplifying its capital structure and ending 2025 with a leverage ratio of 2.5x and $225 million in liquidity [9] Growth Opportunities - Management emphasized growth areas such as PFAS, which currently accounts for 10-15% of revenue with expected double-digit growth, and a water treatment total addressable market exceeding $250 billion [5][15] - The company plans to continue investing 1% to 2% of revenue annually in technology and growth capital expenditures while initiating a $40 million share repurchase program [19] 2026 Guidance - Montrose provided 2026 guidance of $840 million to $900 million in revenue and $125 million to $130 million in consolidated adjusted EBITDA, implying approximately 10% adjusted EBITDA growth versus 2025 [16][17] - The company expects revenue to be split evenly between the first and second halves of 2026, with adjusted EBITDA anticipated to be 40% in the first half and 60% in the second half [17][18]