Montrose Environmental(US:MEG)2022-11-13 12:14Financial Data and Key Metrics Changes - Third quarter revenues were $130.3 million, a decrease from $132.6 million in the prior year quarter, primarily due to lower COVID-19 revenue from CTEH, which dropped by $31.1 million [27] - Year-to-date revenues increased by 0.6% to $404.9 million, driven by organic growth in Measurement and Analysis and Remediation and Reuse segments, along with positive contributions from acquisitions [28] - Consolidated adjusted EBITDA for the third quarter was $17.1 million, or 13.1% of revenue, compared to $20.3 million, or 15.3% of revenue in the prior year quarter [29] Business Line Data and Key Metrics Changes - In the Assessment, Permitting and Response segment, revenue decreased to $46.4 million, with adjusted EBITDA at $9.8 million, impacted by lower COVID-19-related services from CTEH [31] - The Measurement and Analysis segment saw a revenue increase of 12.9% to $43.8 million, primarily due to organic growth and acquisitions [33] - The Remediation and Reuse segment experienced a 32% year-over-year revenue increase to $40.1 million, driven by demand for PFAS Water Treatment services [34] Market Data and Key Metrics Changes - The company noted strong demand across most service lines, particularly in PFAS Water Treatment, greenhouse gas measurement, and renewable energy [10] - Regulatory momentum, including EPA proposals regarding PFAS and methane emissions, is expected to create tailwinds across the company's segments [15][16] Company Strategy and Development Direction - The company continues to consolidate its fragmented industry, completing four acquisitions in 2022, with a focus on supporting organic revenue growth [12] - The strategy includes enhancing capabilities in environmental consulting and testing services, with expectations for an acceleration in acquisition cadence in 2023 [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the annual outlook, emphasizing that the business should be evaluated on an annual basis due to the nature of project timing [30] - The company anticipates full-year 2022 revenue in the range of $535 million to $555 million, narrowing from previous guidance [42] Other Important Information - The company reported strong cash flow from operations of $8.2 million year-to-date, with a liquidity position of $93.6 million in cash and $125 million available on its revolving credit facility [39] - The leverage ratio as of September 30, 2022, was at 1.2x, indicating a strong balance sheet [40] Q&A Session Summary Question: Was third quarter revenue in line with internal expectations? - Management confirmed that the third quarter revenue was in line with internal expectations, despite being below consensus [49][50] Question: What is expected for EBITDA margins in the fourth quarter? - Management indicated expectations for sequential margin improvement due to successful pricing initiatives and recovery from earlier disruptions [53] Question: What system challenges has the company faced as it grows? - Management highlighted the implementation of a new ERP system to handle increased complexity and project-oriented work, which has been operating well [55][56] Question: How does labor availability and wage inflation impact pricing? - Management acknowledged tight labor market conditions but expressed confidence in their ability to manage labor costs through disciplined pricing strategies [60][65] Question: Have there been any project delays due to the current environment? - Management reported no significant project delays, noting that natural scheduling variances occur but overall demand remains strong [67] Question: What is the growth trajectory for PFAS and biogas services? - Management indicated strong growth in PFAS Water Treatment and biogas services, with expectations for continued demand driven by regulatory changes [76][78]