- Revenue Increases 28.9% with Continued Margin
Expansion - - Net Loss of $(7.5) Million; Consolidated Adjusted
EBITDA1 Increases 36.2% to $23.3 Million - - Significant Increase
in Cash Flow from Operations -
Montrose Environmental Group, Inc. (the “Company,” “Montrose” or
“MEG”) (NYSE: MEG) today announced results for the third quarter
ended September 30, 2023.
Montrose Chief Executive Officer and Director, Vijay
Manthripragada, commented, “We are proud to report another quarter
of exceptional results. The surge in organic growth across many of
our service lines and the contribution from the Matrix acquisition
in Canada helped drive record levels of quarterly revenue and
Consolidated Adjusted EBITDA1. We are particularly pleased with the
continued improvement in our margin profile and robust operating
cash flow generation, which validate the strategic portfolio shift
in our Remediation and Reuse segment, our pricing strategy, and the
ongoing integration of the Matrix team. Our recent acquisitions
have been very additive and continue to provide scale, expertise
and geographic reach.”
Mr. Manthripragada continued, “As we look to the full year 2023,
we are reiterating Revenue and Consolidated Adjusted EBITDA1
guidance. The regulatory landscape, with new and pending rules on
methane leak detection and air emissions standards, continues to
generate tailwinds. Additionally, the private sector’s commitment
to environmental stewardship and resiliency, through initiatives
such as net-zero commitments and environmental justice, is creating
opportunities throughout our comprehensive service offerings. Our
history has shown that our business is resilient across economic
and political cycles and despite a very challenging macro-economic
backdrop, our teams continue to deliver as we have shown all year.
We remain very optimistic about our outlook and incredibly grateful
to all of our colleagues around the world.”
________________________________
(1)
Consolidated Adjusted EBITDA, Adjusted Net
Income (Loss) and Adjusted Net Income (Loss) per Share are non-GAAP
measures. See the appendix to this release for a discussion of
these measures, including how they are calculated and the reasons
why we believe they provide useful information to investors, and a
reconciliation for historical periods to the most directly
comparable GAAP measures.
Third Quarter 2023 Results
Total revenue in the third quarter of 2023 was $167.9 million
compared to $130.3 million in the prior year quarter, an increase
of 28.9%. The increase in revenues was primarily due to the
acquisition of Matrix, organic growth in the Assessment, Permitting
and Response segment, organic growth in the Measurement and
Analysis segment, and an increase in CTEH revenues, partially
offset by lower revenues in a specialty lab that is being
discontinued and our Remediation and Reuse segment driven by the
timing of projects and a strategic shift in our biogas business to
focus on higher margin services. Excluding revenue from the legacy
O&M contracts, and the specialty lab being discontinued, of
$2.0 million and $4.6 million, in the third quarters of 2023 and
2022, respectively, revenue in the third quarter of 2023 was $165.9
million compared to $125.7 million in the prior year quarter, an
increase of 32.0% over the prior year period.
Net loss was $(7.5) million, or a loss of $(0.39) per share, in
the third quarter of 2023 compared to a net loss of $(5.7) million,
or a loss of $(0.33) per share, in the prior year quarter. The
year-over-year increase was primarily attributable to an increase
in the fair value adjustment on our Series A-2 preferred stock in
the current year, compared to a fair value gain on our interest
rate swap in the prior year, as well as a higher interest and tax
expense in the current year, partially offset by improved operating
performance.
Adjusted Net Income1 was $9.4 million, and Adjusted Net Income
per Share1 was $0.18, in the third quarter of 2023 compared to
Adjusted Net Income1 of $7.8 million, and Adjusted Net Income per
Share1 of $0.12 in the prior year quarter. The year-over-year
increase was primarily attributable to an increase in revenues.
Third quarter 2023 Consolidated Adjusted EBITDA1 was $23.3
million, representing 13.9% of revenue, compared to $17.1 million
or 13.1% of revenue in the prior year quarter, primarily due to
higher revenues driven by organic growth and acquisitions.
First Nine Months 2023 Results
Total revenue in the first nine months of 2023 increased 13.2%
to $458.5 million compared to $404.9 million in the prior year
period. The increase in revenues was primarily due to organic
growth in the Assessment, Permitting and Response, organic growth
in the Measurement and Analysis segment, an increase in CTEH
revenues, and the contributions of acquisitions completed since the
beginning of 2022, partially offset primarily by lower revenues in
a specialty lab that is being discontinued and our Remediation and
Reuse segment driven by the timing of projects and a strategic
shift in our biogas business to focus on higher margin services.
Excluding revenue from the legacy O&M contracts, and the
specialty lab being discontinued, of $5.9 million and $16.0
million, in the nine-month periods of 2023 and 2022, respectively,
revenue in the first nine months of 2023 was $452.6 million
compared to $388.9 million in the prior year, an increase of 16.4%
over the prior year period.
Net loss was $(29.4) million, or $(1.39) per share, in the first
nine months of 2023 compared to a net loss of $(21.0) million, or
$(1.12) per share, in the prior year period. The year-over-year
change was primarily attributable to changes in the fair value of
business acquisition contingencies, the net impact of fair value
adjustments related to our Series A-2 preferred stock conversion
option and interest rate swaps in the current year compared to the
prior year, as well as higher interest expense and higher
stock-based compensation in the current year.
Adjusted Net Income1 was $21.6 million, and Adjusted Net Income
per Share1 was $0.31, in the first nine months of 2023 compared to
Adjusted Net Income1 of $18.7 million, and Adjusted Net Income per
Share1 of $0.22, in the prior year period.
Consolidated Adjusted EBITDA1 for the first nine months of 2023
was $61.1 million, representing 13.3% of revenue, compared to $48.4
million, or 12.0% of revenue, in the prior year period, an increase
of 26.3%. The increase in Adjusted Net Income1, Adjusted Net Income
per Share1, and Consolidated Adjusted EBITDA1 was primarily due to
higher revenues.
Operating Cash Flow, Liquidity and Capital Resources
Cash provided by operating activities for the first nine months
ended September 30, 2023 was $41.5 million compared to cash
provided by operating activities of $8.2 million in the prior year
period, an increase of $33.3 million, or 407.9%. Cash flow from
operations includes payment of contingent consideration of $0.6
million and $19.5 million in the current and prior year periods,
respectively. Excluding these acquisition-related contingent
earnout payments, which are not part of day-to-day operations, cash
flow from operating activities was $42.1 million compared to $27.7
million in the prior year period, an increase of $14.4 million, or
52.0%.
As of September 30, 2023, we had total debt, before debt
issuance costs, of $168.1 million and $148.2 million of liquidity,
including $23.2 million of cash and $125.0 million of availability
on our revolving credit facility. At our current leverage ratio and
inclusive of our fixed rate on $170.0 million of debt under our
interest rate swaps, our weighted average interest rate was 4.4% as
of September 30, 2023.
As of September 30, 2023, Montrose’s leverage ratio under its
credit facility, which includes recently completed acquisitions and
acquisition-related contingent earnout payments that may become
payable in cash, was 1.9 times.
Full Year 2023 Outlook
The Company reiterates its full year 2023 Revenue and
Consolidated Adjusted EBITDA1 outlook. The Company expects Revenue
to be in the range of $590 million to $640 million. Consolidated
Adjusted EBITDA1 is expected to be in the range of $75 million to
$81 million for the full year 2023.
The revenue and Consolidated Adjusted EBITDA1 outlook does not
include any benefit from future acquisitions that have not yet been
completed.
Webcast and Conference Call
The Company will host a webcast and conference call on
Wednesday, November 8, 2023 at 8:30 a.m. Eastern time to discuss
third quarter financial results. Their prepared remarks will be
followed by a question and answer session. A live webcast of the
conference call will be available in the Investors section of the
Montrose website at www.montrose-env.com. The conference call will
also be accessible by dialing 1-844-826-3035 (Domestic) and
1-412-317-5195 (International). For those who are unable to listen
to the live broadcast, an audio replay of the conference call will
be available on the Montrose website for 30 days.
About Montrose
Montrose is a leading environmental solutions company focused on
supporting commercial and government organizations as they deal
with the challenges of today, and prepare for what’s coming
tomorrow. With approximately 3,500 employees across more than 90+
locations around the world, Montrose combines deep local knowledge
with an integrated approach to design, engineering, and operations,
enabling Montrose to respond effectively and efficiently to the
unique requirements of each project. From comprehensive air
measurement and laboratory services to regulatory compliance,
emergency response, permitting, engineering, and remediation,
Montrose delivers innovative and practical solutions that keep its
clients on top of their immediate needs – and well ahead of the
strategic curve. For more information, visit
www.montrose-env.com.
Forward‐Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements may be identified by the use of
words such as “intend,” “expect”, and “may”, and other similar
expressions that predict or indicate future events or that are not
statements of historical matters. Forward-looking statements are
based on current information available at the time the statements
are made and on management’s reasonable belief or expectations with
respect to future events, and are subject to risks and
uncertainties, many of which are beyond the Company’s control, that
could cause actual performance or results to differ materially from
the belief or expectations expressed in or suggested by the
forward-looking statements. Additional factors or events that could
cause actual results to differ may also emerge from time to time,
and it is not possible for the Company to predict all of them.
Forward-looking statements speak only as of the date on which they
are made, and the Company undertakes no obligation to update any
forward-looking statement to reflect future events, developments or
otherwise, except as may be required by applicable law. Investors
are referred to the Company’s filings with the Securities and
Exchange Commission, including its Annual Report on Form 10-K for
the year ended December 31, 2022, for additional information
regarding the risks and uncertainties that may cause actual results
to differ materially from those expressed in any forward-looking
statement.
MONTROSE ENVIRONMENTAL GROUP,
INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
(In thousands, except per
share data)
Three Months Ended September
30,
For the Nine Months Ended
September 30,
2023
2022
2023
2022
REVENUES
$
167,937
$
130,312
$
458,466
$
404,902
COST OF REVENUES (exclusive of
depreciation and amortization shown below)
102,155
82,234
281,984
261,049
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE
56,901
42,857
161,761
131,120
FAIR VALUE CHANGES IN BUSINESS
ACQUISITIONS CONTINGENT CONSIDERATION
459
59
414
(3,472
)
DEPRECIATION AND AMORTIZATION
11,863
11,504
33,816
35,928
LOSS FROM OPERATIONS
(3,441
)
(6,342
)
(19,509
)
(19,723
)
OTHER (EXPENSE) INCOME
Other (expense) income —net
(671
)
1,814
(1,560
)
4,618
Interest expense—net
(2,089
)
(1,400
)
(5,507
)
(4,010
)
Total other (expense) income—net
(2,760
)
414
(7,067
)
608
LOSS BEFORE EXPENSE (BENEFIT) FROM INCOME
TAXES
(6,201
)
(5,928
)
(26,576
)
(19,115
)
INCOME TAX EXPENSE (BENEFIT)
1,324
(208
)
2,842
1,892
NET LOSS
$
(7,525
)
$
(5,720
)
$
(29,418
)
$
(21,007
)
EQUITY ADJUSTMENT FROM FOREIGN CURRENCY
TRANSLATION
(198
)
20
(304
)
17
COMPREHENSIVE LOSS
(7,723
)
(5,700
)
(29,722
)
(20,990
)
CONVERTIBLE AND REDEEMABLE SERIES A-2
PREFERRED STOCK DIVIDEND
(4,100
)
(4,100
)
(12,300
)
(12,300
)
NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS
(11,625
)
(9,820
)
(41,718
)
(33,307
)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING— BASIC AND DILUTED
30,143
29,691
30,016
29,677
NET LOSS PER SHARE ATTRIBUTABLE TO
COMMON STOCKHOLDERS— BASIC AND DILUTED
$
(0.39
)
$
(0.33
)
$
(1.39
)
$
(1.12
)
MONTROSE ENVIRONMENTAL GROUP,
INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands, except share
data)
September 30, 2023
December 31, 2022
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and restricted
cash
$
23,184
$
89,828
Accounts receivable—net
117,375
94,711
Contract assets
57,081
52,403
Prepaid and other current assets
15,419
10,986
Total current assets
213,059
247,928
NON-CURRENT ASSETS:
Property and equipment—net
57,967
36,045
Operating lease right-of-use asset—net
35,795
26,038
Finance lease right-of-use asset—net
12,635
9,840
Goodwill
356,399
323,868
Other intangible assets—net
151,577
142,107
Other assets
8,676
6,088
TOTAL ASSETS
$
836,108
$
791,914
LIABILITIES, CONVERTIBLE AND REDEEMABLE
SERIES A-2 PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued
liabilities
70,810
63,412
Accrued payroll and benefits
31,286
20,528
Business acquisitions contingent
consideration, current
3,239
3,801
Current portion of operating lease
liabilities
11,190
7,895
Current portion of finance lease
liabilities
4,127
3,775
Current portion of long-term debt
14,177
12,031
Total current liabilities
134,829
111,442
NON-CURRENT LIABILITIES:
Business acquisitions contingent
consideration, long-term
3,130
4,454
Other non-current liabilities
91
13
Deferred tax liabilities—net
10,034
5,742
Conversion option
27,828
25,731
Operating lease liability—net of current
portion
31,329
19,437
Finance lease liability—net of current
portion
8,482
6,486
Long-term debt—net of deferred financing
fees
152,556
152,494
Total liabilities
$
368,279
$
325,799
COMMITMENTS AND CONTINGENCIES
CONVERTIBLE AND REDEEMABLE SERIES A-2
PREFERRED STOCK $0.0001 PAR VALUE—
Authorized, issued and outstanding shares:
17,500 at September 30, 2023 and December 31, 2022; aggregate
liquidation preference of $182.2 million at September 30, 2023 and
December 31, 2022
152,928
152,928
STOCKHOLDERS’ EQUITY:
Common stock, $0.000004 par value;
authorized shares: 190,000,000 at September 30, 2023 and December
31, 2022; issued and outstanding shares: 30,167,657 and 29,746,793
at September 30, 2023 and December 31, 2022, respectively
—
—
Additional paid-in-capital
524,112
492,676
Accumulated deficit
(208,915
)
(179,497
)
Accumulated other comprehensive (loss)
income
(296
)
8
Total stockholders’ equity
314,901
313,187
TOTAL LIABILITIES, CONVERTIBLE AND
REDEEMABLE SERIES A-2 PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
$
836,108
$
791,914
MONTROSE ENVIRONMENTAL GROUP,
INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Nine Months Ended
September 30,
2023
2022
OPERATING ACTIVITIES:
Net loss
$
(29,418
)
$
(21,007
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Provision (recovery) for bad debt
788
(821
)
Depreciation and amortization
33,816
35,928
Amortization of right-of-use asset
7,667
6,934
Stock-based compensation expense
35,609
32,375
Fair value changes in financial
instruments
1,814
(4,664
)
Fair value changes in business acquisition
contingencies
414
(3,472
)
Deferred income taxes
2,842
1,892
Other
1,201
460
Changes in operating assets and
liabilities—net of acquisitions:
Accounts receivable and contract
assets
(9,538
)
7,301
Prepaid expenses and other current
assets
(907
)
(1,364
)
Accounts payable and other accrued
liabilities
(772
)
(12,943
)
Accrued payroll and benefits
6,092
(6,363
)
Payment of contingent consideration
(611
)
(19,457
)
Change in operating leases
(7,525
)
(6,634
)
Net cash provided by operating
activities
41,472
8,165
INVESTING ACTIVITIES:
Purchases of property and equipment
(24,969
)
(5,414
)
Proprietary software development and other
software costs
(2,763
)
(397
)
Proceeds from insurance
311
277
Payment of purchase price obligations
(1,027
)
(439
)
Minority investments
(2,347
)
—
Cash paid for acquisitions—net of cash
acquired
(66,187
)
(21,342
)
Net cash used in investing activities
(96,982
)
(27,315
)
FINANCING ACTIVITIES:
Proceeds from the aircraft loan
10,935
—
Repayment of aircraft loan
(335
)
—
Repayment of term loan
(8,785
)
(8,751
)
Payment of contingent consideration
(1,535
)
(10,722
)
Repayment of finance leases
(3,378
)
(2,906
)
Proceeds from issuance of common stock for
exercised stock options
4,529
812
Dividend payment to the Series A-2
shareholders
(12,300
)
(12,300
)
Payments of deferred offering costs
—
(183
)
Net cash used in financing activities
(10,869
)
(34,050
)
CHANGE IN CASH, CASH EQUIVALENTS AND
RESTRICTED CASH
(66,379
)
(53,200
)
Foreign exchange impact on cash
balance
(265
)
25
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH:
Beginning of year
89,828
146,741
End of period
$
23,184
$
93,566
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
INFORMATION:
Cash paid for interest
$
4,838
$
4,852
Cash paid for income tax
$
1,374
$
587
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Accrued purchases of property and
equipment
$
1,626
$
881
Property and equipment purchased under
finance leases
$
5,728
$
3,939
Common stock issued to acquire new
businesses
$
2,598
$
—
Acquisitions unpaid contingent
consideration
$
6,369
$
6,777
Acquisitions contingent consideration paid
in shares
$
1,000
$
—
MONTROSE ENVIRONMENTAL GROUP,
INC.
SEGMENT REVENUES AND ADJUSTED
EBITDA
(In thousands)
(Unaudited)
Three Months Ended September
30,
2023
2022
Segment
Segment
Segment
Adjusted
Segment
Adjusted
Revenues
EBITDA(1)
Revenues
EBITDA(5)
Assessment, Permitting and Response
$
57,009
$
14,878
$
46,414
$
9,820
Measurement and Analysis
50,468
(2)
10,352
43,754
(2)
8,483
(4)
Remediation and Reuse
60,460
7,446
40,144
7,010
Total Operating Segments
167,937
32,676
130,312
25,313
Corporate and Other
—
(9,373
)
—
(6,940
)
Total
$
167,937
$
23,303
$
130,312
$
18,373
Nine Months Ended September
30,
2023
2022
Segment
Segment
Segment
Adjusted
Segment
Adjusted
Revenues
EBITDA(1)
Revenues
EBITDA(5)
Assessment, Permitting and Response
$
170,634
$
42,977
$
142,051
$
30,252
Measurement and Analysis
143,050
(3)
27,528
125,739
(3)
21,852
(4)
Remediation and Reuse
144,782
18,767
137,112
22,059
Total Operating Segments
458,466
89,272
404,902
74,163
Corporate and Other
—
(28,175
)
—
(22,826
)
Total
$
458,466
$
61,097
$
404,902
$
51,337
_____________________________________
(1) For purposes of evaluating segment
profit, the Company’s chief operating decision maker reviews
Segment Adjusted EBITDA as a basis for making the decisions to
allocate resources and assess performance. See Note 18 to our
unaudited condensed consolidated financial statements included in
the Company’s Quarterly Report on Form 10-Q.
(2) Includes revenue of $2.0 million and
$3.9 million from the Discontinuing Specialty Lab, for the three
months ended September 30, 2023 and September 30, 2022,
respectively.
(3) Includes revenue of $5.9 million and
$12.9 million from the Discontinuing Specialty Lab, for the nine
months ended September 30, 2023 and September 30, 2022,
respectively.
(4) Includes Adjusted EBITDA loss of
$(0.5) million and $(0.1) million from the Discontinuing Specialty
Lab for the three and nine months ended September 30, 2022,
respectively.
(5) Includes the add back of start-up
losses and investment in new services of $1.3 million and $2.9
million for the three and nine months ended September 30, 2022,
respectively.
Non-GAAP Financial Information
In addition to our results under GAAP, in this release we also
present certain other supplemental financial measures of financial
performance that are not required by, or presented in accordance
with, GAAP, including, Consolidated Adjusted EBITDA, Adjusted Net
Income (Loss) and Adjusted Net Income (Loss) per Share. We
calculate Consolidated Adjusted EBITDA as net income (loss) before
interest expense, income tax expense (benefit) and depreciation and
amortization, adjusted for the impact of certain other items,
including stock-based compensation expense and acquisition-related
costs, as set forth in greater detail in the table below. We
calculate Adjusted Net Income (Loss) as net income (loss) before
amortization of intangible assets, stock-based compensation
expense, fair value changes to financial instruments and contingent
earnouts, discontinuing specialty lab, and other gain or losses, as
set forth in greater detail in the table below. Adjusted Net Income
(Loss) per Share represents Adjusted Net Income (Loss) attributable
to stockholders divided by the weighted average number of shares of
common stock outstanding during the applicable period.
Consolidated Adjusted EBITDA is one of the primary metrics used
by management to evaluate our financial performance and compare it
to that of our peers, evaluate the effectiveness of our business
strategies, make budgeting and capital allocation decisions and in
connection with our executive incentive compensation. Adjusted Net
Income (Loss) and Adjusted Net Income (Loss) per Share are useful
metrics to evaluate ongoing business performance after interest and
tax. These measures are also frequently used by analysts, investors
and other interested parties to evaluate companies in our industry.
Further, we believe they are helpful in highlighting trends in our
operating results because they allow for more consistent
comparisons of financial performance between periods by excluding
gains and losses that are non-operational in nature or outside the
control of management, and, in the case of Consolidated Adjusted
EBITDA, by excluding items that may differ significantly depending
on long-term strategic decisions regarding capital structure, the
tax jurisdictions in which we operate and capital investments.
These non-GAAP measures do, however, have certain limitations
and should not be considered as an alternative to net income
(loss), earnings (loss) per share or any other performance measure
derived in accordance with GAAP. Our presentation of Consolidated
Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted Net Income
(Loss) per Share should not be construed as an inference that our
future results will be unaffected by unusual or non-recurring items
for which we may make adjustments. In addition, Consolidated
Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted Net Income
(Loss) per Share may not be comparable to similarly titled measures
used by other companies in our industry or across different
industries, and other companies may not present these or similar
measures. Management compensates for these limitations by using
these measures as supplemental financial metrics and in conjunction
with our results prepared in accordance with GAAP. We encourage
investors and others to review our financial information in its
entirety, not to rely on any single measure and to view
Consolidated Adjusted EBITDA, Adjusted Net Income (Loss) and
Adjusted Net Income (Loss) per Share in conjunction with the
related GAAP measures.
Additionally, we have provided estimates regarding Consolidated
Adjusted EBITDA for 2023. These projections account for estimates
of revenue, operating margins and corporate and other costs.
However, we cannot reconcile our projection of Consolidated
Adjusted EBITDA to net income (loss), the most directly comparable
GAAP measure, without unreasonable efforts because of the
unpredictable or unknown nature of certain significant items
excluded from Consolidated Adjusted EBITDA and the resulting
difficulty in quantifying the amounts thereof that are necessary to
estimate net income (loss). Specifically, we are unable to estimate
for the future impact of certain items, including income tax
(expense) benefit, stock-based compensation expense, fair value
changes and the accounting for the issuance of the Series A-2
preferred stock. We expect the variability of these items could
have a significant impact on our reported GAAP financial
results.
In this release we also reference our organic growth. We define
organic growth as the change in revenues excluding revenues from
our environmental emergency response business, from acquisitions
for the first twelve months following the date of acquisition and
excluding revenues from businesses held for sale, disposed of or
discontinued. As a result of the potential annual volatility in
CTEH’s revenues due to the emergency response aspect of their
business, we will no longer be including CTEH revenues in the
calculation of organic growth. Management uses organic growth as
one of the means by which it assesses our results of operations.
Organic growth is not, however, a measure of revenue growth
calculated in accordance with U.S. generally accepted accounting
principles, or GAAP, and should be considered in conjunction with
revenue growth calculated in accordance with GAAP. We have grown
organically and expect to continue to do so.
Montrose Environmental Group,
Inc.
Reconciliation of Net Loss to
Adjusted Net Income
(In thousands)
(Unaudited)
Three Months Ended September
30,
For the Nine Months Ended
September 30,
2023
2022
2023
2022
Net loss
$
(7,525
)
$
(5,720
)
$
(29,418
)
$
(21,007
)
Amortization of intangible assets (1)
7,922
8,668
22,512
27,579
Stock-based compensation (2)
11,484
11,018
35,609
32,375
Acquisition costs (3)
1,499
368
4,970
1,354
Fair value changes in financial
instruments (4)
806
(1,808
)
1,814
(4,664
)
Expenses related to financing transactions
(5)
3
—
7
7
Fair value changes in business acquisition
contingencies (6)
459
59
414
(3,472
)
Discontinuing Specialty Lab (7)
1,302
—
5,321
—
Other (gains) losses and expenses (8)
(1
)
482
215
1,965
Tax effect of adjustments (9)
(6,573
)
(5,260
)
(19,841
)
(15,440
)
Adjusted Net Income
$
9,376
$
7,807
$
21,603
$
18,697
Preferred dividends Series A-2
(4,100
)
(4,100
)
(12,300
)
(12,300
)
Adjusted Net Income attributable to
stockholders
$
5,276
$
3,707
$
9,303
$
6,397
Net Loss per share attributable to
stockholders
$
(0.39
)
$
(0.33
)
$
(1.39
)
$
(1.12
)
Adjusted Net Income per share
(10)
$
0.18
$
0.12
$
0.31
$
0.22
Diluted Adjusted Net Income per share
(11)
$
0.14
$
0.10
(a)
$
0.25
$
0.18
(a)
Weighted average common shares
outstanding
30,143
29,691
30,016
29,677
Fully diluted shares
36,952
36,147
(a)
36,640
36,101
(a)
________________________________________
(1) Represents amortization of intangible
assets.
(2) Represents non-cash stock-based
compensation expenses related to (i) option awards issued to
employees, (ii) restricted stock grants issued to directors and
selected employees, (iii) and stock appreciation rights grants
issued to selected employees.
(3) Includes financial and tax diligence,
consulting, legal, valuation, accounting and travel costs and
acquisition-related incentives related to our acquisition
activity.
(4) Amounts relate to the change in fair
value of the interest rate swap instruments and the embedded
derivative attached to the Series A-2 preferred stock.
(5) Amounts represent non-capitalizable
expenses associated with refinancing and amending our debt
facilities.
(6) Amounts reflect the difference between
the expected settlement value of acquisition related earn-out
payments at the time of the closing of acquisitions and the
expected (or actual) value of earn-outs at the end of the relevant
period.
(7) Amounts consist of operating losses
before depreciation related to the lab we are discontinuing.
(8) In 2023 and 2022, amounts include
costs associated the aviation loss and the closing of a lab,
respectively.
(9) Applies Montrose's marginal tax rate
of 28.0% to non-GAAP adjustments above, which are each pre-tax.
(10) Represents Adjusted Net Income
attributable to stockholders divided by the weighted average common
shares outstanding.
(11) Represents Adjusted Net Income
attributable to stockholders divided by fully diluted shares.
(a) Prior period amounts have been
recalculated from amounts originally disclosed using the current
methodology.
Montrose Environmental Group,
Inc.
Reconciliation of Net Loss to
Consolidated Adjusted EBITDA
(In thousands)
(Unaudited)
Three Months Ended September
30,
For the Nine Months Ended
September 30,
2023
2022
2023
2022
Net loss
$
(7,525
)
$
(5,720
)
$
(29,418
)
$
(21,007
)
Interest expense
2,089
1,400
5,507
4,010
Income tax expense (benefit)
1,324
(208
)
2,842
1,892
Depreciation and amortization
11,863
11,504
33,816
35,928
EBITDA
$
7,751
$
6,976
$
12,747
$
20,823
Stock-based compensation (1)
11,484
11,018
35,609
32,375
Acquisition costs (2)
1,499
368
4,970
1,354
Fair value changes in financial
instruments (3)
806
(1,808
)
1,814
(4,664
)
Expenses related to financing transactions
(4)
3
—
7
7
Fair value changes in business acquisition
contingencies (5)
459
59
414
(3,472
)
Discontinuing Specialty Lab (6)
1,302
—
5,321
—
Other (gains) losses and expenses (7)
(1
)
482
215
1,965
Consolidated Adjusted EBITDA
$
23,303
$
17,095
$
61,097
$
48,388
________________________________________
(1) Represents non-cash stock-based
compensation expenses related to (i) option awards issued to
employees, (ii) restricted stock grants issued to directors and
selected employees, (iii) and stock appreciation rights grants
issued to selected employees.
(2) Includes financial and tax diligence,
consulting, legal, valuation, accounting and travel costs and
acquisition-related incentives related to our acquisition
activity.
(3) Amounts relate to the change in fair
value of the interest rate swap instruments and the embedded
derivative attached to the Series A-2 preferred stock.
(4) Amounts represent non-capitalizable
expenses associated with refinancing and amending our debt
facilities.
(5) Reflects the difference between the
expected settlement value of acquisition related earn-out payments
at the time of the closing of acquisitions and the expected (or
actual) value of earn-outs at the end of the relevant period.
(6) Amounts consist of adjusted EBITDA add
backs related to the lab we are discontinuing.
(7) In 2023 and 2022, amounts include
costs associated with the aviation loss and the closing of a lab,
respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231107217964/en/
Investor Relations: Rodny Nacier (949) 988-3383
ir@montrose-env.com
Media Relations: Doug Donsky (646) 361-1427
Montrose@icrinc.com
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