Montrose Environmental Group, Inc.

Thank you for standing by. This is the conference operator. Welcome to the Montrose Environmental Group Inc third quarter 2021 earnings call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Rodney Naussier, Investor Relations. Please go ahead.

Thank you, Operator. Welcome to our third quarter 2021 earnings call. Joining me on the call are Vijay Mantripagada, our President and Chief Executive Officer, and Alan Dix, Chief Financial Officer. During our discussion today, we will be referring to our earnings presentation, which is available on the Investors section of the Montrose Environmental website. Our earnings release is also available on the website. Moving to slide two, I would like to remind everyone that today's call will include forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ in a material way due to known and unknown risks and uncertainties that should be considered in evaluating our operating performance and financial outlook. We refer you to our recent SEC filings, including our annual report on Form 10-K for the fiscal year ended December 31, 2020, which identified the principal risks and uncertainties that could affect any forward-looking statements as well as future performance. We assume no obligation to update any forward-looking statements. In addition, we will be discussing or providing certain non-GAAP financial measures today, including adjusted EBITDA and adjusted EBITDA margins. We provide these non-GAAP results for informational purposes, and they should not be considered in isolation from the most directly comparable GAAP measures. Please see the appendix to the earnings presentation or our earnings release for a discussion of why we believe these non-GAAP measures are useful to investors, certain limitations of using these measures, and a reconciliation thereof to their most directly comparable GAAP measure. With that, I would now like to turn the call over to Vijay, beginning on slide four.

Thank you, Rodney, and welcome to all of you who are joining us today. I'm going to provide you with a few business highlights and then hand it over to Alan Dix for our financial review, and then we'll both open it up to Q&A. I will speak generally to pages four through eight of the presentation that all of you have and that we've shared publicly. And let me start by saying the positive momentum in our business continued with our solid third quarter results. These results are due to the efforts of our team members and who are working tirelessly to serve our clients. And without their efforts and unwavering support of each other, we would not have been able to meet our clients' growing demand for our environmental solutions and achieve another quarter of record results. To all of you from Montrose listening, these results belong to you. Thank you very, very much. As we've discussed on previous calls, I would like to highlight our perspective on quarterly results and how we view our business. Since our environmental services don't map neatly to fiscal quarters, and as we have already demonstrated during our short tenure as a public company, Montrose is best assessed and managed on an annual basis. We manage our business on annual trends and annual expectations, and we urge you to do the same. Given our strong results in the first nine months of 2021, we have already exceeded our previously noted full year 2021 objective of over 20% annual base business revenue growth. And in addition, despite substantial investments to support our continued scaling and the unwinding of COVID related defensiveness that we implemented in 2020, as we shared on earlier updates to you, EBITDA in the first nine months of 2021 is already 10% ahead of all of 2020. As a result, as Alan will talk about shortly, we are again, increasing full-year 2021 guidance. Our quarterly and year-to-date results and increased guidance were driven by factors we've discussed with you before. The first factor is strong organic growth across our service lines, especially those focused on greenhouse gas measurement and mitigation, PFAS treatment, and renewable energy, specifically biogas. And of course, our CTH business continues to perform very well. The second factor is accretive acquisitions that have been completed ahead of plan and a robust set of ongoing investment opportunities. Since our last earnings call in August, we have seen several key trends from our customers and regulators that support our organic growth trajectory and strategic rationale for our recent acquisitions. There is growing momentum in federal and state or provincial regulatory initiatives and the continued private sector emphasis on environmental stewardship across our key markets, and they're expected to drive continued demand for our services. As an example, the US EPA recently announced that it is advancing new methane regulations. These methane proposals would address the production, processing, storage, and transmission for new and existing petroleum infrastructure, covering a much broader swath of the oil and gas industry than before. As another example, a few weeks ago, the US EPA unveiled its plan to address impacts stemming from per- and polyfluoroalkyl, or PFAS, compounds. The EPA's plan further validates Montrose's PFAS measurement and remediation strategy, in other words, our strategy of integration of environmental services, and continues to position our business well. As a third example, we were pleased to see the bipartisan support from Congress on the infrastructure bill. This investment in addressing the infrastructure in the United States with an eye to building climate resilience and managing the impacts of environmental change on our communities is a very welcome update and yet another potential driver of demand for Montrose's services. I've said before that I've been disappointed in the politicization of environmental stewardship, as I believe clean air, water, and soil are universally desired. I'm grateful to our Democratic, Republican, and independent leaders in Congress for coming together on this. We are also pleased to partner with our customers who are proactive about their environmental footprint and expect that corporate responses to greenhouse gases, PFAS remediation, renewable energy, and environmental emergency response will continue to drive demand. Corporations are executing proactively on their environmental stewardship initiatives as boards and investors are increasingly focused on corporate and ESG strategies. Perhaps more than regulation, private sector investment and competition are creating incredible opportunities for the environmental industry to innovate and to serve. While our business model by design is resilient and largely insulated from political swings, our increased optimism is due to the emphasis on environmental stewardship by the private sector and capital markets. It is an exciting time for Montrose, and I'm grateful for the privilege of being on this team. A couple of key themes we wanted to touch on, the first of which is year-to-date growth and segment highlights. I'll point to some year-to-date and LTM numbers to help keep focus on the importance of measuring our performance beyond one quarter. Excluding the impact of discontinued services in the prior year, year-to-date 2021 revenue increased 87%. Our CTH business line continues to perform at elevated levels compared to their annual 75 to 95 million per year in revenue. We were also very pleased to see continued organic growth acceleration in the first nine months of 2021, excluding contributions from CTEH. Q3 2021 adjusted EBITDA on a year-to-date basis grew 64% compared to the prior year period, given our strong revenue growth, and despite ongoing investments and the unwinding of our 2020 pandemic-related defensiveness. This exceptional year-to-date performance has put us on path for another year of record results. Within our assessment permitting and response segment, most of this segment is CTEH. The leadership team at CTEH continues to do a stellar job converting the pandemic response and business continuity advice into long-term strategic contracts with new and large industries, the technology and media and entertainment industries in particular. Their business has been driven by, one, More crises driven by climate change, aging infrastructure, or recently the pandemic. The oil spill in California was yet another crisis where CTH's experience and leading market position came through. Two, their business is driven by a larger market share. The number of strategic MSAs has increased in 2021. And three, their business has been driven by more services. CTH's software, for example, helps states administer responses and is a new source of value to our customers. As it relates to CTH supporting clients through the pandemic, we said last quarter that the revenue surge began to modulate in Q3. We saw elevated demand continue into Q3, but at a slower pace than in the first half of 2021. CTH produced approximately $50 million in revenue in Q3, which is well above their run rate, but below the approximately 70 million per quarter in Q1 and Q2. Demand for their pandemic response support is expected to continue longer than we originally anticipated. Within the segment and excluding CTEH, our higher margin assessment permitting and ecological service businesses are seeing a nice organic growth uptick. Our recent acquisition of environmental intelligence in California better positions us to capture what we believe to be growing demand for fire mitigation and ecosystem services. Within our measurement and analysis segment, the revenue decrease versus Q3 of 2020 was due to postponements of certain projects to the fourth quarter, which is why we keep saying quarterly trends aren't that meaningful. Over the longer term, we remain upbeat about continued growth in this segment, which you will see in the near future. For example, our service and software advantages related to methane measurement and mitigation are seeing strong demand across North America. As another example, demand for our environmental testing and specifically our PFAS analytical services remains very strong. This was our reason for adding Vista Analytical to our portfolio and the team has been great and is doing great. Margins remain much higher than industry averages within this segment and are closer to normal for us, so the expectation of normalization we shared with you is panning out as expected. Within our remediation and reuse segment, we are seeing strong demand for our PFAS water remediation, and it is increasingly enhanced by our R&D team and IP portfolio. We are also seeing strong demand for our waste-to-energy services, particularly our ag waste to biogas business. We find this service line compelling because it should continue to help our farmers create jobs and create negative carbon intensity natural gas for our communities. There are a few other key points of note. Our year-to-date organic growth across a broad swath of our services is validation of our strategy and our investments in our people, our R&D, our software, and our commercialization infrastructure, all of which are core to our capital allocation strategy. While wage inflation and higher turnover continue to be areas of focus or concern in the broader market, our recruitment and retention of experienced professionals remains solid, especially at the director level and above. I'm proud of the positive corporate culture we've built and the exceptional team of talented individuals here at Montrose. Our M&A pipeline remains strong. So far in 2021, we have exceeded our annual goal of acquiring 10 million of annualized EBITDA in line with our previous goals and historical cadence. The recent acquisitions of MSC, Vista, EI, Sensible IoT, and ECI are all accretive. and we are already seeing cross-selling success in several key areas, highlighting the benefits from these acquisitions to Montrose. We were also pleased to complete the acquisition of Horizon Water and Environment earlier this month. It supports our environmental advisory presence on the West Coast and augments our water resource knowledge. I'm very happy to have the Horizon team on our squad, helping us think more proactively about our approach to the water market. So in summary, we continue to outperform, and as you, our shareholders, have gotten to know us over the course of the last 15 months, I hope you can see we are transparent with you and do what we say. We appreciate the time you have given us as our story, our strategy, and our approach don't have many comps or precedents which presents challenges in the context of public markets. Those are also reasons why we remain so excited about our future. This is a great time to be part of creating solutions for the world's environmental challenges. I also wanted to reiterate my gratitude for my team. We thank and acknowledge all of our colleagues around the world and the tremendous work they've done for Montrose. More than anything, the caliber of our talent is the reason Alan and I have confidence in our raised outlook for 2021 and beyond. This market remains very fluent and dynamic, and there are lots of opportunities to allocate capital constructively, so we appreciate your support as we continue to do so. Please stay safe and well out there, and we look forward to closing out a strong 2021 and speaking again with you as we look forward to a great 2022. With that, let me hand it over to Alan. Thank you.