Montrose Environmental Group, Inc.

Hello, and welcome to the Montrose Environmental Group, Inc. First Quarter 2023 Earnings Call. All participants will be in listen-only mode. Should you need assistance, please seek the World Conference Specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note, today's event is being recorded. I now would like to turn the conference over to your host today, Marty Nassier, Investor Relations. Please go ahead, sir.

Thank you, Operator. Welcome to our first quarter 2023 earnings call. Joining me on the call are Vijay Manthari-Pragada, our President and Chief Executive Officer, and Alan Dix, Chief Financial Officer. During our discussion today, we will be referring to our presentation, which is available on the Investors section of our 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, 2022, 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 consolidated adjusted EBITDA, adjusted net income, and adjusted net income per share. 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 the 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 joining us today. I will provide you with business highlights, Alan will provide you with financial highlights, and we will then open it up to Q&A. I will speak generally to the first quarter earnings presentation shared on our website. But before I begin, I would like to reiterate that our business is best assessed on an annual basis, given the nature of demand for environmental services is not driven by quarterly patterns. This is how we manage our business and how we recommend you view our results as well. I would like to start by highlighting several key themes from our first quarter 2023 results. As I note each quarter, Montrose's successes and our Q1 2023 successes belong to our over 3,000 colleagues around the world. It is because of them that we collectively get to create and benefit from the value that's being created. The first theme is that regulatory tailwinds are substantive and sustained. Our business and integrated approach to environmental solutions are benefiting from growing demand across most of our service lines. In Q1, our advisory services, our air measurement services, and our environmental lab services all saw strong demand, particularly with greenhouse gas measurement and mitigation. And though there is some expected and planned moderation in our remediation and reuse segment given the incredible organic surge last year, we see sustained tailwinds for our ECT2 brand, our PFAS water treatment and renewable energy services, and we continue to believe their trajectory will be very attractive over the coming years. The second theme is absolute EBITDA, which manifested via profitability and EBITDA margins. We will discuss why it is important to anchor on absolute EBITDA dollars, but given questions from our product conversations with you, we will also highlight margins this morning. Our operating segment adjusted EBITDA margin increased approximately 2% year over year. Our margin improvements include the benefits of pricing initiatives, which we highlighted for you last year. And despite continued and important investments in our business, like with research and development, our total consolidated EBITDA margins also increased even before adjusting for discontinued services and other factors. Including those factors, our consolidated adjusted EBITDA margins increased approximately 1.5%. The third theme is that the CTEH COVID-19 services, which were economically additive but difficult to explain to you, our investors, are effectively behind us. CTEH is back to providing various environmental response services, and the team has been working hard to support our clients with several high-profile responses this year. The fourth theme is acquisitions. We reduced our cadence of acquisitions last year given our 25% plus organic growth surge, but the M&A pipeline continued to build, so we expect to harvest that over the course of this year. The transactions remain very creative strategically and financially. I'm thrilled with the caliber of the teams that have joined us so far, with how they have already fit right in, and with the opportunities they present. Finally, we always noted that we are largely insulated from political and economic swings, and we continue to demonstrate that each year. Not only is our business strong, as you can see from Q1 results, our balance sheet and cash flow remain very strong as well. Our acquisitions to date have been funded largely through our cash flow from operations and our balance sheet remains hedged against rising interest rates, which gives us ample flexibility to continue consolidating our industry and investing in our environmental technology advantages. I will now discuss our first quarter performance by segment. Within our assessment permitting and response segment, we were pleased to see solid organic revenue growth as well as the positive contributions from our acquisitions. Margins in this segment were higher year over year for two reasons, organic growth in our advisory services, and two, CTEH's shift away from COVID-19 related revenues. We expect organic growth and acquisitions will be a meaningful part of this segment's narrative over the coming quarters. Within the measurement and analysis segment, demand for our testing services continues to be robust due to public and shareholder interest and growing political will regarding environmental solutions with greenhouse gas measurement and mitigation, for example. We remain upbeat about continued organic growth in this segment. Annual margins in this segment are expected to remain in the high teens to 20-ish percent, which is where we've always expected them to be. Within our remediation and reuse segment, The year-over-year quarterly decline in revenues, and therefore EBITDA for this segment, were expected given the initiation and conclusion of various large water or renewable energy projects. Quarterly trends are not a meaningful reflection of the trends with our water and renewable services within our ECT2 brand, and we remain very bullish on the opportunity for ECT2 over the coming years. Many of our recent R&D successes and patent awards, which represent growing barriers to entry differentiation in the marketplace, and exciting organic growth opportunities for Montrose and our shareholders are in this segment. We look forward to what we believe will be a very exciting trajectory for this segment over the coming quarters. I will now discuss a few recent regulatory updates and industry trends that support our long-term growth outlook. The US EPA continues to focus on PFAS and recently issued an advance notice of their intent to designate seven more PFAS chemicals to the list of hazardous substances, which triggers reporting and remediation needs, including potential Superfund cleanup status. We expect this action will drive demand across the Montrose portfolio. With regards to methane emissions, the EPA is pursuing high-profile enforcement actions against some of the largest players in the energy industry to reduce releases and increase leak detection frequency. We are working with our clients across our emissions measuring, monitoring, and assessment services. Regarding demand for our environmental consulting services, in April, President Biden signed a new executive order to better protect certain communities from pollution and environmental harm. The EPA has been stepping up enforcement of environmental justice matters, and we anticipate this will drive increased demand for our advisory and testing services, with a primary emphasis on air quality testing. As evident in these recent actions and those we've discussed over the past several quarters, momentum for environmental protection continues to grow. The needs of our clients due to these announcements are very complementary to our existing service offerings, and we believe Montrose is exceptionally well positioned to assist our clients in navigating the rapidly evolving regulatory landscape. So in summary, I want to thank our colleagues around the world for all they've contributed to our business. and for the exceptional work they do for our clients each and every day. I remain incredibly grateful to all of you and thank you. As a result of our Q1 2023 results and the momentum in our business into the second quarter, we are increasing our full year 2023 EBITDA outlook, which Alan will expand upon shortly. We remain as optimistic as ever in our ability to solve environmental challenges and problems and create value for our shareholders and all of our stakeholders. With that, let me hand it over to Alan. Thank you.