Montrose Environmental Group, Inc.

If you would like to withdraw your question, please press star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Adrienne Griffin, Senior Vice President, Investor Relations and Treasury, to begin the conference. Adrienne, over to you.

Thank you, operator. Welcome to our third quarter 2025 earnings call. Joining me today are Vijay Manpreet Bregada, our President and Chief Executive Officer, and Alan Dix, our Chief Financial Officer. During our prepared remarks today, we will refer to our earnings 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 includes forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to known and unknown risks and uncertainties that should be considered when evaluating our operating performance and financial outlook. We refer you to our recent SEC filings included in our annual report on Form 10-K for the fiscal year ended December 31st, 2024, as supplemented by our quarterly reports on Form 10-Q, which identify the principal risks and uncertainties that could affect any forward-looking statements and our future performance. We assume no obligation to update any forward-looking statements. On today's call, we will discuss or provide certain non-GAAP financial measures, such as consolidated adjusted EBITDA, adjusted net income, adjusted net income per share, and free cash flow. 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 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, Adrienne, and welcome to everyone joining us today. I will provide an update on the strength of our third quarter and year-to-date results, discuss our increased 2025 guidance and the reasons for our more optimistic 2026 outlook, and speak generally about the third quarter presentation shared on our website. Alan will provide the financial highlights and following our prepared remarks, we will host a question and answer session. As we have noted each quarter, our business is best assessed on an annual basis given that demand for environmental science-based solutions doesn't follow consistent quarterly patterns. This is how we manage our business and how we recommend viewing our performance. I want to take a moment to express my sincere appreciation for our approximately 3,500 colleagues around the world. Their exceptional contributions, commitment to exemplary client service, and passion for environmental stewardship and innovation are the cornerstones of Montrose's success. Together, we pursue our mission of For Planet and For Progress. For Planet and For Progress, this means Montrose aims to simultaneously address our universally shared desire for clean water, clean air, and clean soil while creating jobs and increasing shareholder value. We are partnering primarily with our industrial clients across end markets to help them operate more efficiently and reduce their impact on their environment. This is why our revenue and earnings are hitting record levels despite all the political rhetoric. Whether it is working with our energy producing clients to reduce air emissions and costs, whether it is working with our waste industry clients to address water contamination concerns and risks, or whether it is working with technology and semiconductor companies on permitting or water access concerns, our financial results speak to how environmental stewardship can work in concert with development and value creation. This is why our record 2025 continues. From a financial perspective, we achieved our third consecutive quarter of record performance, including free cash flow generation that exceeded expectations. Broad-based client demand for our services is reflected in the 26% revenue growth and 19% consolidated adjusted EBITDA growth in Q3 year over year. As we look at the more meaningful and longer-term financial result trends of year-to-date 2025 results, revenue has increased 26% with very strong double-digit organic revenue growth, and adjusted EBITDA has increased even faster than revenue at 30%, reflecting continued margin accretion of an additional 1% of revenue year over year. This margin accretion is due to both strong organic growth and operating leverage in our consulting, testing and water treatment businesses in particular. Operating and free cash flow have increased meaningfully by 65 million and 77 million year over year, which has allowed us to deliver the balance sheet faster than expected and has increased our flexibility to further invest in our people and our business. In addition, Given our strategic acquisition pause at the start of 2025, which we initiated to clearly demonstrate the underlying power of our business and business model, and we believe that power and strength is apparent from these results, for the second consecutive quarter and year-to-date periods, we reported positive net income and positive gap EPS, which Alan will expand upon in his prepared remarks. I'm very proud of my team for delivering these exceptional results while maintaining their focus on our mission and our clients. As we look forward to the rest of 2025 and to 2026, our optimism remains, and we are thrilled that our financial results continue to clearly show why we are and remain upbeat about our business's prospects. Regarding updates to our guidance, due to our strong year-to-date performance, and based on consistent client feedback about the importance of our services to their operations, we are raising 2025 guidance for the third consecutive quarter. We now expect 2025 revenue to be in the range of 810 to 830 million, and 2025 consolidated adjusted EBITDA to be in the range of 112 to 118 million, which represents an approximately 18% revenue increase and 20% full-year adjusted EBITDA increase at the midpoint over 2024. Given recent questions about the topic, we want to remind you that our exposure to the U.S. federal government remains very modest, well less than approximately 5% of revenue, and that we have not been significantly impacted by the recent U.S. government shutdown. Notably, we observe that state and local governments have and continue to, step in to address gaps and uncertainties left by the U.S. federal government, creating additional opportunities for growth that we did not anticipate at the start of this year. We continuously monitor these developments to strategically position ourselves to capitalize on these new opportunities. We do acknowledge that external factors such as economic volatility, policy fluctuations, and evolving regulatory frameworks are influencing our industry. However, Montrose's unique business model and our competitive positioning has allowed us to capture tailwinds from these external factors. And our positioning has also allowed us to stay largely insulated from the broader volatility. I will now highlight a few of the tailwinds benefiting us this year. As a reminder, we have repeatedly heard from our clients that one, their long-term outlook has not changed. that two, they see increasing domestic industrial activity as a net positive, and that three, they remain committed to complying with state and international regulations that impact their ability to drive their financial results. All acknowledge challenges from the current volatility in U.S. federal regulations, but by and large, we've only seen a few of our approximately 6,000 clients make any changes to their operating policies or decisions. This is why our business remains resilient. For example, and regarding greenhouse gases, which are among the most politicized air contaminants, changes to U.S. federal policy seem to have been more than offset by the impact of state regulations, including states in which we have many employees and clients and which are across the political spectrum. For example, in Texas, in Colorado, and in California. In addition, Market forces, such as the recent EU methane regulations, expand the global market for emissions monitoring and compliance, as these requirements affect global exporters, including US LNG and oil producers, who are among our key clients. Montrose's historical investments in advanced monitoring technologies enable us to work with our energy clients to provide better, faster, and more cost-effective results. Coupled with our clients continuing to take practical long-term views, demand for our services continues abase. And because these regulations are multi-year in scope, with phase deadlines and increasing stringency through 2030, demand is often longer term and more predictable. These state regulations and market forces are a large part of why our measurement and analysis segments organic revenue growth and margins are at record levels in 2025. As another example, the clarification of the US EPA's perspectives on PFAS regulations in Q2 2025 and the agency's continued focus on water quality has resulted in a steady increase in the number of opportunities for our water treatment business. Not only does our pipeline of water treatment opportunities continue to expand meaningfully, but our year-on-year organic growth for this service is expected to remain elevated and accretive to our 2025, 2026, and long-term organic growth outlook. As a third example, increased mining activity in our Canadian and Australian markets has resulted in attractive and new growth opportunities for Montrose in both of those geographies. The recent Rare Earths Partnership across governments adds more momentum to an already attractive industrial end market for Montrose. The environmental consulting, permitting, testing, and water treatment needs for our mining sector clients are likely to create nice tailwinds for our business over the foreseeable future. As a fourth example, increased industrial activity, aging infrastructure, and more severe weather-related events continue to drive outsized demand for our environmental emergency response business in the United States. What is critical to convey is that though the response-related earnings are meaningful and unpredictable, they are an increasingly smaller part of the whole and, and this is critical, they are very additive to our long-term organic growth and cross-selling algorithm. As a simple analogy that hopefully sheds light into the strategic and financial value of having a response business as part of our service portfolio. Because of our focus on being an environmental science peer play, our response business is like the emergency room in our environmental hospital, so to speak. Once a patient comes into the ER of a traditional hospital, they are likely to need testing services and inpatient services. This is similar to our dynamic at Montrose, where our environmental testing and our environmental consulting and treatment services often follow our environmental emergency responses. What we are increasingly finding as the team works more closely together is that post-response, there are substantial downstream and often recurring long-term opportunities for Montrose. Said otherwise, our environmental emergency response is not just episodic, it has also provided structurally recurring opportunities for us and supported long-term organic growth opportunities. As a specific example, earlier this year, we responded to an accidental environmental release for one of our energy clients, and our involvement in this response helped us secure long-term remediation and testing related to the event, which not only benefited third quarter results, but will also likely result in multi-year opportunities for Montrose. We expect our environmental advisory and air monitoring services will continue with this client for many years to come. We hope these examples help provide more context around why demand for our services continues to increase and remains visible and predictable for our teams. Before I hand the call over to Alan, I want to reaffirm the framework that underpins our ability to create long-term shareholder value. First, We will continue allocating capital to the highest return opportunities, including investing in organic growth, research and development, and technology. We regularly review our service lines and operations to ensure achievement of our internal return hurdles and research optimization. Through this internal evaluation and given changes to U.S. policy and the resultant impact on the U.S. market for renewable energy, We determined that it is prudent to exit our renewable service line within our remediation and reuse segment. We expect to have this materially wound down by the end of this year, and the impact of this decision has already been embedded in our results and outlook for 2025. Second, we will emphasize scalable profitability by expanding our market position through continued investments in sales and marketing. These investments are already embedded in our current outlook. Given most of our organic growth has come from increasing our share of wallet with our existing customers, given we remain a small fraction of our clients' overall spend on environmental solutions, and given we have very strong customer retention, in 2025, we continue investing in building a best-in-class commercial team. This team is selling technical services to clients, is also enhancing our brand visibility, and has started increasing our focus on sectors that enable us to address broader trends faced by our clients and their peers as a group. We have had the fortune of adding some incredible talent to our technical and commercial teams in 2025, which is why we have so much conviction in our ability to continue driving market leading organic growth and the resultant margin accretion into the foreseeable future. Third, We will continue to evaluate strategic and accretive acquisitions and retain the flexibility to opportunistically repurchase shares to maximize returns. Our acquisition strategy isn't just about skill. It's about capability and geographic reach. We evaluate each opportunity for strategic fit and for the potential to drive outsized financial returns. Optimizing our capital structure and managing leverage, along with our continued focus on increasing operating and free cash flow generation, remain core to our acquisition and to our operating decision models. Due to the highly fragmented nature of our industry and client feedback on the value of scale and capability and reach, and given our strong performance with cash generation in 2025, we expect to restart acquisitions sometime in 2026. Long-term, we will continue delivering compelling organic growth of 7% to 9% annually, with EBITDA growth expected to outpace revenue growth. Coupled with acquisitions which will be additive to these growth rates, we remain confident in our ability to create outsized returns for our shareholders. These frameworks and industry dynamics contributed to our outstanding year-to-date 2025 results, our increased 2025 guidance. and the 2026 outlook we are sharing today. In 2026, we expect to achieve at least $125 million in EBITDA. We also anticipate further improvement in EBITDA margin in 2026 compared to 2025. Our resilient business model, execution in 2025, and exceptional team give us the confidence to provide an early outlook for another excellent year in 2026. We will continue to navigate the complexities of this evolving market landscape. But regardless of the complexities, we are committed to surpassing our goals, as we have been doing, and to generating significant value for all of our shareholders. With that, I will hand it over to Alan. Thank you.