- Strong Operating Segment Adjusted EBITDA
Growth -
- Solid Margin Expansion in Operating Segment
Adjusted EBITDA -
- Net loss of $14.7 million and Consolidated
Adjusted EBITDA1 of $16.6 million -
- Continued Improvement in Cash Flow from
Operations Year-over-Year -
- Strong Balance Sheet and Cash Generation
Support Acquisitions and R&D Successes -
- Raises Consolidated Adjusted EBITDA1 Outlook
for Full Year 2023 -
Montrose Environmental Group, Inc. (the “Company,” “Montrose” or
“MEG”) (NYSE: MEG) today announced results for the first quarter
ended March 31, 2023.
Montrose Chief Executive Officer and Director, Vijay
Manthripragada, commented, “We are pleased to start 2023 with
strong growth and margin improvement in our Operating Segment
Adjusted EBITDA and Consolidated Adjusted EBITDA1 and growth in our
cash flow generation. We experienced solid organic growth across
multiple business lines, particularly in our consulting and testing
services. Our multi-year outlook for our remediation and reuse
segment remains very robust, though this year is expected to be
more moderated following the triple digit growth in our water and
renewable energy services last year. CTEH also began the year well,
engaging in several environmental responses for the energy and
transportation industries, in particular.”
Mr. Manthripragada continued, “We remain very bullish on the
capital allocation opportunities in the environmental industry, and
we remain forward leaning on strategic acquisitions and technology
investments. Since the start of 2023, we have welcomed teams from
GreenPath Energy, Frontier Analytical and Environmental Alliance
into the Montrose family. We expect several others to follow given
our focus on our mission and our reputation as an additive
consolidator in our fragmented industry. In terms of technology,
our R&D department continues to enjoy success with patent
development and technology launches related to PFAS treatment and
destruction, carbon dioxide capture, methane emissions monitoring,
and the conversion of waste to energy and resources. Our innovation
continues to create opportunities for our employees, differentiate
us in the marketplace, create barriers to entry with long term
organic growth opportunities, and help us towards achieving our
mission of helping solve some of the world’s most intractable
problems.
On the back of this strong momentum in our business in 2023, we
are increasing our Consolidated Adjusted EBITDA1 outlook for the
year. We remain as excited as ever about Montrose’s outlook and the
continued transformation we anticipate in 2023.”
________________________________
(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.
First Quarter 2023 Results
Total revenue in the first quarter of 2023 was $131.4 million
compared to $134.7 million in the prior year quarter. The change in
revenues was primarily due to lower demand for COVID-19 related
services provided by CTEH, lower revenues in a specialty lab we are
discontinuing, and the timing of projects in our Remediation and
Reuse segment. Excluding revenue from COVID-19 related services of
$3.8 million and $21.4 million, in the respective first quarters of
2023 and 2022, and the lab we are discontinuing of $1.4 million and
$5.6 million, in the respective first quarters of 2023 and 2022,
revenue in the first quarter of 2023 was $126.2 million compared to
$107.7 million in the prior year quarter, an increase of 17.2% over
the prior year period, mainly owing to strong organic growth in our
Assessment, Permitting and Response and our Measurement and
Analysis segments, an increase in CTEH environmental response
revenues, and the contributions of acquisitions completed during
the past twelve months.
Net loss was $(14.7) million, or a loss of $(0.63) per share, in
the first quarter of 2023 compared to a net loss of $(7.5) million,
or a loss of $(0.39) per share, in the prior year quarter. The
year-over-year change was primarily attributable to higher
stock-based compensation expense in the current year, as well as a
charge in the current year related to the change in fair values of
our interest rate swap and preferred series A-2, compared to a gain
on the interest rate swap in the prior year period.
Adjusted Net Income1 was $3.4 million in the first quarter of
2023 compared to Adjusted Net Income1 of $5.5 million in the prior
year quarter. The year-over-year change was primarily attributable
to a higher tax impact of adjustments as a result of a $4.3 million
change in the impact of fair value adjustments to financial
instruments.
First quarter 2023 Consolidated Adjusted EBITDA1 was $16.6
million compared to $16.5 million in the prior year quarter,
primarily due to replacement of legacy COVID-19 services with
environmental responses at CTEH, strong demand for our testing
services, and the benefit of pricing, which more than offset the
expected decline in Remediation and Reuse revenue. Excluding $1.3
million in Adjusted EBITDA in 2022 from the lab we are
discontinuing and the adjustment for start-up losses of $0.8
million (an adjustment no longer being made in 2023), Consolidated
Adjusted EBITDA1 in the first quarter of 2023 was $16.6 million,
compared to $14.4 million, in the prior year period, which
represented 12.8% and 11.2% of revenues, respectively, excluding
revenues from the lab we are discontinuing.
Operating Cash Flow, Liquidity and Capital Resources
Cash provided by operating activities was $3.0 million in the
first quarter of 2023, compared to cash used in operations of $18.3
million in the prior year quarter. Cash used in operations in the
prior year period included payment of contingent consideration of
$19.5 million. Excluding acquisition-related contingent earnout
payments, which are not part of day-to-day operations, cash
provided by operating activities increased by $1.8 million,
compared to $1.2 million in the prior year quarter.
As of March 31, 2023, Montrose had total debt, before debt
issuance costs, of $164.1 million and $201.8 million of liquidity,
including $76.8 million of cash and $125.0 million of availability
on its revolving credit facility. At our current leverage ratio and
inclusive of our fixed rate on $100.0 million of debt under our
interest rate swap through January 2025, our weighted average
interest rate was 6.1% as of March 31, 2023.
As of March 31, 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 1.4 times.
Acquisitions
In January 2023, Montrose acquired the business of Frontier
Analytical Laboratories (“Frontier”), an environmental laboratory
specializing in high-resolution gas chromatography mass
spectrometry analytical services based in Northern California.
Frontier is a part of the Company’s Measurement and Analysis
segment.
In February 2023, Montrose acquired Environmental Alliance
(“EAI”), a leading environmental engineering and consulting
business in Delaware. EAI is part of the Company’s Remediation and
Reuse segment.
In April 2023, Montrose entered into an arrangement agreement to
acquire Matrix Solutions (“Matrix”), one of Canada’s leading
environmental companies. Subject to obtaining necessary approvals,
the transaction is expected to close towards the end of the second
quarter of 2023.
In May 2023, Montrose acquired GreenPath Energy (“GreenPath”), a
leading optical gas imaging and fugitive emissions management
services firm in Canada. GreenPath is part of the company’s
Measurement and Analysis segment.
Full Year 2023 Outlook
Given the strong performance in the first quarter, the Company
has increased its expectation of full year 2023 Consolidated
Adjusted EBITDA1 to be in the range of $70 million to $76 million
from previously issued guidance of $68 million to $74 million.
Expectations for the full year 2023 revenue range are unchanged at
$550 million to $600 million.
Our revenue and Consolidated Adjusted EBITDA1 outlook does not
include any benefit from future acquisitions that have not yet been
completed, including Matrix Solutions.
Webcast and Conference Call
The Company will host a webcast and conference call on
Wednesday, May 10, 2023 at 8:30 a.m. Eastern time to discuss first
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 2,800+ employees across more than 80 locations
around the world, Montrose combines deep local knowledge with an
integrated approach to design, engineering, and operations,
enabling the Company 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 March
31,
2023
2022
REVENUES
$
131,428
$
134,680
COST OF REVENUES (exclusive of
depreciation and amortization shown below)
81,633
88,386
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE
49,613
41,807
FAIR VALUE CHANGES IN BUSINESS
ACQUISITIONS CONTINGENT CONSIDERATION
(398
)
(21
)
DEPRECIATION AND AMORTIZATION
10,555
12,144
LOSS FROM OPERATIONS
(9,975
)
(7,636
)
OTHER (EXPENSE) INCOME
Other (expense) income
(1,836
)
2,461
Interest expense—net
(1,541
)
(1,092
)
Total other (expense) income—net
(3,377
)
1,369
LOSS BEFORE EXPENSE FROM INCOME TAXES
(13,352
)
(6,267
)
INCOME TAX EXPENSE
1,367
1,269
NET LOSS
$
(14,719
)
$
(7,536
)
EQUITY ADJUSTMENT FROM FOREIGN CURRENCY
TRANSLATION
12
81
COMPREHENSIVE LOSS
(14,707
)
(7,455
)
CONVERTIBLE AND REDEEMABLE SERIES A-2
PREFERRED STOCK DIVIDEND
(4,100
)
(4,100
)
NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS
(18,819
)
(11,636
)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING— BASIC AND DILUTED
29,857
29,662
NET LOSS PER SHARE ATTRIBUTABLE TO
COMMON STOCKHOLDERS— BASIC AND DILUTED
$
(0.63
)
$
(0.39
)
MONTROSE ENVIRONMENTAL GROUP,
INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands, except share
data)
March 31, 2023
December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
76,794
$
89,828
Accounts receivable—net
85,472
94,711
Contract assets
53,563
52,403
Prepaid and other current assets
15,178
10,986
Total current assets
231,007
247,928
NON-CURRENT ASSETS:
Property and equipment—net
40,685
36,045
Operating lease right-of-use asset—net
31,214
26,038
Finance lease right-of-use asset—net
11,391
9,840
Goodwill
326,498
323,868
Other intangible assets—net
137,271
142,107
Other assets
5,111
6,088
TOTAL ASSETS
$
783,177
$
791,914
LIABILITIES, CONVERTIBLE AND REDEEMABLE
SERIES A-2 PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued
liabilities
55,420
63,412
Accrued payroll and benefits
16,352
20,528
Business acquisitions contingent
consideration, current
4,734
3,801
Current portion of operating lease
liabilities
8,570
7,895
Current portion of finance lease
liabilities
4,130
3,775
Current portion of long-term debt
13,125
12,031
Total current liabilities
102,331
111,442
NON-CURRENT LIABILITIES:
Business acquisitions contingent
consideration, long-term
3,121
4,454
Other non-current liabilities
3
13
Deferred tax liabilities—net
7,111
5,742
Conversion option
26,636
25,731
Operating lease liability—net of current
portion
24,093
19,437
Finance lease liability—net of current
portion
7,507
6,486
Long-term debt—net of deferred financing
fees
149,342
152,494
Total liabilities
$
320,144
$
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 March 31, 2023 and December 31, 2022; aggregate
liquidation preference of $182.2 million at March 31, 2023 and
December 31, 2022
152,928
152,928
STOCKHOLDERS’ EQUITY:
Common stock, $0.000004 par value;
authorized shares: 190,000,000 at March 31, 2023 and December 31,
2022; issued and outstanding shares: 29,961,364 and 29,619,921 at
March 31, 2023 and December 31, 2022, respectively
—
—
Additional paid-in-capital
504,301
492,676
Accumulated deficit
(194,216
)
(179,497
)
Accumulated other comprehensive income
20
8
Total stockholders’ equity
310,105
313,187
TOTAL LIABILITIES, CONVERTIBLE AND
REDEEMABLE SERIES A-2 PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
$
783,177
$
791,914
MONTROSE ENVIRONMENTAL GROUP,
INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Three Months Ended
March 31,
2023
2022
OPERATING ACTIVITIES:
Net loss
$
(14,719
)
$
(7,536
)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Provision (recovery) for bad debt
444
(528
)
Depreciation and amortization
10,555
12,144
Amortization of right-of-use asset
2,491
2,271
Stock-based compensation expense
13,035
10,425
Fair value changes in financial
instruments
1,873
(2,449
)
Fair value changes in business acquisition
contingencies
(398
)
(21
)
Deferred income taxes
1,367
1,269
Other
458
143
Changes in operating assets and
liabilities—net of acquisitions:
Accounts receivable and contract
assets
9,615
10,037
Prepaid expenses and other current
assets
(3,363
)
(1,776
)
Accounts payable and other accrued
liabilities
(11,643
)
(12,852
)
Accrued payroll and benefits
(4,350
)
(7,876
)
Payment of contingent consideration
—
(19,457
)
Change in operating leases
(2,336
)
(2,122
)
Net cash provided by (used in) operating
activities
3,029
(18,328
)
INVESTING ACTIVITIES:
Purchases of property and equipment
(4,134
)
(262
)
Proprietary software development and other
software costs
(638
)
(50
)
Proceeds from insurance
75
266
Payment of purchase price true ups
(505
)
(631
)
Cash paid for acquisitions—net of cash
acquired
(6,525
)
(14,328
)
Net cash used in investing activities
(11,727
)
(15,005
)
FINANCING ACTIVITIES:
Repayment of term loan
(2,188
)
(4,375
)
Payment of contingent consideration
(27
)
(10,543
)
Repayment of finance leases
(1,029
)
(943
)
Proceeds from issuance of common stock for
exercised stock options
2,690
429
Dividend payment to the Series A-2
shareholders
(4,100
)
(4,100
)
Payments of deferred offering costs
—
(183
)
Net cash used in financing activities
(4,654
)
(19,715
)
CHANGE IN CASH AND CASH EQUIVALENTS
(13,352
)
(53,048
)
Foreign exchange impact on cash
balance
318
98
CASH AND CASH EQUIVALENTS:
Beginning of year
89,828
146,741
End of period
$
76,794
$
93,791
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
INFORMATION:
Cash paid for interest
$
1,347
$
184
Cash paid for income tax
$
155
$
—
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Accrued purchases of property and
equipment
$
3,096
$
1,144
Property and equipment purchased under
finance leases
$
2,405
$
512
Acquisitions unpaid contingent
consideration
$
7,855
$
6,995
MONTROSE ENVIRONMENTAL GROUP,
INC.
SEGMENT REVENUES AND ADJUSTED
EBITDA
(In thousands)
(Unaudited)
Three Months Ended March
31,
2023
2022
Segment
Segment
Segment
Adjusted
Segment
Adjusted
Revenues
EBITDA(1)
Revenues
EBITDA(1)(4)
Assessment, Permitting and Response
$
52,214
$
14,266
$
45,600
$
9,623
Measurement and Analysis
42,527
(2)
6,387
39,761
(2)
6,322
(3)
Remediation and Reuse
36,687
5,278
49,319
7,993
Total Operating Segments
131,428
25,931
134,680
23,938
Corporate and Other
—
(9,328
)
—
(7,487
)
Total
$
131,428
$
16,603
$
134,680
$
16,451
_____________________________________
(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 our
Quarterly Report on Form 10-Q.
(2)
Includes revenue of $1.4 million and $5.6
million from the lab we are discontinuing, for the three months
ended March 31, 2023 and March 31, 2022, respectively.
(3)
Includes Adjusted EBITDA of $1.3 million
from the lab we are discontinuing.
(4)
Includes the adjustment of start-up losses
and investment in new services of $0.8 million. Beginning in the
first quarter of 2023, the calculation of Segment Adjusted EBITDA
no longer adjusts for start-up losses and investment in new
services. See Note 18 to our unaudited condensed consolidated
financial statements included in our Quarterly Report on Form
10-Q.
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
CTEH, 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)
For the Three Months Ended
March 31,
2023
2022
Net loss
$
(14,719
)
$
(7,536
)
Amortization of intangible assets(1)
7,240
9,419
Stock-based compensation (2)
13,035
10,425
Acquisition costs (3)
775
467
Fair value changes in financial
instruments (4)
1,873
(2,449
)
Expenses related to financing transactions
(5)
4
7
Fair value changes in business acquisition
contingencies (6)
(398
)
(21
)
Discontinuing Specialty Lab (7)
2,436
—
Other losses and expenses (8)
134
267
Tax effect of adjustments (9)
(7,028
)
(5,072
)
Adjusted Net Income
$
3,352
$
5,507
Preferred Dividend Series A-2
(4,100
)
(4,100
)
Adjusted Net (Loss) Income attributable
to stockholders
$
(748
)
$
1,407
Net Loss per share attributable to
stockholders
$
(0.63
)
$
(0.39
)
Adjusted Net (Loss) Income per
share(10)
$
(0.03
)
$
0.05
Diluted Adjusted Net (Loss) Income per
share(11)
$
(0.02
)
$
0.04
Weighted average common shares
outstanding
29,857
29,662
Fully diluted shares
35,891
35,795
___________________________________
(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 instrument 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 (Loss) Income
attributable to stockholders divided by the weighted average common
shares outstanding.
(11)
Represents Adjusted Net (Loss) Income
attributable to stockholders divided by fully diluted shares.
Montrose Environmental Group,
Inc.
Reconciliation of Net Loss to
Consolidated Adjusted EBITDA
(In thousands)
(Unaudited)
For the Three Months Ended
March 31,
2023
2022
Net loss
$
(14,719
)
$
(7,536
)
Interest expense
1,541
1,092
Income tax expense
1,367
1,269
Depreciation and amortization
10,555
12,144
EBITDA
$
(1,256
)
$
6,969
Stock-based compensation (1)
13,035
10,425
Start-up losses and investment in new
services (2)
—
786
Acquisition costs (3)
775
467
Fair value changes in financial
instruments (4)
1,873
(2,449
)
Expenses related to financing transactions
(5)
4
7
Fair value changes in business acquisition
contingencies (6)
(398
)
(21
)
Discontinuing Specialty Lab (7)
2,436
—
Other losses and expenses (8)
134
267
Consolidated Adjusted EBITDA
$
16,603
$
16,451
___________________________________
(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)
Represent start-up losses related to
losses incurred on (i) the expansion of lab testing methods and lab
capacity, including into new geographies, (ii) introduction of new
software and consulting service lines (iii) expansion into Europe
in advance of projects driven by new regulations. Beginning in the
second quarter of 2022, the calculation of Consolidated Adjusted
EBITDA no longer adjusts for start-up losses and investment in new
services. See the Company's Q2 2022 earnings release dated August
8, 2022 for a discussion of the change in methodology.
(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 instrument 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)
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.
(7)
Amounts consist of adjusted EBITDA add
backs 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230509006072/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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