- Delivered Strong Second Quarter Results
Across All Segments -
- Delivered Strong Organic Growth Across All
Segments -
- Completed Strategically and Financially
Accretive Acquisitions -
- Published Inaugural ESG Report and Entered
into ESG-Linked Credit Facility -
- Increased Guidance for Full Year 2021 -
Montrose Environmental Group, Inc. (the “Company,” “Montrose” or
“MEG”) (NYSE: MEG) today announced results for the second quarter
ended June 30, 2021.
Second Quarter 2021 Highlights
- Total revenue of $136.2 million increased 84.7% compared to the
prior year quarter.
- Net loss of $14.5 million compared to a net income of $13.2
million in the prior year quarter due to non-cash fair value
adjustment expenses and non-cash deferred debt issuance write-off
following the Company’s debt refinancing in April, 2021.
- Adjusted EBITDA1 of $21.0 million increased 50.9% compared to
the prior year quarter. Adjusted EBITDA margin1 of 15.4%.
First Six Months 2021 Highlights
- Total revenue of $270.0 million increased 100.3% compared to
the prior year period.
- Organic revenue growth of 9% excluding CTEH, and 47% including
CTEH.2
- Net loss of $26.1 million compared to a net loss of $28.0
million in the prior year period, primarily due to non-cash fair
value adjustment expense and non-cash deferred debt issuance
write-off following the Company’s debt refinancing.
- Adjusted EBITDA1 of $37.8 million grew 94.2% compared to the
prior year period. Adjusted EBITDA margin1 of 14.0%.
- Acquired MSE Group and Vista Analytical to expand geographic
reach, increase exposure to US Federal government spend on
environmental initiatives, and expand PFAS testing capacity.
(1)
Adjusted EBITDA and Adjusted EBITDA margin
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 of Adjusted EBITDA to net income
(loss), the most directly comparable GAAP measure.
(2)
Organic growth is a non-GAAP measure. See
the appendix to this release for a discussion of how we calculate
organic growth.
“We are proud to report another quarter of exceptional results
as we continue to execute our strategy,” stated Vijay
Manthripragada, Montrose’s Chief Executive Officer. “We were
encouraged to realize first half organic growth of 9% excluding our
response business, CTEH, and 47% including our response business.
Montrose is best assessed on an annual basis and elevated first
half demand across all of our segments puts us firmly on track for
another year of record revenue and earnings. We are increasing our
Adjusted EBITDA1 outlook for 2021 to reflect strengthening organic
growth momentum and our recently completed acquisitions.”
Mr. Manthripragada continued, “These results belong to our team
and I remain incredibly grateful to the continued efforts of our
colleagues around the world in what remain challenging and
uncertain times for many. As a company, we remain vigilant but
optimistic about the long-term opportunity for Montrose. A variety
of factors are increasing demand for our services, including: 1)
growing needs to plan for and respond to disruption caused by
climate change, aging infrastructure and the pandemic, 2)
accelerated momentum to measure and mitigate greenhouse gas
emissions, 3) increasing requirements for PFAS testing and
remediation around the world, and 4) evolving regulations,
including the EPA’s addition of new pollutants to environmental
watch lists. We see these factors driving revenue growth and
therefore, we plan to continue investing in our teams, R&D, and
acquisitions to capitalize on opportunities. I’m also happy to
announce that we issued our inaugural ESG report a few weeks ago
which followed our entry into an ESG-linked credit facility in
April. We remain committed to environmental, social, and governance
responsibilities and these collective efforts mark another
important milestone in our journey.”
Second Quarter 2021 Results
Total revenue in the second quarter of 2021 increased 84.7% to
$136.2 million, compared to $73.8 million in the prior year
quarter. The increase in revenues was driven by organic growth
across all three of our segments. Organic growth in our Assessment
Permitting and Response segment was driven primarily by CTEH
(acquired in early April 2020), which continues to benefit from
pandemic response services and organic growth in our environmental
advisory services. Organic growth in our Measurement and Analysis
segment was driven primarily by increased demand across all our
environmental testing services. Organic growth in our Remediation
and Reuse segment was driven primarily by growing demand for PFAS
remediation and waste-to-energy services. Second quarter revenue
growth also benefitted from the acquisition of MSE in January 2021
and Vista Analytical in June 2021
Net loss was $14.5 million, compared to a net income of $13.2
million in the prior year quarter. The year-over-year change was
primarily attributable to current year non-cash fair value
adjustment expenses and non-cash deferred debt issuance write-offs
following the Company’s debt refinancing in April, 2021, compared
to non-cash fair value adjustment income in the prior year,
partially offset by higher current year income from operations
before fair value adjustments.
Adjusted EBITDA1 increased to $21.0 million, compared to $13.9
million in the prior year quarter. The increase in Adjusted EBITDA1
was driven by higher revenues. Adjusted EBITDA margin1 declined 340
basis points to 15.4%, compared to 18.8% in the prior year quarter,
mainly due to: (i) business mix, particularly the lower margin
pandemic response services provided by CTEH, (ii) public company
costs in the current year that did not exist in the prior year, and
(ii) the planned and expected normalization of margins in certain
business lines following temporary cost mitigation actions taken at
the start of the COVID-19 pandemic, which have been reversed.
First Six Months 2021 Results
Total revenue in the first six months of 2021 increased 100.3%
to $270.0 million, compared to $134.8 million in the prior year
period. Excluding discontinued services, which generated no revenue
and $3.8 million in the 2021 and 2020 periods, respectively, total
revenue increased 106.1%. The increase in revenue was driven by
organic growth across all three of our segments, as well as the
acquisitions of CTEH and MSE.
Net loss was $26.1 million, compared to a net loss of $28.0
million in the prior year period. The year-over-year difference in
net loss primarily reflected significantly higher current year
non-cash fair value adjustment expenses and non-cash deferred debt
issuance write-offs following the Company’s debt refinancing,
partially offset by higher income from operations in the current
year before fair value adjustments.
Adjusted EBITDA1 increased 94.2% to $37.8 million, compared to
$19.4 million in the prior year period. The increase in Adjusted
EBITDA1 was due to higher revenues. Adjusted EBITDA margin1
declined 40 basis points to 14.0%, compared to 14.4% in the prior
year mainly due to business mix, public company costs in the
current year, and the planned and expected normalization of margins
in certain business lines following the reversal of COVID-19
related initiatives.
Operating Cash Flow Liquidity and Capital Resources
Cash used in operating activities for the six months ended June
30, 2021 was $17.0 million, compared to cash used in operating
activities of $1.6 million in the prior year period. Cash used in
operations includes payment of contingent consideration of $15.5
million and $6.2 million in current and prior year periods,
respectively. Excluding acquisition-related contingent earnout
payments, which are not part of operations, cash flow used in
operating activities was $1.5 million, a decrease of $6.1 million.
The period-over-period decrease was primarily due to a $30.9
million increase in working capital versus the prior year change in
working capital. The increase in working capital in the current
year is as a result of the increase in revenues in the current
quarter versus the fourth quarter of 2020. The increase in working
capital was partially offset by higher year-to-date earnings before
non-cash items versus the prior year of $23.3 million. We remain
confident in our ability to generate strong cash flows on a full
year basis in 2021.
At June 30, 2021, Montrose had total debt, before debt issuance
costs, of $240.0 million and $40.2 million of cash. Total debt less
cash primarily increased versus the prior quarter due to cash paid
for acquisitions and the cash payment of the first year CTEH
earnout of $25 million. As of June 30, 2021, the Company’s leverage
ratio under its credit facility, which is consistent with the
calculation methodology under the prior credit facility, and which
includes the impact of acquisition-related contingent earnout
payments that may become payable in cash, was 3.1 times. With
expected strong operating cash flows for the remainder of 2021, we
remain confident in being able to continue executing on our organic
and acquisition-related growth strategy while maintaining our
leverage between 2.5x-3.5x.
In April 2021 the Company entered into a new
sustainability-linked credit facility in the form of a term loan,
in an aggregate principal amount of $175.0 million, and a $125.0
million revolving credit facility. The Company used net proceeds
from the new debt to repay all of its outstanding borrowings under
its former term loan and former revolver. The new credit facility’s
opening spread of LIBOR plus 2.0% not only reduces the previous
term loan interest rate of 5.5%, but also provides up to a 5-basis
point pricing adjustment based on Montrose’s performance against
certain sustainability and ESG related objectives pursuant to the
agreement. These objectives are in four key areas, the first of
which pertains to diversity and inclusion objectives at the
Company. The three other benchmarks are directly related to the
Company’s environmental focus serving customers, including liters
of water treated for PFAS, volume of methane leaks detected, and
the amount of low-carbon intensity energy (MMBtu biogas) generated
from waste. Sustainability and ESG performance will be measured and
communicated in the Company’s next ESG Report.
Recent Acquisitions
In June 2021, Montrose acquired Vista Analytical Laboratory
(“Vista”), a premier environmental laboratory for the testing and
analysis of polyfluoroalkyl substances (PFAS), dioxins and other
persistent organic pollutants. The addition of the Vista team is an
important step in advancing Montrose’s integrated PFAS
capabilities. Vista is part of the Company’s Measurement and
Analysis segment.
In July 2021, Montrose acquired Environmental Intelligence, LLC
(“EI”), an environmental consulting company recognized for its
innovative work in wildfire mitigation, biological assessments, and
other environmental services. The introduction of the EI team
enhances Montrose’s ecological planning and service capability in
California and the US West Coast. EI is part of the Company’s
Assessment, Permitting and Response Segment.
In August 2021, Montrose acquired SensibleIoT, LLC, a technology
and software platform that advances the Company’s ability to
integrate its environmental services and enhance environmental data
analytics for clients.
Full Year 2021 Outlook
Because demand for environmental services does not follow fiscal
quarter patterns, the Company’s business is best assessed on yearly
results. Given heightened demand for Montrose’s service offerings
in the first half of 2021, continued organic growth across its
segments, and the contribution of acquisitions, the Company now
expects full year 2021 Adjusted EBITDA1 to be in the range of $70.0
million to $75.0 million, which is increased from its prior full
year 2021 guidance of $63.0 million to $70.0 million in Adjusted
EBITDA1.
The Company’s outlook is based on a combination of high single
digit organic growth plus the contribution of completed
acquisitions. The outlook does not include any benefit from future
acquisitions that have not yet been completed.
We have successfully grown revenue in excess of 20.0% every year
and expect to exceed that threshold in 2021. In addition, we expect
to continue adding strategically and financially accretive
acquisitions.
Webcast and Conference Call
The Company’s senior management will host a webcast and
conference call on Wednesday, August 11, 2021 at 8:30 a.m. Eastern
time to discuss second 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 1-877-407-9208
(Domestic) and 1-201-493-6784 (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 more than 2,000 employees across over 70 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. Further, many of these factors are, and
may continue to be, amplified by the COVID-19 pandemic. 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, 2020,
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.
CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except per
share data)
Three Months Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
REVENUES
$
136,224
$
73,766
$
270,041
$
134,797
COST OF REVENUES (exclusive of
depreciation and
amortization shown below)
92,104
45,889
187,420
90,287
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE
27,366
19,318
52,366
39,837
INITIAL PUBLIC OFFERING EXPENSE
—
—
—
531
FAIR VALUE CHANGES IN BUSINESS
ACQUISITIONS
CONTINGENT CONSIDERATION
12,971
3,983
24,035
3,983
DEPRECIATION AND AMORTIZATION
10,905
9,784
21,674
17,344
(LOSS) FROM OPERATIONS
(7,122
)
(5,208
)
(15,454
)
(17,185
)
OTHER (EXPENSE) INCOME
Other (expense) income
(819
)
21,933
(1,393
)
(7,897
)
Interest expense—net
(6,798
)
(5,260
)
(9,486
)
(7,853
)
Total other (expenses) income—net
(7,617
)
16,673
(10,879
)
(15,750
)
LOSS BEFORE (BENEFIT) EXPENSE FROM INCOME
TAXES
(14,739
)
11,465
(26,333
)
(32,935
)
INCOME TAXES BENEFIT
(256
)
(1,759
)
(256
)
(4,911
)
NET (LOSS) INCOME
$
(14,483
)
$
13,224
$
(26,077
)
$
(28,024
)
EQUITY ADJUSTMENT FROM FOREIGN
CURRENCY
TRANSLATION
28
(90
)
57
(53
)
COMPREHENSIVE (LOSS) INCOME
(14,455
)
13,134
(26,020
)
(28,077
)
ACCRETION OF REDEEMABLE SERIES A-1
PREFERRED
STOCK
—
(5,644
)
—
(11,059
)
CONVERTIBLE AND REDEEMABLE SERIES A-2
PREFERRED STOCK DIVIDEND
(4,100
)
—
(8,200
)
—
NET (LOSS) INCOME ATTRIBUTABLE TO
COMMON STOCKHOLDERS
(18,583
)
7,580
(34,277
)
(39,083
)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING— BASIC
26,056
10,649
25,586
9,718
NET (LOSS) INCOME PER SHARE
ATTRIBUTABLE TO COMMON
STOCKHOLDERS— BASIC
$
(0.71
)
$
0.71
$
(1.34
)
$
(4.02
)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING— DILUTED
26,056
19,139
25,586
9,718
NET (LOSS) INCOME PER SHARE
ATTRIBUTABLE TO COMMON
STOCKHOLDERS— DILUTED
$
(0.71
)
$
0.40
$
(1.34
)
$
(4.02
)
MONTROSE ENVIRONMENTAL GROUP,
INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands, except share
data)
June 30,
December 31,
2021
2020
ASSETS
CURRENT ASSETS:
Cash and restricted cash
$
40,189
$
34,881
Accounts receivable—net
72,351
54,102
Contract assets
55,033
38,576
Prepaid and other current assets
7,706
6,709
Total current assets
175,279
134,268
NON-CURRENT ASSETS:
Property and equipment—net
29,552
34,399
Operating lease right-of-use asset—net
25,823
—
Finance lease right-of-use asset—net
7,439
—
Goodwill
287,293
274,667
Other intangible assets—net
152,740
154,854
Other assets
3,390
4,538
TOTAL ASSETS
$
681,516
$
602,726
LIABILITIES, CONVERTIBLE AND REDEEMABLE
SERIES A-2 PREFERRED STOCK AND
STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued
liabilities
$
40,995
$
34,877
Accrued payroll and benefits
19,279
21,181
Business acquisitions contingent
consideration, current
30,152
49,902
Current portion of operating lease
liabilities
7,268
—
Current portion of finance lease
liabilities
2,966
—
Current portion of long-term debt
6,563
5,583
Total current liabilities
107,223
111,543
NON-CURRENT LIABILITIES:
Business acquisitions contingent
consideration, long-term
1,000
4,565
Other non-current liabilities
2,505
2,523
Deferred tax liabilities—net
2,431
2,815
Conversion option
22,006
20,886
Operating lease liability—net of current
portion
18,643
—
Finance lease liability—net of current
portion
4,785
—
Long-term debt—net of deferred financing
fees
230,934
170,321
Total liabilities
389,527
312,653
COMMITMENTS AND CONTINGENCIES
CONVERTIBLE AND REDEEMABLE SERIES A-2
PREFERRED STOCK $0.0001
PAR VALUE—
Authorized, issued and outstanding shares:
17,500 at June 30, 2021 and
December 31, 2020; aggregate liquidation
preference of $182.2 million at June 30, 2021 and
December 31, 2020
152,928
152,928
STOCKHOLDERS’ EQUITY:
Common stock, $0.000004 par value;
authorized shares: 190,000,000 at
June 30, 2021 and December 31, 2020;
issued and outstanding shares: 26,108,188 and
24,932,527 at June 30, 2021 and December
31, 2020, respectively
—
—
Additional paid-in-capital
287,365
259,427
Accumulated deficit
(148,432
)
(122,353
)
Accumulated other comprehensive income
128
71
Total stockholders’ equity
139,061
137,145
TOTAL LIABILITIES, CONVERTIBLE AND
REDEEMABLE SERIES A-2 PREFERRED STOCK
AND STOCKHOLDERS’ EQUITY
$
681,516
$
602,726
MONTROSE ENVIRONMENTAL GROUP,
INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended June
30,
2021
2020
OPERATING ACTIVITIES:
Net loss
$
(26,079
)
$
(28,024
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Provision for bad debt
590
6,263
Depreciation and amortization
21,674
17,344
Amortization of right-of-use asset
4,025
—
Stock-based compensation expense
4,222
2,290
Fair value changes in embedded
derivatives
1,120
7,781
Fair value changes in business
acquisitions
contingent consideration
24,035
3,983
Deferred income taxes
(254
)
(4,911
)
Other
(87
)
983
Debt extinguishment costs
4,052
—
Changes in operating assets and
liabilities—net of acquisitions:
Accounts receivable and contract
assets
(31,009
)
7,427
Prepaid expenses and other current
assets
1,316
(789
)
Accounts payable and other accrued
liabilities
1,788
(8,296
)
Accrued payroll and benefits
(2,846
)
1,886
Payment of contingent consideration and
other
assumed purchase price obligations
(15,549
)
(6,175
)
Other assets
(107
)
(1,346
)
Change in operating leases
(3,937
)
—
Net cash used in operating activities
(17,046
)
(1,584
)
INVESTING ACTIVITIES:
Purchases of property and equipment
(2,354
)
(3,160
)
Proprietary software development and other
software costs
(208
)
(155
)
Purchase price true ups
(8,377
)
—
Proceeds from net working capital
adjustment
related to acquisitions
—
2,819
Cash paid for acquisitions—net of cash
acquired
(14,876
)
(173,473
)
Net cash used in investing activities
(25,815
)
(173,969
)
FINANCING ACTIVITIES:
Proceeds from line of credit
105,000
104,390
Payments on line of credit
(40,000
)
(176,980
)
Proceeds from term loans
175,000
175,000
Repayment of term loan
(173,905
)
(48,750
)
Payment of contingent consideration and
other
purchase price obligations
(9,605
)
(6,005
)
Repayment of finance leases
(1,143
)
(1,249
)
Payments of deferred offering costs
—
(1,462
)
Prepayment premium on credit facility
—
(351
)
Debt issuance costs
(2,590
)
(4,866
)
Proceeds from issuance of common stock
for
exercised stock options
3,086
21
Issuance of convertible and redeemable
Series A-2
preferred stock and warrant
—
173,664
Dividend payment to the Series A-2
shareholders
(8,200
)
—
Net cash provided by financing
activities
47,643
213,412
CHANGE IN CASH, CASH EQUIVALENTS AND
RESTRICTED CASH
4,782
37,859
Foreign exchange impact on cash
balance
526
71
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH:
Beginning of year
34,881
6,884
End of period
$
40,189
$
44,814
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
INFORMATION:
Cash paid for interest
$
3,397
$
6,539
Cash paid for income tax
$
305
$
72
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Accrued purchases of property and
equipment
$
907
$
814
Property and equipment purchased under
finance leases
$
1,766
$
1,704
Accretion of the redeemable series A-1
preferred
stock to redeemable value
$
—
$
11,059
Common stock issued to acquire new
businesses
$
2,746
$
25,000
Acquisitions unpaid contingent
consideration
$
31,152
$
44,994
Offering costs included in accounts
payable and
other accrued liabilities
$
—
$
941
Acquisitions contingent consideration paid
in shares
$
25,000
$
—
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 Adjusted EBITDA and Adjusted EBITDA margin.
We calculate 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. Adjusted
EBITDA margin represents Adjusted EBITDA as a percentage of
revenues for a given period.
Adjusted EBITDA and Adjusted EBITDA margin are two 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. 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, as well as 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)
or any other performance measure derived in accordance with GAAP.
Our presentation of Adjusted EBITDA and Adjusted EBITDA margin
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, Adjusted EBITDA and Adjusted
EBITDA margin 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 Adjusted
EBITDA and Adjusted EBITDA margin in conjunction with the related
GAAP measures.
Additionally, we have provided estimates regarding Adjusted
EBITDA for 2021. These projections account for estimates of
revenue, operating margins and corporate and other costs. However,
we cannot reconcile our projection of 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 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 provide information regarding organic
growth, which is one of the measures management uses to assess our
results of operations. We define organic growth as the change in
revenues excluding revenues from acquisitions for the first twelve
months following the date of acquisition and excluding revenues
from businesses disposed of or discontinued. As a result of the
significance of the CTEH acquisition to Montrose, and the potential
annual volatility in CTEH’s revenues, at times we also disclose
organic growth without the annual organic revenue growth of CTEH.
We expect to continue to disclose organic revenue growth with and
without CTEH, typically on an annual basis. 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 GAAP and should be considered
in conjunction with revenue growth calculated in accordance with
GAAP.
Montrose Environmental Group,
Inc.
Reconciliation of Net Loss to
Adjusted EBITDA
(in thousands)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
(in thousands)
2021
2020
2021
2020
Net (loss) income
$
(14,483
)
$
13,224
$
(26,077
)
$
(28,024
)
Interest expense
6,798
5,260
9,486
7,853
Income tax expense
(256
)
(1,759
)
(256
)
(4,911
)
Depreciation and amortization
10,905
9,784
21,674
17,344
EBITDA
$
2,964
$
26,509
$
4,827
$
(7,738
)
Stock-based compensation (1)
2,417
1,140
4,222
2,290
Start-up losses and investment in new
services (2)
1,123
296
2,090
675
Acquisition costs (3)
506
2,454
743
3,761
Fair value changes in financial
instruments (4)
518
(21,842
)
1,120
7,783
Expenses related to financing transactions
(5)
—
277
50
277
Fair value changes in business
acquisitions
contingent consideration (6)
12,971
3,983
24,035
3,983
Short term purchase accounting fair value
adjustment
to deferred revenue (7)
—
—
—
243
IPO expense (8)
—
—
—
531
Discontinued service lines and closing of
Berkley
lab (9)
—
1,078
—
7,496
Other losses and expenses(10)
464
—
675
147
Adjusted EBITDA
$
20,963
$
13,895
$
37,762
$
19,448
(1)
Represents non-cash stock-based
compensation expenses related to option awards issued to employees
and restricted stock grants issued to directors.
(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) expansion of our
Remediation and Consulting services and (iii) expansion into Europe
in advance of projects driven by new regulations.
(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 embedded derivatives and warrant option attached to the
Series A-1 preferred stock and 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)
Purchase accounting fair value adjustment
to deferred revenue represents the impact of the fair value
adjustment to the carrying value of deferred revenue as of the date
of acquisition of ECT2.
(8)
Represents expenses incurred by us to
prepare for our initial public offering, as well as costs from
IPO-related bonuses.
(9)
Represents losses from the Discontinued
Service Lines and the Berkeley lab.
(10)
Represents non-operational charges
incurred as a result of non-capitalizable costs related to the
implementation of a new ERP and net of insurance gain.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210810005948/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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