Onterris, Inc. Q2 FY2025 earnings call

• Achieved record performance with 35% revenue growth and 70% consolidated adjusted EBITDA growth year-over-year in the second quarter. • Second quarter revenue was $234.5 million, driven by organic growth across all segments and environmental emergency response. • Adjusted EBITDA for second quarter was $39.6 million or 16.9% margin. • Positive net income and GAAP EPS in second quarter. • Strong cash flow generation, with operating free cash flow up $48.5 million in first half of 2025. • Completed balance sheet simplification by fully redeeming remaining preferred shares, bringing leverage below 3x. • Reaffirmed long-term organic revenue growth expectation of 7% to 9% annually.

The company has three segments: Assessment Permitting and Response (AP&R), Measurement and Analysis, and Remediation and Reuse. In the second quarter, AP&R segment revenue nearly doubled to $103.9 million from $53.4 million in the prior year period, with adjusted EBITDA of $27.6 million or 26.5% of revenue. Measurement and Analysis segment revenue increased nearly 15% to $62.8 million, with adjusted EBITDA rising to $18.3 million or 29.1% of revenue, a 660 basis point margin improvement over the prior year. Remediation and Reuse segment second quarter revenue increased to $67.8 million from $65.1 million in the same quarter last year, with adjusted EBITDA growing to $10 million and a 110 basis point margin increase.

• 2025 revenue expected to surpass 2024 by 17%. • 2025 full year adjusted EBITDA projected to grow 19% over the previous year. • Reaffirmed long-term organic revenue growth expectation of 7% to 9% annually. • Expect to continue generating significant cash flow, including free cash flow in the second half of 2025.

• Regulatory uncertainties, such as the U.S. EPA's proposed repeal of the greenhouse gas endangerment finding, though impact on Montrose is minimal due to most work being for clients in states regulating greenhouse gases and those transacting globally. • Broader macroeconomic concerns affecting clients, though clients' planning cycles haven't changed significantly.

Q: About margins across business lines, especially M&A margins and core business margins.

A: On the Measurement and Analysis segment, long-term expectation is 18% to 22% margin, currently above due to operating leverage and project mix shift. Consulting business margins increasing due to increased staff utilization. Remediation and Reuse segment also seeing margin uptick.

Q: What does greenhouse gas monitoring and measurement represent of the total Montrose business?

A: About 3%, with 2/3 of that state-driven in states regulating greenhouse gases independent of federal government, so de minimis impact on Montrose.

Q: PFAS activity in the quarter and outlook for second half.

A: Outlook remains positive, with continued growth in testing and treatment technology business, patent portfolio beyond PFAS, and broader industrial water treatment portfolio.

Q: Acquisition pipeline, valuations and multiples.

A: Broader market multiples have normalized, but Montrose's acquisitions are word-of-mouth and relationship-driven, typically mid- to high single-digit EBITDA multiples, not greatly affected by broader market trends.

Q: Buybacks cadence.

A: Not a commitment, but an option to maximize shareholder value if opportunities arise. Focus currently on organic growth, margin expansion, and cash flow generation.