Montrose Environmental Group (MEG) 27th Annual Needham Growth Conference summary

Business performance and market outlook

• Operations in Southern California remain unaffected by recent tragic events, with ongoing monitoring of the situation and employee safety prioritized.

• Despite a challenging 2024 for stock performance, reaffirmed revenue and Adjusted EBITDA guidance, and increased optimism for the next four years.

• Supreme Court’s Loper Bright ruling and political changes have not materially impacted client demand; private sector focus and international diversification provide resilience.

• Advisory and consulting demand has increased due to regulatory uncertainty, especially post-Chevron deference overturn.

• Environmental regulations and bipartisan support ensure stability and predictability for business operations.

Regulatory and industry dynamics

• Supreme Court’s Chevron deference overturn shifts regulatory power to states, increasing demand for advisory services.

• PFAS regulations are expanding, with compliance deadlines extended to 2029 and the addressable market now estimated at $200–300 billion in the U.S.

• PFAS-related work spans advisory, testing, and treatment, representing 10–15% of annual revenue.

• International growth, especially in Australia and Northern Europe, is driven by patented PFAS remediation technologies.

• State-level environmental activity is robust and bipartisan, with significant demand from both red and blue states.

Strategic initiatives and financial management

• Cross-selling across consulting, testing, and treatment services has increased, driven by integrated business strategy rather than M&A.

• Recent pause in M&A activity to prioritize repayment of $122 million in preferred equity, with $60 million to be repaid in early April and the remainder by year-end.

• Pro forma leverage expected to be around 3x by end of next year, with robust free cash flow anticipated in 2025.

• Cash flow issues in 2024 were due to integration of Matrix acquisition and delayed receivables from a large Southern California project; both are being resolved.

• Matrix acquisition has tripled EBITDA margins since integration, with strong outlook for 2025 and expected tailwinds from Canadian political changes.