Montrose Environmental Group, Inc. (NYSE: MEG) has announced a robust start to the first quarter of 2024, with record revenues and strong growth projections. The company, specializing in environmental solutions, reported a slight decrease in diluted adjusted net income per share to $0.16, attributed to higher interest and depreciation costs, despite an increase in EBITDA and lower taxes.
Montrose is bullish on its future, banking on organic growth, strategic mergers and acquisitions (M&A), and regulatory changes that could expand market opportunities. The company's remediation and reuse segment is expected to see margin expansion and has been bolstered by the acquisition of Matrix. With a successful equity offering and an upsized credit facility, Montrose is well-positioned for continued momentum in 2024.
Key Takeaways
- Montrose Environmental reported record revenues and consolidated adjusted EBITDA for Q1 2024.
- The company completed a successful follow-on equity offering and upsized its credit facility to support growth.
- Regulatory changes, including new standards for PFAS pollutants and methane emissions, are seen as opportunities.
- Montrose anticipates 10-12% organic growth for 2024, driven by industry tailwinds and M&A activity.
- The company's biogas business has completed its pivot and expects revenue and margin growth.
Company Outlook
- Montrose reiterates its full-year outlook for 2024, with expected revenues between $690 to $740 million.
- Consolidated adjusted EBITDA is projected to be in the range of $95 to $100 million.
- The company foresees a 1% increase in aggregate EBITDA margins and steady growth in its advisory and testing segments.
Bearish Highlights
- Diluted adjusted net income per share decreased slightly from $0.17 to $0.16, due to higher costs.
Bullish Highlights
- Strong organic growth and successful cross-selling efforts are driving revenue increases.
- The remediation and reuse segment grew by 39.7% primarily due to strategic acquisitions.
Misses
- No specific misses were highlighted in the provided context.
Q&A Highlights
- Montrose executives expressed confidence in maintaining an elevated organic growth cadence.
- The company is focusing on high-margin design engineering installation in biogas projects.
- Future prospects are viewed positively, with anticipation for the Q2 update.
Montrose Environmental's first-quarter achievements set a promising tone for the year, with the company leveraging regulatory changes and strategic growth initiatives to fortify its market position. The executives' confidence in the organic growth trajectory and the successful pivot in the biogas business suggest a strong foundation for future performance. Investors and stakeholders can look forward to Montrose's continued progress as it navigates the evolving environmental landscape.
InvestingPro Insights
Montrose Environmental Group's (NYSE: MEG) recent financial performance and future growth prospects are drawing attention in the market. The company's strategic initiatives and market positioning are underscored by several key metrics and insights from InvestingPro:
InvestingPro Data highlights a 19.76% revenue growth in the last twelve months as of Q1 2024, reflecting the company's robust top-line performance. This growth is further supported by a significant 95.54% EBITDA growth in the same period, indicating strong operational efficiency improvements.
The stock has experienced a large price uptick, with a 67.13% six-month price total return, which aligns with the company's bullish stance on its growth trajectory. This performance is noteworthy considering the stock's volatility, as the price is currently at 89.8% of its 52-week high.
InvestingPro Tips suggest that Montrose Environmental is expected to be profitable this year, with net income anticipated to grow. This is a key factor for investors considering the company's recent history of not being profitable over the last twelve months. Additionally, the company's liquid assets exceeding short-term obligations indicate a stable financial position, capable of sustaining its growth initiatives and weathering potential market fluctuations.
For investors looking to delve deeper into Montrose Environmental's financial health and future prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/MEG. These insights could provide valuable context for making informed investment decisions. Moreover, by using the coupon code PRONEWS24, investors can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, offering even more detailed analysis and tips—there are 11 additional tips listed in InvestingPro to explore.
Montrose Environmental's strategic direction, coupled with the insights provided by InvestingPro, paints a picture of a company poised for growth and profitability, making it an interesting prospect for investors monitoring the environmental solutions sector.
Full transcript - Montrose Environmental Grp (NYSE:MEG) Q1 2024:
Operator: Good morning, ladies and gentlemen, and welcome to the Montrose Environmental Group, Inc. First Quarter 2024 Earnings Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Wednesday, May 8, 2024. I would now like to turn the conference over to Rodny Nacier, Investor Relations. Please go ahead.
Rodny Nacier: Thank you, Operator. Welcome to our first quarter '24 earnings call. Joining me on the call are Vijay Manthripragada, our President and Chief Executive Officer; and Allan Dicks, Chief Financial Officer. During our discussion today, we will be referring to our earnings presentation, which is available on the investor section of the website. Our earnings release is also available on the website. Moving to slide two, I would like to remind everyone that today's call will include forward-looking statements that are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ in a material way due to known and unknown risks and uncertainties that should be considered in evaluating our operating performance and financial outlook. We refer you to our recent SEC filings, including our annual report on Form 10-K for the fiscal year ended December 31, 2023, which identify the principal risks and uncertainties that could affect any forward-looking statements, as well as future performance. We assume no obligation to update any forward-looking statements. In addition, we will be discussing or providing certain non-GAAP financial measures today including consolidated adjusted EBITDA, adjusted net income, and adjusted net income per share. 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 reconciliations thereof to their most directly comparable GAAP measure. With that, I would now like to turn the call over to Vijay beginning on slide four.
Vijay Manthripragada: Thank you, Rodny. And welcome to all of you joining us today. I will provide you with business highlights. Allan will provide you with financial highlights. We will then open it up to Q&A. And I will speak generally to the updated earnings presentation shared on our website. We have had and continue to have a strong start to 2024. Our results are the byproduct of that momentum, and I want to start by acknowledging the exceptional efforts of our colleagues around the world. I would also like to remind our listeners that while we discuss quarterly results, our business is best assessed on an annual basis. Demand for environmental solutions does not consistently follow quarterly patterns, and we manage our operations on an annual basis. With that, let me start by highlighting a few key themes related to our first quarter 2024 results. First, we are seeing secular tailwinds and strong performance across our segments and service lines, resulting in record, first quarter revenues and consolidated adjusted EBITDA. Second, our solid performance during the quarter is primarily attributable to strong organic growth. Our organic growth continues to be driven by cross-selling success and R&D successes. There were also a number of key regulatory updates from the U.S. EPA that present significant opportunities for our business and those updates have increased our confidence about our future. I'll provide additional details on that shortly. Third, M&A remains a key component of our growth strategy, and the cadence of opportunities has increased this year relative to our recent past. We are thrilled to welcome the teams from Epic, Two Dot, and ETA. The addition of these teams brings stellar talent to Montrose. They also increase our geographic and service capabilities. We have a robust acquisition pipeline, and we expect continued M&A momentum in 2024. Our strong track record of successfully acquiring and integrating complementary businesses remains a bright spot for Montrose. Allan and I have committed to providing more details about Matrix, which are in our public presentations. Their margins have already improved significantly, and the return on capital has been much stronger than we expected, as the margin increases have occurred without revenue degradation. Matrix is just one example of many in terms of the value creation we're able to offer to our shareholders. I will next discuss our first quarter performance by segment. Within our assessment, permitting, and response segment, this segment contains both our advisory business and our CTEH environmental response business. Excluding our response business, during the first quarter, we were pleased to see solid organic revenue growth in our advisory services, supported by continued cross-selling success across multiple service lines. The increase in margins for this segment were primarily driven by strong organic growth. For the response side of this segment, our emergency response revenue last year was $23.2 million, and this year is $15.7 million, given the major derailment from 2023. This created a tough quarter-on-quarter comp, and the strength of our overall segment performance is particularly encouraging, given this dynamic. Within the measurement and analysis segment, we continue to experience strong organic revenue growth, particularly in our lab services, driven by PFAS and air testing services. For example, around greenhouse gas measurement mitigation and increased regulations around hazardous air pollutants. Margins during the quarter were slightly lower year-over-year, primarily due to business mix, but our annual outlook is unchanged. We reiterate our expectation for annual margins in this segment to be around 18% to 20%. Within our remediation and reuse segment, revenue growth for the quarter was primarily driven by our acquisition of Matrix. This was partially offset by lower revenue from our biogas business, given our pivot from Q3 of last year to higher margin services. The biogas pivot is complete, and our outlook for this year is the same, so this is more about quarter-on-quarter variance to this time last year. Margins in this segment during the quarter were lower, also mainly due to the impact of the Matrix acquisition. Matrix typically breaks even or loses money in the first quarter, given Canadian weather. But that said, I would like to reiterate that we are pleased to see the excellent progress made by the team on increasing Matrix's margins for the full-year, and our outlook is unchanged. Given recent regulatory updates, as well as the improvements in Matrix margins, we expect organic growth and margin expansion in this segment for full-year 2024. Next, I will discuss recent key regulatory developments and industry trends that support our optimistic long-term growth outlook. The U.S. EPA finalized its first-ever national drinking water standards for PFAS pollutants in April. The U.S. EPA also designated PFOA and PFOS as hazardous substances under CERCLA. These long-awaited regulatory actions set legally enforceable maximum contaminant levels for several PFAS chemicals and commit $1 billion of investment to address PFAS in drinking water. The rules also require the reporting of any spills and increase the likelihood that new or legacy Superfund sites will need to be investigated and remediated. We expect both of these regulatory updates to open up an approximately $200 billion addressable market for Montrose based on third-party research. PFAS remediation remains a significant opportunity for growth and value creation across all of our segments, and we anticipate demand will ramp up steadily over the coming quarters. With regards to methane emissions, in March the EPA published landmark rules under the Clean Air Act to regulate methane emissions from the oil and gas industry. These rules set standards for new or modified sources and provide emissions guidelines for states to implement similar standards for existing sources. While the new regulations only apply to new facilities built after December 2022 at this time, this rule is expected to expand and cover existing sources within the next few years. This regulatory framework presents long-term tailwinds for our emissions measuring, monitoring, and assessment solutions as clients evaluate their environmental impact. In terms of regulations tracking and targeting other air pollutants, the EPA finalized their national emission standards for hazardous air pollutants in April. This new rule requires approximately 200 facilities to reduce air toxics emissions to help protect people living near chemical plants. Montrose remains uniquely positioned given our differentiated ability to measure and communicate quality data, particularly via our software capabilities, to industrial partners and local communities. While the compliance deadline was extended since this rule's initial proposal, we expect this action will provide long-term tailwinds to our business as companies review the impact of their facilities and work to meet emissions standards. In summary, we remain upbeat given our organic growth, our patent development and commercialization, our strategic acquisitions, and the broader regulatory tailwinds for Montrose in the quarters and years to come. In early March of this year, we increased our guidance, and we remain confident in our ability to achieve those numbers and goals for 2024. These results and our optimistic outlook belong to our approximately 3,500 colleagues around the world, and I would like to once again thank them for the tremendous work that they've done. I would also like to thank our shareholders for their support, and I would like to welcome our newly added shareholders from April's capital raise. Allan and I look forward to updating you on our progress next quarter and in the quarters to come as we collectively re-imagine ways to simultaneously support human development and protect our shared environment. With that, I will hand it over to Allan. Thank you.
Allan Dicks: Thanks, Vijay. Our strong results in the first quarter reflect the strength of our business, strong organic growth through our cross-selling strategy, as well as the contribution of strategic acquisitions. In addition, we further strengthened our capacity for accretive growth through the successful completion of our follow-on equity offering in April. Moving to our revenue performance on slide nine, we were happy to see continued strong organic growth across most of our service lines during the first quarter. Our first quarter revenues increased 18.2% to $155.3 million compared to the prior year quarter, primarily driven by strong organic revenue growth in our AP&R and the M&A segments and the contributions of acquisitions, partially offset by lower environmental emergency response service revenues, the exiting of a discontinued specialty lab in December 2023, and the shift away from lower margin revenue in our biogas business in the latter part of last year. Looking at our consolidated adjusted EBITDA performance on slide 10, first quarter consolidated adjusted EBITDA was $16.9 million, or 10.9% of revenue. This compares to consolidated adjusted EBITDA of $16.6 million, or 12.6% of revenue in the prior year quarter. The increase in consolidated adjusted EBITDA was driven by higher revenues. Lower consolidated adjusted EBITDA as a percentage of revenues was primarily driven by seasonally low margins from Matrix, which we acquired in June 2023, and therefore was not included in the comparable prior year period. And to a lesser extent, a large higher margin environmental emergency response project in the prior year period, which did not occur in the first quarter this year. Moving to a review of diluted adjusted net income per share on slide 11, adjusted net income per share was $0.16 for the first quarter, compared to $0.17 in the prior year quarter. The decrease was mainly driven by higher interest and higher depreciation in the current period versus the prior year, partially offset by higher EBITDA, lower income tax expense, and lower dividends paid to our Series A-2 preferred shares. Please note, our diluted adjusted net income per share is calculated using adjusted net income attributable to stockholders divided by fully diluted shares. We believe diluted adjusted net income per share is the most helpful net income metric to Montrose and to common equity investors. As an update, we made a change to our tax methodology for adjusted net income as reflected in the adjusted net income reconciliation table in the appendix for the current and prior periods. Turning to our business segments on slide 12, in our assessment, permitting, and response segment, first quarter revenue increased 12.2% year-over-year to $58.6 million, driven by strong organic growth. The year-over-year increase was partially offset by an expected decline in revenues from emergency response services, following a significant event in the first quarter of 2023 that did not occur in the current year. AP&R segment adjusted EBITDA increased 14.1% year-over-year to $16.3 million, or 27.8% of revenue, up from 27.3% in the prior year quarter, reflecting the benefits of organic growth and business mix. In our measurement and analysis segment, revenue for the quarter increased 7% to $45.5 million, primarily attributable to organic growth. First quarter M&A segment adjusted EBITDA was flat year-over-year, and as a result, adjusted EBITDA margins were down slightly to 14.3%, compared to 15% in the prior year quarter, primarily due to business mix. Our outlook for annual margins in this segment remained unchanged at 18% to 20%. In our remediation and reuse segment, first quarter revenues increased to 39.7% to $51.3 million, primarily due to the acquisition of Matrix, partially offset by the shift in our biogas business to focus on higher margin revenue projects. The decrease in R&R segment adjusted EBITDA margin was due to the dilutive impact of Matrix, which has historically generated no or negative earnings in the first quarter of every year, given seasonality in that Canadian business. Our margin optimization efforts are well underway, and we remain pleased with Matrix's increased profitability, which is on track to achieve a double-digit adjusted EBITDA margin by the end of 2024. Moving to a review of our cash flow and capital structure on slide 15, first quarter cash flow used in operating activities was $22 million, compared to cash generated of $3 million in the prior year. The year-over-year change in cash flow used in operations was primarily due to a temporary higher investment in working capital, which was driven primarily by an increase in receivables at Matrix and CTH given recently awarded cross-divisional projects, as well as lower accrued payroll as a result of the payment of larger bonuses in the current year versus the prior year. For the balance of the year, working capital should moderate, and as a result, we expect to reduce cash flows from operations in line with our long-term conversion of adjusted EBITDA into operating cash flow at a rate in excess of 50%. We voluntarily redeemed $60 million of principal on the outstanding preferred stock in January. The associated dividend savings are an estimated $5.4 million annually and represent a proactive step towards simplifying our capital structure. Following this redemption, the principal balance of the preferred stock outstanding was reduced to $122.2 million. As a reminder, our convertible and redeemable Series A-2 preferred stock has no cash maturity date and no cash redemption obligation, but we have the option to redeem the preferred shares at any time for cash. As we highlighted last quarter, in February we upsized our credit facility to $400 million, adding $100 million to our available liquidity on the same terms as our pre-existing facility, $50 million of the increase was added to our term loan, and the other $50 million increased our revolver capacity to $175 million. In April, we completed a follow-on equity offering, raising net proceeds of approximately a $122.4 million. Following this offering, we had $218.8 million of liquidity, including $43.8 million of cash on hand and approximately $175 million of availability on our credit facility. Pro forma for the equity raise, our leverage ratio is 2.1 times, well below our longer-term target leverage of below 3.5 times. The capital raise significantly enhances our liquidity, granting us further flexibility to continue to invest in additional M&A, which we expect to be the primary use of proceeds. Moving to our reiterated full-year outlook on slide 17, based on our strong start to 2024 and the tailwinds we see in our business, we reiterate our recently increased outlook for full-year 2024 revenues to be in the range of $690 to $740 million and consolidated adjusted EBITDA to be in the range of $95 to a $100 million. Our 2024 outlook remains anchored on the expectation for low double-digit organic revenue growth and margin expansion over the prior year and includes an unchanged expectation for full-year emergency response revenues to be in the $50 to $70 million range. We expect the first quarter to be our low point for revenue and adjusted EBITDA for the year, with both metrics increasing sequentially into the second and third quarters of 2024. Based on the timing of business activity this year, we expect to generate roughly 60% of our full-year 2024 adjusted EBITDA in the back-half of the year. The more heavily weighted back-half compared to 2023 is primarily due to significantly improved profitability at Matrix and a substantive emergency response in the first-half of last year. In conclusion, we had a strong start to 2024 with record results in our key operating metrics. As we look to the remainder of 2024 and beyond, we are incredibly optimistic given the demand momentum for our integrated environmental solutions and the material regulatory tailwinds. With the success of our cross-selling strategy and integration of newly acquired businesses, we are confident in our ability to achieve our full-year goals. Thank you all for joining us today and for your continued interest in Montrose. We look forward to the opportunities we see ahead and updating you on our progress next quarter. Operator, we are ready to open the lines to questions.
Operator:
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question is from Tim Mulrooney from William Blair. Please ask your question.
Tim Mulrooney: Vijay, Allan, good morning.
Vijay Manthripragada: Hey, Tim. How are you?
Allan Dicks: Hey, Tim.
Tim Mulrooney: Doing well. Thanks for all the color with the recent finalization of the EPA's regs for MCLs and CERCLA. And I say we appreciate all the color on the market sizing, but I wanted to ask about timing. How do you think about the near-term, one-to-two-year impact of these rulings as you think across all three of your separate business lines?
Vijay Manthripragada: Yes. It's a good question, Tim. If you step back, the regs are structured in a way where the implication for testing has a three-year window. The implication for treatment has a five-year window. Those are the formal, regulatorily mandated timeframes. But what we are seeing a fair amount of is activity that is picking up, given our earlier conversations with you and others, in anticipation of these regs and in anticipation of needing to do some of the testing and remediation, knowing what existing PFAS levels are in various water matrices that a lot of our clients have been working on. The way I would think about it near-term for Montrose is it will be a steady increase. We are seeing increased activity already on the testing and assessment side. The cadence of inbounds on the treatment side has really picked up as well. We anticipate through the back-half of this year, and certainly next year, we will start to see the visible momentum, meaning financially visible momentum on the treatment side, but we are already seeing the momentum on the assessment and on the testing side. We expect that to continue, Tim. Some of that is partially why we are forward-leaning on our view for what the rest of this year looked like earlier this year with you guys.
Tim Mulrooney: Okay. Yes, that's very clear. Thank you. I guess as my follow-up, I was staying on this topic, but I was hoping you might be able to offer a bit of insight into your portfolio of PFAS remediation solutions that you have on hand. Because I know your regenerable resin technology gets a lot of attention, but I also know you have an entire suite of solutions. I am curious, how much do you expect to play on the drinking water side versus those higher contaminated industrial DOD sites, airports, et cetera?
Vijay Manthripragada: Yes. If you go back to our portfolio services, we have experts, regulatory experts, PhDs, toxicologists, which is helping a lot of our clients think about how to model this, how to think about risk, how to think about exposure and liability, and how to treat. We have dedicated PFAS labs that are really well-equipped to address, Tim, not only the drinking water the testing and the testing of other water matrices, but also on the air side. As you think about what happens after PFAS is removed, if you are going to incinerate it, for example, you need to validate that you are actually destroying these molecules. Our testing footprint is really starting to see some momentum, not just with water, but across various environmental media, air, water, and soil. And then, you are exactly right. On the treatment side, because we are now looking at parts per trillion thresholds across six molecules, some of which are more challenging to remove, certainly the anchor regenerable resins are seeing a lot more activity, including now a little bit on the drinking water side that remains not an area of focus for us. Our foam fractionation is seeing a lot of uptick on the landfill leachate side, which we are really encouraged to see. Our teams are seeing some really nice inbounds, given our technology for the replacement of AFFF foams, which impacts a whole different constituency. The reason I bring that to your attention is, obviously, the drinking water limits are there. The municipal drinking water treatment needs to begin and will begin. But all of the sources of upstream contamination are now in everyone's crosshairs because they're partially the reason some of these levels are elevated within the drinking water. It's all interconnected. It's really hard to look at this in isolation. But our suite of services is upstream of a lot of these, and we're getting pulled downstream into the drinking water market because of some of the lifecycle cost advantages that our technology offers. Does that answer your question, Tim?
Tim Mulrooney: It does, yes. It sounds like you do have technologies that can address the drinking water systems, though that's not your main focus. But regardless, these MCLs are going to have adjacent impacts or upstream impacts that go beyond drinking water systems, and that is going to affect your business in a material way. Is that a good summary?
Vijay Manthripragada: Yes. It already is, and that's exactly right.
Tim Mulrooney: Okay, very clear. I'll jump back into you. Thank you very much.
Allan Dicks: Thanks, Tim.
Vijay Manthripragada: Thanks, Tim.
Operator: Thank you. Your next question is from Jim Ricchiuti from Needham & Co. Please ask your question.
Jim Ricchiuti: Hi, good morning.
Vijay Manthripragada: Hey, Jim.
Jim Ricchiuti: I apologize if there's going to be some background noise, but I wanted to ask two questions. First, we didn't have a chance to really talk a whole lot about the revision to the guidance that was raised to you for your guidance earlier. Maybe if you could just spend a moment or two on what really drove that, I mean, it sounds like you're seeing a better performance from Matrix, but I'm not sure that's really having as much of an impact as it is other parts of the business.
Vijay Manthripragada: Yes, let me take that, Jim. Just philosophically, we have learned since our IPO in 2020 that we're best served being as transparent as we can with you at the broader investment community so that there's no surprises quarter in, quarter out. And the reason we were more forthcoming, not just when we increased guidance, but if you go back to our February annual 2023 readout and the first time we provided guidance for '24, we gave a lot more color on what the quarters look like. And the reason for that is there's a few dynamics in the business that are not only topical, but very relevant to the financial outcome. The first is the regulatory landscape has shifted materially through the course of Q1 and even now in the early part of Q2. Jim, and as a result, the implications for us and what the back-half of the year looks like and what the organic trajectory looks like is real, it's material. And that has changed our optimism, not just for this year, but as we look out through the course of the next few years. And so, that's one variable that moved from when we initially provided guidance and certainly has moved since we talked with you through the end of last year and early part of this year. The other dynamic that we are weighing, and it's certainly going to continue to be a theme we have to articulate as we think about quarterly performance, not annual, is the impact of Matrix. So, you're exactly right. That's a business that is very different in terms of its revenue and EBITDA weighting first-half of the year versus second-half of the year. And as a result, we wanted to give you guys more color on that. And then, the third dynamic is the impact both of recent acquisitions and the transition away from the large train derailment emergency response last year. So that's because there were so many confounding variables, we wanted to make sure we were very open about what's driving the business. But fundamentally, the increase in guidance was because the structural underpinnings of the business look really solid for us, and we're really optimistic about what the next couple of quarters, next couple of years looks like. Does that make sense?
Jim Ricchiuti: It does, Vijay, thank you. That's helpful. And just a final follow-up question for me is, you're talking about a growing funnel, M&A. Obviously there was the additional capital that you've added back in April. And maybe if you could, two things, historically, you guys have done more smaller deals than a few bigger ones. But I'm just wondering how we should think about M&A activity and whether you guys have to add some additional resources or if you feel you have the infrastructure in place to accommodate a pickup in M&A. Thanks.
Vijay Manthripragada: We are comfortable with our resources that we have in place now, Jim, to accomplish what we've set up for this year. And you're exactly right. If you go back, if you think about our historical cadence of around $10 million of EBITDA and our target of businesses that are a couple million dollars of EBITDA each that we're purchasing at very attractive multiples, that would suggest just round numbers, call it a handful, five-ish deals a year. And if you look over the last couple of years, we've done more sizable ones like a Matrix, but the cadence has been a little smaller, a little lighter because we've been a little bit more cautious with capital allocation. What we're finding now is that the pipeline never went away and the backlog is quite robust in terms of the opportunities set for us. And you can see that already, right, Jim, through the first quarter we've - or call it the first four months, we've already closed three transactions and there's more on the comments. As a result, the cadence is higher. So, we wanted to make sure not only is the balance sheet going to be able to absorb that because these are very strategic and very attractive transactions for our long-term growth plans, but that our team is able to do it too. So, there's nothing large that's imminent. There's no changes to our strategy. There's no additional resources needed. This is more of the same, except the cadence is higher than it's been in the past.
Jim Ricchiuti: Got it. Thanks very much.
Vijay Manthripragada: Thanks, Jim.
Operator: Thank you. Your next question is from Brian Butler from Stifel. Please ask your question.
Brian Butler: Good morning. Thanks for taking my question.
Vijay Manthripragada: Hey, Brian.
Allan Dicks: Hey, Brian.
Brian Butler: Just you kind of touched on the M&A question, the last M&A question, but maybe a little bit more color on what you're looking for service-wise across the segments and just help understand where those opportunities might lie?
Vijay Manthripragada: Yes. Brian, if you step back and think about where our transaction, ideas or leads come from, these are word of mouth either from our clients or from our teams. And so, it's largely either geographic expansion or the addition of specific service lines that our teams believe will be complementary to what they're already offering to our clients. And so, using the three from this year, Epic was a continuation of what we already do, a fantastic team, just an expansion geographically, Two Dot was exactly the same. It was a geographic expansion of our current service line. And then, ETA is a small transaction. It was a partner of Montrose's serving existing clients, and so we just brought that in-house. And so, that is the geographic expansion, I would say, is by and large the primary driver, existing services, no shift to strategy, just bolstering our ability to serve our clients in different places. The second thing we look for - and look, table stakes is cultural fit, right, and financial accretion, so let's put that to the side. The other variable that we look at, though to a lesser extent, is an expansion of our technical capability or the acquisition of selected technologies. That has not really been the cause for any of the recent transactions, but that is another area we tend to be focused.
Brian Butler: Okay, that's helpful. And then, maybe we could just talk on PFAS revenues, where we are right now, and the outlook with the 200 billion total addressable market is huge, but where are we starting? And again, you talked about the ramp already, but just a little color on the starting point.
Vijay Manthripragada: Yes. So, PFAS, it ebbs and flows a little bit, Brian, based on the projects, but to put it in context, it was, call it 15 to 20-ish million of revenue as we approached our IPO and around IPO, and it's called 75 to a 100 today. And so, we've seen a really nice growth trajectory over the last couple of years, and we think that that will be multiples of its size than it is now over the next several years.
Brian Butler: Okay. And may be just one last one --
Vijay Manthripragada: And sorry, Brian, going back to the earlier point that we were making with Tim, this is not just a treatment consideration for us. It impacts all parts of our business in all three segments.
Brian Butler: Okay, great. And then, just one last one, I was just going to ask on the R&R business. X-Matrix, do you have a comparison on the EBITDA margin? I mean, was that margin up if you took Matrix out of the mix, or was there still some headwinds from the biogas?
Vijay Manthripragada: Yes, margins would have been down just slightly, Brian, and you're exactly right. It's the pivot in biogas. You'll see that start to ramp really nicely, particularly in the back-half of the year. Margins in that segment will be up really nicely for the full-year, largely driven by the back-half. Yes, Brian, just stepping back, and this is why we keep really anchoring in on the quarters not being as meaningful as the full-year comparison. Just to put all this in perspective, but if you look at the midpoint of guidance, it assumes an approximately 100 basis point 1% increase in aggregate EBITDA margins. Obviously, our advisory business, we think margins will be steady in the mid-20s. On the testing side, that's a mature business, 18% to 20%. They'll be steady. Really, that margin accretion you're going to see coming from both increased operating leverage and a really nice margin accretion on the remediation reuse segment. We've got to watch this over time. The individual quarters will swing based on acquisitions and other variables.
Brian Butler: Great. Thank you very much for taking my questions. Nice quarter.
Vijay Manthripragada: Thanks, Brian.
Brian Butler: Thank you.
Operator: [Operator Instructions] Your next question is from Stephanie Yee from J.P. Morgan. Please ask your question.
Stephanie Yee: Hi. Good morning.
Vijay Manthripragada: Hey, Stephanie.
Allan Dicks: Hey, Stephanie.
Stephanie Yee: I was wondering if you can talk about what you think your normal cadence for - I know it's hard, but just a sense of what organic revenue growth cadence should be for the next few years. I know historically you've talked about something like mid-single-digit to high-single-digit that people can expect in any particular year. I'm wondering with the regulations, especially on the PFAS side, whether we should be thinking about high-single-digit to low-double-digit being the new normal for Montrose going forward?
Vijay Manthripragada: Why don't I take that, and then Allan, you should certainly jump in. Stephanie, just to remind everyone, the way we define organic growth is we exclude the impact of acquisitions entirely, and we also exclude the impact of our emergency response business. You've got to look at the core performance to really understand what the organic growth trajectory of the business looks like. When we went public, you're exactly right, Stephanie, we talked about being at approximately 7% to 9% organic growth cadence. If we look, obviously there's been some intro year variability, but as we look past this today, looking back to IPO, we've been growing closer to 15% a year on average organically. If you look at our guidance for this year, we are implying a 10% to 12% organic growth for 2024. Obviously, if you just take those numbers and contrast that with a 7% to 9%, our signal for the near future is that we are at an elevated organic cadence relative to our recent past. As the business grows, obviously as revenue continues to accrete at 30-plus percent a year, as it has been, maintaining those levels on a dollar basis is more challenging. We're not changing our outlook, but we do believe that we're going to be this year at an elevated organic cadence. Certainly, the secular tailwinds in the industry are real and they're going to continue to impact us positively, we believe, into the foreseeable future.
Stephanie Yee: That makes sense. That's super helpful. I was wondering if you can talk more about what you're doing in your biogas business now that you've anniversary the pivot. What kind of projects are you working on now? I think you mentioned that you do expect to see growth in the back-half of the year, but just any additional color on what's going on with that business?
Vijay Manthripragada: The pivot's complete, and so the quarter-on-quarter noise will certainly be there because the pivot was really finished in Q3 of last year. It's all done, it's behind us. As we look '23 versus '24, you're going to see really nice revenue and margin growth in that business, we believe. That'll manifest itself as part of the aggregated ECT2 footprint, which is a combination, obviously, primarily of biogas and our PFAS water treatment business.
Allan Dicks: The biogas, it's not so much different projects, Stephanie, it's the components of the projects that we're servicing that is different; focusing on the higher margin design engineering installation as opposed to some of the other side of construction and equipment procurement.
Stephanie Yee: Okay, sounds good. Thank you.
Vijay Manthripragada: Thanks, Stephanie.
Operator: Thank you. There are no further questions at this time. I will now hand the call back to Vijay Manthripragada for the closing remarks.
Vijay Manthripragada: Thank you very much again for all of you for sharing your time with us this morning. We're really excited about what the prospects look like for us, and we look forward to our Q2 update in the near future. Take care, everyone.
Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect.
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