Montrose Environmental Group Q2 2026 Earnings Report

Montrose Environmental Group EPS Results

• Actual EPS: $0.51
• Consensus EPS: $0.08
• Beat/Miss: Beat by +$0.43
• One Year Ago EPS: N/A

Montrose Environmental Group Revenue Results

• Actual Revenue: $186.66 million
• Expected Revenue: $179.69 million
• Beat/Miss: Beat by +$6.97 million
• YoY Revenue Growth: N/A

Montrose Environmental Group Announcement Details

• Quarter: Q2 2026
• Date: 8/5/2026
• Time: After Market Closes
• Conference Call Date: Wednesday, August 5, 2026
• Conference Call Time: 5:30PM ET

Montrose Environmental Group (NYSE:ONT) (NYSE: MEG) is a global provider of environmental technical and monitoring services, delivering solutions for site assessment, remediation, compliance and long-term environmental stewardship. The company serves a broad range of industries, including energy, manufacturing, chemicals, mining and government agencies, supporting clients with risk management strategies, regulatory permitting and environmental permitting.

Montrose’s core offerings encompass environmental consulting, engineering design, field sampling and laboratory analysis, plus innovative digital monitoring platforms. Its remediation teams deploy a variety of in situ and ex situ treatment techniques to address soil, groundwater and sediment contamination, while its air-quality specialists use continuous monitoring systems to measure emissions and support client compliance with national and local air regulations.

The company operates through a network of regional offices and laboratories across North America, Europe and select international markets, enabling rapid mobilization of resources and localized regulatory expertise. By integrating data analytics, remote monitoring technologies and hands-on field services, Montrose provides end-to-end support for environmental risk assessments, long-term stewardship programs and emergency response planning.

With roots in one of its legacy business units founded in the early 1990s, Montrose Environmental Group consolidated its offerings under a unified platform in 2018 and completed its initial public offering on the New York Stock Exchange in July 2021. The company is led by founder and Chief Executive Officer Gino De Rossi, supported by a leadership team of environmental scientists, engineers and industry veterans.

Montrose Environmental Group Q2 2026 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Full-year revenue guidance was reduced to $740 million–$790 million, reflecting lower pass-through revenue, historically low environmental emergency response activity, and regulatory waivers delaying some air-testing work.
• Positive Sentiment: Despite the lower revenue outlook, adjusted EBITDA guidance was revised to $117 million–$120 million, with midpoint margins of 15.5%, representing approximately 150 basis points of year-over-year expansion driven by cost optimization.
• Positive Sentiment: Management maintained its expectation for strong second-half operating cash flow of $70 million–$80 million and approximately 2.5x year-end leverage, despite $30 million of share repurchases and other cash payments during the first half.
• Neutral Sentiment: The board launched a comprehensive review of the company’s portfolio, capital allocation, strategic plan, and strategic alternatives, including potential acquisition interest, but said no decisions or timetable have been established.
• Positive Sentiment: Management expects to resume disciplined small bolt-on acquisitions in the second half of 2026, particularly in testing and Consulting & Treatment, while maintaining its long-term high-single-digit organic growth objective.

Presentation

[Operator]

Good afternoon, ladies and gentlemen, and welcome to Onterris Incorporated Second Quarter Fiscal Year 2026 financial results conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, August 5th, 2026. I would now like to turn the conference over to Adrianne Griffin. Please go ahead.

[Adrianne Griffin, Senior VP of Investor Relations at Onterris, Inc.]

Thank you, Mark. Welcome to our Second Quarter 2026 earnings call. Joining me today are Vijay Manthripragada, our President and Chief Executive Officer, and Allan Dicks, our Chief Financial Officer. During our prepared remarks today, we will refer generally to our earnings presentation, which is available on the investors section of our website. Our earnings release is also available on the website. Moving to slides two and three, I would like to remind everyone that today's call includes forward-looking statements subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to known and unknown risks and uncertainties that should be considered when evaluating our operating performance and financial outlook.

[Adrianne Griffin, Senior VP of Investor Relations at Onterris, Inc.]

We refer you to our recent SEC filings, including our annual report on Form 10-K for the fiscal year ended December 31st, 2025, as supplemented by the quarterly report Form 10-Q for the quarter ended June 30th, 2026, which identifies the principal risks and uncertainties that could affect any forward-looking statements and our future performance. We assume no obligation to update any forward-looking statements. On today's call, we will discuss or provide certain non-GAAP financial measures such as consolidated adjusted EBITDA, adjusted net income, adjusted net income per share, and free cash flow. We provide these non-GAAP results for informational purposes, and they should not be considered in isolation from the most directly comparable GAAP measures.

[Adrianne Griffin, Senior VP of Investor Relations at Onterris, Inc.]

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 a reconciliation to their most directly comparable GAAP measure. References to EBITDA herein are adjusted EBITDA and when used outside of the context of specific segment performance, refer to consolidated EBITDA. On April 21st, 2026, Montrose Environmental Group, Inc. rebranded to Onterris, Inc. Beginning the first quarter of 2026, the company realigned its reportable segments to reflect updates made to the organizational structure and operating model as a result of the reporting segment realignment. The company's Assessment Permitting and Response segment and Remediation and Reuse segment were aggregated into a newly created Consulting & Treatment segment. The company's Measurement & Analysis and corporate segments were not affected by the realignment.

[Adrianne Griffin, Senior VP of Investor Relations at Onterris, Inc.]

Prior period results have been recast to conform to this new structure. With that, I would now like to turn the call over to Vijay, beginning on slide six.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Thank you, Adrianne. Good afternoon, everyone. Thank you for joining us. Before we begin, I'd like to thank our Onterris employees around the world. Their dedication, technical excellence, and commitment to our clients are central to what we do. I want to thank them for all that they do. Their commitment to our clients and to one another is why we continue to succeed. This afternoon, I'll share how we're thinking about second quarter results, discuss our updated 2026 outlook, summarize priorities we are focusing on to strengthen Onterris and enhance value creation for all stakeholders. As we have noted each quarter, our business is best assessed on an annual basis. Demand for environmental science-based solutions can be variable in any given quarter, particularly when environmental emergency response activity is significantly above or below historical levels.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

On an annual basis, the underlying demand profile and long-term trajectory of the business is very consistent. This is why we manage our operations on an annual basis. We recommend you similarly view our performance. Second quarter revenue was $186.7 million, below our expectations, primarily due to historically low environmental emergency response and related recovery services. Consolidated adjusted EBITDA was $31.9 million or 17.1% of revenue. Although revenue was lower, EBITDA margins increased from 16.9% in the prior year quarter, reflecting successful ongoing cost optimization. I would also like to remind our audience that the second quarter of 2025 included approximately $53.6 million of revenue associated with the single environmental emergency response event and the recovery work that followed. While second quarter revenue declined, without that single event, second quarter 2026 revenue grew.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Based on our first half performance and current visibility, we are updating our full year revenue guidance range to $740 million-$790 million. This revised range reflects three drivers at the midpoint. First, approximately $45 million lower pass-through revenue. Second, approximately $40 million lower emergency response revenue. Third, approximately $20 million of other revenue impacts. Examples of other revenue impacts include temporary regulatory waivers, some of which were recently issued for federal and state air permitting rules that remain promulgated. We are also updating our full year EBITDA guidance range to $117 million-$120 million, a change of $9 million at the midpoint. The encouraging news is despite a more significant drop in revenue, the impact on EBITDA is limited and our margins are higher. Every outcome within this updated EBITDA guidance range would represent a new record for Onterris.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

That's not just a financial milestone. It is evidence that the business continues to become more profitable even in a year when revenue expectations have moved lower. EBITDA margins at the midpoint of the updated guidance have increased to 15.5%, representing approximately 150 basis points of expansion compared to last year, and 50 basis points of margin expansion compared to our original 2026 guidance. Successful ongoing cost optimization offsets a meaningful portion of the earnings impact from the lower revenue outlook. It is also important to note that despite a lower revenue outlook, our full year operating cash flow expectations are largely unchanged from the beginning of the year due to the strong underlying performance of our core business. We continue to expect strong operating cash flow equal to approximately 60% of full year EBITDA, including $70 million-$80 million in the second half of 2026.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

We also expect year-end leverage of approximately 2.5x, which is flat year-on-year despite $30 million of share repurchases, an additional $16 million in payments for bonuses earned in 2025, and $11 million in contingent acquisition-related payments in the first half of this year. Taken together, our revised expectations reflect underlying growth in the core business, improved profitability, and strong cash generation power of the business. Our expectations are grounded in our relatively predictable testing business and known Consulting & Treatment projects. To be clear, this shift in 2026 outlook does not diminish the importance of environmental emergency response to Onterris. Response remains an important capability for our clients, an attractive business for us, and important for cross-selling. It is often the beginning of long-term client relationships that extend well beyond the initial response.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

The updated outlook reflects the activity we see today and does not include environmental emergencies that have not yet occurred. Our focus is on the priorities within our control: serving our clients, maintaining cost discipline, executing known Consulting & Treatment projects, supporting continued momentum in our testing business, and converting a greater share of revenue into earnings and cash flow. That work is strengthening Onterris and our core thesis is unchanged. Environmental challenges remain increasingly interconnected, our clients are looking for partners who can help them navigate a series of interconnected challenges across their operations, that's exactly where Onterris is positioned and why underlying demand remains strong. The integrated platform we've built over the past several years is allowing us to improve profitability even in a year where certain revenue streams are performing below our initial expectations.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

We also expect to resume disciplined bolt-on acquisitions within our valuation and leverage parameters. We believe all of these efforts will continue to maximize value for shareholders. With that, I will turn it over to Allan to walk through the updated outlook and our financial results in greater detail.

[Allan Dicks, CFO at Onterris, Inc.]

Thanks, Vijay. I'll begin with our updated outlook before turning to our second quarter financial performance and the drivers behind the numbers. The easiest way to think about the updated outlook is through two bridges. The first is the revenue bridge, the second is the earnings bridge. Starting with revenue. The revised full year range of $740 million-$790 million reflects $35 million-$55 million of lower pass-through revenue, $35 million-$45 million of lower emergency response revenue, and $15 million-$25 million of other lower revenue. These revenue components have different margin profiles. That is an important consideration when evaluating today's updated outlook. At the midpoint of revised full year EBITDA guidance of $117 million-$120 million, the bridge is as follows: lower pass-through revenue, which consists of revenue on subcontractor and non-labor direct costs, are generally at far lower margins than labor-based service revenue.

[Allan Dicks, CFO at Onterris, Inc.]

Lower pass-through revenue reduces expected EBITDA by approximately $4.5 million. Whereas lower, higher margin emergency response revenue impacts expected EBITDA by approximately $10 million. All other impacts are a net $5.5 million benefit, comprised of the impact of lower other revenue, more than offset by the benefits from successful ongoing cost optimization and operating efficiency. We also provided third quarter expectations of $190 million-$210 million of revenue and EBITDA margin of 17%-18% at the midpoint of that revenue range. I'll remind you that Q3 2025 included significant recovery revenue tied to the single response event Vijay mentioned. Expected Q3 2026 revenues will be down year-over-year. Expected Q3 EBITDA will be up and EBITDA margin up significantly. With that guidance framework in mind, I'll turn to our reported results.

[Allan Dicks, CFO at Onterris, Inc.]

Second quarter revenue was $186.7 million, a decrease of $47.9 million from the prior year quarter. These comparisons primarily reflect significantly lower environmental emergency response activity, together with reduced recovery services associated with environmental events. Growth in the balance of the Consulting & Treatment segment partially offset this reduction. Second quarter consolidated adjusted EBITDA was $31.9 million, representing an EBITDA margin of 17.1%, compared to $39.6 million and an EBITDA margin of 16.9% in the prior year quarter, primarily due to cost optimization. Turning briefly to our operating segments. Within Consulting & Treatment, second quarter revenue was $125.6 million, compared to $171.7 million in the prior year. The decline primarily reflected $37.7 million lower environmental emergency response revenue and $11.2 million of lower recovery services, primarily associated with the single large environmental event in the prior year.

[Allan Dicks, CFO at Onterris, Inc.]

Despite the lower revenue base, Consulting & Treatment segment adjusted EBITDA margin improved to 22.2% from 21.9%, reflecting favorable project mix and improved operating performance. Within Measurement & Analysis, revenue was $61.1 million, compared to $62.8 million in the prior year. The decline primarily reflected lower field services revenue, partially offset by higher lab testing revenue. Measurement & Analysis segment adjusted EBITDA margin of 26.2%, compared to the prior year of 29.1%, resulting primarily from lower operating leverage on the reduced revenue base. Although lower than the prior year period, this margin normalization was expected and margins remained strong. Turning to cash flow. For the first six months, net cash used in operating activities was $5.5 million, compared to net cash provided by operating activities of $27.4 million in the prior year period.

[Allan Dicks, CFO at Onterris, Inc.]

The year-over-year change primarily reflected lower earnings before non-cash items, together with higher working capital usage, including $27.7 million payments of annual incentive compensation made during the first quarter related to 2025 performance. As we look to the balance of the year, with those first quarter bonus payments behind us, we expect operating cash flow to improve significantly, driven by increased earnings and the seasonal benefits from working capital. We expect to generate $70 million-$80 million of operating cash flow during the second half of 2026, maintaining our 60% operating cash conversion expectation. Based on our operating cash flow outlook and absent acquisitions, we expect year-end leverage of approximately 2.5x. At June 30, our leverage ratio under the 2025 credit facility was 3.2x, and total available liquidity was $160.8 million.

[Allan Dicks, CFO at Onterris, Inc.]

Year-to-date, we have repurchased 1.6 million shares for $30 million and paid $10.8 million of contingent consideration. To conclude, while we are disappointed with the slow start to the year, due primarily to lower emergency response revenue, we are encouraged by the operating efficiency we're driving and the resulting margin benefit. These efficiencies are permanent and will be strong drivers of profitability improvement as revenue scales. In addition, our strong cash flow generation provides a solid foundation for us to continue to execute our strategy and create long-term value. Vijay, I will turn it back to you for remarks prior to opening the line for Q&A.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Thank you, Allan. Before opening the line to questions, I want to address the announcement in our earnings release earlier this afternoon that our Board is leading a comprehensive review of Onterris' business, portfolio, capital allocation, long-range strategic plan, and strategic alternatives. Our Board continuously evaluates opportunities to strengthen the company and enhance stockholder value. As part of that ongoing work, the Board determined that it was appropriate to undertake a broader review with the assistance of outside financial and legal advisors. The review will consider a broad range of alternatives, including, among others, evaluating acquisition interest in the company and other value-creating transactions, including acquisition opportunities, operational initiatives, and the continued execution of our standalone plan. The Board has not made any decisions regarding a particular course of action, and we have not established a timetable for completing the review.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

The Board will take the time it needs to determine the course of action it believes is in the best interest of the company and all Onterris stockholders. Of course, there can be no assurance that the review will result in any transaction or other outcome. We are undertaking this review with a strong foundation. Our confidence in Onterris' prospects are independent of the outcome of the Board's review. As the Board conducts its review, the Onterris team is fully focused on executing our strategic plan to strengthen cross-selling, accelerating long-term growth, and executing on our commitments to clients seeking the next generation of environmental solutions. We appreciate your understanding that we cannot provide additional information on the review or speculate about its outcome. As such, we ask you to please keep your questions focused on the quarter.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

We recognize the call today is on short notice, so we look forward to talking with those that could join. For those that can't, we look forward to catching up with you in the near future. Operator, we are now ready to open the line for Q&A.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. First question comes from Tim Mulrooney from William Blair. Please go ahead.

[Tim Mulrooney, Analyst at William Blair]

Yes. Thank you. Vijay, Allan, I have a bunch of questions about the review.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Hey, Tim.

[Tim Mulrooney, Analyst at William Blair]

I'm just kidding. We're gonna focus on the fundamentals here. If I take the midpoint of your revenue guide for total revenue and emergency response, then I'm getting to a core revenue, excluding emergency response, down in the low-single digit range this year. This is pretty different from core revenue growing 6%-9%, which I think was your prior guide back in April. First of all, am I doing my math right? Secondarily, can you walk us through what changed over the last few months that caused you to lower that outlook on the core revenue?

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Yeah. Why don't I start with that, Tim, and then I'll let Allan jump in. You're right. There's two primary dynamics on the revenue. There's the lower emergency response revenue. There's also a reduction in pass-through revenue. Let me give you some color, because this is not something we've talked about a lot in the past. Historically, pass-through revenue has been approximately 25% of our total revenue, and this year it is around 20%. Below 20%, in fact. As a result, our margins are not that impacted because that revenue is margin generative by and large. Hence all the commentary Allan and I made about healthy EBITDA margins, increasing EBITDA margin, strong cash flow. In the math that you're doing, you're taking gross revenue to gross revenue dynamics, and that's why the number is low-single digits.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

If you exclude pass-through revenue and you look at the core operating performance of the business, the underlying trajectory is actually quite strong. You are doing the math correctly. Those are the two dynamics that are at play, if that makes sense.

[Tim Mulrooney, Analyst at William Blair]

Yep. That makes sense. I think pass-through revenue is expected to be down about $45 million at the midpoint. Can you talk about the nature of that work? Like what type of work you do that the subs are supporting primarily, and why there's a $4.5 million dollar reduction in EBITDA? Why there's any reduction in EBITDA? I thought pass-through revenue is by definition zero margin?

[Allan Dicks, CFO at Onterris, Inc.]

Hey, let me take that, Tim. This is Allan. To answer the second part of your question first. There is typically a small markup on pass-through revenues that can range from as little as 3%-5% up to 15%. In some cases where there's an emergency response or recovery services, it can be even higher than 15%. It averages around 10%. There is some margin. It's not a zero margin pass-through revenue. The reduction is primarily related to project mix. Certainly our recovery services, there are a lot of outside subcontractors typically associated with that work. That with the lower emergency response, which has also led to lower response and recovery work, we're seeing lower pass-through revenue. We're also seeing changes in mix within the rest of the Consulting & Treatment business.

[Allan Dicks, CFO at Onterris, Inc.]

Look, as we focus increasingly on margin, as you know, we always report gross revenue, we're focused on margin or gross revenue. It is very sensitive to very low pass-through revenues. Where there is an opportunity to win work and not have to subcontract work, that's the path we'll take because it optimizes the margin outlook. It's really a mix of those factors that is causing the lower

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Yeah. Tim, just adding to Allan's commentary, just stepping back for a minute. This is a relatively new concept for us because the nature of our business has evolved. If you go back to IPO, testing was a substantively larger part of our core business. As we've evolved over the last five years and tripled the size of the firm over the last five to six years, consulting and engineering has become a more prominent part of our business. This type of dynamic, as you know better than we do, is very common in the consulting and engineering industry, where folks differentiate between growth and net. That's why, from our perspective, it's a relatively new phenomenon, but really not all that unique in the industry.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

It's something we've been ancillarily talking about with you and other investors, it's just become a much more prominent dynamic for us this year. Candidly, the material reduction in pass-through revenue surprised us a little bit. It surprised us because we've been winning these larger projects, and the rollout and execution of those projects is going quite well. The nature of those projects, and hence Allan's comment on project mix, has certainly been a little different than we have been used to in the past.

[Tim Mulrooney, Analyst at William Blair]

That is true, Vijay. A lot of the other companies in the space do report gross and net and talk about it more in net terms. We do see that a lot in the industry, that makes sense. Lastly on that change in mix within your Consulting & Treatment segment, does that imply that you're mixing more towards consulting and less treatment? Is that what would drive that? Or what would drive that change in mix?

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

I just meant in aggregate, Tim. In aggregate Consulting & Treatment as a percentage of our total.

[Tim Mulrooney, Analyst at William Blair]

Understood.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

We continue to see really nice long-term opportunity on the water treatment side in particular. That remains a very attractive outlook for us. I'm speaking in aggregate.

[Tim Mulrooney, Analyst at William Blair]

Got it. Yep, that makes sense. I'll hop back in queue. Thank you.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Thanks, Tim.

[Operator]

Thank you. For your next question comes from Wade Suki from Capital One. Please go ahead.

[Wade Suki, Analyst at Capital One]

Great. Thank you. Appreciate y'all taking my questions.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Hey, Wade. How are you?

[Wade Suki, Analyst at Capital One]

Just to sort of dovetail on, I think Tim's question, thinking about the revenue guide down, again, hate to dwell on it, but you sort of touched on it in your prepared remarks, Vijay, but the other revenue component, can you maybe elaborate a little bit more on what that piece is? Sort of along those lines, anything end market-wise in the last couple of months of the quarter surprise you, good, bad, or ugly, I guess? For lack of a better word.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Yeah. Wade, it's a great question. I was speaking specifically about our air testing business, which as you know, saw weather-related impacts in the first quarter, and we expected to see continued momentum through the rest of the year. That momentum has certainly picked up, but it's been offset by these temporary regulatory waivers that certain of our clients either received from federal and state regulators for select air testing services. It's kind of a catch up to the work, given the slow Q1 due to weather offset by some of those delays. That's what I was referring to in my prepared remarks. Again, these rules are promulgated. The rules have not changed. There has been a fair amount of uncertainty created by the federal government's posture, and three or four states over the last couple of months have granted some of these waivers.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

The work is still expected to be done. It's just not being done as quickly as we thought, given the waiver nature. Does that make sense, Wade?

[Wade Suki, Analyst at Capital One]

It does. Just again, just going back to maybe the second part of my question, anything else surprise you in the quarter, end market-wise?

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

No. Despite the optics of the pass-through and lower ER, end market demand remains quite strong for us. As we go back and look at all of the drivers that we anticipated at the start of the year, all of that is continuing exactly as we would have expected. This really is a function of lower emergency response and lower pass-through revenue primarily. The underlying structural demand cycles remain the same.

[Wade Suki, Analyst at Capital One]

Got it. Okay. No, appreciate that. I guess switching gears, you said no questions on the strategic review, Vijay, you didn't say anything about the duration rights plan, I was going to ask a question on that if it's okay. I know it might be a little difficult to do, especially in a public forum, have you all had any dialogue with the, I'm assuming, the referenced investor or is it still sort of an unknown? Any background or color there you can give us?

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Wade, I'm not going to comment on specifics.

[Wade Suki, Analyst at Capital One]

Okay.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

As I'm sure you can understand that, look, it's not unusual for companies to hear from interested parties in potential transactions from time to time. I'll just leave it at that. The Board is in the process of reviewing all alternatives, as I said earlier. It's going to be thorough, it's going to be fulsome, and we'll keep you updated as appropriate.

[Wade Suki, Analyst at Capital One]

Understood. Thank you so much. Appreciate it.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Thanks, Wade.

[Operator]

Thank you for that. Our next question comes from William Griffin from Barclays. Please go ahead.

[William Griffin, Analyst at Barclays]

Thanks very much. Good evening. Hopefully, you can hear me okay. My first question is on the 2026 initial guide, I think had assumed $50 million-$70 million in ER revs, which was already sort of down year-on-year, understandably, because of a large event in 2025. I think it sounds like the new guidance implies around $10 million-$30 million now of ER revenue in 2026. Is that right? Outside of just maybe being a year of lower activity, do you feel like maybe there are other competitive dynamics at play here? Do you feel like there's work that you should be getting but you're not getting?

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

It's a great question, Will. You're exactly right. It's been a $50 million-$70 million is down $20 million-$30 million. Just to be more precise about our expectations and obviously you know what we did in the first half of the year. We're sitting here in August, nothing major has occurred, which is why we're kind of reducing our expectations for the full year. No, this is not competitive dynamic. There just haven't been any major events of note. It is an anomaly in that it is a historically low cycle. It's not happened since we've had the emergency response services as part of our portfolio. Even going back to prior years, it's been a long, long time since it's been a low point like this.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

The team is still an A+ team and is still the best in the industry in our opinion. We don't believe we are losing work to competitors. This is just a low point of the cycle.

[William Griffin, Analyst at Barclays]

Got it. On the regulatory waivers that you talked about, could you give us a little more color on what the guide currently contemplates? Is it just what's known today or are you baking in some assumption of ongoing waivers in the second half?

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

We're baking in some assumptions of ongoing waivers in the second half. We've kind of taken a conservative posture on what it could be, even though the waivers have not yet been granted.

[William Griffin, Analyst at Barclays]

Got it. Just last one. Understand if you can't answer this, on the stockholder rights plan, at what threshold would that be triggered? What percentage ownership does this non-disclosed buyer have today?

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Well, there's going to be an 8-K filing, where all of those details will be disclosed. Look, it's short-term in nature. The purpose of this is to enable the Board to go through and maximize value for all shareholders by creating a level playing field while the Board does so. You'll have all the color in a filing very shortly.

[William Griffin, Analyst at Barclays]

That's all from me. I appreciate the time. Thank you.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Thanks, Will.

[Operator]

Thank you for that. Once again, we got Tim Mulrooney from William Blair. Please go ahead. Tim?

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Hey, Tim.

[Tim Mulrooney, Analyst at William Blair]

Hey. I didn't press star one again, but I do have more questions, so I'm happy to ask more questions. I know you're shocked by that. If we just step back, Vijay, just like bigger picture here. If revenue growth is slowing this year in your core business, can you just talk about what gives you confidence in that back half acceleration and the longer-term growth algo of high-single digit organic growth looking out beyond 2026?

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Yeah, our high-single digit growth algo is really unchanged, Tim, because of all the structural drivers I talked about. Our confidence in the back half of this year is really anchored on our predictable testing business and our existing and known Consulting & Treatment work. As you know, every year when we set guidance, we've got this, call it 50-70 of emergency response revenue that we anticipate based on mathematical averages and going back in history, but we don't have direct visibility into. We've effectively removed that piece of uncertainty in our outlook, we have a lot of confidence in achieving the back half of this year as articulated in our guidance.

[Tim Mulrooney, Analyst at William Blair]

Yeah. I guess, are you seeing stronger project starts or larger projects in the backlog? Or is it more about changes that you're seeing in client spending behavior? Anything more specific you'd be able to point to, Vijay?

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

When we talked about some of the larger project starts on the May earnings call, Tim, those we-

[Tim Mulrooney, Analyst at William Blair]

Yep.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

-realize those projects. Those projects have started. Some of them have started more favorably to us than originally anticipated. They are longer duration in nature, blue-chip in nature, we're very excited about that. Our pipeline and sales rhythm continues to gain momentum, our teams are building momentum into the back half of the year. Those are all reasons why that's going. Client spending behavior hasn't really changed much other than the blip with temporary waivers. This really is the dual impact of lower emergency response and lower passthrough revenue. I'd just anchor back, Tim, on our EBITDA and cash flow. Should this have been structural, we would have had to lower EBITDA more significantly and cash flow more significantly. Those are largely humming along despite the top-line reduction, and that's why we have so much confidence in the long-term trajectory.

[Tim Mulrooney, Analyst at William Blair]

Yep, good point. On that cash flow, maybe this is for Allan. Do you expect a similar cadence to what we saw last year? I think you're expecting about $80 million of operating cash flow in the back half of the year. Is that weighted more towards the fourth quarter there, Allan?

[Allan Dicks, CFO at Onterris, Inc.]

It's slightly more towards the fourth quarter, Tim. I suppose Q3 and Q4 will be strong. We generated a similar amount in the prior year. A lot of confidence in cash generation. Our DSOs are down through the first half of the year. We expect they will continue to decline through the back half. Feel really good about it, where our cash will end.

[Tim Mulrooney, Analyst at William Blair]

Got it.

[Allan Dicks, CFO at Onterris, Inc.]

Leverage.

[Tim Mulrooney, Analyst at William Blair]

Okay. Understood. Thank you very much.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Thanks, Tim.

[Operator]

Thank you for that. Once again, our next question still comes from Wade Suki, Capital One. Please go ahead.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Hey, Wade.

[Wade Suki, Analyst at Capital One]

Hey again. Figured what the heck, I'll ask another one. Just curious, if you could maybe speak to acquisition, what you're seeing out here, and maybe revisit how y'all view acquisitions size, criteria, that kind of thing, and areas of where you might be seeing a little more activity or opportunities maybe for just to kind of switch it up a little bit.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

No, hey, Wade, as we've talked about, just let me step back. Strategic thesis is unchanged. Our market outlook is largely unchanged. The opportunity set, and our desire to continue to consolidate the market is unchanged. As we articulated earlier this year, we anticipate restarting acquisitions in the back half of this year. We continue to focus on that, and continue to expect restarting acquisitions in the back half of the year. We are starting in a measured manner. These will be small bolt-on acquisitions. Obviously, we don't control exactly when and if they occur. We are seeing a lot of opportunity in the testing space, Wade. In some of the areas where we're continuing to see really nice momentum, strong client demand, accretive geographic footprints to us and our portfolio. We're also seeing some very attractive opportunities on the consulting side.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Consulting & Treatment side, I should say, sorry. We're looking across our broader portfolio and really letting our clients help us understand where we can serve them better, and that's the primary driver. None of that has changed, Wade. We do still expect to do that. Obviously, within our leverage and cash flow parameters that we've talked about with you guys in the past.

[Wade Suki, Analyst at Capital One]

Great. Thank you. Would you remind us of your EBITDA multiple kind of criteria as you look at these deals, smaller, larger deals, whatever, however you want to kind of divvy that up?

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Look, when we think about multiples, it is one of many considerations. There's the strategic merits, the cultural fit, then obviously the financial returns. Not just in terms of the multiple paid, but obviously the cash that we expect to generate on a go-forward basis. All of that gets weighed in. I want to make sure we don't just anchor on one of those dynamics. If you go back and look at our history, we have averaged mid to high-single digit EBITDA multiples. As we restart, I should say, our bolt-on strategy, we don't really expect to deviate from that. We will ensure that it meets all of the accretion metrics, strategic and financial, that we've talked about in the past.

[Wade Suki, Analyst at Capital One]

I'm going to respect your request to avoid questions around the strategic review. I'm just assuming normal course of business as the review is going on, buybacks, capital allocation, all these are very consistent with how you've articulated the plan in the past. Is that fair to say?

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

It is, Wade. Yeah, it is. I meant it sincerely when I said the Board is undergoing a thorough and fulsome review. There are no preconceived notions or predetermined outcomes. As a result, we are staying the course, we believe that we still have a really awesome standalone plan to execute, that's what we plan to execute.

[Wade Suki, Analyst at Capital One]

Wonderful. Perfect. Thank you so much. Appreciate it.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Thanks, Wade.

[Operator]

Thank you for that. There are no further questions at this time. I will now turn the call over to Vijay Manthripragada for the closing remarks. Please continue.

[Vijay Manthripragada, President and CEO at Onterris, Inc.]

Thank you all for your time and for your interest in Onterris. We look forward to catching up in the very near future. Take care and have a great afternoon.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Vijay Manthripragada, President and CEO
• Allan Dicks, CFO

Analysts

• Adrianne Griffin, Senior VP of Investor Relations at Onterris, Inc.
• Tim Mulrooney, Analyst at William Blair
• Wade Suki, Analyst at Capital One
• William Griffin, Analyst at Barclays