Montrose Environmental Group Q1 Earnings Call Highlights

Key Points

• Q1 revenue fell to $168.5 million from $177.8 million, as severe winter weather and lower environmental emergency response activity weighed on results. Management said the decline was timing-related rather than a sign of weaker underlying demand.
• Profitability held up well despite the revenue drop, with adjusted EBITDA at $17.8 million and margin nearly flat at 10.6%. The Consulting and Treatment segment saw improved margins, while Measurement and Analysis was pressured by weather-related disruptions.
• Full-year 2026 guidance was reaffirmed at $840 million to $900 million in revenue and $125 million to $130 million in adjusted EBITDA. Management expects more revenue to shift into the second half of the year and continues to see strong demand in water, technology, industrial and compliance-related markets.

Montrose Environmental Group NYSE: ONT, now operating under the Onterris brand, reported lower first-quarter revenue as severe winter weather and reduced environmental emergency response activity weighed on results, but management reiterated its full-year outlook and pointed to stronger profitability and project momentum through the remainder of 2026.

The company said revenue for the quarter ended March 31, 2026, was $168.5 million, down from $177.8 million in the prior-year period. President and Chief Executive Officer Vijay Manthripragada said the year-over-year decline was primarily tied to timing and lower emergency response revenue, rather than a change in underlying demand.

“Excluding environmental emergency response variability, revenue was in line with our expectations,” Manthripragada said. He added that the quarter was affected by “unseasonably severe winter weather in North America” that limited field activity and delayed transportation of samples to the company’s laboratories, particularly in January and February.

Rebrand to Onterris Comes With Segment Realignment

Management highlighted the company’s April 17 rebrand from Montrose Environmental Group to Onterris, which Manthripragada said was part of a roughly 18-month effort to create a more integrated environmental science platform. He said the rebrand is intended to better connect the company’s consulting, measurement, analysis and treatment capabilities and make it easier for clients to understand the breadth of services available.

“Clients wanted what we were offering but were not fully aware of what we could offer,” Manthripragada said during the question-and-answer portion of the call. He said the company is not undertaking an incremental hiring push tied to the rebrand and that related plans are already included in guidance.

The company also realigned its reportable segments beginning in the first quarter. Its former Assessment, Permitting and Response segment and Remediation and Reuse segment were combined into a new Consulting and Treatment segment. The Measurement and Analysis and corporate segments were not affected. Prior-period results were recast to reflect the new structure.

Adjusted EBITDA Holds Nearly Steady Despite Revenue Decline

First-quarter adjusted EBITDA was $17.8 million, compared with $19 million a year earlier. Adjusted EBITDA margin was 10.6%, nearly flat with 10.7% in the prior-year quarter. Manthripragada said margins and adjusted EBITDA were above the company’s expectations, reflecting operating efficiency gains.

Chief Financial Officer Allan Dicks said the revenue decline was driven by a $5.8 million decrease in environmental emergency response revenue and a $5.1 million decline primarily tied to weather impacts in Measurement and Analysis, partially offset by organic growth in Consulting and Treatment.

In the Consulting and Treatment segment, revenue was $114.6 million, down from $118.8 million a year earlier. Segment adjusted EBITDA was $20.1 million, with a margin of 17.6%, up 370 basis points from the prior-year period. Dicks attributed the improvement to stronger operating performance, improved project mix, disciplined pricing and the absence of prior-year losses tied to the company’s renewables business.

Measurement and Analysis revenue declined to $53.9 million from $59 million. Segment adjusted EBITDA was $9.9 million, or 18.4% of revenue, compared with $13.8 million, or 23.3% of revenue, in the prior-year period. Dicks said the margin pressure was temporary and reflected lower utilization caused by weather-related disruptions rather than a change in the segment’s underlying economics.

Guidance Reaffirmed as Revenue Shifts to Second Half

Onterris reaffirmed full-year 2026 guidance for revenue of $840 million to $900 million and adjusted EBITDA of $125 million to $130 million. Management said it remains committed to achieving a 15% adjusted EBITDA margin for the full year.

For the second quarter, the company expects revenue of $190 million to $210 million and adjusted EBITDA margin of 16% to 18% at the midpoint of that revenue range. Dicks said a focus on larger multi-service-line opportunities, which can take longer to close, is pushing more revenue into the back half of the year.

In response to a question from William Blair’s Timothy Mulrooney, Manthripragada provided a bridge for the revenue timing shift. He said approximately $10 million of testing revenue, $25 million of Consulting and Treatment revenue and $15 million of emergency response revenue had shifted from the first half to the second half of the year.

Manthripragada said testing work is supported by compliance requirements, while Consulting and Treatment projects are already underway. On emergency response, he noted that timing is inherently difficult to predict, but the company still expects the business to contribute approximately $50 million to $70 million annually.

“The work wasn’t lost,” Manthripragada said. “It just got delayed.”

Cash Flow Pressured by Bonus Payments, Working Capital

Operating cash flow was negative $11.6 million in the first quarter, compared with positive $5.5 million in the prior-year period. Free cash flow was negative $17.2 million. Dicks said the decrease was primarily driven by $16.3 million of higher bonus payments tied to strong 2025 performance, as well as normal seasonal working capital dynamics.

Dicks said the company still expects to convert at least 60% of adjusted EBITDA into operating cash flow for the full year. He also said Onterris ended the quarter with $10 million of cash and $178 million of availability under its revolving credit facility, for total liquidity of $188 million. The company’s leverage ratio was 2.8 times as of March 31.

During the quarter, Onterris repurchased 376,313 shares of common stock for approximately $10 million, leaving $30 million of remaining repurchase authorization. Dicks said the repurchases reflected management’s view that the company’s valuation does not fully capture its “intrinsic value and long-term earnings power.”

Management Points to Demand in Water, Technology and Industrial Markets

Management said underlying demand remains strong across core services, supported by private-sector clients, infrastructure and industrial investment, regulatory complexity and demand for water and multi-contaminant water solutions. Manthripragada noted that approximately 90% of 2025 revenue came from private-sector clients.

In response to a question from Clear Street’s Tim Moore, Manthripragada said the company is seeing demand in technology, semiconductors and pharmaceuticals, as well as transportation, waste, chemicals, energy and water-related services. He also said the company expects double-digit growth in its water business this year, with its outlook unchanged.

Manthripragada closed the call by saying management’s confidence in the company’s trajectory continues to build, citing strong demand, client interest in integrated solutions and progress in improving efficiency and scalability across the platform.

About Montrose Environmental Group NYSE: ONT

Montrose Environmental Group 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.

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