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What changed in Montrose Environmental Group, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Montrose Environmental Group, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+335 added−446 removedSource: 10-K (2025-03-03) vs 10-K (2024-02-29)

Top changes in Montrose Environmental Group, Inc.'s 2024 10-K

335 paragraphs added · 446 removed · 266 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

55 edited+22 added−52 removed39 unchanged
Biggest changeEach business we acquire is systematically integrated into our systems and processes, thereby creating revenue synergy opportunities and operating leverage. 9 Clients We provide environmental services to approximately 5,900 clients operating in a number of sectors and industries, including but not limited to energy (oil, gas and/or petrochemical), industrials and manufacturing, power and utilities, technology, chemicals, financial services, engineering services, and media, as well as local, state, provincial and federal government entities.
Biggest changeClients We provide environmental services to approximately 6,300 clients operating in a number of sectors and industries, including but not limited to oil & gas, utilities, local, state, provincial and federal government entities, technical services, industrial manufacturing, transportation, chemicals, renewable energy generation, aerospace, telecommunications and engineering. We have long-term, and through our legacy companies, decades-old relationships.
Afsari was an attorney in the corporate practice of Paul Hastings LLP, an international law firm, from September 2007 to October 2014. At Paul Hastings, Ms. Afsari represented a variety of business entities in all aspects of corporate and business law, including domestic and cross-border mergers and acquisitions, venture capital financing, private placements and joint venture transactions. Ms.
Afsari was an attorney in the corporate practice of Paul Hastings LLP, an international law firm, from September 2007 to October 2014. At Paul Hastings, Ms. Afsari represented a variety of business entities in all aspects of corporate and business law, including domestic and cross-border mergers and acquisitions, venture capital financing, private placements and joint venture transactions.
However, we do not principally rely on any single piece of intellectual property, nor is any single piece of intellectual property material to our financial condition or results of operations. Seasonality Because demand for environmental services is not driven by specific or predictable patterns in one or more fiscal quarters, our business is better assessed based on yearly results.
However, we do not principally rely on any single piece of intellectual property, nor is any single piece of intellectual property material to our financial condition or results of operations. 10 Seasonality Because demand for environmental services is not driven by specific or predictable patterns in one or more fiscal quarters, our business is better assessed based on yearly results.
In the United States, Canada, Australia and Europe, the federal, state, provincial and local regulations targeting air and water quality management, waste and contaminated soil management or reductions in greenhouse gas emissions, each of which drives portions of our business, have been implemented over many decades, and are subject to change.
In the United States, Canada, Australia, and Europe, the federal, state, provincial and local 5 regulations targeting air and water quality management, waste and contaminated soil management or reductions in greenhouse gas emissions, each of which drives portions of our business, have been implemented over many decades, and are subject to change.
We believe this segment maintains a number of competitive advantages, including: • strong brands and market leadership, particularly with environmental preparedness and response; • strong relationships with key private and public sector clients with needs for multiple environmental services, facilitating cross selling opportunities; • a core team of approximately 1,100 employees, including well-known technical experts with longstanding client relationships and significant experience across the key disciplines in the segment; • technology, software and data management capabilities, particularly within our response segment; • our proven ability to help clients navigate regulatory, public and legal scrutiny; and • a national reach established by having successfully assessed and permitted hundreds of projects in jurisdictions across the United States.
We believe this segment maintains a number of competitive advantages, including: • strong brands and market leadership, particularly with environmental preparedness and response; • strong relationships with key private and public sector clients with needs for multiple environmental services, facilitating cross selling opportunities; • a core team of approximately 1,817 employees, including well-known technical experts with longstanding client relationships and significant experience across the key disciplines in the segment; • technology, software and data management capabilities, particularly within our response segment; • our proven ability to help clients navigate regulatory, public and legal scrutiny; and • a national reach established by having successfully assessed and permitted hundreds of projects in jurisdictions across the United States.
Our approach has allowed us to successfully and consistently scale our business, and we believe we are well positioned to continue our trajectory and market leadership as we address the growing environmental needs of our clients and communities. The Industry The environmental industry is large, growing, highly fragmented and subject to complex regulatory frameworks.
Our approach has allowed us to successfully and consistently scale our business, and we believe we are well positioned to continue our trajectory and market leadership as we address the growing environmental needs of our clients and communities. The Industry The global environmental industry is large, growing, highly fragmented and subject to complex regulatory frameworks.
We believe we have a variety of sustainable competitive advantages in this market, including: • reputable brands; • one of the most prominent air testing companies in North America with vertically integrated testing and analytical capabilities, including ultra-trace analysis; • comprehensive laboratory network in the United States, offering a complete suite of analytical solutions for virtually all environmental projects; • one of the most experienced providers of advanced optical gas imaging “OGI” testing used to detect hydrocarbon gas leaks; and • our proprietary software, technologies, processes and applications, including the ability to detect air contaminants in real time at ultra-trace concentrations.
We believe we have a variety of sustainable competitive advantages in this market, including: • preeminent brands; • one of the most prominent air testing companies in North America with vertically integrated testing and analytical capabilities, including ultra-trace analysis; • comprehensive laboratory network in the United States, offering a complete suite of analytical solutions for virtually all environmental projects; • one of the most experienced providers of advanced optical gas imaging “OGI” testing used to detect hydrocarbon gas leaks; and • our proprietary software, technologies, processes and applications, including the ability to detect air contaminants in real time at ultra-trace concentrations.
We work closely with clients to navigate the regulatory process at the local, state, provincial and federal levels, identify the potential environmental and political impacts of their decisions and develop practical mitigation approaches, as needed.
We also work closely with clients to navigate the regulatory process at the local, state, provincial and federal levels, identify the potential environmental and political impacts of their decisions and develop practical mitigation approaches, as needed.
To help promote compliance with these and other laws and regulations, our employees are sometimes required to complete tailored ethics and other compliance training relevant to their position and our operations. Information About Our Executive Officers Vijay Manthripragada, 47 – Mr. Manthripragada joined Montrose Environmental as our President in September 2015. In June 2016 Mr.
To help promote compliance with these and other laws and regulations, our employees are sometimes required to complete tailored ethics and other compliance training relevant to their position and our operations. Information About Our Executive Officers Vijay Manthripragada, 48 – Mr. Manthripragada joined Montrose Environmental as our President in September 2015. In June 2016 Mr.
By focusing on environmental solutions, we believe we are uniquely positioned to become a leading platform in the industry.
By focusing solely on environmental solutions, we believe we are uniquely positioned to become a leading platform in the environmental industry.
Mr. Manthripragada received his Master of Business Administration from The Wharton School, University of Pennsylvania and his Bachelor of Science in Biology from Duke University. Allan Dicks, 51 – Mr. Dicks has been our Chief Financial Officer since August 2016. Before joining Montrose Environmental, Mr.
Mr. Manthripragada received his Master of Business Administration from The Wharton School, University of Pennsylvania and his Bachelor of Science in Biology from Duke University. Allan Dicks, 52 – Mr. Dicks has been our Chief Financial Officer since August 2016. Before joining Montrose Environmental, Mr.
He is a Chartered Accountant in South Africa and is a Certified Public Accountant (inactive) in the State of California. Nasym Afsari, 41 – Ms. Afsari has been our General Counsel since November 2014 and our Secretary since August 2015. Before joining Montrose Environmental, Ms.
He is a Chartered Accountant in South Africa and is a Certified Public Accountant (inactive) in the State of California. Nasym Afsari, 42 – Ms. Afsari has been our General Counsel since November 2014 and our Secretary since August 2015. Before joining Montrose Environmental, Ms.
Federal, state, provincial and local environmental regulations dictate compliance requirements that create demand for environmental services. Increasingly, public and stockholder interest in environmental sustainability is also driving prudent management of our shared and finite environmental resources.
Federal, state, provincial and local environmental regulations dictate compliance requirements that create demand for environmental services. Increasingly, public and stockholder interest in environmental sustainability are also driving prudent management of our shared and finite environmental resources.
We believe this segment’s competitive advantages include: • strong brands; • advanced technologies and our owned and licensed intellectual property portfolio, such as our patented water treatment systems and proprietary process to optimize the generation of biogas; • a team with industry-leading experts and several patent-generating scientists; and • local expertise and capabilities with respect to unique soil, sediment and water table characteristics and contamination types.
We believe this segment’s competitive advantages include: • strong brands; • advanced technologies and our owned and licensed intellectual property portfolio, such as our patented water treatment systems and proprietary process to optimize the generation of renewable energy from waste; • a team with industry-leading experts and several patent-generating scientists; and • local expertise and capabilities with respect to unique soil, sediment and water table characteristics and contamination types.
As a result of the nature of our environmental emergency response business, our Assessment, Permitting and Response segment may at times experience higher customer concentration levels based on the severity, duration and outcome of certain types of environmental emergencies for which we provide response services, as was the case in 2023 when 43% of our Assessment, Permitting and Response segment revenues were attributable to three customers.
As a result of the nature of our environmental emergency response business, our Assessment, Permitting and Response segment may at times experience higher customer concentration levels based on the severity, duration and outcome of certain types of environmental emergencies for which we provide response services, as was the case in 2024 when 31.4% of our Assessment, Permitting and Response segment revenues were attributable to three customers.
This segment, which is primarily based on a fixed price and, for out-of-scope work, a T&M revenue model, generated approximately 32% of our revenue for the fiscal year ended December 31, 2023. 6 Remediation and Reuse .
This segment, which is primarily based on a fixed price and, for out-of-scope work, a T&M revenue model, generated approximately 32.2% of our revenue for the fiscal year ended December 31, 2024. Remediation and Reuse .
This segment, which is primarily based on a time and materials, or T&M, revenue model, generated approximately 35% of our revenue for the fiscal year ended December 31, 2023. Measurement and Analysis . Our Measurement and Analysis segment is one of the largest providers of environmental testing and laboratory services in North America.
This segment, which is primarily based on a time and materials, or T&M, revenue model, generated approximately 30.9% of our revenue for the fiscal year ended December 31, 2024. Measurement and Analysis . Our Measurement and Analysis segment is one of the largest providers of environmental testing and laboratory services in North America.
As a result, our operating results in our Measurement and Analysis segment and, following the acquisition of Matrix in Canada, the Remediation and Reuse segment, experience some quarterly variability with generally lower revenues and lower earnings in the first and fourth quarters and typically we experience higher overall revenues and earnings in the second and third quarters.
As a result, our operating results in our Measurement and Analysis segment and our Remediation and Reuse segment, experience some quarterly variability with generally lower revenues and lower earnings in the first and fourth quarters and typically we experience higher overall revenues and earnings in the second and third quarters.
According to data derived from a 2023 Environmental Industry Study prepared by Environmental Business International, Inc., or EBI, which we commissioned and update annually, the global environmental industry is estimated to be approximately $1.44 trillion, with $494.0 billion concentrated in the United States.
According to data derived from a 2024 Environmental Industry Study prepared by Environmental Business International, Inc., or EBI, which we commissioned and update annually, the global environmental industry is estimated to be approximately $1.6 trillion, with $540.0 billion concentrated in the United States.
According to EBI, this $494 billion U.S. environmental market is expected to grow at a CAGR of 3.6% per year from 2024 through 2026, up from its previous forecast of 2.8% per year from 2023 through 2026.
According to EBI, this $540.0 billion U.S. environmental market is expected to grow at a CAGR of 3.8% per year from 2025 through 2026, up from its previous forecast of 3.6% per year from 2024 through 2026.
Our integrated platform has been a catalyst for our organic growth and we have built on this platform through strategic acquisitions. Innovation is core to our strategy. The world’s environmental challenges continue to grow in number, scope and complexity, and mounting public pressure and regulatory changes continue to drive demand for better information and solutions.
Our integrated platform has been a catalyst for our organic growth and we have built on this platform through strategic acquisitions. Innovation is core to our strategy. As the world’s environmental challenges grow in number, scope and complexity, increasing public pressure and ongoing regulatory changes are driving the demand for better information and advanced solutions.
Global Environmental Industry is Large and Growing According to EBI and research commissioned by Montrose, as of 2023 the global environmental industry is estimated to generate approximately $1.44 trillion in revenues, with $494 billion concentrated in the United States.
Global Environmental Industry is Large and Growing According to EBI and research commissioned by Montrose, as of 2024 the global environmental industry is estimated to generate approximately $1.6 trillion in revenues, with $540.0 billion concentrated in the United States.
Supported by approximately 1,160 employees across more than 55 locations in the US and Canada, our highly credentialed teams test and analyze air, water and soil to determine concentrations of contaminants, as well as the toxicological impact of contaminants on flora, fauna and human health.
Supported by approximately 1,210 employees across 6 the US and Canada, our highly credentialed teams test and analyze air, water and soil to determine concentrations of contaminants, as well as the toxicological impact of contaminants on flora, fauna and human health.
See Item 1A. “Risk Factors.” For the fiscal year ended December 31, 2023, 51% of our revenue came from customers engaging us to provide more than one service, an increase of 16 percentage points from the 35% we generated from customers buying more than one service in the fiscal year ended December 31, 2022.
See Item 1A. “Risk Factors.” For the fiscal year ended December 31, 2024, 53.3% of our revenue came from customers engaging us to provide more than one service, an increase of 2.3 percentage points from the 51.0% we generated from customers buying more 9 than one service in the fiscal year ended December 31, 2023.
Employees As of December 31, 2023, we had approximately 3,100 employees (which includes full-time, part-time and stand-by environmental emergency response personnel). Approximately 2,400, or 77%, of our employees work in our U.S. operations and approximately 700 or 23% work in foreign operations. Other than in Sweden, none of our facilities are covered by collective bargaining agreements.
Employees As of December 31, 2024, we had approximately 3,410 employees (which includes full-time, part-time and stand-by environmental emergency response personnel). Approximately 2,560, or 75%, of our employees, work in our U.S. operations and approximately 850 or 25% work in foreign operations. Other than in Sweden, none of our facilities are covered by collective bargaining agreements.
These barriers include: • highly technical, costly and time-consuming accreditation and licensure requirements; • ability to deploy/services client needs across geographies; • advanced quality and safety programs and mandated scores; • the complex and geographically varying regulatory landscape that requires significant industry experience; • the need to acquire or develop innovative technologies and processes that are acceptable to regulatory bodies, which in our case occurred over many years of client and regulator engagements and at significant research and development expense; and • emphasis by large clients on size and scale, length of relationship and past service record. 10 Intellectual Property We utilize a combination of intellectual property safeguards, including patents, copyrights, trademarks, trade secrets and licenses, as well as employee and third-party confidentiality agreements, to protect our intellectual property.
These barriers include: • highly technical, costly and time-consuming accreditation and licensure requirements; • ability to deploy/services client needs across geographies; • advanced quality and safety programs and mandated scores; • the complex and geographically varying regulatory landscape that requires significant industry experience; • the need to acquire or develop innovative technologies and processes that are acceptable to regulatory bodies, which in our case occurred over many years of client and regulator engagements and at significant research and development expense; and • emphasis by large clients on size and scale, length of relationship and past service record.
This segment, which is primarily based on a fixed price and, for out-of-scope work, a T&M revenue model, generated approximately 33% of our revenue for the fiscal year ended December 31, 2023 primarily through project-based work.
This segment, which is primarily based on a fixed price and, for out-of-scope work, a T&M revenue model, generated approximately 36.9% of our revenue for the fiscal year ended December 31, 2024 primarily through project-based work. 7 This table illustrates a summary of our segments.
Afsari earned her Juris Doctorate from the University of California at Los Angeles and a dual Bachelor of Arts degree in Economics and Psychology from the University of California at Berkeley. Joshua W. LeMaire, 50 – Mr.
Ms. 13 Afsari earned her Juris Doctorate from the University of California at Los Angeles and a dual Bachelor of Arts degree in Economics and Psychology from the University of California at Berkeley. Jose M. Revuelta, 43 – Mr.
This table illustrates a summary of our segments. 7 Differentiated Technology, Processes and Applications Advanced technology, innovative processes, and applications are key competitive advantages in the environmental services industry. Our team of industry leaders are integral drivers of our investments in differentiated services.
Differentiated Technology, Processes and Applications Advanced technology, innovative processes, and applications are key competitive advantages in the environmental services industry. Our team of industry leaders plays a vital role in driving our investments in differentiated services.
Steady increases in industrial activity and infrastructure investment, and the regulations underpinning these activities, are also driving demand for environmental services. In addition, environmental disruptions caused by climate change or aging infrastructure drive demand for environmental services. Infrastructure investments and environmental emergency responses often require substantial assessments, planning and/or permitting services in addition to environmental testing or remediation services.
Steady increases in industrial activity and infrastructure investment, and the regulations underpinning these activities are also driving demand for environmental services. In addition, environmental disruptions caused by climate change or aging infrastructure further increase the need for these services.
We expect these trends to continue and to spur future growth in the environmental services industry. The Environmental Services Industry is Highly Fragmented and Complex According to EBI, thousands of firms operate in many of the markets in which we operate. Several larger firms provide environmental services as a part of their broader product portfolio.
We anticipate that these trends will continue and will spur ongoing growth in the environmental services industry. The Environmental Services Industry is Highly Fragmented and Complex According to EBI, thousands of firms operate in many of the markets in which we operate.
Testing and monitoring are typically recurring processes driven by regulations throughout the industrial production process. In addition to current regulations, future regulatory changes may also drive demand for additional or different environmental services.
Infrastructure investments and environmental emergency responses often require substantial assessments, planning and/or permitting services in addition to environmental testing or remediation services. Testing and monitoring are typically recurring processes driven by regulations throughout the industrial production lifecycle. Beyond current regulations, future regulatory changes may also create demand for additional or supplementary environmental services.
We intend to continue innovating by investing in research, development, software development, and technology (directly and through strategic partnerships) to develop better solutions for our clients. We believe these investments—together with our investments in geographic expansion, sales and marketing initiatives, environmental service offerings and strategic acquisitions—will continue to distinguish us in the marketplace. Our revenue and earnings are highly resilient.
These efforts are aimed at creating better solutions for our clients. We believe that these investments, 4 along with our focus on geographic expansion, sales and marketing initiatives, environmental service offerings, and strategic acquisitions, will continue to distinguish us in the marketplace. Our revenue and earnings are highly resilient.
Employee Retention and Rewards Core to our talent retention strategy is our carefully designed and comprehensive compensation package. We strive to maintain a fair and equitable compensation program for comparable roles, experience and performance that is independent of employee race, gender, sexual orientation, or other personal characteristics.
Our carefully designed and comprehensive compensation package is a key element of our talent retention strategy. We strive to maintain a fair and equitable compensation program for comparable roles, experiences, and performance, regardless of employee’s race, ethnicity, gender, sexual orientation, or other personal characteristics. We also have incentive plans in place to reward division and employee performance with cash bonuses.
As we continue to grow and expand into new geographies and service lines, quarterly variability in our Measurement and Analysis and Remediation and Reuse segments may deviate from historical trends. 11 Human Capital Resources We believe one of our greatest strengths is our employees who strive to innovate and deliver unparalleled service to our clients and communities.
As we continue to grow and expand into new geographies and service lines, quarterly variability in our Measurement and Analysis and Remediation and Reuse segments may deviate from historical trends. Human Capital Resources Our employees are our most valuable asset and are committed to innovation and providing exceptional service to our clients.
Given our success in identifying, executing and integrating approximately 70 acquisitions since our inception in 2012, we believe we can continue to selectively acquire additive businesses.
Strategic Acquisitions We operate in a growing and highly fragmented market with thousands of potential acquisition targets. Given our success in identifying, executing and integrating over 70 acquisitions since our inception in 2012, we believe we can continue to selectively acquire additive businesses.
Our Remediation and Reuse segment provides clients with engineering, design, and implementation services, primarily to treat contaminated water, remove contaminants from soil or create biogas from waste. Approximately 720 of our employees, including engineers, scientists and consultants, provide these services to assist our clients in designing solutions, managing products and mitigating environmental risks and liabilities at their locations.
Approximately 241 of our employees, including engineers, scientists and consultants, provide these services to assist our clients in designing solutions, managing products and mitigating environmental risks and liabilities at their locations.
Providers able to address the full lifecycle of environmental concerns and needs, particularly for companies and organizations with multi-jurisdictional footprints subject to complex regulatory frameworks and impacts across environmental media (e.g., air, water and soil) will continue to enjoy competitive advantages.
Providers able to address the full lifecycle of environmental concerns—especially those working with companies and organizations that operate across multiple jurisdictions, with complex regulatory landscapes, and across multiple environmental media (e.g., air, water and soil)—will continue to have a competitive edge.
Our research and development team continued to innovate in the following areas: water treatment, particularly PFAS and selenium removal, PFAS destruction, PFAS testing, foam fractionation, vapor treatment and removal, CO2 capture, and resource recovery. Strategic Acquisitions We operate in a growing and highly fragmented market with thousands of potential acquisition targets.
In total, our research and development team has been awarded 24 patents. Our research and development team continued to innovate in the following areas: water treatment, particularly PFAS and selenium removal, PFAS destruction, PFAS testing, foam fractionation, vapor treatment and removal, wastewater treatment, CO 2 capture, and resource recovery.
We are not dependent upon any single service, product, political approach or regulatory framework. We also serve a diverse set of approximately 5,900 clients across a wide variety of end markets and geographies within the private 4 and public sectors. Funding for our services is typically non-discretionary given regulatory drivers and public health concerns.
We do not rely upon any single service, product, political approach or regulatory framework. We serve a diverse set of approximately 6,300 clients across a wide variety of end markets and geographies in both the private and public sectors, with the majority of clients being in the private sector.
Finally, all of our employees have complete stop work authority and can stop any project or task if there is any concern about a safety issue without any fear of retribution. Our dedication and commitment to safety have resulted in us again receiving National Safety Council Award for Operational Excellence.
A third party occupational medical provider is available to employees 24/7/365 to provide full access to discuss occupational health and safety concerns. Finally, all of our employees have complete stop work authority and can stop any project or task if there is any concern about a safety issue without any fear of retribution.
As a result, our business is positioned to be less susceptible to political and economic cycles. Our financial success is driven by both strong organic and acquisition-driven growth, and as a result, our total revenue has grown at a compounded annual growth rate of 28% since 2019.
Clients generating approximately 96.0% of revenue in the fiscal year ended December 31, 2023 repeated in the fiscal year ended December 31, 2024. Our financial success is driven by both strong organic and acquisition-driven growth, and as a result, our total revenue has grown at a compounded annual growth rate of 24.4% since 2019.
(“Vista”) June 3, 2021 Measurement and Analysis El Dorado Hills, CA MSE Group, LLC ("MSE") January 1, 2021 Remediation and Reuse Orlando, FL We believe we add value to the businesses we acquire by emphasizing a team-centric culture focused on innovation and investment, expanding career opportunities for new employees from smaller businesses, providing a larger eco-system of environmental services and capabilities to further client relationships, and implementing award-winning safety programs and operating processes.
(Huco) November 30, 2022 Assessment, Permitting and Response Houston, TX We strive to add value to acquired businesses by emphasizing a team-centric culture focused on innovation and investment, expanding career opportunities for new employees from smaller businesses, enhancing front and back-office support to facilitate an enhanced focus on project delivery and growth, providing a larger eco-system of environmental services and capabilities to further client relationships, and implementing award-winning safety programs and operating processes.
These dynamics create significant barriers to entry in our industry. 5 As clients increasingly focus on environmental solutions to address their impact on the environment, we believe they value environmental solutions providers with scale, technology and broad service capabilities.
As clients increasingly prioritize environmental solutions to mitigate their impact on the environment, we believe they place a high value on environmental solutions providers that offer scale, advanced technology and comprehensive service capabilities.
(“Environmental Standards”) January 31, 2022 Assessment, Permitting and Response Valley Forge, PA Industrial Automation Group, Inc. (“IAG”) January 31, 2022 Remediation and Reuse Atlanta, GA TriAD Environmental Consultants, Inc. (“TriAD”) August 1, 2022 Remediation and Reuse Nashville, TN AirKinetics, Inc. (“AirKinetics”) September 1, 2022 Measurement and Analysis Anaheim, CA Huco Consulting, Inc.
(TriAD) August 1, 2022 Remediation and Reuse Nashville, TN AirKinetics, Inc. (AirKinetics) September 1, 2022 Measurement and Analysis Anaheim, CA Huco Consulting, Inc.
("EAI") February 1, 2023 Remediation and Reuse Wilmington, DE GreenPath Energy LTD (“GreenPath”) May 1, 2023 Measurement and Analysis Calgary, Canada Matrix Solutions, Inc. ("Matrix") June 1, 2023 Remediation and Reuse Calgary, Canada Vandrensning ApS. ("Vandrensning") July 31, 2023 Remediation and Reuse Copenhagen, Denmark 2022 Acquisitions Environmental Standards, Inc.
(Origins) September 3, 2024 Measurement and Analysis Denver, Colorado 2023 Acquisitions Frontier Analytical Laboratories (Frontier) January 3, 2023 Measurement and Analysis El Dorado Hills, CA Environmental Alliance, Inc. (EAI) February 1, 2023 Remediation and Reuse Wilmington, DE GreenPath Energy LTD (GreenPath) May 1, 2023 Measurement and Analysis Calgary, Canada Matrix Solutions, Inc.
However, much of the industry is served by small firms that provide limited service offerings that address specific regulations and geographies. It is difficult for small firms to expand their offerings or geographies given the technical expertise, accreditations and licenses necessary to serve a broad array of clients and industries across geographies and service lines.
These small firms face challenges in expanding offerings or geographic reach given the technical expertise, accreditations and licenses necessary to serve a broad array of clients and industries across geographies and service lines. These dynamics create significant barriers to entry in our industry.
We believe strongly in employee ownership of Montrose, and we believe our equity incentives can help to retain employees and create value for our clients, for our employees and for our stockholders. We also believe in recognizing our employees for their contributions.
Under our stock incentive plan, we offer long-term equity incentives to many of our employees. We firmly believe in employee ownership of Montrose, and we believe that these equity incentives support employee retention and create value for our clients, our employees, and our stockholders.
Our largest client represented approximately 10% of revenue for fiscal year ended December 31, 2023, with these revenues derived from over 13 separate projects.
We serve a diversified client base in both the private and public sectors, with the vast majority of revenue being generated from clients in the private sector. Our largest client represented approximately 4.6% of revenue for fiscal year ended December 31, 2024, with these revenues derived from over 14 separate projects.
The foundation of the safety program focuses on ensuring that our employees are sufficiently trained to perform their job duties, have properly operating equipment including correct Personal Protective Equipment such as gloves, eyewear and respirators, job hazards are properly identified, mitigated and planned for prior to work commencement, and the entire process is documented to validate and improve performance.
The foundation of the safety program focuses on confirming that our employees are competent, equipment is in good condition, and personal protective equipment such as gloves, eyewear and respirators are readily available. Processes are in place to identify job hazards and implement safeguards prior to work commencement.
Public Demands, Industrial Activity, Climate Change and Regulations Each Drive Needs for Environmental Services Heightened public awareness and increasing stakeholder demand for environmental sustainability has increased the need and demand for environmental services.
Public Demands, Industrial Activity, Climate Change and Regulations Each Drive Needs for Environmental Services Heightened public awareness and increasing stakeholder demand for environmental responsibility and sustainability have led to a growing need for environmental services. Many companies worldwide have implemented environmental, social, and governance stewardship initiatives focused on managing potential future risks, rather than merely complying with regulations.
As our brand and environmental platform grows, our experts are increasingly able to deploy innovative technologies that address our clients’ needs, further differentiate our services and create new barriers to entry.
As our platform of environmental service offerings expands, our experts can increasingly deploy innovative technologies that address our clients’ needs, further differentiate our services and create new barriers to entry. Our investment and development activities include real-time air quality and emissions monitoring, environmental data management and visualization software, and technologies for the removal and destruction of complex contaminant streams.
Our in-house acquisition team has established extensive relationships throughout the industry and maintains and regularly re-evaluates an established pipeline of potential acquisition opportunities, largely driven by word of mouth and personal introductions. 8 Since January 1, 2021 we have acquired the following businesses: Acquired Business Date of Acquisition Segment Location 2024 Acquisitions Epic Environmental Pty Ltd (“Epic”) January 31, 2024 Remediation and Reuse Brisbane, Australia Two Dot Consulting, LLC ("2DOT") February 29, 2024 Remediation and Reuse Denver, Colorado 2023 Acquisitions Frontier Analytical Laboratories (“Frontier”) January 3, 2023 Measurement and Analysis El Dorado Hills, CA Environmental Alliance, Inc.
Although we are temporarily slowing our cadence of consummating acquisitions, it remains a core part of our growth strategy. 8 Since January 1, 2022 we have acquired the following businesses: Acquired Business Date of Acquisition Segment Location 2024 Acquisitions Epic Environmental Pty Ltd (Epic) January 31, 2024 Remediation and Reuse Brisbane, Australia Two Dot Consulting, LLC (2DOT) February 29, 2024 Remediation and Reuse Denver, Colorado Engineering & Technical Associates, Inc.
Our employees are passionate about the environment and supporting one another. We are committed to fostering a diverse, fair and inclusive workplace with a focus on respect, trust and belonging. We invest in the success and development of our employees and maintain people-centric strategies from recruiting, engagement, development, compensation and benefits to safety and communication.
We prioritize fostering a diverse, fair and inclusive workplace that values respect, trust and a sense of belonging. We invest in our employees’ success by implementing people-centric strategies for recruiting, engagement, development, and retention. Our SVP of Human Resources (HR) leads the HR function and is responsible for the development and execution of our human capital strategy.
The Compensation Committee and Board receive regular updates on human capital matters, including training and development, and related strategic initiatives from our SVP of Human Resources and our executive leadership team . Health, Safety and Wellness Our culture of safety and wellbeing of our employees is supported by a dedicated team of health and safety professionals.
The SVP is supported by a robust HR team, consisting of both corporate-level resources as well as business-specific HR partners. The Board of Director’s Compensation Committee actively oversees our human capital programs, initiatives, and performance and receives regular updates from the SVP of HR .
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We focus on innovation in order to improve the quality of information we can provide to clients (such as more accurately measuring methane and greenhouse gas emissions or identifying variations of Per- and polyfluoroalkyl substances, or PFAS, in water) and provide better solutions to their environmental needs (such as the efficient removal of PFAS from contaminated water).
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We prioritize innovation to enhance the quality of information provided to clients, and provide solutions tailored to clients' specific environmental needs. Examples include more accurately measuring emissions, or identifying and remediating known and emerging contaminants. Our commitment to ongoing innovation includes investing in research, development, software development, and technology—both directly and through strategic partnerships.
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Many companies around the world have implemented initiatives on Sustainability and Corporate Social Responsibility, or CSR, and ESG making environmental impact a core factor in many business decisions. These initiatives are often focused on managing potential future risks, as opposed to past emphasis on regulatory compliance.
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Funding for our services is typically non-discretionary given regulatory drivers and public health concerns. As a result, our business is positioned to be less susceptible to political and economic cycles. Our client activities can occur at different times for different industries, regardless of economic cycles.
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Recent examples of our investment and development activities are related to real time air quality and methane emissions monitoring, environmental data management and visualization software, and PFAS removal and destruction technologies. In total, our research and development team has been awarded seventeen patents and has an additional thirty-three patents submitted for patent consideration in the United States.
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While several larger firms offer environmental services as a part of broader product portfolios, much of the industry consists of small firms that provide limited service offerings that address specific regulations and geographies.
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(“Huco”) November 30, 2022 Assessment, Permitting and Response Houston, TX 2021 Acquisitions Horizon Water and Environment, LLC (“Horizon”) November 1, 2021 Assessment, Permitting and Response Oakland, CA Environmental Chemistry, Inc.
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Our Remediation and Reuse segment provides clients with engineering, design, and implementation services, primarily treatment technologies that treat contaminated water, remove contaminants from soil or create renewable energy from waste.
Removed
(“ECI”) October 1, 2021 Measurement and Analysis Houston, TX SensibleIoT, LLC (“Sensible”) August 1, 2021 Measurement and Analysis Paso Robles, CA Environmental Intelligence, LLC (“EI”) July 1, 2021 Assessment, Permitting and Response Laguna Beach, CA Vista Analytical Laboratory, Inc.
Added
Our in-house acquisition team has established extensive relationships throughout the industry and maintains and regularly re-evaluates a pipeline of potential acquisition opportunities, largely driven by word of mouth and personal introductions.
Removed
We have long-term, and through our legacy companies, decades-old relationships. We serve a diversified client base in both the private and public sectors. For the fiscal year ended December 31, 2023, our revenues were derived approximately 89% from the private sector and 11% from the public sector.
Added
(ETA) April 1, 2024 Assessment, Permitting and Response Walbridge, Ohio Paragon Soil and Environmental Consulting Inc. (Paragon) May 31, 2024 Remediation and Reuse Edmonton, Canada Spirit Environmental, LLC. (Spirit) July 1, 2024 Assessment, Permitting and Response Houston, Texas Origins Laboratory, Inc.
Removed
Talent Attraction We believe that we are part of the future of environmental solutions, and we continue to differentiate ourselves by attracting top talent that brings diverse perspectives, experiences, and expertise that can help solve some of the toughest environmental challenges our clients’ face.
Added
(Matrix) June 1, 2023 Remediation and Reuse Calgary, Canada Vandrensning ApS. (Vandrensning) July 31, 2023 Remediation and Reuse Copenhagen, Denmark 2022 Acquisitions Environmental Standards, Inc. (Environmental Standards) January 31, 2022 Assessment, Permitting and Response Valley Forge, PA Industrial Automation Group, Inc. (IAG) January 31, 2022 Remediation and Reuse Atlanta, GA TriAD Environmental Consultants, Inc.
Removed
We are focused on attracting and hiring talented and diverse people while at the same time appreciating each candidates’ career aspirations and development areas. Our internal talent acquisition team has decades of experience that spans industries, enabling them to be forward-thinking, strategic, and anticipatory of talent trends.
Added
Each business we acquire is systematically integrated into our systems and processes, thereby creating meaningful revenue synergy opportunities and operating leverage.
Removed
This team performs the majority of the recruiting and hiring by partnering closely with our business leaders and technical teams to understand their current and future talent needs. We have developed and maintained relationships with external search firms to better inform them regarding our business and talent requirements.
Added
Intellectual Property We utilize a combination of intellectual property safeguards, including patents, copyrights, trademarks, trade secrets and licenses, as well as employee and third-party confidentiality agreements, to protect our intellectual property.
Removed
We leverage these firms for niche and specialized executive, professional and technical roles. We have also advanced our partnerships with select universities by engaging with 20 top-tier universities across the United States and Canada.
Added
Talent Attraction In 2024, we engaged with over 20 top-tier universities in the United States and Canada. These outreach efforts have strengthened our partnerships with these institutions, allowing us to connect with skilled individuals and identify top talent for both internships and full-time positions. Furthermore, we expanded our workforce in 2024 through six strategic acquisitions.
Removed
As part of our engagement efforts in 2023, we met with over 1,000 students, participated in classroom and school panel presentations, and interviewed and hired numerous talented students. We are committed to continuing this initiative with our 2024 spring and fall university relations campaigns.
Added
As a result of both our acquisitions and recruiting efforts, we welcomed 310 incremental new employees in 2024, excluding contingent workers. Employee Engagement We believe that employee engagement is critical to fostering a positive work culture. It can act as a multiplier for organizational success, influencing nearly every aspect of business performance and employee satisfaction.
Removed
We believe these campaigns can better enable us to identify and hire top talent for our internships and entry-level full-time roles, as well as to develop a strong talent pipeline for years to come. Finally, we prioritize developing relationships and affiliations with professional organizations that promote underrepresented populations and affinity groups, such as the Society of Women Environmental Professionals.
Added
In 2024, we launched a company-wide employee engagement survey aimed at understanding and improving our workplace culture. This survey was designed to provide actionable, data-driven insights that can help us retain talent and position ourselves as an employer of choice.
Removed
We post our career opportunities on various diversity job boards and have expanded our military recruiting initiative. Employee Engagement We actively engage with our employees to help them gain a deeper understanding our business, to provide them with important updates, and to share information about our recently developed patents and acquired businesses.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

99 edited+18 added−17 removed249 unchanged
Biggest changeSome of the factors that could negatively affect the market price of our common stock or result in significant fluctuations in price, regardless of our actual operating performance, include: • actual or anticipated variations in our quarterly operating results; • changes in market valuations of similar companies; • changes in the markets in which we operate; • additions or departures of key personnel; • actions by stockholders, including sales of large blocks of our common stock; • the continuation of an active trading market in our common stock or any significant volatility in the liquidity of that market; • speculation in the press or investment community; • short selling of our common stock or related derivative securities or hedging activities; • general market, economic and political conditions, including an economic slowdown; • inflation and changes in interest rates; • our operating performance and the performance of other similar companies; • our ability to accurately project future results and our ability to achieve those or meet the expectations of other industry and analyst forecasts; and • new legislation or other regulatory developments that adversely affect us, our markets or our industry.
Biggest changeSome of the factors that could negatively affect the market price of our common stock or result in significant fluctuations in price, regardless of our actual operating performance, include: • actual or anticipated variations in our quarterly operating results; • changes in market valuations of similar companies; • changes in the markets in which we operate; • additions or departures of key personnel; • actions by stockholders, including sales of large blocks of our common stock; • short selling of our common stock or related derivative securities or hedging activities; • general market, economic and political conditions, including an economic slowdown; • changes to the regulatory and legal landscape that drives a portion of our revenue; • the continuation of an active trading market in our common stock or any significant volatility in the liquidity of that market; • speculation in the press or investment community; • inflation and changes in interest rates; • our operating performance and the performance of other similar companies; • our ability to accurately project future results and our ability to achieve those or meet the expectations of other industry and analyst forecasts; and • new legislation or other political or regulatory developments that adversely affect us, our markets or our industry.
The exercise by any governmental entity of one or 26 more of these rights under its agreements with us could have a material adverse effect on our business, financial condition and results of operations.
The exercise by any governmental entity 26 of one or more of these rights under its agreements with us could have a material adverse effect on our business, financial condition and results of operations.
We have a limited history in offering products and designing and building systems as compared to the services we offer, and this expansion subjects us to new and different risks generally associated with offering products manufactured by third parties, including but not limited to: • production difficulties of third-party manufacturers, including problems involving changes in their production capacity and yields, quality control and assurance, component supply and shortages of qualified personnel; • failure to establish or maintain supplier relationships; • supply chain issues of third-party manufacturers and the failure of suppliers to produce components to specification or supply us with a sufficient amount or adequate quality of materials; • increases in the cost of raw materials, components or the overall cost of production passed to us; • failure to adequately design new or improved products or respond to changing regulatory requirements; • use of defective materials or workmanship in the manufacturing process; • improper use of our products; • failure to satisfy any warranty or performance guarantee; • product liability claims; and • lack of market acceptance, delays in product development and failure of products to operate properly.
We have a limited history in offering products and designing and building systems as compared to the services we offer, and this expansion subjects us to new and different risks generally associated with offering products manufactured by third parties, including but not limited to: 23 • production difficulties of third-party manufacturers, including problems involving changes in their production capacity and yields, quality control and assurance, component supply and shortages of qualified personnel; • failure to establish or maintain supplier relationships; • supply chain issues of third-party manufacturers and the failure of suppliers to produce components to specification or supply us with a sufficient amount or adequate quality of materials; • increases in the cost of raw materials, components or the overall cost of production passed to us; • failure to adequately design new or improved products or respond to changing regulatory requirements; • use of defective materials or workmanship in the manufacturing process; • improper use of our products; • failure to satisfy any warranty or performance guarantee; • product liability claims; and • lack of market acceptance, delays in product development and failure of products to operate properly.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for any stockholder (including any beneficial owner) to bring (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or employees to us or to our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine, is a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction or declines to accept jurisdiction, the federal district court for the District of Delaware); in all cases subject to such court having personal jurisdiction over the indispensable parties named as defendants.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for any stockholder (including any beneficial owner) to bring (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or employees to us or to our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine, is a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction or declines to accept jurisdiction, the federal district court 33 for the District of Delaware); in all cases subject to such court having personal jurisdiction over the indispensable parties named as defendants.
Risks involved with the successful integration of an acquired business include, but are not limited to: • diverting the attention of our management and that of the acquired business; • merging or linking different accounting and financial reporting systems and systems of internal controls and, in some instances, implementing new controls and procedures; • merging computer, technology and other information networks and systems, including enterprise resource planning systems; • assimilating personnel, human resources and other administrative departments and potentially contrasting corporate cultures; • integrating our governmental contracting work with similar services provided by acquired companies; • incurring or guaranteeing additional indebtedness; • disrupting relationships with or losses of key clients and suppliers of our business or the acquired business; 19 • interfering with, or loss of momentum in, our ongoing business or that of the acquired company; • failure to retain our key personnel or that of the acquired company; and • delays or cost-overruns in the integration process.
Risks involved with the successful integration of an acquired business include, but are not limited to: • diverting the attention of our management and that of the acquired business; • merging or linking different accounting and financial reporting systems and systems of internal controls and, in some instances, implementing new controls and procedures; • merging computer, technology and other information networks and systems, including enterprise resource planning systems; • assimilating personnel, human resources and other administrative departments and potentially contrasting corporate cultures; • integrating our governmental contracting work with similar services provided by acquired companies; • incurring or guaranteeing additional indebtedness; • disrupting relationships with or losses of key clients and suppliers of our business or the acquired business; • interfering with, or loss of momentum in, our ongoing business or that of the acquired company; • failure to retain our key personnel or that of the acquired company; and • delays or cost-overruns in the integration process.
If our employees, consultants or other third parties with whom we do business do violate these laws or our policies, we may be ultimately 35 held responsible, and any violation could result in severe criminal or civil sanctions, fines and penalties and suspension or debarment from U.S. government contracting, any of which could have a material and adverse effect on our business, financial condition and results of operations.
If our employees, consultants or other third parties with whom we do business do violate these laws or our policies, we may be ultimately held responsible, and any violation could result in severe criminal or civil sanctions, fines and penalties and suspension or debarment from U.S. government contracting, any of which could have a material and adverse effect on our business, financial condition and results of operations.
Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. 21 If we fail to attract and retain qualified management and skilled technical personnel, our business may be adversely affected. Our long-term success depends, in significant part, upon the continued service and performance of our senior management and other key personnel.
Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. If we fail to attract and retain qualified management and skilled technical personnel, our business may be adversely affected. Our long-term success depends, in significant part, upon the continued service and performance of our senior management and other key personnel.
Some of our primary competitors include, in our Assessment, Permitting and Response segment, the environmental divisions of ERM, Ramboll, Geosyntec, Exponent, WSP and other large engineering companies and small businesses, in our Measurement and Analysis segment, the environmental divisions of SGS, TRC Companies, Eurofins, Pace Analytical and other large testing companies and small businesses, and in our Remediation and Reuse segment, the environmental divisions or remediation segments of Tetra Tech, AECOM, Xylem, Veolia, Mead & Hunt, and other large engineering companies and other small businesses.
Some of our primary competitors include, in our Assessment, Permitting and Response segment, the environmental divisions of ERM, Ramboll, Geosyntec, Exponent, WSP and other large engineering companies and small businesses, in our Measurement and Analysis segment, the environmental divisions of SGS, TRC Companies, Eurofins, Pace Analytical and other large testing companies and small businesses, and in 15 our Remediation and Reuse segment, the environmental divisions or remediation segments of Tetra Tech, AECOM, Xylem, Veolia, Mead & Hunt, and other large engineering companies and other small businesses.
Failure to maintain effective controls and procedures and comply with Section 404 could also delay or otherwise adversely affect our ability to timely produce accurate financial statements and related information, which could restrict our access to capital markets and cause the price of our common stock to fall. Item 1B. Unresolved Staff Comments. None.
Failure to maintain effective controls and procedures and comply with Section 404 could also delay or otherwise adversely affect our 38 ability to timely produce accurate financial statements and related information, which could restrict our access to capital markets and cause the price of our common stock to fall. Item 1B. Unresolved Staff Comments. None.
In addition, our industry may be slow to accept new technologies that we develop because of, among other things, existing regulations or standards written specifically for older technologies and general unfamiliarity of clients with new technologies. As a result, any new services that we may develop may not be successful for a number of years, if at all.
In addition, our industry may be slow to accept new technologies that we develop because of, among other things, 16 existing regulations or standards written specifically for older technologies and general unfamiliarity of clients with new technologies. As a result, any new services that we may develop may not be successful for a number of years, if at all.
If we fail to secure or maintain any such authorizations, or if the relevant bodies place burdensome restrictions or limitations on our ability to obtain or maintain the necessary authorizations, we may not be able to operate in one or more jurisdictions and our business, financial condition and results of operations may be materially adversely affected as a result.
If we fail to secure or maintain any such authorizations, or if the relevant bodies place burdensome restrictions or limitations on our ability to obtain or maintain the necessary authorizations, we may not be able to operate in one 19 or more jurisdictions and our business, financial condition and results of operations may be materially adversely affected as a result.
Any proceeds that we receive may not be adequate to meet any debt service obligations then due. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness.
Any proceeds that we receive may not be adequate to meet any debt service obligations then 29 due. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness.
Some of the more significant risks include: • general global economic, business and other conditions and the cyclical nature of some of our end markets; • the highly competitive nature of our business; • rapidly changing technology and industry and regulatory standards; • our ability to execute on our acquisition strategy and successfully integrate and realize benefits of our acquisitions; • the parts of our business that depend on difficult to predict natural or manmade events; • our work on high profile projects and the risks related thereto; • our ability to maintain necessary accreditations and other authorizations; • significant environmental governmental regulation; • our ability to attract and retain qualified managerial and skilled technical personnel; • safety-related issues; • our ability to expand our client base; and • lack of compliance with prescribed organizational policies and procedures may result in poor performance or suboptimal transactions.
Some of the more significant risks include: • general global economic, business and other conditions and the cyclical nature of some of our end markets; • the highly competitive nature of our business; • rapidly changing technology and industry and regulatory standards; • our ability to execute on our acquisition strategy and successfully integrate and realize benefits of our acquisitions; • the parts of our business that depend on difficult to predict natural or manmade events; • our work on high profile projects and the risks related thereto; • our ability to maintain necessary accreditations and other authorizations; • significant environmental governmental regulation or de-regulation; • our ability to attract and retain qualified managerial and skilled technical personnel; 14 • safety-related issues; • our ability to expand our client base; and • lack of compliance with prescribed organizational policies and procedures may result in poor performance or suboptimal transactions.
If we fail to successfully maintain and continue to grow the Montrose Environmental brand and our 33 other brands through promotion and other efforts, incur excessive unanticipated expenses in attempting to promote and maintain our brands, or lose clients as a result, our business, financial condition and results of operations may be adversely affected.
If we fail to successfully maintain and continue to grow the Montrose Environmental brand and our other brands through promotion and other efforts, incur excessive unanticipated expenses in attempting to promote and maintain our brands, or lose clients as a result, our business, financial condition and results of operations may be adversely affected.
Any such litigation proceedings are inherently costly and uncertain, and could have a material adverse effect on our business, financial condition and results of operations. 20 We may not be able to maintain or expand our accreditation and other authorizations, which may adversely affect our ability to provide our services.
Any such litigation proceedings are inherently costly and uncertain, and could have a material adverse effect on our business, financial condition and results of operations. We may not be able to maintain or expand our accreditation and other authorizations, which may adversely affect our ability to provide our services.
Although we have procedures and systems in place to address applicable legal and regulatory requirements for those aspects of our business impacted by these laws, 27 enforcement actions and investigations by regulatory authorities related to data security incidents and privacy violations continue to increase, and we could be subject to such activity.
Although we have procedures and systems in place to address applicable legal and regulatory requirements for those aspects of our business impacted by these laws, enforcement actions and investigations by regulatory authorities related to data security incidents and privacy violations continue to increase, and we could be subject to such activity.
If we are unable to successfully enhance or update existing services or develop new services to meet these challenges, our business, financial condition and results of operations may be adversely affected. 18 Risks Related to Our Acquisition Strategy The success of our business depends, in part, on our ability to execute on our acquisition strategy.
If we are unable to successfully enhance or update existing services or develop new services to meet these challenges, our business, financial condition and results of operations may be adversely affected. Risks Related to Our Acquisition Strategy The success of our business depends, in part, on our ability to execute on our acquisition strategy.
The loss of the services of one or more members of our management team or of qualified employees and other key personnel, or the inability to identify, hire and retain the key personnel that may be necessary to grow our business, could have a material adverse effect on our business, financial condition and results of operations.
The loss of the services of one or more members of our management team or of qualified employees and other key personnel, or the 20 inability to identify, hire and retain the key personnel that may be necessary to grow our business, could have a material adverse effect on our business, financial condition and results of operations.
Oaktree also holds all outstanding shares of our Series A-2 stock, which may be converted into shares of common stock in the future and would also receive the benefit of these registration rights. See Note 16 to our audited consolidated financial statements included in Item 8.
Oaktree also holds all outstanding shares of our Series A-2 Preferred Stock, which may be converted into shares of common stock in the future and would also receive the benefit of these registration rights. See Note 16 to our audited consolidated financial statements included in Item 8.
In addition, as we increase the number of our technical personnel and execute both our strategy for growth, we may not be able to manage a significantly larger workforce, control our costs or improve our efficiency. We have a history of losses and may not be able to achieve or sustain profitability in the future.
In addition, as we increase the number of our technical personnel and execute both our strategy for growth, we may not be able to manage a significantly larger workforce, control our costs or improve our efficiency. 34 We have a history of losses and may not be able to achieve or sustain profitability in the future.
In addition, some of our competitors are vertically integrated and can leverage this structure to their 17 advantage. We may fail to identify optimal service or geographic markets, focus our attention in suboptimal service or geographic markets or fail to execute an appropriate business model in certain service or geographic markets.
In addition, some of our competitors are vertically integrated and can leverage this structure to their advantage. We may fail to identify optimal service or geographic markets, focus our attention in suboptimal service or geographic markets or fail to execute an appropriate business model in certain service or geographic markets.
Our 2021 Credit Facility contains a number of covenants that among other things, limit our ability to: • incur additional indebtedness or guarantees; • create liens on assets; • enter into sale and leaseback transactions; • engage in mergers or consolidations; • pay dividends and make distributions and other restricted payments; • make certain investments, loans or advances; • repay subordinated indebtedness; • make certain acquisitions; • engage in certain transactions with affiliates; • change our lines of business; • restrict distributions by our restricted subsidiaries; • amend or otherwise modify organizational documents or certain debt agreements; and • manage cash and other assets in our deposit accounts and securities accounts.
Our 2025 Credit Facility contains a number of covenants that among other things, limit our ability to: • incur additional indebtedness or guarantees; • create liens on assets; • enter into sale and leaseback transactions; • engage in mergers or consolidations; • pay dividends and make distributions and other restricted payments; • make certain investments, loans or advances; • repay subordinated indebtedness; • make certain acquisitions; • engage in certain transactions with affiliates; • change our lines of business; • restrict distributions by our restricted subsidiaries; • amend or otherwise modify organizational documents or certain debt agreements; and • manage cash and other assets in our deposit accounts and securities accounts.
We experience seasonal demand with respect to certain of the services we provide, particularly in our Measurement and Analysis segment, and, following the acquisition of Matrix in Canada, the Remediation and Reuse segment, as demand for those services can follow weather trends.
We experience seasonal demand with respect to certain of the services we provide, particularly in our Measurement and Analysis segment, and, following the acquisition of Matrix in Canada, the Remediation and Reuse 24 segment, as demand for those services can follow weather trends.
Our existing and any future indebtedness could have important consequences, including: • making it more difficult for us to make payments on our existing indebtedness; • increasing our vulnerability to general economic and industry conditions; • requiring a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities; • exposing us to the risk of increased interest rates on our borrowings under our 2021 Credit Facility, which is at variable rates of interest; • restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; • limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes; and • limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged.
Our existing and any future indebtedness could have important consequences, including: • making it more difficult for us to make payments on our existing indebtedness; • increasing our vulnerability to general economic and industry conditions; • requiring a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities; • exposing us to the risk of increased interest rates on our borrowings under our 2025 Credit Facility, which is at variable rates of interest; • restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; 28 • limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes; and • limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged.
Further, international operations carry inherent uncertainties regarding the effect of local or domestic actions, such as the United Kingdom’s departure from the European Union (Brexit), any of which could 34 be material.
Further, international operations carry inherent uncertainties regarding the effect of local or domestic actions, such as the United Kingdom’s departure from the European Union (Brexit), any of which could be material.
Litigation and its related costs, as well as the damage to our reputation should any employee or subcontractor injury or death occur during these emergency situations, could have a material adverse effect on our business, financial condition and results of operations. 22 Allegations regarding whether we have complied with professional standards, duties and statutory obligations or our failure to provide accurate results may have an adverse effect on our business.
Litigation and its related costs, as well as the damage to our reputation should any employee or subcontractor injury or death occur during these emergency situations, could have a material adverse effect on our business, financial condition and results of operations. 21 Allegations regarding whether we have complied with professional standards, duties and statutory obligations or our failure to provide accurate results may have an adverse effect on our business.
Among other things, we may not be able to borrow money under our 2021 Credit Facility if we are unable to comply with the financial and other covenants included therein. Our 2021 Credit Facility also contains certain customary representations and warranties, affirmative covenants and events of default (including, among other things, an event of default upon a change of control).
Among other things, we may not be able to borrow money under our 2025 Credit Facility if we are unable to comply with the financial and other covenants included therein. Our 2025 Credit Facility also contains certain customary representations and warranties, affirmative covenants and events of default (including, among other things, an event of default upon a change of control).
Our CTEH business is often responsible for the presentation of plans and advice in emergency situations, including natural disasters and manmade accidents. While our CTEH employees are not responsible for the ultimate approval of such plans, the failure or minimized success of a plan could expose us to potential litigation and damage to our reputation.
Our emergency response business is often responsible for the presentation of plans and advice in emergency situations, including natural disasters and manmade accidents. While our emergency response employees are not responsible for the ultimate approval of such plans, the failure or minimized success of a plan could expose us to potential litigation and damage to our reputation.
Our failure to comply with obligations under our 2021 Credit Facility or the agreements governing any future indebtedness may result in an event of default under the applicable agreement. A default, if not cured or waived, may permit acceleration of some or all of our other indebtedness and trigger other termination and similar rights under other contracts.
Our failure to comply with obligations under our 2025 Credit Facility or the agreements governing any future indebtedness may result in an event of default under the applicable agreement. A default, if not cured or waived, may permit acceleration of some or all of our other indebtedness and trigger other termination and similar rights under other contracts.
Oaktree is in the business of making investments in companies and, notwithstanding its ownership of our preferred stock and that it has a right to appoint a representative on our board of directors, Oaktree may from time to time acquire and hold interests in businesses that compete directly or indirectly with us.
Oaktree is in the business of making investments in companies and, notwithstanding its ownership of our Series A-2 Preferred Stock and that it has a right to appoint a representative on our board of directors, Oaktree may from time to time acquire and hold interests in businesses that compete directly or indirectly with us.
Our 2021 Credit Facility, airplane loan, and our Series A-2 preferred stock restrict our ability to consummate or use the proceeds from asset sales. We may not be able to consummate those asset sales to raise capital or sell assets at prices that we believe are fair.
Our 2025 Credit Facility, airplane loan, and our Series A-2 Preferred Stock restrict our ability to consummate or use the proceeds from asset sales. We may not be able to consummate those asset sales to raise capital or sell assets at prices that we believe are fair.
If an event of default occurs, our lenders will be entitled to take various actions, including the acceleration of amounts due under our 2021 Credit Facility and all actions permitted to be taken by a secured creditor. 29 Any future debt that we incur may contain additional and more restrictive negative covenants and financial maintenance covenants.
If an event of default occurs, our lenders will be entitled to take various actions, including the acceleration of amounts due under our 2025 Credit Facility and all actions permitted to be taken by a secured creditor. Any future debt that we incur may contain additional and more restrictive negative covenants and financial maintenance covenants.
In addition, our 2021 Credit Facility contains certain financial covenants that, among other things, require us not to exceed specified total debt leverage ratios and to maintain a fixed charge coverage ratio.
In addition, our 2025 Credit Facility contains certain financial covenants that, among other things, require us not to exceed specified total debt leverage ratios and to maintain a fixed charge coverage ratio.
Although our 2021 Credit Facility and our Series A-2 preferred stock contain restrictions on the incurrence 28 of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also do not prevent us from incurring obligations that do not constitute indebtedness.
Although our 2025 Credit Facility and our Series A-2 Preferred Stock contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also do not prevent us from incurring obligations that do not constitute indebtedness.
Any future changes to laws and regulations, including changes to permit requirements, applicable to our clients could have a material impact on their businesses and their service needs. If the needs of our clients change, we may be required to incur significant capital and operating expenditures to shift the environmental services we provide in order to address such needs.
Any future changes to laws and regulations applicable to our clients could have a material impact on their businesses and their service needs. If the needs of our clients change, we may be required to incur significant capital and operating expenditures to shift the environmental services we provide in order to address such needs.
The discussion of these risks is organized by the following sections: Risks Related to Our Limited Operating History, Risks Related to Our Industry and the Broader Economy, Risks Related to Our Acquisition Strategy, Risks Related to the Nature of Our Business, Risks Related to Our Contracts and Revenue Streams, Technology and Privacy Related Risks, Risks Related to Our Indebtedness, Risks Related to Ownership of Our Common Stock, Risks Related to Provisions in Our Charter Documents, and General Risks.
The discussion of these risks is organized by the following sections: Risks Related to Our Industry and the Broader Economy, Risks Related to Our Acquisition Strategy, Risks Related to the Nature of Our Business, Risks Related to Our Contracts and Revenue Streams, Technology and Privacy Related Risks, Risks Related to Our Indebtedness, Risks Related to Ownership of Our Common Stock, Risks Related to Provisions in Our Charter Documents, and General Risks.
In addition to the risks discussed elsewhere herein that are common to both our domestic and international operations, we face risks specific to our foreign activities, including but not limited to: • political, social, economic and financial instability, including wars, civil unrest, acts of terrorism and other conflicts, including the wars in Ukraine and the Middle East and surrounding areas; • difficulties and increased costs in developing, staffing and simultaneously managing a large number of varying foreign operations as a result of distance, language and cultural differences; • restrictions and limitations on the transfer or repatriation of funds and fluctuations in currency exchange rates; • complying with varying legal and regulatory environments in multiple foreign jurisdictions, including privacy laws such as the E.U.
In addition to the risks discussed elsewhere herein that are common to both our domestic and international operations, we face risks specific to our foreign activities, including but not limited to: • political, social, economic and financial instability, including wars, civil unrest, acts of terrorism and other conflicts, including the wars in Ukraine and the Middle East and surrounding areas; • difficulties and increased costs in developing, staffing and simultaneously managing a large number of varying foreign operations as a result of distance, language and cultural differences; • restrictions and limitations on the transfer or repatriation of funds and fluctuations in currency exchange rates; • the economic impact of future tariffs and counter-measures on industries in countries in which we operate; • complying with varying legal and regulatory environments in multiple foreign jurisdictions, including privacy laws such as the E.U.
Rapid and/or important changes in current regulations may in the future have a significant adverse effect on our business, financial position and results of operations. Federal and state, provincial legislatures may review and consider legislation that could impact our business and our industry.
Rapid and/or important changes in current regulations or less stringent enforcement of regulation may in the future have a significant adverse effect on our business, financial position and results of operations. Federal and state, provincial legislatures may review and consider legislation that could impact our business and our industry.
These systems may also be damaged, disrupted, or fail entirely as a result of computer viruses or other malicious codes, social-engineering schemes, unauthorized access attempts, and cyber-attacks that could include phishing-attacks, denial-of-service attacks, ransomware, malware, and hacking.
These systems may also be damaged, disrupted, or fail entirely because of computer viruses or other malicious codes, social-engineering schemes, unauthorized access attempts, and cyber-attacks that could include phishing-attacks, denial-of-service attacks, ransomware, malware, and hacking.
See “Provisions of Our Certificate of Incorporation, Bylaws and Delaware Law That May Have an Anti-Takeover Effect” in the Description of Securities exhibit incorporated by reference as exhibit 4.2 to this Annual Report on Form 10-K.
See “Provisions of Our Certificate of Incorporation, Bylaws and Delaware Law That May Have an Anti-Takeover Effect” in the Description of Securities exhibit filed as exhibit 4.2 to this Annual Report on Form 10-K.
In addition, we manage and operate supervisory control and data acquisition systems at a number of operations and maintenance, or O&M, client facilities, including water and biogas facilities, and another cyber-attack or other system failure could cause the facility to be shutdown, which could create regulatory compliance issues, cause a contamination event or have other adverse consequences for which we could have liability.
In addition, we manage and operate supervisory control and data acquisition systems at several operations and maintenance, or O&M, client facilities, including water and renewable energy facilities, and another cyber-attack or other system failure could cause the facility to be shutdown, which could create regulatory compliance issues, cause a contamination event or have other adverse consequences for which we could have liability.
Our operations depend upon our relationships with our clients. Our clients are companies operating in a number of sectors and industries, including the financial, oil & gas, utilities, construction, automotive, real-estate, midstream energy, manufacturing, commodities, petrochemical, food and beverage, telecommunications and engineering industries, as well as local, state, provincial and federal government entities.
Our clients are companies operating in a number of sectors and industries, including the financial, oil & gas, utilities, construction, automotive, real-estate, midstream energy, manufacturing, commodities, petrochemical, food and beverage, telecommunications and engineering industries, as well as local, state, provincial and federal government entities.
Regardless of any contractual provision or insurance, any client claims could have an adverse effect on our business, financial condition and results of operations. We may use small aircraft to transport employees to project sites which could expose us to risks associated with air travel.
Regardless of any contractual provision or insurance, any client claims could have an adverse effect on our business, financial condition and results of operations. We use small aircraft to transport employees to project sites from time to time which exposes us to risks associated with air travel.
See “Exclusive Forum Clause” in the Description of Securities exhibit incorporated by reference as exhibit 4.2 to this Annual Report on Form 10-K. 32 General Risks Our profitability will suffer if we are not able to price our services appropriately or control our costs.
See “Exclusive Forum Clause” in the Description of Securities exhibit filed as exhibit 4.2 to this Annual Report on Form 10-K. General Risks Our profitability will suffer if we are not able to price our services appropriately or control our costs.
In February 2024, the Company partially exercised its option to access the $150 million accordion under our Senior Secured Credit Agreement, and as a result, the Senior Secured Credit Agreement was amended to provide for an additional $100.0 million credit availability under the 2021 Credit Facility, comprised of an additional $50.0 million term loan and $50.0 million revolving credit facility.
In February 2024, the Company exercised its option to access the $100.0 million accordion under our Senior Secured Credit Agreement, and as a result, the Senior Secured Credit Agreement was amended to provide for an additional $50.0 million term loan, $50.0 million revolving credit facility and an incremental accordion of $150.0 million.
As an operator of client O&M facilities, if there is a spill of a hazardous substance or other contamination event at one of these sites, under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, or CERCLA, and comparable state, provincial and local laws, we may be required to investigate, mitigate and remediate any contamination, including addressing natural resource damage, compensating for human exposure or property damage and installing costly pollution control equipment.
When operating at a client site, if there is a spill of a hazardous substance or other contamination event at one of these sites, under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, or CERCLA, and comparable state, provincial and local laws, we may be required to investigate, mitigate and remediate any contamination, including addressing natural resource damage, compensating for human exposure or property damage and installing costly pollution control equipment.
Our 2021 Credit Facility restricts our ability to engage in some business and financial transactions.
Our 2025 Credit Facility restricts our ability to engage in some business and financial transactions.
We may not be able to borrow additional financing or to refinance our 2021 Credit Facility or other indebtedness we may incur in the future, if required, on commercially reasonable terms, if at all. In addition, our ability to borrow under our 2021 Credit Facility is subject to significant conditions, as described in Item 7.
We may not be able to borrow additional financing or to refinance our 2025 Credit Facility or other indebtedness we may incur in the future, if required, on commercially reasonable terms, if at all. In addition, our ability to borrow under our 2025 Credit Facility is subject to significant conditions.
We derive, and expect to continue to derive in the future, revenues from federal, state, provincial or local government clients, which accounted for approximately 11% of our revenues for the fiscal year ended December 31, 2023.
We derive, and expect to continue to derive in the future, revenues from federal, state, provincial or local government clients, which accounted for approximately 16.3% of our revenues for the fiscal year ended December 31, 2024.
If stricter laws or regulations are delayed or are not enacted, are enacted with prolonged phase-in periods, or not enforced, if existing laws and regulations are repealed or amended to be less strict or if a generally less restrictive regulatory framework develops, demand for our services may be reduced.
If stricter laws or regulations are delayed or are not enacted, are enacted with prolonged phase-in periods, or not enforced, if existing laws and regulations are repealed or amended to be less strict or if a generally less restrictive regulatory framework develops, as is anticipated with the new presidential administration, demand for our services may be reduced.
Any failure to successfully respond to the foregoing risks or any others that we may not appreciate as a result of our limited history of production could have material adverse effect on our business, financial condition and results of operations. 24 Our operations are subject to environmental laws and regulations and any liabilities may have a material adverse effect on our business.
Any failure to successfully respond to the foregoing risks or any others that we may not appreciate as a result of our limited history of production could have material adverse effect on our business, financial condition and results of operations.
A significant portion of our historical growth has occurred through acquisitions, and we anticipate continued growth through acquisitions in the future. Our growth strategy is partially dependent on acquiring and integrating the operations of companies in the environmental services industry. Since January 1, 2020, we have acquired 19 companies.
A significant portion of our historical growth has occurred through acquisitions, and though we are temporarily slowing our cadence of consummating acquisitions, we anticipate continued growth through acquisitions in the future. Our growth strategy is partially dependent on acquiring and integrating the operations of companies in the environmental services industry. Since January 1, 2020, we have acquired 25 companies.
Oaktree may have conflicts of interest with other stockholders. OCM Montrose II Holdings, L.P., an affiliate of Oaktree Capital Management, L.P., or collectively, Oaktree, is the holder of all issued and outstanding shares of our Series A-2 preferred stock.
OCM Montrose II Holdings, L.P., an affiliate of Oaktree Capital Management, L.P., or collectively, Oaktree, is the holder of all issued and outstanding shares of our Series A-2 Preferred Stock.
We experienced net losses in each year since inception, including net losses of $30.9 million and $31.8 million for the fiscal years ended December 31, 2023 and 2022, respectively, and we may incur net losses in the future. As of December 31, 2023, we had an accumulated deficit of $210.4 million.
We experienced net losses in each year since inception, including net losses of $62.3 million and $30.9 million for the fiscal years ended December 31, 2024 and 2023, respectively, and we may incur net losses in the future. As of December 31, 2024, we had an accumulated deficit of $272.7 million.
As of December 31, 2023, our Senior Secured Credit Agreement, provided for a $300.0 million credit facility comprised of a $175.0 million term loan and a $125.0 million revolving line of credit, or the 2021 Credit Facility.
As of December 31, 2024, our Senior Secured Credit Agreement, provided for a $400.0 million credit facility comprised of a $225.0 million term loan and a $175.0 million revolving credit facility, or the 2021 Credit Facility.
See Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Dividend Policy.” Accordingly, you 30 may need to sell your shares of our common stock to realize a return on your investment, and you may not be able to sell your shares at or above the price you paid for them.
“Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Dividend Policy.” Accordingly, you may need to sell your shares of our common stock to realize a return on your investment, and you may not be able to sell your shares at or above the price you paid for them. 31 Oaktree may have conflicts of interest with other stockholders.
In the year ended December 31, 2022, as the pandemic began to subside, this percentage dropped to 32%. Similarly, for the fiscal year ended December 31, 2023, 43% of total Assessment, Permitting and Response segment revenues, were attributable to just three customers, each of whom engaged us in connection with environmental emergency response related support across multiple projects.
For example, for the fiscal year ended December 31, 2023, 43% of total Assessment, Permitting and Response segment revenues, were attributable to just three customers, each of whom engaged us in connection with environmental emergency response related support across multiple projects.
The revolving credit facility includes a $20.0 million sublimit for the issuance of letters of credit. Subject to certain exceptions, all amounts under the 2021 Credit Facility will become due on April 27, 2026.
The revolving credit facility includes a $20.0 million sublimit for the issuance of letters of credit. Subject to certain exceptions, all amounts under the 2025 Credit Facility will become due on February 26, 2030.
Shares held by our affiliates are eligible for resale in the public market, subject to applicable securities laws, including the Securities Act of 1933, as amended, or the Securities Act.
Future sales of our common stock in the public market could cause our stock price to fall. Shares held by our affiliates are eligible for resale in the public market, subject to applicable securities laws, including the Securities Act of 1933, as amended, or the Securities Act.
If our research and development activities are unsuccessful, our technologies and offerings may not keep pace with the market, and we may lose clients and one or more competitive advantages, any of which could have a material adverse effect on our business, financial condition and results of operations.
If our research and development activities are unsuccessful, our technologies and offerings may not keep pace with the market, and we may lose clients and one or more competitive advantages, any of which could have a material adverse effect on our business, financial condition and results of operations. 37 Failure to comply with anti-corruption and similar laws could subject us to penalties and other adverse consequences.
Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.
Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.
General Data Protection Regulation; • laws and business practices that favor local competitors or prohibit foreign ownership of certain businesses; • potential for privatization and other confiscatory actions; and • other dynamics in international jurisdictions, any of which could result in substantial additional legal or compliance costs, liabilities or obligations for us or could require us to significantly modify our current business practices or even exit a given market.
General Data Protection Regulation; • laws and business practices that favor local competitors or prohibit foreign ownership of certain businesses; • potential for privatization and other confiscatory actions; and • other dynamics in international jurisdictions, any of which could result in substantial additional legal or compliance costs, liabilities or obligations for us or could require us to significantly modify our current business practices or even exit a given market. 35 Foreign operations bring increased complexity and the costs of managing or overseeing foreign operations, including adapting and localizing services or systems to specific regions and countries, can be material.
If adequate funds are not available on acceptable terms, we may be unable to fund our capital requirements. If we issue new debt securities, the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock.
If we issue new debt securities, the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock.
Any inability to develop or maintain and protect our intellectual property could have a material adverse effect on us. We rely on a combination of patents, trademarks, trade names, confidentiality and nondisclosure clauses and agreements and other unregistered rights to define and protect our rights to our brand and the intellectual property used in our business.
We rely on a combination of patents, trademarks, trade names, confidentiality and nondisclosure clauses and agreements and other unregistered rights to define and protect our rights to our brand and the intellectual property used in our business.
This division of CTEH conducts environmental sampling and provides toxicological assessments, among other services, in emergency situations and natural disasters, many of which are widely covered by the press and in the public eye, such Hurricane Harvey in 2017, Intercontinental Terminals Co, and ITC, fires in 2019, the pandemic and the Norfolk Southern train derailment in 2023.
This business line conducts environmental sampling and provides toxicological assessments, among other services, in emergency situations and natural disasters, many of which are widely covered by the press and in the public eye, such as Intercontinental Terminals Co fires in 2019, the COVID-19 pandemic from 2020 to 2022 and the Norfolk Southern train derailment in 2023.
These and other risks related to our foreign operations, or the associated costs or liabilities, could have a material adverse effect on our business, financial condition and results of operations. Legal and regulatory claims and proceedings could have a material adverse effect on us.
These and other risks related to our foreign operations, or the associated costs or liabilities, could have a material adverse effect on our business, financial condition and results of operations. Any inability to develop or maintain and protect our intellectual property could have a material adverse effect on us.
In addition, as a result of the nature of these services, our Assessment, Permitting and Response segment may at times experience higher customer concentration levels based on the severity, duration and outcome of environmental emergencies (e.g. those caused by natural disasters and industrial accidents) for which we provide response services.
Any extended period without these types of events or other downturn in activity for these business lines may negatively impact our business, financial condition and results of operations. 18 In addition, as a result of the nature of these services, our Assessment, Permitting and Response segment may at times experience higher customer concentration levels based on the severity, duration and outcome of environmental emergencies (e.g. those caused by natural disasters and industrial accidents) for which we provide response services.
For example, we must comply with a number of U.S. federal and state laws that strictly regulate the handling, removal, treatment, transportation and disposal of toxic and hazardous substances.
As a result, our business is subject to numerous U.S. and international laws and regulations relating to the protection of the environment. For example, we must comply with a number of U.S. federal and state laws that strictly regulate the handling, removal, treatment, transportation and disposal of toxic and hazardous substances.
Any inability to successfully integrate our recent or future acquisitions, or realize their anticipated benefits, could have a material adverse effect on us. Acquisitions have required, and in the future will require, that we integrate into our existing operations separate companies that historically operated independently or as part of another, larger organization, and had different systems, processes and cultures.
Acquisitions have required, and in the future will require, that we integrate into our existing operations separate companies that historically operated independently or as part of another, larger organization, and had different systems, processes and cultures.
These potential conflicts of interest could have a material adverse effect on our business, financial condition and results of operations if, among other things, attractive corporate opportunities are allocated by Oaktree to itself or one of its other affiliates.
These potential conflicts of interest could have a material adverse effect on our business, financial condition and results of operations if, among other things, attractive corporate opportunities are allocated by Oaktree to itself or one of its other affiliates. See “Corporate Opportunities” in the Description of Securities exhibit filed as exhibit 4.2 to this Annual Report on Form 10-K.
We may also not be able to manage our growth through acquisitions due to the number and the diversity of the businesses we have acquired or for other reasons. If any of these risks were to occur, our business, financial condition and results of operations may be adversely affected.
We may also not be able to manage our growth through acquisitions due to the number and the diversity of the businesses we have acquired or for other reasons.
Any claim that we have misappropriated the intellectual property of others, whether or not valid, could have a material adverse effect on our business, financial condition and results of operations. Our global operations subject us to additional risks that could adversely affect our business. We have activities outside of the United States.
Any claim that we have misappropriated the intellectual property of others, whether or not valid, could have a material adverse effect on our business, financial condition and results of operations. 36 Legal and regulatory claims and proceedings could have a material adverse effect on us.
If any of the risks described below actually occurs, our business, financial condition and results of operations could be materially and adversely affected and the trading price of our common stock could decline, causing you to lose all or part of your investment in our common stock. 16 Risks Related to Our Industry and the Broader Economy General global economic, business and other conditions and our vulnerability to the cyclical nature of the sectors and industries in which our clients operate, may adversely affect our business.
If any of the risks described below actually occurs, our business, financial condition and results of operations could be materially and adversely affected and the trading price of our common stock could decline, causing you to lose all or part of your investment in our common stock.
A loss of one or more clients, a meaningful reduction in their purchases from us or an adverse change in the terms on which we provide our services and solutions could have a material adverse effect on our business, financial condition and results of operations.
A loss of one or more clients, a meaningful reduction in their purchases from us or an adverse change in the terms on which we provide our services and solutions could have a material adverse effect on our business, financial condition and results of operations. 25 Public clients involve unique policy, contract and performance risks, and we may face challenges to our government contracts or our eligibility to serve government clients, any of which could materially adversely impact our business.
Any of the above could materially impair our ability to increase sales and revenue and have a material adverse effect on our business, financial condition and results of operations. 25 We generally do not have formal long-term agreements with our clients and attempts by clients to change the terms of or terminate their relationships with us may have a negative impact on our business.
We generally do not have formal long-term agreements with our clients and attempts by clients to change the terms of or terminate their relationships with us may have a negative impact on our business. Our operations depend upon our relationships with our clients.
Thus, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest. 31 Risks Related to Provisions in Our Charter Documents Provisions of our amended and restated governing documents, Delaware law and other documents could discourage, delay or prevent a merger or acquisition at a premium price.
Risks Related to Provisions in Our Charter Documents Provisions of our amended and restated governing documents, Delaware law and other documents could discourage, delay or prevent a merger or acquisition at a premium price.
Further, following the exercise of the accordion feature in February 2024, the Company has the remaining option to borrow incremental term loans or request an increase in the aggregate commitments under the revolving credit facility up to an aggregate amount of $150.0 million subject to the satisfaction of certain conditions described in greater detail in Item 7.
Pursuant to the 2025 Credit Facility, the Company also has the option to borrow incremental term loans or request an increase in the aggregate commitments under the revolving credit facility up to an aggregate amount of $200.0 million subject to the satisfaction of certain conditions.
We may work on high profile projects, and any negative publicity or perceived failures of those projects, or litigation resulting from such projects, could damage our reputation and harm our operating results. We may be engaged on high profile projects that garner public attention and scrutiny, particularly with respect to the emergency response division of our CTEH business.
We may work on high profile projects, and any negative publicity or perceived failures of those projects, or litigation resulting from such projects, could damage our reputation and harm our operating results.
As of December 31, 2023, our total indebtedness was $164.5 million, consisting of $154.2 million outstanding under the 2021 Credit Facility, all of which was outstanding under the term loan, and $10.3 million under our aircraft loan.
As of December 31, 2024, our total indebtedness was $222.7 million, consisting of $214.4 million outstanding under the 2021 Credit Facility, $189.2 million of which was outstanding under the term loan, $25.2 million of which was outstanding under the revolving credit facility and $9.3 million of which was outstanding under our aircraft loan.
The success of our environmental emergency response business depends on its employees, and an aviation accident or incident that results in the serious injury or death of those employees could have a material adverse effect on the business.
The success of our environmental emergency response business depends on its employees, and an aviation accident or incident that results in the serious injury or death of those employees could have a material adverse effect on the business. 22 ESG matters, including those related to climate change, sustainability and the goals and initiatives we set and implement and the public statements and disclosures we make in respect of these matters, may have an adverse effect on our business.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

13 edited+2 added−3 removed12 unchanged
Biggest changeIn addition, the Audit Committee’s third-party cybersecurity advisor meets regularly with the CIO and CISO to review our cybersecurity strategy and key initiatives and progress toward meeting our objectives. The Audit Committee reports to the full Board at least quarterly regarding its oversight of cybersecurity risks, events, developments and other related matters, as relevant.
Biggest changeOur CIO and CISO brief the Audit Committee quarterly, at a minimum, on Montrose’s cybersecurity risks, business-impacting incidents, and ongoing and future cybersecurity project implementations. In addition, the Audit Committee’s third-party cybersecurity advisor meets regularly with the CIO and CISO to review our cybersecurity strategy and our continued progress toward meeting our objectives.
Our CISO, with oversight from our Chief Information Officer (CIO), is responsible for executing the relevant cybersecurity incident response plan, which includes response criteria for materiality, applicable requirements for incident disclosure and reporting and escalation procedures to various individuals and departments, including our Audit Committee, Senior Management, Key Stakeholders, General Counsel, Chief Financial Officer and Chief Executive Officer, for risks with a potentially material impact for responding to cybersecurity incidents.
Our CISO, with oversight from our Chief Information Officer (CIO), is responsible for executing the relevant cybersecurity incident response plan, which includes response criteria for materiality, applicable requirements for incident disclosure and reporting and escalation procedures to various individuals and departments, including our Audit Committee, key 39 stakeholders, and senior management, including our General Counsel, Chief Financial Officer and Chief Executive Officer, for risks with a potentially material impact for responding to cybersecurity incidents.
This team works in close coordination with the Audit Committee of our Board of Directors, which is responsible for oversight of cybersecurity 36 risk, senior management and other business functions and teams across the Company to identify threats by performing risk assessments and analyzing effectiveness of controls against identified risks.
This team works in close coordination with the Audit Committee of our Board of Directors, which is responsible for oversight of cybersecurity risk, senior management and other business functions and teams across the Company to identify threats by performing risk assessments and analyzing effectiveness of controls against identified risks.
As of December 31, 2023, we were not aware of any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
As of December 31, 2024, we were not aware of any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
Further, we have adopted an enterprise-wide cybersecurity training and awareness program requiring all employees to complete annual cybersecurity training. The program is supported with monthly education and simulations with remedial training assignments to increase user awareness. We maintain an incident response plan (IRP) aligned with National Institute for Standards and Technology Risk Management Framework (NIST RMF) when responding to incidents.
Further, we have adopted an enterprise-wide cybersecurity training and awareness program requiring all employees to complete annual cybersecurity training. The program is supported with monthly education and simulations with remedial training assignments to increase user awareness. We maintain an incident response plan (IRP) aligned with NIST RMF when responding to incidents.
We also subscribe to third-party services for security operations through a dedicated managed security service provider responsible for mitigating threats to our environment and alerting and responding to events and incidents in coordination with our team.
We continue to leverage third-party services for security operations through a dedicated managed security service provider to monitor and respond to cyber threats. This provider plays a critical role in, mitigating threats to our environment, as well as alerting and responding to events and incidents in close coordination with our internal team.
In the event of a potentially material cybersecurity event, pursuant to our incident response plan, in addition to notification and involvement of our General Counsel, Chief Financial Officer and Chief Executive Officer, among others, the Audit Committee would be notified and briefed, and meetings of the Audit Committee and/or full Board of Directors would be held as appropriate.
In accordance with our Incident Response Plan, in the event of a potentially material cybersecurity event, the Audit Committee as well as our General Council, Chief Financial Officer, and CEO would be notified, briefed, and involved in oversight of mitigation, reporting, and recovery measures as appropriate. 40
In collaboration with third-party experts, our corporate cybersecurity organization is led by our CISO, reporting to our CIO. The CIO has more than 20 years of experience as a CIO and in technology leadership positions, with deep expertise in technical strategy, data management, infrastructure and cybersecurity.
Cybersecurity and Data Privacy Oversight Montrose maintains a dedicated cybersecurity team, led by our CISO and reporting to our CIO . Our CIO has deep expertise in cybersecurity and data management, as well as technical strategy and infrastructure, as part of his over 20 years of experience serving in this and similar roles across multiple organizations.
The full Board also periodically receives briefings from management on our cybersecurity risk management program.
The full Board of Directors receives quarterly updates from the Audit Committee regarding its oversight of cybersecurity risks and is also periodically briefed on our cybersecurity risk management program directly by our CIO and CISO.
At the management level, we have established an Enterprise Cybersecurity Council, which includes our CIO, CISO, Director of Information Security, Director of Infrastructure, Senior Security Architects and Engineers, that meets monthly to identify opportunities to further strengthen our cybersecurity risk management program, including with respect to the prevention, detection, mitigation and remediation of cybersecurity incidents.
At the management level, Montrose’s Enterprise Cybersecurity Council, consisting of our CIO, CISO, Director of Information Security, Director of Infrastructure, and senior security architects and engineers, meets monthly to review and assess cybersecurity risks and evaluate performance metrics to identify areas for continual improvement and system strengthening.
To support our Audit Committee in this function, our Audit Committee has engaged a third-party expert to advise it and the Board on cybersecurity matters, including oversight of the Company’s continued development, evolution and investments in cybersecurity infrastructure, policies and practices.
The Board of Directors oversees management’s processes for identifying and mitigating risks, including cybersecurity risks. The Audit Committee maintains delegated oversight of cybersecurity risks, bringing in third-party expertise as needed to advise on cybersecurity infrastructure, policies, and practices.
Our CISO has 25 years of experience in information technology, governance, compliance and risk management and is a Certified Information Security Manager (CISM), which is an advanced certification indicating an individual possesses the knowledge and experience required to develop and manage an enterprise information security (InfoSec) program.
Furthermore, our CISO is a Certified Information Security Manager (CISM) and brings over 25 years of experience in information technology, governance, compliance, and risk management. The CISO is responsible for developing and deploying Montrose’s overall cybersecurity and data privacy strategy, policies, procedures, and threat detection and response actions, with the support of Montrose’s cybersecurity team.
This group is responsible for developing and coordinating risk identification and remediation, performance metrics and policy enforcement and providing guidance to management and oversight bodies. Members of the group have significant cybersecurity experience and hold a number of certifications, including CISM, Certified Information Systems Security Professionals (CISSP), Certified Ethical Hacker (CEH), and Cisco Certified Network Associate (CCNA).
Furthermore, the Council reviews project implementation status for targeted cybersecurity measures and tracks employee cybersecurity training completion and phishing email response rates. Council members have extensive cybersecurity experience and hold certifications including CISM, Certified Information Systems Security Professional (CISSP), Certified Ethical Hacker (CEH) and Cisco Certified Network Associate (CCNA).
Removed
Cybersecurity Governance The Board of Directors takes an active role in overseeing management’s processes for identifying and mitigating risks, including cybersecurity risks, to help align our risk exposure and our strategies for dealing with this risk with our long-term objectives. The Board has delegated the cybersecurity risk oversight function to the Audit Committee.
Added
For example, this provider performs searches across live and historical data to provide analysis based on threat intelligence and use cases to develop trends and data models to reduce false positives and enhance search criteria for future use.
Removed
Senior leadership, including our CIO and CISO, brief the Audit Committee quarterly, or more regularly, as needed, on the Company’s cybersecurity program, including cybersecurity risks, business-impacting incidents and ongoing and future cybersecurity project status.
Added
The cybersecurity team implements Montrose’s cybersecurity and data privacy policies and procedures, including governance, compliance, and risk management practices, to safeguard Montrose’s information systems and data. Collectively, the CISO and the cybersecurity team manage and evolve Montrose’s cybersecurity posture with the objective of preventing cybersecurity incidents and increasing system resiliency to minimize business impact should an incident occur.
Removed
The CISO is responsible for our overall cybersecurity strategy, policies, security operations and threat detection and response. The cybersecurity organization manages and continually 37 enhances the maturity of our security posture with the goal of preventing or mitigating cybersecurity incidents to the extent feasible, while increasing system resiliency to minimize business impact.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeOur lease terms vary from month-to-month to multi-year current commitments of generally up to 15 years, with our average commitment being 5 years. We believe that our existing facilities are adequate to meet our current requirements and that comparable space is readily available in similar locations.
Biggest changeOur lease terms vary from month-to-month to multi-year current commitments of generally up to 10 years, with our average commitment being 4 years. We believe that our existing facilities are adequate to meet our current requirements and that comparable space is readily available in similar locations.
Item 2. Pro perties. Our principal executive offices are located at 5120 Northshore Drive, North Little Rock, Arkansas. We currently operate out of approximately 115 locations across North America, Australia and Europe, all of which are leased locations other than our corporate headquarters and one environmental laboratory in Richmond, Virginia used in our Measurement and Analysis segment.
Item 2. Pro perties. Our principal executive offices are located at 5120 Northshore Drive, North Little Rock, Arkansas. We currently operate out of approximately 120 locations across North America, Australia and Europe, all of which are leased locations other than our corporate headquarters and one environmental laboratory in Richmond, Virginia used in our Measurement and Analysis segment.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed2 unchanged
Biggest changeRegardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Item 4. Mine Saf ety Disclosures. Not applicable. 38 PART II
Biggest changeRegardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Item 4. Mine Saf ety Disclosures. Not applicable. 41 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−1 removed6 unchanged
Biggest changeDate Montrose Environmental Group Russell 2000 Index MSCI USA ESG Leaders 7/23/20 $ 100.00 $ 100.00 $ 100.00 9/30/20 159.00 101.00 104.00 12/31/20 206.00 133.00 116.00 3/31/21 334.60 150.20 123.97 6/30/21 357.73 156.65 134.98 9/30/21 411.60 149.82 136.20 12/31/21 470.07 153.03 152.66 3/31/22 352.87 141.51 143.68 6/30/22 225.07 117.18 120.76 9/30/22 224.33 114.62 113.16 12/31/22 295.93 121.75 121.81 3/31/23 162.14 125.09 131.78 6/30/23 191.45 131.60 143.35 9/30/23 133.00 124.85 140.23 12/31/23 146.05 142.37 157.30 Securities Authorized for Issuance Under Equity Compensation Plans For information on securities authorized for issuance under our equity compensation plans, see Item 12.
Biggest changeDate Montrose Environmental Group Russell 2000 Index MSCI USA ESG Leaders 12/31/2020 $ 206.00 $ 133.00 $ 116.00 12/31/2021 470.07 153.03 152.66 12/31/2022 295.93 121.75 121.81 12/31/2023 214.20 142.37 157.30 12/31/2024 123.67 158.79 194.41 Securities Authorized for Issuance Under Equity Compensation Plans For information on securities authorized for issuance under our equity compensation plans, see Item 12.
Stock Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, or otherwise subject to the liabilities under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing. 39 The following graph depicts the total cumulative stockholder return on our common stock from July 23, 2020, the first day of trading of our common stock on the NYSE, through December 31, 2023, relative to the performance of the Russell 2000 Index and MSCI USA ESG Leaders.
Stock Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, or otherwise subject to the liabilities under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing. 42 The following graph depicts the total cumulative stockholder return on our common stock from July 23, 2020, the first day of trading of our common stock on the NYSE, through December 31, 2024, relative to the performance of the Russell 2000 Index and MSCI USA ESG Leaders.
In addition, under Delaware law, our board of directors may declare dividends only to the extent of our surplus, which is defined as total assets at fair market value minus total liabilities, minus statutory capital, or, if there is no surplus, out of our net profits for the then current and immediately preceding year.
In addition, under Delaware law, our board of directors may declare dividends only to the extent of our surplus, which is defined as total assets at fair market value minus total liabilities, minus statutory capital, or, if there is no surplus, out of our net profits for the then current and immediately preceding year. Unregistered Sales of Equity Securities None.
Item 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities. Market Information for Common Stock Our common stock is traded on the New York Stock Exchange under the symbol “MEG”. Holders of Record As of February 23, 2024, there were approximately 190 stockholders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities. Market Information for Common Stock Our common stock is traded on the New York Stock Exchange under the symbol “MEG”. Holders of Record As of February 21, 2025, there were approximately 169 stockholders of record of our common stock.
“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” 40
“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” Item 6. [Re served.] 43
Removed
Unregistered Sales of Equity Securities On January 31, 2024, we issued an aggregate of 161,342 shares of common stock to the former owners of Epic as purchase price consideration. The issuance of common stock was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof as a transaction by an issuer not involving any public offering.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

85 edited+27 added−107 removed45 unchanged
Biggest changeSegment Results of Operations Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Year Ended December 31, 2023 2022 (in thousands except percentage data) Segment Revenues Segment Adjusted EBITDA (1) Segment Adjusted EBITDA Margin (2) Segment Revenues Segment Adjusted EBITDA (1)(5) Segment Adjusted EBITDA Margin (2)(5) Assessment, Permitting and Response $ 220,727 $ 52,148 23.6 % $ 187,234 $ 37,458 20.0 % Measurement and Analysis 197,095 (3) 37,217 18.9 % 172,432 (3) 31,588 (4) 18.3 % Remediation and Reuse 206,386 27,087 13.1 % 184,750 30,616 16.6 % Total Operating Segments $ 624,208 $ 116,452 18.7 % $ 544,416 $ 99,662 18.3 % Corporate and Other $ (37,876 ) n/a $ (31,212 ) n/a 52 (1) For purposes of evaluating segment profit, the Company’s chief operating decision maker reviews Segment Adjusted EBITDA as a basis for making the decisions to allocate resources and assess performance.
Biggest changeYear Ended December 31, 2023 Compared to the Year Ended December 31, 2022 For a discussion of our consolidated results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024, or the 2023 Annual Report. 50 Segment Results of Operations Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 Year Ended December 31, 2024 2023 Segment Revenues Segment Adjusted EBITDA (1) Segment Adjusted EBITDA Margin (2) Segment Revenues Segment Adjusted EBITDA (1) Segment Adjusted EBITDA Margin (2) Assessment, Permitting and Response $ 214,850 $ 48,020 22.4 % $ 220,727 $ 52,148 23.6 % Measurement and Analysis 224,366 50,521 22.5 197,095 37,217 18.9 Remediation and Reuse 257,179 38,339 14.9 206,386 27,087 13.1 Total Operating Segments $ 696,395 $ 136,880 19.7 % $ 624,208 $ 116,452 18.7 % Corporate and Other $ (41,092 ) (5.9 )% $ (37,876 ) (6.1 )% (1) For purposes of evaluating segment profit, the Company’s chief operating decision maker reviews Segment Adjusted EBITDA as a basis for making the decisions to allocate resources and assess performance.
Financing Activities For the year ended December 31, 2023, net cash used in financing activities was $20.1 million.
For the year ended December 31, 2023, net cash used in financing activities was $20.1 million.
Furthermore, we exercised our credit facility covenant holiday, increasing its leverage capacity from 3.75 times to 4.25 times for four quarters beginning with the first quarter of 2024. See Note 13 and 22 to our audited consolidated financial statements included in Item 8.
Furthermore, we exercised our credit facility covenant holiday, increasing its leverage capacity from 3.75 times to 4.25 times for four quarters beginning with the first quarter of 2024. 54 See Note 13 and 22 to our audited consolidated financial statements included in Item 8.
The fair value of 60 stock options under its employee stock incentive plan are estimated as of the grant date using the Black-Scholes option valuation model, which is affected by its estimates of the risk-free interest rate, its expected dividend yield, expected term and the expected share price volatility of its common shares over the expected term.
The fair value of stock options under its employee stock incentive plan are estimated as of the grant date using the Black-Scholes option valuation model, which is affected by its estimates of the risk-free interest rate, its expected dividend yield, expected term and the expected share price volatility of its common shares over the expected term.
We have grown organically over the long term and expect to continue to do so. 44 Discontinued Service Lines and Contracts Periodically, or when circumstances warrant, we evaluate the performance of our business services to ensure that performance and outlook are consistent with expectations, and that the services offered are consistent with the Company’s mission.
We have grown organically over the long term and expect to continue to do so. Discontinued Service Lines and Contracts Periodically, or when circumstances warrant, we evaluate the performance of our business services to ensure that performance and outlook are consistent with expectations, and that the services offered are consistent with the Company’s mission.
Certain contracts in our Measurement and Analysis have multiple performance obligations, most commonly due to the contracts providing for multiple laboratory tests which are individual performance obligations. For the Measurement and Analysis contracts with multiple performance obligations, we allocate the transaction price to each performance obligation based on the relative standalone selling price of each performance obligation.
Certain contracts in our Measurement and Analysis have multiple performance obligations, most commonly due to the contracts providing for multiple laboratory tests which are individual performance obligations. 55 For the Measurement and Analysis contracts with multiple performance obligations, we allocate the transaction price to each performance obligation based on the relative standalone selling price of each performance obligation.
Earnings volatility is also driven by the timing of large projects, particularly in our Remediation and Reuse segment, and the impact of acquisitions. As a result of these factors, and because demand for environmental services is not driven by specific or predictable patterns in one or more fiscal quarters, our business is better assessed based on yearly results.
Earnings volatility is also driven by the timing of large projects, particularly in our Remediation and Reuse segment, and the impact of acquisitions. As a result of these factors, and because demand for environmental services is not driven by specific or predictable patterns in one or more fiscal quarters, our business is better assessed based on annual results.
No dividend rates are used in the calculation as these are not applicable to us. Forfeitures are recognized as incurred. Employee options are accounted for in accordance with the guidance set forth by ASC 718. The fair value of stock appreciation rights is estimated at the grant date using the geometric Brownian motion model. 61
No dividend rates are used in the calculation as these are not applicable to us. Forfeitures are recognized as incurred. Employee options are accounted for in accordance with the guidance set forth by ASC 718. The fair value of stock appreciation rights is estimated at the grant date using the geometric Brownian motion model. 57
Historically, we have financed our operations and acquisitions from a combination of cash generated from operations, periodic borrowings under senior secured credit facilities, and proceeds from the issuance of common and preferred stock.
Historically, we have financed our operations and acquisitions from a combination of cash generated from operations, periodic borrowings under senior secured credit facilities, and proceeds from the issuance of common stock and our Series A-2 Preferred Stock.
Item 7. Manag e ment’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes and other information included in Item 8.
Item 7. Manage ment’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes and other information included in Item 8.
The Discontinued Specialty Lab, which was part of our Measurement and Analysis segment, generated revenues of $8.8 million, $17.0 million and $23.9 million in the years ended December 31, 2023, 2022 and 2021, respectively.
The Discontinued Specialty Lab, which was part of our Measurement and Analysis segment, generated revenues of $8.8 million and $17.0 million in the years ended December 31, 2023 and 2022, respectively.
The weighted average interest rate on the 2021 Credit Facility for the years ended December 31, 2023 and 2022 was 6.7% and 3.5%, respectively, before the benefit of our interest rate swaps. Weighted average interest rates, net of the benefit of our interest rate swaps, as of December 31, 2023 and 2022 were 4.1% and 2.3%, respectively.
The weighted average interest rate on the 2021 Credit Facility for the years ended December 31, 2024 and 2023 was 7.2% and 6.7%, respectively, before the benefit of our interest rate swaps. Weighted average interest rates, net of the benefit of our interest rate swaps, as of December 31, 2024 and 2023 were 5.8% and 4.1%, respectively.
As part of this evaluation, during the first quarter of 2023, we determined to discontinue one of our specialty service lines within the lab testing business, the Discontinued Specialty Lab, whose service offering was non-core to our business. On December 29, 2023, we sold the assets of the Discontinued Specialty Lab for a total sales price of $4.8 million.
As part of this evaluation, during the first quarter of 2023, we determined to sell one of our specialty lab testing businesses, the Discontinued Specialty Lab, whose service offering was non-core to our business. On December 29, 2023, we sold the assets of the Discontinued Specialty Lab for a total sales price of $4.8 million.
See Note 13 to our audited consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.” 45 Corporate and Operational Infrastructure Investments Our historical operating results reflect the impact of our ongoing investments in our corporate infrastructure to support our growth.
See Notes 13 and 22 to our audited consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.” Corporate and Operational Infrastructure Investments Our historical operating results reflect the impact of our ongoing investments in our corporate infrastructure to support our growth.
Goodwill is tested for impairment at least annually should an event or circumstances indicate that a reduction in fair value of the reporting unit may have occurred during the year, goodwill would also be tested at such occasion. We use a two-step process to assess the realizability of goodwill.
Should an event or circumstances indicate that a reduction in fair value of the reporting unit may have occurred during the year, goodwill would also be tested at such occasion. We use a two-step process to assess the realizability of goodwill.
This discontinued lab, which was included in our Measurement and Analysis segment, did not generate any material revenue during the years ended December 31, 2022 and 2021. During the second quarter of 2022, we determined to exit all legacy water treatment and biogas operations and maintenance contracts, collectively, the Discontinued O&M Contracts.
This discontinued lab, which was included in our Measurement and Analysis segment, did not generate any material revenue during the year ended December 31, 2022. During the second quarter of 2022, we determined to exit all legacy water treatment and renewable energy operations and maintenance contracts, collectively, the Discontinued O&M Contracts.
“Financial Statements and Supplementary Data.” We expect to continue to finance our liquidity requirements, including any cash earn-out payments that may be required in connection with acquisitions, through cash generated from operations and borrowings under our credit facility.
We expect to continue to finance our liquidity requirements, including any cash earn-out payments that may be required in connection with acquisitions, through cash generated from operations and borrowings under our credit facility.
“Business—Strategic Acquisitions.” The table below sets forth the number of acquisitions completed in each of the last three fiscal years, fiscal year revenues generated by and the percentage of total annual revenues attributable to those acquisitions: (revenues in thousands) Acquisitions Completed Fiscal Year Revenues Attributable to Acquisitions Percentage of Fiscal Year Revenues Fiscal year 2023 5 $ 69,059 11.1 % Fiscal year 2022 5 20,154 3.7 % Fiscal year 2021 6 33,738 6.2 % Revenues from acquired companies exclude intercompany revenues from revenue synergies realized between business lines within operating segments, as these are eliminated at the consolidated segment and Company level.
“Business—Strategic Acquisitions.” The table below sets forth the number of acquisitions completed in each of the last three fiscal years, fiscal year revenues contributed by those acquisitions in the year of acquisition, and the percentage of total annual revenues attributable to those acquisitions: (Revenues in thousands) Acquisitions Completed Fiscal Year Revenues Attributable to Acquisitions Percentage of Fiscal Year Revenues Fiscal year 2024 6 $ 44,590 6.4 % Fiscal year 2023 5 69,059 11.1 % Fiscal year 2022 5 20,154 3.7 % Revenues from acquired companies exclude intercompany revenues from revenue synergies realized between business lines within operating segments, as these are eliminated at the consolidated segment and Company level.
Our obligations under the 2021 Credit Facility are guaranteed by certain of our existing and future direct and indirect subsidiaries, and such obligations are secured by substantially all of our assets. The 2021 Credit Facility includes a number of covenants imposing certain restrictions on our business.
Our obligations under the Senior Credit Facilities are guaranteed by certain of our existing and future direct and indirect subsidiaries, and such obligations are secured by substantially all of our assets. The Senior Credit Facilites includes a number of covenants imposing certain restrictions on our business.
According to data derived from a 2022 Environmental Industry Study prepared by Environmental Business International, Inc., or EBI, which we commissioned, the global environmental industry is estimated to be approximately $1.44 trillion, with $494.0 billion concentrated in the United States.
According to data derived from a 2024 Environmental Industry Study prepared by Environmental Business International, Inc., or EBI, which we commissioned, the global environmental industry is estimated to be approximately $1.6 trillion, with $540.0 billion concentrated in the United States.
Revenue Mix Our segments generate different levels of profitability and, accordingly, shifts in the mix of revenues between segments can impact our consolidated reported net income, net loss margin, Segment Adjusted EBITDA and Segment Adjusted EBITDA margin from quarter to quarter and year to year. Inter-company revenues between business lines within segments have been eliminated.
Revenue Mix Our segments and our business lines within each segment generate different levels of profitability and, accordingly, shifts in the mix of revenues between segments can impact our consolidated reported net income, net loss margin, Segment Adjusted EBITDA and Segment Adjusted EBITDA margin from quarter to quarter and year to year.
Investing Activities For the year ended December 31, 2023, net cash used in investing activities was $101.6 million, driven by cash paid for the acquisitions of Matrix, GreenPath, Vandrensning, Frontier and EAI, net of cash acquired, of $66.2 million, as well as $29.6 million in cash consideration for purchases of property and equipment (which included the purchase of a $12.2 million replacement aircraft for use in emergency responses following an aircraft crash in February 2023), $3.4 million in proprietary software development costs, $2.6 million related to the minority investment in certain companies and the payment of assumed purchase price obligations of $1.4 million, partially offset by proceeds received from the sale of property and equipment of $1.0 million. 56 For the year ended December 31, 2022, net cash used in investing activities was $38.7 million, primarily driven by cash paid for the acquisitions of Environmental Standards, IAG, Triad, AirKinetics and Huco, net of cash acquired of $28.6 million and purchases of property and equipment for cash consideration of $9.6 million.
For the year ended December 31, 2023, net cash used in investing activities was $101.6 million, driven by cash paid for the acquisitions of Matrix, GreenPath, Vandrensning, Frontier and EAI, net of cash acquired, of $66.2 million, 53 as well as $29.6 million in cash consideration for purchases of property and equipment (which included the purchase of a $12.2 million replacement aircraft for use in emergency responses following an aircraft crash in February 2023), $3.4 million in proprietary software development costs, $2.6 million related to the minority investment in certain companies and the payment of assumed purchase price obligations of $1.4 million, partially offset by proceeds received from the sale of property and equipment of $1.0 million.
“Financial Statements and Supplementary Data.” Organic Growth We define organic growth as the change in revenues excluding revenues from i) our environmental emergency response business, ii) acquisitions for the first twelve months following the date of acquisition, and iii) businesses held for sale, disposed of or discontinued.
See Note 8 to our audited consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.” Organic Growth We define organic growth as the change in revenues excluding revenues from i) our environmental emergency response business, ii) acquisitions for the first twelve months following the date of acquisition, and iii) businesses held for sale, disposed of or discontinued.
Corporate activities not directly related to segment performance, including general corporate expenses, interest and taxes, are reported separately. Key Factors that Affect Our Business and Our Results Our operating results and financial performance are influenced by a variety of internal and external trends and other factors.
Corporate activities not directly related to segment performance, including general corporate expenses, interest and taxes, are reported separately. 44 Key Factors that Affect Our Business and Our Results Our operating results and financial performance are influenced by a variety of internal and external trends and other factors. Some of the more important factors are discussed briefly below.
The amount of each for the last three fiscal years is: Year Ended December 31, (in thousands) 2023 2022 2021 Amortization expense $ 30,130 $ 36,053 $ 35,154 Acquisition-related costs 6,930 1,891 2,088 Fair value changes in business acquisition contingencies 84 (3,227 ) 24,372 We expect that amortization of identifiable intangible assets and other acquisition-related costs, assuming we continue to acquire, will continue to be significant.
The amount of each for the last three fiscal years is: Year Ended December 31, (in thousands) 2024 2023 2022 Amortization expense $ 34,943 $ 30,130 $ 36,053 Acquisition-related costs 7,827 6,930 1,891 Fair value changes in business acquisition contingencies 534 84 (3,227 ) We expect that amortization of identifiable intangible assets and other acquisition-related costs, assuming we continue to acquire, will continue to be significant.
If the sum of the expected undiscounted future cash flows is less than the carrying amount, we recognize an impairment based on the fair value of such assets.
If the sum of the expected undiscounted future cash flows is less than the carrying amount, we recognize an impairment based on the fair value of such assets. Goodwill is tested for impairment at least annually.
Revenue from our water treatment and biogas operations and maintenance contracts, which were included in the results of our Remediation and Reuse segment, were $3.6 million and $12.1 million in the years ended December 31, 2022 and 2021, respectively. This decision did not impact the Company’s specialized PFAS water treatment operations and maintenance contracts.
Revenue from our water treatment and renewable energy operations and maintenance contracts, which were included in the results of our Remediation and Reuse segment, were $3.6 million in the year ended December 31, 2022. This decision did not impact the Company’s specialized PFAS water treatment operations and maintenance contracts.
“Financial Statements and Supplementary Data.” Assessment, Permitting and Response Through our Assessment, Permitting and Response segment, we primarily provide scientific advisory and consulting services to support environmental assessments, environmental emergency response, and environmental audits and permits for current operations, facility upgrades, new projects, decommissioning projects and development projects.
“Financial Statements and Supplementary Data.” Assessment, Permitting and Response Assessment, Permitting and Response segment provides scientific advisory and consulting services to support environmental assessments, environmental emergency response and recovery, toxicology consulting and environmental audits and permits for current operations, facility upgrades, new projects, decommissioning projects and development projects.
Some of the more important factors are discussed briefly below. 43 Acquisitions We have been, and expect to continue to be, an acquisitive company. Acquisitions have expanded our environmental service capabilities across all three segments, our access to technology, as well as our geographic reach in the United States, Canada, Europe and Australia. See Item 1.
Acquisitions We have been, and expect to continue to be, an acquisitive company. Acquisitions have expanded our environmental service capabilities across all three segments, our access to technology, as well as our geographic reach in the United States, Canada, Europe and Australia. See Item 1.
We believe these sources will be sufficient to fund our cash needs in the short-term and long-term. 55 Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, (in thousands) 2023 2022 2021 Consolidated statement of cash flows data: Net cash provided by operating activities $ 56,022 $ 20,649 $ 37,581 Net cash used in investing activities (101,624 ) (38,687 ) (71,641 ) Net cash (used in) provided by financing activities (20,110 ) (38,764 ) 146,103 Change in cash, cash equivalents and restricted cash $ (65,712 ) $ (56,802 ) $ 112,043 Operating Activities Cash flows from operating activities can fluctuate from period-to-period as earnings, working capital needs and the timing of payments for contingent consideration, taxes, bonus payments and other operating items impact reported cash flows.
We believe these sources will be sufficient to fund our cash needs in the short-term and long-term. 52 Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, (in thousands) 2024 2023 2022 Net cash provided by (used in): Operating activities $ 22,235 $ 56,022 $ 20,649 Investing activities (138,045 ) (101,624 ) (38,687 ) Financing activities 106,002 (20,110 ) (38,764 ) Change in cash, cash equivalents and restricted cash $ (9,808 ) $ (65,712 ) $ (56,802 ) Operating Activities Cash flows from operating activities can fluctuate from period-to-period as earnings, working capital needs and the timing of payments for contingent consideration, taxes, bonus payments and other operating items impact reported cash flows.
Awards that are issued to non-employees in exchange for their services are accounted for under ASC 505, Equity-Based Payments to Non-Employees. ASC 505 requires that the fair value of the equity instruments issued to a non-employee be measured on the earlier of: (i) the performance commitment date or (ii) the date the services required under the arrangement have been completed.
ASC 505 requires that the fair value of the equity instruments issued to a non-employee be measured on the earlier of: (i) the performance commitment date or (ii) the date the services required under the arrangement have been completed.
We do not own the properties or facilities at which we implement these projects or the underlying liabilities, nor do we own material amounts of the equipment used in projects; instead, we assist our clients in designing solutions, managing projects and mitigating their environmental risks and liabilities.
Our employees, including engineers, scientists and consultants, provide these services to assist our clients in designing solutions, managing products and mitigating environmental risks and liabilities at their locations. We do not own the properties or facilities at which we implement these projects or the underlying liabilities, nor do we own material amounts of the equipment used in projects.
In connection with certain of our acquisitions, we may make up to $7.1 million in aggregate earn-out payments between the years 2024 and 2026, of which up to $1.5 million may be paid only in cash, up to $4.5 million may be paid only in common stock and up to $1.1 million may be paid, at our option, in cash or common stock.
In connection with certain of our acquisitions, we may make up to $57.6 million in aggregate earn-out payments between the years 2025 and 2026, of which up to $22.1 million may be paid only in cash, up to $13.6 million may be paid only in common stock and up to $21.9 million may be paid, at our option, in cash or common stock.
The difference between our effective tax rate of 7.7% and the federal statutory rate of 21.0% is primarily attributable to items recorded for GAAP but permanently disallowed for U.S. federal income tax purposes, recognition of a U.S. federal and state valuation allowance of $30.6 million, state and foreign income tax provisions and Global Intangible Low Taxed Income.
The difference between our effective tax rate and the federal statutory rate of 21.0% is primarily attributable to items recorded for GAAP but permanently disallowed for U.S. federal income tax purposes, change in valuation allowance, and state and foreign income tax provisions.
In January 2023, the Company received $1.0 million in business interruption insurance proceeds related to the cyber-attack. This amount was recorded as insurance income within other income (expense) in the fourth quarter of 2022. These proceeds partially offset the estimated $1.5 million cost of the cyber-attack recognized in the second and third quarters of 2022.
In January 2023, the Company received $1.0 million in business interruption insurance proceeds related to the cyber-attack. This amount was recorded as insurance income within other income (expense) in the fourth quarter of 2022.
Other income for the year ended December 31, 2022 of $3.7 million was driven by a gain related to the fair value adjustment on our interest rate swap of $6.0 million which was partially offset by an expense of $2.7 million related to the fair value adjustment of the Series A-2 preferred stock conversion option and $0.7 million impairment loss related to the decision to exit the Berkeley lab.
Other income for the year ended December 31, 2023 of $4.4 million was driven by a $6.7 million gain related to fair value adjustments on the Series A-2 Preferred Stock conversion option and a $0.3 million gain from other income, partially offset by a $2.6 million loss related to fair value adjustments on our interest rate swap.
See Note 13 to our audited consolidated financial statements included in Item 8.
See Notes 13, 14 and 16 to our audited consolidated financial statements included in Item 8.
See “—Key Factors that Affect Our Business and Our Results —Acquisitions” and Notes 8 and 14 to our audited consolidated financial statements included in Item 8.
See “—Key Factors that Affect Our Business and Our Results—Financing Costs” and Note 7 and 13 to our audited consolidated financial statements included in Item 8.
For the year ended December 31, 2021, net cash provided by financing activities was $146.1 million.
Financing Activities For the year ended December 31, 2024, net cash provided by financing activities was $106.0 million.
Embedded Derivatives Embedded derivatives that are required to be bifurcated from the underlying host instrument are accounted for and valued as a separate financial instrument. These embedded derivatives are bifurcated, accounted for at their estimated fair value, which is based on certain estimates and assumptions, and presented separately on the consolidated statements of financial position.
These embedded derivatives are bifurcated, accounted for at their estimated fair value, which is based on certain estimates and assumptions, and presented separately on the consolidated statements of financial position.
Total revenue from emergency response related services, which include COVID-19 revenues, was $91.4 million, $88.0 million and $211.5 million in the in the years ended December 31, 2023, 2022 and 2021, respectively.
Total revenue from emergency response related services was $48.0 million, $91.4 million, and $88.0 million in the years ended December 31, 2024, 2023 and 2022, respectively.
See Note 16 and 22 to our audited consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.” Critical Accounting Policies and Estimates The Company's significant accounting policies and estimates are described in Notes 2 and 3 to our audited consolidated financial statements included in Item 8.
Critical Accounting Policies and Estimates The Company's significant accounting policies and estimates are described in Notes 2 and 3 to our audited consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.” , which were prepared in accordance with U.S. GAAP.
These uncertainties primarily impact our contracts in the Remediation and Reuse segment. Time-and-materials contracts contain variable consideration. However, performance obligations qualify for the “Right to Invoice” Practical Expedient.
These uncertainties primarily impact our contracts in the Remediation and Reuse segment. Time-and-materials contracts contain variable consideration. However, performance obligations qualify for the “Right to Invoice” practical expedient. Under this practical expedient, we recognize revenue, over time, in the amount to which we have a right to invoice.
As a result, our operating results in our Measurement and Analysis segment and, following the acquisition of Matrix in Canada, the Remediation and Reuse segment, experience quarterly variability with generally lower revenues and lower earnings in the first and fourth quarters and higher overall revenues and earnings in the second and third quarters.
As a result, our operating results could experience quarterly variability with generally lower revenues and lower earnings in the first and fourth quarters and higher overall revenues and earnings in the second and third quarters.
“Financial Statements and Supplementary Data." We may also make up to $7.1 million in aggregate earn-out payments between the years 2024 and 2026 in connection with certain of our acquisitions of which up to $1.5 million may be paid only in cash, up to $4.5 million may be paid only in common stock and up to $1.1 million may be paid in cash or, at our option, in common stock.
We may make up to $57.6 million in aggregate earn-out payments between the years 2025 and 2026 in connection with certain of our acquisitions of which up to $22.1 million may be paid only in cash, up to $13.6 million may be paid only in common stock and up to $21.9 million may be paid in cash or, at our option, in common stock.
On the majority of fixed fee contracts, we recognize revenue, over time, using either the proportion of actual costs incurred to the total costs expected to complete the contract performance obligation, or the cost to cost method, under the time-elapsed basis.
The standalone selling price of each performance obligation is generally determined by the observable price of a service when sold separately. On the majority of fixed fee contracts, we recognize revenue, over time, using either the proportion of actual costs incurred to the total costs expected to complete the contract performance obligation (cost to cost method), or the time-elapsed basis.
“Financial Statements and Supplementary Data.” Other Income Other income for the year ended December 31, 2023 of $4.4 million was driven by the fair value adjustment of the Series A-2 preferred stock conversion option of $6.7 million, partially offset by the fair value adjustment on our interest rate swap of $2.6 million.
“Financial Statements and Supplementary Data.” Other (Expense) Income Year Ended December 31, Change (in thousands, except %) 2024 2023 $ % Other (expense) income, net $ (1,735 ) $ 4,374 $ (6,109 ) n/a Other expense for the year ended December 31, 2024 of $1.7 million was driven by a $1.9 million loss related to fair value adjustments on our interest rate swap and a $1.2 million loss related to fair value adjustments on the Series A-2 Preferred Stock conversion option, partially offset by $1.4 million gain from other income.
Organic growth is not, however, a measure of revenue growth calculated in accordance with U.S. generally accepted accounting principles, or GAAP, and should be considered in conjunction with revenue growth calculated in accordance with GAAP.
Management uses organic growth as one of the means by which it assesses our results of operations. Organic growth is not, however, a measure of revenue growth calculated in accordance with 45 U.S. generally accepted accounting principles, or GAAP, and should be considered in conjunction with revenue growth calculated in accordance with GAAP.
Fair Value Changes in Business Acquisition Contingencies For the year ended December 31, 2023, fair value changes in business acquisition contingencies resulted in an expense of $0.1 million versus a gain of $3.2 million for the year ended December 31, 2022.
Fair Value Changes in Business Acquisition Contingencies Year Ended December 31, Change (in thousands, except %) 2024 2023 $ % Fair value changes in business acquisition contingencies $ 534 $ 84 $ 450 535.7 % For the year ended December 31, 2024, fair value changes in business acquisition contingencies resulted in an expense of $0.5 million versus a gain of $0.1 million for the year ended December 31, 2023.
Selling, General and Administrative Expense Selling, general and administrative expense consists of general corporate overhead, including executive, legal, finance, safety, risk management, human resource, marketing and information technology related costs, as well as indirect operational costs of labor, rent, insurance and stock-based compensation.
Selling, General and Administrative Expense Year Ended December 31, Change (in thousands, except %) 2024 2023 $ % Selling, general and administrative expense $ 261,627 $ 222,861 $ 38,766 17.4 % Selling, general and administrative expense consists of general corporate overhead, including executive, legal, finance, safety, risk management, human resource, marketing and information technology related costs, as well as indirect operational costs of labor, rent, insurance and stock-based compensation.
We consider liquidity in terms of cash flows from operations and other sources, including availability under our credit facility, and their sufficiency to fund our operating and investing activities. Our principal sources of liquidity have been cash generated by operating activities, borrowings under our credit facilities, other borrowing arrangements, and proceeds from the issuance of common and preferred stock.
We consider liquidity in terms of cash flows from operations and other sources, including availability under our credit facility, and their sufficiency to fund our operating and investing activities.
Earnings Volatility In addition to the impact of seasonality on earnings, the acquisition of CTEH exposes us to potentially significant revenue and earnings fluctuations tied both to the timing of large environmental emergency response projects following an incident or natural disaster, and the benefit from COVID-19 related work primarily in 2021.
Earnings Volatility In addition to the impact of seasonality on earnings, our emergency response business exposes us to potentially significant revenue and earnings fluctuations tied to large environmental emergency response projects following an incident or natural disaster or more broad scale events such as the COVID-19 pandemic.
If the fair value of a reporting unit is lower than its carrying value, an impairment to goodwill is recorded, not to exceed the carrying amount of goodwill in the reporting unit. Step 1 of the quantitative test requires comparison of the fair value of each of the reporting units to the respective carrying value.
Step 1 of the quantitative test requires comparison of the fair value of each of the reporting units to the respective carrying value. If the carrying value of the reporting unit is less than the fair value, no impairment exists.
Revenue by segment, and as a percentage of total revenues, was as follows: Year Ended December 31, Revenues % of Total Revenues Revenues % of Total Revenues (revenue in thousands) 2023 2022 Assessment, Permitting and Response $ 220,727 35.4 % $ 187,234 34.4 % Measurement and Analysis (1) 197,095 31.6 % 172,432 31.7 % Remediation and Reuse 206,386 33.1 % 184,750 33.9 % $ 624,208 $ 544,416 _________________________________ 47 (1) Includes revenue of $8.8 million and $17.0 million from the Discontinued Specialty Lab for the year ended December 31, 2023 and December 31, 2022, respectively.
Revenue by segment, and as a percentage of total revenues, was as follows: Year Ended December 31, 2024 2023 Revenues % of Total Revenues Revenues % of Total Revenues Assessment, Permitting and Response $ 214,850 30.9 % $ 220,727 35.4 % Measurement and Analysis (1) 224,366 32.2 197,095 31.6 Remediation and Reuse 257,179 36.9 206,386 33.1 $ 696,395 $ 624,208 (1) Includes revenue of $8.8 million from the Discontinued Specialty Lab for the year ended December 31, 2023.
Results of Operations Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Year Ended December 31, (in thousands except per share data) 2023 2022 Statements of operations data: Revenues $ 624,208 $ 544,416 Cost of revenues (exclusive of depreciation and amortization) 383,903 351,882 Selling, general and administrative expense 222,861 176,295 Fair value changes in business acquisition contingencies 84 (3,227 ) Depreciation and amortization 45,780 47,479 Loss from operations $ (28,420 ) $ (28,013 ) Other income 4,374 3,683 Interest expense, net (7,793 ) (5,239 ) Loss before income taxes (31,839 ) (29,569 ) Income tax (benefit) expense (980 ) 2,250 Net loss $ (30,859 ) $ (31,819 ) Series A-2 dividend payment (16,400 ) (16,400 ) Net loss attributable to common stockholders $ (47,259 ) $ (48,219 ) Weighted average number of shares (basic and diluted) 30,058 29,688 Loss per share - basic and diluted $ (1.57 ) $ (1.62 ) Revenues For the year ended December 31, 2023, we generated revenues of $624.2 million, an increase of $79.8 million or 14.7% from the year ended December 31, 2022.
These proceeds partially offset the estimated $1.5 million cost of the cyber-attack recognized in the second and third quarters of 2022. 47 Results of Operations Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 Year Ended December 31, (in thousands, except per share data) 2024 2023 Revenues $ 696,395 $ 624,208 Cost of revenues (exclusive of depreciation and amortization) 418,193 383,903 Selling, general and administrative expense 261,627 222,861 Fair value changes in business acquisition contingencies 534 84 Depreciation and amortization 52,762 45,780 Loss from operations (36,721 ) (28,420 ) Other (expense) income, net (1,735 ) 4,374 Interest expense, net (15,862 ) (7,793 ) Loss before income taxes (54,318 ) (31,839 ) Income tax expense (benefit) 7,996 (980 ) Net loss (62,314 ) (30,859 ) Series A-2 dividend payment (11,064 ) (16,400 ) Net loss attributable to common stockholders $ (73,378 ) $ (47,259 ) Weighted average number of shares — basic and diluted 33,061 30,058 Loss per share — basic and diluted $ (2.22 ) $ (1.57 ) Revenues Year Ended December 31, Change (in thousands, except %) 2024 2023 $ % Revenues $ 696,395 $ 624,208 $ 72,187 11.6 % For the year ended December 31, 2024, we generated revenues of $696.4 million, an increase of $72.2 million or 11.6% from the year ended December 31, 2023.
Variable costs of revenues generally follow the same trends as revenue, while fixed costs tend to change primarily as a result of acquisitions.
Variable costs of revenues generally follow the same trends as revenue, while fixed costs tend to change primarily as a result of acquisitions. Cost of revenues for the year ended December 31, 2024 increased from the year ended December 31, 2023 driven primarily by an increase in revenues.
Measurement and Analysis Through our Measurement and Analysis segment, our highly credentialed teams test and analyze air, water and soil to determine concentrations of contaminants, as well as the toxicological impact of contaminants on flora, fauna and human health.
Our highly credentialed teams test and analyze air, water and soil to determine concentrations of contaminants, as well as the toxicological impact of contaminants on flora, fauna and human health. Our offerings include source and ambient air testing and monitoring, leak detection, and advanced multi-media laboratory services, including air, soil, stormwater, wastewater and drinking water analysis.
“Financial Statements and Supplementary Data.” Interest Expense, Net Interest expense, net incurred in the year ended December 31, 2022, was $5.2 million, compared to $11.6 million for the year ended December 31, 2021.
“Financial Statements and Supplementary Data.” Interest Expense, Net Year Ended December 31, Change (in thousands, except %) 2024 2023 $ % Interest expense, net $ (15,862 ) $ (7,793 ) $ (8,069 ) 103.5 % Interest expense, net incurred in the year ended December 31, 2024, was $15.9 million, compared to $7.8 million for the year ended December 31, 2023.
See Note 19 to our audited consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.” (2) Represents Segment Adjusted EBITDA as a percentage of revenues. (3) Includes revenue of $8.8 million and $17.0 million from the Discontinued Specialty Lab for the year ended December 31, 2023 and 2022, respectively. See “—Discontinued Service Lines and Contracts ” above.
See Note 19 to our audited consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.” (2) Represents Segment Adjusted EBITDA as a percentage of revenues.
If the carrying value of the reporting unit is less than the fair value, no impairment exists. Otherwise, we would recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit.
Otherwise, we would recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit. 56 Embedded Derivatives Embedded derivatives that are required to be bifurcated from the underlying host instrument are accounted for and valued as a separate financial instrument.
For the year ended December 31, 2021, net cash used in investing activities was $71.6 million, primarily driven by cash paid for the acquisitions of MSE, Vista, EI, Sensible, ECI and Horizon, net of cash acquired of $55.7 million, as well as payment of assumed purchase price obligations of $9.3 million and purchases of property and equipment for cash consideration of $6.7 million.
For the year ended December 31, 2022, net cash used in investing activities was $38.7 million, primarily driven by cash paid for the acquisitions of Environmental Standards, IAG, Triad, AirKinetics and Huco, net of cash acquired of $28.6 million and purchases of property and equipment for cash consideration of $9.6 million.
See “—Discontinued Service Lines and Contracts ” above. See “—Segment Results of Operations” below. Cost of Revenues Cost of revenues consists of all direct costs required to provide services, including fixed and variable direct labor costs, equipment purchases and rental, and other outside services, field and lab supplies, vehicle costs and travel-related expenses.
See “—Discontinued Service Lines and Contracts ” above. 48 Cost of Revenues Year Ended December 31, Change (in thousands, except %) 2024 2023 $ % Cost of revenues (exclusive of depreciation and amortization) $ 418,193 $ 383,903 $ 34,290 8.9 % Cost of revenue as a % of revenue 60.1 % 61.5 % Cost of revenues consists of all direct costs required to provide services, including fixed and variable direct labor costs, equipment purchases and rental, and other outside services, field and lab supplies, vehicle costs and travel-related expenses.
Additionally, in connection with certain acquisitions, we agree to earn-out provisions and other purchase price adjustments that may require future payments. For example, the CTEH acquisition agreement included an earn-out provision that provided for the payment of contingent consideration based on CTEH’s results in excess of a specified target.
Additionally, in connection with certain acquisitions, we agree to earn-out provisions and other purchase price adjustments that may require future payments.
These amounts reflect a $1.5 million earn-out payment made in the first quarter of 2024 in connection with our Huco acquisition, $1.1 million of which was paid in shares of common stock and $0.4 million was paid in cash. See Note 8 to our audited consolidated financial statements included in Item 8.
We made earn-out payments of $1.5 million in March 2024 in connection with our acquisition of Huco Consulting, Inc. (Huco), of which, $0.4 million was paid in cash, and the remaining $1.1 million in the Company's common stock.
The period over period increase in revenues was primarily driven by $77.5 million from revenues pertaining to companies we acquired in 2023 and from a full year of revenue contribution from our 2022 acquisitions, strong organic growth in our Assessment, Permitting and Response segment and strong organic growth in our Measurement and Analysis segment, and an increase in environmental emergency response revenues.
The period over period increase in revenues was primarily driven by $81.6 million from revenues pertaining to acquisitions as well as strong organic growth of 8.3% or $43.4 million driven by Assessment, Permitting and Response and Measurement and Analysis segments, partially offset by lower non-acquisition related revenue in our Remediation and Reuse segment.
The 2021 Credit Facility also includes financial covenants requiring us to remain below a maximum total net leverage ratio and a minimum fixed charge coverage ratio. As of December 31, 2023, our consolidated total leverage ratio was 1.9 times and we were in compliance with all covenants under the 2021 Credit Facility.
The Senior Credit Facilites also include financial covenants requiring us to remain below a maximum total net leverage ratio and a minimum fixed charge coverage ratio.
See “—Key Factors that Affect Our Business and Our Results —Discontinued Service Lines and Contracts” and Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” for additional information regarding the impact of inflation on our business.
See Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” for additional information regarding the impact of inflation on our business and Note 17 to our audited consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data." for details on the SARs cancellation.
For the year ended December 31, 2023, selling, general and administrative expense was $222.9 million, an increase of $46.6 million or 26.4% versus the year ended December 31, 2022.
Selling, general and administrative expense for the year ended December 31, 2024 increased $38.8 million or 17.4% compared to the year ended December 31, 2023.
See “—Key Factors that Affect Our Business and Our Results—Financing Costs” and Note 7 and 13 to our audited consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.” Income Tax (Benefit) Expense Income tax (benefit) expense was $(1.0) million and $2.3 million for the years ended December 31, 2023 and 2022, respectively.
“Financial Statements and Supplementary Data.” Income Tax Expense (Benefit) Year Ended December 31, Change (in thousands, except %) 2024 2023 $ % Income tax expense (benefit) $ 7,996 $ (980 ) $ 8,976 (915.9 %) Income tax expense (benefit) was $8.0 million and $(1.0) million for the years ended December 31, 2024 and 2023, respectively.
Excluding payment of contingent consideration, cash provided by operating activities was $40.1 million for the year ended December 31, 2022, compared to cash provided by operating activities of $53.2 million in the prior year, a decrease of $13.1 million.
Net cash provided by operating activities was $22.2 million for the year ended December 31, 2024, compared to $56.0 million for the year ended December 31, 2023.
Interest expense, net was $7.8 million, $5.2 million and $11.6 million (inclusive of the $4.1 million loss on extinguishment of the 2020 Credit Facility) in the years ended December 31, 2023, 2022 and 2021, respectively. We expect interest expense to remain a significant cost as we continue to leverage our credit facility to support our operations and future acquisitions.
We expect interest expense to remain a significant cost as we continue to leverage the 2021 Credit Facility to support our operations, partially fund the redemption of the Series A-2 Preferred Stock, and to fund future acquisitions. In February 2025, we refinanced our 2021 Credit Facility and replaced it with a new 2025 Credit Facility.
Total revenue from environmental emergency response related services, which include COVID-19 revenues, was $91.4 million and $88.0 million in the years ended December 31, 2023 and 2022, respectively. Total revenue from COVID-19 related services was $4.7 million and $65.2 million in the years ended December 31, 2023 and 2022, respectively.
Emergency response revenue was $48.0 million and $91.4 million for the year ended December 31, 2024 and December 31, 2023, respectively.
Revenue from the Discontinued Specialty Lab was $8.8 million and $17.0 million in the years ended December 31, 2023 and December 31, 2022, respectively. The Discontinued O&M Contracts generated revenues of zero and $3.6 million in the years ended December 31, 2023 and December 31, 2022, respectively.
These increases were partially offset by $43.3 million lower environmental emergency response revenues, which we exclude from organic growth, and the December 2023 sale of the Discontinued Specialty Lab, which generated $8.8 million of revenue in 2023. Environmental emergency response revenues were $48.0 million and $91.4 million for the years ended December 31, 2024 and 2023, respectively.
Changes in fair value of the embedded derivatives are recognized as a component of other income/ expense on our consolidated statements of operations. Stock-based Compensation We sponsor stock incentive plans that allow for issuance of employee stock options and other forms of equity incentives.
Stock-based Compensation We sponsor stock incentive plans that allow for issuance of employee stock options and other forms of equity incentives. Awards that are issued to non-employees in exchange for their services are accounted for under ASC 505, Equity-Based Payments to Non-Employees.
Corporate and other costs were $31.2 million for the year ended December 31, 2022 compared to $30.1 million for the year ended December 31, 2021. The cost increase was primarily driven by continued investment in corporate support functions. Corporate and other costs were 5.7% and 5.5% of revenues in the years ended December 31, 2022 and 2021, respectively.
Corporate and other costs for the year ended December 31, 2024 increased $3.2 million primarily due to increased investments in IT and cybersecurity infrastructure as well as an increase in professional fees. Corporate costs as a percentage of revenues were 5.9% in 2024 compared to 6.1% in the prior year.
Under this practical expedient, we are allowed to recognize revenue, over time, in the amount to which we have a right to invoice. 59 Accounting for Acquisitions and Business Acquisition Contingencies We account for acquisitions using the acquisition method of accounting.
Accounting for Acquisitions and Business Acquisition Contingencies We account for acquisitions using the acquisition method of accounting.
Segment Adjusted EBITDA margin for the year ended December 31, 2023 was primarily impacted by the acquisition of Matrix in June 2023. 53 Corporate and other costs were $37.9 million for the year ended December 31, 2023 compared to $31.2 million for the year ended December 31, 2022.
Remediation and Reuse Segment Adjusted EBITDA for the year ended December 31, 2024 increased compared to the year ended December 31, 2023 due to higher revenues. Improved Segment Adjusted EBITDA margin in 2024 was driven primarily by improved operating efficiency and higher margin acquisitions.
Measurement and Analysis Segment Adjusted EBITDA for the year ended December 31, 2023 was $37.2 million, an increase of $5.6 million or 17.8% compared to Segment Adjusted EBITDA for the year ended December 31, 2022 of $31.6 million.
Measurement and Analysis Segment Adjusted EBITDA and Segment Adjusted EBITDA margin for the year ended December 31, 2024 increased compared to the year ended December 31, 2023 primarily due to operating leverage driven by higher revenues.
“Financial Statements and Supplementary Data.” 2020 Credit Facility On April 13, 2020, we entered into a Unitranche Credit Agreement, or the 2020 Credit Facility, providing for a $225.0 million credit facility comprised of a $175.0 million term loan and a $50.0 million revolving credit facility. The 2020 Credit facility was repaid in full in April 2021.
“Financial Statements and Supplementary Data.” for details on the 2021 Credit Facility and our new credit facility. Series A-2 Preferred Stock In January 2024, we repaid $60.0 million of the outstanding principal balance of the Series A-2 Preferred Stock.
Working capital increased by $14.1 million in the year ended December 31, 2022, primarily due to a decrease in accounts payable and other accrued liabilities of $9.9 million, as a result of lower contract liabilities due to the timing of project completion and the timing of vendor payments, a decrease in accrued payroll and benefits of $6.8 million, and an increase in prepaid expenses and other current assets of $1.8 million, partially offset by a decrease in accounts receivable and contract assets of $4.4 million.
This increase was partially offset by an increase in accounts payable and other accrued liabilities (including accrued payroll) of $2.1 million, due to the timing of payments and growth in the company.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInflation Risk We experienced higher labor and significantly higher travel and other direct costs in the fiscal year ended December 31, 2022 as a result of inflation, particularly in our Measurement and Analysis and Remediation and Reuse segments. In the year ended December 31, 2023, we also experienced, and continue to experience, higher labor costs as a result of inflation.
Biggest changeInflation Risk We experienced, and continue to experience, higher labor and significantly higher travel and other direct costs in the fiscal year ended December 31, 2024 and December 31, 2023 as a result of inflation, particularly in our Measurement and Analysis and Remediation and Reuse segments.
We expect to continue to raise prices if direct costs continue to increase, and although inflation has increased our Selling, general and administrative expense in the year ended December 31, 2023, we do not believe over a longer period of time that inflation will have a material effect on our business, financial condition or results of operations.
We expect to continue to raise prices if direct costs continue to increase, and although inflation has increased our Selling, general and administrative expense in the year ended December 31, 2024, we do not believe over a longer period of time that inflation will have a material effect on our business, financial condition or results of operations.
Based on our overall interest rate exposure to variable rate debt outstanding as of December 31, 2023, which factors in our interest rate swaps on $170.0 million of debt, a 1.0% increase or decrease in interest rates on the term loan, aircraft loan, and revolver would have minimal impact in our annual income (loss) before income taxes.
Based on our overall interest rate exposure to variable rate debt outstanding as of December 31, 2024, which factors in our interest rate swaps on $150.0 million of debt, a 1.0% increase or decrease in interest rates on the term loan, aircraft loan, and revolver would impact our annual income (loss) before income taxes by approximately $0.7 million.
Foreign Exchange Risk Foreign exchange risk exposure arises because we sell our services throughout the United States, Canada, Europe, and Australia. Our exposure to this risk has increased significantly in 2023 due to our acquisition of Matrix in Canada and, to a lesser extent, Vandrensning in Europe in the second and third quarter of 2023, respectively.
Foreign Exchange Risk Foreign exchange risk exposure arises because we sell our services throughout the United States, Canada, Australia and Europe. Our exposure to this risk has increased significantly due to our acquisitions of Paragon and Matrix in Canada, EPIC in Australia, and to a lesser extent, Vandrensning in Europe.
When the U.S. dollar strengthens, the opposite situation occurs. Additionally, previously invoiced amounts can be positively or negatively affected by changes in exchange rates in the course of collection. 62
When the U.S. dollar strengthens, the opposite situation occurs. Additionally, previously invoiced amounts can be positively or negatively affected by changes in exchange rates in the course of collection. A 1.0% increase or decrease in the U.S. dollar exchange rate would impact revenues by approximately $1.5 million and would have a negligible impact on annual net (loss) income. 58
We believe we have successfully raised prices in businesses with short term contracts to offset these inflationary effects.
In the year ended December 31, 2024, we also experienced, and continue to experience, higher labor costs as a result of inflation. We believe we have successfully raised prices in businesses with short term contracts to offset these inflationary effects.

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