Montrose Environmental Group Inc at Needham Growth Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jim Ricchiuti - Needham and Company - Analyst : Why don't we start with -- I think a lot of folks are familiar with the Montrose story at this point, but why don't we start with just a brief overview for those folks who might not be. And then we can dig a little bit more deeply into some of the recent developments, both inside the Company and in the markets that you address.

Question: Jim Ricchiuti - Needham and Company - Analyst : Yes, it does. It's helpful. And if we look back at 2021 and recognize -- the Q4 results are not out yet. But if we think about the nine-month results, tell us about some of the bigger factors that really allowed you to deliver the kind of performance that you did during the first three quarters of the year?

Question: Jim Ricchiuti - Needham and Company - Analyst : Okay, and the goal of the Company, you correct me, is to deliver 20% or so-plus annual revenue growth, and that's both organic and through acquisitions. We'll put aside the unusual dynamics of CTEH, and we will discuss that in a minute. But I guess what do you think the base business is capable of supporting from an organic growth standpoint? Because you highlighted some areas that I think are real catalysts -- but I wonder how do we think of that organic versus inorganic?

Question: Jim Ricchiuti - Needham and Company - Analyst : And Vijay -- I don't know -- have you actually sized within CTEH how much is coming, or came from, is coming from COVID?

Question: Jim Ricchiuti - Needham and Company - Analyst : And then this next question relates -- and we'll move on to both CTEH, but there's another question on CTEH. And you alluded to it that the run rate business that you're anticipating being in the $75 million to $95 million range on a normalized year. Earlier you were thinking that that was a lower run rate business. So I guess, what's changed in the time that you have owned CTEH? Is it just unfortunately more of these incidents -- these emergency incidents? What can you say about that?

Question: Jim Ricchiuti - Needham and Company - Analyst : And at the same time, parts of the business have been impacted negatively by COVID. I mean you, obviously, have had some challenges getting folks to sites. And interestingly, I'm sure within the organization itself, like everyone else, are dealing with the virus. What can you say about the recent spike as it relates to some of the issues that you've experienced on and off over the course of 2021, whether it's staffing, other disruptions? Or are you guys just better able to manage it now just because we're living with it?

Question: Jim Ricchiuti - Needham and Company - Analyst : And Allan, a question for you -- and again, we can put CTEH aside for a second. But maybe it would be helpful, again, to just kind of remind us of the margin profile of the three businesses: assessment, permitting, and response; the measurement and analysis; and the remediation and reuse. Have we seen changes in the way we should be thinking, too, about the margin profile?

Question: Jim Ricchiuti - Needham and Company - Analyst : Great. Thank you for that. That's helpful. So Vijay, you kind of alluded to a bit earlier. As we think about the growth drivers over the next couple of years, it certainly would appear that the Company is going to benefit from several tailwinds across the business, which I'd like to address in the next few questions. First, to what extent are these regulatory initiatives that we are starting to see at the federal, the state, provincial, local levels? It sounds like it's already starting to provide opportunities for Montrose, and maybe you can talk about specifically which areas you are starting to see that.

Question: Jim Ricchiuti - Needham and Company - Analyst : That's fine.

Question: Jim Ricchiuti - Needham and Company - Analyst : That's a good explanation. I wanted to go back to PFAS just because I think admittedly, we are still in a state of -- we're trying to understand what -- how things are going to shape up in the US. But there is -- I guess, a little bit more insight as to how it's impacting your business in Australia, potentially parts of Europe. Is there anything you can say about any additional color you can provide on how some of the ECT2 projects are going? And maybe it's also helpful to talk a little bit about how you guys play in the market versus what's out there? It's not clearly one-solution-fits-all, right?

Question: Jim Ricchiuti - Needham and Company - Analyst : So we have an infrastructure bill and, of course, it always takes a while to see how this all translates -- flows through the system. But I'm wondering now, where would this head initially in the assessment and permitting side of the business? How do you see Montrose benefiting from this as we get further into some of the funding finding its way out into the system?

Question: Jim Ricchiuti - Needham and Company - Analyst : Got it. You touched on this -- the focus on ESG. And clearly, you guys check a lot of the boxes but --.

Question: Jim Ricchiuti - Needham and Company - Analyst : Well, in terms of what you provide your clients. And this is really where the question is going, Vijay. What I'm trying to get a better sense is as you've had discussions with your customers, your clients, they have much more sensitivity, I think, to the environmental concerns, their own ESG responsibilities. And it sounds like you're seeing that already. How big a driver do you see that over the next one to two years?

Question: Jim Ricchiuti - Needham and Company - Analyst : You know that's a good point.

Question: Jim Ricchiuti - Needham and Company - Analyst : Okay. And the next few questions are on the topic of M&A. You touched on one of them. First off, do we see that the mix of business within the Company changing? By that, I mean, you've been more heavily concentrated obviously in private sector versus public sector. How is that going to change over the next one to two years?

Question: Jim Ricchiuti - Needham and Company - Analyst : Okay.

Question: Jim Ricchiuti - Needham and Company - Analyst : Okay. And on the M&A side, you've -- big part of the story as we all know. Bring us up to date on what you have accomplished so far or what you accomplished in 2021. More importantly, how's that pipeline look? Is it shaping up for 2022? Just talk to that a little bit.

Question: Jim Ricchiuti - Needham and Company - Analyst : And probably, fair to say that just given the Company's performance over the last one to two years and given how fragmented the market is, you have some luxury of being pretty selective, too, in terms of what you look for.

Question: Jim Ricchiuti - Needham and Company - Analyst : And last question -- this is probably a difficult business to replicate overnight for a competitor. And certainly, that's the case; I think it is. As you look out over the next two to three years, what excites you the most about how this business could shape up?

Question: Jim Ricchiuti - Needham and Company - Analyst : Okay. We're going to have to end it there. Vijay, thank you. Allan, thanks.

Question: Jim Ricchiuti - Needham and Company - Analyst : Take care.