Core Viewpoint - Investors in the Waste Removal Services sector should consider Montrose Environmental (MEG) and Waste Management (WM) for potential undervalued stock opportunities [1] Valuation Metrics - Montrose Environmental has a forward P/E ratio of 17.04, while Waste Management has a forward P/E of 26.06 [5] - MEG's PEG ratio is 0.89, indicating better expected EPS growth compared to WM's PEG ratio of 2.42 [5] - MEG's P/B ratio is 1.94, significantly lower than WM's P/B of 9.14, suggesting MEG is more attractively valued [6] Analyst Outlook - Montrose Environmental holds a Zacks Rank of 2 (Buy), indicating a more favorable earnings estimate revision activity compared to Waste Management's Zacks Rank of 3 (Hold) [3] - The stronger estimate revision activity for MEG suggests a more positive analyst outlook, making it a more appealing option for value investors [7] Value Grades - MEG has a Value grade of B, while WM has a Value grade of C, reflecting MEG's superior valuation metrics [6]

Core Viewpoint - Montrose Environmental (MEG) is currently viewed as a better value opportunity compared to Zurn Water (ZWS) based on various financial metrics and rankings [1]. Group 1: Zacks Rank and Earnings Outlook - Montrose Environmental has a Zacks Rank of 2 (Buy), indicating a positive earnings estimate revision trend, while Zurn Water has a Zacks Rank of 3 (Hold) [3]. - The Zacks Rank system is designed to identify companies with improving earnings outlooks, which favors MEG over ZWS [3]. Group 2: Valuation Metrics - MEG has a forward P/E ratio of 16.27, significantly lower than ZWS's forward P/E of 28.23, suggesting that MEG is undervalued relative to ZWS [5]. - MEG's PEG ratio is 0.85, indicating a favorable growth outlook compared to ZWS's PEG ratio of 2.01, which suggests that ZWS may be overvalued [5]. - MEG's P/B ratio stands at 1.98, while ZWS has a P/B ratio of 4.91, further supporting the notion that MEG is a more attractive value option [6]. Group 3: Overall Value Assessment - Based on the aforementioned metrics, MEG holds a Value grade of B, whereas ZWS has a Value grade of C, reinforcing MEG's position as the superior value investment at this time [6].

Core Insights - Montrose Environmental Group, Inc. is focused on enhancing environmental stewardship and supporting economic development through federal funding for brownfields restoration and community revitalization [1] Group 1 - In 2025, Montrose assisted with over 20 EPA Grant applications totaling more than $45 million in potential awards [1] - Many communities that received assistance were previously unaware of their eligibility for funding or lacked a compelling narrative to present [1]

Group 1 - Robert F. Abbott has been managing family investments since 1995 and incorporated options trading in 2010, focusing on covered calls and collars with long stocks [1] - Abbott is a freelance writer with a project aimed at providing information for new and intermediate-level mutual fund investors [1] - He holds a Bachelor of Arts and a Master of Business Administration (MBA) degree [1]

Group 1 - Montrose Environmental Group (MEG) has achieved profitability for two consecutive quarters [1] - MEG services are experiencing increased demand, with a 5-year average growth rate [1]

Financial Performance - Revenues for the three months ended September 30, 2025, increased by $46.2 million or 25.9% compared to the same period in 2024, driven by strong organic growth and acquisitions [158]. - Revenues for the nine months ended September 30, 2025, increased by $129.9 million or 25.6% compared to the same period in 2024, with significant contributions from all segments and emergency response revenue [159]. - Total revenues for the nine months ended September 30, 2025, were $637.3 million, representing a 25.7% increase from $507.3 million in the same period of 2024 [175]. - Total reportable segment revenues for the three months ended September 30, 2025, increased by 25.9% to $224.9 million compared to $178.7 million for the same period in 2024 [176]. - For the nine months ended September 30, 2025, total reportable segment revenues increased by 25.6% to $637.3 million from $507.3 million in 2024 [176]. Segment Performance - Total revenue from emergency response related services was $11.5 million for the three months ended September 30, 2025, compared to $12.0 million in 2024, while for the nine months, it increased to $73.9 million from $40.6 million [154]. - Assessment, Permitting and Response segment revenues increased by 75.1% to $91,081,000 for the three months ended September 30, 2025 compared to $52,019,000 in 2024 [176]. - Measurement and Analysis segment revenues increased by 7.5% to $62,958,000 for the three months ended September 30, 2025 compared to $58,583,000 in 2024 [176]. - Remediation and Reuse segment revenues increased by 4.1% to $70,849,000 for the three months ended September 30, 2025 compared to $68,085,000 in 2024 [176]. - The Assessment, Permitting, and Response segment saw organic growth of $39.6 million and $45.0 million for the three and nine months ended September 30, 2025, respectively [176]. - Measurement and Analysis segment revenues increased by $2.6 million and $16.0 million for the three and nine months ended September 30, 2025, respectively, driven by strong organic growth [177]. - Remediation and Reuse segment revenues increased by $2.8 million and $12.4 million for the three and nine months ended September 30, 2025, respectively, with additional revenue from acquisitions of $7.6 million [179]. Expenses and Costs - Cost of revenues for the three months ended September 30, 2025, increased by $30.7 million or 29.1%, with a cost of revenue as a percentage of revenue at 60.6% [161]. - Selling, general and administrative expenses for the three months ended September 30, 2025, increased by $4.8 million or 7.9%, with a decrease in expenses as a percentage of revenues to 29.2% [165]. - Amortization expense for the three months ended September 30, 2025, was $7.3 million, down from $9.0 million in 2024, while for the nine months, it decreased to $23.0 million from $24.6 million [144]. - Corporate and other costs increased by $1,570,000 for the three months ended September 30, 2025 compared to the same period in 2024, primarily due to higher bonus accruals [183]. Income and Earnings - Net income for the three months ended September 30, 2025, was $8.4 million, compared to a net loss of $10.6 million in the same period in 2024 [157]. - Net income per share attributable to common stockholders for the three months ended September 30, 2025, was $0.24, compared to a loss of $0.39 in the same period in 2024 [157]. - Segment Adjusted EBITDA for total reportable segments was $47,131,000 for the three months ended September 30, 2025, a 30.1% increase from $36,213,000 in 2024 [180]. Cash Flow and Financing - For the nine months ended September 30, 2025, net cash provided by operating activities was $55.5 million, a significant increase of $65.3 million compared to a net cash used of $9.7 million for the same period in 2024 [190]. - Net cash used in investing activities for the nine months ended September 30, 2025, was $12.6 million, significantly lower than $137.2 million for the same period in 2024, which included multiple acquisitions [193][194]. - Net cash used in financing activities for the nine months ended September 30, 2025, was $49.2 million, driven by repayments of borrowings totaling $495.6 million [195]. - As of September 30, 2025, the company had $191.7 million available under the 2025 Credit Facility and $6.7 million in cash on hand [185]. Interest and Tax Expenses - Interest expense for the three months ended September 30, 2025, was $5.0 million, compared to $4.1 million in the same period of 2024, indicating an increase in financing costs [151]. - Interest expense, net for the nine months ended September 30, 2025, increased by 30.2% to $14.9 million compared to $11.4 million for the same period in 2024, primarily due to higher interest rates and debt balances [172]. - Income tax expense for the three months ended September 30, 2025 was $7,281,000, a 432.2% increase from $1,368,000 in the same period of 2024 [175]. - Income tax expense for the nine months ended September 30, 2025, increased by 148.7% to $11.1 million compared to $4.5 million for the same period in 2024 [174]. Acquisitions and Future Outlook - During the three months ended September 30, 2025, no acquisitions were completed, while two acquisitions were completed in the same period of 2024, generating revenues of $4.3 million, representing 2.4% of total revenues [144]. - The company expects revenue growth to continue to be driven significantly by acquisitions, despite a temporary pause in acquisition activities [144]. - The company anticipates that amortization of identifiable intangible assets and other acquisition-related costs will continue to be significant as it pursues further acquisitions [144]. - The company anticipates making up to $23.4 million in aggregate earn-out payments between 2025 and 2027 related to acquisitions [185]. - The company announced a stock repurchase program of up to $40.0 million on May 7, 2025, although no repurchases were made in the nine months ended September 30, 2025 [199].

Financial Data and Key Metrics Changes - The company achieved a record third quarter performance with a 26% year-over-year revenue growth and a 19% increase in consolidated adjusted EBITDA [8][9] - Year-to-date revenue increased by 25.6% to $637.3 million, while year-to-date consolidated adjusted EBITDA rose by 35% to $92.3 million [26][27] - Positive GAAP net income of $8.4 million was reported, marking a significant turnaround from a net loss of $10.6 million in the prior year [27][28] Business Line Data and Key Metrics Changes - The Assessment, Permitting, and Response segment saw a 75% revenue increase to $91.1 million, driven by strong demand for non-response consulting and advisory services [31] - The Measurement and Analysis segment's revenue grew by 7.5% to $63 million, with adjusted EBITDA rising to $17.3 million, reflecting a 460 basis point margin improvement [32] - The Remediation and Reuse segment's revenue increased to $70.8 million, although adjusted EBITDA declined to $9.4 million due to losses from the wind-down of the renewables business [32] Market Data and Key Metrics Changes - The company noted that state and local governments are stepping in to fill gaps left by the U.S. Federal government, creating unexpected growth opportunities [12] - Increased industrial activity, particularly in the energy and mining sectors, is driving demand for the company's services [73] Company Strategy and Development Direction - The company plans to exit its renewable service line by the end of the year, reallocating resources to higher return opportunities [20][21] - Future growth is expected to be driven by organic growth of 7 to 9% annually, with EBITDA growth anticipated to outpace revenue growth [24] - The company aims to restart acquisitions in 2026, focusing on strategic fit and potential for outsized financial returns [24][62] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business's prospects, citing strong client demand and the resilience of the business model amid external economic factors [10][13] - The company is well-positioned to capture growth from regulatory changes and increased industrial activity, particularly in the U.S., Canada, and Australia [73] Other Important Information - The company achieved a leverage ratio of 2.7 times and reported substantial available liquidity of $198.5 million [34] - Operating cash flow for the first nine months of 2025 improved by $65.3 million compared to the prior year, representing a 60.2% conversion of consolidated adjusted EBITDA [33] Q&A Session Summary Question: What drove the strong growth in the APNR business? - The growth was largely attributed to excellent cross-selling following emergency responses, with both structural and one-time sales contributing to the performance [36][39] Question: Can you elaborate on the water treatment business's positive outlook? - The water treatment business is experiencing healthy organic growth and margin accretion, driven by advanced technology applicable across multiple contaminants, not just PFAS [41][45] Question: What is the impact of the wind-down of the renewable services business? - The wind-down is expected to significantly reduce revenue, but excluding this impact, segment margins would be up year-to-date [51][55] Question: How will the acquisition strategy evolve moving forward? - The company plans to focus on larger assets with strong cash flow generation and is evaluating opportunities in international markets [62][63]

Financial Performance - Revenue increased by 25.9% to $224.9 million in 3Q25 compared to 3Q24[12, 17] - YTD25 revenue increased by 25.6% to $637.3 million compared to YTD24[19] - Net income increased to $8.4 million, resulting in $0.21 EPS in 3Q25[12, 22] - Consolidated Adjusted EBITDA grew by 18.9% to $33.7 million in 3Q25, representing 15% of revenue[12] - YTD25 Consolidated Adjusted EBITDA increased by 34.6% to $92.3 million, representing 14.5% of revenue[29] Guidance and Outlook - The company increased FY25 revenue guidance, expecting 18% growth over FY24[12] - The company increased FY25 Consolidated Adjusted EBITDA guidance, expecting 20% growth over FY24[12] - The company expects FY26 Consolidated Adjusted EBITDA to be at or above $125 million[12] Segment Performance - Assessment, Permitting & Response (AP&R) segment revenue increased to $91.1 million in 3Q25[56] - Measurement & Analysis segment revenue increased to $63.0 million in 3Q25[65] - Remediation & Reuse segment revenue increased to $70.8 million in 3Q25[71] Strategic Priorities - The company redeemed the remaining $122.2 million Series A-2 Preferred Stock ahead of schedule[30] - The company exceeded its leverage objective, delivering 2.7x leverage as of 3Q25[33] - The company achieved 60.2% of Operating Cash Flow as a percentage of Consolidated Adjusted EBITDA YTD25[33, 49] - The company generated $38.8 million in Free cash flow YTD25, representing 42% of Consolidated Adjusted EBITDA[33]

Core Insights - Montrose Environmental (MEG) reported revenue of $224.89 million for Q3 2025, marking a year-over-year increase of 25.9% and exceeding the Zacks Consensus Estimate of $195.85 million by 14.83% [1] - The company's EPS for the quarter was $0.36, down from $0.41 a year ago, but still above the consensus estimate of $0.33, resulting in an EPS surprise of 9.09% [1] Revenue Breakdown - Revenues from Assessment, Permitting and Response reached $91.08 million, significantly higher than the estimated $58.51 million, reflecting a year-over-year increase of 75.1% [4] - Revenues from Remediation & Reuse were reported at $70.85 million, slightly above the average estimate of $68.55 million, with a year-over-year change of 4.1% [4] - Revenues from Measurements & Analysis totaled $62.96 million, surpassing the estimated $61.29 million, and showing a year-over-year increase of 7.5% [4] Stock Performance - Over the past month, shares of Montrose Environmental have declined by 11.6%, contrasting with a 2.1% increase in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Core Insights - Montrose Environmental (MEG) reported quarterly earnings of $0.36 per share, exceeding the Zacks Consensus Estimate of $0.33 per share, but down from $0.41 per share a year ago, indicating an earnings surprise of +9.09% [1] - The company achieved revenues of $224.89 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 14.83% and up from $178.69 million year-over-year [2] - Montrose Environmental shares have increased approximately 35.3% year-to-date, outperforming the S&P 500's gain of 16.5% [3] Earnings Outlook - The future performance of Montrose Environmental's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4] - Current consensus EPS estimate for the upcoming quarter is $0.30 on revenues of $204.02 million, and for the current fiscal year, it is $1.29 on revenues of $812.67 million [7] Industry Context - The Waste Removal Services industry, to which Montrose Environmental belongs, is currently ranked in the top 38% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]