Montrose Environmental Group, Inc. [MEG] Filings

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

10-Q 1 meg-20220930.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39394

Montrose Environmental Group, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	46-4195044
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5120 Northshore Drive, North Little Rock, Arkansas	72118
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (501) 900-6400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.000004 per share

MEG

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 3, 2022, the registrant had 29,711,566 shares of common stock, $0.000004 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Unaudited Condensed Consolidated Statements of Financial Position	1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Unaudited Condensed Consolidated Statements of Convertible and Redeemable Series A-2 Preferred Stock and Stockholders’ Equity	3
	Unaudited Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	47

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50
Signatures		51

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

MONTROSE ENVIRONMENTAL GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(In thousands, except share data)


	September 30,			December 31,
	2022			2021
ASSETS
CURRENT ASSETS:
Cash and restricted cash	$	93,566		$	146,741
Accounts receivable—net		80,927			98,513
Contract assets		60,444			40,139
Prepaid and other current assets		10,890			8,465
Total current assets		245,827			293,858
NON-CURRENT ASSETS:
Property and equipment—net		33,581			31,521
Operating lease right-of-use asset—net		28,453			23,532
Finance lease right-of-use asset—net		9,869			8,944
Goodwill		318,413			311,944
Other intangible assets—net		146,268			160,997
Other assets		6,694			2,298
TOTAL ASSETS	$	789,105		$	833,094
LIABILITIES, CONVERTIBLE AND REDEEMABLE SERIES A-2 PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued liabilities	$	58,316		$	68,936
Accrued payroll and benefits		20,477			25,971
Business acquisitions contingent consideration, current		3,967			31,450
Current portion of operating lease liabilities		8,130			6,888
Current portion of finance lease liabilities		3,763			3,512
Current portion of long-term debt		8,750			10,938
Total current liabilities		103,403			147,695
NON-CURRENT LIABILITIES:
Business acquisitions contingent consideration, long-term		2,810			4,350
Other non-current liabilities		22			100
Deferred tax liabilities—net		5,766			4,006
Conversion option		24,730			23,081
Operating lease liability—net of current portion		20,841			16,859
Finance lease liability—net of current portion		6,562			5,756
Long-term debt—net of deferred financing fees		155,645			161,818
Total liabilities		319,779			363,665
COMMITMENTS AND CONTINGENCIES
CONVERTIBLE AND REDEEMABLE SERIES A-2 PREFERRED STOCK $0.0001 PAR VALUE—
Authorized, issued and outstanding shares: 17,500 at September 30, 2022 and December 31, 2021; aggregate liquidation preference of $182.2 million at September 30, 2022 and December 31, 2021		152,928			152,928
STOCKHOLDERS’ EQUITY:
Common stock, $0.000004 par value; authorized shares: 190,000,000 at September 30, 2022 and December 31, 2021; issued and outstanding shares: 29,707,503 and 29,619,921 at September 30, 2022 and December 31, 2021, respectively		—			—
Additional paid-in-capital		485,030			464,143
Accumulated deficit		(168,685	)		(147,678	)
Accumulated other comprehensive income		53			36
Total stockholders’ equity		316,398			316,501
TOTAL LIABILITIES, CONVERTIBLE AND REDEEMABLE SERIES A-2 PREFERRED STOCK AND STOCKHOLDERS’ EQUITY	$	789,105		$	833,094

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MONTROSE ENVIRONMENTAL GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE (LOSS) INCOME

(In thousands, except per share data)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
REVENUES	$	130,312		$	132,578		$	404,902		$	402,619
COST OF REVENUES (exclusive of depreciation and amortization shown below)		82,234			85,242			261,049			272,662
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE		42,857			30,499			131,120			82,865
FAIR VALUE CHANGES IN BUSINESS ACQUISITION CONTINGENCIES		59			—			(3,472	)		24,035
DEPRECIATION AND AMORTIZATION		11,504			11,471			35,928			33,145
(LOSS) INCOME FROM OPERATIONS		(6,342	)		5,366			(19,723	)		(10,088	)
OTHER INCOME (EXPENSE)
Other income (expense)		1,814			(516	)		4,618			(1,909	)
Interest expense—net		(1,400	)		(1,722	)		(4,010	)		(11,208	)
Total other income (expense)—net		414			(2,238	)		608			(13,117	)
(LOSS) INCOME BEFORE (BENEFIT) EXPENSE FROM INCOME TAXES		(5,928	)		3,128			(19,115	)		(23,205	)
INCOME TAX (BENEFIT) EXPENSE		(208	)		902			1,892			648
NET (LOSS) INCOME	$	(5,720	)	$	2,226		$	(21,007	)	$	(23,853	)

EQUITY ADJUSTMENT FROM FOREIGN CURRENCY TRANSLATION		20			(74	)		17			(17	)
COMPREHENSIVE (LOSS) INCOME		(5,700	)		2,152			(20,990	)		(23,870	)
CONVERTIBLE AND REDEEMABLE SERIES A-2 PREFERRED STOCK DIVIDEND		(4,100	)		(4,100	)		(12,300	)		(12,300	)
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS		(9,820	)		(1,874	)		(33,307	)		(36,153	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING— BASIC AND DILUTED		29,691			26,220			29,677			25,798
NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS— BASIC AND DILUTED	$	(0.33	)	$	(0.07	)	$	(1.12	)	$	(1.40	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MONTROSE ENVIRONMENTAL GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE AND REDEEMABLE SERIES A-2 PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(In thousands, except share data)


															Accumulated
															Other
	Convertible and Redeemable														Comprehensive			Total
	Series A-2 Preferred Stock				Common Stock				Additional			Accumulated			Income			Stockholders'
	Shares		Amount		Shares		Amount		Paid-In Capital			Deficit			(Loss)			Equity
BALANCE—December 31, 2020		17,500	$	152,928		24,932,527	$	—	$	259,427		$	(122,353	)	$	71		$	137,145
Net loss		—		—		—		—		—			(12,931	)		—			(12,931	)
Stock-based compensation		—		—		—		—		1,805			—			—			1,805
Dividend payment to the Series A-2 preferred shareholders		—		—		—		—		(4,100	)		—			—			(4,100	)
Common stock issued		—		—		506,330		—		4,456			—			—			4,456
Accumulated other comprehensive income		—		—		—		—		—			—			29			29
BALANCE—March 31, 2021		17,500	$	152,928		25,438,857	$	—	$	261,588		$	(135,284	)	$	100		$	126,404
Net loss		—		—		—		—		—			(13,148	)		—			(13,148	)
Stock-based compensation		—		—		—		—		2,417			—			—			2,417
Dividend payment to the Series A-2 preferred shareholders		—		—		—		—		(4,100	)		—			—			(4,100	)
Common stock issued		—		—		669,331		—		27,460			—			—			27,460
Accumulated other comprehensive income		—		—		—		—		—			—			28			28
BALANCE—June 30, 2021		17,500	$	152,928		26,108,188	$	—	$	287,365		$	(148,432	)	$	128		$	139,061
Net loss		—		—		—		—					2,226			—			2,226
Stock-based compensation		—		—		—		—		2,365			—			—			2,365
Dividend payment to the Series A-2 preferred shareholders		—		—		—		—		(4,100	)		—			—			(4,100	)
Common stock issued		—		—		417,656		—		6,220			—			—			6,220
Accumulated other comprehensive income		—		—		—		—		—			—			(74	)		(74	)
BALANCE—September 30, 2021		17,500		152,928		26,525,844		—		291,850			(146,206	)		54			145,698


BALANCE—December 31, 2021		17,500	$	152,928		29,619,921	$	—	$	464,143		$	(147,678	)	$	36

Montrose Environmental Group, Inc. [MEG] Filings
10-Q	[2022-11-09]
10-Q	[2022-08-09]
10-Q	[2022-05-10]
10-K	[2022-03-01]
10-Q	[2021-11-10]
10-Q	[2021-08-11]
10-Q	[2021-05-12]
10-K	[2021-03-24]
S-1	[2020-11-23]
10-Q	[2020-11-12]
10-Q	[2020-08-31]
S-1	[2020-06-29]