Montrose Environmental Group, Inc. (MEG) on Q2 2021 Results - Earnings Call Transcript
Operator: Greetings. Welcome to Montrose Environmental Group, Inc. Second Quarter 2021 Earnings Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Rodny Nacier of Investor Relations.
Rodny Nacier: Thank you, Joe. Welcome to our second quarter 2021 earnings call. Joining me on the call are Vijay Manthripragada, our President and Chief Executive Officer and Allan Dicks, Chief Financial Officer. During our discussion today, we will be referring to our earnings presentation, which is available on the Investors section of our website. Our earnings release is also available on the website. Moving to Slide 2, I’d like to remind everyone that today’s call will include forward-looking statements that are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ in a material way due to known and unknown risks and uncertainties that should be considered in evaluating our operating performance and financial outlook. We refer you to our recent SEC filings, including our final prospectus filed with the SEC on July 23, 2020, which identify the principal risks and uncertainties that could affect any forward-looking statements as well as future performance. We assume no obligation to update any forward-looking statements. In addition, we will be discussing or providing certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margins. We provide these non-GAAP results for informational purposes and they should not be considered in isolation from the most directly comparable GAAP measures. Please see the appendix to the earnings presentation or our earnings release for a discussion of why we believe these non-GAAP measures are useful to investors and the reconciliation thereof to their most directly comparable GAAP measure. With that, I would now like to turn the call over to Vijay, beginning on Slide 4.
Vijay Manthripragada: Thank you very much, Rodney and welcome to all of you joining us today. I will provide you with a few business highlights and then hand it over to Allan for our financial review and we will then open it up to Q&A. I will speak generally to Pages 4 through 8 of the presentation made available to you. But before diving into them, let me start by saying we are and we are pleased to see what we believe our long-term tailwinds for our business continue driving strong results, including in the second quarter and first half of this year in 2021. We could not have achieved these results without the focused execution of our team members, and I am truly grateful for them. Their dedication to providing excellent service to our clients and supporting each other continues to differentiate Montrose. The second point I would like to make is that though the Q2 and first half 2021 results speak for themselves, our team’s emphasis on quality, safety and teamwork are further highlighted in our inaugural ESG report, which we published at the end of July and which you can find on our website. The report touches on many of the themes we value culturally and the impacts of our culture on our business performance, and we look forward to engaging with all of you on how we can continue to integrate ESG into our operating decisions. And finally, before delving into some of the themes for the quarter, I would like to reiterate our previous message around how we look at Montrose in our business. Because demand for our environmental services does not follow fiscal quarter patterns, Montrose’s best assessed on annual results. This is how we manage and forecast our business and how we expect others to view our results as well. So with that and given our solid results in the first half of the year, we believe we will now exceed our 2021 objective of over 20% annual revenue and EBITDA growth. I will expand on the trends in a few seconds, but our results and increased guidance for the year are driven by strong organic growth across all of our segments, accretive acquisitions, and a robust set of investment opportunities. Since our last earnings call in May, our organic growth and strategic rationale for acquisitions remain supported by several key trends. We believe continued private sector emphasis on environmental stewardship, coupled with evolving federal and state or provincial environmental regulatory initiatives across our key markets will drive continued demand for our services in the years to come. For example, the U.S. EPA announced a few weeks ago that it will set stricter requirements for how coal-fired power plants dispose of wastewater with our Arsenic, Lead and Mercury. It also expects to add the first new hazardous air pollutant under the Clean Air Act since 1990. And on the Greenhouse grafts front, the U.S. Department of Transportation notified pipeline operators to expect to cure methane emissions in compliance with the 2020 Pipes Act. And at the U.S. state level, the continued regulation of PFAS is creating opportunities for remediation and water treatment businesses with main recently passing and Wisconsin proposing new builds regulating PFAS in the environment. As another example, in Canada, there are two changes to Canadian regulations beginning in January of 2022, driving market growth for our LDAR and OGI businesses. Regulations focused on upstream oil and gas companies require more of them to monitor and report emissions 3 times a year. And in addition, new Canadian rules require implementing comprehensive LDAR programs at petrochemical facilities. In Australia, we were pleased to renew a multiyear contract with the Australian DoD to operate and maintain water treatment systems at 3 of the country’s military bases, highlighting their commitment to responsible PFAS remediation and minimal waste generation. In terms of upcoming regulations or political initiatives, this week, we were happy to see the U.S. infrastructure package path to Senate with bipartisan support. This is a great example of how we see tailwinds to our business from both sides of the political spectrum, just as we see increasingly great leadership and innovation by both Republican and Democratic leading states here in the United States. We are also excited to see our customers engage us on environmental stewardship initiatives driven more by corporate ESG strategies than regulations. For example, proactive measuring and reducing emissions or addressing the rising issue of PFAS compounds in the environment. We also expect that corporate responses to infrastructure redevelopment and decommissioning initiatives will continue to drive the environmental assessment market and associated activities. It is important to note that our business remains resilient and largely insulated from political swings. We are encouraged to see increased political will across parties on helping the environment, and we are particularly optimistic about the recent emphasis on environmental stewardship by the capital markets. We have discussed variations of these themes in our past calls with you, but as our expectations and outlook start to get realized or manifest themselves we remain in and in many as we are increasingly upbeat about the future of Montrose and our environmental solutions. On Pages 6, 10 and 11 of the presentation, I’ll point to some year-to-date in LTM numbers to help keep focus on the importance of measuring our performance over longer time periods. Excluding the impact of discontinued services in the prior year period, year-to-date 2021 revenue has increased 106%. Additionally, we were very pleased to see 9% organic growth in the first half of 2021, excluding our response team and 47% organic growth, including our team, CTEH. Adjusted EBITDA on a year-to-date basis grew 94% compared to the prior year period given revenue growth. And this strong year-to-date performance has put us on track for another year of record results. At the segment level, within our Assessment, Permitting and Response segment, most of the segment is CTEH. The leadership team at CTEH has done a stellar job, and they’ve converted the pandemic response and business continuity service into long-term strategic contracts with new and large industries, the technology and the media entertainment industries, in particular. I’ve mentioned to you before that CTEH were historically a $60 million to $80 million annual revenue business. And we now believe that run rate has increased organically to an annual $75 million to $95 million business. And there are 3 main reasons for this. One, there are more crises driven by climate change or otherwise, examples of which are hurricanes, floods, fires or recently, the pandemic. The June fire in the Midwest, which was part of their traditional response service and required air quality monitoring and evaluations is the most recent example. They have a larger market share. The number of our strategic MSAs has increased double digits in 2021. And last, but certainly not least, they have more services. Our software, for example, help state administer responses to environmental emergencies and is a new source of value to customers. These variables are multiplicative and intrinsically tied into the broader Montrose footprint and I am thrilled with the team and our strategic expectations for the combination of CTEH and Montrose are starting to manifest themselves as we continue to execute as 1 cohesive team. As it relates to CTEH supporting clients through the pandemic, we said last quarter that we expected the revenue surge to taper in Q3 and Q4 of this year. What the team now sees is that the Delta variance sustaining demand for their business. And as a result, they expect demand that is an elevated revenue level to continue into Q3 and Q4 of this year. Within the segment and excluding CTEH, our higher-margin assessment, permitting and ecological service businesses are seeing a nice organic uptick. Examples of drivers for our services include the new renewable fuel standards rulings under the American Innovation Manufacturing Act to phase down hydrofluorocarbons and client questions related to various net 0 initiatives. Our acquisition of Environmental Intelligence in California better positions us to capture what we believe to be a growing demand for ecosystem services, and I’m incredibly excited about that team joining Montrose as well. Within the measurement and analysis segment, demand continues to grow and remains strong. The revenue increase versus Q2 of 2020 is due to increasing demand across all of our environmental testing services. Specifically, we’re seeing high demand for specialized air test methods and our PFAS analytical services. Our PFAS capabilities were bolstered by the recent acquisition of Vista Analytical in California, which is another stellar addition to our MLP franchise. We are also seeing increased demand from non-regulatory drivers example the OGMP gold standard certification, which is really encouraging for all of us and then our third segment, Remediation and Reuse. Within that segment, we are seeing strong organic growth driven by both our PFAS water remediation technology and our waste-to-energy services. With our recent acquisition of the MSE Group in January, which I mentioned on the last call, coupled with our unique IP for water contaminated with high concentrations of PFAS, we believe we have further positioned ourselves in the U.S. Federal Environmental sector, where we’re seeing more remedial investigations, remedial design and remediation for issues such as PFAS. In terms of our opportunities to allocate capital into our business, into research, development and talent, our strong organic growth across each of our business segments is a function of our continued investments in environmental technology and innovation and our people. Since the launch of our new R&D department in 2020, we have made great strides in building out our patent portfolio and supporting the creation of new solutions for our clients. Our work around PFAS destruction for example, continues to resonate. On our recruitment and retention of top talent, we continue to do well, especially at the director level and above retention remains strong. And I am thrilled that the caliber of the team we’ve built here at Montrose. Our business is our people, and we remain invested in their continued success. Our M&A pipeline also remains very strong. So far in 2021, the acquisitions of MSE, Vista, EI and Sensible IoT are not only strategically and financially accretive but put us very close to achieving our annual goal of $10 million in acquired EBITDA. We are already seeing cross-selling success in several key areas, highlighting the benefits from these transactions. And this Monday, we announced the addition of SensibleIoT to the Montrose platform, augmenting our software and data analytics capabilities. So, in summary, I would like to end where I started by extending a big thank you to our Montrose teams for their hard work and dedication over the past 12 months. July marked our first full year as a public company, and we performed as we did because of the dedication of our team members around the world. Thank you to all of you for your efforts. These results belong to you. And as I have said before, we are also grateful for and appreciate the continued support of all of our shareholders as we push forward into what looks like an increasingly exciting future. With that, let me hand it over to Allan. Thank you.
Allan Dicks: Thanks, Vijay. We are extremely pleased to have delivered solid second quarter results, which reflect the resiliency of our entire team, the focused execution of our growth strategy and the in-demand nature of our environmental solutions. We produced strong year-over-year performance from our core businesses and have continued to execute on our M&A strategy with the recent closing of our fourth acquisition in 2021. Moving to our revenue performance on Slide 10, we continue to drive strong growth across our business during the uncertainty of the COVID-19 pandemic. Our second quarter revenue increased 85% to $136.2 million compared to the prior year quarter. Year-to-date, revenues were up 100% versus the prior year period to $270 million. The primary driver of revenue growth was organic growth across all of our business segments, as well as our acquisitions of CTEH in early April 2020 and MSE in January of the current year. As we have discussed on our prior earnings calls, we completed the process of discontinuing service lines early in the second quarter of 2020, which partially offset our year-to-date and second quarter 2021 comparisons. Excluding discontinued service lines, revenues would have increased 88% in the second quarter of 2021 and 106% year-to-date. We don’t discuss organic growth on a quarterly basis as year-over-year quarterly comparisons can be misleading. However, on a year-to-date basis, organic growth was 47%. We also monitor organic growth without CTEH, given the episodic nature of CTEH’s emergency response revenues and the benefit from pandemic response services, which are not necessarily part of the long-term run rate revenues. Year-to-date organic growth without CTEH was 9% on the high end of our expected 7% to 9% annual organic growth expectations. Looking at our adjusted EBITDA performance on Slide 11, second quarter adjusted EBITDA grew 51% to $21 million and adjusted EBITDA margin declined 340 basis points to 15.4% of revenue. Year-to-date, adjusted EBITDA grew 94% to $37.8 million and adjusted EBITDA margin declined 40 basis points to 14% of revenue. The improvement in adjusted EBITDA was primarily driven by higher revenues. The year-over-year change in margins for both periods was mainly due to business mix. The planned and expected normalization of margins in certain business lines following temporary COVID-related cost mitigation actions taken in the prior year, which have now been reversed and public company costs in the current year. An important part of the Montrose story that I will reemphasize is that our performance needs to be assessed annually. This is how we evaluate the business, due to the stronger predictability of the business on an annual basis. This is also consistent with how we hire staff, allocate resources and manage the company. Turning to our business segments on Slide 12, in our Assessment, Permitting and Response segment, second quarter revenue grew to $70.1 million from $18.6 million in the prior year, and adjusted EBITDA improved to $14.8 million from $5 million in the prior year. The significant year-over-year increases in both revenue and adjusted EBITDA was mainly driven by CTEH, which has seen an acceleration in demand to provide pandemic response related services as well as organic growth in our other business lines in the segment. CTEH revenues in the second quarter were $65.9 million. The decline in segment adjusted EBITDA margin to 21.2% was a result of lower margin COVID work performed by CTEH. Now, Measurement and Analysis segment second quarter revenue increased 7% to $39.7 million, primarily attributable to increased organic growth. Adjusted EBITDA margin declined to 24% due to business mix and the reinstatement of certain costs that have been temporarily suspended at the outset of the COVID-19 pandemic. And finally, in our Remediation and Reuse segment, second quarter revenues increased 46% year-over-year to $26.4 million, reflecting growing organic demand for PFAS remediation and waste to energy services as well as the acquisition of MSE. The 320 basis point increase in remediation and reuse adjusted EBITDA margins of 16.3% was a result of operating leverage as we begin to realize the benefits of the investments made in this segment. Adjusted EBITDA margin in this segment continues to reflect the impact of elevated fixed costs and investments in anticipation of further growth and geographic expansion. Moving to our capital structure on Slide 13, year-to-date cash flow used in operating activities was $17 million, a decrease of $15.4 million compared to the prior year. SUs in operations, includes payment of acquisition-related contingent consideration of $15.5 million and $6.2 million in the current and prior years, respectively. Excluding these acquisition-related payments, year-to-date cash used in operating activities was $1.5 million in the current year. Compared to cash generated by operating activities of $4.6 million in the prior year, a decrease of $6.1 million. This decrease was driven primarily by a $30.9 million increase in working capital versus the prior year change in working capital. The increase in working capital in the current year is as a result of an increase in revenues in the current quarter versus the fourth quarter of 2020. This increase in working capital was partially offset by higher year-to-date earnings before non-cash items versus the prior year of $23.3 million. Cash flow from operations in the second quarter of 2021, before the payment of contingent consideration, was $12.4 million or 59% of adjusted EBITDA. We continue to expect strong cash flow from operations for the balance of the year and a long-term conversion of adjusted EBITDA into operating cash flow at a rate in excess of 50%. This incorporates our expectation that as a growing company, we will continue to be very focused on balancing the generation of cash with investments in technology, R&D and infrastructure to ensure continued scalability. As of June 30, 2021, we had cash of $40.2 million and total debt of $240 million. Our net leverage ratio at June 30, 2021, as calculated under our credit facilities was 3.1x and within our longer term target leverage range of between 2.5x and 3.5x. As discussed during last quarter’s call, in April, we entered into a new sustainability-linked credit agreement, which expanded our borrowing capacity to $300 million and reduced our cost of borrowings at our current leverage ratio to LIBOR plus 2%, while providing for some nominal basis point pricing adjustment based on our performance against certain sustainability and ESG-related objectives. As a reminder, our Series A-2 preferred stock has no maturity date, and we have the option, but not the obligation to redeem the preferred shares at any time for cash, subject to a make-whole payment in the first 3 years. We view this preferred equity instrument as favorable to the value potential in the business given its flexible dynamics. If you include $182 million balance of the Series A-2 equity in our market cap, our total equity capitalization stands at approximately $1.7 billion. Moving to our full year outlook on Slide 14, based on the momentum evident in our business, we are increasing our full year adjusted EBITDA estimate to a range of $70 million to $75 million, which is up from previous guidance of $63 million to $70 million. Our updated guidance implies adjusted EBITDA growth of 29% to 38% year-over-year. The increase from our prior range reflects our strong results in the second quarter and expectation of some continued – continuation of elevated CTEH results from COVID response work, a continued stream of project wins and our recently closed acquisitions. As a reminder, this outlook is based on a combination of high single-digit organic growth for the year, excluding CTEH, plus the contribution of completed acquisitions. Although, we expect to continue adding strategically and financially accretive acquisitions, our outlook does not include any benefit from future acquisitions. So in summary, we are thrilled to build upon our strong first quarter results in the second quarter. Demand for our services remains resilient and our raised outlook for 2021 reflects a unique opportunity to deliver value through our differentiating focus on environmental solutions. Though the timing of projects can influence quarterly performance, we are confident in our ability to produce another year of excellent results. Looking further ahead, we remain optimistic on the economic and political drivers in our growing addressable market as customers seek to distinguish their business through ESG stewardship and additional rules and regulations begin to take shape as the environmental impact of industrial activities and emerging contaminants such as DuPont become more central political issues. Accretive M&A opportunities will continue to be a focus for this team as we seek to continue to expand our geographic footprint and offer more value through additional service lines and technologies to our customers in our immense addressable market. We look forward to the opportunities ahead and we sincerely appreciate your interest in Montrose. Thank you all for joining us today. Operator, we are ready to open the lines for questions.
Operator: Our first question is from Tim Mulrooney with William Blair. Please proceed.
Tim Mulrooney: Good morning, Vijay. Good morning, Allan.
Vijay Manthripragada: Hi, Tim.
Tim Mulrooney: So I just want to make sure I’ve got a couple of things straight. It looks like maybe you raised your guide for organic growth, annual organic growth, for 2021 a little bit maybe. It was mid-single digit to high single-digit range last quarter. And now according to the outlook section of your press release, it looks like the guide is inclusive of more like high single-digit organic revenue growth. So maybe you raised it to the high end of the – of your typical annual range. Is that primarily being driven by the strength in CTEH relative to your prior expectations? Or is that primarily coming from other areas of the business? Thank you.
Vijay Manthripragada: Hi, Tim, this is Vijay. We are – we continue to assert that we expect the business to grow mid to high single digits. So we’re not kind of changing that narrative. But you are correct, given the strong performance through the first half of this year, we expect to be at the high end of that range this year. But we’re not changing our broader narrative around our expected trajectory vis-à-vis the industry in the medium and long-term. And the high single digits is exclusive of CTEH. That does not include their performance, including CTEH, we are closer to 50% organic. And so the mid to high single digits that you’re referencing and the 9% that we alluded to in the release is excluding CTEH.
Tim Mulrooney: Okay, got it. I wasn’t sure. I know CTEH was strong in the back half of last year. So I wasn’t sure if you were expecting some headwinds there which, I guess, maybe gets me to my next question. You expect – you now expect CTEH revenue to remain elevated in the second half of the year. I was wondering if you could unpack that a little more for us because is this elevated above normalized levels of kind of $20 million a quarter or significantly elevated levels similar to what we’ve seen through the first two quarters of this year?
Vijay Manthripragada: Yes. It’s – and so Tim, just stepping back, the $20 million per quarter that you referenced was off of the legacy kind of $60 million to $80 million, and we now think it’s more like $75 million to $95 million per year. So I think $20 million to $25 million we believe they will be elevated above their run rate through Q3 and Q4. It’s a base hard to peg exactly what the number will be because of the nature of the response services and the business continuity services they are providing. But the team is doing a great job, and they remain pretty optimistic that the demand cycle will continue through the back half of this year. So when we talk about elevated, we usually reference that vis-à-vis what we would expect to be their annualized quarterly run rate.
Tim Mulrooney: Understood. Thank you very much.
Vijay Manthripragada: Thank you.
Operator: Our next question is from Andrew Obin with Bank of America. Please proceed.
Andrew Obin: Hi, yes. Good morning.
Vijay Manthripragada: Hi, Andrew.
Allan Dicks: Hi, Andrew.
Andrew Obin: Hi, how are you? Just – I guess, I’ll ask more question on CTEH. Look, clearly, there are some structural changes in the business. You sort of talked about more services, better market share. Could it become a more stable business? How do you think about margin profile change? And more importantly, going into ‘22, how should we think about CTEH? Can it stay flat given everything you’ve done to the business so far?
Vijay Manthripragada: Let me try to parse that a little bit, Tim. The team...
Andrew Obin: Simple question, simple question.
Vijay Manthripragada: Yes. Yes. Let me – So let me take that piece by piece. So in terms of more services, more market share, I believe that, that has structurally shifted the business in a very positive direction, and we’ve spent some time with the CTEH leadership team to understand the various levers there. And so let’s take incidents like the pandemic, but like the hurricanes, floods, fires that we’ve referenced before and the increased frequency, let’s take that aside for a second. The structural shifts that they have done an exceptional job of executing on is signing up more MSAs. So as opposed to kind of one-time relationships with many of these clients, these are now long-term strategic partnerships, which give us collectively more of an opportunity to meet those clients’ environmental needs. And then when we talk about more services, Andrew, an example of that is the utilization of their software capabilities, which I’ve alluded to on prior calls, to help administer for our clients, both at the government and private sector level, there various response needs. So it’s a very nimble software architecture and it provides the team with kind of a unique advantage and a real value proposition for clients, and that’s real value that can be monetized. And take kind of those two variables. And that’s why we think structurally, it is both stable and at a higher level vis-à-vis where they were 2 years ago. Now your second question, will they sustain kind of the current run rate as Allan alluded to, they have done kind of north of $130 million through the first half of this year. That is an exceptionally strong year. And no, we don’t expect that to be their new baseline.
Andrew Obin: Got it. Great answer. Thank you. And just to clarify, you have closed a couple of deals last quarter, can you just tell us what’s the contribution – EBITDA contribution of the deals that you’ve closed so far versus your prior guidance in the second half?
Vijay Manthripragada: Yes, they vary – Yes. So let me touch on the deal specifically, Andrew. So MSE was very typical of that segment on a run rate basis, kind of high teens EBITDA margin. Vista is within the Measurement and Analysis segment and labs, right, tend to typically tend to run single digits, but this runs double digits on the PFAS testing side. And Environmental Intelligence is in our advisory ecosystems side, and that tends to run kind of 20%ish EBITDA margins. Again, in aggregate, I’m talking about the segments, generally speaking, and these businesses puts and takes a little bit for each individual one, but they largely fall into that very consistent narrative. And so no, they haven’t really – if you think about the acquisitions in the context of our broader portfolio, it’s really going to be a back half of the year impact. And no, it’s not shifting our margin expectations materially. The one variable that’s worth noting is the – as Allan alluded to on the call, because of the outperformance of the CTEH business and their differentiated margin profile. That may impact kind of our annual end of year results because of business mix reasons, but the core the non-CTEH part of Montrose continues to perform exactly as we’ve articulated to you before, Andrew, if that makes sense.
Andrew Obin: Okay, guys. Great performance. I will talk to you later. Thanks.
Vijay Manthripragada: Thank you.
Operator: Our next question is from Jim Ricchiuti with Needham & Company. Please proceed.
Jim Ricchiuti: Thank you. Good morning. So a question on the CTEH business is, if we see a little stronger revenue from at least the COVID-related business in the previous quarters, I think a lot of that was testing that went was, in some cases, outsourced to other labs. Should we assume that there will be a similar type of margin profile as that business is a little stronger in the second half?
Vijay Manthripragada: We’re working with the team to kind of mitigate the impacts of the testing services through the CTEH P&L, Jim. And so we’re hoping that, that’s not a continued trend. We don’t believe it will be. But into the foreseeable future, I think that’s from a modeling perspective, I think that’s a fair assumption for the back half of the year for now.
Jim Ricchiuti: Got it. And I know...
Vijay Manthripragada: Sorry. And just to reiterate, we do expect over time for those margins to normalize back to their historical run rates.
Jim Ricchiuti: Got it. Thanks, Vijay. Yes, I know it’s early days as far as discussions and speculation about the infrastructure bill and what it could mean for Montrose. I’m curious, first, how you guys are looking at it internally? And the second question I have is, yes, I don’t normally necessarily think of you as doing a lot of outreach, but is this an area where it might lend itself in some ways to outreach as you start seeing needs arise in certain markets?
Vijay Manthripragada: But what do you mean by outreach, Jim
Jim Ricchiuti: Okay. First of all, let’s take a step back and say, what – as you look at the infrastructure guys yes, look, you’ve had a chance to maybe go through parts of it. Where do you see the biggest opportunities, number one, for you?
Vijay Manthripragada: So we – The infrastructure build to us represents opportunities primarily on the advisory and on the testing side, Jim. And what I mean by that is the enactment of initiatives related to upgrading or building bridges or roads or water infrastructure creates inherent assessment and testing needs for our clients. And so we expect to see downstream demand from the start of those initiatives. In select instances, aspects of those programs may result in the need to redevelop or remediate existing water tables or soil and that also represents opportunities for us. And so we’re adjacent to, as you know, we’re not going to build a road or bridge, but the environmental assessments, remediation and testing associated with that activity is beneficial to us. And so that’s where we see the near-term opportunity. Does that make sense?
Jim Ricchiuti: It does. But you would assume that it would be more demand flowing in, not necessarily you seeing opportunities and maybe reaching out to clients to at least talk about what you might be able to bring to. Okay.
Vijay Manthripragada: Well, we are – well, it’s just as a slight point of clarification, are through the investment and commercialization efforts that we’ve made, we are very active in dialogue with clients around our capabilities. And we’re seeing – I’ve alluded to this on prior calls, just the increased ability to not only cross-sell services but to provide kind of an integrated set of solutions for our clients. And so that is occurring independent of the infrastructure build, Jim. But certainly, as a result, of activities related to the bill, we’re going to – we expect to be beneficiaries of that.
Jim Ricchiuti: Okay. And last question for me is just on the one of the acquisitions caught my eye, the California Environmental Intelligence and obviously, given your expertise wildfire mitigation, which unfortunately continues to be in the news. And I guess what I’m wondering is, to what extent are there potential synergies opportunities with your other lines of business, I’m even thinking with respect to something like a CTEH.
Vijay Manthripragada: Yes. Yes. I mean – well, I think there is a couple of levers of opportunity, which, again, we tend to think of transactions over the long-term, Jim. So in the immediate term, it’s going to be more about integration of that team and cultural simulation, which we’re really excited about. It’s a great group of folks, and we’re thrilled to have them as part of Montrose. But – The – if you think about what they specialize in, which is ecoseromiological services, particularly related to higher mitigation for the utility industry. It’s very complementary to some of the capabilities we have in the northern part of California. And the demand for just the fundamental service continues to increase, which is really encouraging for us. The next immediate set of opportunities we believe will more likely be, Jim, on the testing side, right? So as a result of fires, for example, or the mitigation process there is going to need – there is going to be a need for both data analytics, which is going to be very complementary to our recent acquisition of the SensibleIoT platform, but also testing, right? You can imagine the impact on air quality as a result of some of these fires and then potentially the ongoing remediation. The other part that some of our customers have started to talk to us about, though it’s not immediately actionable for us right now is a lot of these fires are put out by compounds that have PFAS. And as you know, that’s an area where we’re strong. And so I would see both of those as near-term opportunities. CTEH is response expertise is certainly very value add. The question becomes kind of who the customer is. As you know, we tend to focus a little bit more on the private sector. And the allocation of liability and risk in an instance like a fire is a little less clear. And so there is certainly opportunity, but I would consider that more long-term. And I would anchor a little bit more on the testing and the immediate remediation capabilities as near-term cross-selling synergies, if that makes sense to you.
Jim Ricchiuti: It does. Got it. Thank you.
Operator: There are no further questions at this time. I would like to turn the call back to Vijay Manthripragada for closing remarks.
Vijay Manthripragada: Thank you and thank you again to all of you for joining us this morning. We’re incredibly excited about what the future holds, and we appreciate all of your support. Take care and be well.
Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you very much for your participation and have a great day.
