Montrose Environmental Group Inc
For the period ended Sep 30, 2024. Filed Nov 7, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 7, 2024
ONT$21.92+12.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0000950170-24-092715
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0000950170-24-123240
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 99 previous paragraphs and 100 current paragraphs.
63 unchanged; 29 reworded; 8 added; 7 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 14 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
Our revenues and certain expenses, including selling, general and administrative expense, vary from period to period due primary to changes in organic growth, the incremental contribution from recent acquisitions and strategic decisions we may make from time to time. When we refer to changes driven by organic growth, we are referring to the contribution from businesses that have been part of Montrose for more than 12 months, with certain limited exclusions as discussed in greater detail above. In a given reporting period, when we refer to revenue changes driven by acquisitions, we are referring to the revenue contribution from any acquisition from its closing date through the first 12 months of that acquisition, at which point any subsequent contribution therefrom would be organic.
Current report
The Three And Nine Months Ended September 30, 2024 Compared to the Three And Nine Months Ended September 30, 2023
Current report
Selling, general and administrative expense for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 increased $4.0 million or 7.0% primarily due to the impact of acquisitions, which added $2.9 million to selling, general and administrative expense, and an increase in IT, travel and bad debt expenses, partially offset by lower labor and facilities cost.
Current report
Selling, general and administrative expense for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 increased $15.4 million or 9.5% primarily due to the impact of acquisitions, which added $9.2 million to selling, general and administrative expense, as well as an increase in acquisition-related costs, facilities cost, and an increase in IT and travel expenses.
Current report
Other Income (Expense), Net
Current report
The Three And Nine Months Ended September 30, 2024 Compared to the Three And Nine Months Ended September 30, 2023
Current report
Remediation and Reuse segment revenues for the three and nine months ended September 30, 2024 increased compared to the three and nine months ended September 30, 2023, primarily driven by acquisitions. Specifically, acquisitions contributed $11.1 million and $57.9 million to the increase in revenues in the three and nine months ended September 30, 2024, respectively. These increases were partially offset by certain treatment technology project start dates that shifted beyond the second half of 2024.
Current report
Corporate and other costs for the three months ended September 30, 2024 decreased $1.5 million primarily due to lower payroll related costs of $0.5 million and the timing of various other expenses including audit and other marketing related costs. Corporate and other costs for the nine months ended September 30, 2024 increased $1.2 million primarily due to higher travel and IT costs as well as an increase in professional fees. Corporate costs as a percentage of revenues were lower in both the three and nine months ended September 30, 2024.
Removed paragraphs (7)
Previous report
The Three And Six Months Ended June 30, 2024 Compared to the Three And Six Months Ended June 30, 2023
Previous report
Selling, general and administrative expense for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 increased $4.0 million or 7.2% primarily due to an increase of approximately $5.9 million in selling, general and administrative expense from companies acquired in and subsequent to the three months ended June 30, 2023. The increase was partially offset by a $1.6 million decrease in acquisition-related costs and a decrease of $1.1 million related to a decrease in bad debt expense.
Previous report
Selling, general and administrative expense for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 increased $11.5 million or 10.9% primarily due to an increase of $11.6 million in selling, general and administrative expense from companies acquired in and subsequent to the six months ended June 30, 2023. The increase was partially offset by a decrease of $2.4 million related to a decrease in bad debt expense and lower stock-based compensation of $1.5 million.
Previous report
Other (Expense) Income, Net
Previous report
The Three And Six Months Ended June 30, 2024 Compared to the Three And Six Months Ended June 30, 2023
Previous report
Remediation and Reuse segment revenues for the three and six months ended June 30, 2024 increased compared to the three and six months ended June 30, 2023, primarily driven by acquisitions completed in and subsequent to the second quarter of 2023, which contributed revenues of $23.6 million and $46.8 million in the three and six months ended June 30, 2024, respectively, partially offset by expected lower water treatment and renewable services revenues.
Previous report
Corporate and other costs for the three and six months ended June 30, 2024 when compared the three and six months ended June 30, 2023 increased primarily due to higher investments in IT support and information security. Corporate costs as a percentage of revenues were flat year-over-year in both the three and six months ended June 30, 2024.
Reworded paragraphs (29)
Previous wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our historical audited and unaudited consolidated financial statements and related notes and other information included elsewhere in this filing and our other filings with the SEC, including our unaudited condensed consolidated financial statements and the accompanying notes as of and for the three and six months ended June 30, 2024 and June 30, 2023 included in Part I, Item 1. “Financial Statements” in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the section entitled “Forward-Looking Statements”, and elsewhere in this filing and our other filings with the SEC, including in Item 1A. Risk Factors in the 2023 Form 10-K.
Current wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our historical audited and unaudited consolidated financial statements and related notes and other information included elsewhere in this filing and our other filings with the SEC, including our unaudited condensed consolidated financial statements and the accompanying notes as of and for the three and nine months ended September 30, 2024 and September 30, 2023 included in Part I, Item 1. “Financial Statements” in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the section entitled “Forward-Looking Statements”, and elsewhere in this filing and our other filings with the SEC, including in Item 1A. Risk Factors in the 2023 Form 10-K.
Previous wording
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. 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.
Current wording
Remediation and Reuse segment provides clients with engineering, design, and implementation services, primarily (i) treatment technologies which treat contaminated water or create biogas from waste, or (ii) soil remediation. 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.
Previous wording
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. The table below sets forth the number of acquisitions completed, revenues generated by and the percentage of total revenues attributable to those acquisitions completed during the three and six months ended June 30, 2024 and June 30, 2023:
Current wording
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. The table below sets forth the number of acquisitions completed, revenues generated by and the percentage of total revenues attributable to those acquisitions completed during the three and nine months ended September 30, 2024 and September 30, 2023:
Previous wording
Acquisitions revenue amounts in Note 7 to our unaudited condensed consolidated financial statements included in Part I, Item 1. “Financial Statements” includes second quarter revenue from acquisitions completed in the first quarter of 2024 and 2023 of $6.4 million and $1.7 million, respectively, whereas this disclosure only considers revenue attributable to the acquisitions acquired during the three and six months ended June 30, 2023 and 2024.
Current wording
Acquisitions revenue amounts in Note 7 to our unaudited condensed consolidated financial statements included in Part I, Item 1. “Financial Statements” includes third quarter revenue from acquisitions completed in the nine months ended September 30, 2024 and 2023 of $15.0 million and $29.2 million, respectively, whereas this disclosure includes third quarter revenue only attributable to acquisitions acquired during the three months ended September 30, 2024 and 2023.
Previous wording
As a result of our acquisitions, goodwill and other intangible assets represent a significant proportion of our total assets, and amortization of intangible assets has historically been a significant expense. Our historical financial statements also include other acquisition-related costs, including costs relating to external legal support, diligence and valuation services and other transaction and integration-related matters. In addition, in any year gains and losses from changes in the fair value of business acquisition contingencies such as earn-outs could be significant. The amount of each for the three and six months ended June 30, 2024 and June 30, 2023, was:
Current wording
As a result of our acquisitions, goodwill and other intangible assets represent a significant proportion of our total assets, and amortization of intangible assets has historically been a significant expense. Our historical financial statements also include other acquisition-related costs, including costs relating to external legal support, diligence and valuation services and other transaction and integration-related matters. In addition, in any year gains and losses from changes in the fair value of business acquisition contingencies such as earn-outs could be significant. The amount of each for the three and nine months ended September 30, 2024 and September 30, 2023, was as follows:
Previous wording
Additionally, we made an earn-out payment 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. In connection with certain of our acquisitions, we may make up to $40.4 million in aggregate earn-out payments between the years 2024 and 2026, of which up to $14.2 million may be paid only in cash, up to $13.1 million may be paid only in common stock and up to $13.1 million may be paid, at our option, in cash or common stock. See Note 7 to our unaudited condensed consolidated financial statements included in Part I, Item 1. “Financial Statements.”
Current wording
Additionally, 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. In connection with certain of our acquisitions, we may make up to $58.6 million in aggregate earn-out payments between the years 2024 and 2026, of which up to $23.4 million may be paid only in cash, up to $13.1 million may be paid only in common stock and up to $22.1 million may be paid, at our option, in cash or common stock. See Note 7 to our unaudited condensed consolidated financial statements included in Part I, Item 1. “Financial Statements.”
Previous wording
Total debt at June 30, 2024 was $212.4 million net of deferred debt issuance costs, which was an increase of $49.2 million compared to December 31, 2023. The increase is primarily driven by the additional $50.0 million in capacity under our revolving credit facility and an additional $3.6 million issued under the revolving line of credit offset by repayments and amortization of the various debt noted.
Current wording
Total debt at September 30, 2024 was $249.8 million net of deferred debt issuance costs, which was an increase of $86.6 million compared to December 31, 2023. The increase is primarily driven by the additional $50.0 million term loan and additional usage of our revolving line of credit, partially offset by repayments and amortization of the various debt noted.
Previous wording
Interest expense, net was $4.0 million and $7.3 million in the three and six months ended June 30, 2024, respectively, and $1.9 million and $3.4 million in the three and six months ended June 30, 2023, 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.
Current wording
Interest expense, net was $4.1 million and $11.4 million in the three and nine months ended September 30, 2024, respectively, and $2.1 million and $5.5 million in the three and nine months ended September 30, 2023, 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.
Previous wording
Revenue for the three months ended June 30, 2024 increased $14.2 million or 8.9% as compared to the three months ended June 30, 2023. The increase was primarily driven by acquisitions completed in and subsequent to the quarter ended June 30, 2023, which contributed revenues of $23.6 million, and strong organic growth of $7.7 million driven primarily by the Measurement and Analysis and Assessment, Permitting and Response segments. These increases were partially offset by $14.7 million lower environmental emergency response service revenues, the shift away from lower margin revenue in our biogas business, and prior year revenues from the Discontinued Specialty Lab of $2.4 million, which was sold in December 2023. Environmental emergency response revenues were $12.9 million in the three months ended June 30, 2024, compared to $27.6 million in the three months ended June 30, 2023.
Current wording
Revenue for the three months ended September 30, 2024 increased $10.8 million or 6.4% as compared to the three months ended September 30, 2023. The increase was primarily driven by acquisitions, which contributed $15.4 million to the increase in revenues, and strong organic growth driven primarily by our Assessment, Permitting and Response and Measurement and Analysis segments. These increases were partially offset by $12.8 million lower environmental emergency response service revenues, lower treatment technology revenue within our Remediation and Reuse segment, and prior year revenues from the Discontinued Specialty Lab of $2.0 million, which was sold in December 2023.
Previous wording
Revenue for the six months ended June 30, 2024 increased $38.1 million or 13.1% as compared to the six months ended June 30, 2023. The increase was primarily driven by acquisitions completed in and subsequent to the quarter ended June 30, 2023, which contributed revenues of $48.2 million, and $16.2 million of strong organic growth in both our Measurement and Analysis and Assessment, Permitting and Response segments. These increases were partially offset by $22.2 million lower environmental emergency response service revenues, lower water treatment revenues and the shift away from lower margin revenue in our biogas business, and prior year revenues from the Discontinued Specialty Lab of $3.9 million. Revenue from environmental response was $28.6 million in the six months ended June 30, 2024 compared to $50.8 million in the six months ended June 30, 2023.
Current wording
Revenue for the nine months ended September 30, 2024 increased $48.9 million or 10.7% as compared to the nine months ended September 30, 2023. The increase was primarily driven by acquisitions, which contributed $63.6 million to the increase in revenues, and strong organic growth driven by our Assessment, Permitting and Response and Measurement and Analysis segments. These increases were partially offset by $34.9 million lower environmental emergency response service revenues, lower treatment technology revenue within our Remediation and Reuse segment, and prior year revenues from the Discontinued Specialty Lab of $6.1 million.
Previous wording
Cost of revenues for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 increased by $5.9 million driven primarily by an $8.5 million increase in direct labor costs and a $3.9 million increase in other cost of revenues, partially offset by a $6.9 million decrease in field supplies and equipment costs. Cost of revenues as a percentage of revenue for the three months ended June 30, 2024 was 60.1%, compared to 61.7% for the three months ended June 30, 2023. This decrease was driven primarily by lower equipment costs, as a result of lower water treatment and biogas revenues.
Current wording
Cost of revenues for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 increased by $3.4 million driven primarily by a $7.3 million increase in direct labor costs and a $3.5 million increase in other cost of revenues, partially offset by a $5.7 million decrease in field supplies and equipment costs. Cost of revenues as a percentage of revenue for the three months ended September 30, 2024 was 59.1%, compared to 60.8% for the three months ended September 30, 2023. This percentage decrease was driven primarily by revenue mix.
Previous wording
Cost of revenues for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 increased by $20.8 million driven primarily by a $19.5 million increase in direct labor costs, a $5.2 million increase in outside services costs, and a $2.7 million increase in other cost of revenues, partially offset by a $8.3 million decrease in field supplies and equipment costs. Cost of revenues as a percentage of revenue for the six months ended June 30, 2024 was 61.0%, compared to 61.9% for the six months ended June 30, 2023. This decrease was driven primarily by revenue mix.
Current wording
Cost of revenues for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 increased by $24.3 million driven primarily by a $26.8 million increase in direct labor costs, a $3.4 million increase in outside services costs, and a $6.1 million increase in other cost of revenues, partially offset by a $14.0 million decrease in field supplies and equipment costs. Cost of revenues as a percentage of revenue for the nine months ended September 30, 2024 was 60.4%, compared to 61.5% for the nine months ended September 30, 2023. This percentage decrease was driven primarily by revenue mix.
Previous wording
The increase in depreciation of property and equipment and the amortization of intangible assets and finance leases were primarily driven by an increase of $1.5 million and $2.2 million in depreciation of property and equipment during the three and six months ended June 30, 2024 compared to the prior year periods, respectively, as a result of higher property and equipment outstanding during the applicable period. See Notes 5 and 6 to our unaudited condensed consolidated financial statements included in Part 1, Item 1. “Financial Statements.”
Current wording
The increase in depreciation of property and equipment and the amortization of intangible assets and finance leases were primarily driven by an increase of $2.1 million in amortization of intangible assets during both the three and nine months ended September 30, 2024 compared to the prior year periods. See Note 8 to our unaudited condensed consolidated financial statements included in Part 1, Item 1. “Financial Statements.”
Previous wording
Other income (expense), net for the three months ended June 30, 2024 was comprised of losses of $0.7 million related to interest rate swaps fair value adjustment and $0.5 million related to Series A-2 preferred stock conversion option fair value adjustment, partially offset by $0.3 million of other income. Other income (expense), net for the three months ended June 30, 2023 was comprised of a gain of $1.4 million related to interest rate swaps fair value adjustment, partially offset by a loss of $0.5 million related to Series A-2 preferred stock conversion option fair value adjustment.
Current wording
Other income (expense), net for the three months ended September 30, 2024 was comprised of losses of $3.5 million related to a fair value adjustment on our interest rate swaps and a $0.5 million charge related to a fair value adjustment on the Series A-2 Preferred Stock conversion option, partially offset by $0.8 million of other income. Other income (expense), net for the three months ended September 30, 2023 was comprised of a $0.7 million charge related to a fair value adjustment on our interest rate swaps, as well as a loss of $0.1 million related to a fair value adjustment on the Series A-2 Preferred Stock conversion option.
Previous wording
Other income (expense), net for the six months ended June 30, 2024 was comprised of losses of $0.6 million related to Series A-2 preferred stock conversion option fair value adjustment and $0.4 million related to interest rate swaps fair value adjustment, partially offset by $0.5 million of other income. Other income (expense), net for the six months ended June 30, 2023 was comprised of a loss of $1.4 million related to Series A-2 preferred stock conversion option fair value adjustment, partially offset by a $0.4 million gain related to interest rate swaps fair value adjustment and $0.1 million of other income.
Current wording
Other income (expense), net for the nine months ended September 30, 2024 was comprised of losses of $3.8 million related to a fair value adjustment on our interest rate swaps and a $1.0 million charge related to a fair value adjustment on the Series A-2 Preferred Stock conversion option, partially offset by $0.5 million of other income. Other income (expense), net for the nine months ended September 30, 2023 was comprised primarily of a $2.1 million charge related to a fair value adjustment on the Series A-2 Preferred Stock conversion option.
Previous wording
Interest expense, net for the three and six months ended June 30, 2024 and 2023 increased primarily as a result of higher interest rates and higher debt balance.
Current wording
Interest expense, net for the three and nine months ended September 30, 2024 and 2023 increased primarily as a result of higher interest rates and higher debt balance.
Previous wording
Weighted average interest rates as of June 30, 2024 and June 30, 2023 were 7.4% and 6.3%, respectively. See “—Key Factors that Affect Our Business and Our Results—Financing Costs” and Notes 12 and 13 to our unaudited condensed consolidated financial statements included in Part I, Item 1. “Financial Statements.”
Current wording
Weighted average interest rates as of September 30, 2024 and September 30, 2023 were 7.2% and 6.6%%, respectively. See “—Key Factors that Affect Our Business and Our Results—Financing Costs” and Notes 12 and 13 to our unaudited condensed consolidated financial statements included in Part I, Item 1. “Financial Statements.”
Previous wording
The income tax expense for the three and six months ended June 30, 2024 increased compared to the three and six months ended June 30, 2023 primarily as a result of the change in treatment of Canadian tax credits associated with the acquisition of Matrix in June 2023 in addition to an increase in deductible goodwill amortization associated with recent U.S. acquisitions. The income tax expense is primarily related to operations in the United States, Canada and Australia.
Current wording
The income tax expense for the three and nine months ended September 30, 2024 increased compared to the three and nine months ended September 30, 2023 primarily as a result of certain tax inclusions from foreign acquisitions in 2024 in addition to an increase in deductible goodwill amortization associated with recent U.S. acquisitions. The income tax expense is primarily related to operations in the United States, Canada and Australia.
Previous wording
Assessment, Permitting and Response segment revenues for the three and six months ended June 30, 2024 decreased compared to the three and six months ended June 30, 2023 due to a decline in revenues from environmental emergency responses of $14.7 million and $22.2 million, respectively, partially offset by strong organic growth within our non-response consulting and advisory services.
Current wording
Assessment, Permitting and Response segment revenues for the three and nine months ended September 30, 2024 decreased compared to the three and nine months ended September 30, 2023 due to a decline in revenues from environmental emergency responses of $12.8 million and $34.9 million, respectively, partially offset by strong organic growth of $5.1 million and $25.6 million, respectively, mainly within our consulting and advisory services, and the impact of acquisitions, which contributed $2.7 million to the increase in both the three and nine months ended September 30, 2024 .
Previous wording
Measurement and Analysis segment revenues for the three and six months ended June 30, 2024 increased compared to the three and six months ended June 30, 2023 as a result of strong organic growth, partially offset by the sale of the Discontinued Specialty Lab in December 2023, which contributed $1.5 million and $2.2 million, respectively, to the prior year periods.
Current wording
Measurement and Analysis segment revenues for the three and nine months ended September 30, 2024 increased compared to the three and nine months ended September 30, 2023 as a result of strong organic growth of $8.5 million and $19.0 million, respectively, the impact of acquisitions, which contributed $1.6 million and $2.9 million, respectively, partially offset by the sale of the Discontinued Specialty Lab in December 2023, which contributed $2.0 million and $6.1 million to revenues in the respective prior year periods.
Previous wording
Assessment, Permitting and Response Segment Adjusted EBITDA for the three and six months ended June 30, 2024 decreased compared to the three and six months ended June 30, 2023 primarily due to lower emergency response revenues, partially offset by higher Segment Adjusted EBITDA margin as a result of strong organic growth in our non-response advisory services and favorable revenue mix.
Current wording
Assessment, Permitting and Response Segment Adjusted EBITDA and Segment Adjusted EBITDA margin for the three and nine months ended September 30, 2024 decreased compared to the three and nine months ended September 30, 2023 primarily due to a reduction in higher margin emergency response revenues.
Previous wording
Measurement and Analysis Segment Adjusted EBITDA, for the three and six months ended June 30, 2024 increased compared the three and six months ended June 30, 2023 as a result of higher revenues driven by organic growth and higher Segment Adjusted EBITDA margin driven by benefits of improved operating leverage.
Current wording
Measurement and Analysis Segment Adjusted EBITDA and Segment Adjusted EBITDA margin for the three and nine months ended September 30, 2024 increased compared the three and nine months ended September 30, 2023 primarily due to the operating leverage driven by higher revenue growth.
Previous wording
Remediation and Reuse Segment Adjusted EBITDA for the three and six months ended June 30, 2024 increased compared the three and six months ended June 30, 2023 due to higher revenues. Segment Adjusted EBITDA in the three months ended June 30, 2024 also benefited from higher Segment Adjusted EBITDA margin, driven by acquisitions and improved Matrix margins. Adjusted EBITDA growth in the six months ended June 30, 2023 was partially offset by lower year-to-date Segment Adjusted EBITDA margin primarily attributable to the acquisition of Matrix in June 2023, which was break-even in the first quarter of 2024 and lower revenues from certain renewable and water projects compared to the 2023 period.
Current wording
Remediation and Reuse Segment Adjusted EBITDA for the three and nine months ended September 30, 2024 increased compared the three and nine months ended September 30, 2023 due to higher revenues. Improved Segment Adjusted EBITDA margin in the three months ended September 30, 2024 was driven primarily by acquisitions and improved Matrix margins. Improved segment Adjusted EBITDA margin in the nine months ended September 30, 2024 was driven primarily by acquisitions.
Previous wording
Our principal sources of liquidity have been borrowings under our credit facilities, other borrowing arrangements, proceeds from the issuance of common and preferred stock and cash generated by operating activities. 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. Our primary cash needs are for day to day operations, to fund working capital requirements, to fund our acquisition strategy and any related cash earn-out obligations, to pay interest and principal on our indebtedness and dividends on our Series A-2 preferred stock, and to make capital expenditures. Additionally, in connection with certain acquisitions, we agree to earn-out provisions and other purchase price adjustments that may require future payments. We may make up to $40.4 million in aggregate earn-out payments between the years 2024 and 2026 in connection with the acquisitions of Sensible, Vandrensning, EPIC, and 2DOT, of which up to $14.2 million may be paid only in cash, up to $13.1 million may be paid only in common stock and up to $13.1 million may be paid in cash or, at our option, in common stock. See Note 7 to our unaudited condensed consolidated financial statements included in Part 1, Item 1. “Financial Statements.”
Current wording
Our principal sources of liquidity have been borrowings under our credit facilities, other borrowing arrangements, proceeds from the issuance of common and preferred stock and cash generated by operating activities. 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. Our primary cash needs are for day to day operations, to fund working capital requirements, to fund our acquisition strategy and any related cash earn-out obligations, to pay interest and principal on our indebtedness and dividends on our Series A-2 Preferred Stock, and to make capital expenditures. Additionally, in connection with certain acquisitions, we agree to earn-out provisions and other purchase price adjustments that may require future payments. We may make up to $58.6 million in aggregate earn-out payments between the years 2024 and 2026 in connection with the acquisitions of Sensible, Vandrensning, EPIC, 2DOT, Spirit and Origins, of which up to $23.4 million may be paid only in cash, up to $13.1 million may be paid only in common stock and up to $22.1 million may be paid in cash or, at our option, in common stock. See Note 7 to our unaudited condensed consolidated financial statements included in Part 1, Item 1. “Financial Statements.”
Previous wording
For the six months ended June 30, 2024, net cash used in operating activities was $21.1 million compared to net cash provided by operating activities of $24.5 million for the six months ended June 30, 2023. The period-over-period decrease of $45.6 million was primarily due to an increase in accounts receivable and contract assets of $38.0 million, as a result of temporary invoicing delays following the integration of Matrix as well as several large projects with new customers with elongated payment cycles, and a decrease in accrued payroll and benefits of $7.9 million following larger bonus payments made in March 2024 than in the prior year.
Current wording
For the nine months ended September 30, 2024, net cash used in operating activities was $9.7 million compared to net cash provided by operating activities of $41.5 million for the nine months ended September 30, 2023. The period-over-period decrease of $51.2 million was primarily due to an increase in accounts receivable and contract assets of $45.9 million driven by higher revenues, the previously disclosed temporary invoicing delays associated with the integration of Matrix, which is substantially addressed and collections are returning to a normal cadence, and slow payments on a single large US government funded project, which are expected to be resolved by year end. The year over year change was also impacted by a decrease in accrued payroll and benefits of $4.9 million following larger bonus payments made in March 2024 than in the prior year.
Previous wording
For the six months ended June 30, 2024, net cash used in investing activities was $87.9 million, driven by cash paid for the acquisitions of EPIC, 2DOT, ETA, and Paragon, net of cash acquired of $70.3 million, as well as $17.9 million in purchases of property and equipment, and $1.7 million in proprietary software development costs.
Current wording
For the nine months ended September 30, 2024, net cash used in investing activities was $137.2 million, driven by cash paid for the acquisitions of EPIC, 2DOT, ETA, Paragon, Spirit, and Origins, net of cash acquired, of $113.0 million, $19.1 million in purchases of property and equipment, $3.4 million in payment of other purchase price obligations, and $2.1 million in proprietary software development costs.
Previous wording
For the six months ended June 30, 2023, net cash used in investing activities was $87.0 million, driven by cash paid for the acquisitions of Matrix, GreenPath, Frontier and EAI, net of cash acquired of $63.1 million, as well as $21.0 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 a crash in February 2023), and $2.0 million in proprietary software development costs.
Current wording
For the nine months ended September 30, 2023, net cash used in investing activities was $97.0 million, driven by cash paid for the acquisitions of Matrix, GreenPath, Vandrensning, Frontier and EAI, net of cash acquired, of $66.2 million, $25.0 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), $2.8 million in proprietary software development costs, $2.3 million related to minority investment in certain companies, and the payment of assumed purchase price obligations of $1.0 million.
Previous wording
For the six months ended June 30, 2024, net cash provided by financing activities was $102.8 million. Cash provided by financing activities was driven by net proceeds from the issuance of common stock through a public offering of $121.8 million, proceeds from the issuance of an additional term loan of $50.0 million and proceeds from the exercise of stock options of $1.4 million, partially offset by a partial redemption of the Series A-2 preferred stock of $60.0 million, dividends on the Series A-2 preferred stock of $5.6 million, and aggregate repayments made on our term loan, finance leases and aircraft loan of $7.5 million.
Current wording
For the nine months ended September 30, 2024, net cash provided by financing activities was $136.6 million. Cash provided by financing activities was driven by net proceeds from the issuance of common stock through a public offering of $121.8 million, net borrowing of $87.0 million, proceeds from the exercise of stock options of $2.0 million, partially offset by a partial redemption of the Series A-2 Preferred Stock of $60.0 million, dividends on the Series A-2 Preferred Stock of $8.3 million and repayments of finance leases of $4.4 million.
Previous wording
For the six months ended June 30, 2023, net cash used in financing activities was $4.0 million. Cash used in financing activities was driven by the quarterly dividends on the Series A-2 preferred stock of $8.2 million, the term loan amortization payments of $6.6 million related to our 2021 Credit Facility, the repayment of finance leases of $2.2 million, and the payment of acquisition-related contingent consideration of $1.2 million, partially offset by proceeds received from the aircraft loan of $10.9 million and the exercise of stock options of $3.3 million.
Current wording
For the nine months ended September 30, 2023, net cash used in financing activities was $10.9 million. Cash used in financing activities was driven by the quarterly dividends on the Series A-2 Preferred Stock of $12.3 million, the 2021 Credit Facility term loan and the aircraft loan amortization payments of $9.1 million, the repayments of finance leases of $3.4 million, and the payment of acquisition-related contingent consideration of $1.5 million, partially offset by proceeds received from the aircraft loan of $10.9 million and the exercise of stock options of $4.5 million.