Montrose Environmental Group, Inc.

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, 2025 and June 30, 2024 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 2024 Form 10-K and Part II, Item 1A. Risk Factors in the Q1 2025 Form 10-Q.

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, 2025 and September 30, 2024 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 2024 Form 10-K and Part II, Item 1A. Risk Factors in the Q1 2025 Form 10-Q.

Previous wording

Although we have temporarily paused acquisitions, 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, 2025 and June 30, 2024:

Current wording

Although we have temporarily paused acquisitions, 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, 2025 and September 30, 2024:

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, 2025 and June 30, 2024, 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, 2025 and September 30, 2024, was:

Previous wording

During the three months ended June 30, 2025, we made contingent consideration payments of $4.0 million in cash related to earn-out payments for Epic Environmental Pty Ltd (Epic). During the three months ended June 30, 2024 no contingent consideration payments were made.

Current wording

During the three months ended September 30, 2025, we made a contingent consideration cash payment of $1.2 million for Vandrensning. During the three months ended September 30, 2024, no contingent consideration payments were made.

Previous wording

During the six months ended June 30, 2025, we made the contingent consideration payments of $10.6 million for Epic and SensibleIoT, LLC (Sensible), of which $4.0 million was paid in cash, and the remaining $6.6 million was paid in the Company's common stock. During the six months ended June 30, 2024, we made earn-out payments of $1.5 million in connection with our acquisition of Huco Consulting, Inc., of which, $0.4 million was paid in cash, and the remaining $1.1 million in the Company's common stock.

Current wording

During the nine months ended September 30, 2025, we made contingent consideration payments of $11.8 million for Epic, SensibleIoT, LLC (Sensible), and Vandrensning, of which $5.2 million was paid in cash, and the remaining $6.6 million was paid in the Company's common stock. During the nine months ended September 30, 2024, we made earn-out payments of $1.5 million in connection with our acquisition of Huco Consulting, Inc., of which, $0.4 million was paid in cash, and the remaining $1.1 million in the Company's common stock.

Previous wording

In connection with certain of our acquisitions, we may make up to $24.6 million in aggregate earn-out payments between the years 2025 and 2027, of which up to $11.5 million may be paid only in cash, up to $2.8 million may be paid only in common stock and up to $10.3 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

In connection with certain of our acquisitions, we may make up to $23.4 million in aggregate earn-out payments between the years 2025 and 2027, of which up to $10.4 million may be paid only in cash, up to $2.8 million may be paid only in common stock and up to $10.2 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

Our segments and our business lines within each segment generate different levels of profitability and, accordingly, shifts in the mix of revenues between segments can impact our consolidated reported net income or loss, net income or loss margin, Segment Adjusted EBITDA and

Current wording

Our segments and our business lines within each segment generate different levels of profitability and, accordingly, shifts in the mix of revenues between segments can impact our consolidated reported net income or loss, net income or loss margin, Segment Adjusted EBITDA and Segment Adjusted EBITDA margin from quarter to quarter and year to year. Inter-company revenues between business lines within segments have been eliminated. See Note 19 to our unaudited condensed consolidated financial statements included in Part 1, Item 1 “Financial Statements.”

Previous wording

Interest expense, net was $4.8 million and $9.8 million in the three and six months ended June 30, 2025, respectively, and $4.0 million and $7.3 million in the three and six months ended June 30, 2024, 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 $5.0 million and $14.9 million in the three and nine months ended September 30, 2025, respectively, and $4.1 million and $11.4 million in the three and nine months ended September 30, 2024, respectively. We expect interest expense to remain a significant cost as we continue to leverage our 2025 Credit Facility to support our operations and future acquisitions. We also leveraged our 2025 Credit Facility to pay a portion of the redemption price for the Series A-2 preferred stock in April and July 2025.

Previous wording

In addition to the impact of seasonality on earnings, our emergency response business exposes us to potentially significant revenue and earnings fluctuations tied to large environmental emergency response projects following an incident or natural disaster or more broad scale events. Total revenue from emergency response related services was $48.5 million and $12.9 million for the three months ended June 30, 2025 and 2024, respectively, and $62.4 million and $28.6 million for the six months ended June 30, 2025 and 2024, respectively. The higher than normal emergency response revenue in the second quarter of 2025 was primarily driven by one large emergency response project. Demand for environmental emergency response services remains difficult to predict and as a result, revenues and earnings in the current and prior years may not be indicative of future results, making those periods particularly difficult comparisons for future periods. Earnings volatility is also driven by the timing of large projects, particularly in our Remediation and Reuse segment, and the impact of acquisitions. As a result of these factors, and because demand for environmental services is not driven by specific or predictable patterns in one or more fiscal quarters, our business is better assessed based on annual results.

Current wording

In addition to the impact of seasonality on earnings, our emergency response business exposes us to potentially significant revenue and earnings fluctuations tied to large environmental emergency response projects following an incident or natural disaster or more broad scale events. Total revenue from emergency response related services was $11.5 million and $12.0 million for the three months ended September 30, 2025 and 2024, respectively, and $73.9 million and $40.6 million for the nine months ended September 30, 2025 and 2024, respectively. The higher than normal emergency response and environmental services revenue in the nine months ended September 30, 2025 was primarily driven by one large emergency response project. Demand for environmental emergency response services remains difficult to predict and as a result, revenues and earnings in the current and prior years, or specific quarters or year-to-date periods within a given year, may not be indicative of future results, making those periods particularly difficult comparisons for future periods. Earnings volatility is also driven by the timing of large projects, particularly in our Remediation and Reuse segment, and the impact of acquisitions. As a result of these factors, and because demand for environmental services is not driven by specific or predictable patterns in one or more fiscal quarters, our business is better assessed based on annual results.

Previous wording

Revenue for the three months ended June 30, 2025 increased $61.2 million or 35.3% as compared to the three months ended June 30, 2024. The increase was primarily driven by $35.6 million higher emergency response revenue, strong organic growth of $17.1 million driven primarily by the Assessment, Permitting and Response and Measurement and Analysis segments, and $9.1 million of additional revenue from acquisitions. Environmental emergency response revenues were $48.5 million in the three months ended June 30, 2025, compared to $12.9 million in the three months ended June 30, 2024.

Current wording

Revenue for the three months ended September 30, 2025 increased $46.2 million or 25.9% as compared to the three months ended September 30, 2024. The increase was primarily driven by strong organic growth of $44.9 million driven primarily by the Assessment, Permitting and Response segment, which benefited from remediation consulting work cross sold from an initial emergency response incident, and $2.4 million from acquisitions. Environmental emergency response revenues were $11.5 million in the three months ended September 30, 2025, compared to $12.0 million in the three months ended September 30, 2024.

Previous wording

Revenue for the six months ended June 30, 2025 increased $83.7 million or 25.5% as compared to the six months ended June 30, 2024. The increase was primarily driven by a $33.8 million higher emergency response revenue, strong organic growth of $28.4 million across all three segments, and $22.5 million of additional revenue from acquisitions. Revenue from environmental response was $62.4 million in the six months ended June 30, 2025 compared to $28.6 million in the six months ended June 30, 2024.

Current wording

Revenue for the nine months ended September 30, 2025 increased $129.9 million or 25.6% as compared to the nine months ended September 30, 2024. The increase was primarily driven by strong organic growth of $73.3 million across all three segments, $33.3 million higher emergency response revenue, and $25.0 million from acquisitions. Revenue from environmental response was $73.9 million in the nine months ended September 30, 2025 compared to $40.6 million in the nine months ended September 30, 2024.

Previous wording

Cost of revenues for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 increased by $40.6 million or 20.2% driven primarily by the increase in revenues. Cost of revenues as a percentage of revenue for the six months ended June 30, 2025 was 58.5%, compared to 61.1% for the six months ended June 30, 2024. This improvement was a result of similar drivers as those in the three months ended June 30, 2025.

Current wording

Cost of revenues for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 increased by $30.7 million or 29.1% driven primarily by the increase in revenues. Cost of revenues as a percentage of revenue for the three months ended September 30, 2025 was 60.6%, compared to 59.1% for the three months ended September 30, 2024. This increase was driven primarily by an increase in subcontract costs as a percentage of total project costs.

Previous wording

Cost of revenues for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 increased by $28.7 million or 27.6% driven primarily by the increase in revenues. Cost of revenues as a percentage of revenue for the three months ended June 30, 2025 was 56.6%, compared to 60.1% for the three months ended June 30, 2024. This improvement was driven primarily by high margin emergency response revenues in our Assessment, Permitting and Response segment and operating leverage across all business lines within our Measurement and Analysis businesses.

Current wording

Cost of revenues for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 increased by $71.3 million or 23.3% driven primarily by the increase in revenues. Cost of revenues as a percentage of revenue for the nine months ended September 30, 2025 was 59.2%, compared to 60.4% for the nine months ended September 30, 2024. This improvement was driven primarily by business mix in our Assessment, Permitting and Response segment, as high margin emergency response revenues were a greater percentage of total revenues, and operating leverage across all business lines within our Measurement and Analysis businesses.

Previous wording

Selling, general and administrative expense for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 increased $14.4 million or 24.4% primarily due to an increase of $8.9 million in labor costs, mainly driven by a $6.0 million increase in bonus accrual as a result of better than expected performance in the second quarter, and a $4.8 million increase in bad debt expense primarily driven by aged receivables from the City of Tustin. Selling, general and administrative expense as a percentage of revenues decreased to 31.4% from 34.2% in the comparable period.

Current wording

Selling, general and administrative expense for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 increased $4.8 million or 7.9% primarily due to an increase of $2.2 million in labor costs, mainly driven by a $2.7 million increase in bonus accrual as a result of better than expected performance in the third quarter, and a $1.6 million increase in bad debt expense primarily driven by an increase in aged receivables from the City of Tustin. Selling, general and administrative expense as a percentage of revenues decreased to 29.2% from 34.1% in the comparable period.

Previous wording

Selling, general and administrative expense for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 increased $23.6 million or 20.3% primarily due to an increase of $14.9 million in labor costs mainly driven by a $7.9 million increase in bonus accrual, and a $6.1 million increase in bad debt expense, driven by the same factor described above. Selling, general and administrative expense as a percentage of revenues decreased to 33.9% from 35.4% in the comparable period.

Current wording

Selling, general and administrative expense for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 increased $28.4 million or 16.0% primarily due to an increase of $19.4 million in labor costs mainly driven by a $10.6 million increase in bonus accrual, and a $7.1 million increase in bad debt expense, primarily driven by the same factor described above. Selling, general and administrative expense as a percentage of revenues decreased to 32.3% from 34.9% in the comparable period.

Previous wording

The increase in depreciation of property and equipment and the amortization of intangible assets and finance leases in both the three and six months ended June 30, 2025 was primarily driven by higher property and equipment balances during the applicable periods. See Notes 5 and 6 to our unaudited condensed consolidated financial statements included in Part 1, Item 1. “Financial Statements.”

Current wording

See Notes 5 and 6 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, 2025 was comprised of a fair value gain of $10.0 million related to the Series A-2 preferred stock conversion option, partially offset by losses of $0.7 million related to a fair value adjustment on our interest rate swaps. Other income (expense), net for the three months ended June 30, 2024 was comprised of losses related to fair value adjustments on our interest rate swaps of $0.7 million and the Series A-2 preferred stock conversion option of $0.5 million, partially offset by $0.3 million of other non-operating income.

Current wording

Other income (expense), net for the three months ended September 30, 2025 was comprised of a fair value gain of $10.6 million related to the Series A-2 preferred stock conversion option, partially offset by losses of $0.2 million related to a fair value adjustment on our interest rate swaps. 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 non-operating income.

Previous wording

Other income (expense), net for the six months ended June 30, 2025 was comprised of a fair value gain of $9.7 million related to the Series A-2 preferred stock conversion option, partially offset by losses of $1.6 million related to a fair value adjustment on our interest rate swaps. Other income (expense), net for the six months ended June 30, 2024 was comprised of losses related to fair value adjustments on the Series A-2 preferred stock conversion option of $0.6 million and on our interest rate swaps of $0.4 million, partially offset by $0.5 million of other non-operating income.

Current wording

Other income (expense), net for the nine months ended September 30, 2025 was comprised of a fair value gain of $20.2 million related to the Series A-2 preferred stock conversion option, partially offset by losses of $1.8 million related to a fair value adjustment on our interest rate swaps. 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 non-operating income.

Previous wording

Interest expense, net for the three and six months ended June 30, 2025 and 2024 increased primarily as a result of higher interest rates and higher debt balances. Interest expense in the six months ended June 30, 2025 was also impacted by the write off of deferred debt issuance costs of $0.9 million as a result of the refinancing of our senior credit facility in February 2025.

Current wording

Interest expense, net for the three and nine months ended September 30, 2025 increased compared to the three and nine months ended September 30, 2024 primarily as a result of higher interest rates and higher debt balances. Interest expense in the nine months ended September 30, 2025 was also impacted by the write off of deferred debt issuance costs of $0.9 million as a result of the refinancing of our senior secured credit facility in February 2025.

Previous wording

Weighted average interest rates as of June 30, 2025 and June 30, 2024 were 6.2% and 7.4%, 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, after giving effect to the impact of the interest rate swaps, as of September 30, 2025 and September 30, 2024 were 5.5% and 2.8%, 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 six months ended June 30, 2025 increased compared to the six months ended June 30, 2024 primarily as a result of an overall increase in the net deferred tax liability recorded as of June 30, 2025 relative to June 30, 2024, in addition to an increase in pretax book income as of June 30, 2025 relative to June 30, 2024.

Current wording

The income tax expense for the nine months ended September 30, 2025 increased compared to the nine months ended September 30, 2024 primarily as a result of an overall increase in the net deferred tax liability recorded as of September 30, 2025 relative to September 30, 2024.

Previous wording

Assessment, Permitting and Response segment revenues for the three and six months ended June 30, 2025 increased compared to the three and six months ended June 30, 2024 due to an increase in revenues from environmental emergency responses of $35.6 million and $33.8 million, respectively, organic growth within our non-response consulting and advisory services of $12.0 million and $5.4 million, respectively, and $2.8 million and $5.8 million, respectively, from acquisitions.

Current wording

Assessment, Permitting and Response segment revenues for the three and nine months ended September 30, 2025 increased compared to the three and nine months ended September 30, 2024 due to organic growth within our non-response consulting and advisory services of $39.6 million and $45.0 million, respectively, partially driven by remediation consulting work cross sold from an initial emergency response incident, an increase in revenues from environmental emergency responses of $33.3 million, and $5.8 million from acquisitions, both in the year-to-date period. Emergency response revenues were down $0.5 million year-over-year for the three months ended September 30, 2025.

Previous wording

Measurement and Analysis segment revenues for the three and six months ended June 30, 2025 increased compared to the three and six months ended June 30, 2024 as a result of strong organic growth of $4.9 million and $13.4 million, respectively, and additional revenue from acquisitions of $3.7 million and $9.2 million, respectively.

Current wording

Measurement and Analysis segment revenues for the three and nine months ended September 30, 2025 increased compared to the three and nine months ended September 30, 2024 as a result of strong organic growth of $2.6 million and $16.0 million, respectively, and additional revenue from acquisitions of $2.4 million and $11.6 million, respectively, partially offset by a decrease in revenue of $0.6 and $1.8 million, respectively, related to a lab sold in the fourth quarter of 2024.

Previous wording

Remediation and Reuse segment revenues for the three and six months ended June 30, 2025 increased compared to the three and six months ended June 30, 2024, as a result of organic growth of $0.2 million and $9.6 million, respectively, and additional revenue from acquisitions of $2.5 million and $7.6 million, respectively.

Current wording

Remediation and Reuse segment revenues for the three and nine months ended September 30, 2025 increased compared to the three and nine months ended September 30, 2024, as a result of organic growth of $2.8 million and $12.4 million, respectively, and additional revenue from acquisitions of $7.6 million in the year-to-date period. Organic growth was driven primarily by growth in our water treatment business, partially offset by lower revenues in our renewables business.

Previous wording

Assessment, Permitting and Response Segment Adjusted EBITDA for the three and six months ended June 30, 2025 increased compared to the three and six months ended June 30, 2024 primarily as a result of higher revenues. Segment Adjusted EBITDA margin increased for the three months ended June 30, 2025 due to higher margin emergency response projects, and decreased for the six months ended June 30, 2025 due to project mix, when compared to prior year period.

Current wording

Assessment, Permitting and Response Segment Adjusted EBITDA for the three and nine months ended September 30, 2025 increased compared to the three and nine months ended September 30, 2024 primarily as a result of higher revenues. Segment Adjusted EBITDA margin increased for the three months ended September 30, 2025 due to project mix, and decreased for the nine months ended September 30, 2025 as a result of higher bad debt expense, partially offset by favorable emergency response revenue, when compared to the prior year period.

Previous wording

Measurement and Analysis Segment Adjusted EBITDA, for the three and six months ended June 30, 2025 increased compared to the three and six months ended June 30, 2024 as a result of higher revenues driven by organic growth and higher Segment Adjusted EBITDA margin driven by the benefits of improved operating performance.

Current wording

Measurement and Analysis Segment Adjusted EBITDA for the three and nine months ended September 30, 2025 increased compared to the three and nine months ended September 30, 2024 as a result of higher revenues driven by organic growth. Segment Adjusted EBITDA margin for the three and nine months ended September 30, 2025 increased compared to the three and nine months ended September 30, 2024 as a result of improved operating performance and operating leverage.

Previous wording

Corporate and other costs for the three and six months ended June 30, 2025 when compared to the three and six months ended June 30, 2024 increased primarily due to higher bonus accrual of $5.1 million and $6.0 million, respectively, driven in part by an outperformance in the second quarter of 2025, as well as higher outside service costs of $0.9 million related to an IT migration, and, in the three months ended June 30, 2025, the timing of audit expenses.

Current wording

Corporate and other costs for the three and nine months ended September 30, 2025 when compared to the three and nine months ended September 30, 2024 increased primarily due to higher bonus accrual of $1.7 million and $7.5 million, respectively, driven in part by an outperformance in the current year versus the prior year, as well as higher outside service costs of $1.1 million and $2.4 million, respectively, related to an IT migration, and higher marketing expenses in the current year.

Previous wording

Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt service, acquisitions, other commitments and contractual obligations. We consider liquidity in terms of cash flows from operations and other sources, including availability under our credit facility, and their sufficiency to fund our operating and investing activities.

Current wording

Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt service, acquisitions, other commitments and contractual obligations. We consider liquidity in terms of cash flows from operations and other sources, including availability under our senior secured credit facility, and their sufficiency to fund our operating and investing activities.

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 to make capital expenditures. Historically, our cash needs also included the payment of dividends on our Series A-2 preferred stock. 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 $24.6 million in aggregate earn-out payments between the years 2025 and 2027 in connection with the acquisitions of Sensible, Vandrensning, Epic, Spirit and Origins, of which up to $11.5 million may be paid only in cash, up to $2.8 million may be paid only in common stock and up to $10.3 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.” As of June 30, 2025, we had $232.3 million available under the 2025 Credit Facility (without giving effect to any outstanding letters of credit, and subject to borrowing base limitations), and $10.5 million of cash on hand. In April and July 2025, we redeemed the remaining $122.2 million in aggregate stated value of the outstanding Series A-2 Preferred Stock using cash and borrowings under our revolving line of credit.

Current wording

Our principal sources of liquidity have been borrowings under our senior secured 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 to make capital expenditures. Historically, our cash needs also included the payment of dividends on our Series A-2 preferred stock. 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 $23.4 million in aggregate earn-out payments between the years 2025 and 2027 in connection with the acquisitions of Sensible, Epic, Spirit and Origins, of which up to $10.4 million may be paid only in cash, up to $2.8 million may be paid only in common stock and up to $10.2 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.” As of September 30, 2025, we had $191.7 million available under the 2025 Credit Facility (after giving effect to any outstanding letters of credit, and subject to borrowing base limitations), and $6.7 million of cash on hand. In April and July 2025, we redeemed the remaining $122.2 million in aggregate stated value of the outstanding Series A-2 preferred stock using cash and borrowings under our revolving line of credit.

Previous wording

We expect to continue to fund our liquidity requirements, including any cash earn-out payments that may be required in connection with acquisitions, through cash generated from operations and borrowings under our credit facility. We believe these sources will be sufficient to fund our cash needs for the short- and long-term.

Current wording

We expect to continue to fund our liquidity requirements, including any cash earn-out payments that may be required in connection with acquisitions, through cash generated from operations and borrowings under our 2025 Credit Facility. We believe these sources will be sufficient to fund our cash needs for the short- and long-term.

Previous wording

For the six months ended June 30, 2025, net cash provided by operating activities was $27.4 million compared to net cash used in operating activities of $21.1 million for the six months ended June 30, 2024. The period-over-period increase of $48.5 million was primarily due to an increase in cash earnings before non-cash items of $22.5 million for the six months ended June 30, 2025 compared to the same period of the prior year, and improved working capital performance, reflecting a $21.9 million lower cash outflow compared to the prior year.

Current wording

For the nine months ended September 30, 2025, net cash provided by operating activities was $55.5 million compared to net cash used in operating activities of $9.7 million for the nine months ended September 30, 2024. The period-over-period increase of $65.3 million was primarily due to an increase in cash earnings before non-cash items of $41.5 million, and improved working capital performance, reflecting a $44.4 million lower cash outflow.

Previous wording

Working capital (which excludes contingent consideration payments and changes in right-of-use assets) increased by $26.2 million in the six months ended June 30, 2025, primarily due to a seasonal increase in accounts receivable of $27.4 million, partially offset by a $3.1 million increase in accrued payroll.

Current wording

Working capital (which excludes contingent consideration payments and changes in right-of-use assets) increased by $12.8 million in the nine months ended September 30, 2025, primarily due to a seasonal increase in accounts receivable of $28.8 million, partially offset by a $12.1 million increase in accrued payroll.

Previous wording

Working capital increased by $48.1 million in the six months ended June 30, 2024, primarily due to an increase in account receivable of $38.0 million and a $7.9 million decrease in accrued payroll.

Current wording

Working capital increased by $57.2 million in the nine months ended September 30, 2024, primarily due to an increase in accounts receivable of $45.9 million and a $4.9 million decrease in accrued payroll.

Previous wording

For the six months ended June 30, 2025, net cash used in investing activities was $7.9 million, driven by cash paid for the purchases of property and equipment of $5.1 million, and $2.8 million in proprietary software development costs.

Current wording

For the nine months ended September 30, 2025, net cash used in investing activities was $12.6 million, driven by cash paid for the purchases of property and equipment of $10.9 million and $1.8 million in proprietary software development costs.

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, 2025, net cash used in financing activities was $21.3 million. Cash used in financing activities was driven by repayments of borrowing of $364.5 million, a partial redemption of the Series A-2 preferred stock of $60.0 million, a payment for contingent consideration of $4.4 million, repayments of finance leases of $6.1 million, dividends on the Series A-2 preferred stock of $2.8 million, and payment of financing cost of $2.0 million, partially offset by borrowing under our credit facility of $416.0 million.

Current wording

For the nine months ended September 30, 2025, net cash used in financing activities was $49.2 million. Cash used in financing activities was driven by repayments of borrowing of $495.6 million, redemption of the Series A-2 preferred stock of $122.2 million, a payment for contingent consideration of $5.5 million, repayments of finance leases of $8.9 million, dividends on the Series A-2 preferred stock of $4.2 million, and payment of financing cost of $2.0 million, partially offset by borrowing under our credit facility of $586.4 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, and 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

See Notes 15 and 22 to our unaudited condensed consolidated financial statements included in Part I, Item 1. “Financial Statements.”

Current wording

On July 1, 2025, we redeemed the remaining $62.2 million in aggregate stated value of the outstanding Series A-2 preferred stock. See Notes 15 and 22 to our unaudited condensed consolidated financial statements included in Part I, Item 1. “Financial Statements.”

Previous wording

On May 7, 2025, the Company announced that its Board of Directors has approved a stock repurchase program of up to $40.0 million. The repurchase program does not have a set expiration date. The Company did not make any stock repurchases in the three months ended June 30, 2025.

Current wording

On May 7, 2025, the Company announced that its Board of Directors has approved a stock repurchase program of up to $40.0 million. The repurchase program does not have a set expiration date. The Company did not make any stock repurchases in the three and nine months ended September 30, 2025.