Montrose Environmental Group Inc (MEG) 2024 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome for the Montrose Environmental Group, Inc. first-quarter 2024 earnings call. (Operator Instructions) This call is being recorded on Wednesday, May 8, 2024.

I would now like to turn the conference over to Rodny Nacier, Investor Relations. Please go ahead.

Thank you, operator. Welcome to our first quarter '24 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 the website. Our earnings release is also available on the website.

Moving to slide 2. I would 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 annual report on Form 10-K for the fiscal year ended December 31, 2023, 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 today, including consolidated adjusted EBITDA, adjusted net income and adjusted net income per share. We provide these non-GAAP results for informational purposes and they should not be considered in isolation for 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, certain limitations of these measures and a reconciliation thereof for their most directly comparable GAAP measure.

With that, I would now like to turn the call over to Vijay, beginning on slide 4.

Thank you, Rodny. And welcome to all of you joining us today. I will provide you with business highlights. Alan will provide you with financial highlights. We will then open it up to Q&A and I will speak generally to the updated earnings presentation shared on our website.

We have had and continue to have a strong start to 2024. Our results are the by-product of that momentum and I want to start by acknowledging the exceptional efforts of our colleagues around the world. I would also like to remind our listeners that while we discuss quarterly results, our business is best assessed on an annual basis.

Demand for Environmental Solutions does not consistently follow quarterly patterns, and we manage our operations on an annual basis. With that, let me start by highlighting a few key themes related to our first quarter 2024 results. First, we are seeing secular tailwinds and strong performance across our segments and service lines resulting in record first quarter revenues and consolidated adjusted EBITDA.

Second, our solid performance during the quarter is primarily attributable to strong organic growth. Our organic growth continues to be driven by cross-selling success and R&D successes. There were also a number of key regulatory updates from the USCPA that presents significant opportunities for our business, and those updates have increased our confidence about our future. I'll provide additional details on that shortly.

Third, M&A remains a key component of our growth strategy and the cadence of opportunities has increased this year relative to our recent past. We are thrilled to welcome the teams from Epic, Two Dot and ETA. The addition of these teams brings stellar talent to Montrose. They also increase our geographic and service capabilities.

We have a robust acquisition pipeline, and we expect continued M&A momentum in 2024. Our strong track record of successfully acquiring and integrating complementary businesses remains a bright spot for Montrose. Alan and I have committed to providing more details about metrics which are in our public presentations.

Their margins have already improved significantly and the return on capital has been much stronger than we expected as the margin increases have occurred without revenue degradation. Matrix is just one example of many in terms of the value creation we're able to offer to our shareholders.

I will next discuss our first quarter performance by segment. within our Assessment Permitting and Response segment, This segment contains both our advisory business and our CTEH Environmental Response business.

Excluding our response business, during the first quarter, we were pleased to see solid organic revenue growth in our advisory services, supported by continued cross-selling success across multiple service lines. The increase in margins for this segment were primarily attributed driven by strong organic growth. For the response side of this segment, our emergency response revenue last year was $23.2 million and this year is $15.7 million given the major derailment from 2023.

This created a tough quarter-on-quarter comp and the strength of our overall segment performance is particularly encouraging given this dynamic. Within the measurement and analysis segment, we continue to experience strong organic revenue growth, particularly in our lab services driven by PFAS and air testing services. For example, around greenhouse gas measurement mitigation and increased regulations around hazardous air pollutants.

Margins during the quarter were slightly lower year-over-year, primarily due to business mix, but our annual outlook is unchanged. We reiterate our expectation for annual margins in this segment to be around 18% to 20%. Within our Remediation and Reuse segment, revenue growth for the quarter was primarily driven by our acquisition of Matrix.

This was partially offset by lower revenue from our biogas business given our pivot from Q3 of last year to higher margin services. The biogas pivot is complete and our outlook for this year is the same. So this is more about quarter-on-quarter variance to this time last year.

Margins in this segment during the quarter were lower, also mainly due to the impact of the Matrix acquisition. Matrix typically breaks even or loses money in the first quarter, given Canadian weather. That said, I would like to reiterate that we are pleased to see the excellent progress made by the team on increasing Matrix's margins for the full year and our outlook is unchanged.

Given recent regulatory updates as well as the improvements in Matrix margins, we expect organic growth and margin expansion in this segment for full year 2024. Next, I will discuss recent key regulatory developments and industry trends that support our optimistic long-term growth outlook. The US EPA finalized its first ever national drinking water standards for PFAS pollutants in April.

The US EPA also designated PFOA and PFOS as hazardous substances under CERCLA. These long awaited regulatory actions set legally enforceable maximum contaminant levels for several PFAS chemicals and commit $1 billion of investments to address PFAS and drinking water.

The rules also require the reporting of any spills and increase the likelihood that new or legacy superfund sites will need to be investigated and remediated. We expect both of these regulatory updates to open up an approximately $200 billion addressable market for Montrose based on third party research. PFAS remediation remains a significant opportunity for growth and value creation across all of our segments, and we anticipate demand will ramp up steadily over the coming quarters.

With regards to methane emissions, in March, the EPA published landmark rules under the Clean Air Act to regulate methane emissions from the oil and gas industry. These rules set standards for new or modified sources and provide emissions guidelines for states to implement similar standards for existing sources, while the new regulations only apply to new facilities built after December 2022 at this time, this rule is expected to expand and cover existing sources within the next few years.

This regulatory framework presents long-term tailwinds for our emissions, measuring, monitoring and assessment solutions as clients evaluate their environmental impact. In terms of regulations tracking and targeting other air pollutants, the EPA finalized their national emission standards for hazardous air pollutants in April.

This new rule requires approximately 200 facilities to reduce air toxics emissions to help protect people living near chemical plants. Montrose remains uniquely positioned given our differentiated ability to measure and communicate quality data, particularly via our software capabilities to industrial partners and local communities.

While the compliance deadline was extended since this rule's initial proposal, we expect this action will provide long-term tailwinds to our business as companies review the impact of their facilities and work to meet emission standard.

In summary, we remain upbeat given our organic growth, our patent development and commercialization, our strategic acquisitions and the broader regulatory tailwinds for Montrose in the quarters and years to come. In early March of this year, we increased our guidance and we remain confident in our ability to achieve those numbers and goals for 2024.

These results and our optimistic outlook belong to our approximately 3,500 colleagues around the world and I would like to once again thank them for the tremendous work that they've done. I would also like to thank our shareholders for their support, and I would like to welcome our newly added shareholders from April's capital raise.

Allan and I look forward to updating you on our progress next quarter and in the quarters to come as we collectively reimagine ways simultaneously support human development and protect our shared environment.

With that, I will hand it over to Allan. Thank you.

Thanks, Vijay. Our strong results in the first quarter reflect the strength of our business, strong organic growth through our cross selling strategy as well as the contribution of strategic acquisitions. In addition, we further strengthened our capacity for accretive growth through the successful completion of our follow-on equity offering in April.

Moving to our revenue performance on slide 9, we were happy to see continued strong organic growth across most of our service lines during the first quarter. Our first quarter revenues increased 18.2% to $155.3 million compared to the prior year quarter, primarily driven by strong organic revenue growth in our AP&R and M&A segments and the contributions of acquisitions, partially offset by lower environmental emergency response service revenues, the exiting of a discontinued specialty lab in December 2023, and the shift away from lower margin revenue in our bio gas business in the latter part of last year.

Looking at our consolidated adjusted EBITDA performance on slide 10. First quarter consolidated adjusted EBITDA was $16.9 million or 10.9% of revenue. This compares to consolidated adjusted EBITDA of $16.6 million or 12.6% of revenue in the prior year quarter. The increase in consolidated adjusted EBITDA was driven by higher revenues.

Lower consolidated adjusted EBITDA as a percentage of revenues was primarily driven by seasonally low margins for matrix, which we acquired in June 2023, and therefore was not included in the comparable prior year period and to a lesser extent, a large, higher-margin environmental emergency response project in the prior year period, which did not recur in the first quarter this year.

Moving to a review of diluted adjusted net income per share on slide 11. Adjusted net income per share was $0.16 for the first quarter compared to $0.17 in the prior year quarter. The decrease was mainly driven by higher interest and higher depreciation in the current period versus the prior year, partially offset by higher EBITDA, lower income tax expense and lower dividends paid to our Series A2 preferred shares.

Please note our diluted adjusted net income per share is calculated using adjusted net income attributable to stockholders divided by fully diluted shares. We believe diluted adjusted net income per share is the most helpful net income metric to Montrose and to common equity investors.

As an update, we made a change to our tax methodology for adjusted net income as reflected in the adjusted net income reconciliation table in the appendix for the current and prior periods.

Turning to our business segments on slide 12. In our Assessment, Permitting and Response segment, first quarter revenue increased 12.2% year-over-year to $58.6 million, driven by strong organic growth. The year-over-year increase was partially offset by an expected decline in revenues from emergency response services, following a significant event in the first quarter of 2023 that did not recur in the current year.

AP&R. segment adjusted EBITDA increased 14.1% year-over-year to $16.3 million or 27.8% of revenue, up from 27.3% in the prior year quarter, reflecting the benefits of organic growth and business mix.

In our Measurement and Analysis segment, revenue for the quarter increased 7% to $45.5 million, primarily attributable to organic growth. First quarter M&A segment adjusted EBITDA was flat year-over-year. And as a result, adjusted EBITDA margins were down slightly to 14.3% compared to 15% in the prior year quarter primarily due to business mix. Our outlook for annual margins in this segment remain unchanged at 18% to 20%.

In our Remediation and Reuse segment, first quarter revenues increased 39.7% to $51.3 million, primarily due to the acquisition of Matrix, partially offset by the shift in our biogas business to focus on higher margin revenue projects.

The decrease in R&R segment adjusted EBITDA margin was due to the dilutive impact of Matrix, which has historically generated no or negative earnings in the first quarter of every year, given seasonality in that Canadian business. Our margin optimization efforts are well underway and we remain pleased with Matrix's increased profitability, which is on track to achieve a double digit adjusted EBITDA margin by the end of 2024.

Moving to a review of our cash flow and capital structure on slide 15. First quarter cash flow used in operating activity was $22 million compared to cash generated of $3 million in the prior year. The year-over- year change in cash flow used in operations was primarily due to a temporary, higher investment in working capital, which was driven primarily by an increase in receivables at Matrix and CTH, given recently awarded cross-divisional projects, as well as lower accrued payroll as a result of the payment of larger bonuses in the current year versus the prior year.

For the balance of the year, working capital should moderate. And as a result, we expect to produce cash flows from operations in line with our long-term conversion of adjusted EBITDA into operating cash flow at a rate in excess of 50%.

We voluntarily redeem $60 million of principal on the outstanding preferred stock in January. The associated dividend savings are an estimated $5.4 million annually and represent a proactive step towards simplifying our capital structure, following this redemption, the principal balance of the preferred stock outstanding was reduced to $122.2 million.

As a reminder, our convertible and redeemable Series A2 preferred stock has no cash maturity date and no cash redemption obligation, but we have the option to redeem the preferred shares at any time for cash. As we highlighted last quarter, in February, we upsized our credit facility to $400 million, adding $100 million to our available liquidity on the same terms as our pre-existing facility, $50 million of the increase was added to our term loan and the other $50 million increased our revolver capacity to $175 million. In April, we completed a follow-on equity offering raising net proceeds of approximately $122.4 million.

Following this offering, we had $218.8 million of liquidity, including $43.8 million of cash on hand and approximately $175 million of availability on our credit facility. Pro forma for the equity raise, our leverage ratio is 2.1 times, well below our longer-term target leverage of below 3.5 times. The capital raise significantly enhances our liquidity, granting us further flexibility to continue to invest in additional M&A which we expect to be the primary use of proceeds.

Moving to our reiterated full year outlook on slide 17. Based on our strong start to 2024 and the tailwinds we see in our business, we reiterate our recently increased outlook for full year 2024 revenues to be in a range of $690 million to $740 million and consolidated adjusted EBITDA to be in the range of $95 million to $100 million.

Our 2024 outlook remains anchored on the expectation for low double-digit organic revenue growth and margin expansion over the prior year and includes an unchanged expectation for full year emergency response revenues to be in the $50 million to $70 million range.

We expect the first quarter to be our low point for revenue and adjusted EBITDA for the year with both metrics increasing sequentially into the second and third quarters of 2024. Based on the timing of business activity this year, we expect to generate roughly 60% of our full year 2024 adjusted EBITDA in the back half of the year. The more heavily weighted back half compared to 2023 is primarily due to significantly improved profitability at Matrix and a substantive emergency response in the first half of last year.

In conclusion, we had a strong start to 2024 with record results in our key operating metrics. As we look to the remainder of 2024 and beyond, we are incredibly optimistic, given the demand momentum for our integrated environmental solutions and the material regulatory challenge. With the success of our cross-selling strategy and integration of newly acquired businesses, we are confident in our ability to achieve our full year goals.

Thank you all for joining us today and for your continued interest in Montrose. We look forward to the opportunities we see ahead and updating you on our progress next quarter. Operator, we are ready to open the lines to questions.

(Operator Instructions) Tim Mulrooney, William Blair.

Vijay, Allan, good morning.

Hey Tim how are you?

Hey Tim.

Doing well. Thanks for all the color with the recent finalization of the EPA's regs for MCLs and CERCLA. And I say we appreciate all the color on the market sizing, but I wanted to ask about timing. How do you think about the near term one to two year impact of these rulings as you think of this across all three of your separate business lines?

Yes, good question, Tim. So if you step back, the regs are structured in a way where the implication for testing has a three year window application for treatment has a five year window. And so those are kind of the formal regulatorily mandated timeframes.

But what we're seeing a fair amount of activity that's picking up given our earlier conversations with you and others in anticipation of these regs and in anticipation of needing to do some of the testing and remediation, knowing what existing PFAS levels are in various water matrices that a lot of our clients have been working on. And so the way I would think about it near term for Montrose is will be a steady increase. We are seeing increased activity already on the testing and assessment side.

And the cadence of inbounds on the treatment side has really picked up as well. And so we anticipate through the back half of this year and certainly next year, we'll start to see the visible momentum, meaning financially visible momentum on the treatment side. But we're already seeing the momentum on the assessment and on the testing side, and we expect that to continue, Tim, and some of that is partially why we were forward leaning on our view for what the rest of this year looked like earlier this year with you guys.

Okay. That's very clear, thank you. And I guess as my follow-up of staying on this topic, but I was hoping you might be able to offer a bit of insight out on the, I guess, into your portfolio PFAS remediation solutions that you have on hand because I know your general resins technology gets a lot of attention, right, but I also know you have an entire suite of solutions. So I'm curious how much you expect to play on the drinking water side versus those higher contaminated industrial DoD sites, airports, et cetera?

Yes. So I mean, if you go back to our portfolio of services, we have experts, right, regulatory experts, PhD's, toxicologist, helping a lot of our clients thinking about, think about how to model this, how to think about risks, kind of think about exposure and liability and how to treat. We have dedicated PFAS labs that are really well equipped to address Tim, not only the drinking water, testing and the testing of other water matrices, but also on the air side, as you think about what happens after PFAS is removed, right?

If you're going incinerated, for example, you need to validate that you're actually destroying these molecules. And so our testing footprint is really starting to see some momentum, not just with water, but across various environmental media, air, water and soil.

And then you're exactly right on the treatment side because we're now looking at parts per trillion thresholds across six molecules, some of which are more challenging to remove, certainly are anchor regrettable resins are seeing a lot more activity, including now a little bit on the drinking water side that remains not an area of focus for us.

Our foam fractionation is seeing a lot of uptick on the landfill leachate side, which we're really encouraged to see. And then our teams are seeing some really nice inbounds given our technology for the replacement of a triple that foams, which impacts a whole different constituency. And the reason I bring that to your attention is obviously the drinking water limits, are there the municipal drinking water treatment needs to begin and will begin. But all of the sources of upstream contamination are now right in everyone's crosshairs because they're partially the reason some of these levels are elevated within the drinking water.

And so it's all interconnected. It's really hard to look at this in isolation, but our suite of services is upstream of a lot of these, and we're getting pulled downstream into the drinking water market because of some of the lifecycle cost advantages that our technology offers. Does that answer your question, Tim?

It does. Yes. So it sounds like you do have technologies that can address the drinking water system. So that's not your main focus. But regardless these MCL, they're going to have adjacent impacts or upstream impacts that go beyond drinking water systems and that is going to affect your business in a material way. Very good summary.

It already is and that's exactly right? Yes.

Okay. Yes, very clear. I'll jump back in queue. Thank you very much.

Thanks, Tim.

Thanks, Tim.

Jim Ricchiuti, Needham & Co.

Hi, good morning.

Good morning Jim.

(inaudible) background noise, but I wanted to, two questions. First. We didn't have a chance to really talk a whole lot about the (inaudible) to the guidance, the raise to your full year guidance earlier. Maybe if you could just spend a moment or two on what really drove that? I mean, it sounds like you're seeing a better performance from Matrix that I'm not sure if that's really having much of an impact as it is other parts of the business?

Yes. Let me take that, Jim. Just philosophically, we have learned since our IPO in 2020 that we're best served being as transparent as we can with you as the broader investment community so that there's no surprises quarter in, quarter out. And the reason we were more forthcoming, not just when we increased guidance, but if you go back to our February annual 2023 readout in the first time we provided guidance for '24, we gave a lot more color on what the quarters look like. And the reason for that is there's a few dynamics in the business that are of not only topical, but very relevant to the financial outcome.

The first is the regulatory landscape has shifted materially through the course of Q1 and even now in the early part of Q2, given as a result, the implications for us and what the back half of the year looks like and what the organic trajectory looks like is real, it's material, and that has changed kind of our optimism, not just for this year, but as we look out through the course of the next few years, and so that's one variable that moved from when we initially provided guidance and certainly has moved since we talked with you through the end of last year, early part of this year.

The other dynamic that we are weighing and it's certainly going to continue to be a theme we have to articulate as we think about quarterly performance, not annual is the impact of Matrix. So you're exactly right, that's a business that is very different in terms of its revenue and EBITDA weighting first half of the year versus second half of the year.

And as a result, we wanted to give you guys more color on that. And then the third dynamic is the impact both of recent acquisitions and the transition away from the large train derailment emergency response last year. So that's because there were so many confounding variables we wanted to make sure we were very open about what's driving the business.

But fundamentally, the increase in guidance was because the structural underpinnings of the business look really solid for us, and we're really optimistic about what the next couple of quarters, next couple of years looks like. Does that make sense?

It does, Vijay. Thank you. That's helpful. And just a final follow up question for me. You're talking about a growing funnel M&A. Obviously, there will be additional capital that you've added back in April and maybe if you could two things.

Historically, you guys have done more smaller deals than a few bigger ones. But I'm just wondering, if how we should think about M&A activity and whether you know you guys have to add some additional resources or if you feel you have the infrastructure in place to accommodate a pickup in M&A Thanks.

We are comfortable with our resources that we have in place now, Jim, to accomplish what we've set up for this year and you're exactly right. If you go back, if you think about our historical cadence of around $10 million-ish of EBITDA and our target of businesses that are a couple of million dollars of EBITDA each that we're purchasing at very attractive multiples and that would suggest, right, just round numbers, call it a handful, [$5 million-ish] deals a year.

If you look over the last couple of years, we've done more sizable ones like a Matrix, but the cadence has been a little smaller, a little lighter because we've been a little bit more cautious with capital allocation. What we're finding now is that the pipeline never went away and the backlog is quite robust in terms of the opportunity set for us.

And you can see that already, right? Jim through the first quarter, we call it first four months, we've already closed three transactions and there's more on the comments. As a result, the cadence is higher. So we wanted to make sure not only is the balance sheet going to be able to absorb that because these are very strategic and very attractive transactions for our long-term growth plans, but that our team is able to do it too. So there's nothing large that's imminent. There's no changes to our strategy. There's no additional resources needed. This is more of the same except the cadence is higher than it's been in the past.

Got it. Thanks very much.

Thanks, Jim.

Brian Butler, Stifel.

Good morning. Thanks for taking my questions.

Hey Brian.

Hey Brian.

Just on you kind of touched on this on the M&A question, the last M&A question, but maybe a little bit more color on what you're looking for service wise across the segments? And just kind of help understand where those opportunities might lie?

Yes, Brian, we are, if we step back and think about where our transaction ideas or leads come from. These are word of mouth, either from our clients or from our teams. And so it's largely either geographic expansion or the addition of specific service lines that our teams believe will be complementary to what they're already offering to our clients.

And so using the three from this year, Epic was a continuation of what we already do. A fantastic team, just an expansion geographically. Two Dot was exactly the same. That was a geographic expansion of our current service line.

And the ETA is a small transaction. It was a partner of Montroses serving existing clients and so that we just brought that in-house. And so this is, that is the geographic expansion. I would say is by and large, the primary driver, existing services, no shift in strategy, just bolstering our ability to serve our clients in different places.

The second thing we look for and I look table stakes is cultural fit, right and financial accretion. So let's put that to the side. The other variable that we look at, though, to a lesser extent, is an expansion of our technical capability or the acquisition of selected technologies that has not really been the cause for any of the recent transactions, that is another area we tend to be focused.

Okay. That's helpful. And then maybe we could just talk on PFAS revenues where we are right now and the outlook with the $200 million -- $200 billion. Total addressable market is huge. But where are we starting in? Again you kind of talked about the ramp already, but just a little color on the starting point?

Yes. So the PFAS, it ebbs and flows a little bit, Brian, based on kind of the projects. But to put it in context, it was, call it $15 million to $20 million-ish of revenue as we approached our IPO. And I've got IP around IPO and it's called $75 million to $100 million today. So we've seen a really nice growth trajectory over the last couple of years. And we think that that will be multiples of its size that it is now over the next several years.

Okay.

(multiple speakers) earlier and sorry, Brian, going back to the earlier point that we were making with Tim, this is not just a treatment a consideration for us. It impacts all parts of our business in all three segments.

Okay, great. And then just one last one. I was just going to ask on the R&R business, ex Matrix, do you have a comparison where you on the EBITDA margin? I mean, was that margin up if you took Matrix out of the mix or was there still some headwinds from the biogas?

Margins would have been down just slightly, Brian, you're exactly right. It's the pivot in biogas. You'll see that start to ramp really nicely, particularly the back half of the year. Margins in that segment will be up. We're clearly nicely for the full year, largely driven by the back half. Brian just stepping back. And this is why we keep we keep really anchoring in on the quarters not being as meaningful as the full year comparison.

Just to put all this in perspective. If you look at the midpoint of guidance, it assumes an approximately 100 basis 1% increase in aggregate EBITDA margins. Obviously, our advisory business, we think margins will be steady in the mid-20s on the testing side, right? That's a mature business. 18% to 20%, there will be steady.

And so really that margin accretion, you're going to see coming from both our increased operating leverage and a really nice margin accretion on the remediation (inaudible) . So we got to watch this over time, upgrade the individual quarters will be will swing based on acquisitions and other variables.

Great. Thank you very much for taking my questions. Nice quarter.

Thanks, Brian.

Thanks.

(Operator Instructions) Stephanie Yee, JPMorgan.

Hi, good morning.

Hey Stephanie.

I was wondering if you can talk about what you think your normal cadence for I know it's hard, but just a sense of what organic revenue growth cadence should be for the next few years. I know historically you talked about something like mid-single digit to high single digit and what people can expect in any particular year. I'm wondering with kind of the regulations especially on the PFAS side, whether we should be thinking about high single digits to low double digits being the normal, new normal for mantra going forward?

Yes. Why don't I take that and then Allan should certainly jump in, Stephanie. We, just to remind everyone the way we define organic growth as we exclude the impact of acquisitions entirely, and we also exclude the impact of our emergency response business. Obviously, you've got to look at kind of the core performance to really understand what the organic growth trajectory of the business looks like.

When we went public, you're exactly right, Stephanie, we talked about being at a approximately 7% to 9% organic growth cadence. And if we look, obviously, there's been some inter-year variability, but as we look past today, looking back to IPO, we've been growing closer to 15% a year on average organically. And if you look at our guidance for this year, we are implying a 10% to 12% organic growth for 2024.

And so obviously, if you just take those numbers and contrast that with the [seven to nine]. Our signal for the near future is that we are at an elevated organic cadence relative to our recent past. As the business grows, as we obviously as revenue continues to accrete at 30%-plus a year as it has been.

We are maintaining those levels right on a dollar basis is more challenging. And so we're not changing our outlook. But we do believe that we're going to be this year at an elevated organic cadence and certainly the tailwinds, secular tailwinds in the industry are real and they're going to continue to impact us positively, we believe, into the foreseeable future.

Okay. That makes sense. That's super helpful. And I was wondering if you can talk more about what you're doing about biogas business, now that you've anniversaried the pivot. Just what kind of projects are you working on now? And I think you mentioned that you do expect to see growth in the back half of the year, but just, any additional color on what's going on with that business?

Yes, the pivots complete and so the quarter-on-quarter noise will certainly be there because the pivot was really finished through in Q3 of last year. So it's all done. It's behind us. As we look '23 versus '24, you're going to see really nice revenue and margin growth in that business.

We believe and that will manifest itself as part of the aggregated ECT2 footprint, which is a combination, obviously primarily of biogas and our PFAS water treatment business.

As the biogas, it's not so much different projects, Stephanie the components of the projects that we're servicing that is different right to focusing on that higher margin design, engineering installation as opposed to some of the other side of construction and equipment procurement.

Okay. Sounds good. Thank you.

Thanks, Stephanie.

There are no further questions at this time. I will now hand the call back (inaudible) are provided for the closing remarks.

Thank you very much again for all of you for sharing your time with us this morning. We're really excited about what the prospects look like for us, and we look forward to our Q2 update in the near future. Take care, everyone.

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining, you may all disconnect.