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Operator: Good morning. And welcome to the Montrose Environmental Group’s First Quarter 2025 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today’s remarks, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Adrianne Griffin, Senior Vice President, Investor Relations and Treasury. Please go ahead.

Adrianne Griffin: Thank you, Operator. Welcome to our first quarter 2025 earnings call. Joining me on the call are Vijay Manthripragada, our President and Chief Executive Officer; and Allan Dicks, our Chief Financial Officer. During our prepared remarks today, we will refer to our earnings presentation, which is available on the Investor section of our 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 subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to known and unknown risks and uncertainties that should be considered when 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, 2024, which identify the principal risks and uncertainties that could affect any forward-looking statements and our future performance. We assume no obligation to update any forward-looking statements. On today’s call, we will discuss or provide certain non-GAAP financial measures, such as 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 from the most directly comparable GAAP measures. Please see the appendix to the earnings presentation or our earnings release for a discussion of why we believe these non-GAAP measures are useful to investors, certain limitations of using these measures and a reconciliation to their most directly comparable GAAP measures.

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

Vijay Manthripragada: Thank you, Adrianne, and welcome to everyone joining us today. I will provide you with an update on the health of our business, explain our strengthened outlook and raised guidance, and speak generally about the first quarter presentation shared on our website. Allan will provide the financial highlights, and following our prepared remarks, we will host a question-and-answer session. Before I begin, I’d like to acknowledge the exceptional work of our approximately 3,400 colleagues around the world. The Montrose team’s dedication to leading environmental science and technology furthered our mission of helping to protect the air we breathe, the water we drink, and the soil that feeds us. Montrose continues to demonstrate that we can protect our environment while simultaneously driving economic value and development.

As we discuss our results today, I want to remind everyone that our business is best evaluated on an annual basis, since demand for environmental science-based solutions does not follow consistent quarterly patterns. This is how we manage our operations and how we recommend viewing our performance. With that, I’m extremely pleased to discuss our outstanding first quarter. In the first quarter, we achieved revenue of $177.8 million, consolidated adjusted EBITDA of $19 million and operating cash flow of $5.5 million. These record results mark our highest-ever performance metrics for a first quarter, setting new standards for our future achievements. These accomplishments underscore a growing universal demand for clean air, clean water and clean soil, an opportunity that spans across all of our geographies.

There are differing opinions on how to achieve these essential goals and we believe that such market dislocations create opportunities for us. Our team is strategically positioned to navigate these complexities and capture a disproportionate share of growth which will further our leadership position in the environmental industry. In November 2024, we announced the temporary pause an acquisition to focus on consistent high-single-digit organic revenue growth, enhance enhanced EBITDA margins, improved cash flow generation and balance sheet optimization with ample liquidity. I am pleased to report on our progress. Given our strong first quarter results and confidence in our 2025 outlook, we are increasing our full year 2025 EBITDA guidance. We now expect consolidated adjusted EBITDA to be in the range of $103 million to $110 million, an increase from $101 million to $108 million.

We are reaffirming our full year revenue range of $735 million to $785 million. This updated guidance represents continued consolidated adjusted EBITDA margin expansion. We further reiterate our organic growth expectation of 7% to 9%. This demand outlook is supported by strong tailwinds. First, our private sector clients are increasing domestic industrial activity, a trend supported by President Trump’s administration. This drives demand for our solutions. As one example, a public multinational energy company recently selected Montrose to support its emissions monitoring needs at scale. Montrose will deploy one of the largest air quality teams in North America across multiple operating basins in three U.S. states. Our ability to provide this service is because of our unique strategy of integrated services and capabilities, and the project also highlights how our clients continue to stay the course despite federal U.S. regulatory volatility.

Our clients are staying the course because of the longer-term nature of their planning and because of the continued influence and consistency of state regulations. Second, state governments in the United States are gaining more influence, which presents incremental opportunities for our success. We are actively collaborating with several states and clients to tackle some of the most challenging contamination issues in soil and the plumes affecting drinking water sources. We anticipate U.S. Administrator Zeldin’s recent PFAS policy announcement will further support these initiatives. Montrose invested in innovative PFAS treatment solutions long before PFAS was this widely recognized. Our proven patent-protected technology and our subject matter experts have successfully reduced contamination levels to meet various state and local requirements, including to non-detect levels, which means for all PFAS the state was monitoring, they could no longer detect it.

Because our technology can be dialed up or dialed down as needed, we are well-positioned regardless of where thresholds settle, and we are encouraged that this remains a priority for the current administration and for the states in which we operate. We are proud to report five consecutive quarters of revenue growth from our PFAS services from across our diverse offerings. Third, our international operations continue to thrive. We recently announced an award from a major public mining company in Australia supporting the world’s growing demand for steel. This announcement reflects our expanding global footprint, our commitment to helping our industry partners transition to more sustainable practices, and continued demand for our services. Our long-term success fundamentally hinges on our ability to serve our over 6,000 clients.

In discussions with many of our clients, one consistent theme emerges. The overwhelming majority are not changing course at this time, though they are closely monitoring policy and trade developments. We view our clients as embedded partners and aim to strengthen our relationships with them through our integrated business model, emphasis on cross-selling, commitment to technology and our focus on innovation. These elements are essential to our continued organic growth. As we think about the opportunities and risks that could drive us to either end of the guidance range, we wanted to provide some additional context. We have considered the anticipated impacts of recent announcements from the U.S. EPA, changes in tariff policy and broader macroeconomic and geopolitical factors.

We do not expect tariffs to meaningfully affect our margins, and our clients have been very constructive in discussions related to tariff policy. Additionally, our exposure to fluctuations in currency and interest rates is significantly hedged. Also, the impact of political dynamics on our international client relationships has been minimal and is expected to remain so, thanks to our strong local presence and domestic workforce with unique technical capabilities. Based on our current visibility into 2025, we believe our guidance appropriately reflects all of these considerations. Transitioning now to prioritizing balance sheet optimization, in April, we redeemed $60 million of the Series A-2 Preferred as we said we would and we anticipate completing the redemption of the remaining $62 million in 2025.

Last night, we announced Montrose’s inaugural stock repurchase program. Considering the ongoing disconnect between the company’s strong financial and operating performance, near- and long-term outlook, and public stock valuation, the Board has approved up to $40 million in stock repurchases. We will continue to carefully evaluate options for deploying capital to maximize returns to our stockholders. Next, I want to address our commitment to enhancing margins and our expectation for EBITDA margin improvement this year. Our approach has three primary components. First, we expect to leverage our existing back-office infrastructure to support continued growth. Second, by optimizing processes and implementing automation, we expect to improve operating efficiency.

Third, we expect segment margins to align with our stated long-term targets, with most of the benefit coming from the Remediation and Reuse segment. In short, we delivered what we said we would. We reported strong first quarter results. We progressed our capital allocation strategy. We improved operating and cash flow generation. We are well on track for high single-digit organic revenue growth. And we continue to enhance EBITDA margins, which is evident from our raised EBITDA guidance. All this while remaining true to our vision for planet and for progress. 2025 is off to an excellent start, and we do expect momentum to continue. With that, I’ll hand it over to Allan. Thank you.

Allan Dicks: Thanks, Vijay. We delivered an exceptional performance in the first quarter as we continue to maintain our focus and deliver on our stated objectives. Our strong results were driven by robust organic growth from cross-selling momentum and expanding customer relationships, along with the positive contributions from our highly accretive M&A activities in the prior year. Moving to our revenue performance. Our first quarter revenue increased to a first quarter record of $177.8 million, a 14.5% increase, compared to $155.3 million in the prior year period. The primary drivers of growth in the first quarter were strong organic growth in our Remediation and Reuse and Measurement and Analysis segments, plus contributions from acquisitions.

Partially offset by a reduction in Assessment, Permitting and Response segment revenue due to several larger projects in the prior year period that did not repeat, and lower environmental emergency response revenues. The consolidated revenue increase resulted in our highest ever first quarter consolidated adjusted EBITDA of $19 million, a 12.5% increase, compared to $16.9 million in the prior year period. Consolidated adjusted EBITDA as a percent of revenue in the current year quarter was 10.7%, compared to 10.9% in the prior year period. The 20 basis point difference was associated with normalized project margins in the AP&R segment, offset by improved operating leverage in the M&A segment, and the benefit of acquisitions in 2024. I’ll note that despite being lower in Q1, full year 2025 consolidated adjusted EBITDA as a percentage of revenue is expected to be above full year 2024 due to operating leverage in our Measurement and Analysis segment and continued margin improvement in the Remediation and Reuse segment.

In the first quarter of 2025, diluted adjusted net income per share was $0.07, compared to $0.16 in the prior year period. This was primarily due to higher interest and tax expenses and a higher weighted average diluted outstanding share count in the current quarter, partially offset by improved operating income before non-cash items. Please note that our adjusted net income per diluted share attributable to common stockholders is calculated using adjusted net income attributable to stockholders divided by fully diluted shares. We believe this net income methodology is the most helpful net income metric for Montrose and common equity investors. I will now discuss our first quarter performance by segment. In our Assessment, Permitting and Response segment, first quarter revenue was $53.1 million, compared to $58.6 million in the prior year period.

AP&R segment adjusted EBITDA was $10.6 million or 19.9% of revenue, compared to 27.8% in the prior year period. Prior year results included several larger high margin projects that did not repeat in the current year and approximately $2 million lower emergency response revenue, which were partially offset by a $3 million contribution from an acquisition in 2024. Revenue and EBITDA comparisons normalized in subsequent quarters, and accordingly, we expect AP&R revenue and adjusted EBITDA to be up year-over-year in the remaining quarters of the year. We expect long-term and 2025 AP&R segment adjusted EBITDA margins to remain within a normalized 20% to 25% range. Turning to our Measurement and Analysis segment, revenue for the quarter increased 29.8% to $59 million.

We continue to experience strong organic growth across lab and field services in addition to contributions from an acquisition in 2024. M&A segment adjusted EBITDA increased to $13.7 million or 23.3% of revenue, a 900-basis-point margin improvement over the prior year period due to operating leverage across all business lines driven by significantly higher revenue and contributions from an acquisition in 2024. We expect long-term M&A segment adjusted EBITDA margins to remain within a normalized 18% to 22% range, with 2025 annual segment margins expected to remain elevated above the high end of the range, primarily due to business mix, project timing and contributions from acquisitions. In our Remediation and Reuse segment, first quarter revenue increased 28.2% to $65.7 million, benefiting from strong organic growth in treatment technology revenue and contributions from acquisitions in 2024 of $5.1 million.

This segment’s adjusted EBITDA increased to $5.9 million, though adjusted EBITDA margin declined 80 basis points to 9%, primarily driven by business line mix, in part driven by Q1 seasonality in our Canadian operations. We expect long-term R&R segment adjusted EBITDA margins to be within a 20% to 25% range, and are confident that R&R segment adjusted EBITDA margin will deliver year-over-year improvement for the balance of this year. Moving to our cash flow and capital structure. We achieved our highest ever first quarter net cash provided by operating activities of $5.5 million, compared to net cash used in operating activities of $22 million in the prior year period. The significant $27.5 million increase related to improvements in working capital primarily accounts receivable and contract assets.

I am pleased to report that we are on track to significantly outperform 2024 and expect to achieve cash flow from operations greater than 50% of consolidated adjusted EBITDA in 2025. We were also pleased with the strength of our balance sheet at quarter end, reporting a leverage ratio of 2.2 times and substantial liquidity of $294.2 million, following the refinancing of our senior credit facility in Q1, which, as you recall, is larger and on more favorable terms than the previous credit facility. Last quarter, we provided an update on the previously disclosed delayed receivables from a large project related to a U.S. Navy-owned facility fire for the city of Tustin, California. As of yesterday, the remaining amount Tustin owes Montrose is approximately $7.5 million, compared to $13.5 million as reported in February of this year, with the difference of $6 million being collected after the first quarter end, and therefore was not included in the reported first quarter operating cash flow.

We continue working collaboratively with Tustin and remain confident in the full collectability of the outstanding balance. Subsequent to quarter end, we redeemed $60 million of the Series A-2 Preferred Stock in cash, funded with cash on hand and borrowings under our credit facility. In the near-term, we will continue to prioritize balance sheet simplification through the redemption of the remaining Series A-2 Preferred Stock and subsequent deleveraging, while balancing potential stock repurchases. Optimizing our capital structure and leverage are integral parts of our strategy to maximize our financial flexibility. Looking forward, we will be measured in how we allocate capital to stock repurchases, investments to drive organic growth and future M&A, which remains a core part of our long-term growth story.

Overall, we are very pleased with the momentum across our business and our strong start to the year. We remain focused on our strategic objectives to enhance our margin profile, generate strong cash flows and continue to simplify our capital structure through the redemption of the remaining $62 million of our outstanding preferred stock. Our increased guidance for the year reflects the confidence in our ability to continue driving value in our business and the many tailwinds we see. 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: Thank you. [Operator Instructions] Our first question comes from Tim Mulrooney from William Blair. Please go ahead.

Tim Mulrooney: Vijay, Allan, good morning.

Vijay Manthripragada: Hey, Tim. How are you?

Tim Mulrooney: Doing well. Thank you. So a couple questions for me. The first one is just want to have a broader conversation on this topic of deregulation. We recently saw Lee Zeldin’s list of top priorities for environmental deregulation at the EPA. I guess I’m curious if you’ve had a chance to review those 31 proposed actions as well, things like reconsidering the QUOTA regulations or the MATS regulations, for example. How do you think about the potential risks and maybe opportunities associated with this list of priorities?

Vijay Manthripragada: Yeah. Tim, that’s a great question. Why don’t I take that and Allan can certainly jump in. I think there’s kind of two dynamics I want to make sure I highlight. The first is being able to understand and predict where the administration is going to go with the deregulatory agenda. That’s been a little bit of an interesting dance. The word reconsider, right, which is embedded in a lot of what was in that release, is critical because what it suggests and what we know is that there is a significant amount of statutory support for a lot of these regulations. And to unwind that is going to be quite challenging. And so from a legal perspective, we don’t believe that any of this is going to be quick. And I would pivot to a little bit of a more impactful dynamic that we are seeing, which is that as we engage with our clients who are intimately tied in to understanding and interpreting the deregulatory agenda, they are largely staying the course.

And the reason for that, Tim, is the planning cycles tend to be longer. There’s a clear understanding that this is still the law. And as a result, from a compliance and liability perspective, it’s going to be important. And state regulations are increasingly meaningful. And so this is very consistent with a lot of what we talked about at the end of last year following the election of President Trump. Our general belief is that the demand cycle will sustain and that any changes, even with a pretty strong deregulatory emphasis, will take time. What we’re really encouraged to see is that that is certainly manifesting. Even with the announcements, demands remain strong and our clients are staying the course. And you can kind of see that in our results.

It’s not just us saying it, but it’s showing up in the financials. And candidly, as we look out through the rest of 2025, we’re expecting that demand cycle to continue.

Tim Mulrooney: Yeah. That’s really helpful color. Thanks, Vijay. And it is good to hear that what you were kind of expecting when Trump was first elected is kind of manifesting itself through the first four months or five months of the year. So that’s good to hear. I’m going to pivot to your T&M business, which came in quite a bit stronger than I expected for the first quarter on both a revenue and a margin front. I’m curious if there’s anything to call out here, like any particular business line or end market that’s really picked up lately. We’d just love to hear more about what’s going on in this business.

Vijay Manthripragada: Yeah. You’re talking about, sorry, when you say T&M, Tim, you’re talking about our Measurement and Analysis.

Tim Mulrooney: Sorry, Test and Measurement?

Vijay Manthripragada: Yeah. Yeah. Yeah.

Tim Mulrooney: Yeah. Our Measurement and Analysis this year. Thank you.

Vijay Manthripragada: Yeah.

Tim Mulrooney: Sorry.

Vijay Manthripragada: Yeah. I would — that is very much in line with what we just talked about in terms of regulation, right, how our clients who are primarily private sector think about compliance and risks and the long-term nature of a lot of our relationships. There is actually no singular driver of this. We are seeing really nice demand across multiple lines of our business, particularly the parts that are higher margin, and you’re starting to see that now in our Measurement and Analysis segment. As we think about a five-year or six-year outlook, Tim, we’ve always talked about that segment being around 20%-ish, right, plus-minus depending on service line mix, and that long-term outlook certainly holds, but the current performance is just a function of continued operating efficiency and sustained demand across effectively all levers within that business. So, no, there is no one singular driver. That is just sustained tailwinds.

Tim Mulrooney: Okay. Thanks so much. I’ll hop back in queue.

Vijay Manthripragada: Thanks, Tim.

Operator: The next question comes from Jim Ricchiuti from Needham. Please go ahead.

Chris Grego: Hi. Good morning. This is Chris Grego on for Jim.

Vijay Manthripragada: Hey, Chris. Okay.

Chris Grego: Hi. You had mentioned a few drivers of the margin expansion that you expect for the balance of the year. Just wondering if you could elaborate on those and get a little bit more specific about which operational improvements, makeshift and trends you anticipate to drive that projected margin expansion for the balance of 2025.

Vijay Manthripragada: Yeah. As we think about, Chris, as we think about long-term margins, and in particular kind of the outperformance in Q1 and our increased bullishness on the rest of the year, there’s kind of two broad dynamics I think that are important to highlight. One is that our demand cycles across multiple lines of our business, as I was mentioning to Tim, but across all segments, not just within our Testing segment, remain very strong. And so whether it’s our AP&R Consulting business, whether it’s our M&A Testing business or Remediation and Reuse on the treatment side, as there’s increased regulatory clarity on the federal side, as we’re starting to see where the administration is going, as states become more clear on how they’re going to respond, as our clients start to take firmer positions on how they’re going to plan going forward, we start to see the benefits of all of that.

So I think part of our long-term optimism is coming from the topline side, which is sustained demand. We are also seeing the benefits of improved operating effectiveness, whether that’s in the realm of continued cross-sell success, continued pricing optimization, continued operating leverage, and then the normalization of our segment margins towards what we would consider long-term run rates. All of that is starting to come to fruition. And as a result, it’s kind of a multi-faceted benefit cycle for us, but we are feeling really good about what, as a result, what the rest of the year holds and why on the EBITDA side we’re effectively projecting a higher EBITDA and therefore higher margins.

Chris Grego: Got it. Thank you. That’s very helpful. And then you had also mentioned that you’re having constructive dialogue with your clients around their potential tariff exposure. I’m just curious, which areas of the business or where — in the areas where the clients are interfacing with you, where do they see the potential for tariffs to impact that interface the most?

Vijay Manthripragada: Yes. I think the way I would characterize that, Chris, is we expect tariffs to have a minimal, de minimis impact on our business at this time. And all of our guidance expectations and the numbers we’ve provided incorporate our expectations on any potential impact of tariffs. So as a business, it is not really — it’s something we’re paying a lot of attention to, but it is not something we expect will have a meaningful impact. The reason it’s important to highlight our client perspectives is that they face, many of them in the automotive, industrial, energy side, for example, among many others, are clearly staying very close to changes in U.S. policy and changes to policies in the countries in which we operate.

And as a result, when I say they’re being very constructive, they understand that the same pressures they face around predicting what the impact will be on price and cost are ones we may face. And it’s been constructive in the sense that not only are they not changing course, but they understand that should we need to tweak pricing or pass through cost, that’s an optionality we will need to keep and they’ve been open to that as well.

Chris Grego: Great. Thanks. I’ll hop back in the queue.

Operator: [Operator Instructions]

Vijay Manthripragada: Thanks, Chris.

Operator: [Operator Instructions] And our next question comes from Andrew Obin from Bank of America. Please go ahead.

David Ridley Lane: Good morning. This is David Ridley Lane on for Andrew Obin. Measurement…

Vijay Manthripragada: Hey, David.

David Ridley Lane: Good morning. Your Measurement and Analysis business historically has had a pretty pronounced seasonality, just a weaker first quarter. That didn’t happen this year. I just — the results were very strong. I’m just wondering if there was something unusual this year in that segment?

Vijay Manthripragada: Yeah. I would say, David, it’s a great question. What we are effectively seeing is a little bit of the unwind of the reticence following the election. So as we entered the back half of 2024, as folks were trying to understand and predict who would get elected and what that would mean, there was a little bit of a pause and wait and see dynamic that was in play. And now that that clarity has increased, we’re effectively back to business as usual. And so some of this was just a catch up to the pause and wait dynamic, which is unwinding in Q1, which is certainly atypical. And we don’t expect that type of unwind to occur again until the next. So I would think of this as, again, a segment that should run around 20%-ish margins for the year. But, yes, we are very pleased with the sustained demand and with the performance of that segment in Q1 of this year.

David Ridley Lane: Thank you. And then you mentioned that your PFAS-related revenue, which is 10% to 15% of total, continued to grow in the quarter. I think it’s the fifth consecutive quarter.

Vijay Manthripragada: Yeah.

David Ridley Lane: Just wondering was it additive to the organic growth of the total company? And do you still — peer too much into your crystal ball, but would you say it is additive to your organic growth for the foreseeable future?

Vijay Manthripragada: Yes. David, it was additive to our organic growth. Yes, it is additive for the foreseeable future. And the reason I’m saying that with a little bit more conviction is, on April 28th, you may have seen Administrator Zeldin’s EPA PFAS announcement. And in that, you can see a clear conviction in continuing to regulate this family of compounds and molecules. And so there may be variance in the thresholds to which treatment requirements are effectively promulgated, but we are feeling really good about, and our clients are starting to see more certainty around the conviction around the regulation of these PFAS compounds. And as a result, whether it’s on the consulting side as we think about risk and toxicology and permitting, whether it’s on the testing side, as our labs start to see not only on the water side, but now on the air side, PFAS testing requirements.

And on the treatment side, which has historically been where most of Wall Street’s attention has been, we are also seeing some really nice tailwinds there. We’re feeling good in aggregate across all of our segments with the PFAS demand drivers. And we do expect that over the next couple of years to continue to grow nicely. I would, again, caution against extrapolating from any one quarter, but the long-term trends are really encouraging for us. And the recent announcement from President Trump’s EPA candidly is giving us a lot of optimism and conviction.

David Ridley Lane: And last one for me, Remediation and Reuse is probably your most project-based segment ever of other industrial companies and it does appear that there’s just greater macro uncertainty. So maybe not tied to any specific regulatory or tariff, but just a broader macro uncertainty. Have you seen any sort of project delays? Is that some consideration for you?

Vijay Manthripragada: No. So I would actually say macro uncertainty isn’t that much more meaningful for that segment, given the nature of our work, David. So, no, we are not seeing that. And as I look at that segment and I look at 2024 versus 2025, our expectation is that we will see solid growth in that segment and our margins will be at or above where they were last year. So we are quite optimistic with that segment as well. And, again, just anchoring in on our client conversations and our client dynamics, there isn’t really much of a change in course. If you think about the type of work we do, whether it’s making sure there’s clean air or clean water or clean soil for communities, macroeconomics tends to have less of an impact on the desire to get those goals, especially if contaminants are known to exist.

So we’ve said this in the past, we’re not really that exposed to economic or political fluctuations, and that is certainly manifesting, as you can see in our numbers.

David Ridley Lane: Understood. Thank you very much.

Vijay Manthripragada: Thanks, David.

Operator: And the next question is a follow-up from Tim Mulrooney from William Blair. Please go ahead.

Tim Mulrooney: Yeah. Thanks for fitting me back in. I just wanted to build on that last conversation you were having around the EPA. It was good to see the comments that they made around PFAS, but I was wondering if you’ve seen any efforts, just as we think about the Trump administration’s EPA generally, have you seen any impacts from the efforts to reduce the workforce at the EPA? Has this impacted environmental compliance behavior at any of your clients? And we saw the White House budget proposal for a 50% cut to the EPA budget. I’m just curious how you think these workforce reductions and potential budget cuts would translate in terms of impacting your business.

Vijay Manthripragada: It’s a great question, Tim, and it’s always tough to kind of predict based on hypotheticals, but I’ll just anchor back on we have very little exposure to the U.S. federal government’s spend. It represents low single digits percents of our revenue, and the EPA’s reduction in workforce also means that changes to regulations, which is a lot of what you asked us about earlier regarding the March 12th announcement, are also harder to then promulgate, right? So if you don’t have the staff to make all of those changes and follow the statutory requirements, those changes go slower. And so as we talk to our private sector clients, which is where most of our activity is, they are looking at both the state level dynamics, which talks to compliance requirements, the state requirements where they operate in addition to federal, and they think about the longer term implications of making sure they follow the law and stay consistent with their compliance commitments.

And so none of that has changed for them, and the EPA’s reduction in workforce just makes it that much harder to make a lot of the changes that are in flight. And as a result, we haven’t seen much change in behavior, and we don’t really candidly expect to see much of that as we look through the rest of this year and potentially next.

Tim Mulrooney: Okay. Thank you. I wanted your perspective on that. Maybe since we haven’t heard from Allan very much, I could throw one his way. Allan, we — after you pay off the remainder of the preferred instrument later this year, what do you expect the leverage ratio to be at the end of the year after that happens and what is the leverage ratio target that you’d like to achieve before returning to the M&A market?

Allan Dicks: Yeah. Thanks, Tim. So we expect we’re going to be at 3 or under leverage ratio by the end of the year, likely under 3, after the redemption of the final $62 million of the pref. As we then look out long-term, what we’ve said is our preference is to be below 3.25 with continuing acquisitions. We are willing to spike up above that up to, call it, 3.5 for a larger strategic deal, but that’s not where we want to operate on an ongoing basis. So we’re going to target under 3.25 with acquisitions. Cash flow generation will be strong this year. We expect it will continue to be strong as we look out over the next several years, and that will enable us to keep leverage low while getting back to the M&A trail.

Tim Mulrooney: Okay. Thank you, guys.

Vijay Manthripragada: Thanks, Tim.

Allan Dicks: Thanks.

Operator: There are no more questions in the queue. This concludes our question-and-answer session. I would like to turn the conference back over to Vijay Manthripragada for any closing remarks.

Vijay Manthripragada: Thank you very much. And thank you to all of you for your interest in Montrose and for your continued support. We’re feeling really good about the year and we’re quite excited about continuing to share our progress, and we look forward to the next quarterly update. Thanks again and be well.

Operator: Conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.