Thank you for standing by. This is the conference operator. Welcome to the Montrose Environmental Group, Inc. Third Quarter 2021 Earnings Call. As a reminder, the conference is being recorded. I would now like to turn the conference over to Rodny Nacier, Investor Relations. Please go ahead.

Thank you, operator. Welcome to our third quarter 2021 earnings call. Joining me on the call are Vijay Manthripragada, our President and Chief Executive Officer; and Allan Dicks, Chief Financial Officer. During our discussion today, we will be referring to our earnings presentation, which is available on the Investors section of the Montrose Environmental 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, 2020, which identify the principal risks and uncertainties that could affect any forward-looking statements as well as future performance. We assume no obligation to update any forward-looking statements. In addition, we will be discussing or providing certain non-GAAP financial measures today, including adjusted EBITDA and adjusted EBITDA margins. We provide these non-GAAP results for informational purposes, and they should not be considered in isolation from the most directly comparable GAAP measures. Please see the appendix of 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 thereof to their most directly comparable GAAP measure. With that, I would now like to turn the call over to Vijay beginning on Slide 4.

Thank you, Rodny, and welcome to all of you who are joining us today. I'm going to provide you with a few business highlights and then hand it over to Allan Dicks for our financial review, and then we'll both open it up to Q&A. I will speak generally to the pages 4 through 8 of the presentation that all of you have and that we've shared publicly. And let me start by saying the positive momentum in our business continued with our solid third quarter results. These results are due to the efforts of our team members who are working tirelessly to serve our clients. Without their efforts and unwavering support of each other, we would not have been able to meet our clients' growing demand for our environmental solutions and achieve another quarter of record results. To all of you from Montrose listening, these results belong to you. Thank you very, very much. As we've discussed on previous calls, I would like to highlight our perspective on quarterly results and how we view our business. Since our environmental services don't map neatly to fiscal quarters, as we have already demonstrated during our short tenure as a public company, Montrose is best assessed and managed on an annual basis. We manage our business on annual trends and annual expectations, and we urge you to do the same. Given our strong results in the first 9 months of 2021, we have already exceeded our previously noted full year 2021 objective of over 20% annual base business revenue growth. Additionally, despite substantial investments to support our continued scaling and the unwinding of COVID-related defensiveness that we implemented in 2020, as we shared in earlier updates, EBITDA in the first 9 months of 2021 is already 10% ahead of all of 2020. As a result, and Allan will talk about shortly, we are again increasing full-year 2021 guidance. Our quarterly and year-to-date results, along with increased guidance, were driven by factors we've discussed with you before. The first factor is strong organic growth across our service lines, especially those focused on greenhouse gas measurement and mitigation, PFAS treatment, and renewable energy, specifically biogas. Our CTH business continues to perform very well. The second factor is accretive acquisitions that have been completed ahead of plan, along with a robust set of ongoing investment opportunities. Since our last earnings call in August, we have seen several key trends from our customers and regulators that support our organic growth trajectory and strategic rationale for our recent acquisitions. There is growing momentum in federal and state or provincial regulatory initiatives and the continued private sector emphasis on environmental stewardship across our key markets is expected to drive continued demand for our services. As an example, the U.S. EPA recently announced that it is advancing new methane regulations. These methane proposals would address the production, processing, storage, and transmission for new and existing petroleum infrastructure covering a much broader swath of the oil and gas industry than before. As another example, a few weeks ago, the U.S. EPA unveiled its plan to address impacts stemming from PFAS compounds. The EPA's plan further validates Montrose PFAS measurement and remediation strategy. In other words, our strategy of integrating Environmental Services continues to position our business well. As a third example, we were pleased to see the bipartisan support from Congress on the infrastructure bill. This investment in addressing infrastructure in the United States, with an eye to building climate resilience and managing the impacts of environmental change on our communities, is a very welcome update and yet another potential driver of demand for Montrose's services. I've said before that I've been disappointed in the politicization of environmental stewardship, as I believe clean air, water, and soil are universally desired. I'm grateful to our Democratic, Republican, and independent leaders in Congress for coming together on this. We are also pleased to partner with our customers who are proactive about their environmental footprint and expect that corporate responses to greenhouse gases, PFAS remediation, renewable energy, and environmental emergency response will continue to drive demand. Corporations are executing proactively on their environmental stewardship initiatives, as boards and investors are increasingly focused on corporate and ESG strategies. Perhaps more than regulation, private sector investment and competition are creating incredible opportunities for the environmental industry to innovate and serve. While our business model is by design resilient and largely insulated from political swings, our increased optimism is based on the emphasis on environmental stewardship by the private sector and capital markets. It is an exciting time for Montrose, and I'm grateful for the privilege of being on this team. A couple of key themes we wanted to touch on, the first of which is year-to-date growth and segment highlights. I'll point to some year-to-date and LTM numbers to help keep focus on the importance of measuring our performance beyond one quarter. Excluding the impact of discontinued services in the prior year, year-to-date 2021 revenue increased 87%. Our CTH business line continues to perform at elevated levels, with revenue expectations ranging from $75 million to $95 million per year. We were also very pleased to see continued organic growth acceleration in the first 9 months of 2021, excluding contributions from CTH. Q3 2021 adjusted EBITDA on a year-to-date basis grew 64% compared to the prior year period, given our strong revenue growth and despite ongoing investments and the unwinding of our 2020 pandemic-related defensiveness. This exceptional year-to-date performance has put us on the path for another year of record results. Within our Assessment, Permitting, and Response segment, most of this segment is CTEH. The leadership team at CTEH continues to do a stellar job converting the pandemic response and business continuity advice into long-term strategic contracts with new and large industries, particularly in technology and media and entertainment. Their business has been driven by: one, more crises due to climate change, aging infrastructure, or the pandemic. The oil spill in California was another crisis where CTEH's experience and leading market position came through. Two, their business is driven by a larger market share; the number of strategic MSAs has increased in 2021. Three, their business has been driven by more services. CTEH software, for example, helps states administer responses and is a new source of value to our customers. As it relates to CTEH supporting clients through the pandemic, we said last quarter that the revenue surge began to modulate in Q3. We saw elevated demand in Q3, but at a slower pace than in the first half of 2021. CTEH produced approximately $50 million in revenue in Q3, which is well above their run rate but below the approximately $70 million per quarter in Q1 and Q2. Demand for their pandemic response support is expected to continue longer than we originally anticipated. Within the segment and excluding CTEH, our higher-margin assessment permitting and ecological service businesses are seeing a nice organic growth uptick. Our recent acquisition of Environmental Intelligence in California better positions us to capture what we believe to be growing demand for fire mitigation and ecosystem services. Within our Measurement and Analysis segment, revenue decreased compared to Q3 2020 due to postponements of certain projects to the fourth quarter. This is why we keep saying quarterly trends aren't that meaningful. Over the longer term, we remain upbeat about continued growth in this segment, which you will see in the near future. For example, our service and software advantages related to methane measurement and mitigation are seeing strong demand across North America. Demand for our environmental testing, specifically our PFAS analytical services, remains very strong. This was our reason for adding Vista Analytical to our portfolio, and the team has been great and is performing well. Margins remain much higher than industry averages within this segment and are stabilizing to more normal levels for us, so the expectation of normalization we shared with you is panning out as we anticipated. Within our Remediation and Reuse segment, we are observing strong demand for our PFAS water remediation, which is increasingly enhanced by our R&D team and IP portfolio. We are also seeing strong demand for our waste-to-energy services, particularly our agricultural waste to biogas business. We find this service line compelling because it should continue to help our farmers, create jobs, and produce negative carbon intensity natural gas for our communities. There are a few other key points of note. Our year-to-date organic growth across a broad swath of our services is a validation of our strategy and our investments in our people, our R&D, our software, and our commercialization infrastructure, all of which are core to our capital allocation strategy. While wage inflation and higher turnover continue to be areas of focus or concern in the broader market, our recruitment and retention of experienced professionals remains solid, especially at the director level and above. I'm proud of the positive corporate culture we've built and the exceptional team of talented individuals here at Montrose. Our M&A pipeline remains strong. So far in 2021, we have exceeded our annual goal of acquiring $10 million of annualized EBITDA in line with our previous goals and historical cadence. The recent acquisitions of MSE, Vista, EI, SensibleIoT, and ECI are all accretive, and we are already seeing cross-selling success in several key areas, highlighting the benefits from these acquisitions to Montrose. We were also pleased to complete the acquisition of Horizon Water and Environment earlier this month. It supports our environmental advisory presence on the West Coast and augments our water resource knowledge. I'm delighted to have the Horizon team on our squad, helping us think more proactively about our approach to the water market. So in summary, we continue to outperform. As you, our shareholders, have gotten to know us over the course of the last 15 months, I hope you can see we are transparent with you and do what we say. We appreciate the time you've given us as our story, our strategy, and our approach lack many comparisons or precedents, which presents challenges in the context of public markets. Those are also reasons why we remain so excited about our future. This is a great time to be part of creating solutions for the world's environmental challenges. I also want to reiterate my gratitude for my team. We thank and acknowledge all our colleagues around the world for the tremendous work they've done at Montrose. More than anything, the caliber of our talent is the reason Allan and I have confidence in our raised outlook for 2021 and beyond. This market remains very dynamic, and there are numerous opportunities to allocate capital constructively. We appreciate your support as we continue to do so. Please stay safe out there, and we look forward to closing out a strong 2021 and speaking again with you as we look forward to a great 2022. With that, let me hand it over to Allan. Thank you.

Thank you, Vijay. Our strong performance in the third quarter and year-to-date reflects the regulatory themes we've discussed since our IPO, coming to fruition as the need for environmental remediation and monitoring, particularly for PFAS, gains momentum across the globe. Our resilient core business continues to grow, and we continue to execute our M&A strategy with the recent closing of our sixth acquisition in 2021. In addition, we further strengthened our capacity for growth through the successful completion of our follow-on equity offering in October. Moving to our revenue performance on Slide 10. We continue to drive strong growth across our business. Our third quarter revenue increased 57% to $132.6 million compared to the prior year quarter. Year-to-date, revenues were up 83% versus the prior year period to $402.6 million. The primary driver of revenue growth in the quarter was organic growth in our CTEH emergency response business and our remediation and reuse segment, largely offset by an expected decrease in revenues in our Measurement and Analysis segment. Revenue growth also benefited from the acquisitions of MSE in January 2021, Vista in June 2021, and Environmental Intelligence in July 2021. The business drivers were similar for the year-to-date period, and it also included the benefit of a full period of results or CTEH, which was acquired in April 2020. As mentioned on prior calls, we completed the process of discontinuing service lines early in the second quarter of 2020, which partially offset our year-to-date comparisons. Excluding these discontinued service lines, revenues would have increased 87% year-to-date. I would also like to reiterate that we generally don't focus on organic growth on a quarterly basis as year-over-year quarterly comparisons can be misleading. That being said, we are seeing strong organic growth in 2021, excluding contributions from CTEH and on the high end of our expected 7% to 9% annual organic growth expectations. Looking at our adjusted EBITDA performance on Slide 11. Third quarter adjusted EBITDA grew 29% to $21.5 million, and adjusted EBITDA margin declined 350 basis points to 16.2% of revenue. Year-to-date, adjusted EBITDA grew 64% to $59.2 million, and adjusted EBITDA margin declined 180 basis points to 14.7% of revenue. The improvement in adjusted EBITDA was primarily driven by higher revenues. The year-over-year change in margins for both periods was mainly due to business mix. The planned and expected normalization of margins in certain business lines, following temporary COVID-related cost mitigation actions taken in the prior year, which have been reversed, and public company costs for the full 9 months in 2021 compared to 2 months in the comparable period in 2020. I'll reemphasize that Montrose's performance needs to be assessed annually. This is how we evaluate the business due to the stronger predictability of the business on an annual basis. This approach is consistent with how we hire staff, allocate resources, and manage the company. Turning to our business segments on Slide 12. In our Assessment, Permitting, and Response segment, third quarter revenue grew to $63.4 million from $26.6 million in the prior year and adjusted EBITDA improved to $15.7 million from $8.2 million in the prior year. The significant year-over-year increases in both revenue and adjusted EBITDA were mainly driven by CTEH, which has seen an acceleration in demand for providing pandemic response-related services, along with contributions from the EI acquisition. CTEH revenues in the third quarter were $53.6 million compared to $22.6 million in the prior year. The decline in segment adjusted EBITDA margin to 24.8% was a result of lower margin covered work performed by CTEH. We expect normalized adjusted EBITDA margins in this segment to run between 25% and 30%. In our Measurement and Analysis segment, third quarter revenue decreased 2.5% year-over-year to $38.8 million, primarily attributable to the postponement of certain projects into the fourth quarter and partially offset by revenues from our Vista acquisition. Adjusted EBITDA margin declined to 21.4% due to business mix and the reinstatement of certain costs that have been temporarily suspended at the outset of the COVID-19 pandemic. We expect adjusted EBITDA margins in this segment to continue to run around 20% over the long term. Finally, in our Remediation and Reuse segment, third quarter revenues increased 66% year-over-year to $30.4 million, reflecting growing organic demand for PFAS remediation and waste-to-energy services, as well as the acquisition of MSE. The 700 basis point increase in Remediation and Reuse adjusted EBITDA margin to 18% was a result of higher revenues. Adjusted EBITDA margin in this segment continues to reflect the impact of elevated fixed costs and investments in anticipation of growth and geographic expansion. At scale, we expect the segment to run at the mid-20% adjusted EBITDA margins. Looking at a review of our base business trajectory on Slide 13. As mentioned in our Q2 quarterly earnings call, we now estimate that CTEH's annual revenue run rate is $75 million to $95 million, up from our previous estimate of $60 million to $80 million. Although sequential quarterly CTEH revenue continues to normalize, CTEH's revenues were $70.6 million in Q1, $65.9 million in Q2, and $53.3 million in Q3, and it remains elevated as a result of heightened demand for COVID-19-related services. That said, demand for these services and the revenue they produce is expected to be transitory in nature and not expected to recur at the same elevated level in the coming years as the impact of COVID-19 lessens. Excluding above-trend revenue from CTEH, the remainder of our revenue, or what we refer to as our base business, which includes the revenues we would expect to see from CTEH in a given year, continues to experience a solid trajectory and is increasingly benefiting from tailwinds, positioning us well for further growth. Moving to our capital structure on Slide 14. I'm particularly proud of our operating cash flow generation in the third quarter of $30.8 million, which reflects robust cash earnings and a decrease in working capital, primarily driven by lower receivables. Year-to-date cash flow from operating activities was $13.7 million, an increase of $17.6 million compared to the prior year period. Cash from operations includes the payment of acquisition-related contingent consideration of $15.5 million and $6.4 million in the current and prior year, respectively. Excluding these acquisition-related payments, year-to-date cash from operating activities was $29.2 million in the current year compared to cash from operating activities of $2.5 million in the prior year, representing an increase of $26.7 million. This increase was driven primarily by significantly higher year-to-date earnings before contingent consideration payments and non-cash items, partially offset by an increase in working capital in the current year of $17.6 million versus an increase in working capital in the prior year of $7.8 million. The increase in working capital in the current year is due to an increase in accounts receivable and contract assets of $4.5 million, an increase in prepaid expenses and other current assets of $1.8 million, and lower accounts payable and other accrued liabilities of $3.4 million. We continue to expect strong cash flow from operations for the balance of the year, with a long-term conversion of adjusted EBITDA into operating cash flow at a rate in excess of 50%. This incorporates our expectation that as a growing company, we will continue to balance the generation of cash with investments in technology, R&D, and infrastructure to ensure continued scalability. Our leverage ratio as of September 30, 2021, which includes the impact of acquisition-related contingent earn-out payments that may be comparable in cash, was 2.8x, down from 3.1x at the end of the second quarter. In October, we completed a follow-on equity offering, raising net proceeds of approximately $169.8 million. Following this offering, we had $273.8 million of liquidity, including $148.8 million of cash on hand and approximately $125 million of availability on our credit facility with an additional $150 million available under the credit facilities. Pro forma for the equity raise, our leverage ratio is 0.8x, well below our longer-term target leverage of below 3.5x. The capital raise significantly enhances our liquidity, granting us further flexibility to invest in additional M&A, expand our business operations, fund research and development, and invest in working capital. As a reminder, our Series A-2 preferred stock has no maturity date, and we have the option, but not the obligation, to redeem the preferred shares at any time for cash, subject to a make-hole payment in the first 3 years. We view this preferred equity instrument as favorable to the value creation potential in the business given its flexible dynamics. If you include the $182 million balance of the Series A-2 equity in our market cap, our total equity capitalization stands at approximately $2.4 billion. Moving to our full year outlook on Slide 15. Based on our performance during the first 9 months of 2021, we are increasing our full-year adjusted EBITDA estimate to a range of $75 million to $80 million, which is up from previous guidance of $70 million to $75 million. Our updated guidance implies adjusted EBITDA growth of 38% to 47% year-over-year. The increase from our prior range reflects our strong results in the third quarter and expectation of some continuation of elevated CTEH results from COVID-19 response work in the fourth quarter, a continued stream of project wins, and our recently closed acquisitions. As a reminder, this outlook is based on a combination of high single-digit to low double-digit organic growth for the year, excluding CTEH, plus the contribution of completed acquisitions. As we have mentioned on previous calls, our full-year 2020 margins reflected a higher-than-usual margin increase year-over-year due to the temporary cost mitigation measures taken in response to the COVID pandemic. These mitigation efforts have been fully reversed in the current year, and we are now back to investing in SG&A, R&D, and expansion in accordance with our long-term plan as a growth-oriented company. We will incur a full year of public company-related costs in 2021. While we had initially expected our full-year 2021 margins to be steady year-over-year despite this, we are now seeing the surge in CTEH COVID-19-related work, which operates at lower margins than CTEH's typical margins, and the resulting change in business mix for 2021 is likely to weaken full year margins slightly versus the prior year. That being said, our outlook for continued consolidated adjusted EBITDA margin expansion over a 4- to 5-year period remains unchanged. Overall, demand for our services remains resilient and is accelerating in some of our key service lines. We are thrilled to see continued strong organic growth, both with and without CTEH, as the trends we've discussed since our IPO last year continue to accelerate. To this point, our differentiating solutions to address greenhouse gases, PFAS, and renewables are driving strong momentum in our business, and recent news of additional rules and regulations give us confidence to deliver on our objectives in 2021 and beyond. While the timing of projects can influence quarterly performance, as seen in the shift in some projects to the left during the third quarter in our Measurement and Analysis segment, our growth thesis remains intact for the full year 2021. We see an immense addressable market, and we continue to target accretive M&A opportunities that allow us to offer more value to our customers through additional service lines and technological advancements. We have the right strategy and the team to execute, and we expect to continue operating at a high level in the coming quarters and years. We look forward to updating you on the progress we've made in our business next year as we continue to become the leading global environmental solutions brand. We sincerely appreciate your interest in Montrose, and thank you all for joining us today. Operator, we are ready to take our lines to questions.

The first question is from Andrew Obin from Bank of America.

This is Emily Shu on for Andrew Obin. So yes, my first question is just if you could provide any detail and color on CTEH's performance next -- in Q4 and next year, given expected normalization of COVID-related work, that would be great. Should CTEH's COVID-related work in Q4 be similar to Q3? Or do you expect a bit of a step-down? And then also, how much of that normalized run rate do you expect to be COVID work next year?

Yes. Emily, this is Vijay. It's really -- and we've said this to you before, it's really hard to predict what the pandemic-related or response-related work will be. Let me reframe how we think about our CTEH set of opportunities. For all the reasons we've shared with you before, a bigger market share, more incidents, more services, and an expanded team, we think they're really well positioned to continue performing at or above the $75 million to $95 million per year revenue run rate. We currently anticipate that at least through the winter, the COVID-related work will continue. It's really hard to predict exactly when that's going to ebb and flow. Part of the reason it's difficult to predict is due to ongoing fluctuations in regulations. You saw what the Biden administration did with vaccines and testing. OSHA rules came out; some of the court stayed some of that. Our clients, including Montrose, struggle a little bit with exactly how to implement all of that. And the CTEH team, of course, with their experience and expertise, is really well positioned to advise folks through that. For all those reasons, it's hard to predict exactly when it's going to start and stop. But what I can share with you, with the confidence Allan and I have leading into the back half of this year and actually to the end of this year and the first half of next, is that we do anticipate they'll remain elevated, though the magnitude will be difficult to predict at this stage. Does that answer your question?

Yes, that's great. And then just a follow-up question on Measurement and Analysis. Just curious what drove the postponement in projects in the third quarter. Is that just customers delaying projects because of uncertainty around inflation and labor availability, or is there something else to it?

No, there's really nothing else to it. It's just the nature of the work. I think I've said this to you before. When you do these tests and you do them once a year, for example, whether you do it in June or July is meaningless to the client. To Montrose, but it means a lot to folks that measure us on fiscal quarters. So if you move from September to October or something that pushes from Q3 to Q4, there is no material impact from our clients' perspective or Montrose's perspective, which is why we keep saying quarterly does not make sense to measure Montrose. So there's nothing untoward in the business. We remain very bullish on it.

The next question is from Tim Mulrooney from William Blair.

Two questions for me. The first is on your guidance. Your full year guidance implies fourth quarter adjusted EBITDA of about $18 million at the midpoint, which is about flat with last year. Is that primarily because of the difficult comparison with CTEH last year? Or are there other factors that we might want to take into account as well?

There's certainly -- Tim, this is Allan. CTEH did $45 million of revenue in the same quarter of 2020. So you're right, the comparisons in terms of what we forecast are about flat for CTEH. And then we've incurred public company costs that are higher this year. You also have the unwinding of some cost mitigation efforts that were in place for all of last year. So yes, that's a big part of it. But the organic growth on the revenue side, as we mentioned in our prepared remarks, is accelerating. We expect strong performance on the revenue side to lead to favorable comparisons year-over-year.

I forgot about the cost mitigation efforts and those costs coming back in. So that makes a lot of sense. And then I wanted to ask about CTEH revenue. If the step-up in CTEH revenue in the third quarter was primarily pandemic response-related revenue, or if there was any step-up in disaster response related revenue from Hurricane Ida down in Louisiana? I heard that there was some petrochemical infrastructure that was taken out of commission for a while, so I didn't know if there were other elements adding to CTEH's revenue stream. It sounds like from your prepared remarks that it's almost all pandemic-related.

No. No. Tim, sorry, and perhaps we don't do it justice. The team does a fantastic job of having a robust response portfolio. There are many incidents, clients, and projects that contribute to their aggregate performance. Yes, there is some hurricane response, and there will be some oil spill response. They have a market-leading position and more incidents or events that result in environmental emergencies. Because they have more market share, more services, and more personnel, they're able to serve our clients across our broader portfolio. So all of the above applies. And that's why we talk about the pandemic so much—it's a significant part of their performance, but it is not the whole story. We are serving our clients across a broad portfolio of services.

The next question is from Noelle Dilts from Stifel.

Congrats on the quarter. I was hoping you could comment on some of the more emerging markets you've talked about in the past, such as biogas and carbon capture. If you could frame how you're thinking about those opportunities for next year and if you're seeing areas of particular acceleration as we look out over the next few years?

That's a great question, Noelle. We often don't spend time with you on it, but it's a large part of why I'm really optimistic. In the biogas space, as we think more geopolitically and at macro markets, any transition, which is clearly signaled by our political sphere, will necessitate some degree of transition with natural gas being a big part of it. Coupled with the fact that biogas is negative carbon intensity energy, we believe this will drive continued demand from the client side. Clients are indeed asking for more. We are seeing more market opportunities, and the team is doing more. This is a key part of the organic growth you see in the Remediation and Reuse segment, which is why we’re predicting low double-digit organic growth with potential for upside into Q4 for the year. We observe sustained demand there, and we think some macro factors are influential. Regarding carbon capture, we don't anticipate generating any revenue in the immediate term. However, our research and development team is actively involved. They are making encouraging inroads, though it's too early to discuss the impact on our P&L. Water infrastructure, especially now with the infrastructure bill, sees increased investment around remediation and PFAS treatment. Moreover, allocations have spurred some activity. Thus, we see a lot of demand driven not only by capital allocation and regulatory pressures but also from ESG pressures from shareholders, capital markets, and companies we serve. We're optimistic about biogas, renewables, water treatment, and methane mitigation, which we currently identify as primary growth markets likely to influence our financial trajectory both this year and in 2022 and beyond.

That's great. Super thorough. Really quick, somewhat related follow-up question. With Horizon, you mentioned that they're helping you take a more proactive approach to the water markets. I guess I've always thought Montrose had a pretty proactive approach. Could you just expand on what you mean by that and just the strategic importance there?

Yes. They're on our advisory side. They help organizations think about regulations, various capital dollars at play, particularly with the infrastructure bill, which entails some nuanced pockets for resiliency, treatment, and infrastructure upgrades. Our existing portfolio primarily revolves around PFAS remediation, where we assist industrial and DoD clients with treating PFAS-contaminated water. Horizon has a much broader mindset regarding ecological services and water. They provide fantastic insights into potential ways to cross-sell services and penetrate new water markets, leveraging some advantages we possess. That’s what I meant by a more proactive approach.

The next question is from Chris Granda from Needham & Company.

This is Chris on for Jim. Congrats on the results. It sounds like there's a rich pipeline of M&A opportunities, and with the capital raise, should we expect a faster pace of M&A? Do you anticipate changes in the profile of the kinds of deals you're pursuing in terms of size and rationale? Or should we expect a continuation of the current strategy?

Yes, Chris. We are not changing our strategy. What we've been doing works, and we plan to continue with our current approach. We are well positioned to capitalize on opportunities, and that's precisely what the capital raise was intended to facilitate. The pipeline remains robust; candidly, the market is fragmented, and we've noted previously that there's been no shortage of assets. There are even more assets coming to market now, but the market valuation expectations are quite high. We will remain disciplined; we're still targeting mid- to high single-digit multiples. Maintaining that discipline is critical for our long-term vision. Please don’t expect us to shift our strategy. There are attractive opportunities for capital deployment here from not just M&A but also for organic growth, and we plan to act proactively. We intend to continue executing well moving forward, just as we've done so far.

Perfect. That's very helpful. And with the passage of the infrastructure bill, have you seen any changes materialize with respect to clients trying to get out in front of what’s coming down the pike over the next couple of years? Do you have insight into which areas of the business will be most affected by the bill?

Yes. It’s a bit early. The expectation was that this bill would pass, though which pieces were always uncertain given congressional activity. However, we certainly, and I believe most of our clients anticipated this would come through. There hasn't been an immediate change; it will take time for some of that to flow through the system. The part of our business we expect to be positively impacted is our Assessment and Permitting teams. As infrastructure is built or even decommissioned, environmental assessments and permits are often necessary, and we expect increased demand in those areas within our AP&R segment. Testing needs typically rise as well, and the infrastructure build has remediation dollars allocated. So, I expect to see continued benefits across the board at Montrose, but it's still early to pinpoint specifics.

This concludes the question-and-answer session. I would like to turn the conference back over to Vijay Manthripragada for any closing remarks.

Thank you all very much for making the time. We really do appreciate it. We appreciate your continued support of Montrose. Take care, be well out there. Allan and I have been the beneficiaries of a very gracious set of hosts here in Little Rock with our CTEH team, and we're excited about the prospects going into next year. In gratitude to the CTEH team, we'd just like to close by saying, go Hogs. Thank you.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.