Asked if the change in mix within the Consulting and Treatment segment implies a shift towards consulting and less treatment work.

Vijay clarified that he was referring to Consulting and Treatment as an aggregate percentage of total revenue, not a shift within the segment itself. He noted that water treatment remains an attractive long-term opportunity. “No, I just meant in aggregate, Tim, in aggregate Consulting and Treatment as a percentage of our total. No, we continue to see really nice long-term opportunity on the water treatment side, in particular, that remains a very attractive outlook for us.”

Asked for more elaboration on the "$20 million of other revenue impacts" and if any end markets surprised them in the quarter.

Vijay explained that the "other revenue" impact primarily relates to their air testing business, where momentum was offset by temporary regulatory waivers granted by federal and state regulators for select air testing services. He emphasized that the rules haven't changed, but the work is delayed. He stated that end market demand remains strong, and no other end markets presented surprises. “I was speaking specifically about our air testing business, which, as you know, saw weather-related impacts in the first quarter, and we expected to see continued momentum through the rest of the year. And that momentum has certainly picked up, but it's been offset by these temporary regulatory waivers that certain of our clients received from federal and state regulators for select air testing services.”

Asked if there had been dialogue with the "referenced investor" regarding the strategic review and the shareholder rights plan.

Vijay declined to comment on specifics but stated that it's not unusual for companies to hear from interested parties. He reiterated that the Board is conducting a thorough review of all alternatives and will provide updates as appropriate. He also mentioned that an 8-K filing would disclose details of the rights plan, which is short-term and intended to create a level playing field. “Wade, I'm not going to comment on specifics as I'm sure you can understand. But look, it's not unusual for companies to hear from interested parties in potential transactions from time to time.”

ONT

Onterris (ONT) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Aug 5, 2026

Source: earnings call transcript

Executive summary

Onterris Q2 FY26 — Strategic Review Initiated Amidst Lower Revenue Outlook and Strong Profitability

Onterris reported Q2 FY26 results below revenue expectations, primarily driven by historically low environmental emergency response activity and reduced pass-through revenue. Despite the top-line pressure, the company demonstrated strong profitability, with consolidated adjusted EBITDA margins expanding due to successful cost optimization efforts. The Board has initiated a comprehensive review of the business portfolio and strategic alternatives, while management remains focused on executing its stand-alone strategic plan, including disciplined bolt-on acquisitions in the second half of the year.

Highlights

Consolidated adjusted EBITDA margin increased to 17.1% in Q2 FY26 from 16.9% in Q2 FY25, reflecting successful cost optimization.
Full-year EBITDA guidance midpoint increased to 15.5% margin, representing 150 bps expansion YoY and 50 bps expansion vs. original 2026 guidance.
Full-year operating cash flow expectations largely unchanged, with $70M-$80M expected in H2 FY26, maintaining 60% operating cash conversion.
Year-end leverage expected to be approximately 2.5x, flat YoY despite $30M in share repurchases and $21.8M in acquisition-related payments.
Consulting and Treatment segment adjusted EBITDA margin improved to 22.2% from 21.9% YoY, driven by favorable project mix and improved operating performance.

Concerns

Q2 FY26 revenue was $186.7M, below expectations, primarily due to historically low environmental emergency response and related recovery services.
Full-year revenue guidance range updated to $740M-$790M, reflecting $45M lower pass-through revenue, $40M lower emergency response revenue, and $20M of other revenue impacts at the midpoint.
Measurement and Analysis segment adjusted EBITDA margin declined to 26.2% from 29.1% YoY, primarily due to lower operating leverage on reduced revenue base.
Net cash used in operating activities was $5.5M for the first 6 months, compared to net cash provided of $27.4M in prior year, due to lower earnings and higher working capital usage including a $27.7M bonus payment.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 Revenue	$740 million to $790 million high materiality	FY26	High
Full-year 2026 Adjusted EBITDA	$117 million to $120 million high materiality	FY26	High
Full-year 2026 Adjusted EBITDA Margin	15.5% high materiality	FY26	High
Full-year 2026 Operating Cash Flow	Approximately 60% of full year EBITDA high materiality	FY26	High
H2 2026 Operating Cash Flow	$70 million to $80 million medium materiality	H2 2026 · FY26	High
Year-end Leverage Ratio	Approximately 2.5x high materiality	FY26	High
Q3 2026 Revenue	$190 million to $210 million medium materiality	Q3 · FY26	High
Q3 2026 EBITDA Margin	17% to 18% medium materiality	Q3 · FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Consulting and Treatment Revenue decline primarily reflected $37.7M lower environmental emergency response revenue and $11.2M lower recovery services from a single large event in the prior year. Margin improved due to favorable project mix and improved operating performance. Adjusted EBITDA margin: 22.2% (Q2 FY26)Adjusted EBITDA margin (prior year): 21.9% (Q2 FY25)	$125.6 million	—	—	22.2%
Measurement and Analysis Revenue decline primarily reflected lower field services revenue, partially offset by higher lab testing revenue. Margin decline due to lower operating leverage on reduced revenue base, but still strong. Adjusted EBITDA margin: 26.2% (Q2 FY26)Adjusted EBITDA margin (prior year): 29.1% (Q2 FY25)	$61.1 million	—	—	26.2%

Deals & partnerships

Montrose Environmental Group, Inc. Rebranding

On April 21, 2026, Montrose Environmental Group, Inc. rebranded to Onterris Inc.

null Resumption of disciplined bolt-on acquisitions

Company expects to resume disciplined bolt-on acquisitions in the second half of 2026 within valuation and leverage parameters, focusing on small deals in testing and Consulting and Treatment. Historically, these have averaged mid-to-high single-digit EBITDA multiples.

Risks & headwinds

Historically low environmental emergency response activity Q2 FY26 and full-year FY26

Q2 FY26 revenue below expectations; full-year revenue guidance reduced by $40M at midpoint due to lower emergency response revenue.

Mitigation:Management views this as an anomaly and not a competitive dynamic; core thesis unchanged, underlying demand remains strong.

Lower pass-through revenue Full-year FY26

Full-year revenue guidance reduced by $45M at midpoint due to lower pass-through revenue.

Mitigation:Management is focusing on higher-margin work and optimizing project mix, which limits the EBITDA impact despite revenue reduction.

Temporary regulatory waivers impacting air testing business Q2 FY26 and expected to continue into H2 FY26

Contributes to $20M of "other revenue impacts" in full-year guidance.

Mitigation:Management has taken a conservative posture in guidance, assuming ongoing waivers. The work is still expected to be done, just delayed.

Working capital usage impacting operating cash flow H1 FY26

Net cash used in operating activities was $5.5M in H1 FY26 vs. $27.4M provided in H1 FY25, partly due to a $27.7M bonus payment.

Mitigation:Expects significant improvement in H2 FY26, with $70M-$80M operating cash flow, driven by increased earnings and seasonal working capital benefits.

What to watch in Q3 FY26

Outcome of Strategic Review

Next quarter (or as announced)

Current Board initiated comprehensive review of business portfolio and strategic alternatives.

Target Update on review progress or outcome.

Why it matters

The review could lead to significant changes in company structure, ownership, or strategic direction, materially impacting shareholder value.

The Board has not made any decisions regarding a particular course of action, and we have not established a timetable for completing the review. The Board will take the time it needs to determine the course of action it believes is in the best interest of the company and all Onterris stockholders.

Find out whether ONT delivers this. Inve re-checks your case every morning.

Q&A highlights

Analyst noted that core revenue (excluding emergency response) appears to be in low single-digit decline based on new guidance, contrasting with prior high single-digit growth expectations. Asked for confirmation and drivers of this change.

Vijay confirmed the math but clarified that the decline is largely due to a significant reduction in lower-margin pass-through revenue, which historically made up 25% of total revenue but is now below 20%. Allan added that pass-through revenue typically has a small markup (3-15%, averaging 10%), so its reduction does impact EBITDA, but the company is prioritizing higher-margin work.

“You're right, there's 2 primary dynamics on the revenue. There's the lower emergency response revenue. There is also a reduction in pass-through revenue. And so let me give you some color because this is not something we've talked about a lot in the past. Historically, pass-through revenue has been approximately 25% of our total revenue. And this year, it is around 20%, below 20%, in fact.”

asked by Timothy Mulrooney · answered by Vijay Manthripragada

2 min read 6 chapters

Detailed narrative

Strategic Review Initiation

The Board of Directors has initiated a comprehensive review of Onterris's business portfolio, capital allocation, long-range strategic plan, and strategic alternatives. This review will consider various options, including potential acquisition interest in the company, other value-creating transactions, operational initiatives, and the continued execution of its stand-alone plan.

The Board has not set a timetable and emphasizes that there is no assurance of any specific outcome, but aims to maximize shareholder value.

Revenue Outlook Revision Drivers

The company updated its full-year 2026 revenue guidance to $740M-$790M, primarily due to three factors: approximately $45M lower pass-through revenue, $40M lower emergency response revenue, and $20M from other impacts such as temporary regulatory waivers for air permitting rules. Management noted that pass-through revenue, historically 25% of total, is now below 20%, and carries lower margins, thus its reduction has a limited impact on overall profitability.

EBITDA Margin Expansion

Despite the significant reduction in revenue expectations, the full-year adjusted EBITDA guidance was only lowered by $9M at the midpoint, to $117M-$120M. This resilience is attributed to successful ongoing cost optimization and operating efficiencies. The updated guidance implies an EBITDA margin of 15.5% at the midpoint, representing a 150 basis point expansion year-over-year and 50 basis points above the original 2026 guidance, highlighting improved profitability.

Operating Cash Flow Strength

The company maintains its full-year operating cash flow expectations, projecting approximately 60% conversion of full-year EBITDA. Management anticipates generating $70M-$80M in operating cash flow during the second half of 2026, driven by increased earnings and seasonal working capital benefits. This strong cash generation is expected to keep year-end leverage at approximately 2.5x, flat year-on-year, even after $30M in share repurchases and $21.8M in acquisition-related payments.

Segment Realignment

Effective Q1 2026, Onterris realigned its reportable segments. The Assessment, Permitting and Response segment and Remediation and Reuse segment were aggregated into a new "Consulting and Treatment" segment. The "Measurement and Analysis" and "Corporate" segments remained unaffected. Prior period results have been recast to conform to this new structure, impacting year-over-year comparisons for the Consulting and Treatment segment.

Acquisition Strategy

Onterris plans to resume disciplined bolt-on acquisitions in the second half of 2026, focusing on small, accretive deals within its valuation and leverage parameters. Opportunities are being explored in both the testing space, where strong momentum and client demand persist, and the Consulting and Treatment segment. The company aims for mid-to-high single-digit EBITDA multiples, consistent with its historical acquisition strategy.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.