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    ONT
    Earnings call· Jun 2026(Q2 FY26)

    Onterris Q2 FY26 earnings call ONT

    Aug 5, 2026 Source

    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

    5

    • 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

    4

    • 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

    8
    CategoryTargetConfidence
    Full-year 2026 Revenue
    $740 million to $790 million
    high materiality
    High
    Full-year 2026 Adjusted EBITDA
    $117 million to $120 million
    high materiality
    High
    Full-year 2026 Adjusted EBITDA Margin
    15.5%
    high materiality
    High
    Full-year 2026 Operating Cash Flow
    Approximately 60% of full year EBITDA
    high materiality
    High
    H2 2026 Operating Cash Flow
    $70 million to $80 million
    medium materiality
    High
    Year-end Leverage Ratio
    Approximately 2.5x
    high materiality
    High
    Q3 2026 Revenue
    $190 million to $210 million
    medium materiality
    High
    Q3 2026 EBITDA Margin
    17% to 18%
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    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%

    Operational metrics

    11
    Consolidated Adjusted EBITDA
    $31.9 millionvs $39.6 million in Q2 FY25
    Q2 FY26

    Primarily due to cost optimization.

    Consolidated Adjusted EBITDA Margin
    17.1%vs 16.9% in Q2 FY25
    Q2 FY26

    Reflects successful ongoing cost optimization.

    Lower Pass-through Revenue
    $35 million to $55 millionvs prior expectation
    FY26

    Consists of revenue on subcontractor and nonlabor direct costs, generally at far lower margins. Reduction primarily related to project mix and focus on higher-margin work.

    Lower Emergency Response Revenue
    $35 million to $45 millionvs prior expectation
    FY26

    Reflects historically low environmental emergency response activity.

    Other Lower Revenue Impacts
    $15 million to $25 millionvs prior expectation
    FY26

    Includes temporary regulatory waivers for federal and state air permitting rules.

    Net Cash Used in Operating Activities
    $5.5 millionvs net cash provided of $27.4 million in H1 FY25
    H1 FY26

    Expected to improve significantly in H2 2026.

    Total Available Liquidity
    $160.8 million
    Q2 FY26

    As of June 30.

    Leverage Ratio under 2025 Credit Facility
    3.2x
    Q2 FY26

    As of June 30.

    Shares Repurchased
    1.6 million shares
    YTD FY26

    Part of capital allocation.

    Contingent Acquisition-Related Payments
    $10.8 million
    YTD FY26

    Paid in the first half of the year.

    Annual Incentive Compensation Payment
    $27.7 million
    Q1 FY26

    Made during the first quarter, impacting H1 operating cash flow.

    Industry KPIs

    1
    MetricValueDetails
    EBITDA margin17.1%%

    Deals & partnerships

    2
    Montrose Environmental Group, Inc.Rebranding

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

    nullResumption 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

    4
    Historically low environmental emergency response activityQ2 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 revenueFull-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 businessQ2 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 flowH1 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

    4

    Outcome of Strategic Review

    Next quarter (or as announced)
    CurrentBoard initiated comprehensive review of business portfolio and strategic alternatives.
    TargetUpdate 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.

    Q&A highlights

    7

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.