Onterris, Inc. (ONT) | The Buildout — AI Infrastructure
The Verdict
Onterris is an environmental services and solutions company. It handles environmental consulting and assessments, emergency response and recovery, permits and audits, engineering and design, treatment of contaminated water, and laboratory testing of air, soil and water. Its clients are mostly private-sector industrial, energy and infrastructure operators whose projects need environmental review, monitoring and compliance. The company is not a supplier of AI infrastructure components: its own filings and calls do not present AI as a demand driver, and management named technology companies building data centers as an end market only on an earlier call.
| Market Cap | — |
| Revenue (TTM) | $773M |
| Revenue Growth | −0.9% |
| EBITDA Margin (TTM) | 7.4% |
| Net Debt | $406M |
| Earnings Beats | 0 of 2 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- FY2025 was a record year: revenue $830.5M (+19.3%), adjusted EBITDA $116.2M (+21.3%), operating cash flow $107M at 93% of adjusted EBITDA, and free cash flow $87M.
- The FY2026 EBITDA guide was cut only $9M at the midpoint against a roughly $105M revenue cut, while the margin guide rose to 15.5%.
- Consulting and Treatment segment margin improved to 22.2% in Q2 2026 from 21.9%, in the segment that absorbed the emergency response shortfall.
- Cash commitments held: ~60% operating cash conversion, $70M–$80M expected in H2 2026, and year-end leverage guided to ~2.5x.
- PFAS was 10%–15% of 2025 revenue, the water treatment market is framed as exceeding $250 billion, and cross-sell share of revenue rose from 53% to 62%.
What We’re Watching
- The Board-led strategic review has no timetable and includes evaluating acquisition interest in the company; a short-term rights plan is in place and management deferred specifics to an 8-K.
- Whether the cost efficiencies management calls 'permanent' hold as revenue scales, or turn out to be cost-base reduction.
- Air-testing waivers — rules remain promulgated and the work is expected to be done, but management conservatively assumes ongoing waivers in the second half.
- H2 2026 delivery: $70M–$80M of operating cash flow and ~2.5x year-end leverage, from 3.2x at June 30.
The thesis is weakening at the top line and holding, so far, at the margin. Revenue guidance fell about 12% at the midpoint in five months, the Q2 print came in below the company's own May guide for that quarter, and forward visibility is thin — remaining unsatisfied performance obligations were $49.7M at March 31, 2026, roughly 6% of annual revenue and down from $68.4M at year-end 2025. What has not broken is the margin and cash commitment, and the whole test is whether the second half delivers it. The open question is whether the cost savings behind the 15.5% margin guide are structural or a floor that revenue eventually breaks through.
Earnings
Q2 FY2026 revenue was $186.7M, down $47.9M from a year earlier and below the $190M–$210M the company guided for the quarter in May. Gross margin was 44.1%. The prior-year quarter included roughly $53.6M of revenue from a single environmental emergency response event and the recovery work that followed; Consulting and Treatment revenue fell to $125.6M from $171.7M on $37.7M lower emergency response revenue and $11.2M lower recovery services, while Measurement and Analysis came in at $61.1M versus $62.8M. Consolidated adjusted EBITDA was $31.9M at a 17.1% margin, up in margin from 16.9%.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $187M | $168M | $234M | −20.4% |
| Gross margin | 44.1% | 32.3% | 43.4% | +70bps |
| EBITDA | $19M | $6M | $28M | −30.3% |
| EPS | $0.04 | $-0.35 | $0.42 | −91.4% |
Every outcome within this updated EBITDA guidance range would represent a new record for Onterris.— Vijay Manthripragada, CEO, 2026-08-05
Management tone: Management held a short-notice call and asked analysts to keep their questions focused on the quarter. It confirmed the weakened core-revenue arithmetic directly when an analyst walked through it, and reframed the discussion from gross revenue to revenue excluding pass-through. On the strategic review and the rights plan, management declined specifics and deferred to an 8-K filing, while saying it was 'not unusual for companies to hear from interested parties.'
Management Guidance
Management cut FY2026 revenue guidance to $740M–$790M from $840M–$900M, and adjusted EBITDA to $117M–$120M, a $9M reduction at the midpoint, while raising the margin guide to 15.5%. Q3 2026 is guided to $190M–$210M of revenue at a 17%–18% EBITDA margin. Operating cash flow is held at about 60% of full-year EBITDA, including $70M–$80M in H2 2026 and slightly Q4-weighted, with year-end leverage of approximately 2.5x. The guide conservatively assumes ongoing air-testing waivers in the second half, and it carries an emergency response assumption set from historical averages rather than direct visibility.
Trajectory
Revenue fell for three consecutive quarters into March 2026, from $234M in the June 2025 quarter to $168M, then rose to $186.7M in the June 2026 quarter. The drivers management gave were mechanical: roughly $37.7M lower emergency response revenue and $11.2M lower recovery services inside Consulting and Treatment, plus pass-through work that fell from about 25% of revenue historically to below 20% this year. Computed signals from the audited data show the revenue trajectory decelerating and gross, operating and EBITDA margins compressing over the trailing period, while management credits cost optimization for the raised full-year margin guide.
The Model
The model projects FY+1 revenue of $765M with EBITDA of $81M, a 10.6% margin, and FY+2 revenue of $810M with EBITDA of $98M, a 12.1% margin. The model's EBITDA is on the same operating income plus D&A basis as the trailing figures, so it is not directly comparable to the company's own adjusted EBITDA guidance. The near-term anchor is the revised FY2026 revenue guidance of $740M–$790M, with Q3 2026 guided to $190M–$210M. FY+2 depends on the emergency response cycle and the waived air testing normalizing, and on margin expanding with scale.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $830M | $765M | $810M |
| YoY Growth | — | −7.9% | +5.9% |
| EBITDA | $63M | $81M | $98M |
| EBITDA Margin | 7.5% | 10.6% | 12.1% |
Projections are the median of 5 independent model runs. The model’s revenue sits 8.9% below analyst consensus.
Management cut FY2026 revenue guidance to $740M–$790M from $840M–$900M, and adjusted EBITDA to $117M–$120M, a $9M reduction at the midpoint, while raising the margin guide to 15.5%. Q3 2026 is guided to $190M–$210M of revenue at a 17%–18% EBITDA margin. Operating cash flow is held at about 60% of full-year EBITDA, including $70M–$80M in H2 2026 and slightly Q4-weighted, with year-end leverage of approximately 2.5x. The guide conservatively assumes ongoing air-testing waivers in the second half, and it carries an emergency response assumption set from historical averages rather than direct visibility.
What Could Go Right — and Wrong
- Emergency response revenue returns toward the $50M–$70M range assumed at the start of 2026, restoring high-margin revenue plus the recovery and pass-through work that follows it.
- Air-testing waivers lapse and the deferred work is performed, putting the $15M–$25M 'other revenue' cut back into the plan.
- The cost efficiencies management calls 'permanent' hold as revenue scales, keeping margin at or above the 15.5% guide.
- H2 2026 delivers $70M–$80M of operating cash flow, bringing year-end leverage to ~2.5x and preserving capacity for bolt-on acquisitions.
- The C$9M+ Canadian contract running through end-2027 and more than $9M of new energy-client awards grow into a larger, longer-duration project book.
- Air-testing waivers persist or broaden, making the regulatory item structural rather than a timing delay.
- The cost actions prove to be cost-base reduction rather than efficiency, and margin undershoots the 15.5% midpoint.
- Emergency response stays at a historically low cycle for a second year, removing high-margin revenue and the cross-sell relationships it starts.
- H2 operating cash flow falls short of $70M and year-end leverage ends above ~2.5x, from 3.2x at June 30.
- Pass-through revenue keeps falling, shrinking gross revenue without a matching margin benefit as fixed costs are absorbed over a smaller base.
Looking Ahead
The next twelve months run through three checkpoints: the Q3 2026 print, second-half cash flow and year-end leverage, and the Board's strategic review, which has no timetable. Management also expects to restart small bolt-on acquisitions in H2 2026 and to convert PFAS, water treatment and named industrial end-markets into revenue. The unresolved items are whether the air-testing waivers are timing or structure, and what the strategic review decides.
- Q3 2026Q3 2026 earnings print — First test of the revised guide: $190M–$210M revenue at 17%–18% EBITDA margin
- H2 2026H2 cash flow delivery — $70M–$80M guided; DSOs expected to keep declining through the back half
- H2 2026Bolt-on M&A restart — Management expects small acquisitions in testing and Consulting and Treatment
- Year-end 2026Year-end leverage target — ~2.5x guided, from 3.2x at June 30 and flat year over year
- Through end-2027Canadian gas contract revenue — C$9M+ services contract on a C$3B gas transmission project
- No timetableStrategic review outcome — Review includes evaluating acquisition interest; no assurance of a transaction
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $696M | $830M | $773M | +19.3% |
| Gross Margin | 39.8% | 38.5% | 37.2% | 130bps |
| EBITDA | $28M | $63M | $57M | +126.4% |
| EBITDA Margin | 4.0% | 7.5% | 7.4% | +357bps |
| Net Income | −$62M | −$1M | −$11M | +98.7% |
| Free Cash Flow | −$2M | $91M | $52M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)37.2%
- EBITDA Margin (TTM)7.4%
- Net Margin (TTM)-1.4%
- ROIC0.7%
- FCF Conversion90.8%
- SBC / Revenue4.8%
The Company
Onterris is an environmental services and solutions company. It runs scientific consulting and environmental assessments, emergency response and recovery, audits and permits, engineering and design, treatment technologies for contaminated water, soil contaminant removal, and multi-media laboratory testing of air, soil, stormwater, wastewater and drinking water. Its 10-K business summary describes the work as serving 'complex and often non-discretionary environmental needs,' with a private-sector-heavy client base.
The company operates roughly 120 offices across the United States, Canada and Australia, with approximately 3,500 employees as of March 31, 2026. It has grown largely by acquisition: the 10-K lists eleven acquired operating locations dated between January 2023 and September 2024, and the company disposed of its Denmark business in 2025 and wound down its renewables business. Effective Q1 2026 it realigned into two reportable segments, Consulting and Treatment and Measurement and Analysis, and in April 2026 it changed its legal name from Montrose Environmental Group, Inc. to Onterris, Inc.
Business Segments
Competitive Landscape
The FY2025 10-K names competitors by segment, and the lists describe a fragmented market: large global engineering firms, specialist environmental consultancies, specialized testing companies and, in the filing's words, 'other large engineering companies and small businesses.' Management frames the emergency response shortfall as cyclical rather than competitive: 'We don't believe we are losing work to competitors. This is just a low point of the cycle.'
- Named in the 10-K as a competitor in the Remediation and Reuse segment, now part of Consulting and Treatment. Competitor disclosure describes its data-center work as 'relatively small… around $60 million for the year.'
- Named as a Remediation and Reuse competitor. Lists data centers among its fastest-growing businesses.
- Named as a Remediation and Reuse competitor. Guides data-center revenue to grow about 200% in 2026 and to exit the year at about 2% of company revenue.
- ERMNamed in the 10-K competitor list for Assessment, Permitting and Response, now inside Consulting and Treatment. Named in filings; not discussed.
- EurofinsNamed in the 10-K competitor list for Measurement and Analysis. Named in filings; not discussed.
Supply Chain
Onterris is a services, testing and consulting business rather than a manufacturer, so its supply chain runs mainly to subcontractors, equipment and labor. The 10-K confines supply-side risk to product offerings primarily in the former Remediation and Reuse segment.
More on ONT: Earnings recap