Good day, and welcome to the Montrose Environmental Group, Inc. First Quarter 2022 Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Rodny Nacier with Investor Relations. Please go ahead..

Thank you. Welcome to our first quarter '22 earnings call. Joining me on the call are Vijay Manthripragada, our President and Chief Executive Officer; and Allan Dicks, Chief Financial Officer. During our call, we will be referring to our earnings presentation, which is available on the Investors section of our website at montrose-env.com.

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, 2021, 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 margin. We provide these GAAP, 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 the reconciliation thereof to the most directly comparable GAAP measures.

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

Thank you, and welcome to all who are joining us today. I will provide you with a few business highlights, then hand it over to Allan Dicks for our financial review. We will then open it up to Q&A. I will speak generally to Pages 4 through 7 of the presentation provided.

As for the first quarter of 2022, we were pleased to see the strong demand for our environmental solutions continue. I'm thankful to our teams for their continued efforts. They are executing our strategy and collaborating with one another to provide exceptional service to our clients and create great value for our shareholders.

As we discuss our first quarter results and as we say in each update given its importance, our environmental services don't map neatly to fiscal quarters, so Montrose is best assessed on an annual basis, which is how we manage our business as well. With that qualification, the first quarter of 2022 was really about 3 key themes.

First, we continue to see notable organic revenue growth acceleration in our environmental solutions, excluding CTEH. our PFAS water solutions and our negative carbon intensity energy, or biogas teams, were a big contributor to the surge in organic revenue growth.

Second is the deceleration in CTEH's COVID-related work, as we shared with you last quarter. It is proceeding as planned, given the ongoing unwinding of pandemic-related restrictions and testing requirements across the United States. The decline in CTEH was more than offset by growth in the rest of our business, which was very encouraging to see.

Third is the continued accretion of our operating segment's adjusted EBITDA margin. In addition to our solid overall performance in the quarter, we were also happy to bring additional talent to our team through the acquisition of Environmental Standards in January.

As was the case with previous acquisitions, Environmental Standards immediately accretive to our results and contributed to our overall revenue growth in the first quarter. Complementary acquisitions such as ESI remain one of our key growth and value creation drivers. Our M&A pipeline remains robust, and our thesis and strategy remain unchanged.

Furthermore, looking at broader market and regulatory developments, we continue to see many growing environmental needs that validate our strategy and our mission statement of helping to protect the air we breathe, the water we drink and the soil that feeds us.

Let me take a few minutes to walk through some recent developments and some of the catalysts that we see for our business moving forward. On the regulatory front, we see opportunity in connection with the proposal by the U.S.

Securities and Exchange Commission to create standardized financial disclosures of climate risk to ensure companies provide sufficient, consistent, comparable and reliable information.

This proposed rule would require companies to include an analysis of risks, opportunities and business impacts associated with climate-related strategy, outlook and transition plans.

Additionally, public companies would be required to provide climate risk disclosures as well as the materiality of their carbon footprint within the context of Scope 1, 2 and 3 emission reporting requirements.

Proposed rules such as this one, reflects the growing recognition of the need for standardized environmental reporting, which is one of Montrose's strengths.

Should this rule be adopted, we would expect to see upside to our business given our existing services such as climate risk analysis, emissions inventory verification and reporting and the development of climate risk targets and goals. Another theme we've mentioned on prior calls is PFAS, P-F-A-S.

Actions to control and remediate PFAS in the environment continue to advance at a rapid pace, leading to increased activity across all of our segments.

For example, the expected designation of PFOA and PFOS by the EPA as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act, or the CERCLA Act, will have repercussions across the many industries we currently support, including chemicals, refineries, landfills and wastewater facilities.

The passage of this designation will greatly increase the need for environmental assessments, testing, remediation and treatment. We also expect increased due diligence requirements for property transactions and business acquisitions will be needed to assess the group -- the potential presence of PFOA and PFAS from historic activities.

Additionally, increased PFAS testing and water testing, in particular, will be needed as the EPA's fifth Unregulated Contaminant Monitoring Rules, or the UCMR 5, gets underway next year. PFAS monitoring will expand to include all public water systems serving between 3,300 and 10,000 people.

Of note, one of our specialty laboratories has been approved by the EPA for participation in this program. Separately, later this year, the EPA will be publishing its first analytical method for the analysis of nonpotable water and other constituents for PFAS.

The Montrose lab has been selected to join a small group of commercial and government labs participating in the method validation study for the EPA, positioning our testing team well for upcoming wastewater monitoring requirements that will be implemented.

In addition to the federal regulations I just discussed, over 250 state bills addressing PFAS are currently under consideration. These proposals further underpin the anticipated growth in demand for our services as monitoring and litigation in these areas will require our services.

And beyond the U.S., we're also seeing the adoption of low PFAS limits in water across Northern Europe, which continues to create market opportunities for our PFAS treatment technology.

Though the impact of PFAS treatment and testing needs are ready in our financial results this quarter, these regulatory developments are why we remain very optimistic about future market opportunities.

Looking beyond our PFAS services, we're also seeing the growing importance of greenhouse gases, or GHGs, and net zero goals in client environmental mandates driving demand for our unique services targeting greenhouse gas emissions. Voluntary actions to address GHG reductions are on the rise in practically every sector we serve.

We are seeing many opportunities to help clients with the development of their GHG baselines and establishing plans to reduce GHG emissions. Recent engagements of note include companies in the oil and gas, construction materials and metal industries where we are developing net zero implementation plans and identifying reduction strategies.

We are also active in helping clients determine which GHG reporting frameworks are the most appropriate for their operations and stakeholders.

Client activities such as these allow us to work across the Montrose portfolio, including advisory services, source emissions testing, leak detection, community monitoring and environmental permitting and compliance.

We believe Montrose is exceptionally well positioned to help customers navigate rapidly evolving priorities and mandates regarding environmental stewardship, as environmental remediation and protection continue to become more and more central to corporate and governmental policies now and in the future.

With that, next, I will discuss our first quarter business performance by segment. First, within our Assessment, Permitting and Response segment. Despite the planned and expected acceleration in CTEH revenues, most of the revenue in this segment continues to be driven by CTEH.

That said, we were pleased to see continued strong performance for our acquisitions of Environmental Intelligence in July 2021, Horizon in November 2021 and the Environmental Standards in January 2022.

As it relates to CTEH supporting clients through the pandemic, we've mentioned on our prior call that the revenue surge began to moderate during Q3 of 2021, a trend which continued through Q1 of 2022.

While demand is still elevated, compared to the historical run rate for this business, we anticipate the continued normalization of CTEH revenues through 2022 compared to 2021. As such, we expect revenue from CTEH to slightly exceed their $75 million to $95 million revenue run rate, but stay well below their 2021 performance of over $200 million.

It is important to note that the impact of the pandemic is very difficult to predict, so we will stay close on the revenue transition process.

Within the segment and excluding CTEH, our higher-margin environmental assessment, permitting and ecological services continue to see nice organic revenue growth tailwinds as clients have needed regulatory environmental services to maintain operations regardless of COVID.

Next, within our Measurement and Analysis segment, demand for our services remains very strong and drove strong organic revenue growth during the first quarter. We remain well positioned to capture further opportunities in this segment given our position as a market leader in air quality management and PFAS testing in particular.

We remain optimistic on continued growth in this segment, given, for example, the momentum in environmental regulatory requirements and shareholder pressure around retail gas emission measurement as mentioned earlier.

Margins in this segment remained higher than industry averages given our business model, and we expect them to remain at the high teens to 20% as previously discussed.

And finally, within our Remediation and Reuse segment, our trajectory of strong organic revenue growth in the first quarter was again driven by demand for our PFAS water treatment in renewable biogas or negative carbon intensity energy services.

Margins are accretive, as we noted in prior calls, and as expected, but they remain below normal levels, even ongoing investments as our teams, our geographic footprint and our technology grow and mature. As an important point for all the work we do across our segments, last year, 18% of our revenue was sourced from multiple service lines.

We expect to increase that cross-selling success in 2022 and will disclose the cross-selling percentage at the end of each year which is core to our organic revenue growth thesis. So in summary, I would like to once again thank the Montrose team for their hard work and dedication during this quarter.

I'm truly grateful for the team we've built and could not be happier with their execution. With our solid organic revenue growth, excluding CTEH, we reaffirm full year guidance. Looking ahead, we remain as optimistic as ever in future opportunities, building momentum across our businesses. With that, let me hand it over to Allan. Thank you..

Thank you, Vijay. Our results in the first quarter reflect the continued resilience and strength of our business model. The performance in our business reflects the emerging themes we've discussed over the past several quarters, as new environmental regulations and corporate mandates are now at the forefront of regulators and executive minds.

Our growth story remains intact as we saw the benefits from our strong core businesses, integration of accretive M&A and cross-selling strategy drive results during the first quarter. Moving to our first quarter performance on Slide 9. We drove strong organic growth across our business during the first quarter.

Total revenues for the first quarter increased 0.6% to $134.7 million compared to $133.8 million in the prior year quarter. The primary driver of revenue growth in the first quarter was organic growth in our Measurement and Analysis, and Remediation and Reuse segments as well as our acquisitions of Vista, EI, ECI, Horizon and Environmental Standards.

First quarter adjusted EBITDA was $16.5 million compared to $16.8 million in the prior year quarter.

First quarter adjusted EBITDA margin was 12.2% compared to 12.6% in the prior year quarter, mainly due to higher corporate costs, partially offset by improved operating segment's adjusted EBITDA margin of 17.8% in the current quarter, up from 17.3% in the prior year quarter.

As we've discussed on prior calls, Montrose 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 is consistent with how we hire staff, allocate resources and manage the company. Turning to our business segments on Slide 10.

In our Assessment, Permitting and Response segment, revenue and adjusted EBITDA decreased to $45.6 million and $9.6 million, respectively.

The year-over-year decreases in both revenue and adjusted EBITDA were driven by lower revenue from COVID-19-related services provided by CTEH, partially offset by the acquisitions of EI, Horizon and Environmental Standards.

As Vijay mentioned, the normalization of our CTEH revenues was expected as the demand for our pandemic-related services waned, following the reduction of COVID-19 testing and prevention requirements in the U.S. Segment adjusted EBITDA margin was 21.1%, slightly higher than the prior year quarter.

In our Measurement and Analysis segment, revenue increased 18.9% to $39.8 million, primarily attributable to organic growth as well as the acquisitions of Vista and ECI. Segment adjusted EBITDA margin increased to 15.9% as a result of the higher revenue.

And finally, in our Remediation and Reuse segment, revenues increased 96.4% year-over-year to $49.3 million, reflecting a significant increase in demand for PFAS water treatment services and organic growth in our biogas business.

The 630 basis point increase in segment adjusted EBITDA margin of 16.2% was a result of better operating leverage on significantly higher revenue. Segment adjusted EBITDA margin continues to reflect the impact of elevated fixed costs and investments in anticipation of growth and geographic expansion. Moving to our capital structure on Slide 11.

Looking at the first quarter, cash flow used in operating activities was $18.3 million, a decrease of $4.4 million compared to the prior year quarter. Cash flow used in operating activities in both quarters included the impact of seasonality, the payment of annual bonuses and the payment of acquisition-related contingent consideration.

Excluding acquisition-related payments, cash from operating activities was $1.2 million in the first quarter of 2022 compared to cash used in operating activities of $13.9 million in the first quarter of 2021, an increase of $15.1 million.

This increase was driven primarily by an increase in working capital in the current year of $12.5 million compared to an increase in working capital in the prior year of $27.1 million.

Our leverage ratio as of March 31, 2022, which includes the impact of acquisition-related contingent earnout obligations, was 1.1x, down from 3.1x at the end of the prior year quarter.

In January 2022, we entered into an interest rate swap transaction, fixing the variable component of our interest rate on $100 million of borrowings until January 27, 2025. Moves such as this and our follow-on equity offering last quarter give us further financial flexibility to execute on our growth objectives.

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-whole payment we have prepaid prior to April 2023.

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 $1.5 billion. Looking at a review of our base business trajectory on Slide 13.

As we've discussed over the past few quarters, we anticipate an annual revenue run rate of $75 million to $95 million for our CTEH business. Although CTEH revenue continues to normalize, note that CTEH revenues were $70.4 million in Q1 of 2021 and fell sequentially each quarter during 2021 and into 2022 to end Q1 2022 at $29.9 million.

CTEH revenues remain elevated compared to our expected revenue run rate for this business. As we've seen in our first quarter results, demand for COVID-19-related services is expected to be transitory in nature and is not expected to recur at the same level in coming years as the impact of COVID-19-related demand continues to wane.

When excluding the above trend revenue from CTEH, the remainder of our revenue is what we refer to as our base business, which includes the normalized revenues we would expect to see from CTEH. Our base business continues to grow at a solid trajectory reflecting the organic tailwinds we've discussed on this call.

Moving to our full year outlook on Slide 14. Based on our strong start to 2022 and the expected deceleration in our CTEH business, we reiterate our outlook for full year 2022 revenues to be in the range of $520 million to $570 million, and adjusted EBITDA to be in the range of $73 million to $78 million.

Our 2022 outlook is anchored in our expectation for double-digit organic growth, excluding CTEH, plus the contribution of completed acquisitions.

While first quarter margins were lower compared to the prior year quarter due to the reversal of prior cost containment efforts and investments in our corporate infrastructure, we were pleased to see total operating segment margins improve. Our outlook remains unchanged for our consolidated adjusted EBITDA margin expansion over a 4- to 5-year period.

In conclusion, we started 2022 on solid footing as demand for our PFAS-related services are gaining traction with customers at a time when demand for these types of projects has not reached maturity.

This nascent opportunity as well as the increasing momentum in our renewable biogas and greenhouse gas businesses reflect corporate customers beginning to take decisive actions to execute towards their ESG priorities.

These corporate actions and the developing regulatory drivers that we've discussed give us visibility into the ongoing demand for our services through 2022. With our talented team members and investments in our business through R&D, and accretive M&A transactions, we remain confident in our ability to produce another year of strong results.

We are excited for what's to come in the years ahead as we work to drive further value for our shareholders and grow our market share in the environmental solutions industry. We sincerely appreciate your interest in Montrose and want to thank all of you for joining us today. Operator, we are ready to open the line to questions..

And the first question will be from Tim Mulrooney with William Blair..

Congrats on a nice quarter. so I know you didn't talk about this a lot in your prepared remarks, but I wanted to ask about the step-up in corporate investments that you're making to support the growth, the strong organic growth this year.

Can you just talk in a little bit more detail for everybody about exactly what those investments are?.

So why don't -- Allan, do you want me to take the first part of that and then you can maybe walk through the categories?.

Sure..

So Tim, the context of the step-up is because our revenue accelerated faster than we thought. And so as we think about losing our emerging growth status and getting to $0.5 billion of revenue a couple of years ahead of schedule, we had to put in place a series of investments to help us get to $750 million to $1 billion of revenue.

And that includes a series of categories like our internal audit function and all the stocks work that's associated with it, IT investments as our cybersecurity obligations increase, our investments in new geographies, some of which are at the segment level and some of which are at the corporate level as aspects of our revenue surge are in new places, a lot of which we talked about with you on prior calls.

So those are some examples of where those investments have been made. Allan, I don't know if you want to maybe step through some specific categories in terms of the total dollars..

Yes. I would just add, Tim, right, as a still young, fast-growing company, we've -- there are a lot of resources that have needed to be added over the years. We've always managed corporate to a percentage of revenue so that we don't get too far over our skis.

So there's been a constant cadence of adding capabilities like boosting our centralized sales efforts, marketing, branding, IT, particularly around security, boosting up our ability to address more federal work, internal audits, SOX compliance, the ability to do an accelerated audit as we've launched our ESG status and are now a large accelerated filer.

So all of these capabilities are things, 12 to 18 months ago, we didn't really have. And so we can invest quicker to get to where we need to be, but it's really the percentage of revenue that we managed to and that's 6%, and you should see us be at around 6% this year.

And then we've largely will have built it out and would expect beyond 2022 to start seeing the operating leverage as the company continues to grow organically and corporate start to shrink as a percentage of revenue..

Does that answer your question, Tim?.

No, that's really helpful. I mean what -- I guess my second question will kind of shed the light why I'm asking that first question. But a lot of those do sound fixed. But what I'm really trying to get to here is let's say your R&R segment grows a lot faster than what you were even expecting after 2022.

Will you -- we have to make additional growth investments beyond what you're making this year? Would investors see another step-up beyond that 6%? Or are the investments you're placing this year adequate enough, do you think that even if growth were to accelerate more from here, they would be adequate enough.

Do you understand what I'm saying?.

We do. I think, Tim, one way to think about it is, again, because revenue surprised us to the upside in terms of our growth, we certainly expect to step corporate down as a percentage of revenue to that 3% to 5% ZIP code over the next couple of years.

So that's the -- when you think about our messaging around IPO, we talked about being around $400 million to $450 million of revenue, and hoping over a 5-year period from IPO to get to the 3% to 5% corporate as a percentage of revenue, 20-ish percent total margins.

So as we think about our segment profiles, as the R&R segment surges, we think we've made the appropriate investments. Obviously, there's some incremental investments that need to be made, but we think corporate, as a percentage of total revenue, continues to step down over the next couple of years..

Okay.

So nothing about these growth investments kind of pushes out that approaching high teens, low 20% EBITDA margin over the next several years?.

No..

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

This is Emily Shu on for Andrew Obin.

Could you provide any color on how the CTEH business, both the COVID and non-COVID-related businesses performed in April and May month to date? And sort of like what's driving demand for the non-COVID-related services?.

We don't publicly disclose monthly revenues, Emily. So let me talk more conceptually as to what's happening at CTEH. They are at core, a response business. And in 2020 and 2021, the COVID response request from clients is what drove that surge.

As you think about their excess of $225 million that they produced last year, which was incredible, about 60% of that happened in the first half of the year, last year in 2021.

And so as we think about that step down, Emily, right, as an example, $70 million of revenue in Q1 of 2021 and about $30 million in Q1 of 2022, it is just a normalization process as they come off of their all-time highs.

What drives their core business remains various incidents that occur either due to aging infrastructure, for example, or various climate change-related events like certain hurricanes or floods or fires. So that remains kind of core to what drives their business.

And we certainly anticipate as the rest of this year progresses that what's always driven their business will continue to drive their business and various incidents will occur, and the team is really well positioned to capitalize on them.

Does that answer your question, Emily?.

Yes, that does.

And then my follow-up is, are you starting to see any benefit from the federal infrastructure bill that was passed last fall? Or is that more of a 2023 story in terms of when funds are put to use?.

It is not in our forecast as we sit here today, Emily. We've seen some early activity, specifically as it relates to some of the permitting work, but it is too early to determine exactly what the impact of that is going to be this year. So we certainly think of that more as a 2023 and beyond tailwind..

The next question comes from Chris Grenga from Needham..

On gross margins, could you discuss what drove the improvement year-over-year and sequentially? And whether you're observing any impacts from raw material or wage inflation?.

Allan, do you want to take that?.

Yes, yes. Our gross margin, to answer the first part of your question, is largely impacted by business mix and segment mix in 2021 when CTEH was a much more significant part of our overall revenue than it was in Q1.

Their gross margins were much lower than the rest of Montrose because if you recall, a lot of their work -- the COVID work was outsourced lab testing. So significant external costs that drove up their cost of sales and their margins down as the CTEH revenue has continued to decline.

And it's again, a much smaller percentage of the overall revenue in Q1, that impact is starting to reverse. So that's all that is. Are we seeing the impact of inflation? Sure, we're no different to anyone else, certainly, on the labor side, which is still the predominance of our overall cost.

Again, we've had just passed through period increases, hiring folks has become a little more difficult. But we've also had a lot of success in being able to pause those costs through. And as a result, our margins have largely held at a business line level..

Got it. And just a follow-up. The chart in the presentation that mapped the pilots in the technology demonstrations in Northern Europe was helpful. How would you characterize where the U.S.

is along those kind of same lines? And what typically happens after the pilot concludes, does that convert into a longer-term recurring revenue opportunity?.

Yes, Chris, why don't I take that? The European standards in some ways are more stringent and are more focused on drinking water at this point. And what's unique about them is that the EU set certain standards and then various countries can then determine how they want to implement, if not be more stringent in meeting those standards.

And so that's a very similar dynamic that we're seeing here with the federal versus state limits, obviously, none of which have been fully established formally yet. And so we see opportunities in both markets. As it relates to our pilots converting to full projects, it depends on the efficacy and the success rates of the pilots.

What we've been really pleased with and encouraged by is that the pilots are going really well and demonstrating in most of these instances, the superiority of our technology as it relates to removal of some of these specific PFAS compounds.

And so we certainly expect these pilots to the extent they continue performing the way it have been to convert to full projects. The timing and the sequencing of that is a bit tough to predict because some of that is predicated on funding releases from the governments and the establishment of formal guidelines.

And so we still believe that this is kind of a longer-term opportunity set.

The reason for putting it in the slide deck is just to demonstrate that the activity levels have really started to accelerate, suggesting that the attention being put and the market opportunity ahead of us remains as strong in the European market as it is here in the United States.

Does that make sense, Chris?.

Yes..

The next question is from Stephanie Yee with JPMorgan..

I also wanted to ask about PFAS.

Could you give us an idea of how big PFAS is as a percentage of revenue for Montrose and whether the growth in that particular business grew above the double-digit rate for the total company?.

So Stephanie, we don't break out contaminant-specific revenue streams. And what I would say is that it is a substantive portion of our Remediation and Reuse segment, but also a contributor to our Measurement and Analysis segment, and then to a lesser extent, our AP&R segment.

And yes, it is a reason for our accelerated organic, which is in excess of the double-digit average that we talked about for 2022..

Okay. Okay. That's helpful. And just on the cross-selling kind of momentum, that was great to hear, and thanks for the disclosure.

I just wanted to clarify whether that 18% is kind of customers purchasing from multiple segments of the 3 segments that you report? Or is it customers purchasing multiple items that could be within the same segment as you guys report, but it's just different pieces of your business. And I know you have a lot of different service offerings.

So just wanted to see how you define that cross-selling percentage..

It's multiple services, Stephanie. So if, for example, you work with us on the remediation side. You may -- right, so remediation of a contaminant from soil or groundwater.

You may then choose to utilize our labs to assess the impact or the quality of the remediation work that was done or you may work with us on the advisory side and then migrate into testing or treatment. So it's across our service lines, not necessarily across our segments..

Okay. Okay. And I guess if -- so this is not just -- I guess this is the first year that you've had the data to calculate what that percentage is. But it will kind of be a cumulative number. So it's not customers that signed up for a new service or multiple services in the first year.

Like when we look into 2022, it will include the customers currently who have multiple services plus additional cross-selling opportunities. It's going to be kind of like a cumulative number going forward..

Well, that's a bit tough to articulate because the projects don't necessarily run multiple years, right? As you know, most of our projects tend to be short cycle, so it's less likely to be cumulative and more a better articulation of kind of the true cross-selling occurring across our businesses, if that makes sense, right? It's not like we have multiple projects spanning multiple years and then therefore, it's adding 1 year on to the next.

That's the much less likely scenario..

Ladies and gentlemen, this concludes our question-and-answer session. But before we do that, looks like we have a last minute entrant into the question queue, and that's from Noelle Dilts with Stifel..

And sorry if I missed this, I was jumping between calls. But could you just -- I know you were talking about cross-selling opportunities.

But maybe could you expand a little bit on just kind of where you stand in terms of your development and investment of your commercial processes, basically your sales force, where -- what additional steps you're taking during 2022 and kind of where you see yourselves entering '23 from that perspective?.

So Noelle, in the context of where we were this time last year, when we were talking more about the continued development of our commercial infrastructure, I would characterize it today as mostly mature. The leadership is in place. The teams are largely in place. Obviously, there's going to be marginal puts and takes.

But both on the marketing, branding and on the sales side, the team is quite well established and is starting to hit rhythm. That, coupled with our implementation of Salesforce, which gives us visibility into client behavior patterns, as proved and continues to prove itself quite additive to our efforts to cross-sell. So we're really pleased.

I think the investments at this point will mostly be marginal. The team and the process is established and mature, and we're excited to continue to share some of those successes as we progress through the rest of this year and next.

Does that answer your question?.

Okay. Great. It does.

And then just on stock-based comp, what are your expectations for the remainder of the year?.

Let me take that..

Go ahead, Allan..

It should largely be with Q1. I don't expect much change. Yes, yes..

And ladies and gentlemen, this now concludes our question-and-answer session. I would like to turn the conference back over to Vijay Manthripragada for any closing comments..

Thank you. And thank you all again for your time and for joining us today. Take care, stay safe, and we look forward to speaking next quarter..

And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..