Montrose Environmental Group Inc. issued a press release earlier this month saying it’s relocating its principal executive office from Irvine to North Little Rock, Ark.
However, none of its executives are moving to that state, according to a spokesman for the company.
“Montrose is taking a gradual approach, intending to add headcount in Arkansas over time as positions become available or to accommodate its growth,” a spokesman said. “At the same time, the company plans to likewise continue to grow its headcount in California.”
It’s a surprising move for a company that has been developing roots in Orange County since its founding in 2012. The spokesman declined to elaborate on whether the move was caused by the rising burden of California state taxes and regulations or incentives given by Arkansas.
“There is no single reason for the executive office relocation, but the company’s existing offices in Arkansas, the ability to expand easily in a campus environment and Central Time Zone all were all major factors in our decision,” the spokesman said.
Several OC companies have moved their headquarters out of state in the past year such as First Foundation Inc. (Nasdaq: FFWM), Healthpeak Properties Inc. (NYSE: PEAK), Smith Micro Software Inc. (Nasdaq: SMSI), Veritone Inc. (Nasdaq: VERI) and NextGen Healthcare Inc. (Nasdaq: NXGN).
A spokeswoman for the Arkansas Economic Development Commission said Montrose is eligible for two incentives programs: a sales-tax rebate on building materials, taxable machinery and equipment, and a cash rebate based on annual payroll for new employees.
Roll-Up
Montrose (NYSE: MEG) has become one of the country’s largest environmental services firms via an aggressive roll-up strategy. It has made at least 50 acquisitions since its founding. Its company employee base now tops 2,000 at about 70 locations.
The industry is worth about $1.2 trillion with no market leader, Manthripragada previously told the Business Journal.
Montrose has about 5,000 clients that range from government entities to gas companies to utilities, providing services such as treating contaminated water and permitting work for large infrastructure projects.
The company entered Arkansas last year with its largest purchase to date—a $200 million buy of North Little Rock, Ark.-based Center for Toxicology and Environmental Health LLC (CTEH), which provides risk assessments, crisis management and training.
“When they purchased CTEH, they liked what they saw,” Robert Birch, director of business development for the city of North Little Rock, told the Business Journal. “We’re just big enough to have all the amenities of a big city but small enough to have that small town feel.”
Montrose plans in the next three years to add 90 more positions at its new office with an average annual salary close to $100,000, Birch said.
“We’ve got a great business park where they’re going to,” Birch said. “It’s a great environment right in the middle of the country for them.”
Q2 Boom
The company last week reported second-quarter revenue climbed 85% to $136.2 million, topping the average analyst estimate of $114.5 million.
It said revenue will continue surpassing 20% annually this year. Sales are expected to climb 31% this year to $431.4 million, according to the average estimate of seven analysts.
During a conference call last week, Montrose executives didn’t discuss the relocation nor did analysts ask about it.
“The long-term tailwinds for our businesses continue to drive strong results,” Chief Executive Vijay Manthripragada said on the call.
In the trading session after the release, its shares rose 2% to $52.49 and a $1.4 billion market cap.
When the company went public a year ago at $15 a share, Manthripragada told the Business Journal that the company intended to keep its headquarters in Irvine.
“It’s nice to be out here,” he said. “Hopefully we’ll make Orange County proud.”
