Stantec, Inc. Q3 FY2024 earnings call

• Stantec achieved record net revenue, adjusted EBITDA, and adjusted EPS. It was ranked number one in Newsweek's Canada's Most Responsible Companies for 2025.
• US business performed well with 9% net revenue growth, including organic and acquisition growth, and all business operating units had solid organic growth. Canada saw strong net revenue growth with double-digit organic growth in Infrastructure, Buildings, and Water. Global operations had significant growth in various regions with key projects in the UK, Canada, and Puerto Rico.
• Backlog reached a record CAD7.3 billion at the end of Q3, with 9.5% acquisition and ~5% organic growth across regions, and major projects were highlighted in the UK, Canada, and Puerto Rico.

Stantec achieved record net revenue of CAD1.5 billion in Q3 2024, up almost 16% compared to Q3 2023. Organic growth was 6.5% and acquisition growth was almost 8%. The US business saw a 9% increase in net revenue, with 5.6% organic and ~2% acquisition growth. Canada grew net revenue by almost 18%, with 9% organic and 8.5% acquisition growth. Global operations had over 30% growth in net revenue, with 22% acquisition and ~6% organic growth. Water and Buildings businesses had double-digit organic growth. Adjusted EBITDA for the quarter was CAD275 million, up almost 14% with an 18% margin, and adjusted EPS was CAD1.30, up 14%.

• Expecting 2024 to be a record-setting year, raising the bottom end of net revenue range to 14.5%-15% from 12%-15%.
• Organic net revenue growth is mid to high single digits, acquisition growth is high single digits. US and global regions to have mid to high single digits organic growth, Canada to have mid-single digits.
• Adjusted EBITDA margin target for the year is 16.5%-16.9%. Adjusted diluted EPS growth range is 16%-18% (up from 12%-16%), and adjusted ROIC is expected to be above 12%.

Q: Benoit Poirier asked about double-digit sustainability in Water and Buildings segments and Energy & Resources outlook.

A: Gord Johnston said Water franchise has strong tailwinds with framework agreements and AMP8 frameworks in the UK, and Buildings has strong organic growth. For Energy & Resources, Canada and US had positive net revenue growth, and backlog is up 9% year-to-date, expecting return to growth in Q4.

Q: Jacob Bout inquired about election results' impact and Investor Day guidance.

A: Gord Johnston stated neutral impact of election on business, confident in Investor Day guidance of CAD7.5 billion net revenue and 17%-18% EBITDA margins by 2026.

Q: Frederic Bastien asked about M&A pipeline and end markets.

A: Gord Johnston said M&A pipeline is full, targeting Canada, US, UK, Nordics, and Australia/New Zealand for expansion. Vito Culmone reiterated M&A as a key value creation source with a strong balance sheet.

Q: Maxim Sytchev asked about UK market and M&A margin impact.

A: Gord Johnston talked about positive tailwinds in the UK with AMP8 cycle and housing initiatives. Vito Culmone said M&A integration is going well with no abnormal margin impacts.

Q: Jonathan Goldman asked about election impact on US water franchise.

A: Gord Johnston said impact on Water business will be muted due to ongoing opportunities in water scarcity, flooding, and advanced wastewater treatment.