Stantec Q2 2025 Earnings Report

Stantec EPS Results

• Actual EPS: $0.98
• Consensus EPS: $0.98
• Beat/Miss: Met Expectations
• One Year Ago EPS: N/A

Stantec Revenue Results

• Actual Revenue: $1.17 billion
• Expected Revenue: $1.64 billion
• Beat/Miss: Missed by -$468.69 million
• YoY Revenue Growth: N/A

Stantec Announcement Details

• Quarter: Q2 2025
• Date: 8/13/2025
• Time: After Market Closes
• Conference Call Date: Thursday, August 14, 2025
• Conference Call Time: 9:00AM ET

Stantec (NYSE:STN) provides professional services in the areas of infrastructure and facilities to the public and private sectors in Canada, the United States, and internationally. It offers evaluation, planning, and designing infrastructure solutions; solutions for sustainable water resources, planning, management, and infrastructure; environmental services; integrated architecture, engineering, interior design, and planning solutions for buildings; and energy and resources solutions. The company also provides consulting services in engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, project management, and project economics. In addition, it offers planning and design services to clients in residential, logistics, retail, infrastructure, energy, higher education, and urban regeneration sectors; architectural and interior design, and planning services in the science and technology, commercial workplace, higher education, residential, and hospitality markets. Further, the company provides transportation advisory, transport engineering, and technical design; project delivery consultancy services for mining, resources, and industrial infrastructure projects; paleontological and archaeological services for the rail, transportation, water, and power and energy sectors; and environmental and cultural resource compliance services. Additionally, it offers consulting services in sustainable building design, energy infrastructure upgrades, sustainable district heating network, and e-mobility; and planning, design, construction administration, commissioning, maintenance, decommissioning, and remediation services. The company was formerly known as Stanley Technology Group Inc. and changed its name to Stantec Inc. in October 1998. Stantec Inc. was founded in 1954 and is headquartered in Edmonton, Canada.

Stantec Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Stantec raised its 2025 guidance, now expecting 10–12% net revenue growth (up from 7–10%) with mid-to-high single-digit organic growth and an improved adjusted EBITDA margin of 17–17.4%.
• Positive Sentiment: In Q2, the company delivered 6.9% revenue growth to C$1.6 billion (4.8% organic), achieved a 17.8% adjusted EBITDA margin (up 120 bps y/y) and recorded 21% adjusted EPS growth to C$1.36.
• Positive Sentiment: Strategic acquisitions, including US-based architecture firm Page and regional engineering groups in New Zealand and Ireland, expanded Stantec’s workforce to over 34,000 and enhanced its services in healthcare, data centers and water markets.
• Positive Sentiment: Contract backlog increased by 10% y/y to C$7.9 billion, driven by strong demand in water infrastructure, energy transition, transportation and mission-critical projects across North America, Europe and Asia-Pacific.

Presentation

[Operator]

Welcome to Stantec's Second Quarter twenty twenty five Results Webcast and Conference Call. Leading the call today are Gord Johnston, President and Chief Executive Officer and Vito Kulman, Executive Vice President and Chief Financial Officer. Stantec invites those dialing in to view the slide presentation, which is available in the Investors section at stantec.com. Today's call is also webcast. Please be advised that if you have dialed in while also viewing the webcast, you should mute your computer as there is a delay between the call and the webcast.

[Operator]

All information provided during the conference call is subject to the forward looking statement qualification set out on Slide two detailed in Stantec's management discussion and analysis and incorporated in full for the purpose of today's call. Unless otherwise noted, dollar amounts discussed in today's call are expressed in Canadian dollars and are generally rounded. With that, I will turn the call over to Mr. Gord Johnston.

[Gord Johnston, President, CEO & Director at Stantec]

Good morning, and thank you for joining us today. Before I get into our Q2 results, I'm pleased to announce that on July 31, we closed the acquisition of Page. In early April, we announced the acquisition and in the interim period, we were working on various regulatory approvals prior to the formal close. Page is a very S.

[Gord Johnston, President, CEO & Director at Stantec]

Based architecture and engineering firm headquartered in Washington DC. The acquisition complements our buildings business and helps bolster our services in key growth sectors including healthcare, advanced manufacturing, data centers and mission critical, academic, science and technology, and civic markets. In addition, I'd also like to highlight that on June 27, we acquired Cause Groups, a 90 person firm expanding our buildings engineering capabilities in New Zealand. And as we previously announced, we acquired Ryan Hanley back in April, bolstering our offerings in the Irish water sector. I'd like to welcome the 1,500 talented individuals from Page, Cosgroves, and Ryan Hanley to the Stantec team, which has now grown to over 34,000 employees.

[Gord Johnston, President, CEO & Director at Stantec]

I'm also pleased to share that Stantec continues to earn recognition through a range of accolades from respected industry and media organizations. We're honored to be ranked the number one architecture firm in health care worldwide by Modern Healthcare's 2025 construction and design survey. In addition, Time Magazine ranked us fifth on its twenty twenty five list of Canada's best companies and among the top 50 of the world's 500 most sustainable companies. Now let's focus on our results. Stantec has delivered very strong results in the 2025, delivering organic growth across all of our regions and business operating units.

[Gord Johnston, President, CEO & Director at Stantec]

Public infrastructure spending and private investments continues to be a key driver of growth in 2025 with strong demand across the water, transportation, mining, energy transition and mission critical sectors. In the second quarter, we delivered net revenue of $1,600,000,000 up 6.9% year over year, which was primarily driven by 4.8% organic growth. Our Energy and Resources business delivered high single digit organic growth and Water achieved 12.4% organic growth. With our focus on solid project execution and operational excellence, we grew our adjusted EBITDA by 15% with enhanced margin of 17.8%. We also delivered EPS growth adjusted EPS growth of over 21% compared to Q2 twenty twenty four.

[Gord Johnston, President, CEO & Director at Stantec]

Looking at our results in each of our geographies. In The U. S, our Q2 net revenue increased by 5.7%, which was supported by organic growth of 4.4%. From a trend perspective, we saw improvements in U. S.

[Gord Johnston, President, CEO & Director at Stantec]

Organic growth compared to the first quarter. Client demand for mission critical, science and technology and civic all contributed to growth in our buildings business. Growth in Environmental Services was mainly driven by our energy transition, mining and industrial infrastructure sectors, as well as a continued work for a large scale utility provider. Growth in water was driven by large public sector water supply and wastewater treatment projects. And energy and resources growth saw the ramp up of a major hydropower dam project in the Southwest.

[Gord Johnston, President, CEO & Director at Stantec]

In Canada, net revenue grew by 6.2% underpinned completely by organic growth. The continued momentum on major wastewater projects contributed to over 30% organic growth in water. Consistent progress on major industrial process projects grew double digit organic growth in energy and resources. Solid growth in infrastructure was supported by land development projects in Alberta and public sector investment in Western Canada grew growth in our buildings business, primarily in our healthcare and civic markets. Finally, our global business delivered net revenue growth of 10.5% in the second quarter with 4.3% organic and 3.6% acquisition growth as well as positive foreign exchange impacts.

[Gord Johnston, President, CEO & Director at Stantec]

Our industry leading water business delivered double digit organic growth across The UK, Australia and New Zealand through long term framework agreements and public sector investment in water infrastructure. The ramp up of new projects in Chile and Peru drove double digit organic growth in Energy and Resources as the growing need for energy transition solutions continues to drive demand in mining for copper. And we also achieved double digit organic growth in our German business due to continued momentum on a major public sector energy transportation project and increased volume on transit and rail projects. Now I'll turn the call over to Vito to review our Q2 financial results in more detail.

[Vito Culmone, EVP & CFO at Stantec]

Thank you, Gord, and good morning, everyone.

[Vito Culmone, EVP & CFO at Stantec]

Stantec's positive momentum continues as seen with our second quarter results, positioning us to deliver another exceptional year. In Q2, we achieved gross revenue of approximately $2,000,000,000 and net revenue of $1,600,000,000 an increase of 6.9% compared to Q2 twenty twenty four. This was primarily driven by 4.8 organic growth. As a percentage of net revenue, our projects margins remained in line with our expectations at 54.2%. We achieved a very strong adjusted EBITDA margin of 17.8% in the quarter, 120 basis point increase compared to last year.

[Vito Culmone, EVP & CFO at Stantec]

The increase in margin primarily reflects lower admit and marketing expenses as a percentage of net revenue due to lower claim provisions and discretionary spending. And our adjusted EPS in the quarter increased over 21% to $1.36 Our Q2 results build on a strong first quarter and on a year to date basis, our adjusted EBITDA margin is 17%, a full 1% ahead of the 2024. In addition, our adjusted EPS is up a very robust 24.9%. With our year to date performance and the closure of the Page acquisition, we are very well positioned to increase guidance across various metrics, which Gord will speak to shortly. Turning to our cash flow, liquidity and capital resources.

[Vito Culmone, EVP & CFO at Stantec]

Year to date operating cash flows are up 100% compared to 2024 from $117,000,000 to $235,000,000 reflecting continued strong revenue growth, operational performance and continued strong collection efforts. DSO at the end of the second quarter was seventy three days, a decrease of four days compared to the 2025. This is well below our internal target of eighty days or lower. Our net debt to adjusted EBITDA ratio at June 30 was 1.1 times, essentially in line with where we closed out the first quarter and remaining well within our internal target range of one to two times. I'd like to take a minute to highlight some recent financing transactions we completed in Q2.

[Vito Culmone, EVP & CFO at Stantec]

I characterize these as being in a normal course of our business and reflecting the significant growth in our operations over the last few years. On June 10, we issued four twenty five million dollars senior unsecured notes bearing an interest rate of 4.374% per annum for a seven year term. These notes were assigned an investment grade rating excuse me, investment grade credit rating of BBB by ADVRS Limited. Also in mid June, we increased our unsecured revolver credit facility to $1,200,000,000 up from $800,000,000 and we extended the maturity date out to June 30. Both of these financing transactions were well oversubscribed and reflect the credit community's deep understanding and confidence in our sector and company.

[Vito Culmone, EVP & CFO at Stantec]

We appreciate the continued support. As Gord noted, we closed the Page acquisition on July 31 and post closing our remaining credit capacity is just over $1,000,000,000 and our balance sheet remains very strong. Gord, I'll now hand the call back to you.

[Gord Johnston, President, CEO & Director at Stantec]

Thanks, Vito. At the end of the second quarter, our contract backlog stood at $7,900,000,000 reflecting approximately twelve months of work.

[Gord Johnston, President, CEO & Director at Stantec]

Our backlog underscores the continued strong demand to support our clients' most pressing challenges. Year over year, backlog has grown by almost 10%, reflecting robust organic growth of 9% across each of our geographies and most notably double digit growth in our water and energy and resources businesses. I'd also note that our U. S. Organic backlog is up 9.8% year over year.

[Gord Johnston, President, CEO & Director at Stantec]

This reflects the positive trend in organic growth and continued strength of our business in the region. Growth within our global operations was driven by new project awards in our infrastructure and environmental services business in Europe and AMP8 project awards in our UK water business. This growth is partially offset by a retraction in our Australian business of buildings operations as well as high burn rates in our water business. I'll now highlight a few of the projects that Stantec has recently been awarded. A Stantec joint venture was recently awarded a $150,000,000 single award contract supporting the US Navy shipyard infrastructure optimization program, focusing on the modernization of the Portsmouth Naval Shipyard in Maine.

[Gord Johnston, President, CEO & Director at Stantec]

US Navy shipyards were originally designed and built in the nineteenth and twentieth centuries, and this program will support the upgrade of facilities, utilities, dry docks, equipment, and information technology infrastructure. In The UK, our infrastructure team was awarded a four year framework with Transport for Greater Manchester, where we will deliver a range of transport, design, engineering and analysis services, as well as program and project management support. And lastly, water and environmental services teams are collaborating on Google's water replenishment project sourcing in Taiwan. This project is part of Google's global water replenishment initiative It also highlights Stantec's use of nature based solutions, which includes a gravel contact oxidation process for sustainable water treatment and watershed restoration. On the strength of our performance year to date, the completion of two acquisitions within the second quarter and with the recent closure of Page, we're increasing our outlook for 2025.

[Gord Johnston, President, CEO & Director at Stantec]

We now expect to achieve net revenue growth of 10% to 12%, up from our previous guidance of 7% to 10%. Given our strong diversification across geographies, we continue to expect mid to high single digit organic growth across the businesses. In Canada and in Global, we continue to expect organic net revenue growth in the mid to high single digits. We continue to see strong momentum in both these regions with elevated backlog levels in Canada, particularly in infrastructure, energy and resources, and through high levels of activity in our global water business. Amppey continues to ramp up in The UK and other water frameworks in Australia and New Zealand are ramping up as well.

[Gord Johnston, President, CEO & Director at Stantec]

In The U. S, we expect organic growth to accelerate in the second half of the year and we've moderated our outlook slightly to mid single digits. The U. S. Administration has implemented significant shifts in policy, funding priorities, tariffs and regulatory frameworks, and most notably with the recent passage of the One Big Beautiful Bill Act.

[Gord Johnston, President, CEO & Director at Stantec]

The ultimate driver of these initiatives is to stimulate investment in The U. S. Across all sectors and to strengthen The U. S. Economy.

[Gord Johnston, President, CEO & Director at Stantec]

In fact, we're already seeing momentum starting to ramp up again. Furthermore, we're also encouraged by our healthy backlog, which positions us for continued positive growth. On the strength of our operations year to date, we've also increased and narrowed the range for adjusted EBITDA margin to 17% to 17.4%, up from 16.7% to 17.3%. This reflects solid project execution and continued discipline in cost management. With this, we actually expect to hit our strategic plan target of seventeen percent to 18% a year early with the ability to continue building on this performance.

[Gord Johnston, President, CEO & Director at Stantec]

We now expect to deliver 18.5% to 21.5% growth in adjusted EPS compared to 2024, up from 16% to 19%. Once again, driving earnings well above net revenue growth. And finally, adjusted ROIC is now expected to be greater than 12.5%. As we enter the 2025, we remain firmly on track, excuse me, to deliver another record year. Macro trends of aging infrastructure, data centers, energy security, water and wastewater treatment, healthcare and reshoring all continue to drive our business.

[Gord Johnston, President, CEO & Director at Stantec]

We will remain focused on delivering strong project execution and operational excellence. And while we have already completed three acquisitions this year, the pipeline of opportunities remains full and we are extremely well positioned, both from an integration and a financing standpoint to do more. It's an exciting time for our industry and for Stantec and we'll continue to deliver compounded growth as we drive towards our 2024 to 2026 strategic plan goals. And with that, I'll turn the call back to the operator for questions. Operator?

[Operator]

Thank you. Our first question is going to come from the line of Krista Friesen with CIBC. Your line is open. Please go ahead.

[Krista Friesen, Director - Equity Research at CIBC Capital Markets]

Hey, thanks for taking my question. I was wondering if maybe you can just provide us with a little bit of additional color on what you're hearing from your U. S. Customers, specifically in the private sector, as you called out maybe an elevated level of caution right now.

[Gord Johnston, President, CEO & Director at Stantec]

Yes. Great question, Chris. What we're seeing is in the first half of the year, was a little bit of trepidation to make that final investment decision and to move forward. But you know what, as we said in the prepared remarks, we really are looking to see our forecasting our U. S.

[Gord Johnston, President, CEO & Director at Stantec]

Organic growth to accelerate in the second half of this year. Our U. S. Backlog is up nine percent, 9.8% organically year over year and it's actually particularly strong in water, energy, and data centers, some of those private sector type work that you're talking about. So in the private sector, interestingly, data centers, mission critical, and so on.

[Gord Johnston, President, CEO & Director at Stantec]

We're currently working on over a 100 data center projects. And so it's interesting, see our from our even from our July results, we saw an increase in our US organic growth to that even at that high single digit range. But we also interestingly saw continued acceleration even on an organic backlog in July period. So we're actually feeling pretty good about that acceleration in organic growth both in public and in the private sector in the second half of the year.

[Krista Friesen, Director - Equity Research at CIBC Capital Markets]

Okay, great. And then maybe just on the acquisition front, you guys have been busy with a couple acquisitions recently. How are you feeling on the integration? I appreciate Paige was just two weeks ago here, but just any update there.

[Gord Johnston, President, CEO & Director at Stantec]

Yeah. So Ryan Hanley is a firm, a smaller firm, a couple of 100 people in Ireland. We've been working with them for years. So that integration is going very well. We actually anticipated I think to be completed by the end of this year the financial integration.

[Gord Johnston, President, CEO & Director at Stantec]

Cosgrove similarly 90 person from 100 person firm down in New Zealand. You know that one is continuing. Page is really interesting 1,400, 1,500 people, but we've worked with them for a long time and we've over the last number of months we've been working on how do we align leadership starting to look already at the financial transformation And in fact, that's planned for Q4 of this year. So we think we're going to be in pretty good shape, really having wrapped up the majority of the integration and the financial work by the end of the year on all three of these.

[Krista Friesen, Director - Equity Research at CIBC Capital Markets]

That's great. Thank you. I'll pass the line. Congrats on the quarter.

[Gord Johnston, President, CEO & Director at Stantec]

Thank you.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Sabahat Khan with RBC Capital Markets. Your line is open. Please go ahead.

[Sabahat Khan, MD - Global Research at RBC Capital Markets]

Okay, great. Thanks and good morning. I guess just sticking with kind of the outlook commentary, it looks like the margin guidance, the midpoint has been kicked up a little bit. Maybe we can just get into some of the details around the progress here to date on the margin side and just what are some of the contributors to the margin being pushed up higher for the full year mix?

[Vito Culmone, EVP & CFO at Stantec]

Saba. Yes, we're really it's Vito here. Good morning. Really pleased with our progression year to date and what we see for the balance of the year with respect to EBITDA margins. You're absolutely right.

[Vito Culmone, EVP & CFO at Stantec]

We have bumped up the EBITDA margins now from 16.7% to 17.3% to that 17% to 17.4% range. Year to date, we're at 17%, which is one basis points ahead of where we were a year ago. I don't believe we'll be able to maintain that 100 basis points year over year improvement in H2, obviously, because the guidance reflects moderation to the year over year side of things, but continue to see improvement in it. For us, it always starts with just strong project margins. Of course, we don't take that for granted.

[Vito Culmone, EVP & CFO at Stantec]

Your EBITDA margins always start with that, the right customer, right price, excellent execution. So just a huge shout out to the operations team's continued focus on that. Our project margins in the quarter were 54.2%, which actually is 0.2% lower than prior year, but that really reflects mix. Global business was a higher percentage of our overall business in Q2 and they profile at a lower project margin. So in North America, our project margins were actually up year over year, so it starts with strong project margins.

[Vito Culmone, EVP & CFO at Stantec]

You saw that admin and marketing costs, target that as a lower percentage of overall net revenue. Utilization in the quarter was higher, that always contributes. Just the general nature of our operational scale and leveraging our back offices and growing that at a pace that's lower than our overall revenue growth continues to be a positive contributor of course. We did call out claims in the quarter for particularly Q2, claims is always a little bit lumpy, obviously, but in Q2 we did have favorable settlement of two claims in particular relative to the provisions we had, and that contributed, I'll call it 30 to 40 basis points in the quarter, but those are all the drivers, very, very pleased with it, and you know it's a continuation of a multi year story for us, as Gord referred to in his opening remarks, hitting the 17% piercing the 17% mark one year earlier than our strat plan just is a strong indication of what we believe is to come here in the next several years.

[Sabahat Khan, MD - Global Research at RBC Capital Markets]

Great. Thanks for the color there. And then maybe the second one for Gord. On the water side, it looks like about a 12.5% organic growth this quarter. And the interesting thing there being, it's been several years of good strength in the water market.

[Sabahat Khan, MD - Global Research at RBC Capital Markets]

So maybe if you can just help us think through what drove that, the near term demand drivers. It sounds like AMP8 might still be at the early stages, so assuming some of the other work is driving. So maybe just give us perspective on what's driving the strong growth there and maybe the opportunities on data center side if some of those are tied to water as well. Thanks.

[Gord Johnston, President, CEO & Director at Stantec]

Right. No, great perspective. You know, we've talked about before, I think everyone on the call is aware, like, we've had strong organic growth in water back to 2019. And every quarter, it just continues to get stronger with our overall water business. And so you're right, we're still early days with AMP8 ramping up, although we are already sort of at a level roughly about 50% higher this time of year than we were a year ago.

[Gord Johnston, President, CEO & Director at Stantec]

So we're all that is already coming and we're actively hiring people in The UK, expanding our delivery centers in Pune, India to continue to service that demand. But you know, I think we talked about like even in Canada, we had 30% organic growth on top of more and more of the strong quarters year over year. So there's just an enormous amount of work that we see in water treatment, wastewater treatment, advanced manufacturing facilities. You mentioned the data centers, but also as we're talking to clients about reshoring some of their facilities, it all starts with water. So while our water business continues to strengthen, our backlog is even up even further.

[Gord Johnston, President, CEO & Director at Stantec]

So we see continued strength in that water business you know for the remainder of '25 and really for the years to come. No slowing down in the water space whatsoever.

[Operator]

Our next question comes from the line of Chris Murray with ATB Capital Markets.

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

Gord, maybe turning back to thinking about The U. S. Business, maybe longer term. I mean, I guess it feels like a bit of a blip in the quarter because you're talking about, again, like high single digit type growth in the backlogs and your commentary a little bit about recovery. If I go back a couple of quarters, sort of the discussion has been how long could The U.

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

S. Market continue to support, frankly, are kind of above average single digit organic growth levels? And just any thoughts on how you're viewing kind of the next couple of years on what the spending pace looks like and your comfort level on where we're going? And with that, is there any particular sectors that you think that you need to add in order to be able to accomplish or achieve some of that?

[Gord Johnston, President, CEO & Director at Stantec]

Yeah, great question. So as we look forward in the remainder of this year and the rest of next year, we mentioned already that we're organic growth in backlog in The U. S. But then you look at some of the other drivers. We've done a lot of talking before as the industry about IIJA, only about 40% of that less than 40% of that has been spent.

[Gord Johnston, President, CEO & Director at Stantec]

So there's a lot of opportunity to continue to come there you know in the next couple of years to allocate some of those funds before it's you know they're not eligible for allocation at the 2026. So that part feels strong. You know you look at the one big beautiful bill and there's some additional supports for infrastructure, state and local government there. Data centers, mission critical, those continue to grow. You know, it's interesting there, you know, I mentioned to Christa's comments, we've been working on over 100 data center projects right now from 20 megawatts up to a gigawatt in size.

[Gord Johnston, President, CEO & Director at Stantec]

And now the addition of Page to our team even strengthens our already strong group there. So there's so just a lot of opportunity across whether it's transportation or water, buildings, energy, the transition, mining. They're just we see really, really strong strength going forward. So I think that what we've seen in the first couple of quarters of this year, not just us, but the industry overall, it's just a little bit transitory and we see good fundamentals going forward. We did lower our organic guidance for the year to 5%, but that's really just a function of mathematics.

[Gord Johnston, President, CEO & Director at Stantec]

We're sitting at 3.3% year to date so 3.4% year to date. So as we thought about just wanting to be clear and state our expectations, just when we were saying mid to high single digits, everyone goes to 6% to 8% and if we're at 3.4% for the first half of the year, that means we'd almost have to be double digit organic growth in Q3 and Q4 in order to get into that range. We see continued acceleration, but not sure that we're getting at the 10% double digit organic growth in both quarters. So we just wanted to be clear with everyone and confirm our expectations. But just to confirm though, we expect acceleration of organic growth in The U.

[Gord Johnston, President, CEO & Director at Stantec]

S. For the second half of the year and through 2026 and beyond.

[Vito Culmone, EVP & CFO at Stantec]

Gord, I'll just add a couple of things in there. And Chris asked whether there was any particular areas of potential gaps for us in the market or areas of focus. Chris, we remain incredibly bullish about The U.

[Vito Culmone, EVP & CFO at Stantec]

S. Market. Just and with aging infrastructure, U. S. Remains incredibly behind in that, building resilience, heated weather events, so on and so forth, the macro factors are just continuing to be extremely buoyant, and when you look at this administration's focus, frankly, and what they're investing in and what their areas of policy enforcement are with the OBBA and whatnot, it just speaks to increased focus and support for much of what we're describing.

[Vito Culmone, EVP & CFO at Stantec]

Anything on the gas growth for you then? No. Okay. Thanks, Chris.

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

Yeah. Thanks. And then one other question I just had on margins, and this maybe goes back to the Investor Day and talking about sort of the implementation of technology across the platform. And I'm kind of listening to some of the comments about SG and A leverage. But can you just talk to some of the AI and other technologies you guys were referencing?

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

And how they're playing into this margin profile at this point? Are you actually seeing them have any sort of impact or change, I guess, in the trend on revenue per head type metrics or earnings per head metrics at this particular point or is it still kind of too early to be able to point to anything definite?

[Gord Johnston, President, CEO & Director at Stantec]

Yeah, I think you know overall in the industry and Stantec has been included, we're still early days in sort of how far we can push this. Interestingly though, our entire c suites went down to the Microsoft campus in in Redmond there a couple weeks ago, spent a day with their technology folks and and our folks really talking about their journey, our journey, what are some of the areas that we believe that we could make use of AI and other digital tools. So we're working very, very closely with them on some co investment sort of ideas there. But as we look at our inside of Stantec, you know, we've deployed over 10,000 licenses of Copilot, know, throughout the organization. And so we're looking at it from a number of perspectives, Chris.

[Gord Johnston, President, CEO & Director at Stantec]

One is like what can we do to make our back office more efficient, whether that's HR or accounts payable, expense account review, those sorts of things that we can you know make the back of house more efficient in reducing some of the SG and A causes. Proposal writing, how can we speed, you know, get speed to market on those sorts of things. And then also thinking about on the design side, where we can start optimizing and automating some of the design processes. So I think it's still early days. I'm not sure that you're seeing it too much in that margin expansion yet, but certainly I think we'll see it playing more of a factor you know in the years to come.

[Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc]

Okay. That's helpful. I'll leave it there. Thanks.

[Operator]

Thank you. And one moment for our next question. Our next question comes from the line of Yuri Lynk with Canaccord Genuity. Your line is open. Please go ahead.

[Yuri Lynk, Managing Director & Equity Research Analyst - Capital Goods at Canaccord Genuity Group]

Good morning, guys.

[Gord Johnston, President, CEO & Director at Stantec]

Good morning.

[Yuri Lynk, Managing Director & Equity Research Analyst - Capital Goods at Canaccord Genuity Group]

Just back, Gord, on the acceleration in organic growth in the back half of the year. The comps are kind of interesting in terms of what you're lapping there. Q3 is 5.5% and then a 10% comp in Q4. So fair to say that, that should help shape our expectations for more organic growth and bigger organic growth improvement in Q3 versus Q4?

[Gord Johnston, President, CEO & Director at Stantec]

I think that's exactly right. And when you look at the Q4 comp, already up 10%. And that's again one of the reasons why we lowered our guidance to that mid 5% type range. It's just because the comp in Q4 is a bit tough and we just wanted to set reasonable expectations of where we saw it. But we do see, I think we mentioned like in July and of course one period does not make a quarter, but it's a very, very positive trend that we saw high single digit organic growth in The U.

[Gord Johnston, President, CEO & Director at Stantec]

S. In the quarter sorry in the period in July as well as you know our backlog organic backlog acceleration as well. So we're still feeling really good about that and then you know of course consolidated we still have mid to high single digits, so just we only had made that one adjustment on The U. S. Side.

[Gord Johnston, President, CEO & Director at Stantec]

Yeah, and just I mean, I think the fact that obviously The U. S.

[Vito Culmone, EVP & CFO at Stantec]

Represents half of our business, but on the consolidated, we're still at mid to high just reflects, I think Gord and our listeners, the diversity and strength of our global business, including of course North America.

[Gord Johnston, President, CEO & Director at Stantec]

Okay.

[Yuri Lynk, Managing Director & Equity Research Analyst - Capital Goods at Canaccord Genuity Group]

Just thinking about The U. S. Water business and one of your customers in financial difficulties there. Wondering if that might have any impact over the next year or so.

[Gord Johnston, President, CEO & Director at Stantec]

Yes. And so, in particular, you're thinking talking about Thames Water in The UK?

[Yuri Lynk, Managing Director & Equity Research Analyst - Capital Goods at Canaccord Genuity Group]

Yes, exactly.

[Gord Johnston, President, CEO & Director at Stantec]

Yes. No, exactly. And that's pretty public, I think, for everyone to see that they are financial difficulty. But what's interesting with Thames Water is we've worked for Thames Water and their predecessor organizations for almost two hundred years in in the in The UK. And so, you know, discussions that we're having is, you know whether that the government and we have no indication of anything would happen, but if that were to be nationalized for some period of time the work still needs to be done.

[Gord Johnston, President, CEO & Director at Stantec]

And so we're all of our discussions with our clients are the work needs to be done can continue we're having no payment issues at this point. So we don't see that really as an impact to our business from a negative perspective.

[Vito Culmone, EVP & CFO at Stantec]

Not at all.

[Yuri Lynk, Managing Director & Equity Research Analyst - Capital Goods at Canaccord Genuity Group]

Okay. Good to hear. I'll turn it over. Thanks for the time.

[Gord Johnston, President, CEO & Director at Stantec]

Thanks, Jerry.

[Operator]

Thank you. One moment for our next question. Our next question is going to come from the line of Michael DePalme with TD Cowen. Your line is open. Please go ahead.

[Michael Tupholme, Director - Equity Research at TD Cowen]

Thank you. Good morning.

[Gord Johnston, President, CEO & Director at Stantec]

Good morning.

[Michael Tupholme, Director - Equity Research at TD Cowen]

Gord, it's pretty clear from your comments that you expect an acceleration in U. S. Organic growth, which is great to hear. I guess my question is the factors that you called out that, I guess, in the shorter or nearer term here have been weighing on organic growth. So in the public sector side, talked about some slower procurement and on the private sector side, some of the issues in the larger capital project side within private sector.

[Michael Tupholme, Director - Equity Research at TD Cowen]

I guess, have you overcome all of these? Or are you seeing pickups in other areas that are allowing you to offset those headwinds? Just trying to get a sense if you've sort of fully moved past all those issues and those are now behind you and behind the industry? Or if those are still there, but you're seeing strength elsewhere?

[Gord Johnston, President, CEO & Director at Stantec]

Yeah, I think what we're seeing is that the issues are diminishing a little bit. I don't think that they're past. Michael, it's interesting. One thing that we've been hearing from some of our business leaders is that from some of the agencies that we're working with, particularly in The US, a number of people took early retirement when it was offered and those sorts of things. So it's taking a little bit longer sometimes for them to to get new people in those roles, to get the projects out the door and and such.

[Gord Johnston, President, CEO & Director at Stantec]

But we see that diminishing. I think we saw a not just us with the industry overall, little slower organic growth in The US q one, q two as we're working through some of these items. But I think that they're diminishing. I don't but in no way would I say that they're all solved, but you know as we think about acceleration of organic growth in The U. S.

[Gord Johnston, President, CEO & Director at Stantec]

Going forward, we still feel very positive about it even with the diminishing issue that we've called out there previously.

[Vito Culmone, EVP & CFO at Stantec]

Yeah Michael five sectors, mean thousands of projects, thousands of clients across multiple industries obviously, so I just echo 100% of what Gord has described. You still see pockets of it, but overall diminishing as we move forward. Very few cancellations, if any, right, Gord? I mean, these aren't cancellations we're talking about, we're just talking about some delays and pausing.

[Michael Tupholme, Director - Equity Research at TD Cowen]

Right. That's very helpful. Thank you. And then I guess as we look beyond this year, maybe you can just comment on how you're feeling about the multiyear organic growth guidance you put out for over 7% organic growth that extends through 2026. And then is this level of activity that you're seeing here, including the pickup in The U.

[Michael Tupholme, Director - Equity Research at TD Cowen]

S, how does that make you feel about sort of the period beyond 2026 as you're we're getting closer, I guess, point where you're going to start to think about your next three year plan?

[Vito Culmone, EVP & CFO at Stantec]

Yeah, Michael, maybe I'll chime in and then Gord, you can add your sentiments on that. Obviously, we'll come up with our three year plan, our updated three year plan post 2026 in due course, but there is absolutely nothing that we are seeing that it would be fundamental in nature. And I think across all of our markets, including of course The U. S, those macro factors that we're describing support that level of growth activity for we believe at this point several years to come.

[Gord Johnston, President, CEO & Director at Stantec]

And when you look at some of the recent funding programs that have been announced around the world, You UK put out another 10 infrastructure plan, $725,000,000,000, very supportive an additional tailwind for us.

[Gord Johnston, President, CEO & Director at Stantec]

In Ireland, where we just acquired Ryan Hanley, another 100 to 200,000,000,000 there from infrastructure. So again, very, very supportive. So we feel, you know, when you look at the one big beautiful bill and some of the supports that that does, certainly the the increase in defense spending around the world and again you know for everyone's on the line you know we don't do anything related to hot weapons, but the work that we do would be infrastructure in support of hangars for aircraft, docks and ports and in improvements to barracks and hospitals and such. So again, it's defense spending increases or just increased infrastructure spending around the world, that all point to a pretty solid multi year macro for the overall industry.

[Michael Tupholme, Director - Equity Research at TD Cowen]

Thank you for that. I'll turn the line over.

[Gord Johnston, President, CEO & Director at Stantec]

Thanks, Michael.

[Operator]

Thank you. Our next question is going to come from the line of Maxim Sytchev with

[Maxim Sytchev, MD & Research - Industrial Products at National Bank Financial]

morning, Jonathan.

[Gord Johnston, President, CEO & Director at Stantec]

Good morning.

[Maxim Sytchev, MD & Research - Industrial Products at National Bank Financial]

Martin, was if it's possible to get a bit more of an update in terms of what you guys are seeing on on the ground when it comes to FEMA and whether, I mean, some of the federal work is just being shifted to kind of state and local, just trying to get the perspective there?

[Gord Johnston, President, CEO & Director at Stantec]

Thank you. Yeah. Absolutely. As you look at some of the disaster preparedness work in particular, Max, that is looking to be shifted to some of the states and local governments. So you know we had a number of those on calls with FEMA at a national level and we absolutely are in discussions now with a number of other local state and local government agencies about how we could respond to support them.

[Gord Johnston, President, CEO & Director at Stantec]

But that still is you know in a transition phase, but we're absolutely engaged in those discussions.

[Maxim Sytchev, MD & Research - Industrial Products at National Bank Financial]

Okay, that's great to hear. And then is it possible to provide a bit more of an update when it comes to the M and A landscape? Like I mean, obviously, you mentioned your capital capacity, but what are you guys sort of seeing on the ground from a solar perspective, etcetera? Thank you.

[Gord Johnston, President, CEO & Director at Stantec]

Yeah, the environment is actually I would say becoming increasingly active over the last quarter and I think will be for the second half of the year. Certainly within North America, but we're seeing globally as well. So there's a number of assets that we've been talking for a while that we thought we're going to be coming to market kind of a twelve to eighteen month timeframe. And I think those are probably shortened by half a year now, probably in the next six months to a year, some of these assets will be coming to market and wherever possible, we're having proactive meetings individuals before our process would start just to be sure that we're well positioned. So I think you'll see increased activity over the next six to twelve months.

[Maxim Sytchev, MD & Research - Industrial Products at National Bank Financial]

Okay, great to hear. Thank you so much. That's it for me.

[Gord Johnston, President, CEO & Director at Stantec]

Great.

[Operator]

one moment for our next question. Our next question comes from the line of Binwan Puryear with Desjardins. Your line is open. Please go ahead.

[Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities]

Yes. Thank you. Good morning, Gord, and good morning, Vito. We saw an update on Section 174 being removed following the approval of the big beautiful day. Vito, could you talk a little bit about the boost we might expect on free cash flow going forward?

[Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities]

And with respect to the delays that we are seeing temporarily in The U. S, I'm just wondering if customers were waiting for interest rates to decline and whether lower interest rates that could come could accelerate spending when talking to customers.

[Vito Culmone, EVP & CFO at Stantec]

No, with respect to the recent changes Benoit, good morning. With tax deductibility on R and D, believe that's what you're referring to. That's overall a positive factor. Of course, are domestic R and D expenses incurred in The United States that basically effective for 2025 and now are 100% deductible in the year incurred. And actually the provisions allow you to go back to 2022 and through to 2024 and accelerate that deduction as well.

[Vito Culmone, EVP & CFO at Stantec]

So overall positive, too early to tell at this point on our end what the impact would be from a timing perspective for to cash flow. We're modeling that through. There are some complexity, particularly being obviously a foreign jurisdiction and other taxes such as B taxes and whatnot that we need to work our way through, but I would say neutral at worst and positive from a cash flow perspective for us as well.

[Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities]

Okay. And just for follow-up with respect to the Global Technology Center in Pune, could you maybe provide an update on how many employees right now and maybe how do you track and whether there's a potential to exceed the target of 2,000 people by this three year period?

[Vito Culmone, EVP & CFO at Stantec]

Yeah, we're about fourteen fifteen hundred people right now, Benoit. We're really pleased with the progress. We see huge opportunity, such an engaged, knowledgeable, motivated team over there working across not only supporting our corporate functions, but importantly, obviously supporting our operations as well. We see huge opportunity, continued opportunity across both those layers and both those segments. In fact, we've got trips planned for the business here in the back half of this year, where they'll get up and close the personal.

[Vito Culmone, EVP & CFO at Stantec]

So optimistic, continue to be optimistic about the growth of the global delivery centers and in servicing, and obviously that continues to be a lever not only expansion, but importantly in high quality delivery for our customers on a timely basis as we continue to see across several of our markets very robust demand. I'll stop short of whether we're going to hit the 2,000 and whatnot, because I don't have that at tip of my fingers, but overall, obviously it continues to be a very important strategic part of our efforts.

[Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities]

Thank you very much for the time.

[Gord Johnston, President, CEO & Director at Stantec]

Thank you.

[Operator]

Thank you. One moment for our next question. Our next question will come from the line of Devin Dodge with BMO Capital Markets. I

[Devin Dodge, Director - Equity Research at BMO Capital Markets]

wanted to start with a question on Page. The purchase price was, I think, a bit more than we had expected. Just wondering if you could provide a bit of color on, say, the revenue the business generates, organic revenue growth it's been having the last couple of years and how maybe margins stack up to this Dantech company average?

[Vito Culmone, EVP & CFO at Stantec]

Yes, you would see us disclose we disclosed the purchase price as $5.25 You saw that in the notes to our financial statements. I'm surprised to hear you say it was a little more than you would expect that I think when the reports of you know, what the analyst community sort of reported out, I think it was in that range, obviously translates to Canadian dollars. You know, we'll know, was spot short about, you know, also just speaking to what our revenue does the Page bring to the table. Well, obviously, we closed the deal July 31. The teams are incredibly excited about the strategic value.

[Vito Culmone, EVP & CFO at Stantec]

We're happy with the multiple and the value that that business will bring forward to us. Gord, I don't know if you had much more to add to that.

[Gord Johnston, President, CEO & Director at Stantec]

Yes. No, they're roughly a US300 million in net revenue company, high average net revenue generation per employee. And we also are really impressed with them in terms of just the amount of synergy that we've already seen from a client perspective and a project perspective.

[Gord Johnston, President, CEO & Director at Stantec]

Certainly on track or even a little bit better than we thought we were going to see. So particularly pleased with that one.

[Devin Dodge, Director - Equity Research at BMO Capital Markets]

Okay. Thanks for that. Second question, Gord, I think you've mentioned in the past about tapping your exposure to the more cyclical end markets. I think it was around 15% of revenues. Historically, think that cyclical exposure has been more focused on oil and gas and mining, but I think you've also hinted that maybe data centers could be part of that cyclical basket.

[Devin Dodge, Director - Equity Research at BMO Capital Markets]

Just wondering if you could provide an update on where you view your cyclical market exposure now and just based on backlog and bidding activity, where you think this could be over the next couple of years?

[Gord Johnston, President, CEO & Director at Stantec]

Yes. And great question. Our data centers for us are at 2% to 3% of net revenue. And are they increasing? Yes, they're going up.

[Gord Johnston, President, CEO & Director at Stantec]

But I think that we still feel really comfortable that we're that sub 15% when you look at mining, you said, as you say oil and gas and data centers right now we're seeing pretty continuous growth there, but again it's only 2% to 3% of the overall. So I think that we're still well within that 15% range that we've talked about and yeah, I think we're comfortable where we're at.

[Devin Dodge, Director - Equity Research at BMO Capital Markets]

Okay, excellent. I'll turn it over.

[Gord Johnston, President, CEO & Director at Stantec]

Thanks, Devin.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Jonathan Goldman with Scotiabank. Your line is open. Please go ahead.

[Jonathan Goldman, Equity Research Analyst at Scotiabank]

Hi, good morning, team, and thanks for taking my questions. Maybe just to start off, is there any risk with the slower growth environment in The U. S, even if it does prove temporary that there could be some pressure on pricing?

[Gord Johnston, President, CEO & Director at Stantec]

We haven't really seen that yet. Even though things are organic growth has been a little bit slower for industry over the first half of the year, we haven't seen a deterioration in pricing in any way. Now should it go on for a couple of years that you know we might see that, but you know we're not expecting that to be the case. As we said we see accelerated organic growth going forward. We're still actively hiring as our you know others in the industry.

[Gord Johnston, President, CEO & Director at Stantec]

So we haven't seen pricing pressure at this point, which would then translate to project margin pressure, but as Vito said, that's really been holding up well for us.

[Vito Culmone, EVP & CFO at Stantec]

Now we very much see a market, a strong demand market where frankly we're picking our customers and may have been with us for obviously several decades and whatnot. So I don't anticipate that at all.

[Jonathan Goldman, Equity Research Analyst at Scotiabank]

Okay, that's good color. And you did talk about the M and A environment previously in the call about the activity levels. But on valuations, have you seen any change in multiples, whether higher or lower?

[Gord Johnston, President, CEO & Director at Stantec]

I think it's very similar to how we've seen in the market for for the last little while that if larger firms have a little bit of a higher multiple, firms in power and data centers have a little bit of a higher multiple. But, you know, in in general, we haven't seen trends either moving higher or unfortunately lower over the last little bit. So pretty, we're seeing some just really things being stable, really some from where I would say that they were even a year ago.

[Vito Culmone, EVP & CFO at Stantec]

And I guess that just reflects the continued strength of the overall markets and the macro factors that we've been speaking to.

[Jonathan Goldman, Equity Research Analyst at Scotiabank]

Understood. Thanks for taking my questions.

[Gord Johnston, President, CEO & Director at Stantec]

Thank you.

[Operator]

Thank you. And I'm showing no further questions at this time. And I would like to hand the conference back over to Gord Johnston for closing remarks.

[Gord Johnston, President, CEO & Director at Stantec]

Great. Well, thank you, operator, and thank you to everyone for joining us this morning. If you have any follow-up questions after today's call, please reach out to Jess Newkirk, our VP of Investor Relations. So thanks again for your time and look forward to connecting with many of you soon.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.

Participants

Executives

• Gord Johnston, President, CEO & Director
• Vito Culmone, EVP & CFO

Analysts

• Krista Friesen, Director - Equity Research at CIBC Capital Markets
• Sabahat Khan, MD - Global Research at RBC Capital Markets
• Chris Murray, MD & Equity Research - Diversified Industries at ATB Capital Markets Inc
• Yuri Lynk, Managing Director & Equity Research Analyst - Capital Goods at Canaccord Genuity Group
• Michael Tupholme, Director - Equity Research at TD Cowen
• Maxim Sytchev, MD & Research - Industrial Products at National Bank Financial
• Benoit Poirier, VP & Industrial Products analyst at Desjardins Securities
• Devin Dodge, Director - Equity Research at BMO Capital Markets
• Jonathan Goldman, Equity Research Analyst at Scotiabank