Stantec (STN) - 2021 Q4 - Annual Report

2021 Performance Highlights Stantec achieved record earnings in 2021, reporting a record adjusted diluted EPS of $2.42 and a backlog of $5.1 billion, driven by acquisitions and strong regional performance Full-Year 2021 Key Financial Metrics | Metric | 2021 Value | Change vs 2020 | | :--- | :--- | :--- | | Net Revenue | $3.6 billion | +2.6% (constant currency) | | Adjusted EBITDA Margin | 15.8% | +10 bps | | Diluted EPS | $1.80 | +26.8% | | Adjusted Diluted EPS | $2.42 | +9.0% | | Contract Backlog | $5.1 billion | +17.3% | - Strategic acquisitions, including Cardno, expanded Stantec's presence in key areas like environmental services and the energy transition, particularly in the US and Australia[4] - The Board of Directors declared an increased quarterly dividend of $0.18 per share, representing a 9.1% increase on an annual basis[9] - The 2023 Real Estate Strategy is on track to reduce Stantec's real estate footprint by 30% relative to 2019, contributing over $0.18 per share in savings to 2021 net income[5][6] 2022 Outlook Stantec forecasts significant 2022 growth, expecting net revenue growth of 18% to 22% and adjusted diluted EPS growth of 22% to 26%, driven by a robust macroeconomic environment and record backlog 2022 Annual Targets | Target | 2022 Annual Range | | :--- | :--- | | Net revenue growth | 18% to 22% | | Adjusted EBITDA as % of net revenue | 15.3% to 16.3% | | Adjusted net income as % of net revenue | At or above 7.5% | | Growth in adjusted diluted EPS | 22% to 26% | | Net debt to adjusted EBITDA | 1.0x to 2.0x | - Organic net revenue growth is expected to be in the mid to high single digits, with high single-digit growth in the US, low single-digit growth in Canada, and high single to low double-digit growth in the Global segment[10] - The 2023 Real Estate Strategy is expected to contribute an additional $0.20 to $0.25 per share in savings by the end of 2023, split evenly between 2022 and 2023[12] Detailed Financial Review This section details Stantec's financial performance for Q4 and full-year 2021, covering highlights, summary tables, segment revenue, and backlog analysis Full-Year 2021 Financial Highlights Full-year 2021 net revenue reached $3.6 billion with 2.6% constant currency growth, while net income increased 26.1% to $200.7 million and adjusted net income grew 8.4% to $269.9 million Full-Year 2021 vs 2020 Performance (in millions CAD, except EPS) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Net Revenue | $3,636.1 million | $3,684.5 million | | Project Margin | $1,963.3 million (54.0%) | $1,930.5 million (52.4%) | | Adjusted EBITDA | $573.8 million (15.8%) | $578.9 million (15.7%) | | Net Income | $200.7 million | $159.1 million | | Adjusted Net Income | $269.9 million | $248.9 million | | Adjusted Diluted EPS | $2.42 | $2.22 | - The strengthening Canadian dollar against the US dollar reduced 2021 net revenues by $130.7 million and adjusted diluted EPS by approximately $0.06 per share[5] - Contract backlog increased 17.3% to a record $5.1 billion, representing approximately 13 months of work; organic backlog growth was 6.7%, with US Environmental Services backlog growing over 50%[9] Fourth Quarter 2021 Financial Highlights Q4 2021 net revenue grew 8.7% on a constant currency basis, but adjusted net income decreased 4.8% to $63.8 million and adjusted diluted EPS fell to $0.57, mainly due to increased share-based compensation Q4 2021 vs Q4 2020 Performance (in millions CAD, except EPS) | Metric | Q4 2021 | Q4 2020 | | :--- | :--- | :--- | | Net Revenue | $916.2 million | $861.7 million | | Project Margin | $506.6 million (55.3%) | $455.0 million (52.8%) | | Adjusted EBITDA | $142.1 million (15.5%) | $138.5 million (16.1%) | | Net Income | $16.6 million | $14.9 million | | Adjusted Net Income | $63.8 million | $67.0 million | | Adjusted Diluted EPS | $0.57 | $0.60 | - Excluding the descoped Trans Mountain Expansion Project (TMEP), organic growth in Q4 would have been 4.2%[14] - The decrease in adjusted EBITDA margin and adjusted net income was partly driven by a $13.4 million increase in share-based compensation expense[14] Financial Summary Tables This section provides a detailed consolidated financial summary for Q4 and full-year 2021, comparing key revenue, margin, expense, and earnings per share metrics against 2020 Q4 and Full-Year 2021 Financial Summary (in millions CAD, except per share) | | Q4 2021 | Q4 2020 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | :--- | | Net revenue | 916.2 | 861.7 | 3,636.1 | 3,684.5 | | Project margin | 506.6 | 455.0 | 1,963.3 | 1,930.5 | | Net income from continuing operations | 16.6 | 14.9 | 200.7 | 159.1 | | Adjusted EBITDA from continuing operations | 142.1 | 138.5 | 573.8 | 578.9 | | Adjusted net income from continuing operations | 63.8 | 67.0 | 269.9 | 248.9 | | Adjusted diluted EPS from continuing operations | 0.57 | 0.60 | 2.42 | 2.22 | Net Revenue by Reportable Segment In 2021, the Global segment drove organic growth at 8.9% for the full year and 23.8% in Q4, while US and Canada segments experienced organic retractions in Q4 Full-Year 2021 Net Revenue by Segment (in millions CAD) | Segment | 2021 Net Revenue | % Organic Growth | | :--- | :--- | :--- | | Canada | 1,068.5 | (0.8)% | | United States | 1,799.5 | (5.0)% | | Global | 768.1 | 8.9% | Q4 2021 Net Revenue by Segment (in millions CAD) | Segment | Q4 2021 Net Revenue | % Organic Growth | | :--- | :--- | :--- | | Canada | 260.0 | (2.5)% | | United States | 440.2 | (3.0)% | | Global | 216.0 | 23.8% | Backlog Analysis Stantec's total backlog reached a record $5.13 billion by year-end 2021, increasing 17.3% with 6.7% organic growth, notably 10.2% in the United States segment Backlog by Segment as of Dec 31 (in millions CAD) | Segment | 2021 Backlog | 2020 Backlog | % Organic Growth | | :--- | :--- | :--- | :--- | | Canada | 1,169.1 | 1,134.3 | 3.1% | | United States | 3,016.9 | 2,449.2 | 10.2% | | Global | 948.3 | 793.6 | 1.4% | | Total | 5,134.3 | 4,377.1 | 6.7% | Shareholder and Other Information This section provides shareholder details, including conference call information, and important disclosures on non-IFRS financial measures and forward-looking statements, with reconciliation tables Conference Call Information Stantec scheduled a conference call for February 24, 2022, at 9:00 AM Eastern Time, for management to discuss Q4 and full-year 2021 results with the investment community - President and CEO Gord Johnston and CFO Theresa Jang will host a conference call on February 24, 2022, at 7:00 AM Mountain Time (9:00 AM Eastern Time) to discuss Q4 performance[20] Cautionary Statements and Non-IFRS Measures The report utilizes non-IFRS financial measures and includes forward-looking statements regarding the 2022 outlook and strategic goals, which are subject to inherent risks and uncertainties - The company uses non-IFRS measures like adjusted EBITDA, adjusted net income, and organic growth to provide useful information to investors; these measures do not have a standardized meaning under IFRS[23][24] - Forward-looking statements regarding the 2022 outlook are subject to risks, including economic downturns, project cancellations, and failure of US infrastructure stimulus to materialize[25][26] Reconciliation of Non-IFRS Financial Measures This section provides detailed tables reconciling IFRS net income to non-IFRS measures like adjusted EBITDA and adjusted net income for Q4 and full-year 2021 and 2020, including various adjustments Reconciliation of Net Income to Adjusted EBITDA (in millions CAD) | | Q4 2021 | Q4 2020 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income from continuing operations | 16.6 | 14.9 | 200.7 | 159.1 | | Adjustments (Taxes, Interest, D&A, etc.) | 125.5 | 123.6 | 373.1 | 419.8 | | Adjusted EBITDA from continuing operations | 142.1 | 138.5 | 573.8 | 578.9 | Reconciliation of Net Income to Adjusted Net Income (in millions CAD) | | Q4 2021 | Q4 2020 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income from continuing operations | 16.6 | 14.9 | 200.7 | 159.1 | | After-tax adjustments | 47.2 | 52.1 | 69.2 | 89.8 | | Adjusted net income from continuing operations | 63.8 | 67.0 | 269.9 | 248.9 |