Stantec (NYSE:STN) Q4 2025 Earnings call February 26, 2026 09:00 AM ET Company ParticipantsChris Murray - Managing Director and Institutional ResearchFrederic Bastien - Head of Industrial ResearchGord Johnston - President and CEOKrista Friesen - Executive Director and Equity ResearchMaxim Sytchev - Managing Director and Research Industrial ProductsSabahat Khan - Managing Director and Global ResearchVito Culmone - EVP and CFOConference Call ParticipantsBenoit Poirier - VP and Industrial Products AnalystIan G ...

Financial Data and Key Metrics Changes - For Q4 2025, the company generated revenues of $1.6 billion, up 5% year-over-year, with overall internal growth for the quarter being essentially flat due to strong prior comparisons [10] - Adjusted EBITDA for the quarter was $245 million, reflecting a 6% increase over the previous year, in line with revenue growth [10] - The company's leverage declined to 2x as of December 31, benefiting from strong seasonal cash flows [15] Business Line Data and Key Metrics Changes - The commercial real estate segment net revenue increased by 7% in Q4, with Capital Markets revenues rising by 13%, primarily driven by strong activity in the U.S. [11] - Leasing revenues grew by 3%, led by the U.S. in office and industrial asset classes [11] - The engineering segment net revenue was up 8%, supported by recent acquisitions, while investment management net revenues increased by 6% [12] Market Data and Key Metrics Changes - The U.S. market continued to show strength, particularly in Capital Markets, which is expected to maintain high teens growth in 2026 [64] - EMEA and Asia Pacific markets experienced modest growth, with expectations for improvement in 2026 [36] Company Strategy and Development Direction - The company is focused on expanding its diversified platform and has recently agreed to acquire Ayesa Engineering, which will enhance growth avenues and strengthen its global presence [5] - The strategy emphasizes leveraging AI as a productivity and growth enabler, improving efficiency and margins while allowing professionals to focus on higher-value advisory services [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about entering 2026 with strong momentum and a healthy pipeline, expecting solid internal growth and contributions from recent acquisitions [7] - The company anticipates mid-teens growth across its key operating metrics for 2026, driven by a recovery in Capital Markets and strong demand in engineering and investment management [16] Other Important Information - The company raised $2.1 billion in new capital commitments during Q4 and $5.3 billion for the full year, with a fundraising target of $6 billion to $9 billion for 2026 [13][66] - The integration costs in the investment management segment are expected to continue impacting margins through the first half of 2026 [12][32] Q&A Session Summary Question: Organic growth in engineering - Management noted strong demand for services and opportunities to increase pricing, with hiring ongoing to meet demand [19][20] Question: Capital allocation and share buybacks - Management indicated a preference for careful capital management and highlighted the focus on acquisitions rather than share buybacks at this time [29] Question: Macro perspective on Capital Markets - Management does not expect rate cuts to influence their outlook, citing pent-up demand for transactions as a key driver for growth [36] Question: AI's impact on business - Management views AI as a margin enhancer rather than a disruptor, emphasizing its role in improving efficiency and enabling professionals to focus on complex transactions [71][72] Question: Ayesa acquisition and future growth - Management highlighted the strategic importance of the Ayesa acquisition for expanding into new markets and leveraging existing capabilities [56][87]

Financial Data and Key Metrics Changes - Adjusted EPS grew 15% to $1.53, supported by robust 8% net revenue growth and solid underlying margin performance [4][11] - Gross revenue increased 12% year-over-year, and adjusted net revenue grew by more than 8% [10] - Consolidated backlog was up 21% year-over-year to a record $26.3 billion, with trailing 12-month book-to-bill rising to 1.4x [11][12] - Free cash flow for Q1 was $365 million, with a strong underlying performance despite a favorable cash timing item [15][16] Business Line Data and Key Metrics Changes - Life sciences and advanced manufacturing net revenue grew 10% in Q1, driven by strong award activity in data centers and semiconductor sectors [12][13] - Critical infrastructure net revenue increased 8% over Q1 2025, with robust growth in transportation, particularly in rail and aviation [13] - Water and environmental net revenue growth increased sequentially to 4%, driven by high single-digit growth in water [13][14] Market Data and Key Metrics Changes - International business grew over 9%, with broad-based growth in Europe, the Middle East, and APAC [23] - The company is seeing a strong demand for integrated consulting and delivery approaches, particularly in critical infrastructure [9] Company Strategy and Development Direction - The acquisition of the remaining stake in PA Consulting is seen as a key accelerant in the strategy to redefine the asset life cycle [4][10] - The company aims to simplify its structure and produce predictable, high-quality earnings over the long term [10] - Focus on leveraging digital consulting, innovation, and AI advisory to enhance service offerings and drive growth [4][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the updated guidance, citing strong execution and secular growth tailwinds [20] - The company anticipates continued growth in the life sciences and advanced manufacturing sectors, particularly in the second half of the fiscal year [12][14] - Management noted that the government shutdown did not impact their performance, providing confidence in their revenue range [23][24] Other Important Information - The company announced a 12.5% increase in its quarterly dividend from $0.32 to $0.36 per share [16] - The net leverage ratio currently stands just below 0.8x on LTM adjusted EBITDA, well below the target range of 1.0x-1.5x [16] Q&A Session Summary Question: Outlook considering potential government shutdown - Management indicated that the backlog's burn profile and strong wins in life sciences and advanced manufacturing are key drivers for confidence in guidance [23][24] Question: Environmental services business performance - Management highlighted three factors driving improvement: government contracts, disaster relief work transitioning to state and local levels, and increased private sector demand [25][26][28][29] Question: Backlog growth and project complexity - Management confirmed that the risk profile remains unchanged and that they are utilizing the same risk management strategies as in previous years [78][79] Question: PA Consulting acquisition valuation - Management clarified the accounting and economic ownership differences and emphasized the expected accretive nature of the acquisition [81][84] Question: Project pipeline growth by end markets - Management reported strong pipeline growth across water and environmental, life sciences, and critical infrastructure sectors, with varying growth rates [90]

Financial Data and Key Metrics Changes - Adjusted EPS grew 15% to $1.53, supported by robust 8% net revenue growth and solid underlying margin performance [4][11] - Gross revenue increased 12% year-over-year, and adjusted net revenue grew by more than 8% [10] - Consolidated backlog was up 21% year-over-year to a record $26.3 billion, with trailing 12-month book-to-bill rising to 1.4 times [11][12] - Free cash flow for Q1 was $365 million, with a strong working capital performance [15] Business Line Data and Key Metrics Changes - Life sciences and advanced manufacturing net revenue grew 10% in Q1, driven by strong award activity in data centers and semiconductor sectors [12][13] - Critical infrastructure net revenue increased 8% over Q1 2025, with robust growth in transportation, particularly in rail and aviation [13] - Water and environmental net revenue growth increased sequentially to 4%, driven by high single-digit growth in water [13][14] Market Data and Key Metrics Changes - International business grew over 9% year-over-year, with broad-based growth in Europe, the Middle East, and APAC [23] - The company expects environmental services performance to improve as larger programs from the US Department of Defense come through [27] Company Strategy and Development Direction - The company announced an agreement to acquire the remaining stake in PA Consulting, viewing it as a key accelerant in redefining the asset life cycle [4][10] - The focus remains on strong execution, profitable growth, and continued capital returns, with an increased outlook for net revenue, adjusted EPS, and free cash flow margin [5][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the revenue guidance, citing strong private sector work and a robust backlog [24] - The company anticipates that the acquisition of PA Consulting will be accretive to adjusted EPS in the first 12 months following closing [18] - Management noted that AI and digital enablement are driving efficiencies and growth in both top line and bottom line [72] Other Important Information - The company raised its quarterly dividend from $0.32 to $0.36 a share, marking a 12.5% increase [16] - The net leverage ratio currently stands just below 0.8x on LTM adjusted EBITDA, well below the target range [16] Q&A Session All Questions and Answers Question: Outlook considering government shutdown concerns - Management indicated that the backlog's burn profile and strong wins in life sciences and advanced manufacturing are driving confidence in the revenue range [23][24] Question: Environmental services business recovery - Management identified three drivers for recovery: larger programs from the US Department of Defense, transfer of disaster relief work to state and local levels, and increased private sector demand [27][28] Question: Backlog growth and project complexity - Management confirmed that the risk profile remains unchanged and that they are utilizing the same EPCM delivery model as in the past [81] Question: PA Consulting acquisition valuation - Management clarified the accounting and economic ownership differences and emphasized the expected accretive nature of the acquisition [82][86] Question: Project pipeline growth by core end markets - Management reported double-digit pipeline growth in water and environmental, and life sciences and advanced manufacturing, with high single digits in critical infrastructure [92]

Core Insights - Jacobs has been awarded a five-year contract by EirGrid to support the development of Ireland's renewable electricity transmission system, with an option for an additional three years [1][4] - The framework will enable Jacobs to provide comprehensive engineering design, planning, and project management services for high-voltage transmission infrastructure, including both overground and underground assets [2][3] - EirGrid's strategy aims for at least 80% of electricity generation from renewable sources by 2030, and Jacobs' role is crucial in ensuring the long-term resilience of the grid [4] Company Overview - Jacobs is a global leader in engineering and project management, with approximately $12 billion in annual revenue and a workforce of nearly 45,000 [7] - The company is involved in various infrastructure projects across Ireland, including transportation and water services, demonstrating its broad expertise [5] - Jacobs is also engaged in significant global energy infrastructure projects, such as the Suedlink in Europe and Xcel Energy's multi-billion-dollar transmission program in the U.S. [6]

Financial Performance (Q3-25) - Net revenue increased by 11% to $1.06 billion compared to $0.96 billion in Q3-24, excluding USAID and DOS [5] - Operating income increased by 37% to $159 million compared to $116 million in Q3-24, excluding USAID and DOS [5] - Earnings per share (EPS) increased by 46% to $0.41 compared to $0.28 in Q3-24, excluding USAID and DOS [5] Segment Performance (Q3-25) - CIG segment net revenue increased by 2% to $633 million [7] - GSG segment net revenue increased by 29% to $429 million [7] - CIG operating income margin increased by 230 basis points to 19.9% [7] - GSG operating income margin increased by 130 basis points to 15.2% [7] Customer Revenue (Q3-25) - U.S Federal net revenue increased by 46% [8] - U.S State & Local net revenue increased by 30% [8] - U.S Commercial net revenue decreased by 4% [8] - International net revenue decreased by 1% [8] Financial Overview (FY25 YTD) - Net revenue increased by 9% to $3.454 billion [14] - EBITDA increased by 15% to $476 million [15] - Operating income increased by 21% to $432 million [16] - Diluted EPS increased by 26% to $1.11 [16] Backlog - Q3-25 Backlog is $3.09B [10] Guidance - Q4-25 Net Revenue is expected to be between $1.0 billion and $1.1 billion [32] - Q4-25 Adjusted EPS is expected to be between $0.38 and $0.43 [32] - FY-25 Net Revenue is expected to be between $4.454 billion and $4.554 billion [32] - FY-25 Adjusted EPS is expected to be between $1.49 and $1.54 [32]

Financial Data and Key Metrics Changes - The company achieved record results for revenue, net revenue, operating income, and earnings per share in the second quarter, with net revenue increasing to $1.1 billion, up $51 million year-over-year, and operating income rising to $130 million, an 11% increase from the prior year [9][10] - Earnings per share for the quarter was $0.33, reflecting an 18% increase from the previous year [10] Business Line Data and Key Metrics Changes - The Government Services Group (GSG) segment saw a 12% year-over-year revenue increase to $521 million, with a margin of 13.8% [10][11] - The Commercial International Group (CIG) segment's revenue was $597 million, up approximately 2%, with a margin of 13.2% [11] - U.S. Federal client work (excluding USAID) increased by 16%, representing about 20% of total revenues, driven by disaster response activities and new programs for the Army Corps of Engineers [11][12] Market Data and Key Metrics Changes - International work accounted for about 38% of revenues, with slight growth on a constant currency basis, although Australian infrastructure work saw a reduction of over 10% due to a recent election [12][13] - The company reported a backlog of $4.31 billion, which includes $220 million in ongoing work with USAID, primarily in Ukraine [13][14] Company Strategy and Development Direction - The company is focusing on high-end data centers and water and environmental projects, which are expected to carry higher margins [16][31] - The addition of the Sage Group is expected to enhance capabilities in digital systems and automation, positioning the company for growth in these areas [34][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the funding streams from the U.S. Federal Government, particularly in defense-related services, and noted that the Department of Defense is expected to spend what they contract for [72][74] - The company anticipates continued strong demand for its services in water supply and environmental projects, driven by ongoing challenges such as drought and aging infrastructure [86] Other Important Information - The company announced a 12% increase in its quarterly dividend and reinstated its stock buyback program, with $150 million in stock repurchased in the second quarter [22][23] - A new credit facility of $1.5 billion was secured, providing more liquidity and favorable terms for future investments [20][39] Q&A Session All Questions and Answers Question: Concerns about federal expenditure reductions affecting state and local business - Management noted that they have not seen any near-term pressure on state and local projects, which are often funded through multi-year bonds [42][44] Question: Impact of proposed EPA deregulation on the company - Management indicated that most of their environmental work is driven by state and local regulations, and they do not foresee a direct impact from proposed federal regulations [49][52] Question: Core margin progression post-USAID cancellations - Management expects margins to grow slightly faster than the previously targeted 50 basis points annually, with a new higher baseline established [59][60] Question: Visibility and confidence from government partners for future projects - Management reported positive feedback from federal clients regarding funding commitments, particularly in defense and infrastructure projects [72][74] Question: Capital allocation preferences between share buybacks and M&A - Management stated that they have the ability to pursue both share buybacks and acquisitions simultaneously, with a focus on maintaining double-digit dividend increases [88][89] Question: Utilization rates of staff previously working with USAID - Management acknowledged a decrease in utilization rates for USAID staff but noted that overall staffing levels remained high due to disaster response projects [96]