Stantec (US:STN)2022-02-27 06:16Financial Data and Key Metrics Changes - For Q4 2021, the company reported EPS of $0.15 compared to $0.13 last year, and adjusted EPS of $0.57 compared with $0.60 last year [17] - Full year net revenue was $3.6 billion, a 2.6% increase on a constant currency basis, driven by acquisition growth of 3.9% [19] - Adjusted EBITDA margin increased to a record 15.8% for the full year [19][20] - The company built its backlog to a record $5.1 billion, representing a 17% increase from 2020 [7] Business Line Data and Key Metrics Changes - The U.S. business delivered net revenue of $440 million in Q4 and $1.8 billion for 2021, with a backlog achieving 10% organic growth [8] - The Canadian business delivered $260 million in net revenue for Q4 and $1.1 billion for the year, generally consistent with last year [10] - The Global business performed well with $216 million in net revenue in Q4, a 39% increase compared to the same period last year [12] Market Data and Key Metrics Changes - The U.S. Environmental Services business recorded more than 50% organic backlog growth [8] - The UK government has committed over £130 billion to the national infrastructure strategy, which is expected to lead to additional transportation projects [13] - Global backlog increased over 19% during the year to a new record level [13] Company Strategy and Development Direction - The company aims to capitalize on infrastructure stimulus spending, particularly directed towards disadvantaged communities [24][25] - Investments are being made in domestic manufacturing capabilities for essential products, including vaccines and semiconductor facilities [26][27] - The company is focused on improving infrastructure resilience in response to extreme weather events [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the U.S. business's performance in 2022, supported by significant infrastructure stimulus and economic expansion [8] - The company expects net revenue growth in the range of 18% to 22% for 2022, with organic growth in the U.S. expected to be in the high single digits [32] - Management highlighted the importance of attracting and retaining talent to capitalize on future opportunities [30] Other Important Information - The company deployed $703 million to fund acquisitions and returned $123 million to shareholders through dividends and share repurchases [22] - The Board of Directors increased the annualized dividend by 9.1% for 2022, marking the ninth consecutive year of dividend increases [22] Q&A Session Summary Question: What are the moving parts in the 2022 EBITDA margin guidance? - Management discussed the expected increase in SG&A due to reopening and higher labor costs, offset by improved project margins and reduced real estate footprint [38][39] Question: What is the biggest risk in achieving the 2023 targets? - Labor shortages and the complexity of integrating the Cardno acquisition were identified as potential risks [40] Question: How is the company addressing the Russia-Ukraine conflict? - The company had minimal exposure in Ukraine and withdrew personnel from ongoing projects as tensions escalated [42] Question: What is the vision for Cardno's margin profile over the next 2-3 years? - Management expects Cardno's margin profile to be consistent with Stantec's and to improve over time [48] Question: What is the M&A strategy moving forward? - The focus is on ensuring smooth integration of Cardno while actively looking for potential acquisitions in various geographies [49] Question: What are the expectations for utilization in 2022? - Utilization is expected to be lower in Q1 but improve significantly in the second half of the year [62][64] Question: How does the company view the impact of rate hikes on the business? - Discussions with clients have shown more sensitivity to inflation in supplies rather than rate hikes [96]