Stantec (US:STN)2025-08-14 14:00Financial Data and Key Metrics Changes - Stantec reported net revenue of CAD 1.6 billion for Q2 2025, an increase of 6.9% year-over-year, primarily driven by 4.8% organic growth [6][12] - Adjusted EBITDA grew by 15% with an enhanced margin of 17.8%, reflecting a 120 basis point increase compared to the previous year [6][12] - Adjusted EPS increased over 21% to CAD 1.36 compared to Q2 2024 [6][12] Business Line Data and Key Metrics Changes - The Energy and Resources business delivered high single-digit organic growth, while the Water segment achieved 12.4% organic growth [6][12] - The U.S. net revenue increased by 5.7%, supported by organic growth of 4.4%, with strong demand in mission critical, science and technology, and civic sectors [7][8] - In Canada, net revenue grew by 6.2%, driven by over 30% organic growth in water and double-digit growth in energy and resources [9][10] Market Data and Key Metrics Changes - Global business delivered net revenue growth of 10.5% in Q2, with 4.3% organic and 3.6% acquisition growth [10] - The UK, Australia, and New Zealand saw double-digit organic growth in the water business due to public sector investment [11] - The U.S. organic backlog increased by 9.8% year-over-year, indicating strong demand in water, energy, and data centers [17][29] Company Strategy and Development Direction - Stantec closed the acquisition of Page, enhancing its buildings business and services in key growth sectors [3][4] - The company aims to achieve net revenue growth of 10% to 12% for 2025, up from previous guidance of 7% to 10% [21] - Stantec is focused on operational excellence and project execution, with a strong pipeline for future acquisitions [25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about accelerating organic growth in the U.S. for the second half of the year, despite some caution in the private sector [28][30] - The company anticipates continued strong demand driven by macro trends such as aging infrastructure and energy security [24][54] - Management noted that while some challenges remain, they expect to see improvements in project execution and operational performance [80] Other Important Information - Stantec's contract backlog stood at CAD 7.9 billion, reflecting approximately twelve months of work, with year-over-year growth of almost 10% [16][17] - The company has increased its adjusted EBITDA margin guidance to 17% to 17.4%, up from 16.7% to 17.3% [23] - Recent financing transactions included the issuance of CAD 425 million senior unsecured notes and an increase in the unsecured revolver credit facility to CAD 1.2 billion [15] Q&A Session Summary Question: Insights on U.S. Customers' Sentiment - Management noted some initial caution in the private sector but expects organic growth to accelerate in the second half of the year, particularly in water and energy sectors [28][30] Question: Update on Acquisition Integration - Integration of Ryan Hanley and Cosgrove is progressing well, with Page's integration planned for completion by the end of the year [32][33] Question: Margin Guidance Details - Management highlighted strong project margins and lower admin and marketing costs as contributors to the increased EBITDA margin guidance [38][40] Question: Drivers of Water Business Growth - Continued strength in water treatment and wastewater projects, along with the ramp-up of AMP8, are driving organic growth in the water segment [41][44] Question: Long-term U.S. Market Outlook - Management remains optimistic about the U.S. market, citing significant infrastructure spending opportunities and a strong backlog [50][54] Question: Impact of Interest Rates on Spending - Management indicated that while interest rates may influence spending, the overall outlook remains positive with strong demand across various sectors [95] Question: Update on M&A Landscape - The M&A environment is becoming increasingly active, with expectations for more assets to come to market in the near future [91] Question: Risks of Slower Growth Environment - Management has not observed any pricing pressure despite slower organic growth, maintaining strong project margins [112]