Stantec (US:STN)2025-08-14 14:02Financial 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, driven primarily by 4.8% organic growth [7][13] - Adjusted EBITDA grew by 15% with a margin of 17.8%, reflecting a 120 basis point increase compared to the previous year [8][14] - Adjusted EPS increased over 21% to CAD 1.36 compared to Q2 2024 [14] Business Line Data and Key Metrics Changes - The Energy and Resources business experienced high single-digit organic growth, while the Water segment achieved 12.4% organic growth [7][10] - In the U.S., net revenue increased by 5.7%, supported by 4.4% organic growth, with strong demand in mission-critical, science and technology, and civic sectors [8][10] - Canadian net revenue grew by 6.2%, with over 30% organic growth in the Water segment driven by major wastewater projects [10][11] 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 U.S. organic backlog increased by 9.8% year-over-year, indicating strong demand in water, energy, and data centers [20][31] - The UK, Australia, and New Zealand saw double-digit organic growth in the water business due to public sector investments [11] Company Strategy and Development Direction - Stantec aims to increase net revenue growth guidance for 2025 to 10% to 12%, up from the previous 7% to 10% [23] - The company is focused on strong project execution and operational excellence, with plans to continue pursuing acquisitions [27] - Stantec's strategic plan targets a 17% to 18% adjusted EBITDA margin, expected to be achieved a year early [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 [30][56] - The company noted that macro trends such as aging infrastructure and energy security continue to drive demand [26][90] - Management highlighted the importance of recent funding programs and infrastructure investments as supportive of future growth [89] 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 nearly 10% [19] - The company completed several acquisitions, including Page, which is expected to enhance its capabilities in key growth sectors [5][18] Q&A Session Summary Question: Insights on U.S. Customers' Sentiment - Management noted some initial caution among U.S. customers but expects organic growth to accelerate in the second half of the year, particularly in water and energy sectors [30][31] Question: Integration of Recent Acquisitions - Integration of Ryan Hanley and Cosgrove is progressing well, with Page's integration planned for completion by the end of the year [34] Question: Margin Guidance and Contributors - Adjusted EBITDA margin guidance was increased to 17% to 17.4%, driven by strong project margins and lower administrative costs [41][42] Question: Water Segment Growth Drivers - Continued strength in the water business is attributed to ongoing projects in water treatment and wastewater treatment, with significant demand expected to persist [48][49] Question: U.S. Market Long-term Outlook - Management remains optimistic about the U.S. market, citing ongoing infrastructure investments and the potential for accelerated growth in the coming years [54][58] Question: Impact of Slower Growth on Pricing - No significant pricing pressure has been observed despite slower growth, with management confident in maintaining project margins [120][122] Question: M&A Landscape Update - The M&A environment is becoming increasingly active, with expectations for more assets to come to market in the near future [98]