Stantec (US:STN)2025-11-14 15:02Financial Data and Key Metrics Changes - Net revenue grew to CAD 1.7 billion in Q3 2025, an increase of almost 12% compared to Q3 2024, driven by organic and acquisition growth, each over 5% [3][8] - Adjusted EBITDA increased by close to 18% year over year, achieving a record margin of 19% [3][8] - Adjusted EPS grew by 17.7% compared to Q3 2024, reaching CAD 1.53 [9] - Year-to-date operating cash flows increased by 86% compared to 2024, from CAD 296 million to CAD 551 million [9] Business Line Data and Key Metrics Changes - The water business delivered almost 13% organic growth, while energy and resources achieved nearly 10% organic growth [3] - In the U.S., net revenue increased over 14% in Q3, driven by 4.6% organic growth and almost 9% acquisition growth [4] - The buildings business saw net revenue increase by more than 40% in Q3, attributed to the acquisition of Page and continued organic growth [4] Market Data and Key Metrics Changes - In Canada, net revenue grew 7.6% in Q3, driven entirely by organic growth, with double-digit growth in water and energy resources [5][6] - Global business delivered net revenue growth of almost 11% in Q3, achieving 5.5% organic and 2.8% acquisition growth [7] - The U.K. and Australia saw continued double-digit organic growth in the water business due to public sector investment [7] Company Strategy and Development Direction - The company maintains its net revenue growth guidance for the full year while increasing adjusted EBITDA margin outlook to 17.2%-17.5% [13] - The company is optimistic about growth in Canada and globally, expecting mid to high single-digit organic net revenue growth [13] - The company is focused on diversifying its business and pursuing M&A opportunities to support growth [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong demand driven by ongoing needs and priorities of clients, despite some near-term challenges in the U.S. market [13][18] - The recent federal budget in Canada is expected to prioritize infrastructure investments, providing long-term support for the industry [13] - Management remains positive about the prospects for 2026, citing strong momentum in various sectors [19] Other Important Information - The contract backlog stood at CAD 8.4 billion at the end of Q3, an almost 15% increase year over year [11] - Significant project wins include a CAD 7 billion high-voltage project for Manitoba Hydro and a $745 million project in South Carolina [12] Q&A Session Summary Question: Thoughts on 2026 outlook - Management indicated strong momentum going into 2026, with continued support in the water business and infrastructure projects in Canada [17][18] Question: Canadian infrastructure opportunities - Management highlighted solid organic growth in Canada, particularly in land development and water projects, with no slowdown expected [22][23] Question: Concerns about U.S. market conditions - Management acknowledged some uncertainty in the U.S. but emphasized strong macro fundamentals and ongoing demand drivers [31][32] Question: Update on M&A pipeline - Management confirmed a robust M&A environment with ongoing discussions and a positive outlook for future acquisitions [35] Question: Margin sustainability into 2026 - Management expressed confidence in continued EBITDA margin expansion, driven by organic revenue activity [58][59] Question: Exposure to defense spending - Management noted limited exposure to defense but sees potential growth opportunities in related infrastructure projects [61][62] Question: Free cash flow performance - Management attributed strong free cash flow to effective working capital management and expects continued positive trends [64][65]