Stantec (US:STN)2026-02-26 15:00Financial Data and Key Metrics Changes - In 2025, Stantec achieved net revenue of CAD 6.5 billion, an increase of almost 11% compared to 2024, driven by 5% organic growth and 3.9% acquisition growth [3][4] - Adjusted EBITDA increased close to 17% year-over-year, with an adjusted EBITDA margin of 17.9%, a 90 basis point increase from the previous year [4][10] - Adjusted EPS for the year reached CAD 5.30, reflecting a growth of 19.9% compared to 2024 [10][11] - Operating cash flow increased by 43.1% year-over-year, from CAD 603 million to CAD 863 million [11][12] - The contract backlog reached a record high of CAD 8.6 billion, a 9.5% increase year-over-year [12][13] Business Line Data and Key Metrics Changes - The buildings business saw net revenue increase over 30% in 2025, primarily due to the acquisition of Page and solid organic growth [4][5] - The water business achieved almost 11% organic growth, driven by large wastewater treatment projects [3][5] - The energy and resources segment experienced 15% organic growth, supported by major industrial process projects [6][7] - Environmental services growth was driven by the energy transition, mining, and infrastructure sectors [5][6] Market Data and Key Metrics Changes - In the US, net revenue increased by 13.5% in Q4 2025, with 11.5% from acquisitions and just over 2% from organic growth [4][9] - Canadian net revenue grew 5.5% in Q4 2025, entirely from organic growth, and over 8% for the full year [5][6] - The global business delivered net revenue growth of 11% in Q4 2025, with over 6% organic growth [6][7] Company Strategy and Development Direction - Stantec's strategy focuses on leveraging macro trends such as aging infrastructure, defense spending, and energy transition to drive growth [16][21] - The company aims to continue expanding its high-value centers and optimizing digital strategies to enhance margins [14][21] - Stantec is committed to pursuing value-accretive acquisitions while maintaining a disciplined approach to M&A [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustained demand across diverse sectors, with expectations for net revenue growth in 2026 to be between 8.5% and 11.5% [14][16] - The company anticipates continued strong performance in the water business and growth driven by public and private sector investments [19][20] - Management highlighted the importance of AI in enhancing operational efficiency and decision-making processes [22][24] Other Important Information - The board approved an 8.9% dividend increase, raising the annualized dividend to CAD 0.98 per share [12] - Stantec's UK water team was named a preferred bidder for a significant multi-billion pound project, indicating strong future growth potential in the UK market [20][21] Q&A Session Summary Question: How does AI translate into revenue per employee utilization? - Management believes AI will enhance efficiency and drive higher net revenue per employee, similar to past technological advancements [28][29] Question: How long does it typically take for private companies to reset their valuation markers? - Management noted that the decline in public market multiples is a new phenomenon, and it may take time for private companies to adjust their expectations [30][32] Question: Where do you see more application for AI tools in the future? - AI is being used internally for efficiency and externally to refine work products, with applications expected across all business lines [44][46] Question: What is the outlook for the US segment in 2026? - Management sees increased activity in the US, particularly in data centers and environmental services, with a positive outlook for 2026 [48][50] Question: How does the company view the potential for outcome-based pricing? - Management indicated that while there is interest in outcome-based pricing, significant industry-wide changes would be required to shift from time and materials pricing [90][92]