Stantec (US:STN)2024-02-29 18:48Financial Data and Key Metrics Changes - In 2023, the company achieved record financial results with a 14% year-over-year increase in net revenue, driven by nearly 10% organic growth [5][8] - The diluted EPS for Q4 was $0.66, with an adjusted diluted EPS of $0.82, consistent with the previous year [8] - Full-year diluted EPS reached a record high of $2.98, with adjusted diluted EPS up 34% to $3.67 despite a $0.24 unfavorable impact from long-term incentive plan (LTIP) revaluation [18][34] Business Line Data and Key Metrics Changes - The water business experienced a 25% increase in organic growth, driven by robust demand in public sector and industrial projects [6] - The buildings business saw higher activity levels in healthcare, industrial, and science and technology projects, contributing to solid revenue growth [6][42] - Energy and Resources achieved double-digit organic growth, supported by advancements in projects like the Coire Glas pumped storage energy project [36] Market Data and Key Metrics Changes - The US operations delivered over 18% growth in net revenue, with more than 12% from organic growth [14] - Global operations achieved 6.5% organic growth, with double-digit growth in Water and Energy and Resources [7] - In Canada, organic net revenue growth exceeded 8%, with environmental services, infrastructure, and water each delivering double-digit organic growth [35] Company Strategy and Development Direction - The company has closed acquisitions of ZETCON and Morrison Hershfield, enhancing its capabilities and workforce to over 30,000 employees [13] - The strategic plan for 2024 to 2026 aims to leverage these acquisitions for growth [13] - The company is optimistic about high levels of activity across all regions and has raised its net revenue growth target for 2024 to 11% to 15% [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong market demand and the ability to grow backlog, which increased organically by 5% since December 2022 [21] - The company anticipates continued high levels of activity in 2024, with expectations for mid to high-single-digit organic revenue growth in the US and globally [25] - Management noted that while there are salary pressures, they have successfully passed on most of these costs to clients, contributing to organic growth [49] Other Important Information - The company reported a backlog of $6.3 billion, with a 23% organic increase in the water segment [21][22] - The company has been recognized as a top global leader in sustainability for five consecutive years [33] - Management highlighted the importance of cultural alignment in discussions with employee-owned firms for potential acquisitions [95] Q&A Session Summary Question: Criteria for CFO Search - The search for a new CFO is underway, with hopes to complete it in the next quarter or two [27] Question: AMP8 Program in the UK - The company has secured many awards for AMP8 and is already working on preparatory planning for upcoming projects [28] Question: Free Cash Flow and Section 174 Impact - The company expects an impact of approximately $30 million to $40 million in additional cash taxes due to Section 174 [29] Question: Organic Growth and Pricing Inflation - Management indicated that approximately half of the organic growth is due to fee increases, with the other half from additional organic growth [49] Question: Infrastructure Organic Growth Expectations - The company is optimistic about infrastructure growth, particularly in the US, supported by ongoing projects and funding [77] Question: M&A Interest from Employee-Owned Firms - There is increasing interest from employee-owned firms looking for transitions, with discussions ongoing [87] Question: Energy Market Conditions - The company is monitoring the energy market, noting some slowdown in offshore wind projects but projecting good organic growth overall [99] Question: Private Equity-Owned Firms as Acquisition Targets - The company has seen initial conversations with private equity-owned firms nearing the end of their investment cycle [101]