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01/11 03:18
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A indicate a positive outlook with increased guidance on revenue, EBITDA margins, and EPS growth. The company is optimistic about organic growth, driven by strong demand in key sectors and regions. Despite some uncertainties, management's focus on strategic growth, robust M&A pipeline, and positive cash flow performance bolster confidence. However, lack of specific guidance on some metrics and reliance on external factors like government funding introduce minor uncertainties, keeping the sentiment from being 'strong positive.'
Net Revenue $1.7 billion in Q3 2025, an increase of almost 12% compared to Q3 2024, driven by over 5% organic growth and over 5% acquisition growth.
Water Business Organic Growth Almost 13% organic growth in Q3 2025, driven by large public sector water supply and wastewater treatment projects.
Energy & Resources Organic Growth Nearly 10% organic growth in Q3 2025, supported by energy transition, mining, and infrastructure sectors.
Adjusted EBITDA Close to 18% year-over-year growth in Q3 2025, with a record margin of 19%, reflecting lower administration and marketing expenses and higher utilization.
Adjusted EPS 17.7% growth in Q3 2025 compared to Q3 2024, reaching $1.53.
U.S. Net Revenue Increased over 14% in Q3 2025, driven by 4.6% organic growth and almost 9% acquisition growth.
Buildings Business Net Revenue Increased by more than 40% in Q3 2025, driven by the acquisition of Page and continued organic growth.
Canada Net Revenue Grew 7.6% in Q3 2025, driven completely by organic growth, with double-digit growth in Water and Energy & Resources businesses.
Global Business Net Revenue Grew almost 11% in Q3 2025, with 5.5% organic growth, 2.8% acquisition growth, and positive foreign exchange impacts.
Gross Revenue $2.1 billion in Q3 2025, an increase of 11.8% compared to Q3 2024, driven by 5.6% organic growth and 5.2% acquisition growth.
Project Margins Remained at 54.4% as a percentage of net revenue in Q3 2025, consistent with expectations.
Operating Cash Flows Year-to-date operating cash flows increased 86% compared to 2024, from $296 million to $551 million, reflecting strong revenue growth, operational performance, and collection efforts.
DSO (Days Sales Outstanding) Decreased to 73 days at the end of Q3 2025, a reduction of 4 days compared to year-end 2024.
Net Debt to Adjusted EBITDA Ratio 1.5x as of September 30, 2025, reflecting the funding of the Page acquisition and within the target range of 1 to 2x.
Contract Backlog $8.4 billion at the end of Q3 2025, an almost 15% increase year-over-year, with 5.6% organic growth and 6.8% growth from acquisitions.
Buildings business: Net revenue increased by more than 40% in Q3 and over 20% year-to-date, driven by the acquisition of Page and continued organic growth. Integration of Page is progressing well, with revenue synergies already visible.
Water business: Delivered almost 13% organic growth, supported by large public sector water supply and wastewater treatment projects.
Energy & Resources: Achieved nearly 10% organic growth, driven by energy transition, mining, and infrastructure sectors.
U.S. market: Net revenue increased over 14% in Q3, driven by 4.6% organic growth and almost 9% acquisition growth. Growth supported by private and public sector investments in mission-critical, science and technology, and civic sectors.
Canada market: Net revenue grew 7.6% in Q3, driven completely by organic growth. Growth supported by major wastewater projects, industrial process projects, and public sector investments in healthcare and civic markets.
Global market: Net revenue grew almost 11% in Q3, with 5.5% organic and 2.8% acquisition growth. Growth supported by water infrastructure projects in the U.K., Australia, and New Zealand, as well as energy transition projects in Chile and Peru.
Adjusted EBITDA margin: Achieved an all-time high of 19% in Q3, reflecting disciplined management of operations and higher utilization.
Operating cash flows: Year-to-date operating cash flows increased 86% compared to 2024, reaching $551 million, driven by strong revenue growth and operational performance.
Backlog: Contract backlog stood at $8.4 billion, a 15% increase year-over-year, representing approximately 13 months of work.
Acquisition of Page: Contributed significantly to growth in the Buildings business, with financial integration expected to complete by year-end.
Major project wins: Secured significant projects, including Manitoba Hydro's $7 billion high-voltage project, a $745 million infrastructure project in South Carolina, and hospital projects in Western Australia valued at over $1 billion.
Strategic plan targets: Progressing towards delivering net revenue of $7.5 billion by the end of 2026, supported by diversified business operations and strong market demand.
Slower procurement cycles in the U.S.: Persistent slower procurement cycles in the U.S. are highlighted as a near-term challenge, potentially impacting organic growth in the region.
Economic uncertainties in Canada: While the federal budget signals long-term support for infrastructure investments, immediate spending is not expected, which could delay growth in Canada.
Integration of acquisitions: The financial integration of the Page acquisition is ongoing and expected to complete by year-end, posing potential risks to operational efficiency during the transition period.
Debt levels and acquisition strategy: The company’s net debt to adjusted EBITDA ratio is at 1.5x, and while within the target range, the strategy to go above this range for acquisitions could increase financial risk.
Global market conditions: Evolving market conditions across regions could pose challenges to maintaining consistent growth and operational resilience.
Net Revenue Growth Guidance: Stantec has increased its adjusted EBITDA margin outlook to 17.2% to 17.5% for the full year, driven by strong operational performance and disciplined cost management. The company maintains mid-single-digit guidance for U.S. organic growth despite slower procurement cycles, with optimism for long-term demand. In Canada and globally, organic net revenue growth is expected in the mid- to high single digits, supported by strong demand and elevated backlog levels.
Infrastructure Investments: The Canadian federal government's Budget 2025 prioritizes infrastructure investments across various sectors, signaling strong long-term support for the industry, though immediate spending is not expected.
Global Water Business Growth: Growth in the global water business is supported by high activity levels under the AMP8 program in the U.K. and framework agreements in Australia and New Zealand.
Energy & Resources and Infrastructure Growth: Strong demand fundamentals in Energy & Resources and infrastructure in Europe are expected to support growth in Stantec's global business.
Adjusted EPS and ROIC Projections: Adjusted EPS growth is projected to be in the range of 18.5% to 21.5% for the year, with adjusted ROIC expected to exceed 12.5%.
Strategic Plan Targets: Stantec is progressing towards its 2024-2026 strategic plan targets, including achieving net revenue of $7.5 billion by the end of 2026.
The selected topic was not discussed during the call.
The earnings call summary and Q&A indicate a positive outlook with increased guidance on revenue, EBITDA margins, and EPS growth. The company is optimistic about organic growth, driven by strong demand in key sectors and regions. Despite some uncertainties, management's focus on strategic growth, robust M&A pipeline, and positive cash flow performance bolster confidence. However, lack of specific guidance on some metrics and reliance on external factors like government funding introduce minor uncertainties, keeping the sentiment from being 'strong positive.'
The earnings call reveals strong financial performance with raised EBITDA margin guidance, record backlog, and consistent organic growth in key markets like water. The integration of acquisitions is progressing well, and no negative impact is expected from Thames Water's issues. Despite some management opacity and reduced 2023 growth guidance, the overall sentiment is positive, supported by strategic M&A activity and optimism in U.S. growth. The lack of market cap data limits precise prediction, but the positive factors suggest a likely 2% to 8% stock price increase.
The earnings call highlighted strong backlog growth, robust performance in key sectors, and positive sentiment in the Q&A. Despite not raising guidance, management showed confidence in achieving targets. The absence of major negative concerns and the optimistic outlook across various markets suggest a positive sentiment. The lack of market cap information limits precise prediction, but overall indicators point to a positive stock reaction.
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