Stantec Inc. (STN:CA) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong organic growth in various regions, effective AI integration, and margin expansion. The Page acquisition is exceeding expectations, and the U.S. market is set to strengthen. Despite minor issues like permitting delays, the overall outlook is optimistic. The positive sentiment from analysts and management's strategic initiatives suggest a positive stock price movement.
Key Financial Performance
Net Revenue $1.7 billion, up over 9% compared to Q1 2025, driven by 3.6% organic and 7.2% acquisition growth. Organic growth was achieved in all regional operating units, with Water and Energy & Resources businesses achieving over 14% and almost 9% organic growth, respectively.
Adjusted EBITDA Increased close to 14% year-over-year, with an adjusted EBITDA margin of 16.9%, a year-over-year increase of 70 basis points. Growth in margin was primarily due to lower admin and marketing expenses as a percentage of net revenue.
Adjusted EPS Grew almost 15% compared to Q1 2025, reaching $1.33.
Gross Revenue $2.1 billion, with net revenue of $1.7 billion, an increase of 9.1% compared to Q1 2025. Growth was driven by 3.6% organic and 7.2% acquisition growth.
DSO (Days Sales Outstanding) 74 days, an improvement of 3 days compared to Q1 of the prior year, and below the internal target of 75 days.
Net Debt-to-Adjusted EBITDA Ratio 1.3x, within the internal target range of 1 to 2x.
Contract Backlog $9 billion, a 13.2% increase year-over-year, representing approximately 13 months of work. Backlog grew 5.4% organically year-over-year, with notable growth in the Global region (22%) and strong growth in Water and Buildings businesses (nearly 10% organic growth).
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Operating Highlights
Semiconductor Manufacturing Facility: Stantec's Buildings team was selected to provide design services for a multibillion-dollar semiconductor manufacturing and R&D facility in Idaho, including on-site water treatment facilities and ancillary support buildings.
Electric Light Rail System: Stantec's Infrastructure team will lead the design of a fully electric light rail system in Austin, Texas, including a 10-mile, 15-station transit corridor.
Geographic Revenue Growth: U.S. net revenue increased by 11%, driven by acquisition and organic growth. Canada saw over 1% organic growth, while the Global region achieved over 13% net revenue growth, supported by organic and acquisition growth.
Energy Transition Projects: Strong demand for energy transition solutions, particularly in mining for copper in Chile and Peru, contributed to growth.
Revenue and EBITDA Growth: Net revenue grew to $1.7 billion, up 9% year-over-year, with adjusted EBITDA increasing by 14% and adjusted EBITDA margin rising to 16.9%.
Operational Carbon Neutrality: Stantec achieved operational carbon neutrality for the fourth consecutive year and maintained an A- CDP climate score.
Backlog Growth: Contract backlog reached a record $9 billion, a 13.2% increase year-over-year, with significant contributions from acquisitions and organic growth.
M&A Strategy: Stantec remains focused on disciplined M&A, with a healthy pipeline of opportunities and confidence in acquisitions as a key growth driver.
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Risk or Challenges
Operating Environment: Dynamic operating environment could pose challenges to execution and prioritization of work.
Infrastructure Business in Canada: Experienced wind down of certain transit and roadway projects in Q1, with reliance on ramp-up of new projects in Q2.
Cash Flow and Liquidity: First quarter net operating cash outflows totaled $2.3 million, reflecting transitory disruption from financial migration of Page and higher working capital investment.
Procurement Cycle Activity: Dependence on procurement cycle activity picking up in the U.S. for continued backlog growth.
M&A Market: Increased competition from private equity buyers in the M&A market could impact acquisition opportunities.
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Guidance & Outlook
Revenue Growth: Net revenue growth is expected to be in the range of 8.5% to 11.5% for 2026, with organic net revenue growth in the mid- to high single digits. Growth will be driven by strong demand across all geographic reporting segments and business units.
U.S. Market Outlook: Organic growth in the U.S. is expected to accelerate, supported by demand across all five business verticals, including data centers, defense, and advanced manufacturing.
Canadian Market Outlook: Growth in Canada is anticipated to be driven by public sector spending plans and continued demand in energy and resources. Defense and nation-building efforts are expected to contribute to growth beyond 2026.
Global Market Outlook: Strong organic net revenue growth is expected globally, driven by high activity levels in the Water business under AMP8 and other framework agreements, as well as strong demand in Energy & Resources and other business units.
Adjusted EBITDA Margin: The adjusted EBITDA margin is projected to expand to a record range of 17.6% to 18.2% for 2026.
Adjusted EPS Growth: Adjusted EPS is expected to grow by 15% to 18% compared to 2025.
Backlog Growth: The contract backlog reached a record $9 billion at the end of Q1 2026, representing approximately 13 months of work. Organic backlog growth was 5.4% year-over-year, with notable growth in the Global region and Water and Buildings businesses.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:How does Stantec view share buybacks in the current market dynamic?
A:Stantec views share buybacks as a tool in their capital structure optimization toolbox. While they prioritize strategic acquisitions for value creation, they acknowledge that current valuation levels make stock buybacks increasingly appealing. They plan to explore this option post-quarter, but the scale of buybacks will not impede their M&A strategies.
Q:What are Stantec's views on organic growth opportunities in the U.S. and Canada?
A:Stantec sees strong opportunities in both the U.S. and Canada. While Canada had a slow start to the year, infrastructure projects are picking up, and federal initiatives like the Arctic Infrastructure Plan and Build Communities Strong Fund are promising. In the U.S., backlog growth has been steady, with 3% organic growth in the last two quarters, indicating strengthening opportunities.
Q:What is Stantec's perspective on Canadian government initiatives and red tape reduction?
A:Stantec has seen some awards from Canadian government initiatives, such as Arctic Over-The-Horizon. They note a significant number of opportunities but are discerning in their pursuits. While there is some evolution in reducing red tape, the permitting process still needs improvement. They anticipate potential positive announcements from government officials.
Q:What are the current M&A market conditions and valuation trends?
A:Valuations in the M&A market are sector-specific. Recent transactions in the power sector have seen high valuations in the high teens. There is a noticeable dislocation between private and public market valuations, but Stantec remains disciplined in monitoring and navigating these trends.
Q:What is the outlook for Stantec's U.S. operations, particularly in Buildings and emergency response?
A:Stantec's Buildings business had a soft start in Q1, but backlog growth and momentum are improving. Emergency response contributions were weaker, but overall, the U.S. operations are expected to strengthen in Q2 and beyond. Notified awards yet to be contracted will contribute to backlog growth.
Q:What is the sustainability of Stantec's double-digit organic growth in the Global segment?
A:Stantec's double-digit organic growth in the Global segment is sustainable, driven by strong performance in Water projects (e.g., AMP8 in the U.K.) and Mining projects in South America. They are actively hiring in regions like the U.K., India, and South America to support this growth.
Q:What is the status of Stantec's global delivery centers?
A:Stantec's global delivery centers have nearly 2,000 employees, meeting their year-end target ahead of schedule. They have expanded office space in Pune and are hiring in other cities to support continued growth.
Q:What contributed to Stantec's margin expansion in the quarter?
A:Margin expansion was driven by steady project margins (54%), improved utilization, and operational scale. Administrative and marketing expenses were reduced to 38.3% of net revenue, contributing to overall margin improvement. The company has seen consistent year-over-year margin expansion for several quarters.
Q:What is the outlook for IIJA funding and other U.S. demand drivers?
A:IIJA funding for new awards expires in September, but revenue from these projects will continue for 3-5 years. The new Surface Transportation Act reauthorization is expected to provide stable funding of $500-$600 billion. Stantec is also working on hyperscaler data centers and semiconductor facilities, indicating strong U.S. demand.
Q:What is the outlook for Environmental Services and Energy & Resources?
A:Environmental Services is seeing growth from U.S. federal government projects and pipeline-related work in Canada. Organic growth was 1.2% in Q1 but is expected to increase throughout the year. Energy & Resources is showing strong organic growth, supporting optimism for the segment.
Q:What is the status of the Page acquisition and its impact on working capital?
A:The financial migration of the Page acquisition was completed in Q1, and working capital normalization is expected in Q2 and Q3. The acquisition has contributed to healthy organic growth and revenue synergies exceeding expectations.
Q:How is Stantec leveraging AI and digital tools in its operations?
A:Stantec is partnering with clients for AI applications, such as wastewater operations and digital twin development. These tools are creating new service opportunities, like operational modeling for water treatment plants. AI has also improved efficiency in fixed-fee projects, though clients have not yet demanded cost reductions due to faster design.
Q:What is the expected progression of organic growth for the full year?
A:Stantec expects sequential organic growth improvement throughout the year, with a ramp-up in the back half of the year to meet mid- to high single-digit organic growth guidance.
Q:What is the current and projected contribution of data centers to Stantec's business?
A:Data centers currently contribute around 3% of Stantec's business and are growing rapidly. This contribution could double to 5-6% in the near future, but Stantec aims to avoid overexposure to this line of business.
Q:What is the trend in larger project bundling in the U.S. and Canada?
A:Clients in the U.S. and Canada are bundling multiple projects or project phases to reduce procurement efforts. This trend leads to larger projects, often in the $100-$200 million range, which are managed by a smaller, specialized team within Stantec. These projects provide pricing power and long-duration revenue streams.
Q:Review of Unclear Management Responses
A:Management avoided providing a clear answer on whether red tape reduction in Canadian government permitting processes has significantly improved. They stated that the process is still evolving and did not provide specific examples or data to support their assessment.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Accomplishments work
Activity program
Annual Sustainability
Buildings business
CDP climate
CEO Non
Canada Water
Canada challenge
Development Goals
Director Macro
Goals carbon
Independent Director
Infrastructure center
Infrastructure wind
Instructions information
Johnston sir
Macro trend
Non Independent
North region
Officer Vito
Page Water
Page investment
President CEO
Project percentage
Resources Buildings
Resources dam
Stantec Activity
Stantec market
balance
progress
project Energy
water infrastructure
STN Transcript
Stantec Inc. (STN:CA) Q1 2026 Earnings Call Transcript
Positive5-14
The earnings call reveals strong organic growth in various regions, effective AI integration, and margin expansion. The Page acquisition is exceeding expectations, and the U.S. market is set to strengthen. Despite minor issues like permitting delays, the overall outlook is optimistic. The positive sentiment from analysts and management's strategic initiatives suggest a positive stock price movement.
Stantec Inc. (STN:CA) Q4 2025 Earnings Call Transcript
Positive2-26
The earnings call highlights strong financial metrics and optimistic guidance, with increased EBITDA margin outlook and robust EPS and ROIC projections. The strategic plan targets and growth in various sectors, including infrastructure and global water business, further bolster the positive sentiment. The Q&A session reinforces this with discussions on AI integration, M&A opportunities, and strong organic growth outlooks. Despite some uncertainties, such as market valuation resets, the overall tone and strategic positioning suggest a positive stock price movement over the next two weeks.
Stantec Inc. (STN:CA) Q3 2025 Earnings Call Transcript
Positive11-14
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.'
Stantec Inc. (STN) Q2 2025 Earnings Call Transcript
Positive8-14
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.
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Frequently Asked Questions
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