STN — Stantec Inc.

Summary of Stantec's Q4 and Full Year 2025 Earnings Call

1. Key Financial Results and Metrics

• Gross Revenue: $8.1 billion for 2025, up 10.7% from 2024.
• Net Revenue: $6.5 billion, reflecting an increase of almost 11% year-over-year, with 5% organic growth and 3.9% from acquisitions.
• Adjusted EBITDA: Increased by 17% year-over-year, with an adjusted EBITDA margin of 17.9%, exceeding the 2024-2026 strategic plan target range of 17%-18% a year early.
• Adjusted EPS: Grew by 19.9% to $5.30.
• Operating Cash Flow: Increased by 43.1% to $863 million.
• Backlog: Reached an all-time high of $8.6 billion, up 9.5% year-over-year.

2. Strategic Updates and Business Highlights

• Stantec completed three acquisitions in 2025, contributing to growth, particularly in the Buildings business, which saw over 30% net revenue growth.
• Strong demand in sectors such as water, transportation, and energy transition continues to drive performance.
• The Water business achieved nearly 11% organic growth, supported by large wastewater treatment projects.
• The company is leveraging AI to enhance efficiency and decision-making across various projects, with a focus on integrating AI into workflows rather than acquiring AI firms.

3. Forward Guidance and Outlook

• For 2026, Stantec anticipates net revenue growth of 8.5% to 11.5%, primarily driven by organic growth and the Page acquisition.
• Expected adjusted EBITDA margin to be between 17.6% and 18.2%.
• Projected adjusted EPS growth of 15% to 18% compared to 2025.
• Continued strong performance is expected in the U.S. market, particularly in infrastructure, water, and environmental services.

4. Bad News, Challenges, or Points of Concern

• There is uncertainty regarding the M&A market due to recent valuation resets in public equities, which may affect acquisition timing and pricing.
• The company is cautious about the sustainability of current market conditions and the potential impact of geopolitical uncertainties on future performance.
• Environmental Services showed weaker performance in 2025, and there are concerns about maintaining momentum in this segment moving forward.

5. Notable Q&A Insights

• Management expressed confidence in the integration of AI into operations, which is expected to enhance revenue per employee and overall efficiency.
• There is an ongoing discussion about the potential for outcome-based pricing models, but significant challenges remain in shifting government clients away from time-and-materials contracts.
• The company is actively exploring M&A opportunities, with a focus on strategic fit and value accretion rather than just growth for its own sake.
• Stantec's leadership noted a strong pipeline of potential acquisitions, particularly in the power sector and other aligned businesses, indicating readiness to capitalize on market opportunities.

Overall, Stantec reported a strong performance in 2025, with robust financial metrics and strategic growth initiatives, while also navigating challenges in the M&A landscape and market uncertainties.