STN — Stantec Inc.

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

1. Key Financial Results and Metrics

• Net Revenue: Increased by almost 11% year-over-year to CAD 6.5 billion, driven by 5% organic growth and 3.9% from acquisitions.
• Adjusted EBITDA: Rose nearly 17% year-over-year, with a margin of 17.6%, achieving the strategic target range of 17% to 18% a year early.
• Adjusted EPS: Grew by almost 20% compared to 2024, reaching CAD 5.30 for the full year.
• Fourth Quarter Performance:
  • Gross revenue of CAD 2.1 billion, net revenue of CAD 1.6 billion, up 10.9% year-over-year.
  • Adjusted EBITDA margin for Q4 was 17.3%, a 60 basis point increase from Q4 2024.
  • Operating cash flow increased 43.1% to CAD 863 million.
• Backlog: Reached an all-time high of CAD 8.6 billion, a 9.5% increase year-over-year.

2. Strategic Updates and Business Highlights

• Acquisitions: Completed three acquisitions in 2025, contributing to growth, particularly in the Buildings business.
• Sector Performance: Strong demand in water, mission-critical facilities, transportation, and energy transition sectors. The Water business achieved nearly 11% organic growth, while the Buildings division saw over 30% growth, largely due to the Page acquisition.
• Geographic Growth:
  • U.S. net revenue rose 13.5% in Q4, with strong contributions from acquisitions and organic growth.
  • Canadian operations reported 5.5% growth in Q4, driven entirely by organic growth.
  • Global business achieved 11% net revenue growth, with double-digit organic growth in the Water sector across several regions.

3. Forward Guidance and Outlook

• 2026 Expectations:
  • Net revenue growth projected between 8.5% to 11.5%, primarily through organic growth and acquisitions.
  • Anticipated adjusted EBITDA margin between 17.6% to 18.2%.
  • Expected adjusted EPS growth of 15% to 18% compared to 2025.
• Market Drivers: Continued investment in infrastructure, energy transition, and defense spending are expected to drive growth. Stantec is well-positioned to leverage these trends, particularly in the U.S. and Canada.

4. Bad News, Challenges, or Points of Concern

• M&A Environment: The recent decline in public equity valuations may slow down acquisition activity as firms adjust their pricing expectations.
• Market Volatility: Geopolitical uncertainties and economic conditions could impact future growth and project timelines.
• Performance Variability: Some business operating units (BOUs) showed weaker performance in 2025, particularly Environmental Services, which may affect overall growth consistency moving forward.

5. Notable Q&A Insights

• AI Integration: Management emphasized the potential of AI to enhance efficiency and margins, with expectations that it will lead to higher revenue per employee. However, they clarified that they are not currently looking to acquire AI firms but rather develop capabilities in-house.
• M&A Strategy: Stantec remains active in pursuing acquisitions, focusing on strategic fit and synergy rather than just growth for its own sake. The company is optimistic about potential opportunities in the market.
• Sector-Specific Insights: There is a strong pipeline of work in the U.S. across various sectors, including data centers and environmental services, indicating a broad-based recovery and growth potential.
• Government Contracts: There is ongoing discussion about evolving pricing models, particularly with government clients, but significant shifts may take time.

Overall, Stantec's performance in 2025 was robust, with strong financial growth and strategic positioning for future opportunities, despite some challenges in the M&A landscape and market volatility.