Summary of Stantec's Q1 2026 Earnings Call

1Key Financial Results and Metrics

Net Revenue: $1.7 billion, up 9.1% year-over-year, driven by 3.6% organic growth and 7.2% from acquisitions.

Adjusted EBITDA: Increased nearly 14% year-over-year, with an adjusted EBITDA margin of 16.9%, a 70 basis point improvement.

Adjusted EPS: Grew 14.7% to $1.33.

Gross Revenue: $2.1 billion for the quarter.

Cash Flow: Net operating cash outflows of $2.3 million, typical for Q1, impacted by working capital investments.

Days Sales Outstanding (DSO): Improved to 74 days, down 3 days year-over-year.

Net Debt-to-Adjusted EBITDA Ratio: Remained stable at 1.3x.

2Strategic Updates and Business Highlights

Record Backlog: Reached $9 billion, a 13.2% year-over-year increase, with 5.4% organic growth.

Sector Performance:

U.S. net revenue increased by 11%, with strong contributions from Water (double-digit organic growth) and Energy & Resources.

Canadian organic growth was modest at just over 1%, impacted by project wind-downs in Infrastructure.

Global operations saw over 13% net revenue growth, with notable performance in Water (15% organic growth).

Sustainability Initiatives: 68% of revenue aligned with UN Sustainable Development Goals; maintained operational carbon neutrality for the fourth consecutive year.

3Forward Guidance and Outlook

2026 Financial Targets:

Net revenue growth expected between 8.5% to 11.5%.

Adjusted EBITDA margin projected to expand to 17.6% to 18.2%.

Anticipated adjusted EPS growth of 15% to 18% compared to 2025.

Market Trends: Continued strong demand in water, energy transition, and infrastructure sectors, with expectations for increased public sector spending in Canada.

4Bad News, Challenges, or Points of Concern

Canadian Growth: Organic growth in Canada was slower than anticipated, with Infrastructure experiencing a decline due to project completions.

Cash Flow Seasonality: Q1 typically sees lower cash generation, and the financial migration of the Page acquisition has created temporary disruptions.

Market Dynamics: While acquisitions remain a priority, there is increasing pressure to consider share buybacks due to public valuation dynamics.

5Notable Q&A Insights

M&A Strategy: Management emphasized that strategic acquisitions are the primary focus for value creation, though share buybacks may be considered as market conditions evolve.

U.S. Growth Outlook: There is optimism for accelerating organic growth in the U.S., supported by infrastructure demand and new project awards.

Project Bundling Trend: Clients are increasingly bundling larger projects, which may provide pricing power but also requires careful management due to the complexity and duration of such projects.

Environmental Services: Growth in this segment is expected to improve, driven by federal projects and increased demand in the Energy & Resources sector.

AI Integration: Stantec is actively exploring AI applications in collaboration with clients, which could lead to new service offerings and operational efficiencies. Overall, Stantec's Q1 2026 results reflect strong financial performance and a positive outlook, despite some challenges in specific markets and segments. The company remains focused on leveraging its diverse platform and strategic initiatives to drive future growth.