Q2 2022 Stantec Inc Earnings Call
So I'm taking flights those dialing in to view the slide presentation, which is available in the investors section at <unk> Dot Com. Today's call is also webcast. Please be advised that if you have dialed in well also viewing the webcast you should mute your computer.
There is a delay between the call and the webcast. All information provided during this conference call is subject to the forward looking statement qualification set out on slide two.
Children's <unk> management's discussion and analysis, our incorporation in full for the purposes of today's call unless otherwise noted each dollar amounts discussed in today's call are expressed in Canadian dollars and are generally rounded. Please.
Please go ahead.
Good morning, and thank you for joining us today.
We're very pleased to report another strong quarter of operational and financial performance, our second quarter and year to date results are tracking very well against our strategic objectives and as such we remain confident that we will deliver on our targets for the year.
There are two highlights for the quarter that I would want to touch on before turning to our financial results. The first is an update on cardinal.
The integration is progressing very well and is in line with the expectations that we outlined at the time of the transaction.
We've already achieved our target of $10 million in run rate synergies 18 months ahead of schedule and we continue to identify opportunities for additional savings.
The Oracle financial systems migration in Australia, and New Zealand is largely complete and we are in the final stages of the transition.
The U S integration is in full flight and is progressing nicely. There is still a lot to be done. However, we expect this to be completed before the end of the year.
The second highlight that we're very proud of as it as it continues to be recognized for our leadership in ESG for.
For the 13th time, we were recognized as one of Canada's best 50, corporate citizens by corporate Knights.
We're honored to over earned this recognition receiving top quartile scores this year for employee health and safety.
Jordan Executive gender diversity ratio executive diversity and clean investments.
This recognition affirms that our long standing commitment to advancing ESG is having a real impact towards a more sustainable future and we're very proud of the difference that <unk> is making.
Turning now to our Q2 results.
We are pleased to have delivered a 34% increase in adjusted EPS.
We generated $9, 4% organic net revenue growth and consistent with Q1, we delivered organic growth in every one of our geographic regions and in each of our business units.
This reflects our ongoing ability to capitalize on the key drivers that I've spoken about previously and then I'll talk more about towards the end of the call.
A common thread through many of these projects is the need for the skills of our environmental services business, which delivered a 54% increase in net revenue of which 12% was from organic growth and 40% was generated by our recently completed acquisitions.
Our Q2 results also reflect very favorable margin expansion with an 80 basis point increase in project margin and a 60 basis point increase in adjusted EBITDA margin.
Taking a closer look now at each of our geographic regions.
The level of activity in our U S business continues to gather momentum.
In Q2 net revenue increased by 27%.
With 9% organic growth and 14% acquisition growth.
We're pleased to have delivered organic growth across all of our business units as we did last quarter.
And this is a reflection of the robust level of investment occurring in the U S.
Investment in the re shoring of semiconductor production has driven a significant amount of activity across multiple business units.
Environmental services net revenue grew grew by over 80%.
And continue to be the biggest contributor U S revenue growth there.
Combined stands at Cardinal team is very well positioned to address the strong demand for environmental assessment permits.
Permitting and cultural resources work in addition to ongoing monitoring and ecosystem restoration efforts.
Water shifted into double digit growth as activity ramp up on several major projects to a desk to address industrial and advanced manufacturing project needs and water scarcity in the Western U S.
And buildings continued its post COVID-19 recovery with another quarter of organic growth driven by the need for increased health care capacity and investment in the civic industrial and science and technology sectors.
Yes.
Canada also continued to perform well delivering 5% organic growth in the quarter.
Consistent with the themes playing out in the U S. Our environmental services business in Canada had a very strong quarter delivering double digit growth on the strength of high demand for permitting work and our archaeological services.
Infrastructure delivered strong growth arising from the strong housing market in Western Canada.
Organic growth in our transportation sector also reflects our continued support of British Columbia is recovery efforts from the extreme flooding that occurred last year.
Buildings continued to deliver organic growth on the strength of major public projects in healthcare and science and technology.
And growing momentum behind the energy transition and global food security initiatives continued to spur growth in energy and resources.
And rounding out our geographic reaches of global.
<unk> had another remarkably strong quarter net revenue our global region grew by 40%.
Every business unit and global grew organically in Q2, delivering 17% organic growth.
Recent acquisitions delivered a further 27% growth.
The strong financial results global has generated year to date reflect the maturing of acquisitions made in recent years and we're pleased with the way that were performing together under the static banner.
Water continues to perform very well delivering almost 20% organic growth on the strength of the U K, Australia, and New Zealand water framework programs.
Infrastructure has doubled its net revenue with very strong growth in community development and acquisition growth in transportation.
And our mining sector delivered organic and acquisition growth on strong commodity prices client diversification and the lifting of pandemic related restrictions.
With that I'll turn the call to Theresa to review, our Q2 financial results in more detail.
Thank you Lori and good morning, everyone.
As Greg noted, we had a very strong quarter with an overall, 21% and 23% increase in gross and net revenue respectively.
Project margin grew by 25% and by 80 basis points as a percentage of net revenue and this reflects our continued focus on project execution and our heightened diligence and project pursuits, we delivered a 27% increase in adjusted EBITDA, reflecting the overall growth of our business.
Adjusted EBITDA margin was 16, 7% 60 basis points higher than Q2, 2021, resulting from strong performance across the business.
Net income and EPS decreased slightly to $61 million and 55 per share as increased EBITDA was offset by higher acquisition related costs.
We also recorded an unrealized fair value loss associated with our equity investments help yourself insurance liabilities.
Adjusted net income and adjusted EPS increased 33%, 34%, respectively to $93 million.83 per share, reflecting very strong earnings from our underlying operations.
Operating cash flows decreased also.
So a $4 million for the quarter cash flow was primarily disrupted by the Cardinal integration due to the financial system migrations for both Australia and the U S operations occurring during the second quarter as we had outlined in our Q1 earnings call.
To a lesser extent Q2 cash flow was also impacted by investment in working capital to support the organic revenue growth.
We view these causal factors is purely matters of Titan, which will contribute to stronger cash flows in the second half of this year.
The effect of the financial system migration dissipate and processing times normalized particularly in Q4.
And we've already seen cash flows pick up in Australia after quarter end, which was the first of the Cardinal migrations to occur this year.
We continue to be active with our MTI be earlier in the quarter repurchasing just over 625000 shares for $37 million.
Consistent with the change in our operating cash flow. Our DSO is up three days from last year to 79 days.
All of these factors coupled with the funding of Cardinal.
Physicians in the past 12 months resulted in a net debt to adjusted EBITDA being at $2 Zero times.
And of our internal range and the cash flow normalizes over the remainder of this year I'm confident that our leverage will return to the middle of our target range by year end.
Now, let's turn the call back to <unk> now to review our backlog.
Thanks Teresa.
Our outlook continues to be very very strong at a record $5 $8 billion.
We grew backlog organically by 13% since the end of 2021 and again delivered organic growth in every geographic region and in each business operating unit.
Most notably we achieved almost 30% growth in energy and resources and over 20% growth in infrastructure and buildings also achieved double digit growth.
Our backlog represents approximately 14 months of work, which is a high watermark for us.
Before I turn to the outlook for the remainder of the year I want to comment briefly on the risk of a potential slowdown as a result of inflation and a possible recession.
We continue to monitor the situation carefully and have not seen any material slowdown in project or pursuit activity to date.
And as we discussed this with clients the consistent feedback that we received is that the risk of cost increases is being outweighed by the need to address a number of pressing challenges.
<unk> aging infrastructure climate change.
Production capacity constraints and the re shoring of domestic production.
And these imperatives continue to translate into investments in major project awards across all of our business units.
In Canada, our water business was successful in winning two significant projects, but Buffalo pound water treatment plant renewal project in Saskatchewan.
And program management consulting for the Guyana Island wastewater treatment plant program in Vancouver, which is the largest capital program ever undertaken by Metro Vancouver.
In the United States, we want a contract with the Nebraska Department of natural resources to conduct floodplain modeling and mapping and we've also won awards in Hawaii, and Indianapolis, which support clean transportation to help our clients reach their climate goals and objectives.
And in our global operations, we were awarded a transportation framework project in Scotland to support climate change adaptation of Decarbonization.
With respect to capacity constraints and reassuring of domestic production. There are dozens of projects that we're working on in different industries, including technology with semiconductors healthcare with vaccine production and logistics and fulfillment fulfillment centers to shore up supply.
We're seeing significant government funding flowing into these areas.
As we look towards the rest of the year, we are very confident in our ability to achieve our financial targets are.
Our backlog has never been higher.
<unk> grown by well over $1 billion in the past 12 months and we continue to see project opportunities accelerate.
Significant U S. Federal funding is moving forward and EBIT with cost escalation our clients expect critical infrastructure projects will advance.
Private investment also remains robust, especially in areas of water and food supply and resiliency health care and industrial.
And in some instances federal funding is helping drive private investment and there's no. Better example of this in the billions of dollars directed towards the re shoring of semiconductor manufacturing.
In late July both the U S Senate and house passed the $280 billion chips and Science Act.
From this $52 billion will go to support semiconductor chip manufacturing, including $39 billion for plant construction.
Passage of this act was critical for me chip manufacturers to move forward with private investment and we are already working with five of the top 10 semiconductor manufacturers.
And the strength of stats it brings for projects of this scale is our ability to provide multi disciplined expertise our.
Our environmental experts architects transportation and water engineers, all paid critical roles and bringing these facilities into reality.
Europe has also passed similar legislation to Richard semiconductor production. So the opportunity for sensitive is tremendous.
Looking ahead, our outlook for the remainder of 2022 has not changed from the guidance. We provided at the start of the year and I believe <unk> remains very well positioned to capitalize on the opportunities ahead.
With that I'll turn the call back to the operator for questions operator.
Thank you if you wish to ask a question at this time. Please press star one on your telephone keypad. Please ensure the mute function on your telephone is switched off to allow your signal Shaw <unk> equipment. We will now take our first question from Devin Dodge from BMO capital markets. Please go ahead.
Alright, Thanks, good morning, Borgwarner Teresa.
The growth in the backlog year to date.
Really impressive.
Can you speak to how your bid pipeline look.
What you see right now and how that compares to maybe six to 12 months ago.
The.
Unity is that we're seeing we have we have a system, we call our sand check opportunity pipeline and so we do track projects that.
That come in and it's interesting that we're seeing continued strengthening of projects in the backlog and so I think that sort of in the pipeline. So I do think that as we see these projects in the pipeline they will come through.
The bid process. So I think we see positive supports for the backlog growing either even further.
As we progress through the rest of this year and into 2023.
Okay. Okay, and then maybe just continuing on with that can.
Can you speak to your success in your hiring efforts to expand the workforce I'm just trying to understand if it was a significant net addition of employees in Q2 and if this is expected to continue into the second half of the year.
Yeah, absolutely. So what are the things that we've talked about is that we through this period of uncertainty we want to continue to be.
A net importer of staff of our employee base and so through all of 2021 through Q2 of 2022 as we talked about previously and now I can confirm in 2023.
We hired more people than who left us and so our head count continues to grow.
And in fact, we're up to a little over 26500 people now so we are we've.
We've had success in those Onboarding efforts, we continue to grow organically, our employee base and we look for that to continue for the remainder of the year.
Okay. Thanks for that.
Congrats on Q2 results look really good I'll turn it over.
Great. Thanks, David.
We will now take our next question from Jacob bout from CIBC. Please go ahead.
Good morning.
Good morning Jacob.
So strong double digit organic growth in the environment and water business.
Do you expect this to normalize in the quarters ahead or or or do you expect to see a step change going into 2023, and maybe talk through some of the revenue synergies.
Okay.
Sure the environmental business continues to be really really robust and so I think that we continue to see really positive performance in that group going forward not just in North America, but but in our global operations as well.
And the types of synergies that we're seeing our R. R.
Our projects, where previously Cardinal perhaps would would have to.
<unk> powder hire someone else to do archaeological work and now they hire static for it.
We have projects where.
Cardinal was strongly in one geography static with stronger in a different geography or were not offer this.
These combined skill sets to our clients to take on larger and more geographically diverse projects. So we're seeing a lot of synergy there.
When we went into the transaction, we certainly foresaw that we'd have good.
Linkages good integration between the group and generate synergies and actually it has really exceeded our expectations.
And what's the.
Cardinal Cogs clean acquisitions are you rightsize and button up till now.
Maybe just talk through.
Strategically how are you thinking from an M&A perspective for your end market mix.
Yes.
The environmental business continues to expand so even though we've.
Significantly grown the size of our environmental practice with bringing together Stan Tech Cardinal Cox Mcclain.
Our a paleo this year as well there are continued opportunities to grow that business. So we're going to continue to look there where there's a lot of mid size environmental firms in the U S that would really fill in additional geographies for us. So worried we're always in conversations with these types of firms. So so yes absolutely.
Not would we consider ourselves to be done in the environmental space from both an organic and acquisition growth perspective.
Thank you.
Great. Thanks Jacob.
We will now take our next question from Chris Murray from ATB Taps from markets. Please go ahead.
Yes, thanks folks.
I guess my first question is just thinking about your your SG&A costs.
Maybe not now that we've had a couple of quarters of call. It a more normal run rate with activity and folks back in offices and things like that.
Just wondering how youre feeling about.
Some of the initiatives you guys have undertaken so far with real estate.
And really your confidence in being able to leverage the existing SG&A or or how should we be thinking about needing to add.
To support further growth as we go forward.
Sure so as far as our admin and marketing costs.
Pre COVID-19, we are still seeing that discretionary costs are lower and that has been kind of the expectation that we established in the business.
Not return to pre pandemic levels. They are certainly higher than last year and that was also to be expected.
And as people begin to continue to travel more and.
And get out to see clients. So.
That has had a contribution to our increased admin costs. This year, but I don't expect that they're going to continue to rise I think they have some degree it's leveled off.
We're also seeing this year again.
That bucket of cost higher integration and acquisition costs.
The impact of Cardinal and as you noted.
Clean and Barton Walmart.
Being farther I feel that you have.
Second costs associated with those and so we do have an increasingly in those costs as well.
So those things together.
Im going to I was going to contribute but I think.
In a lot of we had leveled off I think as far as investments that we're making we're continuing to focus on business development efforts on major pursuits and that is.
<unk> is contributing as well to the slightly higher admin costs as we as we move forward and Theres always other.
Elements, there's so many costs flow through data there are puts and takes them all the way around.
Real estate, which you asked about as well.
Recall that that sits outside of admin and marketing.
And we're continuing to advance.
Our optimization strategy that we began early last year.
And continues to be on track, we believe to deliver on reducing our footprint by about 30% that we had talked about relative to our 2019 footprint.
And where our card members concerns certainly they have many office locations that we are now sort of midway through that process of evaluating.
What the landscape will look like where there are opportunities to consolidate spaces and so on there.
Okay. No that's helpful. Thank you.
Now, there's a lot of things going on.
The other thing the question I mean, maybe I'm curious again, maybe this one's for you.
Right now with the close of Cardinal Youre really near the top of your leverage range.
I guess free cash flow as you noted or operating cash flows should improve in the second half and we've also noticed you guys buying back some stock.
Do you feel any pressure to have to get that leverage level down a little bit just the support.
Being able to do further acquisitions I know I know you are still kind of inside your range, but at the top of it.
How are you thinking about maybe wanting wanting to walk that back over the next few quarters as maybe just one curious about.
Yes for sure.
So.
As I noted in my comments, we do yes, we do see the first half of this year as being somewhat of a temporary dynamic and.
I'm quite confident that that will normalize in the second half of the year, we're already seeing evidence of that particularly as we come out of it.
Integration.
National piece, the migration that card note.
So.
I wouldn't say that ICL pressure, it's always important to me to to maximize our cash flows.
Yes.
As possible available on our credit facilities I don't think it hampers us in any way in terms of our growth ambitions.
Excess to capital remains strong.
And so I think that we will discontinue to.
To execute on our plan through the rest of this year and beyond.
And as we continue on our M&A.
Jeremy.
Opportunities come up be able we will fund them appropriately I think we'll continue to have good capacity on our balance sheet without having to tap equity markets or the kinds of acquisitions and the size of the scale that we have said we were pursuing.
Okay. Thanks folks.
Thanks, Chris.
We will now take our next question from Michael <unk> from Chardan.
Jordan <unk> capital markets. Please go ahead.
Yes, Thank you and good morning, everyone.
Good morning America appears to have been some of your peers have been very active in M&A in the last few months with the early success of Cardinal have you thought about a larger transaction until the medium small with 1000 employees.
We.
So as we've kind of been talking about over the last couple of quarters.
We continue to look at acquisitions of all different sizes and well we have certainly seen some of that activity in the marketplace, but we will stick to our knitting.
We are making what we believe to be long term decisions for the long term sustainability of Av stand jacket and shareholder value.
<unk>. So yes, no we're looking at all different types of firms different geographies and different sizes.
<unk>.
In due course.
We'll probably have an opportunity to talk more with you about that.
Thank you. Thank you for the color and then maybe just secondly on the U S. By an infrastructure plan have you seen any more clarity or any early signs is it really more of a it's still a 2023 story.
Yeah, so with the.
The Big one of course is the <unk> and we are seeing that the 2022 funding from that has been disbursed to the various agencies. We're currently working on projects related to that as well, but we do see.
More and more projects coming out and well we are generating some revenue from it now it certainly will be will continue to strengthen through the second half of this year and really into 2023 and provide support even from.
For years beyond that.
But in addition to that the Iga.
As the chips and Science Act that I think will continue to.
To spur additional.
Development in the semiconductor industry and as we've talked about we're already working on several projects.
Related to semiconductor manufacturing with five of the top 10 manufacturers around the world. But then we also see additional support from the inflation reduction Act.
Really from the perspective of what that could do from a renewable power perspective at.
Renewable fuels EV charging infrastructure and so on so I think we see a lot of strong supports coming for our first and second for our industry overall through the remainder of 'twenty, two 'twenty three and beyond.
Perfect. Thank you for the great color and looking for the third quarter.
Great. Thanks, Michael.
We will now take our next question from Mark Neville from Scotiabank. Please go ahead.
Hey, good morning, good morning Theresa.
Morning, Mark Court earlier.
Morning.
Earlier in your your common scored you said you've already achieved the $10 million synergies from Cardinal.
But when you were talking about the synergies et cetera, a lot more with like revs.
Our revenue and sort of project pursuits that you where you want it.
So just I just want to clarify.
$10 million to date has been on the cost side.
Anything thats revenue or real estate be additive is that correct.
Well you are right. The 10 million that we spoke about was on the cost side and that would include real estate that would include things on it systems and.
Insurance and all those sorts of things that were set.
That we've been working through.
But in addition to that separately from that it actually we didn't disclose the number on the revenue side, but we have hundreds of joint projects that are that are underway and so yes that $10 million that we spoke about that was really only the cost run rate synergies that we had talked about it and we have achieved that already.
A schedule and that's really just because of the I think the strong integration in the way that our teams are working together.
Isn't stands at just coming up with ideas on how we can collectively reduce cost Cardinal is doing the same and it sometimes theyre coming and saying that's like if you did this.
<unk>, we could reduce costs. So it's actually been extremely extremely positive.
Great that's great.
Just on the real estate opportunity at Cardinal would it be material again like I think you guys were taking 30% of your footprint out so I just.
From 2019, so I'm just curious the opportunity decides they care about.
Yeah, It's hard for me to quantify at this stage, we're just not far enough along yet mark.
No.
But I think it could be significant.
Where we're continuing to do that work, we'll have more to say about we're farther along.
Got it.
Just to follow up on the M&A.
I guess two part question just in terms of the Cardinal going so well.
And would you feel comfortable doing something sooner.
Or is the main focus through integration and second part Teresa I think in.
Bonds to correct when it versus clubs questions you mentioned something about equity I just wasn't I didn't.
I wasn't quite sure what you said.
Sure maybe I'll start on the first part of it a lot of these opportunities for more substantial M&A opportunities are really opportunistic.
Where.
We're always in different levels of discussion with firms and it really is when they're ready to come.
As you say Cardinal is going very very well and so.
If there was something that was ready to come would we hold off on it no I don't think we would I think we'd be ready to move forward, but.
We also won't.
Move forward and just do something because others have been we're going to we're going to keep our discipline and we'll you know we'll.
We will act when the when the when the time is right and maybe I'll pass it to Theresa for the other question.
The point I was trying to make mark is that.
In response to the question of what is average being at the upper end of our range in late <unk>.
<unk> restaurant.
Yes.
Any M&A at this point and the response is no.
And as I look out towards the rest of this year, we're such a strong cash flowing business that really has not changed so we've seen a couple of temporary dynamics.
Disrupted cash flows for the first half of this year, but that will normalize and so to that extent.
We will.
Have a strong balance sheet, we will have lots of capacity.
On our balance sheet to be able to fund the general size of acquisitions that we think about now certainly a bigger acquisition and I can't take equity completely off the table.
But as far as thinking about the kind and size and scale.
John .
Yes.
There is not.
Concern on my part that we are over levered and be required to issue equity.
Got it if I can ask one last question Gordon.
You mentioned, a few times semiconductor manufacturing.
Like how significant an opportunity or are these just boundaries you guys I don't know if they go up.
Yes.
Interesting when you think about like a semiconductor manufacturing facility.
Other than the actual equipment that goes inside the building to manufacture the chips status that can do the rest of it all of the the water and high purity water just general water and wastewater the buildings the site civil the the permitting like we do all of that work and so as we are.
Talking with a number of these.
These clients, that's particularly attractive to them that we have one firm that can provide that multi disciplinary experience.
For everything except what's inside the building and Theres, others, who do we want to do that so I think that's that's an area, but in addition to to semiconductor manufacturing. There is a lot of other reassuring that we are seeing we've just I think maybe you've been more focused on talking about semiconductors, because it's an area that we're doing a lot of it is.
Certainly on everyone's mind these days, but we're working on vaccine production facilities. We are working on other renewable energy sort of.
Equipment facilities solar panels different things like that so.
We're doing a lot of work like that market.
It is.
It's really an exciting area for us. So I think all of these things combined is also a very very strong tailwind for us for for actually for many years to come.
Got it thanks for the color good quarter and good.
Good luck thanks.
Great. Thank you.
We will now take our next question from Brian <unk> from Raymond James. Please go ahead.
Yes, good morning Theresa.
Morning.
I guess as you look at the backlog are you seeing a higher rate of projects I guess pared back or re scoped and just maybe some comments on the health of the backlog just given the shifting macro backdrop.
Yeah. So.
It's interesting as we as we look at the backlog, it's very healthy.
The gross margin or the project margin and there is healthy.
So we feel good about that.
And.
The we haven't really seen.
I mentioned in the prepared remarks, we've seen some projects maybe people are talking about pushing them up to the right, but nothing material and.
So to your point a vote.
With inflation and cost escalation or are we seeing anything on projects where we.
Seeing that sometimes is that.
We're getting an additional assignment from our clients to see how we could re scope the project to bring it in at a lower cost. So in many cases, it's actually increasing our fees because of this value engineering component to it so.
Or is it something we're watching closely absolutely but to this point it really hasn't.
Pushing the backlog up to the rider cancellations has not been material for us at all.
Thanks, that's helpful. And then when we look at project margin. We saw similar trends as coupon were you asking global we're up in Canada was down is that just related to mix in Canada, and then how should we think about those trends going forward.
Yes in this particular quarter there there was a dynamic around project mix.
That had Canada, a little bit lower.
Sure.
Our business is always going to be subject to those dynamics can you talk about project mix.
How well we execute.
And it's our ability to price.
These projects well and then deliver on what we've what we've priced it at and so we have seen.
An increased focus.
And discipline around those elements.
And so as we look forward, we always talked about being in that 53% to 55% kind of hit it right on the nose in the middle of this quarter and I would expect that that would that would continue.
Okay. Thanks, that's it for me great quarter.
Great. Thank you.
We will now take our next question from.
John from Stifel. Please go ahead.
Good morning, everyone.
Good morning, Ian.
Following on from the M&A questions in the success Youre, having with Cardinal.
How does it change your view about maybe sizing from an employee count perspective, if we went back a year ago as kind of the target with 1000 people or less Cardinal was obviously substantially bigger and given your experience. Today now are you willing to go to an even bigger size if the right opportunity presented itself.
Yes, I think it all depends on exactly as you said the right opportunity and the reason that the Cardinal acquisition is being so successful for US is that it's the right type of business and the cultural fit was there and that is so huge for us and so absolutely I think if we saw the right firm with.
The right cultural fit transacting for the right reasons that would be additive to us we absolutely would look at it again.
Okay. That's helpful and switching to the organic revenue growth side globally has been very very strong for five quarters now and you mentioned the term maturing in your prepared remarks.
I was just hoping to get your thoughts around.
When you think the organic growth in that segment.
Revert to the mean or towards kind of the corporate average or whether it should stay quite high for the foreseeable future.
Yes, I think Ian that it really has been great.
Spectacular.
This year for global.
Not expect that.
Over multiple years, it's going to have.
Such high double digits organic growth I think it will normalize.
We haven't completed our planning for for next year, yet so I can't tell you, where we think that will land, but I would suspect that it will not be as strong next year.
Pete this is kind of organic growth.
That's helpful. Thanks, very much I'll turn it back over.
Great. Thanks, Ian.
As a reminder to ask a question. Please press star one we will now take our next question from southwest Kim from RBC capital markets. Please go ahead.
Okay, great. Thanks, and good morning, So I guess on the guidance I think when we think about margins for the rest of your first half looks rough.
Roughly in line to slightly ahead Hudson is there any commentary you can provide on kind of the cadence of EBITDA margins for Q or any big picture puts and takes that we should consider.
Well I think.
Generally when you think about the cadence of our earnings including our EBITDA margin in Q2, and Q3 generally tend to be the higher margin. According to us when we are <unk>.
And Q1, and Q4 slightly less so I think you I would expect it to see generally that same shape this year.
They will remain quite robust for Q3 would be my expectation and then come.
Come back a little bit in Q4, but our target range of about 15, 3% to 16.
Remains.
We're focused on delivering and I think that thats still realistic for us to be to.
To be moving towards.
Okay, Great and then as we think about.
Kind of the bigger picture growth strategy kind of going forward one of the things that you've kind of I think you indicated you want to project <unk>.
Inside our program management and a few of your peers have really focused on that side of the business. How do you feel about sort of pursuing more work in that area versus design or is that capability. If you want to add whats kind of your mix right now and just kind of get your perspective on that piece of the business.
Yeah, Yeah program management is a very attractive piece of the business absolutely and so we were always looking to expand into that area. When you think about the project that we spoke about there the Iona Island, a wastewater treatment plant project.
Massive undertaking and so the program management, there will it'll be for five years or more. So these are really nice long term long duration projects, where we can make a difference for our clients. So it is absolutely an area that we're looking to continue to grow into to grow even further so.
Okay, Great and then just kind of one last one and I think over the last few quarters. You did indicate that you want some projects late last year in the U S side. There were just getting going I guess with the growth that you reported this quarter should we assume that those bigger wins from last year, starting to flow through and those are underway.
Absolutely, yes, that's where we're really seeing it takes a little while for the funding to get going for the words that happened and now we absolutely are beginning to generate revenue from a number of these larger U S Awards that we previously announced.
Okay. Thanks, so much for the color.
Great. Thanks, Evan.
As there are no.
Further questions in the queue I'd like to turn the call back to your speakers for any additional or closing remarks.
Well just thanks again for joining us today, and we look forward to connecting with you.
In the weeks and months to come as we continue to to evolve through executing on our 2022 plants. So thanks very much everyone. Thank you.
Thank you that will conclude today's conference call. Thank you for your participation ladies and gentlemen, you may now disconnect.