Q1 2024 Stantec Inc Earnings Call

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Operator: Good morning, ladies and gentlemen, and welcome to Stantec's first quarter 2024 results webcast and conference call. Leading the golf today are Gord Johnston, President and Chief Executive Officer, and Theresa Jang, Executive Vice President and Chief Financial Officer.

Good day, ladies and gentlemen, and welcome to <unk> first quarter 2024 results webcast and conference call.

Operator: The golf today, our God Johnston, President and Chief Executive Officer, and Theresa Jang Executive Vice President and Chief Financial Officer, Stanczak invites those dialing interviewed a slide presentation, which is available in the investors section at <unk> Dot com.

Operator: Stantec invites those dialing in to view the slide presentation, which is available in the Investors section at stantec.com. Today's call is also webcast. Please be advised that if you have dialed in while also viewing the webcast, you should mute your computer as there is a delay between the call and the webcast. All information provided during this conference call is subject to the forward-looking statements qualification set out on slide 2, detailed in Stantec's Management's Discussion and Analysis and incorporated in full for the purpose of today's call. Unless otherwise noted, dollar amounts discussed in today's call are expressed in Canadian dollars and are generally round. With that, I'm pleased to turn the call over to Mr. Gordon Johnston.

Operator: Today's call is also webcast. Please be advised that if you have dialed in while also viewing the webcast you should mute your computer as there is a delay between the call and the webcast.

Operator: All information provided during this conference call is subject to the forward looking statements qualification set out on slide two detailed in <unk> management's discussion and analysis and incorporate it in full for the purpose of today's call unless otherwise noted dollar amounts discussed in today's call are expressed in Canadian dollars and are generally.

Operator: Round it with that I'm pleased to turn the call over to Mr. Gordon Johnston.

Gordon Allan Johnston: Good morning. Thank you for joining us today. It is off to a great start for the year. Momentum continues to build on the favorable market trends that have emerged over the past two years. We continue to see strong demand and major projects in water security and water treatment. With the recently announced EPA regulations on PFAS, we expect this area to grow significantly. Stantec has been on the leading edge of PFAS work for several years, with multiple contracts underway in data analysis, treatment piloting, site remediation, and full-scale system design, and we have several PFAS treatment systems that are fully operational.

Gordon Allan Johnston: Good morning, Thank you for joining us today.

Gordon Allan Johnston: <unk> is off to a great start for the year.

Gordon Allan Johnston: Momentum continues to build on the favorable market trends that have emerged over the past two years.

Gordon Allan Johnston: We continue to see strong demand and major projects in water security and water treatment.

Gordon Allan Johnston: With the recently announced EPA regulations on DFAST, we expect this area to grow significantly.

Gordon Allan Johnston: <unk> has been on the leading edge of <unk> worked for several years with multiple contracts underway in data analysis treatment piloting site remediation and full scale system design and we have several DFAST treatment systems that are fully operational.

Gordon Allan Johnston: We also continue to see great demand for energy transition and climate solutions, including strengthening electrical grids and for environmental services. Aging infrastructure continues to drive significant needs, either for the repair or replacement of roads, bridges, railways, and transit.

Gordon Allan Johnston: We also continue to see great demand for energy transition and climate solutions, including strengthening our electrical grids and for environmental services.

Gordon Allan Johnston: Aging infrastructure continues to drive significant needs either for the repair or replacement of roads bridges Railways in transit.

Gordon Allan Johnston: With approximately $400 billion of IIGA funding now distributed, investment towards addressing these needs is spurring growth. And the ongoing push to restore productive capacity continues to drive significant work in advanced manufacturing, data centers, and other mission critical facilities in all of our key markets. Our solid first quarter results reflect our ability to capitalize on this robust market demand and deliver strong operational performance. We are also successfully executing on our plans to grow through strategic and disciplined M&A. In the first quarter, we closed our acquisitions of Zetcon and Morrison-Hirschfield.

Gordon Allan Johnston: Approximately $400 billion of IAG and funding now distributed investment towards addressing these needs is spurring growth.

Gordon Allan Johnston: And the ongoing push to reach our productive capacity continues to drive significant work in advanced manufacturing Datacenters and other mission critical facilities and all of our key markets.

Gordon Allan Johnston: Our solid first quarter results reflect our ability to capitalize on this robust market demand.

Gordon Allan Johnston: We delivered strong operational performance.

Gordon Allan Johnston: We are also successfully executing on our plans to grow through strategic and disciplined M&A.

Gordon Allan Johnston: In the first quarter, we closed our acquisitions of zircon and Morrison Hershfield.

Gordon Allan Johnston: And it's been very gratifying to see that since joining Stantec, both companies have continued to attract new employees, as both firms have grown their headcount by over 5% organically. And on May 1st, we announced that we had acquired Hydrox, a 950-person firm headquartered in Bristol, England. With 22 locations across the UK, Hydrox provides integrated engineering design and energy and sustainability consultancy services. They offer solutions for major infrastructure projects and landmark buildings across a number of sectors, including healthcare, energy, education, logistics and distribution, and the public sector.

Gordon Allan Johnston: And it's been very gratifying to see intense joined joining extensive both companies have continued to attract new employees as both firms have grown their head count by over 5% organically.

Gordon Allan Johnston: And on May 1st we announced that we acquired hydro and 950 person firm headquartered in Bristol, England.

Gordon Allan Johnston: With 22 locations across the U K hydraulic provides integrated engineering design and energy and sustainability consultancy services.

Gordon Allan Johnston: They offer solutions to major infrastructure projects and landmark buildings across a number of attractive sectors, including healthcare energy education logistics and distribution and the public sector.

Gordon Allan Johnston: Hydrox is a great strategic fit for Stantec. It grows our presence in the UK by more than 30% and provides us with a highly complementary line of services and expertise that bolsters our UK service offering. Combined with Zetcon and Morrison Hirschfield, we have added over 2,700 people to the Stantec team in the first four months of 2024.

Gordon Allan Johnston: <unk> is a great strategic fit for <unk> and.

Gordon Allan Johnston: In growing our presence in the UK by more than 30% and provides us with a highly complementary line of services and expertise that bolsters, our UK service offerings.

Gordon Allan Johnston: Combined with debt and Morrison Hershfield, we've added over 2700 people to the Centex team in the first four months of 2024.

Gordon Allan Johnston: This, in conjunction with our Q1 performance, sets us up very well for progressing towards our three-year target. This brings me to our Q1 results. We achieved record net revenue for the quarter of 12% year over year with 7% organic and 6% acquisition growth. We continue to see high demand for water in all of our regions, delivering 16% organic growth. Buildings also delivered double-digit organic growth this quarter. Adjusted EBITDA increased to $212 million with a margin of 15.5%.

Gordon Allan Johnston: This in conjunction with our Q1 performance sets us up very well and progressing towards our three year targets.

Gordon Allan Johnston: This brings me to our Q1 results.

Gordon Allan Johnston: We achieved record net revenue for the quarter up 12% year over year, with 7% organic and 6% acquisition growth.

Gordon Allan Johnston: We continued to see high demand for water in all of our regions delivering 16% organic growth.

Gordon Allan Johnston: Building <unk> also delivered double digit organic growth this quarter.

Gordon Allan Johnston: Adjusted EBITDA increased to $212 million with a margin of 15, 5%.

Gordon Allan Johnston: And as a result, we delivered a 23% increase in adjusted EPS of $0.90. Our U.S. business continues to perform extremely well. Delivering a 14% increase in net revenue for the quarter, including 10% organic growth and 4% acquisition growth. We achieved organic growth in every one of our business units. Our water business delivered over 20% organic growth. The key drivers included industrial and major water security projects, like the City of Joliet Alternative Water Source Program.

Gordon Allan Johnston: And as a result, we delivered a 23% increase in adjusted EPS of <unk> 90.

Gordon Allan Johnston: Our U S business continues to perform extremely well.

Gordon Allan Johnston: Delivering a 14% increase in net revenue for the quarter, including 10% organic growth and 4% acquisition growth.

Gordon Allan Johnston: We achieved organic growth in every one of our business units.

Gordon Allan Johnston: Our water business delivered over 20% organic growth.

Gordon Allan Johnston: The key drivers included industrial at major water security projects like the city of Juliet alternative water source program.

Gordon Allan Johnston: Our healthcare expertise and hospital structures, medical technology, and service delivery models drove double-digit organic growth in our buildings business, along with strong demand for industrial projects, particularly in data centers and other mission critical facilities. Infrastructure also had a solid quarter, with heavy activity in major transit, rail, and roadway projects, reflecting the beginnings of the ramp-up of projects funded by the IIJA. In Canada, we increased net revenue by 7%, with 6% acquisition growth from Morrison Hirschfield and 1% organic growth.

Gordon Allan Johnston: Our healthcare expertise in hospital structures medical technology and service delivery models drove double digit organic growth in our buildings business along with strong demand for industrial projects, particularly in data centers and other mission critical facilities.

Gordon Allan Johnston: Infrastructure also had a strong solid quarter.

Gordon Allan Johnston: With heavy activity in major transit rail and roadway projects, reflecting the beginnings of the ramp up of projects funded by the <unk>.

Gordon Allan Johnston: In Canada we.

Gordon Allan Johnston: We increased net revenue by 7%.

Gordon Allan Johnston: With 6% acquisition growth for Morrison, Hershfield, and 1% organic growth.

Gordon Allan Johnston: Our water business delivered double-digit organic growth, as activity on major wastewater projects remains high. Infrastructure also delivered double-digit organic growth on the strength of several roadway projects across the country and Education and Civic Projects for Organic Growth and Building. Energy and Resources retracted this quarter, as several significant projects wound down late in 2023, and we experienced delays in the ramp-up of new projects.

Gordon Allan Johnston: Our water business delivered double digit organic growth as activity on major wastewater projects remained high.

Gordon Allan Johnston: Infrastructure also delivered double digit organic growth on.

Gordon Allan Johnston: On the strength of several roadway projects across the country.

Gordon Allan Johnston: And education and civic projects drove organic growth in buildings.

Gordon Allan Johnston: Energen resources retracted this quarter as several significant projects wound down late in 2023, and we experienced delays in the ramp up of new projects.

Gordon Allan Johnston: We're beginning to see these new projects moving towards commencement, and we've successfully added new contracts to our backlog. And so we're confident that E&R will shift towards organic growth later this year. Our global operations generated 11% net revenue growth, with an 8% increase from Zetcon and 5% organic growth. Our water, building, and environmental services business units all delivered double-digit organic growth. Our industry-leading water business delivered strong results across the UK, New Zealand, and Australia through long-term framework agreements and public sector investment in water infrastructure.

Gordon Allan Johnston: We're beginning to see these new projects moving towards commencement and we have successfully added new contracts through our backlog and so we are confident that <unk> will shift towards organic growth later this year.

Gordon Allan Johnston: Our global operations generated 11% net revenue growth with an 8% increase from that con and 5% organic growth.

Gordon Allan Johnston: Our water building, an environmental services business units, all delivered double digit organic growth.

Gordon Allan Johnston: Our industry, leading water business delivered strong results across the UK, New Zealand and Australia through long term framework agreements and public sector investment in water infrastructure.

Gordon Allan Johnston: Buildings achieved over 20% organic growth with high levels of activity in every major region; the group was most pronounced in the Middle East, where we are the lead designer for the Hamdan bin Rashid Cancer Center in Dubai. Buildings also started work on the four billion pound Agritas battery manufacturing facility in the UK, and the strong performance from Environmental Services was driven by the European Energy Transition Project. Infrastructure net revenue retracted this quarter due in part to the Australian government's decision to delay or cancel certain transportation projects. And now I'll turn the call over to Theresa to review our financial results in more detail. Thank you, Board.

Gordon Allan Johnston: Building achieved over 20% organic growth.

Theresa: With high levels of activity in every major region.

Theresa: Growth was most pronounced in the middle East.

Theresa: Where we are in the lead designer of the harm done bin Rashid cancer Center in Dubai.

Theresa: Building is also starting to work on the 4 billion pound <unk> battery manufacturing facility in the UK.

Theresa: And the strong performance from environmental services was driven by European energy transition projects.

Theresa: Infrastructure net revenue retracted this quarter due in part to the Australia government decision to delay or cancel certain transportation projects.

Gordon Allan Johnston: And now I'll turn the call over to Theresa to review our financial results in more detail.

Theresa B. Y. Jang: Thank you, Board. Good morning, everyone.

Theresa: Thank you Blair and good morning, everyone.

Theresa B. Y. Jang: We delivered a very solid quarter of performance in Q1, with record net revenue, enhanced project margin, and disciplined cost management. In Q1, we generated gross revenue of $1.7 billion and net revenue of $1.4 billion, both of which were up 12% compared to Q1-23. Project margin increased 50 basis points due to our continued discipline in project execution, our ability to raise rates on certain projects to mitigate the impacts of wage inflation, and increased selectivity in project pursuits.

Theresa: We delivered a very solid quarter of performance in Q1 with record net revenue and hence project margin and disciplined cost management in.

Theresa B. Y. Jang: In Q1, we generated gross revenue of $1 7 billion and net revenue of $1 4 billion, both of which were up 12% compared to Q1 'twenty three.

Theresa B. Y. Jang: Product margin increased 50 basis points due to our continued.

Theresa B. Y. Jang: Continued discipline and project execution, our ability to raise rates on certain projects to mitigate the impact of wage inflation and increased selectivity and projects.

Theresa B. Y. Jang: This, along with our continued focus on operational efficiency, drove a 90 basis point increase in adjusted EBITDA margins to 15.5%. Diluted EPS for the quarter increased 19% to $0.70, and adjusted diluted EPS was up 23% to $0.90. Again this quarter, we saw a meaningful increase in our share price, which required a revaluation of our long-term incentive plan. Excluding the effect of the LGIP revaluation, our adjusted EBITDA margin would have been 15.9%, and Q1 adjusted EPS would have been $0.94.

Theresa B. Y. Jang: This along with our continued focus on operational efficiency drove a 90 basis point increase in adjusted EBITDA margin to 15, 5%.

Theresa B. Y. Jang: Diluted EPS for the quarter increased 19% to 70.

Theresa B. Y. Jang: And adjusted diluted EPS was up 23% to 90.

Theresa B. Y. Jang: Again this quarter, we saw a meaningful increase in our share price, which requires the reevaluation of our long term incentive plan.

Theresa B. Y. Jang: Clearly the effect of the algebra revaluation, our adjusted EBITDA margin would've been 15, 9% in Q1, adjusted EPS would have been 94 cents.

Theresa B. Y. Jang: Turning to our liquidity and capital resources, we delivered a strong quarter of cash flow generation in Q1. Operating cash flow increased to $57 million, compared to $37 million in Q1-23. And DSO was 79 days below our target of 80 days. However, capital return to our shareholders increased as a result of the board raising the dividend rate and a higher number of common shares outstanding compared to Q123. And our net debt-to-adjusted EBITDA ratio was 1.5 times, reflecting the funding for Zepfon and Morrison-Hurstfield, still within our internal leverage range of 1 to 2 times. And now I'll turn the call back to the board.

Theresa B. Y. Jang: Turning to our liquidity and capital resources, we delivered a strong quarter of cash flow generation in Q1.

Theresa B. Y. Jang: Operating cash flow increased to $57 million compared to $37 million in Q1, 'twenty three and.

Theresa B. Y. Jang: DSO was 79 days below our target of 80 days.

Theresa B. Y. Jang: Capital return to our shareholders increased as a result to support raising the dividend rate and the higher number of common shares outstanding compared to Q1 'twenty three.

Theresa B. Y. Jang: And our net debt to adjusted EBITDA ratio was one five times, reflecting the funding reserve funds in March the first deal still within our internal leverage range.

Theresa B. Y. Jang: Two times.

Theresa B. Y. Jang: And now I will turn the call back to Bart.

Board: Thanks Teresa.

Gordon Allan Johnston: At the end of the first quarter, our backlog stood at a record $7 billion. Our recent acquisitions contributed 7% to our backlog since December 2023, primarily in infrastructure and buildings. Backlog increased organically by 3%, with growth in Canada and the U.S., predominantly in our environmental services and infrastructure business units. Project WISD and Environmental Services translated into solid low-double-digit organic growth in our global and US operations. U.S. infrastructure also had a number of strong winds, translating into mid-single-digit organic growth.

Theresa B. Y. Jang: At the end of the first quarter, our backlog stood at a record $7 billion.

Gordon Allan Johnston: Our recent acquisitions contributed 7% to our backlog since December 2023, primarily in infrastructure and buildings.

Gordon Allan Johnston: Backlog increased organically by 3% with growth in Canada, and the U S predominantly in our environmental services and infrastructure business units.

Gordon Allan Johnston: Project wins in environmental services translated into solid low double digit organic growth in our global and U S operations.

Gordon Allan Johnston: U S infrastructure also had a number of strong wins translating into mid single digit organic growth.

Gordon Allan Johnston: We're seeing strong demand for transit, bridge, and highway projects underpinned by funding from the IIJA. The non-organic retraction in global backlog reflects, in part, the drawdown of our UK backlog associated with the AMP7 cycle. And although we have... We have already won over 60% of the Ampey programs we are pursuing.

Gordon Allan Johnston: We're seeing strong demand for transit bridge and highway projects underpinned with funding from the <unk>.

Gordon Allan Johnston: The nominal organic retraction in globals backlog reflects in part the drawdown of our UK backlog associated with the <unk> <unk> cycle.

Gordon Allan Johnston: And although we have.

Gordon Allan Johnston: We have already won over 60% of the Abbvie programs Youre pursuing these contracts are not yet in backlog.

Gordon Allan Johnston: These contracts are not yet in backlog. In aggregate, our backlog represents 13 months of work, which is one month higher than it was at year end. We continue to hire at a near record pace, and our voluntary turnover remains well below industry average, meaning that we are attracting and retaining the workforce needed to deliver on our growing backlog.

Gordon Allan Johnston: In aggregate our backlog represents 13 months of work, which is one month higher than it was at year end.

Gordon Allan Johnston: We continue to hire at near record pace.

Gordon Allan Johnston: And our voluntary turnover remains well below industry average, meaning that we are attracting and retaining the workforce needed to deliver on our growing backlog.

Gordon Allan Johnston: Turning now to major projects awarded in Q1, through our Climate Solutions Strategic Growth Initiative, we continue to advance our services and technologies for efficient water use and reuse projects, including a design-build project for Arlington County. This $175 million upgrade will enhance the solid handling facilities and incorporate cutting-edge technology to sustainably transform wastewater into a renewable energy source and a nutrient-rich soil inventory. In support of the energy transition, our energy and resources team will be providing project management and transmission and distribution engineering to the B.C. Hydro and Power Authority

Gordon Allan Johnston: Turning now to major projects awarded in Q1.

Gordon Allan Johnston: Through our climate solutions strategic growth initiatives, we continue to advance our services and technologies for efficient water use and reuse projects, including a design build project for Arlington County.

Gordon Allan Johnston: This $175 million upgrade will enhance the solids handling facilities and incorporate cutting edge technology to sustainably transformed wastewater into renewable energy source and in nutrient rich soil Amendment.

Gordon Allan Johnston: In support of the energy transition, our energy and resources team will be providing project management and transmission and distribution engineering to the BC Hydro power authority.

Gordon Allan Johnston: This is a seven-year master services agreement valued at $186 million. And in Eastern Canada, also under a seven-year MSA with options to be extended, we will be providing services to Hydro-Quebec for environmental assessments. The last project I'd like to highlight is an exciting win in Australia that underscores our global strength in the water industry. As part of this four-year project, our water, environmental services, and infrastructure teams will collaborate to assist with the $595 million wastewater system upgrade in Sydney. This is a prime example of how we were able to leverage our leading expertise in water to broaden the scope of services and bring together our expertise from all disciplines and regions across Stantec.

Gordon Allan Johnston: This is a seven year Master services agreement valued at $186 million.

Gordon Allan Johnston: And in Eastern Canada also under a seven year MSA with options to be extended we will be providing services to hydro Quebec for environmental assessments.

Gordon Allan Johnston: The last project I'd like to highlight is an exciting win in Australia that underscores our global strength in the water industry.

Gordon Allan Johnston: As part of this four year project, our water environmental services and infrastructure teams will collaborate to assist with the $595 million.

Gordon Allan Johnston: Wastewater system upgrade in Sydney, Australia.

Gordon Allan Johnston: This is a prime example of how we were able to leverage our leading expertise in water to broaden the scope of services and bring together our expertise from all disciplines and regions across the Atlantic.

Gordon Allan Johnston: Looking at the remainder of the year, we are reaffirming our 2024 financial targets, which were provided in February. We expect net revenue growth for the year to be in the range of 11 to 15%, and we expect organic net revenue growth to be in the mid to high single digits. For the U.S. and global, we expect mid- to high-single-digit organic revenue growth. And in Canada, we're guiding to mid-single-digit growth. Acquisition net revenue growth, which will now include a partial year for Hydrox, is expected to be in the mid-single digits.

Gordon Allan Johnston: Looking at the remainder of the year, we are reaffirming our 2024 financial targets, which were provided in February.

Gordon Allan Johnston: We expect net revenue growth for the year to be in the range of 11% to 15%.

Gordon Allan Johnston: And expect organic net revenue growth to be in the mid to high single digits.

Gordon Allan Johnston: For U S and global we expect mid to high single digit organic revenue growth.

Gordon Allan Johnston: And in Canada, we're guiding to mid single digit growth.

Gordon Allan Johnston: Acquisition net revenue growth, which will now include a partial year for hydro is expected to be in the mid single digits.

Gordon Allan Johnston: Our adjusted EBITDA margin target for the year remains in the range of 16.2 to 17.2%. And finally, we expect our adjusted diluted EPS growth to be in the range of 12 to 16%. We are very confident in being able to achieve these targets given the robust activity we're seeing throughout our region and the three successful acquisitions we've completed so far this year. And with that, I'll turn the call back to the operator for questions. Operator.

Gordon Allan Johnston: Our adjusted EBITDA margin target for the year remains in the range of 16, 2% to 17, 2%.

Gordon Allan Johnston: And finally, we expect our adjusted diluted EPS growth to be in the range of 12% to 16%.

Gordon Allan Johnston: We are very confident in being able to achieve these targets given the robust activity, we're seeing throughout our regions and the three successful acquisitions. We've completed so far this year.

Gordon Allan Johnston: And with that I'll turn the call back to the operator for questions.

Gordon Allan Johnston: Later.

Operator: Ladies and gentlemen, if you have a question or comment at this time, please press star 1 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star 11 again. Once again, if you have a question or comment at this time, please press star 11 on your telephone keypad. Please stand by while we compile the Q&A list. Our first question or comment comes from the line of Benoit Poirier from Desjardins. Sir, your line is open.

Speaker Change: Ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone keypad.

Operator: Question has been answered or you wish to remove yourself from the queue simply press star one again.

Operator: Once again, if you have a question or comment at this time. Please press star one one on your telephone keypad.

Operator: Please standby, while we compile the Q&A roster.

Benoit Poirier: Our first question or comment comes from the line of goodwill Poirier from Desjardins, Sir Your line is open.

Benoit Poirier: Yes, thank you very much and congratulations on the strong start of the year. In terms of the M&A environment, obviously quite positive. You've been able to add almost 2,700 people so far, so congrats. And obviously, in terms of size, it compares pretty well to Carnot, but is there any main difference when it comes to integrating different acquisitions versus a big one like Carnot? And could you talk about whether there's any limit in terms of the number of people you could integrate, let's say, over a year? Thank you.

Benoit Poirier: Yes, Thank you very much and congratulations for the strong start of the year.

Benoit Poirier: In terms of M&A.

Benoit Poirier: <unk>, obviously quite positive you've been able to add almost 2700 people so far.

Benoit Poirier: Congrats.

Benoit Poirier: And obviously in terms of size it compares pretty well to cardinal but is there any different when it comes to integrating.

Benoit Poirier: Different acquisition versus a b.

Benoit Poirier: Big one like Cardinal and could you talk about whether there is any limits in terms of the.

Benoit Poirier: Number of people you could integrate let's say over a year. Thank you.

Gordon Allan Johnston: Hi Benoit, as we look at integrating these three different firms, they are all a little bit unique and slightly different from Cardno. So, Cardno, we had almost two integrations, one in the US and one in Australia. The US business, of course, is very mature, and lots of expertise around to contribute to getting that integration accomplished. Australia was a little bit farther afield but still had developed a pretty good ability to integrate there. But you'll recall there was some disruption. It was challenging, just given its overall size.

Speaker Change: Hi, Ben.

Benoit Poirier: So as.

Gordon Allan Johnston: As we look at integrating these three different they are all a little bit unique.

Gordon Allan Johnston: And im slightly different from Cardinal.

Gordon Allan Johnston: No we had.

Gordon Allan Johnston: Almost two integrations one in the U S. One in Australia. The U S business of course very mature.

Gordon Allan Johnston: Months.

Gordon Allan Johnston: Expertise around to contribute to getting that integration that conflict, Australia was a little bit farther afield, but still had developed a pretty good ability to integrate there, but you'll recall there was no. There was some disruption there was it was challenging just given its overall size.

Theresa B. Y. Jang: When we look at these three acquisitions we've just completed, Zetcon is a little bit different from the other firms we've acquired because it is our only presence in Germany. And so, because of language differences, they use German GAP. At Zetcon, we, of course, report under IFRS, and so, you know, the transition will take a little bit longer, and we're not looking to move as fast to bring them on to Oracle because they are our only presence in Germany.

Gordon Allan Johnston: When you look at these three acquisitions, we just completed a jet condos.

Theresa B. Y. Jang: So it is a little bit different from other firms, but we've acquired because it is our only focus in Germany and so between language difference they used German GAAP at jet Com, We of course report under IRS and so.

Theresa B. Y. Jang: Transition will take a little bit longer and we're not looking to move as fast to bring them onto oracle because they are only presence in Germany, Torsten hirschfield and calendar again, great depth here.

Theresa B. Y. Jang: Morrison-Hirsfield in Canada, again, great depth here, more presence here, and so I think that is a process that is already underway, and we would look to complete that financial integration in the second half of this year. It's pretty early days for HyDROC as we start mapping out what that integration could look like. So, you know, I think these things are always complicated. They always create a little bit of noise, particularly in the acquiring firm. But I think we have a pretty great track record of getting through that quickly and then moving towards sort of that holistic value creation that we can achieve from our acquisitions.

Theresa B. Y. Jang: More presence here and so I think John is the trough.

Theresa B. Y. Jang: That is already underway and we look to complete that.

Theresa B. Y. Jang: Financial integration in the second half of this year.

Speaker Change: Hi, Lucas.

Theresa B. Y. Jang: It's pretty early days.

Theresa B. Y. Jang: For hydronic as we start mapping out what that integration could look like so.

Theresa B. Y. Jang: I think these things are always complicated.

Theresa B. Y. Jang: They always create a little bit of noise, particularly in the acquiring firm. So I think we have a pretty great track record of getting through that quickly.

Theresa B. Y. Jang: And then moving towards sort of the holistic value creation that we can achieve from our acquisitions.

Theresa B. Y. Jang: Okay, and is there any reason, Theresa, why you did not adjust the guidance this year in light of the solid start but also the fact that you just completed the iDROC acquisitions?

Speaker Change: Okay and is there any reason to resolve where.

Theresa B. Y. Jang: Why you did not adjust yet.

Theresa B. Y. Jang: The guidance this year in light of the.

Theresa B. Y. Jang: Solid start but also the fact that you just completed the <unk>.

Theresa B. Y. Jang: Acquisition.

Theresa B. Y. Jang: Yeah, I think the range for guidance is appropriate. We are off to a strong start to the year, but as we look out to the rest of the year, there are always puts and takes in various corners of our business that we consider. And I think at the beginning of the year, we want to make sure that we've got latitude to adapt if things unfold either more quickly or more slowly than we've seen.

Theresa: Yeah, I mean, I think the range for guidance is appropriate.

Theresa B. Y. Jang: We are off to a strong start to the year, but as we look out to the rest of the given there's always puts and takes in various corners of our business that we consider.

Theresa B. Y. Jang: And I think.

Theresa B. Y. Jang: Beginning of the year, we want to make sure that we've got a magnitude.

Theresa B. Y. Jang: To adapt if things unfold.

Theresa B. Y. Jang: Either more quickly or more slowly than we've seen.

Theresa B. Y. Jang: High rockets, you know, it's eight months of results we'll have. And as we just talked about, we're going to be moving into integration at varying paces, though, between three firms. So it's a pretty high degree of difficulty that we have set for ourselves. But we're confident that we're going to be successful in getting these firms integrated and creating value. But I think it's early in the year. We want to make sure that we're focused on integrating and getting these firms aligned within Stantec's practices and driving toward those revenue synergies and not overly concerned about how that first sub-period performance looks for the year.

Theresa B. Y. Jang: The bronchus eight months.

Theresa B. Y. Jang: Our results for Howard.

Theresa B. Y. Jang: And as we just talked about it we're going to be moving into integration of.

Theresa B. Y. Jang: Burying pieces, though three firms so that's a pretty high degree of difficulty that we have set for ourselves we're confident that we're going to be successful in.

Theresa B. Y. Jang: Getting these firms integrated and creating value, but I think it's early in the year. We wanted to make sure that we're focused on integrating and getting it springs aligns with <unk> practices and driving towards those revenue synergies.

Theresa B. Y. Jang: And not overly concerned about how that first stub period performance for the year.

Gordon Allan Johnston: Okay, and last one for me on the water side, obviously, a great achievement so far, Q1, organic growth 16%, great opening remarks also about all the awards that are not yet in the backlog with respect to the M8 program. So could you maybe talk a little bit about the kind of quantified opportunities that will be added to the backlog? And I know that over the next three years you're targeting high single-digit growth, but given the start and the potential around the M8, could we even see a low double-digit growth rate given the backdrop in the water segment overall?

Theresa B. Y. Jang: Okay and last one for me on the water side, obviously, a great achievement. So far Q1, though organic growth 16% great opening remarks also about all the awards that are not yet in the backlog with respect to them.

Gordon Allan Johnston: <unk> program. So could you maybe talk a little bit about.

Gordon Allan Johnston: Uh huh.

Gordon Allan Johnston: Quantify the deal fortunate fees that will be added to the backlog.

Gordon Allan Johnston: And I know that over the next three years, you are targeting high single digit growth, but given the start and the potential around the MAA could we even see a low double digit.

Gordon Allan Johnston: In the backdrop in the water segment overall.

Gordon Allan Johnston: You know, and you're right, the water segment, on top of 20% organic growth last year, putting up another 16% in Q1, just shows the strength of that water franchise we have really around the world. And so we see strength in in all of the regions it could be in. You know, in Canada, we're seeing great opportunities from a wastewater perspective. There is a lot of water work here as well.

Gordon Allan Johnston: Youre right on the water segment on top of 20% organic growth last year in putting up another 16% in Q1 just shows the strength of that water franchise, we have really around the world and so we see strength in all of the regions it could be in.

Gordon Allan Johnston: The US, certainly, while it's already very robust with both municipal and advanced manufacturing facilities, you know, we see considerable growth opportunities in the PFAS space there as well. And then outside of North America, you know, we've talked about the strength as we come into the AMP-8 program and the framework agreements in Australia and New Zealand. So, we feel very, very strong and positive about our water franchise moving forward.

Gordon Allan Johnston: In Canada, we're seeing great opportunities from our wastewater perspective, a lot of water work here as well in the U S.

Gordon Allan Johnston: Certainly while it is already very robust with both municipal and advanced manufacturing facilities, we see considerable growth opportunities in the <unk> space, there as well and then outside of North America, We've talked about the just the strength as we come into the <unk> program and the framework agreements in Australia, and New Zealand. So we feel very very.

Gordon Allan Johnston: But, you know, that said, it's one component of the overall diversified profile that we have. And so, while we do see opportunities for continued organic growth going forward, I think we, at this point, are not looking to change that guidance from that 7% organic growth CAGR for the next 3 years. And, you know, as things evolve, as we move into budgeting and guidance for next year and the following year, then, you know, perhaps we'll make an adjustment if required, but we're not looking to do so at this point.

Gordon Allan Johnston: Strong and positive about our water franchise moving forward.

Gordon Allan Johnston: That said it is one component of the overall diversified profile that we have and so while we do see opportunities for continued organic growth going forward.

Gordon Allan Johnston: We at this point, we're not looking to change that guidance from the 7% organic growth CAGR for the next step the next three years.

Gordon Allan Johnston: Things evolve as we move into your budgeting and.

Gordon Allan Johnston: Guidance for next year and the following year, then, perhaps we'll make an adjustment if required but we're not looking to do so at this point.

Benoit Poirier: Perfect. So congrats and thanks for the time.

Speaker Change: So congrats and thanks for the time.

Speaker Change: Thank you Pamela.

Operator: Thank you. Our next question or comment comes from the line of Devin Dodge from BMO Capital Markets. Mr. Dodge, your line is now open.

Benoit Poirier: Thank you. Our next question or comment comes from the line of Devin Dodge from BMO capital markets. Mr. Dodd. Your line is now open.

Devin Dodge: Thanks. Good morning. So I asked I asked one of your competitors a similar question earlier, but I wanted to give you a chance to address it as well. So the look, the demand environment is clearly, you know, strong across, you know, a lot of your regions. You've talked about this, you know, but how do you think about the balance between pursuing the growth opportunities that are available but require a lot of effort to expand the workforce and being more selective in your bidding activity to drive margin expansion?

Devin Dodge: Yeah. Thanks, good morning.

Speaker Change: So good morning, I guess I asked one of your competitors just similar question earlier, but I wanted to give you a chance to address that as well so that looked at the demand environment is clearly strong across a lot of your regions you've talked about this.

Devin Dodge: How do you think about the balance between pursuing the growth opportunities that are available, but requires a lot of effort to expand the workforce with being more selective in your bidding activity to drive margin expansion.

Gordon Allan Johnston: Yeah, so that's actually a good question, but you know I think we're really in a unique environment right now at Stantec where we're focusing on both. So we are absolutely being more selective in both our project and our client selection, and you can see that in the strong project margins that we've been delivering. And actually, even last year in December, when we rolled out our 3-year strategic plan and targets, we increased the top end of our project margin guidance range previously from 53% to 55% to now 53% to 56%.

Devin Dodge: Yeah.

Speaker Change: That's actually a good question, but I think we're really in a unique environment right now at Symantec, where we're focusing on both.

Gordon Allan Johnston: So we are absolutely being more selective in both our project and our client selection and you can see that in the strong project margins that we've been delivering and actually even last year in December when we rolled our three year strategic plan and targets. We increased the top end of our project margin guidance range previously from 53% to 50%.

Gordon Allan Johnston: 5% to $53 to 56%, so we see that client selection that being more discriminating only taking the the higher higher margin projects being very very successful. We've also talked to our project managers about if you have a client that is particularly problematic.

Gordon Allan Johnston: So we see that client selection, that being more discriminating, only taking the higher-margin projects, being very, very successful. We've also talked to our project managers about if you have a client that is particularly problematic, and that they pay slow, they don't want to give change orders for changes in work, they're litigious.

Gordon Allan Johnston: Got it and that day.

Gordon Allan Johnston: They pay slow they don't want to give change orders for changes in work Theyre litigious.

Gordon Allan Johnston: This is the time in the evolution of our overall company and the industry to not work for those clients and instead expend your energy on positive clients with good projects and good project margins. So we are absolutely increasing the selectivity of the projects and clients that we're working on. But in the same way, you've heard us say very accurately that we have one of the lowest voluntary turnover rates in the industry and one of the highest rates for attracting new staff.

Gordon Allan Johnston: This is the time in the evolution of our overall company and the industry to not work for those clients and instead expand your energy on positive clients with good good projects and good project margins. So we are absolutely increasing the selectivity of the projects and clients that we're working on but in the same way you've heard us to say.

Gordon Allan Johnston: And very accurate that we are one of the lowest voluntary turnover rates in the industry and one of the highest attraction of new staff. So we are we are growing our head count growth by retaining existing staff and in attracting new so that we can also take on that higher volume of work and grow organically because of the.

Gordon Allan Johnston: So we are growing our headcount both by retaining existing staff and attracting new ones so that we can also take on that higher volume of work and grow organically because of that. So I think there's, you know, while it's an excellent question, we are focusing on both the focus on clients and projects and on the growth component.

Gordon Allan Johnston: So I think there as well while it's an excellent question we are focusing on both the.

Gordon Allan Johnston: The focus on clients and projects and on the growth component.

Devin Dodge: That was excellent. Good color. Thanks for that. Second question. I looked at the double-digit organic growth in the building sector, which I thought was interesting. You went through some of the major projects in your prepared remarks, but what are some of the subsectors that are driving that strong growth?

Speaker Change: That was excellent color. Thanks for that second question I looked at the double digit organic growth and the building sector. I thought was interesting you went through some of the major projects in your prepared remarks, but.

Devin Dodge: What are some of the subsectors that are driving that strong growth.

Gordon Allan Johnston: So a couple in particular, health care is very, very strong for us. And so we are continuing to ramp up over the past number of years on that. So we talked about the cancer center in Dubai. We've also been awarded the design of the first proton therapy treatment center in Canada, because we have a particular expertise from that perspective.

Devin Dodge: So a couple of in particular health care is very very strong for us and so we are <unk>.

Gordon Allan Johnston: Continuing to ramp up over the over the past number of years on that so we talked about the cancer Center in Dubai. We have also been awarded the design of the first proton therapy treatment Center in Canada, because we have a particular expertise.

Gordon Allan Johnston: From that perspective, we're seeing a lot of growth also in data centers no. We were strong in Datacenters before but then what ESD joined US we got even stronger and then with the Morrison Hershfield team joining us we're even stronger again, so we see a lot of growth in the data centers mission critical facilities.

Gordon Allan Johnston: We're also seeing a lot of growth in data centers. Now, we were strong in data centers before. But then when ESD joined us, we got even stronger. And then with the Morrison Hirschfield team joining us, we're even stronger again.

Gordon Allan Johnston: So we see a lot of growth in data centers, mission critical facilities, and health care, in particular, as two areas that are very, very strong. And then, of course, on top of that is our focus on advanced manufacturing. And so we've talked about the Agritas battery facility. We've talked previously about the solar panel manufacturing facilities. So there's just an enormous amount of work out there that's really driving solid growth in our buildings.

Gordon Allan Johnston: In healthcare in particular.

Gordon Allan Johnston: Two areas that are very very strong and then of course on top of that is our focus on advanced manufacturing and so we've talked about the average house battery facility. We've talked previously about the the solar panel manufacturing facilities. So there's just an enormous amount of work out there thats really driving solid growth in our buildings business.

Devin Dodge: Great, thanks for that. I'll turn it over.

Speaker Change: Great. Thanks, I'll turn it over.

Speaker Change: Thanks, Dave.

Operator: Thank you. (inaudible)

Speaker Change: Thank you.

Devin Dodge: Our next question or comment comes from the line of Jacob Boot from CIBC. Mr. Boot. Your line is now open.

Operator: Good morning, Gordon, Theresa, this is Rahul for Jacob. Thank you, Maureen. Good morning.

Operator: Good morning, Gordon Theresa this is rahul on for Jacob.

Rahul: Great Good morning.

Unknown Attendee: So looking at organic net revenue growth, strong performance in water and buildings, but notice that growth in the infrastructure business has been creeping higher as well. So with about 40% of that IIJA funds now released, are you seeing that hit the revenue line more meaningfully now? And how should we be thinking about the ramp-up there for the balance?

Rahul: Good morning.

Rahul: So looking at organic net revenue growth strong performance in water and buildings, but noticed that growth in the infrastructure business has been creeping higher as well.

Unknown Attendee: So with.

Unknown Attendee: About 40% of that.

Unknown Attendee: Hey funds out of the lease.

Unknown Attendee: Are you seeing that hit the revenue line more meaningfully now and how should we be thinking about the ramp up there for the balance of the year.

Gordon Allan Johnston: Yeah, yeah, so we absolutely are starting to see more IIJ projects being awarded. We're starting to generate some revenue there, but we see that ramping up even more as the year progresses. So, you know, a little bit coming on now, but, you know, backlogs are coming up, and we see that work increasing, you know, even more in the 2nd half of the year and then holding pretty steady, even growing a little bit kind of through 25 through 28, 29.

Speaker Change: Yes, yes.

Gordon Allan Johnston: So we absolutely are starting to see more <unk> projects being awarded we're starting to generate some revenue there, but we see that ramping up even more towards as the year progresses. So a.

Gordon Allan Johnston: A little bit coming out now, but backlogs are coming up and we see that work increasing even more in the second half of the year, and then holding pretty steady even growing a little bit kind of through 25 through 28 29, So we see.

Gordon Allan Johnston: So we see, you know, now that the ramp-up is happening. Of course, it always took longer to get going than we in the industry had hoped it would, but we are seeing it now, ramping up through the 2nd half of the year and then holding at a pretty elevated level for the next 3 to 5 years.

Gordon Allan Johnston: Now that the ramp up is happening of course, it always took longer to get going and then we industry I don't do it but we are seeing it now ramping up through the second half of the year and then holding at a pretty elevated level for the next three years to five years.

Unknown Attendee: Right, okay, so that's helpful. And, then maybe just a question on the pace of M&A. So, three deals announced so far this year. Do you expect this pace to continue in 2024? Or do you now anticipate taking a bit of a pause to focus on integration? And, and maybe if you could comment on your overall M&A pipeline, that would be helpful.

Speaker Change: Right. Okay. That's helpful.

Unknown Attendee: And then maybe just a question on the pace of M&A.

Unknown Attendee: The deal was announced so far this year.

Unknown Attendee: Do you expect this pace to continue in 2024 or do you now anticipate taking a bit of a pause.

Unknown Attendee: Focus on integration and maybe if you can comment on your overall M&A pipeline that would be helpful.

Gordon Allan Johnston: Great. So the overall M&A pipeline is really full and just continues to strengthen. And so our balance sheet is good. Our ability to integrate is solid. So we don't see taking a pause at all.

Speaker Change: Great. So the.

Gordon Allan Johnston: The overall M&A pipeline is is really full and just continues to strengthen and so our balance sheet is good our ability to integrate is solid so we don't seem to be taking a pause at all so we are as we always are actively in different levels of discussion with companies around the world.

Gordon Allan Johnston: So we're, as we always are, actively involved in different levels of discussions with companies and around the world. And so, you know, but we're maintaining our discipline. And so when the right opportunity comes around, we absolutely would, would pull the trigger and make that happen.

Gordon Allan Johnston: So, but we're maintaining our discipline and so when when the right opportunity comes around we absolutely would would pull the trigger and make that happen.

Unknown Attendee: Great. I appreciate the responses. Thank you. I'll turn it over. Thank you.

Speaker Change: Great I appreciate the responses. Thank you I'll turn it over.

Speaker Change: Thank you.

Operator: Thank you. Our next question or comment comes from the line of Michael Doumet from Scotiabank. Mr. Doumet, your line is now open.

Speaker Change: Thank you.

Unknown Attendee: Our next question or comment comes from the line of Michael <unk> from <unk>.

Michael Doumet: Scotiabank Mr. <unk>. Your line is now open.

Michael Doumet: Good morning, guys.

Michael Doumet: Good morning.

Michael Doumet: Good morning, Gordon. Hi, Theresa. So maybe the first question is, can you remind us how much of the ENR is? And then maybe, as a follow-on to that, I think you laid out in the prepared remarks a comment about returning to organic growth in ENR in the second half of the year. Just, just wondering if we should assume that maybe, you know, Q2 growth up there should be a little squis

Michael Doumet: Good morning, Greg.

Michael Doumet: So maybe first question can you remind us how much of the Anr is in Canada, and just maybe discuss the moving pieces for Canada.

Michael Doumet: And then just maybe as a follow on to that I think you laid out in the prepared remarks.

Michael Doumet: Comment about returning to organic growth in <unk> in the second half.

Michael Doumet: Of the year, just wondering if we should assume that maybe Q2 growth there should be a little squishy.

Gordon Allan Johnston: Sure. So I'll start there.

Speaker Change: Sure So I'll start there so.

Gordon Allan Johnston: We had really strong growth in E&R, you know, in Canada, through last year, working on several significant projects, Trans Mountain and others, and a lot of them wrapped up, you know, near the end of last year. So, you know, we expected, of course, a little bit of revenue retraction from that, but, you know, our backlog has really increased in that group over the, you know, the last period of time.

Theresa: We had really strong growth at Anr in.

Gordon Allan Johnston: In Canada through last year working on several significant projects Trans mountain and others a lot of the wrapped up near the end of last year. So we expect that of course, a little bit of revenue retraction from that but our backlog is really increased in that group over the over the last period of time, So we do see that.

Gordon Allan Johnston: So we do see that coming back in the second half of last year. We're also coming off a really high comp, and, you know, when you look at Q1 2023, E&R was a really high comp, so, you know, we're seeing inflation, rising interest rates, slow regulatory approvals, all slowing a little bit of that in Western Canada, in particular, but overall, E&R in Canada is less than 5% of the overall net revenue percentage.

Gordon Allan Johnston: Coming back in the second half of last year, we're also coming off a really high comp and when you look at Q1 2023, and Anr was a really high comp so.

Gordon Allan Johnston: We're seeing that.

Gordon Allan Johnston: <unk> rising interest rates slow regulatory approvals, all slowing a little bit of that in western Canada in particular, but overall.

Gordon Allan Johnston: And Canada is less than 5% of the overall net revenue per center.

Michael Doumet: Okay, very helpful. Thank you.

Speaker Change: Okay very helpful. Thank you.

Michael Doumet: Then last year, the organic hires accounted for about 5% of the.

Michael Doumet: The increase in the employee base, so you're you're nearing or maybe a couple of months away from peak season, How do you think 2024 will trend versus that.

Speaker Change: I'm just wondering how much of the organic hires as in water.

Michael Doumet: Maybe versus the rest of the company.

Speaker Change: Yes, we are.

Michael Doumet: Sure of course actively hiring in water, but we're actively hiring in a number of our other groups as well while water ramps up a little bit.

Michael Doumet: And then, you know, last year, the organic hires accounted for about 5% of the increase in the employee base. So you're, you know, you're nearing or maybe a couple of months away from peak season, you know; how do you think 2024 will trend versus that? And I'm just wondering how much of the organic hires is in the water, you know, maybe versus the rest of the workforce.

Michael Doumet: The summer months.

Gordon Allan Johnston: Yeah, well, you know, we are, of course, actively hiring in water, but we're actively hiring in a number of our other groups as well. While water ramps up a little bit in the summer months, some of our other groups even ramp up more when you get into the northern hemisphere field season.

Michael Doumet: Some of our other groups, even ramp up more and when you get into the northern Northern Hemisphere field season, Environmental services gets more busy more people out in the field, while transportation land development work out so it always depends a little bit about.

Gordon Allan Johnston: You know, environmental services gets more busy, more people out in the field, a lot of transportation, and land development work out. So it always depends a little bit on the types of people you're hiring and has some seasonality impact as well. So, you know, as we said in the prepared remarks, we are at a record hiring pace, but we're just a little bit off of kind of the pace where we were last year.

Gordon Allan Johnston: The types of people you are hiring and have some seasonality impact as well so as we said in the prepared remarks, we are at a record hiring.

Gordon Allan Johnston: Just a little bit off of kind of the pace, where we were last year. So we see really continued strong organic growth from a hiring perspective this year.

Gordon Allan Johnston: So we see really continued strong organic growth from a hiring perspective this year. And we've also seen that labor pressures have come off a little bit, you know, a little easier to hire people than it was a couple of years ago. Salary increased pressure is a little bit less than it was a couple of years ago. So we're actually feeling really good about both our ability to retain, of course, but our ability to attract people.

Gordon Allan Johnston: We are also seeing that.

Gordon Allan Johnston: Labor pressures have come off a little bit little easier to hire people and it was a couple of years ago salary increase pressure a little bit less than it was a couple of years ago. So we're actually feeling really good about both of our ability to retain of course, but our ability to attract people and then as you've seen through our project margin pass along any salary increase.

Gordon Allan Johnston: And then, as you've seen through our project margin, pass along any salary increases or any pressure we see that way to our clients. The other interesting point to note is that our water group has the lowest voluntary turnover rate of any of our business lines. And so, you know, while we're actively hiring there, we also do, while we do an incredibly good job of retaining employees everywhere, it's even more solid in the water franchise.

Gordon Allan Johnston: Is there any pressure, we see that way to our clients.

Gordon Allan Johnston: The other interesting point just to note is that our water group has the lowest voluntary turnover rate of any of our business lines and so while we're actively hiring there. We also do what we do an incredibly good job of retaining everywhere, it's even more solid in the water franchise.

Michael Doumet: Super helpful, thank you very much. (inaudible)

Speaker Change: Super helpful. Thank you very much.

Speaker Change: Thanks, Michael.

Operator: Thank you.

Speaker Change: Thank you.

Michael Doumet: Our next question or comment comes from the line of Chris Murray from <unk> capital markets. Mr. Murray. Your line is now open.

Unknown Attendee: You know, Gordon, I don't know who wants to take this one, but turning back to Hydroc and just talking a little bit about the UK water business and what that brings to you, a couple of questions around that. First of all, you described Hydroc as an integrated firm, and I'm wondering, you know, maybe get your thoughts on, you know, does that mean there's a construction element in there that we have to be thinking about or anything like that?

Speaker Change: Gordon as percent of all who wants to take this one but coming back to hydraulics, just talking a little bit about.

Unknown Attendee: Maybe in the U K water business and what that brings to you a couple of questions around this.

Unknown Attendee: And as part of this, was Hydroc a competitor of yours around AMP-8, or does it change how you guys can attack maybe the rest of the AMP-8 program as we go through the year? Yeah, great, great questions, Chris.

Unknown Attendee: First of all you described hydrarch.

Unknown Attendee: As an integrated firm.

Unknown Attendee: And I'm wondering.

Unknown Attendee: Maybe get your thoughts on does that mean, there is a construction element in there that we have to be thinking about or anything like that and as also part of this.

Unknown Attendee: What's hard rock a competitor of yours around amp eight or does it change how you guys can.

Unknown Attendee: Attack, maybe the rest of the E&P program as we go through the year.

Gordon Allan Johnston: So firstly, 100% with clarity, they do no construction work. And so when we and so when we talk about them being an integrated firm, they're really integrated, they fire safety, energy, sustainability, civil, structural, transportation, environmental, geotech, that's why, you know, that they're integrated from their perspective, but they do little to no water work, which is why they're so complimentary to Stantec there, because there's very, very little overlap, very, very little overlap, but great opportunities for synergies as, you know, we can bring our water expertise to their clients, they can bring some of their expertise and, you know, MEP and fire safety and so on to our clients.

Gordon: Yes got it great great questions, Chris So firstly on 100% with clarity they do no construction work and so when we and so when we.

Gordon Allan Johnston: Talk with them being an integrated firm, so really integrated fire safety energy sustainability civil structural transportation environmental Geo Tech. That's why they are integrated from their perspective, but they do little to no water work, which is why there is so complementary to <unk> there because.

Gordon Allan Johnston: There's very very little overlap.

Gordon Allan Johnston: Very very little overlap with great opportunities for synergies.

Gordon Allan Johnston: We can bring our water expertise to their clients they can bring some of their expertise.

Gordon Allan Johnston: MEP and fire safety and so on to our clients. So that's why we're so excited devote hydraulic bear a great firm with incredibly strong leadership. So we're going to be really really additive to our operations in the U K.

Gordon Allan Johnston: So that's why we're so excited about Hydron; they're a great firm with incredibly strong leadership. So we're going to be really, really additive to our operations in the UK. Okay, great. No, that's, that's great. And then the other question, just very quickly, I don't know who wants to take this one, but I guess, Theresa, you indicated that, you know, you were thinking of retiring this year. Any update on the transition that you can provide us would be great.

Speaker Change: Okay, Great that's great I appreciate the clarification.

Speaker Change: And then the other question just very quickly.

Speaker Change: I don't know who wants to take this one but I guess Theresa indicated that you were thinking of retiring this year any update on the transition that you can provide us would be great.

Gordon Allan Johnston: Actually, no, that's a good question for Gordon to answer because I do fully intend to retire this year. Yeah. So the selection process is continuing. We've got some incredibly strong growth in internal and external candidates. So, you know, we're beginning the formal interview process, and, you know, we'll be able to announce something to you here when it's time. But, you know, the process is going along well. We've been extremely impressed with the quality of candidates that we're attracting. All right. We'll leave it there. Thanks, folks.

Speaker Change: Actually no thats a good question with regard to <unk>.

Gordon Allan Johnston: Because I fully intend to retire this eric yeah. So.

Gordon Allan Johnston: The selection process is is continuing.

Gordon Allan Johnston: Got some incredibly strong growth in internal and external candidates.

Gordon Allan Johnston: We are beginning the formal interview process.

Gordon Allan Johnston: We'll be able to announce something to you here.

Gordon Allan Johnston: When when it is time, but.

Gordon Allan Johnston: The first is just going along well we've been extremely impressed with the quality of candidates that we're attracting.

Gordon Allan Johnston: Alright ill leave it there thanks a lot.

Speaker Change: Thanks, Chris.

Operator: Thank you. Our next question or comment comes from the line of Michael Tupholme from TD Securities. Mr. Tupholme, your line is now open.

Speaker Change: Thank you our next question or comment comes from the line of Michael.

Michael Tupholme: <unk> from TD Securities Mr. <unk>. Your line is now open.

Michael Tupholme: Thank you good morning.

Michael Tupholme: Good morning.

Michael Tupholme: Gordon or Theresa, a couple of questions about project margins. First off, it looks like the improvement that you saw in the first quarter on a year-over-year basis was really driven by a couple of specific BOUs, namely water and buildings. Whereas the other BOUs saw flat or down project margins year over year. I guess as we're looking toward the rest of the year, are the project margin improvement opportunities more prolific in certain BOUs than others?

Michael Tupholme: Corridor trees, a couple of questions about project margins. So first off it looks like the improvement.

Michael Tupholme: You saw in the first quarter on a year over year basis was really driven by a couple of specific names.

Michael Tupholme: Namely water and buildings.

Michael Tupholme: Whereas the other video you saw flat or down project margins year over year.

Michael Tupholme: I guess as we're looking toward the rest of the year are the are the project margin improvement opportunities more prolific in certain <unk> and others.

Gordon Allan Johnston: Yeah, I think that's, I think that's accurate. You know, the public sector work, which is, of course, very much where transportation sits, tends to be on the lower end of the project margin range that we put out there. Water, especially the specialty water work that we provide, does tend to garner those higher margins. You know, we were flat in environmental services, but as we move into the peak season, which will be later in Q2 and really strongly into Q3, I would expect to see that strengthen again. So, yeah, I think that is just the nature of the different differences you see across the businesses, but really strong performance, as you noticed in water and in building.

Speaker Change: Yeah, I think that's I think that's accurate.

Gordon Allan Johnston: Dean.

Gordon Allan Johnston: Always pointed to.

Gordon Allan Johnston: Public sector work, which is of course this is very much where transportation since it tends to be on the lower end of the project margin range that we put out their water, especially in the specialty water work that we provide and it does tend to garner higher margins.

Gordon Allan Johnston: We were flat in environmental services, but as we move into the peak season, which will be later in Q2 and really strong into Q3, I would expect to see that that strength and again so.

Gordon Allan Johnston: Yes, I think thats, just the nature of the.

Gordon Allan Johnston: The different difference that you see across the business.

Gordon Allan Johnston: But really strong performances as you noticed in water and in buildings.

Michael Tupholme: Okay, that's helpful. Thank you. And then as a follow-up, at your Investor Day late last year, you talked about looking to reduce your subcontractor use and using that as a means of helping improve project margins. I wondered to what extent that is already happening, if that is something you would expect to happen in the near term, or if we should be thinking about that as more of a sort of medium to potentially longer-term opportunity.

Speaker Change: Okay. That's helpful. Thank you and then.

Michael Tupholme: As a follow up at your Investor Day late last year, you talked about looking to reduce your sub consultant to us.

Michael Tupholme: Using that as a means of helping improve project margin I was wondering to what extent that is already happening. If that is a something you would expect to happen in the near term or if we should be thinking about that as more of a sort of medium.

Michael Tupholme: Potentially longer term opportunity.

Gordon Allan Johnston: Yeah, I mean, it is absolutely a longer-term initiative. I would say what we've done thus far is really have all of our business leaders examine the makeup of their sub consultants. There's, as we noted yesterday, there's always going to be a requirement to subcontract out, particularly for federal work in the US and in Canada, where, you know, you are required to allocate a portion of your contracts to indigenous owned or minority owned businesses and so on.

Michael Tupholme: Yes, I mean, it is absolutely a longer term.

Gordon Allan Johnston: Initiatives.

Gordon Allan Johnston: Let's say what we've done thus far is really have all of our business leaders examined.

Gordon Allan Johnston: The makeup of their sub consultants has been noticed.

Gordon Allan Johnston: Today, there is always going to be.

Gordon Allan Johnston: <unk> to a sub workout, particularly for federal work.

Gordon Allan Johnston: In the U S and Canada, where you are required to allocate a portion of your contracts too.

Gordon Allan Johnston: This older and minority owned businesses and so on.

Gordon Allan Johnston: But we are identifying where there are opportunities to use different components of Stantec as opposed to going outside. So that analysis is really well underway. And of course, in some BOUs, there's a greater opportunity than in others. But I think, you know, we've got a good handle on where we have the opportunities, and now we'll move toward that over the next couple of years.

Gordon Allan Johnston: Our identifying where there are opportunities.

Gordon Allan Johnston: To use.

Gordon Allan Johnston: Ed.

Gordon Allan Johnston: Components of this downturn as opposed to billing outside so that analysis is really well underway and of course in some.

Gordon Allan Johnston: It's there's a greater opportunity than in others.

Gordon Allan Johnston: But I think we've got a good handle on.

Gordon Allan Johnston: Where we have the opportunities and now we will move towards that over the next couple of years.

Michael Tupholme: Great, thank you. I will leave it there.

Speaker Change: Great. Thank you I will leave it there.

Operator: Thank you. Again, ladies and gentlemen, if you have a question or comment at this time, please press star 11 on your telephone keypad. Our next question or comment comes from the line of Maxim Sytchev from NBF. Mr. Sytchev, your line is open.

Speaker Change: Thank you again, ladies and gentlemen, if you have a question or comment at this time. Please press star one one on your telephone keypad.

Maxim Sytchev: Our next question or comment comes from the line of Maxim <unk> from NBA. This dispatch of your line is open.

Maxim Sytchev: Hi, good morning.

Maxim Sytchev: Good morning.

Maxim Sytchev: Obviously, very solid performance on all the fronts, and I was wondering if you would mind providing a bit of an update on your design center strategy, and especially how we should be thinking about this, sort of like the ceiling we can contemplate over the long term, because I mean some of the federal work, I presume you're not allowed to use some of those design centers. Just wondering if you can provide a bit more color on that process. Thank you so much.

Maxim Sytchev: Obviously very solid performance.

Maxim Sytchev: On all the fronts.

Maxim Sytchev: I was wondering if you don't mind, providing a bit of an update on your design center.

Maxim Sytchev: <unk> and especially how we should be thinking about this sort of like the ceiling. We can contemplate over the long term because I mean, some of the federal work I presume you're not allowed to use some of those design centers. Just wondering if you can provide a bit more color on that.

Maxim Sytchev: Our process. Thank you so much.

Gordon Allan Johnston: Sure. Thanks, Matt. So we have three of these integrated delivery centers currently. Our largest one is in Pune and in India, which we've talked about before. Just a little bit less than 1,000 people are there now. We have one in Manila in the Philippines that joined through the Cardinal acquisition at just shy of 150 people. And then we have one in Vizag in India that came with MH Morrison Hirschfield at about 75 people or thereabouts. So, you know, combined, let's call it just a little bit over 1,000 people.

Speaker Change: Sure. Thanks, Matt So we have three.

Gordon Allan Johnston: These integrated delivery centers currently our largest one is <unk> in India, and we've talked about before just a little bit less than 1000 people there now.

Gordon Allan Johnston: One in Manila in the Philippines that joined us through the Cardinal acquisition at just shy of 150 people and then we have one envisaged in India.

Gordon Allan Johnston: That came with MH Morrison Hershfield.

Gordon Allan Johnston: About 75 people or thereabouts so.

Gordon Allan Johnston: Combined let's call it just a little bit over 1000 people, we have plans within our three year.

Gordon Allan Johnston: Target here to increase that to 2000 people that we see the opportunity to do that.

Gordon Allan Johnston: We have plans within our three-year target here to increase that to 2,000 people. We see the opportunity to do that. In Pune, India, we've already taken the real estate. We had an additional floor plate available above us. So we've taken that floor plate, we've fitted it out, and we've already moved people to it. So the resources are available to us. So we're actively hiring to move that forward on that in a double act, roughly 2,000 people.

Gordon Allan Johnston: In Pune, India, we've already taken the real estate, we had an additional floor plates available above us that we've taken us worldwide, we fit it out we've already moved people to it so.

Gordon Allan Johnston: The resources are available to us. So we are actively hiring to move that to.

Gordon Allan Johnston: To move forward on that and double up relative to 2000, and we've mentioned before that when you compare <unk> the percentage of our overall global employee head count that's in our integrated delivery centers.

Gordon Allan Johnston: We've mentioned before that when you compare at Stantec the percentage of our overall global employee headcount that's in our integrated delivery centers versus our competitors, we are probably subscale compared to a number of our other global competitors, so we see opportunities there. Now, as you say, there are some clients that don't like the use of these integrated delivery centers, but there are others that basically require them. So you have to manage the growth of that along with your client base and be clear and honest and disclose everything to them and your clients as you work through it. But we still see great opportunities for further expansion there.

Gordon Allan Johnston: Versus our competitors, we are probably sub scale compared to a number of our other global competitors. So we see opportunities. There now as you say there are some clients.

Gordon Allan Johnston: They don't like the use of these integrated delivery centers.

Gordon Allan Johnston: There is others that basically required so you have to manage the growth of that along with your client base and being clear and honest and disclose everything to limit your clients as you work through it but we still see great opportunities for further expansion there.

Maxim Sytchev: Okay, that's super helpful, thank you so much. And maybe just a quick follow-up to Michael's question. Theresa, when I look at environmental services, gross revenue versus net revenue, so gross lightweight action and 3.5% growth on a net basis, so is this where we're starting to see that sort of insourcing capacity bear fruit? Is that how we should be thinking about this?

Speaker Change: Okay. That's very helpful. Thank you so much and maybe just a quick follow up to probably Michael's question to us and when I look at it.

Maxim Sytchev: Environmental services gross revenue versus net revenue.

Theresa: So on gross like the retraction and two 5%.

Theresa: Growth on net basis. So is this where we're starting to see that.

Maxim Sytchev: Sort of in sourcing capacity.

Maxim Sytchev: Bearing fruit, that's how should we thinking about this.

Theresa B. Y. Jang: I would say probably not, Max. I think what you saw in the first quarter sometimes that happens where, you know, depending on project mix, you can get that dynamic where at a gross revenue level, it tracks and net revenue growth organically. So I would not attribute that to the longer-term effort around some.

Theresa: I would say probably not.

Theresa B. Y. Jang: I think what you saw in the first quarter, sometimes that happens where it depending on project mix.

Theresa B. Y. Jang: Get that dynamic, whereas at a gross revenue number.

Theresa B. Y. Jang: It tracks and net revenue growth.

Theresa B. Y. Jang: Organically, so I would not attribute that to.

Theresa B. Y. Jang: The longer term effort around <unk>.

Maxim Sytchev: Okay, okay. Thanks for clarifying this for me.

Max: Okay. Okay. Thanks, Paul Conference that's it for me.

Operator: Thank you. Our next question or comment comes from the line of Frederic Bastien from Raymond James. Mr. Bastien, your line is now open.

Maxim Sytchev: Thank you. Our next question or comment comes from the line of Frederic Bastien from Raymond James Mr. Bastian. Your line is now open.

Frederic Bastien: Good morning.

Frederic Bastien: Good morning.

Frederic Bastien: Guys, if we look at your footprint, you're still very much overweight North America, which has worked great in recent years, and you're comparatively more subscaled globally. Now, if we take a cue from the recent deals... You know, you're obviously changing that, but is the intent, longer term, to grow that 20% that you derive, that 20% of revenue that you derive globally?

Frederic Bastien: Hey, guys, if we look at your footprint.

Frederic Bastien: Still very much overweight North America, which has worked great in recent years and you're comparatively more sub scale globally.

Frederic Bastien: It would take you from the recent deals.

Frederic Bastien: You are obviously changing that but is the intent longer term too.

Frederic Bastien: To grow that 20% that you derive.

Frederic Bastien: That 20% of revenue that you derive globally.

Gordon Allan Johnston: Yeah, you know, I think as we look at things, a lot of the opportunities that we have for continued growth certainly will come from outside of North America. But, that said, we still have, and I think, you know, we've mentioned before in our calls that, you know, we have the opportunity, based on the size of the US market, to roughly double our footprint there, or even more. So we, you know, we are actively looking at opportunities there. But outside of North America, you're absolutely right; it's a big world out there.

Speaker Change: Yeah, I think as we look at things on a lot of the opportunities that we have for continued growth certainly will come from from outside of North America that said, we still have and I think we've mentioned before on our calls that we have the opportunity based on the size of the U S market to roughly double our footprint there or even more so.

Gordon Allan Johnston: We are actively looking at opportunities there, but outside of North America, Youre, absolutely right and it's a big world out there and so we have opportunities to continue to grow in the U K, Australia, but then as we talked about before and up into the Nordics.

Frederic Bastien: And so we have opportunities to continue to grow in the UK and Australia, but then, you know, as we talked about before, up into the Nordics. And certainly, while we've got an initial start in Germany with Zekon, there are great opportunities for further expansion there. The German market is extremely fragmented, with, you know, the largest firm taking about 1% of the overall revenue. So there are great opportunities for continued growth in that market. So I think we're looking at all markets, Frederick, and from a disciplined perspective, and wherever we can find the best place to deploy capital to get good returns, we'll continue to grow there.

Frederic Bastien: Great. You beat me to my second question. You answered it by discipline.

Frederic Bastien: And certainly while we have got an initial start in Germany with zircon create opportunities for further expansion there.

Frederic Bastien: The German market is extremely fragmented.

Frederic Bastien: The largest firm there are only taking about 1% of the overall revenue so great opportunities for continued growth into that market. So I think we're looking at all markets Frederic and then from a disciplined perspective wherever we can find the best place to deploy capital we get good returns we'll continue to.

Frederic Bastien: To grow there.

Frederic Bastien: So I'm all set. Thank you very much. Great, thank you.

Speaker Change: Great You beat me to my second question you answered it by disciplined so I'm all set thank you very much.

Speaker Change: Great. Thank you.

Operator: Thank you. Our next question or comment comes from the line of Ian Gillies from Stiefel. Mr. Gillies, your line is now open.

Frederic Bastien: Thank you our next question or comment comes from the line of Anne Gillies from Stifel.

Ian Brooks Gillies: Your line is now open.

Ian Brooks Gillies: Good morning, everyone.

Ian Brooks Gillies: Good morning.

Ian Brooks Gillies: It feels like a lot of the growth, or seems that a lot of the growth is going to be coming from advanced manufacturing, power, data centers, etc. Can you talk a little bit about how easy or how challenging it's going to be to repurpose some of your employees from other areas into that area?

Ian Brooks Gillies: It feels like a lot of the growth here it seems that a lot of the growth or it's going to be coming in for advanced manufacturing power data center et cetera. Can you can you talk a little bit about how easy or how challenging is going to be to repurpose. Some of your employees from other areas into that area.

Gordon Allan Johnston: Yeah, you know, while we certainly do see growth in those areas that you're just describing, there's also considerable growth in the general core areas that we have water, obviously, you know, we see transportation continuing to grow. So, as we look at data centers, there are some absolutely some specialty disciplines required there, but, you know, we have those through the ESD acquisition through the MH acquisition and others. Tiger Rock also brings a considerable amount of specialty building services, as do some of our Australian operations.

Ian Brooks Gillies: Yes.

Ian Brooks Gillies: Well, we certainly do see growth in those areas that we're in a year.

Gordon Allan Johnston: Scribing, there's also considerable growth in the general core areas that we had water obviously, we see transportation continuing to grow so as we look at data centers. There are some absolutely some specialty.

Gordon Allan Johnston: Disciplines required there, but we have those through the ESB acquisition through the <unk> acquisition and others.

Gordon Allan Johnston: <unk> also brings a considerable amount of specialty building services.

Gordon Allan Johnston: Do some of our Australian operations. So we actually feel really good about the overall mix of our disciplines of our employee head count in there so.

Ian Brooks Gillies: So, we actually feel really good about the overall mix of our disciplines and our employee headcount in there. So, where possible, we absolutely do cross train and move people around, but we actually see growth really broadly across the organization. And so cross training and moving folks around isn't a huge part of what we're looking to do over the next little bit.

Gordon Allan Johnston: Where possible, we absolutely do cross trained and move people around but we actually see growth really broad brush across the organization being so several cross training and moving folks around isn't a huge part of what we're looking to do over the next little bit.

Gordon Allan Johnston: Okay, that's helpful, and then obviously, you've added a footprint in Germany. Is there anywhere else in Europe at this juncture that you find yourself particularly interested in where you would like to add scale or perhaps add another leg under the stool?

Speaker Change: Okay. That's helpful and then.

Gordon Allan Johnston: Obviously, you've added a footprint in Germany.

Gordon Allan Johnston: Is there is there anywhere else in Europe at this juncture that you find yourself, particularly interested in where you would like to add scale or perhaps add another leg under the stool.

Ian Brooks Gillies: Yeah, you know, I think the one area that we're continuing to look at is the North. And, you know, we have no presence up there currently. So, in addition to, you know, building out the footprint that we have now in Germany, we are still looking to see if there's an entry point for us up into the Nordics.

Gordon Allan Johnston: Yes, I think the one area that we're continuing to look at is the north face.

Ian Brooks Gillies: And we have no presence up there currently so we in addition to <unk>.

Ian Brooks Gillies: Building out the footprint that we have now in Germany, we are still looking to see if there is.

Ian Brooks Gillies: An entry for us.

Ian Brooks Gillies: Through the noise.

Gordon Allan Johnston: Okay, that's helpful. Thanks very much. I'll turn it back over.

Speaker Change: Okay. That's helpful. Thanks, very much I'll turn it back over.

Speaker Change: Great. Thank you.

Operator: Thank you. Our next question or comment comes from the line of Sabahat Khan from RBC. Mr. Khan, your line is now open.

Speaker Change: Thank you. Our next question or comment comes from the line of Saba Hot Kang from RBC. Mr. Khan. Your line is now open.

Sabahat Khan: Great. Thanks, and good morning.

Sabahat Khan: Great. Thanks, and good morning, I was hoping as we look out to 'twenty four and into 25, you can maybe give us some perspective on sort of the price and volume mix, presumably pricing was quite high over the last few years is it fair to assume that volume is becoming a bigger contributor and how are the pricing discussions going with some of your customers as new work.

Sabahat Khan: I was hoping, you know, as we look ahead to 24 and into 25, you could maybe give us some perspective on sort of the price and volume mix. Presumably, prices have been quite high over the last few years. Is it fair to assume that volume is becoming a bigger contributor? And, you know, how are the pricing discussions going with some of your customers as new work is up for bid and or places where you're looking to get price increases?

Sabahat Khan: It.

Sabahat Khan: Is up for bid and or maybe places, where you're looking to get price increases.

Gordon Allan Johnston: Yeah, so a couple things there. Thanks, Sabahat.

Speaker Change: Yeah, So a couple of things there. Thanks.

Gordon Allan Johnston: As we think about pricing certainly were able to reflect in our pricing the increases that we see from from for the most part from salary increases you can see that because project margins.

Sabahat Khan: As we think about pricing, certainly we're able to reflect in our pricing the increases that we see from, for the most part, salary increases. You can see that because project margins, you know, continue to stay the same or even increase a little bit. So what we're hearing from clients now is, of course, there's always price sensitivity in our business. But clients that we're talking to now are more concerned about schedule. You know, can you get the work done within the timeframe that I require?

Sabahat Khan: <unk> to stay the same or even increase a little bit.

Sabahat Khan: What we're hearing from clients now is of course, there is always price sensitivity in our business but.

Sabahat Khan: Clients that we're talking to now are more concerned about schedule can you get the work done within the timeframe that are required.

Sabahat Khan: With high quality is still important but and of course pricing is important but it's really the schedule is the primary driver right now so that gives us and the overall industry a little bit of opportunity there should be some some tail winds on pricing again, it's still it's still competitive space no. One gets the rest of their own ticket but.

Gordon Allan Johnston: Of course, high quality is still important, and of course, pricing is still important, but it's really the schedule that is the primary driver right now. So that gives us and the overall industry a little bit of an opportunity to be able to have some tailwinds on pricing. You know, again, it's still a competitive space. No one gets to write their own ticket. But, you know, I think we do have some opportunities with some tailwinds to pricing over the next several years.

Gordon Allan Johnston: I think we do have some opportunities with some tailwind for pricing over the next several years.

Sabahat Khan: I guess then just to follow up on that, you know, presumably you're able to reallocate staff, you know, across regions and leverage or international centers, but are there any areas of your business where you are seeing a bit of labor tightness or you're more focused on hiring because demand might be outpacing supply?

Speaker Change: And then just a follow up to that presumably you're able to reallocate staff.

Sabahat Khan: Across regions and leverage our international centers.

Sabahat Khan: Any areas of your business, where you are seeing a bit of labor tightness, where you're most focused on for hiring the demand might be outpacing supply.

Gordon Allan Johnston: Yeah, not really. You know, we, and where there is a lot of great demand, like in water, for example, we are so strong in water that we continue to attract sort of the best and brightest there. So, you know, where there is a little bit of additional tightness, you know, we're very strong. So, yeah, there's no particular areas that I can think of, Sabah, that are of concern for us.

Speaker Change: Yes, no not really.

Gordon Allan Johnston: And where there is a lot of great demand like in water. For example were so strong in water that we continue to attract the best and brightest there. So we're in there is a little bit of additional tightness were very strong. So yes. There is no particular areas that I can think of some of that.

Gordon Allan Johnston: That are of concern for us.

Sabahat Khan: Okay, and then just one last quick one, I guess, there's this view out there that wraps up in IAJ's expectations for the next 12 to 18 months, and we will talk about the end markets, where you are starting to see some of that money show up in customer hands and where the kind of RFPs with RFPs are getting going, just trying to get a perspective of which end markets we could see as some acceleration in the US for yourself Yeah, yeah. And so, you know, we're starting to see.

Speaker Change: Okay, and then just one last quick one I guess.

Sabahat Khan: This view out there that will wrap up in IAG is expected over the next 12 to 18 months and when we talk about the end markets, where you are starting to see some of that money show up in customer had been where the kind of the rfps with rfps are getting going I'm, just trying to get a perspective of which end markets. We could see some acceleration in the U S for yourself and maybe it is the broader indices.

Sabahat Khan: Thanks.

Gordon Allan Johnston: Yeah, yeah. And so, you know, we're starting to see it primarily in the transportation space with, you know, the State Departments of Transportation and so on, local and local municipal government as well. So we see that ramp up in transportation. We're starting to see some in water as well.

Speaker Change: Yes, so we're starting to see primarily in the transportation space with department of the state departments of transportation and so on the local and local municipal government as well. So we see that ramp up in transportation and we're starting to see southern water as well, but when you look at the overall.

Sabahat Khan: But when you look at the overall IIGA funding, the majority of it is for transportation. So I think we'll see a gradual run-up in transportation. You know, you've seen that state DOT budgets are up roughly 12% already this year. In part, that'll be because of IIGA. So we'll see that ramp up into the second half of this year and hold steady for the next several years, and water kind of coming along as well. But, of course, at a smaller level, supported by IIGA, but still, water is very, very robust due to the other drivers that we're seeing there.

Sabahat Khan: Funding the majority of it is transportation related so I think we will see a gradual runoff in transportation.

Sabahat Khan: <unk> seen that state dot budgets are up roughly 12% already this year.

Sabahat Khan: Or is that at least through <unk>. So we will see that ramp up into the second half of this year and hold steady for the next several years and water kind of coming along as well but of course at a smaller level supported by <unk>.

Sabahat Khan: But still water very very robust due to the other drivers that we're seeing there.

Speaker Change: Great. Thanks very much.

Speaker Change: Great. Thanks Alan.

Operator: Thank you. I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to Mr. Johnston for any closing remarks.

Gordon Allan Johnston: Thank you I'm showing no additional questions in the queue at this time I would like to turn the conference back over to Mr. Johnston for any closing remarks.

Gordon Allan Johnston: Great. Well, thank you, operator. And thanks, everyone, for joining us this morning. And in follow-up, should you have any questions, please contact Jess Nieukerk, our VP of investor relations. He's always available to take your call.

Johnston: Great well, thank you operator, and thanks to everyone for joining us this morning and in follow ups should you have any questions. Please contact just newkirk, our VP of Investor Relations is always available to take your calls.

Gordon Allan Johnston: Thank you thank.

Operator: Thank you. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day. Speakers, stand by.

Speaker Change: Thank you ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day speakers standby.

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