Q1 2025 Stantec Inc Earnings Call

[music].

Operator: Welcome to Stantec's first quarter 2025 results webcast and conference call.

Welcome to stand Teck's first quarter 2025 results webcast and conference call, leading the call today are Gordon Johnson, President and Chief Executive Officer, and BDO, Komorny Executive Vice President and Chief Financial Officer, Stan Tech invites those dialing in to view this.

Operator: Leading the call today are Gord Johnston, President and Chief Executive Officer, and Vito Culmone, Executive Vice President and Chief Financial Officer. Stantec invites those dialing in to view the slide presentation, which is available in the investor 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.

<unk> presentation, which is available in the investors section that's fantastic Dot Com. Today's call is also webcast. Please be advised that if you have dialed in what 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 statement qualification set out on slide two, detailed in Stantec's management discussion and analysis, and incorporated in full for the purposes of today's call. Unless otherwise noted, dollar amounts discussed in today's call are expressed in Canadian dollars and are generally rounded.

All information provided during this conference call is subject to the forward looking statement qualification set out on slide two detailed and scan, Texas management's discussion and analysis and incorporated in full for the purposes of today's call unless otherwise noted dollar amounts discussed in today's call are expressed in Canadian dollars and are.

Gordon Johnston: With that, I'll turn the call over to Mr. Gord Johnston. Good morning, and thank you for joining us today. Stantec had a very strong start to 2025, delivering organic growth in each of our regional and business operating units, most notably in Canada, with double-digit organic growth. Amid a dynamic market environment, we continue to thrive in a resilient industry driven by macro factors including water security, aging infrastructure, emerging technologies, and the expansion of advanced manufacturing. As a result, in the first quarter, we delivered net revenue of $1.6 billion, up 13.3% year-over-year. This was underpinned by 5.9% organic and 3.2% acquisition growth.

Speaker Change: Generally rounded with that I'll turn the call over to Mr. Gore Johnston.

Good morning, and thank you for joining us today.

That's a kind of a very strong start to 2025.

Speaker Change: Organic growth in each of our regional and business operating units, most notably in Canada with double digit organic growth.

I made a dynamic market environment, we continue to thrive in a resilient industry driven by macro factors, including water security aging infrastructure emerging technologies and the expansion of advanced manufacturing.

Speaker Change: As a result in the first quarter, we delivered net revenue of $1 $6 billion up 13, 3% year over year.

Speaker Change: This was underpinned by five 9% organic and three 2% acquisition growth.

Gordon Johnston: With our focus on solid project execution and operational excellence, we grew our adjusted EBITDA by over 19%, with an enhanced margin of 16.2%. We also delivered a Johnston EPS growth of 29% compared to Q1 2024. I'm also pleased to announce that we started off the year strong on the M&A front with two strategic acquisitions. In early April, Stantec entered into a definitive agreement to purchase PAGE, a 1,400-person architecture and engineering firm headquartered in Washington, D.C., which delivered over $300 million U.S. in net revenue last The acquisition of PAGE will deepen Stantec's expertise and resources in key growth areas such as advanced manufacturing, data centers, and healthcare, while adding new capabilities in cleanroom design and fabrication facilities.

Speaker Change: With our focus on solid project execution and operational excellence, we grew our adjusted EBITDA by over 19% with an enhanced margin of 16, 2%.

Speaker Change: We also delivered adjusted EPS growth of 29% compared to Q1 2024.

Speaker Change: I'm also pleased to announce that we started off the year strong on the M&A front with two strategic acquisitions.

Speaker Change: Early April Stanczak entered into a definitive agreement to purchase page a fortune 500 person architecture and engineering firm headquartered in Washington, D C, which delivered over 300 million U S. Net revenue last year.

Speaker Change: The acquisition of page will deepen <unk> expertise and resources in key growth areas such as advanced manufacturing.

Speaker Change: Peter centers, and health care, while adding new capabilities and clean room design and fabrication facilities.

Gordon Johnston: The acquisition will result in Stantec becoming the second largest architectural firm in North America. It also significantly strengthens our position as the largest integrated engineering and architecture firm. We expect the page acquisition to close in Q3. We also announced the acquisition of Ryan Hanley, a 150 person engineering and environmental consultancy firm in Ireland, expanding our presence in the country. Consistent with over 145 acquisitions that we've completed over the last 30 years, these acquisitions will deliver strong shareholder value and contribute to the target that we've set out in our 2024 to 2026 strategic plan. And we look forward to welcoming over 1,500 talented individuals to the Stantec team.

Speaker Change: The acquisition will resolve in <unk>, becoming the second largest architectural firm in North America.

It also significantly strengthens our position as the largest integrated engineering and architecture firm.

Speaker Change: We expect the page acquisition to close in Q3.

Speaker Change: We also announced the acquisition of brine handling a 150 person engineering environmental consultancy firm in Ireland, expanding our presence in the country.

Speaker Change: Consistent with over 145 acquisitions that we've completed over the last 30 years. These acquisitions will deliver strong shareholder value and contribute to the target that we set out in our 2024 to 2026 strategic plan.

Speaker Change: And we look forward to welcoming over 1500 talented individuals to the <unk> team.

Gordon Johnston: Looking at our results in each of our geographies. In the US, we increased our Q1 net revenues by 9.7%, reflecting positive foreign exchange and organic growth of 2.4%. Organic growth was in line with our expectations for the quarter, as we had expected some project cycle timing in our water segment. While we had a major project roll-off, we have several new projects which are set to accelerate in Q2, and we are maintaining our bid-to-high single-digit organic growth guidance for the year. Public and private sector investments across our healthcare, industrial, and science and technology sectors contributed to growth and building.

Speaker Change: Looking at our results in each of our geographies.

Speaker Change: In the U S. We increased our Q1 net revenues by nine 7%, reflecting positive foreign exchange and organic growth of two 4%.

Speaker Change: Organic growth was in line with our expectations for the quarter as we had expected some project cycle timing in our water segment.

Speaker Change: We had a major project roll off we have several new projects, which are set to accelerate in Q2, and we're maintaining our mid to high single digit organic growth guidance for the year.

Speaker Change: Public and private sector investments across our healthcare industrial and science and technology sectors contributed to growth in buildings.

Gordon Johnston: Growth in environmental services was mainly driven by our energy transition, mining and infrastructure sectors, as well as the continued work for a large-scale utility provider. Momentum on major infrastructure projects continues to fuel strong organic growth, particularly in tram and rail projects in the West and roadway design in the East. Overall, activity in the U.S. remains strong and our outlook for the full year remains intact. In Canada, we had a very strong first quarter, growing net revenue by 15%, largely underpinned by 12.2% organic grower. The continued momentum on major wastewater solution projects contributed to double-digit organic growth in water.

Speaker Change: Growth in environmental services was mainly driven by our energy transition mining and infrastructure sectors as well as the continued work for a large scale utility provider.

Speaker Change: Momentum on major infrastructure projects continues to fuel strong organic growth, particularly in transit and rail projects in the west and roadway design in the east.

Speaker Change: Overall activity in the U S remains strong and our outlook for the full year remains intact.

Speaker Change: In Canada, we had a very strong first quarter.

Speaker Change: Growing net revenue by 15% largely underpinned by 12, 2% organic growth.

Speaker Change: The continued momentum on major wastewater solution projects contributed to double digit organic growth in water.

Gordon Johnston: We also delivered solid double-digit organic growth in energy and resources and infrastructure. E&R was driven by the ramp-up of major power-intensive industrial process projects. and infrastructure was spurred by transitant rail projects in eastern Canada, airport sector projects in Quebec, and land development projects in Alberta. and our buildings team delivered high single-digit organic growth through public investments in healthcare and civic sector. Finally, in the first quarter, our global business delivered 20.3% growth in net revenue, with 7.5% organic growth and 9.4% acquisition growth. Our industry-leading water business delivered over 20% organic growth across the UK, New Zealand and Australia through long-term framework agreements and public sector investment.

Speaker Change: We also delivered solid double digit organic growth in energy and resources and infrastructure.

Speaker Change: You know our was driven by the ramp up of major power intensive industrial process projects and.

Speaker Change: In infrastructure was spurred by transit and rail projects in Eastern Canada, Eric.

Speaker Change: Airport sector project in Quebec, and land development projects in Alberta.

Speaker Change: And our buildings team delivered high single digit organic growth through public investments in healthcare and civic sectors.

Speaker Change: Finally in the first quarter, our global business delivered 23% growth in net revenue with seven 5% organic growth and nine 4% acquisition growth.

Speaker Change: Our industry, leading water business delivered over 20% organic growth across the UK, New Zealand and Australia through long term framework agreements and public sector investments.

Gordon Johnston: The wrap-up of new projects in Chile and Peru drew double-digit organic growth in energy and resources, as the growing need for energy transition solutions continues to drive demand in mining for copper.

Speaker Change: The ramp up of new projects in Chile, and Peru drove double digit organic growth in energy and resources as the growing need for energy transition solutions continues to drive demand in mining for koppers.

Vito Culmone: Now I'll turn the call over to Vito to review our Q1 financial results in more detail. Thank you, Gordon. Good morning, everyone. We achieved very strong results in the first quarter, setting us up for another very successful year. Our gross revenue in Q1 grew to $1.9 billion, up almost 12% year over year, and net revenue of $1.6 billion is up 13.3% compared to Q1 of 2024. As a percentage of net revenue, our project margins came in at 54.3%, reflecting solid project execution and a 10 basis point increase over last year. We achieved a very solid adjusted EBITDA margin of 16.2% in the quarter, representing an increase of 70 basis points year over year.

Now I will turn the call over to Vito to review, our Q1 financial results in more detail.

Vito: Thank you Gordon and good morning, everyone.

Vito: We achieved very strong results in the first quarter setting us up for another very successful year at <unk>.

Vito: Gross revenue in Q1 grew to $1 9 billion.

Vito: Up almost 12% year over year and net revenue of $1 6 billion is up 13, 3% compared to Q1 of 2024.

Vito: As a percentage of net revenue our project margins came in at 54, 3%.

Vito: That being solid project execution, and a 10 basis point increase over last year.

Vito: We achieved a very solid adjusted EBITDA margin of 16, 2% in the quarter, representing an increase of 70 basis points year over year.

Vito Culmone: And our adjusted EPS in the quarter increased almost 29% to $1.16. Turning to our cash flow liquidity and capital resources, during the quarter, our operating cash flow increased almost 136% year-over-year, from $43 million to $101 million, reflecting continued strong cash flow generation, growth, and solid operational performance. DSO at the end of the first quarter remained consistent at 77 days, remaining well within our internal target of 80 days or lower. Our net debt-to-adjusted EBITDA ratio at March 31st was 1.1 times a further reduction from where our leverage sat at the end of the calendar year at 1.2 times.

Vito: And our adjusted EPS in the quarter increased almost 29% to $1 16.

Vito: Turning to our cash flow liquidity and capital resources during the quarter, our operating cash flow increased almost 136% year over year from $43 million to $101 million, reflecting.

Vito: Continued strong cash flow generation growth and solid operational performance.

Vito: DSO at the end of the first quarter remained consistent at 77 days remaining well within our internal target of 80 days or lower.

Vito: Net debt to adjusted EBITDA ratio at March 31 was one one times a further reduction from where our leverage debt at the end of the calendar year at one two times.

Vito Culmone: I'll note that upon closure of the page acquisition, we expect our leverage to remain well within our internal target of one to two times.

Vito: Note that upon closure of the page acquisition, we expect our leverage to remain well within our internal target of one to two times.

Gordon Johnston: With that, I'll now hand the call back to you. Great. Thanks, Vito.

Vito: With that I'll now hand, the call back yet.

Neil: Thanks Neil.

Gordon Johnston: At the end of the first quarter, our backlog reached a new all-time record of $7.9 billion. Year over year, backlog has grown overall by almost 13%, of which 7.5% was organic growth. Organic growth was achieved in each of our regional operating units with double-digit growth in our water and energy resources business. Our backlog represents approximately 12 months of work and underscores the continued strong demand to support our clients' most pressing challenge.

Neil: At the end of the first quarter, our backlog reached a new all time record of $7 9 billion.

Neil: Year over year backlog has grown overall by almost 13% of which seven 5% was organic growth.

Neil: Organic growth was achieved in each of our regional operating units with double digit growth in our water and energy and resources business.

Neil: Our backlog represents approximately 12 months of work and underscores the continued strong demand to support our clients' most pressing challenges.

Gordon Johnston: turning to some of the major projects we've recently won. In the first quarter, Stantec was awarded the $1.1 billion major upgrade at the Irving Pulp and Paper Westside Mill in New Brunswick. The upgrade is one of the largest investments projects in the Canadian forest products industry, and it is expected to increase production by almost 66%. We were also selected to lead the detailed design and contract administration on the Dundas Bus Rapid Transit's Mississauga East Corridor, which includes over 7 kilometres of bus rapid transit with 8 stations. This BRT segment has an estimated project budget of $580 million, which includes design, construction, land acquisition, and additional regional utility upgrades to be coordinated to increase construction efficiency.

Neil: Turning to some of the major projects, we have recently won.

In the first quarter <unk> was awarded a $1 $1 billion a major upgrade at the urban pulp and paper website mill in New Brunswick.

Neil: The upgrade is one of the largest investments project and the Canadian Forest products industry and it is expected to increase production by almost 66%.

Neil: We were also selected to meet the detailed design and contract administration on the Dundas bus rapid transit Mississauga East corridor, which includes over 70 kilometers of bus rapid transit with eight patients.

Neil: This BRT segment has an estimated project budget of $580 million, which includes design construction land acquisition and additional regional utility upgrades to be coordinated to increase construction efficiency.

Gordon Johnston: Finally, I'm pleased to announce that Stantec was selected by the City of Vancouver, Washington to design a treatment system to remove PER and polyfluoroalkyl substances, or PFAS. from a high-volume water station with the goal of providing cleaner, more reliable drinking water for the community. When complete, this PFAS filter system will treat up to 12.2 million gallons per day, making it the largest PFAS project in the northwestern United States in terms of treatment capability.

Neil: Finally, I am pleased to announce that <unk> was selected by the city of Vancouver, Washington.

Neil: The design of treatment system to remove <unk> and poly Fluoro alkyl substances are PFS.

Neil: From a high volume water station with the goal of providing a cleaner more reliable drinking water for the community.

Neil: When complete this DFAST filter system will treat up to $12 2 million gallons per day, making it the largest G fast project in the northwestern United States in terms of treatment capabilities.

Neil: Okay.

Gordon Johnston: Despite heightened market uncertainty driven by tariffs, policy shifts, and regulatory changes, we remain confident in our ability to achieve our outlook for the year. translate aging infrastructure, energy security, water treatment, healthcare, data centers, and reshoring all continue to drive strong demand for our business. And a diversified business model across different geographies, across five business operating units, each with multiple subsectors, ensures that we're able to capitalize on this demand. Throughout each of our geographies, we continue to see steady levels of bidding activity and forecast mid- to high-single-digit organic growth in each of them. In the U.S., we continue to see growth in infrastructure with IIGA-funded projects, in water with new projects ramping up in Q2, and we're seeing momentum on the healthcare front, especially in the western U.S.

Neil: Despite heightened market uncertainty driven by tariffs policy shifts in regulatory changes, we remain confident in our ability to achieve our outlook for the year.

Neil: Translate aging infrastructure energy security water treatment healthcare Datacenters and reassuring.

Neil: Continue to drive strong demand for our business.

Neil: And our diversified business model across different geographies across five business operating units each with multiple subsectors ensures that we're able to capitalize on this demand.

Throughout each of our geographies, we continue to see steady levels of bidding activity and forecast mid to high single digit organic growth in each of them.

Neil: In the U S. We continue to see growth in infrastructure with Iga funded projects in water with new projects ramping up in Q2, and we're seeing momentum on the healthcare front, especially in the Western U S.

Gordon Johnston: In March, the American Society for Civil Engineers released its 2025 Comprehensive Infrastructure Assessment, which highlights that increased funding is beginning to improve the conditions of infrastructure across the U.S. However, the report estimates that an additional $9.1 trillion in funding is needed across all infrastructure categories to achieve a state of good repair. And even with current funding levels, including IHA, a significant funding gap will remain over the next decade. As a result, while some government priorities are changing, we still expect steady investment from the federal, state, and local governments as they continue to address these challenges.

Neil: In March the American Society for Civil Engineers released its 2025 comprehensive infrastructure assessment, which highlights that increased funding is beginning to improve the conditions of infrastructure across the U S.

Neil: However, the report estimated estimates that an additional nine one trillion and funding is needed across all infrastructure categories to achieve a state of good repair.

Neil: And even with current funding levels, including IHA, a significant funding gap will remain over the next decade.

Neil: As a result, while some government priorities are changing we still expect steady investment from the federal state and local governments as they continue to address these challenges.

Gordon Johnston: In Canada, major investments continue to be driven by large-scale water projects, transportation infrastructure, including roads and transit, and health care. The federal government's recent economic platform places further emphasis on infrastructure, energy, housing, community development, and critical health care. While it may take some time for these additional investments to materialize, we are well positioned to capitalize on the opportunities ahead.

Neil: In Canada major investments continued to be driven by large scale water projects transportation infrastructure, including roads and transit and health care.

Neil: The federal government's recent economic platform places further emphasis on infrastructure energy housing community development and critical health care.

Neil: It may take some time for these additional investments to materialize, we are well positioned to capitalize on the opportunities ahead.

Gordon Johnston: and globally, we continue to see significant opportunity. In the UK, the £104 billion AM8 program is starting to ramp up in Q2, and the government's renewed focus on housing and community development is generating new opportunities. In Germany, we continue to see work in infrastructure, specifically in roads and transit, and with the €500 billion fund for infrastructure, defence and energy transition projects, we expect more opportunities to follow. And finally, new frameworks in Australia and New Zealand continue to drive growth in our water business in these regions.

Neil: And globally, we continue to see significant opportunities.

Neil: In the U K, the 104 billion pound Ami program is starting to ramp up in Q2, and the government's renewed focus on housing and community development is generating new opportunities.

Neil: In Germany, we continue to see work in infrastructure, specifically in roads in transit and.

Neil: And with the 500 billion Euro fund for infrastructure defense and energy transition projects, we expect more opportunities to follow.

Neil: And finally, new frameworks in Australia, and New Zealand continue to drive growth in our water business in these regions.

Gordon Johnston: With all of this in mind, we remain optimistic for 2025 and beyond. While we await the closing of the page acquisition, we're maintaining our current outlook, which includes net revenue growth of 7 to 10% for the year. EBITDA margin in the range of 16.7 to 17.3 percent, which reflects our continued confidence in solid project execution and operational performance. and adjusted EPS growth to be in the range of 16% to 19%. Once again, above our net revenue growth expectation.

Neil: With all of this in mind, we remain optimistic for 2025 and beyond while.

Neil: While we await the closing of the page acquisition, we're maintaining our current outlook, which includes net revenue growth of 7% to 10% for the year.

Neil: EBITDA margin in the range of $16 seven to 17, 3%, which reflects our continued confidence in solid project execution and operational performance.

Neil: And adjusted EPS growth to be in the range of 16% to 19% once again above our net revenue growth expectations.

Gordon Johnston: As we near the halfway mark of our 2024 to 2026 strategic plan, I'm extremely pleased with our performance. We're tracking well against all of the targets set out in the plan, including growth from M&A. With the anticipated closing of the page acquisition later this year, we will have completed five acquisitions since the start of 2024, welcoming nearly 4,500 new employees to Stantec. And we are just getting started. Our M&A pipeline remains full, and our balance sheet remains strong.

Neil: As we hear the halfway Mark of our 2024 to 2026 strategic plan I am extremely pleased with our performance.

Neil: We're tracking well against all of the targets set out in the plan including growth from M&A.

Neil: With the anticipated closing of the page acquisition later this year.

Neil: We'll have completed five acquisitions since the start of 2020 for welcoming nearly 4500, new employees to static.

Neil: And we are just getting started.

Neil: Our M&A pipeline remains full and our balance sheet remains strong.

Gordon Johnston: I'm confident that we can achieve our strategic plan target of 50% growth in net revenues to $7.5 billion by the end of next year. As we continue throughout the year, we remain committed to sustainable growth, strong project execution, operational excellence, and delivering sustained shareholder value for years to come.

Neil: Confident that we can achieve our strategic plan target of 15% growth in net revenues to seven $5 billion by the end of next year.

Neil: As we continue throughout the year, we remain committed to sustainable growth strong project execution operational excellence and delivering sustained shareholder value for years to come.

Operator: And with that, I'll turn the call back to the operator for questions. Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone, and wait for your name to be announced. To withdraw your question, please press star 1 1 again. One moment for questions.

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

Neil: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment for questions.

Benoit Poirier: Our first question comes from Benoit Poirier with... This chart ends, you may proceed. Yes, good morning, Gord, good morning, Vito. Just in terms of organic growth for the U.S., you were able to grow organically 2.4 percent, which is slightly below the consolidated level.

Speaker Change: Our first question comes from Ben <unk> with this.

Speaker Change: <unk> you May proceed.

Speaker Change: Yes, good morning, or good morning veto.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Just in terms of organic growth for the U S. You were able to grow organically two 4%.

Speaker Change: Which is slightly below the consolidated level. Obviously, there are some color in the MD&A, but I was wondering if it's more a matter of a tough comparison.

Gordon Johnston: Obviously, there's some color in the MDMA, but I was wondering if it's more a matter of a tough comparison versus the double-digit territory a year ago, or are you seeing some uncertainty south of the border right now? The backlog is strong, but just curious about your take on the U.S. Yeah, great question, Benoit. So, absolutely, we look at it from a number of perspectives. The first is, as you highlighted there, that coming off a 10% comp a year ago. And a year ago, we were finishing up a really significant water project for a semiconductor fabrication plant.

Speaker Change: The double digit territory, a year ago or are you seeing some uncertainties south of the border right now it looks like the backlog is strong but just curious about your take on the U S.

Speaker Change: Yes, yes, great great question.

Speaker Change: So absolutely we look at it from a network perspective. So first is as you highlighted there that coming off of a 10% comp a year ago and a year ago, we were finishing up a really significant water project for our semiconductor fabrication plans and so that really spiked.

Gordon Johnston: And so that really spiked things a bit a year ago. Now, that project is off, but we see a lot of additional projects in the water space and others coming on. We spent a lot of time actually, over the last little bit, working with our business leaders, business operating unit leaders here in North America, just to see where they're thinking, how they're feeling about things. Certainly, they've reiterated their confidence that we will achieve that mid to high single digit organic growth, strengthen through the year, and we'll receive that, get there by the end of the year.

Speaker Change: A year ago now that project is off but we see a lot of additional projects in the water space and others coming on we spent a lot of time actually over the last little bit working with our business leaders business operating unit leaders here in North America, just to see where they're thinking how they're feeling about things certainly they reiterated their con.

Speaker Change: <unk> that we will achieve that mid to high single digit organic growth.

Speaker Change: <unk> through the year and we'll receive that get there by the end of the year and as you said backlog is good. It is it is up.

Gordon Johnston: And as you said, backlog is good, it is up, low double digits organically, or mid to high single digits organically.

Speaker Change: Low double digits organically.

Speaker Change: The low mid to mid to high single digits organically.

Vito Culmone: Okay, that's great. Thanks, Gordon. With respect to the guidance for the Outlook for 2025, it was maintained despite the addition of two acquisitions and close to 1,600 people. Is there any reason why you haven't raised the guidance? Is it more a matter of closing or maybe some cautiousness?

Speaker Change: Okay, that's great.

Speaker Change: Great. Thanks, Gordon and with respect to the guidance for the outlook for 2025. It was maintained despite the addition of two acquisition and close to 1600 people is there any reason why you have been raised.

Speaker Change: The guidance is it more a matter of closing or maybe some cautiousness.

Vito Culmone: No, Benoit, hi, it's Vito. In regards to our base business, excluding the acquisitions, we're off to a terrific start relative to our expectations and the guidance. So the fact we haven't changed the guidance has nothing to do with our degree of confidence, obviously, it's just normal course with respect to, we'll let those two transactions close. And, and obviously get another three months under our belt here with Q2. And you can expect us then, obviously, coming out of Q2, to assess our guidance and either narrow or expand or do whatever we need to do. But get another three months under our belt, have these transactions close as we expect in a timely basis.

Speaker Change: <unk> Hi, it's Vito in regards to our base business, excluding the acquisitions.

Speaker Change: We're off to a terrific start relative to our expectations and the guidance. So the fact, we haven't changed that guidance has nothing to do with that.

Speaker Change: Our degree of confidence obviously, it's just normal course with respect to well, let those two transactions close.

Speaker Change: And obviously you get another three months under our belt here with Q2, and you can expect us that obviously.

Speaker Change: Coming out of Q2 to assess our guidance at either narrow or expand or do whatever we need to get another three months under our belt have these transactions close as we expect in a timely basis and then we will give.

Benoit Poirier: And then we'll give an update to our guidance. That's what I thought. Great caller, Vito.

Speaker Change: Get to our guidance.

Speaker Change: That's what I talk a great color video and last one for me. If you look at the stock price. It's been a great performer year to date could you maybe remind us about the sensitivity for stock based comp.

Vito Culmone: And last one for me, if you look at the stock price, it's been a great performer year to date. Could you maybe remind us about the sensitivity for stock based comp and whether it's embedded in the guidance? Yeah, you know, now, what we've done with our stock-based comp is, you know, we've hedged a certain degree component of it. So on a go-forward basis, you should expect very little variability, if you will, or year-over-year variants related to stock price appreciation. In the quarter itself, in Q1, I think the delta was close to $4 million year-over-year, where last year's LTIP would have been sort of a $7 million charge, and this year we're in more than $3 to $4 million.

Speaker Change: It's embedded in the guidance.

Speaker Change: Yes, now what will be done with our stock based comp as you know we've we've hedged it.

Speaker Change: Certain degree component of it so on a go forward basis, you should expect very little.

Speaker Change: Variability of weather year over year.

Speaker Change: Very insulated to stock price appreciation in the quarter itself in Q1, I think the delta was close to $4 million.

Speaker Change: Year over year, where last year.

Speaker Change: <unk> would have been sort of a $7 million charge and this year, we're in more than $3 million to $4 million. So you can see that its becoming less noise than it was in previous years.

Vito Culmone: So you can see that it's becoming less noisy than it was in previous years. That's that.

Benoit Poirier: Perfect. Okay. Thank you very much for the Thanks, Benoit. Thank you.

Speaker Change: Perfect. Okay. Thank you very much for the time.

Manuel: Great. Thank you Manuel.

Manuel: Thank you.

Chris Murray: Our next question comes from Chris Murray with ATV Capital Markets. Well, yeah, thanks, folks. Good morning. Morning, Chris. Gordon, you talked a little bit about the US business, and I was wondering, you know, there has been a lot of uncertainty around the US government business. I know you've got some different aspects in there, certainly a lot of water work, also some other direct government work.

Speaker Change: Our next question comes from Chris Murray with ATB capital markets. You May proceed.

Speaker Change: Yes, thanks folks good morning.

Speaker Change: Good morning Britain first.

Speaker Change: Gordon you talked a little bit about the U S business and I was wondering if there has been a lot of uncertainty around the U S government business I know you've got some different aspects and there certainly a lot of water work.

Speaker Change: Also some other direct government works can you maybe give us some color on exactly what you guys are seeing at this particular point not only on new contract awards, but maybe some of the conversations that you folks are having.

Gordon Johnston: Can you maybe give us some color on exactly what you guys are seeing at this particular point, not only on new contract awards, but maybe some of the conversations that your folks are having around what to expect around contract renewals on a go-forward basis? Yeah, no, great, great question. So, you know, really, in the US, we aren't seeing any appreciable impact from this uncertainty. We've seen a little bit of slowing in procurement cycles in some areas in the government, and in particular, that would be early in Q1, when they had to reshape their procurement practices a little bit by removing, you know, references to DE&I in both procurement documents and evaluation scoring.

Speaker Change: Around what to expect around contract renewals on a go forward basis.

Speaker Change: Yes, no great great question, so really in the U S. We arent seeing any appreciable impact from this uncertainty we've seen a little bit of slowing in procurement cycles in some areas.

Speaker Change: And the government in particular that would be early in Q1 wins when they have to reshape their procurement practices a little bit by removing.

Speaker Change: References to Eni in both procurement documents and evaluation, scoring that sort of has worked through so we see that we're back onto a more normal cadence now.

Gordon Johnston: That sort of is worked through. So we see that, you know, we're back onto a more normal cadence now. The groups that we're working with in the federal, state, and local government aren't those groups that are particularly impacted by, you know, some of the, you know, the budget changes that are being made down there. So our groups are still feeling positive about the project that we have on the books right now, as well as what they foresee coming down the pipe. Interesting, when we talk with some of our private sector clients there, you know, there was a little bit of, you know, uncertainty earlier in the, you know, earlier in the year.

Speaker Change: The groups that we're working with.

Speaker Change: The federal state and local government arent those groups that are particularly impacted by some of the <unk>.

Speaker Change: Budget changes that are being made down there. So our art groups are still feeling positive about the projects that we have on on on the books right now as well as what they foresee coming down the pipe interestingly when we talk with some of our private sector clients there.

Speaker Change: There was a little bit of an <unk>.

Speaker Change: Certainty earlier in the <unk>.

Gordon Johnston: Tariffs are on, tariffs are off, you know, a little bit of heightened rhetoric, but that all seems to have calmed down a little bit, that the temperature has seemed to have been reduced. So we're seeing a little bit better sense of it from our private sector clients. Again, we didn't see any appreciable uptick in projects that were postponed or canceled, but we're just seeing a little bit more positive sentiment from people. So I think that bodes well for the rest of the year. It makes us even feel better about maintaining our organic growth guidance, particularly in the U.S.

Speaker Change: Earlier in the year tariffs are on tariffs are off.

Speaker Change: A little bit of heightened rhetoric, but that all seems to have calmed down a little bit that the.

Speaker Change: The temperature has seemed to have been reduced so we're seeing a little bit better sentiment from our private sector clients again, we didn't see any appreciable uptick in projects that were postponed or canceled, but we're just seeing a little bit more positive sentiment from people. So I think that bodes well for the rest of the year and it makes us even feel better about maintaining R. R.

Speaker Change: Our organic growth guidance, particularly in the U S.

Chris Murray: Okay, that's helpful. Thank you.

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

Chris Murray: Um, my other question is just, um, around, you know, acquisitions on a go forward basis. And, and I'd also like to dovetail this into talking a little bit about Zetcon for a second. Um, so when you acquired Zetcon, certainly it was a different territory in Germany. Um, but the idea was it sort of gave you a base to, to try to grow, you know, even when you get, um, I think some of the other acquisitions done, you know, I think Vito alluded to the fact that you'll be well within your one to two times range, if not, you know, I'll, I'll say probably still, still to the bottom end of that.

Speaker Change: My other question is just.

Speaker Change: Around acquisitions on a go forward basis.

Speaker Change: And I'd also like to dovetail this into talking a little bit of a best conference.

Speaker Change: So when you required in Satcom, certainly it was a different territory in Germany.

Speaker Change: But the idea was sort of gave you a base to try to grow even when you get.

Speaker Change: I think some of the other acquisitions done I think Vito alluded to the fact that you'll be well within your one to two times range if not.

Speaker Change: I'll say, probably still spill to the bottom end of that.

Gordon Johnston: Um, so a couple of questions on this one, you know, how is Zetcon coming? Cause I know the integration was a little more complicated than typical. Um, and two, you know, in the German market now, does this give you the opportunity to start growing that as, as part of the strategy that it was at least originally envisioned? Yeah, absolutely. And so when we look at Zedcon, they're performing even better than we had initially anticipated when we brought them on. You know, great firm, extremely well run. The manufacturing market, of course, as you read in Germany, is not as solid right now.

Speaker Change: So a couple of questions on that one.

Speaker Change: Zircon coming because I know the integration was a little more complicated than typical.

Speaker Change: And two.

Speaker Change: In the German market now does this give you the opportunity to start growing that as as part of the strategy that it was at least originally envisioned.

Speaker Change: Yeah, absolutely and so when we look at that Con theyre performing even better than we had initially anticipated when when we brought them on great firm extremely well run the manufacturing market of course as you read in the in Germany is not.

Gordon Johnston: But the infrastructure market, particularly with this 500 billion euro infrastructure bill, is very, very robust. And they have a lot of needs in transportation, rail, electrical distribution and transmission. So, you know, we see a lot of opportunities there. But to your point, that exactly dovetails into our initial thesis when we acquired Zedcon, is that we would use them as a platform to continue to build on and acquire additional firms in the German market. So we are absolutely looking at those.

Speaker Change: There is not as solid right now with the infrastructure market, particularly with its 500 billion Euro infrastructure Bill is very very robust and they have a lot of needs in transportation rail electrical distribution and transmission. So we see a lot of opportunities there, but to your point that exactly dovetails into our <unk>.

Speaker Change: <unk> thesis when we acquired that comment is that we would use them as the platform to continue to build on and acquire additional firms in the German market. So we are absolutely looking at dose Chris.

Gordon Johnston: Okay, and the integration, you know, we're moving along now that you're you feel comfortable with where you're at? Or is there still a little more work? Yeah, you know, the integration of ZETCON, we're taking it a little bit slower, you know, certainly German language issues, German GAP, and so on. But so we had initially planned to continue to go a bit slower or to go a bit slower on this one. And we're maintaining that that philosophy.

Speaker Change: Okay and the integration work.

Speaker Change: Moving along now that you're you feel comfortable with where you are at or is there still a lot more work to do.

Speaker Change: Yes, no the integration of zircon and we're taking it a little bit slower certainly German language issues German GAAP and so on pace. So we had initially planned to continue to go a bit slower or to go a bit slower on this one and we're maintaining that philosophy.

Chris Murray: Okay, I'll leave it there. Thank you.

Speaker Change: Okay I'll leave it there thank you.

Speaker Change: Thank you.

Operator: And as a reminder, to ask a question, please press star 1 1 on your telephone.

Speaker Change: Thank you and as a reminder to ask a question. Please press star one on your telephone. Our next question comes from Christopher <unk> with CIBC you May proceed.

Krista Friesen: Our next question comes from Krista Friesen with CIBC. Hi, good morning. Maybe if I could, if I could just take a bit deeper on the M&A. I believe last quarter you'd mentioned to us that you're happy with executing in your sweet spot of small to medium-sized transactions, which clearly you've done since you last reported. Is that where you're still feeling comfortable or where you're still feeling the most interest or are you starting to maybe see larger transactions come to market? We, we, I think the answer to that question would be yes to both of them, you know, there's there continues to be a number of those, you know, sub 1500, 2000 person firms out there that that we're in active conversations with.

Speaker Change: Hey, good morning.

Speaker Change: Morning, Chris.

Speaker Change: And then if I could.

Speaker Change: If I could just.

Speaker Change: Take a bit deeper on the.

Speaker Change: On the M&A I believe last quarter, you had mentioned to us.

John: Youre happy with executing in your sweet spot of small to medium sized transactions, which clearly as John since you last reported.

Speaker Change: Is that where youre still feeling comfortable or where you are still feeling the most interest or are you starting to maybe see larger transactions come to market.

John: We.

John: The answer to that question, yes to both of them.

John: There continues to be a number of those sub 502000 person firms out there that we're in active conversations with but there are a number of those five 7000.

Gordon Johnston: But there are a number of those 5, 7000 plus companies that we see that we're coming to market here later this year that we've already had some initial conversations with. So there is opportunities really at both the small and that larger size. And, you know, from a balance sheet and a capital perspective, we're, you know, we're, we'd be very comfortable with, with transacting on either of them.

John: Companies that we see that we're coming to market. Here later this year that we've already had some initial conversations with so there is opportunities.

John: Really that both the small and larger size and from a.

John: Our balance sheet and a capital perspective.

John: We'd be very comfortable with the transacting on either inputs.

John: Thanks, Kristen all I'd add there is I think it's not so much the size that is our starting point with <unk>.

John: Criteria.

John: Really a strategic cultural that geographic how does it fit within our sectors and whatnot.

John: Primary lines by which we look at things and as <unk> alluded to there is tremendous opportunity both in the <unk>.

John: Tuck ins, if you will and some larger ones coming forth.

Gordon Johnston: And then maybe if you could just expand on are there, I mean, you've laid out your kind of longer term priorities in terms of what areas you'd like to grow on, but kind of in the near term. in your different operating units? Are there areas that that you're really looking to build out? You know, we're feeling pretty good actually about the overall spread of of those business operating units, now certainly having acquired PAGE, we probably will not focus on additional buildings or architectural for a while, but absolutely continue to look for opportunities in the water space, in the infrastructure space, environmental, and certainly even in our energy and resources space.

John: And maybe if you could just expand on are there.

John: I mean, you've laid out your kind of longer term priorities in terms of.

John: What areas you'd like to Carl.

John: Kind of in the near term.

John: And your different operating units are there areas that you are.

John: Looking to build out.

John: We're feeling pretty good actually about the overall <unk>.

John: <unk>.

John: <unk>.

John: Of those business operating units I would certainly having acquired a page we probably will not focus on additional buildings or architectural for awhile, but absolutely continuing to look for opportunities in.

John: In the water space in the infrastructure space entered.

John: The environmental uncertainty, even in our energy and resources space, good opportunities certainly mining, making a bit of a comeback there. We're seeing good opportunity. So really we have a bit of a blank canvas. So as we're looking at opportunities based on service line, even from a geography perspective, we see a lot of opportunities for us to for <unk>.

Gordon Johnston: Good opportunities, certainly mining making a bit of a comeback there, we're seeing good opportunities. So, really, we have a bit of a blank canvas as we're looking at opportunities based on service line, even from a geography perspective, you know, we see a lot of opportunities for us to, for continued consolidation in the US, but even in the markets outside that we've talked about being active in, Australia, New Zealand, the UK, still looking up in the Nordics a little bit. So, a lot of opportunity for us from an M&A perspective. All right, thanks. Congrats on the quarter.

John: <unk> consolidation in the U S, but even in the markets outside that we've talked about being active in Australia, and New Zealand the UK still looking up in the Nordics a little bit.

John: A lot of opportunity for us from an M&A perspective.

John: Alright, thanks, congrats on the quarter.

Krista Friesen: I'll jump back in the queue. Thank you.

John: Back in the queue.

John: Thank you.

Michael Tupholme: Our next question comes from Michael Tupholme with TD Cowan. Thank you. Good morning.

John: Thank you.

Speaker Change: Our next question comes from Michael <unk> with TD Cowen You May proceed.

Speaker Change: Thank you good morning.

Speaker Change: Morning, Joe.

Michael Tupholme: Maybe just to follow on to some of these other questions you've had about M&A, so thinking about some of the macro and trade-related uncertainty that's... for a little while now. Certainly doesn't sound like that's having any kind of an impact on your outlook for your business.

Speaker Change: Maybe just to.

Speaker Change: To follow on to some of these other questions you've had about M&A, so thinking about some of the macro and trade related uncertainty.

Speaker Change: Okay.

Speaker Change: Existed for a little while now certainly doesn't sound like that's having any kind of an impact on your outlook for your business, but I'm just wondering if.

Gordon Johnston: But I'm just wondering if, in terms of M&A opportunities, has that affected the M&A landscape in any way, shape, or form, whether that be from a seller perspective or buyer perspective, you know, and has it in any way changed your views on what regions you might be interested in? I realize you're taking a longer term view here, but I'm not sure if there's been anything going on in any particular regions or heightened uncertainty that's affected the.

Speaker Change: In terms of M&A opportunities has that affected.

Speaker Change: The M&A landscape in any way shape or form whether that be from a from a seller perspective or buyer perspective.

Speaker Change: Is it in any way change your views on on what regions you might be interested and I realize you are taking a longer term view here, but.

Speaker Change: Not sure if there's anything going.

Speaker Change: Are there any particular regions or heightened uncertainty.

Speaker Change: The views around regional M&A opportunities.

Gordon Johnston: Yeah, no, great question. You know, as we've looked at, you know, your comment about long term is exactly where we're thinking about things. You know, a lot of the firms that we've been talking about, we've partnered with them, we've been working with them for years or decades in many cases. And so, you know, we're looking at good firms and good markets from a long term perspective.

Speaker Change: Yes, no great question as we've looked at your comment about long term is exactly where we're thinking about them.

Speaker Change: A lot of the firms that we've been talking about.

Speaker Change: We've partnered with them, we've been working with them.

Speaker Change: For for years or decades in many cases and so we're looking at good firms in good markets from a long term perspective.

Gordon Johnston: You know, have we seen some uncertainty here over the last quarter? Absolutely. But these are firms that we haven't seen any rapid adjustments to valuations. You know, and over the quarter, if we had, we might see something strengthening a bit as coming back up. So it really hasn't changed our outlook. Michael, we just continue to take that long term approach, making sure it's value creative, and you would do the right thing for the company that we're acquiring and for Stantec overall.

Speaker Change: We've seen some uncertainty here over the last quarter, absolutely, but these are firms that we haven't seen any rapid adjustments to valuations.

Speaker Change: Over the quarter and if we have we might see some things strengthening a bit is coming back up so.

Speaker Change: It really hasnt changed our outlook.

Speaker Change: Michael We just continue to take that long term approach, making sure it's value accretive and.

Speaker Change: You would do the right thing for the company that we're acquiring and first at Teck overall.

Vito Culmone: And Michael, I would say from a seller's perspective, you know, nothing fundamentally has changed. You know, when you sit back and you look at why are companies coming to market, you know, the themes around smaller firms and how this industry is going to evolve from a technology perspective and the investments required. Clearly, smaller firms, you know, have a scale related issue with that or challenges with respect to that. Valuation is still continuing to be robust in our industry, presents dynamics. For them, as they think about succession. So bigger picture from a seller's perspective, nothing has really changed, perhaps even accelerated.

Speaker Change: And Michael I would I would say from a seller's perspective.

Speaker Change: Fundamentally has changed when you sit back and you look at larger companies coming to market.

Speaker Change: The themes around a smaller firms and how this industry is going to evolve from a technology technology perspective, and the investments required.

Speaker Change: Smaller firms.

Speaker Change: Have a scale related issue with that or challenges with respect to that valuation is still continuing to be robust and our industry presents dynamics for them as they think about succession. So bigger picture from a seller's perspective, nothing has really changed perhaps even accelerating.

Michael Tupholme: Okay, that's all very helpful. Thank you.

Speaker Change: Okay. That's all very helpful. Thank you.

Michael Tupholme: Next question is just about the energy and resources business operating unit. So that was an area that in 2024, you had seen some negative organic growth, and I think you were calling for it to turn positive in the first quarter, which it didn't, I think in the first quarter. was actually your strongest. from an organic growth perspective.

Speaker Change: Next question is just about it.

Speaker Change: About the Energen resources.

Speaker Change: So that was one area.

Speaker Change: In 2024.

Speaker Change: So negative organic growth and we're calling for it to turn.

Speaker Change: During the first quarter, we Didnt I think.

Speaker Change: In the first quarter.

Speaker Change: It was actually our strongest.

Speaker Change: Yes.

Gordon Johnston: I just wonder if you can talk a little bit about that shift and that change, and exactly what's driving that now, and how you see that evolving over the next... Yeah, so, you know, we the world of ENR is kind of unfolding as we have thought. You're right, 8.3% organic growth in Q1, but BATBOG is also up organically, low double digits in that group year over year. So that's kind of as we saw a lot of strengthening, particularly in the mining space. You've heard some of the talk about some of the large projects that we're doing from an industrial process perspective, energy transition, grid strengthening type work, really strong copper.

Speaker Change: For a perspective.

I Wonder if could talk a little bit about that.

Speaker Change: Can I change and exactly what it is.

Speaker Change: Driving that now.

Speaker Change: And how you see that evolving over the next step.

Speaker Change: Okay.

Speaker Change: Yes, so we.

Speaker Change: In the world.

Speaker Change: On slide eight.

Speaker Change: Eight 3%.

Speaker Change: Organic growth in Q1.

Speaker Change: <unk> also.

Speaker Change: We're getting organically low double digits in that group year over year.

Speaker Change: So thats kind of where you saw a lot of strengthening.

Speaker Change: Strengthening particularly.

Speaker Change: The mining space.

Speaker Change: You've heard some of the market with some of the.

Speaker Change: Large projects that we're doing from an industrial process perspective.

Speaker Change: Energy transition.

Speaker Change: Britain strengthening type work.

Gordon Johnston: We've had a number of copper projects move forward because of the need for copper to support the transitioning. So we're actually feeling really good about that space as we move forward. BATBOG's continued to be strong and customer sentiment is solid. We're feeling good about that. We see strong, continued organic growth in that business throughout the year. Albeit we're coming off some lower comps for the next couple of quarters, but we do see strong organic growth. Very pleased with that.

Speaker Change: Strong copper.

Speaker Change: Yes.

Speaker Change: Projects moving forward because of the need for copper to support transitioning. So we're actually feeling really good about that space as we move forward backlogs continue to be to be strong.

Speaker Change: And.

Speaker Change: Customer sentiment is is solid.

Speaker Change: Yes, we're feeling good about that we see strong.

Speaker Change: Organic growth in that business throughout the year.

Speaker Change: We're coming off some lower costs.

Speaker Change: A couple of quarters.

Speaker Change: Organic growth.

Speaker Change: Sir Please go ahead Sir.

Michael Tupholme: Okay, that's helpful. Thanks very much.

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

Vito Culmone: And then just one last one, the the margin performance in the quarter was obviously quite quite strong up 70 basis points, I think, year over year. in terms of adjusted EBITDA margin. Does that, is that in line with what you were expecting? Is that coming a little stronger? And how do we think about what that means as far as where you're likely to land on a full year? Yeah, Michael, you know, you saw that when we provided guidance, obviously, for our margin profile with our year-end results that are in February, we expanded the range there and we expect year-over-year improvement.

Speaker Change: And just one last one the the margin performance of the quarter was obviously quite strong up 70 basis points.

Speaker Change: Over here.

Speaker Change: Adjusted EBITDA margin.

Speaker Change: Does that.

Speaker Change: Youre expecting is that becoming a little stronger and how do we think about it.

Speaker Change: What that means as far as where youre likely to land on a full year basis.

Speaker Change: Yes.

Michael: Yes, Michael.

Michael: When we provided guidance obviously for our margin.

Michael: With our yearend results in February.

Michael: Extended.

Michael: And we expect year over year improvement.

Vito Culmone: We're very pleased with how that's working its way through here in the early goings of the year. And that's just kudos to the entire organization, the operations and the support teams. When you look at the year-over-year improvement, 16.2 BIPs this year versus 15.5 last year, that's what you were referencing, the 70 basis points. It really comes from three or four key areas. It all starts with project margin, of course. I mean, that's key to us. And that was up 0.1, effectively, as you saw. We had lower admin and marketing. So, that's a whole bunch of.

Michael: We're very pleased with.

Michael: Working its way through.

Michael: <unk> for the year.

Michael: And Thats, just kudos to the entire organization the operations and the support teams.

Michael: When you look at that.

Michael: Year over year improvements of $10 two bps this year versus 15 five last year.

Michael: Referencing the 700.

Michael: Basis points.

Michael: Three or four key areas and I'll start with the project of.

Michael: Of course.

Michael: Okay.

Michael: And Thats up.

Michael: And that effectively as you saw.

Michael: <unk> had been in marketing.

Vito Culmone: It's a game of engines when it comes to that. That's utilization, that's labor, that's discretionary spend. And we did have a smaller impact there on a gain on sale of equities, which wasn't significant, but about $3 million year over year. But overall, very pleased with the performance of what we're tracking, both on solid execution of project margins and overall demand, and then how we are fulfilling that through our corporate services and all the other aspects of our discretionary spend. So pleased with the start we have for the year.

Michael: So that's a whole bunch of them.

Michael: Yes.

Michael: It comes to that.

Michael: <unk> flavor.

Michael: <unk> been in.

Michael: Yes.

Michael: Okay.

Michael: Hello, equities, which was significant.

Michael: $3 million year over year.

Michael: Overall very pleased with the performance track.

Michael: Traffic.

Solid execution of product market merchandise overall demand and then.

Michael: And all aspects of our discretionary spend so please let's start with half of the year.

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

Michael: Got it I'll leave it there thank you.

Michael: Thank you.

Maxim Sytchev: Our next question comes from Maxim Sytchev with NBF, you may proceed. Hi everyone, I'm Jonathan Goldman. Morning.

Maxim: Our next question comes from Maxim <unk> with UBS you May proceed.

Michael: Okay.

Michael: Good morning.

Gordon Johnston: But Vito, obviously we've seen federal elections in Canada and Australia seems to be sort of normalizing a little bit. How do you think about sort of continued demand from these two geographies as there still seems to be a lot of support for infraspending? I guess my question is, can we actually see further acceleration, especially in Australia that's been a little bit more sluggish? Yeah, so, you know, you're right, the little, quite a few elections so far this year made some some changes for us when we look at Canada, you know, and the platform that Prime Minister Carney ran on with the support of infrastructure that, you know, feels really good for us.

Okay.

Michael: Yeah.

Michael: Hello.

Canada, Australia from Smedes.

Michael: Yes.

Michael: How do you think.

Michael: So continued demand from these two properties.

Michael: It seems to be a lot of support staff for.

Michael: Infra spending.

Keith: Question for Keith.

Michael: So that acceleration.

Michael: Especially in that space.

Michael: So it's been a little sluggish.

Michael: Okay.

Michael: Yes, so youre right.

Michael: Quite a few elections, so far this year it made some sense.

Michael: We look at.

Michael: Got it.

Michael: Prime Minister Carnegie ran off with the support of infrastructure that.

Michael: He feels really good for us.

Gordon Johnston: You're right, our Australia business infrastructure, a little bit slower at the first part of the year, but we do see it strengthening, you know, through through going as the year progresses, many of our, we've heard some commentary from a number of our peers, sort of feeling the same way. But in the same way in the UK, you know, they've recently introduced that UK planning and infrastructure bill, which isn't passed yet. But if it does, you know, again, more support there for nationally significant infrastructure projects, building a million and a half new homes, process improvements to make the thing smoother, all directionally positive for us.

Michael: Australia.

Michael: Infrastructure, a little bit slower.

Michael: The first part of the year.

Michael: Strengthening.

Michael: Through <unk>.

Michael: Throughout the year progresses.

Michael: Okay.

Michael: We've heard some commentary from a number of our peers.

Michael: The same way.

Michael: At the same way in the UK.

Michael: They've recently introduced that UK planning, an infrastructure bill which is in past Jack but if it does.

Michael: Again more support there for nationally significant infrastructure projects building new.

Michael: New homes process improvements to make that things smoother all directionally positive for us so whether it's the.

Gordon Johnston: So whether it's the, you know, the UK, whether it's Australia, whether it's Canada, you know, we've seen some some good directionally positive announcements and movement over the next little bit. And Gordon, all that is in Australia, water continues to be really, really strong. Extremely strong in Australia and New Zealand. I know that's good to hear.

Michael: The UK, whether it's Australia, whether it's Canada, we've seen some good directionally positive announcements and move into over the next over the last little bit angry at all of that is in Australia water.

Michael: It's an extremely strong in Australia, New Zealand.

Michael: Okay. No that's good to hear and then in terms of <unk>.

Gordon Johnston: And then in terms of, you know, UK, the wrap up around AMP programs, how's the tracking in terms of kind of the curvature of acceleration, where we are in terms of that spending budget? Yeah, so AmpAid officially started in April. And so, you know, and of course, you've seen the considerable increase in the over 75%, I believe it was the increase in the overall funding. So, as we've talked about for the last several quarters, we've been actively ramping up hiring, taking real estate, getting ready to deliver on the additional work that's coming our way. And it is sort of tracking, as we would expect, Max, where we're seeing the, you know, additional work orders coming through.

Andrew: Hey, Andrew does that Bob.

Michael: Around our.

Michael: Our programs how is that tracking in terms of kind of corporate sharp acceleration.

Michael: Where we are in terms of that spending buckets. Thanks.

Michael: Yes, so happy to officially started in April and so and of course, you've seen the considerable increase.

Michael: In.

Michael: Over 75% of it was the increase in the overall funding so as we've talked about before for the last several quarters, where we've been actively ramping up hiring taking real estate getting ready to deliver on the additional work that is coming our way and it is sort of tracking as we would expect Max where we're seeing the additional work order.

Vito Culmone: Now, and keeping our folks really busy over there. So, directly, the AmpAid program is unfolding exactly as we had anticipated that it would. 100%. Okay.

Michael: Is coming through now and then keeping our folks really busy over there. So directionally. The Abbvie program is unfolding exactly as we had anticipated that it would 100%, okay and I guess the follow up question for you because it kind of is it will take a hiring I presume revenue was less robust from this programs does that mean that the operating lever.

Vito Culmone: And Vito, I guess the follow up question for you, because again, as you were doing this hiring, I presume revenue was, you know, less robust from this program. Does it mean that the operating leverage should start to kick in in Q2 and Q3? Or am I just being too tactical? And you're referring to the UK in particular, Max? Yeah, yeah, yeah. Yeah, no, I think, well, I think overall, and maybe this dovetails back to the earlier question around our margin and whatnot. I think, you know, obviously, as we continue to expand and the organic growth and the acquisition, I think scale and operating leverage just continues to be a major area of focus for us.

Michael: It should start to kick in in Q2, and Q3 or am I just being tactical here.

Michael: And you're referring to the U K together, yes, yes, yes, yes.

Michael: Yes, no I think well I think overall and maybe this dovetails back to the earlier question around our margin and whatnot I think.

Michael: Obviously as we continue to expand in the organic growth and the acquisition I think scale and operating leverage just continues to be a major area of focus for us the entire organization.

Vito Culmone: The entire organization is focused on that and, and we'll see that flow through our results as we move forward.

Michael: Focused on that.

Michael: And we'll see that flow through our results.

Operator: Okay, excellent, thank you so much, that's it for me. Yep, you're welcome, thank you.

Michael: Florida.

Michael: Okay excellent. Thank you so much left for me.

Michael: Thank you.

Devin Dodge: Thank you.

Devin Dodge: Our next question comes from Devin Dodge with BMO Capital Markets. He may... Yeah, good morning, Gord. Good morning, Vito.

Speaker Change: Thank you. Our next question comes from Devin Dodge with BMO capital markets. You May proceed.

Yes, good morning, Gordon I'm wondering if you do.

Devin Dodge: I wanted to start with maybe data centers. There's been some questions about the growth outlook there, after one of the large tech companies pulled back its CapEx budget. Look, from Stantec's perspective, I believe your backlog for data centers continues to increase, but just wondering if you've seen any evidence Slowing growth from this market when you look at earlier stage bidding or RFP activity. Yeah, you know, we we really have it at this point, Devin, we think that that data center market continues to be robust for us. But the one thing that of interest to note is, you know, what I think in a previous call, we said that that represents two to 3% of our overall revenue.

Devin Dodge: I wanted to start with.

Speaker Change: Data centers.

Speaker Change: Questions about the growth outlook there after one of the large tech companies pulled back its capex budget.

Speaker Change: Look from Centex perspective, I believe your backlog for data centers continues to increase but just wondering if you've seen any evidence of slowing growth from this market. When you look at earlier stage bidding or RFP activity.

Speaker Change: Yes, we really haven't at this point definitely think that that data center market continues to be robust for us, but the one thing that of interest to notice.

Speaker Change: I think in our previous call, we said that that represents 2% to 3% of our overall revenue so.

Gordon Johnston: So it's It continues with that overall diversification model of Stantec that, you know, to the upside, you know, we'll certainly take, you know, additional work as it comes, and we could perhaps double the size of that. But if a downturn comes, it's not really material to us as, as it is for some other firms that are, you know, heavily, heavily exposed to it. So I, we feel good about it. Certainly want to ride the wave on the way up. But if it does slow, you know, we don't see it being an overhang flow. Okay, good context.

Speaker Change: It continues with that overall diversification model of static.

Speaker Change: To the upside, we'll certainly take additional work as it comes in we could perhaps double the size of that but if if a downturn comes it's not really material to us as it is for some other firms that are heavily heavily exposed to it. So we feel good about it certainly wont arrived a wave on the way up but if it does slow we don't.

Speaker Change: See it being an overhang for us.

Devin Dodge: Thanks for that.

Speaker Change: Okay. Good context, thanks for that and then the second question.

Gordon Johnston: And then the second question... It might be early days here, but there seems to be an improving backdrop for energy-related investments in Western Canada. Just wondering if you started to see more RFPs or inquiries from some of your midstream customers? Absolutely. Yeah, we're having a number of discussions and ongoing talk about this project or that project or which one might be supported or come back to market. You know, still early days, but certainly that increasing sentiment and those ongoing discussions, we feel very positive about. Okay, thanks for that.

Speaker Change: It might be early days here, but there seems to be an improving backdrop for energy related investments in Western Canada, just wondering if you're starting to see more rfps or or inquiries from some of your midstream customers.

Speaker Change: Absolutely, yes, we're having a number of discussions and <unk>.

Speaker Change: Ongoing talk about this project or that project or which one might be supported or come back to market still early days, but certainly that increasing sentiment than those ongoing discussions we feel very positive about it.

Speaker Change: Okay. Thanks for that I'll turn it over.

Devin Dodge: I'll turn it over.

Operator: Thank you.

Speaker Change: Thank you.

Jonathan Goldman: Our next question comes from Jonathan Goldman with Scotiabank. Hi, good morning, team, and thanks for taking my question. Maybe just circling back to the margin.

Speaker Change: Our next question comes from Jonathan Goldman with Scotiabank you May proceed.

Jonathan Goldman: Hi, good morning team and thanks for taking my questions.

Jonathan Goldman: Maybe just circling back to the market. Good morning, maybe just circling back to the margin conversation coming at it differently you maintained the guidance, which seems to imply back nine months improvement of 10 bps year on year, you just did 70 in the first quarter.

Jonathan Goldman: Good morning. Maybe just circling back to the margin conversation coming at it a different way. You maintain the guidance, which seems to imply back nine months improvement of 10 BIPs year on year. You just did 70 in the first quarter. And it seems like the reasons you described were just solid execution, things that can actually be maintained for the balance of the year, lower admin utilization of labor. So is there some conservatism baked in there or why wouldn't we think improvements could be sustainable through the balance of the year? Yeah, I mean, again, you know, anytime you're providing full year guidance at the outset, a lot of moving pieces.

Speaker Change: And it seems like the reasons you described where just solid execution and things that can actually be maintained for the balance of the year lower abdomen utilization on labor. So is there some conservatism baked in there or why wouldn't we think improvements could be sustainable through the balance of the year.

Ben: Yeah, Hi, Ben again.

Speaker Change: Anytime youre, providing full year guidance at the outset lot of moving pieces, but I think from an overall settlement perspective, Jonathan what youre describing.

Vito Culmone: But I think from an overall sentiment perspective, Jonathan, what you're describing, we, you know, we don't expect to be giving any, any gains back in a way. It doesn't mean we'll carry 70 bips all the way through the year sort of thing. But I would, you know, I would, I would look at the Q1, you know, we, and consider that an indication of the pacing of the business for sure. And again, we'll get another three months under our belt, we've got, you know, meaningful acquisitions coming through the back half that we'll need to obviously digest and understand the cost structure of that and how it moves through.

Speaker Change: We don't expect to be giving any.

Speaker Change: Any gains back.

Speaker Change: That doesn't mean, we'll carry 70 bps all the way through the year sort of thing but.

Speaker Change: Good.

Speaker Change: I would look at Q1.

Speaker Change: Okay.

Speaker Change: And consider that an indication of the pacing of the business for sure and again, we'll get another three months under our belt we've got.

Speaker Change: Meaningful acquisitions coming through the back half that will need to obviously digest that understand the cost structure of that and how it moves through we've got a pretty good handle on that already obviously, we understand that well so.

Vito Culmone: We got a pretty good handle on that already. Obviously, we understand that well. So just be patient for the update here at mid-year. But by all means, I share your enthusiasm around what's possible. No, fair enough. And that's that's good color.

Speaker Change: Patient for the update here at <unk>.

Speaker Change: At mid year, but by all means I share your enthusiasm around what's possible.

Speaker Change: No fair enough and Thats good color.

Jonathan Goldman: We did have, you know, pretty fulsome discussion already about M&A. But on sellers, have you noticed them being a little more hesitant to consummate a deal? So maybe the environment's still the same valuations, incentives to close, but things getting drawn out a bit longer. No, we haven't. We actually have not experienced that at all. The two that we announced this year, so far, we executed exactly as per our schedule. In fact, we had talked about when the page one came out, the day that we announced it, ended up being when President Trump had Liberation Day.

Speaker Change: And we did have a pretty fulsome discussion already about M&A, but on sellers have you noticed them being a little more hesitant to consummate a deal so maybe the environment still the same valuation as incentives.

Speaker Change: To close but thing is getting drawn out a bit longer.

Speaker Change: No we haven't we actually have not experienced that at all.

Speaker Change: The two that we announced.

Speaker Change: This year, so far we executed exactly as per our schedule. In fact, we had talked about when the page one came out the day that we announced that ended up being when president Trump had liberation days. So we had talked about should we should we delayed just not to go on that day, but again, we thought that longer bigger.

Gordon Johnston: So, we had talked about, should we delay it just not to go on that day? But, you know, again, we thought that longer, bigger picture, long-term perspective, we're going to move forward with our schedule as it is.

Speaker Change: Picture long term perspective, we're going to move forward with our schedule as it is.

Gordon Johnston: Now, great. It's good to see you.

Speaker Change: Now great and it's good to see and then maybe I guess, one more garg I guess from a high level perspective have you had a chance to look at Trump's proposed many budget.

Gordon Johnston: And then maybe, I guess, one more, Gord, I guess, from a high-level perspective. Have you had a chance to look at Trump's proposed mini-budget, and did you have any takeaways for the IIJA or infrastructure spending in general in the U.S.? You know, interesting on on IIJA in general, I think we've commented on past calls that, you know, we've been engaging with some discussions related to what an IIJA 2.0 could look like. Those discussions sort of in the in the first, you know, several months of President Trump's presidency, those have slowed a little bit, I think, just as people are taking stock of where we are and what are the priorities of the new administration.

Speaker Change: And did you have any takeaways for the Iga or infrastructure spending in general in the U S.

Speaker Change: Interesting.

Speaker Change: In General I think we've commented on past calls that we have.

Speaker Change: Been engaging with some discussions related to what an Iga 2.0 could look like.

Speaker Change: Those discussion sort of in the in the first several months of President Trump's presidency, those have slowed a little bit I think just as people are taking stock of where we are and what are the priorities of the new administration. So you heard us talk in the prepared remarks today about that.

Gordon Johnston: So, you know, you heard us talk in the prepared remarks today about that, you know, while the state of infrastructure has improved a little bit from the last infrastructure report card, the amount of funds required to continue to improve it has actually increased as well to over 9 trillion. So certainly the need is there, but the discussions at this point in the first several months have slowed a little bit, but I anticipate that those will pick up near the back half of the year.

Speaker Change: While the state of infrastructure has improved a little bit from the last infrastructure report card the amount of funds required to.

Speaker Change: To continue to improve and has actually increased as well to over over nine trillion. So certainly the need is there.

Speaker Change: But the discussions at this point in the first several months of slowed a little bit, but I anticipate that those will pick up near the back half of the year.

Jonathan Goldman: Okay, that's great color.

Jonathan Goldman: Thanks again, guys.

Speaker Change: Okay. That's great color. Thanks, again, guys good results I get back in queue.

Gordon Johnston: Good results.

Operator: I'll get back to you.

Operator: Thank you.

Speaker Change: Thank you.

Gordon Johnston: I would now like to turn the call back over to Gord Johnston for any closing remarks. Great. Well, well, thanks to everyone for joining us this morning. Thanks, operator. So in summary, you know, we started the year off really very, very positively here in Q1. We feel good about our forecast for the rest of the year.

Speaker Change: Thank you I would now like to turn the call back over to Gordon Johnson for any closing remarks.

Speaker Change: Okay, great well, thanks to everyone for joining us this morning. Thanks.

Speaker Change: Operator.

Speaker Change: In summary, we started the year off really very very positively here in Q1, we feel good about that.

Operator: And if you have any follow up questions, following today's call, please reach out to Jess Newkirk, our VP of investor relations and have a great day, everyone. Thank you.

Speaker Change: Our forecast for the rest of the year and if you have any follow up questions. Following today's call. Please reach out to just new occurred our VP of Investor Relations and have a great day everyone.

Operator: This concludes the conference. Thank you for your participation.

Speaker Change: Thank you. This concludes the conference. Thank you for your participation you may now disconnect.

Operator: You may now disconnect.

Speaker Change: Okay.

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