Q1 2025 Stantec Inc Earnings Call
Yeah.
BDO: Welcome to <unk> 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 the slide presentation.
BDO: What is available in the investors section that Stan Tech 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.
BDO: 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.
Generally rounded with that I'll turn the call over to Mr. Gordon Johnson.
Gordon Johnson: Good morning, and thank you for joining us today.
Speaker Change: Yeah, Jack had a very strong start to 2025.
BDO: 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 drive in a resilient industry driven by macro factors, including water security aging infrastructure emerging technologies and the expansion of advanced manufacturing.
BDO: As a result in the first quarter, we delivered net revenue of $1 $6 billion up 13, 3% year over year.
BDO: This was underpinned by five 9% organic and three 2% acquisition growth.
BDO: 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%.
BDO: We also delivered adjusted EPS growth of 29% compared to Q1 2024.
BDO: 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 in 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: Data centers, and health care, while adding new capabilities and clean room design and fabrication facilities.
Speaker Change: The acquisition will resolve in <unk>, becoming the second largest architectural firm in North America.
Speaker Change: It also significantly strengthens our position as the largest integrated engineering and architecture firm.
We expect the page acquisition to close in Q3.
Speaker Change: We also announced the acquisition of Bryan 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.
Speaker Change: And we look forward to welcoming over 1500 talented individuals to the <unk> team.
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: While 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.
Speaker Change: Growth in environmental services was mainly driven by our energy transition.
Speaker Change: 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.
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.
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.
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.
Speaker Change: 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.
Speaker Change: We achieved very strong results in the first quarter setting us up for another very successful year.
Speaker Change: Gross revenue in Q1 grew to $1 9 billion.
Speaker Change: Up almost 12% year over year and net revenue of $1 6 billion is up 13, 3% compared to Q1 of 2024.
Speaker Change: As a percentage of net revenue our project margins came in at 54, 3%.
Speaker Change: Wrapping solid project execution, and a 10 basis point increase over last year.
Speaker Change: We achieved a very solid adjusted EBITDA margin of 16, 2% in the quarter, representing an increase of 70 basis points year over year.
Speaker Change: And our adjusted EPS in the quarter increased almost 29% to $1 16.
Speaker Change: 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.
Speaker Change: <unk>.
Speaker Change: DSO at the end of the first quarter remained consistent at 77 days remaining well within our internal target of 80 days or lower.
Speaker Change: Our 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.
Speaker Change: 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.
Ed: With that I'll now hand, the call back to Ed great. Thanks Neal.
Speaker Change: At the end of the first quarter, our backlog reached a new all time record of $7 9 billion.
Speaker Change: Year over year backlog has grown overall by almost 13% of which seven 5% was organic growth.
Speaker Change: Organic growth was achieved in each of our regional operating units with double digit growth in our water and energy and resources business.
Speaker Change: Our backlog represents approximately 12 months of work and underscores the continued strong demand to support our clients' most pressing challenges.
Speaker Change: Turning to some of the major projects, we have recently won.
Speaker Change: 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.
Speaker Change: 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%.
Speaker Change: We were also selected to meet the detailed design and contract administration on the Dundas bus rapid transit Mississauga East corridor, which includes over seven kilometers of bus rapid transit with eight patients.
Speaker Change: 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.
Speaker Change: Finally, I am pleased to announce that <unk> was selected by the city of Vancouver, Washington to design, a treatment system to remove <unk> and poly fluoro alkyl substances or PFS.
Speaker Change: From a high volume water station with the goal of providing cleaner more reliable drinking water for the community.
Speaker Change: 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.
Speaker Change: Okay.
Speaker Change: 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.
Speaker Change: Translate aging infrastructure energy security water treatment healthcare Datacenters and re shoring all continued to drive strong demand for our business.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: In March the American Society for Civil Engineers released its 2025 comprehensive infrastructure assessment, which highlights that increased funding is beginning to improve their conditions of infrastructure across the U S.
Speaker Change: 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.
Speaker Change: And even with current funding levels, including IHA, a significant funding gap will remain over the next decade.
Speaker Change: 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.
Speaker Change: In Canada major investments continued to be driven by large scale water projects transportation infrastructure, including road to transit and healthcare.
Speaker Change: The federal government's recent economic platform places further emphasis on infrastructure energy housing community development and critical health care.
Speaker Change: While it may take some time for these additional investments to materialize, we are well positioned to capitalize on the opportunities ahead.
Speaker Change: And globally, we continue to see significant opportunities.
Speaker Change: 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.
Speaker Change: In Germany, we continue to see work on infrastructure, specifically in roads in transit.
Speaker Change: And with the 500 billion Euro fund for infrastructure defense and energy transition projects, we expect more opportunities to follow.
Speaker Change: And finally, new frameworks in Australia, and New Zealand continue to drive growth in our water business in these regions.
Speaker Change: With all of this in mind, we remain optimistic for 2025 and beyond.
Speaker Change: 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.
Speaker Change: EBITDA margin in the range of 16, 7% to 17, 3%, which reflects our continued confidence in solid project execution and operational performance.
Speaker Change: And adjusted EPS growth to be in the range of 16% to 19% once again above our net revenue growth expectations.
Speaker Change: As we near the halfway Mark of our 2024 to 2026 strategic plan I am extremely pleased with our performance were tracking well against all of the targets set out in the plan including growth from M&A.
Speaker Change: With the anticipated closing of the page acquisition later this year, we will have completed five acquisitions since the start of 2020 for welcoming nearly 4500, new employees to <unk>.
Speaker Change: And we are just getting started.
Speaker Change: Our M&A pipeline remains full and our balance sheet remains strong.
Speaker Change: I'm confident that we can achieve our strategic plan target of 15% growth in net revenues to $7 5 billion by the end of next year.
Speaker Change: 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.
Speaker Change: And with that I'll turn the call back to the operator for questions operator.
Speaker Change: 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.
Speaker Change: Our first question comes from Ben <unk> with the.
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 versus 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.
Speaker Change: 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 number of perspectives. The 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.
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.
Speaker Change: <unk> that we will achieve that mid to high single digit organic growth.
Speaker Change: And 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.
Speaker Change: Low double digits organically.
Speaker Change: Mid to mid to high single digits organically.
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 haven't raised.
Speaker Change: The guidance is it more a matter of closing or maybe some cautiousness.
Vito: <unk> Hi, it's Vito in regards to our base business, excluding the acquisitions.
Vito: We're off to a terrific start relative to our expectations and the guidance. So the fact that we haven't changed that guidance has nothing to do with that.
Vito: Alright, our degree of confidence obviously, it's just normal course with respect to well, let those two transactions close.
Vito: And obviously you get another three months under our belts here with Q2 and you can expect us that obviously.
Vito: Coming out of Q2 to assess our guidance on 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 on a timely basis and then we will give an update to our guidance.
Speaker Change: That's what I talk a great color Vito 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.
Vito: Our stock based comp and whether it's embedded in the guidance.
Vito: Yes, now what will be done with our stock based comp as you know we've we've hedged.
Vito: Certain degree component of it so on a go forward basis, you should expect very little.
Vito: Variability of weather year over year.
Vito: Very insulated to stock price appreciation in the quarter itself in Q1, I think the delta was close to $4 million.
Vito: Year over year, where last year.
Vito: L tip 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.
Speaker Change: Perfect. Okay. Thank you very much for the time.
Vito: Great. Thanks, Pat.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Chris Murray with ATB capital markets. You May proceed.
Chris Murray: 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.
Speaker Change: Different aspects in there.
Chris Murray: A lot of water work 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.
Chris Murray: Around what to expect around contract renewals on a go forward basis.
Chris Murray: 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.
Chris Murray: 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.
Chris Murray: References to Eni in both procurement documents and evaluation, scoring that sort of has worked through so we see that we're back on to a more normal cadence now.
Chris Murray: The groups that we're working with.
Chris Murray: In the federal state and local government art those groups that are particularly impacted by some of the.
Chris Murray: 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.
Chris Murray: Interestingly, when we talk with some of our private sector clients there.
Chris Murray: There was a little bit of.
Chris Murray: Uncertainty earlier in the <unk>.
Chris Murray: Earlier in the year tariffs are on tariffs are off.
Chris Murray: A little bit of heightened rhetoric, but that all seems to have calmed down a little bit that the.
Chris Murray: 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 and it makes us even feel better about maintaining R. R.
Chris Murray: Our organic growth guidance, particularly in the U S.
Chris Murray: Okay. That's helpful. Thank you.
Chris Murray: My other question is just.
Chris Murray: Around acquisitions on a go forward basis.
Chris Murray: And I'd also like to dovetail this into talking a little bit of a debt conference.
Chris Murray: So when you required at Con certainly it was a different territory in Germany.
Chris Murray: But the idea was it 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.
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 cotton theyre performing even better than we had initially anticipated when when we brought them on.
Speaker Change: <unk> firm extremely well run up.
Speaker Change: The manufacturing market of course as you read in Germany is not.
Speaker Change: It 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: Initial 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.
Speaker Change: Okay and the integration.
Speaker Change: We're moving along now that you're you feel comfortable with where you're at or is there still a lot more work to do.
Speaker Change: Yes, the integration of zircon and we're taking it a little bit slower certainly German language issues, driven gap and so on pace. So we had initially planned to continue to grow a bit slower or to go a bit slower on this one and we're maintaining that philosophy.
Speaker Change: Okay I'll leave it there thank you.
Speaker Change: Thank you.
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.
Christopher: Hey, good morning.
Speaker Change: Good morning, Thanks, Kristen if I could.
Christopher: If I could just take a bit deeper on the.
Speaker Change: On the M&A.
Christopher: Last quarter you'd mentioned to us.
Christopher: 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.
Speaker Change: We I think the answer to that retro, yes to both of them.
Speaker Change: 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.
Speaker Change: 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 in both the small and that larger size and.
Speaker Change: From a.
Speaker Change: Our balance sheet and a capital perspective.
Speaker Change: We'd be very comfortable with transacting on either of those.
Chris Murray: And Chris ill I'd add there is I think it's not so much the size that is our starting point with <unk>.
Speaker Change: Criteria.
Speaker Change: Clearly a strategic cultural that geographic how does it fit with our sectors and whatnot.
Speaker Change: Primary lines by which we look at things and as <unk> alluded to there is tremendous opportunity both in the.
Speaker Change: Tuck ins, if you will and some larger ones coming forth.
Speaker Change: And maybe if you could just expand on are there.
Speaker Change: I mean, you've laid out your kind of longer term priorities in terms of.
Speaker Change: What areas you'd like to Carl.
Speaker Change: Kind of in the near term.
Speaker Change: And your different operating units are there areas that you are really looking to build out.
Speaker Change: We're feeling pretty good actually about the overall spread.
Speaker Change: All of those business operating units I will 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.
Speaker Change: In the water space in the infrastructure space entered.
Speaker Change: 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>.
Speaker Change: Continued 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.
Speaker Change: A lot of opportunity for us from an M&A perspective.
Speaker Change: Alright, thanks, congrats on the quarter.
Speaker Change: Jump back in the queue.
Speaker Change: Thank you.
Speaker Change: 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.
Speaker Change: Maybe just two.
Speaker Change: To follow on to some of your other questions you've had about M&A, so thinking about some of the macro and trade related uncertainty that.
Speaker Change: That's 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.
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: I'm not sure if there's anything going on in any particular regions or heightened uncertainty.
Speaker Change: The views around regional M&A opportunities.
Speaker Change: Yes, no great question as we've looked at.
Speaker Change: Your comment about long term is exactly where we are thinking about doing.
Speaker Change: A lot of the firms that we've been talking about <unk>.
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.
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: <unk>.
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 Michael.
Speaker Change: Michael.
Speaker Change: 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.
Speaker Change: And Michael I would I would say from a seller's perspective, nothing fundamentally has changed when you sit back and you look at larger companies coming to market.
Speaker Change: The themes around that.
Speaker Change: 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: The 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.
Speaker Change: Okay. That's all very helpful. Thank you.
Speaker Change: The next question is just about.
Speaker Change: About the Energen resources.
Speaker Change: Our business operating units, so that was an area that endpoint.
Speaker Change: <unk> seen some negative organic growth.
Speaker Change: For it too.
Speaker Change: Got it.
Speaker Change: I think in the first quarter.
Speaker Change: Like your strongest.
Speaker Change: Got it from an organic growth perspective.
I Wonder if you could talk a little bit about that.
Speaker Change: That shift change exactly.
Speaker Change: What's driving that out.
Speaker Change: How do you see that evolving over the next.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: In the world.
Speaker Change: Holding as we are on your radar.
Speaker Change: Eight 3% organic and organic growth in Q1.
Speaker Change: August also.
Speaker Change: Organic organically double digit.
Speaker Change: In aggregate year over year, So that's kind of a we saw a lot of strengthening.
Speaker Change: Yeah.
Speaker Change: The mining space.
Speaker Change: You heard some of them to talk about some of the large project that we're doing from an industrial process perspective.
Speaker Change: Energy transition.
Speaker Change: British strengthening type work.
Speaker Change: Copper I've got a number of copper projects moving forward because of the deeper copper to support the transition. So we're actually feeling really good about.
Speaker Change: <unk> as we move forward.
Speaker Change: Backlogs continue.
Speaker Change: <unk> continued to be to be strong.
Speaker Change: And in it.
Speaker Change: Customer sentiment is a solid so we're.
Speaker Change: We're feeling good that we see strong continued organic growth in that business throughout the year.
Speaker Change: Albeit some lower comps for the next couple of quarters, but we do see strong organic growth.
Speaker Change: Please.
Speaker Change: Okay. That's helpful. Thanks very much.
Speaker Change: Last one the margin performance in the quarter.
Speaker Change: Obviously quite quite strong up 70 basis points.
Speaker Change: Year over year.
Speaker Change: The adjusted EBITDA margin.
Speaker Change: Does that tie back in line with what you are expecting is that coming out stronger at how do we think about.
Speaker Change: That means as far as we're likely to lay out a full year basis.
Michael: Yes, Michael.
Michael: You saw that when we provided guidance obviously for our margin profile with our yearend results in February.
Michael: And we expect year over year improvement.
Michael: Very pleased with how thats.
Speaker Change: Oregon, It's way too early.
Michael: So of the year.
Michael: And that's just kudos to the entire organization the operations and the support teams.
Michael: And they'll get the year over year improved by $16 2 billion this year versus 15, 5%.
Michael: Thats referencing of 770.
Michael: 70 basis points really comes from three or four key areas.
Michael: Ill start the project budget of course.
Michael: And that was up one.
Michael: It's actually as you saw.
Michael: Lower admin and marketing.
Michael: That's a whole bunch of them.
Michael: When it comes to that utilization labor that discretionary spend and.
Michael: Smaller.
Michael: Impact.
Michael: Please.
Michael: Yes.
Michael: Year over year.
Michael: Very pleased with performance.
Michael: We're tracking both on solid.
Michael: Solid execution of project market margin overall demand and then.
Michael: Hi, Matt.
Speaker Change: Here at our corporate services.
Speaker Change: And all the other aspects of our discretionary spend so that's.
Speaker Change: For the year.
Speaker Change: Got it.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Maxim <unk> with <unk>.
Speaker Change: MBS.
Speaker Change: Thanks, John.
Speaker Change: Alright.
Speaker Change: Okay.
Speaker Change: 16.
Speaker Change: Federal elections in Canada, and Australia seems to be sort of normalized.
Speaker Change: How do you think about sort of continuing.
Speaker Change: Demand for these two geographies.
Speaker Change: CCD.
Speaker Change: Forums.
Speaker Change: Sure.
Speaker Change: I just had one.
Speaker Change: With Keith for that celebration.
Speaker Change: Especially in Australia.
Speaker Change: Okay. Thanks.
Speaker Change: Yes, so youre right.
Speaker Change: Quite a few elections this year.
Speaker Change: First when we look at.
Speaker Change: Canada.
Speaker Change: Firm that prime Mr. Carney ran off.
Speaker Change: So part of infrastructure.
Speaker Change: It feels really good for us.
Speaker Change: Turning to our Australia business infrastructure, and a little bit slower.
Speaker Change: The first part of the year.
Speaker Change: We do see strengthening through.
Speaker Change: So as the year progressed.
Speaker Change: Many of our.
Speaker Change: We've heard some commentary from a number of our peers sort of feeling the same way.
Speaker Change: Anyway in the UK.
Speaker Change: Hey.
Speaker Change: They've recently introduced that UK planning, an infrastructure bill which is in past Jack but if it does.
Speaker Change: Again more support there for nationally significant infrastructure projects building a million dollars.
Speaker Change: New homes process improvements to make that things smoother all directionally positive for us so whether it's the.
Speaker Change: 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 and going at all of that is in Australia on water.
Speaker Change: It's not extremely strong in Australia, New Zealand.
Speaker Change: Okay. No that's good to hear and then in terms of U.
Andrew: Okay Andrew.
Bob: Does that Bob.
Speaker Change: <unk> and <unk>.
Speaker Change: Our programs how is that tracking in terms of kind of corporate sharp acceleration.
Speaker Change: We are in terms of that spending buckets. Thanks.
Speaker Change: Yes, so happy to officially started in April and so and of course, you've seen the considerable increase.
Speaker Change: In the <unk>.
Speaker Change: 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.
Speaker Change: Work, that's coming our way again and it is sort of tracking as we would expect Max where we're seeing the additional work orders 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 final question for you.
Speaker Change: Because again as we're doing the hiring I presume revenue was less robust from this programs doesn't mean that the operating leverage should start to kick in in Q2, and Q3 or am I, just being too tactical here.
Speaker Change: And you're referring to the UK together, yes, yes, yes.
Speaker Change: Yes, no I think.
Speaker Change: I think overall and maybe this dovetails back to the earlier question around our margin and whatnot I think.
Speaker Change: 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.
Speaker Change: Focused on that.
Speaker Change: And we will see that flow through our results as we can.
Speaker Change: Florida.
Speaker Change: Okay excellent. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from Devin Dodge with BMO capital markets. You May proceed.
Devin Dodge: Yes, good morning, Gordon wondering veto.
Speaker Change: I wanted to start with.
Speaker Change: Data centers.
Speaker Change: Questions about the growth outlook there after one of the large tech companies pull 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.
Speaker Change: It continues with that overall diversification model stands at that.
Speaker Change: To the upside, we'll certainly take additional work as it comes in we could perhaps double the size of that.
Speaker Change: The downturn comes it's not really material to us as 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 see it being an overhang for us.
Speaker Change: Okay. Good context, thanks for that and then the second question.
Speaker Change: It might be early days here, but there seems to be an improving backdrop for energy related to 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 are having a number of discussions and.
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 in those ongoing discussions we feel very positive about it.
Speaker Change: Okay. Thanks for that I'll turn it over.
Speaker Change: Thank you.
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 margin. 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. We just did 70 in the first quarter.
Jonathan Goldman: 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, where we're at in May and 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.
Yes.
Jonathan Goldman: Hi, Ben again.
Speaker Change: Anytime you are providing full year guidance at the outset lot of moving pieces, but I think from an overall sentiment perspective, Jonathan what you're describing we don't expect to be giving any.
Speaker Change: Any gains back in a way that doesn't mean, we will carry 70 bps all the way through the year sort of thing but.
Speaker Change: Good.
Speaker Change: I would look at the Q1.
Speaker Change: We.
Speaker Change: 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 it.
Meaningful acquisitions coming through the back half that will need to obviously digest that understand the cost structure of that how it moves through we've got a pretty good handle on that already obviously, we understand that well so.
Speaker Change: Be 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.
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 it ended up being when president Trump and Liberation days. So we had talked about should we should we delay it just not to go on that day, but again, we thought that longer bigger.
Speaker Change: Picture long term perspective, we're going to move forward with our schedule as it is.
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.
Speaker Change: And did you have any takeaways for the Iga or infrastructure spending in general in the U S.
Speaker Change: Interesting.
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.
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.
Speaker Change: Okay. That's great color. Thanks, again, guys good results I get back in queue.
Speaker Change: Thank you.
Speaker Change: Thank you I would now like to turn the call back over to Gordon Johnson for any closing remarks.
Speaker Change: 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.
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 Justin <unk>, our VP of Investor Relations and have a great day everyone.
Speaker Change: Thank you. This concludes the conference. Thank you for your participation you may now disconnect.
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