Q2 2025 Stantec Inc Earnings Call

Jess Nieukerk: Welcome to Stantec's second quarter 2025 results webcast and conference call. Leading the call today are Gordon 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. All information provided during the 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 purpose of today's call. Unless otherwise noted, dollar amounts discussed in today's call are expressed in Canadian dollars and are generally rounded.

Welcome to stantec second quarter 2025, results, webcast and conference. Call leading the call today, are or Johnston, president and chief executive officer, and Fetal Coleman, Executive Vice President, and financial, and Chief Financial Officer. Stantec, invites those dialing in to view the slide presentation which is available in the investor section at stantec cam.

Today's call is also webcast, please be advised that if you have dialed in. Well, also viewing the webcast. You should mute your computer, as there is a delay between the call and the webcast.

All information provided during the conference call is subject to the forward-looking statement qualif ication, set out on slide 2, detailed in the Management Discussion and Analysis, and incorporated in full for the purpose of today's call.

Jess Nieukerk: With that, I will turn the call over to Mr. Gordon Johnston.

Unless otherwise noted dollar amounts discussed in today's, call are expressed in Canadian dollars and are generally rounded.

With that. I will turn the call over to Mr. Gordon. Johnston.

Gordon Johnston: Good morning, and thank you for joining us today. Before I get into our Q2 results, I am pleased to announce that on July 31, we closed the acquisition of Page. In early April, we announced the acquisition, and in the interim period, we were working on various regulatory approvals prior to the formal close. Page is a very strong US-based architecture and engineering firm headquartered in Washington, D.C. The acquisition complements our buildings business and helps bolster our services in key growth sectors, including healthcare, advanced manufacturing, data centers and mission-critical, academic, science and technology, and civic markets. In addition, I would also like to highlight that on June 27, we acquired Cosgroves, a 90-person firm expanding our buildings engineering capabilities in New Zealand.

Good morning.

And thank you for joining us today.

Before I get into our Q2 results, I'm pleased to announce that on July 31st, we closed the acquisition of page.

In early April, we announced the acquisition and in the interim, period. We were working on various regulatory approvals, prior to the formal clothes.

Pages of very strong us-based architecture and engineering firm headquartered in Washington DC.

The acquisition Compliments are building business and helps bolster our services and key growth sectors, including Health Care, Advanced manufacturing data, centers, and Mission critical.

Academic science and technology and civic markets.

Gordon Johnston: As we previously announced, we acquired Ryan Hanley back in April, bolstering our offerings in the Irish water sector. I would like to welcome the 1,500 talented individuals from Page, Cosgroves, and Ryan Hanley to the Stantec team, which has now grown to over 34,000 employees. I am also pleased to share that Stantec continues to earn recognition through a range of accolades from respected industry and media organizations. We are honored to be ranked the number one architecture firm in healthcare worldwide by Modern Healthcare's 2025 Construction and Design Survey. In addition, Time Magazine ranked us fifth on its 2025 list of Canada's best companies and among the top 50 of the world's 500 most sustainable companies. Now, let us focus on our results. Stantec has delivered very strong results in the first half of 2025, delivering organic growth across all of our regions and business operating units.

In addition, I'd also like to highlight that, on June 27th. We acquired cause groups, a 90 person firm. Expanding our buildings, engineering capabilities in New Zealand.

And as we previously, announced, we acquired Ryan. Hanley back in April bolstering, our offerings in the Irish Water sector.

Home page caused Groves and Ryan Hanley to the Sante team, which has now grown to over 34,000 employees.

I'm also pleased to share that stantec continues to earn recognition through a range of accolades from respected industry and media organizations.

We are honored to be ranked the number 1 Architecture, Firm in healthcare, worldwide by modern healthcare's 2025 Construction, and design survey.

In addition Time, Magazine, ranked us 5th on a 2025 list of Canada's best companies and among the top 50 of the world's 500, most sustainable companies.

Now, let's focus on our results.

Gordon Johnston: Public infrastructure spending and private investments continue to be a key driver of growth in 2025, with strong demand across the water, transportation, mining, energy transition, and mission-critical sectors. In the second quarter, we delivered net revenue of $1.6 billion, up 6.9% year-over-year, which was primarily driven by 4.8% organic growth. Our energy and resources business delivered high single-digit organic growth, and water achieved 12.4% organic growth. With our focus on solid project execution and operational excellence, we grew our adjusted EBITDA by 15%, with an enhanced margin of 17.8%. We also delivered adjusted EPS growth of over 21% compared to Q2 2024. Looking at our results in each of our geographies, in the U.S., our Q2 net revenue increased by 5.7%, which was supported by organic growth of 4.4%. From a trend perspective, we saw improvements in U.S. organic growth compared to the first quarter.

Stantec has delivered very strong results in the first half of 2025, delivering organic growth across all of our regions and business operating units.

Public infrastructure, spending and private Investments continues to be a key driver of growth in 2025 with strong demand, across the water transportation mining, energy transition, and Mission critical sectors.

In the second quarter we delivered net revenue of 1.6 billion dollars up 6.9% year-over-year which was primarily driven by 4.8% organic growth.

Our energy and resources, business delivered, High single-digit, organic growth and water, achieved 12.4%, organic growth.

With our focus on solid project execution and operational excellence, we grew our adjusted EVA down by 15%.

With an enhanced margin of 17.8%.

We also delivered EPS, growth, adjusted EPS, growth of over 21% compared to Q2 2024.

Looking at our results. In each of our geographies,

In the US, our Q2, net revenue increased by 5.7%.

Gordon Johnston: Client demand for mission-critical, science and technology, and civic all contributed to growth in our buildings business. Growth in environmental services was mainly driven by our energy transition, mining, and industrial infrastructure sectors, as well as the continued work for a large-scale utility provider. Growth in water was driven by large public sector water supply and wastewater treatment projects. Energy and resources growth saw the ramp-up of a major hydropower dam project in the Southwest. In Canada, net revenue grew by 6.2%, underpinned completely by organic growth. The continued momentum on major wastewater projects contributed to over 30% organic growth in water. Consistent progress on major industrial process projects drove double-digit organic growth in energy and resources. Solid growth in infrastructure was supported by land development projects in Alberta, and public sector investment in Western Canada drove growth in our buildings business, primarily in our healthcare and civic markets.

Which was supported by organic growth of 4.4% from a trend perspective. We saw improvements in US organic growth compared to the first quarter.

Client demand for Mission critical science and technology and Civic. All contribute, to growth in our buildings business,

Growth and environmental services was mainly driven by our energy transition, mining and industrial infrastructure sectors, as well as continued work for a large-scale utility provider.

Growth in water was driven by large public sector water supply and wastewater treatment projects.

And energy and resources growth, saw the wrap-up of a major hydropower Dam project in the Southwest.

In Canada, net revenue, grew by 6.2% underpinned, completely buy organic growth.

The continued momentum on major Wastewater projects contribute to over 30%. Organic growth in water.

Consistent progress on major, industrial process projects, grow double digit, organic growth and energy and resources.

Solid growth and infrastructure was supported by Land, Development projects in Alberta.

Gordon Johnston: Finally, our global business delivered net revenue growth of 10.5% in the second quarter, with 4.3% organic and 3.6% acquisition growth, as well as positive foreign exchange impacts. Our industry-leading water business delivered double-digit organic growth across the UK, Australia, and New Zealand through long-term framework agreements and public sector investment in water infrastructure. 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 copper. We also achieved double-digit organic growth in our German business due to continued momentum on a major public sector energy transportation project and increased volume on transit and rail projects. Now I'll turn the call over to Vito Culmone to review our Q2 financial results in more detail.

And public sector investment in western Canada. Growth in our buildings, business primarily in our Healthcare and Civic markets

Finally, our Global business delivered, net revenue, growth of 10.5% in the second quarter, with 4.3% Organic and 3.6% acquisition growth, as well as positive foreign exchange impacts.

Our industry-leading water business delivered double-digit organic growth across the UK, Australia, and New Zealand through long-term framework agreements and public sector investment in water infrastructure.

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

And we also achieve double digit organic growth in our German business. Did it continued momentum on a major public sector energy Transportation project.

And increased volume on Transit, and rail projects.

Vito Culmone: Thank you, Gordon. Good morning, everyone. Stantec's positive momentum continues, as seen with our second quarter results, positioning us to deliver another exceptional year. In Q2, we achieved gross revenue of approximately $2 billion and net revenue of $1.6 billion, an increase of 6.9% compared to Q2 2024. This was primarily driven by 4.8% organic growth. As a percentage of net revenue, our project margins remained in line with our expectations at 54.2%. We achieved a very strong adjusted EBITDA margin of 17.8% in the quarter, a 120 basis point increase compared to last year. The increase in margin primarily reflects lower and mid-end marketing expenses as a percentage of net revenue due to lower claim provisions and discretionary spending. Our adjusted EPS in the quarter increased over 21% to $1.36.

Now, I'll turn the call over to veto to review our Q2 Financial results in more detail.

Thank you Gordon. Good morning, everyone.

Stantec's positive momentum continues, as seen with our second quarter results. We are positioned to deliver another exceptional year.

In Q2, we achieved gross revenue of approximately $2 billion and net revenue of $1.6 billion, an increase of 6.9% compared to Q2 2020.

This was primarily driven by 6, 4.8% organic growth.

As a percentage of net revenue, our projects margins remained in line with our expectations at 54.2%.

We achieved a very strong adjusted ebit margin of 17.8% in the quarter, 120 basis, point increase compared to last year.

The increase in margin primarily reflects lower marketing expenses as a percentage of net revenue, due to lower claim provisions and discretionary spending.

Vito Culmone: Our Q2 results build on a strong first quarter, and on a year-to-date basis, our adjusted EBITDA margin is 17%, a full 1% ahead of the first half of 2024. In addition, our adjusted EPS is up a very robust 24.9%. With our year-to-date performance and the closure of the Page acquisition, we are very well positioned to increase guidance across various metrics, which Gordon will speak to shortly. Turning to our cash flow, liquidity, and capital resources, year-to-date operating cash flows are up 100% compared to 2024, from $117 million to $235 million, reflecting continued strong revenue growth, operational performance, and continued strong collection efforts. DSO at the end of the second quarter was 73 days, a decrease of four days compared to the first quarter of 2025. This is well below our internal target of 80 days or lower.

And our adjusted EPS in the quarter increased over 21% to $1.36.

Our Q2 results build on a strong first quarter and on a year-to-date basis or adjusted even to margin of 17% a full. 1% ahead of the first half of 2024

In addition, our adjusted EPS is up a very robust 24.9%.

With our year-to-date performance. And the closure of the page acquisition, we are very well positioned to increase guidance, across various metrics, which Gordon will speak to you shortly.

Returning to our cash flow, liquidity and capital resources.

Year to date operating cash. Flows are up 100% compared to 2024 from 117 million to 235 million, reflecting continued, strong Revenue, growth operational, performance and continued, strong collection, efforts,

Vito Culmone: Our net debt to adjusted EBITDA ratio at June 30 was 1.1 times, essentially in line with where we closed out the first quarter and remaining well within our internal target range of one to two times. I would like to take a minute to highlight some recent financing transactions we completed in Q2. I characterize these as being in the normal course of our business and reflecting the significant growth in our operations over the last few years. On June 10, we issued $425 million senior unsecured notes bearing an interest rate of 4.374% per annum for a seven-year term. These notes were assigned an investment grade credit rating of triple D by DBRS Limited. Also, in mid-June, we increased our unsecured revolver credit facility to $1.2 billion, up from $800 million, and we extended the maturity date out to June 30.

So, at the end of the second quarter, our days outstanding was 73 days, a decrease of 4 days compared to the first quarter of 2025. This is well below our internal target of 80 days or lower.

Our net debt to adjusted ibida ratio at June 30th was 1.1 times. Essentially, in line, with where we closed out the first quarter and remaining well within our internal target range of 1 to 2 times.

I'd like to take a minute to highlight some recent financing transactions. We completed in Q2

I characterize these as being in the normal course of our business and reflecting the significant growth in our operations over the last few years.

On June 10th, we issued 425 million senior unsecured notes. Bearing an interest rate of 4.374% per Anum for a 7-year term.

These notes were assigned an investment grade rating. Excuse me, investment grade. Credit rating of triple V by dbr Limited.

Vito Culmone: Both of these financing transactions were well oversubscribed and reflect the credit community's deep understanding and confidence in our sector and company. We appreciate the continued support. As Gordon noted, we closed the Page acquisition on July 31, and post-closing, our remaining credit capacity is just over $1 billion, and our balance sheet remains very strong. Gordon, I will now hand the call back to you.

Also, in mid-June, we increased our unsecured revolver credit facility to $1.2 billion, up from $800 million, and we extended the maturity date out to June 30th.

Both of these financing transactions were well oversubscribed and reflect the credit community's deep understanding and confidence in our sector and company. We appreciate the continued support.

As Gordon noted, we closed the page acquisition on July 31st, and post-closing, our remaining credit capacity is just over $1 billion.

And our balance sheet remains a very strong.

Gordon Johnston: Thanks, Vito. At the end of the second quarter, our contract backlog stood at $7.9 billion, reflecting approximately 12 months of work. Our backlog underscores the continued strong demand to support our clients' most pressing challenges. Year over year, backlog has grown by almost 10%, reflecting robust organic growth of 9% across each of our geographies, and most notably, double-digit growth in our water and energy and resources businesses. I'd also note that our U.S. organic backlog is up 9.8% year over year. This reflects the positive trend in organic growth and continued strength of our business in the region. Growth within our global operations was driven by new project awards in our infrastructure and environmental services business in Europe and ABAT project awards in our UK water business.

Gourd on our hand, to call back to you.

Thanks Vito.

At the end of the second quarter, our contract backlog. Stood at 7.9 billion dollars reflecting approximately 12 months of work.

Our backlog underscores the continued strong demand to support our clients and the most pressing challenges.

Year-over-year, backlog has grown by almost 10% reflecting robust, organic growth of 9%, across each of our geographies, and most notably double-digit growth in our water and energy and resources businesses.

I'd also note that our us organic backlog.

Is up, 9.8% year-over-year?

In organic growth and continued strength of our business in the region.

Growth within our Global operations was driven by new project Awards and our infrastructure and environmental services business in Europe.

Gordon Johnston: This growth is partially offset by a retraction in our Australian business buildings operations, as well as high burn rates in our water business. I'll now highlight a few of the projects that Stantec has recently been awarded. A Stantec joint venture was recently awarded a $150 million single award contract supporting the U.S. Navy Shipyard Infrastructure Optimization Program, focusing on the modernization of the Portsmouth Naval Shipyard in Maine. U.S. Navy shipyards were originally designed and built in the 19th and 20th centuries, and this program will support the upgrade of facilities, utilities, dry docks, equipment, and information technology infrastructure. In the UK, our infrastructure team was awarded a four-year framework with Transport for Greater Manchester, where we will deliver a range of transport, design, engineering, and analysis services, as well as program and project management support.

And amp 8 project Awards in our UK water business.

This growth is partially offset by a retraction in our Australian business buildings operations, as well as high burn rates in our water business.

I'll now highlight a few of the projects that stantec has recently been awarded

A static joint venture was recently. Awarded a 150 million single award contract supporting the US Navy shipyard infrastructure optimization program.

Focusing on the modernization of the Portsmouth Naval Shipyard in Maine.

US Navy shipyards were originally designed in built in the 19th and 20th centuries. And this program will support the upgrade of facilities utilities.

Dry docks equipment and information technology infrastructure.

Gordon Johnston: Lastly, Stantec's water and environmental services teams are collaborating on Google's water replenishment project sourcing in Taiwan. This project is part of Google's Global Water Replenishment Initiative. It also highlights Stantec's use of nature-based solutions, which includes a gravel contact oxidation process for sustainable water treatment and watershed restoration. On the strength of our performance year to date, the completion of two acquisitions within the second quarter and with the recent closure of Page, we're increasing our outlook for 2025. We now expect to achieve net revenue growth of 10% to 12%, up from our previous guidance of 7% to 10%. Given our strong diversification across geographies, we continue to expect mid-to-high single-digit organic growth across the businesses. In Canada and in global, we continue to expect organic net revenue growth in the mid-to-high single digits.

In the UK, our infrastructure team was awarded a 4-year framework with Transport for Greater Manchester, where we will deliver a range of transport, design, engineering, and analysis services, as well as program and project management support.

Google's Water Replenishment Project sourcing in Taiwan.

This project is part of Google's Global Water Replenishment Initiative.

And ALS highlights Dante's use of nature-based solutions.

Which includes a gravel contact? Oxidation process for sustainable water treatment and watershed restoration.

On the strength of our performance year to date the completion of 2 Acquisitions within the second quarter. And with the recent closure of page, we're increasing our outlook for 2025

We now expect to achieve net revenue growth of 10% to 12%, up from our previous guidance of 7% to 10%.

Given our strong diversification across geographies, we continue to expect mid.

To high single-digit organic growth across the businesses.

Gordon Johnston: We continue to see strong momentum in both these regions, with elevated backlog levels in Canada, particularly in infrastructure and energy and resources, and through high levels of activity in our global water business. ABAT continues to ramp up in the U.K., and other water frameworks in Australia and New Zealand are ramping up as well. In the U.S., we expect organic growth to accelerate in the second half of the year, and we've moderated our outlook slightly to mid-single digits. The U.S. administration has implemented significant shifts in policy, funding priorities, tariffs, and regulatory frameworks, and most notably with the recent passage of the One Big Beautiful Bill Act. The ultimate driver of these initiatives is to stimulate investment in the U.S. across all sectors and to strengthen the U.S. economy. In fact, we're already seeing momentum starting to ramp up again.

In Canada and in global, we continue to expect organic net revenue growth in the mid to high single digits.

We continue to see strong momentum in both these regions with elevated. Backlog levels in Canada, particularly in infrastructure, and energy, and resources, and through high levels of activity, in our Global Water Business.

Ampi continues to ramp up in the UK, and other water frameworks in Australia and New Zealand are ramping up as well.

In the US, we expect organic growth to accelerate in the second half of the year and we've moderated our, our Outlook slightly to Mid single digits.

The US Administration has implemented significant shifts in policy funding priorities, tariffs, and Regulatory Frameworks.

And most notably, with the recent passage of the $1 big beautiful bill act.

Gordon Johnston: Furthermore, we're also encouraged by our healthy backlog, which positions us for continued positive growth. On the strength of our operations year to date, we've also increased and narrowed the range for adjusted EBITDA margin to 17% to 17.4%, up from 16.7% to 17.3%. This reflects solid project execution and continued discipline in cost management. With this, we actually expect to hit our strategic plan target of 17% to 18% a year early, with the ability to continue building on this performance. We now expect to deliver 18.5% to 21.5% growth in adjusted EPS compared to 2024, up from 16% to 19%, once again driving earnings well above net revenue growth. And finally, adjusted ROIC is now expected to be greater than 12.5%. As we enter the second half of 2025, we remain firmly on track to deliver another record year.

The ultimate driver of these initiatives, is to stimulate investment in the US across all sectors and to strengthen the US economy. In fact, we're already seeing momentum starting to wrap up again.

Furthermore, we're also encouraged by our healthy backlog which positions us for continued. Positive growth.

On the strength of our operations year to date. We've also increased and narrowed the range for adjusted EBA margin to 17 to 17.4% up from 16.7 to 17.3%.

This reflects solid project execution and continued discipline and cost management.

With this, we actually expect to hit our strategic plan Target of 17 to 18% a year, early, with the ability to continue building on this performance.

we now expect to to deliver 18.5 to 21.5% growth in adjusted, EPS compared to 2024 up from 16 to 19% once again, driving earnings well above net, revenue growth,

And finally, adjusted roic is now expected to be greater than 12.5%.

Gordon Johnston: Macro trends of aging infrastructure, data centers, energy security, water and wastewater treatment, healthcare, and reshoring all continue to drive our business. We will remain focused on delivering strong project execution and operational excellence. And while we have already completed three acquisitions this year, the pipeline of opportunities remains full, and we are extremely well positioned, both from an integration and a financing standpoint, to do more. It is an exciting time for our industry and for Stantec, and we will continue to deliver compounded growth as we drive towards our 2024 to 2026 strategic plan goals. With that, I will turn the call back to the operator for questions. Operator?

As we enter the second half of 2025, we remain firmly on track, excuse me to deliver another record year.

Macro trends of aging infrastructure, data centers, energy security, and water and wastewater treatment in healthcare continue to drive our business.

We will remain focused on delivering strong project execution, and operational excellence. And while we have already completed, 3 Acquisitions this year, the pipeline of opportunities remains full and we are extremely well positioned.

Both from an integration and a financing standpoint, to do more.

It's an exciting time for our industry and for stantec and we'll continue to deliver compounded growth as we drive towards our 2024 to 2026 strategic plan goals.

Speaker 5: Thank you. To ask a question, please press star one-one on your telephone and wait for your name to be announced. To withdraw your question, please press star one-one again. We ask that you please limit yourself to one question and one follow-up before reentering the queue. One moment as we compile our Q&A roster. Our first question is going to come from the line of Krista Friesen with CIBC. Your line is open. Please go ahead.

And with that, I'll turn the call back to the operator for questions. Operator.

Thank you.

To ask a question, please press *1, 1 on your telephone and wait for your name to be announced to withdraw your question. Please press *1, 1 again. We ask that you please limit yourself to 1 question and 1 follow-up before re-entering the queue. One moment as we compile our Q&A roster.

our first question is going to come from the line of Christopher with

Speaker 6: Hey, thanks for taking my question. I was wondering if maybe you can just provide us with a little bit of additional color on what you're hearing from your US customers, specifically in the private sector, as you called out, maybe an elevated level of caution right now.

CIBC, your line is open. Please go ahead.

Hey, thanks for taking my question. Um oh

Gordon Johnston: Yeah, great question, Krista. What we are seeing is that in the first half of the year, there was a little bit of trepidation to make that final investment decision and to move forward. But as we said in the prepared remarks, we really are looking to see our forecasting our U.S. organic growth to accelerate in the second half of this year. Our U.S. backlog is up 9.8% organically year over year, and it is actually particularly strong in water, energy, and data centers, some of those private sector type work that you are talking about. In the private sector, interestingly, data centers, mission-critical, and so on, we are currently working on over 100 data center projects. It is interesting. We see our, even from our July results, we saw an an increase in our U.S. organic growth to even that high single-digit range.

Maybe you can just uh, provide us with a little bit of additional color on what you're hearing from your us, customers specifically in the uh private sector. As you called out, maybe an elevated level of caution right now.

And organically, year-over-year, it's actually particularly strong in water, energy, and data centers. Some of those private sector types of work that you're talking about.

In the private sector. Interestingly, data centers, Mission critical, and so on. We're currently working on over a hundred data center projects and so

Gordon Johnston: We also, interestingly, saw continued acceleration even on an organic backlog in the July period. We are actually feeling pretty good about that acceleration in organic growth, both in public and in the private sector in the second half of the year.

Speaker 6: Okay, great. Then maybe just on the acquisition front, you guys have been busy with a couple of acquisitions recently. How are you feeling on the integration? I appreciate Page was just two weeks ago here, but just any update there?

it's, it's interesting. We see our from our even from our July results, we saw an increase in or us organic growth to the even that that high single digit range. But we also interesting, saw continued acceleration even on an organic backlog, uh, in in, in the July period. So we're actually feeling pretty good about, you know, that acceleration in organic growth, both in public and in the private sector, in the second half of the year.

Gordon Johnston: Yeah, so, no, but I will let you go ahead. Ryan Hanley is a firm, a smaller firm, a couple hundred people in Ireland. We have been working with them for years. That integration is going very well. We actually anticipated, I think, to be completed by the end of this year, the financial integration. Cosgroves, similarly, 90-person firm, 100-person firm down in New Zealand. That one is continuing. Page is really interesting, 1,400, 1,500 people, but we have worked with them for a long time. We have, over the last number of months, been working on how do we align leadership, starting to look already at the financial transformation. In fact, that is planned for Q4 of this year.

Okay, great. And then maybe just on the acquisition front, uh, you guys have been busy with the, with a couple Acquisitions recently. Um, how are you feeling on? On the integration? I appreciate Paige was, uh, just a 2 weeks ago here, but just any update there.

Yeah. So oh a little bit. I'll so the um

Gordon Johnston: We think we are going to be in pretty good shape, really having wrapped up the majority of the integration and the financial work by the end of the year on all three of these.

Speaker 6: That's great. Thank you. I'll pass the line. Congrats on the quarter.

Ryan Hanley, uh, is a firm smaller firm, couple hundred people in Ireland. We've worked been working with them for years, so that that integration is going very well. We actually anticipated, I think to be completed by the end of this year, the financial integration, uh, Cosgrove, similarly, uh, 90 person firm 100 person firm down in New Zealand. You know that 1 is is continuing page, is, is really interesting 140000500 people, but we've worked with them for a long time and and we've over the last number of of months, we've been working on. How do we align leadership starting to look already at the financial transformation? And in fact, that's planned for Q4 of this year. So we think we're going to be in pretty good shape really having wrapped up the majority of the integration and the financial work by the end of these. At the end of the year, on all 3 of these,

Gordon Johnston: Thank you.

Speaker 5: Thank you. One moment for our next question. Our next question comes from the line of Sadat Khan with RBC Capital Markets. Your line is open. Please go ahead.

That's great. Thank you. I'll, uh, I'll pass the line. Congrats on the quarter.

Thank you. Thank you. 1 moment for our next question.

Speaker 7: Great. Thanks and good morning. I guess just sticking with kind of the outlook commentary, it looks like the margin guidance midpoint has been kicked up a little bit. Maybe we can just get into some of the details around the progress here to date on the margin side and just what are some of the contributors to the margin being pushed up higher for the full year. Thanks.

Our next question comes from the line of sot con with RBC Capital markets. Your line is open. Please go ahead.

Vito Culmone: All right, Sadat. We're really, it's been a beautiful year this morning. Really pleased with our progression year to date and what we see for the balance of the year with respect to EBITDA margins. You're absolutely right. We have bumped up the EBITDA margins now from 16.7% to 17.3% to that 17.3% to 17.4% range. Year to date, we're at 17%, which is 100 basis points ahead of where we were a year ago. I don't believe we'll be able to maintain that 100 basis points year-over-year improvement in H2, obviously because the guidance reflects moderation to the year-over-year side of things, but continue to see improvement in it. For us, it always starts with just strong project margins. Of course, we don't take that for granted. Your EBITDA margins always start with that, the right customer, right price, excellent execution.

Okay, great, thanks, and good morning. Um, I guess just uh, stick with kind of the, the Outlook commentary. You know, it looks like the the margin guide is the midpoints been picked up a little bit. Maybe you can just get into some of the details around, you know the progress here to date on the margin side and just what are some of the contributors to the margin being pushed up higher for the for the full year. Thanks.

Vito Culmone: So just a huge shout out to the operations team to continue to focus on that. Our project margins in the quarter were 54.2%, which actually is 0.2% lower than prior year. But that really reflects mixed global business. It was a higher percentage of our overall business in Q2, and they profiled at a lower project margin. So in North America, our project margins were actually up year over year. It starts with strong project margins. You saw that admin and marketing costs. We target that as a lower percentage of overall net revenue. Utilization in the quarter was higher. That always contributes. Just the general nature of our operational scale and leveraging our back offices and growing that at a pace that's lower than our overall revenue growth continues to be a positive contributor, of course. We did call out claims in the quarter for particular Q2.

Hi, csaba. Yeah, we're really uh Speedo here. Good morning really pleased with our progression uh year to date. And what we see for the balance of the year uh with respect to ebit emergence. Uh, you're absolutely right. Uh you know we have bumped up the emergence. Now from 167 to 173 to that 17 to 174 range year to date. We're at 17%, which is 100% 100 basis points. Ahead of where we were a year ago, I don't believe we'll be able to maintain that. 100 basis points year-over-year Improvement in H2. Uh, obviously because the guidance reflects a moderation to the year-over-year side of things but continue to see Improvement in it, you know for us it always starts with just strong project, margins, of course we don't take that for granted. Uh you're even a margin is always start with that the right customer, right price.

Excellent execution. So just a huge shout out to the operations teams continued to focus on that our project margins in the quarter were 54.2%, which actually is 0.2% lower than prior year. But uh, that really reflects mixed Geographic, uh, Global business was this,

A higher percentage of our overall business in Q2 profiled at a lower project margin. So in North America, our project margins were actually up year-over-year, so we'll start with strong parts of project margins. You saw that admin and marketing costs, uh, you know, we target that as a lower percentage of overall net revenue, uh, utilization in the quarter.

Vito Culmone: Claims is always a little bit lumpy, obviously, but in Q2, we did have favorable settlement of two claims in particular relative to the provisions we had. That contributed, I'll call it 30 to 40 basis points in the quarter. Those are all the drivers. Very, very pleased with it. It's a continuation of a multi-year story for us, as Gordon referred to in his opening remarks, hitting the 17, piercing the 17% mark one year earlier than our strap line just is a strong indication of what we believe is to come here in the next several years.

Speaker 7: Great. Thanks for the color there. Maybe the second one for Gordon. On the water side, it looks like it is about a 12.5% organic growth this quarter. The interesting thing there being, it has been several years of good strength in the water market. Maybe if you can just help us think through what drove that, the near-term demand drivers. It sounds like ABAT might still be at the early stages, so assuming some of the other work is driving. Maybe just give us perspective on what is driving the strong growth there and maybe the opportunities in the data center side if some of those are tied to water as well. Thanks.

Mark, 1 year earlier than our strap plan. Just uh uh, is is a strong indication of what we believe is uh, to come here in the in the next several years.

Great thanks. Thanks for the caller there and then maybe the second 1 for gourd. Um, on the on the water side it looks like about a 12 and a half percent organic growth this quarter.

And the interesting thing there being, you know, it's been several years of good strength in the Water Market. So maybe if you can just help us think through

Gordon Johnston: Right. No, great perspective. As we have talked about before, and I think everyone on the call is aware of it, we have had strong organic growth in water back to 2019. Every quarter, it just continues to get stronger with our overall water business. You are right, we are still early days with ABAT ramping up, although we are already sort of at a level roughly about 50% higher this time of year than we were a year ago. That is already coming, and we are actively hiring people in the U.K., expanding our delivery centers in Pune, India, to continue to service that demand. I think we talked about like even in Canada, we had 30% organic growth on top of more and more of strong quarters year over year.

what drove that the near-term demand drivers sounds like a 8 might still be at the early stages. So assuming some of the other work is driving. So maybe just give us perspective on you know what's driving the strong growth there and maybe you know the opportunities in the data center side if some of those are tied to water as well, thanks

All right. No problem. Great perspective.

You know, we as, as we've talked about before, and I think everyone on the call is, we're like we've had strong organic growth in water back to 2019 and every, every quarter, it just continues to get stronger with with our overall water business. And so, you're right. We're still early days with um, with amp, uh, 8 ramp up. Although we are already sort of at a level roughly about 50% higher this time of year than we were a year ago. So we're all that is already coming. And we're, we're actively hiring, um, people in the UK expanding our delivery centers in, um, in Pune India to continue to, uh, to to service that demand. But, you know, I think we talked about, like, even in Canada. We had 30% organic growth on

Gordon Johnston: There is just an enormous amount of work that we see in water treatment, wastewater treatment, advanced manufacturing facilities. You mentioned the data centers, but also as we are talking to clients about reshoring some of their facilities, it all starts with water. While our water business continues to strengthen, our backlog is even up even further. We see continued strength in that water business for the remainder of 2025 and really for the years to come. No slowing down in the water space whatsoever.

On top of more and more, you know, strong quarters, uh, uh, year-over-year. So there's just an enormous amount of of work that we see, um, in water treatment wastewater treatment, uh, Advanced manufacturing facilities you mentioned, you know, the data centers. But also as you know, we're talking to clients about reshoring some uh some of their uh their facilities. It all starts with with water so while our water business continues to strengthen our backlog is even up even further. So we see continued strength in that water business, you know, for the remainder of 25 and and really for the years to come

Speaker 7: All right. Thanks very much.

No slowing down in the water space uh whatsoever.

Speaker 5: Thank you. One moment for our next question. Our next question comes from the line of Chris Murray with ATB Capital Markets. Your line is open. Please go ahead.

Thanks very much.

Thank you. When

Gordon Johnston: Thanks, folks. Gordon, maybe turning back to thinking about the U.S. business, maybe longer term. It definitely feels like a bit of a blip in the quarter because you are talking about, again, like high single-digit type growth in the backlogs, and your commentary a little bit about recovery. If I go back a couple of quarters, the discussion has been, how long could the U.S. market continue to support, frankly, what are kind of above-average single-digit organic growth levels? Just any thoughts on how you are viewing kind of the next couple of years on what the spending pace looks like and your comfort level on where we are going. With that, is there any particular sectors that you think that you need to add in order to be able to accomplish or achieve some of that? Great question.

Question comes from the line of Chris Murray with ATB Capital markets. Your line is open. Please go ahead.

Yeah, thanks folks. Um, you know Gordon may turn it back to thinking about the US business um maybe longer term. I mean it it it gets the feels like a bit of a blip in the quarter because you're talking about, you know, again like high single digit type growth in the backlogs. Um and and you know, your commentary a little bit about recovery. Um, if I go back a couple quarters, you know, sort of the discussion has been, you know, how long could the US market continue to support, you know, frankly what are kind of above average single digital organic growth levels um and just any thoughts on on how you're viewing kind of the next

Couple years um on you know what, the what the spending Pace looks like and your comfort level on on where we're going. And with that, you know, is there any particular sectors that you think that you need to add in order to be able to accomplish or achieve some of that?

Gordon Johnston: As we look forward in the remainder of this year and the rest of next year, we mentioned already that we are 80% organic growth in backlog in the U.S. Then you look at some of the other drivers. We have done a lot of talking before as in the industry about IIJA. Only about 40% of that, less than 40% of that has been spent. So there is a lot of opportunity to continue to come there in the next couple of years to allocate some of those funds before they are not eligible for allocation at the end of 2026. That part feels strong. You look at the One Big Beautiful Bill, and there is some additional supports for infrastructure, state and local government there. Data centers, mission-critical, those continue to grow. It is interesting there.

Gordon Johnston: I mentioned to Krista's comments, we have been, we are working on over 100 data center projects right now from 20 megawatts up to a gigawatt in size. Now the addition of Page to our team even strengthens our already strong group there. So there is just a lot of opportunity across, whether it is transportation or water, buildings, energy, the energy transition, mining. We see really, really strong strength going forward. I think that what we have seen in the first couple of quarters of this year, not just us, but the industry overall, is just a little bit transitory. We see good fundamentals going forward. We did lower our organic guidance for the year to 5%, but that is really just a function of mathematics. That, you know, like we are sitting at 3.3% year to date, and so 3.4% year to date.

Yeah, a great question. So, you know, as we, as we look forward in the, the remainder of this year and the and the rest of next year, you know, we mentioned already that we're, uh, you know, 90% organic growth in backlog in the US. But then you look at, you know, some of the other drivers, you know, we, we've done a lot of talking before, as in the industry about iija, only about 40% of that less than 40% of that has been spent. So there's a lot of opportunity to continue to come there, you know, in the next couple of years, uh, to allocate some of those funds before. It's, uh, you know, we they're not eligible for allocation at the end of 2026. So that that part feels strong, you know, you look at the 1, big beautiful Bill and there's some additional supports for infrastructure state and local give government uh uh, their data centers Mission critical. Those continue to grow. And, you know, it's interesting there, you know, I mentioned uh, to Chris's comments. We've been we're working on over a hundred data center projects right now from 20, megawatts up to a gigawatt inside.

And now the the addition of page to our team, even strengthens our already strong, uh, group there. So there's

Gordon Johnston: As we thought about just wanting to be clear and state our expectations, when we were saying mid to high single digits, everyone goes to 6% to 8%. If we are at 3.4% for the first half of the year, that means we would almost have to be double-digit organic growth in Q3 and Q4 in order to get into that range. We see continued acceleration, but I am not sure that we are going to get to 10% double-digit organic growth in both quarters. We just wanted to be clear with everyone and confirm our expectations. Just to confirm, though, we expect acceleration of organic growth in the US for the second half of the year and through 2026 and beyond.

To 5% but that's really just a function of mathematics. Yeah, that, you know, like we're we're sitting at 3.3% um, year to date and so 3.4% year to date. So as we thought about just wanting to be clear and state, our expectations, just, you know, when we were saying mid to high single digits, you know, everyone goes to 6 to 8 and if we're at 3.4 for the first half of the year, that means we'd almost have to be double digit organic growth in Q3 and Q4 in order to get into that range.

Vito Culmone: Yeah. Gordon, I will just add maybe a couple of points in there. Chris asked whether there were any particular areas of potential gaps for us in the market or areas of focus. Chris, we remain incredibly bullish about the U.S. market. We, you know, aging infrastructure, U.S. remains incredibly behind in that, building resilience, heated weather events, so on and so forth. The macro factors just continue to be extremely buoyant. When you look at this administration's focus, frankly, and what they are investing in and what their areas of policy enforcement are with the OBBA and whatnot, it just speaks to increased focus and support for much of what we are describing.

We see continued acceleration but not not sure that we're getting hit to 10% double digit organic growth, in both quarters. So we just wanted to be clear with everyone and confirm our expectations, but but just to confirm, though, we expect acceleration of organic growth in the US for the second half of the year and through 2026 and Beyond. Yeah,

Uh, Gordon. I'll just add. Maybe a couple of things there and Chris asked, whether there was any particular areas of potential gaps for us in the market or, or areas of focus. Uh, Chris we remain incredibly bullish about the US market. Uh, I just uh and we you know, aging infrastructure, you know, us is remains incredibly behind in that building resilience heated weather events, so on and so forth. The macro factors are just continue to be uh extremely buoyant and and when you look at this administration's Focus, frankly uh and and what they're what they're investing in and what their areas of policy enforcement are with the, the obba and whatnot, it just speaks to increased focus. And so

Gordon Johnston: Anything else, Gordon, for you then?

Support for for much of what we're describing. So,

Vito Culmone: No.

Gordon Johnston: Okay.

Vito Culmone: Thanks, Chris.

Anything on the gas, the other know. Okay.

Gordon Johnston: Yeah, thanks. One other question that I just had on margins, and this maybe goes back to the investor day and talking about sort of the implementation of technology across the platform. I am kind of listening to some of the comments about SG&A leverage. Can you just talk to some of the AI and other technologies you guys were referencing and how they are playing into this margin profile at this point? Are you actually seeing them have any sort of impact or change, I guess, in the trend on revenue per head type metrics or earnings per head metrics at this particular point, or is it still kind of too early to be able to point to anything definite? Yeah, I think, you know, overall in the industry and Stantec Inc. included, we are still early days in sort of how far we can push this.

Um, thanks Chris.

Yeah, thanks. Um, and then 1 other question that I just had on on margins and this maybe goes back to the investor day and talking about sort of the implementation of Technology across the, uh, the platform. Um, and, you know, I'm kind of listening to some of the comments about sgna leverage, um, but can you just talk to some of the AI and other Technologies you guys are referencing and, and how they're playing into this margin profile of this point? Um are you actually seeing them? Have them any sort of impact or, or, or change I guess in the trend on revenue for head, um, type metrics or or or earnings per head metrics at this particular point, or is it still kind of too early to be able to point to anything definite?

Gordon Johnston: Interestingly, though, our entire C-suite went down to the Microsoft campus in Redmond there a couple of weeks ago, spent a day with their technology folks and our folks really talking about their journey, our journey, what are some of the areas that we believe that we could make use of AI and other digital tools. We are working very, very closely with them on some co-investment sort of ideas there. As we look at our inside at Stantec Inc., we have deployed over 10,000 licenses of Microsoft Copilot throughout the organization. We are looking at it from a number of perspectives, Chris.

Yeah, I I think, you know, overall, in the industry in santic has included, we're still early days and so, so how far we can push this, interestingly, though, our entire SE Suite, uh, went down to the Microsoft campus in, uh, in Redmond. There are a couple weeks ago, spent a day with their technology folks and, and our folks really talking about their Journey, our journey. What are some of the areas that that, we believe that we could, uh, make use of AI and other digital tools? And, and, um, so we're working very, very closely with them on, on some of, uh, some cool Investments sort of ideas there. Uh, but as we look,

Gordon Johnston: One is like, what can we do to make our back office more efficient, whether that is HR or accounts payable, expense account review, those sorts of things that we can make the backup house more efficient, reducing some of the SG&A costs, proposal writing, how can we speed, get speed to market on those sorts of things. Then also thinking about on the design side where we can start optimizing and automating some of the design processes. I think it is still early days. I am not sure that you are seeing it too much in that margin expansion yet, but certainly I think we will see it playing more of a factor in the years to come. Okay, that is helpful. I will leave it there. Thanks.

Look in at at our um, at in inside at sanche, you know, we've deployed over 10,000 licenses of co-pilot, um, you know, throughout the organization. And so we're looking at it from a number of perspectives, Chris. Um, 1 is like what can we do to make our back office more efficient? Whether that's HR or accounts, payable expense account review. Those sorts of things that we can, you know, make the, the back of house more efficient in reducing, some of the sgna costs, um, proposal writing, how can we speed, you know, get speed to Market on those sorts of things. And then also thinking about on the on the design side where we can start. Um,

Optimizing and and automating some of the design processes. So I think it's still early days and I'm not sure that you're seeing it too much in that margin expansion yet. But certainly, I think we'll see it playing more of a factor, uh, you know, in the years to come

Speaker 5: Thank you. One moment for our next question. Our next question comes from the line of Yuri Link with Canaccord Genuity. Your line is open. Please go ahead.

Okay. That's helpful. I'll leave it there. Thanks.

Thank you. Thank you.

And 1 moment for our next question.

Speaker 7: Good morning, guys.

Our next question comes from the line of your link with canaccord. Genuity, your line is open, please go ahead.

Gordon Johnston: Morning.

Good morning, guys.

Speaker 7: Just back, Gordon, on the acceleration and organic growth in the back half of the year. The comps are kind of interesting in terms of what you're lapping there. Q3 is 5.5% and then a 10% comp in Q4. Is it fair to say that that should help shape our expectations for more organic growth and bigger organic growth improvement in Q3 versus Q4?

Just back, uh, gourd on the, um, the the, the acceleration and organic growth in the, in the back half of the year. Um, the the comps are kind of interesting, uh, in terms of what you're lapping there, you know, Q3 is

5 and a half percent and then 10% comp and in Q4. So um fair to say that that should help shape our our expectations for um,

Gordon Johnston: You know, I think that's exactly right. When you look at the Q4 comp, already up 10%. That's again one of the reasons why we lowered our guidance to that 5%, that mid-5% type range. It's just because the comp in Q4 is a bit tough. We just wanted to set reasonable expectations of where we saw it. But we do see, I think we mentioned like in July, and of course, one period does not make a quarter, but it's a very, very positive trend that we saw high single-digit organic growth in the U.S. in the quarter, sorry, in the period in July, as well as a backlog, organic backlog acceleration as well. We're still feeling really good about that. Of course, consolidated, we still have mid to high single digits. It's just we only made that one adjustment on the U.S. side.

You know, more organic growth in bigger organic growth that Improvement in Q3 versus Q4.

Vito Culmone: Yeah. And just, I mean, I think the fact that obviously the U.S. represents half of our business, but on the consolidated, we're still at mid to high, just reflects, I think, Gordon and our listeners, the diversity and the strength of our global business, including, of course, North America.

1 of the reasons why we, why we lowered our guidance, to to that 5% that, you know, mid 5% type range is just because the the comp and Q4 is a bit tough and we just wanted to set reasonable expectations of of where we saw it. But we do see, you know, I think we mentioned like, in in July. And of course, 1 1 period. 1 does not make a a quarter, but it's, but it's a very, very positive trend that we saw. Um, you know, High single digit organic, uh, growth in the US in the quarter, sorry in the period in July as, as well as, you know, a backlog organic backlog acceleration as well. So we're still feeling really good about that and then, you know, of course, Consolidated we still have, uh, uh, mid to high single digits. It's just, we had only made that 1 adjustment on the US side. Yeah. And just, I mean, I think the the fact that

Speaker 7: Okay. Just thinking about the U.S. water business and one of your customers in financial difficulties there, wondering if that might have any impact over the next year or so.

obviously the US represents half of our business, uh, but on the Consolidated, uh, we're still at mid to high just reflects, I think or and and our listeners, you know, the diversity and the strength of our Global business including, and of course North America

Okay. Um,

Just thinking about uh the the US water business and uh 1 of your customers in. Uh,

Gordon Johnston: Yeah. In particular, you are thinking, talking about TEMS Water in the U.K.?

Financial difficulties there. Um, wondering if uh, if that might have any any impact, uh, over over the next year or so.

Speaker 7: Yeah, exactly. Yeah.

Gordon Johnston: Yeah, exactly. That's pretty public, I think, for everyone to see that they are in financial difficulty. What's interesting with TEMS Water is we've worked for TEMS Water and their predecessor organizations for almost 200 years in the U.K. You know, discussions that we're having is whether the government, and we have no indication of anything would happen, but if that were to be nationalized for some period of time, the work still needs to be done. We are, all of our discussions with our client are the work needs to be done, can continue. We're having no payment issues at this point. So we don't see that really as an impact to our business from a negative perspective.

Yeah. And so, um, in particular, you're thinking talking about Tam's water in the UK? Yeah, exactly. Yeah.

Yeah, no, exactly. And that's pretty public, I think for everyone to see that they are in in financial difficulty. But what's interesting with Tim's water is, we've worked for Tim's water, and their predecessor organizations for almost 200 years in, in the, uh, in the UK. And so, you know, discussions that we're having is

You know, whether the the government and we have no indication of of anything would happen. But uh, if that were to be nationalized for some period of time, the work still needs to be done. And so, um, we are all of our discussions with our clients are the the work needs to be done, can continue. We're having, no payment issues at this point so we don't, um,

Speaker 7: Yeah, not at all. Okay. Good to hear. I will turn it over. Thanks for the time.

We don't see that really as an impact to our business from a negative perspective. Yeah, not at all.

Gordon Johnston: Thanks, Yuri.

Speaker 5: Thank you. One moment for our next question. Our next question is going to come from the line of Michael DePaul with TD Cowan. Your line is open. Please go ahead.

Okay, good to hear. I'll turn it over. Thanks for the time.

Thanks Jerry.

Thank you. One moment for our next question.

Speaker 7: Thank you. Good morning.

Our next question is going to come from the line of Michael tool with TD. Cow on your line is open. Please go ahead.

Gordon Johnston: Morning.

Good morning.

Speaker 7: Gordon, it is pretty clear from your comments that you expect an acceleration in U.S. organic growth, which is great to hear. I guess my question is, the factors that you called out that, I guess, in the shorter, nearer term here have been weighing on organic growth. In the public sector side, you talked about some slower procurement, and on the private sector side, some of the issues in the larger capital project side within the private sector. I guess, have you overcome all of these, or are you seeing hiccups in other areas that are allowing you to offset those headwinds? I am just trying to get a sense if you have sort of fully moved past all those issues and those are now behind you and behind the industry, or if those are still there, but you are seeing strength elsewhere.

Morning.

Um cord is pretty clear from your comments, um, that you, you expect an acceleration in US organic growth which is great to hear. I guess. My question is the the factors that you called out that that um I guess in the shorter nearer term here have been weighing on organic growth. So in the public sector side, you talked about, um, you know, some, some slower procurement and on the private sector side. Um, some of the issues in the larger Capital project side within it within private sector, I guess. Like have you overcome all of these or are you seeing

Pickups in other areas are allowing you to offset those headwinds. It just, um,

Gordon Johnston: Yeah, I think what we're seeing is that the issues are diminishing a little bit. I don't think that they're past. Michael, it's interesting. One thing that we've been hearing from some of our business leaders is that from some of the agencies that we're working with, particularly in the U.S., a number of people took early retirement when it was offered and those sorts of things. So it's taking a little bit longer sometimes for them to get new people in those roles, to get the projects out the door and such. But we see that diminishing. I think we saw, not just us, but the industry overall, a little slower organic growth in the U.S., Q1, Q2, as we're working through some of these items. But I think that they're diminishing. In no way would I say that they're all solved.

Trying to get a sense if if you know you've sort of fully moved past all those issues and those those are now behind you and behind the industry or if those are still there, but you're seeing strength elsewhere.

Yeah. I I think what we're seeing is that the the issues are diminishing a little bit. I I don't think that they, that we've, that they're passed Michael. It's interesting. 1 thing that we've been hearing from some of our, our Business Leaders is that from some of the agencies that were that were working with particularly, in the US, a number of people took early retirement when it was offered and those sorts of things. So it's taking a little bit longer sometimes for

Gordon Johnston: But as we think about the acceleration of organic growth in the U.S. going forward, we still feel very positive about it, even with the diminishing issues that we called out there previously.

Them to, to get new people in those roles to get the projects out the door and such. But we see that diminishing. I think we saw a not just us, but the industry overall, a little slower organic growth in the US, q1 Q2 as we're working through some of these items but I think that they're diminishing. I, I don't but in no way what I say that they're all salt. But uh, you know, as we think about acceleration of organic growth in the US going forward.

Vito Culmone: Yeah, Michael, five sectors, thousands of projects, thousands of clients across multiple industries, obviously. I just echo 100% of what Gordon Johnston has described. You still see pockets of it, but overall diminishing as we move forward. Very few cancellations, if any, right, Gordon Johnston? These aren't cancellations we're talking about. We're just talking about some delays and pausing.

We still feel very positive about it even even with the, um, you know, the diminishing issues that we've we've called up there, previously. Yeah, Michael 5, sectors. I mean, thousands of projects, thousands of clients across multiple Industries, obviously. So I just Echo 100% of what gourd is described. Uh, uh, you still see pockets of it, but overall, diminishing as we move forward.

Speaker 7: Right. That is very helpful. Thank you. Then, I guess, as we look beyond this year, maybe you can just comment on how you are feeling about the multi-year organic growth guidance you had put out for over 7% organic growth that extends through 2026. Then, is this level of activity that you are seeing here, including the pickup in the U.S., how does that make you feel about sort of the period beyond 2026 as you are getting closer, I guess, to the point where you are going to start to think about your next three-year plan?

Was talking about some, some delays and pausing.

Right. Um, that's very helpful. Thank you. And then I guess as we as we look Beyond this here, um, maybe you can just comment on how you're feeling about, uh, the multi-year organic growth, uh, guidance. You'd put out for over 7% organic growth that extends through 2026 and then, you know, is, is this level of activity that you're seeing here, including the pick up, pick pick up in the US. Um, you know, how does that make you feel about sort of the peer Beyond 2026 is your

Vito Culmone: Yeah, Michael, maybe I will chime in, and Gordon, you can add your sentiments on that. Obviously, we will come up with our updated three-year plan post-2026 in due course. There is absolutely nothing that we are seeing that would be fundamental in nature. I think across all of our markets, including, of course, the U.S., those macro factors that we are describing support that level of growth activity for what we believe at this point in several years to come.

You know, we're getting closer, I guess, to the point you're going to start to think about your next three-year plan.

Gordon Johnston: When you look at some of the recent funding programs that have been announced around the world, the U.K. put out another 10-year infrastructure plan, 725 billion pounds, very supportive, an additional tailwind for us. In Ireland, where we just acquired Ryan Hanley, another 100 to 200 billion there from infrastructure. Again, very, very supportive. We feel when you look at the One Big Beautiful Bill and some of the supports that that does, certainly the increase in defense spending around the world. For everyone on the line, we do not do anything related to hot weapons, but the work that we do would be infrastructure in support of hangars for aircraft, docks, and ports, and improvements to barracks and hospitals and such. Whether it is defense spending increases or just increased infrastructure spending around the world, that all point to a pretty solid multi-year macro for the overall industry.

Yeah, Michael. Maybe I'll try man and G. You can add your sentiments on that obviously, you know, we'll come up with our 3 year plan. Our revised update. A 3-year plan, post 2026 in Duke course, but there is absolutely nothing that we are seeing that. It would, uh, would you know, uh, be fundamental in nature. Uh and uh I think across all of our markets, including, of course, the US. Those macro factors that were describing support that level of growth activity, uh, for what we believe at this point in several years to come. And when you look at some of the the recent funding programs that have been announced around the world, you know, the the UK put out an another 10 year. Infrastructure plan, 700, 725 billion pounds, very supportive and additional Tailwind for us. Uh, in Ireland where we just acquired grind. Hanley another 1002 billion 1001,

$0 to $200 billion, uh, there from infrastructure. So again, very, very supportive. So we feel.

Speaker 7: Thank you for that. I will turn the line over.

You know, when you look at the 1, big beautiful Bill and some of the supports that that does certainly, the the increase in defense spending around the world. And again, you know, for everyone's on the line, you know, we don't do anything related to hot weapons but the work that we do would be infrastructure in support of um hangers for aircraft docks and ports and um, in in uh improvements to barracks and hospitals and such. So again, whether it's defense spending uh, increases or just increased infrastructure spending around the world, you know, that all point to a pretty, you know, solid multi-year Macro for uh, for the overall industry.

Gordon Johnston: Thanks, Michael.

Thank you for that all.

Speaker 5: Thank you. As a reminder, if you would like to ask a question, please press star one-one. Our next question is going to come from the line of Maxim Sychev with NBS. Your line is open. Please go ahead.

Thanks Michael.

Thank you. And as a reminder, if you would like to ask a question, please press star 1, 1 1.

Speaker 6: Good morning, Gordon Johnston.

Our next question is going to come from the line of Maximum side Chev with NBS. Your line is open, please go ahead.

Gordon Johnston: Morning.

Speaker 6: Yes, it is possible to get a bit more of an update in terms of what you guys are seeing on the ground when it comes to FEMA and whether some of the federal work is just being shifted to kind of state and local, just trying to get people stuck there. Thank you.

Morning.

Gordon Johnston: Yeah, you know, absolutely. As you look at some of the disaster preparedness work in particular, Max, that is looking to be shifted to some of the states and local governments. So, we had a number of those on-calls with FEMA at a national level, and we absolutely are in discussions now with a number of other local state and local government agencies about how we could respond to support them. But that still is, you know, in a transition phase. But we're absolutely engaged in those discussions.

If it's possible to get a bit, uh, more of an update in terms of, um, what you guys are seeing, um, on the ground when it comes to FEMA, and whether—I mean, some of the federal workers just being shifted to, uh, kind of state and local, just trying to get their respective there. Thank you.

Speaker 6: Okay, that's great to hear. Is it possible to provide a bit more of an update when it comes to the M&A landscape? I mean, obviously you mentioned your capital capacity, but what are you guys seeing on the ground from a seller's perspective, et cetera? Thank you.

Yeah, you know, absolutely, as you look at some of the disaster, preparedness, uh, work in particular Max that, that is looking to be shifted to, to some of the, the states and local governments. So, um, you know, we had a number of those, uh, those on calls with FEMA at a national level and we absolutely are in discussions now, with with a number of other, uh, local state and local government agencies about how we could respond to support them. But that that still is, uh, you know, in a transition phase. But we're, um, we're absolutely engaged in those discussions.

That's great to hear and then is it?

Gordon Johnston: Yeah, the environment is actually, I would say, becoming increasingly active over the last quarter, and I think will be for the second half of the year, certainly within North America, but we're seeing globally as well. There's a number of assets that, you know, we've been talking for a while that we thought were going to be coming to market in, you know, kind of a 12 to 18-month timeframe. I think those are probably, you know, shortened by half a year now. Probably in the next six months to a year, some of these assets will be coming to market. Wherever possible, we're having proactive meetings with individuals before our process would start just to be sure that we're well positioned. I think you'll see increased activity over the next 6 to 12 months.

Provides, um, a bit more of an update when it comes to the M&A landscape. Um, like I mean obviously you mentioned your, you know, capital capacity, but what do you guys sort of seeing on the ground from a seller's perspective? Etc. Thank you.

Yeah. The the environment is actually, as I would say, becoming increasingly active uh over the last quarter and and I think will be for the second uh second half of the year. Um certainly within North America but we're seeing globally as well. So there's um, there's a number of assets that, you know, we've been talking for a while that we thought we were going to

Speaker 6: Okay, great to hear. Thank you so much, that is it from me.

You come into market and uh, you know, kind of a 12 to 18 month, time frame. And I think those are probably, you know, shortened by by half a year now, you know, probably in the next 6 months to a year, uh, some of these assets will be coming to Market. And, and, you know, wherever possible. We're having proactive meetings with, uh, with individuals before process would start just to be sure that, uh, we're well positioned. So I think you'll see increased activity over the next 6 to 12 months.

Gordon Johnston: Great, thanks, ma'am.

Speaker 5: Thank you. One moment for our next question. Our next question comes from the line of Benoit Pereier with Desjardins. Your line is open. Please go ahead.

Okay, great to hear. Thank you so much. That's it from me.

Thanks man.

And one moment for our next question.

Our next question comes from.

Juan Perrier with,

Gordon Johnston: Yeah, thank you. Good morning, Gordon, and good morning, Vito. We saw an update on Section 174 being removed following the approval of the Big Beautiful Day. Vito, could you talk a little bit about the boost we might expect on free cash flow going forward? With respect to the delays that we are seeing temporarily in the U.S., I am just wondering if customers were waiting for interest rates to decline and whether lower interest rates that could come could accelerate spending when talking to customers. Thank you.

Does does jardeon your line is open? Please go ahead.

Vito Culmone: Yeah, no, with respect to the recent changes, Benoit, good morning, with tax deductibility on R&D, I believe that is what you are referring to. That is overall a positive factor. Of course, these are domestic R&D expenses incurred in the United States that basically affect it for 2025 and now are 100% deductible in the year incurred. And actually, the provisions allow you to go back to 2022 through to 2024 and accelerate that deduction as well. So overall positive. Too early to tell at this point on our end what the impact would be from a timing perspective for cash flow. We are modeling that through. There are some complexities, particularly being obviously a foreign jurisdiction and other taxes such as B taxes and whatnot that we need to work our way through.

Um, we saw an update on a section 174 being removed uh following the approval of the bug, big, beautiful day, uh, Vito. Could you talk a little bit about the Boost? We might expect on free cash flow going forward and which respect to the delays. Uh, that we are seeing temporarily in the US. I'm just wondering if customers were waiting for interest rates to decline and whether lower interest rates uh, that could come could accelerate spending uh, when talking to to customers. Thank you.

Yeah. No it with respect to the recent changes Beno. Good morning, uh, uh, with the tax deductibility on R&D. I believe that's what you're referring to. Uh, that's overall a positive factor, of course, these are domestic, uh, R&D expenses and incurred in the United States that uh,

Basically effective for 2025 and now, our 100% deductible in the year. Incurred and actually the provisions allow you to go back to 2022 to through the 2024 and the accelerate that uh, deduction as well. So overall positive, uh, too early to tell at this point on our end, uh, what the impact would be from a, a timing perspective for 2 cash flow. Uh, we're modeling that through. There are some complexity particularly being obviously a um a a foreign entity, uh jurisdiction.

Vito Culmone: But I would say neutral at worst and positive from a cash flow perspective for us, Benoit.

Gordon Johnston: Okay. Just for follow-up, with respect to the Stantec Global Technology Center in Pune, could you maybe provide an update on how many employees right now, and maybe how do you track, and whether there's a potential to exceed the target of 2,000 people by the three-year period?

Addiction and and other taxes such as be taxes and whatnot, that we need to work our way through. But I would say neutral at at worst and positive, uh, from a cash flow perspective for us as well,

Vito Culmone: Yeah, we're about 1,400, 1,500 people right now, Benoit. We're really pleased with the progress. We see huge opportunity. It's such an engaged, knowledgeable, motivated team over there working across not only supporting our corporate functions, but importantly, obviously supporting our operations as well. We see huge opportunity, continued opportunity across both those layers and both those segments. In fact, we've got trips planned for the business here in the back half of this year where they'll get up and close and personal. So optimistic, continue to be optimistic about the growth of the global delivery centers and in servicing. Obviously, that continues to be a lever not only in margin expansion, but importantly in high-quality delivery for our customers on a timely basis as we continue to see across several of our markets very robust demand.

Okay. And just for follow-up, with respect to the Global Technology Center in Pune, could you maybe provide an update on how many employees there are right now and how do you track this? Additionally, is there a potential to exceed the target of 2,000 people by the end of this three-year period?

Vito Culmone: I'll stop short on whether we're going to hit the 2,000 and whatnot because I don't have that at my fingertips. But overall, obviously, it continues to be a very important strategic part of our efforts.

Yeah, we're about 14 1500 people right now. Then while we're really pleased with the progress. We see huge opportunity, uh, such an Engaged, uh, knowledgeable um, motivated team over there working across, not only supporting our corporate functions, but importantly, obviously supporting our, uh, our operations as well. We see huge opportunity continued opportunity across both those layers and both those segments. In fact, you know we we we've got trips planned for the business here in the back half of this year where they'll get up and close and personal. So optimistic, uh, continue to be optimistic about the growth of of the global delivery centers and and uh, in servicing and obviously that's a, you know, that that continues to be a leader, not only in margin expansion, but importantly, in high quality delivery for our customers on a timely basis, as we continue to see across several of our

Gordon Johnston: Thank you very much for the time.

Markets are showing very robust demand. I'll stop short of whether we're going to hit the 2000 mark and whatnot because I don't have that at the tip of my fingers, but overall, it continues to be a very important strategic part of our efforts.

Vito Culmone: Thank you.

Thank you very much for that song.

Speaker 5: Thank you. One moment for our next question. Our next question will come from the line of Devin Dodge with BMO Capital Markets. Your line is open. Please go ahead.

Thank you. Thank you.

Speaker 7: All right. Thank you. Good morning. I wanted to start with a question on Page. The purchase price was, I think, a bit more than we had expected. Just wondering if you could provide a bit of color on, say, the revenue the business generates, organic revenue growth it's been having the last couple of years, and how maybe margins stack up to the Stantec company average.

Of Dev and Dodge with BMO Capital Markets. Your line is open; please go ahead.

All right, thank you. Good morning. Um, I wanted to start with, uh,

Question on page.

Purchase price was I think a bit more than we had expected. Just wondering if you could provide a bit of color on.

Vito Culmone: You would see us disclose, we disclosed the purchase price as $525 US. You saw that in the notes to our financial statements. I am surprised to hear you say it was a little more than you would expected. I think when the reports of, you know, what the analyst community sort of reported out, I think it was in that range, obviously translated to Canadian dollars. It was spot short about, you know, also just speaking to what revenue did Page bring to the table. Obviously, we closed the deal July 31st. The teams are incredibly excited about the strategic value. We are happy with the multiple and the value that that business will bring forward to us. Gordon Johnston, I do not know if you had much more to add to that.

Say that the revenue the business generates organic revenue growth. It's been having the last couple of years, and how maybe March can stack up to the Stantec company average.

Yeah, you would see us disclose we disclose the purchase price as 5.25 us. Uh, you saw that in the notes store financial statements, uh, I'm surprised to hear you say. It was a little more than you would expect that. I think when the reports of you know, what the analyst Community, sort of reported out, I think it was in that range obviously translates to Canadian Dollars, you know, we'll, you know, it will stop short of about, you know, also, just speaking to what our Revenue, those the page bring to the table, uh, we'll obviously, we close the deal. July 31st, the teams are incredibly excited about the Strategic value. We're happy with

Gordon Johnston: They are roughly $300 million U.S. in net revenue company, a high average net revenue generation per employee. We also are really impressed with them in terms of just the amount of synergy that we have already seen from a client perspective and a project perspective. Certainly on track or even a little bit better than we thought we were going to see. So particularly pleased with that one.

Speaker 7: Okay, thanks for that. Second question, Gordon. I think you have mentioned in the past about capping your exposure to the more cyclical end markets. I think it was around 15% of revenues. Historically, I think that cyclical exposure has been more focused on oil and gas and mining, but I think you have also hinted that maybe data centers could be part of that cyclical basket. Just wondering if you could provide an update on where you view your cyclical market exposure now and just based on backlog and bidding activity, where you think this could be over the next couple of years.

Perspective and a project perspective. Um, certainly on track or even a little bit better than we thought we were going to see. So, uh, particularly pleased with that.

Okay, thanks for that. Um, second question. Uh, Gordon. I think you mentioned in the past about...

Tapping your exposure to the more cyclical markets, I think it was around 15% of revenues.

Gordon Johnston: Yeah, great question. Our data centers for us are at 2% to 3% of net revenue. Are they increasing? Yeah, they're going up. I think that we still feel really comfortable that we're that sub 15% when you look at mining. You said that, as you say, oil and gas. Data centers, like right now, we're seeing pretty continuous growth there. Again, it's only 2% to 3% of the overall. I think that we're still well within that 15% range that we've talked about. I think we're comfortable where we're at.

Uh, historically, I think that cyclical exposure has been more focused on oil and gas and mining, but I think you've also hinted that maybe data centers could be part of that cyclical basket. Just wondering if you could provide an update on where you view your cyclical market exposure now, and just based on backlog and bidding activity, where you think this could be over the next couple of years.

yeah, and a great question you know our um,

Data centers for us are at 2 to 3 percent, uh, of, of net revenue and you know, are they increasing? Yeah, they're they're going up. But I think that, you know what, we still feel really comfortable that we're that sub 15%. When you look at, you know, mining, uh, you said that as you say oil and gas, and, you know, data centers. Like right now, we're we're seeing pretty continuous growth there. But again, it's only 2 to 3, you know, percent of the overall. So I, I think that we're still well within that 15% range that we've that we've talked about and and, uh,

Speaker 7: Okay, excellent. I will turn it over.

Yeah, I think we're we're we're comfortable where we're at.

Gordon Johnston: Thanks, Devin.

Speaker 5: Thank you. One moment for our next question. Our next question comes from the line of Jonathan Goldman with Scotiabank. Your line is open. Please go ahead.

Hey excellent, I'll turn it over.

Thanks Devin.

Speaker 7: Hi, good morning, team, and thanks for taking my questions. Maybe just to start off, are there any risks with the slower growth environment in the U.S., even if it does prove temporary, that there could be some pressure on pricing?

Our next question comes from the line of Jonathan Goldman with Scotia Bank. Your line is open. Please go ahead.

Gordon Johnston: You know, we haven't really seen that yet. Even though things are, organic growth has been a little bit slower for industry over the first half of the year, we haven't seen a deterioration in pricing in any way. Should it go on for a couple of years, then we might see that. But we're not expecting that to be the case. As we said, we see accelerated organic growth going forward. We're still actively hiring, as are others in the industry. So yeah, we haven't seen pricing pressure at this point, which would then translate to project margin pressure. But as Vito Culmone said, that's really been holding up well for us.

Hi, good morning team, and thanks for taking my questions. Maybe just start off. Is there any risk with the slower growth environment in the US? Even if it does prove temporary that there could be some pressure on pricing?

You know, we haven't really seen that yet.

Even though things are, you know, organic growth has been a little bit slower for the industry over the first half of the year, we haven't seen a deterioration in pricing in any way.

Vito Culmone: Now, we very much see a market, a strong demand market where, frankly, we're picking our customers, and many of them have been with us for obviously several decades and whatnot. So I don't anticipate that at all.

Should it go on for a couple years that, you know, we might, we might see that but, you know, we're not expecting that that to be the case. As we said, we see accelerated to organic growth going forward. We're still actively hiring as our, you know, others in the industry. So yeah, we haven't seen pricing pressure at this point which would uh then translate to project margin pressure. But as as veto said, you know that's really been holding up well for us.

Now we very much see a strong demand market where.

Speaker 7: That's good color. You did talk about the M&A environment previously in the call about the activity levels. But on valuations, have you seen any change in multiples, whether higher or lower?

Frankly, we're picking our customers and uh and and many of them have been have been with us for obviously several decades and whatnot. So uh don't anticipate that at all.

Gordon Johnston: I think it is very similar to how we have seen in the market for the last little while, that if larger firms have a little bit of a higher multiple, firms in power and data centers have a little bit of a higher multiple. In general, we haven't seen trends either moving higher or unfortunately lower over the last little bit. We are seeing some just really things being stable, really from where I would say that they were even a year ago.

Okay, that's good color and you did talk about the m&a environment, previously in the call but yet to be levels. But on valuations. Have you seen any change in multiples with a higher or lower?

You know, I think it's very similar to how we've seen in the market for the last little while that if um,

Larger firms have a little bit of a higher, multiple firms in power and data centers, have a little bit of a higher multiple, but, you know, in in general, we haven't seen Trends, uh, either moving higher or unfortunately, he lower, uh, over the last little bit. So pretty, uh, you know, we're seeing some

Vito Culmone: Like I said, Gordon, that just reflects the continued strength of the overall markets and the macro factors that we've been speaking to.

Just really things being stable, really. So from where I would say that they were even a year ago,

Gordon Johnston: Okay, good point.

Speaker 7: Understood. Thanks for taking my question.

And I I guess that gourd that that just that just reflects the continued strength of the overall markets and, and the macro factors that we've been speaking to got a good point.

Gordon Johnston: Thank you.

Speaker 5: Thank you. I am showing no further questions at this time. I would like to hand the conference back over to Gordon Johnston for closing remarks.

Understood. Thanks for taking my questions.

Thank you.

And I'm showing no further questions at this time.

Gordon Johnston: Thank you, operator, and thank you to everyone for joining us this morning. If you have any follow-up questions after today's call, please reach out to Jess Nieukerk, our Vice President of Investor Relations. Thanks again for your time, and look forward to connecting with many of you soon.

Speaker 5: This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.

Great. Well, thank you, operator, and thank you to everyone for joining us this morning. If you have any follow-up questions after today's call, please reach out to Just Newkirk, our VP of Investor Relations. So, thanks again for your time, and I look forward to connecting with many of you soon. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.

Speaker 1: Let's start testing the Stantec Inc. Q4 module.