Q3 2025 Stantec Inc Earnings Call

Operator: Welcome to Stantec's Q3 2025 results webcast and conference call. Leading the call today are Gord Johnston, President and Chief Executive Officer, and Vito Culmone, Executive Vice President and Chief Financial Officer. Stantec invites those dialing in to view the slide presentation, which is available in the investors section at stantec.com. Today's call is also webcast. Please be advised that if you have dialed in while also viewing the webcast, you should mute your computer as there is a delay between the call and the webcast. All information provided during the conference call is subject to the forward-looking statement. Qualifications set out on slide 2, detailed in Stantec's management discussion and analysis, and incorporated in full for the purposes of today's call. Unless otherwise noted, dollar amounts discussed in today's call are expressed in Canadian dollars and are generally rounded.

Speaker #1: Stantec invites those dialing in to view the slide presentation, which is available in the investor's 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.

Speaker #1: All information provided during the conference call is subject to the forward-looking statement. Qualifications set out on slide two detailed in Stantec's management discussion and anal incorporated in full for the purposes of today's call.

Speaker #1: 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 Gordon Johnston.

Operator: With that, I'll turn the call over to Gord Johnston.

Gord Johnston: Good morning, everyone, and thank you for joining us today. I'm pleased to announce that Stantec delivered robust performance in Q3, generating organic growth across all our regions and business operating units. Global trends across Water, Transportation, Energy Transition, and mission-critical sectors continue to drive strong demand for our services. Our diversification across sectors and geographies creates resilience within our operations. Net revenue grew to CAD 1.7 billion in Q3, an increase of almost 12% compared to Q3 of last year, driven by organic and acquisition growth, each over 5%. Most notably, our Water business delivered almost 13% organic growth. Energy and Resources delivered nearly 10%. We grew adjusted EBITDA by close to 18% year over year with a record margin of 19%.

Speaker #2: Good morning, everyone. And thank you for joining us today. I'm pleased to announce that Stantec delivered robust performance in the third quarter. Generating organic growth across all our regions, and business operating units.

Speaker #2: Global trends across water, transportation, energy transition, and mission-critical sectors continue to drive strong demand for our services. And our diversification across sectors and geographies creates resilience within our operations.

Speaker #2: Net revenue grew to $1.7 billion in the third quarter. An increase of almost 12% compared to Q3 of last year, driven by organic and acquisition growth, each over 5%.

Speaker #2: Most notably, our water business delivered almost 13% organic growth, and energy and resources delivered nearly 10%. We grew adjusted EBITDA by close to 18% year over year, with a record margin of 19%.

Gord Johnston: We also delivered adjusted EPS growth of 17.7% compared to Q3 2024. Looking at our results in each of our geographies, in the US, net revenue increased over 14% in Q3, which was driven by 4.6% organic growth and almost 9% acquisition growth. In our buildings business, net revenue increased by more than 40% in Q3 and over 20% year to date, driven by our acquisition of Page and continued organic growth. The integration of Page is going very well. Already we're seeing many revenue synergies from the acquisition. We expect to have completed the financial integration into our systems by year-end. Private and public sector investments, particularly in mission-critical, science and technology, and civic, supported growth in buildings. Organic growth was also driven by our water and environmental services businesses.

Speaker #2: We also delivered adjusted EPS growth of 17.7% compared to Q3 2024. Looking at our results in each of our geographies, in the US, net revenue increased over 14% in the third quarter.

Speaker #2: Which was driven by $4.6% organic growth and almost 9% acquisition growth. In our buildings business, net revenue increased by more than 40% in Q3 and over 20% year to date driven by our acquisition of Page, and continued organic growth.

Speaker #2: The integration of Page is going very well, and already we're seeing many revenue synergies from the acquisition. We expect to have completed the financial integration into our systems by year-end.

Speaker #2: Private and public sector investments particularly in mission-critical, science and technology, and civic supported growth in buildings. Organic growth was also driven by our water, and environmental services businesses.

Gord Johnston: Large public sector water supply and wastewater treatment projects contributed to double-digit growth in water. In energy transition, mining and infrastructure sectors, as well as the continued work for a large utility provider, supported growth in environmental services. In Canada, net revenue grew 7.6% in the quarter, driven completely by organic growth. We delivered double-digit growth in our water and energy and resources businesses, and high single-digit growth in infrastructure. The continued momentum on major wastewater projects contributed to over 20% organic growth in water. Continued work on major industrial process projects also drove double-digit organic growth in energy and resources. Solid growth in infrastructure was supported by land development projects in Alberta, airport sector projects in Quebec, as well as transit and rail projects and bridge sector work in Eastern Canada. Public sector investment drove growth in buildings, primarily in our healthcare and civic markets.

Speaker #2: Large public sector water supply and wastewater treatment projects contributed to double-digit growth in water. And energy transition, mining and infrastructure sectors, as well as the continued work for a large utility provider, supported growth in environmental services.

Speaker #2: Canada, net revenue grew In 7.6% in the quarter, driven completely by organic growth. We delivered double-digit growth in our water, and energy and resources businesses, and high single-digit growth in infrastructure.

Speaker #2: The continued momentum on major wastewater projects contributed to over 20% organic growth in water. Continued work on major industrial process projects also drove double-digit organic growth in energy and infrastructure was supported by land development projects in Alberta, airport sector projects in projects, and bridge sector work in eastern Canada.

Speaker #2: resources. Public sector investment drove growth in buildings. Primarily in our healthcare, and civic Solid growth in markets. Finally, our global business delivered net revenue growth of almost 11% in the third quarter.

Speaker #2: Quebec, as well as transit and rail Achieving $5.5% organic, and $2.8% acquisition growth, along with positive foreign exchange impacts. Our industry-leading water business continued to deliver consecutive double-digit organic growth through long-term framework agreements and public sector investment in water infrastructure, across the UK, Australia, and New Zealand.

Gord Johnston: Finally, our global business delivered net revenue growth of almost 11% in Q3, achieving 5.5% organic and 2.8% acquisition growth, along with positive foreign exchange impacts. Our industry-leading water business continued to deliver consecutive double-digit organic growth through long-term framework agreements and public sector investment in water infrastructure across the UK, Australia, and New Zealand. 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 infrastructure business due to continued momentum on a major electrical transmission project and increased volume on transit and rail projects. Now I'll turn the call over to Vito to review our Q3 financial results in more detail.

Speaker #2: The ramp-up of new resources, as the growing need for projects in Chile and Peru drove energy transition solutions, continues to drive demand in mining for double-digit organic growth in energy and copper.

Speaker #2: We also achieved double-digit organic growth in our German infrastructure business, due to continued momentum on a major electrical transmission project, and increased volume on transit and rail projects.

Speaker #2: Now I'll turn the call over to Vito to review our third quarter financial results in more detail.

Vito Culmone: Thank you, Gord. Good morning, everyone. We are very pleased with Stantec's Q3 financial results, which demonstrate the continued momentum of our business and the resilience of our operating model. Robust demand for our services, combined with favorable global trends, allows us to continue achieving record-setting results. In Q3, we achieved gross revenue of CAD 2.1 billion and net revenue of CAD 1.7 billion, an increase of 11.8% compared to Q3 of 2024. This was driven by 5.6% organic growth and 5.2% acquisition growth. As a percentage of net revenue, our project margins once again remained in line with our expectations at 54.4%. We achieved an all-time high adjusted EBITDA margin of 19% in the quarter, a 100 basis point increase compared to Q3 of last year.

Speaker #3: Thank you, Gordon. Good morning, everyone. We are very pleased with Stantec's third quarter financial results. Which demonstrate the continued momentum of our business, and the resilience of our operating model.

Speaker #3: Robust demand for our services, combined with favorable global trends, allows us to continue achieving record-setting Q3, we achieved gross revenue of $2.1 billion. And net revenue of $1.7 billion.

Speaker #3: An increase of 11.8% compared to Q3 of 2024. This was driven by $5.6% organic results. growth, and $5.2%, excuse me, acquisition growth. As a percentage In of net revenue, our project margins once again remained in line with our expectations, at 54.4%.

Speaker #3: We achieved an all-time high adjusted EBITDA margin of 19% in the quarter. A $100 basis point increase, compared to Q3 of last year. The increase in margin, primarily reflects lower administration and marketing expenses a percentage of net revenue, due to our discipline management of operations and higher utilization.

Vito Culmone: The increase in margin primarily reflects lower administration and marketing expenses as a percentage of net revenue due to our disciplined management of operations and higher utilization. Our adjusted EPS in Q3 increased 17.7% to CAD 1.53. Turning to our cash flow, liquidity, and capital resources, our year-to-date operating cash flows are up 86% compared to 2024, from CAD 296 million to CAD 551 million, reflecting strong revenue growth, strong operational performance, and continued strong collection efforts. DSO at the end of Q3 was 73 days, a decrease of 4 days compared to year-end 2024 and in line with our Q2. Our net debt to adjusted EBITDA ratio at 30 September was 1.5x, reflecting the funding of our recent acquisition of Page.

Speaker #3: And our adjusted EPS in the quarter increased 17.7% to $1.53. Turning to our cash flow liquidity and capital resources, our year-to-date operating cash flows are up 86% compared to 2024, from $296 million to $551 million.

Speaker #3: Reflecting strong revenue growth, strong operational performance, and continued strong collection efforts. DSO, at the end of the third quarter, was $73 days, a decrease of four days compared to year-end 2024, and in line with our Q2.

Speaker #3: Our net debt to adjusted EBITDA ratio at September 30th was $1.5 times, reflecting the funding of our recent acquisition of Page. This remains within our internal range target range of one to two times, and positions us well for continued M&A.

Vito Culmone: This remains within our internal range, target range of 1 to 2 times, and positions us well for continued M&A. As we have stated before, we are comfortable going above this range for a period of time for the right acquisition. Gord, I'll now hand the call back to you.

Speaker #3: And as we have stated before, we are comfortable going above this range for a period of time, for the right acquisition. Gordon, I'll hand the call back to

Speaker #3: you. Great.

Gord Johnston: Great. Thanks, Vito. At the end of Q3, our contract backlog stood at CAD 8.4 billion, an almost 15% increase year over year, representing approximately 13 months of work. Backlog continues to grow organically and is up 5.6% year over year. Organic backlog growth has been driven primarily by our US and global operations, which achieved 6.6% and 6.8% growth respectively. The acquisitions we've completed in 2025 contributed to 6.8% growth in backlog, primarily within our Buildings and Water businesses. Over the quarter, Stantec was awarded a number of significant project wins across each of our 5 business verticals, each project varying in size, scope, and complexity. I'll highlight just a few of these wins. Stantec was selected as owner's engineer for Manitoba Hydro's CAD 7 billion high-voltage direct current reliability project.

Speaker #2: Thanks, Vito. At the end of the third quarter, our contract backlog stood at $8.4 billion, and almost 15% increased year over year, representing approximately 13 months of organically, and is up work.

Speaker #2: Organic backlog growth has been driven primarily by our U.S. and global operations, which achieved 6.6% and 6.8% backlog growth, respectively. Backlog continues to grow.

Speaker #2: The acquisitions we've completed in 2025 contributed to $6.8% growth in backlog, primarily within our buildings, and water businesses. Over the quarter, Stantec was awarded a number of significant project wins, across each of our five business verticals.

Speaker #2: Each project varying in size, scope, and complexity. I'll highlight just a few of these wins. Stantec was selected as Owners Engineer for Manitoba Hydro's $7 billion high-voltage direct current reliability project.

Gord Johnston: The project aims us to secure continuous grid reliability for communities across the province. We've worked with Manitoba Hydro on power delivery projects in the province for over 50 years, and we look forward to continuing our work with them. Stantec's infrastructures team was selected for a CAD 745 million project to widen the SC 90 corridor in South Carolina. Our team will be responsible for shaping the overall project vision and layout, focusing on traffic operations, access management, bicycle and pedestrian infrastructure, and impact minimization. In Western Australia, our buildings team was selected to deliver specialist engineering services for 2 hospitals, one of which will be over 94,000 sq m in size and valued at nearly CAD 1 billion.

Speaker #2: The project aims to secure continuous grid reliability for communities across the province. And we've worked with Manitoba Hydro on power delivery projects in the province for over 50 years, and we look forward to continuing our work with them.

Speaker #2: Stantec's infrastructure team was selected for a $745 million project to widen the SC90 corridor in South Carolina. Our team will be responsible for shaping the overall project vision and layout, focusing on traffic operations, access management, bicycle and pedestrian infrastructure, and impact minimization.

Speaker #2: deliver specialist engineering services for two hospitals. One of which will be And in Western Australia, over 94,000 square meters in size, and valued at nearly $1 billion.

Gord Johnston: The second project includes refurbishment and expansion work at the Osborne Park Hospital, valued at over CAD 250 million. These projects will enhance healthcare for women, children, and families. Given our solid Q3 results, we are net revenue growth guidance for the full year, while increasing our adjusted EBITDA margin outlook to 17.2% to 17.5% on the strength of our operational performance and discipline in cost management. We maintain our mid-single-digit guidance for US organic growth given persistent slower procurement cycles in the region. We remain optimistic that these are simply near-term challenges as we continue to see strong demand driven by the ongoing needs and the priorities of our clients. In Canada and in global, we still expect organic net revenue growth in the mid to high single digits.

Speaker #2: The second project includes refurbishment and expansion work at the Osborne Park Hospital, valued at over $250 million. These projects will enhance healthcare for women, children, and families.

Speaker #2: Given our solid third quarter results, our net revenue growth guidance for the full year, while increasing our adjusted EBITDA margin outlook to 17.2 to 17.5% on the strength of our operational performance, and discipline in cost management.

Speaker #2: We maintain our mid-single-digit guidance for U.S. organic growth, given persistent slower procurement cycles in the region. However, we remain optimistic that these are simply near-term challenges, as we continue to see strong demand driven by the ongoing needs and priorities of our clients.

Speaker #2: In Canada, and in global, we still expect organic net revenue growth in the mid to high single digits. Growth in Canada is expected to be driven by continued strong demand, and elevated backlog levels.

Gord Johnston: Growth in Canada is expected to be driven by continued strong demand and elevated backlog levels. Following the release of Budget 2025 last week, we're encouraged to see the federal government prioritize infrastructure investments across various sectors. While we don't expect immediate spending, the budget signals strong long-term support for our industry. In global, growth is supported by ongoing high levels of activity in our water business under the AMP8 program in the UK and other framework agreements in Australia and New Zealand. Strong demand for infrastructure in Europe and positive demand fundamentals in energy and resources are also supporting growth in our global business. Considering all of these factors, we expect growth in adjusted EPS to be in the range of 18.5% to 21.5% for the year, and adjusted ROIC is expected to be greater than 12.5%.

Speaker #2: Following the release of Budget 2025 last week, we're encouraged to see the federal government prioritize infrastructure investments across various sectors. And while we don't expect immediate spending, the budget singles strong long-term support for our industry.

Speaker #2: In global, growth is supported by ongoing high levels of activity in our water business, under the AMP-AID program in the UK, and other framework agreements in Australia and New Zealand.

Speaker #2: Strong demand for infrastructure in Europe, and positive demand fundamentals in energy and resources, are also supporting growth in our global business. Considering all of these factors, we expect growth in adjusted EPS to be in the range of 18.5 to 21.5% for the year, and adjusted ROIC is expected to be greater than 12.5%.

Gord Johnston: Given our uniquely diversified business, Stantec remains resilient amid evolving market conditions across all of our regions. We continue to progress towards the targets we laid out in our 2024 to 2026 strategic plan, including delivering net revenue of CAD 7.5 billion by the end of next year. With that, I'll turn the call back to the operator for questions. Operator?

Speaker #2: Given our uniquely diversified business, Stantec remains resilient amid evolving market conditions across all of our regions. We continue to progress towards the targets we laid out in our 2024 to 2026 strategic plan, including delivering net revenue of $7.5 billion by the end of next year.

Speaker #2: And with that, I'll turn the call back to the operator for questions. Operator?

Operator: Certainly. Ladies and gentlemen, if you do have a question at this time, please press star one one on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star one one again. Our first question from today comes from the line of Sabahat Khan from RBC Capital Markets. Your question, please.

Speaker #3: Certainly. Ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again.

Speaker #3: And our first question from today comes from the line of Sahabat Khan from RBC Capital Markets. Your question,

Speaker #3: please. Great.

Sabahat Khan: Great. Thanks, and good morning. You know, knowing it's kind of close to the end of the year, you know, good organic print this quarter, just wondering if you're able to share at a high level how you're thinking about 2026. Just maybe, and I know you guys provide guidance at Q4, but just, you know, given some of the moving pieces this year, any color you can provide either by major end markets or by region would be helpful. Thank you.

Speaker #2: Thanks and good morning. Knowing it's kind of close to the end of the year, good organic print this quarter, just wondering if you're able to share at a high level how you're thinking about 2026, just maybe I know you guys provide guidance at Q4, but just given some of the moving pieces this year, any color you can provide either by major end markets or by region would be helpful.

Speaker #2: Thank

Gord Johnston: Thanks, Sabahat. Certainly, this is something we spend a lot of time talking about as well. You're right, we're gonna provide our formal guidance for 2026 in February. Directionally, we see really strong momentum going into next year. You know, in global, the AMP8 programs in the UK are gonna continue to ramp up as well as the frameworks in Australia and New Zealand. We see continued strong support in our water business going forward. The need for copper to support, you know, grid strengthening, energy transition keeps continuing to support growth in our mining teams, particularly in South America, where I actually was down and visited with our offices last month.

Speaker #3: Great. Thanks, Saba. And certainly, this is something we spend a lot of time talking about as well. And you're right, we're going to provide our formal guidance for 2026 in February, but directionally, we see really strong momentum going into next year.

Speaker #3: In global, the AMP-AID programs in the UK are going to continue to ramp up, as well as the frameworks in Australia and New Zealand.

Speaker #3: So we see continued strong support in our water business going forward. The need for copper to support grid strengthening, energy transition, keeps continuing support growth in our mining teams, particularly in South America, where I actually was down and visited with our offices last month.

Gord Johnston: Here in Canada, you know, the federal budget that was recently released, you know, provides continued support for infrastructure really across the country. You know, we see a lot of opportunities in the major projects that Prime Minister Carney announced last week and even those that he announced previously. We're already working on a number of those projects, and we're in discussions and participating on a whole bunch of other ones. In the US, you know, a little period of uncertainty, but we see that the macro fundamentals really are still strong there. You know, aging infrastructure, climate-related impacts, reshoring of manufacturing, data centers, mission-critical facilities. All of those things, whether it's global, Canada, the US, are strong.

Speaker #3: Here in Canada, the federal budget that was recently released provides continued support for infrastructure really across the country. We see a lot of opportunities in the major projects that Prime Minister Carney announced last week, and even those that he announced previously.

Speaker #3: And we're already working on a number of those projects, and we're in discussions and participating on a whole bunch of other ones. In the US, a little period of uncertainty, but we see that the macro fundamentals really are still strong there.

Speaker #3: Aging infrastructure, climate-related impacts, reshoring of manufacturing, data centers, mission-critical facilities, so all of those things, whether it's global, Canada, the US, are strong. And then I think one thing that we've talked about a lot too is that around the globe, certainly a lot of discussion for increased spending on defense work.

Gord Johnston: I think one thing that we've talked about a lot too is that around the globe, you know, certainly a lot of discussion for increased spending on defense work. For that's, for us, that's ports, that's dry docks, that's aircraft hangars and runways, housing, all sorts of various types of infrastructure. We're actually really positive on the prospects and the momentum going into 2026.

Speaker #3: And for that, that's for us, that's ports, that's dry docks, that's aircraft hangars and runways, housing, all sorts of various types of infrastructure. So we're actually really positive on the prospects and the momentum going into 2026.

Sabahat Khan: Great. Then maybe if you could just dig in on the Canadian side, obviously a large part of your business. We saw a couple of lists come out thus far. Can you just share some thoughts on, is there just kind of the broad infrastructure programs in Canada that the prime minister is announcing that you're getting involved with, or is it more kind of the energy-based? Although I know historically some of the pipeline work in Western Canada was a big part of your business. Are you seeing maybe some of those opportunities as being more meaningful? Just curious kind of where within those buckets is Stantec exposed. Thanks. I'll pass the line.

Speaker #2: Great. And then maybe if you could just dig in on the Canadian side. Obviously, a large part of your business. Obviously, we saw kind of two lists come out thus far.

Speaker #2: Can you just share some thoughts on, is there just kind of the broad infrastructure programs in Canada that the Prime Minister is announcing that you're getting involved with?

Speaker #2: Or is it more kind of the energy based on the historic work in Western Canada, which was a big part of your business?

Speaker #2: Are you seeing maybe some of those opportunities as being more meaningful? Just curious kind of where within those buckets is Stantec exposed. Thanks. And I'll pass

Speaker #2: the line. Yeah.

Gord Johnston: Yeah, great. Thanks, Sabahat Khan. I think in both of those fields, both the opportunities that Prime Minister Mark Carney has announced, we see great opportunities. You know, you've seen the really solid organic growth that we've seen in Canada all year, really 8.5% year-to-date organic growth in Canada. That's of course, absent any of those projects that Prime Minister Mark Carney had mentioned. When we look at Canada, we've seen a lot of strength actually in Western Canada, in particular in land development. We've seen great opportunities in transportation. You know, a number of the projects we're working on, bridge jobs in Toronto and a lot of sort of roadway projects here in Western Canada. Water has been incredibly strong all year for us.

Speaker #3: Great. Thanks, Saba. I think in both of those fields—both the opportunities that Prime Minister Carney has announced—and we see great opportunities. But you've seen the really solid organic growth that we've seen in Canada all year: really, 8.5% year-to-date organic growth in Canada.

Speaker #3: And that's, of course, absent any of those projects that Prime Minister Carney had mentioned. So when we look at Canada, we've seen a lot of strength actually in Western Canada in particular in land development.

Speaker #3: We've seen great opportunities in transportation. A number of the projects working on bridge jobs in Toronto and a lot of sort of roadway projects here in Western Canada.

Speaker #3: But water has been incredibly strong all year for us. And we see really no slowdown of the both public sector work that we're doing, and we've talked about the work we're doing with Metro Van in Vancouver, in Winnipeg, and other locations.

Gord Johnston: We see really no slowdown of the both public sector work that we're doing, and we've talked about the work we're doing with Metro Van, in Vancouver, in Winnipeg and other locations. A lot of private sector work, coming along as well, advanced manufacturing, data centers and that sort of work. That's very, very robust. Of course, as you said, the energy sector. You know, we've seen some opportunities there, as well as that group working on a number of the work that we do on industrial projects also comes out of that. We've talked in previous quarters about some work that we're doing in Eastern Canada on some industrial projects.

Speaker #3: But a lot of private sector work is coming along as well—advanced manufacturing, data centers, and that sort of work. So that's very, very robust.

Speaker #3: And then, of course, as you've said, the energy sector. We've seen some opportunities there, as well as that group working on a number of the work that we do on industrial projects, also comes out of that.

Speaker #3: And we've talked in previous quarters about some work that we're doing in Eastern Canada on some industrial projects. So, Canada is pretty strong and pretty broad-based.

Gord Johnston: Canada, pretty strong, pretty broad-based and, you know, we're feeling pretty good about Canada overall, and, you know, as we go into next year.

Speaker #3: And we're feeling pretty good about Canada overall. And as we go into next.

Speaker #3: year.

Vito Culmone: Thanks very much.

Operator: Thank you. Our next question comes from the line of Yuri Lynk from Canaccord Genuity. Your question please.

Speaker #3: Thank you. much. question comes from the line of Yuri Link from Canaccord Genuity. Your question, please.

Yuri Lynk: Good morning, guys.

Speaker #4: Good morning, guys.

Gord Johnston: Morning, Yuri.

Vito Culmone: Morning.

Yuri Lynk: Gord, I just want to push a little bit more on the outlook. I understand things are strong right now, you know, that's generally reflecting work that was booked, you know, 12, 18 months ago in some cases. Can you just talk about some of your forward most looking indicators? I'm thinking, you know, if you look around, you know, Canada, I know there's lots of good headlines, you know, the current economic data is pretty weak. Australia's soft outside of water. AMP8, one of the biggest customers there is struggling financially. The US government shut down. You know, there's a whole bunch of worrying signs out there.

Speaker #4: Great. Good morning. Gordon, I just want to push a little bit more on the outlook. I understand things are strong right now, but that's generally reflecting work that was booked 12, 18 months ago.

Speaker #4: In some cases, can you just talk about some of your forward-most-looking indicators? And I'm thinking if you look around Canada, I know there's lots of good headlines, but the current economic data is pretty weak, Australia's soft outside of water.

Speaker #4: AMP-AID, one of the biggest customers there, is struggling financially. The US government shut down. There's a whole bunch of worrying signs out there. So are you seeing any of that in proposal or RFP or whatever you look at on the most leading edge of your

Yuri Lynk: Are you seeing any of that in, you know, proposal or RFP or whatever you look at on the most leading edge of your outlook?

Speaker #4: outlook? Yeah.

Gord Johnston: Yeah, no, a great question. Maybe I'll address a couple of them individually there. You know, in the US, without question, there's been a confluence of factors that we've seen there that caused a little bit of uncertainty and kind of slowed the procurement cycles. I mean, certainly that's not unique to Stantec, and you've seen that throughout the industry. In the US, we've and you'll see that our backlog in the US has been flat year to date. A lot of that is we, you know, we've been verbally awarded a number of projects, but we haven't been able to get them signed and contracted, so they haven't showed up at backlog. Little bit slower start on some of the things.

Speaker #3: No, great question. Maybe I'll address a couple of them individually there. So in the US, without question, there's been a confluence of factors that we've seen there cause a little bit of uncertainty and kind of slowed the procurement cycles.

Speaker #3: I mean, certainly that's not unique to Stantec, and you've seen that throughout the industry. So in the U.S., we've— and you'll see that our backlog in the U.S. has been flat year to date.

Speaker #3: And a lot of that is we've been verbally awarded a number of projects, but we haven't been able to get them signed and contracted, so they haven't showed up at backlog.

Speaker #3: A little bit slower start on some of the things. Environmental services in the U.S. has maybe a little bit slower so far, waiting for some of those things to pick up.

Gord Johnston: You know, environmental services in the US is maybe a little bit slower so far, waiting for some of those things to pick up. You know, we're encouraged by the fact that the government is back at work now. We're also keeping a pretty close eye on that might only be for a couple of months until we, you know, have to go through this again. You know, the macros haven't changed in the US. You know, whether it is the aging infrastructure and roadways related to, you know, and support from IIJA, and we still see those supports coming to some of the reshoring that we're seeing in the private sector. You know, we see some positivity there.

Speaker #3: We're encouraged by the fact that the government is back at work now. We're also keeping a pretty close eye on that, which might only be for a couple of months until we have to go through this again.

Speaker #3: But the macros haven't changed in the U.S. Whether it is the aging infrastructure and roadways related to and support from the IIJA, we still see those supports coming to some of the reshoring that we're seeing in the private sector.

Speaker #3: So we see some positivity there. You talked about AMP-AID and one of the largest customers there, certainly having some financial difficulty. And we all read about that in the papers.

Gord Johnston: You talked about AMP8 and one of the largest customers there certainly having some financial difficulty, and we all read about that in the papers. That really has no impact on our business because they, you know, the way that the AMP cycles work is that the water company commits to doing certain amount of capital spend in order to justify rate increases and so on and improvements in the overall operation. That work has to get done. You know, people have said, Well, what if that particular client was to get nationalized? Well, for us, you know, we wouldn't want to see that happen, but if it did, the work still has to get done.

Speaker #3: But that really has no impact on our business because the way that the AMP cycles work is the water company commits to doing certain amount of capital spend in order to justify rate increases and so on.

Speaker #3: And improvements in the overall operation. So that work has to get done. And people have said, 'Well, what if that particular client us, we wouldn't want to see that happen.'

Speaker #3: But if it did, the work still has to get done. And we've worked with Thames Water and for a number of successor companies for the last 200 years in the region.

Gord Johnston: You know, we've worked with Thames Water and for a number of successor companies for the last 200 years, you know, in the region. You know, we do see, you know, that regardless of what shakes out there, that AMP8 work is gonna continue. You know, it certainly is a little bit of a cloudy environment out there, not all rays of sunshine. We do see the demand drivers in our business being pretty strong.

Speaker #3: So we do see that regardless of what shakes out there, that AMP-AID work is going to continue. So it certainly is a little bit of a cloudy environment out there, not all rays of sunshine.

Speaker #3: But we do see the demand drivers in our business being.

Speaker #3: pretty strong. The

Vito Culmone: The only other thing I'd add to that, Gord, it's hard to argue with the points that you bring forward. The diversity of our platform, I think is a, you know, an incredible asset and you see it manifest itself through our year-to-date results, and I think you'll continue to see that, you know, both geographically and across our segments. Notwithstanding, you're gonna see pluses and minuses through it all, I think that, you know, to Gord's opening comments here, you know, we will be positive moving into 2026, no doubt.

Speaker #2: The only thing I'd add to that, Gord, is that it's hard to argue with the points you bring forward. But the diversity of our platform, I think, is an incredible asset.

Speaker #2: And you're starting to see it manifest itself through our year-to-date results. And I think you'll continue to see that both geographically and across our segments.

Speaker #2: So, notwithstanding, you're going to see pluses and minuses through it all. I think that to Gord's opening comments here, we will be positive moving into 2026.

Yuri Lynk: Okay. Good to hear. Second and last one for me. Just any update on the M&A pipeline? I understand over the last year or two, there's been some large private players maybe working themselves towards a sale. Just any change in the pipeline?

Speaker #4: Okay. Good to hear. Second and last one for me, just any update on the M&A pipeline? I understand over the last year or two, there's been some large private players, maybe working themselves towards a sale.

Speaker #4: Just any change in the pipeline?

Gord Johnston: Yeah. You know, it's a pretty robust industry right now. Lots of discussions ongoing. You know, you've certainly read in the papers about some of these private firms coming to market. You've also heard rumors about, you know, big firms in our space having discussions. Of course, we, you know, we can't comment on any of those things other than to say, we maintain very positive on M&A in general, and specifically for Stantec. Our board is supportive. Our investor community is supportive. We're supportive. The opportunity set is there. You know, we're continuing a number of conversations and, you know, look forward to bringing something forward at the appropriate time. Good to hear. Thanks, guys.

Speaker #3: Yeah. It's a pretty robust industry right now. Lots of discussions ongoing. You've certainly read in the papers about some of these private firms coming to market.

Speaker #3: You also heard rumors about big firms in our space having discussions. And of course, we can't comment on any of those things other than to say we maintain very, very positive on M&A in general and specifically for Stantec.

Speaker #3: Our board is supportive. The investor community is supportive. We're supportive. And the opportunity set is there. So we're continuing a number of conversations. And look forward to bringing something forward at the appropriate

Speaker #3: time.

Speaker #4: Good to hear. Thanks,

Vito Culmone: Thanks, Jake.

Speaker #2: Thanks, guys.

Operator: Our next question comes from the line of Ian Gillies from Stifel. Your question, please.

Speaker #3: And our next question comes from the line of Ian Gillies from C4. Your question, please.

Ian Gillies: Morning, everyone.

Speaker #5: Morning, everyone.

Vito Culmone: Morning.

Ian Gillies: Following on some of the previous commentary, you just hit the nail on the head. With organic backlog growth in the US flat year to date, you don't believe that impinges on your ability to generate some amount of organic growth in the US as we go into next year?

Speaker #5: Following morning on, some of the previous commentary may have hit the nail on the head. With organic backlog growth in the U.S. flat year-to-date, you don't believe that impinges on your ability to generate some amount of organic growth in the U.S. as we go into next year?

Vito Culmone: Yeah, that's absolutely correct, Ian. We do not envision our year-to-date backlog being flat as an indicator of organic growth going into next year. We'll be positive in organic growth next year. We'll give guidance again, you know, at the appropriate time. Our expectations at this time, and you heard Gord echo, you know, opening comments around the US, including the US. We feel pretty good about it. Factors that are contributing to the year-to-date. First of all, backlog is generally lumpy. Obviously, we expect it to build here as we move into the first half of the year. Our year-to-date backlog, though, even in the US, our year-to-date, which is probably a better comparison or equally important comparison, excuse me, our year-over-year.

Speaker #2: Yeah, that's absolutely correct. Ian, we do not envision our year-to-date backlog being flat as an indicator of organic growth going into next year. We'll be positive in organic growth next year.

Speaker #2: We'll give guidance again. At the appropriate time. But our expectations at this time and you heard Gord echo opening comments around the US, including the US, we feel pretty good about it.

Speaker #2: Factors that are contributing to the year-to-date backlog are generally lumpy. Obviously, we expect it to build here as we move into the first half of the year.

Speaker #2: Our year-to-date backlog, though, even in the US, our year-to-date, which is probably a better comparison or equally important comparison, excuse me, our year-over-year, thank you, is up 6.6%, I believe it is, or over 6%.

Gord Johnston: Year over year.

Vito Culmone: Thank you. You know, is up 6.6%, I believe it is, or over 6%. Overall, you know, notwithstanding the confluence of factors that we've talked about, that our peers have talked about, we clearly expect organic growth in the US as we move into next year.

Speaker #2: So overall, notwithstanding the confluence of factors that we've talked about that our peers have talked about, we clearly expect organic growth in the US as we move into next year.

Ian Gillies: Understood. That's very helpful. Maybe, along similar lines, and most of the other engineering firms have been asked about this, so I will ask as well, do you have any concerns about IIJA funds not being released? Like, do you with some certainty, for instance, does your US team still feel quite confident that the bulk of those funds will come out over the next, call it, 4 to 5 years and should continue to be that long-term tailwind and not be canceled?

Speaker #4: Understood. That's very helpful. And maybe along similar lines in most of the other engineering firms we've been asked about this, so I'll ask as well is do you have any concerns about IIJA funds not being released?

Speaker #4: With some certainty, for instance, does your US team still feel quite confident that the bulk of those funds will come out over the next, call it, four to five years?

Speaker #4: And should continue to be that long-term tailwind and not be canceled?

Gord Johnston: Yeah. I think our answer would be similar to what you've heard from some of our, from the others who have reported as well, that we have no indication that that program like the IIJA would be canceled or funds would be withheld. We still see the continued momentum on that. No, we think that program remains intact.

Speaker #2: Yeah. And so I think our answer would be similar to what you've heard from some of our the others who have reported as well, that we have no indication that a program like the IIJA would be canceled or funds would be withheld.

Speaker #2: We still see the continued momentum on that. And no, we think that that program remains intact.

Ian Gillies: Perfect. Thanks very much. I'll turn the call back over.

Speaker #4: Perfect. Thanks very much. I'll turn the call back over.

Gord Johnston: Thank you.

Speaker #2: Thanks,

Operator: Thank you. Our next question comes from the line of Krista Friesen from CIBC. Your question, please.

Speaker #3: question comes from the line of Krista Friesen from CIBC. Your question,

Speaker #3: please. Hi.

Krista Friesen: Hi. Thanks for taking my question. Maybe just thinking about your margin, obviously a pretty impressive quarter and raising and narrowing the guide for the remainder of the year. Can you speak to what's changed on that front relative to the beginning of the year when you first issued your guidance?

Speaker #6: Thanks for taking my question. Maybe just thinking about your margin, obviously, a pretty impressive quarter. And raising and narrowing the guide for the remainder of the year, can you speak to what's changed on that front relative to the beginning of the year when you first issued your guidance?

Speaker #6: Thanks for taking my question. Maybe just thinking about your margin, obviously, a pretty impressive quarter. And raising and narrowing the guide for the remainder of the year, can you speak to what's changed on that front relative to the beginning of the year when you first issued your guidance?

Vito Culmone: Hi, Krista. Yeah, it's Vito. You're absolutely right. We're really pleased. A lot of hard work across all of the teams, of course, across our organization in delivering an EBITDA margin year to date 17.7%, 100 basis points ahead of prior year, or more than that, actually. Really pleased with it. It all, you know, I sound like a broken record a little bit with this, but it all starts with project margins. You know, right customer, right project, right pricing, right risk profile. You know, we spend a lot of time with that, and our professionals are excellent in the delivery of that. Our project margins year to date are 0.1% ahead of where we were last year.

Speaker #2: Hi, Krista. Yeah, it's Vito. You're absolutely right. We are really pleased. A lot of hard work across all of the teams, of course, across our organization in delivering an EBITDA margin year-to-date of 17.7%, 100 basis points ahead of the prior year.

Speaker #2: Or more than that, actually. So, really, really pleased with it. I sound like a broken record a little bit with this, but it all starts with project margins.

Speaker #2: So right customer, right project, right pricing, right risk profile. We spend a lot of time with that. And our professionals are excellent in the delivery of that.

Speaker #2: margins year-to-date So our project are 0.1% ahead of where we were last year. So without that, that's the fundamental. And then what you're seeing, of course, is admin and marketing as a percentage of NSR come down.

Vito Culmone: Without that's the fundamental. Then what you're seeing, of course, is admin and marketing as a percentage of NSR come down. On a year-to-date basis, 37.6% versus 38.6% last year. Again, a 100 basis point improvement, and that's driven by a number of things. Clearly, scale is a big part of that, you know. As we grow, and organic growth is a significant component of that, the ability to obviously deliver against that base in a more efficient way, that's important for us, and that's contributed meaningful to our year-to-date results. Our utilization. Our utilization is another area that has contributed positive to it. Our occupancy costs are also contributing positive to it on a year-to-date basis.

Speaker #2: So on a year-to-date basis, 37.6% versus 38.6% last year. Again, 100 basis point improvement. And that's driven by a number of things. Clearly, scale is a big part of that.

Speaker #2: So, as we grow, organic growth is a significant component of that. The ability to, obviously, deliver against that base in a more efficient way is important for us.

Speaker #2: And that's contributed meaningful to our year-to-date results. Our utilization, our utilization is another area that is contributed positive to it. Our occupancy costs are also contributing positive to it on a year-to-date basis.

Vito Culmone: Net-net, you've got, you know, this business has significant operational leverage attached to it. With continued organic growth, continued acquisitions, contributing to obviously, you know, the net revenue growth, it provides a continued opportunity for EBITDA margin expansion going forward. While at the same time, very importantly, ensuring we continue to invest. Invest in our people, invest in our offerings, and investing in the market. That's equally, if not more important as well as we move our way through here.

Speaker #2: So net-net, you've got this business has significant operational leverage attached to it. And with continued organic growth, continued acquisitions, contributing to obviously the net revenue growth, it provides a continued opportunity for EBITDA margin expansion going forward.

Speaker #2: While at the same time, very importantly, ensuring we continue to invest. Invest in our people, invest in our offerings, and investing in the market.

Speaker #2: That's equally, if not more important, as we move our way through.

Speaker #2: here. Thanks.

Krista Friesen: Thanks. That's great color. Just the last one for me here. You mentioned the Page acquisition, integration's progressing well and starting to realize some synergies there. Can you just provide us with a little bit more detail there? Thank you.

Speaker #6: That's great color. And just a last one from me here. You mentioned the paycheck acquisition. Integration is progressing well and starting to realize some synergies there.

Speaker #6: Can you just provide us with a little bit more detail there? Thank you.

Vito Culmone: Yeah, not much more to add other than Gord's commentary. You know, we knew Page very, very well coming into this acquisition. We work with them and, you know, we have to say that everything post that close of the acquisition has just reconfirmed. Just an incredible team and really hit the ground running from an integration perspective. I think the pace to which we're seeing some of the opportunities, both in market and some of the efficiency, reflects the fact that we knew each other so well and had spent a fair bit of time in these sorts of discussions, well in advance. Gord, any additional comment on Page?

Speaker #2: Yeah, not much more to add than the Gord's commentary. We knew paid very, very well coming into this acquisition. We work with them and we have to say that everything post-close of the acquisition has just reconfirmed, just an incredible team.

Speaker #2: And really hit the ground running from an integration perspective. I think the pace to which we're seeing some of the opportunities, both in market and some of the efficiency reflects the fact that we knew each other so well and had spent a fair bit of time in these sorts of discussions well in advance.

Speaker #2: But Gord,

Speaker #2: any additional comment on Paige? No,

Gord Johnston: No, it's, you know, as we've really started working through the integration, you know, everything that we thought was there has really shown itself to be true and then some. It's actually been very positive. A lot of great project-based and pursuit-based synergies there. Actually feeling really good about Page. I wish we could find another five Pages to join us.

Speaker #3: it's as we've really started working through the integration, everything that we thought was there has really shown itself to be true. And then some.

Speaker #3: So it's actually been very, very positive. A lot of great project-based and pursuit-based synergies there. So actually feeling really good about Paige, which I wish we could find another five pages.

Speaker #3: To join

Speaker #3: us. Thanks.

Krista Friesen: Thanks. Appreciate the commentary.

Speaker #6: Appreciate the commentary.

Gord Johnston: Thanks, Krista.

Speaker #2: Thanks, Krista.

Operator: Thank you. Our next question comes from the line of Benoit Poirier from Desjardins. Your question please.

Speaker #3: Thank you. And our next question comes from the line of Benoit Parrier from Desjardins. Your question, please.

Benoit Poirier: Yep. Good morning, Vito. Good morning, Gord. Great performance on the margin front and also great color that was provided on the previous question. Looking at 2026, could you provide maybe some comments whether the pace of improvement we've seen so far this year is sustainable going into 2026? What are the puts and takes when looking at margins going into next year?

Speaker #5: Yep. Good morning, Vito. Good morning, Gord. And great performance on the margin front and also great color that was provided on the previous question.

Speaker #5: So looking at 2026, could you provide maybe some comments, whether the pace of improvement we've seen so far this year is sustainable going into 2026, 2026?

Speaker #5: And what are the puts and takes when looking at margins going into next year?

Vito Culmone: That's a sneaky way of asking me for guidance already there, Benoit. No. We'll do that, we'll do that in February. I mean, I think, you know, when you look at the last several years, there's been steady year-over-year improvement, point 3, point 4, point 5. This year, to your point, a little bit outpacing our, you know, our historical track record, which is wonderful. You know, one of the big factors in EBITDA margin expansion clearly is connected to a lot of what this call's been about, which is, you know, the pace of organic revenue activity in the business. That is a big driver of obviously what you can deliver bottom line.

Speaker #2: That's a sneaky way of asking me for guidance already. There, Benoit. But we'll do that. We'll do that in February. I mean, I think when you look at the last several years, there's been steady year-over-year improvement.

Speaker #2: 0.3, 0.4, 0.5. This year, to your point, a little bit outpacing. Our historical track record, which is wonderful. One of the big factors in EBITDA margin expansion, clearly, is connected to a lot of what this call has been about, which is the pace of organic revenue activity in the business.

Speaker #2: So that is a big driver of obviously what you can deliver bottom line. But when you sort of zoom out, notwithstanding where we may be here in 2026 and whatnot, which again, we feel fairly comfortable with at this point, and you look at a two or three or four-year picture with the macro demand and whatnot, I think you can expect obviously continued EBITDA margin expansion.

Vito Culmone: You know, but when you, when you sort of zoom out, notwithstanding where we may be here in 2026 and whatnot, which again, we're, you know, we feel fairly comfortable with at this point, and you look at a 2 to 3 or 4-year picture with the macro demand and whatnot, I think you can expect obviously continued EBITDA margin expansion. We're just going through, you know, we're entering our 3rd year of our 3-year strat plan where we committed to 17 to 18. Obviously, we're in the higher end of that range as we sit here in 2025. We expect to be at these levels or better obviously as we move into 2026, and we'll refine that next year.

Speaker #2: We're just going through we're entering our third year of our three-year strat plan where we committed to 17 to 18. Obviously, we're in the higher end of that range as we sit here in 2025.

Speaker #2: We expect to be at these levels or better, obviously, as we move into 2026, and we'll refine that next year. But it's the commercial activity that enables in large part for us to really lean into these margin expansions.

Vito Culmone: you know, it's the commercial activity that enables, in large part for us to really lean into these margin expansions and we expect that to continue.

Speaker #2: And we expect that to continue.

Benoit Poirier: Okay. That's great color. Maybe, Gord, you made some great comments about the opportunities you foresee in terms of defense. I would be curious if you could expand on what is your exposure to defense right now, and how material could it be given the opportunities you see out there? I would be curious to see how it would compare to the opportunities with the data center, let's say.

Speaker #5: Okay, that's great color. And maybe, Gord, you made some great comments about the opportunities you foresee in terms of defense. So I would be curious if you could expand on what your exposure to defense is right now and how material it could be given the opportunities you see out there?

Speaker #5: I would be curious to see how it would compare to the opportunities with data center, let's say.

Gord Johnston: Yeah, no, that's great. You know, the beauty of the Stantec model is in that diversification piece. You know, when you look at even in the US where we do a lot of, you know, dry docks and aircraft hangars and those sorts of things, our exposure to the US federal government overall is still in that 5% range. It's, it's, you know, that's the beauty of the diversification model. I think you would see, you know, in other countries around the world it's probably sub 5, you know, what we would be doing in that. Again, a lot of this is just our bread-and-butter infrastructure work. Just, you know, with a little bit different, instead of a hangar for a commercial aircraft, it's for a military aircraft.

Speaker #3: Yeah. No, that's great. The beauty of the Stantec model is in that diversification. Piece. And so when you look at even in the US where we do a lot of dry docs and aircraft hangars and those sorts of things, our exposure to the US federal government overall is still in that five-ish percent range.

Speaker #3: And so that's the beauty of the diversification model. I think you would see in other countries around the world, it's probably sub-5. What we would be doing in that.

Speaker #3: But again, a lot of this is just our bread and butter infrastructure work. Just with a little bit different instead of a hanger for a commercial aircraft, it's for a military aircraft.

Gord Johnston: You know, this is stuff that we're all very, very comfortable with. You know, we don't expect that while, you know, there's been a lot of commitments to increasing spending on defense and some of these infrastructure things, we don't expect it's gonna pop right away. It's gonna take a while to build and that's fine. We're spending a lot of time with our clients and ensuring that when, you know, when they get the budget in their, you know, and they're ready to go, they're thinking of us top of mind. You know, I think we'll see it continue to grow, but I'm not sure that it'll be that we'll see it being material.

Speaker #3: And so this is stuff that we're all very, very comfortable with. And we don't expect that while there's been a lot of commitments to increasing spending on defense and some of these infrastructure things, we don't expect it's going to pop right away.

Speaker #3: It's going to take a while to build. And that's fine. We're spending a lot of time with our clients and ensuring that when they get the budget in their and they're ready to go, that they're thinking of us top of mind.

Speaker #3: So I think we'll see it continue to grow. But I'm not sure that we'll see it being material.

Benoit Poirier: Okay. That's great. Maybe last one for me in terms of free cash flow. Vito, very strong performance in the quarter. It looks like that you were able to maintain DSO while typically they go up a bit sequentially from Q2 to Q3. Just wondering what is a matter of a stronger collection efforts? Is it a matter of business mix? What about the expectation, let's say, for Q4? Was there some pull forward in terms of free cash flow? Would be curious to get some thoughts around the strong free cash flow performance.

Speaker #5: Okay. That's great. And maybe last one for me in terms of free cash flow. Vito, very strong performance in the quarter. It looks like that you were able to maintain DSO while typically they go up a bit sequentially from Q2 to Q3.

Speaker #5: So just wondering what is the matter of a stronger collection efforts? Is it a matter of business mix or what about the expectation, let's say, for Q4?

Speaker #5: Was there some pull forward in terms of free cash flow? I would be curious to get some thoughts around the strong free cash flow performance.

Vito Culmone: Yeah. Again, Benoit, I take you to the you're right. You know, free cash flow can be lumpy quarter to quarter, and this Q2, Q3 was outside year-over-year gain. Clearly the trend has been incredibly positive for us. As you heard in my commentary, our prepared commentary, our year-to-date numbers are up significantly. That's driven by, of course, the business and the expansion of the business first and foremost. Clearly our working capital management has, you know, it remains to be seen, but it looks like we've made a significant one step, one time sort of move here that is continuing to stay with us. Our DSOs now are at 73, 74. You know, we had an internal target of 80 for the longest time.

Speaker #2: Yeah. And again, Benoit, I take you to there. You're right. Free cash flow can be lumpy quarter to quarter. And this quarter Q3 was outsized year-over-year gain.

Speaker #2: But clearly, the trend has been incredibly positive for us. As you heard in my commentary, or prepared commentary, our year-to-date numbers are up significantly.

Speaker #2: That's driven by, of course, the business and the expansion of the business first and foremost. But clearly, our working capital management has remained to be seen, but it looks like we've made a significant one-step one-time sort of move here that is continuing to stay with us.

Speaker #2: Our DSOs now are at 73 and 74. We had an internal target of 80 for the longest time. I think we're getting pretty comfortable saying that perhaps the mid-70s is the new starting point for us.

Vito Culmone: I think we're getting pretty comfortable saying that perhaps the mid-seventies is the new starting point for us. You know, we'll give ourselves another quarter before we do that. You know, we've made some changes internally. It's an area of focus for us.

Speaker #2: But we'll give ourselves another quarter before we do that. And I just need to we've made some changes internally. It's an area of focus for us primarily.

Gord Johnston: Primarily, just a huge shout-out to all of our project managers across all of the entire network that are managing aggressively to that, while obviously keeping our commitments to our clients and whatnot. Really, really pleased with it. Might give some back in Q4. You know, I am not worried about that in any way, shape, or form. Full year will continue to be well ahead of where we were in prior year. Very pleased with our working capital management.

Speaker #2: And just a huge shout-out to all of our project managers across the entire network who are managing aggressively to that, while obviously keeping our commitments to our clients and whatnot.

Speaker #2: So really, really pleased with it. Might give some back in Q4. I'm not worried about that in any way, shape, or form. But full year will continue to be well ahead of where we were in prior year.

Speaker #2: So very pleased with our working capital management.

Benoit Poirier: Okay. Kudos, and thank you for the time.

Speaker #5: Okay. Kudos. And thank you for the time.

Gord Johnston: Yep. See you, Benoit. Thanks.

Speaker #2: Yep. See you, Benoit. Thanks.

Operator: Thank you. Once again, if you have a question at this time, please press star one one on your telephone. Our next question comes from the line of Michael Tupholme from TD Cowen. Your question please.

Speaker #1: Thank you once again. If you have a question at this time, please press star 11 on your telephone. Our next question comes in line of Michael Tapon from TD Cowan.

Speaker #1: Your question,

Speaker #1: please. Thank you.

Michael Tupholme: Thank you. Good morning.

Speaker #6: Good morning.

Gord Johnston: Morning.

Speaker #3: Morning.

Michael Tupholme: Gord, you've talked a fair bit about the water business, obviously over time, but also mentioned it this quarter, very strong organic growth. You often talk about the contribution from the UK's AMP program and what that's meaning for your organic growth. I'm wondering if you can talk a little bit more about what you're seeing in Canada and the US. I think you've touched on it a little bit, but I'd be curious what kind of organic growth rates you're seeing in water in those regions, and maybe if you can talk a little bit about the drivers you're seeing as well?

Speaker #6: Gord, you've talked a fair bit about the water business. Obviously, over time, but also mentioned it this quarter. Very strong organic growth. You often talk about the contribution from the UK's AMP program and what that's meaning for your organic growth.

Speaker #6: I'm wondering if you can talk a little bit more about what you're seeing in Canada and the U.S. I think you've touched on it a little bit, but I'd be curious what kind of organic growth rates you're seeing in water in those regions and maybe if you can talk a little bit about the drivers you're seeing as well.

Speaker #6: well.

Gord Johnston: Yeah. Well, so in the US, you know, really strong growth in water as well.

Speaker #3: Yeah.

Speaker #3: Well, so us, a really, really strong growth in water as well. Just trying to look for the number here, but it's definitely well into the double digits—was it 20% in the quarter?

Michael Tupholme: Love the question.

Gord Johnston: the number here, but it's definitely well into the double. Was it 20% that in the quarter, Vito?

Vito Culmone: In the US.

Speaker #2: In the US?

Gord Johnston: You know, we'll grab that.

Speaker #3: But we'll grab that. Yeah, no, I've got.

Benoit Poirier: Yeah.

Gord Johnston: Yeah, no, I've got certainly double-digit growth in the US in water. What's interesting, it's over 20% in Canada. What's really interesting is that, you know, we've talked about it in sequential quarters, like we've had continued in our organic growth in our water business, like all the way back to early 2019, and it just continues to strengthen. In.

Speaker #2: Yeah.

Speaker #3: certainly double-digit growth in the US in water and what's interesting, what whether it's—and it's over 20% in Canada. But what's really interesting is that we've talked about it in sequential quarters.

Speaker #3: We've had continued in our organic growth in our water business all the way back to early 2019. And it just continues and continues to

Speaker #3: strengthen. It was So in.

Vito Culmone: It was 10% growth.

Gord Johnston: 10%? Okay.

Speaker #3: 10. 10%. 10%, Gordon.

Vito Culmone: In the US.

Speaker #2: Yeah. In the US.

Gord Johnston: Yeah. Like in Canada, the type of works that we're doing are big, you know, public sector wastewater projects and water projects and Metro Vancouver, you know, where we're working on the Iona Island, you know, relocation there, a big biosolids project.

Speaker #3: Okay. Yeah. So in Canada, the type of work that we're doing are big, public sector wastewater projects and water projects. And Metro Vancouver, where we're working on the Iona Island relocation there, big biosolids project in Winnipeg that we've talked about billion dollars.

Michael Tupholme: Yeah

Gord Johnston: in Winnipeg that we've talked about, CAD 1 billion. There's just a lot of big, you know, projects like that. Toronto continues with basement flooding enhancements and such. In the US, you know, we see the same of a lot of it is municipal type work, water supply, water treatment, water scarcity type issues in some areas. In the Gulf, certainly it's, you know, flooding and excess of water. It's all just that, sort of that core fundamentals that just keeps going with our water business. Whether it's not enough water and we're working on water reuse and recycle, too much water and flooding, we're doing, you know, big projects like the big pump station we did in New Orleans several years ago.

Speaker #3: So there's just a lot of big projects like that. Toronto continues with basement flooding enhancements. And such. In the US, we see the same of a lot of it is municipal-type work, water supply, water treatment, water scarcity-type issues.

Speaker #3: And some areas in the Gulf, certainly, it's flooding and an excess of water. And so it's all just that sort of core fundamentals that just keeps going with our water business where—whether it's not enough water and we're working on water reuse and recycling, too much water and flooding, and so we're doing big projects like the big pump station we did in New Orleans several years ago, or currently working on shoreline protection-type work, sea level rise-type work, and regulation like PFAS continues to provide opportunities in the short but more so in the longer term.

Gord Johnston: We're currently working on shoreline protection type work, sea level rise type work. Regulation like PFAS, you know, continues to provide opportunities in the short but more so in the longer term. Just the advanced manufacturing and reshoring of some of that, you know, of course, you read about in the papers all the time. Very often, the first thing that clients need is water, access to water allocations, the treatment of high purity water for manufacturing processes. Really strong drivers in water, and we don't see them slowing down in any way.

Speaker #3: And then just the advanced manufacturing and reshoring of some of that that, of course, you read about in the papers all the time. And very often, the first thing that clients need is water.

Speaker #3: Access to water, water allocations, and the treatment of high-purity water for manufacturing processes are really, really strong drivers in water. We don't see them slowing down in any way.

Michael Tupholme: Thank you for that. That's very helpful. The second question I wanted to ask is just about data center activity. Wondering if you can provide a bit of an update on activity levels in that area. I guess also curious what percentage of the revenue of the company is that represented by today and how you see that evolving and looking into 2026 as far as share of revenue contribution relative to 2025.

Speaker #6: Thank you for that. That's very helpful. The second question I wanted to ask is just about data center activity. I was wondering if you can provide a bit of an update on activity levels in that area. I guess I'm also curious about what percentage of the company's revenue is represented by that today, and how you see that evolving. Looking into 2026, how do you see the share of revenue contribution relative to 2025?

Gord Johnston: Yeah. We're currently working on, you know, over 100, you know, data centers, mission-critical facilities, ranging in size from 20 MW all the way up to a GW. You know, a lot of projects on the go, but a pretty robust pipeline as well. I think right now it would represent, Vito, I'd say like 3%-

Speaker #3: Yeah. So we're currently working on over 100 data centers, mission-critical facilities, ranging in size from 20 megawatts all the way up to 1 gigawatt.

Speaker #3: So a lot of projects on the go. But a pretty robust pipeline as well. I think right now what would represent, Vito, I'd say like 3% of 2, 3% of the overall net revenue of the company.

Vito Culmone: Yep

Vito Culmone: 2%, 3% of the overall net revenue of the company. Do we see that growing? Yeah. I mean, that's growing at a bit of an outsized. You know, would it get to 4%, maybe 5%? We don't see that we'd want it to go a lot more than that. We don't wanna become 15% exposed to any sort of a, you know, a high growth area like that because, you know, it just in the, as we've talked about our diversification, over time. We feel good in that 3% to 5% range if data center is mission critical, we're in that area, but certainly a high growth area for us.

Speaker #3: And do we see that growing? Yeah. I mean, that's growing at a bit of an outsized rate. But would it get to 4, maybe 5?

Speaker #3: But we don't see that we'd want it to go a lot more than that. We don't want to become 15% exposed to any sort of a high-growth area like that because just in the, as we've talked about, our diversification over time.

Speaker #3: So we feel good in that 3 to 5 percent range if data center is mission-critical, we're in that area. But certainly a high-growth area for

Speaker #3: us. That's perfect.

Michael Tupholme: That's perfect. Thanks for the time.

Speaker #6: Thanks for the time.

Gord Johnston: Okay. See you, Mike.

Gord Johnston: Thanks, Mike.

Speaker #2: Okay. See you later. Thank

Operator: Thank you. Our next question comes from the line of Chris Murray from ATB Capital Markets. Your question please.

Speaker #1: You. And our next question comes from the line of Chris Murray from ATB Capital Markets. Your question, please.

Chris Murray: Yeah, folks. Good morning. You know, Gord, you mentioned earlier, the 3-year financial target sitting, I guess, at CAD 7.5 billion by the end of next year. Maybe just a couple thoughts here. I mean, I'm looking at consensus right now. It's about CAD 7.2 billion, you know, which means that you probably have to find some acquisition growth, I won't say in a hurry, but soon. There's also, you know, I guess, some questions.

Speaker #5: Yeah, folks. Good morning. Gordon, you mentioned earlier the three-year financial targets hitting, I guess, $7.5 billion by the end of next year. So maybe just a couple of thoughts here.

Speaker #5: I mean, I'm looking at consensus right now. It's about 7 to which means that you probably have to find some acquisition growth. I won't say in a hurry, but soon.

Speaker #5: But there's also I guess some questions we kind of heard on the call about the whole idea behind being able to maintain a 7% CAGR because even if we go back a couple of experienced over the last couple of years, hitting 7% next year on a three-year CAGR is going to require just a stupid lift.

Chris Murray: I think we kinda heard on the call about. You know, the whole idea behind being able to maintain a 7% CAGR, 'cause even if we go back a couple years ago, and what we've actually experienced over the last couple years, hitting 7% next year on a 3-year CAGR is gonna require just a stupid lift, which is probably not reasonable. I guess the question I've got for you is, you know, the rest of the other metrics that we're seeing up and down, you know, things like adjusted EBITDA, some of the financial metrics are all looking okay.

Speaker #5: Which is probably not reasonable. So I guess the question I've got for you is, the rest of the other metrics that we're seeing up and down, things like the just to give it to us and the financial metrics, are all looking okay.

Chris Murray: You know, I guess the question I've got for you is like, are you married to that 7.5 as a target, or is it just more, you know, kind of aspirational and we can kinda think about, you know, how the, how the game is gonna play? Because, you know, the environment is shifting and, you know, we could be heading into some choppy water. Just, just thoughts on how those targets are set and, and how you're actually aiming at them.

Speaker #5: Are you, I guess the question I've got for you is, are you married to that 7.5 as a target, or is it just more kind of aspirational and we can kind of think about how the game is going to play?

Speaker #5: Because the environment is shifting and we could be heading into some choppy waters. So just thoughts on how those targets are set and how you're actually aiming at them.

Vito Culmone: Yeah, Chris, maybe I'll take that one, and Gord, you can jump in if you. You know, the seven and a half was established, CAD 7.5 billion was established obviously years ago based on exactly what you're describing, Chris. It was based on a CAGR of seven and a half, 7% organic, and then obviously the rest of it filled in by acquisition. You know, you're right. When you look at that 7% CAGR now, relative to obviously what we're doing here in 2025, it's gonna be hard probably for us to get 7% CAGR, you know, obviously, again, we'll stop just short of 2026 at this point.

Speaker #4: Yeah, Chris, maybe I'll take that one. And Gordon, you can jump in if you want. The $7.5 billion was established, obviously years ago, based on exactly what you're describing, Chris. It was based on a CAGR of 7% organic.

Speaker #4: And then, obviously, the rest of it filled in by acquisition. You're right. When you look at that 7% CAGR now, relative to obviously what we did and are doing here in 2025, it's going to be hard, probably, for us to get 7% CAGR. But obviously, again, we'll stop just short of 2026 at this point.

Vito Culmone: We'll see how the next few years clearly expect organic growth next year, and expect a good year there. We're not married to the 7.5. You know, it's not something that at the end of the day we're linked to. This company is all about just obviously continued diversification, organic growth, and M&A strategy. You know, when you look at the pace of our M&A, you sort of say we expect to obviously be in market, expect to continue to do acquisitions, and as a result, that's what contributed, I think, to Gord's comment around our ability to be in that 7.5 range. I would say, you know, the number itself isn't driving our activity.

Speaker #4: We'll see how the next few years. Clearly expect organic growth next year. And expect a good year there. And so we're not married to the 7.5.

Speaker #4: It's not where it's not something that at the end of the day we're linked to. This company is all about, obviously, continued diversification, organic growth, and M&A strategy.

Speaker #4: When you look at the pace of our M&A, you sort of say we expect to obviously be in market, expect to continue to do acquisitions.

Speaker #4: And as a result, that's what contributed, I think, to Gordon's comment around our ability to be in that 7.5 range. But I would say that the number itself isn't driving our activity.

Vito Culmone: It's our strategy that's driving the activity, and it's proved out really well at this point. Any other, Gord?

Speaker #4: It's our strategy that's driving the activity. And it's proved out really well at this point.

Gord Johnston: No, absolutely right, Vito. You know, Chris, while you're right, if it does, if organic growth does slip below that 7% CAGR, you know, there's some great optionality on the acquisition side that, you know, we would never rush anything or do anything that we didn't feel was the right thing to do long term in order to hit that 7.5 target. It's a pretty robust environment right now, so, you know, feeling optimistic about some things that could happen there.

Speaker #3: No, absolutely right. Vito, and Chris, while you're right, if organic growth does slip below that 7% CAGR, there's some great optionality on the acquisition side.

Speaker #3: That we would never rush anything or do anything that we didn't feel was the right thing to do long-term in order to hit that 7.5 target.

Speaker #3: But it's a pretty robust environment right now. So feeling optimistic about some things that could happen there.

Chris Murray: Okay, that's helpful. The other question, and I know this is something that we haven't looked at in a while, but, you know, Vito, I'll throw it out at you, is just, you know, getting back into the market and maybe buying back stock again. You know, we haven't really seen that. I know that, you know, the multiple's been fairly high, but now it's starting to come maybe back to what I would call a more normal range. You know, is maybe getting into a regular cadence on the NCIB something that you guys are maybe more open to, or is that something that you're just gonna stay kind of full blown pressed on M&A as a use of capital?

Speaker #5: Okay, that's helpful. The other question, and I know this is something that we haven't looked at in a while, but Vito, I'll throw it out at you: is just getting back into the market and maybe buying back stock again.

Speaker #5: We haven't really seen that. I know that the multiples have been fairly high, but now it's starting to come maybe back to what I would call a more normal range.

Speaker #5: Is maybe getting into a regular cadence on the NCIB something that you guys are maybe more open to? Or is that something that you're just going to stay kind of full board pressed on M&A as a use of capital?

Vito Culmone: Yeah, no, I take you back to our capital structure objectives. Obviously, we're gonna generate a significant amount of free cash flow. We will continue to do that. You know, our capital allocation priorities are obviously first and foremost funding our internal capital needs, which are fairly modest. You know, our capital expenditures have been in the area of CAD 100 million on an annual basis. This year will be actually fairly below that. Obviously, you know, we have a dividend in place. We'll continue to respect that dividend and, you know, likely grow it as we have in the last several years. The NCIB there, and M&A there.

Speaker #4: Yeah, no, I take you back to our capital structure objectives. Obviously, we're going to generate a significant amount of free cash flow. We will continue to do that.

Speaker #4: Our capital allocation priorities are obviously first and foremost funding our internal capital needs, which are fairly modest. Our capital expenditures have been in the area of $100 million on an annual basis.

Speaker #4: This year we'll be actually fairly below that. And then obviously we have a dividend in place. We'll continue to respect that dividend and likely grow it as we have in the last several years.

Speaker #4: And then the NCIB, there's an M&As there. Again, we see an incredible opportunity for this organization going forward with the right acquisitions, a fragmented market to prioritize acquisitions.

Vito Culmone: Again, we see an incredible opportunity for this organization going forward with the right acquisitions, a fragmented market to prioritize acquisitions, and that also contributes to organic growth, right? I mean, acquisitions are a big part of also, across this revenue synergies and whatnot to driving organic growth. M&A is lumpy. Like, when you're looking at M&A, you're, you know, over the years, you can't sort of predict it. Clearly we'll continue to use the NCIB. You're absolutely right. We have been muted on share buybacks the last couple of years I think now. We'll continue to use the NCIB and have it on the shelf as required, and opportunistically, we wouldn't hesitate to get in the market and buy back our shares if required.

Speaker #4: And that also contributes to organic growth, right? I mean, acquisitions are a big part of also across the revenue synergies and whatnot to drive organic growth.

Speaker #4: But M&A is lumpy. When you're looking at M&A, over the years, you can't sort of predict it. So clearly we'll continue to use the NCIB.

Speaker #4: You're absolutely right. We have been muted on share buybacks the last couple of years, I think now. But we'll continue to use the NCIB and have it on the shelf as required.

Speaker #4: And opportunistically, we wouldn't hesitate to get in the market and buy back our shares if required. But M&A is we think a really significant value creator for this organization going forward, as is our stock buyback program.

Vito Culmone: M&A is, we think, a really significant value creator for this organization going forward, as is our stock buyback program.

Chris Murray: Okay. I'll leave it there. Thanks, folks.

Speaker #5: Okay, I'll leave it there. Thanks.

Speaker #5: folks.

Gord Johnston: Thanks. Thanks, Chris.

Speaker #3: Thanks.

Speaker #4: Thanks, Chris. Thank

Operator: Thank you. Our next question comes to the line of Maxim Sytchev from NBCM. Your question please.

Speaker #1: you. And our next question comes to the line of Maxim Sychev from NBCM. Your question, please.

Maxim Sytchev: Hi. Good morning, gentlemen.

Speaker #6: Hi, good morning,

Speaker #6: gentlemen. Gordon, Morning. maybe the first question for you and just turning back to the US. I mean, one of the things that we're hearing is that the procurement methodology has changed a little bit from the federal government, that it's a bit more book and burn.

Gord Johnston: Morning.

Maxim Sytchev: Gord, maybe the first question for you, and just turning back to the US. I mean, one of the things that we're hearing is that the procurement methodology has changed a little bit from the federal government, that it's a bit more book and burn, sort of less visibility, but work is still coming through. Is this also something that perhaps explains that dichotomy between backlog and organic growth, which still remains pretty robust? Just any color you can provide there would be super helpful. Thank you.

Speaker #6: Sort of less visibility, but work is still coming through. Is this also something that perhaps explains that dichotomy between backlog and organic growth, which still remains pretty robust?

Speaker #6: So just any call you can provide, that would be super helpful. Thank you.

Gord Johnston: Yeah, you know, without question, the overall procurement cycle and process for, you know, for a number of federal, state, and local governments have changed with some of the executive orders that have come from President Trump. That was a little bit slowness there the first part of the year. We're, you know, we've been awarded a number of projects, and we're just waiting for to get them signed. Certainly, the shutdown slowed things down there. I think as we see hopefully folks start to come back and begin to work through the they work through the backlog of paper on their desk, we get some things signed, and then that'll turn into backlog, for us and others in the industry. I think, you know, we're still long-term bullish, on the US market.

Speaker #3: Overall procurement cycle and, yeah, without question, the process for a number of federal, state, and local governments has changed with some of the executive orders that have come from President Trump.

Speaker #3: And so that was a little bit slowness there the first part of the year. Now we've been awarded a number of projects and we're just waiting to get them signed.

Speaker #3: And certainly the shutdown slowed things down there. So I think as we see hopefully folks start to come back and begin to work through the they work through the backlog of paper on their desk, we get some things signed and then they'll turn into backlog for us and others in the industry.

Speaker #3: So I think we're still long-term bullish. On the US market there, a lot of good opportunities. And we'll just keep

Gord Johnston: There are a lot of good opportunities, and we'll just keep working on it.

Speaker #3: working on it. Yeah, for

Maxim Sytchev: Yeah, for sure. Do you mind providing a bit of color in terms of the environmental services organic growth? I mean, we're seeing a bit of a slowdown while water is actually accelerating. Do you mind maybe talking about the puts and takes in terms of what explains that divergence as well? Thank you.

Speaker #6: sure. And then do you mind providing a bit of color in terms of the environmental services organic growth? I mean, we're seeing a bit of a slowdown while water is actually accelerating.

Speaker #6: So, do you mind maybe talking about the puts and takes in terms of what explains that divergence as well? Thank you.

Gord Johnston: Yeah. You know, absolutely. A couple of things there. One is that even more than other other groups, our ES group has got a number of large US federal projects that we've been awarded just waiting for waiting for signature. We do see those coming. No question of discussion of cancellation or deferral. We just need to get them signed, then we can get them going here early in the new year. I think longer term, you know, we see both in Canada, we've got some good projects that are going to be starting up in the near term as well, in the US too.

Speaker #3: Yeah, absolutely. So a couple of things there. One is that even more than other groups, our ES group has got a number of large US federal projects that we've been awarded just waiting for signature.

Speaker #3: So we do see those coming no question of discussion of cancellation or deferral. We just need to get them signed and then we can get them going here early in the new year.

Speaker #3: So, I think longer term, we see, both in Canada, we've got some good projects that are going to be starting up in the near term as well.

Speaker #3: In the US too. So I think we've seen a little bit of a slowness in ES this year or organic growth really quarter over quarter has been kind of low single digits.

Gord Johnston: I think we've seen a little bit of a slowness in ES this year, or, you know, organic growth really quarter-over-quarter has been, you know, kind of low single digits. I do think we'll see a bit of an acceleration in that as we move into 2026.

Speaker #3: I do think we'll see a bit of an acceleration in that as we move into.

Speaker #3: 2026. Okay, super helpful.

Maxim Sytchev: Okay. Super helpful. Thank you so much. Last question, if I may. You called out the German market, which is obviously sort of a recent beachhead for you guys, seeing very nice growth. Do you mind maybe talking about what is driving that? I presume some of that is defense, transport, any incremental color would be super helpful. Thank you.

Speaker #6: Thank you so much. And then last question, if I may. You called out the German market, which is obviously sort of a recent beachhead for you guys seeing very nice growth.

Speaker #6: Do you mind maybe talking about what is driving that? I presume some of that is defense transport, but any incremental color would be super helpful.

Speaker #6: Thank

Speaker #6: you. Yeah, so

Gord Johnston: Yeah. Our group in Germany, incredibly well managed, with lots of opportunity, particularly since the, you know, the government took off the debt break there and investing another EUR 500 billion. Some of the work that we're doing now, in addition to the typical work that we do, which is, you know, roadways and bridges and rail projects, we're working a lot of folks on right now on a big electrical transmission project. There's a real north-south need for electrical transmission in Germany as well. That's a market that we've just begun to move into probably over the last six to nine months. I see a lot of growth there.

Speaker #3: Our group in Germany is incredibly well-managed, with lots of opportunity, particularly since the government removed the debt brake and is investing another €500 billion.

Speaker #3: So some of the work that we're doing now, in addition to the typical work that we do, which is roadways and bridges and rail projects, we're working a lot of folks on right now on a big electrical transmission project.

Speaker #3: And there's a real north-south need for electrical transmission in Germany as well. So, that's a market that we've just begun to move into probably over the last six to nine months.

Speaker #3: So I see a lot of growth there. So in addition to the strength of our existing business, which is growing really, really well, we're absolutely looking for other opportunities to bolt on to the beachhead, the foothold that we've got now in Germany, and continue to grow it.

Gord Johnston: In addition to, you know, the strength of our existing business, which is growing really, really well, you know, we're absolutely looking for other opportunities to bolt on to, you know, to the beachhead, the foothold that we've got now in Germany and continue to grow it. You know, good market, predictable, well-run companies. We're looking to look for opportunities to continue to expand.

Speaker #3: Good market, predictable, well-run companies. So, we're looking for opportunities to continue to expand.

Maxim Sytchev: Okay. Does that imply sort of inorganic growth as well? That's how we should be interpreting this?

Speaker #6: Okay, and so does that imply sort of inorganic growth as well? That's how we should be.

Speaker #6: interpreting this? Yeah, I

Gord Johnston: Yeah. I think we, you know, we certainly was gonna see a lot of organic growth, and we're absolutely looking at inorganic opportunities as well.

Speaker #3: think we certainly was going to see a lot of organic growth and we're absolutely looking at inorganic opportunities as well.

Maxim Sytchev: Okay. Thank you for clarifying.

Speaker #6: Okay, thank you for

Speaker #6: clarifying. Great,

Gord Johnston: Great. Thanks, Max.

Speaker #3: thanks, Max. Thank

Operator: Thank you. Once again, if you have a question at this time, please press star one one. Our next question comes in line of Jonathan Goldman from Scotiabank. Your question please.

Speaker #1: You are once again. If you have a question at this time, please press *11. Our next question comes from Jonathan Goldman from Scotiabank.

Speaker #1: Your question, please.

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

Speaker #7: Hi, good morning, team, and thanks for taking my call.

Speaker #7: questions.

Gord Johnston: Hi, Jonathan. Good morning.

Jonathan Goldman: Maybe if we could Good morning. If we think back to the commentary on the last call, I think in the US, you called out in July you had seen high single-digit organic growth. I'm just curious how things progressed sequentially through August, September, October, November, and if there's been any reversal in the trend, because I guess with the 4.6% in the quarter, it does seem like things deteriorated, August and September.

Speaker #4: Hi, Jonathan.

Speaker #7: Good morning. If we think back to Good morning. the commentary on the last call, I think in the US you called out in July you had seen high single-digit organic growth.

Speaker #7: I'm just curious how things progress sequentially through August, September, October, and November, and if there's been any reversal in the trend because, I guess, with the 4.6% on the quarter, it does seem like things deteriorated in August.

Speaker #7: September. Yeah, Jonathan, you're

Gord Johnston: Yeah, Jonathan. You're absolutely right. We did call out obviously that July number. You know, we ended up where we ended up, which was just under 5% there. You know, it wasn't a big drop from July, and I wouldn't say there's further deterioration at this point. You know, all the commentary with respect to the US, we were, you know, we sort of made it here today. I don't have anything else to add.

Speaker #3: Absolutely right. We did call out, obviously, that July number. We ended up where we ended up, which was just under 5% there, so it wasn't a big drop from July.

Speaker #3: And I wouldn't say there's further deterioration at this point. All the commentary with respect to the U.S., we sort of made it here today at home.

Speaker #3: Anything else to add? The only other thing one small tidbit here, it's not a bigger picture piece, is clearly as we go into Q4, we have a very significant comp that we're cycling here with Q4 for the year and US organic was a part of that where I believe we were 10% or so last year or just under 10%.

Gord Johnston: The only other thing, you know, one small tidbit here, it's not a bigger picture piece, is clearly as we go into Q4, we have a very significant comp that we're cycling here with Q4 for the year, and US organic was a part of that, where I believe we were 10% or so last year, or just under 10%. That's just a reality of what we need to cycle. Overall, no additional commentary in the US as we've mentioned, and we wouldn't say there's actually a deteriorating. If anything, over the last little bit, you know, the last little few weeks, a month or whatnot, it may be just a bit more buoyancy, quite frankly, and you'll see that reflected in our commentary.

Speaker #3: So that's just a reality of what we need to cycle. But overall, no additional commentary in the US as we've mentioned. And we wouldn't say there's actually deteriorating if anything over the last little bit the last little few weeks a month or whatnot.

Speaker #3: Maybe just a bit more buoyancy, quite frankly, and you’ve seen that reflected in our commentary.

Jonathan Goldman: Okay. That's good color. I guess maybe switching to the margin guidance. If you take the full year guide, and by my math, if you back it out, it looks like you're implying Q4 margins would be down year on year something in the range of 30 to 40 basis points. Clearly, that's not the year-to-date trend, and obviously there's moving pieces, but why would margins be down year to date, given all the improvements in the business you've undertaken?

Speaker #7: Okay, that's good color. And then I guess maybe switching to the margin guidance, if you take the full year guide and by my math, if you back it out, it looks like you're implying Q4 margins would be down year on year, something in the range of 30 to 40 basis points.

Speaker #7: Clearly, that's not the year-to-date trend. Obviously, there are moving pieces, but why would margins be down year-to-date given all the improvements in the business you've made?

Speaker #7: undertaken? Yeah, you

Gord Johnston: Yeah, you know, I don't know that margins are gonna be down going into next year. That's not necessarily what we're predicting. Obviously, you do have, we'll see the Page integration manifest itself fully next year with next quarter with our financial integration. You always can have some ups and downs with the financial integration. Again, nothing concerning, but that, you know, that could impact margins. The only other thing I'd say is back to that or, you know, the consolidated organic growth that we had last year, clearly, dependent on where we're at, just cycling a big quarter, that ends up manifesting itself, you know, through a margin back to operational scale and whatnot.

Speaker #3: know I don't know that margins are going to be down going into next year. That's not necessarily what we're predicting, obviously. You do have we'll see the page integration manifest itself fully next year with next quarter with our financial integration.

Speaker #3: You always can have some ups and downs with the financial integration. Again, nothing concerning, but that could impact margins. And the only other thing I'd say is back to the consolidated organic growth that we had last year.

Speaker #3: Clearly, depending on where we're at, just cycling a big quarter, that ends up manifesting itself through a margin back to operational scale and whatnot.

Gord Johnston: No, we're very, very pleased with our margins and don't expect any significant pullback in the trends and thematics that we've talked about when it comes to EBITDA margin expansion.

Speaker #3: But no, we're very, very pleased with our margins and don't expect any significant pullback in the trends and thematics that we've talked about when it comes to EBITDA margin expansion.

Jonathan Goldman: Okay, that's helpful color. I guess last one, if we're looking at M&A at this point, I guess maybe relative to other periods, what would be the main bottleneck at the moment? Is it valuations, culture fit, maybe a paucity of attractive targets? How does the cycle time from identification to closing relate now versus other historical periods?

Speaker #7: Okay, that's helpful color. And I guess last one, if we're looking at M&A, at this point, I guess maybe relative to other periods, what would be the main bottleneck at the moment?

Speaker #7: Is it valuations, culture fit, maybe a paucity of attractive targets? And how does the cycle time from identification to closing relate now versus other historical

Speaker #7: periods? Yeah, sure.

Gord Johnston: Yeah, sure. I'll start and then, Dean, you'll be able to-

Speaker #3: I'll start and then Vito will be able to chime in if you'd like. But I think, Jonathan, there's really nothing slowing the process down right now.

Vito Culmone: Yeah

Vito Culmone: chime in if you like. You know, I think, Jonathan, there's really nothing slowing the process down right now. It's just very robust. A lot of conversations on the go. Cycle times vary from discussion to discussion. You know, sometimes we work with a client or a company, partner with them for 5 or more years before we finally decide, Hey, you wanna do this? Because we know each other really well, you know, it can proceed pretty quickly. Other times, there's an established process that can take, you know, 3, 4, 6 months. 6 would be an outlier, I would think. You know, they're all over in terms of timing and where we would see them.

Speaker #3: It's just very robust. A lot of conversations on the go. Cycle times vary from discussion to discussion. Sometimes we work with the client or a company partner for five or more years before we finally decide, "Hey, you want to do this?" And then, because we know each other really well, it can proceed pretty quickly.

Speaker #3: Other times, there's an established process that can take three, four, or six months. Six would be an outlier, I would think, but they're really all over in terms of timing and where we would see them.

Gord Johnston: Certainly, you know, a number of ongoing discussions and both exclusive and through processes that are in, you know, in play right now. Yeah, I think it's just a normal cadence here and when the time is right, if the stars align, we'll be glad to share news with you guys.

Speaker #3: But certainly, a number of ongoing discussions and both exclusive and through processes that are in play right now. So yeah, I think it's just the normal cadence here and when the time is right, if the stars align, we'll be glad to share news with you guys.

Vito Culmone: Not much more to add there, Gord. Each one has a life of its own.

Speaker #4: Not much more to add there, Gord. Each one has a life of its own.

Gord Johnston: Yeah.

Vito Culmone: That's, uh

Speaker #3: Yeah. Anything to say on

Jonathan Goldman: Anything to say on valuations? I think, Gord, you referenced maybe, you know, slow organic growth could also translate into a silver lining on valuations. How have those trended year to date versus, I guess, last year or maybe the last couple years?

Speaker #7: valuations? I think, Gord, you referenced maybe slower organic growth could also translate into a silver lining on valuations. But how have those trended year to date versus, I guess, last year or maybe the last couple of

Speaker #7: years? Okay.

Vito Culmone: Yeah. You know, no major changes on valuation. I mean, obviously it's, it's sometimes a little bit sector dependent and, yeah, significant areas of growth in one sector obviously have a higher valuation, which is, you know, quite obviously expected and implicit obviously in the valuations of us and our peer groups. You know, I don't think valuations in any way, shape, or form are an issue. We look at these things clearly from a strategic perspective, always about value creation over a reasonable period of time, revenue synergies, but valuations isn't getting in the way at this point for us.

Speaker #3: Yeah, no, no major changes on valuation. I mean, obviously, it's sometimes a little bit sector dependent. And significant areas of growth in one sector obviously have a higher valuation, which is quite obviously expected and implicit, obviously, in the valuations.

Speaker #3: Of us and our peer groups. So I don't think valuations in any way, shape, or form are an issue. We look at these things clearly from a strategic perspective always above value creation over a reasonable period of time.

Speaker #3: Revenue synergies, but valuations aren't getting in the way at this point for.

Speaker #3: us. Okay.

Jonathan Goldman: Okay. Thanks for the color. Appreciate the time. I'll give it back to you.

Speaker #7: Thanks for the color. I appreciate the time. I'll get back to you.

Vito Culmone: Okay.

Speaker #3: Okay.

Operator: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Gord Johnston for any further remarks.

Speaker #1: Thank you. This does include the question and answer session of today's program. I'd like to hand the program back to Gord Johnson for any further remarks.

Gord Johnston: Great. Well, thank you, operator, and thanks to everyone for joining us this morning. You know, we're really pleased with our Q3 results, and certainly, if you have any follow-up questions following the call today, please reach out to Jess Nieukerk, our VP of Investor Relations. Thanks again, and I look forward to catching up with everybody in the next little while.

Speaker #8: Great. Well, thank you, operator. And thanks to everyone for joining us this morning. We're really pleased with our Q3 results. And certainly, if you have any follow-up questions following the call today, please reach out to Jess Newkirk, our VP of Investor Relations.

Speaker #8: So, thanks again, and I look forward to catching up with everybody in the next little while.

Speaker #8: while. Thank you, ladies and gentlemen, for

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.