Stantec (TSX, NYSE:STN), a global leader in sustainable design and
engineering, today reported its results for the three month period
ended March 31, 2022. Unless otherwise indicated, financial
figures are expressed in Canadian dollars and comparisons are to
the prior period ended March 31, 2021.
Stantec delivered solid first quarter earnings on the strength
of 19.5% net revenue growth, and reaffirms its guidance for the
full year. Every regional and business operating unit delivered
organic net revenue growth1 and recent acquisitions generated
double-digit growth. Backlog continues to grow, rising to a record
$5.4 billion, with continued growing momentum in the US.
“The organic growth we achieved in Q1 reflects our ability to
capitalize on our sector’s strong market fundamentals that continue
to be spurred by robust public infrastructure spending and
increasing private investment,” said Gord Johnston, President and
CEO. “We expect this favorable backdrop to drive accelerating
growth as we continue to provide our clients with solutions to the
largest and most complex problems of our time. These include the
strengthening of local supply chain resilience by re-shoring
domestic production, global food security, and climate change,
sustainability, and the related energy transition.”
“I’m particularly pleased that as we continue to execute on our
growth strategy, our leadership in sustainability is driving
increasing revenues related to the UN Sustainability Development
Goals (SDGs). In our recently released Sustainability Report, we
disclosed that 53% of our 2021 gross revenues relate to the SDGs,
up from 49% in 2020 and 45% in 2019, when we became the first firm
in our space to provide this quantification.”
Q1 2022 Highlights
Stantec achieved adjusted diluted EPS1 of $0.61 in Q1 2022, an
$0.11 per share or 22.0% increase from $0.50 in Q1 2021, reflecting
solid execution of its strategic growth initiatives and focused
project execution.
- Net revenue
increased 19.5% or $171.4 million compared to Q1 2021, reflecting
6.4% organic and 13.9% acquisition net revenue growth. All of
Stantec's regional and business operating units delivered organic
growth, most notably in Global and in Environmental Services where
organic growth was in the double-digits.
- Project margin
increased $100.7 million or 21.6% to $567.1 million as a
result of higher net revenue, solid project execution, and shifts
in project mix. As a percentage of net revenue, project margin
increased 0.9% to 54.0% from 53.1%.
- Adjusted EBITDA1
from continuing operations increased $23.1 million or 17.9% to
$152.2 million. Adjusted EBITDA margin1 was 14.5% compared to 14.7%
in Q1 2021 due to higher administrative and marketing expenses as a
percentage of net revenue, largely related to business development
efforts on major programs, increased discretionary spending, and
investments in internal resources.
- Net income decreased
12.0%, or $6.1 million, to $44.8 million, and diluted EPS from
continuing operations decreased 13.0%, or $0.06, to $0.40, mainly
due to higher administrative and marketing expenses, depreciation,
amortization, and lower other income. Additions from recent
acquisitions contributed to higher depreciation and amortization.
These increases in expenses were partly offset by increased project
margin and lower income tax expense.
- Adjusted net income1
grew 21.9%, or $12.3 million, to $68.4 million, representing 6.5%
of net revenue, and adjusted diluted EPS increased 22.0% to $0.61
from $0.50 in Q1 2021.
- Contract backlog
stands at $5.4 billion at March 31, 2022, a new record that
reflects 6.8% organic growth from December 31, 2021. Like net
revenues, organic backlog growth was achieved across all of
Stantec's regional and business operating units. US operations led
with organic backlog growth of 9.8%. Infrastructure and Energy
& Resources achieved double digit organic backlog growth, and
Environmental Services' backlog of $1.1 billion is a high-water
mark for this business. Contract backlog represents approximately
14 months of work—an increase of one month from December 31,
2021.
- Operating cash flows
amounted to an inflow of $6.0 million compared to $55.7 million in
the prior period. First quarter operating activities typically
result in cash outflows due to a lower level of activity in the
winter season and the timing of payment for Stantec's short-term
incentive program. Positive operating cash flow in Q1 2022 was
driven by acquisitions completed in late 2021 and improved market
conditions, offset by higher cash paid to employees, reflecting an
increased workforce and a higher wage environment relative to Q1
2021.
- Net debt to adjusted
EBITDA (on a trailing twelve-month basis) at March 31, 2022
was 1.8x, remaining within Stantec's internal target range of 1.0x
to 2.0x.
- Days sales
outstanding was 75 days, consistent with March 31, 2021 and
December 31, 2021.
- In Q1 2022, Stantec
repurchased 460,657 common shares under its Normal Course Issuer
Bid program at a cost of $28.6 million. From April 1 to May 11,
2022, Stantec repurchased a further 386,273 shares for $23.3
million.
- On April 1, 2022,
Stantec acquired Barton Willmore, the UK's leading planning and
design consultancy firm. This acquisition added approximately 300
team members across the UK providing services for both public and
private clients across all development sectors, which strategically
complements Stantec's existing business in infrastructure.
- On May 11,
2022, the Board of Directors declared a dividend of $0.18 per
share, payable on July 15, 2022, to shareholders of record on
June 30, 2022.
Q1 2022 Financial Highlights
|
For the quarter endedMarch
31, |
|
2022 |
2021 |
(In millions of Canadian dollars, except per share amounts and
percentages) |
$ |
% of NetRevenue |
$ |
% of NetRevenue |
Gross revenue |
1,313.9 |
125.1 |
% |
1,089.2 |
|
124.0 |
% |
Net
revenue |
1,050.1 |
100.0 |
% |
878.7 |
|
100.0 |
% |
Direct
payroll costs |
483.0 |
46.0 |
% |
412.3 |
|
46.9 |
% |
Project margin |
567.1 |
54.0 |
% |
466.4 |
|
53.1 |
% |
Administrative and marketing expenses |
426.1 |
40.6 |
% |
341.5 |
|
38.9 |
% |
Depreciation of property and
equipment |
14.2 |
1.4 |
% |
13.2 |
|
1.5 |
% |
Depreciation of lease
assets |
30.6 |
2.9 |
% |
26.9 |
|
3.1 |
% |
Reversal of lease asset
impairment |
— |
— |
% |
(1.6 |
) |
(0.2 |
%) |
Amortization of intangible
assets |
24.3 |
2.3 |
% |
13.3 |
|
1.5 |
% |
Net interest expense |
12.4 |
1.2 |
% |
9.3 |
|
1.1 |
% |
Other |
0.7 |
0.1 |
% |
(4.2 |
) |
(0.5 |
%) |
Income
taxes |
14.0 |
1.2 |
% |
17.1 |
|
1.9 |
% |
Net income |
44.8 |
4.3 |
% |
50.9 |
|
5.8 |
% |
Basic and diluted earnings per share (EPS) |
0.40 |
n/m |
|
0.46 |
|
n/m |
|
Adjusted EBITDA (note) |
152.2 |
14.5 |
% |
129.1 |
|
14.7 |
% |
Adjusted net income
(note) |
68.4 |
6.5 |
% |
56.1 |
|
6.4 |
% |
Adjusted diluted EPS
(note) |
0.61 |
n/m |
|
0.50 |
|
n/m |
|
Dividends declared per common share |
0.180 |
n/m |
|
0.165 |
|
n/m |
|
note: Adjusted EBITDA, adjusted net income, and adjusted diluted
EPS are non-IFRS measures (discussed in the Definitions of Non-IFRS
and Other Financial Measures section of the Q1 2022 MD&A).
n/m = not meaningful
Net Revenue by Reportable Segment
(In
millions of Canadian dollars, except percentages) |
Q1 2022 |
Q1 2021 |
TotalChange |
|
Change
DuetoAcquisitions |
|
Change Dueto ForeignExchange |
|
Change Dueto OrganicGrowth |
|
% of Organic Growth |
|
Canada |
274.0 |
256.1 |
17.9 |
|
— |
|
n/a |
17.9 |
|
7.0 |
% |
United States |
531.0 |
454.7 |
76.3 |
|
60.2 |
|
0.2 |
|
15.9 |
|
3.5 |
% |
Global |
245.1 |
167.9 |
77.2 |
|
61.8 |
|
(7.1 |
) |
22.5 |
|
13.4 |
% |
Total |
1,050.1 |
878.7 |
171.4 |
|
122.0 |
|
(6.9 |
) |
56.3 |
|
|
Percentage Growth |
|
|
19.5 |
% |
13.9 |
% |
(0.8 |
%) |
6.4 |
% |
|
Backlog
(In
millions of Canadian dollars, except percentages) |
Mar 31, 2022 |
Dec 31, 2021 |
TotalChange |
|
Change Dueto ForeignExchange |
|
Change Dueto OrganicGrowth |
|
% of Organic Growth |
|
Canada |
1,215.5 |
1,169.1 |
46.4 |
|
n/a |
|
46.4 |
|
4.0 |
% |
United States |
3,282.1 |
3,016.9 |
265.2 |
|
(30.4 |
) |
295.6 |
|
9.8 |
% |
Global |
946.8 |
948.3 |
(1.5 |
) |
(8.2 |
) |
6.7 |
|
0.7 |
% |
Total |
5,444.4 |
5,134.3 |
310.1 |
|
(38.6 |
) |
348.7 |
|
|
Percentage Growth |
|
|
6.0 |
% |
(0.8 |
)% |
6.8 |
% |
|
Webcast & Conference Call
Stantec will host a live webcast and conference call on
Thursday, May 12, 2022, at 7:00 AM Mountain Time (9:00 AM
Eastern Time) to discuss the Company’s first quarter performance.
The webcast and slide presentation can be accessed at the following
link: https://edge.media-server.com/mmc/p/2iyc4rsf
Participants wishing to listen to the call via telephone may
dial in toll-free at 1-888-394-8218 (Canada and United States) or
+1-647-484-0475 (international). Please provide confirmation code
9503786 when prompted.
The conference call and slideshow presentation will be broadcast
live and archived in their entirety in the Investors section of
stantec.com.
About Stantec
Communities are fundamental. Whether around the corner or across
the globe, they provide a foundation, a sense of place and of
belonging. That's why at Stantec, we always design with
community in mind.
We care about the communities we serve—because they're our
communities too. This allows us to assess what's needed and connect
our expertise, to appreciate nuances and envision what's never been
considered, to bring together diverse perspectives so we can
collaborate toward a shared success.
We're designers, engineers, scientists, and project managers,
innovating together at the intersection of community, creativity,
and client relationships. Balancing these priorities results in
projects that advance the quality of life in communities across the
globe.
Stantec trades on the TSX and the NYSE under the symbol STN.
Visit us at stantec.com or find us on social media.
Cautionary Statements
Non-IFRS and Other Financial Measures
Stantec reports its financial results in accordance with IFRS.
However, in this news release, the following non-IFRS and other
financial measures are used by the Company: adjusted EBITDA,
adjusted net income, adjusted earnings per share (EPS), adjusted
return on invested capital (ROIC), net debt to adjusted EBITDA,
days sales outstanding (DSO), margin (percentage of net revenue),
organic growth (retraction), acquisition growth, and measures
described as on a constant currency basis and the impact of foreign
exchange or currency fluctuations, as well as measures and ratios
calculated using these non-IFRS or other financial measures.
Additional disclosure for these non-IFRS and other financial
measures, incorporated by reference, is included in the Definitions
of Non-IFRS and Other Financial Measures section of the Q1 2022
Management's Discussion and Analysis, available on SEDAR at
SEDAR.com, EDGAR at sec.gov, and the company's website at
stantec.com and the reconciliation of Non-IFRS Financial Measures
appended hereto.
These non-IFRS and other financial measures do not have a
standardized meaning under IFRS and, therefore, may not be
comparable to similar measures presented by other issuers.
Management believes that, in addition to conventional measures
prepared in accordance with IFRS, these non-IFRS and other
financial measures provide useful information to investors to
assist them in understanding components of our financial results.
These measures should not be considered in isolation or viewed as a
substitute for the related financial information prepared in
accordance with IFRS.
Forward-looking Statements
Certain statements contained in this news release constitute
forward-looking statements. These statements include, without
limitation, management's outlook on favorable macroeconomic trends
and our ability to capitalize and accelerate growth. Readers of
this news release are cautioned not to place undue reliance on
forward-looking statements since a number of factors could cause
actual future results to differ materially from the expectations
expressed in these forward-looking statements. These factors
include, but are not limited to, the risk of economic downturn,
cash flow projections, project cancellations and a slowdown in new
opportunities related to COVID-19, the economic impact of the war
in Ukraine, decreased infrastructure spending levels, the failure
of US infrastructure stimulus spending to materialize, the ability
to remain on schedule to complete the integration of Cardno and the
recently acquired firms, changing market conditions for Stantec’s
services, and the risk that Stantec fails to capitalize on its
strategic initiatives. Investors and the public should carefully
consider these factors, other uncertainties, and potential events,
as well as the inherent uncertainty of forward-looking statements,
when relying on these statements to make decisions with respect to
the Company.
For more information about how other material risk factors could
affect Stantec’s results, refer to the Risk Factors section and
Cautionary Note Regarding Forward-Looking Statements section in the
Company’s 2021 Annual Report. This report is accessible online by
visiting EDGAR on the SEC website at sec.gov or by visiting the CSA
website at sedar.com or Stantec’s website, stantec.com. You may
obtain a hard copy of the 2021 annual report free of charge from
the investor contact noted below.
Investor Contact |
Media
Contact |
|
|
Tanya Finney |
Stephanie Smith |
Stantec Investor Relations |
Stantec Media Relations |
Ph: 403-205-5791 |
Ph: 780-917-7230 |
tanya.finney@stantec.com |
stephanie.smith2@stantec.com |
To subscribe to Stantec’s email news alerts, please fill out the
subscription form, which is available on the Contact Information
page of the Investors section at Stantec.com.
Design with community in mind
Attached to this news release are Stantec’s
consolidated statements of financial position, consolidated
statements of income and reconciliation of
non-IFRS measures.
Reconciliation of Non-IFRS Financial
Measures
Reconciliation of Non-IFRS Financial Measures
|
For the quarter endedMarch
31, |
(In
millions of Canadian dollars, except per share amounts) |
2022 |
2021 |
Net income |
44.8 |
50.9 |
|
Add back
(deduct): |
|
|
Income taxes |
14.0 |
17.1 |
|
Net interest expense |
12.4 |
9.3 |
|
Reversal of lease asset impairment |
— |
(1.6 |
) |
Depreciation and amortization |
69.1 |
53.4 |
|
Unrealized loss (gain) on investments held on equity
securities |
6.0 |
(5.1 |
) |
Acquisition, integration, and restructuring costs (note 4) |
5.9 |
5.1 |
|
|
|
|
Adjusted EBITDA from continuing operations |
152.2 |
129.1 |
|
|
For the quarter endedMarch
31, |
(In
millions of Canadian dollars, except per share amounts) |
2022 |
2021 |
Net income |
44.8 |
50.9 |
|
Add back (deduct)
after tax: |
|
|
Reversal of lease asset impairment (note 1) |
— |
(1.2 |
) |
Amortization of intangible assets related to acquisitions (note
2) |
14.5 |
6.4 |
|
Unrealized loss (gain) on equity securities (note 3) |
4.6 |
(3.8 |
) |
Acquisition, integration, and restructuring costs (note 4) |
4.5 |
3.8 |
|
|
|
|
Adjusted net income |
68.4 |
56.1 |
|
Weighted average number of shares outstanding - basic |
111,343,295 |
111,280,965 |
|
Weighted average number of
shares outstanding - diluted |
111,613,788 |
111,774,488 |
|
|
|
|
Adjusted earnings per share |
|
|
Adjusted earnings per share – basic and diluted (note 5) |
0.61 |
0.50 |
|
See the Definitions section of the Q1 2022 MD&A for our
discussion of non-IFRS and other financial measures used and
additional reconciliations of non-IFRS financial measures.
note 1: For the quarter ended March 31, 2021, this amount is net
of tax of $0.4.
note 2: The add back of intangible amortization relates only to
the amortization from intangible assets acquired through
acquisitions and excludes the amortization of software purchased by
Stantec. For the quarter ended March 31, 2022, this amount is net
of tax of $4.5 (2021 - $2.2).
note 3: For the quarter ended March 31, 2022, this amount is net
of tax of $1.4 (2021 - $(1.3)).
note 4: The add back of other costs primarily relates to
integration expenses associated with our acquisitions and
restructuring costs. For the quarter ended March 31, 2022, this
amount is net of tax of $1.4 (2021 - $1.3).
note 5: Earnings per share calculated in accordance with IFRS
disclosed on M-4 of the Q1 2022 MD&A.
_____________________1 Adjusted diluted EPS, adjusted EBITDA,
adjusted EBITDA margin, organic net revenue growth, and adjusted
net income are non-IFRS measures and other financial measures
(discussed in the Definitions section of the Q1 2022 MD&A).
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