Stantec (TSX, NYSE:STN), a global leader in sustainable design and
engineering, today reported its results for the three and six month
periods ended June 30, 2022. Unless otherwise indicated,
financial figures are expressed in Canadian dollars and comparisons
are to the prior period ended June 30, 2021.
Stantec delivered another quarter of increased earnings on the
strength of 22.9% net revenue growth. Consistent with the first
quarter of this year, every regional and business operating unit
delivered organic net revenue growth1 and recent acquisitions
generated double-digit growth. Earnings were further enhanced by an
80 basis point increase in project margin. Backlog also continued
to grow, increasing organically by 13% since year end 2021 and now
stands at a record $5.8 billion. Based on the strength of its
performance to date and confidence in the continued execution of
its strategic plan, Stantec is reaffirming earnings guidance for
the year with full year adjusted diluted earnings1 per share
expected to achieve 22% to 26% growth compared to 2021.
“We are very pleased that our operational performance continues
to drive record earnings,” said Gord Johnston, President and CEO.
“Our backlog has never been higher and the opportunity pipeline
remains robust. Significant US Federal funding is moving forward,
although it has taken longer than expected, and this will further
add to future growth prospects that will accelerate in 2023.”
“The inflationary environment does not seem to be slowing the
pace of project opportunities in any meaningful way,” continued Mr.
Johnston. “As we engage with our clients, the imperative for
tackling the challenges of aging and overloaded infrastructure,
climate change, and production capacity constraints is outweighing
the effects of inflation. This gives us confidence in our continued
ability to meet our financial targets.”
Q2 2022 Highlights
Stantec achieved adjusted diluted EPS of $0.83 in Q2 2022, a
$0.21 per share or 33.9% increase from $0.62 in Q2 2021, reflecting
strong net revenue growth, solid execution of its strategic growth
initiatives, and focused project execution.
- Net revenue
increased 22.9% or $208.4 million to $1.1 billion compared to Q2
2021, driven by 9.4% organic growth and 12.4% acquisition growth.
Consistent with the first quarter of this year, every one of the
regional and business operating units delivered organic growth,
most notably in Global and in Water and Environmental Services
where organic growth was in the double-digits.
- Project margin
increased $119.4 million or 24.7% to $602.7 million as a
result of net revenue growth and solid project execution. As a
percentage of net revenue, Stantec delivered a 54.0% project
margin, an 80 basis point increase from Q2 2021.
- Adjusted EBITDA1
increased $40.1 million or 27.4% to $186.7 million and achieved a
margin of 16.7% compared to 16.1% in the prior period, resulting
from strong performance across the business.
- Net income decreased
4.0%, or $2.5 million, to $60.7 million, and diluted EPS decreased
3.5%, or $0.02, to $0.55. Acquisition-related expenses (namely
integration, depreciation and amortization, and interest expenses),
coupled with a net unrealized fair value loss associated with
Stantec's equity investments held for self-insured liabilities,
more than offset increased project margin and lower income tax
expense.
- Adjusted net income1
grew 33.0%, or $23.0 million, to $92.6 million, achieving 8.3% of
net revenue compared to 7.7% in Q2 2021, and adjusted diluted EPS
increased 33.9% to $0.83 from $0.62 in Q2 2021.
- Contract backlog
stands at $5.8 billion at June 30, 2022, a new record
reflecting 13.0% organic growth from December 31, 2021. Like
net revenue, organic backlog growth was achieved across all
Stantec's regional and business operating units. US operations led
with 14.8% organic backlog growth. Global's backlog exceeded $1
billion, a high-water mark, reflecting 13.4% organic growth.
Infrastructure, Buildings, and Energy & Resources achieved
double-digit organic backlog growth. Contract backlog represents
approximately 14 months of work—an increase of one month from
December 31, 2021.
- Operating cash flows
amounted to an outflow of $4.4 million compared to an inflow of
$78.2 million in the prior period reflecting the expected
disruptions from the Cardno integration, particularly the financial
system migration. Cash outflow was also driven by the increased
investment in net working capital to support organic revenue growth
and an increase in days sales outstanding (DSO).
- Days sales
outstanding was 79 days, remaining within Stantec's expectations,
and represents an increase of 4 days from 75 days at
December 31, 2021.
- Net debt to adjusted
EBITDA (on a trailing twelve-month basis) at June 30, 2022 was
2.0x, remaining within Stantec's internal target range of 1.0x to
2.0x.
- In Q2 2022, Stantec
repurchased 625,019 common shares at a cost of $36.7 million under
its normal course issuer bid.
- 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 August 10,
2022, the Board of Directors declared a dividend of $0.18 per
share, payable on October 17, 2022, to shareholders of record
on September 29, 2022.
Q2 2022 Financial Highlights
|
For the quarter endedJune
30, |
For the two quarters endedJune
30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(In millions of Canadian dollars, except per share amounts and
percentages) |
$ |
% of NetRevenue |
$ |
% of NetRevenue |
$ |
% of NetRevenue |
$ |
% of NetRevenue |
Gross revenue |
1,376.6 |
|
123.3 |
% |
1,134.0 |
|
124.8 |
% |
2,690.5 |
|
124.2 |
% |
2,223.2 |
|
124.4 |
% |
Net
revenue |
1,116.7 |
|
100.0 |
% |
908.3 |
|
100.0 |
% |
2,166.8 |
|
100.0 |
% |
1,787.0 |
|
100.0 |
% |
Direct
payroll costs |
514.0 |
|
46.0 |
% |
425.0 |
|
46.8 |
% |
997.0 |
|
46.0 |
% |
837.3 |
|
46.9 |
% |
Project margin |
602.7 |
|
54.0 |
% |
483.3 |
|
53.2 |
% |
1,169.8 |
|
54.0 |
% |
949.7 |
|
53.1 |
% |
Administrative and marketing expenses |
431.6 |
|
38.6 |
% |
341.3 |
|
37.6 |
% |
857.7 |
|
39.6 |
% |
682.8 |
|
38.2 |
% |
Depreciation of property and
equipment |
14.4 |
|
1.3 |
% |
13.4 |
|
1.5 |
% |
28.6 |
|
1.3 |
% |
26.6 |
|
1.5 |
% |
Depreciation of lease
assets |
29.9 |
|
2.7 |
% |
26.3 |
|
2.9 |
% |
60.5 |
|
2.8 |
% |
53.2 |
|
3.0 |
% |
Reversal of lease asset
impairment |
(2.6 |
) |
(0.2 |
%) |
(1.0 |
) |
(0.1 |
%) |
(2.6 |
) |
(0.1 |
%) |
(2.6 |
) |
(0.1 |
%) |
Amortization of intangible
assets |
26.2 |
|
2.3 |
% |
13.7 |
|
1.5 |
% |
50.5 |
|
2.3 |
% |
27.0 |
|
1.5 |
% |
Net interest expense |
15.4 |
|
1.4 |
% |
10.6 |
|
1.2 |
% |
27.8 |
|
1.3 |
% |
19.9 |
|
1.0 |
% |
Other |
8.4 |
|
1.1 |
% |
(4.1 |
) |
(0.5 |
%) |
9.1 |
|
0.4 |
% |
(8.3 |
) |
(0.5 |
%) |
Income
taxes |
18.7 |
|
1.4 |
% |
19.9 |
|
2.1 |
% |
32.7 |
|
1.5 |
% |
37.0 |
|
2.1 |
% |
Net income |
60.7 |
|
5.4 |
% |
63.2 |
|
7.0 |
% |
105.5 |
|
4.9 |
% |
114.1 |
|
6.4 |
% |
Basic and diluted earnings per share (EPS) |
0.55 |
|
n/m |
|
0.57 |
|
n/m |
|
0.95 |
|
n/m |
|
1.02 |
|
n/m |
|
Adjusted EBITDA (note) |
186.7 |
|
16.7 |
% |
146.6 |
|
16.1 |
% |
338.9 |
|
15.6 |
% |
275.7 |
|
15.4 |
% |
Adjusted net income
(note) |
92.6 |
|
8.3 |
% |
69.6 |
|
7.7 |
% |
161.0 |
|
7.4 |
% |
125.7 |
|
7.0 |
% |
Adjusted diluted EPS
(note) |
0.83 |
|
n/m |
|
0.62 |
|
n/m |
|
1.45 |
|
n/m |
|
1.12 |
|
n/m |
|
Dividends declared per common share |
0.180 |
|
n/m |
|
0.165 |
|
n/m |
|
0.360 |
|
n/m |
|
0.330 |
|
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 Q2 2022 MD&A).
n/m = not meaningful
Net Revenue by Reportable Segment
(In
millions of Canadian dollars, except percentages) |
Q2 2022 |
Q2 2021 |
Total Change |
Change Due to Acquisitions |
Change Due to Foreign Exchange |
Change Due to Organic Growth |
% of Organic Growth |
Canada |
291.6 |
278.0 |
13.6 |
|
— |
|
n/a |
|
13.6 |
|
4.9 |
% |
United States |
565.9 |
445.0 |
120.9 |
|
62.4 |
|
17.6 |
|
40.9 |
|
9.2 |
% |
Global |
259.2 |
185.3 |
73.9 |
|
50.5 |
|
(7.5 |
) |
30.9 |
|
16.7 |
% |
Total |
1,116.7 |
908.3 |
208.4 |
|
112.9 |
|
10.1 |
|
85.4 |
|
|
Percentage Growth |
|
|
22.9 |
% |
12.4 |
% |
1.1 |
% |
9.4 |
% |
|
Backlog
(In
millions of Canadian dollars, except percentages) |
Jun 30, 2022 |
Dec 31, 2021 |
Total Change |
Change Due to Foreign Exchange |
Change Due to Organic Growth |
% of Organic Growth |
Canada |
1,264.7 |
1,169.1 |
95.6 |
|
n/a |
|
95.6 |
|
8.2 |
% |
United States |
3,521.1 |
3,016.9 |
504.2 |
|
57.9 |
|
446.3 |
|
14.8 |
% |
Global |
1,034.6 |
948.3 |
86.3 |
|
(41.1 |
) |
127.4 |
|
13.4 |
% |
Total |
5,820.4 |
5,134.3 |
686.1 |
|
16.8 |
|
669.3 |
|
|
Percentage Growth |
|
|
13.3 |
% |
0.3 |
% |
13.0 |
% |
|
Webcast & Conference Call
Stantec will host a live webcast and conference call on
Thursday, August 11, 2022, at 7:00 AM Mountain Time (9:00 AM
Eastern Time) to discuss the Company’s second quarter performance.
The webcast and slide presentation can be accessed at the following
link: https://edge.media-server.com/mmc/p/i4emhi93
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
8216131 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 Q2 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 guidance pertaining to adjusted diluted
EPS growth and other financial targets, anticipated US Federal
funding (and resulting growth prospects), the impact of an
inflationary environment on project opportunities. 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 |
Jess Nieukerk
Stantec Investor Relations Ph:
403-569-5389
jess.nieukerk@stantec.com |
|
Stephanie
Smith
Stantec Media
Relations
Ph:
780-917-7230
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
|
For the quarter endedJune
30, |
For the two quarters endedJune
30, |
(In
millions of Canadian dollars, except per share amounts) |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Net income |
60.7 |
|
63.2 |
|
105.5 |
|
114.1 |
|
Add back
(deduct): |
|
|
|
|
Income taxes |
18.7 |
|
19.9 |
|
32.7 |
|
37.0 |
|
Net interest expense |
15.4 |
|
10.6 |
|
27.8 |
|
19.9 |
|
Reversal of lease asset impairment (note 1) |
(1.9 |
) |
(1.0 |
) |
(1.9 |
) |
(2.6 |
) |
Depreciation and amortization |
70.5 |
|
53.4 |
|
139.6 |
|
106.8 |
|
Unrealized loss (gain) on equity securities |
12.5 |
|
(4.3 |
) |
18.5 |
|
(9.4 |
) |
Acquisition, integration, and restructuring costs (note 4) |
10.8 |
|
4.8 |
|
16.7 |
|
9.9 |
|
|
|
|
|
|
Adjusted EBITDA from continuing operations |
186.7 |
|
146.6 |
|
338.9 |
|
275.7 |
|
|
For the quarter endedJune
30, |
For the two quarters endedJune
30, |
(In
millions of Canadian dollars, except per share amounts) |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Net income |
60.7 |
|
63.2 |
|
105.5 |
|
114.1 |
|
Add back (deduct)
after tax: |
|
|
|
|
Reversal of lease asset impairment (note 1) |
(1.5 |
) |
(0.8 |
) |
(1.5 |
) |
(2.0 |
) |
Amortization of intangible assets related to acquisitions (note
2) |
15.7 |
|
6.8 |
|
30.2 |
|
13.2 |
|
Unrealized loss (gain) on equity securities (note 3) |
9.5 |
|
(3.3 |
) |
14.1 |
|
(7.1 |
) |
Acquisition, integration, and restructuring costs (note 4) |
8.2 |
|
3.7 |
|
12.7 |
|
7.5 |
|
|
|
|
|
|
Adjusted net income |
92.6 |
|
69.6 |
|
161.0 |
|
125.7 |
|
Weighted average number of shares outstanding - basic |
110,897,590 |
|
111,246,823 |
|
111,119,211 |
|
111,336,576 |
|
Weighted average number of
shares outstanding - diluted |
111,054,142 |
|
111,735,116 |
|
111,287,552 |
|
111,779,412 |
|
|
|
|
|
|
Adjusted earnings per share |
|
|
|
|
Adjusted earnings per share -
basic (note 5) |
0.84 |
|
0.63 |
|
1.45 |
|
1.13 |
|
Adjusted earnings per share - diluted (note 5) |
0.83 |
|
0.62 |
|
1.45 |
|
1.12 |
|
See the Definitions section of the Q2 2022 MD&A for our
discussion of non-IFRS and other financial measures used and
additional reconciliations of non-IFRS financial measures.
note 1: The reversal of lease asset impairment for the quarter
and the two quarters ended June 30, 2022 includes onerous contracts
associated with impairment of $0.7 (2021 - nil). For the quarter
ended June 30, 2022, this amount is net of tax of $(0.4) (2021 -
$(0.2)). For the two quarters ended June 30, 2022, this amount is
net of tax of $(0.4) (2021 - $(0.6)).
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 June 30, 2022, this amount is net of
tax of $4.9 (2021 - $2.1). For the two quarters ended June 30,
2022, this amount is net of tax of $9.4 (2021 - $4.3).
note 3: For the quarter ended June 30, 2022, this amount is net
of tax of $3.0 (2021 - $(1.0)). For the two quarters ended June 30,
2022, this amount is net of tax of $4.4 (2021 - $(2.3)).
note 4: The add back of other costs primarily relates to
integration expenses associated with our acquisitions and
restructuring costs. For the quarter ended June 30, 2022, this
amount is net of tax of $2.6 (2021 - $1.1). For the two quarters
ended June 30, 2022, this amount is net of tax of $4.0 (2021 -
$2.4).
note 5: Earnings per share calculated in accordance with IFRS
disclosed on M-4 of the Q2 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 Q2 2022 MD&A).
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