Stantec (TSX, NYSE:STN), a global leader in sustainable design and
engineering, today reported its results for the three month period
ended March 31, 2023.
Stantec generated net revenue of $1.2 billion in the first
quarter of 2023 on the strength of 12.2% organic growth1 and 1.4%
acquisition growth1. Every regional and business operating unit
delivered organic net revenue growth in the first quarter, with
notable organic growth achieved in Water (24.4%), Energy &
Resources (15.9%) and Buildings (11.4%). Adjusted EBITDA margin
increased by 10 basis points over Q1 2022 to 14.6%, despite a
significant mark-to-market expense related to the revaluation of
the Company’s long-term incentive plan (LTIP) due to strong share
price appreciation in the quarter. Excluding the mark-to-market
revaluation, adjusted EBITDA margin would have been 15.2%. Stantec
delivered diluted earnings per share (EPS) of $0.59, and record
first quarter adjusted diluted EPS of $0.73. Backlog at the end of
March 31, 2023 reached $6.2 billion, in line with the previous
all-time high, driven primarily by organic growth of 5.8% since
December 31, 2022 and 9.2% over Q1 2022.
“Our first quarter results reflect the strong market positioning
of our business as we continue to build on favorable macro themes
and momentum coming out of last year,” said Gord Johnston,
President and CEO. "2023 is shaping up to be another very strong
year for Stantec and we are well positioned to deliver on our
outlook for the year."
Q1 2023 compared to Q1
2022
- Net revenue
increased 17.0% or $178.4 million to $1.2 billion compared to Q1
2022, driven by 12.2% organic growth and 1.4% acquisition growth.
Double-digit organic growth was achieved in all regions and in the
Water, Buildings, and Energy & Resources businesses.
- Project margin
increased $92.9 million or 16.4% to $660.0 million. As a
percentage of net revenue, project margin decreased by 30 basis
points to 53.7%.
- Adjusted EBITDA
increased $26.9 million or 17.7% to $179.1 million. Adjusted EBITDA
margin increased by 10 basis points over Q1 2022 to 14.6%, despite
a significant mark-to-market expense related to the revaluation of
the Company's LTIP. Excluding the revaluation, adjusted EBITDA
margin would have been 15.2%.
- Net income increased
44.9%, or $20.1 million, to $64.9 million, and diluted EPS
increased 47.5%, or $0.19, to $0.59, mainly due to strong net
revenue growth and lower administrative and marketing expenses as a
percentage of net revenue.
- Adjusted net income1
grew 18.3%, or $12.5 million, to $80.9 million, achieving 6.6% of
net revenue (7.1% without the effect of the LTIP revaluation), and
adjusted diluted EPS increased 19.7% to $0.73 ($0.78 without the
effect of the LTIP revaluation).
- Contract backlog
stands at $6.2 billion at March 31, 2023, matching a record
high and reflecting 5.8% organic growth from December 31,
2022—with strong organic backlog growth in Stantec's US operations
of 9.2%, and double-digit organic growth in Environmental Services
and Water. Contract backlog represents approximately 13 months of
work—an increase of one month from December 31, 2022.
- Operating cash flows
increased $30.7 million, with cash inflows of $36.7 million
compared to $6.0 million in the prior period, reflecting continued
strong revenue growth and operating performance.
- DSO was 81 days,
consistent with December 31, 2022.
- Net debt to adjusted
EBITDA (on a trailing twelve-month basis) at March 31, 2023
was 1.6x, remaining within the internal target range of 1.0x to
2.0x.
- On April 18, 2023,
Stantec announced through the release of its 2022 Sustainability
Report, that the Company delivered on its commitment to achieve
operational carbon neutrality for 2022—a key milestone in the
phased process to achieve science-based operational net zero, and
that 60%, or $3.4 billion, of 2022 gross revenues supported the
United Nations Sustainable Development Goals.
- On May 10,
2023, Stantec's Board of Directors declared a dividend of $0.195
per share, payable on July 17, 2023, to shareholders of record
on June 30, 2023.
_______1 Adjusted diluted EPS, adjusted net income, adjusted
EBITDA, and adjusted EBITDA margin are non-IFRS measures, and
organic growth and acquisition growth are other financial measures
(discussed in the Definitions section of the Q1 2023 MD&A).
2023 Outlook
Stantec reaffirms full year 2023 guidance for net revenue growth
of 7% to 11%, and continues to expect organic growth to be in the
mid- to high-single digits. Stantec expects to deliver on its
annual targets for adjusted EBITDA margin in the range of 16% to
17%, adjusted net income margin greater than 7.5%, and growth in
adjusted diluted EPS of 9% to 13%. Stantec further reiterates its
expectation to achieve adjusted return on invested capital of
greater than 10.5% for the year.
These targets do not include any assumptions for additional
acquisitions given the unpredictable nature of the size and timing
of such acquisitions, or the unpredictable impacts from share price
movements subsequent to December 31, 2022 and relative total
shareholder return components on Stantec's share-based compensation
programs.
Q1 2023
Financial Highlights
|
For the quarter endedMarch
31, |
|
2023 |
|
2022 |
|
(In millions of Canadian dollars, except per shareamounts and
percentages) |
$ |
% of NetRevenue |
$ |
% of NetRevenue |
Gross revenue |
1,539.2 |
|
125.3 |
% |
1,313.9 |
125.1 |
% |
Net
revenue |
1,228.5 |
|
100.0 |
% |
1,050.1 |
100.0 |
% |
Direct
payroll costs |
568.5 |
|
46.3 |
% |
483.0 |
46.0 |
% |
Project margin |
660.0 |
|
53.7 |
% |
567.1 |
54.0 |
% |
Administrative and marketing expenses |
488.3 |
|
39.7 |
% |
426.1 |
40.6 |
% |
Depreciation of property and
equipment |
15.5 |
|
1.3 |
% |
14.2 |
1.4 |
% |
Depreciation of lease
assets |
30.9 |
|
2.5 |
% |
30.6 |
2.9 |
% |
Reversal of lease asset
impairment |
(2.5 |
) |
(0.2 |
%) |
— |
0.0 |
% |
Amortization of intangible
assets |
26.3 |
|
2.1 |
% |
24.3 |
2.3 |
% |
Net interest expense |
20.7 |
|
1.7 |
% |
12.4 |
1.2 |
% |
Other |
(3.0 |
) |
(0.4 |
%) |
0.7 |
0.1 |
% |
Income
taxes |
18.9 |
|
1.7 |
% |
14.0 |
1.2 |
% |
Net income |
64.9 |
|
5.3 |
% |
44.8 |
4.3 |
% |
Basic and diluted earnings per
share (EPS) |
0.59 |
|
n/m |
|
0.40 |
n/m |
|
Adjusted EBITDA (note) |
179.1 |
|
14.6 |
% |
152.2 |
14.5 |
% |
Adjusted net income (note) |
80.9 |
|
6.6 |
% |
68.4 |
6.5 |
% |
Adjusted diluted EPS (note) |
0.73 |
|
n/m |
|
0.61 |
n/m |
|
Dividends declared per common share |
0.195 |
|
n/m |
|
0.180 |
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 2023 MD&A).
n/m = not meaningful
Net Revenue by Reportable Segment
(In millions of Canadian dollars, except
percentages) |
Q1 2023 |
Q1 2022 |
Total Change |
Change Due to Acquisitions |
Change Due to Foreign Exchange |
Change Due to Organic Growth |
% of Organic Growth |
Canada |
303.0 |
274.0 |
29.0 |
|
— |
|
n/a |
|
29.0 |
|
10.6 |
% |
United States |
643.2 |
531.0 |
112.2 |
|
2.5 |
|
36.3 |
|
73.4 |
|
13.8 |
% |
Global |
282.3 |
245.1 |
37.2 |
|
11.9 |
|
(0.2 |
) |
25.5 |
|
10.4 |
% |
Total |
1,228.5 |
1,050.1 |
178.4 |
|
14.4 |
|
36.1 |
|
127.9 |
|
|
Percentage Growth |
|
|
17.0 |
% |
1.4 |
% |
3.4 |
% |
12.2 |
% |
|
Backlog
(In
millions of Canadian dollars, except percentages) |
Mar 31, 2023 |
Dec 31, 2022 |
Total Change |
Change Due to Foreign Exchange |
Change Due to Organic Growth |
% of Organic Growth |
Canada |
1,253.3 |
1,249.2 |
4.1 |
|
n/a |
|
4.1 |
|
0.3 |
% |
United States |
4,052.6 |
3,715.9 |
336.7 |
|
(5.9 |
) |
342.6 |
|
9.2 |
% |
Global |
926.9 |
936.6 |
(9.7 |
) |
(4.0 |
) |
(5.7 |
) |
(0.6 |
)% |
Total |
6,232.8 |
5,901.7 |
331.1 |
|
(9.9 |
) |
341.0 |
|
|
Percentage Growth |
|
|
5.6 |
% |
(0.2 |
)% |
5.8 |
% |
|
Webcast & Conference Call
Stantec will host a live webcast and conference call on
Thursday, May 11, 2023, at 7:00 AM Mountain Time (9:00 AM
Eastern Time) to discuss the Company’s first quarter
performance.
To listen to the webcast and view the slide presentation, please
join here.
If you are an analyst and would like to participate in the
Q&A, please register here.
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.
This news release also reports the following non-IFRS and other
financial measures are used by the Company: adjusted EBITDA,
adjusted net income, adjusted earnings per share (EPS), net debt to
adjusted EBITDA, days sales outstanding (DSO), margin (percentage
of net revenue), organic growth (retraction), acquisition growth,
return on invested capital (ROIC) 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 2023
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 and ratios 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, comments regarding our ability to capture future growth
opportunities, our adjusted diluted EPS and net revenue growth,
adjusted EBITDA margin, ROIC, and our 2023 outlook. 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, access and retention
of skilled labor, decreased infrastructure spending levels,
decrease or end to stimulus programs, 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.
Future outcomes relating to forward-looking statements may be
influenced by many factors and material risks. For the quarter
ended March 31, 2023, there has been no significant change in our
risk factors from those described in our 2022 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 2022 annual
report free of charge from the investor contact noted below.
Investor Contact |
Media
Contact |
|
|
Jess Nieukerk |
Stephanie Smith |
Stantec Investor Relations |
Stantec Media Relations |
Ph: 403-569-5389 |
Ph: 780-917-7230 |
jess.nieukerk@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
reconciliation of non-IFRS measures.
Reconciliation of Non-IFRS Financial
Measures
|
For the quarter endedMarch
31, |
(In millions of Canadian dollars, except per share amounts) |
2023 |
|
2022 |
|
Net income |
64.9 |
|
44.8 |
|
Add back
(deduct): |
|
|
|
Income taxes |
18.9 |
|
14.0 |
|
Net interest expense |
20.7 |
|
12.4 |
|
Reversal of lease asset impairment (note 1) |
(2.5 |
) |
— |
|
Depreciation and amortization |
72.7 |
|
69.1 |
|
Unrealized (gain) loss on equity securities |
(3.9 |
) |
6.0 |
|
Acquisition, integration, and restructuring costs (note 4) |
8.7 |
|
5.9 |
|
|
|
|
|
Adjusted EBITDA |
179.1 |
|
152.2 |
|
|
For the quarter endedMarch
31, |
(In millions of Canadian dollars, except per share amounts) |
2023 |
|
2022 |
|
Net income |
64.9 |
|
44.8 |
|
Add back (deduct)
after tax: |
|
|
|
Reversal of lease asset impairment (note 1) |
(2.2 |
) |
— |
|
Amortization of intangible assets related to acquisitions (note
2) |
14.5 |
|
14.5 |
|
Unrealized (gain) loss on equity securities (note 3) |
(3.0 |
) |
4.6 |
|
Acquisition, integration, and restructuring costs (note 4) |
6.7 |
|
4.5 |
|
|
|
|
|
Adjusted net income |
80.9 |
|
68.4 |
|
Weighted average number of shares outstanding - diluted |
110,927,669 |
|
111,613,788 |
|
|
|
|
|
Adjusted earnings per share |
|
|
|
Adjusted earnings per share - diluted |
0.73 |
|
0.61 |
|
See the Definitions section of the Q1 2023 MD&A for the
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 includes onerous
contracts recoveries associated with the impairment for the quarter
ended March 31, 2023 of $(0.4) (2022- nil). For the quarter ended
March 31, 2023, this amount is net of tax of $(0.7) (2022 -
nil).
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, 2023, this amount is net
of tax of $4.2 (2022 - $4.5).
note 3: For the quarter ended March 31, 2023, this amount is net
of tax of $(0.9) (2022 - $1.4).
note 4: The add back of other costs primarily relates to
integration expenses associated with acquisitions and restructuring
costs. For the quarter ended March 31, 2023, this amount is net of
tax of $2.0 (2022 - $1.4).
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