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, 2023.
Stantec generated net revenue of $1.3 billion in the second
quarter of 2023 on the strength of 11.2% organic growth1. For the
sixth consecutive quarter, every regional and business operating
unit delivered organic net revenue growth, with notable organic
growth achieved in Water (16.2%), Environmental Services (12.1%),
and Energy & Resources (12.0%). Adjusted EBITDA margin
increased by 20 basis points over Q2 2022 to 16.9%, despite a
significant expense related to the revaluation of Stantec's
long-term incentive plan (LTIP), due primarily to strong share
price appreciation in the quarter. Excluding the revaluation,
adjusted EBITDA margin was 17.5%. Stantec delivered diluted
earnings per share (EPS) of $0.79, and record second quarter
adjusted diluted EPS of $0.99. Backlog at the end of June 30,
2023 reached $6.6 billion, a new all-time high, driven primarily by
organic growth of 10.0% since December 31, 2022.
“We continue to deliver significant growth in revenue and
earnings driven by strong performance across all our regional and
business operating units,” said Gord Johnston, President and CEO.
"As a result of our strong year-to-date results and our expectation
of continued favorable market fundamentals for the remainder of the
year, we are increasing our net revenue and adjusted earnings per
share guidance for 2023.”
Q2 2023 compared to Q2
2022
- Net revenue
increased 14.5% or $162.0 million to $1.3 billion, primarily driven
by 11.2% organic growth. Double-digit organic growth was achieved
in all regions and in Water, Environmental Services, and Energy
& Resources businesses.
- Project margin
increased $91.3 million or 15.1% to $694.0 million. As a
percentage of net revenue, project margin increased by 30 basis
points to 54.3%.
- Adjusted EBITDA1
increased $29.3 million or 15.7% to $216.0 million. Adjusted EBITDA
margin increased by 20 basis points over Q2 2022 to 16.9%, despite
a significant expense related to the revaluation of the Company's
LTIP, primarily due to strong share price appreciation in the
quarter. Excluding the revaluation, adjusted EBITDA margin was
17.5%.
- Net income increased
45.0%, or $27.3 million, to $88.0 million, and diluted EPS
increased 43.6%, or $0.24, to $0.79, mainly due to strong net
revenue growth, solid project margins, and lower administrative and
marketing expenses as a percentage of net revenue.
- Adjusted net income1
and adjusted diluted EPS achieved record highs in the quarter.
Adjusted net income grew 18.1%, or $16.8 million, to $109.4
million, achieving 8.6% of net revenue (9.0% without the effect of
the LTIP revaluation), and adjusted diluted EPS increased 19.3% to
$0.99 ($1.04 without the effect of the LTIP revaluation).
- Contract backlog
increased to $6.6 billion at June 30, 2023, a record high
reflecting 10.0% organic growth from December 31, 2022—with
double-digit organic backlog growth in Stantec's US and Canada
operations as well as 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 $35.4 million, with cash inflows of $31.0 million,
reflecting strong revenue growth and operational performance. This
compares to $4.4 million outflows in the comparative period, which
resulted primarily from the Cardno financial system
integration.
- DSO1 was 81 days,
consistent with December 31, 2022 and March 31, 2023.
- On June 30, 2023,
Stantec acquired Environmental Systems Design, Inc. (ESD), a
300-person firm headquartered in Chicago that provides building
engineering services, specializing in mission critical and data
center services.
- Net debt to adjusted
EBITDA (on a trailing twelve-month basis) at June 30, 2023 was
1.8x, remaining within Stantec's internal target range of 1.0x to
2.0x, and reflecting the impact of funding the ESD acquisition on
the last day of the reporting period.
- On June 27, 2023,
Stantec issued $250 million senior unsecured notes due June 27,
2030 that bear interest at a fixed rate of 5.393% per annum. These
notes were assigned an investment-grade credit rating of BBB by
DBRS Limited. Additionally, the Company entered into and fully drew
upon an unsecured bilateral term credit facility of $100 million
that matures on June 17, 2024. The proceeds of both the notes and
new term facility were used to repay a portion of existing
indebtedness on the revolving credit facility.
- On August 9,
2023, the Board of Directors declared a dividend of $0.195 per
share, payable on October 16, 2023, to shareholders of record
on September 29, 2023.
Year-to-date Q2 2023
compared to year-to-date Q2
2022
- Net revenue
increased 15.7% or $340.4 million to $2.5 billion,
primarily driven by 11.7% organic growth. Double-digit organic
growth was achieved in all regions and in the Water, Environmental
Services, and Energy & Resources businesses.
- Project margin
increased $184.2 million or 15.7% to $1.4 billion. As a
percentage of net revenue, project margin remained consistent at
54.0%.
- Adjusted EBITDA
increased $56.2 million or 16.6% to $395.1 million.
Adjusted EBITDA margin increased by 20 basis points over the prior
period to 15.8%, despite a significant expense related to the
revaluation of the LTIP, primarily due to strong share price
appreciation in the year to date. Excluding the revaluation,
adjusted EBITDA margin was 16.4%.
- Net income increased
44.9%, or $47.4 million, to $152.9 million, and diluted
EPS increased 45.3%, or $0.43, to $1.38, mainly due to strong net
revenue growth and lower administrative and marketing expenses as a
percentage of net revenue.
- Adjusted net income
grew 18.2%, or $29.3 million, to $190.3 million,
achieving 7.6% of net revenue (8.1% without the effect of the LTIP
revaluation), and adjusted diluted EPS increased 18.6% to $1.72
($1.82 without the effect of the LTIP revaluation).
- Operating cash flows
increased $66.1 million, with cash inflows of
$67.7 million, reflecting strong revenue growth and
operational performance. This compares to $1.6 million in the
comparative period, which resulted primarily from the Cardno
financial system integration.
- Year to date Q2
2023, Stantec repurchased 129,036 of common shares under the
Company's Normal Course Issuer Bid (NCIB) program at a cost of
$10.0 million.
______________________1 Adjusted diluted EPS, adjusted net
income, adjusted EBITDA, and adjusted EBITDA margin are non-IFRS
measures, and organic growth, acquisition growth and DSO are other
financial measures (discussed in the Definitions section of the Q2
2023 MD&A).
2023 Outlook
Stantec is revising and increasing certain targets contained
within the Company's 2023 guidance (provided on page M-10 in the
2022 Annual Report) based on the strength of the Company's
financial performance to date and the outlook for the balance of
this year.
Stantec is raising its guidance for net revenue and adjusted
diluted EPS growth and narrowing the target range for adjusted
EBITDA as a percentage of net revenue.
|
Previously Published 2023 Annual Range |
Revised 2023 Annual Range |
Targets |
|
|
Net revenue growth |
7% to 11% |
10% to 13% |
Adjusted EBITDA as % of net
revenue (note) |
16% to 17% |
16.3% to 16.7% |
Adjusted net income as % of
net revenue (note) |
above 7.5% |
above 7.5% |
Adjusted diluted EPS growth
(note) |
9% to 13% |
12% to 15% |
Adjusted ROIC (note) |
above 10.5% |
above 10.5% |
In setting the revised targets and guidance, the average value
for the US dollar was assumed to be $1.34, GBP to be $1.65, and AU
$0.91. For all other underlying assumptions, see the Assumptions
section of the Q2 2023 MD&A. These targets do not include the
impact of revaluing the share-based compensation, which fluctuates
primarily due to share price movements subsequent to December 31,
2022.note: Adjusted EBITDA, adjusted net income, adjusted diluted
EPS, and adjusted ROIC are non-IFRS measures discussed in
the Definitions section of the Q2 2023 MD&A.
Net Revenue
The Company is raising the net revenue growth target range to
10% to 13% (previously 7% to 11%), and overall organic net revenue
growth target to high single digits (previously mid to high single
digits). In Canada, Stantec now expects organic net revenue growth
to be in the mid single digits (previously low single digits).
Additionally, the Company now expects organic growth in the US to
be in the low double digits (previously high single digits to low
double digits), driven by momentum from the record-high US backlog
and project opportunities arising from previously announced
programs and acts. The Company also continues to expect Global to
achieve mid to high single digit organic growth, driven by
continued high levels of activity in the UK Water business and
demand and stimulus in Environmental Services.
Adjusted EBITDA Margin
Stantec is narrowing the target range for adjusted EBITDA margin
to 16.3% to 16.7% (previously 16.0% to 17.0%). This reflects the
Company's confidence in continued solid project execution and
operational efficiency.
Adjusted Diluted EPS
Based on the factors described above, Stantec is raising the
target range for adjusted diluted earnings per share growth to 12%
to 15% (previously 9% to 13%).
Consistent with guidance previously provided, these targets do
not include the impact of revaluing share-based compensation, which
fluctuates primarily due to share price movements subsequent to
December 31, 2022. For the year to date, this revaluation resulted
in a $14.9 million expense (pre-tax), the equivalent of 60 basis
points relative to net revenue and $0.10 per share.
The above targets also do not include any assumptions for
additional acquisitions given the unpredictable nature of the size
and timing of such acquisitions.
Q2 2023
Financial Highlights
|
For the quarter endedJune
30, |
For the two quarters endedJune
30, |
|
2023 |
2022 |
2023 |
2022 |
(In millions of Canadian dollars, except per share amounts and
percentages) |
$ |
% of NetRevenue |
$ |
% of NetRevenue |
$ |
% of NetRevenue |
$ |
% of NetRevenue |
Gross revenue |
1,638.2 |
|
128.1 |
% |
1,376.6 |
|
123.3 |
% |
3,177.4 |
|
126.7 |
% |
2,690.5 |
|
124.2 |
% |
Net
revenue |
1,278.7 |
|
100.0 |
% |
1,116.7 |
|
100.0 |
% |
2,507.2 |
|
100.0 |
% |
2,166.8 |
|
100.0 |
% |
Direct
payroll costs |
584.7 |
|
45.7 |
% |
514.0 |
|
46.0 |
% |
1,153.2 |
|
46.0 |
% |
997.0 |
|
46.0 |
% |
Project margin |
694.0 |
|
54.3 |
% |
602.7 |
|
54.0 |
% |
1,354.0 |
|
54.0 |
% |
1,169.8 |
|
54.0 |
% |
Administrative and marketing expenses |
487.3 |
|
38.1 |
% |
431.6 |
|
38.6 |
% |
975.6 |
|
38.9 |
% |
857.7 |
|
39.6 |
% |
Depreciation of property and
equipment |
14.7 |
|
1.1 |
% |
14.4 |
|
1.3 |
% |
30.2 |
|
1.2 |
% |
28.6 |
|
1.3 |
% |
Depreciation of lease
assets |
30.2 |
|
2.4 |
% |
29.9 |
|
2.7 |
% |
61.1 |
|
2.4 |
% |
60.5 |
|
2.8 |
% |
Net impairment (reversal) of
lease assets |
0.4 |
|
0.1 |
% |
(2.6 |
) |
(0.2 |
%) |
(2.1 |
) |
(0.1 |
%) |
(2.6 |
) |
(0.1 |
%) |
Amortization of intangible
assets |
26.4 |
|
2.1 |
% |
26.2 |
|
2.3 |
% |
52.7 |
|
2.1 |
% |
50.5 |
|
2.3 |
% |
Net interest expense |
22.3 |
|
1.7 |
% |
15.4 |
|
1.4 |
% |
43.0 |
|
1.7 |
% |
27.8 |
|
1.3 |
% |
Other |
(0.8 |
) |
(0.1 |
%) |
8.4 |
|
0.8 |
% |
(3.8 |
) |
(0.1 |
%) |
9.1 |
|
0.4 |
% |
Income
taxes |
25.5 |
|
2.0 |
% |
18.7 |
|
1.7 |
% |
44.4 |
|
1.8 |
% |
32.7 |
|
1.5 |
% |
Net income |
88.0 |
|
6.9 |
% |
60.7 |
|
5.4 |
% |
152.9 |
|
6.1 |
% |
105.5 |
|
4.9 |
% |
Basic and diluted earnings per
share (EPS) |
0.79 |
|
n/m |
|
0.55 |
|
n/m |
|
1.38 |
|
n/m |
|
0.95 |
|
n/m |
|
Adjusted EBITDA (note) |
216.0 |
|
16.9 |
% |
186.7 |
|
16.7 |
% |
395.1 |
|
15.8 |
% |
338.9 |
|
15.6 |
% |
Adjusted net income
(note) |
109.4 |
|
8.6 |
% |
92.6 |
|
8.3 |
% |
190.3 |
|
7.6 |
% |
161.0 |
|
7.4 |
% |
Adjusted diluted EPS
(note) |
0.99 |
|
n/m |
|
0.83 |
|
n/m |
|
1.72 |
|
n/m |
|
1.45 |
|
n/m |
|
Dividends declared per common share |
0.195 |
|
n/m |
|
0.180 |
|
n/m |
|
0.390 |
|
n/m |
|
0.360 |
|
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 2023 MD&A).n/m =
not meaningful
Net Revenue by Reportable Segment
(In millions of Canadian dollars, except
percentages) |
Q2 2023 |
Q2 2022 |
TotalChange |
|
Change Dueto Acquisitions |
|
Change Dueto ForeignExchange |
|
Change Dueto OrganicGrowth |
|
% of OrganicGrowth |
|
Canada |
320.3 |
291.6 |
28.7 |
|
— |
|
n/a |
|
28.7 |
|
9.8 |
% |
United States |
667.2 |
565.9 |
101.3 |
|
3.1 |
|
29.2 |
|
69.0 |
|
12.2 |
% |
Global |
291.2 |
259.2 |
32.0 |
|
— |
|
4.5 |
|
27.5 |
|
10.6 |
% |
Total |
1,278.7 |
1,116.7 |
162.0 |
|
3.1 |
|
33.7 |
|
125.2 |
|
|
Percentage Growth |
|
|
14.5 |
% |
0.3 |
% |
3.0 |
% |
11.2 |
% |
|
Backlog
(In millions of Canadian dollars, except percentages) |
Jun 30, 2023 |
Dec 31, 2022 |
TotalChange |
|
Change Dueto Acquisitions |
|
Change Dueto Foreign Exchange |
|
Change Dueto OrganicGrowth |
|
% of OrganicGrowth |
|
Canada |
1,395.3 |
1,249.2 |
146.1 |
|
— |
|
n/a |
|
146.1 |
|
11.7 |
% |
United States |
4,252.6 |
3,715.9 |
536.7 |
|
188.1 |
|
(79.8 |
) |
428.4 |
|
11.5 |
% |
Global |
927.7 |
936.6 |
(8.9 |
) |
— |
|
(25.1 |
) |
16.2 |
|
1.7 |
% |
Total |
6,575.6 |
5,901.7 |
673.9 |
|
188.1 |
|
(104.9 |
) |
590.7 |
|
|
Percentage Growth |
|
|
11.4 |
% |
3.2 |
% |
(1.8 |
)% |
10.0 |
% |
|
Webcast & Conference Call
Stantec will host a live webcast and conference call on
Thursday, August 10, 2023, at 7:00 AM Mountain Time (9:00 AM
Eastern Time) to discuss the Company’s second 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 Q2 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 the
Company's 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 the Company's ability to capture
future growth opportunities, adjusted diluted EPS and net revenue
growth, adjusted EBITDA margin, ROIC, and the updated 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 three and
six month periods ended June 30, 2023, there has been no
significant change in the risk factors from those described in
Stantec's 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 sedarplus.ca 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
Jess NieukerkStantec Investor RelationsPh:
403-569-5389jess.nieukerk@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 endedJune
30, |
For the two quarters endedJune
30, |
(In
millions of Canadian dollars, except per share amounts) |
2023 |
2022 |
2023 |
2022 |
Net income |
88.0 |
|
60.7 |
|
152.9 |
|
105.5 |
|
Add back
(deduct): |
|
|
|
|
Income taxes |
25.5 |
|
18.7 |
|
44.4 |
|
32.7 |
|
Net interest expense |
22.3 |
|
15.4 |
|
43.0 |
|
27.8 |
|
Net impairment (reversal) of lease assets (note 1) |
0.9 |
|
(1.9 |
) |
(2.0 |
) |
(1.9 |
) |
Depreciation and amortization |
71.3 |
|
70.5 |
|
144.0 |
|
139.6 |
|
Unrealized (gain) loss on equity securities |
(3.3 |
) |
12.5 |
|
(7.2 |
) |
18.5 |
|
Acquisition, integration, and restructuring costs (note 4) |
11.3 |
|
10.8 |
|
20.0 |
|
16.7 |
|
|
|
|
|
|
Adjusted EBITDA |
216.0 |
|
186.7 |
|
395.1 |
|
338.9 |
|
|
For the quarter endedJune
30, |
For the two quarters endedJune
30, |
(In
millions of Canadian dollars, except per share amounts) |
2023 |
2022 |
2023 |
2022 |
Net income |
88.0 |
|
60.7 |
|
152.9 |
|
105.5 |
|
Add back (deduct)
after tax: |
|
|
|
|
Reversal of lease asset impairment (note 1) |
0.6 |
|
(1.5 |
) |
(1.6 |
) |
(1.5 |
) |
Amortization of intangible assets related to acquisitions (note
2) |
14.6 |
|
15.7 |
|
29.1 |
|
30.2 |
|
Unrealized (gain) loss on equity securities (note 3) |
(2.6 |
) |
9.5 |
|
(5.6 |
) |
14.1 |
|
Acquisition, integration, and restructuring costs (note 4) |
8.8 |
|
8.2 |
|
15.5 |
|
12.7 |
|
|
|
|
|
|
Adjusted net income |
109.4 |
|
92.6 |
|
190.3 |
|
161.0 |
|
Weighted average number of shares outstanding - diluted |
111,015,228 |
|
111,054,142 |
|
110,953,350 |
|
111,287,552 |
|
|
|
|
|
|
Adjusted earnings per share - diluted |
0.99 |
|
0.83 |
|
1.72 |
|
1.45 |
|
See the Definitions section of the Q2 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 net impairment (reversal) of lease assets includes onerous
contracts associated with the impairment for the quarter ended June
30, 2023 of $0.5 (2022 - $0.7) and for the two quarters ended
June 30, 2023 of $0.1 (2022 - $0.7). For the quarter ended
June 30, 2023, this amount is net of tax of $0.3 (2022 - $(0.4)).
For the two quarters ended June 30, 2023, this amount is net
of tax of $(0.4) (2022 - $(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 June 30,
2023, this amount is net of tax of $4.2 (2022 - $4.9). For the two
quarters ended June 30, 2023 this amount is net of tax of $8.4
(2022 - $9.4).note 3: For the quarter ended June 30, 2023, this
amount is net of tax of $(0.7) (2022 - $3.0). For the two quarters
ended June 30, 2023 this amount is net of tax of $(1.6) (2022-
$4.4).note 4: The add back of other costs primarily relates to
integration expenses associated with acquisitions and restructuring
costs. For the quarter ended June 30, 2023, this amount is net of
tax of $2.5 (2022 - $2.6). For the two quarters ended June 30,
2023, this amount is net of tax of $4.5 (2022- $4.0).
Stantec (TSX:STN)
Historical Stock Chart
Von Apr 2024 bis Mai 2024
Stantec (TSX:STN)
Historical Stock Chart
Von Mai 2023 bis Mai 2024