Stantec Inc

Welcome to Stantec's third quarter 2022 earnings results conference call. Leading the call here are Gore Johnson, President and Chief Executive Officer, and Teresa Jang, Executive Vice President and Chief Financial Officer. Stantec invites those dialing in to view the slide presentation, which is available in the investor 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 this conference call is subject to the forward-looking statements qualifications set out on slide two, detailed in Stantec's management discussion 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. With that, I am pleased to turn the call over to Mr. Gore-Johnston.

Good morning, and thank you for joining us today. I'm very pleased to report record third quarter results that delivered in line with our expectations. Our results reflect strong operational performance and the ongoing solid execution of our strategic plan, delivering both top and bottom line growth. We generated a 24% increase in net revenue, reaching approximately 1.2 billion, propelled by the key drivers that we've noted over the course of this year. Aging infrastructure, climate change and sustainability, and the reshoring of domestic production. NatRevenue was driven by double-digit organic growth of 11% and acquisition growth of 13%. We continue to drive organic growth in each of our geographic regions and business units. Notably, water and energy and resources delivered 16% and 17% organic growth respectively. And environmental services continues to have a very strong year. with over 9% organic growth and a 47% net revenue increase overall. Water and environmental services continue to account for 40% of our business, which speaks to the strong weighting of our business towards addressing climate change and sustainability challenges. We achieved solid project and EBITDA margins of 54.1%, and 16.7% respectively. And this performance translated into adjusted diluted earnings per share of 86 cents for the quarter. Looking at our results by region, our activity level in the U.S. continues to increase, driven by momentum in both public and private investment. We grew net revenue by almost 29% overall, with 12% organic growth, 13% acquisition growth, and 4% from the stronger U.S. dollar. Organic growth in water was driven by the ramp-up of public sector and industrial projects, including advanced manufacturing projects, as well as our work on large-scale water security projects addressing water scarcity risks in the western U.S. We also delivered solid organic growth in infrastructure, from work on projects in transportation, as well as in industrial and residential land development activities. and we continue to see activity levels recover in buildings, with investments still flowing into healthcare and science and technology. Of note, our U.S. environmental services business has now grown to match the net revenue generation of our U.S. infrastructure business. Our results reflect how well aligned our U.S. business is to continue to capture the wave of opportunities and funding being made available to address the key drivers and developing trends. Canada continued to perform very well. Net revenues were up 7% in the quarter, all attributed to organic growth. Similar to the US, both private and public spending remains robust in Canada. We saw the strongest growth in environmental services, with continued high demand for permitting work in archaeological services, and in energy and resources, where power transmission and distribution and energy transition work generated continued opportunities. We also grew our infrastructure revenues with ongoing work in community development through the housing market, bridge work in Quebec, and the continued recovery efforts in British Columbia from last year's flooding. Work on public health care and private commercial projects drove growth in our building segment. And our global region continues to lead, with 38% net revenue growth for the quarter, or 44% on a constant currency basis. Global also continued to have the highest organic growth at just over 14%. The strength of our acquisition programs generated additional net revenue growth of 30%. Our water business continues to be a significant pillar for us to capture long-term framework opportunities in both the UK and New Zealand. And we also continue to see strong demand for our services in community development and in mining. So you can see that the themes we've been discussing continue to play out across all of our regions. With that, I'll turn the call over to Theresa to review our Q3 financial results in more detail.

Thank you, Gord, and good morning, everyone. As Gord stated, Q3 was a very solid quarter for us. We grew gross revenue by 26% and net revenue by 24%. Project margin was also up 24%, driven by strong net revenue growth. As a percentage of net revenue, project margin was very solid at 54.1%, in line with our expectations. Our project margin reflects our continued discipline in project execution, our ability to increase rates on certain projects to mitigate the impacts of wage inflation, and increased selectivity in project pursuits. Consistent with the increase in our project margin, we also delivered adjusted EBITDA growth of 24%, and through solid execution across the business, adjusted EBITDA margin was 16.7%, directly in line with Q3 2021. Turning to our earnings, net income in the quarter was $68 million, or $0.61 per share. This was down slightly compared to Q3 2021, primarily driven by acquisition-related expenses. Our adjusted net income for the third quarter was 95 million, or 86 cents per share, an increase of 18% and 19%, respectively, over Q3 2021, reflecting our focus on delivering both top line and bottom line growth. Looking at our liquidity and capital resources, operating cash flows in the quarter were 93 million. DSO was 86 days, largely resulting from the Cardinal integration and two days from the effect of foreign exchange. And net debt to adjusted EBITDA was at 1.9 times. As we approach completion of the card note financial migration, cash flows are beginning to normalize, and we continue to expect cash flows, DSO, and leverage to be at more typical levels by the end of the year. However, the disruption during the financial migration has led to our average debt level for the year being slightly higher than anticipated and this will impact 2022 adjusted ROIC. With that, I'll turn the call back over to Gord.