Stantec Inc

Welcome to Stantec's first quarter 2023 earning results webcast and conference call. Leading the call today are Gore Johnston, 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 statement qualifications set out on slide two, detailed in Stantec's management discussion and 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 happy to report that we're off to an excellent start for the year. We delivered net revenue growth for the first quarter of 17%, reaching $1.2 billion. This was driven by over 12% organic growth. Market dynamics remained very favorable over the quarter, and through strong operational performance, we were able to deliver double-digit organic net revenue growth in each of our geographic regions. We also delivered solid organic growth in each of our business segments, most notably in water, which generated over 24% organic growth, 11% in buildings, and 16% in energy and resources. These results reflect our strong market positioning as we continue to build on the macro themes of aging infrastructure, climate change, and reshoring of domestic production. Looking at our operating regions, net revenue in the U.S. increased 21%, With organic net revenue growth of 14%, robots public and private sector spending continues to drive growth. We also benefited from the strong US dollar in the quarter, which contributed approximately 7% of the increase in net revenue. We saw double digit growth in water, buildings, and energy and resources. Our water business continues to be a leader in the US. achieving significant wins across all megatrends, including water reuse, climate resiliency, and large-scale water security projects. Buildings continues to be very active based on momentum from investments in healthcare, civic, industrial and the science and technology sectors, and energy and resources continues to drive growth through the acceleration of mining and significant reservoir and dam projects. In community development, Demand for industrial and residential units built specifically for rental has spurred growth. Overall, the U.S. had a very strong quarter, with the key themes that we've spoken about previously continuing to play out. In Canada, we achieved 11% organic net revenue growth. Environmental services was driven by project permitting, archaeological investigations, and environmental impact assessment work in the renewable energy sector. Our water business continued to provide services for climate change resilience, including work surrounding Toronto's basement flooding program. Both environmental services and water achieved close to 20% organic net revenue growth. Energy and resources delivered double digit growth, with strong activity related to the energy transition, including projects in power transmission and distribution, as well as a large renewable energy project in Western Canada. Our global operations delivered another quarter of solid revenue growth. Net revenue grew 15% with organic growth of over 10% and acquisition growth of 5%. Our water business continues to capitalize on long-term water framework agreements and public sector investments in the UK, New Zealand, and Australia. Energy and resources delivered robust organic growth through heightened levels of activity. driven by the ongoing demand for copper and other metals that support the increasing imperative for the energy transition. Before turning the call over to Theresa, I want to share that our buildings group was recently ranked number two overall in modern healthcare's top construction and design firms. Modern healthcare is the industry's leading source of healthcare business and policy news, research, and information. And this is a global ranking, and it clearly demonstrates the great work our buildings team is doing in healthcare. And now, I'll turn the call over to Theresa to review our financial results in more detail.

Thank you, Gord. Good morning, everyone. As Gord noted, we delivered solid first quarter results. We grew both growth and debt revenue by 17% to $1.5 billion and $1.2 billion, respectively. Project margin for Q1 was 53.7%, in line with our expectations. Project margin in Canada and the U.S. remained strong, while we experienced a few challenges in our global operations, none of which were individually material. We expect project margin in global to strengthen in the coming quarters. Adjusted EBITDA margin was 14.6%, a 10 basis point increase over Q1 2022. As a result of very strong share price appreciation in Q1, we did have a significant mark-to-market expense, related to the revaluation of our long-term incentive plan. Without this, our adjusted EBITDA margin would have been 15.2%. Strong revenue growth and lower admin and marketing expenses as a percentage of net revenue drove first quarter diluted EPS of 59 cents compared with 40 cents in the prior year, and adjusted diluted EPS of 73 cents compared with 61 cents last year, an increase of 20%. Excluding the mark-to-market LTIP revaluation expense, adjusted deluge VPS would have been $0.78 and would have resulted in an increase of 28% over the prior year. Looking at our liquidity and capital resources, operating cash flow for the quarter came in at $37 million, an increase of $31 million over Q1-22. Operating cash flow was driven by the strong revenue growth we achieved this quarter and partly offset by our short-term employee incentive payments, which always occur in the first quarter. DSO at the end of March was 81 days, consistent with year-end 22, and our net debt to adjusted EBITDA was 1.6 times in the middle of our target range and also consistent with year-end 2022. Before I hand it back to Gord for final remarks, I'd like to draw your attention to our 16th Annual Sustainability Report, which we released last month. Our sustainability report is a wonderful resource that reviews all of the amazing work we are doing to achieve our ESG ambitions. We're particularly proud to report that for the fourth straight year, we've increased the portion of our gross revenue that's aligned with the UN Sustainable Development Goals. For 2022, we determined this to be 60%, up from 53% in 2021, a 13% increase. We also achieved our goal of operational carbon neutrality across our entire business. But there's so much more information contained in this report, I encourage you to take some time and look through it. With that, I'll turn the call back to Gord.