Stantec Inc

Welcome to Stantec's fourth quarter and full year 2024 results webcast and conference call. Leading the call today are Gord Johnston, President and Chief Executive Officer, and Vito Comoni, 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 qualification set out on slide two, detailed in Stantec's Management Discussions 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'm pleased to turn the call over to Mr. Gord Johnson.

Good afternoon, and thank you for joining us today. Vito and I are currently traveling, which is why our conference call is so late in the day. Next quarter, we'll return to the regular cadence of our earnings calls. I'm pleased to report that 2024 was another record year for Stantec. We had a very strong finish to the year with double digit organic growth in the US and high single digit growth in Canada and global in the fourth quarter. All of our business operating units also delivered organic growth in the quarter, including energy and resources, which returned to growth as expected in Q4. We continue to thrive in a resilient industry driven by macro factors such as water security, aging infrastructure, climate change, emerging technology, and the expansion of advanced manufacturing. As a result, for the full year, we delivered record net revenues of $5.9 billion, up 15.8% compared to 2023. This was underpinned by 7.4% organic and 7.5% acquisition growth. With our focus on solid project execution and operational excellence, we grew our adjusted EBITDA to $980 million, up 18%, with an enhanced margin of 16.7%, reflecting a 30 basis point increase. We also delivered adjusted EPS of $4.42, up over 20% compared to 2023. Looking at our results in each of our geographies, In the U.S., we increased our Q4 net revenues 14.1%, driven primarily by 10.3% organic growth. For the full year, our net revenues in the U.S. increased by 13.3%, through 8.6% organic and 3.3% acquisition growth. Water delivered double-digit organic growth through continued robust public sector and industrial project demand. as well as large-scale water security projects. Our buildings business also delivered double-digit organic growth, driven by solid investment across the healthcare, industrial, and science and technology sectors. Momentum on major infrastructure projects continues to fuel strong organic growth, primarily in transit and rail projects in the west, roadway designs in the east, and residential development in the south. In Canada, we also had a very strong fourth quarter, growing net revenue by 17.6%, with 9.1% organic growth. Acquisition growth was also very strong, at 8.5% in the quarter, coming from Morris and Hirshfield. For the full year, net revenue in Canada rose 14.5%, with 6% organic growth and 8.5% acquisition growth. Both our buildings and water businesses experienced double-digit organic growth. Growth in our buildings business was driven by public sector investment in Western Canada, primarily in our civic, education, and healthcare sectors. And momentum continued on significant wastewater solution projects in our water business. Our infrastructure business delivered solid, high single-digit organic growth with a wrap-up of roadway, transit, rail, and land development projects. Finally, in the fourth quarter, our global business delivered 32.6% growth in net revenue with 7.3% organic growth and 21.8% acquisition growth from Zetcon and Hydroc. For the full year, global generated 23.2% growth in net revenue, reflecting 16.3% acquisition and 5.8% organic growth. Our global buildings team achieved 20% organic growth as work continued to ramp up on the cancer center in Dubai and on the 4 billion pound battery cell manufacturing facility in the UK. Our industry leading water business saw double digit organic growth through long term framework agreements and public sector investment in water infrastructure. And our environmental services business continued to see strong organic growth from energy transition projects in Europe. Before turning the call over to Vito, I want to mention that I'm very pleased that Stantec continues to receive various public sustainability-related accolades. We were once again recognized by corporate nights as being one of the world's most sustainable companies. We placed eighth overall and first amongst our industry peers. In addition, Time ranked Stantec 14th on its 2024 list of the world's most sustainable companies. This recognition reinforces our authentic commitment to environmental, social, and governance, which has solidified our position as a global leader in sustainability. On the same note, I'd like to thank Don Lowry for his many years of service to our board and for having chaired our Sustainability and Safety Committee. Don will not be standing for re-election in May of this year and retired from our board as of January 31st. Don brought a wealth of knowledge and great insights to Stantec and he'll be missed. Now, I'll turn the call over to Vito to review our Q4 and full year 2024 financial results in more detail. Thank you, Gord, and hello, everybody.

Our strong fourth quarter results include robust year-over-year debt revenue growth of 19% to $1.5 billion, and that was driven by 9.3% organic and 7.6% acquisition growth. We achieved organic growth in all of our regional and business operating units, with double-digit growth achieved in our U.S. region and water and buildings businesses. Profit margins in Q4 increased 21.5%, or $143.8 million, and increased 110 basis points as a percentage of net revenue, from 53.9% to 55%. This growth was primarily due to higher project recoveries and change order approvals during the fourth quarter, as well as continued strong project execution. Adjusted EBITDA increased 26.7% to $246.5 million, and we achieved a 16.7% adjusted EBITDA margin, an increase of 100 basis points year over year. We also delivered 35.4% growth in adjusted EPS at $1.11. Looking at full year, At the full year, gross revenue in 2024 grew to $7.5 billion, up almost 16% year-over-year, and net revenue of $5.9 billion is also up almost 16% compared to 2023. As a percentage of net revenue, our project margins came in at 54.5%, and that's an increase of 30 basis points compared to 2023, again, as a result of net revenue growth and strong project execution. We achieved a very solid adjusted EBITDA margin of 16.7% in 2024, an increase of 30 basis points from 2023. And finally, our adjusted EPS in the year increased over 20% to $4.42. Turning to our cash flow liquidity and capital resources. During 2024, our operating cash flow has increased 16%. from $520 million to $603 million, and that reflected continued strong cash flow generation, growth, of course, and solid operational performance. We also achieved greater than one times free cash flow to net income for the year. Our DSO at the end of the fourth quarter stood at 77 days, and that's consistent with the prior year and remains well within our internal target of 80 days or lower. Our net debt to adjusted EBITDA ratio at the year end was 1.2 times, a further reduction from 1.5 times at the end of Q3. We remain well within our target range of one to two times leverage, and our balance sheet continues to be in great shape. As a result of our strong performance, the board has approved a 7.1% increase to our dividend, now at $0.90 per share on an annualized basis. The dividend continues to be a key component of our capital allocation plan, And with the strength and growth of our earnings, we've been able to raise the dividend consistently while still lowering our overall payout ratio and ensuring we have a very strong balance sheet for M&A. Scored with that, I'll hand the call back to you.