Stantec Inc

Welcome to Stantec's first quarter 2025 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 Investors 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 2, detailed in Stantec's management's 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'll turn the call over to Mr. Gord Johnston.

Good morning, and thank you for joining us today. Stantec

had a very strong start to 2025, delivering organic growth in each of our regional and business operating units, most notably in Canada, with double-digit organic growth. Amid a dynamic market environment, we continue to thrive in a resilient industry, driven by macro factors including water security, aging infrastructure, emerging technologies and the expansion of advanced manufacturing. As a result, in the first quarter we delivered net revenue of $1.6 billion, up .3% year over year. This was underpinned by .9% organic and .2% acquisition growth. With our focus on solid project execution and operational excellence, we grew our adjusted EBITDA by over 19%, with an enhanced margin of 16.2%. We also delivered adjusted EPS growth of 29% compared to Q1 2024. I'm also pleased to announce that we started off the year strong on the M&A front, with two strategic acquisitions. In early April, Stantec entered into a definitive agreement to purchase PAGE, a 1400-person architecture and engineering firm headquartered in Washington DC, which delivered over $300 million US in net revenue last year. The acquisition of PAGE will deepen Stantec's expertise and resources in key growth areas such as advanced manufacturing, data centers and healthcare, while adding new capabilities in cleanroom design and fabrication facilities. The acquisition will result in Stantec becoming the second largest architectural firm in North America. It also significantly strengthens our position as the largest integrated engineering and architecture firm. We expect the PAGE acquisition to close in Q3. We also announced the acquisition of Ryan Hanley, a 150-person engineering and environmental consultancy firm in Ireland, expanding our presence in the country. Consistent with over 145 acquisitions that we've completed over the last 30 years, these acquisitions will deliver strong shareholder value and contribute to the target that we've set out in our 2024 to 2026 strategic plan. And we look forward to welcoming over 1,500 talented individuals to the Stantec team.

Looking at our results in each of our geographies.

In

the U.S.,

we increased our Q1 net revenues by 9.7%, reflecting positive foreign exchange and organic growth of 2.4%. Organic growth was in line with our expectations for the quarter, as we had expected some project cycle timing in our water segment. While we had a major project roll-off, we have several new projects which are set to accelerate in Q2, and we are maintaining our bid to high single-digit organic growth guidance for the year. Public and private sector investments across our healthcare, industrial, and science and technology sectors contributed to growth in buildings. Growth in environmental services was mainly driven by our energy transition, mining and infrastructure sectors, as well as the continued work for a large-scale utility provider. Momentum on major infrastructure projects continues to fuel strong organic growth, particularly projects in the west and roadway design in the east. Overall, activity in the U

.S. remains strong, and our outlook for the full year remains intact. In Canada, we had a very strong first quarter,

growing net revenue by 15%, largely underpinned by .2% organic growth. The continued momentum on major wastewater solution projects contributed to double-digit organic growth in water. We also delivered solid double-digit organic growth in energy and resources and infrastructure. E&R was driven by the ramp-up of major power-intensive industrial process projects, and infrastructure was spurred by transit and rail projects in eastern Canada, airport sector projects in Quebec, and land development projects in Alberta. And our buildings team delivered high single-digit organic

growth through public investments in healthcare and civic sectors. Finally, in the first quarter, our global business delivered

.3% growth in net revenue, with .5% organic growth and .4% acquisition growth. Our industry-leading water business delivered over 20% organic growth across the UK, New Zealand, and Australia through long-term framework agreements and public sector investments. The ramp-up of new projects in Chile and Peru drew double-digit organic growth in energy and resources, as the growing need for energy transition solutions continues to drive demand in mining for copper. Now I'll turn the call over to Vito to review our Q1 financial results in more detail. Thank you, Gord, and good morning, everyone.

We achieved a very strong results in the first quarter, setting us up for another very successful year. Our gross revenue in Q1 grew to $1.9 billion, up almost 12% -over-year, and net revenue of $1.6 billion is up .3% compared to Q1 of 2024. As a percentage of net revenue, our project margins came in at 54.3%, reflecting solid project execution and a 10 basis point increase over last year. We achieved a very solid adjusted EBITDA margin of .2% in the quarter, representing an increase of 70 basis points -over-year. And our adjusted EPS in the quarter increased almost 29% to $1.16. Turning to our cash flow liquidity and capital resources, during the quarter, our operating cash flow increased almost 136% -over-year, from $43 million to $101 million, reflecting continued strong cash flow generation, growth, and solid operational performance. DSO at the end of the first quarter remained consistent at 77 days, remaining well within our internal target of 80 days or lower. Our net debt to adjusted EBITDA ratio at March 31st was 1.1 times, a further reduction from where our leverage sat at the end of the calendar year at 1.2 times. I'll note that upon closure of the page acquisition, we expect our leverage to remain well within our internal target of 1 to 2 times. With that, I'll now hand it over to you. Great, thanks, Vito.

At the end of the first quarter, our backlog reached a new all-time record of $7.9 billion. -over-year, backlog has grown overall by almost 13%, of which .5% was organic growth. Organic growth was achieved in each of our regional operating units, with double-digit growth in our water and energy resources businesses. Our backlog represents approximately 12 months of work and underscores the continued strong demand to support our clients' most pressing challenges. Turning to some of the major projects we've recently won. In the first quarter, Stantec was awarded the $1.1 billion major upgrade at the Urban Pulp and Paper Westside Mill in New Brunswick. The upgrade is one of the largest investments, projects in the Canadian forest products industry, and is expected to increase production by almost 66%. We were also selected to lead the detailed design and contract administration on the Dundas Bus Rapid Transit Mississauga East Corridor, which includes over 7 km of bus rapid transit with 8 stations. This BRT segment has an estimated project budget of $580 million, which includes design, construction, land acquisition and additional regional utility upgrades to be coordinated to increase construction efficiency. Finally, I'm pleased to announce that Stantec was selected by the City of Vancouver, Washington to design a treatment system to remove PUR and polyfluoroalkyl substances, or PFAS, from a high-volume water station with the goal of providing cleaner, more reliable drinking water for the community. When complete, this PFAS filter system will treat up to 12.2 million gallons per day, making it the largest PFAS project in the Northwestern

United States

in

terms of treatment capability. Despite heightened market uncertainty driven by tariffs,

policy shifts and regulatory changes, we remain confident in our ability to achieve our outlook for the year. Trends like aging infrastructure, energy security, water treatment, healthcare, data centers and reshoring all continue to drive strong demand for our business. And our diversified business model across different geographies, across five business operating units, each with multiple subsectors, ensures that we're able to capitalize on this demand. Throughout each of our geographies, we continue to see steady levels of bidding activity and forecast mid to high single-digit organic growth in each of them. In the U.S., we continue to see growth in infrastructure with IIGA-funded projects, in water with new projects ramping up in Q2, and we're seeing momentum on the healthcare front, especially in the Western U.S. In March, the American Society for Civil Engineers released its 2025 Comprehensive Infrastructure Assessment, which highlights that increased funding is beginning to improve the conditions of infrastructure across the U.S. However, the report estimates that an additional $9.1 trillion in funding is needed across all infrastructure categories to achieve a state of good repair. And even with current funding levels, including IIGA, a significant funding gap will remain over the next decade. As a result, while some government priorities are changing, we still expect steady investment from the federal, state, and local governments as they continue to address these challenges. In Canada, major investments continue to be driven by large-scale water projects, transportation infrastructure, including roads and transit, and health care. The federal government's recent economic platform places further emphasis on infrastructure, energy, housing, community development, and critical health care. While it may take some time for these additional investments to materialize, we are well positioned to capitalize on the opportunities ahead. And globally, we continue to see significant opportunities. In the U.K., the £104 billion AB-8 program is starting to ramp up in Q2, and the government's renewed focus on housing and community development is generating new opportunities. In Germany, we continue to see work in infrastructure, specifically in roads and transit. And with the €500 billion fund for infrastructure, defense, and energy transition projects, we expect more opportunities to follow. And finally, new frameworks in Australia and New Zealand continue to drive growth in our water business in these regions. With all of this in mind, we remain optimistic for 2025 and beyond. While we await the closing of the page acquisition, we're maintaining our current outlook, which includes net revenue growth of 7 to 10% for the year, EBITDA margin in the range of 16.7 to 17.3%, which reflects our continued confidence in solid project execution and operational performance, and adjusted EPS growth to be in the range of 16 to 19%, once again, above our net revenue growth expectations. As we near the halfway mark of our 2024 to 2026 strategic plan, I'm extremely pleased with our performance. We're tracking well against all of the targets set out in the plan, including growth from M&A. With the anticipated closing of the page acquisition later this year, we will have completed five acquisitions since the start of 2024, welcoming nearly 4,500 new employees to Stantec. And we are just getting started. Our M&A pipeline remains full and our balance sheet remains strong. I'm confident that we can achieve our strategic plan target of 50% growth in net revenues to 7.5 billion by the end of next year. As we continue throughout the year, we remain committed to sustainable growth, strong project execution, operational excellence, and delivering sustained shareholder value for years to come. And with that, I'll turn the call back to the operator for questions. Operator.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment for questions. Our first question comes from Benoit Poirier with Desjardins. You may proceed.

Yes. Good morning, Gord. Good morning, Vito. Morning. Yes. Just in terms of organic growth for the US, you were able to grow organically 2.4%, which is slightly below the consolidated level. Obviously, there are some color in the M&A, but I was wondering if it's more a matter of a tough comparison versus the double-digit territory a year ago, or are you seeing some uncertainty out of the border right now? The backlog is strong, but just curious about your take on the US.

Yeah, great question, Benoit. So, absolutely. We look at it from a number of perspectives. The first is, as you highlighted there, coming off a 10% comp a year ago. And a year ago, we were finishing up a really significant water project for a semiconductor fabrication plant. And so that really spiked things a bit a year ago. Now, that project is off, but we see a lot of additional projects in the water space and others coming on. We spent a lot of time, actually, over the last little bit, working with our business leaders, business operating unit leaders here in North America, just to see where they're thinking, how they're feeling about things. Certainly, they reiterated their confidence that we will achieve that mid to high single-digit organic growth, you know, strengthen through the year, and we'll receive that, get there by the end of the year. And as you said, backlog is good, and it is up, you know, low double digits organically, or low mid to high single digits organically.

Okay, that's great. Thanks, Gord. And with respect to the guidance for the outlook for 2025, it was maintained despite the addition of two acquisition and close to 1600 people. Is there any reason why you haven't raised the guidance? Is it more a matter of closing or maybe some cautiousness?

No, Ben Wahai, it's Vito. In regards to our base business excluding the acquisitions, we're off to a terrific start relative to our expectations and the guidance. So, the fact we haven't changed the guidance has nothing to do with our degree of confidence, obviously. It's just a normal course with respect to, we'll let those two transactions close and obviously get another three months under our belt here with Q2. And you can expect us then obviously coming out of Q2 to assess our guidance and either narrow or expand or do whatever we need to do. But get another three months under our belt, have these transactions close as we expect on a timely basis, and then we'll give an update to our guidance.

That's what I thought. Okay, great call, Vito. And last one for me, if you look at the stock price, it's been a great performer here today. Could you maybe remind us about the sensitivity for stock-based comp and whether it's embedded in the guidance?

Yeah, you know, now what we've done with our stock-based comp is, you know, we've hedged a certain degree component of it. So, on a go-forward basis, you should expect very little variability, if you will, in your -over-year variance related to stock price appreciation. In the quarter itself in Q1, I think the delta was close to $4 million -over-year where last year LTIP would have been sort of a $7 million charge, and this year we're in more than $3 to $4 million, so you can see that it's becoming less noisy than it was in previous years.

That's perfect. Okay, thank you very much for the time.

Great. Thanks, Manuel.

Thank you. Our next question comes from Chris Murray with ATB Capital Markets. You may proceed.

Yeah, thanks, folks. Good morning. Good morning, Chris. Good morning. Gordon, you talked a little bit about the U.S. business, and I was wondering, you know, there has been a lot of uncertainty around the U.S. government business. I know you've got some different aspects in there, certainly a lot of water work, also some other direct government work. Can you maybe give us some color on exactly what you guys are seeing at this particular point, not only on new contract awards, but maybe some of the conversations that your folks are having around what to expect around contract renewals on a go-forward basis?

Yeah, no, great question. So, you know, really in the U.S., we aren't seeing any appreciable impact from this uncertainty. We've seen a little bit of slowing in procurement cycles in some areas in the government, in particular, that would be early in Q1 when they had to reshape their procurement practices a little bit by removing, you know, references to DE&I in both, you know, procurement documents and evaluation scoring. That sort of is worked through, so we see that, you know, we're back onto a more normal cadence now. The groups that we're working with in the federal, state, and local government aren't those groups that are particularly impacted by, you know, some of the budget changes that are being made down there. So our groups are still feeling positive about the project that we have on the books right now, as well as what they foresee coming down the pipe. Interestingly, when we talk with some of our private sector clients there, you know, there was a little bit of uncertainty earlier in the year. Tariffs are on, tariffs are off, you know, a little bit of heightened rhetoric, but that all seems to have calmed down a little bit, that the temperature has seemed to have been reduced. So we're seeing a little bit better sentiment from our private sector clients. Again, we didn't see any appreciable uptick in projects that were postponed or canceled, but we're just seeing a little bit more positive sentiment from people. So I think that bodes well for the rest of the year, and makes us even feel better about maintaining our organic growth guidance, particularly in the US.

OK, that's

helpful. Thank you.

My other question is just around, you know, acquisitions on a go-forward basis. And I'd also like to dovetail this into talking a little bit about Zetcon for a second. So when you acquired Zetcon, certainly it was a different territory in Germany. But the idea was it sort of gave you a base to try to grow, you know, even when you get, I think, some of the other acquisitions done. You know, I think Vito alluded to the fact that you'll be well within your one to two times range, if not, you know, I'll say probably still to the bottom end of that. So a couple of questions on this. One, you know, how is Zetcon coming? Because I know the integration was a little more complicated than typical. And two, you know, in the German market now, does this give you the opportunity to start growing that as part of the strategy that was at least originally envisioned?

Yeah, absolutely. And so when we look at Zetcon, they're performing even better than we had initially anticipated when when we brought them on. You know, great firm, extremely well run. The manufacturing market, of course, as you read in Germany, is not is not as solid right now. But the infrastructure market, particularly with this 500 billion euro infrastructure bill, is very, very robust and they have a lot of needs in transportation, rail, electrical distribution and transmission. So, you know, we see a lot of opportunities there. But to your point, that exactly dovetails into our initial thesis when we acquired Zetcon, is that we would use them as a platform to continue to build on and acquire additional firms in the German market. So we are absolutely looking at those,

Chris. OK, and the integration, you know, we're moving along now that you feel comfortable with where you're at, or is there still a little more work to do?

Yeah, you know, the integration of Zetcon, we're taking it a little bit slower, you know, certainly German language issues, German gap and so on. But so we had initially planned to continue to go a bit slower or to go a bit slower on this one. And we're maintaining that philosophy.

OK, I'll leave it there. Thank you. Thank

you. Thank you. And as a reminder, to ask a question, please press star 1-1 on your telephone. Our next question comes from Christopher Pryzen with CIBC. You may proceed.

Hi, good morning. If I could just dig a bit deeper on the M&A, I believe last quarter you've mentioned to us that you're happy with executing in your sweet spot of small to medium sized transactions, which clearly you've done since you last reported. Is that where you're still feeling comfortable or where you're still feeling the most interest? Or are you starting to maybe see larger transactions come to market?

We I think the answer to that question would be yes to both of them. There continues to be a number of those sub-1500, 2000 person firms out there that we're in active conversations with, but there are a number of those 5,000, 7,000 plus companies that we see that we're coming to market here later this year that we've already had some initial conversations with. So there is opportunities really at both the small and the larger size. From a balance sheet and a capital perspective, we'd be very comfortable with

transacting on either of those. Chris, all I'd add there is I think it's not so much the size that is our starting point with our criteria. It really is strategic, cultural fit, geographic, how does it fit with our sectors and whatnot. That's the primary lens by which we look at things. As Gordon has alluded to, there's tremendous opportunity both in the tuck-ins, if you will, and some larger ones coming forth.

Maybe if you could just expand on, you've laid out your longer term priorities in terms of what areas you'd like to grow on, but in the near term in your different operating units, are there areas that you're really looking to build out?

We're feeling pretty good actually about the overall spread of those business operating units. Now certainly having acquired a page, we probably will not focus on additional buildings or architectural for a while, but absolutely continue to look for opportunities in the water space, in the infrastructure space, the environmental and certainly even in our energy and resources space. Good opportunities, certainly mining making a bit of a comeback there. We're seeing good opportunities. We have a bit of a blank canvas as we're looking at opportunities based on service line, even from a geography perspective. We see a lot of opportunities for us to for continued consolidation in the US, but even in the markets outside that we've talked about being active in Australia, New Zealand, the UK, still looking up in the Nordics a little bit. A lot of opportunity for us from an M&A perspective.

Thanks. Congrats on the quarter. I'll jump back in the queue. Thank you.

Thank you. Our next question goes to Michael Topham with TD Cowan. You may proceed.

Thank you. Good morning.

Morning.

Maybe just to follow on to some of these other questions you've had about M&A. So thinking about the macro and trade related uncertainty that's existed for a little while now. It certainly doesn't sound like that's having any kind of an impact on your outlook for your business, but I'm just wondering if in terms of M&A opportunities, has that affected the M&A landscape in any way, shape or form, whether that be from a seller perspective or buyer perspective? Has it in any way changed your views on what regions you might be interested in? I realize you're taking a longer term view here, but I'm not sure if there's been anything going on in any particular regions or heightened uncertainty that's affected the views around regional M&A opportunities.

Yeah, no, great question. As we've looked at, your comment about long term is exactly where we're thinking about things. A lot of the firms that we've been talking about, we've partnered with them, we've been working with them for years or decades in many cases. So we're looking at good firms and good markets from a long term perspective. Have we seen some uncertainty here over the last quarter? Absolutely. But these are firms that we haven't seen any rapid adjustments to valuations over the quarter. If we had, we might see something strengthening of it as coming back up. So it really hasn't changed our outlook. Michael, we just continue to take that long term approach, making sure it's value creative and you would do the right thing for the company that we're acquiring

and for Stantec overall. And Michael, I would say from a seller's perspective, nothing fundamentally has changed. When you sit back and you look at lawyer companies coming to market, the themes around smaller firms and how this industry has been involved from a technology perspective and the investments required, clearly smaller firms have a scale related issue with that or challenges with respect to that. Valuation is still continuing to be robust in our industry, presents dynamics for them as they think about succession. So bigger picture from a seller's perspective, nothing has really changed, perhaps even accelerating.

Okay, that's all very helpful. Thank you. Next question is just about the Energy and Resources Business Operating Unit. So that was an area that in 2024, you had seen some negative organic growth and I think you were calling for it to turn positive in the first quarter, which it didn't. I think in the first quarter was actually your strongest unit from an organic growth perspective. I just wonder if you could talk a little bit about that shift and that change and exactly what's driving that now and how you see that evolving over the next coming quarters.

Yeah, so the world of P&R is kind of unfolding as we have thought. You're right, .3% organic growth in Q1, but VATBog is also up organically low double digits in that group year over year. So that's kind of as we saw a lot of strengthening, particularly in the mining space. You've heard some of the talk about some of the large projects that we're doing from an industrial process perspective, energy transition, grid strengthening type work, really strong copper. We've had a number of copper projects move forward because of the need for copper to support the transitioning. So we're actually feeling really good about that space as we move forward. VATBogs continue to be strong and customer sentiment is solid. So we're feeling good about that. We see strong, continued organic growth in that business throughout the year. I'll be it, we're coming off some lower comps for the next couple quarters, but we do see strong organic growth. Very pleased with that.

That's helpful. Thanks very much. And then just one last one, the margin performance in the quarter was obviously quite strong, up 70 basis points, I think year over year in terms of adjusted EBITDA margin. Is that in line with what you were expecting? Is that coming a little stronger and how do we think about what that means as far as you're likely to land on a full year basis?

Yeah, Michael, you saw that when we provided guidance, obviously for our margin profile with our year end result in February, we expanded the range there and we expect year over year improvement. We're very pleased with how that's working its way through here in the early goings of the year. And that's just kudos to the entire organization, the operations and the support teams. When you look at the year over year improvement, 16.2 BIPs this year versus 15.5 last year. That's what you were referencing the 70 basis points really comes from three or four key areas. It all starts with project margin, of course. I mean, that's key to us. And that was up 0.1 effectively, as you saw, we had lower admin and marketing. So that's a whole bunch of, you know, it's a game of engines when it comes to that. That's utilization, that's labor, that's discretionary spend. And we did have a smaller impact there on a gain on sale of equities, which wasn't significant, but about $3 million year over year. But overall, very pleased with the performance of what we're tracking both on solid execution of project market margins and overall demand, and then how we are fulfilling that through our corporate services and all the other aspects of our discretionary spend. So with the start we have for the year.

Got it. I will leave it there. Thank you.

Thank you. Our next question comes from Maxim Sitra with NBF. You may proceed.

Good morning.

Bordito, obviously we've seen, you know, federal elections in Canada and Australia seems to be normalizing a little bit. How do you think about continued demand from these two geographies as, you know, there still seems to be a lot of support for infraspending? I guess my question is, you know, can we actually see for that celebration, especially in Australia that's been a little bit more sluggish?

Thanks. Yeah, so you're right. Quite a few elections so far this year made some changes for us when we look at Canada, you know, and the platform that Prime Minister Carney ran on with the support of infrastructure that, you know, feels really good for us. You're right, our Australia business infrastructure a little bit slower than the first part of the year, but we do see it strengthening, you know, through going and we, as the year progresses, many of our, we've heard some commentary from a number of our peers sort of feeling the same way, but in the same way in the UK, you know, they're, they've recently introduced that UK planning and infrastructure bill, which isn't passed yet, but if it does, you know, again, more support there for nationally significant infrastructure projects, building a million and a half new homes, process improvements to make the things smoother, all directionally positive for us. So whether it's the, you know, the UK, whether it's Australia, whether it's Canada, you know, we've seen some good directionally positive announcements and movement over the next little, last little bit.

And going all that is in Australia, water, continuous, you're really, really strong. Oh,

extremely strong in Australia, New Zealand. Yeah.

Okay, no, that's good to hear. And then in terms of, you know, UK, the ramp up around AMT programs, how's the tracking in terms of kind of the curvature of acceleration, where we are in terms of that spending bucket? Thanks.

Yeah, so AMT officially started in April, and so, you know, of course, you've seen the considerable increase in the over 75%, I believe it was the increase in the overall funding. So as we've talked about for the last several quarters, we've been actively ramping up hiring, taking real estate, getting ready to deliver on the additional work that's coming our way. And it is sort of tracking as we would expect, Max. We're seeing the, you know, additional work orders coming through now and keeping our folks really busy over there. So directionally, the AMT program is unfolding exactly as we had anticipated that it would. 100%. Okay.

And, and Vito, I guess the follow up question for you, because again, as you were doing this hiring, I presume revenue was, you know, less robust from this program. Does it mean that the operating leverage should start to kick in in Q2 and Q3? Or am I just being too tactical here?

And you're referring to the UK in particular, Max? Yeah, yeah,

yeah. Yeah.

Yeah, no, I think, well, I think overall, and maybe this dovetails back to the earlier question around our margin and whatnot. I think, you know, obviously, as we continue to expand and the organic growth and the acquisition, I think scale and operating leverage just continues to be a major area of focus for us. The entire organization is focused on that. And, and we'll see that flow through our results as we move forward.

Okay,

excellent. Thank you so much, Stephanie. Yeah, you're welcome. Thank you.

Thank you. Our next question comes from Devin Dodge with BMO Capital Markets. He may proceed.

Yeah. Good morning, Gord. Good morning, Vito. I wanted to start with maybe data centers. Look, there's been some questions about the growth outlook there after one of the large tech companies pulled back its CapEx budget. Look, from Stantec's perspective, I believe your backlog for data centers continues to increase, but just wondering if you've seen any evidence of slowing growth from this market when you look at earlier stage bidding or RFP activity?

Yeah, you know, we really haven't at this point. Definitely, we think that that data center market continues to be robust for us. But the one thing that of interest to note is, you know, I think in a previous call, we said that that represents two to three percent of our overall revenue. So it's, it continues with that overall diversification model of Stantec that, you know, to the upside, we'll certainly take additional work as it comes and we could perhaps double the size of that. But if a downturn comes, it's not really material to us as it is for some other firms that are heavily, heavily exposed to it. So we feel good about it. Certainly, we want to ride the wave on the way up, but if it does slow, you know, we don't see it being an overhang for us.

Okay, good context. Thanks for that. And then the second question, it might be early days here, but there seems to be an improving backdrop for energy related investments in Western Canada. Just wondering if you started to see more RFPs or inquiries from some of your mystery customers?

Absolutely. Yeah, we're having a number of discussions and ongoing talk about, you know, this project or that project or which one might be supported or come back to market, you know, still early days, but certainly that that increasing sentiment and those ongoing discussions, we feel very positive

about.

Okay, thanks for that. I'll turn it over. Thank you. Our next question comes from Jonathan Goldman with Scotiabank. You may proceed.

Hi, good morning, team. Thanks for taking my questions. Maybe just circling back to the margin. Good morning. Maybe just circling back to the margin conversation coming at it a different way. You maintain the guidance, which seems to imply back nine months improvement of 10 dips year on year. You just did 70 in the first quarter. And it seems like the reasons you described were just solid execution and things that can actually be maintained for the balance of the year, lower admin utilization of labor. So is there some conservatism baked in there or why wouldn't we think improvements could be sustainable through the balance of the year?

Yeah,

I mean, again, you know, anytime you're providing full year guidance at the outset, a lot of moving pieces. But I think from an overall sentiment perspective, Jonathan, what you're describing, we, you know, we don't expect to be giving any gains back in a way. That doesn't mean we'll carry 70 dips all the way through the year sort of thing. But I would, you know, I would look at the Q1, you know, we and consider that an indication of the pacing of the business for sure. And again, we'll get another three months under our belt. We've got, you know, meaningful acquisitions coming through the back half that we'll need to obviously digest and understand the cost structure of that and how it moves through. We got a pretty good handle on that already. Obviously, we understand that well. So just be patient for the update here at mid year. But by all means, I share your enthusiasm around what's possible.

No, fair enough. And that's that's good color. And we did have, you know, pretty fulsome discussion already about M&A. But on sellers, have you noticed them being a little more hesitant to consummate a deal? So maybe the environment still the same valuations incentive to close, but things getting drawn out a bit longer?

No, we haven't. We actually have not experienced that at all. The the two that we announced this year. So far, we executed exactly as per our schedule. In fact, we had talked about when the page one came out the day that we announced it ended up being when President Trump had liberation day. So we had talked about should we should we delay it, just not to go on that day. But, you know, again, we thought that long bigger picture long term perspective, we're going to move forward with our schedule as it is.

Now, great. It's good to see and then maybe I guess one more gourd, I guess, from a high level perspective, you had a chance to look at Trump's proposed mini budget. And did you have any takeaways for the IJ or infrastructure spending in general in the US?

You know, interesting on on IJ in general, I think we've commented on past calls that, you know, we've been engaging with some discussions related to what an IJ 2.0 could look like those discussions sort of in the in the first, you know, several months of President Trump's presidency, those have slowed a little bit, I think, just as people are taking stock of where we are and what are the priorities of the new administration. So, you know, you heard us talk in the prepared remarks today about that, you know, while the state of infrastructure has improved a little bit from the last infrastructure report the amount of funds required to to continue to improve it has actually increased as well to over over 9 trillion. So certainly the need is there. But the discussions at this point in the first several months have slowed a little bit. But I anticipate that those will pick up near the the back half of the year.

Okay, that's great color. Thanks again, guys. Good results. I get that. Thank you.

Thank you.

Thank you. I would now like to turn the call back over to Gord Johnson for closing remarks.

Great. Well, well, thanks everyone for joining us this morning. Thanks, operator. So, in summary, you know, we started the year off really very, very positively here in Q1. We feel good about our forecast for the rest of the year. And if you have any follow up questions following today's call, please reach out to Jess Newkert, our VP of Invest Relations and have a

good one. You may now disconnect.