Stantec Inc

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 the conference call is subject to the forward-looking statement qualification set out on slide two, detailed in Stantec's management discussion and analysis and incorporated in full for the purpose 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 will turn the call over to Mr. Gord Johnston.

Good morning, and thank you for joining us today. Before I get into our Q2 results, I'm pleased to announce that on July 31st, we closed the acquisition of Page. In early April, we announced the acquisition And in the interim period, we were working on various regulatory approvals prior to the formal close. PAGE is a very strong U.S.-based architecture and engineering firm headquartered in Washington, D.C. The acquisition complements our buildings business and helps bolster our services in key growth sectors, including healthcare, advanced manufacturing, data centers and mission critical, academic, science and technology, and civic markets. In addition, I'd also like to highlight that on June 27, we acquired Cosgroves, a 90 person firm expanding our buildings engineering capabilities in New Zealand. And as we previously announced, we acquired Ryan Hanley back in April, bolstering our offerings in the Irish water sector. I'd like to welcome the 1500 talented individuals from PAGE, Cosgroves and Ryan Hanley to the Stantec team which has now grown to over 34,000 employees. I'm also pleased to share that Stantec continues to earn recognition through a range of accolades from respected industry and media organizations. We're honored to be ranked the number one architecture firm in healthcare worldwide by Modern Healthcare's 2025 construction and design survey. In addition, Time Magazine ranked us fifth on its 2025 list of Canada's best companies and among the top 50 of the world's 500 most sustainable companies. Now let's focus on our results. Stantec has delivered very strong results in the first half of 2025, delivering organic growth across all of our regions and business operating units. Public infrastructure spending and private investments continues to be a key driver of growth in 2025, with strong demand across the water, transportation, mining, energy transition and mission-critical sectors. In the second quarter, we delivered net revenue of $1.6 billion, up 6.9% year-over-year, which was primarily driven by 4.8% organic growth. Our energy and resources business delivered high single-digit organic growth, and water achieved 12.4% organic growth. With our focus on solid project execution and operational excellence, we grew our adjusted EBITDA by 15%, with an enhanced margin of 17.8%. We also delivered EPS growth, adjusted EPS growth of over 21% compared to Q2 2024. Looking at our results in each of our geographies. In the US, our Q2 net revenue increased by 5.7%, which was supported by organic growth of 4.4%. From a trend perspective, we saw improvements in U.S. organic growth compared to the first quarter. Client demand for mission critical science and technology and civic all contribute to growth in our buildings business. Growth in environmental services was mainly driven by our energy transition, mining and industrial infrastructure sectors, as well as the continued work for a large scale utility provider. Growth in water was driven by large public sector water supply and wastewater treatment projects. And energy and resources growth saw the ramp up of a major hydropower dam project in the southwest. In Canada, net revenue grew by 6.2%, underpinned completely by organic growth. The continued momentum on major wastewater projects contributed to over 30% organic growth in water. Consistent progress on major industrial process projects drove double-digit organic growth in energy and resources. Solid growth in infrastructure was supported by land development projects in Alberta. And public sector investment in Western Canada drove growth in our buildings business, primarily in our healthcare and civic markets. Finally, our global business delivered net revenue growth of 10.5% in the second quarter, with 4.3% organic, and 3.6% acquisition growth, as well as positive foreign exchange impacts. Our industry leading water business delivered double digit organic growth across the UK, Australia and New Zealand through long term framework agreements and public sector investment in water infrastructure. The ramp up of new projects in Chile and Peru drove double digit organic growth in energy and resources as the growing need for energy transition solutions continues to drive demand in mining for copper. And we also achieved double-digit organic growth in our German business due to continued momentum on a major public sector energy transportation project and increased volume on transit and rail projects. Now I'll turn the call over to Vito to review our Q2 financial results in more detail.

Thank you, Gordon. Good morning, everyone. Stantec's positive momentum continues as seen with our second quarter results, a position in us to deliver another exceptional year. In Q2, we achieved gross revenue of approximately $2 billion and net revenue of $1.6 billion, an increase of 6.9% compared to Q2 2024. This was primarily driven by 4.8% organic growth. As a percentage of net revenue, our project's margins remained in line with our expectations at 54.2%. We achieved a very strong adjusted EBITDA margin of 17.8% in the quarter, 120 basis point increase compared to last year. The increase in margin primarily reflects lower admin and marketing expenses as a percentage of net revenue due to lower claim provisions and discretionary spending. And our adjusted EPS in the quarter increased over 21% to $1.36. Our Q2 results build on a strong first quarter, and on a year-to-date basis, our adjusted EBITDA margin is 17%, a full 1%, ahead of the first half of 2024. In addition, our adjusted EPS is up a very robust 24.9%. With our year-to-date performance and the closure of the page acquisition, we are very well positioned to increase guidance across various metrics, which Gord will speak to shortly. Turning to our cash flow, liquidity, and capital resources, Year-to-date operating cash flows are up 100% compared to 2024 from $117 million to $235 million, reflecting continued strong revenue growth, operational performance, and continued strong collection efforts. DSO at the end of the second quarter was 73 days, a decrease of four days compared to the first quarter of 2025. This is well below our internal target of 80 days or lower. Our net debt to adjusted EBITDA ratio at June 30th was 1.1 times, essentially in line with where we closed out the first quarter and remaining well within our internal target range of one to two times. I'd like to take a minute to highlight some recent financing transactions we completed in Q2. I characterize these as being in the normal course of our business and reflecting the significant growth in our operations over the last few years. On June 10th, we issued $425 million senior unsecured notes bearing an interest rate of 4.374% per annum for a seven year term. These notes were assigned an investment grade rating, excuse me, investment grade credit rating of triple V by a DBRS Limited. Also in mid June, we increased our unsecured revolver credit facility to 1.2 billion up from $800 million and we extended the maturity date out to June 30th. Both of these financing transactions were well oversubscribed and reflect the credit community's deep understanding and confidence in our sector and company. We appreciate the continued support. As Gord noted, we closed the page acquisition on July 31st, and post-closing, our remaining credit capacity is just over $1 billion, and our balance sheet remains very strong. Gord, I'll now hand the call back to you.

Thanks, Vito. At the end of the second quarter, our contract backlog stood at $7.9 billion, reflecting approximately 12 months of work. Our backlog underscores the continued strong demand to support our clients' most pressing challenges. Year over year, backlog has grown by almost 10%, reflecting robust organic growth of 9% across each of our geographies, and most notably, double digit growth in our water and energy and resources businesses. I'd also note that our U.S. organic backlog is up 9.8% year over year. This reflects the positive trend in organic growth and continued strength of our business in the region. Growth within our global operations was driven by new project awards in our infrastructure and environmental services business in Europe and AAP8 project awards in our UK water business. This growth is partially offset by a retraction in our Australian business buildings operations, as well as high burn rates in our water business. I'll now highlight a few of the projects that Stantec has recently been awarded. A Stantec joint venture was recently awarded a $150 million single award contract supporting the US Navy Shipyard Infrastructure Optimization Program, focusing on the modernization of the Portsmouth Naval Shipyard in Maine. US Navy shipyards were originally designed and built in the 19th and 20th centuries, and this program will support the upgrade of facilities, utilities, dry docks, equipment and information technology infrastructure. In the UK, our infrastructure team was awarded a four year framework with Transport for Greater Manchester, where we will deliver a range of transport, design, engineering and analysis services, as well as program and project management support. And lastly, Stantec's water and environmental services teams are collaborating on Google's water replenishment project sourcing in Taiwan. This project is part of Google's global water replenishment initiative. It also highlights Stantec's use of nature-based solutions, which includes a gravel contact oxidation process for sustainable water treatment and watershed restoration. On the strength of our performance year to date, the completion of two acquisitions within the second quarter, and with the recent closure of PAGE, we're increasing our outlook for 2025. We now expect to achieve net revenue growth of 10 to 12%, up from our previous guidance of 7 to 10%. Given our strong diversification across geographies, we continue to expect mid to high single-digit organic growth across the businesses. In Canada and in global, We continue to expect organic net revenue growth in the mid to high single digits. We continue to see strong momentum in both these regions with elevated backlog levels in Canada, particularly in infrastructure and energy and resources, and through high levels of activity in our global water business. AMP-8 continues to ramp up in the UK, and other water frameworks in Australia and New Zealand are ramping up as well. In the US, we expect organic growth to accelerate in the second half of the year, and we've moderated our outlook slightly to mid single digits. The US administration has implemented significant shifts in policy, funding priorities, tariffs and regulatory frameworks, and most notably with the recent passage of the One Big Beautiful Bill Act. The ultimate driver of these initiatives is to stimulate investment in the US across all sectors and to strengthen the US economy. In fact, we're already seeing momentum starting to wrap up again. Furthermore, we're also encouraged by our healthy backlog, which positions us for continued positive growth. On the strength of our operations year to date, we've also increased and narrowed the range for adjusted EBITDA margin to 17 to 17.4%, up from 16.7 to 17.3%. This reflects solid project execution and continued discipline and cost management. With this, We actually expect to hit our strategic plan target of 17 to 18% a year early, with the ability to continue building on this performance. We now expect to deliver 18.5 to 21.5% growth in adjusted EPS compared to 2024, up from 16 to 19%. Once again, driving earnings well above net revenue growth. And finally, adjusted ROIC is now expected to be greater than 12.5%. As we enter the second half of 2025, we remain firmly on track to deliver another record year. Macro trends of aging infrastructure, data centers, energy security, water and wastewater treatment, healthcare and reshoring all continue to drive our business. We will remain focused on delivering strong project execution and operational excellence. And while we have already completed three acquisitions this year, the pipeline of opportunities remains full and we are extremely well positioned, both from an integration and a financing standpoint, to do more. It's an exciting time for our industry and for Stantec, and we'll continue to deliver compounded growth as we drive towards our 2024 to 2026 strategic plan goals. And with that, I'll turn the call back to the operator for questions. Operator?

Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit yourself to one question, one follow up before reentering the queue. One moment as we compile our Q&A roster. Our first question is going to come from the line of Krista Friesen with CIBC. Your line is open. Please go ahead.

Hey, thanks for taking my question. I was wondering if maybe you can just provide us with a little bit of additional color on what you're hearing from your U.S. customers, specifically in the private sector, as you called out, maybe an elevated level of caution right now.

Yeah, great, great question, Krista. You know, what we're seeing is in the first half of the year, there was a little bit of trepidation to make that final investment decision and to move forward. But, you know, as we said in the prepared remarks, we really are looking to see our forecasting, our U.S. organic growth to accelerate in the second half of this year. You know, our U.S. backlog is up 9%, 9.8% organically year over year, and it's actually particularly strong in water, energy and data centers, some of those private sector type work that you're talking about. So in the private sector, interestingly, data centers, mission critical and so on, we're currently working on over 100 data center projects. And so It's interesting, we see even from our July results, we saw an increase in US organic growth to that, even at that high single digit range. But we also interesting saw continued acceleration, even on an organic backlog in the July period. So we're actually feeling pretty good about that acceleration in organic growth, both in public and in the private sector in the second half of the year.

Okay, great. Then maybe just on the acquisition front, you guys have been busy with a couple of acquisitions recently. How are you feeling on the integration? I appreciate Paige was just two weeks ago here, but just any update there?

Yeah, so the Ryan Handley is a firm, a smaller firm, a couple of hundred people in Ireland. We've been working with them for years. So that integration is going very well. We actually anticipated, I think, to be completed by the end of this year, the financial integration. Cosgrove, similarly, 90-person firm, 100-person firm down in New Zealand. That one is continuing. Page is really interesting. 1,400, 1,500 people, but we've worked with them for a long time. And we've, over the last number of months, we've been working on how do we align leadership, starting to look already at the financial transformation And in fact, that's planned for Q4 of this year. So we think we're going to be in pretty good shape, really having wrapped up the majority of the integration and the financial work by the end of the year on all three of these.

That's great. Thank you. I'll pass the line. Congrats on the quarter. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of about con with RBC Capital Markets. Your line is open. Please go ahead.

Okay, great. Thanks and good morning. I guess just sticking with kind of the outlook commentary, you know, it looks like the margin guidance, the midpoint's been kicked up a little bit. Maybe we can just get into some of the details around, you know, the progress here to date on the margin side and just what are some of the contributors to the margin being pushed up higher for the full year. Thanks.

Hi, Saba. Yeah, we're really, it's Vito here this morning, really pleased with our progression. year-to-date and what we see for the balance of the year with respect to EBITDA margins. You're absolutely right. We have bumped up the EBITDA margins now from 16.7 to 17.3 to that 17 to 17.4 range. Year-to-date, we're at 17%, which is 100 basis points ahead of where we were a year ago. I don't believe we'll be able to maintain that 100 basis points year-over-year improvement in H2. Obviously, because the guidance reflects moderation to the year-over-year side of things, but continue to see improvement in it. You know, for us, it always starts with just strong project margins. Of course, we don't take that for granted. Your EBITDA margins always start with that, the right customer, right price, excellent execution. So just a huge shout out to the operations teams, continue to focus on that. Our project margins in the quarter were 54.2%, which actually is 0.2% lower than prior year. But that really reflects mix. Global business was a higher percentage of our overall business in Q2, and they profile at a lower project margin. So in North America, project margins were actually up year over year. So it starts with strong project margins. You saw that admin and marketing costs, we target that as a lower percentage of overall net revenue. Utilization in the quarter was higher. That always contributes. Just the general nature of our operational scale and leveraging our back offices and growing that at a pace that's lower than our overall revenue growth continues to be a positive contributor, of course. We did call out claims in the quarter for particularly Q2. Claims is always a little bit lumpy, obviously, but in Q2, we did have favorable settlement of two claims in particular relative to the provisions we had. And that contributed, I'll call it 30 to 40 basis points in the quarter. But those are all the drivers. Very, very pleased with it. And, you know, it's a continuation of a multi-year story for us. As Gord referred to in his opening remarks, hitting the 17, piercing the 17% mark one year earlier than our strat plan just is a strong indication of what we believe is to come here in the next several years.

Great. Thanks for the color there. And then maybe the second one for Gord. On the water side, it looks like about a 12.5% organic growth this quarter. And the interesting thing there being it's been several years of good strength in the water market. So maybe if you can just help us think through what drove that, the near-term demand driver. It sounds like AMP8 might still be at the early stages, so assuming some of the other work is driving. So maybe just give us perspective on What's driving the strong growth there? And maybe the opportunities in the data center side, if some of those are tied to water as well.

Thanks. Great perspective. As we've talked about before, and I think everyone on the call is aware, we've had strong organic growth in water back to 2019. And every quarter, it just continues to get stronger with our overall water business. And so you're right, we're still early days with AMP 8 ramping up. although we are already sort of at a level roughly about 50% higher this time of year than we were a year ago. So that is already coming and we're actively hiring people in the UK, expanding our delivery centers in Pune, India to continue to service that demand. But I think we talked about like even in Canada, we had 30% organic growth on top of more and more strong quarters year over year. So there's just an enormous amount of work that we see in water treatment, wastewater treatment, advanced manufacturing facilities. You mentioned the data centers, but also as we're talking to clients about reshoring some of their facilities, it all starts with water. So while our water business continues to strengthen, our backlog is even up even further. So we see continued strength in that water business

know for the remainder of 25 and and really for the years to come no slowing down in the water space whatsoever all right thanks very much thank you one moment for our next question our next question comes from the line of chris murray with atb capital markets your line is open please go ahead

Yeah, thanks, folks.

You know, Gord, maybe turning back to thinking about the U.S. business, maybe longer term. I mean, I guess it feels like a bit of a blip in the quarter because you're talking about, you know, again, like high single-digit type growth in the backlogs and, you know, your commentary a little bit about recovery. If I go back a couple quarters, you know, sort of the discussion has been, you know, how long could the – U.S. market continue to support, you know, frankly, what are kind of above average single digital organic growth levels. And just any thoughts on on how you're viewing kind of the next couple of years on, you know, what the what the spending pace looks like and your comfort level on where we're going. And with that, you know, is there any particular sectors that you think that you need to add in order to be able to accomplish or achieve some of that?

Yeah, a great question for you as we As we look forward in the remainder of this year and the rest of next year, you know, we mentioned already that we're, you know, 90% organic growth in backlog in the US. But then you look at, you know, some of the other drivers, you know, we've done a lot of talking before in the industry about IIJA, only about 40% of that, less than 40% of that has been spent. So there's a lot of opportunity to continue to come there, you know, in the next couple years to allocate some of those funds before it's, You know, they're not eligible for allocation at the end of 2026. So that part feels strong. You know, you look at the one big beautiful bill and there's some additional supports for infrastructure, state and local government there. Data centers, mission critical, those continue to grow. And, you know, it's interesting there, you know, I mentioned to Krista's comments, we're working on over 100 data center projects right now from 20 megawatts up to a gigawatt in size. And now the addition of Paige to our team even strengthens our already strong group there. So there's just a lot of opportunity across, whether it's transportation or water, buildings, energy, the transition, mining. We see really, really strong strength going forward. So I think that what we've seen in the first couple quarters of this year, not just us, but the industry overall, it's just a little bit transitory. And we see, you know, good fundamentals going forward. So, you know, we did lower our organic guidance for the year to 5%, but that's really just a function of mathematics. Yeah. That, you know, like we're sitting at 3.3% year to date. And so 3.4% year to date. So as we thought about just wanting to be clear and state our expectations, just, you know, when we were saying mid to high single digits, you know, everyone goes to six to eight. And if we're at 3.4 for the first half of the year, that means we'd almost have to be double-digit organic growth in Q3 and Q4 in order to get into that range. We see continued acceleration, but I'm not sure that we're going to get to 10% double-digit organic growth in both quarters. So we just wanted to be clear with everyone and confirm our expectations. But just to confirm, though, we expect acceleration of organic growth in the U.S. for the second half of the year and through 2026 and beyond.

Yeah. Gord, I'll just add maybe a couple things there. Chris asked whether there was any particular areas of potential gaps for us in the market or areas of focus. Chris, we remain incredibly bullish about the U.S. market. Aging infrastructure, U.S. remains incredibly behind in that, building resilience, heated weather events, so on and so forth. The macro factors just continue to be extremely buoyant. And when you look at this administration's focus, frankly, and what they're investing in and what their areas of policy enforcement are with the OBBA and whatnot. It just speaks to increased focus and support for much of what we're describing. Anything on the gas, Gorpio, then? No. Okay. Thanks, Chris.

Yeah, thanks. And then one other question I just had on margins, and this maybe goes back to the investor day and talking about sort of the implementation of technology across the platform. And, you know, I'm kind of listening to some of the comments about SG&A leverage. Can you just talk to some of the AI and other technologies you guys were referencing? and how they're playing into this margin profile at this point. Are you actually seeing them have any sort of impact or change, I guess, in the trend on revenue per head type metrics or earnings per head metrics at this particular point? Or is it still kind of too early to be able to point to anything definite?

Yeah, I think, you know, overall in the industry and Stantec is included, we're still early days. and so how far we can push this. Interestingly though, our entire C-Suite went down to the Microsoft campus in Redmond there a couple weeks ago, spent a day with their technology folks and our folks really talking about their journey, our journey, what are some of the areas that we believe that we could make use of AI and other digital tools and So we're working very, very closely with them on some co-investment sort of ideas there. But as we look inside of Stantec, we've deployed over 10,000 licenses of co-pilot throughout the organization. And so we're looking at it from a number of perspectives, Chris. One is, what can we do to make our back office more efficient, whether that's HR or Accounts payable, expense account review, those sorts of things that we can make the back of house more efficient in reducing some of the SG&A costs. Proposal writing, how can we get speed to market on those sorts of things. And then also thinking about on the design side, where we can start optimizing and automating some of the design processes. So I think it's still early days. I'm not sure that you're seeing it too much in that margin expansion yet. But certainly, I think we'll see it playing more of a factor, you know, in the years to come. Okay, that's helpful. I'll leave it there. Thank you.

Thank you. And one moment for our next question. Our next question comes from the line of Yuri Link with Canaccord Genuity. Your line is open. Please go ahead.

Good morning, guys.

Good morning.

Just back, Gord, on the acceleration in organic growth in the back half of the year, the comps are kind of interesting in terms of what you're lapping there. Q3 is 5.5% and then a 10% comp in Q4. fair to say that that should help shape our expectations for more organic growth and bigger organic growth improvement in Q3 versus Q4?

I think that's exactly right. And when you look at the Q4 comp already up 10%, and that's, again, one of the reasons why we lowered our guidance to that mid-5% type range. It's just because the comp in Q4 is a bit tough, and we just wanted to set reasonable expectations of where we saw it. But we do see, you know, I think we mentioned like in July, and of course, one period, one does not make a quarter, but it's a very, very positive trend that we saw, you know, high single digit organic growth in the U.S. in quarter, sorry, in the period in July, as well as, you know, a backlog, organic backlog acceleration as well. So we're still feeling really good about that. And then, you know, of course, consolidated, we still have mid to high single digits. It's just we only made that one adjustment on the U.S. side.

Yeah, and just, I mean, I think the fact that obviously the U.S. represents half of our business, but on the consolidated, we're still at mid to high, just reflects, I think, and our listeners, you know, the diversity and strength of our global business, including, of course, North America.

Okay. Just thinking about the U.S. water business and one of your customers in financial difficulties there. Wondering if that might have any impact over the next year or so.

Yeah. And so in particular, you're talking about Thames Water in the UK?

Yeah, exactly. Yeah.

Yeah. No, exactly. And that's pretty public, I think, for everyone to see that they are in in financial difficulty. But what's interesting with Thames Water is we've worked for Thames Water and their predecessor organizations for almost 200 years in the UK. And so, you know, discussions that we're having is, you know, whether the government, and we have no indication of anything would happen, but if that were to be nationalized for some period of time, the work still needs to be done. And so, all of our discussions with our client are, The work needs to be done, can continue. We're having no payment issues at this point. So we don't see that really as an impact to our business from a negative perspective. Not at all.

Okay, good to hear. I'll turn it over. Thanks for the time. Thanks, Jerry.

Thank you. One moment for our next question. Our next question is going to come from the line of Michael DePolme with TD Cowan. Your line is open. Please go ahead.

Thank you. Good morning. Good morning. Gord, it's pretty clear from your comments that you expect an acceleration in US organic growth, which is great to hear. I guess my question is the factors that you called out that I guess in the shorter, nearer term here have been weighing on organic growth. So in the public sector side, you talked about some slower procurement and on the private sector side, some of the issues in the larger capital project side within private sector. I guess, like, have you overcome all of these or are you seeing pickups in other areas that are allowing you to offset those headwinds? Trying to get a sense if, you know, you've sort of fully moved past all those issues and those are now behind you and behind the industry or if those are still there but you're seeing strength elsewhere.

Yeah, I think what we're seeing is that the issues are diminishing a little bit. I don't think that they're past. Michael, it's interesting. One thing that we've been hearing from some of our business leaders is that from some of the agencies that we're working with, particularly in the US, a number of people took early retirement when it was offered and those sorts of things. So it's taking a little bit longer sometimes for them to get new people in those roles, to get the projects out the door and such. But we see that diminishing. I think we saw, not just us, but the industry overall, a little slower organic growth in the U.S., Q1, Q2, as we're working through some of these items. But I think that they're diminishing. But in no way would I say that they're all salt. But as we think about acceleration of organic growth in the U.S. going forward, we still feel very positive about it, even with the diminishing issues that we've called out there previously.

Yeah, Michael, five sectors, I mean, thousands of projects, thousands of clients across multiple industries, obviously. So I just echo 100% of what Gord has described. You still see pockets of it, but overall diminishing as we move forward. And very few cancellations, if any, right, Gord? I mean, these aren't cancellations we're talking about. We're just talking about some delays and pausing.

Right. That's very helpful. Thank you. And then I guess as we look beyond this year, maybe you can just comment on how you're feeling about the multi-year organic growth guidance you'd put out for over 7% organic growth that extends through 2026. And then, you know, is this level of activity that you're seeing here, including the pickup in the US, you know, how does that make you feel about sort of the period beyond 2026 as you're you know, we're getting closer, I guess, to the point where you're going to start to think about your next three-year plan.

Yeah, Michael, maybe I'll chime in, and then, Gordon, you can add your sentiments on that. Obviously, you know, we'll come up with our three-year plan, our revised, updated three-year plan post-2026 in due course, but there is absolutely nothing that we are seeing that would, you know, be fundamental in nature. And I think across all of our markets, including, of course, the U.S., those macro factors that we're describing support that level of growth activity for what we believe at this point in several years to come.

And when you look at some of the recent funding programs that have been announced around the world, you know, the U.K. put out another 10-year infrastructure plan, 725 billion pounds, very supportive, an additional tailwind for us. In Ireland, where we just acquired Ryan Hanley, another $100 to $200 billion there from infrastructure. So again, very, very supportive. So we feel, you know, when you look at the one big beautiful bill and some of the supports that that does, certainly the increase in defense spending around the world. And again, you know, for everyone's on the line, you know, we don't do anything related to hot weapons, but the work that we do would be infrastructure in support of infrastructure hangars for aircraft, docks and ports, and improvements to barracks and hospitals and such. So again, whether it's defense spending increases or just increased infrastructure spending around the world, that all point to a pretty solid multi-year macro for the overall industry.

Thank you for that. I'll turn the line over.

Thanks, Michael.

Thank you. And as a reminder, if you would like to ask a question, please press star 11. Our next question is going to come from the line of Maxim Sychev with NBF. Your line is open. Please go ahead.

Good morning, Jonathan. Good morning. If it's possible to get a bit more of an update in terms of what you guys are seeing on the ground when it comes to FEMA. and whether, I mean, some of the federal work is just being shifted to kind of state and local, just trying to get the perspective there.

Thank you. Yeah, you know, absolutely. As you look at some of the disaster preparedness work in particular, Max, that is looking to be shifted to some of the states and local governments. So, you know, we had a number of those on calls with FEMA at a national level, and we absolutely are in discussions now with a number of other organizations local state and local government agencies about how we could respond to support them. But that still is, you know, in a transition phase. But we're absolutely engaged in those discussions.

Okay. That's great to hear. And then is it possible to provide a bit more of an update when it comes to the M&A landscape? Like, I mean, obviously you mentioned your, you know, capital capacity, but what are you guys sort of seeing on the ground from a seller's perspective, et cetera? Thank you.

Yeah, the environment is actually, I would say, becoming increasingly active over the last quarter and I think will be for the second half of the year. Certainly within North America, but we're seeing globally as well. So there's a number of assets that we've been talking for a while that we thought were going to become into market in kind of a 12 to 18 month time frame. And I think those are probably shortened by by half a year now, you know, probably in the next six months to a year, some of these assets will be coming to market. And, you know, wherever possible, we're having proactive meetings with individuals before a process would start just to be sure that we're well positioned. So, I think you'll see increased activity over the next six to 12 months.

Okay, great to hear. Thank you so much. That's it for me. Thank you.

And one moment for our next question. Our next question comes from the line of Benoit Poirier with Desjardins. Your line is open. Please go ahead.

Yeah, thank you. Good morning, Gord, and good morning, Vito. We saw an update on Section 174 being removed following the approval of the Big Beautiful Day. Vito, could you talk a little bit about the boost we might expect on free cash flow going forward? And with respect to the delays that we are seeing temporarily in the U.S., I'm just wondering if customers were waiting for interest rates to decline and whether lower interest rates that could come could accelerate spending when talking to customers.

Thank you. Yeah, no, with respect to the recent changes, Benoit, good morning. With tax deductibility on R&D, I believe that's what you're referring to. That's overall a positive factor. Of course, these are domestic R&D expenses incurred in the United States that basically affected for 2025 and now are 100% deductible in the year incurred. and actually the provisions allow you to go back to 2022 through to 2024, and they accelerate that deduction as well. So, overall positive. Too early to tell at this point on our end what the impact would be from a timing perspective to cash flow. We're modeling that through. There are some complexity, particularly being obviously a foreign jurisdiction and other taxes such as B taxes and whatnot that we need to work our way through. But I would say neutral at worst and positive from a cash flow perspective for us.

Okay. And just for follow-up, with respect to the Global Technology Center in Pune, Could you maybe provide an update on how many employees right now and maybe how do you track and whether there's a potential to exceed the target of 2,000 people by the three-year period?

Yeah, we're about 1,400, 1,500 people right now, Benoit. We're really pleased with the progress. We see huge opportunity, such an engaged, knowledgeable, motivated team over there working across not only supporting our corporate functions, but importantly, obviously supporting our operations as well. We see huge opportunity, continued opportunity across both those layers and both those segments. In fact, you know, we've got trips planned for the business here in the back half of this year where they'll get up and close and personal. So optimistic, continue to be optimistic about the growth of the global delivery centers and in uh in servicing and obviously that's a you know that that continues to be a lever not only in margin expansion but importantly in high quality delivery for our customers on a timely basis as we continue to see across several of our markets very robust demand i'll stop short of whether we're going to hit the 2000 and whatnot because i don't have that to my fingers but overall uh obviously it continues to be a very important strategic part of our of our efforts

Thank you very much for the time. Thank you.

Thank you. One moment for our next question. Our next question will come from the line of Devin Dodge with BMO Capital Markets. Your line is open. Please go ahead.

All right. Thank you. Good morning. I wanted to start with a question on page. The purchase price was, I think, a bit more than we had expected. Just wondering if you could provide a bit of color on say the revenue, the business generates organic revenue growth. It's been, it's been having the last couple of years and how maybe margin stack up to the Stantec company average.

Yeah, you would see us disclose. We disclosed the purchase price as a five 25 us. Uh, you saw that in the notes to our financial statements. Uh, I'm surprised to hear you say a little more than you would expect. I think when the reports of what the analyst community sort of reported out, I think it was in that range, obviously translated to Canadian dollars. We'll stop short about also just speaking to what revenue did Page bring to the table. Obviously, we closed the deal July 31st. The teams are incredibly excited about the strategic value. We're happy with the multiple and the value that that business will bring forward to us. Gord, I don't know if you had much more to add to that. Yeah.

No, you know, they're roughly, you know, a $300 million U.S. in net revenue company. A high, you know, average net revenue generation per employee. And we also are really impressed with them. in terms of just the amount of synergy that we've already seen from a client perspective and a project perspective, certainly on track or even a little bit better than we thought we were going to see. So, particularly pleased with that one.

Okay, thanks for that. Second question, Gord, I think you mentioned in the past about capping your exposure to the more cyclical end markets. I think it was around 15% of revenues. Historically, I think that cyclical exposure has been more focused on oil and gas and mining, but I think you've also hinted that maybe data centers could be part of that cyclical basket. Just wondering if you could provide an update on where you view your cyclical market exposure now, and just based on backlog and bidding activity, where you think this could be over the next couple of years.

Yeah, great question. You know, our data centers for us are at 2% to 3% of net revenue, and you know, are they increasing? Yeah, they're going up. But I think that, you know, we still feel really comfortable that we're that sub 15% when you look at, you know, mining, you said, as you say, oil and gas. And, you know, data centers, like right now, we're seeing pretty continuous growth there. But again, it's only two to three, you know, percent of the overall. So I think that we're still well within that 15% range that we've talked about. And yeah, I think we're comfortable where we're at.

Okay, excellent. I'll turn it over.

Thanks, Devin.

Thank you. One moment for our next question. Our next question comes from the line of Jonathan Goldman with Scotiabank. Your line is open. Please go ahead.

Hi. Good morning, team, and thanks for taking my questions. Maybe just to start off, is there any risk with the slower growth environment in the U.S., even if it does prove temporary, that there could be some pressure on pricing?

We haven't really seen that yet. Even though organic growth has been a little bit slower for industry over the first half of the year, we haven't seen a deterioration in pricing in any way. Now, should it go on for a couple of years? We might see that, but we're not expecting that to be the case. As we said, we see accelerated organic growth going forward. We're still actively hiring as are others in the industry. Yeah, we haven't seen pricing pressure at this point, which would then translate to project margin pressure. But as Vito said, you know, that's really been holding up well for us.

Now, we very much see a market, you know, strong demand market where, frankly, we're picking our customers and many of them have been with us for obviously several decades and whatnot. So don't anticipate that at all.

Okay, that's good color. And you did talk about the M&A environment previously in the call about the activity levels. But on valuations, have you seen any change in multiples, whether higher or lower?

You know, I think it's very similar to how we've seen in the market for the last little while, that if larger firms have a little bit of a higher multiple, firms in power and data centers have a little bit of a higher multiple. But, you know, in general, we haven't seen trends either moving higher or unfortunately lower over the last little bit. So pretty, you know, we're seeing some just really things being stable, really some from where I would say that they were even a year ago.

And I guess that just reflects the continued strength of the overall markets and the macro factors that we've been speaking to. Good point.

Understood. Thanks for taking my question. Thank you.

Thank you, and I'm showing no further questions at this time, and I would like to hand the conference back over to Gord Johnston for closing remarks.

Great. Well, thank you, Operator, and thank you to everyone for joining us this morning. If you have any follow-up questions after today's call, please reach out to Jess Newkirk, our VP of Investor Relations. So thanks again for your time, and look forward to connecting with many of you soon.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.