Stantec Inc

Welcome to Santec's fourth quarter and full year 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. Santec invites those dialing in to view the slide presentation, which is available in the investor section at Santec.com. Today's call is being 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 SANTEC'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'll turn the call over to Mr. Gord Johnston.

Good morning, everyone, and thank you for joining us today. 2025 marked another record year for Stantec. We delivered solid mid-single-digit organic growth and completed three acquisitions, despite a year of ongoing geopolitical uncertainty. Global trends across the water, mission critical, transportation and energy transition sectors continue to underpin strong demand for our services. And our diversified portfolio across sectors and geographies continues to enhance the resilience of our operations. As a result, we grew our net revenue almost 11% compared to 2024 to $6.5 billion, driven by 5% organic, and 3.9% acquisition growth. Organic growth was achieved in all of our regional and business operating units, with our water business achieving almost 11% organic growth. Adjusted EBITDA increased close to 17% year over year, and continued strong project execution drove our adjusted EBITDA margin to 17.6%, achieving our 2024 to 2026 strategic plan target range of 17 to 18%, one full year earlier than originally anticipated. We also delivered adjusted EPS growth of almost 20% compared to 2024. Looking at our results in each of our geographies, in the fourth quarter, US net revenue increased 13.5%, driven primarily by 11.5% acquisition and just over 2% organic growth. On a full year basis, net revenue grew by almost 11%, supported by just over 5% acquisition and 3.4% organic growth. In our buildings business, net revenue increased over 30% in the year, primarily due to our acquisition of Page, but also from solid organic growth. Public and private sector investments in data centers and other mission-critical facilities, science and technology and civic, continued to continue to drive organic growth in this division. Organic growth in water was driven by large wastewater treatment projects, and growth in environmental services was primarily driven by the energy transition, mining and infrastructure sectors, as well as continued work for a large utility provider. In Canada, fourth quarter net revenue grew 5.5% in the quarter, driven completely by organic growth. For the full year, Net revenue grew over 8% compared to 2024, primarily through organic growth. We're pleased that our water and energy and resources businesses continued to deliver strong double digit growth. Momentum on major wastewater projects contributed to over 20% organic growth in water and consistent progress on major industrial process projects drove 15% organic growth in energy and resources. Solid growth in infrastructure was primarily supported by land development projects in Alberta, airport sector projects in Quebec, and bridge sector work in Eastern Canada. Public sector investment continued to drive growth in buildings, primarily in our civic and healthcare markets. Lastly, in the fourth quarter, our global business delivered net revenue growth of 11%, achieving over 6% organic, and 2.5% acquisition growth, and to a lesser extent, positive foreign exchange impact. For the full year, the global business grew net revenue by almost 13%, underpinned by almost 6% organic and over 4% acquisition growth. Our industry-leading water business continued to deliver consecutive double-digit organic growth through long-term framework agreements and public sector investment in water infrastructure across the UK, Australia and New Zealand. The ramp-up of new projects in Chile and Peru drove strong organic growth in energy and resources as the growing need for energy transition solutions continues to drive demand in mining for copper. We also achieved double-digit organic growth in our German infrastructure business due to continued momentum on a major public sector electrical transmission project and increased volume on transit and rail projects. I'll now turn the call over to Vito to review our fourth quarter and full year 2025 financial results, as well as to provide an update on our backlog and financial targets for 2026.

Thank you, Gord, and good morning, everyone. 2025 truly was another exceptional year for Stantec, and we are very pleased with our fourth quarter and our full year 2025 results. Sustained demand across our diverse multi-sector platform underpinned by favorable global trends, continues to support our strong results. In the fourth quarter, we achieved gross revenue of $2.1 billion and net revenue of $1.6 billion, an increase of 10.9% compared to Q4 of 2024. This growth was driven by 3.9% organic growth and 6.5% acquisition growth. As a percentage of our net revenue, project margins once again remained in line with our expectations at 54.5%. We achieved an adjusted EBITDA margin of 17.3% in the quarter. That's a 60 basis point increase compared to Q4 of 2024. The increase in margin primarily reflects lower admin and marketing expenses as a percentage of our net revenue, mainly due to higher utilization and our continued discipline in the management of our operations. And our adjusted EPS in the fourth quarter increased 12.6% to $1.25. Looking at the full year, as Gordon mentioned, 2025 was another record year for Stantec. Our gross revenue reached $8.1 billion, and we grew net revenue to $6.5 billion, up 10.7% when compared to our performance in 2024. This was achieved through 5% organic and 3.9% acquisition growth. And as a percentage of our net revenue, project margins came in at 54.3%, once again, in line with our expectations. On a full year basis, we achieved a very strong adjusted EBITDA margin of 17.9%, a 90 basis point increase year over year. This record margin was driven by strong project execution and cost management across our entire business. And finally, our adjusted EPS for the year reached $5.30, an increase of 19.9%. when compared to 2024. Turning to our cash flow liquidity and capital resources. During 2025, our operating cash flow increased 43.1% compared to 2024, growing from $603 million to $863 million, reflecting continued strong cash flow generation through our revenue growth, operational performance, and strong working capital management. Our free cash flow to net income conversion was 1.3 times above our target of 1.0 times. DSO at the end of the fourth quarter was 69 days, a substantive improvement of eight days compared to Q4 of 2024 due to excellence in working capital management. We finished the year with a net debt to adjusted EBITDA ratio at 1.3 times within our internal range, target range of one to two times. As a result of our continued strong performance, the Board has approved an 8.9% dividend increase. With this, our annualized dividend will increase to $0.98 per share. It's important to note that our strong balance sheet leaves us very well positioned for future acquisition growth in 2026. Now, turning to our backlog, at the end of 2025, our contract backlog reached the new all-time high of $8.6 billion. A 9.5% increase year-over-year, representing approximately 13 months of work. Acquisitions completed in 2025 contributed to backlog growth of over 8%, primarily within our building's business. Year-over-year organic growth was 3.6%. We achieved organic growth in all of our regions, most notably in Global, which delivered double-digit growth of 14.2%. We also saw strong Blacklaw growth in water and strengthened our building's business with supported by healthcare, data centers, and other mission-critical facilities. Let's now turn to our 2026 financial targets, and we expect another strong year. Net revenue growth is expected to be in the range of 8.5% to 11.5% achieved through organic net revenue and acquisition growth, primarily due to the page acquisition. We anticipate our adjusted EBITDA margin will continue to expand, and that's driven by solid project execution, enhanced strategies in the management of admin and marketing, continued expansion of our high-value centers, and optimization of our digital strategies. As such, we expect to deliver an adjusted EBITDA margin between 17.6% to 18.2%. And we expect to deliver 15% to 18% growth in adjusted EPS, compared to 2025. These targets of course do not include any assumptions related to additional acquisitions given the unpredictable nature of the timing and size of such transactions. With that, let me turn the call back to Gord to highlight the business drivers supporting our targets for 2026.