Stantec reports strong first quarter 2024 results with 19% growth in diluted earnings per share and 23% growth in adjusted diluted earnings per share
Stantec reported strong Q1 2024 results with 19% growth in diluted earnings per share and 23% growth in adjusted diluted earnings per share. Record net revenue of $1.4 billion, 11.5% increase over Q1 2023. Adjusted EBITDA margin of 15.5%, up 90 basis points. Adjusted diluted EPS of $0.90, up 23.3%. Record backlog of $7.0 billion, up 11.5% since Dec 31, 2023. Completed three acquisitions. Dividend of $0.21 per share declared. Reaffirmed 2024 annual targets.
Record net revenue of $1.4 billion, 11.5% increase over Q1 2023.
Adjusted EBITDA margin of 15.5%, up 90 basis points.
Adjusted diluted EPS of $0.90, up 23.3%.
Record backlog of $7.0 billion, up 11.5% since Dec 31, 2023.
Completed three acquisitions to bolster offerings.
Expense related to the revaluation of LTIP impacted adjusted EBITDA margin and adjusted diluted EPS.
LTIP revaluation reduced adjusted EPS by $0.04 in Q1 2024.
Share price appreciation led to a headwind in adjusted EBITDA margin.
Insights
The reported first quarter results from Stantec indicate a robust financial performance, with a significant 11.5% increase in net revenue and a 19% growth in diluted EPS. Particularly notable is the 23% growth in adjusted diluted EPS, which suggests effective cost management and improved profit margins. The 90 basis point increase in adjusted EBITDA margin is a healthy sign of operational efficiency and financial discipline.
The record backlog of $7.0 billion, up 11.5% since the last quarter of the previous year, provides a clear visibility of future revenue, potentially sustaining the uptrend in earnings. The acquisitions made by Stantec, adding over 2,700 people, reflect a strategic expansion that can diversify the company's portfolio and drive future growth. However, it is critical to monitor the integrations of these acquisitions to ensure they contribute positively to net revenue growth and do not dilute earnings.
From an investor's perspective, the consistent dividend payout, with an increase to $0.21 per share, is indicative of a solid cash flow and management's confidence in the company's financial stability. However, investors should pay attention to the net debt to adjusted EBITDA ratio of 1.5x, ensuring it remains within a manageable range. The outlook for 2024 appears positive, reinforcing confidence in the company's strategic direction and execution.
Stantec's first quarter performance reflects a favorable response to market demands, with the U.S. and Water business units showing double-digit organic growth. The growth in these areas may be attributed to increased infrastructure spending and sustainable development trends, positioning Stantec favorably in the market.
The company's strategy of growth through strategic mergers and acquisitions (M&A) is evident in their completion of three acquisitions in the quarter. This strategy can enhance Stantec's geographical footprint and service offerings, potentially opening up new revenue streams. The emphasis on disciplines with high demand, such as Environmental Services, aligns with global sustainability trends, which could improve shareholder value in the long term.
However, the overall industry performance and economic conditions should be closely monitored as they can impact project pipelines and client spending. The commitment to an aggressive M&A strategy could be a double-edged sword if not paired with diligent cost management and integration processes.
Q1 2024 Highlights
- Record net revenue of
$1.4 billion , an increase of11.5% over Q1 2023 - Adjusted EBITDA margin1 of
15.5% , up 90 basis points over Q1 2023 - Adjusted diluted EPS1 of
$0.90 , up23.3% over Q1 2023 - Record backlog of
$7.0 billion , up11.5% since December 31, 2023
EDMONTON, Alberta and NEW YORK, May 08, 2024 (GLOBE NEWSWIRE) -- Stantec (TSX, NYSE:STN), a global leader in sustainable design and engineering, today reported its results for the three months ended March 31, 2024.
Stantec delivered strong first quarter earnings driven by continued favorable market conditions and solid operational performance.
Stantec generated record net revenue of
“We are off to a great start for the year,” said Gord Johnston, President and CEO. “With robust market demand across all our regions, we expect 2024 will be another excellent year. Our first quarter performance reflects our focus on executing on our Strategic Plan, including our continued drive to grow through strategic M&A. To that end, we have already closed three acquisitions this year and added over 2,700 people to the Stantec team.”
Q1 2024 compared to Q1 2023
- Net revenue increased
11.5% or$141.6 million to$1.4 billion , primarily driven by6.6% organic and5.5% acquisition net revenue growth. The Company achieved organic growth in all regional and business operating units with the exception of Energy & Resources. Double-digit organic growth was achieved in the United States and in the Water business. - Project margin increased
12.5% or$82.5 million to$742.5 million . As a percentage of net revenue, project margin increased by 50 basis points to54.2% due to strong project execution. - Adjusted EBITDA increased
18.3% or$32.8 million , to$211.9 million . Adjusted EBITDA margin increased by 90 basis points over Q1 2023 to15.5% , driven by strong net revenue growth, enhanced project margins, and disciplined cost management. The strengthening of Stantec's share price in Q1 2024 resulted in a 40 basis point headwind to its Adjusted EBITDA margin due to the revaluation of the Company's LTIP compared to the 60 basis point headwind for Q1 2023. - Net income increased
22.3% , or$14.5 million , to$79.4 million , and diluted EPS increased18.6% , or$0.11 , to$0.70 , mainly due to strong net revenue growth, solid project margins, and consistent administrative and marketing expenses as a percentage of net revenue. - Adjusted net income grew
27.3% , or$22.1 million , to$103.0 million , achieving7.5% of net revenue—an increase of 90 basis points, and adjusted diluted EPS increased23.3% to$0.90 . Q1 2024 LTIP revaluation reduced adjusted EPS by$0.04 ,$0.01 less than the impact in Q1 2023. - Contract backlog increased to
$7.0 billion at March 31, 2024, a record high reflecting7.1% acquisition growth and3.1% organic growth from December 31, 2023. Organic backlog growth was achieved in Canada and US, while Global retracted by less than1% . The Company achieved double-digit organic backlog growth in the Environmental Services business. Contract backlog represents 13 months of work. - Operating cash flows increased
$20.2 million , with cash inflows of$56.9 million , reflecting revenue growth and solid operational performance. - DSO was 79 days, remaining below Stantec's target of 80 days.
- Net debt to adjusted EBITDA (on a trailing twelve-month basis) at March 31, 2024 was 1.5x, reflecting the funding of recent acquisitions, and remaining within the Company's internal target range of 1.0x to 2.0x.
- Consistent with Stantec's growth strategy, the Company completed the following acquisitions:
- On January 8, 2024, Stantec acquired ZETCON Engineering, a 645-person engineering firm headquartered in Bochum, Germany. ZETCON provides a strong platform in infrastructure planning, inspection, project management, and construction management.
- On February 9, 2024, Stantec acquired Morrison Hershfield, a 1,150-person engineering and management firm headquartered in Markham, Canada. The firm has a highly respected industry reputation in transportation, buildings, and environmental services.
- On April 30, 2024, Stantec completed the acquisition of Hydrock Holdings Limited (Hydrock), a 950-person integrated engineering design firm headquartered in Bristol, England. Hydrock holds a nationwide presence with 22 locations in the UK and industry-renowned experience, bolstering the Company's offering to the energy, buildings, and infrastructure markets.
- On May 8, 2024, the Company's Board of Directors declared a dividend of
$0.21 per share, payable on July 15, 2024, to shareholders of record on June 28, 2024.
2024 Outlook
Stantec reaffirms its annual targets for 2024, included in the guidance released on February 28, 2024.
| 2024 Annual Range | |
| Targets | |
| Net revenue growth | |
| Adjusted EBITDA as % of net revenue (note) | |
| Adjusted net income as % of net revenue (note) | above |
| Adjusted diluted EPS growth (note) | |
| Adjusted ROIC (note) | above |
+In setting Stantec's targets and guidance, the Company assumed an average value for the US dollar of
note: Adjusted EBITDA, adjusted net income, adjusted diluted EPS, and adjusted ROIC are non-IFRS measures (discussed in the Definitions of Non-IFRS and Other Financial Measures section of the Q1 2024 MD&A).
The Company expects that net revenue will increase between
Stantec anticipates adjusted EBITDA margin will be in the range of
The Company expects adjusted net income to achieve a margin above
Effect of Long-term Incentive Plan
Consistent with guidance previously provided, the targets do not include the impact of revaluing Stantec's share-based compensation, which fluctuates primarily due to share price movements subsequent to December 31, 2023. For Q1 2024, the revaluation resulted in a
The above targets do not include any assumptions for additional acquisitions given the unpredictable nature of the size and timing of such acquisitions, or the impact from share price movements subsequent to December 31, 2023 and the relative total shareholder return components on the Company's share-based compensation programs.
Q1 2024 Financial Highlights
| For the quarter ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (In millions of Canadian dollars, except per share amounts and percentages) | $ | % of Net Revenue | $ | % of Net Revenue | ||||
| Gross revenue | 1,721.4 | 125.6 | % | 1,539.2 | 125.3 | % | ||
| Net revenue | 1,370.1 | 100.0 | % | 1,228.5 | 100.0 | % | ||
| Direct payroll costs | 627.6 | 45.8 | % | 568.5 | 46.3 | % | ||
| Project margin | 742.5 | 54.2 | % | 660.0 | 53.7 | % | ||
| Administrative and marketing expenses | 542.9 | 39.6 | % | 488.3 | 39.7 | % | ||
| Depreciation of property and equipment | 15.8 | 1.2 | % | 15.5 | 1.3 | % | ||
| Depreciation of lease assets | 31.5 | 2.3 | % | 30.9 | 2.5 | % | ||
| Amortization of intangible assets | 31.0 | 2.3 | % | 26.3 | 2.1 | % | ||
| Net interest expense and other net finance expense | 24.2 | 1.8 | % | 21.6 | 1.8 | % | ||
| Other | (5.3 | ) | (0.5 | %) | (6.4 | ) | (0.5 | %) |
| Income taxes | 23.0 | 1.7 | % | 18.9 | 1.5 | % | ||
| Net income | 79.4 | 5.8 | % | 64.9 | 5.3 | % | ||
| Basic and diluted earnings per share (EPS) | 0.70 | n/m | 0.59 | n/m | ||||
| Adjusted EBITDA (note) | 211.9 | 15.5 | % | 179.1 | 14.6 | % | ||
| Adjusted net income (note) | 103.0 | 7.5 | % | 80.9 | 6.6 | % | ||
| Adjusted diluted EPS (note) | 0.90 | n/m | 0.73 | n/m | ||||
| Dividends declared per common share | 0.210 | n/m | 0.195 | n/m | ||||
note: Adjusted EBITDA, adjusted net income, and adjusted diluted EPS are non-IFRS measures (discussed in the Definitions of Non-IFRS and Other Financial Measures section of the Q1 2024 MD&A).
n/m = not meaningful
Net Revenue by Reportable Segment
| (In millions of Canadian dollars, except percentages) | Q1 2024 | Q1 2023 | Total Change | Change Due to Acquisitions | Change Due to Foreign Exchange | Change Due to Organic Growth | % of Organic Growth | ||
| Canada | 323.7 | 303.0 | 20.7 | 17.8 | n/a | 2.9 | |||
| United States | 733.9 | 643.2 | 90.7 | 28.2 | (2.4 | ) | 64.9 | ||
| Global | 312.5 | 282.3 | 30.2 | 21.5 | (4.3 | ) | 13.0 | ||
| Total | 1,370.1 | 1,228.5 | 141.6 | 67.5 | (6.7 | ) | 80.8 | ||
| Percentage Growth (Retraction) | ( | ) | |||||||
Backlog
| (In millions of Canadian dollars, except percentages) | Mar 31, 2024 | Dec 31, 2023 | Total Change | Change Due to Acquisitions | Change Due to Foreign Exchange | Change Due to Organic Growth (Retraction) | % of Organic Growth (Retraction) | ||
| Canada | 1,568.1 | 1,342.6 | 225.5 | 206.1 | n/a | 19.4 | |||
| United States | 4,265.1 | 3,950.8 | 314.3 | 45.4 | 87.1 | 181.8 | |||
| Global | 1,197.0 | 1,012.5 | 184.5 | 194.8 | (3.7 | ) | (6.6 | ) | (0.7)% |
| Total | 7,030.2 | 6,305.9 | 724.3 | 446.3 | 83.4 | 194.6 | |||
| Percentage Growth | |||||||||
Webcast & Conference Call
Stantec will host a live webcast and conference call on Thursday, May 9, 2024, at 7:00 AM Mountain Time (9:00 AM Eastern Time) to discuss the Company’s first quarter performance.
To listen to the webcast and view the slide presentation, please join here.
If you are an analyst and would like to participate in the Q&A, please register here.
The conference call and slideshow presentation will be broadcast live and archived in their entirety in the Investors section of Stantec.com.
About Stantec
Communities are fundamental. Whether around the corner or across the globe, they provide a foundation, a sense of place and of belonging. That's why at Stantec, we always design with community in mind.
We care about the communities we serve—because they're our communities too. This allows us to assess what's needed and connect our expertise, to appreciate nuances and envision what's never been considered, to bring together diverse perspectives so we can collaborate toward a shared success.
We're designers, engineers, scientists, and project managers, innovating together at the intersection of community, creativity, and client relationships. Balancing these priorities results in projects that advance the quality of life in communities across the globe.
Stantec trades on the TSX and the NYSE under the symbol STN. Visit us at stantec.com or find us on social media.
Cautionary Statements
Non-IFRS and Other Financial Measures
Stantec reports its financial results in accordance with IFRS. This news release also reports the following non-IFRS and other financial measures used by the Company: adjusted EBITDA, adjusted net income, adjusted earnings per share (EPS), net debt to adjusted EBITDA, days sales outstanding (DSO), margin (percentage of net revenue), organic growth (retraction), acquisition growth, adjusted return on invested capital (ROIC), and measures described as on a constant currency basis and the impact of foreign exchange or currency fluctuations, as well as measures and ratios calculated using these non-IFRS or other financial measures. Additional disclosure for these non-IFRS and other financial measures, incorporated by reference, is included in the Definitions of Non-IFRS and Other Financial Measures section of the Q1 2024 Management’s Discussion and Analysis, available on SEDAR+ at sedarplus.ca, EDGAR at sec.gov, and the Company’s website at Stantec.com and the reconciliation of Non-IFRS Financial Measures appended hereto.
These non-IFRS and other financial measures do not have a standardized meaning under IFRS and, therefore, may not be comparable to similar measures presented by other issuers. Management believes that, in addition to conventional measures prepared in accordance with IFRS, these non-IFRS and other financial measures and ratios provide useful information to investors to assist them in understanding components of the Company's financial results. These measures should not be considered in isolation or viewed as a substitute for the related financial information prepared in accordance with IFRS.
Forward-looking Statements
Certain statements contained in this news release constitute forward-looking statements. These statements include, without limitation, comments regarding the Company's ability to capture future growth opportunities, adjusted diluted EPS and net revenue growth, adjusted EBITDA margin, adjusted ROIC, and the 2024 outlook. Readers of this news release are cautioned not to place undue reliance on forward-looking statements since a number of factors could cause actual future results to differ materially from the expectations expressed in these forward-looking statements. These factors include, but are not limited to, the risk of economic downturn, cash flow projections, project cancellations, access and retention of skilled labor, decreased infrastructure spending levels, decrease or end to stimulus programs, changing market conditions for Stantec’s services, and the risk that Stantec fails to capitalize on its strategic initiatives. Investors and the public should carefully consider these factors, other uncertainties, and potential events, as well as the inherent uncertainty of forward-looking statements, when relying on these statements to make decisions with respect to the Company.
Future outcomes relating to forward-looking statements may be influenced by many factors and material risks. For the three month period ended March 31, 2024, there has been no significant change in the risk factors from those described in Stantec's 2023 Annual Report. This report is accessible online by visiting EDGAR on the SEC website at sec.gov or by visiting the CSA website at sedarplus.ca or Stantec’s website, Stantec.com. You may obtain a hard copy of the 2023 annual report free of charge from the investor contact noted below.
Investor Contact
Jess Nieukerk
Stantec Investor Relations
Ph: 403-569-5389
jess.nieukerk@stantec.com
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Reconciliation of Non-IFRS Financial Measures
| For the quarter ended March 31, | ||||
| (In millions of Canadian dollars, except per share amounts) | 2024 | 2023 | ||
| Net income | 79.4 | 64.9 | ||
| Add back (deduct): | ||||
| Income taxes | 23.0 | 18.9 | ||
| Net interest expense | 24.0 | 20.7 | ||
| Net impairment (reversal) of lease assets and property and equipment (note 1) | 0.5 | (2.9 | ) | |
| Depreciation and amortization | 78.3 | 72.7 | ||
| Unrealized gain on equity securities | (1.9 | ) | (3.9 | ) |
| Acquisition, integration, and restructuring costs (note 4) | 8.6 | 8.7 | ||
| Adjusted EBITDA | 211.9 | 179.1 | ||
| For the quarter ended March 31, | ||||
| (In millions of Canadian dollars, except per share amounts) | 2024 | 2023 | ||
| Net income | 79.4 | 64.9 | ||
| Add back (deduct) after tax: | ||||
| Net impairment (reversal) of lease assets and property and equipment (note 1) | 0.3 | (2.2 | ) | |
| Amortization of intangible assets related to acquisitions (note 2) | 18.1 | 14.5 | ||
| Unrealized gain on equity securities (note 3) | (1.5 | ) | (3.0 | ) |
| Acquisition, integration, and restructuring costs (note 4) | 6.7 | 6.7 | ||
| Adjusted net income | 103.0 | 80.9 | ||
| Weighted average number of shares outstanding - diluted | 114,066,995 | 110,927,669 | ||
| Adjusted earnings per share - diluted | 0.90 | 0.73 | ||
See the Definitions section of the Q1 2024 MD&A for the discussion of non-IFRS and other financial measures used and additional reconciliations of non-IFRS financial measures.
note 1: The net impairment (reversal) of lease assets and property and equipment includes onerous contracts associated with the impairment for the quarter ended March 31, 2024 of
note 2: The add back of intangible amortization relates only to the amortization from intangible assets acquired through acquisitions and excludes the amortization of software purchased by Stantec. For the quarter ended March 31, 2024, this amount is net of tax of
note 3: For the quarter ended March 31, 2024, this amount is net of tax of
note 4: The add back of certain administrative and marketing costs and depreciation primarily related to acquisition and integration expenses associated with Stantec's acquisitions and restructuring costs. For the quarter ended March 31, 2024, this amount is net of tax of
_____________________
1 Adjusted diluted EPS, adjusted net income, adjusted EBITDA, and adjusted EBITDA margin are non-IFRS measures, and organic growth, acquisition growth and DSO are other financial measures (discussed in the Definitions section of the Q1 2024 MD&A).
FAQ
<p>What was the percentage growth in adjusted diluted EPS in Q1 2024?</p>
The adjusted diluted EPS grew by 23.3% in Q1 2024.
<p>What was the record net revenue in Q1 2024?</p>
The record net revenue in Q1 2024 was $1.4 billion.
<p>How much was the record backlog at the end of March 2024?</p>
The record backlog at the end of March 2024 was $7.0 billion.
<p>What acquisitions did Stantec complete in 2024?</p>
Stantec completed acquisitions of ZETCON Engineering, Morrison Hershfield, and Hydrock Holdings in 2024.
<p>What dividend was declared per share on May 8, 2024?</p>
A dividend of $0.21 per share was declared on May 8, 2024.
