Stantec, Inc. 2026 Q2 Earnings Call

Please go ahead, sir. Good morning, everyone, and thank you for joining us today.

Our second quarter financial results continue to showcase the strength of our business. Stantec's diversification across operating regions and across sectors has kept us on track to deliver on our financial targets for the year. In the second quarter, we grew our net revenue to CAD 1.8 billion, up almost 12% compared to Q2 2025, driven by almost 4% organic and 7% acquisition growth. Organic growth was driven by double-digit growth of approximately 13% in our global region. Our industry-leading water business achieved close to 12% organic growth. Adjusted EBITDA increased over 17%, and we achieved an adjusted EBITDA margin of 18.7%, a record for Q2, and this represents an increase of 90 basis points year over year. Adjusted EPS grew over 18% compared to Q2 2025.

Looking at our results in each of our geographies, in the second quarter, U.S. net revenue increased almost 13%, driven by the acquisition and strong performance of Page. Underlying demand across our end markets remains very strong, supported by long-term investments in infrastructure, energy, transportation, water, and advanced manufacturing facilities. Our water business saw continued demand and work on large wastewater treatment projects. In energy and resources, work on a major hydropower dam project drove organic growth, and our infrastructure business delivered growth through data center projects in our north central region and benefited from favorable recoveries on a large transportation project. While organic growth was flat in the quarter, driven by some delays and the slower ramp-up on certain projects, we have already started to see positive signs of acceleration in Q3 and expect this trend to continue throughout the back half of this year.

In Canada, second quarter net revenue grew 2.4% organically. Double-digit organic net revenue growth in our water business was driven by biosolids projects and continued momentum on wastewater projects. Robust net revenue growth was also achieved in both our buildings and environmental services businesses through public sector investment, primarily in our civic markets and an increase in environmental planning in the mining industry, respectively. Our infrastructure business continued to experience a wind-down of certain transit and roadway projects in accordance with anticipated project cycles. Lastly, our global business delivered over 18% net revenue growth in the second quarter, driven by almost 13% organic and over 2% acquisition growth, as well as positive foreign exchange impacts. Our industry-leading water business delivered over 20% organic growth this quarter through long-term framework agreements and public sector investments in water infrastructure across the U.K., Australia, and New Zealand.

The wrap-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. On a year-to-date basis, our global operations also had modest growth in its infrastructure business, driven primarily by double-digit organic growth in Germany due to 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 second quarter financial results in more detail.

Thank you, Gord, and good morning, everyone. Strong operational execution, supported by sustained demand across our diversified multi-sector and multi-regional platform, continues to deliver solid financial results. At the mid-year point of 2026, we are firmly on track to deliver against all of our financial guidance metrics. In the second quarter, we achieved gross revenue of CAD 2.2 billion and net revenue of CAD 1.8 billion, an 11.5% increase compared to Q2 of 2025. This growth was driven by 3.7% organic and 7.1% acquisition growth, which primarily reflects strong results from our global region and from the Page acquisition, respectively. Project margins as a percentage of our net revenue increased 30 basis points to 54.5%. We achieved an adjusted EBITDA margin of 18.7% in the quarter, a 90-basis point increase compared to Q2 of 2025.

On a trailing 12-month basis, our adjusted EBITDA margin is 18%, an increase of 80 basis points compared to the prior trailing 12 months. The growth in margins continues to be driven by a methodical and disciplined approach to all aspects of our business. It all starts with a continued focus on execution and servicing of our client needs. The work we do is of meaningful value across all of our sectors and regions, and our focus remains on enabling superior outcomes for our clients, all the while focusing on efficient management of our operations and the optimization of our discretionary spending. On the back of our increase in net revenue and the expansion of our margins, our adjusted EPS in the second quarter increased 18.4% to CAD 1.61. Turning to our cash flow liquidity and capital resources.

Following the financial integration of Page in Q1, our operating cash flows in Q2 returned to a more normalized cadence. On a year-to-date basis, our cash flows from operations totaled CAD 116 million. In terms of capital allocation, our strategy remains unchanged. We believe that continued disciplined M&A remains our highest source of value creation for our shareholders, measured over a reasonable period of time. The pipeline remains robust, notwithstanding certain short-term dislocation in valuation ranges between public and private entities. Given our proven track record of disciplined M&A, we expect the strategic expansion of our business to continue. To that end, although perhaps on a smaller scale, we are happy to announce the acquisition of Niche, a 200-person engineering and environmental consultancy firm in Australia.

Niche helps strengthen our environmental services business in the region and supports our ability to help clients advance critical infrastructure and develop projects while protecting and restoring natural environments. This transaction closed effective July 31st. Our continued strong operating cash flow and exemplary balance sheet offers us considerable flexibility in our capital allocation activities. In Q2, we stepped into our NCIB and repurchased approximately 1.7 million common shares, or 1.5% of our outstanding shares, for an aggregate purchase price of approximately CAD 175 million. Notwithstanding this cash outflow, our net debt to adjusted EBITDA ratio remained at 1.3 times, within our internal target range of one to two times. Given our Q2 NCIB activity, it's prudent for us to have additional flexibility, and we intend to seek TSX approval to expand the program beyond the existing 2% limit.

Finally, DSO at the end of the second quarter was 75 days, within our internal target. I will now hand the call back to Gord to discuss our backlog, our recent project wins, and our outlook for 2026.

Great. Thanks, Vito. At the end of Q2, our contract backlog reached a record of CAD 9.2 billion, a 17.5% increase year over year, representing approximately 13 months of work. Year over year, our backlog has grown 7% organically. During the quarter, backlog grew in each of our regions. The most notable year-over-year growth coming from our global region, which delivered double-digit growth of almost 25%. We also saw strong backlog growth in water, which delivered over 10% organic growth. Acquisitions completed in 2025 further contributed to backlog growth by almost 8%, primarily within our buildings business, which had over 40% growth. I will now highlight a few projects Stantec secured during the quarter, showcasing the breadth of opportunities we are capturing across diverse markets, project sizes, and levels of complexity.

Our buildings team was selected to provide architecture, engineering, and integrated design services for Meta's CAD 13 billion data center in Sturgeon County, Alberta. The project strengthens our data center capabilities while supporting the continued expansion of Alberta's critical digital infrastructure. Stantec's water team was selected to provide preliminary design and evaluation services for the Drake Water Reclamation Facility in Fort Collins, Colorado, a 23-million-gallon-per-day wastewater treatment plant. The project will modernize critical headworks infrastructure, improving debris removal and treatment reliability while reducing impacts to downstream processes. Activity continues to wrap up in Australia for our buildings business, supported by increased investment in social infrastructure. During the quarter, the team was selected to provide engineering services for the Redcliffe Hospital redevelopment in Queensland, further strengthening our position in the growing healthcare infrastructure market.