Stantec (TSX, NYSE:STN), a global leader in sustainable design and
engineering, today reported its results for the three and nine
month periods ended September 30, 2022.
Stantec delivered record third quarter adjusted diluted EPS of
$0.86 driven by significant net revenue growth and solid project
margin. Net revenue of $1.2 billion in the third quarter was
generated on the strength of 11.0% organic growth1 and 12.9%
acquisition growth1. Consistent with the first half of 2022, every
regional and business operating unit delivered organic net revenue
growth in the third quarter. Project margin in the third quarter
was 54.1%. Backlog at the end of September 30, 2022 reached an
all-time high of $6.2 billion, driven primarily by organic growth
of 15.1% since December 31, 2021.
“Our performance in the quarter demonstrates the ongoing strong
execution of our strategic plan, while our record backlog reflects
the resiliency of our business despite broader economic headwinds,”
said Gord Johnston, President and CEO. “As we look ahead to the
remainder of the year and into 2023, we continue to see numerous
growth opportunities that we are well positioned to capture,
bolstering our confidence in our ability to deliver on our
strategic plan.”
For nine months ended September 30, 2022, Stantec delivered
adjusted diluted EPS of $2.30, an increase of 24.3% over the same
period last year. Net revenue increased to $3.3 billion, up 22.3%
from $2.7 billion last year on the strength of 9.0% organic growth
and 13.1% acquisition growth. Project margin was up 40 basis points
at 54.0%.
Q3 2022 compared to Q3
2021
- Net revenue
increased 24.3% or $227.1 million to $1.2 billion, driven by 11.0%
organic growth and 12.9% acquisition growth. Consistent with the
first half of this year, every one of the regional and business
operating units delivered organic growth, most notably in US and
Global, and in Water and Energy & Resources, where organic
growth was in the double digits this quarter.
- Project margin
increased $120.0 million or 23.7% to $627.0 million as a
result of net revenue growth. As a percentage of net revenue,
Stantec delivered a 54.1% project margin.
- Adjusted EBITDA1
increased $37.3 million or 23.9% to $193.3 million and achieved a
margin of 16.7% resulting from strong performance across the
business.
- Net income decreased
2.9%, or $2.0 million, to $68.0 million, and diluted EPS decreased
3.2%, or $0.02, to $0.61. Acquisition-related expenses (namely
integration, depreciation and amortization, and interest expenses)
more than offset increased project margin.
- Adjusted net income1
grew 18.2%, or $14.6 million, to $95.0 million, achieving 8.2% of
net revenue, and adjusted diluted EPS increased 19.4% to $0.86 from
$0.72 in Q3 2021.
- Contract backlog
stands at $6.2 billion at September 30, 2022, achieving a new
record and reflecting 15.1% organic growth from December 31,
2021. Like net revenue, organic backlog growth was achieved across
all the regional and business operating units. Double-digit organic
backlog growth continued in US operations, which led the regions
with 20.9%, and in Infrastructure, Buildings, and Energy &
Resources. Contract backlog represents approximately 14 months of
work—an increase of one month from December 31, 2021.
- Operating cash flows
amounted to an inflow of $93.1 million compared to an inflow of
$101.0 million in the prior period reflecting the expected
disruptions from the Cardno integration, particularly the financial
system migration. Lower operating cash flows also reflected the
increased investment in net working capital to support organic
revenue growth and an increase in days sales outstanding
(DSO).
- DSO was 86 days,
reflecting a 5-day increase from 81 days at September 30, 2021. Net
foreign exchange impacts, primarily from the strengthening of the
US dollar compared to the Canadian dollar, contributed to a net DSO
increase of 2 days. The integration of Cardno also contributed to
the increase in DSO.
- Net debt to adjusted
EBITDA (on a trailing twelve-month basis) at September 30,
2022 was 1.9x, remaining within Stantec's internal target range of
1.0x to 2.0x.
- On October 28, 2022, Stantec acquired all of the outstanding
shares of L2, Inc. and Partridge Architects, Inc. (collectively
L2P). L2P is a 40-person full-service architectural firm
headquartered in Philadelphia, Pennsylvania serving the science and
technology, commercial workplace, higher education, residential,
and hospitality markets and strategically complements the Buildings
business.
- On November 10,
2022, the Board of Directors declared a dividend of $0.18 per
share, payable on January 17, 2023, to shareholders of record
on December 30, 2022.
2022 Outlook
Stantec reaffirms full year 2022 guidance for adjusted diluted
EPS growth of 22% to 26% and net revenue growth of 18% to 22%, both
compared to 2021, and for adjusted EBITDA margin in the range of
15.3% to 16.3%. Stantec further anticipates delivering adjusted
return on invested capital of greater than 10.0% for 2022, compared
to earlier guidance of greater than 10.5%. This is largely due to
the disruption to cash flows arising from the integration of
Cardno, which has resulted in higher than anticipated average debt
outstanding for the year. Stantec anticipates cash flows and debt
levels normalizing by the end of this year as the financial
integration work winds up.
Q3 2022
Financial Highlights
|
For the quarter endedSeptember
30, |
For the three quarters endedSeptember
30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(In millions of Canadian dollars, except per share amounts and
percentages) |
$ |
% of NetRevenue |
$ |
% of NetRevenue |
$ |
% of NetRevenue |
$ |
% of NetRevenue |
Gross revenue |
1,473.2 |
|
127.0 |
% |
1,168.3 |
|
125.2 |
% |
4,163.7 |
|
125.2 |
% |
3,391.5 |
|
124.7 |
% |
Net
revenue |
1,160.0 |
|
100.0 |
% |
932.9 |
|
100.0 |
% |
3,326.8 |
|
100.0 |
% |
2,719.9 |
|
100.0 |
% |
Direct
payroll costs |
533.0 |
|
45.9 |
% |
425.9 |
|
45.7 |
% |
1,530.0 |
|
46.0 |
% |
1,263.2 |
|
46.4 |
% |
Project margin |
627.0 |
|
54.1 |
% |
507.0 |
|
54.3 |
% |
1,796.8 |
|
54.0 |
% |
1,456.7 |
|
53.6 |
% |
Administrative and marketing expenses |
445.4 |
|
38.4 |
% |
353.2 |
|
37.9 |
% |
1,303.1 |
|
39.2 |
% |
1,036.0 |
|
38.1 |
% |
Depreciation of property and
equipment |
14.4 |
|
1.2 |
% |
13.8 |
|
1.5 |
% |
43.0 |
|
1.3 |
% |
40.4 |
|
1.5 |
% |
Depreciation of lease
assets |
29.7 |
|
2.6 |
% |
26.4 |
|
2.8 |
% |
90.2 |
|
2.7 |
% |
79.6 |
|
2.9 |
% |
Reversal of lease asset
impairment |
(1.1 |
) |
(0.1 |
%) |
(1.7 |
) |
(0.2 |
%) |
(3.7 |
) |
(0.1 |
%) |
(4.3 |
) |
(0.2 |
%) |
Amortization of intangible
assets |
26.6 |
|
2.3 |
% |
15.0 |
|
1.6 |
% |
77.1 |
|
2.3 |
% |
42.0 |
|
1.5 |
% |
Net interest expense |
18.7 |
|
1.6 |
% |
9.6 |
|
1.0 |
% |
46.5 |
|
1.4 |
% |
29.5 |
|
1.2 |
% |
Other |
4.2 |
|
0.6 |
% |
2.7 |
|
0.3 |
% |
13.3 |
|
0.4 |
% |
(5.6 |
) |
(0.2 |
%) |
Income
taxes |
21.1 |
|
1.6 |
% |
18.0 |
|
1.9 |
% |
53.8 |
|
1.6 |
% |
55.0 |
|
2.0 |
% |
Net income |
68.0 |
|
5.9 |
% |
70.0 |
|
7.5 |
% |
173.5 |
|
5.2 |
% |
184.1 |
|
6.8 |
% |
Diluted earnings per share (EPS) |
0.61 |
|
n/m |
|
0.63 |
|
n/m |
|
1.56 |
|
n/m |
|
1.65 |
|
n/m |
|
Adjusted EBITDA (note) |
193.3 |
|
16.7 |
% |
156.0 |
|
16.7 |
% |
532.2 |
|
16.0 |
% |
431.7 |
|
15.9 |
% |
Adjusted net income (note) |
95.0 |
|
8.2 |
% |
80.4 |
|
8.6 |
% |
256.0 |
|
7.7 |
% |
206.1 |
|
7.6 |
% |
Adjusted diluted EPS (note) |
0.86 |
|
n/m |
|
0.72 |
|
n/m |
|
2.30 |
|
n/m |
|
1.85 |
|
n/m |
|
Dividends declared per common share |
0.180 |
|
n/m |
|
0.165 |
|
n/m |
|
0.540 |
|
n/m |
|
0.495 |
|
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 Q3 2022 MD&A).
n/m = not meaningful
Net Revenue by Reportable Segment
(In millions of Canadian dollars, except percentages) |
Q3 2022 |
Q3 2021 |
Total Change |
Change Due to Acquisitions |
Change Due to Foreign Exchange |
Change Due to Organic Growth |
% of Organic Growth |
Canada |
294.1 |
274.4 |
19.7 |
— |
n/a |
19.7 |
7.2% |
United States |
591.8 |
459.6 |
132.2 |
60.9 |
16.8 |
54.5 |
11.9% |
Global |
274.1 |
198.9 |
75.2 |
59.8 |
(12.7) |
28.1 |
14.1% |
Total |
1,160.0 |
932.9 |
227.1 |
120.7 |
4.1 |
102.3 |
|
Percentage Growth |
|
|
24.3% |
12.9% |
0.4% |
11.0% |
|
Backlog
(In
millions of Canadian dollars, except percentages) |
Sep 30, 2022 |
Dec 31, 2021 |
Total Change |
Change Due to Foreign Exchange |
Change Due to Organic Growth |
% of Organic Growth |
Canada |
1,286.1 |
1,169.1 |
117.0 |
|
n/a |
|
117.0 |
|
10.0 |
% |
United States |
3,930.0 |
3,016.9 |
913.1 |
|
283.9 |
|
629.2 |
|
20.9 |
% |
Global |
954.1 |
948.3 |
5.8 |
|
(24.6) |
|
30.4 |
|
3.2 |
% |
Total |
6,170.2 |
5,134.3 |
1,035.9 |
|
259.3 |
|
776.6 |
|
|
Percentage Growth |
|
|
20.2 |
% |
5.1 |
% |
15.1 |
% |
|
Webcast & Conference Call
Stantec will host a live webcast and conference call on Friday,
November 11, 2022, at 7:00 AM Mountain Time (9:00 AM Eastern
Time) to discuss the Company’s third 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.
However, in this news release, the following non-IFRS and other
financial measures are used by the Company: adjusted EBITDA,
adjusted net income, adjusted earnings per share (EPS), adjusted
return on invested capital (ROIC), net debt to adjusted EBITDA,
days sales outstanding (DSO), margin (percentage of net revenue),
organic growth (retraction), acquisition growth, 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 Q3 2022
Management’s Discussion and Analysis, available on SEDAR at
SEDAR.com, 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 provide useful information to investors to
assist them in understanding components of our 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 our ability to capture future growth
opportunities, our adjusted diluted EPS, net revenue growth,
adjusted EBITDA margin, and ROIC targets in our 2022 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 and a
slowdown in new opportunities related to COVID-19, access and
retention of skilled labour, decreased infrastructure spending
levels, the failure of US infrastructure stimulus spending to
materialize, the ability to remain on schedule to complete the
integration of Cardno and the recently acquired firms, 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.
For more information about how other material risk factors could
affect Stantec’s results, refer to the Risk Factors section and
Cautionary Note Regarding Forward-Looking Statements section in the
Company’s 2021 Annual Report. This report is accessible online by
visiting EDGAR on the SEC website at sec.gov or by visiting the CSA
website at sedar.com or Stantec’s website, Stantec.com. You may
obtain a hard copy of the 2021 annual report free of charge from
the investor contact noted below.
Investor Contact |
Media
Contact |
Jess Nieukerk |
Stephanie Smith |
Stantec Investor Relations |
Stantec Media Relations |
Ph: 403-569-5389 |
Ph: 780-917-7230 |
jess.nieukerk@stantec.com |
stephanie.smith2@stantec.com |
|
|
To subscribe to Stantec’s email news alerts, please fill out the
subscription form, which is available on the Contact Information
page of the Investors section at Stantec.com.
Design with community in mind
Attached to this news release are Stantec’s
consolidated statements of financial position, consolidated
statements of income and reconciliation of
non-IFRS measures.
Reconciliation of Non-IFRS Financial
Measures
|
For the quarter endedSeptember
30, |
For the three quarters endedSeptember
30, |
(In millions of Canadian dollars, except per share amounts) |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Net income |
68.0 |
|
70.0 |
|
173.5 |
|
184.1 |
|
Add back
(deduct): |
|
|
|
|
Income taxes |
21.1 |
|
18.0 |
|
53.8 |
|
55.0 |
|
Net interest expense |
18.7 |
|
9.6 |
|
46.5 |
|
29.5 |
|
Reversal of lease asset impairment (note 1) |
(1.4 |
) |
(1.7 |
) |
(3.3 |
) |
(4.3 |
) |
Depreciation and amortization |
70.7 |
|
55.2 |
|
210.3 |
|
162.0 |
|
Unrealized loss (gain) on equity securities |
3.7 |
|
0.3 |
|
22.2 |
|
(9.1 |
) |
Acquisition, integration, and restructuring costs (note 4) |
12.5 |
|
4.6 |
|
29.2 |
|
14.5 |
|
|
|
|
|
|
Adjusted EBITDA from continuing operations |
193.3 |
|
156.0 |
|
532.2 |
|
431.7 |
|
|
For the quarter endedSeptember
30, |
For the three quarters endedSeptember
30, |
(In millions of Canadian dollars, except per share amounts) |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Net income |
68.0 |
|
70.0 |
|
173.5 |
|
184.1 |
|
Add back (deduct)
after tax: |
|
|
|
|
Reversal of lease asset impairment (note 1) |
(1.0 |
) |
(1.3 |
) |
(2.5 |
) |
(3.3 |
) |
Amortization of intangible assets related to acquisitions (note
2) |
15.6 |
|
7.9 |
|
45.8 |
|
21.1 |
|
Unrealized loss (gain) on equity securities (note 3) |
2.8 |
|
0.1 |
|
16.9 |
|
(7.0 |
) |
Acquisition, integration, and restructuring costs (note 4) |
9.6 |
|
3.7 |
|
22.3 |
|
11.2 |
|
|
|
|
|
|
Adjusted net income |
95.0 |
|
80.4 |
|
256.0 |
|
206.1 |
|
Weighted average number of shares outstanding - basic |
110,737,375 |
|
111,076,831 |
|
110,990,534 |
|
111,249,043 |
|
Weighted average number of
shares outstanding - diluted |
110,896,770 |
|
111,545,984 |
|
111,150,916 |
|
111,664,717 |
|
|
|
|
|
|
Adjusted earnings per share |
|
|
|
|
Adjusted earnings per share -
basic (note 5) |
0.86 |
|
0.72 |
|
2.31 |
|
1.85 |
|
Adjusted earnings per share - diluted (note 5) |
0.86 |
|
0.72 |
|
2.30 |
|
1.85 |
|
See the Definitions section of the Q3 2022 MD&A for the
discussion of non-IFRS and other financial measures used and
additional reconciliations of non-IFRS financial measures.
note 1: The reversal of lease asset impairment includes onerous
contracts associated with the impairment for the quarter ended
September 30, 2022 of $(0.3) (2021- nil) and for the three quarters
ended September 30, 2022 of $0.4 (2021 - nil). For the quarter
ended September 30, 2022, this amount is net of tax of $(0.4) (2021
- $(0.4)). For the three quarters ended September 30, 2022, this
amount is net of tax of $(0.8) (2021 - $(1.0)).
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 September 30, 2022, this amount is
net of tax of $4.8 (2021 - $2.0). For the three quarters ended
September 30, 2022, this amount is net of tax of $14.2 (2021 -
$6.3).
note 3: For the quarter ended September 30, 2022, this amount is
net of tax of $0.9 (2021 - $0.2). For the three quarters ended
September 30, 2022, this amount is net of tax of $5.3 (2021 -
$(2.1)).
note 4: The add back of other costs primarily relates to
integration expenses associated with the acquisitions and
restructuring costs. For the quarter ended September 30, 2022, this
amount is net of tax of $2.9 (2021 - $0.9). For the three quarters
ended September 30, 2022, this amount is net of tax of $6.9 (2021 -
$3.3).
note 5: Earnings per share calculated in accordance with IFRS
disclosed on Q3 2022 MD&A.
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