Welcome to Stantec's First Quarter 2023 Earnings Results Webcast and Conference Call. Leading the call today are Gord Johnston, President and Chief Executive Officer; and Theresa Jang, Executive Vice President and Chief Financial Officer. Stantec invites those dialing in to view the slide presentation which is available in the Investors section at stantec.com. Today's call is also webcast. [Operator Instructions] All information provided during this conference call is subject to the forward-looking statement qualification set out on Slide 2, detailed in Stantec's management's discussion and analysis and incorporated in full for the purposes 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 am pleased to turn the call over to Mr. Gord Johnston.

Good morning, and thank you for joining us today. I'm happy to report that we are off to an excellent start for the year. We delivered net revenue growth for the first quarter of 17%, reaching $1.2 billion. This was driven by over 12% organic growth. Market dynamics remained very favorable over the quarter and through strong operational performance, we were able to deliver double-digit organic net revenue growth in each of our geographic regions. We also delivered solid organic growth in each of our business segments, most notably in Water, which generated over 24% organic growth, 11% in Buildings, and 16% in Energy & Resources. These results reflect our strong market positioning as we continue to build on the macro themes of aging infrastructure, climate change and re-shoring of domestic production. Looking at our operating regions, net revenue in the U.S. increased 21% with organic net revenue growth of 14%. Robust public and private sector spending continues to drive growth. We also benefited from the strong U.S. dollar in the quarter, which contributed approximately 7% of the increase in net revenue. We saw double-digit growth in Water, Buildings and Energy & Resources. Our Water business continues to be a leader in the U.S., achieving significant wins across all megatrends, including water reuse, climate resiliency, and large-scale water security projects. Buildings continues to be very active based on momentum from investments in healthcare, civic, industrial and the science and technology sectors and Energy & Resources continue to drive growth through the acceleration of mining and significant reservoir and dam projects. In community development, demand for industrial and residential units built specifically for rental have spurred growth. Overall, the U.S. had a very strong quarter with the key themes that we've spoken about previously, continuing to play out. In Canada, we…

Thank you, Gord. Good morning, everyone. As Gord noted, we delivered solid first quarter results. We grew both gross and net revenue by 17% to $1.5 billion and $1.2 billion, respectively. Project margin for Q1 was 53.7%, in line with our expectations. Project margin in Canada and the U.S. remained strong, while we experienced a few challenges in our Global operations, none of which were individually material. We expect project margin in Global to strengthen in the coming quarters. Adjusted EBITDA margin was 14.6%, a 10 basis point increase over Q1 2022. As a result of very strong share price appreciation in Q1, we did have a significant mark-to-market expense related to the revaluation of our long-term incentive plan. Without this, our adjusted EBITDA margin would have been 15.2%. Strong revenue growth and lower admin and marketing expenses as a percentage of net revenue drove first quarter diluted EPS of $0.59 compared with $0.40 in the prior year and adjusted diluted EPS of $0.73 compared with $0.61 last year, an increase of 20%. Excluding the mark-to-market LTIP revaluation expense, adjusted diluted EPS would have been $0.78 and would have resulted in an increase of 28% over the prior year. Looking at our liquidity and capital resources. Operating cash flow for the quarter came in at $37 million, an increase of $31 million over Q1 '22. Operating cash flow was driven by the strong revenue growth we achieved this quarter, partly offset by our short-term employee incentive payments, which always occur in the first quarter. DSO at the end of March was 81 days, consistent with year-end '22, and our net debt to adjusted EBITDA was 1.6x in the middle of our target range and also consistent with year-end 2022. Before I hand it back to Gord for final remarks, I'd like to draw your attention to our 16th Annual Sustainability Report, which we released last month. Our sustainability report is a wonderful resource that reviews all of the amazing work we're doing to achieve our ESG ambitions. We're particularly proud to report that for the fourth straight year, we've increased the portion of our gross revenue, that's aligned with the UN sustainable development goals. For 2022, we determined this to be 60%, up from 53% in 2021, a 13% increase. We also achieved our goal of operational carbon neutrality across our entire business, but there is so much more information contained in this report. I encourage you to take some time and look through it. With that, I'll turn the call back to Gord.

Thanks, Theresa. In Q1, we grew backlog to $6.2 billion, in line with our previous all-time high. This is an increase of 15% from Q1 2022 and an increase of 6% since the end of last year. Our U.S. segment delivered over 9% organic growth in backlog this quarter, with most of that growth in Environmental Services, Water and Buildings. Growth in Environmental Services backlog stems from strong tailwinds in the marketplace, augmented by robust cross-selling and collaboration with our other business units to provide services such as environmental permitting and archeological work for large infrastructure projects. Backlog in water was driven by wins related to wastewater treatment solutions and water requirements for power generation that will support the energy transition. Buildings also had strong backlog growth in the quarter, generated through wins in advanced manufacturing, education and healthcare. Our backlog represents approximately 13 months of work. As our backlog demonstrates, momentum continues to build based on investments spurred by government stimulus around the world. Looking at some of our major project wins, each of these follows the key trends that we've been discussing. In Q1, we won additional work on semiconductor fabs and in advanced manufacturing, including the Q-Cells project, which we mentioned back in February. The Coire Glas 1,500-megawatt pumped storage project in Scotland is the first large-scale pumped storage project to be developed in the UK in more than 40 years with more than double current existing storage capacity, greatly supporting the energy transition and the climate change and sustainability imperative. The Veterans Memorial Bridge in Kentucky was constructed back in 1936, and it currently carries more than twice its intended daily capacity. The redesign of this bridge will strengthen the aging infrastructure and provide safe, multimodal crossing for vehicles, bicycles and pedestrians. And just last week, we announced our appointment to the Homes England development and regeneration technical services framework. We expect this appointment will bring us significant amount of work over the next 4 years in community development as we continue to support Homes England in building sustainable and resilient communities. These are just a few examples that demonstrate the continued momentum that's driving public and private investments. Looking at the rest of the year, we remain confident that we will achieve the financial targets that we set out in February. This includes delivering mid to high single-digit organic net revenue growth, driven primarily from our significant position in the U.S. While the U.S. remains as our top growth market for the year, we continue to expect solid growth in our Global segment and high levels of activity in Canada. And we're focused on driving bottom line growth that meets or exceeds our top line growth. 2023 is shaping up to be another excellent year for Stantec. And with that, I'll turn the call back to the operator for questions. Operator?

[Operator Instructions] Our first question comes from Chris Murray with ATB Capital Markets.

Gord, maybe turning back to your comments about organic growth and the backlog obviously, the U.S. is very, very strong. But in the quarter, anyway, Canada was pretty weak and so was Global. Can you talk a little bit about your thoughts around what we should be seeing as we move further into the year and maybe each of those regions outside the U.S.? And is there anything -- any cause for concern here or anything particularly odd happening? Or is this just maybe a timing issue?

Yes. I think it's mostly a timing issue, Chris. We had strong organic growth in both of those regions, both over 10%. And there's going to be a little bit of lumpiness when you look between organic growth and backlog. So we're not really concerned. In Global, we had a -- the backlog was a bit retracted a touch there, primarily due to the timing of AMP cycle stuff in the UK. So we're not really concerned with backlog in other locations. We're really confident in our projections for 2023. We think we have a considerable number of opportunities really that we're working on in all of our regions.

So just, even though the Global backlog is going a little bit negative, you don't feel like you're going to burn the backlog faster than you can replace it at least in the medium term, right?

No, we're feeling actually really good about that Global business as well.

[Operator Instructions] Our next question comes from Sabahat Khan with RBC.

I guess -- just looking, I guess, closer at the U.S. market, can you maybe give a little bit of color around where you are with the backlog, which end markets are contributing most? And more importantly, I guess, at this point in the macro environment and with some of the bills pending, where are you seeing opportunities as it relates to your backlog stuff that might not already be in there?

Yes. Thanks, Saba. So in the U.S., we did have over 9% backlog growth organically in the quarter, and we saw backlog growth in all of our business operating units. The strongest backlog growth in Water, Buildings & Environmental Services, both well into double digits, all of those. So -- but we're seeing a pretty broad-based across all of the groups. And so we're really bullish on the U.S. growth. A lot of the IIJA work has not yet come or has not yet fully baked in or built into the -- into our backlog there. We see that starting to come more and more. You may have seen a recent announcement that the EPA has now funded roughly $7 billion spend out to the Water group. $6 billion of that came from IIJA. So that's going to just further strengthen the backlog growth in Water going forward as well.

And then just looking, I guess, on the M&A front, I didn't see a lot of mention of Cardno assuming the integration there is largely done. How are you looking sort of at the M&A horizon right now? One of the things we've noticed across the industry is some of the medium to large-sized transactions have quieted a bit. Is it just the valuations aren't at the right place? Is there more of the company such as yourself in the integration phases? Kind of what are you seeing on the M&A horizon? Curious where the private sector multiples are at and just your appetite for a transaction at this point looking beyond Cardno.

Yes. So in addition to focusing on backlog growth, operational efficiency, we're really focused on our M&A program. And you said that and you're right, there's been a little bit of slowness in some of these transactions, but I think that's just timing issues. The market remains quite robust. The M&A funnel also quite full. So I think that we're continuing to stay active. You can see we've got some dry powder that's ready to take action when the right opportunity comes along for us. Again, we're maintaining our discipline. But yes, we're ready to transact when the right opportunity comes along.

And then just one last quick one for me. I guess, given your U.S. exposure, obviously, there is a bit of noise on the U.S. side with the government potentially hitting a bit of a wall on the debt ceiling side. The organic growth there looks good. The backlog is building. But I guess as you look over the medium-term, is that something that could potentially be an issue? Or given the funding that's in the system, you don't necessarily see it as a near-term concern given all the bills, et cetera, that are already in the works?

Yes. I think that last part you mentioned, Saba, is where we are at. So we don't see that there would be any short-term impact. The projects that are underway are funded, funds have been disbursed. And so it's a bit of a question around if there is a shutdown, how long will that last? And our expectation is that it wouldn't be prolonged. And so there might be a slight impact over the medium or longer-term with respect to projects that are coming to market, but we really don't anticipate that there would be any significant impact to us.

[Operator Instructions] Our next question comes from Ian Gillies with Stifel.

Gord, the employee count corporately has kind of been around 26,000 employees as reported for the last three quarters. Can you maybe talk about some of the dynamics with respect to adding people and what's transpiring there and how it pertains to backlog growth and revenue, et cetera, and how you're managing that dynamic?

Yes. Yes. We continue to hire far more people than leave -- than are leaving us. And so our headcount continues to grow. In fact, we had the highest hiring quarter ever in Q1 of this year. So we continue to see that growth. We often -- the number will come up in the summer. We're typically over 27,000 in the summer because we have our seasonal staff and it drops down to 26,000 as those folks go back to college and university. So I think we are feeling good about our ability to both recruit and retain employees. And I think that will help us to continue to service the backlog. We are seeing that -- we're not seeing as much wage pressure as we've seen previously. We're not -- we're seeing that the pendulum may be swinging back a little bit from where it was very much in favor of the employee. A year or two ago, we're seeing it come back little bit more of a balanced situation. And our voluntary turnover rates really have tapered off and settled over the last couple of quarters. So we're actually feeling pretty good about from a headcount perspective. We continue to grow in our offices, our delivery centers in Pune, India. We're up well over 700 people there now might be approaching 750. So that's only almost a doubling of the size of that group over the last couple of years, and we see continued opportunities for -- to grow there. So no, I think we're feeling pretty good about the -- from a staffing perspective. We still talk about it every day, of course, because that's our #1 asset, but we're feeling in pretty good shape with it.

Maybe switching gears to Canada. Q1 organic growth was very strong. Guidance obviously hasn't really moved there. You've reiterated your confidence. But is there potential that there's revenue or contraction as we move into the back half of the year in that region? I'm just trying to tell you what happened in Q1 versus what may transpire for the remainder of the year.

Yes. I mean, I think Ian what we saw in Q1 was certainly positive, and we're really pleased with the performance there. And I think what we saw was some carryover effect from the momentum we saw in Q4 and some projects a little bit less sensitive to seasonality or the cold weather. And so that was very helpful for Canada. And so we haven't changed our guidance for the rest of the year. It's still early in the year. And we do have some projects that are kind of reaching that run down phase and others that are -- we're expecting to ramp up in the year. So that always causes a little bit of slowdown and restart. So it is currently our expectation that we will see that growth moderate a bit over the course of the rest of this year. But we'd be happy to just see it continue to be as strong as it was in Q1. So we'll see how it plays out.

Our next question is the follow-up question from Sabahat Khan.

I guess maybe this one is for Theresa. Just given where your share price is at currently, we talked a bit about M&A earlier, just curious how you're looking at capital allocation at this point for the remainder of the year given kind of the options out there?

Yes. I mean the philosophy really hasn't changed, Saba. Of course, we're pretty happy with where the share price is trading at. But overall, M&A remains our top focus in terms of capital deployment. And so that's -- there is really no altering of the approach there. We want to be doing accretive M&A transactions. We will go into the market when we see that there's some dislocation there and be opportunistic about that approach. But we're also focused on maintaining solid leverage, so keeping our cash flow deployed toward paying down our revolver every opportunity we get. So again, not a change there in strategy.

And then there's a bit of discussion earlier around the U.S. side. I want to switch a bit more over to UK, the AMP programs obviously are contributing for you, but I'm curious how the demand trends and the outlook is for some of the other end markets in that region where you operate?

Sure. Well, you mentioned the AMP program. So we're in the middle of AMP7, certainly, and we're robust growth there. We continue to hire to service the AMP7 demands. But we're beginning to see some clients beginning to re-compete for AMP8 and we've been successful in securing those. Other areas of the UK, we -- there's a lot of discussion about the UK housing market. And if you're reading in the papers lately, some people have said they're going to take off the numbers that they need to continue to build, others just said, we need to put those back on. But I think -- so we're seeing a little bit of softness there. But I think we've mentioned before the permitting process for housing in the UK is quite onerous and takes quite some time. So once you begin to develop a project, you typically keep going through until you get your permitting. And I think we feel particularly good with that UK housing market with our appointment to that Homes England 4-year framework that we talked about. Homes England is really looking to push increasing housing stock there. So that's going to, I think, be very, very positive for us for the next 4 years. So those would be our two largest end markets there would be the community development group that we talked about and Water. On the transportation side, we have some good wins there with Highways England that continue to deliver. So I think we're feeling okay about the UK, but we're certainly keeping an eye on it, absolutely.

And just one last one for me. On the U.S. side, obviously, the other big bill out there is the IRA. I think you've announced a large solar project win there. Just curious, what are some of the other buckets within the IRA where you're pursuing projects or opportunities, whether span market or type of project, just some color there, please?

Yes. The IRA really is supportive of sort of a transition to green and more renewable power. So there's a number of different projects that we're talking to our clients about. There's opportunity. There's an extension of project start dates and production tax credits for wind and solar and geothermal, biomass, hydrocarbon, sorry hydropower projects, carbon sequestration. So we're in discussion with clients on all of these. There's -- the IRA has expand credits for clean hydrogen, renewable fuels, EV charging infrastructure. So there's a lot of opportunities there, and we're in discussion with clients on really any number of these projects.

Our next question comes from Frederic Bastien with Raymond James.

Just question -- big picture here. If all else equal, where would you look to deploy your next dollar on M&A? And secondly, I mean if we fast forward 5 years out, does the revenue profile of Stantec look different from here in terms of geographic exposure?

Yes. So we're -- we've talked about before there's a number of opportunities that we have around the world. But I think some of the biggest opportunities we still have are in the United States. So as we're looking for opportunities, we're certainly in discussion with folks in the U.S. But that doesn't, in any way, negate the continued discussions that we'd be having in Canada and from a global perspective. So you're right, if I had $1, I'd probably spend it on buying a company in the U.S. right now. But as you know, we're in a pretty good shape. Our leverage -- so we have more than $1. So we continue to have multiple discussions with firms around the world. And then from overall, what would the -- what would be revenue profile look like. I think we're pretty comfortable with where we are with those taking advantage of the big programs, that are coming in Infrastructure, Water, Buildings and so on, Environment certainly. So we're going to continue to focus on the megatrends, but I would not expect our revenue -- our net revenue profile to be significantly different in the -- if we look out 5 years from now.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Gord for any closing remarks.

Great. Well, thanks, everyone, for joining us this morning. We're really pleased with our Q1 results and are very optimistic about the remainder of 2023. So thanks again for joining us, and we look forward to catching up with you as the year progresses.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.