Welcome to Stantec's Third 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 Financial -- 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. 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 qualification set out on Slide 2, detailed in Stantec's management's 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'm pleased to turn the call over to Mr. Gord Johnston.

Good morning. Thank you for joining us today. I'm very pleased to report that Stantec has delivered another quarter of record earnings. We continue to see very strong market demand across all of our geographies, with Canada in particular showing remarkable resilience. We met this demand with excellent operational performance, driven by high utilization and augmented by our effective workforce management strategies and strong talent attraction and retention. Organic hiring remains robust. This was the busiest Q3 we've ever experienced in terms of hiring. And we are hiring at two times the rate that we were pre-pandemic. And our North American -- sorry, and our employee retention rates remain amongst the best in our industry with voluntary turnover in North America returning to pre-pandemic levels. These were some of the key drivers that led to our Q3 earnings exceeding our expectations. Looking at our financial results, we grew our net revenue by 14% to $1.3 billion, with organic growth of 9%. For the seventh consecutive quarter, each of our regional and business operating units delivered organic growth, with double-digit growth in the U.S. region and in our Water and Environmental Services business segments. We drove significant margin expansion and delivered record-high adjusted EPS of $1.14. On the strength of our performance to date and our expectation of continued favorable tailwinds, we've raised our guidance for the second time this year, and I'll speak a little more about this a little later in the presentation. Our U.S. business delivered a very strong third quarter. This included net revenue growth of 20% in the quarter, with 13% organic growth and 5% acquisition growth, driven primarily from our acquisition of ESD. We achieved organic growth in each business line with Water, Buildings, and Energy and Resources, all delivering double-digit growth. In particular, our…

Thank you, Gord, and good morning, everyone. As Gord mentioned, our third quarter results exceeded our expectations. Factors that contributed to our outperformance include: stronger-than-anticipated demand in Canada, higher utilization in Canada and the U.S., robust hiring, disciplined cost management, and a higher-than-normal volume of change order approval. Gross revenue was up 15% in the quarter at $1.7 billion, while net revenue grew by 14% to reach $1.3 billion. Project margin increased 70 basis points to 54.8%, benefiting from disciplined project selection and execution. Our strong operational performance drove a 160 basis points increase in our adjusted EBITDA margin. For the quarter, diluted EPS was $0.94 compared to $0.61 in Q3 last year. And adjusted diluted EPS increased 33% to a record $1.14 compared with $0.86 last year. As has been the case all year, the significant increase in our share price for the year-to-date has resulted in a material increase in our admin and marketing expenses due to the quarterly revaluation of our long-term incentive plan. The impact of revaluing our LTIP was 60 basis points as a percentage of net revenue or $0.05 per share for Q3. Year-to-date, the revaluation was 60 basis points or $0.15 per share. Now, turning to our liquidity and capital resources. We generated $281 million of operating cash flow year-to-date, compared to $95 million over the same period last year. Cash flow this year has benefited from increased revenues and strong operational performance, partially offset by an increase in working capital investment to support growth, higher tax installment payments driven in part by the impact of U.S. Section 174, and higher interest payments. Last year's operating cash flow reflected the impact of the Cardno financial system integration. At the end of September, DSO was 83 days, a couple of days higher than the previous quarters. It is fairly typical for DSO to rise in the third quarter due to seasonality. And our net debt to adjusted EBITDA ratio was 1.5 times, well within our internal leverage range of 1 time to 2 times. With that, I'll turn the call back to Gord.

Thanks, Theresa. Backlog in the third quarter remained very strong at $6.4 billion, an increase of 8% from December 2022. Backlog has grown organically by 6% and continues to grow in each of our geographic regions. Backlog growth was most pronounced in Water, which is up 23% organically. Water continues to increase with project wins around water security, wastewater treatment solutions, and water requirements for power generation to support the energy transition. And of course, with AMP7 still underway, we continue to add to our backlog as new task orders are issued. We've also started to secure backlog for AMP8 with Northumbrian Water announced earlier this year, and South West Water, which was just announced this week. Buildings backlog saw solid organic growth. Buildings has captured wins in all of their sub-sectors, the majority of which continues to be in healthcare, civic, industrial, and science and technology. Buildings is also benefiting from backlog brought in through the position of ESD, which primarily relates to data centers and mission-critical facilities. Environmental Services backlog reflects additional project wins related to environmental assessments, including natural resource service -- surveys, regulatory permitting, and environmental monitoring for construction projects. While difficult to precisely quantify, we do know that our backlog includes projects that are backed with IIJA and IRA funding. Our backlog represents approximately 12 months of work. Providing reliable water supply requires investment in water management and water infrastructure, and we're proud to partner with clients around the world to get water to where it's needed. Recently, we announced that we were awarded a continuation of our contract with Tampa Bay Water for the final design and construction management of a new water supply pipeline. We've been working with Tampa Bay Water since 2009 to help meet the growing demand for potable water. Stantec…

Thank you. [Operator Instructions] And our first question comes from the line of Benoit Poirier with Desjardins. Your line is open. Please go ahead.

Yes. Good morning, everyone, and congratulations for the outstanding results. Looking at the EBITDA margin, 18.3% in the quarter, very impressive. I was just wondering about what were the main drivers behind this strong performance. And it looks like that this is the biggest margin you've post in recent history despite the LTIP impact. So -- and it looks like that it implies a much weaker margin in Q4. So, any thoughts about what drove the performance and the implication for Q4? Thank you.

Sure. Hi, Benoit. So, you're right, we had a very, very strong quarter from an EBITDA margin perspective, and really reflective throughout our financial results. And so, as you -- I'm an accountant, so I think of things as you roll your way through the P&L, and it really starts with the quality of our revenue, our ability to execute well, that has driven a stronger project margin. And as we work through to our EBITDA, the primary driver, as I've always said, is our ability to maintain high utilization. And so that compounding effect of high utilization that's driving higher absolute dollars, it means that you have a lower proportion of your workforce that is not utilized and sort of dropping those costs into the unrecoverable line or our admin labor. It also means that there's been a little less time for folks to spend time on marketing and business development, not to the degree to which we would neglect that, of course, but it just means in real time that there is a focus on addressing current projects and getting that work accomplished. And we combine that with, again, a continued focus and discipline on our spending, and we have seen a rise in the use and the hiring in our high-value centers, in Pune, in particular. So it's really, I think, a matter of doing all the things that we're supposed to be doing all at the same time and driving to a really strong result. As we look towards the fourth quarter, it does typically moderate and that is our expectation. It tends to be a little bit slower, so utilization is not as high because of weather-related reasons, field season is largely over in colder climates, it's a busier holiday season. And we do expect and want people to take time off to refresh, to take their vacation time as we work into the fourth quarter. And so that is fairly typical and that is why you'd see that fourth quarter EBITDA margin as well -- is expected to come down.

Okay, that's great color, Theresa. And just looking at your organic backlog, it's declined 4% quarter-over-quarter, was mostly driven by the U.S. and Canada. Is this mostly due to project timing and the confirmation of funding flow from government infrastructure programs? And on a high level, what are you seeing on your hand in terms of speed for funding coming out?

Yeah, so maybe I'll address the first piece and Gord can talk about the timing of funding. But part of what you described is what drove the drawdown of backlog from Q2 to Q3. It was in Canada and the U.S., and again, that correlates directly with the outperformance of organic revenue growth. And it means that we drew down that backlog faster, we were busier, and again, that's reflected in the revenue growth. So, it's not a trend that we would find concerning at all. I think it is just sort of the advancement of what you typically see in the back half, usually more in the fourth quarter. But activity level remains very high on the bidding front. And as you referenced, the timing within which we actually have everything completed so that we can record it in backlog, it's a snapshot in time. So, we're confident that backlog remains very solid and has a great trajectory.

Yeah, completely agree. We're not concerned with that reduction in backlog on a quarterly basis, Benoit. But on the timing, we are seeing that some funding starting to flow. It's always -- we've been talking about this IIJA now for a couple of years, and it's always -- we've been optimistic as an industry that it's this quarter, the next quarter, this half, the next half, but we are seeing that those -- about 23% of the IIJA funds have been dispersed. We're getting ready for the '24 allocations now. So that's starting to hit the street now. So, I think that's only going to continue to strengthen. The interesting thing is that when you look at our strong performance year-to-date, that's been without really any of the funding from IIJA or some of those other things. So that's, I think, just going to further strengthen as we move into '24 and the years beyond.

Okay. So, thank you very much, and looking forward to seeing you in Boston on December 5th. Thanks.

Thank you.

Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of Michael Doumet with Scotiabank. Your line is open. Please go ahead.

Hey, good morning, guys.

Good morning.

Good morning.

Good morning. So on the margins, obviously, really good margin expansion in Q2, Q3. A little bit of a follow-up on the last question. But -- now you're exiting Q4 flattish versus the big Q3, Q4 margin expansion -- sorry, Q2, Q3 margin expansion, how do we square the moving parts into 2024, given the above-average margin expansion in '23, but the flattish margin exit?

So I think when we look at our margin and we consider it on an as reported basis, so throughout this year, because of the impact of LTIP revaluation, we pulled that piece out so we can identify what our performance has been relative to the baseline we set at the start of the year. But of course, as Gord noted in his remarks, the LTIP impact is in our admin and marketing costs and that does reflect in our EBITDA margin. And so, when we come out of this year, we do expect that the margin will be higher than it was last year. And as we look towards the coming years, we continue to expect to be able to grow that margin, recognizing that if our share price stays where it is and continues to expand that there will continue to be this dynamic of a growing impact on our cost, but notwithstanding that, we do expect that the margin will continue to expand. So, it's not something that we're concerned about in terms of our ability to drive that margin growth. And again, it's all those levers that I talked about earlier and a few other things thrown in that are going to help us to continue to grow our margin.

Thanks, Theresa. Super helpful. And I think you talked about some of the reasons for the upside surprise in Canada. I guess the question is how sustainable do you find this incremental organic push here? Because if we were to assume Canada is, call it, a mid-single-digit organic growth type market, does this effectively represent a tougher comp for next year? Just trying to square that out as well.

Yeah, I mean, it does. Anytime you have a very good year, it makes it harder next year from a mathematical growth standpoint. And that's -- when we came into this year, that's what we're anticipating because the back half of last year was really strong for Canada. And so, we have been very pleased with the continued high level of demand in Canada. Some drivers around increased investment in healthcare, in our building sector, for instance, has just been greater and more sustained than we had expected, and we're expecting that that's going to continue into next year. There have been a couple of larger projects for both our environmental and our transportation groups that have gone faster than we expected and driven solid growth this year. And so, how that affects our growth rates for next year is part of what we're working on as we prepare to roll out our strategic plan targets and our guidance in early December. But we do expect that there will continue to be growth in Canada. Will it be as strong as it's been this year? Will it moderate somewhat? That's the piece we're working on. But we do still expect Canada to have the capacity to grow next year.

Very helpful. Thanks a lot, and I'll see you soon.

Thank you.

Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of Chris Murray with ATB Capital Markets. Your line is open. Please go ahead.

Yeah, thanks. Good morning, folks. Gord, maybe this is the second quarter in a row where you guys have seen some really good organic growth, and really your commentary is quite optimistic about the future. So, as I'm hearing you and I'm kind of putting together the pieces, it kind of sounds like there -- you talked about a little bit that you haven't really even seen much of the benefit from things like IIJA, that a lot of that what you're seeing in organic has been good. And then you also mentioned, I think, your turnover was better maybe than you had expected. As we put that together and we think about the next couple of years, is there anything to suggest that you can't -- that you wouldn't be above kind of the normal organic kind of mid-single-digit growth rate through '24, probably for '25 and '26 as well?

We will be issuing our guidance for 2024 on -- in December 5th, when we have our -- rollout our strategic plan in Boston. So yeah, I won't comment specifically on any numbers. But when you think about the industry overall, I've been -- this is the season where there's a number of these engineering firm CEO conferences. And so, I've attended two of those recently. And the general sentiment is that the market is very, very robust. We see that strong support in -- certainly, in water and in transportation and energy and energy transition, like there's just an enormous amount of opportunity there. So, there is nothing that we see on the horizon in any of our geographies that we would think would be pointing to a downturn in our overall business for us and truly for our competitors. So, we really do feel good about the next several years.

Okay. That's fair. And then, Theresa, just maybe talking and going back to project margin for a couple of seconds. Again, very good result, we saw that. You did make the comment, I think in a couple of the segments that there were some recoveries that also went into the margin. Can you give us a sense of the order of magnitude either dollars or basis points on how much that played into the margin performance in the quarter?

Sure. Yeah, I mean, the recoveries, risk releases, change order approval, those are always a dynamic within our business, of course. And what we saw this quarter was a slightly higher volume of that than typical and we felt it was important to call out as one of the drivers. It certainly wasn't the most significant driver in terms of our outperformance, but it has an impact. And we would estimate it was around 20-ish basis points from a margin standpoint. So again, not overly significant, but enough to make an impact.

Okay. That was helpful. Thanks, folks.

Thank you. And one moment for our next question. And our next question comes from the line of Michael Tupholme with TD Securities. Your line is open. Please go ahead.

Thank you. Maybe just a follow-up on the last question about the change order impact. Theresa, the -- I appreciate the color on the margin impact. Would that have had any impact in the organic growth rate you did in the quarter in terms of benefiting it?

Not really. No.

Okay. I didn't think so, but I just thought I'd check. And then, in terms of the margin for the fourth quarter, maybe when we're just thinking about EBITDA margins, you talked a little bit about this earlier, but when we're looking at project margins and the SG&A as a percentage of revenue in the fourth quarter, what is it that we should really be thinking about as sort of the area that sees sort of the biggest pull back as you go into the fourth quarter and see a bit of a step down?

So, I think as we head into the fourth quarter, again, that we're going to expect in general that organic growth will likely moderate relative to what we've seen for the first nine months of this year. I think project margin, we should expect would not very dramatically in terms of the percentage of project margin because that is purely a reflection of our execution on particular projects. But we do expect that EBITDA margin, driven mostly by admin and marketing costs, will be lower than what you've seen for Q2 and Q3 in particular, again, as we have probably a slower or a stepdown in our utilization to reflect -- consistent with the comments I made earlier. So that's where you're going to see it, I think. And that should be fairly broad-based across our organization.

That's helpful. And then, I suspect we may get some more thoughts and detail on this at the Investor Day, but maybe I'll just ask right now, just in terms of looking forward on the margin performance and potential within the business, how do you think about the margin improvement potential from here? Again, you had a very strong quarter here in the third quarter. Are there -- what would be the potential drivers to further improvement? And sort of how much room might there be to go on that front?

Yeah. So, there we -- as I said earlier, there is room to continue to expand margins. And -- but we will go into a bit more detail at our Investor Day when we roll out our strat plan. But there's not going to be anything shocking in there. So, it's all the same drivers. And I think, again, what you saw -- what you've seen us do for the year-to-date is really successfully deploy all of these strategies to grow our margins. And so, I have every expectation that what we've done to this point will continue, and that will -- the operating leverage that we'll gain through our business, through our size, our scale, our ability to manage our workforce in a strategic way, all of those things will continue to give us opportunity to expand our margins.

Okay, thank you. And maybe just one last one here. Appreciate the challenge early in the year with trying to provide guidance that is inclusive of LTIP piece. Really appreciate you giving us that detail this time around because it's sort of more closely aligned with how the results actually get reported. I guess the question is, in the guidance you've given that includes the expected impact of LTIP revaluation, do you make assumptions for the fourth quarter in coming to these numbers on what that looks like? Or do you just assume nothing? Or how do you deal with that in the fourth quarter in your assumptions?

Yeah. It's proven to be quite tricky to think our way through how to provide it in a way that's helpful, because I'll start by saying it, a number of you have asked us one-on-one, why can't you give us specific guidance or a rule of thumb or how this works. And in part, what complicates this is our need from an accounting standpoint, to run a Monte Carlo simulation on what our performance from a relative TSR standpoint is compared to our peers. And so, that is a wild card. So, in the guidance that we've provided, what we've said is, assuming there's no change in our share price from the end of September -- assuming all of those metrics stay the same, here's what the impact will be. And that's the best guidance we can provide because, of course, we don't know what's going to happen from a share price perspective. And so, the piece that even if our share price doesn't change from the third to the fourth quarter, as we continue to accrue a quarterly tranche of our LTIP, that now gets priced at a higher level than would have been assumed when we set our guidance at the start of the year. And so, there is an impact even if our share price doesn't move from third to fourth quarter, and that's the value that we've tried to give you.

Okay, that's helpful. Thank you.

Thank you. And one moment as move on to our next question. Our next question comes from the line of Sabahat Khan with RBC Capital Markets. Your line is open. Please go ahead.

Great. Thanks, and good morning. So, you provided a bit of color on the outlook and just the demand environment. But I was hoping we could go a little bit deeper into what you might be hearing from kind of the U.S. federal, state, municipal customers. Like a lot of the pushback we heard from investors over the recent week has been macro related. So, I was hoping you could just maybe give you an opportunity to share some comments on kind of some of the specifics you're hearing on the rollout of these bigger plans, kind of their ability to fund these programs, and just kind of the state of the U.S. kind of government customer relative to where it was maybe three, four months ago? Thanks.

Yeah. Thanks, Sabahat. Good morning. We're feeling really strong about the U.S. economy overall. You've seen where organic growth this year has been, about 13%, 12.9%. We're just kind of matching that here in the third quarter. But we still see very strong growth. When we look at some of our big markets in the U.S., Water, certainly 26% organic growth in Water in the quarter. And we see no slowdown in the type of work that we're doing there. Certainly, a lot related on the industrial side. We've talked about some of the advanced manufacturing facilities previously that we're working on there. We see a lot of work with the U.S. federal government from the perspective of shoreline resiliency type work and so on. So, a lot of opportunity there. So we feel very, very strong in the Water business. Transportation remains robust. And that's even -- as you said before, the IIJA has really started to hit, and we do expect that to be more of a tailwind for us through '24, but really, that's going to provide -- once that's ramped up, strong bidding environment out to 2028 and beyond. Energy transition still very strong. We see a lot of work coming out in electrical grid strengthening. We saw just yesterday, I think it was announced a [ballot] (ph) initiative in Texas, several billions of dollars in electrical grid strengthening. So, whether it's electrical grid work, environmental work, water work, transportation work, we're just seeing very strong support in all of our businesses in the U.S. The one area that we are seeing a little bit of potential softness would be in our land development business. That's -- you've seen housing starts trending down a little bit as interest rates have gone up. So that's something we're certainly monitoring. And that's not just in the United States. We're seeing that in the U.K. as well. So it's not a significant piece of our business, but certainly something that we're watching closely. But other than that, we see very, very strong tailwinds across our business.

Great. And then I guess, amidst this kind of outlook, how are you thinking about staffing up whether -- I think primarily in the U.S.? You've got a potentially large pipeline of demand. Are you going more with full time? Or are you looking more to go toward contract to keep some flexibility? Just -- and maybe how is the wage situation in terms of hiring engineers, consultants, et cetera?

Yeah. So the majority of the people that we bring on, Sabahat, are full-time employees. And I made a couple of comments in our -- in the prepared remarks. Firstly, that our voluntary turnover rates when people leave us have returned to pre-pandemic levels, down almost 2% in the last year. We had record hiring quarters in terms of number of people joining us. Q3 was another record. We're hiring at roughly 2 times the rate that we did before the pandemic. So, we've got good work. We're bringing on good employees. From a salary perspective, interestingly, we're seeing salary pressures soften a bit this year from what we saw last year. Last year, we saw overall salary increases in that 4% to 4.5%-ish type range. This year, we're seeing it in that 3% to 3.5%, sometimes 4%. But certainly, we've seen that the wage inflation has moderated from an expectation perspective as we go into 2024 in our industry.

Great. And then maybe just one last one. If you kind of take the demand commentary, just a commentary around the labor situation, kind of how would you think about pricing into kind of '24 and '25 relative to maybe '23? I'm not sure if that's something you're going to cover at the Investor Day, but just curious how the directional pricing environment is trending.

Yeah. I think what -- certainly what we've seen all through 2023, when you look at our project margin and such, you see that we've been able to pass on that additional salary pressure from a fee perspective. Certainly, I think we see that being the case as we move into '24 and beyond as well that the industry is busy. People -- we certainly are being more selective in terms of the projects that we pursue, the clients that we work for. And so I think that does give us a little bit of pricing pressure -- pricing support as well, sorry. But this is still a competitive industry. No one gets to write their own check. But we are seeing that we have a little bit of ability to increase pricing as well to cover that salary increases.

Great. Thanks very much.

Thank you. And one moment as we move onto our next question. Our next question is going to come from the line of Ian Gillies with Stifel. Your line is open. Please go ahead.

Good morning, everyone.

Good morning, Ian.

Good morning, Ian.

With respect to employee utilization in the third quarter, can you get it any better than it was? Or was that kind of as good as it gets?

I think it can get better. There is always room to move up. And again, when you think about all the different sectors we work in, you have different levels of utilization across different business lines and geographies. So, I would say that generally, there is opportunity to increase utilization. What's really interesting about the third quarter and utilization where it was the strongest was our Water business, both in Canada, but particularly the U.S. And you saw that in our revenue growth. And that really was the product of being able to import work from -- workers from other parts of our business to help address the backlog. So, I think about 100 FTEs that we used from an imported talent standpoint. We -- I think we used 50 to 60 FTEs in our Pune office, and that's really what helped to drive utilization now. But as I commented earlier, when we go into the fourth quarter, we really want to see some of those folks take a bit of time away because the utilization has been so high. And so again, and we'll expect some of those folks that maybe have been lent into that business go back into their own businesses as they start to pick up. So that mix is really, really dynamic. But it's a bit of a long answer, Ian, but I think really we were very successful and have become very successful at how we manage our workforce. And so I think overall, the ability to continue to move utilization up is certainly there.

Okay. Thanks. That's quite helpful. Theresa, maybe bring you back some of your time [indiscernible]. I wanted to ask about cash taxes. I know there's been some changes in the U.S., which have kept those elevated. Are you seeing anything transpiring on that front that makes you -- that could normalize or change in the future here to perhaps even improve free cash generation where it is today? Or is it pretty steady state?

No. I mean I think cash taxes, unfortunately has taken a step in the wrong direction, mainly because of this U.S. Section 174 to change in how they allow deductibility for your R&D costs. So I think everybody knows that up until very recently, you were able to deduct them as you incur them. And starting this year, we now have to capitalize them for [tax] (ph) purposes and are only allowed to amortize them over a five-year period. And so with that said, is to actually increase our cash taxes until we reach kind of a five-year time horizon where now we have five years of programs all rolling over together, it will take a dent out of our cash flow to a greater extent than we've seen before. But as you saw from our results, we continue to focus on strong cash flow generation, and in spite of that extra bit of taxes we're having to pay in the U.S., we're managing to continue to strengthen our cash flow.

Okay, that's helpful. Thanks very much. I'll bring it back over.

Thanks, Ian.

Thank you. And one moment as we move on to our next question. Our next question comes from the line of Maxim Sytchev with NBF. Your line is open. Please go ahead.

Hi, good morning, Gord and Theresa.

Good morning, Max.

Good morning.

I think you guys have recently added a Chief Technology Officer to your management roster. And I'm just wondering in terms of maybe some of the kind of the road map that this individual is going to be hoping to sort of implement especially on the digital side, I was wondering if you can give us a bit of a preview from that perspective.

Absolutely. We're thrilled with the individual that joined us as our Chief Technology Officer. And so that -- as we've been talking over the last couple of years about our -- some of our digital programs, whether those are internal initiatives to increase the amount of net revenue that we can generate per employee from an efficiency perspective and also externally in terms of the products that we can develop and offer for sale to our clients who are looking for them. And so, we've been working through that for the last couple of years. This individual who's joined us, really his charge is to focus on both of those activities, both internal and external, working very, very closely with our current Chief Information and Security Officer who provides sort of the foundational piece, the cyber, the tool sets and then working closely with our CTO to ensure that we're focused, we're getting the highest use. And I think you'll see over the next couple of years, we're going to increase the amount of time and focus that we're spending on those digital products. So, we're really excited about it. And I think it'll -- we'll see some really short-term benefit from that as we go into 2024 and then only strengthening in the years to come.

Okay. Yeah. And to your point, like the tools that are being kind of developed or rolled out, I presume it's -- most of the stuff is kind of [above the shelf] (ph). So it's not like sort of super bespoke to see the results like in 2027 range?

No, I think that's right. So a lot of the products that we are developing externally, for example, we already have products for sale on the Microsoft Azure marketplace that clients are going directly there to purchase and go. So, we are looking at less bespoke one-off type products for a client and more of something that we can resell, offer as a software-as-a-service and generate higher margins from that, increasing the amount of non-labor revenue that we generate there.

Okay. Super helpful. Thank you so much. And Theresa, just a quick question for you, if I may. Do you mind maybe just commenting on kind of the puts and takes of global growth outside of the U.K. just in terms of what you guys are seeing there? Thank you.

Yeah. So I think outside of the U.K., Australia is certainly our next biggest geography or probably actually similar in size and if you throw New Zealand in with that. Again, both performing very well. We see good growth drivers in both of those geographies. New Zealand, in particular, is an incredibly strong operation for us, albeit just under 1,000 people, they continue to perform very well. So the water sector in both of those geographies will continue to be strong. And of course, we're very strong there. And the transportation side of things, from an infrastructure standpoint, probably still on the upswing as we've seen in the U.S. with funding promises and funds allocated, and so that growth, we expect -- we would expect to continue to show up. And on the energy and resources side, from both the mining standpoint in Australia, the growing market for energy -- renewable energy in those geographies in Australia, again, are very strong drivers. So, we feel very positive about that. So, some of the smaller spaces, the Netherlands where we have an environmental services business, very good demand there. And so across the board, I think we feel that there are good drivers in each of those geographies. And again, as it gets smaller, it's a little bit harder to detect in our results. But as we've said before, it really is part of what makes our business model so resilient is how diversified we are both in terms of business line and geography.

Okay. 100%. And Gord, maybe just any kind of final thoughts in terms of kind of the M&A landscape? What are you seeing now? Thanks.

Yeah. The M&A landscape, very, very busy. And we certainly are in active discussions with firms in different locations around the world. So it's robust. We're seeing multiples, not necessarily trending upwards, but not a lot of softening either over the last couple of quarters. So we're going to keep working on it, Max, we're very, very disciplined. And when we're ready to move forward, you can see that the dry powder is there, and we look forward to announcing something.

Excellent. Thank you so much.

Thank you. And I would like to turn the conference back over to Gord Johnston for closing remarks.

Great. Well, thank you again for joining us today. We're very pleased with our performance this quarter, and we look forward to rolling out our new three-year strategic plan on December 5 in Boston, and we hope you'll be able to join us either in-person or via the webcast. So, goodbye, and thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.