Welcome to Stantec's Third Quarter 2024 Results Webcast and Conference Call. Leading the call today are Gord Johnston, President and Chief Executive Officer; and Vito Culmone, 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. 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 statements 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. Please go ahead.

Good morning. And thank you for joining us today. I'm happy to report very solid third quarter results as we delivered another record quarter. We continue to see strong demand in all of our geographies and across our business operating units. Climate change, aging infrastructure, industry shifts, reshoring of production and incremental and breakthrough technologies all continue to drive this demand. We achieved record net revenue of CAD1.5 billion, up almost 16% compared to Q3 2023. This was generated with 6.5% organic and almost 8% acquisition growth. We delivered solid organic growth in each of our key geographies and we had organic growth in each of our business operating units with the exception of Energy & Resources. Our Water and Buildings businesses both realized double-digit organic growth. As a result of solid project execution, adjusted EBITDA for the quarter rose to CAD275 million, up almost 14% with a very healthy margin of 18% and we delivered adjusted EPS of CAD1.30 also up 14%. In addition to our record results, I want to highlight a recent accolade that Stantec received. Newsweek recently released their list of Canada's Most Responsible Companies for 2025. I'm very pleased to announce that Stantec was ranked at number one for our commitment to climate, social welfare and responsible governance. Over 700 of Canada's largest private and public companies were evaluated on over 30 key performance indicators. And those results were coupled with a corporate social responsibility reputation survey of over 4,000 Canadian consumers. The final rankings list included only 150 companies, where Stantec achieved the highest score and was the only firm in the rankings to achieve a score of 100 related to governance. We're honored to be recognized by organizations like Newsweek for our leadership in sustainability and for making a positive impact on society.…

Thank you, Gord, and good morning, everyone. The very strong results we delivered in Q3 continues our solid track record thus far for the 2024 fiscal year. Gross revenue in Q3 grew to CAD1.9 billion up almost 14% year-over-year and net revenue of CAD1.5 billion is up almost 16%. On a year-to-date basis, net revenue was approximately CAD4.4 billion up almost 15% compared to last year at this time. As a percentage of net revenue, projects came in at 54.3%, a decrease of 50 basis points compared to Q3 of 2023 reflecting a minor shift in project mix and as previously stated project recoveries and change order approvals in 2023 that were higher than normal for a single quarter. As Gord mentioned, we achieved a very solid adjusted EBITDA margin of 18% in Q3. Our year-to-date EBITDA margin now stands at 16.7%. And our adjusted diluted EPS in the quarter increased 14% year-over-year to CAD1.30. This increase reflects strong operational performance along with the revaluation impacts of our long-term incentive program due to strong share price appreciation in the prior period. Turning to our cash flow, liquidity and capital resources. During the first nine months of the year, we generated very strong cash flows achieving CAD296 million in operating cash flow. This reflects continued strong organic revenue growth partially offset by an increased investment in net working capital in support of organic revenue growth. DSO at the end of the quarter stood at 80 days which is within our target range. And as a reminder DSO is typically a little higher in the third quarter as a result of the seasonal impacts. Our net debt to adjusted EBITDA ratio at quarter end was 1.5 times a reduction from 1.7 times at the end of Q2 which reflects the free cash…

Great. Thanks, Vito. At the end of the third quarter, our backlog reached a record-setting CAD7.3 billion. Since December of 2023 this represents 9.5% acquisition and almost 5% organic growth, which was achieved across all of our regions. Backlog traditionally declined in the third quarter as we burn through a significant amount of work. However, this year despite our strong revenues, we've seen an increase in backlog sequentially from Q2 which really highlights the demand for our services. Our backlog represents approximately 12 months' work. Let me now highlight just some of the major projects we were awarded in Q3. First, I'll note that in the UK, we continue to secure our future workload related to AMP8 in the regulated water business. During the quarter, we received a significant win with Northern Ireland Water to provide feasibility, design and climate change services for the next regulatory cycle. In addition, we continue to secure additional AMP8 frameworks across the UK with significant contracts being won with both Thames Water and United Utilities over the last quarter. This brings the total number of AMP8 framework secured across the UK and Ireland to over 20 strengthening our position as the leading water firm in the UK and securing our market share in regulated water. Second between Community Development and Buildings, we've been awarded an MSA to assist a confidential data center client in selecting sites and providing design services for multiple data center campuses across Western Canada. In terms of scale, each site will equate to hundreds of megawatts. While data centers currently only account for 1% to 2% of our overall net revenue, it is one of the fastest-growing areas within our Buildings business. And given our strong expertise in the space, we see this business potentially tripling within just a couple…

Thank you. At this time, we will conduct a question-and-answer session. [Operator Instructions] Our first question comes from the line of Benoit Poirier of Desjardins. Your line is now open.

Yes. Thank you very much and good morning, everyone. Congrats for the results and welcome to the Stantec team Vito.

Thank you Benoit.

Yeah. Just in terms of organic growth, obviously, very strong performance during the quarter, especially from Water and Building that reported double digit. Any thoughts about the double digit sustainability for those two segments, and also if you could comment about Energy and Resources, obviously, you experienced some delays in the ramp-up of new projects and the wind down of some projects late in 2023. So just wondering what we could expect in the coming quarter for this segment? Thank you.

Yeah. Thanks Benoit. For Water and Buildings, we see really strong tailwinds for both of them. Certainly our Water franchise, extremely busy here in Canada, the US, Australia and New Zealand with the framework agreements there. And as we've mentioned, we've now won over 20 AMP8 frameworks in the UK and Ireland. So very strong growth going forward for the next couple of years there. Buildings is another interesting one for us. We all look at the ABI index and 20 quarters of successive performance below 50. But yet for us, you can see the strong organic growth that we've had in Buildings for the last couple of years just a little over 11% year-to-date for us here now. So we see good continued growth in the Buildings section. So to your comment on E&R, you're right. We've come off last year, every quarter that we had in E&R in 2023 was pretty strong particularly in the first part of the year. So we have seen some -- in Q3, Canada and the US we both had some positive net revenue growth there. But it really was the global mining business that pulled things down a little bit. So I think what we see is that we're still confident that we're going to return to organic growth in E&R in Q4. Just as an aside the backlog in our Energy and Resources group is up about 9% year-to-date. So that really supports that thesis of returning to backlog growth here in Q4 and certainly stronger performance going into 2025.

Yeah, definitely improving trend in E&R.

Yeah.

Okay. That's great color. And just with respect to the margin, a little bit down versus a year ago even if you normalize with LTIPs. I'm looking at admin and marketing expenses, percentage was up slightly versus a year ago. Is it just a matter of LTIPs? Or is there more cost to support the strong bidding activities that you see out there?

Benoit, you're absolutely right. As a percentage of NR, our Q3 admin was 37.5% this year versus 37.3% so up a little bit. That does reflect some benefit actually we had last year the share-based compensation would have been a headwind again. Because we had share price appreciation this year was fairly neutral. So, when you adjust for that you do have a bit more of increase relative to what we're showing in the externals. And what that reflects really is labor training and integration with respect to some of the acquisitions and which is normal all within our expectations. We've got some slightly lower utilization as we move staff off over some major projects coming out of last year into this year. But all very much within our expectations and we really are as we look into Q4 and into 2025 pleased with the progress against that.

That’s great color. I'll pass it over. Thank you.

Thank you.

Thank you. Our next question comes from the line of Jacob Bout of CIBC. Your line is now open.

Good morning.

Good morning.

Yes. Looking for maybe your thoughts around the election results. The view seems to be that Trump administration will be supportive of the IIJA and CHIPS Act but that we could see some changes to the IRA program in USAID. What are your thoughts? And any adjustments that you think you'll have to make?

I think as we were -- we've been thinking over the last year or so what a change in administration -- either changed or same administration in the U.S. might look like for our business and our industry overall. I think in general we feel pretty neutral about whichever firm was in there. We've been around a long time performed well under Republican Presidents and Democratic Presidents. So, to your point, I think IIJA is good. I think CHIPS and Science is good. Even IRA, the majority of that funding has been disbursed to Republican states. So, will there be a pullback there? Hard to say Jacob. But if there -- if President Trump might bring tariffs in, certainly that might bring some onshoring of manufacturing facilities back. And we've actually already had some manufacturing clients calling us asking about siting and design should that occur. So, we actually feel pretty positive about the economic opportunities for us going forward.

Okay. And then maybe just going back to the Investor Day that we had last December, you're talking in a 2026 net revenue of CAD7.5 billion and EBITDA margins of about 17% to 18%. Does that feel about right? I mean you're taking up your revenue guidance here or at least the midpoint. Does it feel like it's a bit more on the conservative side? Or how are you thinking about that?

I think we still feel really comfortable with that Jacob. Recall that was 50% net revenue growth in a three-year period of time. And so we're performing well. This year we see that continued performance. But yes we're not putting out any changes to that guidance at this point.

Yes. Yes Jacob on the margin side of things obviously we're pleased with our year-to-date EBITDA margin. I think we delivered a strong Q3 here. I feel good about where we're tracking to on a full year basis. We'll obviously provide 2025 color here with our year-end results in February and feel very confident that we can step into that 17% to 18% range. And then we'll take it from there quite frankly. I think there's lots of opportunity.

Excellent. Thank you.

Thank you. Our next question comes from the line of Frederic Bastien of Raymond James. Your line is now open.

Good morning. I hope everyone is well. Just wanted to switch gears on M&A. And Gord wondering if your pipeline is as busy or healthy as it was 12 months ago?

Yes. Yes. Thanks Frederic. Great question. We actually do see the pipeline of M&A very full not just here in Canada and the United States but also in different countries around the world. And all sorts of different sizes from that sub-1000 firm size to some that are a little bit larger than that. So, we feel really good about the overall pipeline. We're still feeling good about the competitive environment as to who we would see out there in various processes. So, no change to our M&A thoughts no change to sort of what we're seeing out there in terms of competition or the amount of firms available.

Okay. And when you think about adding new building blocks, I guess you mentioned a number of regions but is there a specific end market where you would like to bolster your presence?

Yes, I think we still have some opportunities for some tuck-ins here in Canada. But as I look at the U.S. I absolutely see the opportunity to even double our size in the U.S. U.K., we still have great opportunity to expand there. While we're dominant in Water we're not dominant in some of the other areas that we have Buildings Transportation and so on. We've spoken previously about the Nordics. I still would be interested in doing the right deal up in the Nordics. And we're looking down in Australia and New Zealand a little bit as well, but really focusing on a little bit Canada, the U.S., U.K., Nordics, and then a little bit down Australia and New Zealand.

Maybe just a good time for me to chime in. As the new guy we've been on the road a little bit and I do get the questions around capital structure and our perspectives on M&A. And I just want to reiterate what Gord has already articulated here. Historically, M&A has been one of the biggest sources of our value creation and we continue to see significant opportunities. We'll obviously remain disciplined. Balance sheet is in great shape. We continue to be levered here through Q4 and into the early part of the year. But significant growth ahead of us through the M&A channel.

Thank you both and welcome Vito.

Thank you.

Thank you. One moment for next question. Our next question comes from the line of Maxim Sytchev of NBF. Your line is now open.

Gordon I was wondering if potentially you could comment around the U.K. market in general. It feels like there's a bit of a turning of the page on kind of austerity dynamic. Curious to see if -- and how that could translate for your business in that geography. Thanks.

Yes. Thanks Max. Certainly in the U.K., we've talked a lot about the AMP8 cycle. And certainly we're transitioning to that. It officially starts in April of 2025. The final ruling from Ofwat as to the size of the AMP8 program is expected here in December. But as we've talked about before all indications are 40% to 50% increase in funding availability. I mentioned that we've secured over 20 new renewals or new AMP frameworks there. So we've been growing by market share a little bit in addition to securing the existing. So Water is really, really strong. We've already taken some additional real estate space there. We're hiring people there scaling up our Pune, India operations already there for that. From a housing perspective, the new labor government has talked about reducing some of the regulatory burden on the permitting side and getting more new houses built up to 1.5 million new houses. We've mentioned I think previously that we have a four-year master services agreement with Homes England to support that. So maybe it does feel like some of those things are all really positive tailwinds for us in the U.K.

Okay. And then just shifting gears to I think in the past couple of quarters you said that recent M&A sort of in the short-term is constraining the margin somewhat. And I'm just wondering if you can maybe provide an update here and potentially link it to some of the design center opportunity that could be coming through yes. Thanks.

Yes, Max, it's Vito here. Honestly from an acquisitions perspective and the integration, we're very, very pleased with the four that we're integrated at this point. We've got our normal sort of impact related to that but nothing to call out. Really pleased with the margins, really pleased with how admin costs are performing as a percentage of NR. So really I think it provides a bit of a tailwind as we move through Q4 into in 2025. But nothing really abnormal relative to other acquisitions we've had to call out all in order.

That's great color. Thanks Vito.

Thank you.

Thank you. One moment for next question. Our next question comes from the line of Jonathan Goldman of Scotiabank. Your line is now open.

Hi. Good morning. Thanks for taking my questions. Just one for me. I wanted to circle back to the question around the potential impacts of the recent elections. Gord does that change your outlook for the water franchise in the U.S. and specifically the potential funding allocated to the PFAS renewal work and other water infra programs?

Yes. The -- there's some funding for water program enhancement in the IIJA and certainly that's there. Will there be changes to either PFAS regulatory limits or time frames for work to be done? All remains to be seen. But while we've done some of that work and the industry is starting to ramp up for that work that still is a couple of years down the road. So whether or not there's a change made to that I don't see causing any impact on our Water business in the next number of years. Huge amount of opportunity still in water related to scarcity of water Southern California Southwestern U.S. in general flooding work in a number of the projects that we're doing in Texas and other areas. So there's just so much opportunity there in addition to the number of advanced wastewater and wastewater treatment that we're seeing with some of these new manufacturing facilities that are going in whether they're semiconductor solar panel manufacturing and others. So I think really any impact from the election on our Water business will be really muted.

That's great. Thanks. I'll get back in the queue.

Thank you.

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Gord Johnston for closing remarks.

Great. Well thank you operator and thank you to everyone for joining us this morning. If you have any questions following today's call please reach out to Jess Nieukerk, our VP of Investor Relations. So, thanks again and we look forward to chatting with all of you again soon.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.