Welcome to Stantec's Fourth Quarter and Full Year 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 statement qualification set out on slide two, detailed in Stantec's Management Discussions 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'm pleased to turn the call over to Mr. Gord Johnston.

Good afternoon, and thank you for joining us today. Vito and I are currently traveling, which is why our conference call is so late in the day. Next quarter, we'll return to the regular cadence of our earnings calls. I'm pleased to report that 2024 was another record year for Stantec. We had a very strong finish to the year, with double-digit organic growth in the U.S. and high-single-digit growth in Canada and Global in the fourth quarter. All of our business operating units also delivered organic growth in the quarter, including Energy & Resources, which returned to growth as expected in Q4. We continue to thrive in a resilient industry, driven by macro factors such as water security, aging infrastructure, climate change, emerging technology and the expansion of advanced manufacturing. As a result, for the full year, we delivered record net revenues of CAD5.9 billion, up 15.8% compared to 2023. This was underpinned by 7.4% organic and 7.5% acquisition growth. With our focus on solid project execution and operational excellence, we grew our adjusted EBITDA to CAD980 million, up 18%, with an enhanced margin of 16.7%, reflecting a 30 basis point increase. We also delivered adjusted EPS of CAD4.42, up over 20% compared to 2023. Looking at our results in each of our geographies. In the U.S., we increased our Q4 net revenues 14.1%, driven primarily by 10.3% organic growth. For the full year, our net revenues in the U.S. increased by 13.3% through 8.6% organic and 3.3% acquisition growth. Water delivered double-digit organic growth through continued robust public sector and industrial project demands, as well as large scale water security projects. Our Buildings business also delivered double-digit organic growth, driven by solid investment across the healthcare, industrial and science and technology sectors. Momentum on major infrastructure projects continues…

Thank you, Gord, and hello, everybody. Our strong fourth quarter results include robust year-over-year net revenue growth of 19% to CAD1.5 billion, and that was driven by 9.3% organic and 7.6% acquisition growth. We achieved organic growth in all of our regional and business operating units, with double-digit growth achieved in our U.S. region and Water and Buildings businesses. Profit margins in Q4 increased 21.5% or CAD143.8 million and increased 110 basis points as a percentage of net revenue from 53.9% to 55%. This growth was primarily due to higher project recoveries and change order approvals during the fourth quarter, as well as continued strong project execution. Adjusted EBITDA increased 26.7% to CAD246.5 million. And we achieved a 16.7% adjusted EBITDA margin, an increase of 100 basis points year-over-year. We also delivered 35.4% growth in adjusted EPS at CAD1.11. Looking at full year -- at the full year, gross revenue in 2024 grew to CAD7.5 billion, up almost 16% year-over-year and net revenue of CAD5.9 billion is also up almost 16% compared to 2023. As a percentage of net revenue, our project margins came in at 54.5%, and that's an increase of 30 basis points compared to 2023, again, as a result of net revenue growth and strong project execution. We achieved a very solid adjusted EBITDA margin of 16.7% in 2024, an increase of 30 basis points from 2023. And finally, our adjusted EPS in the year increased over 20% to CAD4.42. Turning to our cash flow, liquidity and capital resources. During 2024, our operating cash flows increased 16% from CAD520 million to CAD603 million, and that reflected continued strong cash flow generation, growth of course and solid operational performance. We also achieved greater than one times free cash flow to net income for the year. Our DSO at the end of the fourth quarter stood at 77 days, and that's consistent with the prior year and remains well within our internal target of 80 days or lower. Our net debt-to-adjusted EBITDA ratio at the year-end was 1.2 times, a further reduction from 1.5 times at the end of Q3. We remain well within our target range of 1 to 2 times leverage. And our balance sheet continues to be in great shape. As a result of our strong performance, the Board has approved a 7.1% increase to our dividend, now at CAD0.90 per share on an annualized basis. The dividend continues to be a key component of our capital allocation plan. And with the strength and growth of our earnings, we've been able to raise the dividend consistently, while still lowering our overall payout ratio and ensuring we have a very strong balance sheet for M&A. Gord, with that, I'll hand the call back to you.

Great. Thanks, Vito. At the end of 2024, our backlog reached a new record of CAD7.8 billion. This is truly remarkable and really highlights the demand for our services as backlog in Q4 is generally lower given seasonality. This represents a 24.1% increase from December 2023, driven by 9.7% acquisition and 8.5% organic growth. Organic backlog growth was primarily achieved in our Canadian and US operations, with Water realizing an impressive 24% organic growth in backlog. Organic growth in Global's backlog was relatively flat. But this is primarily due to timing. In New Zealand, we experienced a high project burn rate on some major Water projects and we yet to convert new contracts into backlog. And similarly, while some AMP8 contracts are currently in backlog, there are many more yet to come as AMP8 officially doesn't start until April of this year. Our backlog represents approximately 13 months of work and underscores a sustained demand for our services to support our clients' most pressing challenges. Turning to some of the major projects we were recently awarded. In the fourth quarter, we were appointed to Thames Water's GBP400 million asset, capital & engineering framework for AMP8. Stantec will provide asset strategy, engineering design, environmental and program and project management support across the entire lifecycle. In December, Ofwat announced that GBP104 billion has been approved for the overall AMP8 program, of which we've won over 20 different frameworks, significantly enhancing our leadership -- our leading Water position in the U.K. And I'd like to highlight that AMP8 is approximately 75% larger than AMP7. Stantec has been selected by the University of Texas at Dallas to provide design planning and programming for a new multistory, multi-building student housing project. Integrated services will include architecture, building, engineering, landscape architecture and the selection of furniture,…

Thank you. [Operator Instructions] And our first question will come from the line of Sabahat Khan with RBC. Your line is open.

Great. Thanks very much. Maybe just for the first question, there are a lot of moving pieces in the operating backdrop. I mean provide a bit of color on sort of your outlook, but maybe you can just dig into what are some of the things you're seeing in the demand environment, the conversations you're having that give you confidence in the kind of the total revenue growth that you laid out here for 2025? Thanks.

Sure. Thanks, Sabahat. Great question. Some of the things we look at is just straight to the backlog and that very, very strong organic backlog growth over the year. Some of the main areas where we see there, firstly, in our Buildings business, continues to be very strong. We saw an organic growth ramping up in the Buildings business, hitting almost 18% here in Q4. And we see a lot of really strong opportunities in the Buildings business going forward. But when you look at Water, which has been extremely strong for us over the years, 20% organic growth in 2023, another 14% organic growth here in '24 and a 24% backlog increase organically going in Canada and the U.S. going into 2025, that certainly drives us with that -- leaves us with a very, very high degree of confidence. And then we mentioned in the U.K. where we've talked before that we have the leading Water franchise there moving into AMP8 with a 75% increase in the capital program there, and a lot of that work isn't yet in backlog. So our Infrastructure business with transportation very, very strong around the world, also, we're seeing continued engagement -- continued project pursuits in the pipeline again in the U.S. So whether -- it's really all of our different business lines in various geographies are feeling really strong. There's always going to be little pockets of weakness here or there. But overall, from a -- the overall company, we still feel very strong about the -- going forward.

And Gord, just maybe if I can chime in on that. And the last piece you mentioned, I think is really important. Not only the backlog, but also the proposal activity. We're really seeing continued strong proposal activity right up to sort of the current times, and that's a strong reflection of demand environment continues to be quite robust.

Okay, great. And then similarly on the margin guidance, looks like 16.7% to kind of 17.3% guidance range on the EBITDA line. The lower end seems to be in line with what you reported for full year '24. Maybe if you can just share some assumptions around what moving parts would get you to the low end of the margin guide versus getting something closer to that 17.3% range? Thanks.

Yes. We feel really the progress we've made on EBITDA margin and continued obviously incredible focus for us. It's really about the quality of the work that we're doing and converting and obviously to cash. So I'd say probably the biggest driver in the 16.7% and 17.3% is really project margin. And with respect to project margin, then you're into mix elements. I mean, we're very pleased with the project margins across our entire businesses, but Global SKU is a little lower than North America and whatnot. So to the extent that mix is probably going to be the biggest driver of that, from where we'll be in the range side of things. But continued focus obviously on operational leverage, use of our high value centers, utilization, the use of technology and driving productivity, all those continue to be very important levers for us as we move forward here. And, obviously, our 2026 guidance was 17% to 18%, and this is a nice step into that range.

Okay. And then maybe the last one, you highlighted the balance sheet is in good shape and provided a little bit of color on your M&A outlook. Maybe a two-part question there. One, can you maybe just talk about the mix of opportunities within that pipeline across large opportunities to something more small or medium sized? And then secondly, has an operating backdrop and some of the noise in the macro environment change the target's willingness to transact or the multiples at all? Thanks. And I'll leave it at that.

Sure. I'll start with the first part. And Saba, we -- in terms of the firms that we're looking at now, our sweet spot has always kind of been in that mid-sized, 1,000, 2,000 person company. There's still lots of opportunity there. And you heard Vito mention too, balance sheet very, very strong. There are some other -- there are some larger ones that we see coming to market in the next six, 12, 18 months. And we'll absolutely have a -- take a good look at those. But from globally, whether it's in primarily in the U.S. and other countries globally, lots of opportunity in that 1,000, 2,000 person company that we -- that we're very, very comfortable with.

Yes. And Saba, in respect to the second part, it might be too early at this point, but we are not seeing any discernible sort of change in the environment, both whether it's from a multiple perspective or whether it's from a funnel perspective related to the macro drop. But it's interesting to think a little bit about that one and you can probably land on both sides of that as far as either making it more ripe or maybe slowing it down a little bit. But at this point, we're not seeing anything. And based on the quantum of our funnel and our opportunities and whatnot, we don't anticipate any challenges and continued our M&A pursuits as we historically have.

Great. Thanks very much.

Thanks, Saba.

Thank you. One moment for our next question. And that will come from the line of Krista Friesen with CIBC. Your line is open.

Hi, thanks for taking my question. And congrats…

Hi, Krista.

…on the quarter. I was just wondering if you can speak to a little bit more detail around Energy & Resources. Obviously, a stronger quarter in Q4 than we've seen earlier in the year. If you can just speak to that? And then, maybe also how we should think about 2025? Thank you.

Yes. And so Energy & Resources, as we -- through the first part of the year, we had seen that organic retraction in Energy & Resources in part because of really high comps as we were finishing up projects in Q1, Q2 of last year. And so now we've returned to where we think is more sort of that middle ground on Energy & Resources. We've seen backlog in that group increase 14% year-over-year, which speaks to good opportunities for us going forward. So we've -- what we're seeing there is a lot of that growth is coming in Canada and the U.S. And so a lot of it kind of split evenly between power and mining. Some copper projects we've seen coming in Arizona. We've seen some opportunities for -- feasibility trade-off studies for mine and metallurgical site closures. In Chile, our teams won a number of very, very strong projects down there for permit management and engineer record and so on. So we're seeing mining coming back, but also power very -- being very, very strong. So we do forecast that E&R will return to positive organic growth for the remainder of 2025.

Thanks. I'll jump back in the queue.

Thanks, Krista.

Thank you. One moment for our next question. And that will come from the line of Chris Murray with ATB Capital Markets.

Thanks folks. Just a couple of questions about maybe the EPS guidance. Just trying to maybe square this a little bit. I was just wondering if there's anything in there that would be kind of unusual. A couple of things we noticed was that the intangible amortization stepped down quite hard in Q4. So just wondering things like that. And if there's any implication or thoughts around some stock buyback around there just taking share counts down?

Hi, Chris, it's Vito. Thanks for the question. No, I mean, at the end of the day, the EPS guidance is driven by the strong fundamentals of the business. So that's back to net revenue. Obviously, project -- strong project margin and EBITDA margin expansion. So that's essentially the most significant component of that. There are no modeling around any -- obviously no acquisitions or additional stock buybacks in that at all. A little bit of modeling there with respect to obviously a lower interest rate environment vis-a-vis 2024 and our lower debt level. So we've got some interest benefit -- interest expense benefit reflected in the guidance, but really it's driven by strong operating fundamentals.

Okay. That's helpful. Thanks. I'll leave it there.

Thank you.

Thank you. One moment for our next question. And that will come from the line of Frederic Bastien with Raymond James. Your line is open.

Hi. Good afternoon, guys. We saw organic growth reaccelerate quite nicely in the U.S. And I know you highlighted the Water and Buildings segment as areas of strength. But I was wondering if you could unpack this a bit more for us, if there is any particular projects or specific end markets that you saw a lot of strength in? A - Gord Johnston Pretty broad based actually in the U.S. We felt pretty good about it specifically in the quarter. In fact, in Q4, I think virtually all of our business lines in the U.S. had organic growth leading up to that strong just over 10%.

Every single one of them did. And many of them were double-digits growth. Yes.

Yes. And so we saw double-digit growth in Water and Buildings and in our E&R business, very strong in community development in terms of land development. So really pretty broad based, Frederic. But we also like to see that the backlog continued to grow year-over-year in the U.S., which is setting us up really well, I think, for a strong 2025.

Okay. Thanks for that. Just turning back to some questions were asked about the pipeline for M&A and that stuff. You highlighted some regions where you were focusing on and sort of the -- I guess, the size of the acquisition will obviously depend and you'll be opportunistic on that. But any specific disciplines where you'd like to become a little stronger and just add diversity to your offering?

We're not looking at this point into getting into any new lines of business. We see an incredible runway in our current five business operating units to just continue to grow those. And so I think as we look at it, we're looking at opportunities really in all of them, not prioritizing any more than others and just really having a look at the set that comes along those that we're pursuing. So no, I wouldn't say any particular areas of focus for us right now. We have a lot of opportunities in really all of our business operating U.S.

Okay, that's helpful. One last for me, if I may. You guide for a lower tax rate. What is behind that? And wondering if there's anything that we can read through into 2026. Is that going to be sustained into 2026? Or should we expect the tax rate to get back to a slightly higher level? Thank you.

Yes. I think the tax rate is essentially the same. It's no material change. 22.5% is our effective tax rate that we're guiding to. And so no substantive changes in overall tax distributions, if you will and/or planning. 22.5%.

Okay. Thank you.

You're welcome.

And one moment for our next question. And that will come from the line of Yuri Lynk with Canaccord Genuity. Your line is open.

Hey. Good evening or good afternoon, guys.

Yuri?

Hi, Yuri.

Wanted to dig in a little bit on AMP8 trying to put into context the -- that program being 75% larger than AMP7. Can you give us a flavor for AMP7's overall contribution to your Water business? And if program spending is up 75%, and if you've got same market share or less or more, I don't know what the case is, but like are you up 75% too? Like how do we think about this?

Yes. So as we look at overall, the AMP7 overall spend, the capital spend was in and around GBP59 billion and the budget for the spend for AMP8 is about GBP104 billion. So that's where that 75% increase comes from. What's particularly interesting in that, Yuri is that some of the water companies have actually launched appeals of the amount that they're -- that they could spend in AMP8 because they're saying with that spend that I've been given, I won't be able to meet the improvements in levels of service that you're asking me to do. So there's no guarantee whatsoever that it will increase above what it's currently there. But certainly I believe there's five of the water companies now that have launched appeals to actually get a larger capital spend in that base. So there's even additional upside to that. And so when you think about our overall spend or the potential benefit to Stantec, it's not a one-to-one increase with the increase in the capital spend, but it's often not far off from that. And so knowing that this was coming, we've begin -- we began even last year to take some additional real estate in some locations in the U.K., where we've ramped up hiring both in the U.K. and in our Pune delivery center so that we would be available and ready to take on these new assignments as they come. So great opportunities for us there, and in addition to the strength of the Water business in North America that we talked about as well.

And Yuri, the U.K. is -- obviously is our single largest revenue contributor in the Global side of the business, where we don't give specific country numbers. But the U.K. is -- and we saw really impressive both organic and acquisition growth. But through that region, that country last year, AMP8 -- AMP7 obviously contributed strongly to that. And we expect that to continue moving forward.

AMP8 kicks in...

In April.

April.

April 2025. Although we have already started work on some AMP programs, we were awarded some projects back in '24 on a strategic advisory sort of consultative process in order to start already planning in advance what the capital programs might be and kind of get a jump on it. So we hit the round -- the ground running here in April '25.

Okay. And last one for me. Just your CapEx was only CAD3 million in the quarter, abnormally low. Anything to call out there? And any -- or how do we think about that number going forward?

No, I think you could -- that's just timing more than anything else. We probably had some stuff that didn't quite qualify as capital and ended up on the balance sheet and sort of prepaid related stuff, but that would be more IT related items as you think about just normal accounting classifications, but nothing unusual at all and we don't guide to obviously CapEx on an annual base. Well, we do actually. We include the number and so you see what we're guiding to. I'd expect next year to be a very similar year from a pattern perspective with resulting strong free cash flow generation.

Okay. That's it from me. Thanks.

That's great.

Thank you.

And one moment for our next question. And that will come from the line of Michael Tupholme with TD Cowen. Your line is open.

Thank you. When we look at the guidance ranges you've provided and thinking specifically about organic growth, are the sorts of factors that could lead you to the high end versus the low end of that range, are those factors materially different in the current environment as you develop the guidance? Or would they be consistent, generally speaking, with the way you've thought about things in the past?

I think they're pretty consistent really. There is so much volatility in the world these days and no one really knows how things may shake out. But that's the beauty of our diversification model that we feel that if one country or one line of business goes -- gets a little bit stronger, a little bit weaker overall, we feel really good about the guidance. It's generally consistent from what we've been thinking about.

Agree.

Okay, that's helpful. Thank you. Second question is just about the Global region. So it does sound like you remain upbeat about organic growth for Global. I think you're talking about a similar level of mid- to high-single-digit to what you're expecting in the other regions. But if we look at the backlog, it was sort of flattish on a year-over-year basis. I know you did talk about some of the awards that you think will begin to contribute. Should we expect the cadence of the growth we would see in Global, should that kick in right at the beginning of the year? Or is there sort of a building of growth as we move through the year for modeling purposes?

I think you should -- you can expect a little bit of a build as we work our way through AMP8. I mean Gord has already referenced, obviously that -- some of that activity has started, but the U.K. will drive the -- we get to see some real strong performances across our Global business, but you should expect to see some increases in backlog as we make our way through 2025 related to the Global operations.

Right. And then just in terms of the organic growth, those similar cadence, like it would start a little slower, but you'd expect that to pick up and land you in that mid- to high-single as you get to the end of the year? Or is it is that strength observed throughout the year?

Yes, I think that's right. As AMP8 sort of ramps sort of ramps probably back half loaded, I would say from a calendar year perspective.

Okay. Got it. Thank you. And then just lastly, I think Chris touched on this, but I'm not sure. I'm not sure I got the full answer here. Just in terms of amortization of intangibles, it did come down in the fourth quarter relative to what we've seen in prior quarters through 2024. If we assume no further acquisitions, what does that look like on a quarterly basis as we move through 2025?

I probably can take that one offline with you guys and get you a more defined range. I don't have it on my fingertips here, but happy to obviously provide that.

Okay. Thanks.

And one moment for our next question. And that will come from the line of Benoit Poirier with Desjardins.

Yes. Good afternoon, everyone. Congrats for the very solid quarter. Just with respect to the California fires, we've been getting some inbound calls from client on that. And given your dominant position in the water space, we were wondering if you have seen any incremental customer inbounds following the fires?

Yes. Absolutely, Benoit. And more than just in the water space, this is where we -- our environmental people are in early. There is -- and we've had a number of clients reach out to us for everything from response plans, recovery plans. There'll be -- a lot of work will be required and things -- even things like characterizing the ash in terms of toxicity, how do you remove it, where do you remove it to. So we do expect an uptick of work required there. And what's positive in terms of the -- how quickly we can respond is, we do have master services agreements in place with a number of the utilities and public sector agencies in California. So we can respond to the request very quickly rather than waiting for a request for proposal process to go through.

Okay. And just with respect to the overall tariff, obviously there's a lot of question on the USA's federal work, but you provide a lot of granularity. And I'm just wondering whether we should be thinking that it could even turn to be out a net positive for Stantec as some clients may look to relocate to the U.S. And on top of that, you also have the FX tailwind. So I'm just wondering, if we should be thinking about being a net positive rather than a potential negative with respect to the overall tariff situation?

Yes. We are certainly not looking to benefit from any tariffs that might come in into play. But I think from your perspective, there is very similar to how we're seeing things. We have been talking for a couple of quarters that we have been getting some inbounds from clients that may be looking to move, relocate manufacturing capacity into the United States. So those are the sorts of things that we absolutely are having a look at.

Okay. And maybe just for Vito, could you provide maybe more color about free cash flow for 2025? Are there some moving parts with respect to either free cash flow conversion, DSOs? And maybe if you could provide right now, given you were talking about Pune, if you could provide the current headcount in your Global Technology Center, that would be great.

In Pune, where are we now, Gord? We're at 1,200.

1,200, 1,300.

That's where we're at in Pune. And that -- that's a combination of obviously service delivery folks on the front end of our business and support -- admin support, if you will, or corporate services support. Really pleased with the continued penetration there, the continued growth. These are just amazing people doing amazing work for us across our entire network and we expect that number to continue to grow obviously as we move forward here. And it's a key pillar of our EBITDA margin expansion of course. With respect to free cash flow, nothing strange, if you will, and/or different relative to 2024. You see our guidance there, which is a function of net income. We definitely expect to be there again. We guide to one time or greater of net income. Really pleased with the operating cash flow generated by the business, working capital, of course, DSO management. And just a shout out to all the project managers in the entire network that continues to focus on that. That's a lot of dollars associated with that. And it's a key accountability for folks and they're doing a great job delivering that. So we expect to -- obviously, you saw our year end number was at 77 days on a consolidated basis and continues to be a focus for us to continue to get better at that, if you will, and lower that. If you sort of map obviously free cash flow relative to where we are today and impact on leverage again, it just goes back to the tremendous operating cash flow capacity in this business. We'll obviously continue to, from a capital structure, pay our dividend and look to that. But just incredible capacity with respect to, obviously, balance sheet possibilities moving forward and, obviously, supporting our M&A strategy.

Thanks very much for the time.

Thanks, Benoit.

Thank you. One moment for our next question. And that will come from the line of Devin Dodge with BMO Capital Markets. Your line is open.

Yes, thanks. Good afternoon or good morning depending on where you are here. But I just want to ask, can you remind us where is Stantec on the evaluation of AI technology and where you're most optimistic about the opportunities to leverage these capabilities in your business?

Yes. So we have a -- an AI task force that we set up last year. That's really looking at the details of how can we use AI and other technologies to both improve our speed of delivery internally on both chargeable work that we deliver for clients, but also internally whether it's financial analysis, proposal generation, these sorts of things. And so that group has been -- the way we structured it, Devin, is we -- people submits inquiries to that group saying, hey, this is what I'd like to try with our -- with using these new AI tools and so then -- so we don't have 33,000 people around the world all trying different things and duplicating. We're trying to centralize that, get some economies of scale in terms of the work that we're doing. So it's actually working out really well. We're looking at things like proposal generation, financial analysis, we're using various AI and VR tools in the design process already just to both speed our ability to deliver the product, but also for how the client might want to review it. Many of our clients aren't engineers or technical people by training. So if we go to their office and roll out a set of blueprints that you see typically engineers carrying around underneath their arms, sometimes it's hard for them to visualize it. What might this look like, how would I interact with it? And so that's where we find using some of these AI virtual augmented reality tools really are beneficial.

Okay. Good context there. Thanks for that. And then just a quick one. In the MD&A, I think you talked about project margin benefited from some recoveries and change orders. I think we all recognize it that's a normal part of your business. But are you able to provide some color on how meaningful these were to Q4 results?

Devin, I -- it is normative sort of the impacts, if you will. They all relate to sort of 2024. So I think when you just sort of blend it all in, it's just a normal timing related items. We call it out because obviously it's a -- it was a factor, but I would not let that take away at all from just really the strong operating fundamentals in the business. And you see that reflected obviously -- yes, you see that reflected in our 2025 guidance. You've given a little bit of color with respect to quarters and Q1 and Q4 and whatnot from just a seasonal impact of guiding to EBITDA margin for the quarter. But all very, very strong.

Okay. Thanks for that. Congrats on the good close out here to 2024. I'll turn it over.

Thanks, Devin.

One moment for our next question. And that will come from the line of Maxim Sytchev with NBF. Your line is open.

Hi. Good evening, gentlemen.

Hi.

Gord, maybe the first question for you, if I may. In terms of some of the policy shifts, how are you guys thinking internally around, I guess, Canada specifically, any potential tariffs impacts? And then, in the U.S., if you don't mind providing a bit of an update in terms of how you think the curvature of IIJA spending is landing kind of like around the peak intensity. Is it still kind of 2027, 2028? Just wondering if visibility has evolved at all? Thank you.

Yes. No, great. Thanks, Max. When we think about the impacts of tariffs in the U.S. -- in Canada, sorry, what that might mean for manufacturing capacity. One thing that we reflect on is that a lot of the segments that might be the most impacted aren't segments that we are particularly active in, steel, aluminum, some of the big auto manufacturing and so on. So we see that impact on us would be -- it would be minimal. You might have seen that there was a Globe article a month -- or a couple of weeks ago about firms in Canada on the TSX that might be least impacted by the impacts of tariffs. And so that -- I think they kind of called out a little bit of that as well. And so we feel that we will be not impacted significantly in Canada if that were to hit us. We still hope it does not from an overall economic perspective, but so we think that we would be not significantly impacted. And then your question about IIJA and touch down in the U.S., we -- we've seen through 2024, our overall U.S. transportation business, we saw high-single-digit organic net revenue growth there. So things are coming. We're seeing still a lot of large transportation procurements that are moving forward. Tennessee, Austin and other locations, we haven't seen any impact there. We've seen a few task orders related to EV charging infrastructure on some of our projects have been canceled, but nothing material from an overall transportation perspective. As we're talking to our clients, their thought is still the work that needs to be done to improve the state of repair of the U.S. transportation network is still there. And so they're not looking to scale back at this point. I mean, we'll learn more as things go forward. But at this point, everybody is still feeling very, very good about it.

I know that's excellent color. And then I just had one follow-up question. In terms of Buildings, I mean that inflection in growth, how much of that is driven by like the semis and the data center space, if it's possible?

Yes. So certainly, there is some of it in there, Max. But a lot of it is just the general type of work that our guys do day in, day out. So it's -- we're looking at things like hospitals, which is really big for us in both Canada and the U.S. We're seeing a lot of work in Canada, in civic and education, certainly healthcare in the U.S., a lot of work in industrial, a lot of science and technology there and certainly a lot of healthcare. So data centers, absolutely, we're seeing that there, but that's not the main driver.

Okay. Interesting. And then is it possible to get a bit of an update on Germany, how that integration is going. Yes, that would be great. Thank you.

Yes. Yes. And we actually just finished reviewing all of the financials of all of our acquired firms. And Germany, in particular, is performing extremely well. The work, in fact, even a little bit above our expectations. And what we find there is that certainly manufacturing in Germany, you read about it in the paper all the time, is in a difficult situation. But the work that we're doing, roads, bridges, the railway network, is all continues to be very, very strong. Our backlogs are up, our margins are even better than we had thought. So we're extremely pleased by the operations and -- of ZETCON there in Germany.

Okay. Excellent. That's it from me. Thank you so much.

Thanks, Max.

And one moment for our next question. And that will come from the line of Jonathan Goldman with Scotiabank. Your line is open.

Hi, good evening. Thanks for taking my questions. Most of them have been asked, but just one more maybe for you, Gord. What are the factors that can get you to the high or low end of the organic growth guidance in the U.S. in '25? Or maybe asked a different way, do you see anything changing in the circumstances from the print you just put out in Q4 going into '25? Do you think these levels might be sustainable?

Yes, we actually feel really good about it and that guidance of that kind of mid- to high-single-digits. When we look at the overall increase in backlog that we've seen sort of across the board in the U.S., we think it sets us up really well for 2025 being a particularly strong year for us in the U.S. Backlog growth of almost 10% on an annual basis. So really driving and pretty broad based. So really driving strong support for us.

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

Thanks, Jon.

Thank you. That is all the time we have for our question-and-answer session. I would now like to turn the call back over to Mr. Gord Johnston for any closing remarks.

Great. Well, thanks, operator, and thank you to -- for -- to everyone for joining us. We feel really good about the performance Q4 and 2024 and certainly how we're set up for a strong performance here in 2025. So if you have any follow-up questions following today's call, please feel free to reach out to Jess Nieukerk, our VP of Investor Relations. So thanks again everyone, and we look forward to connecting with you again soon.

This concludes today's program. Thank you all for participating. You may now disconnect.