Stantec’s Q1 2025 Earnings: Strong Growth and Optimism

Stantec ((TSE:STN)) has held its Q1 earnings call. Read on for the main highlights of the call.

Stantec’s Q1 2025 earnings call revealed a robust performance, marked by strong revenue growth, successful acquisitions, and increased profitability. The company continues to expand its global presence and maintain a strong backlog, despite minor challenges in the U.S. market, particularly in government procurement. Overall, the sentiment was positive, reflecting confidence in Stantec’s strategic direction and financial health.

Strong Revenue and Growth

Stantec delivered impressive financial results in Q1 2025, with net revenue reaching $1.6 billion, a 13.3% increase year-over-year. This growth was driven by 5.9% organic growth and 3.2% acquisition growth, underscoring the company’s effective strategies in expanding its market reach and enhancing its service offerings.

Record Adjusted EBITDA and EPS Growth

The company reported a significant increase in adjusted EBITDA, which grew by over 19% with a margin of 16.2%. Additionally, adjusted EPS saw a remarkable 29% rise compared to Q1 2024, highlighting Stantec’s operational efficiency and profitability improvements.

Successful Strategic Acquisitions

Stantec announced two major acquisitions during the quarter: Page, a 1,400-person architecture and engineering firm, and Ryan Hanley, a 150-person consultancy in Ireland. These acquisitions are set to enhance Stantec’s expertise in key growth areas, further solidifying its competitive edge in the industry.

Strong Performance in Canada and Global Markets

Canada emerged as a strong performer with a 15% net revenue growth, 12.2% of which was organic. The global business also delivered impressive results, with a 20.3% growth in net revenue and 7.5% organic growth, reflecting Stantec’s successful international expansion efforts.

Record Backlog

Stantec’s backlog reached an all-time high of $7.9 billion, representing a 13% year-over-year growth, with 7.5% being organic. This record backlog underscores the company’s strong market demand and its ability to secure future projects.

Improved Cash Flow and Leverage

The company saw a 136% increase in operating cash flow year-over-year, and its net debt to adjusted EBITDA ratio was reduced to 1.1 times, indicating improved financial health and reduced leverage.

Slower Growth in U.S. Organic Revenue

While U.S. net revenues increased by 9.7% in Q1, organic growth was only 2.4%, primarily due to project cycle timing in the Water segment. This indicates a need for strategic adjustments to accelerate organic growth in the U.S. market.

Challenges in Government Procurement

Stantec faced some challenges in the U.S. market, particularly with government procurement. Changes in procurement practices have led to slower project timelines, posing a minor challenge to the company’s otherwise strong performance.

Forward-Looking Guidance

Stantec’s outlook remains optimistic, with the company maintaining a guidance of 7% to 10% net revenue growth for the year. The record backlog and strategic acquisitions are expected to drive future growth, with significant contributions anticipated from the Water and Energy & Resources sectors.

In summary, Stantec’s Q1 2025 earnings call highlighted a strong financial performance, driven by strategic acquisitions and robust revenue growth. Despite minor challenges in the U.S. market, the overall sentiment was positive, reflecting confidence in the company’s future prospects and strategic direction.