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Stantec reports third quarter 2017 results with continued positive organic gross revenue growth in line with expectations

Highlights

  • Gross revenue increased 3.3% to $1.3 billion from Q3 16 to Q3 17
  • Overall organic gross revenue growth was 6.0% from Q3 16 to Q3 17
  • Strong organic gross revenue growth achieved in Energy & Resources business operating unit (BOU): up 5.7% from Q3 16 to Q3 17
  • Organic gross revenue growth achieved in Buildings (3.0%), Infrastructure (2.8%), and Environmental Services (2.0%) from Q3 16 to Q3 17
  • EBITDA as a percentage of net revenue was 12.5% in Q3 17
  • Net income was $46.2 million in Q3 17
  • Diluted earnings per share (EPS) was $0.40 in Q3 17, and adjusted diluted EPS was $0.54 in Q3 17

Overview
Continuing a trend that started earlier this year, Stantec’s overall strength builds with organic growth in the third quarter of 2017.

Stantec’s gross revenue rose 3.3% from approximately $1.26 billion in Q3 16 to $1.3 billion in Q3 17, driven by acquisitions completed in 2016 and 2017 and overall organic gross revenue growth of 6.0% from Q3 16 to Q3 17; both Consulting Services and Construction Services contributed to that growth. This builds on organic gross revenue growth in Q2 17, which was up 4.5% over Q2 16. These results were possible because of the Company’s diverse services and local expertise in many locations across the globe.

Four of Stantec’s five BOUs experienced organic gross revenue growth this quarter: Energy & Resources was up 5.7% due to growth in the Company’s Mining and Power sectors; Buildings was up 3.0%, due to continued activities on our Canadian healthcare projects; Infrastructure was up 2.8%, mainly due to the Canadian Transportation sector; and Environmental Services was up 2.0%, mainly due to higher than expected project volumes in the Company’s Global operations.

Stantec’s Water BOU experienced organic revenue retraction of 3.0% due to the completion of certain US projects and delays in project starts. These factors—as well as unfavorable foreign exchange rates, lower gross margins in Construction Services, a $3.8 million increase in the fair value of the Company’s stock-based compensation, and impacts from the hurricanes in Florida and Houston—led to decreases in some  metrics in Q3 16 compared to Q3 17.

EBITDA as a percentage of net revenue was 12.5%; diluted earnings per share (EPS) was $0.40; and adjusted diluted EPS was $0.54.

Net income was $49.3 million in Q3 16 and was $46.2 million in Q3 17. The change was mainly due to the factors noted previously, along with a $3.6 million tax expense related to a corporate reorganization in Q3 17, which makes the Company’s corporate tax and organizational structures more efficient. 

Financial Summary

 

Quarter Ended September 30

(In millions of Canadian dollars, except per share amounts and %)

2017

2016

$
Change

% Change

Gross revenue

1,299.2

1,257.3

41.9

3.3%

Adjusted EBITDA (note)

106.9

113.7

(6.8)

(6.0%)

Diluted earnings per share

  0.40

0.43

(0.03)

(7.0%)

Adjusted diluted earnings per share (note)

0.54

0.55

(0.01)

(1.8%)

Cash dividends declared per common share

0.125

0.1125

0.0125

11.1%

note: adjusted EBITDA and adjusted diluted earnings per share (EPS) are non-IFRS measures and are further discussed in the Definition of Non-IFRS Measures in the Critical Accounting Estimates, Developments, and Measures section (the Definitions section) of our 2016 Annual Report. 

Executive Commentary
According to Bob Gomes, president and chief executive officer, Stantec met the challenges presented during the third quarter: “Of most importance this quarter is that all of our employees in the states affected by hurricanes are safe. We are heavily involved in recovery efforts in Texas, Louisiana, and Florida,” Gomes says. “While it’s too soon to say what our ultimate involvement in rebuilding will be, it’s very likely a lot of work lies ahead. As for this quarter’s financial results, the increases in gross revenue and organic growth represent a continued positive trend in line with the projections for performance we outlined earlier this year. We were very happy with our Energy & Resources BOU, which had strong organic gross revenue growth of 5.7% over the same quarter last year, driven mainly by growth in our Power and Mining sectors—a welcome development. The end of some large projects, delays in project start-ups in our water business, and foreign exchange rates negatively affected some financial metrics, but altogether, these results show that our diverse service offerings and our global reach mitigates business headwinds and helps us achieve consistent performance.”

Subsequent Event
Stantec declared and paid a cash dividend of $0.1250 per share on October 12, 2017, to shareholders of record on September 29, 2017. On November 8, 2017, Stantec declared a dividend of $0.1250 per share, payable on January 11, 2018, to shareholders of record on December 29, 2017.

Conference Call and Company Information
Stantec’s third quarter conference call—to be held Thursday, November 9, at 7:00 AM MST (9:00 AM EST)—will be broadcast live and archived in the Investors section of stantec.com. Financial analysts wanting to participate in the earnings conference are invited to call 1-866-233-4566 (Canada and United States) or 1-416-204-1042 (international) and provide the operator with confirmation code 2252252.

About Stantec
We’re active members of the communities we serve. That’s why at Stantec, we always design with community in mind. 

The Stantec community unites approximately 22,000 employees working in over 400 locations across 6 continents. We collaborate across disciplines and industries to bring buildings, energy and resource, environmental, water, and infrastructure projects to life. Our work—engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, construction services, project management, and project economics, from initial project concept and planning through to design, construction, commissioning, maintenance, decommissioning, and remediation—begins at the intersection of community, creativity, and client relationships.

Our local strength, knowledge, and relationships, coupled with our world-class expertise, have allowed us to go anywhere to meet our clients' needs in more creative and personalized ways. With a long-term commitment to the people and places we serve, Stantec has the unique ability to connect to projects on a personal level and advance the quality of life in communities across the globe. Stantec trades on the TSX and the NYSE under the symbol STN. Visit us at stantec.com or find us on social media.

Cautionary Statements
Stantec’s EBITDA, adjusted EBITDA, and adjusted diluted earnings per share are non-IFRS measures. For a definition and explanation of non-IFRS measures, refer to the Critical Accounting Estimates, Developments, and Measures section of the Company’s 2016 Annual Report and the Company’s 2017 Third Quarter Management’s Discussion and Analysis.

Certain statements contained in this news release constitute forward-looking statements. These statements include, but are not limited to, anticipated tax and organizational efficiencies to be gained by our corporate restructuring, and statements regarding anticipated work associated with hurricane recovery efforts. Any such statements represent the views of management only as of the date hereof and are presented for the purpose of assisting the Company’s shareholders in understanding Stantec’s operations, objectives, priorities, and anticipated financial performance as at and for the periods ended on the dates presented, and may not be appropriate for other purposes. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties.

We caution readers of this news release not to place undue reliance on our forward-looking statements since a number of factors could cause actual future results to differ materially from the expectations expressed in these forward-looking statements. These factors include, but are not limited to, our ability to secure and complete work in a competitive landscape, as well as global tax reform. Investors and the public should carefully consider these factors, other uncertainties, and potential events, as well as the inherent uncertainty of forward-looking statements, when relying on these statements to make decisions with respect to our Company.

For more information about how other material risk factors could affect results, refer to the Risk Factors section and Cautionary Note Regarding Forward-Looking Statements in our 2016 Annual Report and the 2017 Third Quarter Management’s Discussion and Analysis. Stantec’s 40-F has been filed with the SEC, and you may obtain this document by visiting EDGAR on the SEC website at sec.gov. You may obtain our complete audited annual consolidated financial statements and associated Management’s Discussion and Analysis for the year ended December 31, 2016 (which form our 2016 Annual Report) by visiting EDGAR on the SEC website at sec.gov, on the CSA website at sedar.com, or at stantec.com. Alternatively, you may obtain a printed copy of the 2016 Annual Report free of charge from our Investor Contact noted below.

Media Contact                    
Earl J. Woods                       
Stantec Media Relations   
Ph: 780-969-6544                  
earl.woods@stantec.com

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