Stantec raises 2025 net revenue growth outlook to 10%-12% while expanding through acquisitions

Earnings Call Insights: Stantec Inc. (STN) Q2 2025

MANAGEMENT VIEW

* Gordon Allan Johnston, President and CEO, announced the completion of the Page acquisition, a U.S.-based architecture and engineering firm, stating it “complements our buildings business and helps bolster our services in key growth sectors, including health care, advanced manufacturing, data centers and mission-critical, academic science and technology and Civic markets.” Johnston also highlighted the acquisitions of Cosgroves in New Zealand and Ryan Hanley in Ireland, which expand capabilities in buildings engineering and the Irish water sector.
* Johnston reported, “Stantec has delivered very strong results in the first half of 2025, delivering organic growth across all of our regions and business operating units.” He emphasized strong public infrastructure spending and private investments as major growth drivers, particularly in water, transportation, mining, energy transition, and mission-critical sectors.
* In the second quarter, net revenue reached $1.6 billion, up 6.9% year-over-year, driven by 4.8% organic growth. The Energy & Resources business delivered high single-digit organic growth, and water achieved 12.4% organic growth.
* Vito Culmone, EVP & CFO, stated, “We achieved gross revenue of approximately $2 billion and net revenue of $1.6 billion, an increase of 6.9% compared to Q2 2024. This was primarily driven by 4.8% organic growth. As a percentage of net revenue, our projects margins remained in line with our expectations at 54.2%. We achieved a very strong adjusted EBITDA margin of 17.8% in the quarter, a 120 basis point increase compared to last year.”

OUTLOOK

* Johnston announced an increase in 2025 guidance, stating, “We now expect to achieve net revenue growth of 10% to 12%, up from our previous guidance of 7% to 10%.” Adjusted EBITDA margin guidance was also raised and narrowed to 17%-17.4% from 16.7%-17.3%. Adjusted EPS growth guidance is now 18.5%-21.5% compared to 2024, up from the previous 16%-19%. Adjusted ROIC is expected to be greater than 12.5%.
* The company expects mid- to high single-digit organic growth in Canada and globally, with the U.S. outlook moderated to mid-single digits. Johnston noted, “We expect organic growth to accelerate in the second half of the year, and we've moderated our outlook slightly to mid-single digits.”

FINANCIAL RESULTS

* Stantec delivered adjusted EBITDA growth of 15% with a margin of 17.8%. Adjusted EPS grew over 21% to $1.36 for the quarter. Year-to-date, adjusted EBITDA margin is 17% and adjusted EPS is up 24.9%.
* Year-to-date operating cash flows doubled to $235 million from $117 million in 2024. DSO improved to 73 days, down 4 days from Q1, and net debt to adjusted EBITDA was 1.1x.
* The company completed $425 million in senior unsecured notes and increased its revolver credit facility to $1.2 billion. Post-acquisition, credit capacity remains just over $1 billion.
* Contract backlog at quarter-end stood at $7.9 billion, with nearly 10% year-over-year growth, including 9% organic growth across geographies and double-digit growth in Water and Energy & Resources.

Q&A

* Krista Friesen, CIBC: Asked about U.S. customer sentiment and acquisition integration. Johnston responded that private sector clients, particularly in data centers and mission-critical, are showing growing demand, and integration of recent acquisitions is progressing well, with financial integration expected by year-end.
* Sabahat Khan, RBC: Inquired about margin guidance and water business drivers. Culmone explained margin improvement was due to strong project margins, higher utilization, and favorable claim settlements. Johnston described continued robust demand in water, particularly in AMP8 and advanced manufacturing, with “no slowing down in the water space whatsoever.”
* Christopher Allan Murray, ATB: Queried about U.S. growth sustainability. Johnston noted U.S. organic backlog is up 9.8%, with strong fundamentals in transportation, water, buildings, energy transition, and mining. Culmone added, “macro factors are just continue to be extremely buoyant.”
* Michael Tupholme, TD Cowen: Asked if U.S. growth headwinds are resolved. Johnston stated issues are “diminishing a little bit,” but not fully resolved. Culmone echoed that project delays are minimal and cancellations are rare.
* Additional questions covered FEMA funding shifts, M&A environment, cash flow impact from U.S. tax changes, expansion of the Pune global technology center, Page acquisition details, cyclical market exposure, and pricing dynamics in the U.S.

SENTIMENT ANALYSIS

* Analysts expressed moderate optimism but pressed on sustainability of U.S. growth, integration of acquisitions, and margin expansion, showing a slightly positive but cautious tone. Questions focused on timing and durability of organic growth and market risks.
* Management maintained a confident and upbeat tone, emphasizing project execution, backlog strength, and successful integration of acquisitions. Johnston stated, “we're actually feeling pretty good about that acceleration in organic growth, both in public and in the private sector in the second half of the year.” Culmone highlighted operating leverage and cost discipline as margin drivers.
* Compared to the previous quarter, analyst tone shifted from neutral to slightly positive, while management’s confidence increased, especially with the raised guidance and successful acquisitions.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for net revenue growth was raised from 7%-10% to 10%-12%. Adjusted EBITDA margin guidance increased and narrowed, and adjusted EPS growth target was also raised.
* Q2 organic growth in Water (12.4%) and Energy & Resources (high single-digit) remained strong, while the U.S. organic revenue growth improved from Q1’s 2.4% to 4.4%.
* Acquisitions of Cosgroves and closure of Page and Ryan Hanley completed, compared to only announced deals in Q1.
* Analyst concerns shifted from U.S. project cycle timing and acquisition closure timing in Q1 to integration progress and sustainability of growth in Q2.
* Management’s tone became more assertive and confident, supported by concrete operational and financial achievements.

RISKS AND CONCERNS

* Johnston acknowledged lingering delays in U.S. public sector procurement and private sector investment decisions, though these are “diminishing.”
* Analyst questions focused on risks from slower U.S. growth, cyclical market exposure, and potential pricing pressures. Management reported no evidence of pricing pressure and highlighted ongoing demand.
* Thames Water’s financial difficulties were discussed, but management sees no payment issues or impact on operations.
* M&A landscape described as increasingly active, with more assets expected to come to market in the next 6-12 months.

FINAL TAKEAWAY

Stantec’s management emphasizes a strong first half of 2025, marked by robust organic growth, improved margins, and successful integration of new acquisitions. With net revenue growth guidance raised to 10%-12%, and enhanced targets for EBITDA margin and EPS, the company points to a healthy backlog, diversified geographic footprint, and continued momentum in key sectors such as water and energy transition as foundations for another record year. Management maintains a positive outlook for accelerating organic growth, especially in the U.S. in the second half, and signals readiness for further expansion and disciplined execution aligned with its strategic plan.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/stn/earnings/transcripts]

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