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 Stantec reports second quarter 2017 results with overall 4.5% organic gross revenue growth
   Wednesday, August 09, 2017 6:45:27 AM ET

EDMONTON, ALBERTA and NEW YORK, NEW YORK--(Marketwired - Aug. 9, 2017) - Stantec Inc. (TSX:STN)(STN ) -


Gross revenue increased 26% from approximately $1.05 billion to $1.3 billion from Q2 16 to Q2 17

Organic gross revenue grew 4.5% from Q2 16 to Q2 17

EBITDA increased from $73.7 million to $158.1 million from Q2 16 to Q2 17, and adjusted EBITDA grew by 22% or $18.9 million

Diluted EPS increased from $0.20 to $0.85 from Q2 16 to Q2 17, and adjusted diluted EPS grew by 38% from $0.37 to $0.51

Administrative and marketing expenses as a percentage of net revenue decreased from 43.9% to 42.3% from Q2 16 to Q2 17

Proceeds from the Innovyze sale were used to repay debt by $221.3 million, and the transaction reduced goodwill and intangible assets by $194.4 million and $95.1 million respectively


Through execution of its consistent strategy of supplying expertise to clients through local offices around the world, Stantec gross revenue rose 26% from approximately $1.05 billion in Q2 16 to $1.3 billion in Q2 17. From Q2 16 to Q2 17, EBITDA rose from $73.7 million to $158.1 million. EBITDA was positively impacted by a decrease in administrative and marketing expenses as a percentage of net revenue, from 43.9% in Q2 16 to 42.3% in Q2 17. Adjusted EBITDA grew by 22% to $103.5 million. Diluted earnings per share (EPS) increased from $0.20 to $0.85, and adjusted diluted EPS increased 38% from $0.37 to $0.51.

Financial Summary
For the period ended June 30                                       2017 Q2 2016 Q2 Change
(In millions of Canadian dollars, except per share amounts and %)  $       $
Gross revenue                                                      1,318.6 1,046.6 26.0%
EBITDA (note)                                                      158.1   73.7    114.5%
Adjusted EBITDA (note)                                             103.5   84.6    22.3%
Net income                                                         97.6    21.2    360.4%
Adjusted net income (note)                                         57.9    39.5    46.6%
Diluted earnings per share (EPS)                                   0.85    0.20    325.0%
Adjusted diluted EPS (note)                                        0.51    0.37    37.8%
Cash dividends declared per common share                           0.1250  0.1125  11.1%
Note: EBITDA, adjusted EBITDA, adjusted net income, and adjusted diluted EPS are non-IFRS measures defined in the Critical Accounting Estimates, Developments, and Measures section of the Company’s 2016 Annual Report and the Q2 17 Management’s Discussion and Analysis.

Business Operating Unit and Geographic Results

Overall organic gross revenue growth of 4.5% was led by Stantec’s Buildings business operating unit, which experienced organic gross revenue growth of 5.1% in Q2 17 compared to Q2 16. The Company attributes this growth to the mobilization of new project wins in Canada and new opportunities in the US Education sector. In Q2 17 compared to Q2 16, growth in the Canadian and US Transportation sectors helped lift Stantec’s Infrastructure business operating unit to realize organic gross revenue growth of 4.6%; the Company’s Water business operating unit experienced 4.1% organic gross revenue growth.

In Q2 17 compared to Q2 16, Stantec’s Environmental Services business operating unit was stable, while organic revenue in the Energy & Resources business operating unit retracted 11.8%, a rate of retraction that slowed compared to 2016.

Executive Commentary

Bob Gomes, president and chief executive officer, noted that Stantec’s second quarter results met executive expectations. "These results were in line with our expectations and establish the trend of recovery in 2017 that we outlined in the first quarter. Organic growth in the consulting business was good across most of our business operating units and all our geographies this quarter. Buildings experienced a strong quarter, with organic gross revenue growth of 5.1%. We also experienced good growth in Water and Infrastructure. Including Construction Services, we had overall organic growth of 4.5% in the second quarter of 2017. This growth demonstrates the continued success of our full integration acquisition strategy and our ability to win projects and execute work around the world across a diverse range of sectors."

Impact of Innovyze Sale

As projected last quarter, the Q2 17 sale of Innovyze (the water software business that was part of the acquisition of MWH Global) had a positive impact on earnings in the second quarter; sale proceeds were used to repay $221.3 million of the Company’s revolving credit facility, reducing our interest payments. The sale of Innovyze also reduced goodwill and intangible assets by $194.4 million and $95.1 million respectively and reduced amortization of intangible assets by $1.2 million in Q2 17 compared to Q2 16.

The table below shows the impact of the Innovyze sale in the first and second quarters of 2017 and year to date:

Impact of Innovyze Transaction
(In millions of Canadian dollars except per share amounts) Q1 17    Q2 17    YTD     
Gross proceeds                                             -        369.1    369.1   
Estimated working capital adjustments                      -        (15.3  )      (15.3  )
Transaction costs                                          -        (16.9  )      (16.9  )
Net proceeds from sale                                     -        336.9    336.9   
Net assets on close                                        -        (282.3 )      (282.3 )
Pre-tax gain on disposal                                   -        54.6     54.6    
Impact on Taxes, Net Income, and EPS                                  
Current tax provision                                      -        (124.1 )      (124.1 )
Deferred taxes previously recorded on Innovyze net assets  -        27.6     27.6    
Deferred taxes recorded on held for sale classification    (90.4  )      92.4     2.0     
Income taxes expense                                       (90.4  )      (4.1   )      (94.5  )
Impact on net income                                       (90.4  )      50.5     (39.9  )
Impact on EPS - basic                                      (0.79  )      0.44     (0.35  )
Impact on EPS - diluted                                    (0.79  )      0.44     (0.35  )

Additional Company Activity

During the second quarter of 2017, Stantec completed the transition of projects and the financial integration of MWH Americas Consulting Services into the Company’s enterprise management system. MWH Global should be fully integrated in 2018.

In Q2 17, Stantec acquired Seattle-based Inventrix Engineering Inc. (Inventrix), adding 22 employees to the Company and enhancing the Buildings business operating unit in the United States. Inventrix provides expertise in mechanical engineering.

Also in the quarter, Stantec repurchased 465,713 shares for a total value of $14.4 million at an average price of $30.94 per share through its Normal Course Issuer Bid.

On July 13, 2017, Stantec declared and paid a cash dividend of $0.1250 per share to shareholders of record on June 30, 2017. On August 8, 2017, the Company again declared a dividend of $0.1250 per share, payable on October 12, 2017, to shareholders of record as of September 29, 2017.

Subsequent Event

On July 28, 2017, Stantec acquired Denver-based RNL Facilities Corporation (RNL), adding approximately 130 employees to the Company’s Buildings business operating unit. Along with Denver, RNL has offices in Phoenix, Los Angeles, Washington, DC, and Abu Dhabi. RNL provides expertise in architecture, interior design, urban design, and landscaping.

Executive Transition

During the second quarter, Stantec announced the retirement of president and chief executive officer, Bob Gomes, effective December 31, 2017, after almost nine years in that role. Bob will remain as a director on the Company’s board. The board of directors chose Gord Johnston, executive vice president of Stantec’s Infrastructure business operating unit, as the incoming president and chief executive officer. Gord Johnston has more than 30 years of industry leadership experience, including more than 20 years with Stantec. During his time at Stantec, Gord has taken on various roles, including business leader for the Water and Infrastructure business operating units, and has played an active role in helping guide the Company’s strategic planning over the past nine years.

Conference Call and Company Information

Stantec’s second quarter conference call—to be held Wednesday, August 9, at 7:00 AM MDT (9:00 AM EDT)—will be broadcast live and archived in the Investors section of Financial analysts wanting to participate in the earnings conference are invited to call 1-866-222-0265 (Canada and United States) or 1-416-640-5942 (international) and provide the operator with confirmation code 5088427.

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 or find us on social media.

Cautionary Statements

Stantec’s EBITDA, adjusted EBITDA, adjusted net income, 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 Second 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, the anticipated integration timeline for MWH Global. 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 successfully manage our integration program and respond to changing market conditions for Stantec’s services. 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 Second 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 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, on the CSA website at, or at Alternatively, you may obtain a printed copy of the 2016 Annual Report free of charge from our Investor Contact noted below.

Design with community in mind

- Continued, Consolidated Statements of Financial Position and Consolidated Statements of Income attached -

Consolidated Statements of Financial Position
                                        June 30        December 31  
                                        2017           2016         
(In thousands of Canadian dollars)           $              $            
Cash and cash equivalents                    203,529        210,903      
Cash in escrow                               3,436          8,844        
Trade and other receivables                  794,257        806,417      
Unbilled revenue                             475,350        421,829      
Income taxes recoverable                     51,152         46,705       
Prepaid expenses                             57,803         62,253       
Other financial assets                       17,513         20,890       
Other assets                                 5,223          4,679        
Total current assets                         1,608,263      1,582,520    
Property and equipment                       210,170        213,931      
Goodwill                                     1,581,812      1,828,061    
Intangible assets                            300,110        449,530      
Investments in joint ventures and associates 9,722          9,220        
Deferred tax assets                          28,332         26,195       
Other financial assets                       166,236        160,056      
Other assets                                 15,383         15,155       
Total assets                                 3,920,028      4,284,668    
LIABILITIES AND EQUITY                                         
Trade and other payables                     664,262        718,197      
Deferred revenue                             209,751        201,766      
Income taxes payable                         5,307          1,795        
Long-term debt                               200,572        91,876       
Provisions                                   30,134         36,011       
Other financial liabilities                  3,111          2,378        
Other liabilities                            21,698         20,795       
Total current liabilities                    1,134,835      1,072,818    
Long-term debt                               601,161        928,586      
Provisions                                   83,208         80,664       
Net employee defined benefit liability       46,331         50,490       
Deferred tax liabilities                     50,489         79,592       
Other financial liabilities                  7,504          7,591        
Other liabilities                            81,487         88,427       
Total liabilities                            2,005,015      2,308,168    
Shareholders’ equity                                           
Share capital                                873,741        871,822      
Contributed surplus                          19,736         18,736       
Retained earnings                            918,255        917,883      
Accumulated other comprehensive income       100,100        167,287      
Total shareholders’ equity                   1,911,832      1,975,728    
Non-controlling interests                    3,181          772          
Total liabilities and equity                 3,920,028      4,284,668    
Consolidated Statements of Income
                                                        For the quarter ended             For the two quarters ended        
                                                        June 30                           June 30                           
(In thousands of Canadian dollars, except per share amounts) 2017           2016          2017            2016         
                                                             $                   $                  $                    $
Gross revenue                                                1,318,681      1,046,642     2,594,941       1,802,025    
Less subconsultant/subcontractor and other direct expenses   427,194        269,316       829,656         396,051      
Net revenue                                                  891,487        777,326       1,765,285       1,405,974    
Direct payroll costs                                         412,186        360,420       813,606         649,929      
Gross margin                                                 479,301        416,906       951,679         756,045      
Administrative and marketing expenses                        377,247        341,630       757,981         613,307      
Depreciation of property and equipment                       13,568         12,547        27,474          22,604       
Amortization of intangible assets                            18,727         19,941        42,237          30,744       
Net interest expense                                         6,204          10,843        13,812          13,931       
Other net finance expense                                    1,361          2,524         3,550           3,652        
Share of income from joint ventures and associates           (1,252      )       (704        )      (1,985      )        (1,076      )
Foreign exchange (income) loss                               (1,053      )       (39         )      163             65           
Gain on disposition of a subsidiary                          (54,576     )       -             (54,576     )        -            
Other income                                                 (557        )       (253        )      (1,344      )        (128        )
Income before income taxes                                   119,632        30,417        164,367         72,946       
Income taxes                                                                                       
Current                                                      18,857         6,868         28,382          20,909       
Current tax on disposition of subsidiary                     124,053        -             124,053         -            
Deferred                                                     (967        )       2,378         1,810           245          
Deferred tax on disposition of subsidiary                    (119,945    )       -             (29,506     )        -            
Total income taxes                                           21,998         9,246         124,739         21,154       
Net income for the period                                    97,634         21,171        39,628          51,792       
Weighted average number of shares outstanding - basic        114,045,875    106,207,939   114,087,887     100,049,233  
Weighted average number of shares outstanding - diluted      114,355,587    106,621,988   114,454,989     100,451,362  
Shares outstanding, end of period                            113,816,504    113,907,017   113,816,504     113,907,017  
Earnings per share                                                                                 
Basic                                                        0.86           0.20          0.35            0.52         
Diluted                                                      0.85           0.20          0.35            0.52         

Media Contact Earl J. Woods Stantec Media Relations 780-969-6544 Investor Contact Sonia Kirby Stantec Investor Relations 780-616-2785

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