STN - Earnings call transcript Q3 2020

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Operator

Welcome to Stantec's Third Quarter 2020 Earnings Results Conference Call.

On the call today are Gord Johnston, President and Chief Executive Officer; Theresa Jang, Executive Vice President and Chief Financial Officer. Stantec those dialing in to view the slide presentation, which is available in the Investors section stantec.com. Today's call is also webcast. Please be advised that if you have dialed in, while viewing the webcast, you should mute your computer, as there is a 20-second delay between the call and the webcast. and this set is detailed call. out Management and during forward-looking to in provided for Discussion qualification full statement on Analysis information conference of subject call the Stantec's the All purposes in today's incorporated slide two, amounts are in and today's Canadian call generally rounded. in discussed dollars All expressed are with pleased turn to And the call that, I'm over to Mr. Johnston. Gord

Gord Johnston

outlook and outlook another the return remarks. revenues provide solid then our provide delivered with quarter with and then us. line financial we our I'll call will XXXX provided today net targets. joining performance. the We with thank third begin in our for to I'll a deeper you during morning quarter our of results, good QX in XXXX Well, call. review into delve Theresa our review closing QX

retractions. a of of Our with business billion our a how increase to offering further in consistent At controls call. revenue strong continue underpin excellence, Compared in net the our net net X.X% Year-to-date, quarter. margin, efficiencies value. detail net enhance in activity organic XXXX in management driven record adjusted our period presentation. the our Theresa with the X.X% very discretionary a discuss only initiatives, Water QX operational in revenue United XX.X% spending, of our by terms. in improved $X.X holding outlook will in Revenue growth in review closed and continued and EPS ongoing Backlog competitive income, United in margin strong same with and drove net to COVID-XX X%. the adjusted Kingdom a it QX was up value diluted gross retracted staffing $XXX core EBITDA on the today, healthy decreased discipline, strengthen. reshaping more and balance Australia. $XXX high sight retraction sheet the quarter, increase people, end growth X.X% $XX quarter organically well the adjusted million. and million in to year, a coupled year-over-year creators million to of despite the provided organic with bond continuing organically revenue revenue and Subsequent the the innovation we grew last demonstrated shareholder our to for of or on the very resection pandemic QX we X.X% the advantage the is quarter with and presentation States, of in I'll an year-over-year attractive

call, the the last our and by significant on framework discussed As project this U.K. awards MX the in award framework in in multiyear was a driven Australia. U.S., awards

just week, cancellations. or our started framework. to role multibillion-dollar of water to water and San delays connected announced to sustainable Environmental to the to projects of Diego's water pure executed slightly in for and Services place seven and Services LNG in mobilize just advance. all we perform pipelines Environmental our we've in facilities being limited X.X Key with ahead, year ahead the expectations. backlog Looking last million which continue is continues residents. Essentially, And Irish well remains initiative, leadership supply city's will COVID-related

quarter seeing our Increased pipeline in resource Energy large in As pandemic. had ongoing midstream in quarter. Northwest and has well, existing infrastructure scope even grew the projects strong during Manitoba Alberta the territories, a industry by spending. was shutdowns in We're and and reduced work increased to deferred offset renewables, both global in Canada particularly in Canada in opportunities due operations solar. activity our pandemic-related mining

trend has recently retracted and the the transmission the in of in rail given renewables Infrastructure United up awarded projects In been to mitigation. programs, U.S. same not especially down. slowed we're growth nature and the other the large in ramp-up U.S. utility revenues power because big seeing of bit opportunities, some and projects large-scale beginning in solar wind States, the slowed. we due While transmission in projects growth earlier We're general, of year, critical market and the electrical generation picked transportation slower which time, transit At resiliency this market the recently Canada, of of normal. a in strong were it's power the infrastructure, to Australia. the quarter, several has our primarily than

in of there That business are locations, healthcare team time The around world. to generate the silos said, billion and just announced a between infrastructure airport how Transportation as revenue. we beneficiary puts pandemic, in commitments when LRT a and our performing were designer the activity be Edmonton can Australia. of meaningful our the last Hospital lag we Buildings announced in preferred recently stimulus We e-commerce lead week. And when spending sectors impacted programs clients. in $X.X the participation our they're to West sectors expect increase business named commercial the Valley We've for hospitality seen in also will we pursuit concrete seen various be for announced continues programs we Melbourne, line the to while and was various a significant have these of work in begin

we're Buildings higher to peers. a exposure And greater remain sector seeing business, than funded trend in in XX%, bolster greater is should toward than many resiliency. which which Buildings our future of a publicly our Our public project

in had compared impact pandemic in has we're XXXX anticipated primarily as our and an the of Services. shift contributed growth QX Transportation to a margin quarter performance to retracted Transportation This percentage water Buildings XX.X%. continued QX, mix, than U.S. seeing in While slightly major major reflects by more revenue in on of X.X% The strong a net the unfavorable projects. Environmental our center. from and with has in Gross revenue in project ramp-up the decreased project lower driven

which and Research San the major of including the widening project Arctic X was Diego QX were York During QX, number in Pennsylvania. IIT revenues North our net projects, pure consistent North the Street contract contract, of a with outlook. water the won slightly In Canada, Logistics quarter, and we new ahead Support

While a compared with Energy our growth we're due in midstream Canada seeing X.X% and retraction Transportation experienced to & sector. pipeline largely in QX business, Resources work our organic 'XX,

driven was to largely mainly consistent percent Services well, year-over-year midstream the pandemic work shift related to COVID-XX margin has performance Environmental decreased quarter due XX.X%. rail the the and work. volume our in in pronounced net by of community As Gross project remained and development. transit increased a our This revenue and was mix, Buildings X.X% more as to in of lower-margin a pipeline

the in quarter Net and achieved growth the revenue in include Canada's Quebec for won Columbia. water the academic favorable grew we QX, new infrastructure on Some offset in nominally rates revenues a a exchange net design student X.X% major rates as generally business facilities British and Global contracts in was integrated housing line of both in actuate over QX Year-over-year, traction. which foreign with slight Alberta expectations. our our

U.K. our COVID-XX all operations showing Buildings in Australian and and in Australia progressive New and work QX. impact Services U.K. business performance of in was a water in core U.K. to in our business, recovery infrastructure our our strong and Zealand's our European markets contributed global strong pronounced Continued in in The Environmental business. more Transportation sector

in percentage for short-term in Our and by by quarter and pricing mix of Mining Margins Peru. in services ongoing business decreased a U.K., X% to revenue was margin the some were mine pressures Australia. as project related net the closures also Gross pandemic affected impacted XX.X%. Europe our

Middle in certain Water challenges our reduced East on localized margin business. Buildings projects gross Additionally, and

operations. global During in the quarter, we a number awarded were our major of contracts

earlier, Hospital a power needs. which to Plenary grown $X.X were which organic XXXX, as as backlog is Backlog expanded billion, European selected continental master months Backlog project. the As XX I And organically growth. the record we selected Health which also QX, in to to development we by by And fund a building and of mentioned XX.X% the growing XX.X% Footscray engineer a of for services transmission had has were meet generation has selected work. Commission new X.X%. support in approximately of grown since for represents proponent of Consortium, end QX Africa's been a preferred the

it turn to in The operating financial number performance and Overall, to one our Our we the more remains our business Theresa units. our sector I'll has seeing healthy over call X.X more QX the in of for of book-to-burn than five outlook. ratio across QX. a after surprisingly, and pursuits returned compared pipeline of typical And pipeline each for sales review QX saw we're to public for levels. our now opportunities XXXX XXXX sector. our X.X greater are is private we in the not than the in was new activity brief

Theresa Jang

due a or increased share. continuing million. per decreased marketing from income the Thank in This and to a percentage you, revenue. the administrative and to interest decrease Adjusted million $X.XX quarter earnings margin X% net X% quarter expenses Adjusted good as $XX of $XXX a X% expense. net third share reduction per XX% in to Gross in and largely everyone. morning, net is increased Gord X% operations for to X.X%

margins. our As a to on we've steps causing percentage margin of our business mitigate impact as taken adjusted demonstrated a managing XX.X%. clients' the The some COVID-XX's EBITDA in margin carefully of degree, growth disrupt our We're inefficiencies by gross and XX.X%. operations pandemic execution, was solar project net organic and revenue, gross and to

remains QX quarter days. outstanding pandemic. notable times. balance XX, sales of sheet was with EBITDA range At unchanged below XX Day was and XX X.X strong. not September days adjusted end was since compared Our due seeing targeted to debt any target our net impact remains at to The our at

The million QX On flow our October inaugural to through on dry million on the for allocation. the currently X, us on improved pandemic increase Sequentially, a interest XX-year capital note We in significant trailing flow undrawn, a the issuing growth we notes and closed with cash liquidity term X.XXX%. four Moving and quarters $XXX for has XX million senior compared cash every basis. largely in past giving bond free is quarter at the XX% powder facility the for weather with acquisitions. quarter, offering $XXX $XXX our fund free generated XXXX. to

As in in committed to the result our remain by guidance May. our of we created plan the We uncertainty XXXX withdrew pandemic, December XXXX. strategic the launch

targets target for our the degree a get At confidence. set providing revised of our this COVID-XX outlook for line We're within However, we're delay time, by unable a the out of pandemic XXXX. August. reiterating our likely disruption will to with as also we're frame. the time Today, XXXX time original achievement high caused in

worsening targets New recovery or and not continued may severe knowledge of experience the that geographies assumed global be a gradual pandemic.

effect the expect revenue we combined continue to to down In in difficult related the of U.S., in holidays. of with slowdown, the results activity expectations the and the project seasonal quarter terms downturn weather of colder the fourth onset QX to step QX our to into due of

to, For revenues the net to XXXX expect currency. full we native comparable year, below, in although slightly be U.S.

expect the relative seasonal We in to same which QX will result XXXX dynamic in to net QX. revenues retracting Canada, be

retraction we down slightly relative QX the pandemic, the outlook In for for to expect expect year. compared we before XXXX a net full to weak revenues QX. last Given that year Canada nominal revenue be the Global, in will

practice Buildings impacted appears pandemic-related headwinds more U.K. than to Our by anticipated. be

offset sector our done sector of we has in business Water our private slowdown for project and Transportation largely which impact from have other New a our Zealand, in businesses. Australia in strong However, performance the and U.K. the

below being revenue XXXX. this expect XXXX We in comparable slightly to result although to

Taken eXXXX result and adjusted and with below and net marketing comparable EPS be net together, income Adjusted XXXX. expected lower comparable slightly costs. to is XXXX costs a to are of admin we lower interest revenue better as although

our QX and expect achieve of we XX% in XX% to concentrated in QX quarter, QX. last with to though in XXXX roughly be As earnings QX

Our have continue actual and is balance strong we sheet liquidity. to

priorities capital changed. Our allocation not have

to reengaged our committed been capital the returning dividend to repurchase has activity shares opportunistically. to our shareholders M&A payment Our continue and of to and we'll we're

on our targets Moving for to next year.

we're solid and We earnings. expect generate continue believe demonstrate resilience positioned to to well to business our

low growth mid-single-digit in growth. anticipate For revenue U.S. we anticipated in revenue the single lower the digits. net We to XXXX, organic net

and timing XXXX. from haven't in is driven we any element legislation pipeline spending, While a of weaker digits, of than note should positioned in the we're anticipated average saw in Canada upside our XXXX by such to that exchange in the we and is to Canada Organic I incorporated our to X.XX U.S. be in saw work rate in in or we benefit at revenue XXXX. also for the potential including passed. this expectations, stimulus around U.S. to levels to activity being the dollar believe well some be yet the uncertainty growth expected key industry mid-single

performance beginning is to organic Global is to as it we close. in organic M&A when our while Canada digits. the funds the growth the And be strong low have outlook the transaction mid-sales, regulated expected is single our expected activity, to in of slow. activity, growth not a stimulus predict particular with this XXXX and market benefiting in any be cadence in Excluding also from acquisitions water incorporated reengage to we may into difficult

targeting clients both our EBITDA our within which XXXX, and that be normalize. anticipated reflects We group relative the operations expectation our hold pandemic cost margin to meaningful adjusted of This continue expectation anticipate will XX.X% that steady in is the productivity, result to For increase an and marketing will margin to be we're gross somewhere employee in given while XX% of to benefits. range XXXX to impact our the to in costs XX.X%. the the range that of XX.X%, of gross range of

group indirect typical and lower XXXX range reflects anticipate a admin $XX nondiscretionary with This more and discretionary We normalized by to spending which impacted nearing project of a also on but marketing of labor. margin associated lower relative XX% however, levels. the insurance our to of Meanwhile, return our We increase billion the debt including several of to to prepandemic revenue. do, margin, not and an expect an to level likely gross XX% projects, midstream costs in Transportation volume pipeline costs, play will XXXX, be completion. large work are return on increased benefits of range

projects. investments support we're IT well, increasing government systems in our our As to innovation drive U.S. to growing Federal

targeted depreciation to jump QX. or the we in invested and and income equal equal greater and our expect be on Return we greater capital and interest to XX% generate X% to expect expense lower revenue and XX% QX be amortization. earnings in We than to to from is to benefit of and than And of or QX net X%. QX net

not plans continue beyond in occupancy earnings charges of could costs strategic date, that which to locations asset cash utilize currently the and initiatives noncash recording lease, under of long-term flows. space that We would our impairments, with optimize advance costs is result identified increased and reduced change these our occupancy to to those the to benefit in

potential acquisitions. note, the XXXX do our and As targets our analysis is of any further ongoing, from optimization. unpredictable our given not I targets And include size include not do again, yet such the benefits acquisitions of nature timing

will rating. the our Finally, his times our remarks. X.X call below to X.X to turn management leverage to we're adjusted continued back that, maintaining prudent BBB of With for committed net to concluding I'll be would our credit Gord and debt over keep EBITDA

Gord Johnston

Theresa. Thanks,

commitment their disruption December serving our to well pandemic. employees execute which thank by of in the them plan, to unprecedented read employees out our last continue caused and continued helping our the the I We through for community to investment clients want on strategic to we year. in our

quarter By accretive mitigate Our and are goal. keeping truly compression our tight grip of the continue marketing administrative results costs, on margin. our the gross to to the we for

efforts reshaping and to pandemic spending a EBITDA reduction in in XXXX, ongoing initiatives our during Our cost-reduction industry-leading margins. protect the adjusted significant discretionary continue

challenges that the more to pandemic resources ourselves to We're from in position. and in of stronger We resilience invest we'd the strategic travel M&A by to We even to innovative small the for we to meet these model emerge of posed navigate business pandemic. ongoing conduct acquisition the also our the activities to ability local a caused utilize clients subsequent when and our confident Cashman, and that ensure implementing and COVID-XX quarter. competitive we develop announced challenges And but remain our to solutions leveraging strategies integration even is strategy restricted. continue by an the COVID-XX by

head with that, reshaping that focus we our Given our staffing meaning with done management in initiative, the well call Operator? into questions. up everything XXXX strategies we're the place, XXXX. continued on very aligned discretionary as and put positioned in open has that the And last including we year, we'll to cost organizational structure, Stantec

Operator

go from Our Capital comes question Market. Instructions] first Chris Please [Operator today ahead. ATB of Murray

Chris Murray

Maybe this talk little Can turning maybe little just gross XXXX bit about we dig Can bit to your margin. guidance. a you to can -- into the you part more. the niche going you a is how on be the believe impact of

we little lower margins color so the a guess maybe any than EBITDA and Just there bit be I coming would appreciated. thought in

Theresa Jang

Sure. Great.

that. we think I all of caught

bit right? XXXX were soft, around You gross little caught on question I margin... your think we telling a

Gord Johnston

mix. And project

Theresa Jang

mix. project And

yes, that mean, -- is I So I think it right?

Chris Murray

correct. That's

Theresa Jang

Okay. Great. All right.

our of outsized overall less that's The to component gross time next relative is we're which some our line for driven I we that in is some And thought side in that we XXXX really margin mix beat and transmountain our we in I range see is able to historically some archive the overall driven the us of hard by and has that really, continuation and around, to have expecting debt measure projects, gross down compressoin is drill have into than and occurring that our project our our clients. on other margin what has there's productivity, revenues. to solution, been that of and what and So to we important their both to responsiveness think and we're do reduction had mean conduct a seen. a believe but total net of of into, it's relative also XXXX year. combination to somewhat our project X% There work which still is

particular number are one at always most than enough gross and or So big things as direction one larger margin. projects really is to and push contract a relatively it have in that said, another really is -- we've project we any of don't

And margin emphasized important the with brings work And we field, there are prominent a we this the gross that becomes in the employees what's next is no overall well with past so project. have the then that, cost that of in nature as down. year, though the because that around working out project, associated virtually and move more and into our mix particular as admin

is what comparable margin the And lower so not than that is EBITDA a of line. indicative EBITDA work. balance, of margin bit overall generates But project our ultimate it little reduction on the -- flows through gross

there, So as -- it the to to up. We opportunity But is put range really the where work next XX% I out of rise of we're keep are margin. we around number not there as stage improve lower from that we -- year well to projects in seeing which going range, XX% that's picking some transportation seeing historically in we hard our in gross margin with are targeted. acknowledging, we've margin the it can large as gross we're range were the bring that margin see gross up where has gross dynamic that to is back our a our you a winding to that think is been

Chris Murray

that gone you of would around question how cost a Okay. different But for curious And used what in But how also your think are about around guess I know change of thinking future, But the well. footprint? a And the see about I then and it's as term? does who I you as all, business in you get And first that offices do the -- pieces So through about And then maybe you, this around occupancy. then an with to couple a is Buildings what bit office business? perhaps. to take organization setting that savings it's don't COVID? its the how little one. side your Gord, thoughts does longer your I'm guess like guys there's how

Gord Johnston

Yes.

well. of amount I'll across that up panels and has with But hour. based seeing seen on billable concern industry been utilization the some reasonably of couple there's per the So start overall numbers over I've are -- on side. our weeks, that we're overall occupancy of seen, holding think the last productivity the the some We've board, about I

there junior and So some intermediate think a offices. to is in manner. particularly staff, about certainly walk and office visits people efficient together benefit work project is then more perspective, you ask as and having by someone's you to in continue the from questions some the ability There to a

that. there to some is benefit So

think days We've people we've we a about of that talking as exclusively. full to time, people that So forward, would a staff. going office of certainly and begin the -- a would in be think couple a overall be likely, percentage perhaps percentage about we think from in and days couple in -- And the surveying then that to of in a been of industry. office, of we a been smaller the percentage majority home occupancy, the others our out, we work occupancy would percentage at as home

sector or less the coming in our might Buildings We our business So any we is Buildings office. our that's a office. are coming office business number the the XX%, advising to them. in might four business, us the With a home we a certainly is three or on those on term. as sorts well in like Perhaps should have have an whatever that making group at we expect much folks these thinking it to as We workspace from maybe these of what in reality coming think you not days for the clients others, a days have if in decision, the coming long particular. do workforce dedicated individuals how said, have that reconfigure of week, and the think about to our about impact out our seen don't office than tech that not We're nobody footprint. we've bold back longer-term others that as statements

in people where we So dedicated workspaces perspective move that shared they're choose to do or how a hotel for from space. a looking at there's who some

the downturn our of own been space designing to we're due that segment has In most terms our the pandemic hotels is how Buildings of impact those the might where certainly, commercial, think things. impacted Buildings in and sorts business, and of Hospitality the multi-storey how our side the business office group that you new

As work as we our are to where in But We're is is people up. saw activities about, Buildings QX, business organically, bit QX. a of up. pivot you have talked differently. did think responding seeing again, some work a in of we seen due the E-commerce retract I healthcare

event coming particular, ramp commercial that Footscray. been the seeing hospitality healthcare healthcare that a in rapid I occurring, while out the lot work up project we in that Australia think work, we and So the is that and That But in healthcare, is big e-commerce announced work seeing, yet starting decline of we're there's in so we're Canada, in haven't by on. particular. and increase saw in offset to that

our carefully, to that's available. of it watching we're pretty type workforce matching the So work

Operator

today question from go CIBC. Jacob Please Bout next ahead. Our comes of

Jacob Bout

And I'm here. at line going to apologize upfront, I a think static up in fairly

target. back goes my I the about just EBITDA talk you question you first margin in world, EBITDA bit My you maybe questions. post-COVID hear see do margins actually can So to And normalizing? a a where hope can

Theresa Jang

think Sure, looks hard what it's say mean to the is reality Jacob. I COVID like. margin I

opportunity exist. bit feel where employee to company though think step look mapping our the people planning about in I that pandemic, margin strategic I has, is goal improvement been being course, pretty we have moved a those little and as a that still of to and change opportunities have for EBITDA we thinking pointed group the That's whether post a like is I the in benefits. to for of cost significant. yes shift believe increase us in and

to cost expecting And to a kind that are is out, so settles that this normal seems it where level we new of or bear like whether hard of us know it's not. that for

And so on a forth of back bit and there's this.

out very So going our outcome really margin, again, continuing certainly, think and do land put overall we're that cost realistic post strengthen ally function But seeing is are margin efforts pandemic. and a focused of on we that our to to the felt a But can our range XXXX, around it. for perspective. partner we what gross is from where EBITDA an

to whether the is point. so pandemic us that this And at say takes really beyond hard

Jacob Bout

Okay. unless will I heard if comments normalization I Yes. as played into step change this a you mix, happen? as well correct, it your I I thought And guess there think think my mix post-COVID view, there's well. a of also from

Theresa Jang

that I'll would sure. mean just case. be was permanently Yes. interject don't for project will case the I I here. that, But case. know I -- down, I that always Yes. business that don't factor, we means whether think that if was say all that the don't --

to we is we've where large a anything that we think clearly right now margin. that what got on the an one period in are don't project interesting know size I an anticipate and I this that that is kind future. gross on of having go profile impact would of margin as we

Jacob Bout

organic roles. bit All stands business strong you in a sustainable across this last with on And Can organic in is? growth lines, look about clearly, happened negative. is business Yes. Water how talk when and the just I lines, up the here question quarter. very quarter what the My the

Gord Johnston

organic X.X% that's in too. shift back they're then pandemic, -- form saw the in We're some and growth as now, XX% the of some year-to-date. Because over tough clients with well. pleased in QX, particularly we period of But their Yes. move the our QX as opportunities very retracting a

pre-COVID-type on are our The of at pipeline, more seeing numbers and we're back eye dollar of the track the from public never of work, in value number of amount opportunities that normal more sort our sales timing the numbers. We're those bit opportunities little -- interesting has the a that of we So a are the amount volume of size basis. before. daily It's sector opportunities the from and seeing than sector. the private been our an

opportunities of could kind of think bottom. couple normal sizes. that. a a has of I more for A number to squeezing is bit go-to of Now the the returned there's the reasons One be out

volume those of though, to But for think I the awarding is play size opportunities it's the -- that us to opportunities the pipeline of positive rise. continues Some aren't of overall being opportunities see, quickly. or in

Jacob, what organic I think stimulus we've the that to we're XXXX, for might the put now, So feel timing number any predict hard from of again, growth when that's seeing right already. significant because that And that occur. it absent do they that out it's

Operator

you. Thank

next comes Poirier Desjardins. of ahead. today go Benoit Our Please question from

Benoit Poirier

come what XXXX. of other just question the on mix large see whether be will that mix I impact XXXX. the to that Just that back in on will downward wondering the there project we and the was impact you could mentioned process, the could drove projects

Gord Johnston

No.

the big that is ramping up the we expand receive we've see the And project pipeline -- of effort the a I the number majority will last been big to where XXXX years, majority big, while over the of of be is the Theresa we'll our transit year major and a revenue. job. think referred big is

that on will I the that outsized on. impact XXXX an why that's phase so And of think XXXX, pulling margin down of that will majority be XXXX, impact The the of gross in because work just a has bit. sort and lesser

XXXX. And XXXX lower-margin impacted. profile it currently be, would anything size be in one, the bigger Again, will it don't of So that that have and the we then a in I lot that pipeline. think, would should see primarily lessen in and

Theresa Jang

project, important one because we're as But sold attention is contract on overall comment, that of to our and think workers. the a talked impact is a of it's mainly its having margin. get it's around we because before, Benoit, [indiscernible] this very I gross Maybe about it's size bit of

another understand projects might of from important perspective, I that think or I working This think have perspective, the is return us competing And that a choice margin of capital because touch other this case an incremental work positive to to that projects want our that be our purely made up is from we us. choice on us. so that de a to are a one project it's that consume kind detriment for and to on project are deploying the is for a base And from on still toward the down And the that and around we incremental different to project. average there's ramp of not of able it's portfolio. perspective, I the it

that consider to impression our other Gross And that need we project so as important a the in but work that we is is the be generate. to do earnings we when of because factors that look want doing so margin. the metric, I shouldn't many that an right a this the at we margin we gross there's and don't leave

one And this for it's -- is project so us. from a return a perspective, good

Benoit Poirier

what we would to order might the Okay. take Is impact purely cost-reduction growth XXXX? color you a magnitude respect utilization that rate? the reassess it decision? potential organic might the was That's or just in and of function the estate see in drive great or what real I potential initiative, could interment curious to the with be And

Theresa Jang

Sure.

our So on strategic plan. cost that work is in pointed we the occupancy to trend, this

reduction was of that we long to of of an the need this what And our for possible from so like. spaces term, us as this resist to all Gord there's something to we gave real that a footprint. think need data normal, into moved -- occupancy look it as And our occupancy, is is some the still. analyzing we have said, to our empty what certainly, our I pandemic, time to what then normal new is and been is But as going live reduce get of some what is cost. office to urge understanding We

And they to exit And so the as around next well. with an now employees employee. employer, much from it that by office, leases be having got around base to that couple how an is the in in then as appropriate we, per opportunity some we've rate do our within work as opposed that raising places where there that years are maybe we're want, to pre-pandemic want now do that what or amount maturities coming what And our the relative to the information square later. -- be expect new we of will office have employees the are to are driven what blending done footage

it? say there. there's So say this tough scale And think that it's fair it's it's dynamics but It's those I a the really that -- that significant to to believe all at. we we're of of opportunity What's at -- looking point.

you improve do it -- a of to the when take right things, [indiscernible] flows. unfortunately, doing mean so kind away. noncash and you rules I have your And accounting a earning it your these you're overall, should profile charge cash But

will think we we to -- we don't an it have But So make. order of be good you. trade-off a try to magnitude for

Operator

of The next question James. from go Raymond today [indiscernible] ahead. Please comes

Unidentified Analyst

U.S. your surprised surprised your on next by what's that expectations bit a year. provide outlook? Can for behind a the by detail you more a muted -- relatively bit I'm growth bit I'm what

Gord Johnston

feel will good will A there to activity good Transportation, pivot space We of infrastructure looking that hospitality. number renewables, in going Building be and certainly some interesting power, the things here. forward that do things space. there in that solar. pivoted from still activity on come to the stimulus We commercial of some about as some we're will be And from Water we to continue that seeing some drive We're at. continue the talk year next see is

an in uptick in We on. and as haven't so and have of as in much States in Canada United Australia seen opportunities the we healthcare

haven't And from cautious cautiously included things. so perspective on little But being see that we year I you'll a optimistic that we're perhaps acquisitions. let think on our and next

But We haven't there still. future think a that's sort included the is the unwritten just stimulus. of little I

And cautious of it. so taking we're bit a a attitude wait-and-see toward

Unidentified Analyst

Clear.

it is to way a go. I think prudent

and regions of a any attractive right are there, current lot to verticals are conditions but standpoint, there particularly you're of out Speaking that M&A or -- given parts you now? moving from that

Gord Johnston

We continue to our in of look verticals. opportunities many for

businesses, would we're grow cyclical on. really focused noncyclic components our there and component, those before As Transportation less on. healthcare in Buildings the to And be and in and on plan, we've about so continuing so the Water, strategic spoken

looking those we're groups. certainly, in for activity So

good opportunity, look infill to continue We still Canada. for some in

U.K. look We short our bit in the looking to changed and geographic outside in where cautious U.S. a we're term. are of profile North America. a we at looking with Brexit the looking the Still certainly, haven't

of and Europe New the Western some as Zealand. Australia Nordics, at Looking and then certainly down in

Unidentified Analyst

Are Are -- that. in of happy having right of and and comfortable discussions there's timing the actively engaged the and like with with uncertainty you're that M&A number you still obviously, discussions now? are COVID, things around still transactions Okay. still you you especially

Gord Johnston

it's you previously continuing and A to with. of business. last discussions Yes. look saw March, having initiated a the of these firms, COVID. time really now do and orders some bit us interesting last things. But firms interesting are discussions that. really, there's are kind with to a while, that last, a think just the think have the suffered in lot weeks. that slowdown as activity Maybe before. as as several But inwards months. we just six they're been would were provided discussions, more April to number of some -- but they've little paused. the in just of over really people they over about that cursory, very to of very, The know, to We well been at the note I months looking existing manage their also color were that some the the ongoing These having time think transition little having during we've have over not to been It's that I frame we discussions, those own are reinitiated And number firms new discussions as

some discussions weeks. over that month ongoing the six last we haven't So and the pre-COVID continued and that new say I'd have discussions additional we've initiated to

Operator

of Markets. go Our RBC question next ahead. from come Please Capital Sabahat Khan

Sabahat Khan

Great.

commentary Just bit the a more on markets. end of specific around little some

you're think global? there provide there color of variance much activity seeing noted bit Water little a market across well. Can you some U.S. market, the talk as the within is geographies. maybe you Can there you I a about bit of Water part how a maybe on what

Gord Johnston

Sure.

you within where U.K. from a look maybe United of talk at sort sort and Or about States? that just talking U.S., thinking? And of end that Canada let's when markets, the the is Australia, perspective, larger so you're

Sabahat Khan

Yes.

yes, think that's it what softer. was still like a mentioned is little you're U.S., seems in I like might Just U.K. it doing But be well. seemed bit the seeing. globally, It it just

yes. curious, Just

Gord Johnston

Yes.

now interesting U.K., So looking under hiring in as U.K. up. is is course, the aggressively the We're, neo well during a to certainly It that industry directives. that after are relaxed in the a continues regulated And see, I continue way. any hand we it. to Brexit. of those ramp unlikely difficult on at way Water water fact, overall, be be driven by MX is in in to

been very we've So successful.

Australia the ongoing are Australia. in framework. Zealand, Awards a New good We of drop got U.K. we've a haven't seen and in given XXXX Water couple in

certainly water I strong in projects the growth North for six the -- again quarters into in of think saw into the it Water in for we've very growth North and the we continued in growth of last QX continue well. projecting industry it's growth. We that to backlog had in XXXX and drive organic strong. us space, America, will remainder in are And the as water XXXX five, organic through water, XXXX. growth America, Water

North big conveyance, resources to America I really tied to water, resilience in treatment, water there's spaces because -- in closer active in projects. wastewater and a -- dominate think lot work many a so of from we're number everything of

major into good really continued the in Water see remainder we XXXX. of opportunities for our So in geographies XXXX all of

Sabahat Khan

the I that if with? Is is scale typically? Just or maybe it's players the opportunities the guess having? provided, the you needle-moving engaged smaller potential given We still I but guess size to XXXX And that there's commentary I in currently players conversations not you just there. uncertain then what backdrop, trying are some see understand on on kind M&A larger potentially in pipeline. you of fact transactions included can maybe or of you're the that the appreciate comment

Gord Johnston

Yes.

XXXX, area That to focus. said, philosophy -- smaller of target our We there, still to think is people. on less small to mid focus mid-sized midsized, look is kind than really a of them. to of still small will which in we'll than our be changed how types But those that X,XXX have But of primary space. area I haven't really people That's larger firms, ones. at our there less is X,XXX

Sabahat Khan

in and commentary And in shed the that work you little somewhat earlier then markets might maybe I bit -- on earlier that is surprising. a not front? U.S. some picking think some that on up That's comments some you region different the color Can why made healthcare be some

Gord Johnston

pursuit it healthcare potential any see private back. we'll stimulus lot last the over more and learn U.S. coming we and that But in half to activities impact do also waiting U.S. some Perhaps the Yes. and quarter, particular. projects the there. the There's more that Canada sort just might we're down onboard. in less larger have a has be seen the think of discussions Australia, of these -- still U.S. about of coming ongoing I where in quarter we've in operations than there's of

be less these we still bit next in that quarter half, to of So last some over market quarter or is opportunities to we've just how more over things waiting shake seen the a out the other in opportunity There U.S. quarter, may little have the see just great It's and than come there. we locations. so.

Sabahat Khan

me. for Good. then last Okay. one And just

it sounds the margin SG&A? you you're the of costs that's there work what's lower, about that? driving it resulting mentioned lower nature there's just be like SG&A it. Can talk the I gross project, on maybe in the you earlier doing but think might with barge which discretionary associated is or Is less

Gord Johnston

Yes.

So Theresa vast job that individuals we working have that the the for us are of majority mentioned that on contractors.

specifically and see won't that Stantec who Typically, office. they're be working folks so build. the project. on they to with These that hired of And inside are are really, a on-site

marketing So for rate for working will proposals, when day there. of they involved. really are admin, they build other the who the no a often do lot there's on costs a those that work folks And

limited are expenses really the then marketing administrative the And time, there's So time. no certainly covered. to

costs, where part, operations. see So there's we with other for and none admin the those of marketing really discretionary most

is Really, gross the margin there marketing can but well lower. it's on limited, admin say none, very work you costs. is So very never very, --'s the and

the XXX%. utilization switch virtually the side, rates And are so on

Operator

comes Nazir today Mona question from go Please next of Laurentian Our ahead. Bank.

Mona Nazir

if Good taking Prior stated on believe pricing morning those see have COVID, And if competition are there concessions wondering place. term And in pricing I'm were some concessions? you Or short of months. wondering, of that in six pressure? the nature, the majority just my three questions. they related thank there calls, I'm are just and all? that, come back increased you conference for to to the further put or out at I you

Gord Johnston

Yes. Thanks, Mona.

will shorter for factored those this some come duration that of year certainly, for well. longer. and next of Others the for a were into have we of as forecast all our year bit off. stay But that So remainder

pricing what a pressures of from we saw bit in terms In the seen haven't the this forward, of that lessening a early we're pandemic. We've that. seeing price-competitive always But on seen a competitive market. going some is of a we environment of

the at other from you still see well. firms space, look that companies very in doing these You'll are

a other become as So lot the each I of, said move the and couple But degree. of proceeded. say, people a come as of continue pandemic forward, as market. a need market share up has competitive to continually like, That drive we less of always in people concern to that months beat a pricing of saw first has pressure it's additional off to as to the prices down really secure that

Mona Nazir

a speak That's on then this. questions to number just M&A. And you did very I of on secondly, know helpful.

not of have number transactions space. within We a seen

diligence that wanted various U.S. on you're companies think U.K., to with location just Australia. I the the the in the then Nordics, targeting you just do ones that, there's of financials geographies wondering, that a M&A proximity, and one only Tesla integration. target, ability travel due if not or given And for restrictions. universe. kind from Canada probably is that just of mentioned related you the my covered I'm and I'm the the higher just you're I to wondering continue in to comfortable confirm

Gord Johnston

Yes.

firm, terms looking what's we're really perspective. that look, we presence us So important Stantec of where in to from a we're a where is solid looking, for have

in leadership very takes to Western the Canada we We the Europe, States. leadership that place we the we the have source have U.K., the the diligence, firm, set Australia and through United in to And to have place due people addition in what feel what cultural with it like. that in look in go comfortable understand New Zealand, and

location And we're in that So in are I discussions, we geographies mentioned as comfortable strong have move that then. those we feel think that very where to of as continuing really, you we all forward. you long ongoing a leadership, having

questions, the to are leads on from so these sort But groups with contact appropriately. due on taxation, the in conducting people -- forward various ensure HR, we're diligence people we're just of our initiative, -- have and any of perspective project So on, accounting, in that be diligence of again, leaders you ground. the we'll whether pushing the right that always do our due we'll where asking areas with group the that diligence,

move don't forward this point M&A that restrictions I with at see travel inhibiting So our discussions. significantly really these our really ability to are

Mona Nazir

Okay. a questions more just of That's I outlook, XXXX appreciate me. clarification. guidance, lastly, times. helpful. is are number And providing challenging surrounding understand such particularly for you in the that very there a but this just of

Just you given of kind target but then feel somewhat cautious. that organic growth stated also right, you're

the as say it being purposes, the guidance right fair are to or would conservative? characterize own now somewhat sitting be Just things on realistic that from based how you perhaps overall would

Gord Johnston

good Mona. feel it, about We

that out kind we to all our our then now. target were cause And I we we realistic that feel with know on thought do it's unachievable think of sort next we because issues based feel where comfortable what put will We want the are. we of of year. that didn't

how we're realistic So the thinking we environment about numbers I at think feel point. these that this are reflect

Operator

comes Our next from from Securities. TD Tupholme Michael ahead. go Please question

Michael Tupholme

optimization still the in -- of back stage at Theresa, initiative sort here. this is timing, you're of of to of or evaluation discussion wanted it I the occupancy an terms costs. like to to strategic go in evaluation look at an just sounds

not benefits your But you the I is benefits included that? some timing could conclusions quickly some And process? guidance XXXX then from it's what how through in expect included. for potentially see from this. No think this to coming to

Theresa Jang

because the I data around we work we whole what's may want Well, make crunch appropriate trying take lot we're next fluid conclusion. three And around of place. to from a to it have to of expected. homes again, we bouncing months, think think lot But where and thinking we're and that than a sort pricing situation be in in it'd There's decisions, draw that are, based the long-term longer -- we on through to almost have the locations continues the XXX to realistic world. be we of to put to around six

to our period, longer the it say, change So three is with but I that that caveat expectation month be that extensively. would could kind six things would just in, a of it take as

Michael Tupholme

in see that get expectation start to I period takes of process, on out within time of front. if And begin for terms when of benefits? leases rearrange you of would to What it to be things it know the or realistic sort decision-making that sort the would to is a

Theresa Jang

that depreciation away, if the We line of on yourself lease. around are way to Well, have established plans determination right accounting and the because extending rule make I you would costs that firm impairment right and start away interesting with also you've the through items, away. from expense interest just line take unburdened your of use lower space, you but think you it about that your because occupancy you benefit charge take And kind assess like what's item. charge mostly now that what through to the see a works is right and that you have that start when then pretty see to G&A

depending pretty start that From sublease able be pretty space. standpoint, to when see immediate. cash you're flow on could So much that would an earnings impact is to it The lagged slightly away. release right or you

Michael Tupholme

second being were I earlier, pipeline you see that strong. then opportunity you mentioned very And Gord, as pipeline, the helpful. That's the awards Okay. think you question, speaking

quarterly releases in XXXX. of current half thinking to observing second last was about awards Just back slowdowns there in projects some call, the some and discussion the

pipeline So the are suppose the conversion? just to robust, going pipeline, of sort of awards? still quarter of mean that are activity awards Or confident reconcile is environment a pressures commentary with about trying those the strength new sort some conversion the of of very sort the slowing in the bit. to but last opportunities given I the of terms pipeline that be you in there to I'm

Gord Johnston

Yes.

in our But QX, take a Sometimes increase in little see some those. can could process from been organic have you bit converting X.X% the we backlog award in longer. the yes, growth

to So I we're think back getting a cadence. more that normal

of the these an longer But little can in all it on environment on backlog really where again, all things organically sometimes increased we're sort opportunities fact all comfort paperwork a QX, are still think in seeing our provide I some we Although the X% just to from of the get that move home, we working to by take clients I that -- are me to conversion forward. backlog. you that

Michael Tupholme

Okay.

an that situation guess there I in quarter of about comments that has has So perspective? your I'm a hospital been made sort makes your just has those sense. Like you terms relative from actual improvement -- of perspective awards? the there slowdowns from -- of improved last been to wondering,

Gord Johnston

under Melbourne couple a next look slower. at where where open, a to lockdown, slower of gone got active, speed be about And a next -- we interesting award pretty it's during now lockdown period lockdown because the conversely, bit next have area the has going I to be flexibility a time going New we in is Michael, in or next U.K. month, think it's I offices awards now -- are for think, months Zealand, Australia, bit thought the I sorry, we're little has just bit which when after see we've during month, U.K. projects lockdown. is way. might the you the open for into But the and reopened they see now in a Australia, U.K. going of the of if where I over think the our back. new to perhaps all And that been their little at again. think because expect one look we're are up if my I'd

point lurched at think backwards. So because statement a world -- be hard think backwards, has be this I I lurched to the it's it's to forward, forward, it moved going -- to make broad-brush going is moved

are like in going internally and somewhat each been that is happen word greater just both some be flexible visit But of slower. to balance, we be right we've burn units things quarter. to some going than growing, track. on are for the that going the our operating happen we're understand it's feel of one on in Backlog the using to is things faster, So

same the XXXX. -- just we in as But is impressive. way that pretty it's future talked in about So the

I statements a any think make the we're a of bit just unknown to being an bit cautious because is still. place broad world in

Michael Tupholme

Right. That sense. makes

regions the appreciate and the that fluidity I Now differ. fact

So that makes sense.

to the In And benefits. outlook, this. discussion Just for if little I meaningful there me and looking can final provide on employee question what's more and a you about me. XXXX at was I behind apologize But around the of detail increase commentary in missed just that driving a cost some explain group that? what's

Theresa Jang

Yes.

were at of increased went on, of But stopped rate. employee seeing really use is doing has a kind was pretty pretty at home people everything. time the the -- we're high pandemic, the and initially what to because think interesting benefits it I

whether lease now are taking offers those more is we're in into people so or seeing And whether to the the But it's that what, the no that's are programs that's [indiscernible] next a and of advantage, employee the seeing to year, idea. the and going we're on cost reflective, we what into what that pricing the done. is They're for support course, have programs can I is, year increase getting transactions increase. all so believe there, And significant I programs going dramatic higher But when here the of emotional factored exist. what and getting assumed company, and seeing. usage. a -- programs think, I have us sort current that quite effect there challenging those next vendor over not, quite of through or why that's it's people

Operator

from Our Maxim next go question Please ahead. comes from Sytchev Financial. Bank National

Maxim Sytchev

commentary I around to shopback being to your at about book-to-bill X. just wanted

the run we think the change about claims. strong at look not the rate is should than did. literally, or obviously which How organic kind just side of there which the we sort backlog, on in impacting As is growth revenue timing, is of

back organic see volume how into my we So backlog quickly growth can actually I guess is, question coming territory given the trends?

Gord Johnston

Yes.

a seen have out these that projects stretching longer than we bit of So they little some had. are

look growth groups, the about. we lines as forward spoken with and so there And other of business in low- positioning growing assumptions number our different various of mid-single-digit that's the as low- But XXXX feel what our different good to everyone into leaders organic that sort higher in and we in -- see that certainly, sort end backlog. gone geographies, feels in we to organic organic based the a and Certainly, mid-single-digit that on based we've And comfortable we've in a pipeline group pretty is about to we spread. see water, think I and -- into like put XXXX on the that. we on probably make the what growth pretty so

Maxim Sytchev

sort there going you mean first of QX to QX of where is kind quarter I you comps? guess the positive sort see of be or can by I

Gord Johnston

certainly slower as programs in anything. think of typically fuel little always lot from north. because We a perspective, the up I are here moving of don't is have bit a see we seasonality a part we what QX

that we're 'XX So going into I a get QX Where course, still post-pandemic. we that looking is a to was QX, of higher think prepandemic, while at so be of -- cost. and knowing,

to from going at that -- still we're 'XX, as pandemic while comps. be might from to perspective, higher we see 'XX, comparing organic seasonal we QX that as the look we're 'XX QX revenues an reactive, referring higher So we're QX perspective, to growth would still expect a

and because better ramping much think numerically lower it a coming up So see full I we'll off QX in reflects we're pandemic probably comp.

Maxim Sytchev

you Stuff. if division that in given And that appropriate the that Yes. could the have then Building sort you headcount of of all just No, my horizon? is, feel specifically lastly, guys the the of on that given guess do sense. have makes sort contemplate is sort you side, you that revenue seen have question I the opportunities moving on parts you

Gord Johnston

Yes. has organization at we've the managed matching through to the available different been work and well headcount levels extremely That throughout. been pandemic in group

we'll I we have. managing continue judiciously think So it very as

pandemic. to So need any throughout more reductions the because the significant don't run I see well going it's for headcount very

Operator

That will or additional closing. session. the now conclude for to like our to back speakers hand today I would question-answer any

Gord Johnston

us Thanks programs and look with again, joining about call for on the very everyone, and have day thanks, seeing We forward healthy. Well, to today. our great speak a you to future much. stay Great.

Theresa Jang

Thanks, everyone.

Stantec (STN) 8 Nov 202020 Q3 Earnings call transcript