Stantec's Q3 2024: A Record-Breaking Surge in Revenue and Backlog

November 8, 2024, 9:32 pm
Stantec
Stantec
AssistedDesignEnergyTechEngineeringEnvironmentalFirmInteriorLifeManagementPlanning
Location: Canada, Alberta, Edmonton
Employees: 10001+
Founded date: 1954
Total raised: $7.3B
Stantec, a titan in sustainable design and engineering, has unveiled its third-quarter results for 2024, showcasing a remarkable performance that paints a bright picture for the future. The company reported net revenue of $1.5 billion, marking a 15.8% increase compared to the same quarter last year. This surge is not just a blip; it reflects a robust growth trajectory fueled by both organic and acquisition-driven strategies.

The heart of Stantec's success lies in its ability to adapt and thrive amid changing market dynamics. The company achieved a 6.5% organic growth rate, complemented by a 7.8% increase from acquisitions. This dual approach has allowed Stantec to solidify its position across various sectors, particularly in Water and Buildings, where organic growth reached double digits at 11.9% and 10.0%, respectively.

Stantec's adjusted EBITDA also saw a healthy rise, climbing 13.8% to $274.6 million, with an adjusted EBITDA margin of 18.0%. This margin indicates the company's efficiency in converting revenue into profit, a crucial metric for investors. The diluted earnings per share (EPS) stood at $0.90, while the adjusted diluted EPS rose to $1.30, reflecting a 14% year-over-year increase. Such figures not only underscore Stantec's operational strength but also its commitment to delivering value to shareholders.

A standout feature of this quarter is the record backlog of $7.3 billion, up 15.9% since the end of 2023. This backlog is a treasure trove of future projects, representing nearly a year’s worth of work. It signals confidence in Stantec's ability to execute and deliver on its commitments. The backlog growth is attributed to both acquisition and organic growth, with a notable 9.5% increase from acquisitions and 4.7% from organic sources.

Looking ahead, Stantec has adjusted its guidance for the remainder of 2024. The company now anticipates net revenue growth between 14.5% and 15.0%, up from the previous range of 12% to 15%. This optimistic outlook is bolstered by expectations of continued strong performance in the fourth quarter. The adjusted diluted EPS growth forecast has also been raised to between 16% and 18%, indicating Stantec's confidence in sustaining its momentum.

The company’s strategic focus on sustainability and innovation has positioned it well in a market increasingly driven by environmental considerations. Stantec's commitment to addressing global challenges resonates with clients and stakeholders alike. This alignment with broader societal goals enhances its appeal and strengthens its market position.

However, the journey is not without challenges. The company faces rising administrative and marketing expenses, which have increased as a percentage of net revenue. This uptick is partly due to higher software costs and the transition of staff from completed projects to new ones. Additionally, Stantec has encountered a non-cash lease impairment charge of $13.7 million, a consequence of its real estate optimization strategy. These factors highlight the complexities of managing growth while maintaining operational efficiency.

Despite these hurdles, Stantec's financial health remains robust. The net income for Q3 2024 increased by 1.9% to $103.2 million. The adjusted net income grew even more significantly, up 16.7% to $147.9 million, achieving 9.7% of net revenue. This growth reflects the company's ability to navigate challenges while capitalizing on opportunities.

Stantec's operating cash flows decreased by 15.9%, attributed to increased investments in working capital and the integration of Morrison Hershfield's financial systems. However, the company remains within its target range for net debt to adjusted EBITDA at 1.5x, demonstrating prudent financial management.

The company’s board of directors declared a dividend of $0.21 per share, payable in January 2025. This move underscores Stantec's commitment to returning value to its shareholders, even as it invests in growth.

In summary, Stantec's Q3 2024 results reveal a company on the rise. With record revenues, a substantial backlog, and an optimistic outlook, Stantec is well-positioned to tackle future challenges. Its focus on sustainable practices and strategic growth will likely continue to resonate in an increasingly competitive landscape. As the company moves forward, it carries the momentum of a strong quarter, ready to seize new opportunities and deliver on its promises. The road ahead looks promising, and Stantec is steering toward a bright future.