Stantec Inc Aktie

Welcome to Stantec's Second Quarter 2026 Results Webcast and Conference Call. Leading the call today are Gord Johnston, President and Chief Executive Officer; and Vito Culmone, Executive Vice President and Chief Financial Officer. Stantec invites those dialing in to view the slide presentation, which is available in the Investors section at stantec.com. Today's call is also webcast.

[Operator Instructions] All information provided during this conference call is subject to the forward-looking statement qualifications set out on Slide 2. Detailed in Stantec's management's discussion and analysis and incorporated in full for the purposes of today's call.

Unless otherwise noted, dollar amounts discussed in today's call are expressed in Canadian dollars and are generally rounded. With that, I'll turn the call over to Mr. Gord Johnston. Please go ahead, sir.

Good morning, everyone, and thank you for joining us today. Our second quarter financial results continue to showcase the strength of our business. Stantec's diversification across operating regions and across sectors has kept us on track to deliver on our financial targets for the year.

In the second quarter, we grew our net revenue to $1.8 billion, up almost 12% compared to Q2 2025, driven by almost 4% organic and 7% acquisition growth. Organic growth was driven by double-digit growth of approximately 13% in our global region. And our industry-leading water business achieved close to 12% organic growth.

Adjusted EBITDA increased over 17%, and we achieved an adjusted EBITDA margin of 18.7%, a record for Q2, and this represents an increase of 90 basis points year-over-year. Adjusted EPS grew over 18% compared to Q2 2025. Looking at our results in each of our geographies. In the second quarter, U.S. net revenue increased almost 13%, driven by the acquisition and strong performance of Page.

Underlying demand across our end markets remains very strong, supported by long-term investments in infrastructure, energy, transportation, water and advanced manufacturing facilities. Our water business saw continued demand and work on large wastewater treatment projects. In Energy & Resources, work on a major hydropower dam project drove organic growth, and our infrastructure business delivered growth through data center projects in our North Central region and benefited from favorable recoveries on a large transportation project.

While organic growth was flat in the quarter, driven by some delays and the slower ramp up on certain projects, we've already started to see positive signs of acceleration in Q3 and expect this trend to continue throughout the back half of this year. In Canada, second quarter net revenue grew 2.4% organically.

Double-digit organic net revenue growth in our water business was driven by biosolids projects and continued momentum on wastewater projects. Robust net revenue growth was also achieved in both our Buildings and Environmental Services businesses through public sector investment, primarily in our civic markets and an increase in environmental planning and the mining industry, respectively. Our infrastructure business continued to experience a wind down of certain transit and roadway projects in accordance with anticipated project cycles.

Lastly, our global business delivered over 18% net revenue growth in the second quarter, driven by almost 13% organic and over 2% acquisition growth as well as positive foreign exchange impacts. Our industry-leading water business delivered over 20% organic growth this quarter through long-term framework agreements and public sector investments in water infrastructure across the U.K., Australia and New Zealand.

The ramp-up of new projects in Chile and Peru drove strong organic growth in Energy & Resources as the growing need for energy transition solutions continues to drive demand in mining for copper. On a year-to-date basis, our global operations also had modest growth in its infrastructure business, driven primarily by double-digit organic growth in Germany due to momentum on a major public sector electrical transmission project and increased volume on transit and rail projects.

I'll now turn the call over to Vito to review our second quarter financial results in more detail.

Thank you, Gord, and good morning, everyone. Strong operational execution supported by sustained demand across our diversified multi-sector and multiregional platform continues to deliver solid financial results. At the midyear point of 2026, we are firmly on track to deliver against all of our financial guidance metrics. In the second quarter, we achieved gross revenue of $2.2 billion and net revenue of $1.8 billion, an 11.5% increase compared to Q2 of 2025.

This growth was driven by 3.7% organic and 7.1% acquisition growth, which primarily reflects strong results from our global region and from the Page acquisition, respectively. Project margins as a percentage of our net revenue increased 30 basis points to 54.5%. We achieved an adjusted EBITDA margin of 18.7% in the quarter, a 90 basis point increase compared to Q2 of 2025.

On a trailing 12-month basis, our adjusted EBITDA margin is 18%, an increase of 80 basis points compared to the prior trailing 12 months. The growth in margins continues to be driven by a methodical and disciplined approach to all aspects of our business. It all starts with a continued focus on execution and servicing of our client needs.

The work we do is of meaningful value across all of our sectors and regions, and our focus remains on enabling superior outcomes for our clients, all the while focusing on efficient management of our operations and the optimization of our discretionary spending. On the back of our increase in net revenue and the expansion of our margins, our adjusted EPS in the second quarter increased 18.4% to $1.61.

Turning to our cash flow, liquidity and capital resources. Following the financial integration of Page in Q1, our operating cash flows in Q2 returned to a more normalized cadence. And on a year-to-date basis, our cash flows from operations totaled $116 million. In terms of capital allocation, our strategy remains unchanged. We believe that continued disciplined M&A remains our highest source of value creation for our shareholders measured over a reasonable period of time. The pipeline remains robust, notwithstanding certain short-term dislocation in valuation ranges between public and private entities.

Given our proven track record of disciplined M&A, we expect the strategic expansion of our business to continue. And to that end, although perhaps on a smaller scale, we are happy to announce the acquisition of Niche, a 200-person engineering and environmental consultancy firm in Australia. Niche helps strengthen our environmental services business in the region and supports our ability to help clients advance critical infrastructure and develop projects, while protecting and restoring natural environments.

This transaction closed effective July 31. Our continued strong operating cash flow and exemplary balance sheet offers us considerable flexibility in our capital allocation activities. And in Q2, we stepped into our NCIB and repurchased approximately 1.7 million common shares or 1.5% of our outstanding shares for an aggregate purchase price of approximately $175 million.

Notwithstanding this cash outflow, our net debt to adjusted EBITDA ratio remained at 1.3x within our internal target range of 1 to 2x. And given our Q2 NCIB activity, it's prudent for us to have additional flexibility, and we intend to seek TSX approval to extend the program beyond the existing 2% limit. And finally, DSO at the end of the second quarter was 75 days within our internal target.

I'll now hand the call back to Gord to discuss our backlog, our recent project wins and our outlook for 2026.

Great. Thanks, Vito. At the end of Q2, our contract backlog reached a record of $9.2 billion, a 17.5% increase year-over-year, representing approximately 13 months of work. Year-over-year, our backlog has grown 7% organically. During the quarter, backlog grew in each of our regions. The most notable year-over-year growth coming from our global region, which delivered double-digit growth of almost 25%.

We also saw strong backlog growth in Water, which delivered over 10% organic growth. Acquisitions completed in 2025 further contributed to backlog growth by almost 8%, primarily within our Buildings business, which had over 40% growth. I'll now highlight a few projects Stantec secured during the quarter, showcasing the breadth of opportunities we're capturing across diverse markets, project sizes and levels of complexity.

Our buildings team was selected to provide architecture, engineering and integrated design services for Meta's $13 billion data center in Surgeon County, Alberta. The project strengthens our data center capabilities, while supporting the continued expansion of Alberta's critical digital infrastructure. Stantec's water team was selected to provide preliminary design and evaluation services for the Drake Water Reclamation Facility in Fort Collins, Colorado, a 23 million gallon per day wastewater treatment plant.

The project will modernize critical headworks infrastructure, improving debris removal and treatment reliability, while reducing impacts to downstream processes. Activity continues to ramp-up in Australia for our buildings business, supported by increased investment in social infrastructure. During the quarter, the team was selected to provide engineering services for the Redcliffe Hospital redevelopment in Queensland, further strengthening our position in the growing health care infrastructure market.

The team was also selected by the Western Australia Department of Housing and Works for a 10-year framework to provide engineering and building-related consulting services for nonresidential projects, including education, healthcare, justice and other social infrastructure. As we look toward the remainder of the year, we continue to track to our 2026 financial targets.

And with the continued solid progress to date, we are increasing and narrowing the range of adjusted EBITDA margin we expect to achieve. We continue to expect net revenue growth in the range of 8.5% to 11.5%, driven by strong acquisition growth from Page and organic growth across our operating regions. Overall organic net revenue growth is now expected to be in the mid-single-digit range, driven by strong demand across all geographic reporting segments and business units.

In the U.S., we expect organic net revenue growth to be in the mid-single-digit range. We expect activity to accelerate in the second half of the year, supported by the demand across all 5 of our business verticals. We are encouraged by the increased activity and movement we started to see with large environmental projects ramping up, increased demand related to Water and Energy & Resources as well as growing demand in key areas such as advanced manufacturing and data centers.

In Canada, we also now expect to achieve mid-single-digit organic growth, supported by public sector spending plans and continued demand, particularly around water and buildings. There's still a lot of momentum around defense and other nation-building projects, which are still in the early stages. We expect these programs to contribute more fully in 2027 and beyond.

Lastly, Global is expected to achieve high single-digit organic growth. The growth in Global is being driven by high levels of activity in our water business under AMP8 and other framework agreements, strong demand in Energy & Resources, particularly in Latin America and positive demand fundamentals across other global business units.

With our strong margins year-to-date and continued focus on operational excellence, we are increasing our outlook for adjusted EBITDA margin. We now expect to deliver 17.8% to 18.3% for the year. Finally, we're maintaining our adjusted EPS target for the year of 15% to 18% growth, reflecting our confidence in delivering strong bottom line results and long-term shareholder value.

Before we open up the line for questions, I'd like to take a moment to acknowledge that this is my final earnings call as Stantec's President and CEO. As announced in June, I'll be retiring from the role effective October 1 and transitioning to Vice Chair of Stantec's Board of Directors. It's been an incredible privilege to lead this company for the last 8.5 years, and I'm very proud of what our teams have accomplished together.

The underlying demand for our services is strong and our diversified, resilient, stable and multi-sector platform positions us well to capture opportunities across the markets that we serve. I'm especially excited to be passing the torch to Susan Reisbord. Susan has a deep understanding of our business, our clients and our people. Having worked closely with her, I have all the confidence in her capabilities, experience and energy to lead Stantec into its next chapter.

I'm looking forward to staying close to the company in my role as Vice Chair and supporting Susan and the team as they continue to execute on the opportunities ahead. Finally, I want to thank our employees, our clients and all of our analysts and shareholders for their support over the years. And with that, let me turn the call over to the operator for questions. Operator?

[Operator Instructions] And our first question for today comes from Sabahat Khan from RBC Capital Markets.

Before I get into the questions, I just want to congratulate you, Gord, on a great run here in your current seat and all the best with the next chapter?

Thanks so much, Sabahat. It's been an incredible privilege to lead the team over the last 8.5 years, and I wouldn't have traded it for anything.

Great. Just maybe, I guess, starting with kind of the outlook for the back half of the year. On the U.S. segment, it looks like you're pointing to mid-single-digit organic growth. Just looking at the first half, call it, low single digit for the first half implies about a high single-digit organic for the back half of the year in the U.S.

If you can maybe just detail out your sort of the building blocks and sort of your confidence in that outlook on getting to that high single-digit range over the next couple of quarters?

Yes. Thanks, Sabahat, for the question. And so in the U.S. specifically, we see that this is not a demand issue. It's really more of a timing issue for us here in Q2. We had a number of projects wrap up as per schedule and planned. And a number of projects that we've got awarded and got in backlog just were a bit slow getting out of the blocks and getting started.

Now subsequent to the quarter, we've seen some good positive momentum in Q3, a number of these projects have kicked off and the field seasons are going and such. So in addition to that momentum, as we look at the back half of the year, we're looking from a demand perspective, the sales funnel is strong, the soft backlog, both trending really, really well.

And also, if you look at our -- the organic backlog growth in the U.S., both year-to-date and year-over-year, both up in positive organic territory, further supporting that ramp-up and that momentum as we enter the second half of the year and particularly into 2027.

One other thing that just to call out is the Page acquisition. And we've talked about in the prepared remarks and with others over the year, Page is a fantastic company, and they're performing exceptionally well, driving strong acquisition growth. As per our normal processes, when a company joins us for a year, we report that growth as acquisition growth. But now in Q3, Page is flipping over to that will be reported as organic growth in Q3 and Q4 of the year.

So these projects that we've got in the backlog ramping up, strong sales, strong backlog, good organic backlog growth there in the U.S. year-to-date and year-over-year. Page transitioning from acquisition into the organic side, that all kind of supports our thesis of that continued organic acceleration into the second half of the year and good momentum into 2027.

Great. And then just on the margin side, it looks like about, call it, 80 bps or so of year-over-year EBITDA margin improvement through the first half of the year. The guidance increase implies round numbers about 15 basis points. Maybe you can just walk us through the puts and takes on the assumption of the full year guide and maybe sort of the delta between the higher amount realized versus the guide increase?

Saba, it's Vito here. Yes, we're incredibly proud of the progress we've made with the margin expansion. And you heard that in my prepared remarks, that comes from really across all elements of our business. Our project margins continue to be strong, and that's all about the right client, the right price, obviously, and exemplary project execution. The team has always worked towards that.

When you're looking at our admin and marketing, obviously, that's been declining as a percentage of our overall revenue. That reflects obviously improved utilization. And when you think about utilization, that's probably one of the pieces as we go into the back half and just maybe attaching myself to Gord's comments, we feel incredibly confident with the velocity of the business moving forward. That's when we're going to require and it is already requiring up headcount and expansion of our workforce.

So I think what you see in the back half margin expansion moderation, if you will, relative to our year-to-date performance is really just that timing of workforce and as we obviously look to lean into our -- what will be significant organic growth in the back half. But overall, the momentum around our margin improvement, and there's probably a little bit of conservatism built into there, quite frankly.

I think this is now what is it maybe the seventh quarter of year-over-year margin expansion. And on a trailing 12 months, as you heard me say, 80 bps ahead. So this just enables continued investment in our business as well as we move forward, and we're focused on ensuring we're making those internal investments moving forward as well.

Great. And then just the last one on my end. I think the commentary around Page sounds like it's trending well. Are you able to share maybe the organic growth or just the growth rate in that business on a year-over-year basis maybe through Q1 and Q2 of this year as you think about how that can contribute to the overall Stantec numbers?

Yes. Sabahat, it's hard for us to do that because the baseline business is probably not in accordance with our how we convert to our IFRS accounting. But I would venture to say that it's robust. And as Gord has alluded to, we probably underreported by a smidge in our Q2 organic because of the way we do things.

And that is we shifted a significant amount of our building workforce to the Page-led opportunities that, as Gord has noted, will be reflected in organic going forward. So Q2, probably a little understated, frankly, we don't get into slicing and dicing those numbers too much, but organic growth in Page, quite robust.

And our next question comes from the line of Frederic Bastien from Raymond James.

How are you? How is it feel -- how does it feel for you?

It's actually been a really interesting preparing for the quarter, preparing for the earnings call. So many things were -- this is the last time we'll do this. This is the last time we'll do this. But I'm just actually so thrilled to be staying on the Board. I love our company. I love our clients. I love our people and what we do. So being able to stay connected to the company through being on the Board, I think, for me is the best of both worlds.

Great. We're excited to have you stick around a little longer, and congrats on a great career. Now on to question. As Vito, you alluded to earlier, a good chunk of the margin expansion came from the project margins, which is nice to see, not all coming from SG&A and cost optimization. How far can you get those margins going? I mean it's -- they've been in the low 54% range for quite some time. Is there an opportunity for Stantec to take them even higher on a go-forward basis?

That's -- obviously, we are more centered really on continuing to provide outstanding outcomes for our customers. That really is the ethos of our organization. And along with that, obviously, is great project execution, the right risk profile, great value for our work and being obviously transparent about that with our client base.

We're in the middle of our 3-year planning process right now. So we'll probably have a more robust, I'll say, aligned response to that as we roll out the back half of the year here and as we get into our Investor Day in December. But I think bottom line margins, and it does all start with the project margin, but I love the fact that you start with that because at the end of the day, that is the spine that drives bottom line. And we're really, really confident about that.

With the macro demand being as strong as it is across our markets, we really can be picky and choosy, quite frankly, in some of the clients that we're choosing and whatnot. So really confident about project margins going forward.

My other question is around M&A activity. We've seen some bids recently in the public sector realm. One privatization, one obviously didn't pan through as of yet. But how are you reconciling sort of the valuations you're probably still seeing in the private sector land, which are probably still elevated and the current valuations here in the public sector and what that might bring in terms of opportunity for you to deploy capital?

Yes. The acquisition environment is incredibly active right now. And you made some reference to like a number of the typical transactions that we would see in our space where publics are bringing some private firms on. There is still a bit of a dislocation in those where those public markets who are looking to sell are still a little bit elevated over where we are in the public markets, but we're still in the midst of any number of conversations at different levels, and we have been for some time.

And actually, that will be one of the things that I'll continue to work closely with Susan and the team as we're halfway through some of these M&A conversations, we want to just -- I'll stay involved in a supportive role just from a continuity perspective. But in addition to that, I think you make reference to that we've seen some big moves on the chessboard that people have been -- some that are public and others that I think people are just kind of thinking about in the back.

And so this is a very attractive industry. And do I think further consolidation is likely? I think perhaps it will in the next year or so. So Stantec is -- we're very alive to all these things, and we just remain focused on doing what's best for Stantec and our shareholders in the long run.

And our next question comes from the line of Yuri Lynk from Canaccord Genuity.

Congrats to both Gordon and Susan. Just wanted to turn back to the U.S. for a minute, Gord. I mean, I get that you're seeing an acceleration in some of those delayed projects. But was there an overriding theme as to the original slowdown that you saw in the U.S.? And any comment on how that might have translated into backlog -- organic backlog growth was also 2.5% lower than what we've seen. So what's going on in the quarter there?

Yes. So again, just to reiterate, I think a lot of it was just a timing issue. When we talk about some of the projects that were a little bit slower to get going out of the gate there in Q2, a little bit in all of the different groups. For example, in our Environmental Services group, we had a large program with the Navy that was a little bit slower to get moving. It's moving now. We had another really significant project with a large electrical utility in the U.S. West that got going. And so we're seeing, again, that's moving in our infrastructure group. It was a little slower than in Q2 than we would have liked.

Large public transit project in the U.S. South was a little bit slow to get moving, and we were actually working on a very, very significant proposal in Q2 as well. So a number of those things just took a little bit longer to get going. But I mentioned that big -- that significant proposal that we worked on in infrastructure. That would have a very positive impact on backlog with that one came through.

So I think it's just one of those quarters that the stars aligned, maybe not in the way that you would have wanted them to. But we don't -- longer term, we really don't see it having any negative impact on the business, nor do we believe it should be reflective sort of on how we'll perform in the second half of the year.

Okay. And just should we expect the organic growth recovery in the U.S. to kind of build throughout the back half of the year, especially considering you've got a pretty easy comparable in the fourth quarter?

Yes, I think that's right. I think we should -- our forecast is for some good organic growth here in Q3 and further strengthening into Q4 and really then entering 2027 with good and strong momentum.

Okay. Last one for me, just a clarification on the G&A expense. Just wondering if -- given the share price movement in the quarter, if there was any positive impact from LTIP in the quarter?

Very minor. We hedge most of our long-term incentive programs. So essentially, there's an offset and between any valuation between our hedging program and then obviously, a mark-to-market on [ RSC ]. So very minor small benefit.

And our next question comes from the line of Michael Tupholme from TD Cowen.

Congratulations, Gord.

Yes. Thanks so much. It's interesting as I kind of reflect on what we've done over the last 8.5 years. I'm actually just so incredibly proud of what we've collectively done as a team and positioning Stantec for success going forward.

Absolutely. The first question I wanted to ask is you've had a lot of questions here on the call about the U.S. organic growth and the pickup you expect in the second half to get you to your full year mid-single-digit organic growth target.

Can we talk a little bit about Canada because it's a similar situation there where half 1 organic growth has been a little bit slow. You're trending at the moment below your mid-single-digit organic growth target for the year. So how do you think about the organic growth pickup in the back half in Canada and exactly what is driving that?

Yes. No, thanks. Great question. And so we see in Canada, again, good organic backlog growth year-to-date and year-over-year. Lot of projects. We talked about that $13 billion Meta data center project that we've just got going on. There's a really significant program that we're running just kicking off for utility here in Western Canada, an enormous amount of opportunity up in defense, in the North and with some of these nation building projects.

So we see a lot of supports for us moving forward. And in particular, though, in Canada, our water and our Buildings group, backlogs are looking great, and we see continued organic expansion there. So I think we're just fairly broad-based in Canada, supportive of growth into the second half of the year here.

I think you got it, Gord. Buildings and Water, we expect would be the biggest drivers of H2 increase in organic growth in Canada.

Okay. And then second question, regarding the improved margins, obviously, very, very strong performance. You called out a number of drivers. One of the things you mentioned is optimization of digital strategies. I'm just wondering, if you can elaborate a little bit on what it is you had going on in the quarter from that perspective that benefited the margins and how we think about that also going forward?

Yes. I think digitization, obviously, is at the core of our ongoing strategies throughout our organization. And when we think about some of the back office-related opportunities for us, whether it's accounting, finance, accounts payable, that's always been a core component for us.

When we're looking at bidding and proposals right now, we're really leaning into digitization, implementation of some artificial intelligence tools. So those are all core to what we're discussing and will continue to be part of our -- basically ingrained in our 3-year strategy.

And our next question comes from the line of Chris Murray from ATB Cormark.

Gord, let me echo my congratulations like everyone else. I guess the first question, we talked a little bit about Canada and U.S., but global also has been very, very strong. And in fact, you're moving it higher. Is there something in particular that's driving that?

Is it maybe Europe coming back a little stronger than you had expected? But any additional color that you could give us, maybe breaking down Europe versus the New Zealand or Australia, just so we have a flavor of how this is all coming together would be great.

Yes, absolutely. So we're seeing pretty broad-based strength in our global operations. Australia has returned to organic growth. I don't have the number here, but I think kind of mid-single-digit-ish organic growth in Australia. In the U.K., very, very strong. We're seeing the certainly, the growth in AMP8, extremely strong as we would have expected. We're running about 15% organic growth right now in the U.K., incredibly strong.

And then another area for us, Europe, absolutely with our operations in Germany with ZETCON, we're running low-20s in terms of organic growth rates there. But in terms of just raw numbers, it's Latin America. And with the demand for copper and the work that we're doing down there, we're seeing over 50% organic growth in our Latin American operations right now. So really strong sort of across our global operations.

That's helpful. And I guess the next question, maybe Vito, I'm not sure if you want to -- or Gord, do you want to chime in on this one. But just thinking about the NCIB, you talked about increasing it and maybe looking at it. But your commentary around multiples in the private market versus public market, we've got public market valuations at pretty much 20-year lows.

Is there any thought about doing a larger buyback? It almost makes sense if the privates are not really where you need them to be. Any thoughts around maybe doing a substantial issuer bid, maybe taking your leverage into the middle of your range and sort of waiting out whatever this valuation gap is for now?

Chris, as you heard me say in my prepared remarks, at the core of what we believe is long-term value creation is continued M&A and expansion of our portfolio in our regions. And as Gord has already noted, we're seeing some really good opportunities starting to surface, and I expect us to be more active in that portfolio.

We just announced Niche, as you saw, that's a relatively small but important one for us. And my prediction for the next 12 months would be more M&A relative to the last 12 months, where obviously, Page would have been our most significant acquisition. So we're feeling good about how that evolves, notwithstanding what we're describing as obviously pricing dislocation. And we'll continue to be very disciplined in that.

I think SIB is one step further from where we currently are. We've stepped into the NCIB. We are going to the regulator now and essentially expanding our program from 2% to 5%. And so I just love that flexibility going from 2% to 5%. That's another meaningful step. It doesn't mean we're going to execute all the way to 5%, but continuing to have the flexibility of with respect to, obviously, where our valuation sits, which, as you noted, is not, I think, representative of what we believe long-term value is and long-term representation there, we'll take measured steps along the way here.

And our next question comes from the line of Devin Dodge from BMO Capital Markets.

Look, before I get started, Gord, just congrats on the well-earned semi retirement. And Susan, if she's there in the background, just best of luck with the new role.

Fabulous. Thank you so much.

Look, I going to come back to Chris' question on Global. Obviously, order intake was really, really strong again there in Q2. Has the duration of that backlog changed much over the last few quarters? Or will you need to be adding -- expanding that workforce to convert that backlog into revenue?

Yes. We are actively expanding the workforce globally, particularly those regions that we discussed there, Latin America, Germany, the U.K. hiring aggressively, and we have been for the last 18 months or so. And also one thing to call out, too, is that while you've seen that incredible backlog growth there, those AMP programs, as an example, if we get a 5- or 6- or 7-year AMP program that has a not to exceed number of some very large number, that does not go into our backlog. It only goes into our backlog when we actually get a specifically assigned change order.

So the contract opportunities there with AMP, and that's the same way we do it everywhere, you are much larger than even what you've seen there. But yes, absolutely to your point, we're looking -- we have been for the last year, 18 months. taking additional real estate in the U.K., hiring people aggressively. We've been ramping up the hiring in our global delivery center in India.

I think we've just hit roughly 2,000 people, which was our goal for the end of the year. So we're a little bit ahead of schedule, taking more space there, looking to expand to other cities. So hiring is very much top of mind for us in order to process the backlog.

Yes. I'll add, Devin, this is a bit of an inflection point for our global business. I think we're into an environment here of high single digits for several quarters to come.

All right. Excellent. And then maybe a question probably for Vito here, just on working capital. Look, the first half of the year is typically a period of investment, but it seems a little bit more pronounced in 2026 than in the past. Just can you provide some color on the drivers behind that and how we should be thinking about working capital in the second half?

Yes. You're absolutely right, Devin. Obviously, where our free cash flow has been on a year-to-date basis relative to where it was last year is lower. Nothing from an operational concern from my perspective to be concerned about. We're very, very focused on working capital management. That starts with obviously DSOs. And you see DSOs at 75, which is within our guidance, but it's at the higher end of our internal metrics sort of thing.

So team will be totally focused on bringing that in. As you say, there is normal seasonality and back half is considerably obviously higher for us. We're coming out of what we -- you heard me reference the last call with respect to the Page integration. And so I'm overall pleased with the velocity, and I expect it to dovetail nicely into what we would otherwise normally expect here as we move into the back half.

And our next question comes from the line of Krista Friesen from CIBC.

Congrats, Gord, on a great tenure at Stantec and look forward to having you around a little bit longer here.

Yes. Thank you so much.

Maybe just one for me, following up on the M&A questions. Can you speak to if your priorities have shifted at all just in terms of M&A targets size or end market based on what you're seeing in valuations in the private and public markets at the moment?

Yes. No, great question. But no, we're holding our consistency, holding our discipline as to where we think there are great opportunities longer term, either geographically or in certain lines of business. So yes, the current environment hasn't changed our strategy at all, really just to continue to do the right acquisitions at the right time to continue to build the strength of Stantec for the long term.

And our next question comes from the line of Maxim Sytchev from NBCM.

Gord, obviously, congrats on all the achievements and a wonderful career, and welcome to Susan.

Thank you so much.

The first question I had was, I mean, maybe it's more sort of a philosophical approach to efficiency versus kind of organic growth. I think we saw that marketing spend was pretty controlled in Q2 and obviously, we're seeing somewhat slower growth in the U.S. Is there any correlation in relation to that? Or how, I guess, should we think about this on a prospective basis about, again, that tension of kind of getting work and versus being very efficient from a cost perspective?

That's a great question, Max, and thank you for that. And one point to make is particularly impressive when you think about the margin expansion that we've had in the quarter and year-to-date in the face of the lower organic because typically, when you've got softer organic, that typically puts pressure on your margins perspective with respect to obviously getting the scale from your back office.

So again, kudos to the team, and I think that bodes well. In respect to philosophy, I would say no change in philosophy. It is all about the right growth, of course. I mean this goes back to a bit of the project margin question that was asked earlier a little bit. And we need to obviously continue to be thoughtful of our client base and projects and whatnot. So the focus of 100% is on growth. And of course, that's the right growth as we move forward. So no change in philosophy. We'll just continue to shine the light, obviously, as we, I'll say, x-ray our business moving forward.

Okay. That's great color. And then one quick question I also had just in terms of any initial thoughts in relation to kind of surface transportation spending buckets there and how that could potentially influence 2027?

Yes. Great. And so as we think about IIJA, we've been seeing this end at the end of September coming for several years now. And we see a real concerted effort to try and get those funds encumbered prior to the end of September. And while data is a little bit obscure right now, we think that about 80% of it has been encumbered is kind of the industry thought on that.

So working hard to get all that encumbered and not lose the IIJA funding. But in terms of the Surface Transportation Act and the reauthorization, the House has put forward their bill, which about was $581 billion. And so -- the Senate now we're waiting for their proposal. And it's anticipated now that we're not going to get it until after Labor Day. Kind of all indications of it will be similar in size to the one put forward by the House in that $500 billion to $600 billion range. But the kind of the thought is that while those 2 things will be forward, it's likely not to move forward until after the midterms.

So probably we'll get that -- my thought and our thought is that it will be reauthorized, and we'll see that coming forward early into the new year. Everyone has kind of anticipated that, that's going to be the schedule here based on where we're at. So I don't see it really being a negative impact going into next year because everyone sort of has made plans for it, got their proposals out now when they can and such. So no, looking forward to another strong year next year.

And our next question comes from the line of Ian Gillies from Stifel.

Gord. I look forward to catch up in Calgary at some point, hopefully in the near term.

Look forward to it.

With respect to the U.S., can you maybe just help us reconcile the U.S. growth accelerating in the back half of the year in conjunction with midterm elections, which can often implies what I would call dislocations or gyrations or slowdowns. That's a bit of a challenging one right now.

Yes, absolutely. Any time there's a change, it can introduce a little bit of uncertainty. But I think based on what we've been talking about with the backlog that we've got, with the soft backlog and the -- that we see coming with the projects that have started, we actually feel good about our plans.

Again, Page kind of converting from acquisition to organic. As we talk to all of our business leaders and others in the industry, as we look at the -- we see the contribution from just mathematically from Page, I think we feel good about those numbers in the second half of the year.

Yes. Ian, our Buildings and Environmental Service business, they enter the second half of the year with significant momentum and driven by both the growing portfolio of recently awarded projects that are expected to ramp in Q3, Q4. So I think most of those would be insulated from midterm type activity.

Okay. I'm going to try this one. Do you anticipate any of the growth issues that persisted in the first half of the year will leak into the '28 to 2030 business plan that's due in December?

2027 to -- 2025 to 2029 plan?

Yes...

Yes, yes. Let us continue our work, obviously. I think the more we make our way through our planning cycle and ironically, the way we make our way through our 2026, it actually just gives us continued confidence that the macro drivers and our positioning serves up really well for the next 3-year period. But let's let the process roll out.

Obviously, let's let Susan get in the seat and present her perspectives there as we roll forward. But we're feeling good about the industry and our position in it.

And our next question comes from the line of Jonathan Goldman from Scotiabank.

Most of them have been asked already, but maybe, Gord, just one for you philosophically. How are you thinking about the pace of consolidation in the E&C space? Maybe you can just update us on where -- how fragmented it is today? And do you think consolidation could accelerate just given the dynamics we've seen recently on valuations and kind of the disconnect there?

Yes. Just as we look at it philosophically, as you say, our market is still really fragmented. Even the largest firm in the U.S., I think the estimate is in that 6%, 7%, 8% of market penetration. So lots of opportunities for continued consolidation. We've all seen the rumors that have been going around the industry.

I wouldn't be surprised that we'll see some additional consolidation going forward, either -- it's certainly easier with the small to midsized ones, but will we see it with some of the bigger global players remains to be seen. But I certainly know that the -- that people are thinking about it now, what it could look like, what that value would be to clients, employees and shareholders. So I guess time will tell.

Are valuations bottlenecked on the private side? You had given some commentary about things coming down to more reasonable levels, but is there enough spread still to make things value accretive at this level?

Jonathan, I think that's on a case-by-case basis, as a specific sort of situation, we wouldn't do anything that we think that over the longer term, obviously. And I'm confident that those exist as we move into the next 12 months.

Okay. And maybe if I can squeeze one more in terms of deal financing. Do you have enough capacity and dry powder now with the balance sheet if you want to run something maybe a little more sizable? Or is this going to be something bigger? Do you think possibly of going another route, maybe some sort of share exchange or equity?

I think you just back to our capital allocation philosophy. We're an investment-grade company. Obviously, we think that's important for us going forward. You look at our leverage of 1.3x. We've got great relations with obviously our rating agency. We've tested the limits of that expansion from a leverage perspective and are very, very pleased with that affords.

So there's a substantial amount of dry powder and debt capacity on our balance sheet. And obviously, depending on the size of what you're talking about, you would need to blend that with equity if that situation arise. But that's a very hypothetical situation, and it's all about what's in the best interest over a reasonable period of time for, of course, our shareholders, but lots of dry powder on the balance sheet.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Gord Johnston for any further remarks.

Great. Well, thank you, operator, and thanks to everyone for joining us this morning. Serving as Stantec's CEO has been truly the highlight of my career, and I really appreciate and value all the support and the friendship and the good times and bad times as we've been traveling together all over the world with many over the years.

So thank you truly for everything. And if you have any follow-up questions following today's call, please reach out to Jess Nieukerk, our Vice President of Investor Relations. Thank you.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Hello, everyone. My name is Doug Ammerman. I'm the Chair of Stantec. I'd like to welcome you to our AGM. This AGM will be held on a virtual basis and also in-person. So it's a hybrid AGM. We have people here in Edmonton joining in person. We have people joining remotely through the Stantec site. Wherever you're joining us today, I'd like to welcome you to the meeting.

Today, before we get started, I'll begin with a Safety Moment because at Stantec, we start every meeting with a Safety Moment. We always want safety to be top-of-mind. So if there's an emergency in the room, there'll be an alarm that will go off directing you where to go. There's a Muster Station downstairs by the Bell Tower, and we'll meet by 102nd Street. So don't move on the first alarm, you'll be instructed to leave.

What I'd like to do is introduce some of the folks here today from Stantec. We have our President and CEO, Gord Johnston. Vito Culmone, our Executive Vice President and CFO; and Executive Vice President and General Counsel, Paul Alpern. These individuals will be available to answer any questions during the question-and-answer period of the session that will follow.

I would also like to introduce our Board of Directors who are standing for reelection, including myself. We have Martin a Porta, Shelley Brown, Angie Chen, Rick Eng, Gord Johnston, Chris Lopez, Marie-Lucie Morin and Celina Wang Doka and all of the members standing for reelection are here today, and I want to thank them for their continued contributions to the Board. So thank you.

With that, I'd like to officially call the meeting to order, and I'd like to appoint Paul Alpern to act as Secretary of the meeting and Chris Parsons and Stephanie Tuss of Computershare to act as scrutineers of the meeting. They've confirmed that we do have a quorum today. And as a reminder, only shareholders who held their shares as of March 19, 2026, which is the Record Date of the Meeting, or their validly appointed proxy holders, are entitled to vote at today's meeting.

This morning's meeting will proceed in 3 parts. First, we're going to be considering the major matters to vote on. Secondly, we'll open it up to any questions that will get questions from shareholders and people attending in person and virtually. And third, we'll report back to you on the preliminary financial results, our voting results, and the results of the meeting will be released to Computershare and will be available at our website at stantec.com, SEDAR+ and EDGAR.

So now I'd like to ask Paul to talk about the voting procedures.

Thank you, Doug, and good morning, everyone. The business matters for today's meeting are described in the Management Information Circular dated March 19, 2026, which accompanied the Notice of Meeting. I will take the Notice of Meeting as read. Every shareholder and proxy holder entitled to vote on each of the business matters brought before today's meeting has 1 vote in respect of each share held by that shareholder or proxy holder.

If you've already voted by proxy, there's no need to vote again unless you wish to change your vote. Registered Shareholders and duly appointed proxy holders who are physically present at today's meeting and haven't voted in advance will vote by ballot. Shareholders who have appointed Management as their proxy holder will have their shares voted at the meeting by Gord Johnston. Shareholders who have not already voted in advance and proxy holders who are present have received 3 ballots at the registration desk. [Audio Gap]

Thank you, Paul. The first item of business is the presentation of our financial statements. We have placed before the meeting Stantec's consolidated financial statements for the fiscal year ended December 31, 2025. These financial statements and corresponding auditor's report are included in our annual report. Extra copies of the annual report are available at the registration desk as you entered today's meeting. You can also view the annual report in the Investors section of our website at stantec.com.

If any shareholders have any questions about the Annual Financial Statements, we will be happy to address them during the question period that follows this meeting. The next item of business is the election of our directors. We'll be electing 9 directors today. Information about each nominee appears in the Proxy Circular that was made available to you in advance of today's meeting.

I'll now ask Paul Alpern to nominate the directors.

Thank you, Doug. I nominate each of the persons whose name appears in the Management Information Circular under the heading Nominees for Election to the Board of Directors to be elected as a Director of Stantec and to hold office for the ensuing year or until his or her successor is elected or appointed.

Thank you, Paul. Unless there are any questions, I'll now put the motion to the meeting. Are there any questions about the election of our directors? Hearing none, we'll proceed with the vote. Please use your blue ballot to vote for the election of our directors. And shareholders who are voting through the virtual meeting platform, please cast your vote on the election of our directors now.

[Voting]

We'll now proceed to the next item, which is the appointment of our auditors.

So Paul, I'll turn it over to you.

Thank you. I move that PricewaterhouseCoopers LLP be reappointed auditors of Stantec for the 2026 fiscal year, that they hold office until the close of the next Annual Meeting of Shareholders or until their successors are appointed, and that the directors be authorized to fix their remuneration.

Thanks, Paul. I'll now put the motion to the meeting. Are there any questions about the appointment of our Auditors? Hearing none, we'll proceed with the vote. Please use your green ballot to cast your vote on the appointment of our Auditors.

[Voting]

And again, shareholders voting virtually, please cast your vote on the appointment of our auditors. The next item is our non-binding advisory vote on executive compensation. Paul, can you have a motion on that?

I move on an advisory basis, and not to diminish the role and responsibilities of the Board of Directors, that the shareholders accept the approach to executive compensation disclosed in Stantec's Management Information Circular delivered in advance of today's meeting.

Thanks, Paul. I'll now put the motion to the meeting. Are there any questions regarding executive compensation? Hearing none, we'll proceed with the vote. At this point, please use your yellow ballot to mark your vote on our Annual Say-on-Pay. And again, shareholders that are voting through the Virtual Meeting Platform, please cast your vote now. So that concludes the matters to be voted on.

[Voting]

Again, shareholders who are attending virtually, if you've not voted on the resolutions, please do so now, as the polls will close in a short period of time. So while the votes are being tabulated, I'll open the floor to questions or comments from Shareholders. If you have any, please raise your hand, indicate your name and whether you are a Shareholder or a Proxy holder. And if you're attending the meeting virtually, please use the Q&A function available in the virtual meeting room.

Okay. Mr. Chair, there's one question from the online community. It reads, there's been a lot of talk lately about how AI might impact the engineering industry. What are your thoughts on how AI may be a positive or negative influence?

Doug, perhaps I'll answer that one. And so we're actively engaged in the incorporation of AI tools into our operations, both from a back-office administrative perspective and in gaining efficiencies in our client-facing projects. We see AI as enhancing our margins, and we continue to engage with our employee base at all levels on how we can best incorporate the technology into our operations.

And there's no further questions from the online community, so you can proceed.

Okay. With that, the voting is now closed. Paul, if you could, could you please share with us the preliminary voting results?

Thank you, Mr. Chair. I've received a copy of the Scrutineer's Interim Report and wish to advise that approximately 83 million shares or 73% of the eligible shares have been voted on at today's meeting. All matters to be voted on at the meeting have been approved by a very large majority of the votes.

Okay. Thank you, Paul. And on that basis, I'll now declare that all the motions put forward at today's meeting have been approved. Please note that the results have been recorded by the scrutineers. They are preliminary. After the meeting, the scrutineers can provide an actual exact tally of the votes to anybody interested. Final voting results will be published shortly on our website at stantec.com and filed with U.S. and Canadian regulatory authorities.

So on behalf of the Board, I'd like to thank you very much for your support. So this concludes our meeting today. And I'd like to close by thanking you for trusting us at Stantec with your vote, and the people at Stantec that are dedicated and innovative employees that make a big difference to what we do here. And on behalf of our Board, I'd like to thank you for your participation today. So thanks for attending today, and we look forward to seeing you next year.

Welcome to Stantec's First Quarter 2026 Results Webcast and Conference Call. Leading the call today are Gord Johnston, President and Chief Executive Officer; and Vito Culmone, Executive Vice President and Chief Financial Officer. Stantec invites those dialing in to view the slide presentation, which is available in the Investors section at stantec.com. Today's call is also being webcast.

[Operator Instructions] Please be advised that also all information provided during this conference call is subject to the forward-looking statements qualification set out on Slide 2, detailed in Stantec's management discussion and analysis and incorporated in full for the purposes of today's call. Unless otherwise noted, dollar amounts discussed in today's call are expressed in Canadian dollars and are generally rounded.

With that, I'll turn the call over to Gord Johnston. Please go ahead, sir.

Good morning, everyone, and thank you for joining us today. Our first quarter results reflect a solid start to the year, underpinned by continued strong execution and our diversified platform. We are well positioned to continue building momentum through the balance of the year.

Macro trends across water, aging infrastructure, mission-critical facilities and the energy transition continue to support strong long-term demand for our services. While the operating environment remains dynamic, we remain focused on execution, prioritizing the right work and continually driving strong operational performance.

In the first quarter, we grew our net revenue to $1.7 billion, up over 9% compared to Q1 2025, driven by 3.6% organic and 7.2% acquisition growth. Organic growth was achieved in all of our regional operating units. Our Water and Energy & Resources businesses achieved over 14% and almost 9% organic growth, respectively.

Adjusted EBITDA increased close to 14% year-over-year, and our adjusted EBITDA margin increased to 16.9%, a year-over-year increase of 70 basis points. Adjusted EPS grew almost 15% compared to Q1 2025.

Looking at our results in each of our geographies. In the first quarter, U.S. net revenue increased 11%, driven by 12.5% acquisition growth from Page and almost 3% organic growth. Our Water business achieved double-digit organic growth, primarily due to activities on large wastewater treatment projects.

In Energy & Resources, work on a major hydropower dam project contributed to solid organic growth, and our Infrastructure business continued to deliver growth through data center projects in the North Central region. We're seeing a number of our major clients consolidating work and awarding larger, more integrated programs to a smaller set of trusted providers like Stantec. Activity is beginning to ramp up across these programs, and we expect this to continue throughout 2026.

In Canada, first quarter net revenue grew just over 1% organically. Strong organic net revenue growth in our Water business was driven by biosolids projects and continued momentum on wastewater projects. Robust organic net revenue growth was also achieved in both our Energy & Resources and Buildings businesses through consistent progress on major industrial process projects and public sector investments, primarily in civic markets, respectively.

While our Infrastructure business experienced the wind down of certain transit and roadway projects in the quarter, we expect a ramp-up of new projects to commence in Q2.

Lastly, our Global business delivered over 13% net revenue growth in the first quarter, driven by almost 8% organic and 3% acquisition growth as well as positive foreign exchange impacts. Our industry-leading Water business delivered 15% organic growth this quarter through long-term framework agreements and public sector investments in water infrastructure across the U.K., Australia and New Zealand.

The ramp-up of new projects in Chile and Peru drove strong organic growth in Energy & Resources as the growing need for energy transition solutions continues to drive demand in mining for copper.

And we achieved double-digit organic growth in our German Infrastructure business due to continued momentum on a major public sector electrical transmission project and increased volume on transit and rail projects.

Before handing the call over to Vito, I want to briefly highlight our 19th Annual Sustainability Report, which we released in April. Accomplishments from the report include: approximately $5.5 billion or 68% of total revenue was generated from work aligned with the UN Sustainable Development Goals.

We achieved operational carbon neutrality for the fourth consecutive year while continuing progress towards our net zero commitments under Canada's net zero challenge. And we maintained an A- CDP climate score for the eighth consecutive year, reflecting sustained external recognition of our climate action efforts.

Sustainability is a core driver of Stantec's strategy, shaping the markets we serve, the projects we pursue and how we deliver work, all of which support long-term growth.

I'll now turn the call over to Vito to review our first quarter financial results in more detail.

Thank you, Gord, and good morning, everyone. As Gord noted, we achieved solid financial results in the first quarter. Sustained demand across a diverse multi-sector platform, combined with strong operational execution continues to support these strong results.

In the first quarter, we achieved gross revenue of $2.1 billion and net revenue of $1.7 billion, an increase of 9.1% compared to Q1 of 2025. This growth was driven by 3.6% organic and 7.2% acquisition growth. Project margins as a percentage of our net revenue once again remained in line with our expectations at 54%.

We achieved an adjusted EBITDA margin of 16.9% in the quarter, a 70 basis point increase compared to Q1 of 2025. The growth in margin was primarily due to lower admin and marketing expenses as a percentage of our net revenue and reflects ongoing disciplined management of our operations. And our adjusted EPS in the first quarter increased 14.7% to $1.33.

Turning to our cash flow, liquidity and capital resources, during the first quarter, our net operating cash outflows totaled $2.3 million. The first quarter is typically a seasonally lower quarter for cash flow generation. Further, the Q1 results reflect the expected transitory disruption associated with the financial migration of Page and the higher investment in working capital funding the elevated organic growth in our global region required.

Our DSO at the end of the first quarter was 74 days, an improvement of 3 days compared to Q1 of the prior year and below our internal target of 75 days. Our net debt-to-adjusted EBITDA ratio remained at 1.3x, and this is within our internal target range of 1 to 2x. And our balance sheet remains very strong, leaving us well positioned for future acquisition growth.

I'll now hand the call back over to Gord to discuss our backlog, our recent project wins and our outlook for 2026.

Great. Thanks, Vito. At the end of Q1 2026, our contract backlog reached a record of $9 billion, a 13.2% increase year-over-year, representing approximately 13 months of work. Acquisitions completed in 2025 contributed to backlog growth of over 9%, primarily within our Buildings business. Backlog grew 5.4% organically year-over-year.

Most notable year-over-year organic growth was achieved in our Global region, which delivered double-digit growth of 22%. We also saw strong backlog growth in our Water and Buildings businesses, both achieving nearly 10% organic growth.

I'll note that in the U.S., we continue to see procurement cycle activity picking up as we delivered another quarter of consecutive organic backlog growth. When compared to Q4 2025, backlog increased over 3% organically, which follows the 3% organic growth that we saw from Q3 to Q4 of last year.

I'll now highlight a few projects Stantec secured over the quarter. These wins help demonstrate the breadth of opportunities we're capturing, varying in size, scope and complexity.

Drawing upon extensive experience in advanced manufacturing, our Buildings team was selected to provide design services during the construction phase of a multibillion-dollar semiconductor manufacturing and research and development facility in Idaho. This project includes on-site water treatment facilities and 5 ancillary support buildings.

Our Infrastructure team as part of a joint venture, was selected to lead the design of the first fully electric light rail system in Austin, Texas. This project includes a 10-mile 15-station transit corridor, where we will deliver full multidisciplinary design across tracks, stations, bridges, systems, utilities, drainage, and streetscape improvements.

In Chile, our Energy & Resources team was selected to provide oversight and quality review for a tailings management facility, reflecting our continued strength in supporting complex mining infrastructure projects. Our scope spans earthmoving, civil, piping, geosynthetics and electromechanical systems. And our work will continue through construction and commissioning, including tailings pumps, water systems, piping and electrical components.

As we look toward the remainder of the year, we are reaffirming our 2026 financial targets, including net revenue growth, which is expected to be in the range of 8.5% to 11.5% with organic net revenue growth in the mid- to high single digits, driven by strong demand across all geographic reporting segments and business units.

In the U.S., organic growth is expected to accelerate, supported by the demand across all 5 of our business verticals. We are also encouraged by the growing demand in key areas such as data centers and defense as well as in advanced manufacturing.

In Canada, we expect to see growth driven by public sector spending plans and continued demand in energy and resources. We continue to see good momentum in defense and other nation-building efforts following the recent announcements by the Canadian government. While still in early stages, these programs are expected to contribute to growth well beyond 2026.

Related to defense, Stantec has completed work on 16 national defense and Canadian forces bases across Canada and is currently supporting projects that advance national sovereignty from coast to coast to coast. And the Canadian Defense Review recently named Stantec within its list of top 100 defense companies in 2026.

Lastly, Global is expected to maintain strong organic net revenue growth, driven by continued high level of activities in our Water business under AMP8 and other framework agreements, strong demand in Energy & Resources and positive demand fundamentals across other Global business units.

With our continued focus on operational excellence, we expect our adjusted EBITDA margin will continue to expand to a record range of 17.6% to 18.2%. And we expect to deliver 15% to 18% growth in adjusted EPS compared to 2025. I would note that these targets do not include any assumptions related to additional acquisitions, given the unpredictable nature of the timing and size of such transactions.

On M&A, we are starting to see more buyers in the market, particularly private equity. We remain active evaluating opportunities while maintaining our disciplined approach. We continue to see a healthy pipeline of firms coming to market, and we remain confident that M&A represents the best use of our capital.

As we close out the final year of our 2024 to 2026 strategic plan, we continue to be grounded in disciplined execution while preparing Stantec for what comes next. We are confident in our positioning and our ability to continue delivering strong performance and long-term value for years to come.

With that, let me turn the call over to the operator for questions. Operator?

And our first question for today comes from the line of Frederic Bastien from Raymond James.

Listen, investors have come to expect Stantec to direct its next dollar of investment towards M&A. And Gord, you just said as much in your prepared remarks. How do you think about share purchases as the current dynamic around AI and just the pressure on public valuation, this narrative and that this dynamic evolves? How do you think about share buybacks in this light?

Yes. Thank you, Frederic. Maybe I'll take that one. You're absolutely right. I mean, at the end of the day, fundamentally, we really continue to believe that strategic acquisitions present the highest value creation opportunity for our organization going forward. Stock buybacks are definitely a tool in our capital structure optimization toolbox, if you will.

And as you are describing and insinuating, I think, frankly, at these valuation levels, it's becoming increasingly hard to ignore not getting into the market and buying back stock. So look out for that as we move into our open windows here post the quarter.

Having said that, the quantums and values contemplated, if you take into account our 2% approved NCIB, and the scope of our balance sheet is not overly significant and in no way would impede our M&A strategies. So thank you for the question.

I Appreciate the answer, Vito. Thinking more higher level on -- I guess, on the organic growth front, are you still the most excited about the opportunities in the U.S.? Or I mean, based on your comment around Canada and defense spending and nation building initiatives, it sounds like Canada could be a great area for growth on a go-forward basis.

I think we see great opportunities, both north and south of the border. But you're right, Canada started the year a little bit slow on the organic growth side. But what's interesting, and we talked in the prepared remarks about how infrastructure pulled back on a couple of transportation projects that we had, but we see that filling those being filled up here again in Q2.

But other than that, every one of our businesses came into that mid- to high single organic growth for the quarter, just pulled down a little bit by Infrastructure. So -- and we're lapping a high comp. It was 12% in Q1 of '25. But if you look at the Canadian business, backlog up 6% organically over the year.

But then when you look at the opportunities, as you've said, with the federal government in the North, our first defense industrial strategy, the arctic Infrastructure plan, the Build Communities Strong Fund, there's just so much good directional activity going in Canada. So we do feel very good about it.

We've talked before about the Arctic Over-The-Horizon award, Grays Bay that we're working on, but there's a lot of opportunities coming up in the North, Frederic, that we feel really good about.

Not to discount the U.S. at all. And so we saw that in the U.S., you've seen our backlog sort of that momentum continue to build in backlog, a little over 3% organic backlog growth this quarter, building on about 3% organic backlog growth in the last quarter. So I think we see that coming and strengthening as well. But -- so we feel pretty good about North America overall.

And our next question comes from the line of Krista Friesen from CIBC.

I'm just wondering if you can give a little bit more color in terms of what you're seeing from the Canadian government. Like a lot of announcements been made. Are we seeing that translate into awards at that point in time? And do you feel like some of the red tape has been cut here in terms of what we've historically seen from the government?

We certainly have seen some awards. Of course, we've all talked about Arctic Over-The-Horizon. But there's a number of additional either proposals that are just -- that we're waiting for. In fact, what's interesting as we look at the amount of opportunities, I think you'll see us being pretty discerning as to which ones we pursue because there's so many coming that we'll be looking at it pretty closely.

So great opportunities there. You saw that we are named 42 in the top 100 Defense Canada's ranking. So just a lot of opportunity coming there, Krista. In terms of has red tape been reduced? Do we see a difference in the permitting process at this point? I think that's still evolving, and we'll see more. But we also note that Prime Minister Carney is coming to Alberta on Friday. So we'll see what he has to say there, certainly has some expectations of an announcement as well, which would be directionally positive for us.

Indeed.

Okay. That's great. And then just on the M&A side, can you comment what you're seeing in terms of multiples out there for the private companies? And how much of a dislocation, I guess, there is between that market and the public markets and what we're seeing?

Yes. And I'll take that one, maybe, Gordon. I mean we definitely see -- when you talk valuations on the M&A side, it's obviously very specific to sectors. You've seen some transactions occur, obviously, over the last several weeks and largely on the power side that has you in the high teens sort of area. So if you look at that compared to, obviously, where we're trading, there's significant sort of dislocation there, but that's the power assets.

I'd say right now with what's going back to almost Benoit's question -- excuse me, Frederic's question around valuations, we are seeing a dislocation of valuation that I think over time, obviously, there'll be some convergence. But valuations overall are obviously very company sector specific, and we'll continue to monitor that and be disciplined as we make our way through.

And our next question comes from the line of Benoit Poirier from Desjardins.

Just to come back on the U.S., obviously, you've talked about the softer start with 2.8% organic growth. I was wondering, any weaker contribution from emergency response? And is the retraction in Building that we saw, given the completion of certain projects, going to impact Q2 as well? I'm just trying to get some thoughts where there's a slowdown on [ IIJA ] fund flows or anything else would be appreciated.

Yes. So in the Buildings business, we did have a soft start to the year in Q1. That said, the backlog in our Buildings business year-over-year and actually even quarter -- over Q1 of this year over Q4 of last year, we're seeing some positive growth in Buildings momentum.

Similar to in Canada, where infrastructure was the only group that we had that retracted because of some project wind downs, it was the same in the States that Buildings was the only group we had that retracted a bit organically. Everything else grew.

And so as Buildings sort of strengthens here in Q2 and the last half of the year, I think that will be generally supportive to our overall growth there in the organic growth in the U.

S. Overall, backlog growth, we talked about sequential growth in this quarter and the previous quarter. And both in Canada and the U.S., we actually have a considerable amount of notified awards that hasn't yet been contracted also that we'll see that going into backlog here in Q2 and beyond. So we actually feel pretty good about where we are and how the year is going to shape up.

The only other thing I'd add to that, Gord, is, Benoit, with respect to the Buildings practice, we're really excited about the Page acquisition. And obviously, our Page revenue and business is being reported through our acquisition sort of reporting. But year-on-year, some really nice healthy organic growth in the Page business.

So those Page and our reported organic Building sector are working hand-in-hand, and we're very pleased with how that is evolving as we look for the year.

And maybe I'd just add on with Page, I think our revenue synergies are even exceeding what we had hoped that we would see there. It's -- the two groups together are very, very strong.

Okay. That's great color. And on the Global side, you were able to achieve 15% organic growth that was pretty impressive. You called out the strong performance on Water, but also the ramp-up of projects in Chile and Peru. So just wondering about the sustainability of the double-digit performance going forward.

When we look at the Water segment in the -- with the AMP8, we've been talking about that for some time, and that just continues to ramp up. So we feel really good about that. actively hiring everyone we can get our hands on in the U.K., you would have seen that finally now we're able to talk openly about Scottish Water because they press released it now, how we're one of the primary design partners there. So that's going to continue to ramp up, active hiring there. We're hiring a lot in India to support these groups as well. So that's very, very sustainable.

When you look into our South American operations, again, primarily supporting copper with the continued run-up and need for copper to support energy transition and such, we're seeing really, really strong growth in our Mining segment there, actively hiring there.

Interestingly, we're also starting to even more use our Indian -- our delivery centers to support our Latin American operations as well just because of the -- with the growth there, it's easier to get some folks elsewhere. So we're feeling good about that, really good about our Global delivery center as well.

Okay. And where would you be right now in terms of employees in those global centers, Gord?

Yes. So we're sitting just shy right around 2,000 people, which is where we wanted to be sort of by the end of this year. So we might achieve that goal even a little bit early. And so what's interesting is that we targeted about 2,000 people.

And as we continue to grow there, we've actually taken a second office in [ Pune ] as well. We've expanded within our existing office until there's no more space available. Now we've taken additional real estate. So -- and we're starting to hire some people in some other cities as well to support our continued growth. So more to come there.

Yes. And just a shout out to that team. They're extraordinary, and we thank them for their commitment. They are part of Stantec.

And our next question comes from the line of Sabahat Khan from RBC Capital Markets.

This is [ Patti ] on the line for Sabahat. I was wondering if I could just maybe get a bit more color on the kind of puts and takes and drivers of the pretty good margin expansion in the quarter. It looks like you're tracking at this rate pretty positively against your full-year guidance. So it looks like some leverage on the administrative and marketing expenses.

And I was wondering if you could kind of give color on that as well as some of the more mix-driven contractions, I guess, in project margins across the business and maybe the timeline or how you expect those to play out through the rest of the year?

Yes, [ Patti ], thanks for the question. It's Vito here. I'll take that one.

When we talk about margin, it always starts with obviously the right project, the right customer, the right pricing mechanics and then strong operational execution. And I always go straight to the project margin line as the first line of sight there.

Project margins were steady this quarter year-over-year, 54%, I think, was the number, just slightly lower than prior year, and that was largely mix related. Our Global business continues to grow, which is wonderful. The margin profile there in some certain sectors just a bit below maybe other areas.

We've talked a little bit about the Water business and incredible volume year-over-year, slightly lower margins as expected. Obviously, very, very pleased with that business and the work the teams are doing.

So I would describe project margins evolving in a normal expanding sort of continuum there. So nothing unusual with that activity. What you're seeing as far as overall margin expansion, then really comes down to the admitted marketing. And you referenced that our admitted marketing in Q1 was 38.3% of our net revenue, and that was just over 100 basis points lower than prior year.

And the drivers there really are we had improved utilization. That's very, very important. So as the teams look to obviously hire and you heard Gord describe the strong demand environment as we move forward, while obviously putting people to work and obviously continuing to invest and billable hours and leveraging our back office as appropriate. So we're really pleased with how the operations as it continues to evolve in that regard and managing overall utilization.

And then we're getting scale from our operations. So -- and that's our continued expectations of that. And it's been several quarters that you've been seeing that in effect, and Q1 just continued to manifest that. I think it's the sixth or seventh consecutive quarter perhaps of year-over-year margin expansion for us bottom line.

So very, very pleased with our margin performance. And obviously, you see that reflected, obviously, in our full year guidance where we guided to no changes in the guidance, too early to make any changes, but 17.6% to 18.2% is a real step forward, building on the 90 basis point improvement in 2025 versus 2024.

All right. That's helpful color. And then maybe just kind of going back to the demand environment in the U.S. good to hear your updated thoughts on the outlook for IIJA funding and maybe some of the new or the more emerging tailwinds.

I think you had recently mentioned that you're working on a handful of kind of hyperscaler data centers representing more than a couple of gigawatts of capacity. So just kind of your updated thoughts on that and how you feel about the region going forward, that would be helpful.

Absolutely. Yes. So for IIJA, what we've talked about before and you've heard others talk that the that bill for new awards expires in September of this year. So we're seeing more and more people talking about trying to get out ahead of time, make sure they get their allocations before September.

So we often get asked, do you think it will all be allocated by September? That's hard to say because it's harder to get some of the data than it would. But of course, important to note that with those IIJA-funded projects, even though that program ends at the end of September for new awards, revenue will continue to be generated on that project for the next 3 to 5 years. That's the sort of the dynamic, the period of time it takes to process those transportation projects.

Parallel with that, the new Surface Transportation Act reauthorization, which will provide stable funding for the next 5 years, is still in process, anticipated to be in that $500 billion to $600 billion range. we're expecting the draft bill from the House is coming. The Senate version is not expected until June. And so it's not expected to pass before the end of the year. But certainly, we see -- there'll be good bipartisan support for that.

You mentioned that the data center is mission-critical. Absolutely. That work continues to go. We're working still with the top -- for 5 of the top hyperscalers and up to and well over 1 gigawatt. We talked about in the prepared remarks about this multibillion-dollar semiconductor manufacturing and research and development facility in Idaho that we're working on now.

So we do see a lot of still great opportunities coming in the U.S. We feel -- you see backlogs are -- the momentum is coming there, 3% growth per quarter over the last couple. So we feel good about the U.S.

[Operator Instructions] Our next question comes from the line of Maxim Sytchev from NBCM.

I just wanted to circle back to Environmental Services. Like obviously, I realize that very often that segment acts as a sub to other verticals. But how should we think about sort of the inflection point there, especially as Energy & Resources is showing some pretty strong organic growth?

Yes. Interestingly, we've seen some good projects come into that Environmental Services group, some with the U.S. federal government, some with other groups just looking to continue to push that forward.

You're right, they do support a lot of newer projects, but they're also engaged in everything from the first part of pipelines that we've seen some significant organic backlog growth in Canada in that space. So there's some good things happening in the ES space. You see organic growth in Q1, a little bit lighter at 1.2%, 1.5% last year, but I think we'll see that begin to continue to increase as we go through the year.

Okay. That's good to hear. And then maybe a question for Vito. So Page obviously delayed some of the working capital kind of normalization. When should we see kind of full run rate kind of similar to Stantec's sort of standards? Can you maybe comment there, please?

Yes. Financial migration was completed here in Q1. So our expectations would be that we are back in line and pretty well on pace here as we move through Q2 and Q3, Maxim. So not concerned about that or don't expect any significant impact moving forward.

Of course. Yes, makes sense. And then just more sort of a general question around AI and procurement methodologies. Are you seeing any pushback or demands from your customer set around sharing costs or sharing maybe upside from faster design? Do you mind maybe providing any color in terms of how these conversations are going or maybe not?

Yes. So a couple of things there. We've actually partnered with a number of our clients for the co-creation of some AI applications. An example that is down in the U.S., [ WSSC ] water in Prince William County. We're kind of partnering with them for the co-development of some AI-enabled wastewater operations space. We're working with some on digital twin development.

Interesting, we're seeing AI -- our usage continue to expand with our client base. And what we find is it's providing us with some new service opportunities. So I'll give you an example of that.

In Taiwan, we recently worked with our client there and developed a digital twin of a water treatment plant, and we integrated it with some AI-driven operational models. So it's -- so Taiwan, of course, very mountainous area. When you get a heavy rain, not only does the water flow down towards the rivers, but so does the sediments. And so that increases turbidity in the water.

And so what we do that is using our AI models, we simulate not just the water, but the turbidity. Then we've simulated how could the plant operations be varied in order to deal with this water. The beautiful part of it is while we absolutely -- the AI system could control the operation of the plant from there, there's always a person in the middle.

This is a public water supply. So we give all that information to the operator, they make their decision. And then using the digital twin, we can watch the dosing of the chemicals change. We can watch how the plant operations changes. So that sort of that getting into the operational phase as a new service offering for us. We consult on that often, but providing this product is new for us.

We consult on that often, but providing this product is new for us. Interestingly, it's working really well. And it's one of the reasons that we were recently awarded a really large water treatment plant design in the Middle East. And so the beauty of that is that we're getting new work from it.

But there's others and maybe where we've used AI on a -- we designed a beach club on the Caribbean Island recently. And that was a fixed-fee job. And so there, we had our fixed fee. We were able to do the design a bit quicker. And we did not see -- we don't see clients at this point asking for a reduction in that fixed percentage of capital costs. Might that come at some point in the future, perhaps, but we're not seeing it yet, Max. So we're seeing some good things happening there.

Our next question comes from the line of Michael Tupholme from TD Cowen.

Just a question about the overall organic growth and the progression from here. Obviously, maintaining the mid- to high single-digit organic growth guidance for full year. Just if you can help maybe us think through how that progression will play out over coming quarters? Like will Q2 get you right into that range? Or is this more of a building process throughout the year?

Yes. Sorry, no, we expect a sequential organic growth improvement. I mean it's obviously hard to time quarters and what that might look like. But definitely, as we move into the back half of the year and set ourselves up for 2027, our expectations would be that you'd see a ramp through the organic, particularly off the Q1 levels.

Perfect. That's helpful. And then there was some commentary just a few moments ago about data centers. Gord, I know you've been asked this in the past, but can you give us an update on sort of what percentage of the business that is today, given the growth you're seeing? And how you maybe see that looking as we maybe look out to, say, next year, 2027, just a percentage of overall revenue?

Yes. It's sitting in and around that 3% range, and it's certainly growing quickly. So we could see a doubling to the 5%, 6% range. But one of the things that we've talked about before is that I would never want to see it for our company to get up in 15%, 20% because while it's good work and it's high-margin work, we just wouldn't want to have -- be so exposed to one line of business. So we'll take the good questions. It's good work. And yes, I could see it doubling to that 5%, 6% range.

And our next question comes from the line of Jonathan Goldman from Scotiabank.

Just one for me. The larger projects that you're booking in the U.S., is it possible to quantify or maybe directionally talk about how big those projects are relative to the average-size project you do in the U.S.? And maybe also if you can talk about how the delivery kind of period or the conversion of those projects would compare to an average size order? And is this part of a bigger trend moving to more complex and larger projects than in the past?

We are absolutely seeing a number of clients, both in Canada and in the U.S. that are sort of bundling large packages of projects together in part because rather than having to run 10 projects, they run 2, for example. And so -- but they're much larger.

So we are seeing -- the competitive set on those is much different because it's really only the big majors that can pursue those. And so the competitive set is different, which allows a little bit of pricing power in a number of instances.

But it's while an average project size might be in the $100,000, couple of hundred thousand dollar range, these ones could be in the $100 million to a couple of hundred million dollar range. Like these are -- there are some big projects out there.

And for us, it changes the way that we manage them. Like we have -- there's a smaller number of people within Stantec and the industry overall that can manage projects of that size. We're fortunate to have more than our fair share of them. So yes, we do see that being a growing part of the business.

What's interesting about those projects is that they do typically take a little longer to ramp up. They go at a high level for multiple years, 3, 4, 5 years and then before they ramp down. So the magic in the Stantec model is being able to service those long-duration projects. But as they're ramping up and ramping down, you use your smaller projects to fill in those ramp-up and ramp-down projects.

So that's a little bit of the beauty of the Stantec model, is that we can service both the smaller projects and the larger projects, keeping our utilization rates up, keeping our people engaged sort of at all phases.

And Gord, all I'd add there is I love the way that's evolving from a competitive perspective for reasons you described. But in no way shape or form from a diversification perspective or from a concentration perspective, does this create an issue for us in any way.

The organization is so large across both our sectors and across our geographies that no single project in any way, shape or form is -- makes it problematic from a cycling perspective and overall exposure perspective.

Interesting. And then, Gord, your comment about maybe bundling projects together from -- is this multiple projects from a single customer that are flowing to kind of single sourced or one rather than a bunch? Or is it multiple phases of a project that they used to be outsourcing to a broader set of suppliers?

Yes, it's more a series of projects that they would bring together where they used to maybe issue 2, 3 or 4 requests for proposals, run 2, 3 or 4 concurrent projects. We're seeing sort of some bundling of multiple sort of independent projects.

But also, to your point, in other cases, it's bundling all the phases together just so -- because for them to go and procure takes a lot of time and effort as well. So the less times you can go to have to procure, then the better it is for them, better it is for us actually as well.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Gord Johnston for any further remarks.

Well, only to say thanks to everyone for joining us this morning. I know it's a busy morning there. And if you have any follow-up questions following today's call, please reach out to Jess Nieukerk, our VP of Investor Relations, and enjoy the rest of your day. Thank you.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Welcome to Stantec's Fourth Quarter and Full Year 2025 Results Webcast and Conference Call. Leading the call today are Gord Johnston, President and Chief Executive Officer; and Vito Culmone. Executive Vice President and Chief Financial Officer. Stantec invites those dialing in to view the slide presentation, which is available in the Investors section at stantec.com. Today's call is being webcast. Please be advised that if you have dialed in, while also viewing the webcast, you should mute your computer, as there is a delay between the call and the webcast.

All information provided during this conference call is subject to the forward-looking statement qualification set out on Slide 2, detailed in Stantec's management discussion and analysis and incorporated in full for the purpose of today's call. Unless otherwise noted, dollar amounts discussed in today's call are expressed in Canadian dollars and are generally rounded.

With that, I'll turn the call over to Mr. Gord Johnston.

Good morning, everyone, and thank you for joining us today. 2025 marked another record year for Stantec. We delivered solid mid-single-digit organic growth and completed three acquisitions despite a year of ongoing geopolitical uncertainty. Global trends across the water, mission-critical, transportation and energy transition sectors continue to underpin strong demand for our services, and our diversified portfolio across sectors and geographies continues to enhance the resilience of our operations.

As a result, we grew our net revenue almost 11% compared to 2024 to $6.5 billion, driven by 5% organic and 3.9% acquisition growth. Organic growth was achieved in all of our regional and business operating units with our Water business achieving almost 11% organic growth. Adjusted EBITDA increased close to 17% year-over-year and continued strong project execution drove our adjusted EBITDA margin to 17.6%, achieving our 2024 to 2026 strategic plan target range of 17% to 18%, 1 full year earlier than originally anticipated. We also delivered adjusted EPS growth of almost 20% compared to 2024.

Looking at our results in each of our geographies. In the fourth quarter, U.S. net revenue increased 13.5%, driven primarily by 11.5% acquisition and just over 2% organic growth. On a full year basis, net revenue grew by almost 11%, supported by just over 5% acquisition and 3.4% organic growth. In our Buildings business, net revenue increased over 30% in the year, primarily due to our acquisition of Page, but also from solid organic growth. Public and private sector investments in data centers and other mission-critical facilities, science and technology and civic continue to drive organic growth in this division. Organic growth in Water was driven by large wastewater treatment projects, and growth in Environmental Services was primarily driven by the energy transition, mining and infrastructure sectors as well as continued work for a large utility provider.

In Canada, fourth quarter net revenue grew 5.5% in the quarter, driven completely by organic growth. For the full year, net revenue grew over 8% compared to 2024, primarily through organic growth. We're pleased that our Water and Energy & Resources businesses continued to deliver strong double-digit growth. Momentum on major wastewater projects contributed to over 20% organic growth in water, and consistent progress on major industrial process projects drove 15% organic growth in Energy & Resources. Solid growth in Infrastructure was primarily supported by land development projects in Alberta, airport sector projects in Quebec, and bridge sector work in Eastern Canada. Public sector investment continued to drive growth in buildings, primarily in our civic and health care markets.

Lastly, in the fourth quarter, our Global business delivered net revenue growth of 11%, achieving over 6% organic and 2.5% acquisition growth and to a lesser extent, positive foreign exchange impact. For the full year, the Global business grew net revenue by almost 13%, underpinned by almost 6% organic and over 4% acquisition growth. Our industry-leading Water business continued to deliver consecutive double-digit organic growth through long-term framework agreements and public sector investment in water infrastructure across the U.K., Australia and New Zealand.

The ramp-up of new projects in Chile and Peru drove strong organic growth in Energy & Resources as the growing need for energy transition solutions continues to drive demand in mining for copper. We also achieved double-digit organic growth in our German Infrastructure business due to continued momentum on a major public sector electrical transmission project, and increased volume on transit and rail projects.

I'll now turn the call over to Vito to review our fourth quarter and full year 2025 financial results as well as to provide an update on our backlog and financial targets for 2026.

Thank you, Gord, and good morning, everyone. 2025 truly was another exceptional year for Stantec, and we are very pleased with our fourth quarter and our full year 2025 results. Sustained demand across our diverse multi-sector platform, underpinned by favorable global trends continues to support our strong results.

In the fourth quarter, we achieved gross revenue of $2.1 billion and net revenue of $1.6 billion, an increase of 10.9% compared to Q4 of 2024. This growth was driven by 3.9% organic growth and 6.5% acquisition growth. As a percentage of our net revenue, project margins once again remained in line with our expectations at 54.5%. We achieved an adjusted EBITDA margin of 17.3% in the quarter, that's a 60 basis point increase compared to Q4 of 2024. The increase in margin primarily reflects lower admin and marketing expenses as a percentage of our net revenue, mainly due to higher utilization and our continued discipline in the management of our operations. And our adjusted EPS in the fourth quarter increased 12.6% to $1.25.

Looking at the full year, as Gordon mentioned, 2025 was another record year for Stantec. Our gross revenue reached $8.1 billion, and we grew net revenue to $6.5 billion, up 10.7% when compared to our performance in 2024. This was achieved through 5% organic and 3.9% acquisition growth. And as a percentage of our net revenue, project margins came in at 54.3%, once again, in line with our expectations. On a full year basis, we achieved a very strong adjusted EBITDA margin of 17.9%, a 90 basis point increase year-over-year. This record margin was driven by strong project execution and cost management across our entire business. And finally, our adjusted EPS for the year reached $5.30, an increase of 19.9% when compared to 2024.

Turning to our cash flow, liquidity and capital resources. During 2025, our operating cash flow increased 43.1% compared to 2024 and growing from $603 million to $863 million, reflecting continued strong cash flow generation through our revenue growth, operational performance and strong working capital management. Our free cash flow to net income conversion was 1.3x, above our target of 1.0x. DSO at the end of the fourth quarter was 69 days, a substantive improvement of 8 days compared to Q4 of 2024 due to excellence in working capital management. We finished the year with a net debt to adjusted EBITDA ratio at 1.3x within our internal range -- target range of 1 to 2x.

As a result of our continued strong performance, the Board has approved an 8.9% dividend increase, with this, our annualized dividend will increase to $0.98 per share. It's important to note that our strong balance sheet leaves us very well positioned for future acquisition growth in 2026.

Now turning to our backlog. At the end of 2025, our contract backlog reached a new all-time high of $8.6 billion, a 9.5% increase year-over-year, representing approximately 13 months of work. Acquisitions completed in 2025 contributed to backlog growth of over 8%, primarily within our Buildings business. Year-over-year organic growth was 3.6%. We achieved organic growth in all of our regions, most notably in Global, which delivered double-digit growth of 14.2%. We also saw strong backlog growth in Water and strength in our Buildings business was supported by health care, data centers and other mission-critical facilities.

Let's now turn to our 2026 financial targets, and we expect another strong year. Net revenue growth is expected to be in the range of 8.5% to 11.5% achieved through organic net revenue and acquisition growth, primarily due to the Page acquisition. We anticipate our adjusted EBITDA margin will continue to expand, and that's driven by solid project execution, enhanced strategies in the management of admin and marketing, continued expansion of our high-value centers and optimization of our digital strategies. As such, we expect to deliver an adjusted EBITDA margin between 17.6% to 18.2%. And we expect to deliver 15% to 18% growth in adjusted EPS compared to 2025. These targets, of course, do not include any assumptions related to additional acquisitions, given the unpredictable nature of the timing and size of such transactions.

With that, let me turn the call back to Gord to highlight the business drivers supporting our targets for 2026.

Thank you. As Vito mentioned, we expect strong net revenue for 2026, primarily driven by improved organic net revenue growth across the business. Each of our geographies is expected to be in the mid- to high single-digit range. Macro trends, including aging infrastructure, defense spending, water security, advanced manufacturing, the growing demand for mission-critical facilities and the energy transition, all continue to create meaningful opportunities for Stantec. Over the past couple of months, we've started to see an increase in activity in the U.S., and we expect this trend to continue throughout the year. We're securing our fair share of wins across all five of our business operating units.

Growth in the U.S. will be underpinned by the continued strength of our Buildings business as we continue to capture synergies from the Page acquisition. Our Buildings team continues to see strong activity in data centers. As an example, Stantec was just selected by an artificial intelligence firm to design the initial 300- to 350-megawatt phase of a large data center campus, which has the potential to scale up to 1 gigawatt.

In Environmental Services, work is picking up related to the U.S. Navy CLEAN Program and activity within the U.S. Department of Defense continues to accelerate. In the energy sector, particularly LNG, strong demand is expected to generate meaningful project activity and cross-selling opportunities for both our Environmental Services and Energy & Resources businesses. U.S. Infrastructure remains a significant growth driver for us. With roughly half of IIJA funding still to be allocated, we continue to see strong momentum across our Infrastructure business, including major roads and bridge projects in the Southeast and large transit and rail programs in the West.

In Canada, organic growth will be driven by public and private sector spending plans. We continue to see strong growth in our Water business through major wastewater and biosolid treatment facilities. We expect strong growth in Environmental Services and Energy & Resources, with large private investments in energy infrastructure. And we're seeing strong growth coming from enhanced defense spending in both our Buildings and Infrastructure businesses. We're involved in a number of projects in the Arctic, where we bring specialized expertise in extreme climate conditions to support defense work. These include projects like Grays Bay Road, which leads to the proposed deepwater port that will have the ability to handle Navy vessels and large cargo ships.

We're also involved in facilities to support the North American Aerospace Defense Command, and we're doing work for the Canadian Department of National Defense to deliver facility upgrades for the Canadian Armed Forces. And we also just secured a major design build contract for Defence Construction Canada's Multi-Mission Aircraft hangar.

Finally, in our Global region, organic growth is expected to be driven by continued high levels of activity in our Water business under the ongoing AMP8 program. We're involved in over 20 AMP8 frameworks and we continue to be an industry leader in U.K. water by a significant margin. Stantec U.K. water team was recently named as a preferred bidder for the multibillion pound Scottish water enterprise, which is set to transform Scotland's water and wastewater networks. This program, which can extend out 13 years, is the largest program of investment in Scottish water's history. Combined with other frameworks in Australia and New Zealand, we expect strong growth in our Global Water segment.

In addition, we continue to see strong demand in our Global Energy & Resources business and in Transportation, particularly in Germany. Outside of organic growth, M&A remains a fundamental driver for Stantec. However, we will not pursue acquisitions solely for the sake of growth or to meet a certain target. Acquisitions must be value accretive. Stantec has a long and proven track record of successful M&A with last year's addition of Page marking our 150th completed transaction. We're very well positioned to continue to build on this track record in 2026 and beyond, and we continue to see ample opportunities in the market.

As we enter the final year of our 2024 to 2026 strategic plan, we're making meaningful progress towards the plan's targets. The momentum we've built, combined with favorable long-term market trends, position Stantec to drive sustained growth and shareholder value for many years to come.

Before concluding today's prepared remarks, I'd like to touch on AI and how we're thinking about it at Stantec. As engineers, architects and designated professionals, we're trusted advisers. Our clients hire us to use our qualified judgment to solve problems and develop solutions using a variety of tools. AI helps manage scale, consistency and document-heavy work, so our teams can stay focused on the design intent, risk trade-offs and client accountability. To do this work, clients are continually asking for faster delivery, fewer surprises and clearer defensibility. For us, AI enables earlier option evaluation, reduces late-stage conflicts and improves quality control. The opportunity isn't the technology itself. It's the ability to make better decisions earlier and deliver stronger outcomes across the asset life cycle.

From a financial standpoint, AI does not automatically translate to lower fees. In fixed fee work, it improves margins by reducing rework and execution risk. In time and materials work, it increases throughput and delivery confidence, allowing teams to manage more work in parallel. Our pricing remains anchored in value and risk reduction, not simply in hours. Strategically, we take a partner-agnostic approach. Our advantage isn't tied to a single technology. It's our ability to operationalize AI without compromising that trust governance or professional standards. We've moved beyond isolated AI pilots, and we're now enabling AI directly into our delivery workflows while maintaining professional accountability.

AI also provides multiple revenue opportunities. For example, related to data center development, our teams are already working on 5 separate hyperscalers to develop approximately 2.5 gigawatt of capacity. Combined, these facilities are worth almost $35 billion. In addition, we're working on well over 100 other mission-critical facilities. This work crosses several of our verticals, given the need for planning, design, energy, cooling and resilience. We also see opportunities from advanced analytics and predictive advisory services for our clients, and for digital and data-enhanced deliverables. Clients trust us to securely manage and govern large volumes of project data, which enables us to provide predictive and structured analytical solutions.

And these are just a couple of examples of how AI is an opportunity amplifier, enabling new work, new service lines and deeper client relationships. Clients who are building AI-enabled infrastructure and operations need trusted partners like Stantec who understand both engineering and data. In short, AI strengthens our professional model enhancing predictability, allowing for better delivery, creating new opportunities, and supporting margin enhancement.

And with that, let me turn the call over to the operator for questions. Operator?

[Operator Instructions] Our first question comes from the line of Ian Gillies from Stifel.

As you think about AI, and I had asked this question on previous conference call, how do you think this ends up translating into revenue per employee, employee utilization and the like? Because those have always been pretty key drivers in improving margin and improving top line.

Yes, absolutely. I think in all of those, Ian, it's favorable for us. I see this -- and I think we've talked before, like I see AI is just the latest tool in a series of sort of technological enhancements that have come through the engineering space. Each time these tools have come, they've made us more efficient and they've driven higher net revenue per employee. So we're thinking of things like the transition from when I graduated from calculators to computers to AutoCAD to 3D and now AI is just that latest tool that I believe will allow us to drive more revenue per full-time employee.

Understood. And Gord, you've been pretty vocal about wanting to execute M&A over the last, call it, 18 to 24 months and rightfully so. But with the reset in valuation metrics for public equities, I guess, over the course of your career and as you follow the M&A market, how long does it typically take for by the companies to reset their valuation markers because there's probably a bit of a disconnect right now given the rapidity or how rapid it's been and how quickly things have moved over the last few months?

Yes. I mean -- it's interesting because as you can imagine, we're having these very same conversations. And the sort of the decline in the multiples in the public sector -- in the public markets is a pretty new phenomenon, for us, it's been a couple of weeks or a month. So we haven't really seen a lot of transactions that have closed in this period of time. So there is a bit of a -- probably an expectation adjustment that will take a while to flow through. The question is too is, is this sort of where all of us and our competitors are now, is this just a transient downward blip? Or is this going to be sustained for a period of time. And I think that will play into how we see what happens in the M&A market.

A very quick follow-on. So would it be fair to presume that it may take a little longer than we would have thought maybe 6 months ago, just given everything that's happened.

Take a little longer for...

Sorry, to execute on M&A.

Oh, we're very, very active still. Absolutely. And you always have a number of conversations in the works. And these are good firms that we see have good long-term bones and good synergies with Stantec. So certainly, the pricing conversation is ongoing, but that's only one conversation out of multiple to make sure that the fit is there, the synergies are there, the cultural piece is there. And now we're just talking about the financial piece.

No, ultimately, we fundamentally believe in the long-term value creation opportunities for our sector, notwithstanding the recent downturn that you're alluding to. So clearly, valuation is one component, as Gord noted, of any conversation when it comes to targets. But the primary focus, it really is about how these potential acquisitions fit into our strategic portfolio, what it enables us to do for our clients. And so from that perspective, we don't see any timing-related issues.

And our next question comes from the line of Sabahat Khan from RBC Capital Markets.

Great. Maybe just one on AI, and I promise to switch over to something else after. But I guess, in your sort of use of AI to date, where are you finding in terms of end markets or just these efficiency tools, digital tools, where do you see more application for such tools and capabilities today? And where do you think that sort of evolves over time? Is this something that can sort of make its way across all end markets providing efficiency. Just curious what you're seeing in the early days versus where you see this going?

Yes. Thanks, Sabahat. A couple of things we're focusing on both what we can do internally to make ourselves more efficient. And so those are back-office tools and things that we're working through. But then we're also on the front foot, how can our engineers and architects and professional services people use AI tools, again, to be more efficient, but also to refine work products.

So some of the examples of things where we're using it, we're using a tool called Stable Diffusion in our Buildings group right now. And that's -- it's more of a visual and more of a graphical AI tool. So you can be working with the client, you can sketch something up and feed it into the AI tool, and it turns it into drawings and things much more efficiently. We have -- as you can imagine, when our engineers and architects around the world are working, we have to select a specific specification for a type of project that we're working on or a type of material or equipment. And so we have these very, very large specification libraries. So we're using AI tools to help us quickly narrow down what's the right spec to use.

When we submit a big package, for example, to a client, we call it a design submittal. And there's a number of things that you have to check off to make sure that you -- from a regulatory perspective to get a permit or for client reviews that you've accomplished these things. We're using AI to help us in QA. And so a lot of these things will be used across all of our geographies and across all of our business lines. And so I think we're still in early days. But we and actually our design teams are pretty excited about where this can take us.

Okay. Great. And then just in terms of the sort of the setup into 2026, just looking at your guide, maybe just if you could dig into the U.S. segment a bit more. One of your peers noted a bit more predictability and stability in that market this year. Can you give, from your vantage point, what are you seeing across either the infrastructure side, water side, just kind of your larger end markets, in the U.S. market today and sort of where the funding mechanisms are for the year ahead?

Yes. Great. So a couple of things. One of the things there is we've mentioned in the prepared remarks that we've seen a little bit of increased activity in the U.S. over the last several months. And if you look at our U.S. backlog Q4 over Q3 is up about 3% just in the quarter. So that increase in activity that we're seeing is translating into backlog, and we do see that continuing forward. Incredible amount of work right now in the data center work that we're doing for the hyperscalers. We mentioned the 5 projects, $35 plus or minus billion worth of work there. So that continues to go a lot of environmental services work. We talked about the U.S. Navy Clean Water -- sorry, U.S. Navy CLEAN Program and D&D work. So there's a lot of opportunity we're seeing really across the majority of our sectors in the U.S., energy transition type work, grid strengthening in the south.

So we're actually feeling pretty good broad-based support across the U.S. for us as we move into 2026.

And our next question comes from the line of Frederic Bastien from Raymond James.

It feels like an engineering firm's ability to seamlessly embed AI with proprietary data will be a major competitive advantage going forward. And I think those who invest accordingly will obviously be awarded. Do you believe that will benefit larger firms like you over the smaller ones and potentially lead to more consolidation acquisition opportunities?

That is exactly our thesis as well, Frederic, that as we've talked over the past, some of the firms that have joined us, these 1,000-, 2,000-person firms, even before AI, they've got to this level, and then they need to professionalize IT and cybersecurity and finances and HR and such. And they don't have the resources either in terms of skills or finances to support that. They just want to focus on the work.

And now we see AI is even driving that more, that just the additional investment in resources, both people and financially to get there, plus the data probably isn't in common formats and all those things. I do believe that this will -- as we move forward, that AI and some of the things that we see there will continue to drive more firms in that space towards the consolidators.

That's a good answer. You also -- in your prepared remarks, you mentioned some good developments on the defense side in Canada. Would you mind just expanding on that and potentially indicate whether all the momentum that we're hearing about is actually translating into projects and bids?

Yes. It absolutely is. We're seeing certainly a renewed focus from the Canadian federal governments related to defense, related to the Arctic as well as other governments around the world. But we did talk about the Defence Construction Canada's Multi-Mission Aircraft hangar, and I believe that's in Nova Scotia that we're working on. A facility upgrades for the Armed Forces sort of across the region. So there's a lot of work coming there.

Interestingly, we started working on that Grays Bay Road project a year ago or more. But now I think everyone can see, well, that used to be and everyone say, well, that's like a road to nowhere, but it's not. It's a road to what will be a deepwater port that will hold both Navy vessels, cargo ships and the like. And so a lot of this work is coming to fruition, and I think you'll see a lot more coming in the short term.

And Gord, we're particularly well positioned north of the 60th with our capabilities, right?

Absolutely. With our capabilities in Yellowknife, in Whitehorse and a number of other locations out there as well as significant presence in Alaska, uniquely positions Stantec for this north of 60 work.

And our next question comes from the line of Chris Murray from ATB Capital Markets.

Good to hear that you might still have T-square sticking around. I guess the first question is just on margins. And when I look at the guidance, you're sort of either guiding to flat to up margins. So I was just wondering if you could talk a little bit about some of the puts and takes around where you think the margin profile evolves over the next little while. It looks like there's a some good opportunities in some of the back-office stuff you guys have been doing and certainly some of the AI tools. But just any color you can provide on how to think about evolution over the next year would be great.

Yes. Chris, maybe I'll take that one. First off, we're incredibly pleased with the progress to date. So when you look at our 90 basis point improvement year-to-date, that's basically come 50% or half of it from, I'll say, the business itself, operations, whether that's project margin improvement across certain sectors, utilization improvement. And then the balance of it, I'll call it, more back office and driving efficiency and just operational scale.

And frankly, as I think as we move forward, it's really more of the same. I don't think there's going to be any magic bullets that contribute to what it is. It's really just continuing to lean in our continued use of our global delivery centers, the excitement around what's happening there and the capabilities of our folks offshore, which are just incredible, both from a professional development -- a professional service perspective, but also from a back office, and we see significant continued momentum there.

And so we definitely don't expect to be flat. Clearly, the low end of our range is 17.6%, which is where we landed the year, but we continue to see continued improvement. So just really more of the same. Labor at the end of the day is the biggest component of it, driven either by efficiency and/or utilization and then just continued focus on discretionary spend, I would say. But it all starts with, of course, really continued excellence in project management and project execution. That's where the fundamental point is, and just a shout out to our team of 34,000-plus across our organization who day in, day out, do well by our customers, our clients and obviously, the bottom line. So I really appreciate it.

Okay. Great. And then I know there's been a lot of focus on AI and infrastructure. But one of the other areas that we're seeing more evolution is resources. I know historically, that's been something that you guys have had a lot of exposure to. Just wondering if you're seeing any, call it, green shoots or new developments in the resource business, be that either new pipelines or sort of pre-feasibility work or around other kind of resource work that might drag in maybe the Water business or something like that?

Yes. So a couple of things there. We think it is in our MD&A, isn't it, Vito, that we did pick up environmental work and permitting work related to a 125-mile long natural gas pipeline in Tennessee. So we are seeing those projects absolutely coming to bear. And then also, in addition to that, from a resources perspective, incredibly strong performance this year in South America, in our Chile and Peru operations, a lot of work coming back from the copper mining perspective. I went down and visited our offices in both locations and the amount of investment in either mine expansions and new mines coming down there is truly phenomenal.

Copper prices are still pretty robust and certainly required if we want to continue with this energy transition grid hardening, grid strengthening and such. So yes, we're seeing that electrical piece continues to grow for us, which in us is in our Energy & Resources business. We're seeing the resources required to support that. The copper mining and such continues to grow. And then as you -- as we talked about the this 125-mile long natural gas pipeline in Tennessee. So we are seeing more work in most of those phases in our Energy & Resources business.

And you would have seen that through our 2025 results, Chris, the early shoots of it, we had a very strong year on organic growth, high single digits on the Energy & Resources, and we continue to expect that momentum organically to continue into 2026.

And our next question comes from the line of Michael Tupholme from TD Cowen.

I just wanted to go over the organic growth outlook from a BOU perspective. I know overall, mid- to high single digits, the guidance. In 2025, you saw quite a bit of variance in terms of organic growth across the different BOUs. How do you see that looking in 2026, do you see sort of more consistent performance? Or should we still expect some of these higher growth areas to really be the drivers?

Yes. Maybe I'll start there. As Gord, I think, indicated in his prepared remarks, we expect organic growth across all of our BOUs next year. So that's a great place to start. I mean water has been -- Water is now 22% of our business overall. We saw continued strength. I think it's 4 years of consecutive double-digit growth in Water, if not more than that. And we definitely continue to see that and expect that going forward.

Infrastructure was a little maybe more muted in 2025 in the low single digits. I think that was a temporary drop from our more mid-single-digit range. So we expect continued strength there, a rebound there.

Buildings, 4.4% organic growth in 2025, really a lot of strength. The Page acquisition, in particular, and what the team has brought to the table there, we're really coming off some very, very strong years and expect to rebound there. So really strength across all of them. Gord, any other commentary you might want to add?

No, I completely agree.

Yes. Yes. So I think we'll -- Water will continue to lead the way, perhaps, but strength across the board.

I appreciate that. And sorry, not to belabor the point, but just Environmental Services, I guess, that was probably the weakest last year and in the fourth quarter was kind of flattish. How do you think about that one for 2026?

Yes. We do see with all of these projects coming along, whether they're in the north -- the Canadian North or these big pipeline projects that we talked about, the first group in the door is Environmental Services. So we do see that kind of leads up, provides us some support. So we're looking for stronger organic growth in Environmental Services this year than we saw in -- certainly in 2025. And then the last group perhaps is our Energy & Resources business that put up 8.7%, almost 9% last year, but we look for continued growth in that segment as well, really strong in mining, particularly in South America, the energy transition, the transmission and distribution work we're doing there. And so we're looking for pretty good strength across the board from all of our business operating units.

Okay. Perfect. And then maybe just one further question. You talked a little bit about M&A earlier in the call. As it relates to accelerating adoption and use of AI in the industry, is this in any way affecting how you're thinking about M&A, the kinds of targets you would be interested in? And are there certain targets that maybe we traditionally would have been interested in, but that's sort of evolving and changing and others that maybe now become of greater interest? Just curious as to how this is affecting your thinking on M&A?

Yes. I think from the core business that we're working on, our 5 core verticals and our geographies. AI, again, we think while it will enable us and make us more efficient, the firms that we're talking to are viewing it really from the same perspective. So it doesn't really change our thought process there. I don't think we're, at this point, looking to go out and buy an AI firm. We see them -- a lot of them are pretty highly valued, and with little revenue or certainly a little even less profit in many cases. So we're not looking to do that. We're developing those skills in-house, partnering with firms as required. So it really isn't looking to change our M&A strategy at this point.

Yes. I would add, Gord, certain targets have more developed digital capabilities than others do. And so where we have some targets that really are a bit advanced and/or interested in have capabilities there. I think that gets our attention a little bit. And as far as how -- what value add they might bring to us. But as Gordon mentioned, no overall change in strategy as it affects our M&A.

And our next question comes from the line of Maxim Sytchev from NBCM.

I just wanted to start a bit with a broader question around thoughts on outcome-based pricing as there are some discussions around how much of a cost plus evolution we could see in the space right now? And I guess how AI and your expertise sort of ties in? Because I mean, I presume this is something that actually you would welcome as the penetration of some of these pricing models could evolve. So I'm just curious what are your thoughts at the moment? And are we seeing any evolution from that perspective?

Yes, great question. And what we're finding in a lot of this sort of fixed fee outcome-based pricing percentage of construction. A lot of it depends on the client and the type of work that you're doing. So a lot of the -- of course, the big design build or P3 projects that we do are all virtually all fixed fee or deliverables-based, milestone-based. And so there certainly, as we've been doing for the last 5 or 10 years, the increased use of technology, whether it's AI or other tools can help optimize your margin. A lot of buildings projects are similar, land development projects similar. But the government clients, in particular, we haven't seen -- as we work with the municipal clients really around the world, the city of X, Y or Z, they don't really move towards the -- or we haven't seen movement towards outcome-based pricing, fixed fee value based. They still seem to be more time and materials to an upset limit.

Now through ACEC and through other of these sort of professional associations, we're absolutely having these discussions and seeing is there a way that we could move more towards it from a certainty perspective. But I think that would be not as much a Stantec initiative or an initiative of any of our competitors. It really would have to be an overall industry initiative, and that's where we're working with those industry associations to see what we can do to get ourselves there. But it's difficult.

The other reason, Max, that I think a number of government agencies go with the time and materials is that if you want to go with an outcome-based price with a fixed fee, you have to have the scope incredibly well defined, so that the engineer can come in and say, the scope of what you're asking for, I'm going to do for $1 million fee just as an example. But if the scope is moving and there's going to be change orders and such, that really complicates the whole commercial terms. So it's -- there's a lot of work to be done, I think, before we can get municipal and government clients, in particular, off of time and materials type work. But the industry overall is working on it.

Yes. No, that's great color. And maybe just one quick one for Vito, if I may. I mean the margin guidance is certainly stronger than we were modeling. And I'm just curious, if you don't mind talking about the ability to get to maybe that 18.2% at the high end of the range. What needs to happen from your perspective, Vito, to potentially hit that number?

Yes. I think the higher we are on the revenue range, the more probability that we'll be on the higher end of the EBITDA margin. So that's just really operational leverage. I would say. Otherwise, from an initiative perspective, really, really pleased with everything we're doing and having the works. And we're working towards, obviously, our next 3-year plan, and we expect to have a date out to the community sometime soon, late in the year, probably more December, January as far as when we're rolling out our 3-year plan. And I'm very excited about the work and the modeling we're doing about what's the next 3 years look like from a margin perspective. So we'll wait and see where 2026 lands, but highly encouraged by the progress and the momentum to date.

And our next question comes from the line of Benoit Poirier from Desjardins.

Yes, congrats for the strong achievement in 2025. If we look at Canada, organic growth came in very solid at 7.7% for the whole year. However, when we look at Q1 2025, you reported a very strong performance at 12.2%. So would it be fair to assume potentially a bit of a softer performance to start the year given the tough comparison, even though the outlook remains very strong.

Yes, that might be appropriate, Benoit. I mean, again, we think about these things not necessarily from a quarter-over-quarter. You're absolutely right. By the way, last year was at 12.2% for Canada in organic growth in Q1. We ended the year at full year 7.8%. So I think Q1 might be a little bit softer relative to where we feel the full year will land for Canada. But as we've been noting in the commentary, when we look at the full year in all of our regions and all of our BOUs continued sort of -- we feel very nice sort of balance throughout the entire year. But that is our single biggest quarter for any region on an organic growth. And so you've pinpointed something that is a legitimate question for sure. But nothing that I'm overly concerned about or need to signal with related to Q1.

Okay. That's great. And obviously, a lot of talk about M&A bidding pipeline remains extremely solid. However, given the pullback in share price, I was wondering if you could provide more details. My understanding, there's a big preference on M&A. But given the strength of your balance sheet, do you see any opportunity to step in, in terms of buyback in the short to medium term?

Yes, that's interesting. I mean, I think we will be renewing our NCIB. So first of all, as it relates to dry powder on the balance sheet, you saw our leverage 1.3 at the end of the year. That enables us to do sizable M&A on balance sheet. It's specific, obviously, to targets and whatnot, we will continue to prioritize our investment grade, obviously, and whatnot, that's important to us. But there's a lot of room there for us to do on balance sheet meaningful acquisition. So that's a wonderful privilege for us as we sit here, and that's important for us. So we'll just take that.

And sorry, Benoit, I forgot the second component of the question.

Just wondering if you would be open to consider more closely the NCIB given the pullback in share price and probably given the fact that we haven't seen the seller expectation coming down yet?

Yes. Short answer is yes. We would be more actively looking at buybacks with respect to where we're valued. First priority, of course, continues to be M&A for us. But we do have price ranges that we think when we look at our overall perspective of our organization and the value creation opportunities that we'll continue to look at it a little bit more closely than perhaps we have in the past.

And our next question comes from the line of Jonathan Goldman from Scotiabank.

Most of them have already been asked, but I guess I just have one high-level one, the anniversary of the IIJA this year, how do you see that playing out? And is there a potential for renewal or maybe a reshaping of that infrastructure bill and maybe some other form of disbursements there?

Yes. Great question. And so we've -- early on, 2 or 3 years ago, there was a lot of talk about an IIJA 2.0 and what it could look like. We haven't really heard as much of that over the last little bit. So we are seeing increasing activity, bidding activity and such as folks are beginning to look to how can they place their -- get some funding in place before IIJA current terms out in -- or has to be allocated by, I believe, it's September of this year.

But recall, too, that once that is allocated, it doesn't have to be spent. So I think that the current funds from IIJA will continue to drive really solid performance in the -- not just for us, but for the overall industry in the transportation space primarily for the next 3 to 5 years. So there is some discussion about -- currently about renewing the Surface Transportation Act and such, and that will -- I don't think there'll be any concerns that, that would not be renewed. But yes, I haven't heard a lot of conversation about an IIJA 2.0 right now. But the industry, I think, will continue to be busy in the transportation space in the U.S., in particular, for the last -- next several years to come.

And our next question comes from the line of Krista Friesen from CIBC.

Maybe just a follow-up on the M&A topic. You've previously talked about how you expect a handful of larger firms to come to market this year. Is that still what you're seeing in the pipeline? And it sounds like that's still something you'd be interested in given your balance sheet capacity at this moment.

Absolutely. Yes. Some of the ones that we have been talking about, you've likely read that came and went in the latter part of last year. But there still are others that are either in process now or that we understand will be coming to the market here in the next couple of quarters. So still a good opportunity there, good optionality, in terms of geographies and type of work that these firms are engaged in. And absolutely, as you heard, Vito say the balance sheet is in good shape. So we absolutely will continue to look at those. And of course, paying particular attention to the pricing piece.

For sure. And are you able to share maybe some of these larger firms, what areas they're operating in? Is power still a big focus for you?

Certainly, we do see some firms of the power focus that will be coming to market, but others as well in different lines of business that Stantec currently is in. And some of them are in the U.S. and some of them are -- we'd see Europe, Australia and such. So good geographic spread with these as well.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to management for any further remarks.

Great. Well, thanks, everyone, for joining us this morning. We feel really good about 2025 and where we're going in 2026. So if you have any follow-up questions, please reach out to Jess Nieukerk, and we'll line things up and take it from there. So thanks again, everyone.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Welcome to Stantec's Third Quarter 2025 Results Webcast and Conference Call. Leading the call today are Gord Johnston, President and Chief Executive Officer; and Vito Culmone, Executive Vice President and Chief Financial Officer. Stantec invites those dialing in to view the slide presentation, which is available in the Investors section at stantec.com. Today's call is also webcast. Please be advised that if you have dialed in, while also viewing the webcast, you should mute your computer as there is a delay between the call and the webcast.

All information provided during the conference call is subject to the forward-looking statements. qualifications set out on Slide 2, detailed in Stantec's management discussion and analysis and incorporated in full for the purposes of today's call. Unless otherwise noted, dollar amounts discussed in today's call are expressed in Canadian dollars and are generally rounded. With that, I'll turn the call over to Gord Johnston.

Good morning, everyone, and thank you for joining us today. I'm pleased to announce that Stantec delivered robust performance in the third quarter, generating organic growth across all our regions and business operating units. Global trends across water, transportation, energy transition and mission-critical sectors continue to drive strong demand for our services. And our diversification across sectors and geographies creates resilience within our operations. Net revenue grew to $1.7 billion in the third quarter, an increase of almost 12% compared to Q3 of last year, driven by organic and acquisition growth, each over 5%.

Most notably, our Water business delivered almost 13% organic growth, Energy & Resources delivered nearly 10%. We grew adjusted EBITDA by close to 18% year-over-year with a record margin of 19%. We also delivered adjusted EPS growth of 17.7% compared to Q3 2024. Looking at our results in each of our geographies. In the U.S., net revenue increased over 14% in the third quarter, which was driven by 4.6% organic growth and almost 9% acquisition growth. In our Buildings business, net revenue increased by more than 40% in Q3 and over 20% year-to-date, driven by our acquisition of Page and continued organic growth. The integration of Page is going very well, and already, we're seeing many revenue synergies from the acquisition. We expect to have completed the financial integration into our systems by year-end. Private and public sector investments, particularly in mission-critical, Science and technology and Civic supported growth in buildings. Organic growth was also driven by our Water and Environmental Services businesses. Large public sector water supply and wastewater treatment projects contributed to double-digit growth in water.

In energy transition, mining and infrastructure sectors as well as the continued work for a large utility provider supported growth in environmental services. In Canada, net revenue grew 7.6% in the quarter, driven completely by organic growth. We delivered double-digit growth in our Water and Energy & Resources businesses and high single-digit growth in infrastructure. The continued momentum on major wastewater projects contributed to over 20% organic growth in Water. Continued work on major industrial process projects also drove double-digit organic growth in Energy & Resources. Solid growth in infrastructure was supported by land development projects in Alberta, airport sector projects in Quebec as well as transit and rail projects and bridge sector work in Eastern Canada. Public sector investment drove growth in buildings, primarily in our health care and civic markets. Finally, our global business delivered net revenue growth of almost 11% in the third quarter, achieving 5.5% organic and 2.8% acquisition growth, along with positive foreign exchange impacts.

Our industry-leading water business continued to deliver consecutive double-digit organic growth through long-term framework agreements and public sector investment in water infrastructure across the U.K., Australia and New Zealand. The ramp-up of new projects in Chile and Peru drove double-digit organic growth in Energy & Resources as the growing need for energy transition solutions continues to drive demand in mining for copper. We also achieved double-digit organic growth in our German infrastructure business due to continued momentum on a major electrical transmission project and increased volume on transit and rail projects. Now I'll turn the call over to Vito to review our third quarter financial results in more detail.

Thank you, Gord, and good morning, everyone. We are very pleased with Stantec's third quarter financial results, which demonstrate the continued momentum of our business and the resilience of our operating model. Robust demand for our services, combined with favorable global trends allows us to continue achieving record-setting results. In Q3, we achieved gross revenue of $2.1 billion and net revenue of $1.7 billion, an increase of 11.8% compared to Q3 of 2024. This was driven by 5.6% organic growth and 5.2%, acquisition growth. As a percentage of net revenue, our project margins once again remained in line with our expectations at 54.4%.

We achieved an all-time high adjusted EBITDA margin of 19% in the quarter, a 100 basis point increase compared to Q3 of last year. The increase in margin primarily reflects lower administration and marketing expenses as a percentage of net revenue due to our disciplined management of operations and higher utilization. And our adjusted EPS in the quarter increased 17.7% to $1.53. Turning to our cash flow, liquidity and capital resources. Our year-to-date operating cash flows are up 86% compared to 2024 from $296 million to $551 million, reflecting strong revenue growth, strong operational performance and continued strong collection efforts. DSO at the end of the third quarter was 73 days, a decrease of 4 days compared to year-end 2024 and in line with our Q2. Our net debt to adjusted EBITDA ratio at September 30 was 1.5x, reflecting the funding of our recent acquisition of Page. This remains within our internal range -- target range of 1 to 2x and positions us well for continued M&A. And as we have stated before, we are comfortable going above this range for a period of time for the right acquisition. Gord, I'll now hand the call back to you.

Great. Thanks, Vito. At the end of the third quarter, our contract backlog stood at $8.4 billion, an almost 15% increase year-over-year, representing approximately 13 months of work. Backlog continues to grow organically and is up 5.6% year-over-year. Organic backlog growth has been driven primarily by our U.S. and global operations, which achieved 6.6% and 6.8% growth, respectively.

The acquisitions we've completed in 2025 contributed to 6.8% growth in backlog, primarily within our Buildings and Water businesses. Over the quarter, Stantec was awarded a number of significant project wins across each of our 5 business verticals, each project varying in size, scope and complexity. I'll highlight just a few of these wins. Stantec was selected as owner's engineer for Manitoba Hydro's $7 billion high-voltage direct current reliability project. The project aims to secure continuous grid reliability for communities across the province. And we've worked with Manitoba Hydro on power delivery projects in the province for over 50 years, and we look forward to continuing our work with them. Stantec's Infrastructure team was selected for a $745 million project to widen the SC-90 corridor in South Carolina. Our team will be responsible for shaping the overall project vision and layout, focusing on traffic operations, access management, bicycle and pedestrian infrastructure and impact minimization.

And in Western Australia, our buildings team was selected to deliver specialist engineering services for 2 hospitals, one of which will be over 94,000 square meters in size and valued at nearly $1 billion. The second project includes refurbishment and expansion work at the Osborne Park Hospital valued at over $250 million. These projects will enhance health care for women, children and families. Given our solid third quarter results, our net revenue growth guidance for the full year, while increasing our adjusted EBITDA margin outlook to 17.2% to 17.5% on the strength of our operational performance and discipline in cost management. We maintain our mid-single-digit guidance for U.S. organic growth given persistent slower procurement cycles in the region. However, we remain optimistic that these are simply near-term challenges as we continue to see strong demand driven by the ongoing needs and the priorities of our clients. In Canada and in global, we still expect organic net revenue growth in the mid- to high single digits. Growth in Canada is expected to be driven by continued strong demand and elevated backlog levels. Following the release of Budget 2025 last week, we're encouraged to see the federal government prioritize infrastructure investments across various sectors. And while we don't expect immediate spending, the budget signals strong long-term support for our industry.

In global, growth is supported by ongoing high levels of activity in our water business under the AMP8 program in the U.K. and other framework agreements in Australia and New Zealand. Strong demand for infrastructure in Europe and positive demand fundamentals in Energy & Resources are also supporting growth in our global business. Considering all of these factors, we expect growth in adjusted EPS to be in the range of 18.5% to 21.5% for the year and adjusted ROIC is expected to be greater than 12.5% -- given our uniquely diversified business, Stantec remains resilient amid evolving market conditions across all of our regions. We continue to progress towards the targets we laid out in our 2024 to 2026 strategic plan, including delivering net revenue of $7.5 billion by the end of next year. And with that, I'll turn the call back to the operator for questions. Operator?

[Operator Instructions] And our first question from today comes from the line of Sabahat Khan from RBC Capital Markets.

Knowing it's kind of close to the end of the year, a good organic print this quarter. Just wondering if you're able to share at a high level how you're thinking about 2026? Just maybe -- and I know you guys provide guidance at Q4, but just given some of the moving pieces this year, any color you can provide either by major end markets or by region would be helpful.

Great. Thanks, Saba. And certainly, this is something we spend a lot of time talking about as well. And you're right, we're going to provide our formal guidance for 2026 in February. But directionally, we see really strong momentum going into next year. In global, the AMP8 programs in the U.K. are going to continue to ramp up as well as the frameworks in Australia and New Zealand. So we see continued strong support in our water business going forward. The need for copper to support grid strengthening, energy transition keeps continuing to support growth in our mining teams, particularly in South America, where I actually was down and visited with our offices last month. here in Canada.

The federal budget that was recently released provides continued support for infrastructure really across the company -- country, sorry. And we see a lot of opportunities in the major projects that Prime Minister Carney announced last week and even those that he announced previously. And we're already working on a number of those projects, and we're in discussions and participating on a whole bunch of other ones. In the U.S., a little period of uncertainty, but we see that the macro fundamentals really are still strong there. Aging infrastructure, climate-related impacts, reshoring of manufacturing, data centers, mission-critical facilities. So all of those things, whether it's global, Canada, the U.S. are strong. And then I think one thing that we've talked about a lot, too, is that around the globe, certainly a lot of discussion for increased spending on defense work. And for that, that's -- for us, that's ports, that's dry docks, that's aircraft hangers and runways, housing, all sorts of various types of infrastructure. So we're actually really positive on the prospects and the momentum going into 2026.

Great. And then maybe if you could just dig in on the Canadian side, obviously, a large part of your business. Obviously, we saw [indiscernible] come out thus far. Can you just share some thoughts on -- is it just kind of the broad infrastructure programs in Canada that the Prime Minister is announcing that you're getting involved with? Or is it more kind of the energy base I know historically, some of the pipeline work in Western Canada was a big part of your business. Are you seeing maybe some of those opportunities as being more meaningful? Just curious kind of where within those buckets is Stantec exposed?

Yes. Great. Thanks, Saba. I think in both of those fields, both the opportunities that Prime Minister Carney has announced, and we see great opportunities. But you've seen the really solid organic growth that we've seen in Canada all year, really 8.5% year-to-date organic growth in Canada. And that's, of course, absent any of those projects that Prime Minister Carney had mentioned. So when we look at Canada, we've seen a lot of strength actually in Western Canada, in particular, in land development. We've seen great opportunities in transportation. A number of the projects we're working on bridge jobs in Toronto and a lot of sort of roadway projects here in Western Canada. But water has been incredibly strong all year for us.

And we see really no slowdown of the -- both public sector work that we're doing. We've talked about the work we're doing with Metro Van in Vancouver, in Winnipeg and other locations, but a lot of private sector work coming along as well, advanced manufacturing, data centers and that sort of work. So that's very, very robust. And then, of course, as you said, the energy sector, we've seen some opportunities there as well as that group working on a number of -- the work that we do on industrial projects also comes out of that. And we've talked in previous quarters about some work that we're doing in Eastern Canada on some industrial projects. So Canada, pretty strong, pretty broad-based. And we're feeling pretty good about Canada overall and as we go into next year.

And our next question comes from the line of Yuri Lynk from Canaccord Genuity.

Gord, I just want to push a little bit more on the outlook. I understand things are strong right now, but that's generally reflecting work that was booked 12, 18 months ago in some cases. Can you just talk about some of your forward most looking indicators? And I'm thinking, if you look around Canada, I know there's lots of good headlines, but the current economic data is pretty weak. Australia is soft outside of water. AMP8, one of the biggest customers there is struggling financially. The U.S. government shutdown. There's a whole bunch of worrying signs out there. So are you seeing any of that in proposal or RFP or whatever you look at on the most leading edge of your outlook?

Yes. No, great question. Maybe I'll address a couple of them individually there. So in the U.S., without question, there's been a confluence of factors that we've seen there caused a little bit of uncertainty and kind of slowed that -- the procurement cycles. I mean, certainly, that's not unique to Stantec, and you've seen that throughout the industry. So in the U.S., we've -- and you'll see that our backlog in the U.S. has been flat year-to-date. And a lot of that is -- we've been verbally awarded a number of projects, but we haven't been able to get them signed and contracted. So they haven't showed up in backlog.

A little bit slower start on some of the things. Environmental Services in the U.S. and maybe a little bit slower so far waiting for some of those things to pick up. We're encouraged by the fact that the government is back at work now. We're also keeping a pretty close eye on that, that might only be for a couple of months until we have to go through this again. But the macros haven't changed in the U.S., whether it is the aging infrastructure and roadways related to and support from IIJA, and we still see those supports coming to some of the reshoring that we're seeing in the private sector. So we see some positivity there. You talked about AMP8 and one of the largest customers there is certainly having some financial difficulty, and we all read about that in the papers. But that really has no impact on our business because the way that the AMP cycles work is the water company commits to doing certain amount of capital spend in order to justify rate increases and so on and improvements in the overall operations. So that work has to get done. And people have said, well, what if that particular client was to get nationalized? Well, for us, we wouldn't want to see that happen. But if it did, the work still has to get done. And we've worked with Thames Water and all -- and for a number of successor companies for the last 200 years in the region. So we do see that regardless of what shakes out there, that AMP8 work is going to continue. So it certainly is a little bit of a cloudy environment out there, not all rays of sunshine, but we do see the demand drivers in our business being pretty strong.

The only thing I'd add to that, Gord, is it's hard to argue with the points that you bring forward. But the diversity of our platform, I think, is an incredible asset and you're starting to -- you see it manifest itself through our year-to-date results and I think you'll continue to see that both geographically and across our segments. So notwithstanding, you're going to see pluses and minuses through it all. I think net debt to Gord's opening comments here, we will be positive moving into 2026, no doubt.

Okay. Good to hear. Second and last one for me. Just any update on the M&A pipeline? I understand over the last year or 2, there's been some large private players maybe working themselves towards a sale? Just any change in the pipeline?

Yes. It's a pretty robust industry right now, lots of discussions ongoing. You certainly read in the papers about some of these private firms coming to market. You also heard rumors about big firms in our space having discussions. And of course, we can't comment on any of those things other than to say we maintain very, very positive on M&A in general and specifically for Stantec. Our Board is supportive. The -- our investor community is supportive. We're supportive and the opportunity set is there. So we're continuing a number of conversations and look forward to bringing something forward at the appropriate time.

And our next question comes from the line of Ian Gillies from Stifel.

Following on some of the previous commentary and maybe just hit the nail on the head. With organic backlog growth in the U.S. supply year-to-date, you don't believe that impinges on your ability to generate some amount of organic growth in the U.S. as we go into next year?

Yes, that's absolutely correct, Ian. We do not envision our year-to-date backlog being flat as an indicator of organic growth going into next year. We'll be positive in organic growth next year. We'll give guidance again at the appropriate time, but our expectations at this time, and you heard Gord echo opening comments around the U.S., including the U.S., we feel pretty good about it. Factors that are contributing to the year-to-date. First of all, backlog is generally lumpy. And obviously, we expect it to build here as we move into the first half of the year. Our year-to-date backlog, though, even in the U.S., our year-to-date, which is probably a better comparison or equally important comparison -- excuse me, our year-over-year is up 6.6%, I believe it is or over 6%. So overall, notwithstanding the confluence of factors that we've talked about that our peers have talked about, we clearly expect organic growth in the U.S. as we move into next year.

Understood. That's very helpful. And maybe along similar lines and most of the other engineering firms have been asked about this, so I'll ask as well is, do you have any concerns about IIJA funds not being released like with some certainty, like, for instance, does your U.S. team still feel quite confident that the bulk of those funds will come out over the next, call it, 4 to 5 years and should continue to be that long-term tailwind and not be canceled?

Yes. And so I think our answer would be similar to what you've heard from some of our -- from the others who have reported as well that we have no indication that program like the IIJA would be canceled or funds would be withheld. We still see the continued momentum on that. And no, we think that, that program remains intact.

And our next question comes from the line of Krista Friesen from CIBC.

Maybe just thinking about your margin, obviously, a pretty impressive quarter and raising and narrowing the god for the remainder of the year. Can you speak to what's changed on that front relative to the beginning of the year when you first issued your guidance?

Krista, yes, it's Vito. You're absolutely right. We're really pleased with a lot of hard work across all of the teams, of course, across our organization in delivering an EBITDA margin. Year-to-date, 17.7%, 100 basis points ahead of prior year or more than that actually. So really, really pleased with it. It all -- I sound like a broken record a little bit with this, but it all starts with project margins. So right customer, right project, right pricing, right risk profile. We spend a lot of time with that, and our professionals are excellent in the delivery of that. So our project margins year-to-date are 0.1% ahead of where we were last year. So without that, that's the fundamental. And then what you're seeing, of course, is admin and marketing as a percentage of NSR come down. So on a year-to-date basis, 37.6% versus 38.6% last year, again, 100 basis point improvement. And that's driven by a number of things. Clearly, scale is a big part of that.

So as we grow and organic growth is a significant component of that, the ability to obviously deliver against that base in a more efficient way, that's important for us, and that's contributed meaningful to our year-to-date results. Our utilization, our utilization is another area that has contributed positive to it. Our occupancy costs are also contributing positively on a year-to-date basis. So net-net, you've got -- this business has significant operational leverage attached to it. And with continued organic growth, continued acquisitions contributing to, obviously, the net revenue growth, it provides a continued opportunity for EBITDA margin expansion going forward. While at the same time, very importantly, ensuring we continue to invest, invest in our people, invest in our offerings and invest in the market. That's equally, if not more important as well as we move our way through here.

That's great color. And just a last one for me here. You mentioned the Page acquisition integration is progressing well and starting to realize some synergies there. Can you just provide us with a little bit more detail there? Yes.

Not much more to add to the Gord's commentary. We knew Page very, very well coming into this acquisition. We work with them. And we have to say that everything post that close of the acquisition has just reconfirmed just an incredible team and really hit the ground running from an integration perspective. I think the pace to which we're seeing some of the opportunities, both in market and some of the efficiency reflects the fact that we knew each other so well and had spent a fair bit of time in these sorts of discussions well in advance.

But Gordon, any additional comment on Page?

No, it's as we've really started working through the integration, everything that we thought was there has really shown itself to be true and then some. So it's actually been very, very positive. A lot of great project-based and pursuit based synergies there. So actually feeling really good about Page. I wish we could find another 5 Pages to join us.

And our next question comes from the line of Benoit Poirier from Desjardins.

Yes. Great performance on the margin front and also great color that was provided on the previous question. So looking at 2026, could you provide maybe some comments whether the pace of improvement we've seen so far this year is sustainable going into 2026. And what are the puts and takes when looking at margins going into next year?

That's a sneaky way of asking me for guidance already there, Benoit. But so we'll do that in February. I mean, I think when you look at the last several years, there's been steady year-over-year improvement, 0.3, 0.4, 0.5 -- this year, to your point, a little bit outpacing our historical track record, which is wonderful. One of the big factors in EBITDA margin expansion clearly is connected to a lot of what this call has been about, which is the pace of organic revenue activity in the business. So that is a big driver of obviously what you can deliver bottom line.

But when you sort of zoom out, notwithstanding where we may be here in 2026 and what, which, again, we feel fairly comfortable with at this point and you look at a 2- or 3- or 4-year picture with the macro demand and whatnot, I think you can expect obviously continued EBITDA margin expansion. We're just going through -- we're entering our third year of our 3-year strat plan where we committed to 17% to 18%. Obviously, we're in the higher end of that range as we sit here in 2025. We expect to be at these levels or better, obviously, as we move into 2026, and we'll refine that next year. But it's the commercial activity that enables in large part for us to really lean into these margin expansions, and we expect that to continue.

Okay. That's great color. And maybe, Gord, you made some great comments about the opportunities you foresee in terms of defense. So I would be curious if you could on what is your exposure to defense right now? And how material could it be given the opportunities you see out there? I would be curious to see how it would compare to the opportunities with data center, let's say?

Yes. No, that's great. The beauty of the Stantec model is in that diversification piece. And so when you look at even in the U.S., where we do a lot of dry docks and aircraft hangers and those sorts of things, our exposure to the U.S. federal government overall is still in that 5-ish percent range. And so it's-- that's the beauty of the diversification model. I think you would see in other countries around the world, it's probably sub-5%, what we would be doing in that. But again, a lot of this is just our bread-and-butter infrastructure work just with a little bit different instead of a hangar for a commercial aircraft, it's for a military aircraft. And so this is stuff that we're all very, very comfortable with. And we don't expect that while there's been a lot of commitments to increasing spending on defense and some of these infrastructure things, we don't expect it's going to pop right away. It's going to take a while to build. And that's fine. We're spending a lot of time with our clients and ensuring that when they get the budget and they're ready to go that they're thinking of us top of mind. So I think we'll see it continue to grow, but I'm not sure that it will be -- that we'll see it being material.

Okay. That's great. And maybe last one for me. In terms of free cash flow, Vito, very strong performance in the quarter. It looks like that you were able to maintain DSO while typically they go up a bit sequentially from Q2 to Q3. So just wondering what is the matter of a stronger collection efforts? Is it a matter of business mix? Or what about the expectation, let's say, for Q4? Was there some pull forward in terms of free cash flow? I would be curious to get some thoughts around the strong free cash flow performance.

Yes. And again, Benoit, I take you to there. You're right, free cash flow can be lumpy quarter-to-quarter, and this Q3 was outsized year-over-year gain. But clearly, the trend has been incredibly positive for us. As you heard in my commentary, our prepared commentary, our year-to-date numbers are up significantly. That's driven by, of course, the business and the expansion of the business, first and foremost. But clearly, our working capital management has -- it remains to be seen, but it looks like we've made a significant one-step onetime sort of move here that is continuing to stay with us.

Our DSOs now are at 73, 74. We had an internal target of 80 for the longest time. I think we're getting pretty comfortable saying that perhaps the mid-70s is the new starting point for us. But we'll give ourselves another quarter before we do that. And I just need to -- we've made some changes internally. It's an area of focus for us primarily and just a huge shout out to all of our project managers across all of the entire network that are managing aggressively to that while obviously keeping our commitments to our clients and whatnot. So really, really pleased with it. Might give some back in Q4. I'm not worried about that in any way, shape or form. But full year will continue to be well ahead of where we were in the prior year. So very pleased with our working capital management.

[Operator Instructions] Our next question comes from the line of Michael Tupholme from TD Cowen.

Gord, you've talked a fair bit about the water business, obviously, over time, but also I mentioned it this quarter, very strong organic growth. Often talk about the contribution from the U.K. AMP program and what that's meaning for our organic growth. I'm wondering if you can talk a little bit more about what you're seeing in Canada and the U.S. I think you've touched on it a little bit, but I'd be curious what kind of organic growth rates you're seeing in Water in those regions? And maybe you can talk a little bit about the drivers you're seeing as well?

Yes. Well, so in the U.S., really, really strong growth in water as well. Just trying to look on the number here, but it's definitely well into the doubled. Was it 20% in the quarter, Vito?

In the U.S.?

But we'll grab that. Yes. No, I've got certainly double-digit growth in the U.S. in Water. And what's interesting whether it's -- and it's over 20% in Canada. But what's really interesting is that we've talked about it in sequential quarters, like we've had continued organic growth in our Water business, like all the way back to early 2019, and it just continues and continues to strengthen. So in...

It was 10%, Gordon, in the U.S.

10%, okay. So like in Canada, the type of work that we're doing are big public sector wastewater projects and water projects in Metro Vancouver, where we're working on the Iona Island relocation there, big biosolids project in Winnipeg that we've talked about $1 billion. So there's just a lot of big projects like that. Toronto continues with basement flooding enhancements and such. In the U.S., we see the same. A lot of it is municipal type work, water supply, water treatment, water scarcity type issues and some areas.

And in the Gulf, certainly, it's flooding in excess of water. And so it's all just that sort of that core fundamentals that just keeps going with our water business where -- so whether it's not enough water, and we're working on water reuse and recycle, too much water and flooding and so we're doing big projects like the big pump station we did in New Orleans several years ago.

We're currently working on shoreline protection type work, sea-level rise type work. Regulation like PFAS continues to provide opportunities in the short, but more so in the longer term. And then just the advanced manufacturing and reshoring of some of that, that, of course, you read about in the papers all the time. And very often, the first thing that clients need is water, access to water, water allocations, the treatment of high-purity water for manufacturing processes. So really, really strong drivers in water, and we don't see them slowing down in any way.

That's very helpful. The second question I wanted to ask is just about data center activity. Wondering if you can provide a bit of an update on activity levels and in that area, I guess, also curious what percentage of the revenue of the company is that represented by today and how you see that evolving and looking into 2026 as far as share of revenue contribution relative to 2025?

Yes. So we're currently working on over 100 data centers, mission-critical facilities ranging in size from 20 megawatts all the way up to a gigawatt. So a lot of projects on the go, but a pretty robust pipeline as well. I think right now, it would represent, Vito, I'd say like 3% 2%, 3% of the overall net revenue of the company. And do we see that growing? Yes. I mean that's growing at a bit of an outsized, but would it get to 4%, maybe 5%, but we don't see that we'd want it to go a lot more than that. We don't want to become 15% exposed to any sort of a high-growth area like that because just in the -- as we've talked about our diversification over time. So we feel good in that 3% to 5% range if data center is mission-critical, we're in that area, but certainly a high-growth area for us.

And our next question comes from the line of Chris Murray from ATB Capital Markets.

Gordon, you mentioned earlier the 3-year financial targets hitting, I guess, the $7.5 billion by the end of next year. And so maybe just a couple of thoughts here. I mean, I'm looking at consensus right now, it's about 7.2, which means that you probably have to find some acquisition growth, I won't say in a hurry, but soon. But there's also, I guess, some questions.

I think we kind of heard on the call about the whole idea behind being able to maintain a 7% CAGR because even if we go back a couple of years ago and what we've actually experienced over the last couple of years, hitting 7% next year on a 3-year CAGR is going to require just a stupid lift, which is probably not reasonable. So I guess the question I've got for you is the rest of the other metrics that we're seeing up and down, things like adjusted EBITDA, some of the financial metrics are all looking okay. Are you -- I guess the question I've got for you is like are you married to that 7.5% as a target? Or is it just more kind of aspirational and we can kind of think about how the game is going to play because the environment is shifting, and we could be heading into some choppy waters. So just thoughts on how those targets are set and how you're actually aiming at them.

Yes, Chris, maybe I'll take that one, and Gordon, you can jump in if you -- the $7.5 billion was established, $7.5 billion was established obviously years ago based on exactly what you're describing, Chris, it was based on a CAGR of 7% organic. And then obviously, the rest of it filled in by acquisition. You're right. When you look at that 7% CAGR now relative to obviously what we did -- we're doing here in 2025, it's going to be hard probably for us to get 7% CAGR. But obviously, again, we'll stop just short of 2026 at this point. We'll see how the next few years. clearly expect organic growth next year and expect a good year there. And so we're not married to the 7.5%. It's not something that at the end of the day, we're linked to. This company is all about just obviously continued diversification, organic growth and M&A strategy. When you look at the pace of our M&A, you sort of say we expect to obviously be in market, expect to continue to do acquisitions. And as a result, that's what contributed, I think, to Gord's comment around our ability to be in that 7.5% range. But I would say the number itself isn't driving our activity. It's our strategy that's driving the activity, and it's proved out really well at this point.

No, absolutely right, Vito. And Chris, while you're -- if organic growth does slip below that 7% CAGR, there's some great optionality on the acquisition side that we would never rush anything or do anything that we didn't feel was the right thing to do long term in order to hit that 7.5 target. But it's a pretty robust environment right now. So feeling optimistic about some things that could happen there.

Okay. That's helpful. The other question, and I know this is something that we haven't looked at in a while, but Vito, I'll throw it out at you is just getting back into the market and maybe buying back stock again, we haven't really seen that. I know that the multiple has been fairly high, but now it's starting to come maybe back to what I would call a more normal range. Is maybe getting into a regular cadence on the NCIB is something that you guys are maybe more open to? Or is that something that you're just going to stay kind of full bore pressed on M&A as a use of capital?

Yes. No, I take you back to our capital structure objectives. Obviously, we're going to generate a significant amount of free cash flow. We will continue to do that. Our capital allocation priorities are obviously, first and foremost, funding our internal capital needs, which are fairly modest. Our capital expenditures have been in the area of $100 million on an annual basis. This year, we'll be actually fairly below that. And then obviously, we have a dividend in place.

We'll continue to respect that dividend and likely grow it as we have in the last several years. And then the NCIB there and M&A -- and M&A is there. Again, we see an incredible opportunity for this organization going forward with the right acquisitions, a fragmented market to prioritize acquisitions. And that also contributes to organic growth, right? I mean acquisitions are a big part of also across revenue synergies and whatnot to drive inorganic growth. But M&A is lumpy. Like when you're looking at M&A, over the years, you can't sort of predict it. So clearly, we'll continue to use the NCIB. You're absolutely right. We have been muted on share buybacks in the last couple of years, I think, now. But we'll continue to use the NCIB and have it on the shelf as required. And opportunistically, we wouldn't hesitate to get in the market and buy back our shares if required. But M&A is, we think, a really significant value creator for this organization going forward as is our stock buyback program.

And our next question comes from the line of Maxim Sytchev from NBCM.

Gord, maybe the first question for you and just turning back to the U.S. I mean one of the things that we're hearing is that the procurement methodology has changed a little bit from the federal government that is a bit more book-and-burn sort of less visibility, but work is still coming through. Is this also something that perhaps explains that dichotomy between backlog and organic growth, which still remains pretty robust? So just any color you can provide with this, that would be so helpful.

Yes. Without question, the overall procurement cycle and process for a number of federal, state and local governments have changed with some of the executive orders that have come from President Trump. And so that was a little bit slowness there the first part of the year. Now we've been awarded a number of projects, and we're just waiting to get them signed. And certainly, the shutdown slowed things down there.

So I think as we see, hopefully, folks start to come back and gain to work through the -- they work through the backlog of paper on their desk, we get some things signed and then they'll turn into backlog for us and others in the industry. So I think we're still long-term bullish on the U.S. market there, a lot of good opportunities, and we'll just keep working on it.

Yes, for sure. And then do you mind providing a bit of color in terms of the environmental services organic growth? I mean we're seeing a bit of a slowdown while water is actually accelerating. So do you mind maybe talking about the puts and takes in terms of what explains that divergence as well?

Yes, absolutely. So a couple of things there. One is that even more than other groups, our ES group has got a number of large U.S. federal projects that we've been awarded just waiting for signature. So we do see those coming. No question of discussion of cancellation or deferral. We just need to get some signs that we can get them going here early in the early in the new year. So I think longer term, we see both in Canada. Canada, we've got some good projects that are going to be starting up in the near term as well in the U.S., too. So I think we've seen a little bit of a slowness in ES this year or organic growth really quarter-over-quarter has been kind of low single digits. I do think we'll see a bit of an acceleration in that as we move into 2026.

Okay. Super helpful. And then last question, if I may. You called out the German market, which is obviously sort of a recent beachhead for you guys seeing very nice growth. Do you mind maybe talking about what is driving that? I presume some of that is defense, transport, but any incremental color would be more helpful.

Yes. So our group in Germany, incredibly well managed with lots of opportunity, particularly since the government took off the debt break there and investing another EUR 500 billion. So some of the work that we're doing now in addition to the typical work that we do, which is roadways and bridges and rail projects. We're working a lot of folks on right now on a big electrical transmission project. And there's a real north-south need for electrical transmission in Germany as well. So -- and that's a market that we've just begun to move into probably over the last 6 to 9 months. So I see a lot of growth there.

So in addition to the strength of our existing business, which is growing really, really well. We're absolutely looking for other opportunities to bolt on to the beachhead the foothold that we've got now in Germany and continue to grow it. Good market, predictable well-run companies. So we're looking to look for opportunities to continue to expand.

Okay. And sorry, does that imply sort of inorganic growth as well. That's how we should be interpreting this?

Yes. I think we -- certainly was going to see a lot of organic growth, and we're absolutely looking at inorganic opportunities as well.

Our next question comes from the line of Jonathan Goldman from Scotiabank.

If we think back to the commentary on the last call, I think in the U.S., you called out in July, you had seen high single-digit organic growth. I'm just curious how things progress sequentially through August, September, October and November? And if there's been any reversal in the trend because, I guess, with the 4.6% in the quarter, it does seem like it's deteriorated August and September.

Yes, Jonathan, you're absolutely right. We did call out, obviously, that July number. We ended up where we ended up, which was just under 5% there. So it wasn't a big drop from July. And I wouldn't say there's further deterioration at this point. All the commentary with respect to the U.S., we sort of made it here today. I don't have anything else to add.

The only other thing, one small tidbit here, it's not a bigger picture -- piece is -- clearly, as we go into Q4, we have a very significant comp that we're cycling here with Q4 for the year, and U.S. organic was a part of that where I believe we were 10% or so last year or just under 10%. So that's just the reality of what we need to cycle. But overall, no additional commentary in the U.S., as we've mentioned, and we wouldn't say there's actually deteriorating. If anything, over the last little bit, the last few weeks, a month or whatnot, maybe just a bit more buoyancy, quite frankly, and you've seen that reflected in our commentary.

Okay. That's good color. And then I guess maybe switching to the margin guidance. If you take the full year guide and by my math, if you back it out, it looks like you're implying Q4 margins would be down year-on-year, something in the range of 30 to 40 basis points. Clearly, that's not year-to-date trend. And obviously, there's moving pieces. But why would margins be down year-to-date given all the improvements in the business you've undertaken?

Yes. I don't know that margins are going to be down going into next year. That's not what necessarily what we're predicting. Obviously, you do have we will see the page integration manifest itself fully next year with next quarter with our with our financial integration, you always can have some ups and downs with the financial integration. Again, nothing concerning, but that could impact margins.

And the only other thing I'd say is back to that or the consolidated organic growth that we had last year, clearly, depending on where we're at, just cycle in a big quarter, that ends up manifesting itself through a margin back to operational scale and one up. But no, we're very, very pleased with our margins and don't expect any significant pullback in the trends and thematics that we've talked about when it comes to EBITDA margin expansion.

Okay. That's helpful color. And I guess last one. If we're looking at M&A, at this point, I guess, maybe relative to other periods, what would be the main bottleneck at the moment? Is it valuations culture fit, maybe a paucity of attractive targets? And how does the cycle time from identification to closing late now versus other historical periods?

Yes, sure. I'll start and then Vito will be able to chime in if you like. But I think, Jonathan, we there's really nothing slowing the process down right now. It's just very robust, a lot of conversations on the go. Cycle times vary from discussion to discussion. Sometimes we work with a client or a company partner with them for 5 or more years before we finally decide, hey, you want to do this?

And then because we know each other really well, it can proceed pretty quickly. Other times, there's an established process that can take 3, 4, 6 months. 6 would be an outlier, I would think. But -- so they're really -- they're all over where -- in terms of timing and where we would see them. But certainly, a number of ongoing discussions and both exclusive and through processes that are in play right now. So yes, I think it's just a normal cadence here. And when the time is right, if the stars aligned, we'll be glad to share news with you guys.

Not much more to add there, Gord. Each one has a life of its own. That's it.

Anything to say on valuations. I think you referenced maybe store organic growth could also translate into a silver lining on valuations. But how have those trended year-to-date versus, I guess, last year or maybe the last couple of years.

Yes. No major changes on valuation. I mean, obviously, it's sometimes a little bit sector dependent and significant areas of growth in one sector obviously have a higher valuation, which is quite obviously expected and implicit obviously in the valuations of us and our peer groups. So I don't think valuations in any way, shape or form are an issue. We look at these things clearly from a strategic perspective, always above value creation over a reasonable period of time, revenue synergies, the valuation isn't getting in the way at this point for us.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Gord Johnston for any further remarks.

Great. Well, thank you, operator, and thanks to everyone for joining us this morning. We're really pleased with our Q3 results. And certainly, if you have any follow-up questions following the call today, please read out to Jess Nieukerk Newkirk, our VP of Investor Relations. So thanks again, and look forward to catching up with everybody in the next little while.

Thank you. Ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.