Mr. Gord Johnston reports

STANTEC REPORTS STRONG FIRST QUARTER 2023 RESULTS ACHIEVING 20 per cent GROWTH IN ADJUSTED DILUTED EPS

Stantec Inc. has released its results for the three-month period ended March 31, 2023.

Stantec generated net revenue of $1.2-billion in the first quarter of 2023 on the strength of 12.2-per-cent organic growth (1) and 1.4-per-cent acquisition growth (1). Every regional and business operating unit delivered organic net revenue growth in the first quarter, with notable organic growth achieved in water (24.4 per cent), energy and resources (15.9 per cent), and buildings (11.4 per cent). Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin increased by 10 basis points over Q1 2022 to 14.6 per cent, despite a significant mark-to-market expense related to the revaluation of the company's long-term incentive plan (LTIP) due to strong share price appreciation in the quarter. Excluding the mark-to-market revaluation, adjusted EBITDA margin would have been 15.2 per cent. Stantec delivered diluted earnings per share (EPS) of 59 cents and record first quarter adjusted diluted EPS of 73 cents. Backlog at the end of March 31, 2023, reached $6.2-billion, in line with the previous all-time high, driven primarily by organic growth of 5.8 per cent since Dec. 31, 2022, and 9.2 per cent over Q1 2022.

"Our first quarter results reflect the strong market positioning of our business as we continue to build on favourable macro themes and momentum coming out of last year," said Gord Johnston, president and chief executive officer. "Two thousand twenty-three is shaping up to be another very strong year for Stantec, and we are well positioned to deliver on our outlook for the year."

Q1 2023 compared with Q1 2022:

• Net revenue increased 17.0 per cent or $178.4-million to $1.2-billion compared with Q1 2022, driven by 12.2-per-cent organic growth and 1.4-per-cent acquisition growth. Double-digit organic growth was achieved in all regions and in the water, building, and energy and resource businesses.
• Project margin increased $92.9-million or 16.4 per cent to $660.0-million. As a percentage of net revenue, project margin decreased by 30 basis points to 53.7 per cent.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased $26.9-million or 17.7 per cent to $179.1-million. Adjusted EBITDA margin increased by 10 basis points over Q1 2022 to 14.6 per cent, despite a significant mark-to-market expense related to the revaluation of the company's LTIP. Excluding the revaluation, adjusted EBITDA margin would have been 15.2 per cent.
• Net income increased 44.9 per cent, or $20.1-million, to $64.9-million, and diluted EPS increased 47.5 per cent, or 19 cents, to 59 cents, mainly due to strong net revenue growth and lower administrative and marketing expenses as a percentage of net revenue.
• Adjusted net income (1) grew 18.3 per cent, or $12.5-million, to $80.9-million, achieving 6.6 per cent of net revenue (7.1 per cent without the effect of the LTIP revaluation), and adjusted diluted EPS increased 19.7 per cent to 73 cents (78 cents without the effect of the LTIP revaluation).
• Contract backlog stands at $6.2-billion at March 31, 2023, matching a record high and reflecting 5.8-per-cent organic growth from Dec. 31, 2022, with strong organic backlog growth in Stantec's U.S. operations of 9.2 per cent, and double-digit organic growth in environmental services and water. Contract backlog represents approximately 13 months of work, an increase of one month from Dec. 31, 2022.
• Operating cash flows increased $30.7-million, with cash inflows of $36.7-million compared with $6.0-million in the prior period, reflecting continued strong revenue growth and operating performance.
• DSO was 81 days, consistent with Dec. 31, 2022.
• Net debt to adjusted EBITDA (on a trailing 12-month basis) at March 31, 2023, was 1.6 times, remaining within the internal target range of 1.0 times to 2.0 times.
• On April 18, 2023, Stantec announced through the release of its 2022 sustainability report, that the company delivered on its commitment to achieve operational carbon neutrality for 2022 -- a key milestone in the phased process to achieve science-based operational net zero, and that 60 per cent, or $3.4-billion, of 2022 gross revenues supported the United Nations Sustainable Development Goals.
• On May 10, 2023, Stantec's board of directors declared a dividend of 19.5 cents per share, payable on July 17, 2023, to shareholders of record on June 30, 2023.

(1) Adjusted diluted EPS, adjusted net income, adjusted EBITDA and adjusted EBITDA margin are non-international financial reporting standard measures, and organic growth and acquisition growth are other financial measures (discussed in the definitions section of the Q1 2023 management's discussion and analysis).

2023 outlook

Stantec reaffirms full-year 2023 guidance for net revenue growth of 7 per cent to 11 per cent, and continues to expect organic growth to be in the mid- to high-single digits. Stantec expects to deliver on its annual targets for adjusted EBITDA margin in the range of 16 per cent to 17 per cent, adjusted net income margin greater than 7.5 per cent and growth in adjusted diluted EPS of 9 per cent to 13 per cent. Stantec further reiterates its expectation to achieve adjusted return on invested capital of greater than 10.5 per cent for the year.

These targets do not include any assumptions for additional acquisitions given the unpredictable nature of the size and timing of such acquisitions, or the unpredictable impacts from share price movements subsequent to Dec. 31, 2022, and relative total shareholder return components on Stantec's share-based compensation programs.

Webcast and conference call

Stantec will host a live webcast and conference call on Thursday, May 11, 2023, at 7 a.m. Mountain Time (9 a.m. Eastern Time), to discuss the company's first quarter performance.

To listen to the webcast and view the slide presentation, please join the webcast.

If you are an analyst and would like to participate in the question-and-answer session, please register.

The conference call and slide show presentation will be broadcast live and archived in their entirety in the investors section of the Stantec website.

About Stantec Inc.

Communities are fundamental. Whether around the corner or across the globe, they provide a foundation, and a sense of place and of belonging. That is why at Stantec, it always designs with community in mind.

It is a designer, engineer, scientist and project manager, innovating together at the intersection of community, creativity and client relationships. Balancing these priorities results in projects that advance the quality of life in communities across the globe.

Stantec trades on the Toronto Stock Exchange and the New York Stock Exchange under the symbol STN.

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