Mr. Gord Johnston reports

STANTEC REPORTS RECORD THIRD QUARTER 2023 RESULTS AND RAISES FULL YEAR GUIDANCE

Stantec Inc. has released its results for the three- and nine-month periods ended Sept. 30, 2023.

Stantec delivered record third quarter earnings, as continued strong demand was met with high utilization, particularly in the United States and Canada. Excellent operational performance was augmented by effective work force management strategies and continued robust organic hiring, bolstered by the effect of voluntary turnover returning to prepandemic levels in North America. Third quarter results also reflected the favourable impacts from a higher-than-typical volume of resolved change orders.

In the third quarter of 2023, Stantec generated net revenue of $1.3-billion on the strength of 9.0-per-cent organic growth. The company's regional and business operating units all delivered organic net revenue growth for the seventh consecutive quarter, with notable organic growth achieved in water (18.1 per cent) and environmental services (12.8 per cent). Stantec also achieved double-digit organic net revenue growth of 12.9 per cent in its U.S. region. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin increased by 160 basis points over Q3 2022 to 18.3 per cent, driven by high utilization and operating leverage, combined with sustained discipline in cost management. These factors were partially offset by a significant expense related to the revaluation of Stantec's long-term incentive plan (LTIP) primarily due to strong share price appreciation year to date. Stantec delivered diluted earnings per share (EPS) of 94 cents and record third quarter adjusted diluted EPS of $1.14. Backlog at Sept. 30, 2023, increased to $6.4-billion, driven primarily by organic growth of 5.5 per cent since Dec. 31, 2022.

"I am extremely pleased with our third quarter results as we continued to deliver exceptional growth in revenue and earnings through excellent operational performance," said Gord Johnston, president and chief executive officer. "As a result of our outperformance this quarter, our strong year-to-date results and the continued favourable market demand, we are increasing our guidance for 2023 once more."

Mr. Johnston continued: "Our backlog is at a near-record-high level, and market demand continues to be robust, bolstering our optimism for ongoing strong growth in 2024 and beyond. We are confident that our diverse business model and engaged work force ideally position Stantec to continue delivering industry-leading results."

2023 outlook

As a result of the strong year-to-date results, Stantec is revising its targets contained within the company's 2023 guidance, which was previously updated in August, 2023, and provided on page M-6 of the second quarter 2023 financial report.

In setting the revised targets and guidance, the average value for the U.S. dollar was assumed to be $1.35, the British pound to be $1.66 and the Australian dollar to be 91 cents. For all other underlying assumptions, see the assumptions section of the Q3 2023 management's discussion and analysis.

Stantec continues to expect high-single-digit net revenue organic growth, with the U.S. being in the low double digits, and global in the mid- to high single digits. The Canadian market has continued to be more resilient than expected across Stantec's business units, particularly in water and infrastructure, where organic growth forecasts were exceeded in the third quarter. While Stantec expects growth in Canada to moderate in the fourth quarter, the company expects organic net revenue growth to be in the mid- to high single digits (previously mid-single digits).

Given regular seasonal factors in the northern hemisphere, Stantec reiterates guidance that the earnings pattern will continue to fall within 40 to 45 per cent in first quarter and fourth quarter, and 55 to 60 per cent in second quarter and third quarter.

Webcast and conference call

Stantec will host a live webcast and conference call on Friday, Nov. 10, 2023, at 7 a.m. Mountain Time (9 a.m. Eastern Time), to discuss the company's third quarter performance.

A webcast and slide presentation will be available.

If you are an analyst and would like to participate in the questions and answers, 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 cares about the communities it serves because they are its communities too. This allows it to assess what is needed and connect its expertise, to appreciate nuances and envision what has never been considered, and to bring together diverse perspectives so it can collaborate toward a shared success.

It consists of designers, engineers, scientists and project managers, 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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