TSX, NYSE:STN
Stantec, a global leader in sustainable design and engineering,
today reported its results for the fourth quarter and year ended
December 31, 2022, and provided its 2023 outlook.
Stantec achieved record financial results and delivered another
solid year of excellent performance in 2022. Net revenue increased
$821 million to $4.5 billion driven by 9.4% organic growth1
and 12.3% acquisition growth1. All of Stantec's business operating
units and geographic regions delivered net organic growth.
Continued focus on strong project execution and operational
excellence drove record adjusted EBITDA margin1 of 16.2%, diluted
earnings per share ("EPS") of $2.22, and adjusted diluted EPS of
$3.13.
In the fourth quarter of 2022, Stantec grew net revenue 23.4% to
$1.1 billion through strong organic growth of 10.6% and 9.8%
acquisition growth. Adjusted EBITDA margin increased 150 basis
points to 17.0% compared to the fourth quarter of 2021, while
diluted EPS was $0.66 and adjusted diluted EPS increased 43.9% to
$0.82.
“For the second consecutive year, we achieved record financial
results, and I am extremely pleased that we outperformed our
revenue and earnings guidance for 2022 on the strength of our
outstanding fourth quarter performance,” said Gord Johnston,
President and CEO. “I am also very proud that Stantec has again
been ranked as one of the most sustainable companies in the world.
These remarkable achievements are attributed to the dedication and
passion of our employees. With the Cardno integration behind us, we
expect our strong financial momentum to continue throughout 2023
and the years ahead.”
________________1 Adjusted diluted EPS, adjusted EBITDA, and
adjusted EBITDA margin are non-IFRS measures, and organic growth
and acquisition growth are other financial measures (discussed in
the Definitions section of Stantec's 2022 Annual Report).
2023 Outlook
“Stantec is well positioned for another year of solid growth,”
said Mr. Johnston. “Significant backlog and strong tailwinds of
public and private investment, along with Stantec’s focus on
project execution and operational efficiencies, support Stantec’s
confidence for delivering on our strategic plan and 2023
targets.”
For 2023, Stantec has established the following targets and
expectations.
|
2023 Annual Range |
Targets |
|
Net revenue growth |
7% to 11% |
Adjusted EBITDA as % of net
revenue (note) |
16% to 17% |
Adjusted net income as % of
net revenue (note) |
above 7.5% |
Adjusted diluted EPS growth
(note) |
9% to 13% |
Adjusted ROIC (note) |
above 10.5% |
Other expectations |
|
Net debt to adjusted EBITDA
(note) |
1.0x to 2.0x |
Effective tax rate (without
discrete transactions) |
23.0% to 24.0% |
Earnings
pattern |
40-45% in Q1 and Q4 |
55-60% in Q2 and Q3 |
Days
sales outstanding (note) |
at or below 80 |
In setting targets and guidance, the Company assumed an average
value for the US dollar of $1.32, GBP $1.62, and AU $0.95. For all
other underlying assumptions, see Stantec's 2022 Annual
Report.note: Adjusted EBITDA, adjusted net income, adjusted diluted
EPS, adjusted ROIC, and net debt to adjusted EBITDA are non-IFRS
measures and DSO is a metric discussed in the Definitions section
of Stantec's 2022 Annual Report.
Stantec expects that net revenue growth will increase 7% - 11%
in 2023, with net revenue organic growth in the mid- to high-single
digits. Organic growth in the US is expected to be in the high
single digits to low double digits, driven by growing momentum as
reflected in record-high US backlog and continuing project
opportunities arising from the Infrastructure Investment and Jobs
Act (IIJA), the CHIPS and Science Act, and the Inflation Reduction
Act. Growth from the IIJA is expected to be slower in the first
half of the year and to accelerate in the second half of the year.
After another year of robust organic growth in Canada in 2022,
Stantec expects to maintain high levels of activity, moderating to
organic growth in the low single digits. Organic growth in Global
is expected to achieve mid- to high-single digit growth driven by
continued high levels of activity in its UK Water business under
the ongoing Asset Management Program, and demand and stimulus in
environmental services and infrastructure sectors.
Full-Year 2022
Financial Highlights
- Net revenue
increased 22.6%, or $821.1 million, to $4.5 billion
compared to 2021, driven by 9.4% organic growth and 12.3%
acquisition growth. All of the regional and business operating
units delivered organic growth, most notably in Global and in Water
and Energy & Resources where organic growth was in the double
digits.
- Project margin
increased $454.0 million, or 23.1%, to $2.4 billion and
as a percentage of net revenue, Stantec delivered 54.2% project
margin, a 20 basis point increase from 2021. The increase in
project margin was the result of net revenue growth and solid
project execution.
- Adjusted EBITDA1
increased $150.1 million, or 26.2%, to $723.9 million and
achieved a margin of 16.2%, a 40 basis point increase from 2021,
resulting from strong performance across the business.
- Net income increased
23.1%, or $46.3 million, to $247.0 million, representing
5.5% of net revenue, and diluted EPS increased 23.3%, or $0.42, to
$2.22.
- In 2022, Stantec
continued to execute on its 2023 Real Estate Strategy, driving
approximately $0.34 of incremental adjusted EPS and a 28% reduction
in the footprint relative to the 2019 baseline – largely
accomplishing the Company's 2023 target a year early. On a pre-IFRS
16 basis, this initiative is estimated to have increased 2022
adjusted EBITDA margin by more than 110 basis points.
- Adjusted net income
increased 28.6%, or $77.2 million, to $347.1 million,
representing 7.8% of net revenue, an improvement of 40 basis
points, and adjusted diluted EPS increased 29.3%, or $0.71, to
$3.13.
- Contract backlog
stands at $5.9 billion—a 14.9% increase from December 31,
2021—reflecting 10.4% organic growth, with double digit growth in
US operations and in Infrastructure, Buildings, and Energy &
Resources. Contract backlog represents approximately 12 months of
work.
- Net debt to adjusted
EBITDA was 1.6x at December 31, 2022—within Stantec's internal
range of 1.0x to 2.0x.
- Operating cash flows
decreased 23.4% from, $397.0 million, to $304.3 million, reflecting
increased investment in net working capital to support strong
revenue growth.
- Days sales
outstanding was 81 days at December 31, 2022, a 5-day
reduction from Q3 2022. As expected, completion of Cardno financial
migration activities returned DSO to more typical levels, moderated
by stronger than anticipated revenue growth in the fourth quarter
which drove additional net working capital investment.
- Stantec repurchased
1,085,676 common shares for an aggregated price of
$65.3 million under the company's normal course issuer
bid.
- On February 22,
2023, Stantec's Board of Directors declared a dividend of $0.195
per share, payable on April 17, 2023, to shareholders of
record on March 31, 2023, representing an 8.3% increase.
Fourth Quarter
2022 Financial Highlights
- Net revenue
increased 23.4%, or $214.2 million, to $1.1 billion,
driven by 10.6% organic growth and 9.8% acquisition growth. All of
the regional and business operating units delivered organic growth,
most notably in Canada and the US, and in Buildings, Water, and
Energy & Resources, where organic growth in the double digits
was achieved this quarter.
- Project margin
increased 22.5%, or $113.9 million, and decreased 40 basis
points as a percentage of net revenue from 55.3% to 54.9%.
- Adjusted EBITDA
increased 34.9%, or $49.6 million, to $191.7 million, and
achieved a margin of 17.0% compared to 15.5% in the prior period
due to lower administrative and marketing costs as a percentage of
net revenue.
- Net income increased
342.8%, or $56.9 million, to $73.5 million and diluted
EPS increased by 340.0%, or $0.51, to $0.66. In Q4 2022, Stantec's
2023 Real Estate Strategy contributed to non-cash net impairment
reversal and lower onerous contract cost adjustments, depreciation,
and occupancy costs compared to the prior period. Additionally, the
disposition of an intangible asset contributed $5.6 million to
net income in Q4 2022.
- Adjusted net income
increased 42.8%, or $27.3 million, to $91.1 million,
representing 8.1% of net revenue, and adjusted diluted EPS
increased 43.9%, or $0.25, to $0.82.
Q4 and
Full-Year 2022 Financial
Summary
|
Quarter Ended Dec 31, |
Year Ended Dec 31, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(In
millions of Canadian dollars, except per share amounts and
percentages) |
$ |
% of NetRevenue |
$ |
% of NetRevenue |
$ |
% of NetRevenue |
$ |
% of NetRevenue |
Gross revenue |
1,513.5 |
|
133.9% |
|
1,185.3 |
|
129.4% |
|
5,677.2 |
|
127.4% |
|
4,576.8 |
|
125.9% |
|
Net revenue |
1,130.4 |
|
100.0% |
|
916.2 |
|
100.0% |
|
4,457.2 |
|
100.0% |
|
3,636.1 |
|
100.0% |
|
Direct payroll costs |
509.9 |
|
45.1% |
|
409.6 |
|
44.7% |
|
2,039.9 |
|
45.8% |
|
1,672.8 |
|
46.0% |
|
Project margin |
620.5 |
|
54.9% |
|
506.6 |
|
55.3% |
|
2,417.3 |
|
54.2% |
|
1,963.3 |
|
54.0% |
|
Administrative and marketing expenses |
439.4 |
|
38.9% |
|
387.6 |
|
42.3% |
|
1,742.5 |
|
39.1% |
|
1,423.6 |
|
39.2% |
|
Depreciation of property and equipment |
13.8 |
|
1.2% |
|
13.5 |
|
1.5% |
|
56.8 |
|
1.3% |
|
53.9 |
|
1.5% |
|
Depreciation of lease assets |
31.9 |
|
2.8% |
|
28.3 |
|
3.1% |
|
122.1 |
|
2.7% |
|
107.9 |
|
3.0% |
|
Net
(reversal) impairment of lease assets and property and
equipment |
(1.8 |
) |
(0.2%) |
|
29.1 |
|
3.2% |
|
(5.5 |
) |
(0.1% |
) |
24.8 |
|
0.7% |
|
Amortization of intangible assets |
27.5 |
|
2.4% |
|
18.0 |
|
2.0% |
|
104.6 |
|
2.3% |
|
60.0 |
|
1.7% |
|
Net
interest expense |
17.5 |
|
1.5% |
|
8.4 |
|
0.9% |
|
64.0 |
|
1.4% |
|
37.9 |
|
1.0% |
|
Other |
(5.6 |
) |
(0.3% |
) |
(2.2 |
) |
(0.3% |
) |
7.7 |
|
0.2% |
|
(7.8 |
) |
(0.3% |
) |
Income taxes |
24.3 |
|
2.1% |
|
7.3 |
|
0.8% |
|
78.1 |
|
1.8% |
|
62.3 |
|
1.7% |
|
Net income |
73.5 |
|
6.5% |
|
16.6 |
|
1.8% |
|
247.0 |
|
5.5% |
|
200.7 |
|
5.5% |
|
Diluted EPS |
0.66 |
|
n/m |
|
0.15 |
|
n/m |
|
2.22 |
|
n/m |
|
1.80 |
|
n/m |
|
Adjusted EBITDA (note) |
191.7 |
|
17.0% |
|
142.1 |
|
15.5% |
|
723.9 |
|
16.2% |
|
573.8 |
|
15.8% |
|
Adjusted net income (note) |
91.1 |
|
8.1% |
|
63.8 |
|
7.0% |
|
347.1 |
|
7.8% |
|
269.9 |
|
7.4% |
|
Adjusted diluted EPS (note) |
0.82 |
|
n/m |
|
0.57 |
|
n/m |
|
3.13 |
|
n/m |
|
2.42 |
|
n/m |
|
Dividends declared per common share |
0.180 |
|
n/m |
|
0.165 |
|
n/m |
|
0.72 |
|
n/m |
|
0.66 |
|
n/m |
|
Total assets |
|
|
|
|
5,652.9 |
|
|
5,226.4 |
|
|
Total long-term debt |
|
|
|
|
1,235.8 |
|
|
1,245.1 |
|
|
note: Adjusted EBITDA, adjusted net income, adjusted diluted EPS
are non-IFRS measures (discussed in the Definitions of
Non-IFRS and Other Financial Measures section of Stantec's 2022
Annual Report).n/m = not meaningful
Net Revenue by Reportable Segment
Full-Year 2022
(In
millions of Canadian dollars, except percentages) |
2022 |
2021 |
Total Change |
Change Due to Acquisitions |
Change Due to Foreign Exchange |
Change Due to Organic Growth |
% of Organic Growth |
Canada |
1,150.8 |
1,068.5 |
82.3 |
|
— |
|
n/a |
|
82.3 |
|
7.7 |
% |
United States |
2,266.6 |
1,799.5 |
467.1 |
|
227.7 |
|
68.7 |
|
170.7 |
|
9.5 |
% |
Global |
1,039.8 |
768.1 |
271.7 |
|
217.8 |
|
(34.0 |
) |
87.9 |
|
11.4 |
% |
Total |
4,457.2 |
3,636.1 |
821.1 |
|
445.5 |
|
34.7 |
|
340.9 |
|
|
Percentage growth |
|
|
22.6% |
|
12.3% |
|
0.9% |
|
9.4% |
|
|
Fourth Quarter
2022
(In
millions of Canadian dollars, except percentages) |
Q4 2022 |
Q4 2021 |
Total Change |
Change Due to Acquisitions |
Change Due to Foreign Exchange |
Change Due to Organic Growth |
% of Organic Growth |
Canada |
291.1 |
260.0 |
31.1 |
|
— |
|
n/a |
|
31.1 |
|
12.0 |
% |
United States |
577.9 |
440.2 |
137.7 |
|
44.2 |
|
34.1 |
|
59.4 |
|
13.5 |
% |
Global |
261.4 |
216.0 |
45.4 |
|
45.7 |
|
(6.7 |
) |
6.4 |
|
3.0 |
% |
Total |
1,130.4 |
916.2 |
214.2 |
|
89.9 |
|
27.4 |
|
96.9 |
|
|
Percentage growth |
|
|
23.4% |
|
9.8% |
|
3.0% |
|
10.6% |
|
|
Backlog
(In
millions of Canadian dollars, except percentages) |
Dec 31, 2022 |
Dec 31, 2021 |
Total Change |
Change Due to Acquisitions |
Change Due to Foreign Exchange |
Change Due to Organic Growth (Retraction) |
% of Organic Growth (Retraction) |
Canada |
1,249.2 |
1,169.1 |
80.1 |
|
— |
|
n/a |
|
80.1 |
|
6.9 |
% |
United States |
3,715.9 |
3,016.9 |
699.0 |
|
12.8 |
|
214.1 |
|
472.1 |
|
15.6 |
% |
Global |
936.6 |
948.3 |
(11.7 |
) |
— |
|
6.8 |
|
(18.5 |
) |
(2.0) |
% |
Total |
5,901.7 |
5,134.3 |
767.4 |
|
12.8 |
|
220.9 |
|
533.7 |
|
|
Percentage growth |
|
|
14.9% |
|
0.2% |
|
4.3% |
|
10.4% |
|
|
Tomorrow’s Conference Call
On Thursday, February 23, 2023, at 7:00 AM Mountain Time
(9:00 AM Eastern Time), Gord Johnston, President and Chief
Executive Officer, and Theresa Jang, Executive Vice President and
Chief Financial Officer, will hold a conference call to discuss the
company’s fourth quarter and year end 2022 performance.
To listen to the webcast and view the slide presentation, please
join here.
If you are an analyst and would like to participate in the
Q&A, please register here.
The conference call and slideshow presentation will be broadcast
live and archived in their entirety in the Investors section of
Stantec.com.
About Stantec
Communities are fundamental. Whether around the corner or across
the globe, they provide a foundation, a sense of place and of
belonging. That's why at Stantec, we always design with
community in mind. We care about the communities we
serve—because they're our communities too. This allows us to assess
what's needed and connect our expertise, to appreciate nuances and
envision what's never been considered, to bring together diverse
perspectives so we can collaborate toward a shared success.
We're 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 TSX and the NYSE under the symbol STN.
Visit us at stantec.com or find us on social media.
Cautionary Statements
Non-IFRS and Other Financial Measures
Stantec reports its financial results in accordance with IFRS.
However, in this press release, the following non-IFRS and other
financial measures are used by the company: adjusted EBITDA,
adjusted net income, adjusted earnings per share (EPS), adjusted
return on invested capital (ROIC), net debt to adjusted EBITDA,
days sales outstanding (DSO), margin (percentage of net revenue),
organic growth (retraction), acquisition growth, and measures
described as on a constant currency basis and the impact of foreign
exchange or currency fluctuations, as well as measures and ratios
calculated using these non-IFRS or other financial measures.
Additional disclosure for these non-IFRS and other financial
measures, incorporated by reference, is included in the Definitions
of Non-IFRS and Other Financial Measures section of the 2022 Annual
Report, available on SEDAR at SEDAR.com, EDGAR at sec.gov, and the
Company's website at stantec.com and the reconciliation of Non-IFRS
Financial Measures appended hereto.
These non-IFRS and other financial measures do not have a
standardized meaning under IFRS and, therefore, may not be
comparable similar measures presented by other issuers. Management
believes that, in addition to conventional measures prepared in
accordance with IFRS, these non-IFRS and other financial measures
provide useful information to investors to assist them in
understanding components of Stantec's financial results. These
measures should not be considered in isolation or viewed as a
substitute for the related financial information prepared in
accordance with IFRS.
Forward Looking Statements
Certain statements contained in this news release constitute
forward-looking statements. Forward-looking statements in this news
release include, but are not limited to, Stantec's Outlook and
Annual Targets for 2023 in their entirety, any projections related
to revenue, adjusted EBITDA as a % of net revenue, adjusted net
income as a % of net revenue, adjusted diluted EPS growth, adjusted
ROIC, net debt to adjusted EBITDA, effective tax rate, earnings
patterns, and days sales outstanding. Any such statements represent
the views of management only as of the date hereof and are
presented for the purpose of assisting the company’s shareholders
in understanding Stantec’s operations, objectives, priorities, and
anticipated financial performance as at and for the periods ended
on the dates presented and may not be appropriate for other
purposes. By their nature, forward-looking statements require
management to make assumptions and are subject to inherent risks
and uncertainties. Stantec's assumptions relating to the 2023
Outlook and Annual Targets are provided in the company’s 2022
Annual Report.
Readers of this news release are cautioned not to place undue
reliance on forward-looking statements since a number of factors
could cause actual future results to differ materially from the
expectations expressed in these forward-looking statements. These
factors include, but are not limited to, the risk of economic
downturn, future pandemics or health crises that could adversely
affect operations, reduced public or private sector capital spend,
changing market conditions for Stantec’s services, and the risk
that Stantec fails to capitalize on its strategic initiatives.
Investors and the public should carefully consider these factors,
other uncertainties, and potential events, as well as the inherent
uncertainty of forward-looking statements, when relying on these
statements to make decisions with respect to the company.
For more information about how other material risk factors could
affect Stantec’s results, refer to the Risk Factors section and
Cautionary Note Regarding Forward-Looking Statements section in the
company’s 2022 Annual Report. This report is accessible online by
visiting EDGAR on the SEC website at sec.gov or by visiting the CSA
website at sedar.com or Stantec’s website, stantec.com. You may
obtain a hard copy of the 2022 Annual Report free of charge from
the investor contact noted below.
Investor Contact |
Media
Contact |
Jess Nieukerk |
Stephanie Smith |
Stantec Investor Relations |
Stantec Media Relations |
Ph: 587-579-2086 |
Ph: 780-917-7230 |
jess.nieukerk@stantec.com |
stephanie.smith2@stantec.com |
To subscribe to Stantec’s email news alerts, please fill out the
subscription form, which is also available on the Contact
Information page of the Investors section at Stantec.com.
Design with community in mind
Attached to this news release are Stantec’s
reconciliation of non-IFRS measures.
Reconciliation of Non-IFRS Financial
Measures
|
Quarter Ended Dec 31, |
Year Ended Dec 31, |
(In millions of Canadian dollars, except per share amounts) |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Net income |
73.5 |
|
16.6 |
|
247.0 |
|
200.7 |
|
Add back (deduct): |
|
|
|
|
Income taxes |
24.3 |
|
7.3 |
|
78.1 |
|
62.3 |
|
Net interest expense |
17.5 |
|
8.4 |
|
64.0 |
|
37.9 |
|
Net (reversal) impairment of lease assets and property and
equipment (note 1) |
0.4 |
|
41.6 |
|
(2.9 |
) |
37.3 |
|
Depreciation and amortization |
73.2 |
|
59.8 |
|
283.5 |
|
221.8 |
|
Unrealized loss (gain) on equity securities |
(4.2 |
) |
(4.8 |
) |
18.0 |
|
(13.9 |
) |
Acquisition, integration, and restructuring costs (note 4) |
12.6 |
|
13.2 |
|
41.8 |
|
27.7 |
|
Gain on disposition of intangible asset |
(5.6 |
) |
— |
|
(5.6 |
) |
— |
|
Adjusted EBITDA |
191.7 |
|
142.1 |
|
723.9 |
|
573.8 |
|
|
Quarter Ended Dec 31, |
Year Ended Dec 31, |
(In millions of Canadian dollars, except per share amounts) |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Net income |
73.5 |
|
16.6 |
|
247.0 |
|
200.7 |
|
Add
back (deduct) after tax: |
|
|
|
|
Net (reversal) impairment of lease assets and property and
equipment (note 1) |
0.3 |
|
31.8 |
|
(2.2 |
) |
28.5 |
|
Amortization of intangible assets related to acquisitions (note
2) |
15.3 |
|
9.1 |
|
61.1 |
|
30.2 |
|
Unrealized loss (gain) on equity securities (note 3) |
(3.2 |
) |
(3.6 |
) |
13.7 |
|
(10.6 |
) |
Acquisition, integration, and restructuring costs (note 4) |
9.5 |
|
9.9 |
|
31.8 |
|
21.1 |
|
Gain on disposition of intangible asset (note 5) |
(4.3 |
) |
— |
|
(4.3 |
) |
— |
|
Adjusted net income |
91.1 |
|
63.8 |
|
347.1 |
|
269.9 |
|
Weighted average number of shares outstanding - diluted |
110,915,844 |
|
111,669,548 |
|
111,069,776 |
|
111,616,665 |
|
Adjusted earnings per share - diluted |
0.82 |
|
0.57 |
|
3.13 |
|
2.42 |
|
See the Definitions section of the 2022 Annual Report for the
discussion of non-IFRS and other financial measures used
and additional reconciliations of non-IFRS financial measures. This
table includes only continuing operations results.
note 1: The net (reversal) impairment of lease assets and
property and equipment includes onerous contracts associated with
the impairment for the year ended December 31, 2022 of $2.6
(2021 - $12.5l) and for the quarter ended December 31, 2022 of $2.2
(2021 - $12.5). For the year ended December 31, 2022, this
amount is net of tax of $(0.7) (2021 - $8.8). For the quarter ended
December 31, 2022, this amount is net of tax of $0.1 (2021 -
$9.8).
note 2: The add back of intangible amortization relates only to
the amortization from intangible assets acquired through
acquisitions and excludes the amortization of software purchased by
Stantec. For the year ended December 31, 2022, this amount is
net of tax of $19.3 (2021 - $9.4). For the quarter ended
December 31, 2022, this amount is net of tax of $5.1 (2021 -
$3.1).
note 3: For the year ended December 31, 2022, this amount
is net of tax of $4.3 (2021 - ($3.3)). For the quarter ended
December 31, 2022, this amount is net of tax of ($1.0) (2021 -
$(1.2)).
note 4: The add back of other costs primarily relates to
integration expenses associated with acquisitions and restructuring
costs, For the year ended December 31, 2022, this amount is
net of tax of $10.0 (2021 - $6.6). For the quarter ended
December 31, 2022, this amount is net of tax of $3.1 (2021 -
$3.3).
note 5: For the year and quarter ended December 31, 2022,
this amount is net of tax of $(1.3) (2021 - nil).
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