Investor Presentation · 2 days ago · Investor Presentation EXCELLENCE INNOVATION PEOPLE GROWTH...

Investor PresentationAugust 2020

EX

CE

LL

EN

CE

I

NN

OV

AT

ION

P

EO

PL

E

GR

OW

TH

1

Joint Venture with SnøhettaTemple University – Charles LibraryPhiladelphia, Pennsylvania, USAPhoto credit: Michael Grimm

Cautionary Note Regarding Forward-Looking Statements

EX

CE

LL

EN

CE

I

NN

OV

AT

ION

P

EO

PL

E

GR

OW

TH

2

Certain statements contained in this presentation constitute forward-looking information and statements within the meaning of applicable securities law (collectively, "forward-looking statements"). Forward-looking statements in this presentation include, but are not limited to: our financial targets (including our annual net revenue growth, adjusted EBITDA, and net income targets; employee count; and ROIC target), our anticipated business and geographical mix, our expectations regarding economic and industry trends in the sectors and regions in which we operate, our acquisition strategy, our capital deployment strategy, and our overall growth strategy. These statements provide information about management’s current expectations and plans relating to the future. Readers are cautioned that this information may not be appropriate for other purposes. Stantec does not undertake any obligations to publicly update or revise any forward-looking statements except as required by law.

By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. Readers are cautioned not to place undue reliance on our forward-looking statements since a number of factors could cause actual future results, conditions, actions, or events to differ materially from the targets, expectations, estimates, or intentions expressed in these forward-looking statements. Risk factors include, but are not limited to, the risk of an economic downturn, decreased spending in the private and/or public sectors, 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 about our company. For more information about how other material risk factors could affect our results, please refer to the Risk Factor section in our 2019 Annual Report and Q2 2020 Management’s Discussion and Analysis incorporated herein by reference. Readers can access these documents by visiting EDGAR on the SEC website at sec.gov or by visiting the CSA website at sedar.com or on Stantec’s website at stantec.com.

In determining our forward-looking statements, we consider material factors including assumptions about the performance of the Canadian, US, and global economies in 2020 and beyond and their effect on our business. These key factors and assumptions areoutlined thoroughly in our press release dated December 3, 2019. Unless otherwise indicated, all amounts expressed in Canadian dollars.

Design & Engineering ServicesE

XC

EL

LE

NC

E

IN

NO

VA

TIO

N

PE

OP

LE

G

RO

WT

H

3

BUSINESS OPERATING UNITS (TTM Q2 2020 Net Revenue)

WATER ENVIRONMENTAL SERVICES

$1,066M $828M $754M $570M

INFRASTRUCTURE BUILDINGS ENERGY & RESOURCES

$542M

Stantec is a signatory to the UN Global Compact and partners with clients to promote the achievement of the UN’s Sustainable Development Goals

For everything from small local projects to iconic mega projects

Diversified Global Footprint – Local PresenceE

XC

EL

LE

NC

E

IN

NO

VA

TIO

N

PE

OP

LE

G

RO

WT

H

4

54%

29%

17%

Distribution of Net Revenue

United States Canada Global

$3.8BTTM Q2 2020

Stantec at a glanceE

XC

EL

LE

NC

E

IN

NO

VA

TIO

N

PE

OP

LE

G

RO

WT

H

5

65 YEARSOf Uninterrupted Profitability

CDN $4.9B(2)

Market Capitalization

STNTSX & NYSE

350Locations Worldwide

22,000Employees Globally

6.6%10-Year Adjusted Diluted

EPS CAGR(1)

(1) TTM Q2 2020(2) As of August 7, 2020

Infrastructure

EX

CE

LL

EN

CE

I

NN

OV

AT

ION

P

EO

PL

E

GR

OW

TH

6

International Ave Pedestrian RealmCalgary, Alberta

Global

Canada

United States

Bridges

Transit & Rail

Community Development

Roadways

Net revenue by geographyQ2 2020 YTD

Net revenue by sectorQ2 2020 YTD

Q2 2020 YTD 2020

Organic net revenue growth (retraction) (1.7%) (0.2%)

Net revenue growth (retraction) 0.4% 1.1%

28%

% of Net RevenueQ2 2020 YTD

Buildings

EX

CE

LL

EN

CE

I

NN

OV

AT

ION

P

EO

PL

E

GR

OW

TH

7

Google Midwest Headquarters Phase IVChicago, IL, USA

Global

Canada

United States

Science & TechnologyAirports & AviationEducationCivicHealthcareIndustrialCommercial



Q2 2020 YTD 2020

Organic net revenue growth (retraction) (8.7%) (4.0%)

Net revenue growth (retraction) (7.0%) 0.0%

22%


Water

EX

CE

LL

EN

CE

I

NN

OV

AT

ION

P

EO

PL

E

GR

OW

TH

8

*

Hyperion Advanced Water Purification FacilityDel Mar, Playa del Rey, CA, USA

Global

Canada

United States



Client Enterprise Systems

Water Treatement

Stormwater

Water Resources

Wastewater Treatment

Conveyance

Q2 2020 YTD 2020

Organic net revenue growth (retraction) 3.4% 4.5%


21%


Environmental Services

EX

CE

LL

EN

CE

I

NN

OV

AT

ION

P

EO

PL

E

GR

OW

TH

9

Lower Powers CreekWest Kelowna, British Columbia

Global

Canada

United States

MiningCommunity DevelopmentTransportationPower & DamsBuildingsWaterOil & Gas



Q2 2020 YTD 2020

Organic net revenue growth (retraction) (3.7%) 1.0%

Net revenue growth (retraction) (1.6%) 2.2%

14%


Energy & Resources

EX

CE

LL

EN

CE

I

NN

OV

AT

ION

P

EO

PL

E

GR

OW

TH

10

Dokie Wind Energy ProjectBritish Columbia

Global

Canada

United States

WaterPower & Dams

Mining

Power

Oil & Gas



Q2 2020 YTD 2020

Organic net revenue growth (retraction) 2.0% 6.2%


15%


2020 Outlook

EX

CE

LL

EN

CE

I

NN

OV

AT

ION

P

EO

PL

E

GR

OW

TH

11

Bridge Replacement Design for a Structure on Sturgeon Road over Sturgeon CreekWinnipeg, Manitoba, Canada

Key Drivers by Business Operating UnitE

XC

EL

LE

NC

E

IN

NO

VA

TIO

N

PE

OP

LE

G

RO

WT

H

12

COVID-19 Long-term

Impact

Business Operating Unit

% of Net Revenue

(Q2 2020 YTD)Key Drivers

Water 21%▲ Multi-year frameworks for water utilities in UK and AUS; acceleration of UK AMP contract awards▲ Likely to benefit if governments implement stimulus programs▲ Investment drivers – climate change, water availability, sustainability.

Infrastructure 28%▲ Majority of projects are continuing as “essential” aside from slowdown in community development▲ Likely to benefit if governments implement stimulus programs▬ Investment drivers – state of good repair, urbanization, transportation, mass transit, etc.

Buildings 22%▲ Post COVID-19 requirements for workplace, education and healthcare environments▼ Decrease in commercial and hospitality projects▬ Investment drivers – healthcare, remote education / office working, connectivity

Environmental Services 14%

▲ Opportunities to develop greenfield sites will increase post COVID-19, renewable energy surge▼ Largely funded by private sector: energy & resource, industrial sector and land development▬ Investment drivers – environmental stewardship as a public priority in most jurisdictions

Energy & Resources 15%

▲ Midstream projects are continuing▼ Largely funded by private sector▬ Investment drivers – commodity prices, climate change, energy transition, green policies

Deg

ree

of Im

pact

Less Impacted

More Impacted

Public sector revenue >50% | Variable fee revenue >50%

Geographic Region

% of Net Revenue

(YTD)Outlook

United States

55%• Nominal revenue contraction in Q3 20 relative to Q2 20 is expected across all businesses

except Water, with a slightly more pronounced decline in Q4 20 due to the seasonal slowdown• Expect continuing benefit of US/Canadian exchange rate

Canada

28%• Q3 20 revenues are expected to be stable relative to Q2 20, while Q4 20 revenues are expected

to experience the typical seasonal downturn in activity• Ramp-up of major transportation and midstream projects

Global

17%• Net revenues are projected to improve modestly from Q2 20 to Q3 20 and stabilize at that level

in Q4 20• The strength of the Water business in the UK and Australia and the Transportation sector in

New Zealand are expected to offset the impact of COVID-19 related project slowdowns

2020 Net revenue outlook2

02

0 O

UT

LO

OK

13Full-year 2020 net revenue expected to be comparable to 2019

2020 Outlook2

02

0 O

UT

LO

OK

14

• Full-year 2020 net revenue expected to be comparable to 2019• Adjusted net income and adjusted diluted EPS comparable to 2019• 55% of adjusted earnings in Q2 and Q3, and 45% in Q1 and Q4

Net Revenue and Adjusted Earnings

• Net debt to adjusted EBITDA expected to be at the low end of internal range of 1.0x to 2.0x• No near-term debt maturities• More than 70% of debt is floating rate

Leverage

Liquidity & Capital Allocation• >$330 million available liquidity on committed revolving credit facility ($600 million also available through accordion)• Non-essential capital expenditures on hold• Dividend re-affirmed• Share repurchases on opportunistic basis

Continued balance sheet strength and disciplined capital deployment

Ma'Amir & North Refinery Industrial Area Sewage Treatment Plant

ESG leadership that drives valueE

XC

EL

LE

NC

E

IN

NO

VA

TIO

N

PE

OP

LE

G

RO

WT

H

15

Stantec’s ESG frameworkE

XC

EL

LE

NC

E

IN

NO

VA

TIO

N

PE

OP

LE

G

RO

WT

H

16

Stantec is a signatory to the UN Global Compact and has adopted the UN’s sustainable development goals (SDGs)

Member of the UN Global Compact CFO Taskforce for the SDGs

Impact throughour actions

our project work

In addition to UN SDGs, Stantec’s programs take into account

GRI, TCFD, SASB, and CDP

Environmental leadershipE

XC

EL

LE

NC

E

IN

NO

VA

TIO

N

PE

OP

LE

G

RO

WT

H

17

Stewardship and innovation that drives valueStantec’s recognized leadership in sustainable design helps win projects

Recent accolades

Corporate Knights 2020Ranked as Top 100 Most Sustainable Companies in the World

CDP Climate Leader 2019 CDP score of A-

Top 100 Smart City PartnersNewsweek magazine

*ENR – Engineering News-Record Magazine

Industry Recognition*

#1Green design firm for educational facilities

#1International design firm for sewer and waste

#2 International design firm for water

#2Green building firm

#2Design firm in power for hydro plants

#4 Design firm in power for wind power

#4Design firm in North America

#8Environmental Firm

#11Design firm in the world

0

1

2

3

4

5

14 15 16 17 18 19

Met

ric T

ons

CO

2Eq

uiva

lent

Emissions per Employee by Year

Scope 1 and 2 Scope 3

In 2019 we achieved a 39% reduction in scope 1 and 2 emissions per employee from our 2013 baseline – We expect to surpass our 2028 reduction target of 40%

EX

CE

LL

EN

CE

I

NN

OV

AT

ION

P

EO

PL

E

GR

OW

TH

18

Stantec’s SaferTogether™ culture encourages safe choices so our people return home safely each day. Stantec’s safety metrics continue to improve

Social leadershipEmbracing and engaging diverse groups Improves the performance of our business and our ability to support clients. STN in included in the Bloomberg Gender-Equality and Jantzi Social Indexes

Stantec attracts, retains, develops, and rewards talent by paying fairly, providing benefits with meaningful choices and offering a consistent global approach while being sensitive to local market practices.

Employee Retention: Targeting < 12% voluntary turnover

Global Compact Network Canada -Gender Equality Leadership in theCanadian Private Sector Project participant. Signatory to UN Women Empowerment Principles.

Board of Director Composition

Currently expanding our long-term support for diversity and inclusion programs with a focus on Black, Indigenous and People of Color communities around the world.

Inclusion and Diversity: Targeting > 85% engagement

Gender38% Female

62% Male

Strong governance E

XC

EL

LE

NC

E

IN

NO

VA

TIO

N

PE

OP

LE

G

RO

WT

H

19

A diverse board and values-based leadershipA board dominated by independent directors from exceptional backgrounds and leadership driven by clear values position Stantec for the future

95%Environmental and Social Factors

63% highly experienced

25% general experience

12% limited experience

Governance100% highly experienced

Board Composition and Experience

How Stantec’s people conduct themselves has a direct impact on the integrity of both the Company and the institutions in the jurisdictions where we operate

compliance with mandatory ethics training in 2019

Our Strategic Plan (Launched December 3, 2019)

EX

CE

LL

EN

CE

I

NN

OV

AT

ION

P

EO

PL

E

GR

OW

TH

20SEVA résidences – foot bridge and marsh development Candiac, Québec

Our visionE

XC

EL

LE

NC

E

IN

NO

VA

TIO

N

PE

OP

LE

G

RO

WT

H

21

To be a top 10 global design firm that maximizes long-term, sustainable value

Pure play design focus

Strong alignment with shareholders Earnings growth Disciplined capital

allocation

Peace River Regional ReservoirBradenton/DeSoto County, Florida, United States

Our opportunityE

XC

EL

LE

NC

E

IN

NO

VA

TIO

N

PE

OP

LE

G

RO

WT

H

22

US$24TTOTAL SPEND IN THE NEXT DECADE

1) United Nations by 2030 2) Navigant Research by 2030 3) IEA by 2025

Key Market TrendsClimate change, Urbanization, Geopolitics and breakthrough technology

STRATEGIC GROWTH OPPORTUNITIES

US$2TADDRESSABLE ENGINEERING AND DESIGN SPEND

SMART CITIES AND URBAN PLACES

ENERGY REMIX

US $300B1 US $9,000B1 US $1,700B2 US $13,040B3

COASTAL RESILIENCE ECOSYSTEMRESTORATION

Our strategyE

XC

EL

LE

NC

E

IN

NO

VA

TIO

N

PE

OP

LE

G

RO

WT

H

23

We will do this throughStrong execution, efficient operations, and disciplined capital allocation while delivering a great client experience.

We will measure our success throughStrong earnings per share growth, improved returns on invested capital, balance sheet stability, employee engagement and client satisfaction.

To grow and diversify sustainably for the benefit of our clients, employees and shareholders.

Share buyback

Focused on achieving the best risk adjusted returns

Our capital allocation philosophyE

XC

EL

LE

NC

E

IN

NO

VA

TIO

N

PE

OP

LE

G

RO

WT

H

24

Sustaining CapExMaintaining a strong

balance sheet Base dividend

Excess Cash Flow

Operating cash flow

Growth

Our core commitments

Competing capital for the best risk adjusted returns

Organic and innovation Acquisitions

EPS Growth

Our TargetsE

XC

EL

LE

NC

E

IN

NO

VA

TIO

N

PE

OP

LE

G

RO

WT

H

25

Ruwais Marina DistrictRumais, Abu Dhabi, UAE

>10%CAGR

16-17%Of net revenue

>11% >10%Net revenue Adjusted

EBITDA marginReturn on invested capital

Adjusted earnings per share

CAGR

Concluding Remarks

Fremont Water Pollution Control Center ExpansionFremont, OH, USA

EX

CE

LL

EN

CE

I

NN

OV

AT

ION

P

EO

PL

E

GR

OW

TH

26

Continuing to execute our strategy2

02

0 O

UT

LO

OK

27

• Innovating client solutions to address the challenges created by COVID-19• Virtual marketing and business development toolkit developed and launched to enhance sales and client relationship management

Innovation

• Focused account management has driven 7.4% organic growth in key accounts year-over-year• Pace of acquisitions slowed due to travel restrictions

Growth

• Our people’s health and safety comes first as we begin our phased office remobilization• Integrity of workforce is being preserved to work through record backlog and to position Stantec for economic recovery

People

• Continued focus on project execution and delivering exceptional work for clients• Stantec’s EBITDA margins bolstered by prudent management of discretionary spending

Excellence

EX

CE

LL

EN

CE

I

NN

OV

AT

ION

P

EO

PL

E

GR

OW

TH

28

Lyu-Chuan - Shin Sei Green WaterwayTaichung City, Taiwan

Q2 2020

Q2

20

20

29

Long-term strategy of delivering value through diversified business model

United States Canada Global

$4.7 B gross revenue

backlog

12 Months of work

4% Growth in Q2 Adjusted Diluted EPS

Solid Q2 results

Organic growth(retraction) 2.3% (6.8)% (7.4)%

Q2 net revenue $532M $261M $158M

0

100

200

300

400

500

600

($ m

illion

s)

Q2 20 Q2 19

Solid net revenue generation in Q2

Q2

20

20

30

UNITED STATES CANADA GLOBAL

Q2 Net revenue stable year-over-year at:

$951M 2.1% organic retraction

Organic growth (retraction) (1.7)% (8.7)% 3.4% (3.7)% 2.0%

Q2 net revenue $272M $202M $201M $141M $135M

0

100

200

300

($ m

illion

s)

Q2 20 Q2 19

Business line diversity bolsters Stantec’s resiliency

Q2

20

20

31

WATER ENVIRONMENTAL SERVICES

INFRASTRUCTURE BUILDINGS ENERGY & RESOURCES

United States

Q2 20

Net revenue growth 6.0%

Organic net revenue growth 2.3%

Backlog ($ millions) $2,781

Gross Margin 52.9%

Q2

20

20

32

$532 $502

$0

$200

$400

$600

$800

Q2 20 Q2 19

($ m

illion

s)

Gross & Net Revenue

Martin County, Florida SubstationLake Mary, Florida

2.3% organic growth in Q2• Driven by:

• Water, Mining, and Power with the commencement of several large projects and continuation of existing programs

• New federal Environmental Services projects that more than offset pandemic-related slowdowns

• Partially offset by:• A slowdown in Buildings, particularly

in the commercial, airports, and hospitality sectors

Net RevenueGross Revenue

Canada

Q2 20

Net revenue retraction (6.8)%

Organic net revenue retraction (6.8)%

Backlog ($ millions) $1,163

Gross Margin 48.5%

Q2

20

20

33

$261 $280 $0

$200

$400

$600

$800

Q2 20 Q2 19

($ m

illion

s)

Gross & Net Revenue

University of Manitoba Museum Phase IIWinnipeg, MB, Canada

6.8% organic retraction in Q2• Driven by:

• Slowed economic growth amplified by the COVID-19 pandemic

• Buildings and Community Development particularly affected

• Environmental Services impacted by project slowdowns in field work

• Partially offset by organic growth in:• Oil & Gas driven by midstream

projects• Transportation related to several

large light-rail transit projects in Edmonton, Montreal, and the greater Toronto area


Global

Q2 20

Net revenue retraction (7.9)%

Organic net revenue retraction (7.4)%

Backlog ($ millions) $769

Gross Margin 51.7%

Q2

20

20

34

$158 $171 $0

$200

$400

$600

$800

Q2 20 Q2 19

($ m

illion

s)

Gross & Net Revenue

University of Manitoba Museum Phase IIWinnipeg, MB, CanadaCenter Parcs, Longford ForestCounty Longford, Ireland

7.4% organic retraction in Q2• Driven by:

• Project slowdowns from COVID-19• Most pronounced in Buildings and

European Environmental Services

• Pandemic-related mine closures in Latin America

• Partially offset by:• New Zealand transportation projects• UK Infrastructure strength• Water remaining steady in the UK

with increased work in Australia


Q2 2020 resultsQ

2 2

02

0

35

$954 $953 $901 $955 $951

Q2 19 Q3 19 Q4 19 Q1 20 Q2 20

2.3% 7.4% 5.3% 4.2% (2.1)%

Net revenue & organic growth (retraction)($ millions, %)

$145 $159$143 $140 $143

Q2 19 Q3 19 Q4 19 Q1 20 Q2 20

15.2% 16.7% 15.8% 14.6% 15.0%

Adjusted EBITDA and margin($ millions, %)

Q2 20 Q2 19 Change

(In millions of Canadian dollars, except per share amounts and percentages) $

% of Net Revenue $

% of Net Revenue

% Year-over-year

change

Net revenue 951.1 100.0 953.6 100.0 (0.3)%

Gross margin 489.7 51.5 517.5 54.3 (5.4)%

Administrative and marketing expenses 344.0 36.2 372.4 39.1 (7.6)%

EBITDA from continuing operations(1) 144.9 15.2 145.9 15.3 (0.7)%

Net income from continuing operations 52.6 5.5 49.3 5.2 6.7%

Diluted earnings per share (EPS) from continuing operations 0.47 - 0.44 - 6.8%

Adjusted EBITDA from continuing operations(1) 142.5 15.0 145.4 15.2 (2.0)%

Adjusted net income from continuing operations(1) 57.7 6.1 56.1 5.9 2.9%

Adjusted diluted EPS from continuing operations(1) 0.52 - 0.50 - 4.0%

(1) EBITDA, adjusted EBTIDA, adjusted net income, and adjusted diluted EPS are non-IFRS measures (discussed in the Definitions section of Stantec's 2019 Annual Report and Q2 2020 Management's Discussion and Analysis).

0

0.5

1

1.5

2

Q2 19 Q3 19 Q4 19 Q1 20 Q2 20

Net debt to adjusted EBITDA(1) (TTM)

Balance sheet strengthQ

2 2

02

0

36

Target range

1.0 - 2.0x

Net debt to adjusted EBITDA(1)

1.0x at June 30, 2020

70

75

80

85

90

95

Q2 19 Q3 19 Q4 19 Q1 20 Q2 20

Days sales outstanding

Target

90 days

Days sales outstanding

82 days at June 30, 2020

(1) Net debt to adjusted EBTIDA and days sales outstanding are non-IFRS measures. (discussed in the Definitions section of Stantec's 2019 Annual Report and Q2 2020 Management's Discussion and Analysis).

Liquidity and capital allocation(Comparisons to Q2 2019)

Q2

20

20

37

$115 $94 $204

($85)

$210

Q2 19 Q3 19 Q4 19 Q1 20 Q2 20

Free cash flow(1)

($ millions)

$16 $16 $17 $16 $17

$12 $17$33

Q2 19 Q3 19 Q4 19 Q1 20 Q2 20

Dividends Share buy backs

Capital returned to shareholders($ millions)

• 83% improvement in free cash flow(1)

• >50% decrease in capital expenditures

• >$330 million in undrawn credit capacity

Cash flow from continuing operations (millions of Canadian dollars) Q2 20 Q2 19

Inflow (Outflow)

Operating 251.5 162.3

Investing (11.2) (18.6)

Financing (100.4) (83.0)

Net 139.9 60.7

(1) Free cash (out)flow is defined as operating cash flows less capital expenditures and net payment of lease obligations.

Thank You!

EX

CE

LL

EN

CE

I

NN

OV

AT

ION

P

EO

PL

E

GR

OW

TH

38

Investor Presentation · 2 days ago · Investor Presentation EXCELLENCE INNOVATION PEOPLE GROWTH...

Documents

Transcript of Investor Presentation · 2 days ago · Investor Presentation EXCELLENCE INNOVATION PEOPLE GROWTH...