Stantec reports second quarter 2017 results with overall 4.5% organic gross revenue growth
EDMONTON, ALBERTA and NEW YORK, NEW YORK--(Marketwired - Aug. 9, 2017) - Stantec Inc. (TSX:STN)(STN) -
Gross revenue increased 26% from approximately $1.05 billion to $1.3 billion from Q2 16 to Q2 17
Organic gross revenue grew 4.5% from Q2 16 to Q2 17
EBITDA increased from $73.7 million to $158.1 million from Q2 16 to Q2 17, and adjusted EBITDA grew by 22% or $18.9 million
Diluted EPS increased from $0.20 to $0.85 from Q2 16 to Q2 17, and adjusted diluted EPS grew by 38% from $0.37 to $0.51
Administrative and marketing expenses as a percentage of net revenue decreased from 43.9% to 42.3% from Q2 16 to Q2 17
Proceeds from the Innovyze sale were used to repay debt by $221.3 million, and the transaction reduced goodwill and intangible assets by $194.4 million and $95.1 million respectively
Through execution of its consistent strategy of supplying expertise to clients through local offices around the world, Stantec gross revenue rose 26% from approximately $1.05 billion in Q2 16 to $1.3 billion in Q2 17. From Q2 16 to Q2 17, EBITDA rose from $73.7 million to $158.1 million. EBITDA was positively impacted by a decrease in administrative and marketing expenses as a percentage of net revenue, from 43.9% in Q2 16 to 42.3% in Q2 17. Adjusted EBITDA grew by 22% to $103.5 million. Diluted earnings per share (EPS) increased from $0.20 to $0.85, and adjusted diluted EPS increased 38% from $0.37 to $0.51.
For the period ended June 30
2017 Q2 2016 Q2 Change
(In millions of Canadian dollars, except per share amounts and %)
1,318.6 1,046.6 26.0%
Adjusted EBITDA (note)
Adjusted net income (note)
Diluted earnings per share (EPS)
Adjusted diluted EPS (note)
Cash dividends declared per common share
Note: EBITDA, adjusted EBITDA, adjusted net income, and adjusted diluted EPS are non-IFRS measures defined in the Critical Accounting Estimates, Developments, and Measures section of the Companys 2016 Annual Report and the Q2 17 Managements Discussion and Analysis.
Business Operating Unit and Geographic Results
Overall organic gross revenue growth of 4.5% was led by Stantecs Buildings business operating unit, which experienced organic gross revenue growth of 5.1% in Q2 17 compared to Q2 16. The Company attributes this growth to the mobilization of new project wins in Canada and new opportunities in the US Education sector. In Q2 17 compared to Q2 16, growth in the Canadian and US Transportation sectors helped lift Stantecs Infrastructure business operating unit to realize organic gross revenue growth of 4.6%; the Companys Water business operating unit experienced 4.1% organic gross revenue growth.
In Q2 17 compared to Q2 16, Stantecs Environmental Services business operating unit was stable, while organic revenue in the Energy & Resources business operating unit retracted 11.8%, a rate of retraction that slowed compared to 2016.
Bob Gomes, president and chief executive officer, noted that Stantecs second quarter results met executive expectations. "These results were in line with our expectations and establish the trend of recovery in 2017 that we outlined in the first quarter. Organic growth in the consulting business was good across most of our business operating units and all our geographies this quarter. Buildings experienced a strong quarter, with organic gross revenue growth of 5.1%. We also experienced good growth in Water and Infrastructure. Including Construction Services, we had overall organic growth of 4.5% in the second quarter of 2017. This growth demonstrates the continued success of our full integration acquisition strategy and our ability to win projects and execute work around the world across a diverse range of sectors."
Impact of Innovyze Sale
As projected last quarter, the Q2 17 sale of Innovyze (the water software business that was part of the acquisition of MWH Global) had a positive impact on earnings in the second quarter; sale proceeds were used to repay $221.3 million of the Companys revolving credit facility, reducing our interest payments. The sale of Innovyze also reduced goodwill and intangible assets by $194.4 million and $95.1 million respectively and reduced amortization of intangible assets by $1.2 million in Q2 17 compared to Q2 16.
The table below shows the impact of the Innovyze sale in the first and second quarters of 2017 and year to date:
Impact of Innovyze Transaction
(In millions of Canadian dollars except per share amounts) Q1 17
Estimated working capital adjustments
Net proceeds from sale
Net assets on close
Pre-tax gain on disposal
Impact on Taxes, Net Income, and EPS
Current tax provision
Deferred taxes previously recorded on Innovyze net assets
Deferred taxes recorded on held for sale classification
Income taxes expense
Impact on net income
Impact on EPS - basic
Impact on EPS - diluted
Additional Company Activity
During the second quarter of 2017, Stantec completed the transition of projects and the financial integration of MWH Americas Consulting Services into the Companys enterprise management system. MWH Global should be fully integrated in 2018.
In Q2 17, Stantec acquired Seattle-based Inventrix Engineering Inc. (Inventrix), adding 22 employees to the Company and enhancing the Buildings business operating unit in the United States. Inventrix provides expertise in mechanical engineering.
Also in the quarter, Stantec repurchased 465,713 shares for a total value of $14.4 million at an average price of $30.94 per share through its Normal Course Issuer Bid.
On July 13, 2017, Stantec declared and paid a cash dividend of $0.1250 per share to shareholders of record on June 30, 2017. On August 8, 2017, the Company again declared a dividend of $0.1250 per share, payable on October 12, 2017, to shareholders of record as of September 29, 2017.
On July 28, 2017, Stantec acquired Denver-based RNL Facilities Corporation (RNL), adding approximately 130 employees to the Companys Buildings business operating unit. Along with Denver, RNL has offices in Phoenix, Los Angeles, Washington, DC, and Abu Dhabi. RNL provides expertise in architecture, interior design, urban design, and landscaping.
During the second quarter, Stantec announced the retirement of president and chief executive officer, Bob Gomes, effective December 31, 2017, after almost nine years in that role. Bob will remain as a director on the Companys board. The board of directors chose Gord Johnston, executive vice president of Stantecs Infrastructure business operating unit, as the incoming president and chief executive officer. Gord Johnston has more than 30 years of industry leadership experience, including more than 20 years with Stantec. During his time at Stantec, Gord has taken on various roles, including business leader for the Water and Infrastructure business operating units, and has played an active role in helping guide the Companys strategic planning over the past nine years.
Conference Call and Company Information
Stantecs second quarter conference call—to be held Wednesday, August 9, at 7:00 AM MDT (9:00 AM EDT)—will be broadcast live and archived in the Investors section of stantec.com. Financial analysts wanting to participate in the earnings conference are invited to call 1-866-222-0265 (Canada and United States) or 1-416-640-5942 (international) and provide the operator with confirmation code 5088427.
Were active members of the communities we serve. Thats why at Stantec, we always design with community in mind.
The Stantec community unites approximately 22,000 employees working in over 400 locations across 6 continents. We collaborate across disciplines and industries to bring buildings, energy and resource, environmental, water, and infrastructure projects to life. Our work—engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, construction services, project management, and project economics, from initial project concept and planning through to design, construction, commissioning, maintenance, decommissioning, and remediation—begins at the intersection of community, creativity, and client relationships.
Our local strength, knowledge, and relationships, coupled with our world-class expertise, have allowed us to go anywhere to meet our clients needs in more creative and personalized ways. With a long-term commitment to the people and places we serve, Stantec has the unique ability to connect to projects on a personal level and 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.
Stantecs EBITDA, adjusted EBITDA, adjusted net income, and adjusted diluted earnings per share are non-IFRS measures. For a definition and explanation of non-IFRS measures, refer to the Critical Accounting Estimates, Developments, and Measures section of the Companys 2016 Annual Report and the Companys 2017 Second Quarter Managements Discussion and Analysis.
Certain statements contained in this news release constitute forward-looking statements. These statements include, but are not limited to, the anticipated integration timeline for MWH Global. Any such statements represent the views of management only as of the date hereof and are presented for the purpose of assisting the Companys shareholders in understanding Stantecs 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 us to make assumptions and are subject to inherent risks and uncertainties.
We caution readers of this news release not to place undue reliance on our 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, our ability to successfully manage our integration program and respond to changing market conditions for Stantecs services. 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 our Company.
For more information about how other material risk factors could affect results, refer to the Risk Factors section and Cautionary Note Regarding Forward-Looking Statements in our 2016 Annual Report and the 2017 Second Quarter Managements Discussion and Analysis. Stantecs 40-F has been filed with the SEC, and you may obtain this document by visiting EDGAR on the SEC website at sec.gov. You may obtain our complete audited annual consolidated financial statements and associated Managements Discussion and Analysis for the year ended December 31, 2016 (which form our 2016 Annual Report) by visiting EDGAR on the SEC website at sec.gov, on the CSA website at sedar.com, or at stantec.com. Alternatively, you may obtain a printed copy of the 2016 Annual Report free of charge from our Investor Contact noted below.
Design with community in mind
- Continued, Consolidated Statements of Financial Position and Consolidated Statements of Income attached -
Consolidated Statements of Financial Position
(In thousands of Canadian dollars)
Cash and cash equivalents
Cash in escrow
Trade and other receivables
Income taxes recoverable
Other financial assets
Total current assets
Property and equipment
Investments in joint ventures and associates 9,722
Deferred tax assets
Other financial assets
Trade and other payables
Income taxes payable
Other financial liabilities
Total current liabilities
Net employee defined benefit liability
Deferred tax liabilities
Other financial liabilities
Accumulated other comprehensive income
Total shareholders equity
Total liabilities and equity
Consolidated Statements of Income
For the quarter ended
For the two quarters ended
(In thousands of Canadian dollars, except per share amounts) 2017
Less subconsultant/subcontractor and other direct expenses
Direct payroll costs
Administrative and marketing expenses
Depreciation of property and equipment
Amortization of intangible assets
Net interest expense
Other net finance expense
Share of income from joint ventures and associates
Foreign exchange (income) loss
Gain on disposition of a subsidiary
Income before income taxes
Current tax on disposition of subsidiary
Deferred tax on disposition of subsidiary
Total income taxes
Net income for the period
Weighted average number of shares outstanding - basic
Weighted average number of shares outstanding - diluted
Shares outstanding, end of period
Earl J. Woods
Stantec Media Relations
Stantec Investor Relations