Stantec Inc. (NYSE:STN) Q3 2019 Earnings Conference Call Transcript

Nov 07, 2019 • 09:00 am ET

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Stantec Inc. (NYSE:STN) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Welcome to Stantec's Third Quarter 2019 Earnings Results Conference Call. Leading the call today are Gord Johnston, President and Chief Executive Officer; and Theresa Jang, Executive Vice President and Chief Financial Officer. Today's call is webcast and Stantec invites those dialing in to view the slide presentation, which is available in the investors section at stantec.com.

All information provided during this conference call is subject to the forward-looking statement qualification set out in slide 2 detailed in Stantec's Management's Discussion and Analysis and incorporated in full for the purpose of today's call.

With that, I am pleased to turn the call over to Mr. Gord Johnston

Executive
Gord Johnston

Good morning and thank you for joining us. I'll begin our call today with an overview of our 3rd quarter performance. Theresa will then provide details on our results. Following that, I'll review our operations in more detail. In Q3, we drove a 12.4% year-over-year increase in net revenue with 7.4% representing organic growth across all geographies.

In particular, we saw major contributions from the United States and our global operations; environmental services and Infrastructure generated double-digit organic growth and water and buildings delivered strong growth of 7.4% and 4.5% respectively. Energy & Resources by contrast, experienced a modest contraction again this quarter mostly due to major projects nearing completion, but it should be noted that comparative figures for last year were very high.

Acquisitions delivered a 4.8% increase in net revenue, primarily in our global buildings business. Gross margin, which is a reflection of project mix and the quality of our execution increased by 13.4% and at September 30th, our consolidated contract backlog remains at a record high 4.4 billion, that's up 5.4% from the end of 2018 and represents approximately 11 months of work.

We've made very good progress on our organization reshaping initiatives and continue to focus on driving efficiency. We reduced administrative and marketing costs, and improved utilization compared to the first half of this year. Importantly, as demonstrated by the results delivered this quarter, our reshaping initiative has not impacted our ability to achieve organic growth, execute projects or build backlog.

In fact, we've won a number of major projects in the back half of this year and we're actively hiring in regions and businesses with strong organic growth. We're also on track to deliver annualized cost savings of approximately $40 million to $45 million or $0.26 to $0.29 per share, consistent with our estimate in Q2.

And with that, I'll hand it over to Theresa.

Executive
Theresa Jang

Thanks Gord. As we've done throughout this year, we presented Q3 2019 results both before and after the adoption of IFRS 16. And you will find a reconciliation of our Q3 '19 statements in our MD&A, in the appendix of the slide presentation and in the supplemental information posted to the investors section of our website.

Adjusted net income for the quarter increased 29.5% to $66.3 million and adjusted earnings per share increased 31.1% to $0.59 per share. This was largely due to net