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Investor PresentationAugust 2020
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Joint Venture with SnøhettaTemple University – Charles LibraryPhiladelphia, Pennsylvania, USAPhoto credit: Michael Grimm
Cautionary Note Regarding Forward-Looking Statements
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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
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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
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54%
29%
17%
Distribution of Net Revenue
United States Canada Global
$3.8BTTM Q2 2020
Stantec at a glanceE
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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
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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
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Google Midwest Headquarters Phase IVChicago, IL, USA
Global
Canada
United States
Science & TechnologyAirports & AviationEducationCivicHealthcareIndustrialCommercial
Net revenue by geographyQ2 2020 YTD
Net revenue by sectorQ2 2020 YTD
Q2 2020 YTD 2020
Organic net revenue growth (retraction) (8.7%) (4.0%)
Net revenue growth (retraction) (7.0%) 0.0%
22%
% of Net RevenueQ2 2020 YTD
Water
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*
Hyperion Advanced Water Purification FacilityDel Mar, Playa del Rey, CA, USA
Global
Canada
United States
Net revenue by geographyQ2 2020 YTD
Net revenue by sectorQ2 2020 YTD
Client Enterprise Systems
Water Treatement
Stormwater
Water Resources
Wastewater Treatment
Conveyance
Q2 2020 YTD 2020
Organic net revenue growth (retraction) 3.4% 4.5%
Net revenue growth (retraction) 5.3% 5.4%
21%
% of Net RevenueQ2 2020 YTD
Environmental Services
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Lower Powers CreekWest Kelowna, British Columbia
Global
Canada
United States
MiningCommunity DevelopmentTransportationPower & DamsBuildingsWaterOil & Gas
Net revenue by geographyQ2 2020 YTD
Net revenue by sectorQ2 2020 YTD
Q2 2020 YTD 2020
Organic net revenue growth (retraction) (3.7%) 1.0%
Net revenue growth (retraction) (1.6%) 2.2%
14%
% of Net RevenueQ2 2020 YTD
Energy & Resources
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Dokie Wind Energy ProjectBritish Columbia
Global
Canada
United States
WaterPower & Dams
Mining
Power
Oil & Gas
Net revenue by geographyQ2 2020 YTD
Net revenue by sectorQ2 2020 YTD
Q2 2020 YTD 2020
Organic net revenue growth (retraction) 2.0% 6.2%
Net revenue growth (retraction) 2.8% 6.3%
15%
% of Net RevenueQ2 2020 YTD
2020 Outlook
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Bridge Replacement Design for a Structure on Sturgeon Road over Sturgeon CreekWinnipeg, Manitoba, Canada
Key Drivers by Business Operating UnitE
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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
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13Full-year 2020 net revenue expected to be comparable to 2019
2020 Outlook2
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• 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
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Stantec’s ESG frameworkE
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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
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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
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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%
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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
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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)
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20SEVA résidences – foot bridge and marsh development Candiac, Québec
Our visionE
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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
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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
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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
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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
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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
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Continuing to execute our strategy2
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• 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
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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
Net RevenueGross Revenue
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
Net RevenueGross Revenue
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!
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