Slide 1: Q3 2020 Earnings Presentation
Q3 2020 Q3 2020 Earnings Presentation November 5, 2020 Joint Venture with Snøhetta Temple University – Charles Library Philadelphia, Pennsylvania, USA Photo credit: Michael Grimm 1
Slide 2: Cautionary Statement
Cautionary Statement This presentation contains non-IFRS measures and forward-looking statements, including a discussion of our business targets, expectations, and outlook. We caution readers not to place undue reliance on our forward-looking statements since a number of factors could cause actual Q
Slide 3: Agenda
Agenda Gord Johnston Opening Remarks Q3 Operational Performance Theresa Jang Q3 2020 Financial Performance Q3 2020 2020 Outlook 2021 Targets Gord Johnston Concluding Remarks 3
Slide 4: Continued solid performance, committed to our strategy
Continued solid performance Committed to our strategy Strong Q3 results delivered through focused execution • 5.1% increase in adjusted diluted EPS • Net revenue retraction held at <5% due to diverse business model, strong client relationships, committed employees • Tight rein on discretionary spend
Slide 5: Stable net revenue generation
Stable net revenue generation Q3 net revenue: $916.5M 3.8% decrease from Q3 2019 Q3 2020 Net revenue ($ millions) UNITED STATES CANADA GLOBAL 4% CAGR Organic retraction (5.4)% (5.3)% (1.7)% 5 Q3 net revenue $479M $270M $167M
Slide 6: Business line diversity contributes to resiliency
Business line diversity contributes to resiliency Q3 2020 ENVIRONMENTAL ENERGY & INFRASTRUCTURE BUILDINGS WATER SERVICES RESOURCES Organic growth (retraction) (10.1)% (10.7)% 7.9% (3.5)% (2.9)% 6 Q3 net revenue $253M $189M $202M $146M $127M
Slide 7: United States
United States Strengths • Continued growth in Water and strong performance in Environmental Services Challenges • Pandemic-related slowdowns in Buildings • Wind down of large rail-transit projects Q3 2020 combined with slow ramp up of new Martin County, Florida Substation transportation projects Lak
Slide 8: Canada
Canada Strengths • Energy & Resources – midstream projects • Environmental Services – consistent strong performance • Transportation - several large light-rail transit projects in Edmonton, Montreal, and the greater Toronto area Q3 2020 Challenges Fortis Alberta 64L Project Canmore, Alberta, Canada
Slide 9: Global
Global Strengths • UK and Australian Water businesses • New Zealand transportation projects • Progressive recovery in core markets in our UK Infrastructure business Challenges Q3 2020 • COVID-19 disruption in UK and Australia Buildings and European Environmental Green Park Biodiversity Reading, Unit
Slide 10: Steady, growing backlog
Steady, growing backlog Book to burn > 1 across all business operating units 12 Months of work 12.7% growth since Q4 2019 Q3 2020 $4.8 B gross revenue backlog Organic growth in backlog 10.6% since December 31, 2019 3.2% since June 30, 2020 10
Slide 11: Q3 2020 Financial Performance
Q3 2020 Q3 2020 Financial Performance Pont Samuel-De Champlain / Samuel-De Champlain Bridge Joint Venture / Association / Collaboration: Le consortium Stantec et Ramboll Architect of Record: Arup Canada / Dissing+Weitling / Provencher Roy.Stewart Montreal, QC, Canada 11
Slide 12: Q3 2020 results
Q3 2020 results Q3 2020 Q3 2019 Change 52.3% % Year- Gross margin (In millions of Canadian dollars, over-year 52.0% 53.0% 54.0% 55.0% (% of net revenue) except per share amounts and percentages) $ $ change Net revenue 916.5 952.6 (3.8) Gross margin 479.1 516.1 (7.2) 35.4% Admin & marketing expenses
Slide 13: Balance sheet strength
Balance sheet strength Net debt to adjusted EBITDA(1) 0.8x at Sep 30, 2020 Target range 1.0 - 2.0x Q3 2020 Days sales outstanding 82 days at Sep 30, 2020 Target 90 days (1) Net debt to adjusted EBITDA and days sales outstanding are non-IFRS measures 13 (discussed in the Definitions section of Stante
Slide 14: Liquidity and capital allocation
Liquidity and capital allocation Quarterly and TTM Free cash flow(1) ($ millions) (Comparisons to Q3 2019) • 31% increase in free cash flow (1) • 38% decrease in capital expenditures • $300 million bond offering closed on October 8, 2020 Q3 2020 • 7-year term bearing interest at 2.048% per annum Cap
Slide 15: 2020 Outlook
Q3 2020 2020 Outlook Zero Harm Discharge Program Shanghai, China 15
Slide 16: 2020 Net revenue outlook
2020 Net revenue outlook Geographic Region Key Drivers • Q3 2020 net revenue retracted slightly more than anticipated compared to Q2 2020 • Further decline expected in Q4 2020 as project slowdowns are combined with the typical downturn in activity related to the onset of colder weather and seasonal
Slide 17: 2020 Outlook
2020 Outlook Net Revenue and Adjusted Earnings ◦ Full-year 2020 net revenue expected to be comparable to, although slightly below, 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 Leverage 2020 OUTLOOK ◦ Net debt to
Slide 18: 2021 Targets
2021 TARGETS 2021 Targets Sage Grouse Survey Elko, Nevada, USA 18
Slide 19: 2021 Net revenue outlook
2021 Net revenue outlook Geographic Region Key Drivers • Anticipate muted net revenue growth in the US. • Potential upside from a US stimulus bill has not been incorporated due to uncertainty around timing • Forecasting a weaker US to Canadian dollar exchange rate compared to 2020 United States 2021
Slide 20: 2021 Targets
2021 Targets 2021 Targets: YTD 2020 Performance: 15.6% Adjusted EBITDA(1) 12.0% 13.0% 14.0% 15.0% 16.0% 17.0% 18.0% (% of net revenue) 6.4% Adjusted net income(1) 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% (% of net revenue) 9.0% 2021 TARGETS Return on invested capital 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0%
Slide 21: Continuing to execute the strategy
Continuing to execute the strategy People ◦ The health and safety of our people continues to come first ◦ Strategies in place to protect the integrity of Stantec’s workforce Excellence ◦ Thoughtful and deliberate as we manage the whole business ◦ Focus on project execution and delivering exceptional
Slide 22: Q&A
Q3 2020 Q&A Bridgepoint Active Healthcare Redevelopment Joint Venture / Association / Collaboration: Stantec/KPMB Architect of Record: Stantec/KPMB Toronto, Ontario, Canada 22