Stantec Inc · TSX:STN
Stantec — Investor Presentation (August 2020)
38 slides from Stantec's investor presentation, August 2020
Slide 1: Investor Presentation August 2020
GROWTH PEOPLE INNOVATION Investor Presentation EXCELLENCE August 2020 Joint Venture with Snøhetta Temple University – Charles Library Philadelphia, Pennsylvania, USA Photo credit: Michael Grimm 1
Slide 2: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements Certain statements contained in this presentation constitute forward-looking information and statements within the meaning of applicable GROWTH securities law (collectively, "forward-looking statements"). Forward-looking statements in this present
Slide 3: Design & Engineering Services
Design & Engineering Services For everything from small local projects to iconic mega projects BUSINESS OPERATING UNITS (TTM Q2 2020 Net Revenue) GROWTH ENVIRONMENTAL ENERGY & INFRASTRUCTURE BUILDINGS WATER SERVICES RESOURCES $1,066M $828M $754M $570M $542M PEOPLE INNOVATION EXCELLENCE Stantec is a
Slide 4: Diversified Global Footprint – Local Presence
Diversified Global Footprint – Local Presence GROWTH Distribution of Net Revenue PEOPLE 29% INNOVATION 54% $3.8B TTM Q2 2020 17% EXCELLENCE United States Canada Global 4
Slide 5: Stantec at a glance
Stantec at a glance GROWTH 22,000 6.6% STN PEOPLE Employees Globally 10-Year Adjusted Diluted TSX & NYSE EPS CAGR(1) INNOVATION EXCELLENCE (2) 350 65 YEARS CDN $4.9B Locations Worldwide Of Uninterrupted Profitability Market Capitalization (1) TTM Q2 2020 5 (2) As of August 7, 2020
Slide 6: Infrastructure
Infrastructure GROWTH Q2 2020 YTD 2020 PEOPLE Organic net revenue growth (retraction) (1.7%) (0.2%) Net revenue growth (retraction) 0.4% 1.1% International Ave Pedestrian Realm INNOVATION Calgary, Alberta % of Net Revenue Net revenue by sector Net revenue by geography Q2 2020 YTD Q2 2020 YTD Q2 2020
Slide 7: Buildings
Buildings GROWTH Q2 2020 YTD 2020 PEOPLE Organic net revenue growth (retraction) (8.7%) (4.0%) Net revenue growth (retraction) (7.0%) 0.0% Google Midwest Headquarters Phase IV INNOVATION Chicago, IL, USA % of Net Revenue Net revenue by sector Net revenue by geography Q2 2020 YTD Q2 2020 YTD Q2 2020
Slide 8: Water
Water GROWTH Q2 2020 YTD 2020 PEOPLE Organic net revenue growth (retraction) 3.4% 4.5% Net revenue growth (retraction) 5.3% 5.4% Hyperion Advanced Water Purification Facility INNOVATION Del Mar, Playa del Rey, CA, USA % of Net Revenue Net revenue by sector Net revenue by geography Q2 2020 YTD Q2 202
Slide 9: Environmental Services
Environmental Services GROWTH Q2 2020 YTD 2020 PEOPLE Organic net revenue growth (retraction) (3.7%) 1.0% Net revenue growth (retraction) (1.6%) 2.2% Lower Powers Creek INNOVATION West Kelowna, British Columbia % of Net Revenue Net revenue by sector Net revenue by geography Q2 2020 YTD Q2 2020 YTD Q
Slide 10: Energy & Resources
Energy & Resources GROWTH Q2 2020 YTD 2020 PEOPLE Organic net revenue growth (retraction) 2.0% 6.2% Net revenue growth (retraction) 2.8% 6.3% Dokie Wind Energy Project INNOVATION British Columbia % of Net Revenue Net revenue by sector Net revenue by geography Q2 2020 YTD Q2 2020 YTD Q2 2020 YTD EXCE
Slide 11: 2020 Outlook
GROWTH PEOPLE INNOVATION 2020 Outlook EXCELLENCE Bridge Replacement Design for a Structure on Sturgeon Road over Sturgeon Creek Winnipeg, Manitoba, Canada 11
Slide 12: Key Drivers by Business Operating Unit
Key Drivers by Business Operating Unit COVID-19 % of Net Business Long-term Revenue Key Drivers GROWTH Operating Unit Impact (Q2 2020 YTD) ▲ Multi-year frameworks for water utilities in UK and AUS; acceleration of UK AMP contract awards Less Water 21% ▲ Likely to benefit if governments implement sti
Slide 13: 2020 Net revenue outlook
2020 Net revenue outlook % of Net Geographic Revenue Outlook Region (YTD) • Nominal revenue contraction in Q3 20 relative to Q2 20 is expected across all businesses 55% except Water, with a slightly more pronounced decline in Q4 20 due to the seasonal slowdown • Expect continuing benefit of US/Canad
Slide 14: 2020 Outlook
2020 Outlook Net Revenue and Adjusted Earnings • 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 2020 OUTLOOK Leverage • Net debt to adjusted EBITDA expected t
Slide 15: ESG leadership that drives value
ESG leadership that drives value GROWTH PEOPLE INNOVATION EXCELLENCE 15 Ma'Amir & North Refinery Industrial Area Sewage Treatment Plant
Slide 16: Stantec's ESG framework
Stantec’s ESG framework Stantec is a signatory to the UN Global Compact and GROWTH has adopted the UN’s sustainable development goals (SDGs) PEOPLE Member of the UN Global Compact CFO Taskforce for the SDGs INNOVATION our actions Impact through EXCELLENCE our project work In addition to UN SDGs, Sta
Slide 17: Environmental leadership
Environmental leadership In 2019 we achieved a 39% reduction in scope 1 and 2 emissions per employee from our 2013 baseline – We Stewardship and innovation that drives value expect to surpass our 2028 Stantec’s recognized leadership in sustainable design helps win projects reduction target of 40% GR
Slide 18: Social leadership
Social leadership Stantec’s SaferTogether™ culture encourages safe choices so our people return home safely each Embracing and engaging diverse groups day. Stantec’s safety Improves the performance of our business and our ability to support clients. STN in metrics continue to improve GROWTH included
Slide 19: Strong governance
Strong governance 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 A diverse board and values-based leadership GROWTH A board dominated by independent directors from exceptional backgrounds and
Slide 20: Our Strategic Plan
Our Strategic Plan (Launched December 3, 2019) GROWTH PEOPLE INNOVATION EXCELLENCE SEVA résidences – foot bridge and marsh development 20 Candiac, Québec
Slide 21: Our vision
Our vision To be a top 10 global design firm that maximizes long-term, sustainable value GROWTH PEOPLE Pure play Strong alignment Disciplined capital Earnings growth design focus with shareholders allocation INNOVATION EXCELLENCE Peace River Regional Reservoir 21 Bradenton/DeSoto County, Florida, Un
Slide 22: Our opportunity
Our opportunity Key Market Trends Climate change, Urbanization, Geopolitics and breakthrough technology GROWTH STRATEGIC GROWTH OPPORTUNITIES US$24T PEOPLE TOTAL SPEND IN THE NEXT DECADE INNOVATION US$2T ADDRESSABLE ENGINEERING AND EXCELLENCE DESIGN SPEND COASTAL RESILIENCE ECOSYSTEM SMART CITIES AN
Slide 23: Our strategy
Our strategy To grow and diversify sustainably for the benefit of GROWTH our clients, employees and shareholders. PEOPLE INNOVATION We will do this through Strong execution, efficient operations, and disciplined capital allocation while delivering a great client experience. EXCELLENCE We will measur
Slide 24: Our capital allocation philosophy
Our capital allocation philosophy Focused on achieving the best risk adjusted returns GROWTH Operating cash flow Our core PEOPLE Maintaining a strong commitments Sustaining CapEx balance sheet Base dividend INNOVATION Excess Cash Flow Competing capital Share buyback Growth for the best risk EXCELLEN
Slide 25: Our Targets
Our Targets GROWTH PEOPLE INNOVATION Ruwais Marina District Rumais, Abu Dhabi, UAE EXCELLENCE Net revenue Adjusted Adjusted Return on EBITDA margin earnings per share invested capital >10% 16-17% >11% >10% CAGR Of net revenue CAGR 25
Slide 26: Concluding Remarks
GROWTH PEOPLE INNOVATION Concluding Remarks EXCELLENCE Fremont Water Pollution Control Center Expansion Fremont, OH, USA 26
Slide 27: Continuing to execute our strategy
Continuing to execute our strategy People • 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 2020 OUTLOOK Excellence • Continued focus on pr
Slide 28: Q2 2020
GROWTH PEOPLE INNOVATION EXCELLENCE Q2 2020 Lyu-Chuan - Shin Sei Green Waterway Taichung City, Taiwan 28
Slide 29: Solid Q2 results
Solid Q2 results 4% Growth in Q2 Adjusted Diluted EPS $4.7 B Q2 2020 gross revenue backlog United States Canada Global Long-term strategy of delivering value through diversified business model 12 Months of work 29
Slide 30: Solid net revenue generation in Q2
Solid net revenue generation in Q2 Q2 Net revenue stable year-over-year at: $951M Q2 2020 UNITED STATES CANADA GLOBAL 600 Q2 20 Q2 19 2.1% organic retraction 500 ($ millions) 400 300 200 100 0 Organic growth (retraction) 2.3% (6.8)% (7.4)% Q2 net revenue $532M $261M $158M 30
Slide 31: Business line diversity bolsters Stantec's resiliency
Business line diversity bolsters Stantec’s resiliency Q2 2020 INFRASTRUCTURE BUILDINGS WATER ENVIRONMENTAL ENERGY & 300 SERVICES RESOURCES Q2 20 Q2 19 200 ($ millions) 100 0 Organic growth (retraction) (1.7)% (8.7)% 3.4% (3.7)% 2.0% Q2 net revenue $272M $202M $201M $141M $135M 31
Slide 32: United States
United States 2.3% organic growth in Q2 • Driven by: • Water, Mining, and Power with the commencement of several large projects and continuation of existing programs • New federal Environmental Services Q2 2020 projects that more than offset pandemic-related slowdowns Martin County, Florida Substati
Slide 33: Canada
Canada 6.8% organic retraction in Q2 • Driven by: • Slowed economic growth amplified by the COVID-19 pandemic • Buildings and Community Development particularly affected • Environmental Services impacted by Q2 2020 project slowdowns in field work University of Manitoba Museum Phase II Winnipeg, MB,
Slide 34: Global
Global 7.4% organic retraction in Q2 • Driven by: • Project slowdowns from COVID-19 • Most pronounced in Buildings and European Environmental Services • Pandemic-related mine closures in Latin America Q2 2020 • Partially offset by: Center Parcs, University LongfordMuseum of Manitoba Forest Phase II
Slide 35: Q2 2020 results
Q2 2020 results Net revenue & organic growth (retraction) ($ millions, %) 7.4% 5.3% 4.2% 2.3% (2.1)% Q2 20 Q2 19 Change % Year- (In millions of Canadian dollars, % of Net % of Net over-year except per share amounts and percentages) $ Revenue $ Revenue change Net revenue 951.1 100.0 953.6 100.0 (0.3)
Slide 36: Balance sheet strength
Balance sheet strength Net debt to adjusted EBITDA(1) (TTM) Net debt to adjusted EBITDA(1) 2 1.5 1.0x at June 30, 2020 1 0.5 Target range 1.0 - 2.0x Q2 2020 0 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Days sales outstanding 95 Days sales outstanding 90 85 82 days at June 30, 2020 80 Target 75 90 days 70 Q2 19 Q
Slide 37: Liquidity and capital allocation
Liquidity and capital allocation Free cash flow(1) ($ millions) (Comparisons to Q2 2019) • 83% improvement in free cash flow (1) $204 $210 $115 $94 • >50% decrease in capital expenditures ($85) • >$330 million in undrawn credit capacity Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q2 2020 Cash flow from continuing
Slide 38: Thank You!
38 EXCELLENCE INNOVATION PEOPLE GROWTH Thank You!