Michael Tupholme

Michael Tupholme asked about the organic growth outlook for Stantec's Business Operating Units (BOUs) in 2026, specifically for environmental services, and how AI is influencing the company's M&A strategy.

Answer

EVP and CFO Vito Culmone projected organic growth across all BOUs in 2026, with water continuing its strong performance, infrastructure rebounding, and buildings showing strength. President and CEO Gord Johnston anticipated stronger organic growth in environmental services due to new projects and continued growth in energy and resources. He clarified that AI does not fundamentally alter their M&A strategy, as they focus on developing AI skills internally rather than acquiring AI firms, though targets with advanced digital capabilities are of interest.

Michael Tupholme from TD Cowen sought clarification on the 2026 organic growth outlook across Stantec's Business Operating Units (BOUs), specifically asking if performance would be more consistent or if high-growth areas would continue to dominate, with a particular focus on environmental services, and how AI is influencing Stantec's M&A strategy and target selection.

Answer

Gord Johnston, President and CEO, Stantec, and Vito Culmone, EVP and CFO, Stantec, stated that all BOUs are expected to show organic growth, with water continuing to lead. They anticipate stronger organic growth in environmental services in 2026 compared to 2025, driven by new projects. Regarding M&A, Gord Johnston clarified that AI doesn't change the core M&A strategy for verticals and geographies, as Stantec is developing AI skills internally rather than acquiring AI firms. Vito Culmone added that targets with advanced digital capabilities do garner attention.

Michael Tupholme asked for more details on the organic growth drivers in Stantec's water business in Canada and the U.S., beyond the U.K.'s AMP program, and sought an update on data center activity, including its current revenue percentage and expected evolution into 2026.

Answer

Gord Johnston, President and CEO, reported double-digit water growth in the U.S. (10%) and Canada (over 20%), driven by large public sector wastewater projects, water scarcity issues, flooding, PFAS regulation, and high-purity water demand for advanced manufacturing. He stated Stantec is working on over 100 data centers, representing 2-3% of net revenue, with expected growth to 3-5% but limited by the company's diversification strategy.

Michael Tupholme asked about the organic growth rates and drivers in Stantec's water business in Canada and the U.S., complementing the U.K.'s AMP program. He also sought an update on data center activity, its current revenue percentage, and expected evolution into 2026.

Answer

Gord Johnston, President and CEO, reported double-digit organic growth in U.S. water (10%) and over 20% in Canada, a trend continuing since early 2019. Drivers include large public sector wastewater and water supply projects, water scarcity/reuse, flooding/shoreline protection, PFAS regulation, and high-purity water needs for advanced manufacturing/reshoring. He stated Stantec is working on over 100 data centers/mission-critical facilities, representing 2-3% of net revenue, with expectations to grow to 4-5% while maintaining diversification.

Michael Tupholme sought clarity on whether the headwinds affecting U.S. growth have been resolved and asked about the company's confidence in its multi-year organic growth targets through 2026.

Answer

President and CEO Gord Johnston explained that the U.S. headwinds are 'diminishing' but not fully resolved. Both he and EVP and CFO Vito Culmone expressed strong confidence in achieving the multi-year growth targets, citing robust, long-term macro drivers like global infrastructure funding programs and increased defense spending.

Michael Tupholme asked about the impact of macro uncertainty on the M&A landscape, the drivers behind the strong turnaround in the Energy & Resources business, and the sustainability of the quarter's strong margin performance.

Answer

Executive Gordon Johnston stated that Stantec's long-term M&A view is unaffected by short-term uncertainty. He attributed the 8.3% organic growth in Energy & Resources to mining, energy transition, and grid projects. Executive Vito Culmone explained the 70 bps margin improvement resulted from solid project execution, lower administrative costs, and operational efficiencies, expressing pleasure with the strong start to the year.

Michael Tupholme from TD Cowen asked about the factors that could drive performance to the high or low end of the organic growth guidance, the expected cadence of growth in the Global region, and the quarterly run-rate for intangible amortization in 2025.

Answer

Executive Gordon Johnston stated the factors influencing the guidance range are consistent with the past, with the company's diversification model providing stability. Executive Vito Culmone suggested Global's growth would likely build through the year, being more back-half loaded as the AMP8 program ramps up. He offered to take the specific question on intangible amortization offline for a more defined range.

Michael Tupholme asked for more detail on the 2025 potash sales volume guidance, specifically what tariff-related assumptions were made to account for the noted uncertainty.

Answer

CEO Kenneth Seitz framed it as a question of timing and buyer behavior, before passing to CFO Mark Thompson. Thompson explained that the midpoint of their 13.6 to 14.4 million tonne guidance assumes a relatively limited impact from potential tariffs and no material supply chain disruptions. The upper end of the range assumes no impact at all. The lower end of the guidance is where the tariff risk is factored in, primarily reflecting potential timing-related impacts on demand in North America should tariffs be implemented.