Welcome to Stantec's second quarter 2026 results webcast and conference call. Leading the call today are Gord Johnston, President and Chief Executive Officer, and Vito Culmone, Executive Vice President and Chief Financial Officer. Stantec invites those dialing in to view the slide presentation, which is available in the investor section at stantec.com. Today's call is also webcast. Please be advised that if you have dialed in while also viewing the webcast, you should mute your computer as there's a delay between the call and the webcast. All information provided during this conference call is subject to the forward-looking statement qualifications set out on slide two, detailed in Stantec's management's discussion and analysis and incorporated in full for the purposes of today's call. unless otherwise noted, dollar amounts discussed in today's call are expressed in Canadian dollars and are generally rounded. With that, I'll turn the call over to Mr. Gordon Johnston. Please go ahead, sir.

Good morning, everyone, and thank you for joining us today. Our second quarter financial results continue to showcase the strength of our business. Stantec's diversification across operating regions and across sectors has kept us on track to deliver on our financial targets for the year. In the second quarter, we grew our net revenue to $1.8 billion, up almost 12% compared to Q2 2025, driven by almost 4% organic and 7% acquisition growth. Organic growth was driven by double digit growth of approximately 13% in our global region. and our industry leading water business achieved close to 12% organic growth. Adjusted EBITDA increased over 17% and we achieved an adjusted EBITDA margin of 18.7%, a record for Q2 and this represents an increase of 90 basis points year over year. Adjusted EPS grew over 18% compared to Q2 2025. Looking at our results in each of our geographies, In the second quarter, U.S. net revenue increased almost 13%, driven by the acquisition and strong performance of Page. Underlying demand across our end markets remains very strong, supported by long-term investments in infrastructure, energy, transportation, water, and advanced manufacturing facilities. Our water business saw continued demand and work on large wastewater treatment projects. In energy and resources, work on a major hydropower dam project drove organic growth and our infrastructure business delivered growth through data center projects in our north central region and benefited from favorable recoveries on a large transportation project. While organic growth was flat in the quarter, driven by some delays and the slower ramp up on certain projects, we've already started to see positive signs of acceleration in Q3 and expect this trend to continue. throughout the back half of this year. In Canada, second quarter net revenue grew 2.4% organically. Double digit organic net revenue growth in our water business was driven by biosolids projects and continued momentum on wastewater projects. Robust net revenue growth was also achieved in both our buildings and environmental services businesses through public sector investment, primarily in our civic markets and an increase in environmental planning in the mining industry respectively. Our infrastructure business continued to experience a wind down of certain transit and roadway projects in accordance with anticipated project cycles. Lastly, our global business delivered over 18% net revenue growth in the second quarter, driven by almost 13% organic and over 2% acquisition growth, as well as positive foreign exchange impacts. Our industry-leading water business delivered over 20% organic growth this quarter through long-term framework agreements and public sector investments in water infrastructure across the UK, Australia, and New Zealand. The wrap-up of new projects in Chile and Peru drove strong organic growth in energy and resources as the growing need for energy transition solutions continues to drive demand in mining for copper. On a year-to-date basis, Our global operations also had modest growth in its infrastructure business, driven primarily by double digit organic growth in Germany due to momentum on a major public sector electrical transmission project and increased volume on transit and rail projects. I'll now turn the call over to Vito to review our second quarter financial results in more detail.

Thank you, Gordon. Good morning, everyone. Strong operational execution supported by sustained demand across our diversified multi-sector and multi-regional platform continues to deliver solid financial results. At the mid-year point of 2026, we are firmly on track to deliver against all of our financial guidance metrics. In the second quarter, we achieved gross revenue of $2.2 billion and net revenue of $1.8 billion, an 11.5% increase compared to Q2 of 2025. This growth was driven by 3.7% organic and 7.1% acquisition growth, which primarily reflects strong results from our global region and from the page acquisition, respectively. Project margins as a percentage of our net revenue increased 30 basis points to 54.5%. We achieved an adjusted EBITDA margin of 18.7% in the quarter, A 90 basis point increase compared to Q2 of 2025. On a trailing 12 month basis, our adjusted EBITDA margin is 18%, an increase of 80 basis points compared to the prior trailing 12 months. The growth in margins continues to be driven by a methodical and disciplined approach to all aspects of our business. It all starts with a continued focus of execution and servicing of our client needs. The work we do is of meaningful value across all of our sectors and regions, and our focus remains on enabling superior outcomes for our clients, all the while focusing on efficient management of our operations and the optimization of our discretionary spending. On the back of our increase in net revenue and the expansion of our margins, our adjusted EPS in the second quarter increased 18.4% to $1.61.

Turning to our cash flow liquidity and capital resources.

Following the financial integration of Page and Q1, our operating cash flows in Q2 returned to a more normalized cadence. And on a year-to-date basis, our cash flows from operations totaled $116 million. In terms of capital allocation, our strategy remains unchanged. We believe that continued discipline M&A remains our highest source of value creation for our shareholders measured over a reasonable period of time. The pipeline remains robust, notwithstanding certain short-term dislocation and valuation ranges between public and private entities. Given our proven track record of disciplined M&A, we expect the strategic expansion of our business to continue. And to that end, although perhaps on a smaller scale, we are happy to announce the acquisition of Niche. a 200 person engineering and environmental consultancy firm in Australia. Niche helps strengthen our environmental services business in the region and supports our ability to help clients advance critical infrastructure and develop projects while protecting and restoring natural environments. This transaction closed effective July 31st. Our continued strong operating cash flow and exemplary balance sheet offers us considerable flexibility in our capital allocation activities. And in Q2, we stepped into our NCIB and repurchased approximately 1.7 million common shares or one and a half percent of our outstanding shares for an aggregate purchase price of approximately $175 million. Now withstanding this cash outflow, our net debt to adjusted EBITDA ratio remained at 1.3 times within our internal target range of one to two times. and given our Q2 NCIB activity, it's prudent for us to have additional flexibility and we intend to seek TSX approval to expand the program beyond the existing 2% limit. And finally, DSO at the end of the second quarter was 75 days within our internal target. I'll now hand the call back to Gord to discuss our backlog, our recent project wins and our outlook for 2020. 26. Great, thanks, Vito.

At the end of Q2, our contract backlog reached a record of $9.2 billion, a 17.5% increase year over year, representing approximately 13 months of work. Year over year, our backlog has grown 7% organically. During the quarter, backlog grew in each of our regions. The most notable year over year growth coming from our global region, which delivered double digit growth of almost 25%. We also saw strong backlog growth in water, which delivered over 10% organic growth. Acquisitions completed in 2025 further contributed to backlog growth by almost 8%, primarily within our buildings business, which had over 40% growth. I'll now highlight a few projects Antec secured during the quarter. showcasing the breadth of opportunities we're capturing across diverse markets, project sizes, and levels of complexity. Our buildings team was selected to provide architecture, engineering, and integrated design services for Meta's $13 billion data center in Sturgeon County, Alberta. The project strengthens our data center capabilities while supporting the continued expansion of Alberta's critical digital infrastructure. Stantec's water team was selected to provide preliminary design and evaluation services for the Drake Water Reclamation Facility in Fort Collins, Colorado, a 23 million gallon per day wastewater treatment plant. The project will modernize critical headworks infrastructure, improving debris removal and treatment reliability while reducing impacts to downstream processes. Activity continues to ramp up in Australia for our buildings business. supported by increased investment in social infrastructure. During the quarter, the team was selected to provide engineering services for the Redcliffe Hospital redevelopment in Queensland, further strengthening our position in the growing healthcare infrastructure market. The team was also selected by the Western Australia Department of Housing and Works for a 10 year framework to provide engineering and building related consulting services for non-residential projects, including education, healthcare, Justice and other social infrastructure. As we look toward the remainder of the year, we continue to track toward 2026 financial targets. And with a continued solid progress to date, we are increasing and narrowing the range of adjusted EBITDA margin we expect to achieve. We continue to expect net revenue growth in the range of 8.5 to 11.5%, driven by strong acquisition growth from Page, and organic growth across our operating regions. Overall organic net revenue growth is now expected to be in the mid single digit range, driven by strong demand across all geographic reporting segments and business units. In the US, we expect organic net revenue growth to be in the mid single digit range. We expect activity to accelerate in the second half of the year, supported by the demand across all five of our business verticals. We are encouraged by the increased activity and movement we started to see with large environmental projects ramping up, increased demand related to water and energy and resources, as well as growing demand in key areas such as advanced manufacturing and data centers. In Canada, we also now expect to achieve mid single digit organic growth supported by public sector spending plans and continued demand, particularly around water and buildings. There's still a lot of momentum around defense and other nation building projects, which are still in the early stages. We expect these programs to contribute more fully in 2027 and beyond. Lastly, global is expected to achieve high single digit organic growth. The growth in global is being driven by high levels of activity in our water business under AMP8 and other framework agreements. Strong demand in energy and resources, particularly in Latin America, and positive demand fundamentals across other global business units. With our strong margins year to date and continued focus on operational excellence, we are increasing our outlook for adjusted EBITDA margin. We now expect to deliver 17.8% to 18.3% for the year. Finally, we're maintaining our adjusted EPS target for the year of 15 to 18% growth, reflecting our confidence in delivering strong bottom line results and long-term shareholder value. Before we open up the line for questions, I'd like to take a moment to acknowledge that this is my final earnings call as Stantec's President and CEO. As announced in June, I'll be retiring from the role effective October 1st and transitioning to Vice Chair of Stantec's Board of Directors. It's been an incredible privilege to lead this company for the last eight and a half years, and I'm very proud of what our teams have accomplished together. The underlying demand for our services is strong and our diversified, resilient, stable and multi-sector platform positions us well to capture opportunities across the markets that we serve. I'm especially excited to be passing the torch to Susan Reisbord. Susan has a deep understanding of our business, our clients, and our people. Having worked closely with her, I have all the confidence in her capabilities, experience and energy to lead Stantec into its next chapter. I'm looking forward to staying close to the company in my role as vice chair and supporting Susan as the team as they continue to execute on the opportunities ahead. Finally, I want to thank our employees, our clients and all of our analysts and shareholders for their support over the years. And with that, let me turn the call over to the operator for questions. Operator?

Certainly. Ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. And our first question for today comes from Shahabat Khan from RBC Capital Markets. Your question, please.

Great. Thanks, and good morning. And before I get into the questions, I just want to congratulate you, Gordon, on a great run here in your current seat, and all the best with the next chapter.

Thanks so much, Saba. It's been an incredible privilege to lead the team over the last eight and a half years, and I wouldn't have traded it for anything.

Great. Just maybe, I guess, starting with kind of the outlook for the back half of the year, on the U.S. segment, it looks like you're pointing to mid-single-digit organic growth. Just looking at the first half and call it low single digit for the first half implies about a high single digit organic for the back half of the year in the U.S. If you can maybe just detail out your sort of the building blocks and sort of confidence in that outlook on getting to that high single digit range over the next couple of quarters. Thanks.

Yeah, thanks, Salva, for the question. And so, you know, in the U.S. specifically, we see that this is not a demand issue. It's really more of a timing issue for us here in Q2. We had a A number of projects wrap up as per schedule and planned. And a number of projects that we've got awarded and got in backlog just were a bit slow getting out of the blocks and getting started. Now, subsequent to the quarter, we've seen some good positive momentum. In Q3, a number of these projects have kicked off and the field seasons are going and such. So in addition to that momentum, you know, as we look at the back half of the year, we're looking from a demand perspective. The sales funnel is strong, the soft backlog. both trending really, really well. And also, if you look at the organic backlog growth in the U.S., both year to date and year over year, both up in positive organic territory, further supporting that ramp up and that momentum as we enter the second half of the year and particularly into 2027. One other thing just to call out is the page acquisitions. and we've talked about in the prepared remarks and with others over the year, Page is a fantastic company and they're performing exceptionally well, driving strong acquisition growth. As per our normal processes, when a company joins us for a year, we report that growth as acquisition growth. But now in Q3, Page is flipping over to that'll be reported as organic growth. in Q3 and Q4 of the year. So these projects that we've got, the in the backlog ramping up, strong sales, strong backlog, good organic backlog growth there in the U.S. year to date and year over year, paid transitioning from acquisition into the organic side, that all kind of supports our thesis of that continued organic acceleration into the second half of the year and good momentum into 2027.

Great and then just on the on the margin side looks like about I'll call it 80 beats or so a few over the year even the margin improvement through the first half of the year. The guidance increase implies round numbers about 15 basis points. Maybe you can just walk us through the puts and takes on the assumptions the full year guide and maybe sort of you know the delta between the the higher amount realized versus a guide increase. Thanks.

Hi Sabit, it's Vito here. We're incredibly proud of the progress we've made with margin expansion. You heard that in my prepared remarks. That comes from really across all elements of our business. Our project margins continue to be strong. That's all about the right client, the right price, obviously, and exemplary project execution. The team always works towards that. When you're looking at our admin and marketing, obviously that's been declining as a percentage of our overall revenue. That reflects obviously improved utilization. And when you think about utilization, that's probably one of the pieces as we go into the back half and just maybe attaching myself to Gord's comments, we feel incredibly confident with the velocity of the business moving forward. That's what we're going to require and it is already requiring us Headcount and expansion of our workforce. So I think what you see in the back half margin expansion moderation, if you will, relative to our year to date performance is really just that timing of workforce and as we obviously look to lean into our what will be significant organic growth in the back half. But overall, the momentum around our margin improvement and there's probably a little bit of conservatism built into there, quite frankly. I think this is now, what is it, maybe the seventh quarter of year-over-year margin expansion and on a traveling 12 months, as you heard me say, 80 bps ahead. So this just enables continued investment in our business as well as we move forward and we're focused on ensuring we're making those internal investments moving forward as well.

Great. And then just the last one on my end, you know, I think the commentary around page sounds like it's trending well. Are you able to share maybe the organic growth or just the growth rate in that business on a year over basis, maybe through Q1 and Q2 of this year, as you think about how that can contribute to the overall stat tech numbers? Thanks, and I'll pass the line.

Yeah, Salve, it's hard for us to do that because the baseline business is, you know, probably not in accordance with our, how we convert to our IFRS accounting. But I would venture to say that it's, you know, it's robust. And as Gordon has alluded to, you know, we probably underreported by a smidgen our Q2 organic because of the way we do things. And that is, we shifted significant amount of our building workforce to the page-led opportunities that, as Gordon has noted, you know, will be reflected and organic going forward. So Q2, probably a little understated, frankly. We don't get into slicing and dicing those numbers too much, but organic growth in PAGE quite robust.

Thanks very much. Thank you. And our next question comes from the line of Frederick Bastien from Raymond James. Your question, please.

Good morning, guys. Good morning. How are you? How does it feel? How does it feel, Gordon?

You know, it's actually been a really interesting, you know, preparing for the quarter, preparing for the earnings call. So many things where this is the last time we'll do this. This is the last time we'll do this. But, you know, I'm just actually so thrilled to be staying on the board. You know, I love our company. I love our clients. I love our people and what we do. So being able to stay connected to the company through being on the board, I think for me is the best of both worlds.

All right. Great. Thanks, Gordon. We're excited to have you stick around a little longer and congrats on a great career. Now on to question. As Vito, you alluded to earlier, a good chunk of the margin expansion came from the project margins, which is nice to see not all coming from SG&A and cost optimization. How far can you get those margins going? I mean, it's They've been in the low 54% range for quite some time. Is there an opportunity for Stantec to take them even higher on a go-forward basis?

Obviously, we're centered really on continuing to provide outstanding outcomes for our customers. That really is the ethos of our organization. And along with that, obviously, is great project execution. The Right Risk Profile, great value for our work and being obviously transparent about that with our client base. We're in the middle of our three-year planning process right now, so we'll probably have a more robust, I'll say aligned response to that as we roll out the back half of the year here and as we get into our investor day in December. But I think bottom line margins, and it does all start with the project margins, and I love the fact that you start with that because at the end of the day, You know, that is the that is the spine that that drives the bottom line. And we're really, really confident about that. You know, with the macro demand being as strong as it is across our markets, you know, we really can be picky and choosy, quite frankly, in some of the clients that we're choosing and whatnot. So really confident about project margins going forward.

Thanks. My other questions around any activity we've seen We've seen some bids recently in the public sector realm. One privatization, one obviously didn't pan through as of yet. But how are you reconciling sort of the valuations you're probably still seeing in the private sector land, which are probably still elevated and the current Valuations here in the public sector and what might what that might bring in terms of opportunity for you to deploy capital. Thanks.

Yeah, you know, the the the acquisition environment is incredibly active right now. And, you know, you made some reference to like a number of the, you know, the typical transactions that we would see in our space where, you know, publics are bringing some private firms on. There is still a bit of a dislocation in those where they The the those public markets who are looking to sell are still, you know, a little bit elevated over where we are in the public markets, but we're still in the midst of any number of conversations at different levels. And we have been for some time. And actually, that'll be one of the one of the things that I'll continue to work closely with Susan and the team. You know, as we're halfway through some of these M&A conversations, we want to just all stay stay involved in a supportive role, just from a continuity perspective. but in addition to that, I think you make reference to that we've seen some big moves on the chessboard that people have been, some that are public and others that I think people are just kind of thinking about in the back and so this is a very attractive industry and do I think further consolidation is likely? I think perhaps it will in the next year or so. So Stantec is, we're very alive to all these things and we just remain focused on doing what's best for Stantec and our shareholders in the long run.

Thank you very much.

Thanks, Frederick.

Thank you, and our next question comes from the line of Yuri Link from Canaccord Genuity. Your question, please.

Hey, good morning, guys. Thanks for taking my question, and congrats to both Gordon and Susan. I just wanted to turn back to the US for a minute, Gord. I mean, I get that you're seeing an acceleration in some of those delayed projects, but was there an overriding theme as to the original slowdown that you saw in the US and any comment on how that might have translated into Backlog, organic backlog growth was also, you know, two and a half percent lower than what we've seen. So what's going on in the quarter there?

Yeah, so, you know, again, just to read it, I think a lot of it was just a timing issue. You know, when we talk about some of the projects, they were a little bit slower to get going out of the gate. They're in Q2, a little bit in all of the different groups. For example, in our environmental services group, we had a a large program with the Navy that was a little bit slower to get moving. It's moving now. We had another really significant project with a large electrical utility in the US West that got going and so we're seeing again that that's moving in our infrastructure group that was a little slower than in Q2 than we would have liked. Large public transit project in the US South was a little bit slow to get moving and we were actually working on a a very very significant proposal in Q2 as well so you know a number of those things just took a little bit longer to get going but you know I mentioned that big that significant proposal that we worked on an infrastructure you know that would have a very positive impact on backlog with that one came through so I think it's just one of those quarters that the stars aligned maybe not in the way that you would have wanted them to but we don't Longer term, we really don't see it having any negative impact on the business, nor do we believe it should be reflective on how we'll perform in the second half of the year.

Should we expect the organic growth recovery in the U.S. to build throughout the back half of the year, especially considering you've got a pretty easy comparable in the fourth quarter?

Yeah, I think that's right. I think our forecast is for some good organic growth here in Q3 and further strengthening into Q4 and really then entering 2027 with good and strong momentum.

Okay. Last one for me, just a clarification on the G&A expense. Just wondering if, given the share price movement in the quarter, if there was any positive impact from LTIP in the quarter?

Very minor. We hedge most of our long-term incentive programs, so essentially there's an offset between any valuation between our hedging program and then obviously the mark-to-market on our RRG. So very minor small benefit. Okay, I'll turn it over. Thanks.

Thank you. And our next question comes from the line of Michael Tuffone from TD Cowan. Your question, please.

Thank you. Good morning and congratulations, Gordon.

Yes, thanks so much. You know, it's interesting as I kind of reflect on what we've done over the last eight and a half years. I'm actually just so incredibly proud of what we've collectively done as a team that positioning Stantec for success going forward.

Absolutely. The first question I wanted to ask is you've had a lot of questions here on the call about the U.S. organic growth and the pickup you expect in the second half to get you to your full year mid single digit organic growth target. Can we talk a little bit about Canada? Because it's a similar situation there where half one organic growth has been a little bit slow. You're trending at the moment below your mid-single digit organic growth target for the year. So how do you think about the organic growth pickup in the back half in Canada and exactly what is driving that?

Yeah, no, thanks. Great question. And so, you know, we see in Canada, again, good organic backlog growth year to date and year over year. a lot of projects you know we talked about that that 13 billion dollar you know meta data center project that that we've got going on there's a a really significant program that we're running it's just kicking off for utility here in western Canada an enormous amount of opportunity up in in the in defense in the north and with some of these nation building projects so you know we see a lot of supports for us moving forward and in particular though in Canada our water and our buildings group. Backlogs are looking great and we see continued organic expansion there. So I think we're just fairly broad-based in Canada, supportive of growth into the second half of the year here.

I think you got it, Gord. Buildings and water we expect would be the biggest drivers of H2 increase in organic growth in Canada.

Okay, thanks for that. And then second question, Regarding the improved margins, obviously very, very strong performance. You called out a number of drivers. One of the things you mentioned is optimization of digital strategies. I'm just wondering if you can elaborate a little bit on what it is you had going on in the quarter from that perspective that benefited the margins and how we think about that also going forward.

Yeah, I think digitization obviously is at the core of our ongoing strategies throughout our organization. And when we think about some of the back office related opportunities for us, whether it's accounting, finance, accounts payable, that's always been a core component for us. When we're looking at bidding and proposals right now, we're really leaning into digitization, implementation of some artificial intelligence tools, So those are all core to what we're discussing. And we'll continue to be part of our basically ingrained in our, you know, in our three year strategy.

Right. Perfect. I will leave it there. Thank you.

Thank you. Thanks. Thank you. And our next question comes to the line of Chris Murray from ATP Cormac. Your question, please.

Yeah, thanks, folks. Good morning. And let me echo my congratulations like everyone else. I guess the first question, we talked a little bit about Canada and the US, but global also has been very, very strong. And in fact, you're moving it higher. Is there something in particular that's driving that? Is it maybe Europe coming back a little stronger than you had expected? But any additional color that you could give us, maybe breaking down Europe versus the New Zealand or Australia, just so we have a flavor of how this is all coming together would be great. Yeah, absolutely. So we're seeing pretty broad based strength in our global operations. You know, Australia has returned to organic growth. I don't have the number here, but I think kind of mid single digit ish organic growth in Australia. In the UK, very, very strong. You know, we're seeing certainly the growth in AMP8 extremely strong as we would have expected. We're running about 15% organic growth right now in the UK. You know, incredibly strong. And then another area for us, you know, Europe, absolutely. With our operations in Germany with Zetcon, we're running low 20s in terms of organic growth rates there. But in terms of just raw numbers, it's Latin America. And, you know, with the the demand for copper and the work that we're doing down there, we're seeing over 50 percent organic growth in our in our Latin American operations right now. you know, really strong sort of across our global operations. Okay, that's so thoughtful. Thank you. And I guess the next question, maybe Vito, I'm not sure if you want to, or do you want to chime in on this one, but just thinking about the NCIB, you talked about increasing it and maybe looking at it, but you know, your commentary around multiples in the private market versus public market, You know, we've got public market valuation that pretty much 20 year lows. Is there any thought about doing a larger buyback? It almost makes sense if the privates are not really where you need them to be. Any thoughts around maybe doing a substantial or short bid, maybe taking your leverage into the middle of your range and sort of waiting out whatever this valuation gap is for now?

Chris, as you heard me say in my prepared remarks, at the core of what we believe is long-term value creation is continued emanating expansion of our portfolio and our regions. And as Gord has already noted, we're seeing some really good opportunities starting to surface, and I expect us to be more active in that portfolio. We just announced niche, as you saw. That's a relatively small but important one for us. and my prediction for the next 12 months would be more M&A relative to the last 12 months where obviously Page would have been our most significant acquisition. So we're feeling good about how that evolves notwithstanding what we're describing as obviously pricing dislocation and we'll continue to be very disciplined in that. I think SID is one step further from where we currently are. We've stepped into NCIB. We are going to the regulator now and essentially expanding our program from 2% to 5%. And so I just love that flexibility of going from 2% to 5%. That's another meaningful step. It doesn't mean we're going to execute all the way to 5%, but continuing to have the flexibility with respect to obviously where our valuation sits, which as you noted is Thank you. And our next question comes from the line of Devin Dodge from BMO Capital Markets. Your question, please.

Yeah, thanks. Good morning. Look, before I get started, Gord, just congrats on the well-earned semi-retirement. And Susan, if she's there in the background, just best of luck with the new role.

Fabulous. Thanks so much.

Look, I was going to come back to Chris's question on global. Obviously, order intake was really, really strong again there in Q2. Has the duration of that backlog changed much over the last three quarters, or will you need to be expanding that workforce to convert that backlog into revenue?

We are actively expanding the workforce globally, particularly those regions that we discussed there, Latin America, Germany, the UK, hiring aggressively, and we have been for the last 18 months or so. and also one thing to call out too is that while you've seen that incredible backlog growth there, those AMP programs as an example, if we get a five or a six or seven year AMP program that has a not to exceed number of some very large number, that does not go into our backlog. It only goes into our backlog when we actually get a specifically assigned change order. So the contract opportunities there with AMP, and that's the same way we do it everywhere, You are much larger than even what you've seen there. But yeah, absolutely to your point. We have been for the last year, 18 months, taking additional real estate in the UK, hiring people aggressively. We've been ramping up the hiring in our global delivery center in India. I think we've just hit roughly 2,000 people, which was our goal for the end of the year. So we're a little bit ahead of schedule, taking more space there, looking to expand to other cities. You know, hiring is very much top of mind for us in order to process the backlog.

Yeah. I'll add, Devin, you know, this is a bit of an inflection point for our global business. I think we're into an environment here of high single digits for several quarters to come.

All right. Excellent. Thanks for that. Okay. And then maybe a question probably for Vito here, just on working capital. Look, the first half of the year is typically a period of investment, but it seemed a little bit more pronounced in 2026 than in the past. Just Can you provide some color on the drivers behind that and how we should be thinking about working capital in the second half?

Yeah, you're absolutely right, Devin. Obviously, where our free cash flow has been on a year-to-date basis relative to where it was last year is lower. Nothing from an operational concern from my perspective. to be concerned about. We're very, very focused on working capital management. That starts with obviously DSOs. And you see DSOs at 75, which is within our guidance, but it's at the higher end of our internal metrics sort of thing. So team will be totally focused on bringing that in. As you say, there is normal seasonality. Back half is considerably obviously higher for us. We're coming out of what we You heard me reference last call with respect to the page integration. So I'm overall pleased with the velocity and I expect it to dovetail nicely into what we would otherwise normally expect here as we move into the back half.

Okay, great. Thanks for that, Vito. I'll turn it over.

Thanks, Devin. Thanks, Devin. Thank you. And our next question comes from the line of Krista Friesen from CIBC. Your question, please.

Hi, thanks for taking my question and congrats, Gord, on a great tenure at Stantec and look forward to having you around a little bit longer here.

Yeah, thanks so much.

Maybe just one from me following up on the M&A questions. Can you speak to if your priorities have shifted at all just in terms of M&A targets Thank you. Yeah, no, great, great question.

But no, we're holding our consistency, holding our discipline as to where we think there are great opportunities longer term, either geographically or in certain lines of business. So, yeah, the current environment hasn't changed our our strategy at all really just to continue to do the right acquisitions at the right time to continue to build the strength of Stantec for the long term.

Thank you. That's great color. I'll jump back in the queue.

Thank you. Thank you. And our next question comes from the line up, Maxim Sychev from NBCCM. Your question please.

Yes, hi, good morning. And Gordon, obviously, congrats on all the achievements and wonderful career and welcome to Susan.

Yeah, thanks so much.

The first question I had was, I mean, maybe it's more sort of a philosophical approach to efficiency versus kind of organic growth. I think we saw that marketing spend was pretty controlled in Q2 and obviously by seeing somewhat slower growth in the U.S., Is there any correlation in relation to that or how, I guess, should we think about this on a prospective basis about, again, the tension of kind of getting work versus being very efficient from a cost perspective? Thank you.

That's a great question, Max, and thank you for that. And, you know, one point to make is it's particularly impressive when you think about the margin expansion that we've had in the quarter and year to date. In the face of the lower organic is typically when you've got softer organic, you know, that typically puts pressure on your margins perspective, you know, with respect to obviously getting the scale from your, your back office. So again, kudos to the team. And I think that bodes well, in respect to philosophy, I would say You know, no change in philosophy. You know, it is all about the right growth, of course. I mean, this goes back to a bit of the project margin question that was asked earlier a little bit. And we need to obviously continue to be thoughtful of, you know, our client base and projects and whatnot. So the focus 100% is on growth. And of course, that's the right growth. as we move forward. So no change in philosophy. We'll just continue to shine the light, obviously, as we, I'll say, x-ray our business moving forward.

Okay, that's great, Carla. Thank you so much. And then one quick question I also had just in terms of any initial thoughts in relation to kind of surface transportation, spending buckets there, and how that could potentially influence 2027. Thank you for that.

Yeah, great. And so, you know, as we think about IIJA, you know, we've been seeing this end at the end of September coming for several years now. And, you know, we see a real concerted effort to try and get those funds encumbered prior to the end of September. And, you know, while data is a little bit obscure right now, we think that about 80% of it has been encumbered. It's kind of the industry thought on that. So, you know, working hard to get all that encumbered and not lose the IIJA funding. But In terms of the Surface Transportation Act and the reauthorization, you know, the House has put forward their bill, which about was $581 billion. And so the Senate now, we're waiting for their proposal, and it's anticipated now that we're not going to get it until after Labor Day. Kind of all indications of it will be similar in size to the one put forward by the House in that $500 to $600 billion range. But the kind of the thought is that while those two things will be forward, It's likely not to move forward until after the midterms. So probably we'll get that, my thought and our thought is that it'll be reauthorized and we'll see that coming forward early into the new year. Everyone is kind of anticipated that that's going to be the schedule here based on where we're at. So I don't see it really being a negative impact going into next year because everyone sort of has made plans for it, got their proposals out now when they can and such. So no looking forward to another strong year next year.

Excellent. Thank you so much.

Thanks, Max.

Thank you. And our next question comes from the line of Ian Gillis from Stifel. Your question, please.

Morning, everyone, and congrats, Gordon. I look forward to catching up in Calgary at some point, hopefully in the near term.

Look forward to it.

With respect to the U.S., can you maybe just help us reconcile the U.S. growth accelerating in the back half of the year In conjunction with midterm elections, which can often cause what I would call dislocations or gyrations or slowdowns. That's a bit of a challenging one right now.

Yeah, absolutely. Anytime there's a change, it can introduce a little bit of uncertainty. But I think based on what we've been talking about with the The backlog that we've got with the soft backlog and the that we see coming with the projects that have started, you know, we actually feel good about our plans. Again, Paige kind of converting from acquisition to organic. You know, as we as we talk to all of our business leaders and others in the industry, as we look at the, you know, we see the contribution from just mathematically from Paige. I think, you know, we feel good about those numbers in the in the second half of the year.

Our buildings and environmental service business, they enter the second half of the year with significant momentum and driven by both the growing portfolio of recently awarded projects that are expected to ramp in Q3, Q4. So I think most of those would be insulated from midterm type activity.

Okay. I'm going to try this one. Do you anticipate any of the growth issues that persisted in the first half of the year will leak into the 28 to 2030 business plan that's due in December?

The 2027 to 2029 plan? Yeah, sorry, excuse me. Yeah, yeah, yeah. You know, let us continue our work, obviously. I think the more we make our way through our planning cycle, and ironically, the way we make our way through our 2026, it actually just gives us continued confidence that the macro drivers and our positioning serves up really well for the next three-year period. But, you know, let's let the process roll out, obviously. Let's let Susan get in the seat and present her perspectives there. as we roll forward. But we're feeling good about the industry and our position in it.

Understood. I appreciate the detail. And once again, congrats, Gordon. Cheers.

Great. Thank you. Thank you. And our next question comes from the line of Jonathan Goldman from Scotiabank. Your question, please.

Hey, good morning, team. Thanks for taking my questions. Most of them have been asked already, but maybe, Gordon, just one for you philosophically. How are you thinking about the pace of consolidation in the ENC space? Maybe you can just update us on how fragmented it is today. And do you think consolidation could accelerate just given the dynamics we've seen recently on valuations and kind of the disconnect there?

Yeah, you know, just as we look at it philosophically, as you say, our market is still really fragmented. You know, even the largest firm in the U.S., I think, you know, the estimate is in that 6, 7, 8% of market penetration. So lots of opportunities for continued consolidation. We've all seen the rumors that have been going around the industry. I wouldn't be surprised that we'll see some additional consolidation going forward either. It's certainly easier with the small to mid-sized ones, but will we see it with some of the bigger global players remains to be seen. I certainly know that people are thinking about it now, what it could look like, what that value would be to clients, employees, and shareholders. I guess time will tell.

Are valuations a bottleneck on the private side? You had given some commentary about things coming down to more reasonable levels, but is there enough spread still to make things value-accretive at this level?

Jonathan, I think that's, you know, on a case-by-case basis, that's a specific sort of situation. We wouldn't do anything that we think that over the longer term, obviously, and I'm confident that those exist as we move into the next 12 months.

Okay, maybe if I can squeeze one more in terms of deal financing. Do you have enough capacity in dry powder now with the balance sheet if you wanted to take it run at something maybe a little more sizable or if it's going to be something bigger, do you think possibly of, you know, going another route, maybe some sort of share exchange or equity?

You know, I take you just back to our capital allocation philosophy. We're an investment grade company. Obviously, we think that's important for us going forward. You look at our leverage at 1.3 times. We've got great relations. with obviously our rating agency. We've tested the limits of that expansion from a leverage perspective and are very, very pleased with that affords. So there's a substantial amount of dry powder and debt capacity on our balance sheet. And obviously, depending on the size of what you're talking about, you would need to blend that with equity if that situation arise. But that's a very hypothetical situation. And it's all about what's in the best interest over a reasonable period of time for, of course, our shareholders. But lots of dry powder on the balance sheet. Understood.

Thanks for taking my question. Thank you.

Thanks, Jonathan.

Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Gordon Johnston for any further remarks.

Very well. Thank you, Operator, and thanks to everyone for joining us this morning. Serving as Stantec's CEO as has been truly the highlight of my career. And I really appreciate and value all the support and the friendship and the good times and bad times that we've been traveling together all over the world with many over the years. So thank you truly for everything. And if you have any follow-up questions following today's call, please reach out to Jess Newkirk, our vice president of investor relations.

Thank you. Thank you ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.