EDMONTON, Alberta and NEW YORK, Aug. 04, 2021 (GLOBE NEWSWIRE) -- Stantec (TSX, NYSE:STN), a global leader in sustainable design and engineering, today reported its results for the three and six month periods ended June 30, 2021. Unless otherwise indicated, financial figures are expressed in Canadian dollars, and comparisons are to the prior periods ended June 30, 2020.
Stantec delivered another quarter of strong earnings, with the transition to revenue growth on a constant currency basis enhanced by solid project execution and operational performance. Based on the strength of its performance to date and confidence in the continued execution of its strategic plan, Stantec is raising earnings guidance for the year, with full year adjusted diluted earnings per share in comparison to 2020 now expected to achieve 4% to 7% growth compared to the previous guidance of low to mid-single digit (1% to 5%) growth.
"2021 continues to unfold largely as we expected with strong organic growth in Canada and Global this quarter offsetting a slower start to the US turnaround. We see clear evidence of building momentum in all our key markets, particularly in the US where we have achieved 6.4% organic backlog growth through the first half of this year. Beyond wins recorded in backlog, we have received award notifications for approximately $1.2 billion in gross revenue, more than half of which is in the US. While these notified awards can take months or longer to filter into our backlog, especially for large multi-year frameworks, their sheer magnitude gives us every reason to be confident in our outlook,” said Gord Johnston, President and CEO. "As our results continue to demonstrate, we are managing every aspect of our business to deliver organic revenue growth, increased earnings, and a strong balance sheet while continuing our disciplined pursuit of growth through acquisition."
Q2 2021 Highlights
Q2 2021 adjusted diluted earnings per share increased 19.2% to $0.62. Revenue generation continues to strengthen as the world begins to emerge from the pandemic. Increased earnings were achieved through strong project execution, disciplined discretionary spending, the ongoing execution of the 2023 Real Estate Strategy, lower interest expenses, and reduced taxes. Lower interest expenses resulted from improved working capital management and the issuance of lower interest Senior Notes in October 2020, while lower tax expense is attributed to the implementation of tax optimization strategies. Overall, margins have improved considerably on a quarter-over-quarter basis with a 1.1% increase in adjusted EBITDA margin to 16.1% and a 1.6% increase in adjusted net income margin to 7.7%.
The Canadian dollar has strengthened considerably relative to the US dollar, with the average exchange rate shifting from $1.39 to $1.22 on a quarter-over-quarter basis ($1.37 to $1.25 year to date). This has reduced Q2 net revenues by $60.9 million ($90.5 million year to date). Stantec further estimates that the impact to adjusted EBITDA, adjusted net income and adjusted diluted EPS was approximately $8.2 million, $4.0 million and $0.04, respectively (approximately $11.6 million, $5.5 million, and $0.05 year to date).
2021 Outlook - Earnings guidance increased
Stantec's earnings guidance for 2021 has increased based on financial performance to date and the outlook for the balance of this year. Adjusted EBITDA and adjusted net income margin ranges, as well as the adjusted ROIC target, have been revised upward. Stantec now expects full year adjusted diluted earnings per share to achieve 4% to 7% growth in comparison to 2020, where previous guidance was for low to mid-single digit growth (1% to 5%).
Select Updates to Stantec's Annual Targets for 2021 - Please refer to this quarter's MD&A for the full table
(In millions of Canadian dollars, unless otherwise stated) | Previously Published 2021 Annual Range | Revised 2021Annual Range | For the two quarters ended June 30, 2021 |
Targets | |||
Adjusted EBITDA as % of net revenue (note) | 14.5% to 16.0% | 15.0% to 16.0% | 15.4% |
Adjusted net income as % of net revenue (note) | At or above 6.5% | At or above 6.8% | 7.0% |
Adjusted diluted EPS growth | Low to mid single % | 4% to 7% | 12.0% |
Adjusted ROIC (note) | At or above 9.5% | At or above 10.0% | (note) |
Other expectations | |||
Gross margin as % of net revenue | 52% to 54% | no change | 53.1% |
Administrative and marketing expenses as % of net revenue | 37% to 39% | no change | 38.2% |
Effective tax rate (without discrete transactions) | 27% to 28% | 23.3% to 24.8% | 24.5% |
Earnings pattern | 40% in Q1 and Q4 | 45% in Q1 and Q4 | n/a |
60% in Q2 and Q3 | 55% in Q2 and Q3 | n/a | |
Days sales outstanding | 90 days |