EDMONTON, Alberta & NEW YORK–(BUSINESS WIRE)–Stantec today announced its financial results for the quarter ended
March 31, 2019. “Our solid first-quarter performance reflects our
continued focus on organic and acquisition growth,” said Stantec
president and chief executive officer Gord Johnston. “We are
particularly pleased with the strong organic growth achieved in our
global business, which demonstrates the value of our growing geographic
reach and augments the diversity of our business mix.”

Effective January 1, 2019, Stantec adopted IFRS 16 Leases using
the modified retrospective approach and did not restate comparative
information.

Q1 2019 Highlights

After adoption of IFRS 16

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• Adjusted net income of $50.3 million or $0.45 on a diluted per share
  basis, increases of 5.0% and 7.1%, respectively, compared to Q1 18.
• Net income of $44.9 million or $0.40 on a diluted per share basis,
  increases of 22.0% and 25.0%.
• Gross and net revenue of $1,151.5 million and $904.1 million,
  respectively, reflecting growth of 12.7% and 11.8%, with increases
  across all geographies.
• Organic net revenue growth of 2.5%, with growth in all geographies and
  business operating units, except Water, where growth was offset by the
  effect of a large recovery recognized in Q1 18.
• Acquisition net revenue growth of 6.6% compared to Q1 18,
  predominately from the recent global acquisitions of Peter Brett
  Associates and Wood & Grieve Engineers (WGE).
• Adjusted EBITDA of $127.1 million, representing 14.1% of net revenue.
• EBITDA of $132.2 million, representing 14.6% of net revenue.
• Contract backlog of $4.4 billion—a 5.6% increase from December 31,
  2018—representing 12 months of work.
• Days sales outstanding (DSO) of 104 days (90 days including deferred
  revenue), an increase of one day from December 31, 2018. Reducing DSO
  continues to be a key focus for the Company.
• Net debt to adjusted EBITDA of 2.0x—at the upper end of the Company’s
  internal guideline of 1.0x to 2.0x (post-IFRS 16 adoption) due to
  typically lower cash flows in Q1, funding the WGE acquisition,
  opportunistic share repurchases, and the impact of only one month’s
  EBITDA contribution from WGE.
• On May 9, 2019, the Board of Directors declared a dividend of $0.145
  per share, payable on July 15, 2019, to shareholders on record on June
  28, 2019.

Excluding adoption of IFRS 16:

• Adjusted net income and diluted earnings per share (EPS)—no
  significant impact.
• Net income and diluted EPS—no significant impact.
• Adjusted EBITDA of $91.6 million—a 2.3% increase from Q1 18,
  representing 10.1% of net revenue.
• EBITDA of $96.7 million—an 11.3% increase from Q1 18, representing
  10.7% of net revenue.
• Net debt to adjusted EBITDA of 2.67x.

Financial Summary

		Quarter Ended March 31
(In millions of Canadian dollars, except per share amounts)		2019 $		2018 $		Change Advertisement $
Gross revenue		1,151.5		1,021.3		130.2
Net revenue		904.1		808.8		95.3
EBITDA from continuing operations (1)		132.2		86.9		45.3
– Excluding IFRS 16 (1)		96.7		86.9		9.8
Net income from continuing operations		44.9		36.6		8.3
Net income from discontinued operations		–		0.2		(0.2)
Net income		44.9		36.8		8.1
Basic and diluted earnings per share (EPS) from continuing operations		0.40		0.32		0.08
Dividends declared per common share		0.1450		0.1375		0.0075
Continuing operations
Adjusted EBITDA (1)		127.1		89.5		37.6
– Excluding IFRS 16 (1)		91.6		89.5		2.1
Adjusted net income (1)		50.3		47.9		2.4
Adjusted EPS – basic and diluted (1)		0.45		0.42		0.03
(1) EBITDA, adjusted EBITDA, adjusted net income, and adjusted basic and diluted EPS are non-IFRS measures (discussed in the Definitions section of Stantec’s 2018 Annual Report and Q1 19 Management’s Discussion and Analysis).

Revised Annual Targets for 2019
The Company expects IFRS 16
will reduce 2019 net income by approximately $3.0 million and EPS by
$0.03 evenly over Q2 19 to Q4 19. Adoption of IFRS 16 resulted in
non-cash impacts to administrative and marketing expenses, depreciation
of leased assets, and net interest expense. As a result, the Company
updated its targets, previously provided in its 2018 Annual Report. The
Company revised its EBITDA and net income targets to adjusted EBITDA and
adjusted net income since it believes these measures better reflect its
underlying operations.

Measure		Previously Published 2019 Target *		Revised 2019 Annual Target   Advertisement		Q1 19 Results Compared to Revised 2019 Annual Target
Gross margin as % of net revenue		53% to 55%		No change		54.0%
Administrative and marketing expenses as % of net revenue		41% to 43%		37% to 39%		39.5%
EBITDA as % of net revenue (note)		11% to 13%		withdrawn
Adjusted EBITDA as % of net revenue (note)				15% to 17%		14.1%
Net income as % of net revenue		At or above 5.0%		withdrawn
Adjusted net income as % of net revenue (note)				At or above 6.0%		5.6%
A complete list of 2019 targets is presented in the Financial Targets section of Stantec’s Q1 2019 Management’s Discussion and Analysis and in the Investors section of stantec.com.
(1) EBITDA, adjusted EBITDA, and adjusted net income, are non-IFRS measures (discussed in the Definitions section of Stantec’s 2018 Annual Report and Q1 19 Management’s Discussion and Analysis).
* 2019 Target Range was previously published in Stantec’s 2018 Annual Report.

Q1 19 results are consistent with the Company’s expectations. Certain
measures are outside the targeted annual ranges due to the typical
slowdown in the first quarter related to winter weather conditions and
holiday schedules. This also occurs in the fourth quarter. The Company
is confident it will achieve its annual targets by the end of the fiscal
year.

Conference Call and Annual General Meeting of Shareholders

On Friday, May 10, 2019, at 7:00 AM MDT (9:00 AM EDT), Stantec’s first
quarter 2019 conference call and slideshow presentation will be
broadcast live and archived in their entirety in the Investors
section of stantec.com.
Those wishing to listen to the call can phone toll-free at
1-888-220-8451 (Canada and United States) or 1-647-484-0475
(international). Please provide confirmation code 3085729 when prompted.

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Stantec’s Annual General Meeting of Shareholders will be held on Friday,
May 10, 2019, at 10:30 AM MDT (12:30 PM EDT) at Stantec Tower, 400-10220
103 Avenue NW, Edmonton, Alberta, Canada.

Investor Day

Stantec’s Investor Day will be held on Wednesday, June 12, 2019, at the
Stantec Tower in Edmonton, Alberta. Gord Johnston, CEO, and Theresa
Jang, CFO, will share details on the Company’s strategy and outlook.
Leaders of the Company’s business and regional operating units will
provide additional insight into Stantec’s growth opportunities.

About Stantec

Communities are fundamental. Whether around the corner or across the
globe, they provide a foundation, a sense of place and of belonging.
That’s why at Stantec, we always design with community in mind.

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We care about the communities we serve—because they’re our
communities too. This allows us to assess what’s needed and connect our
expertise, to appreciate nuances and envision what’s never been
considered, to bring together diverse perspectives so we can collaborate
toward a shared success.

We’re designers, engineers, scientists, and project managers,
innovating together at the intersection of community, creativity, and
client relationships. Balancing these priorities results in projects
that advance the quality of life in communities across the globe.

Stantec trades on the TSX and the NYSE under the symbol STN. Visit us
at stantec.com or find us on social media.

Cautionary Statements

Stantec’s EBITDA, adjusted EBITDA, adjusted net income, adjusted
basic and diluted earnings per share, and days sales outstanding are
non-IFRS measures. For a definition and explanation of non-IFRS
measures, refer to the Critical Accounting Estimates, Developments, and
Measures section of the Company’s 2018 Annual Report or the Q1 2019
Management’s Discussion & Analysis.

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Certain statements contained in this news release constitute
forward-looking statements. Forward-looking statements in this news
release include, but are not limited to, statements relating to the
Company’s focus on reducing DSO, and updated guidance relating to
Stantec’s 2019 financial targets. Any such statements represent the
views of management only as of the date hereof and are presented for the
purpose of assisting the Company’s shareholders in understanding
Stantec’s operations, objectives, priorities, and anticipated financial
performance as at and for the periods ended on the dates presented and
may not be appropriate for other purposes. By their nature,
forward-looking statements require us to make assumptions and are
subject to inherent risks and uncertainties.

We caution readers of this news release not to place undue reliance
on our forward-looking statements since a number of factors could cause
actual future results to differ materially from the expectations
expressed in these forward-looking statements. These factors include,
but are not limited to, the risk of economic downturn, decreased
infrastructure spending levels, changing market conditions for Stantec’s
services, and the risk that Stantec fails to capitalize on its strategic
initiatives. Investors and the public should carefully consider these
factors, other uncertainties, and potential events, as well as the
inherent uncertainty of forward-looking statements, when relying on
these statements to make decisions with respect to our Company.

For more information about how other material risk factors could
affect our results, refer to the Risk Factors section and Cautionary
Note Regarding Forward-Looking Statements section in our 2018 Annual
Report. You may access our annual report online by visiting EDGAR on the
SEC website at sec.gov
or by visiting the CSA website at sedar.com
or Stantec’s website, stantec.com.
You may obtain a hard copy of the 2018 Annual Report free of charge from
our investor contact noted below.

Design with community in mind

Attached to this news release are Stantec’s consolidated statements
of financial position, consolidated statements of income, a summary of
impacts of IFRS 16, and reconciliation of non-IFRS measures.

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Consolidated Statements of Financial Position

(Unaudited)
(In millions of Canadian dollars)		March 31 2019 $		December 31 2018 $ Advertisement
ASSETS
Current
Cash and deposits		96.9		185.2
Trade and other receivables		825.0		878.1
Unbilled receivables		450.3		384.6
Contract assets		61.7		59.7
Income taxes recoverable		68.0		47.9
Prepaid expenses		53.0		56.8
Other assets		27.6		23.2
Total current assets		1,582.5		1,635.5
Non-current
Property and equipment		299.5		289.4
Lease assets		551.7		–
Goodwill		1,688.8		1,621.2
Intangible assets		276.0		247.7
Investments in joint ventures and associates		9.1		9.4
Net employee defined benefit asset		11.9		10.0
Deferred tax assets		23.9		21.2
Other assets		183.0		175.5
Total assets		4,626.4		4,009.9
LIABILITIES AND EQUITY
Current
Bank indebtedness		43.1		–
Trade and other payables		468.4		567.2
Lease liabilities		38.5		–
Deferred revenue		172.9		174.4
Income taxes payable		1.2		2.9
Long-term debt		64.6		48.5
Provisions		36.0		42.4
Other liabilities		6.5		23.2
Total current liabilities		831.2		858.6
Non-current
Lease liabilities		602.8		–
Income taxes payable		17.3		15.9
Long-term debt		1,042.0		885.2
Provisions		84.4		78.2
Net employee defined benefit liability		59.8		68.6
Deferred tax liabilities		77.1		54.3
Other liabilities		49.0		140.4
Total liabilities		2,763.6		2,101.2
Shareholders’ equity
Share capital		868.6		867.8
Contributed surplus		25.4		24.8
Retained earnings		837.1		851.2
Accumulated other comprehensive income		130.0		163.1
Total shareholders’ equity		1,861.1		1,906.9
Non-controlling interests		1.7		1.8
Total liabilities and equity		4,626.4		4,009.9

Consolidated Statements of Income

(Unaudited)
		For the quarter ended March 31
(In millions of Canadian dollars, except per share amounts)		2019 $		2018 Advertisement $
Continuing operations
Gross revenue		1,151.5		1,021.3
Less subconsultant and other direct expenses		247.4		212.5
Net revenue		904.1		808.8
Direct payroll costs		415.6		368.3
Gross margin		488.5		440.5
Administrative and marketing expenses		357.1		348.0
Depreciation of property and equipment		13.7		12.1
Depreciation of lease assets		27.4		–
Amortization of intangible assets		15.4		19.3
Net interest expense		17.2		5.3
Other net finance expense		1.3		1.6
Share of income from joint ventures and associates		–		(0.3)
Foreign exchange loss		2.9		2.1
Other (income) expense		(5.0)		2.2
Income before income taxes and discontinued operations		58.5		50.2
Income taxes
Current		(4.2)		13.7
Deferred		17.8		(0.1)
Total income taxes		13.6		13.6
Net income for the period from continuing operations		44.9		36.6
Discontinued operations
Net income from discontinued operations, net of tax		–		0.2
Net income for the period		44.9		36.8
Weighted average number of shares outstanding – basic		111,805,946		114,064,729
Weighted average number of shares outstanding – diluted		111,805,946		114,306,834
Shares outstanding, end of the period		111,657,956		113,906,006
Earnings per share, basic and diluted
Continuing operations		0.40		0.32
Discontinued operations		–		–
Total basic and diluted earnings per share		0.40		0.32

Impact on Statement of Financial Position at January 1, 2019
(In millions of Canadian dollars)		IFRS 16 $		Before IFRS 16 $ Advertisement		Increase (decrease) $
Current assets
Trade and other receivables		828.1		878.1		(50.0)
Prepaid expenses		43.9		56.8		(12.9)
Other assets		24.3		23.2		1.1
Non-current assets
Lease assets		561.8		–		561.8
Intangible assets		242.0		247.7		(5.7)
Other assets		178.2		175.5		2.7
Total increase in assets						497.0
Current liabilities
Trade and other payables		566.9		567.2		(0.3)
Lease liabilities		44.8		–		44.8
Provisions		41.7		42.4		(0.7)
Other liabilities		5.0		23.2		(18.2)
Non-current liabilities
Lease liabilities		600.2		–		600.2
Provisions		86.6		78.2		8.4
Deferred tax liabilities		45.6		54.3		(8.7)
Other liabilities		45.9		140.4		(94.5)
Shareholders’ equity
Retained earnings		817.2		851.2		(34.0)
Total increase in liabilities and equity						497.0

		Quarter ended March 31
(In millions of Canadian dollars)		2019 as reported Advertisement $		2019 before IFRS 16 $		Increase Advertisement (decrease) $
Impact on income statement items
Administrative and marketing expenses		357.1		392.6		(35.5)
Net interest expense		17.2		9.1		8.1
Depreciation of lease assets		27.4		–		27.4
Net income		44.9		44.9		–
Impact on non – IFRS financial measures(1)
EBITDA		132.2		96.7		35.5
Adjusted EBITDA		127.1		91.6		35.5
Net debt/adjusted EBITDA – Continuing operations		2.00		2.67		(0.67)
(1) Non-IFRS measures are discussed in the Definitions section of Stantec’s 2018 Annual Report and Q1 19 Management’s Discussion and Analysis. Net debt/adjusted EBITDA was calculated using a proforma IFRS 16 adjustment for Q2 18 to Q4 18 adjusted EBITDA, calculated as 3.8% of net revenue from the respective quarter.

Impact on Statement of Cash Flows – Continuing Operations		Quarter ended March 31
(In millions of Canadian dollars)		2019 as reported $ Advertisement		2019 before IFRS 16 $		Increase (decrease) Advertisement $
Cash flows used in operating activities		(88.5)		(114.1)		25.6
Cash paid to suppliers		(515.0)		(548.7)		33.7
Interest paid		(17.9)		(9.8)		(8.1)
Cash flows from investing activities		(104.2)		(99.4)		(4.8)
Proceeds from leasehold inducements		–		4.8		(4.8)
Cash flows from financing activities		68.2		89.0		(20.8)
Payments of lease obligations		(25.6)		–		(25.6)
Proceeds from leasehold inducements		4.8		–		4.8

Reconciliation of Non-IFRS Financial Measures
		Quarter Ended March 31 As reported
(In millions of Canadian dollars, except per share amounts)		2019		2018
Net income from continuing operations		44.9		36.6
Add back:
Income taxes		13.6		13.6
Net interest expense		17.2		5.3
Depreciation and amortization		56.5		31.4
EBITDA from continuing operations		132.2		86.9
Add back (deduct) pre-tax:
Unrealized (gain) loss on investments held for self-insured liabilities		(5.1)		2.6
Adjusted EBITDA from continuing operations		127.1		89.5
		Quarter Ended Advertisement March 31
(In millions of Canadian dollars, except per share amounts)		2019		2018
Net income from continuing operations		44.9		36.6
Add back (deduct) after tax:
Amortization of intangible assets related to acquisitions(1)		7.0		9.4
Unrealized (gain) loss on investments held for self-insured liabilities(2)		(3.7)		1.9
Transition tax(3)		2.1		–
Adjusted net income from continuing operations		50.3		47.9
Weighted average number of shares outstanding – basic		111,805,946		114,064,729
Weighted average number of shares outstanding – diluted		111,805,946		114,306,834
Adjusted earnings per share from continuing operations
Adjusted earnings per share – basic		0.45		0.42
Adjusted earnings per share – diluted		0.45		0.42
See the Definitions section of Stantec’s 2018 Annual Report and Q1 19 Management’s Discussion and Analysis for a discussion of non-IFRS measures used. Construction Services operations are presented as discontinued operations. This table has been updated to include only continuing operation results.
(1) The add back of intangible amortization relates only to the amortization from intangible assets acquired through acquisitions and excludes the amortization of software purchased by Stantec. For the quarter ended March 31, 2019, this amount is net of tax of $2.7 (2018 – $3.5).
(2) For the quarter ended March 31, 2019, this amount is net of tax of $1.4 (2018 – $0.7 recovery).
(3) Refer to Income Taxes section of the Q1 19 Management’s Discussion and Analysis for further details.

Contacts

Investor Contact
Cora Klein
Stantec Investor Relations
780-969-2018
cora.klein@stantec.com

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Media Contact
Stephanie Smith
Stantec Media Relations
780-917-7230
stephanie.smith2@stantec.com