Stantec (NYSE:STN) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
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Summary
Stantec’s Q2 2026 net revenue grew by almost 12% to $1.8 billion, driven by 4% organic and 7% acquisition growth, with notable performance in the global region and the water business.
Adjusted EBITDA increased over 17% year-over-year, with a record margin of 18.7%, and adjusted EPS rose by over 18% compared to Q2 2025.
The company reported strong demand across end markets, particularly in infrastructure, water, and energy sectors, with positive signs of project acceleration expected in the second half of the year.
Stantec announced the acquisition of Niche, enhancing its environmental services in Australia, and emphasized a robust M&A pipeline despite valuation challenges.
The company’s contract backlog reached a record $9.2 billion, up 17.5% year-over-year, with significant growth in the global region and water sector.
Stantec maintains its 2026 financial targets, increasing its adjusted EBITDA margin outlook to 17.8-18.3% and expecting mid-single-digit organic growth across its regions.
CEO Gord Johnston announced his retirement, effective October 1st, with Susan Reisbord set to succeed him, and he will transition to Vice Chair of the Board.
Full Transcript
OPERATOR
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 Carmoni, Executive Vice President and Chief Financial Officer. Stantec invites those dialing in to view the slide presentation, which is available in the investors 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 2, 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. Gord Johnston. Please go ahead, sir.
Gord Johnston, President and CEO
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 US 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 ramp-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.
Vito Carmoni, Executive Vice President and CFO
Thank you, Gord, and 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 on 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 in 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 disciplined 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 in 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 development 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 1.5% of our outstanding shares, for an aggregate purchase price of approximately $175 million.
Notwithstanding this cash outflow, our net debt to adjusted EBITDA ratio remained at 1.3 times, within our internal target range of 1 to 2 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 2026.
Gord Johnston, President and CEO
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 Stantec 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 to our 2026 financial targets, and with the 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 defence 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 and 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.
Shahabat Khan, Analyst at RBC Capital Markets
Great. Thanks and good morning. And before I get into the questions, I just want to congratulate you, Gord, on a great run here in your current seat and all the best with the next chapter.
Gord Johnston, President and CEO
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.
Shahabat Khan, Analyst at RBC Capital Markets
I guess starting with kind of the outlook for the back half of the year on the US segment, 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 US. 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.
Gord Johnston, President and CEO
Yeah, thanks, Saba, for the question. So in the US 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 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, as we look at the back half of the year, 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 US, both year to date and year over year, both up and 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 acquisition, and we’ve talked about it 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 — that will be reported as organic growth in Q3 and Q4 of the year. So these projects that we’ve got in the backlog ramping up, strong sales, strong backlog, good organic backlog growth there in the US year to date and year over year, Page 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.
Shahabat Khan, Analyst at RBC Capital Markets
Great. And then just on the margin side, looks like about, I’ll call it, 80 bps or so of year-over-year EBITDA margin improvement through the first half of the year; the guidance increase implies, round numbers, about 15 basis points. Maybe if you can just walk us through the puts and takes on the assumptions, the full-year guide, and maybe sort of the delta between the higher amount realized versus the guide increase. Thanks.
Vito Carmoni, Executive Vice President and CFO
Hi, Saba. It’s Vito here. Yeah, we’re incredibly proud of the progress we’ve made with margin expansion, and you heard that in my prepared remarks. That comes from really across all elements of our business. Our project margins continue to be strong and that’s all about the right client, the right price, obviously, and exemplary project execution. The teams always work 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 attach 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, 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 trailing 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.
Shahabat Khan, Analyst at RBC Capital Markets
Great. And then just the last one on my end, 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-year basis maybe through Q1 and Q2 of this year, as we think about how that can contribute to the overall Stantec numbers? Thanks and I’ll pass the line.
Vito Carmoni, Executive Vice President and CFO
Yeah, Saba, it’s hard for us to do that because the baseline business is probably not in accordance with how we convert to our IFRS accounting. But I would venture to say that it’s robust and, as Gord has alluded to, we probably underreported by a smidgen our Q2 organic because of the way we do things. And that is, we shifted a significant amount of our Buildings workforce to the Page-led opportunities that, as Gord has noted, will be reflected in 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.
Shahabat Khan, Analyst at RBC Capital Markets
Thanks very much.
OPERATOR
Thank you. And our next question comes from the line of Frederick Bastian from Raymond James. Your question, please.
Frederick Bastian, Analyst at Raymond James
Good morning, guys.
Gord Johnston, President and CEO
Good morning.
Frederick Bastian, Analyst at Raymond James
How are you? How does it feel, Gordon?
Gord Johnston, President and CEO
You know, it’s actually been a really interesting, you know, preparing for the quarter, preparing for the earnings call. So many things were, 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.
Frederick Bastian, Analyst at Raymond James
Great. Thanks, Gord. We’re excited to have you stick around a little longer and congrats on a great career. Now onto a 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? 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?
Vito Carmoni, Executive Vice President and CFO
You know, that’s obviously — we are more centered really on continuing to provide outstanding outcomes for our customers. You know, that really is the ethos of our organization and along with that, obviously, is great project execution, the right risk profile, you know, 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 margin, and I love the fact that you start with that because at the end of the day, you know, that is the spine that drives 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.
Frederick Bastian, Analyst at Raymond James
Thanks. My other question is around M&A activity. 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 that might bring in terms of opportunity for you to deploy capital? Thanks.
Gord Johnston, President and CEO
Yeah, you know, 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, you know, bringing some private firms on. There is still a bit of a dislocation in those where 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 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—I’ll stay involved in a supportive role, just from a continuity perspective.
But in addition to that, you know, I think you make reference to that. We’ve seen some big moves on the chessboard, you know, that people have been—you know, that are some that are public and others that I think people are just kind of thinking about in the back. And so, you know, this is a very attractive industry, you know. And do I think further consolidation is likely? I think perhaps. Perhaps it will in the next year or so. So, you know, Stantec is—we’re very alive to all these things, and, you know, we just remain focused on doing what’s best for Stantec and our shareholders in the long run.
Frederick Bastian, Analyst at Raymond James
Thank you very much.
Gord Johnston, President and CEO
Thanks, Frederick.
OPERATOR
Thank you. And our next question comes to the line of Yuri Link from Canaccord Genuity. Your question, please.
Yuri Link, Analyst at Canaccord Genuity
Hey, good morning, guys. Thanks for my question, and congrats to both Gord and Susan. Just wanted to turn back to the U.S. 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 U.S. and any comment on how that might have translated into backlog? Organic backlog growth was also 2.5% lower than what we’ve seen. So what’s going on in the quarter there?
Gord Johnston, President and CEO
Yeah. So, you know, again, just to reiterate, 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 there in Q2, a little bit in all of the different groups. For example, in our Environmental Services group, we had 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 U.S. West that got going. And so we’re seeing—again, that’s moving. In our Infrastructure group, that was a little slower in Q2 than we would have liked. Large public transit project in the U.S. South was a little bit slow to get moving. And we were actually working on 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 significant proposal that we worked on in Infrastructure—you know, that would have a very positive impact on backlog if 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 longer term, we really don’t see it having any negative impact on the business, nor do we believe it should be reflective of how we’ll perform in the second half of the year.
Yuri Link, Analyst at Canaccord Genuity
Okay. And just should we expect the organic growth recovery in the U.S. to kind of build throughout the back half of the year? Especially considering you’ve got a pretty easy comparable in the fourth quarter.
Gord Johnston, President and CEO
Yeah, I think that’s right. I think we should. 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.
Yuri Link, Analyst at Canaccord Genuity
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.
Vito Carmoni, Executive Vice President and CFO
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 RSUs. So very, very minor, small benefit.
Yuri Link, Analyst at Canaccord Genuity
Okay, I’ll turn it over. Thanks.
OPERATOR
Thank you. And our next question comes from the line of Michael Tupholme from TD Cowen. Your question please.
Michael Tupholme, Analyst at TD Cowen
Thank you. Good morning and congratulations, Gordon.
Gord Johnston, President and CEO
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 and positioning Stantec for success going forward.
Michael Tupholme, Analyst at TD Cowen
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 H1 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?
Gord Johnston, President and CEO
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 $13 billion mega data center project that we’ve got going on. There’s a really significant program that we’re running, just kicking off for a utility here in Western Canada. An enormous amount of opportunity up 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—you know, backlogs are looking great and we see, you know, 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.
Vito Carmoni, Executive Vice President and CFO
I think you got it, Gord. Buildings and Water we expect would be the biggest drivers of H2 increase in organic growth in Canada.
Michael Tupholme, Analyst at TD Cowen
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.
Gord Johnston, President and CEO
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, you know, 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 will continue to be basically ingrained in our, you know, in our three-year strategy.
Michael Tupholme, Analyst at TD Cowen
All right, perfect.
I will leave it there.
OPERATOR
Thank you. Thank you. Thanks.
Thank you. And our next question comes from the line of Chris Murray from ATB Capital Markets. Your question please.
Chris Murray, Analyst at ATB Capital Markets
Yeah, thanks folks. Good morning. And, Gord, let me echo my congratulations like everyone else. I guess the first question, we talked a little bit about Canada and the U.S. 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.
Gord Johnston, President and CEO
Yeah, absolutely. So we’re seeing pretty broad-based strength in our Global operations. Australia has returned to organic growth—I don’t have the number here, but I think kind of mid-single-digit organic growth in Australia. In the UK, very, very strong. You know, we’re seeing the growth in AMP8 extremely strong, as we would have expected. We’re running about 15% organic growth right now in the UK, incredibly strong. And then another area for us—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 with the demand for copper and the work that we’re doing down there, we’re seeing over 50% organic growth in our Latin American operations right now. So really strong across our Global operations.
Chris Murray, Analyst at ATB Capital Markets
Okay, that’s helpful, thank you. And I guess the next question maybe, Vito, I’m not sure if you wanted to—or Gordon, 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 valuations at 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 issuer bid, maybe taking your leverage into the middle of your range and sort of waiting out whatever this valuation gap is for now.
Vito Carmoni, Executive Vice President and CFO
Chris, you know, as you heard me say in my prepared remarks, you know, at the core of what we believe is long-term value creation is continued M&A and expansion of our portfolio in 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, you know, 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, you know, SIB is one step further from where we currently are. We’ve stepped into the 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 not, I think, representative of what we believe long-term value is and long-term representation there. We’ll take measured steps along the way here.
Chris Murray, Analyst at ATB Capital Markets
Okay, thanks. I’ll leave it there.
Gord Johnston, President and CEO
Thanks, Chris.
OPERATOR
Thank you. And our next question comes to the line of Devin Dodge from BMO Capital Markets. Your question please.
Devin Dodge, Analyst at BMO Capital Markets
Yeah, thanks. Good morning. Look, before I get started, Gord, congrats on the well-earned semi-retirement, and Susan, if she’s there in the background, just best of luck with the new role.
Gord Johnston, President and CEO
Fabulous. Thanks so much.
Devin Dodge, Analyst at BMO Capital Markets
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 few quarters, or will you need to be adding, expanding that workforce to convert that backlog into revenue?
Gord Johnston, President and CEO
Yeah, 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 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—are much larger than even what you’ve seen there. But yeah, absolutely, to your point, we’re looking—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. I think we’ve just hit roughly 2,000 people, which was our goal for the end of the year.
So we’re, you know, a little bit ahead of schedule, taking more space there, looking to expand to other cities. So, 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.
Devin Dodge, Analyst at BMO Capital Markets
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?
Vito Carmoni, Executive Vice President and CFO
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 the 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 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, you know, what we would otherwise normally expect here as we move into the back half.
Devin Dodge, Analyst at BMO Capital Markets
Okay, great. Thanks for that, Vito. I’ll turn it over.
Gord Johnston, President and CEO
Thanks, Devin.
Vito Carmoni, Executive Vice President and CFO
Thanks, Devin.
OPERATOR
Thank you. And our next question comes to the line of Krista Friedthen from CIBC. Your question please.
Krista Friedthen, Analyst at CIBC
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.
Gord Johnston, President and CEO
Yeah, thanks so much.
Krista Friedthen, Analyst at CIBC
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, size, or end market based on what you’re seeing in valuations in the private and public markets at the moment? Thank you.
Gord Johnston, President and CEO
Yeah, no, great, great question, but no. Our, you know, we’re holding our consistency, holding our discipline as to, you know, 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 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.
Krista Friedthen, Analyst at CIBC
Thank you. That’s great color. I’ll jump back in the queue.
OPERATOR
Thank you. And our next question comes from the line of Maxim Saichev from NBCCM. Your question, please.
Maxim Saichev, Analyst at NBCCM
Yes, hi, good morning. And Gord, obviously congrats on all the achievements and wonderful career, and welcome to Susan.
Gord Johnston, President and CEO
Yeah, thanks so much.
Maxim Saichev, Analyst at NBCCM
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 we’re 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.
Vito Carmoni, Executive Vice President and CFO
That’s a great question, Max, and thank you for that. And one point to make is 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, because typically when you’ve got softer organic, that typically puts pressure on your margins with respect to obviously getting the scale from your back office. Again, kudos to the team, and I think that bodes well. In respect to philosophy, I would say no change in philosophy.
It is all about the right growth. 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 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.
Maxim Saichev, Analyst at NBCCM
Okay, that’s great, Kali, 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.
Gord Johnston, President and CEO
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 is 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 is about $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 are 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 anticipating 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.
Maxim Saichev, Analyst at NBCCM
Okay, excellent. Thank you so much.
Gord Johnston, President and CEO
Thanks, Max.
OPERATOR
Thank you. And our next question comes from the line of Ian Gibbs from Stifel. Your question, please.
Ian Gibbs, Analyst at Stifel
Morning everyone, and congrats, Gord. I look forward to catching up in Calgary at some point, hopefully in the near term.
Gord Johnston, President and CEO
Look forward to it.
Ian Gibbs, Analyst at Stifel
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.
Gord Johnston, President and CEO
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 backlog that we’ve got, with the soft backlog that we see coming, with the projects that have started, we actually feel good about our plans. Again, Page kind of converting from acquisition to organic—as we talk to all of our business leaders and others in the industry, as we look at the—we see the contribution just mathematically from Page—I think we feel good about those numbers in the second half of the year.
Yeah. Ian, our Buildings and Environmental Services 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.
Ian Gibbs, Analyst at Stifel
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 2020 to 2029? Sorry, yeah. Excuse me.
Gord Johnston, President and CEO
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 serve us 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.
Ian Gibbs, Analyst at Stifel
Understood. I appreciate the detail. And once again, congrats, Gordon.
OPERATOR
Great. Thank you. Thank you. And our next question comes from the line of Jonathan Goldman from Scotiabank. Your question please.
Jonathan Goldman, Analyst at Scotiabank
Hey, good morning, team. Thanks for taking my questions. Most of them have been asked already, but maybe, Gord, just one for you. Philosophically, how are you thinking about the pace of consolidation in the E&C 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?
Gord Johnston, President and CEO
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, you know, market penetration. So lots of opportunities for, you know, for continued consolidation. You know, 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.
You know, it’s certainly easier with the small to mid-sized ones, but, you know, will we see it with some of the bigger global players? You know, remains to be seen, but 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. So I guess time will tell.
Jonathan Goldman, Analyst at Scotiabank
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 SP still to make things value accretive at this level?
Vito Carmoni, Executive Vice President and CFO
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.
Jonathan Goldman, Analyst at Scotiabank
Okay, maybe if I can squeeze one more. In terms of deal financing, do you have enough capacity and dry powder now with the balance sheet, if you wanted to take a run at something a little more sizable, or if it’s going to be something bigger, do you think possibly of going another route, maybe some sort of share exchange or equity?
Vito Carmoni, Executive Vice President and CFO
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 what 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 arises. 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.
Jonathan Goldman, Analyst at Scotiabank
Understood. Thanks for taking my question.
Vito Carmoni, Executive Vice President and CFO
Thank you.
OPERATOR
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 Gord Johnston for any further remarks.
Gord Johnston, President and CEO
Great. Well, you know, thank you, operator, and thanks to everyone for joining us this morning. You know, serving as Stantec CEO 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 as 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.
OPERATOR
Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
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