管理層發言
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 Investors section at stantec.com. Today's call is also webcast. (Operator Instructions) 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.
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 & 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 and 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 U.K., Australia and New Zealand. The ramp-up of new projects in Chile and Peru drove strong organic growth in Energy & 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, Gord, and good morning, everyone. Strong operational execution supported by sustained demand across our diversified multi-sector and multiregional platform continues to deliver solid financial results. At the midyear 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 develop projects, while protecting and restoring natural environments. This transaction closed effective July 31. 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 1.3x within our internal target range of 1 to 2x. And given our Q2 NCIB activity, it's prudent for us to have additional flexibility, and we intend to seek TSX approval to extend 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.
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 health care 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 nonresidential 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 U.S., 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 5 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 & 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 & 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 1 and transitioning to Vice Chair of Stantec's Board of Directors. It's been an incredible privilege to lead this company for the last 8.5 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?
分析師問答
(Operator Instructions) And our first question for today comes from Sabahat Khan from RBC Capital Markets.
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?
Thanks so much, Sabahat. It's been an incredible privilege to lead the team over the last 8.5 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, 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 your confidence in that outlook on getting to that high single-digit range over the next couple of quarters?
Yes. Thanks, Sabahat, for the question. In the U.S. specifically, this is not a demand issue; it's more of a timing issue for us in Q2. We had a number of projects wrap up as scheduled and planned, and several projects we were awarded and added to backlog were a bit slow to get started. Since the quarter, we've seen positive momentum in Q3: many of these projects have kicked off and the field seasons are underway. Looking at the back half of the year from a demand perspective, the sales funnel is strong and the soft backlog is trending very well. Our organic backlog growth in the U.S., both year-to-date and year-over-year, is in positive territory, which supports the ramp-up and momentum as we enter the second half of the year and into 2027. One other point to call out is the Page acquisition. Page is a fantastic company performing exceptionally well and driving strong acquisition growth. Under our normal process, when a company joins us we report that growth as acquisition growth for the first year, but beginning in Q3 Page will be reported as organic growth in Q3 and Q4. The projects in backlog ramping up, strong sales, strong backlog, positive organic backlog growth, and Page’s transition from acquisition to organic all support our thesis of continued organic acceleration into the second half of the year and good momentum into 2027.
Great. And then just on the margin side, it looks like about, 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 you can just walk us through the puts and takes on the assumption of the full year guide and maybe sort of the delta between the higher amount realized versus the guide increase?
Saba, it's Vito here. We're incredibly proud of the progress we've made with margin expansion, which I mentioned in my prepared remarks, and it comes from across all parts of our business. Project margins remain strong, driven by the right clients, the right pricing, and exemplary project execution. Administrative and marketing expenses have declined as a percentage of revenue, reflecting improved utilization. Echoing Gord's comments, we feel very confident in the business's forward momentum, and that velocity is already requiring increased headcount and workforce expansion. The moderation of margin expansion in the back half relative to year-to-date performance largely reflects the timing of that hiring as we lean into what will be significant organic growth in the back half. Overall, the momentum in margin improvement continues, with some conservatism built into our outlook; this is now about the seventh consecutive quarter of year-over-year margin expansion, and on a trailing 12-month basis we are roughly 80 basis points ahead. That progress enables continued investment in the business as we move forward.
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 you think about how that can contribute to the overall Stantec numbers?
Yes. Sabahat, it's hard for us to do that because the baseline business is probably not in accordance with our 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 smidge in our Q2 organic because of the way we do things. And that is we shifted a significant amount of our building 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.
And our next question comes from the line of Frederic Bastien from Raymond James.
How are you? How does it feel for you?
Preparing for the quarter and the earnings call has been really interesting. So many things changed and this will be the last time we do this. I am thrilled to be staying on the Board. I love our company, our clients, our people, and what we do. Being on the Board will let me stay connected to the company, and for me that is the best of both worlds.
Great. We're excited to have you stick around a little longer, and congrats on a great career. Now on to the question. As Vito alluded to earlier, a good chunk of the margin expansion came from project margins, which is nice to see, not all coming from SG&A and cost optimization. How far can you push those margins? I mean, 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 are focused on continuing to provide outstanding outcomes for our customers. That is the ethos of our organization. Along with that is great project execution, the right risk profile, great value for our work, and being transparent 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, aligned response as we roll out the back half of the year and as we get into our Investor Day in December. But I think bottom-line margins start with project margin, and I love the fact that you start with that because, at the end of the day, that is the spine that drives the bottom line. We're really confident about that. With macro demand being as strong as it is across our markets, we can be picky and choosy with some of the clients we choose. So I'm really confident about project margins going forward.
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?
Yes. The acquisition environment is incredibly active right now. You mentioned the typical transactions in our space where public companies bring private firms on. There is still some dislocation, with sellers in the private market remaining a bit elevated compared with current public market levels, but we are in the midst of numerous conversations at different levels and have been for some time. I will continue to work closely with Susan and the team; as we're halfway through some of these M&A discussions, I will stay involved in a supportive role to provide continuity. In addition, there have been some big moves on the chessboard, some public and others that people are considering behind the scenes. This is a very attractive industry, and I do think further consolidation is likely in the next year or so. Stantec is very attentive to all of this, and we remain focused on doing what is best for Stantec and our shareholders in the long run.
And our next question comes from the line of Yuri Lynk from Canaccord Genuity.
Congratulations to both Gordon and Susan. I want to turn back to the U.S. for a minute, Gord. I understand you're seeing an acceleration in some delayed projects, but was there an overriding theme behind the original slowdown you saw in the U.S.? And can you comment on how that translated into backlog? Organic backlog growth was about 2.5% lower than we've seen, so what was going on in the quarter there?
Yes. To reiterate, I think much of it was a timing issue. Some projects were a bit slower to get going out of the gate in Q2 across several groups. For example, in our Environmental Services group we had a large Navy program that was slower to start; it's moving now. We also had a significant project with a large electrical utility in the U.S. West that has started, which is in our infrastructure group. A large public transit project in the U.S. South was also slow to get moving, and we were working on a very significant infrastructure proposal in Q2. Several of these things simply took longer to start. I mentioned that significant proposal we worked on in infrastructure — if it comes through, it would have a very positive impact on backlog. So I think it was one of those quarters where the stars aligned differently than we would have liked. But longer term, we don't see any negative impact on the business, nor do we believe this should be reflective of how we'll perform in the second half of the year.
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?
Yes, I think that's right. Our forecast is for good organic growth in Q3, further strengthening in Q4, and entering 2027 with 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, there was any positive impact from the 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, a mark-to-market on RSUs. So very minor small benefit.
And our next question comes from the line of Michael Tupholme from TD Cowen.
Congratulations, Gord.
Yes. Thanks so much. It's interesting as I kind of reflect on what we've done over the last 8.5 years. I'm actually just so incredibly proud of what we've collectively done as a team and 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 1 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?
Yes. No, thanks. Great question. And so we see in Canada, again, good organic backlog growth year-to-date and year-over-year. Lot of projects. We talked about that $13 billion Meta data center project that we've just got going on. There's a really significant program that we're running just kicking off for 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 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. 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?
I think digitization, obviously, is at the core of our ongoing strategies throughout our organization. When we think about back-office opportunities, whether it's accounting, finance, or accounts payable, that's always been a core component for us. In bidding and proposals, we're leaning into digitization and implementing artificial intelligence tools. These initiatives are central to what we're discussing and will continue to be basically ingrained in our three-year strategy.
And our next question comes from the line of Chris Murray from ATB Cormark.
Gord, let me echo my congratulations like everyone else. I guess the first question, we talked a little bit about Canada and 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.
Yes, 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-ish organic growth in Australia. In the U.K., very, very strong. We're seeing the certainly, the growth in AMP8, extremely strong as we would have expected. We're running about 15% organic growth right now in the U.K., 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 sort of across our global operations.
That's helpful. I guess the next question, Vito, I'm not sure if you want to, or Gord, do you want to chime in on this one? Thinking about the NCIB, you mentioned increasing it and possibly pursuing it. Given your comments about private-market versus public-market multiples and public-market valuations being at roughly 20-year lows, is there any consideration of a larger buyback? It seems to make sense if private valuations aren't where you'd like them to be. Any thoughts about doing a substantial issuer bid, perhaps moving leverage toward the middle of your range and waiting out the valuation gap 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 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 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 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 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 of 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.
And our next question comes from the line of Devin Dodge from BMO Capital Markets.
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. Thank you so much.
Look, I'm going to come back to Chris' 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 add or expand that workforce to convert that backlog into revenue?
Yes. We are actively expanding the workforce globally, particularly in the regions we discussed, Latin America, Germany and the U.K., and we have been hiring aggressively there for the last 18 months or so. One thing to call out is that while you've seen the incredible backlog growth from AMP programs, if we get a 5-, 6- or 7-year AMP program that includes a not-to-exceed amount, that amount does not go into our backlog. It only goes into backlog when we actually receive a specifically assigned change order. So the contract opportunities with AMP, and the same applies everywhere, are much larger than what appears in the backlog. To your point, we have been taking additional real estate in the U.K. and hiring people aggressively over the last year to 18 months. We've also been ramping up hiring at 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 ahead of schedule. We're taking more space there and looking to expand to other cities. Hiring is very much top of mind for us in order to process the backlog.
Yes. I'll add, Devin, 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. 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 seems 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?
Yes. You're absolutely right, Devin. Our year-to-date free cash flow is lower than last year's, but I don't see any operational concerns. We're very focused on working capital management, starting with DSOs. DSOs are at 75, which is within our guidance but at the higher end of our internal range, so the team will be focused on bringing that down. There is normal seasonality and the back half is typically considerably stronger for us. We're coming out of what you heard me reference on the last call regarding the Page integration. I'm pleased with the velocity, and I expect it to dovetail nicely into our normal expectations as we move into the back half.
And our next question comes from the line of Krista Friesen from CIBC.
Congrats, Gord, on a great tenure at Stantec and look forward to having you around a little bit longer here.
Yes. Thank you so much.
Maybe just one for 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?
Yes. No, 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 yes, 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.
And our next question comes from the line of Maxim Sytchev from NBCM.
Gord, obviously, congrats on all the achievements and a wonderful career, and welcome to Susan.
Thank you 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, 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, that tension of kind of getting work and versus being very efficient from a cost perspective?
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 perspective with respect to obviously getting the scale from your back office. So 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, 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 our client base and projects and whatnot. So the focus of 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 color. 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?
Yes, great. As we think about the IIJA, its scheduled end at the end of September has been anticipated for several years. There is a real, concerted effort to encumber those funds before the end of September. Although the data are a little obscure, the industry estimate is that about 80% has been encumbered. We're working hard to get the remainder encumbered so we don't lose the IIJA funding. Regarding the Surface Transportation Act reauthorization, the House has put forward a bill of about $581 billion. We're now waiting for the Senate proposal, which is anticipated after Labor Day. All indications are it will be similar in size to the House bill, in the $500 billion to $600 billion range. While both of these are likely to move forward, it is expected they will not progress until after the midterms. My view and our view is that it will be reauthorized, likely coming forward early in the new year. Based on the current position, I don't see this being a negative for next year because everyone has anticipated the timing, submitted proposals where they can, and made plans accordingly. We're looking forward to another strong year next year.
And our next question comes from the line of Ian Gillies from Stifel.
Gord. I look forward to catch 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 implies what I would call dislocations or gyrations or slowdowns. That's a bit of a challenging one right now.
Yes, absolutely. Any time there's a change it can introduce a little uncertainty. But based on what we've been saying about the backlog we have, the soft backlog and what we see coming from projects that have started, we feel good about our plans. Page is kind of converting from acquisition-driven to organic growth. As we talk to our business leaders and others in the industry, and as we look at the contribution, just mathematically, from Page, we feel good about those numbers in the second half of the year.
Yes. Ian, 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?
2028 to 2030 plan? Let's continue our work. I think as we move through our planning cycle and through 2026, it gives us continued confidence that the macro drivers and our positioning set us up very well for the next three-year period. But let's let the process play out and let Susan take the seat and present her perspectives as we move forward. We're feeling good about the industry and our position in it.
And our next question comes from the line of Jonathan Goldman from Scotiabank.
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? Could you update us on how fragmented it is today? And do you think consolidation could accelerate given the recent dynamics in valuations and the disconnect we've seen?
Yes. Philosophically, as you say, our market is still very fragmented. Even the largest firm in the U.S. has only about six to eight percent market penetration. So there are many opportunities for further consolidation. We've all seen the rumors circulating in the industry. I wouldn't be surprised if we see more consolidation ahead. It's certainly easier among the small to midsized firms, but whether it will happen with some of the larger global players remains to be seen. I do know people are thinking about what consolidation could look like and what value it would create for clients, employees and shareholders. So time will tell.
Are valuations bottlenecked 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 on a case-by-case basis, as 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. And 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 want to run something maybe a little more sizable? Or is this going to be something bigger? Do you think possibly of going another route, maybe some sort of share exchange or equity?
I think 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 of 1.3x. 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.
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.
Great. Well, thank you, operator, and thanks to everyone for joining us this morning. Serving as Stantec's 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 Nieukerk, 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.