Bob Gomes - CEO Dan Lefaivre - CFO.

Mona Nazir - Laurentian Bank Sara O'Brien - RBC Capital Markets Anthony Zicha - Scotiabank Leon Aghazarian - National Bank Financial Paul Lechem - CIBC Michael Tupholme - TD Securities Bert Powell - BMO Capital Markets John Rogers - D.A. Davidson Ben Cherniavsky - Raymond James Chris Murray - AltaCorp Capital.

Welcome to Stantec Inc.'s First Quarter 2015 Earnings Results Conference Call. With us today from Stantec management are Bob Gomes, President and Chief Executive Officer and Dan Lefaivre, Chief Financial Officer. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct the question-and-answer session.

[Operator Instructions] As a reminder, today is May 14, 2015, and this conference call is being recorded as well as broadcasted live over the Internet. It will be archived for future reference at stantec.com under the Investors section.

Therefore, any members of the media who are joining the call today in a listen-only mode and who wish to quote anyone other than Mr. Gomes or Mr. Lefaivre are asked to please request permission to do so from the individual concerned.

Stantec management would like to caution you that this call non or additional IFRS measures, as well as forward-looking statements and information which are risks and uncertainties. I would now like to introduce you to your host, Bob Gomes. Please go ahead, Mr. Gomes..

Thank you, John. Good afternoon, everyone, and welcome to our 2015 first quarter results conference call. Dan will provide a brief summary of our financial results for the first quarter. I will then follow with some highlights of our performance and an outline of our market outlook. We will then address individual questions.

Today, we released the results of Stantec's operations for the first quarter of 2015. I am pleased to report we continue to achieve solid performance, even while areas of our business have been impacted by lower commodity prices.

The strength of our diversified business model again demonstrated its effectiveness in Q1 ’15 with overall organic revenue growth in the quarter. We achieved strong organic revenue growth in our Buildings and Infrastructure business operating units, offset by retraction in our energy and resources business operating unit.

Dan will now provide review of our first quarter 2015 financial results.

Dan?.

Thank you, Bob. Good afternoon everyone. We are pleased with our overall results in Q1 ’15 compared to Q1 ’14. During Q1 2015, our gross revenue increased by almost 132 million or 23% compared to the same period in 2014. Of that increase, 1.7% was organic revenue growth marching over three years of consecutive organic growth.

The Q1 ’15 growth was due to strong activity in our Buildings and Infrastructure business as Bob mentioned, which was partly offset by a retraction in our Energy & Resources business operating unit. Gross margin was 55.2% in Q1 ’15, compared to 54.4% in Q1 ’14 and there is within our targeted range of 54% to 56%.

Gross margin in our Canadian operations increased mainly from the recognition of certain performance fees obtained in the quarter and strong project execution. This was offset by an increase in our administrative and marketing expenses, as a percentage of net revenue to 42.5% in Q1 ’15 from 41.5% in Q1 ’14.

This increase was primarily due to overall -- lower overall utilization and higher Dessau acquisitions integration cost including additional infrastructure and the French language translation cost. As well, we incurred additional severance cost to align staffing levels to our work backlog primarily in our and resources business.

For Q1 ’15 net income increased 13.4% to 38 million compared to 33.5 million in Q1 ’14. Diluted earnings per share increased 11.1% to $0.40 from $0.36 in Q1 ’14. Our backlog grew to approximately $2 billion at the end of Q1 ’15 representing approximately nine months of revenue.

Just to come back to Dessau for a moments, they are fully integrated, we’re very pleased with how that acquisitions is going, it is going very well and the staff are enthused. As we have stated in previous calls, we still expect the Dessau group to contribute approximately 130 million in net revenue in 2015, now the budgeting process is complete.

However as the margins are a bit lower due to the mix of work, which is mostly in transportation. Last week [yesterday], the company declared a cash dividend of $10.5 per share to shareholders of record on June 30, 2015. Back to you Bob..

Thanks, Dan. I’ll provide a bit more detail on our performance in Q2 and some thoughts in the rest of 2015 and then we dive right into the Q&A. Looking at our performance across our business operating unit, I would like to provide you with some highlights.

After a number of quarters of retraction, we’re very happy to report that the buildings operating unit experience growth in all our regions and sectors.

In the United States we have seen activity in the commercial and hospitality sectors there is also an increased activity in the education and residential sectors where we are starting to see synergies and additional work from recent acquisitions such as ADD Inc and SHW.

For example during the quarter we secured the planning, management and engineering work for the construction of the new interdisciplinary research lab for the Yale Science Building at Yale University in Connecticut.

In our energy and resources business units in Q1 ’15 our environmental services sector achieve good growth in Eastern Canada and in the United States. In contrast to the slow start in Q1 ’14 caused by last year's harsh winter conditions.

This growth was however offset by a retraction in our engineering group in the oil and gas sector largely due to the impact of a downturn in the sector. During the quarter we continued to secure projects in mining and power.

In our power sector activity is being driven by the transmission and distribution market as well as power replacement to meet environmental compliance requirements. All sectors in our infrastructure business operating unit experienced organic gross revenue growth in Q1 ’15 to Q1 ’14.

Community development sector achieved strong organic revenue growth in the quarter. This growth was seen in both the United States and Canada where each region represents about half of the sectors work. In our transportation sector our reputation and presence in a rebounding U.S.

economy together was stable infrastructure spending, especially at the state of municipal level have led to increase opportunities. A project we recently secured is the design of services for the reconstruction of a 10 mile sections of the I-4 in Volusia County, Florida.

In our water sector our expertise in water management signified by several recent key projects is driving demand for our services related to ageing infrastructure rehabilitation and regulatory requirements. One recent award in Ontario is the full scale retrofit of the City of Barrie wastewater treatment plant with Membrane Bioreactor technology.

This will be the largest full retrofit MBR project in Canada and the largest for cold weather application in North America. Now I would like to comment briefly on potential market conditions going forward. Our overall outlook across our business remains a the moderate increase in organic revenue for 2015 with a target of approximately 3%.

Our outlooks for 2015 in each of our regions also remain the same as we outline in our 2014 annual report. In Canada our outlook remains stable; we anticipate that it may continue to retract in the first half of 2015 primarily due to the retraction in the oil and gas sector.

However we expect activity in sectors and regions linked to non-energy related businesses will continue to be positive. In the United States we expect to achieve moderate organic revenue growth. Our strong organic revenue growth of 10.2% in the first quarter was due to the U.S.

economy continuing to gain momentum in the quarter across many sectors, where we provide services something we expect to carry on through the rest of the year. In addition, our U.S. organic revenue growth reflects the weaker weather related Q1 2014. In our international business we expect to achieve moderate organic revenue growth.

Similar to other locations in the United Kingdom and the Middle East we expect to leverage our local position to drive cross selling opportunities. Looking at our individual business operating units, for building we continue to anticipate moderate organic revenue growth. Overall we anticipate that the buildings industry will continue its recovery.

With our global expertise and our stronger position in across many sectors, we believe we have many opportunities for continued growth. We believe that our energy in resources business operating unit will end the year with a retraction in gross revenue when compared to 2014.

We revised our outlook included in the 2014 annual report due to the greater than expected retraction in our Canadian oil and gas sector compared to the robust growth experienced during the past few years. We expect to see the retraction through the first part of the year and stabilizing in the second half at those lower levels.

We are seeing some project cancellations in upstream however relatively small portion of the revenues drive from this area. They are mostly in the mid-stream area where we are seeing delays while clients adjust their capital expenditure decisions in response to the current economic climate.

We continue to monitor our backlog and make adjustments to allowing staffing levels with work load and market conditions. In our infrastructure business operating unit, we continue to expect moderate organic revenue growth.

We expect that the ongoing requirements for the renewal of existing infrastructure and development of new infrastructure driven by population growth -- urbanization and population growth will continue to drive demand for our services.

With the strength of our diversified business model and the consistent disciplined execution of our strategy, we are committed to achieving revenue growth and providing long term value to our shareholder. This concludes our comments for today. Dan and I are now available to answer any question you may have.

I'll turn it back to John the conference call operator, who will explain the question procedure..

Thank you. Ladies and gentlemen, we will now conduct the question and answer session. [Operator Instructions] Your first question today will come from Mona Nazir with Laurentian Bank. Please go ahead..

Another great quarter, so my first question is just about the acquisition growth in Canada I think about 28.3 million.

I just wanted to confirm that all Dessau, correct?.

For both cities we are thinking yes, I don't think we did another acquisition in 2014 in Canada, so they were all new -- right, that would all be Dessau..

Yes, I've wrote them out and I didn't see anything in Canada.

Okay and I was just wondering, is there any seasonality behind that for Q1 or will that maybe a little bit lower just, given the integration?.

Specifically as it pertains Dessau, there wouldn't be on a loss of seasonality in their business, a little bit, I would say most of it was due to the integration efforts..

If we've reduced certainly in our overall business has some seasonality Mona in both Q4 and Q1, that's where some of that lower utilization comes in, during the winter months..

Okay and I know that you commented on potentially adding to the headcount there.

Has that happened or you're just kind of weigh into the how it all comes together?.

No, I think at this point in time, we're working on those opportunities. Working on bringing some of our other services into the [indiscernible], such as mining. That's going to take some time, it's not -- I think that's measured more in months, not weeks.

So I don't think we've seen a significant headcount at this time and so certainly we're still anticipating it will be..

We haven't seen a retraction on -- that's always positive..

And just lastly from me, before I step back in queue, looking at your list of acquisition targets, as you move through the list.

Is there a certain percentage of success or some sort of trend to be drawn, like how you've had more success in moving from early discussion to the final transaction announcement? Currently versus the few years ago, or there's been no change? And just lastly on that, despite weakness on the energy and resources side, are you seeing that multiple [tab] in this sector and are opportunities looking more attractive?.

So to answer the first part of the question. No, we really haven't seen a significant change in our ability or process in searching out acquisitions, having discussions in closing.

It is very specific to various sectors, types of firms, sizes of firms with probably how some similar trends in those, like from a point of view of 10 years to today, not a lot of significant change, other than we're seeing that the process is a little bit more structured, because there's a lot more knowledge in the industry about the fact that how the process goes.

But not a significant change there with regards to multiples in the energy and resources areas or specifically even oil and gas. No and this is fairly consistent that even when we're seeing some downturns, usually what happens in a slower economy, you get more people interested, but not necessarily do their expectations go down.

Most of our evaluations are done on a forward looking basis, what we can do with that firm; where they are today, how we can build that and develop synergies, look for organic growth subsequent to acquiring them. So that really everybody is looking towards the future and with some optimism.

So even if you had a lower level, that optimism is still there, so really doesn't change the multiples that much..

The next question will come from Tahira Afzal with KeyBanc. Please go ahead..

Hi guys, this is Sean on for Tahira today, so I get to start, just given the revision in your energy and resources outlook, I'd like to get a better ideas, maybe you know what’s offsetting that greater than expected decline in Canadian oil and gas to give you confidence that, you’re still going to meet that 3% organic growth target, are there any markets that are sort of performing ahead of expectations versus your prior outlook?.

I say, as we said in the call and in our MD&A, that both are Infrastructure groups and our Buildings groups, are doing better the we expected and it's almost across all the sectors now, community development, water and transportation and infrastructure all doing better, all the sectors in buildings are doing better and I guess that's what gives us that confidence is they had good growth of over 7% organic growth in both those business operating units in the first quarter and we see that continuing and backlog continues to grow, opportunities are there.

So that in itself gives us that optimism that, that 3% is still achievable..

That's a good answer, thanks very much. And secondly as it relates to oil and gas, could you just provide a little more color on 1-Q '15 activity levels and the outlook in the U.S.

versus in Canada in terms of your engineering versus environmental activities and does that stabilized outlook that's intact from what you said last quarter, does that sort of imply that your customers are sort of quickly working through this pause in decision making?.

Well I'd say that, we have seen a bit of a difference between Canada and U.S., the Canadian market was, I would say a little bit more mature in the midstream area than the U.S. and therefore their reactions of the pricing was a little bit quicker. In U.S.

we haven’t seen, the downplay as significant but at the same point we’re not as large in United States as we are in Canada. In Canada as we message again in our script in the MD&A we see a continued decline in that oil and gas in the second quarter.

We see it then stabilizing and then maintaining those levels for the rest of the year and really we’re taking that information from our clients. Now our clients to a certain degree are speculating as well based on how they see the price of oil stabilizing.

So there is an awful lot of obviously moving parts in there, but we continue to see close to our clients, we’re signing new master service agreements with some of our clients, we’re working on smaller projects with them and all of that gives us some very good and strong hope that we’ll be able to continue to ride through this downturn in the oil prices and our clients are quite confident they can as well.

But as I said a lot of moving parts with that and comes down to what’s happening with the price of oil..

And then just lastly for me, I’ll just sneak one more in, in terms of the rightsizing going on in your oil and gas business, has this initiative sort of wrapped up in the first quarter or are we going to see some of those severance costs sort of pop up again in later quarters in the year?.

I think you’ll see few more pop up in the second quarter and there won’t as significant potentially is the first quarter.

But again as we said we do believe that that should be the bottom of that, we don’t feel that we’re still continuing to the third, we see a [network] coming albeit much smaller projects, we also have much smaller workforce to do that with. So there will be some additional severance cost in the second quarter..

Thank you. Your next question will come from the line of Sara O'Brien with RBC Capital Markets. Please go ahead..

How should we think about the EBITDA margin going forward just given some of the comments in the MD&A so there is positive from performance metrics fees in Canada, Dessau margins are little bit lower than expectation and there is more complication in midstream pricing, just wondering how we should put this all together, are you still comfortable in your margin range that you’ve seen historically given these factors?.

I’ll take that one, the EBITDA margin is at 12.8% in the quarter is actually to go back last several years that’s consistent with what we’ve seen in Q1 in prior years, that EBITDA margin is again related to lower utilization overall, plus we have the additional items of integration cost and so on in the quarter which offset some of that gross margin impact, which is kind of a normal event as well.

so I guess the simple answer is as we do expect to stay within EBITDA margin range as we forecast, Q1 is always a little bit lower as is Q4 and we expect to see bit of recovery in Q2..

And then wonder if you could comment on public partnership opportunities, in particular the Eglington LRT award that’s expected shortly, just wondered how meaningful some of these projects are getting bigger StanTec part of the consortium, just wondering how important is it going to be to StanTec revenue flow and I guess margin expectation over the next year should be successful in some of these?.

Overall as we win them, yes, they will have an impact and yes they are significant, unfortunately the Eglington is not all that significant.

Our participation there, at this time anyway is relatively small and that’s the point these consortiums are made up of a number of different partnerships and we play in a number of different areas in these, anywhere from doing project management to doing detailed design.

So it really depends on what our role is in that partnership and then of course the success of winning it. But we are -- we feel we’re very strong player in the P3 market in Canada.

We feel we are a preferred partner in many of the projects and many of the sectors and P3s in Canada; we have some very good partnerships with our contracted partners and consortium partners. So we are very positive that that will continue to be a good source of revenue for us.

But in perspective though that is still roughly only five -- little over 5% of our revenue. So we see that growing and continuing to grow for the rest of this year and continuing to grow into next year. But it’s still relatively small part, but it can’t have some significant increases on a project-by-project basis..

So maybe just a follow-on to that, what about the opportunity in the U.S., I mean kind of snail-paced alone, but there seems to be a little bit more momentum coming for P3s in the U.S.

would you expect StanTec to get involved in larger projects there and how soon could we see some of those announcements?.

The P3 market isn’t as mature in the U.S., but is certainly design build is an area that StanTec is already involved in. As the P3 market involves I think the very well position given our experiencing in Canada to continue to be able to be active in that market as it evolves..

Thank you. Your next question will come from the line of Anthony Zicha with Scotiabank. Please go ahead..

Good afternoon.

Could you comment please on the organic growth rate like have you experience any pricing power and can you give us an idea in the competitive environment maybe bit of color on a regional basis?.

Yes. It is different from sector-to-sector adjusting form region-to-region, but I would say overall we are probably ahead of point where the competition is high as we've ever seen it. Certainly this happens in times where a very large industry like oil and gas has a downturn.

We get some of the bigger players that are sometimes more focus in that area get a little bit more interested in some of our more historical traditional type of engineering business so that increases it those are always there, those pressures are there usually those firms don’t have as a good of a position with the relationships with their clients.

Although pricing is one of the issues certainly the relationship with your clients is as important. So it's more just the fact you’re having more competition in some of the design build type of space that is happening. In the United States we haven't seen as much of that expect again in the Buildings market.

Buildings market is a competitive market it's also a very segmented and fractured market, so again we see a lot of smaller competition in some of the smaller projects. But again when you’re working on the larger projects you have less competition, when you’re working on the highly complex [barge] projects you have less competition.

So overall in Canada a little bit more competitive environment, in the U.S. much of the same..

Okay.

And it’s hard to say that the bigger companies like StanTec as we continue to grow; it's becoming as significantly harder for the smaller players to achieve new business wins?.

It depends on what space and the size of the project, even though we are one of the larger firms in North America in field and that does position us very well sometimes the smaller firms are little bit more nimble and so in our competitive environment what we see is that it is very difficult for the smaller firms to bid on the mid-size and large projects, but they are very well positioned to bid on some of the smaller projects.

I guess all our competitive advantage we feel it's only as that we can actually position ourselves to across that we can win the bigger jobs and compete with those of the bigger firms, we’re very well situated in our sweet spot is the mid-size firm, mid-size project, but we can also go down and bid on $50,000 projects with much smaller firm so we find we are well positioned for that, but we do find that there is still a large volume of work at the very small and mid-size level for the smaller companies but we feel we compete very well in that space compare to some of the larger peers..

Thank you. Your next question will come from Leon Aghazarian with National Bank Financial. Please go ahead..

Hi. Good afternoon. You mentioned that Dessau has been fully integrated.

Can you comment on if there are any other related costs left for the remainder of the year and regarding just kind of your first impression so far of the acquisition so far?.

I’ll maybe a touch on the integration and additional cost. Yes, we do expect there were still be some additional integration cost, certainly French translation costs were significant in the quarter.

We optimize our business systems to get the French language capability and the basically the core of our business systems we are going through a phase two of that that's going to allow our employees to operate in French and do their work in French, do things like dealings and entering the time cards and expenses and so on so that's more work that we have to complete this year and those are largely internal cost or not a lot of external cost; the bulk of the external cost that we have incurred to date we don't expect them to continue on through the remainder of the year.

And the second part do you want to touch second part of that question of Dan? Second part it was do you want to just restate that Leon?.

Yes.

Just your first impression, have you seen any surprises whether it would be positive or negative? I know it's early days but just kind of your first impressions?.

No I think sorry I forgot the first part of the question, but yes that were actually really happy with what we are seeing so far, they’re very enthusiastic group, they want to work hard to able to prove an awful lot to us. They want to prove that they are a very good firm, so we go a lot of enthusiastic staff.

We’ve seen no negatives surprises at all and that in itself is a good surprise because when you acquire firm with some history, all is your concern we have been very-very pleasantly surprises there with everything so far and believe me we have been digging into the firms, so it’s a real credit to their staff and their leadership, we’re very happy..

Great.

And then just a follow up and so the following question from me would be regarding the backlog I mean we saw that it drew from 1.8 billion at the end of the year to 2 billion I mean I would assume that some of that its related to Dessau, so can you just comment on how much of the increase is attributable to that and if or not you had gained other additional contracts along the way as well?.

Portion of it is certainly attributable to Dessau, a portion of it is attributable to the change in the foreign exchange and we also saw some organic growth in our work backlog. So a combination of all three contributed to that growth. .

Thank you. Your next question will come from Paul Lechem with CIBC. Please proceed..

Just wondering Dan about the jump in receivables and unbilled revenues it went to 100 days from 86 at the end of the year.

Can you give some more details on what’s going on there? And then also you allowance [doubtful] accounts is up a fair bit, what’s your thoughts about the collectability?.

There is really no concerned Paul in terms of the increase in day sales outstanding, compliments of a couple of things. Start with in Q4 day DSOs tend to go down little bit that last week, two weeks of the year there is less project activity, people are on holidays, so you generate less with and maybe bill a little bit less.

So there is a slightly lower, artificially lower DSOs outstanding, I think were 86 days at the end of the year bumped to 100. The addition of Dessau added probably about four, five days to our DSOs.

Dessau receivables, largely public sector related receivables are older, but they are good receivables, we’re not concerned, the collection ability is good. And the third thing is really just bit of a change in the revenue for the quarter. We have three fewer days in revenue in the recognition just as the way the quarter ended on March 31st.

So not overly concerned, certainly an area of focus for us is consistently around our asset management getting that [indiscernible] billed and collecting those receivable. So we target somewhere around 90 to 95 days, is probably a reasonable level..

Bob maybe I can just on the oil and gas station the midstream sector that you have a good presence in Canada.

Can you talk about where in the lifecycle of those projects you generate the most of your revenue, is it upfront in the environmental approval process, what work do you actually do at these project group due construction, can you just talk a little bit about that where you playing that cycle?.

We play certainly -- we play at the beginning and end of it, so as you said in the environmental services side we’re working with the clients on routing, we’re working with them on environmental assessments, on regulatory approvals and stakeholder engagements. So there is number of areas that we play in that frontend regulatory part.

At the same point in time, we’re also doing a lot of preliminary engineering, feasibility studies, routing studies, technical studies associated with the engineering sides of those projects. So at the front end of the job is certainly where we gather most of our revenue.

When it moves into detail design that’s usually environmental services work ends and the detail design starts, so we’re getting the see designs in detail, again high revenue generators for us.

Once they are designed then it turns to construction, our work then goes into construction management and that is a much less -- I would say roughly 75% of fees are generated upfront with only 25 being done in the construction management and supervision of the project.

So we are still at the frontend of most of these jobs lot of these [closed] pipelines haven’t been built and most of these pipelines is still going through, they’re routing a regulatory approvals and stakeholder engagement. So still a lots of opportunities for the revenue growth.

Of course what we stated is a lot of those projects essentially been put on hold. They are moving slower and new projects aren’t being advanced, but that really is a temporary thing. We just have to determine how long is temporary, but quite happy with our position, it’s still very strong..

Thank you. Your next question will come from [indiscernible] with Desjardins. Please go ahead..

Just to come back on the energy, could you maybe provide more color on how sizeable you expect the retraction in the gross revenue this year?.

Well that’s a difficult one, I think we saw the overall in energy and resources retracted about 6%, it’s really about trying to get -- we’re staying close to our clients as Bob mentioned, but we’re trying to get that visibility and so what’s going to happen in the second half of the year.

Getting the MSA signed with some of our major clients puts is in a good position for when they are ready to make their decisions to move forward. We expect as Bob mentioned again, we’ll see some further retraction in Q2, but beyond that not a great deal of visibility..

That’s been the hardest thing for us trying to determine. Even our clients are having a difficult time determining exactly how long this is going to last.

As we said the retraction in the second quarter shouldn’t be as large as retraction we experience in the first quarter and then it should level up for the rest of the year, but lot of that is depending on the price of oil and how quickly our clients react..

And we have to remember we were comparing to a very strong H1 of 2014 itself..

And just on the election side with the NBP, have you seen any changes or should we expect any project to be delay, any views on them?.

It’s still very early days, I think there has been awful lot of discussion, a lot of comments in the press and really, we believe everyone really needs to relax a little bit.

We do believe that this government has said all the right things so far, I think they really do want to work with the oil and gas industry, they want to protect what Alberta has builds and I think it's still early days the problem isn’t any kind of a government change, in any kind of a major shifting government, just the transition of that and the lack of clarity causes concern and I think that's what most of the corporations concern is.

I don' think that the concern is gravitating to immediately being negative, I think the concern is just that their isn't currently a good amount of clarity and how fast things are going to move forward and how new items are going to play out so were certainly optimistic we believe what the government understands the business here in Alberta and we work with business to ensure that is protected but it will take some time and there is a lack of clarity today and how long that will take..

Okay.

And lastly just to come back on Paul's question around the accounts receivable obviously such a lot of pressure on the working cap this quarter looking also last year typically you consume some working cap in Q1 so just wondering for 2015 whether you should almost recover the full amount that you consume in Q1 so any more color on the working cap going forward?.

Yes. That would be our expectation then we generally do have lower cash generated from operations in the first quarter we used a lot of our cash for America as well as the payment of Dessau.

So, our cash flows are -- I know we were somewhat criticize for our working capital and our structure previously, that's all remedied we’re back in our optimal capital range and we still expect to generate pretty solid free cash flows this year..

Okay, perfect. And I assume the recovery in working cap typically happens in the second half.

Right?.

In Q2 and Q3 are the best quarters for that. That's correct..

Thank you. Your next question will come from Michael Tupholme with TD Securities. Please go ahead..

Just wondering if you can just taught me a little bit more of the energy and resources business unit I understand the second half is murky, but when we think about the second quarter the 6% retraction you saw in Q1 is that consistent with what you would expect to see in Q2 or could it be worse than that?.

Good question. I don’t think it's going to be worse than that could it be the same of that, potentially could.

I'm saying maybe in potential because I'm not sure what I'm comparing to again in the second quarter of Q 2014 that has -- so it was still pretty strong so that's why we have to look at comparing it, that may result in the number being larger but we don't see more layoffs in the second half or more staff rationalization in the second quarter than we experienced in the first quarter.

So to me that the translating in to slightly less retraction in the second quarter than the first quarter..

Okay.

And then secondly is there anything anymore color you can provide on the performance fees in the Canadian mining area in Q1 and then would the Canadian mining practice or business still grow without those fees?.

It would have been a very small growth. I think most of the growth that we experience and that revenue growth was associated with that projects success fee, which was all part of something we do all the time, is rationalize those projects. This was a safety and scheduled revenue generator bonus for us or the project award.

It wasn’t I would call overly significant, it would have probably ended up being a few cents difference to the bottom line, but without that the mining business would have probably been flat..

Okay, perfect. And then just like to squeeze one more in.

I think thus mention of an adjustment to the Dessau purchase price just wondering if you can elaborate on that how much it was and what drove that?.

Yes. Sorry Micheal, I don’t have the exact number, certainly as a material. I think it’s around 4 million or something like that, but it's just the working capital adjustment from the original payment and the closing balance sheet.

We've now receive the closing balance sheet, we are going through the final purchase price accounting on that, so it's not material..

Got it. Okay, thanks a lot..

Thank you. Your next question will come from the line of Bert Powell with BMO Capital Markets. Please go ahead..

Thanks. Bob, we're hearing a lot about growth in the building side of thing these days, I'm wondering if you could just give us a little bit more color in terms of the difference sectors within that, I know you say it’s pretty board based for you guys. But I’d be particularly interested and what's driving stuff on the commercial side.

I know healthcare and education tend to be more of your focus, but I'm just wondering if you can give us any insights in terms of what's really driving the uptick in the activity in the Buildings space..

I think we can really point to the acquisition of ADD Inc. which has a what I would call a commercial workforce planning of some residential high rise capabilities they had a very strong presence in Miami, a very strong presence in Boston.

We've been able to translate that and move that around the rest of the country where we do have good relationships with commercial clients or residential clients, but didn't have that high portfolio of strong projects in a high rise type of developments.

So we've been able to export that especially out of the Miami office and have been winning projects across North America and in Canada.

In that what I'd call, workforce planning high rise, residential high rise commercial space which was not a big space for us before, so that would be the -- probably the biggest reason, the biggest indicator for the growth there..

Okay. And then, just coming back to residential, that was a big area for you guys in prior to 2007 I guess, and there was always a view, that there was some scarce resource that there you had or capabilities that you guys had that would position you well for when that market recovered.

And I am just wondering if you can talk to us about if that's still the case today and generally what kind of line of sight you have to what’s going on in that space, especially in the U.S.?.

Yes, you're right, it is especially in the U.S., in Canada, a good chunk of our community development work is in Western Canada, and to date there's been some slight pausing in reduction of projects, especially in Calgury, not as much as in Edmonton, Eastern Canada still is fairly strong.

In the U.S., though, no doubt, that's where we're seeing some pickup and we're seeing some growth and some more opportunities.

And you're right, we were well positioned from the 2007 and 2008, some of the problems that we're starting to see is in some of the areas, and I think probably, especially California, that downturn was so long, it extended well into 2012 and 2013, it lasted 5 to 6 years in the California market.

So didn’t -- we're probably not as well positioned as we would like in California.

Still well positioned, but we had a dominant position in 2006 and '07, so that was one of the reasons we made an acquisition of Penfield & Smith in the fall of last year, there in the Santa Barbara and up in that valley, and they are doing a lot of land development work. This seems to be a strong area of California.

We've done some strategic hires in the Southern California, Orange County area trying to get a better position in that marketplace. We did invest in WilsonMiller in 2010-2011 which was essentially a community development firm in Florida. So we have a very strong position in Florida.

We've seen a strong pickup of opportunities there, we're trying to build some presence into Texas and there, because Texas has a very strong community development it facing to be almost somewhat unaffected by the procession.

So we still see that community development area been a very strong differentiator for us, it's something that none of our competitors are in, or focused on, that gives us a great competitive advantage and we have a strong position in continuing to build even a stronger one..

Okay, that's great, and I respect your two-question limit and not try to sneak in another one. Thanks..

Thank you. The next question will come from the line of John Rogers with D.A. Davidson..

Hi good afternoon. Congratulations on the quarter as well. Bob, in your comment and I think, you mentioned that within the U.S.

you expected continuation of current growth rate to 10%, but then you also used the word moderate growth and I just wanted to make sure I have that straight, maybe that’s how you think about moderate growth?.

Yes, our moderate growth for us is -- and you know we sort of waivered around certain definitions of our guidance, but the moderate, in our words was plus two to plus five organic growth, in that range.

For us 10% in the first quarter is substantially more than moderate but we're not comparing that first quarter against the relatively low first quarter in 2014, so because of that weakness in Q1 of '14 resulted in maybe a little higher number in Q1 '15.

When you look at Q2 '14 in comparing the Q2 '15 as far we still feel it's moderate, now we would hope it's going to be at the upper end of that moderate range we gave, but to be back at 10% again, probably not.

So when we say continued growth, continued strength in the U.S., you do have to take into account the quarterly results we're comparing to from last year..

Okay, thank you.

And then, just in terms of thinking about organic growth overall, is it hopefully continuing the pickup here, could you talk a little bit about your hiring and are you trying to hire out ahead of that or you're following the client’s lead in terms of -- when their orders is coming -- and how you're thinking about that, and how you expect to drive it that versus acquisition growth bringing in people that way?.

Yes, certainly organic growth I say is two-fold. When you win projects, you have a core group of people to do that project, but it's about every project when you win and especially the larger ones, that gives you an opportunity to staffing up and that generates hiring people and getting organic growth.

And that's companywide, in other words, we may win a project in Western Canada, but they may result in organic growth in California because we're going to be leveraging that -- the expertise in California on that project, so wining a job no matter where we win it in North America is on catalyst obviously for our organic growth, the other one would be more of a strategic hire an individual and we are starting to see more and more of that, but we created, we are not there yet.

But we’re pretty close to getting a position in Unites States where we can start leveraging that position to get stronger organic growth but in some geographies and some sectors we just need that one person not that special individual that's got a great client relationship, a great history, the great portfolio of expertise and we can then leverage with the rest of the company we have in other areas so were staring to see that hiring and hiring some strategic individuals in a lot of the geographies in the U.S.

it's starting to also been build organic growth opportunities, so those of you are the two ways we would look at organic growth..

Thank you. Your next question will come from Ben Cherniavsky with Raymond James. Please go ahead..

Hi. Guys. I am out of ammo; all the good questions have been asked. .

Oh. Common you've got something for us..

Well. Frankly it's hard to keep coming with questions when everything is so consistently as the same every quarter..

We try to be consistent..

Yes. You do have very well congratulations.

I guess I might just ask you since I have the mic, to clarify what seem to be implicate and I think a little bit explicate in your MD&A is an anticipation that the oil and gas business might improve a bit in the second half? Are you seeing -- like what would give you that reason to believe that? And what are you seeing in your order book if you will specifically in oil and gas business in Alberta right now?.

That's actually a good question. Because it is not an easy one to answer, what gives us the confidence of the second half of the year is going to be stable in [indiscernible] and be better than the retractions we suffered in the first half. So a few reason for that one, that's what our clients were saying.

Our clients are telling us that that’s their expectation, when you try to get -- dig into why they’re saying that, it really comes down to the price of oil, so it’s stabilized around this $60, it hasn't continued to decline, it hasn't gone to 40 like everyone it was going to be, it’s staying at 60.

They are trying to find where is that going to stabilize and even in some of our discussions in the last few days with some clients they are even looking at, okay if it gets back to 65, we will start moving projects back into the hopper, if it gets to 70 and were going to be ramping up even more.

So I think a lot of the anticipation for a stronger second half is because there is a general feeling that oil is either plateaued at this level of 60 or is potentially even going to sneak up to the $70 range by the end of the year. Now we need to do is hope that actually happens and then all this will come to fruition.

But at this point in time that's what we're hearing, that's what we read about, we don't know probably any more than anybody else does because we are getting their information from our clients..

Thank you. Your next question will come from the line of Chris Murray with AltaCorp Capital. Please go ahead..

Thanks guys. Good afternoon. Just really quick on a couple of more follow ups.

Just to start intangible assets you kind of give us the numbers there, so you still expecting that I guess it would trend down quarter-over-quarter is that the fair way to think about it or there are some reasons you’re thinking of a step jump as we move through the year?.

No. I think as the intangible asset amortizes there is really two key assets, it's work backlog that we acquire in the client relationship. So we did a number of acquisitions in 2014, the beginning the 2015 with this so and [Sparlings], so we expect -- I think we gave the number in the MD&A about what our expectations are for the year.

We certainly had a more active year in 2014 and that's working its way through the intangible amortizations for this year. I don’t expect them to be higher as a percentage in that revenue than what we saw in Q1..

Okay, great..

But that is contingent on other acquisitions occurring as well..

Fair enough.

And then just kind of returning just to this [indiscernible] very quickly and I guess I’ll also tie this into just the SG&A cost that maybe went into that I guess working with the EBITDA margin for Dessau, I think that your comment was that you expect that at this particular point EBITDA margins will be a bit lower now I guess by a bit you means close to bottom ends of your target range or are we talking couple of points lower and is it like some of the comments you made how to bring in different services over the next couple of years perhaps before that moves higher and the I guess the second part of that is there seems to be a lot of the acquisition cost that happen in Q1 do you still think that you can fit your target for SG&A on a full year basis?.

Yes. There Dessau acquisition related cost did contribute to higher SG&A. we as I said I think earlier we expect most of those external cost have been incurred, there is still some training, some other integration activities that we have to continue on and still some French language translation.

But most of those cost now are internal so that's going to affect utilization which obviously affects SG&A.

So the bulk of the external cost that have been incurred with respect to lower EBITDA margins yes we expect the [Quebec] market is very different in terms of the clients and the margins so what really is needed there is they may get a lower gross margin but we need to have very high utilization and what we're seeing so far is that the utilization levels for the Dessau operations are actually quite high, higher than the rest of the business.

They know how to manage in that market. So we expect it to be a little bit lower, maybe a couple of points on EBITDA, but overall it’s going pretty much as we expected it would..

And do you still expect, your thoughts around I guess in your target range on administrative and marketing expenses?.

Yes, I think as you get through Q2 and Q3 is overall utilization increases and yes we do expect to get there..

Thank you. [Operator Instructions] We seem to have no further questions at this time. I’ll turn the call back over to management for any closing comments..

Thanks, John. Like to close our call by saying, we’re confident on our ability to continue to deliver that consistent value to our shareholders, our diversified plan has served us well to-date and considering the circumstances in the market we expected to serve us well over the long-term. Look forward to speaking to you again in the future. Good bye..

Ladies and gentlemen, that does conclude our conference call for today. We thank you for your participation. And now disconnect your lines and have a great day..