Bob Gomes - Chief Executive Officer Dan Lefaivre - Chief Financial Officer.

Jacob Bout - CIBC Yuri Lynk - Canaccord Genuity Mona Nazir - Laurentian Bank John Rogers - DA Davidson Bert Powell - BMO Capital Markets Sara O’Brien - RBC Tahira Afzal - KeyBanc Ben Cherniavsky - Raymond James Maxim Sytchev - National Bank Financial.

Welcome to Stantec Inc’s First Quarter 2016 Earnings Results Conference Call. With us today from Stantec management are Bob Gomes, President and Chief Executive Officer; and Dan Lefaivre, Executive Vice President and Chief Financial Officer. At this time, all participants are in a listen-only mode.

Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, today is May 12, 2016, and this conference call will be recorded and broadcast live over the Internet. It will be archived for future reference at stantec.com, under the Investors section.

Any members of the media, who are joining us today in a listen-only mode and who would like to quote anyone other than Mr. Gomes or Mr. Lefaivre must ask permission from the individual concerned.

Stantec management would like to caution you that this call will include forward-looking statements and forward-looking information within the meaning of applicable U.S. and Canadian securities laws. By their very nature, forward-looking statements require Stantec management to make assumptions and are subject to inherent risks and uncertainties.

Stantec management will also mention non-IFRS measures. And now, your host, Bob Gomes. Please go ahead..

Good afternoon, and thanks to everyone for joining us. Welcome to Stantec’s first quarter 2016 earnings conference call. Before we begin I'd like to mention that the people of Fort McMurray have been in our thoughts. I'm pleased to report that all Stantec's Fort McMurray employees and their families evacuated safely.

Our focus continues to be ensuring these employees are supported in the aftermath of the wall of fire. Today, Dan is going to provide a summary of our first quarter financial results. After that I will share some operational highlights and provide a glimpse of our market outlook. Following that we will answer your questions.

We have posted a copy of our slide show presentation on our website, it will archived in the Investors section. Today, we released the results of Stantec’s operations for the first quarter of 2016.

We achieved good results this quarter, we can attribute that to contributions from previously completed and integrated acquisitions which contributed to strong organic gross revenue growth in our buildings, in infrastructure business operating unit and to the strength in our United States operations.

And of course lastly we closed the acquisition of MWH Global. This was the largest transaction in our history and it marks the strong step forward in our journey to be a top 10 global design firm.

As a global leader in water and infrastructure MWH will expand our presence to new locations around the world including Asia-Pacific, the UK, Europe and Latin America. They will also add top tier capabilities n dams and hydropower to the Stantec's portfolio. We also acquired Bury Inc. and signed a definitive agreement to acquire VOA Associates.

Both of these organizations will broaden our reach in key areas of the United States. Before I go further I'll call in Dan to share the details of our first quarter financial results.

Dan?.

Thank you, Bob. Good afternoon everyone. As Bob mentioned we achieved good results this quarter. Gross revenue increased 7% from 705.7 million to 755.4 million when comparing Q1 16 to Q1 15, we can attribute this strong growth to our U.S. operations and strong organic gross revenue growth in our buildings and infrastructure business operating units.

Compared to Q1 ’15 gross revenue in U.S. our operations grew by 26.3% with 4.4% of that being organic growth, we're seeing increased opportunities in the U.S. as a result of our going presence, urbanization trend and the increased federal funding, at 5.1% we saw strong organic gross revenue growth in our buildings business operating unit.

Majority of that growth was generated in our education, healthcare and commercial sectors. We also created a new civic sector in response to the move towards urbanization in cities, saw even strong organic gross revenue growth in our infrastructure business with an 8.6% increase over Q1 ’15.

This is mostly from our transportation sector, right now about 75% of our transportation work is in the United States. The U.S. economy is rebounding and our strategic markup position is leading to increased work in major light rail, transit, roadways and bridge projects.

Our recent KBR and FST acquisitions further expand our infrastructure foothold in the U.S. Moving onto gross margin, we did see a decrease from the 55.2% in Q1 ’15 to 53.9% in Q1 ’16, this is mainly due to the following factors.

Recognition of performance fees contained in a large mining project in Q1 ’15, ongoing pursuit for design built in P3 project, primarily in transportation and continued downward pressure on our fees primarily in oil and gas. Our administrative and marketing expensive increased as a percentage of net revenue from 42.5% in Q1 ’15 to 43.2% in Q1 ’16.

This was mainly due to the $3.5 million incurred on acquisition related costs in the quarter. We also have $1.2 million increase in lease exit cost and additional occupancy costs related to office consolidations. As a result of the aforementioned items, our net income decreased 19.5% from 38 million to 30.6 million in Q1 ’16.

In addition we're reporting adjusted EBITDA and adjusted diluted earnings per share this quarter. The cost related to the MWH acquisition had a material impact on our results this quarter and it will continue to do so going forward. We expect adjustments to be higher in Q2 now that we’ve closed the MWH acquisition.

We believe these new measures will provide external stakeholders with better insight into our core operations going forward therefore we have expected acquisition related cost and amortization of acquisition related intangibles. For a full explanation of the adjustments, please have a look at Page M29 of the Q1 management discussion and analysis.

Adjusted EBITDA decreased 8% from 76.3 million to 70.2 million. Adjusted diluted earnings per share increased 15% from $0.46 to $0.40. These decreases are mainly due to the reductions in gross margin and the increase in admin and marketing cost that I mentioned earlier.

I would also like to add that our free cash flow has improved quarter-over-quarter in a strong on a 12-month trailing basis. The day sales outstanding improved from 96 days at the end of 2015 to 89 day of this Q1 ’16. Moving on Slide 8, please not that we'll revisit our 2016 targets as we move forward with MWH integration this year.

We closed this, the acquisition just last week, so we'll be able to provide more guidance over the coming quarters.

We met our targets for gross margin as a percentage of net revenues this quarter and missed targets as mentioned because some of the other factors noted in the admin and marketing expenses and EBITDA as a percentage of net revenue, at 4.9% gross of net income was just slightly below our target of 6% and our return on equity just shy of 12% was pretty close to the lower end of our targeted range.

Our net debt to EBITDA was well within our target below 2.5 times and again as a result of the acquisition that will not change maturity our capital structure and that will report in the second quarter. Lastly, we declared a cash dividend $0.1125 per share to shareholders of record on June 30, 2016. Bob, back to you..

Thanks Dan. Our buildings and infrastructure business operating units continued to grow organically in Q1. As you can see on Slide 10, at 73% buildings and infrastructure represent a large portion of total business.

And as Dan said with the federal funding announcement here in Canada and the United States, we see increased opportunities on our horizon for these business operating units. And of course as we integrate MWH, we look forward to positioning ourselves to take on some of the most high profile water and infrastructure projects in the world.

Story in energy and resources and environmental services hasn't really changed this quarter. We continue to expand retraction in both of these business operating units, but at a slightly reduced rate compared to the fourth quarter 2015. Our Oil & Gas engineering and environmental services work is now a much smaller part of our business.

Therefore, market fluctuations will have less impact on us going forward and we will also be comparing to weaker quarters in 2015. Regardless throughout the Oil & Gas declines we have done a great job of managing our margins. We continue to secure projects which is a testament to our top tier presence and strong client relationships.

Not only in Oil & Gas, throughout the rest of our business in Western Canada. This quarter, we secured a couple of key projects. We’re awarded the civil and electrical engineering design services for the transmission infrastructure, electrical system studies and underground collective systems for two solar farms in Ontario.

We’re also awarded a project for the proposed Auroa LNG expert terminal Digby Island in British Columbia. This project involved completing the marine geo technical investigation to evaluate the soil and rock conditions to the marine off load facility and main ship loading jetty. Moving on to the next slide.

We made some significant progress in our acquisition strategy this quarter. The acquisition of Bury and the pending acquisition of VOA Associates are in line with our strategy to expand our presence in the United States.

If you recall, our 2016 strategic plan outlined our intent to broaden our acquisition strategy to include larger firms with international presence. Our MWH acquisition certainly achieved this.

And while this is the largest acquisition transaction in our history, we don’t see this a departure from our disciplined approach to acquisitions or integration it’s more than natural evolution. The acquisition aligns with our growth strategy in our objective to building top tier presence in the markets we serve.

Our businesses are very complementary to each other. MWH is established in geographic regions and sectors where we would like to grow and vice versa.

Our goal is for a phased approach integration which will truly be a combination of our businesses, as the year progresses they will start to realize the full benefits of our acquisition, but we expect that by adding MWH to our tem we will be a global leader in the water and infrastructure markets and expand our geographic footprint especially in the U.K., Asia-Pacific and Latin America.

We’ll also enhanced our cross selling capabilities to different end markets in that water related construction capabilities to our portfolio. MWH’s position in dams and hydropower will allow us to leverage their global expertise with many of our clients.

And our employees will have a chance to work on some of the most technology advanced water related infrastructure projects in the world. Moving on to organic outlook. During the quarter we revised our outlook for Canada.

In setting our organic growth outlook for the 2015 Annual Report, we expect that the Oil & Gas industry would stabilize or increase in the latter half of 2016 but now the economy is indicating that we may not see a recovery until 2017. As a result, we now believe our Canadian redraw operating unit will retract organically in 2016 compared to 2015.

We do expect strong macro environment and government support for investments and infrastructure and we believe organic revenue will be positively impacted in sectors and regions not tied to the energy industry. We believe that our U.S. operations will achieve moderate organic revenue growth in 2016.

This is in line with the outlook in our 2015 annual report. U.S. economy continues to gain momentum and that is expected to carry on in 2016. Recent infrastructure acts like the FAST Act and the Water Resources Development Act and Proposition One in California will bolster opportunities in the transportation and water sectors.

We expect an organic growth revenue retraction in international operations which currently makes up a small percentage of our business.

The retraction is due to the expected decline in our mining operations which continue to be affected by the decline in the global commodities market and the continued impact of the divesture of our India operations which we completed in Q4 of 2015.

We believe our overall outlook is to end the year with stable organic revenue growth in 2016 compared to 2015. Stable organic growth means in the range of negative 2% to plus 2%. Last quarter we were at the upper end of that range and we’re now expecting to be at the lower end of that range of 2016 in light of the revised outlook for Canada.

To sum it up, with the addition of MWH Global for our team and with the public support of infrastructure investments we look forward to increased opportunities in the short term that means working water and infrastructure.

In the long term as we make progress on the MWH integration we can expect to realize more of the benefits of bringing these great companies together. To just a note, we look forward to seeing investors at our upcoming Investor Day in Boston on June the 2nd.

We will have our business operating unit leaders and MWH leadership in attendance to provide color on our performance and our strategic plans. With that I will turn it back to our operator to begin the Q&A. Thank you..

Thank you. [Operator Instructions] And the first question comes from the line of Jacob Bout form CIBC. Please go ahead..

Had a question on -- I know the deal from WH [ph] just closed, but maybe you can talk a little bit about your thoughts, if they’ve changed at all as far as cost and revenue synergies? And then how the integration is proceeding?.

It's been only days, so the integration, is in pretty early days right now. But certainly we've been holding a lot of meetings in the last couple of weeks that really get to know them better and really understand where the synergies are.

And our outlook for that group hasn't changed it’s still pretty early days for us to consider anything, but certainly we're very optimistic. We haven't seen any surprises so far, we haven't seen anything that changes our opinions of what was stated in the perspectives or what we've seen to-date.

So, so far so good, but it's been basically five days, so we'll just see how things progress. But still very excited, we had Alan Krause who's the CEO of MWH today with our Board and he presented to the Board and we’re all very positive right now..

I mean your contract backlog it's pretty close to flat year-on-year, talk a bit about your duration of your backlog and mix both geographically and by industry and do you have a sense of what the MWH backlog looks like year-on-year?.

So, our backlog it was flat I think our backlog has always represented our revenue pretty closely and so I think we're happy that our backlog has gone up and Buildings has increased in Infrastructure has gone down slightly in Energy & Resources which is a reflection of where our revenue is earned.

With MWH they do measure their backlog slightly differently, they do have a secured and unsecured backlog, so it's really contracted work and work that has been awarded but not contracted. Statements they make and certainly in our review of the information this is the largest their backlog has ever been, it is very strong, especially in the U.S.

water market which is very good to see, I would say it's probably somewhat softer in areas like the Asia-Pacific but overall on a consolidated basis there statements are and again reflected by us reviewing their information, their backlog is the highest level they've ever had..

Last question here, just on impact of the forest fires in Fort McMurray?.

Yes, it certainly was a tragedy for the people there and it's certainly going to be a long term recovery and we want to assist in every way we can.

We were very involved with the government and with all the residence in Southern Alberta few years ago with the floods, so we do have a very strong disaster recovery group that works very closely with the government, we offered our services, we're going to be assisting them in the re-commissioning of the water plants here soon, so certainly we'll do our best to assist that community to get back on its feet.

It is going to be a long recovery but I think that Fort McMurray will continue to succeed, we don't see this long term hopefully effecting our staff there, hope to get back into their houses, but we're certainly looking for our business to continue to grow and flourish in Fort McMurray..

Thank you. [Operator Instructions] We'll take the next question from the line of Yuri Lynk from Canaccord Genuity. Please go ahead..

Bob, just on MWH, wondering if you could tell us a little bit about how that transaction came to be, were they in an active sale process or did you make an unsolicited approach?.

I'd like to say both, they were in a process, we had heard rumors that that they were in a process but they had made any thing official and I did contact them, and it's probably about a week after that that they got back and stated that they had engaged a company to assist them in reviewing their strategy going forward.

So, they did run a process, but it was quite relatively short process, it was very focused on finding a strategic partner, that either being a PE firm or a strategic merger and we are lucky enough to convince them that this was the right choice..

Everything you read about water, calls for higher spending in that segment so I can see the logic from that perspective on MWH, I was a little bit surprised on the perspective that that the firm has essentially been flat in terms of revenue and EBITDA generation for the last three years.

Can you provide any color as to why that is and if that's what we should be expecting going forward, you talked a little bit about the backlog but just how should we think about the growth profile of MWH?.

I think you're right, when you look at their information their definitely -- their revenues were, almost retracing if not being flat for the last couple of years. Two main reasons to that, one they did have a global platform and some of their operations were in Asia-Pacific, in Australia, New Zealand which has relatively flat economy.

They were very also focused in those markets, where in other words they are only doing water, but they didn’t have an off a lot of diversity to rely upon to do -- look at other sectors that maybe a little bit stronger in those economies. They were bidding a NAFTA [ph] program in the United Kingdom in the last couple of years.

This is asset management program of the utility companies of which the 12 utility companies in the UK. They go on a five year cycle for bidding those projects. They were in, in the last year and the year before into a lot of marketing and business development expense in those programs to secure those.

We are happy to say that they were successful on 10 of the 12 programs in the United Kingdom those programs last 5 to 10 years, so they are now in the full revenue generation part of those which is great.

So that was there -- and they also had an ownership capital structure constraint maybe I'll past it Dan and he can talk about the fact that they had difficulty growing because of their capital structure..

Sam WH [ph] was an employee of the firm that had about 1,400 shareholders were employee and over half of those employees were 55 or older quite a bit more than half and so what they realized over the last few year is that the number of shares having to be repurchased by the company was more than the shares that new shareholders were buying.

So it really was a drain on their cash flows and inhibited them from being able to grow the business, so that was probably a third factor that affective their growth over the last two years..

So we see all those areas being really addressable.

This transaction, we can diversify their operations globally, they're now ramped up in the ramp programs and are working fully and certainly we reserve their capital programs, so we see those impediments being removed and we're looking for them, renewing their organic growth was really strong and even through the years like 9, 10, 11 were optimistic..

And I'll just try to sneak one more in here and you've just talked about the nature of the risk that you're taking on with the construction piece of the business that’s a bit concerning because that does look like a bit of departure from your business model that serves you so well for so long.

So are we going to wake up one day and see cost reforecast and that kind of stuff with Stantec or if the risk really not that great, it’s well contained?.

I'll jump on your last comment that risk is well contained, that's one thing we're very comfortable with. For one thing it's 15% of our business, so it's not a large part of the business and we don’t see that significantly growing, we see the consulting operations opportunities there.

They are very focused construction business and the water business, so it's a business that they understand very focused and very specific part of it which is, water and wastewater treatment.

So because of that we're very comfortable, they run it like a very separate business which is very important to us because we do not see this as an integrated part of our overall company. This is a part of the business that is different needs to be managed different, needs to be led differently. It has a much different risk profile as you’ve stated.

Certainly, it's an increased risk profile for us, but again it's only 15% and it's well managed and very focused only in two countries United Kingdom, United States. So it's not that they're going out to into the emerging countries and trying to win work. So we feel it's very focused, it is very separate.

We do not talk about it as an integrated service delivery between and construction consulting.

We talk it about it as a bundle delivery service or a combined and we see that as where the advantages especially in the United Kingdom where a great deal of work, the majority of the work there is designed and build and you need to bring the construction partner to the table.

You might bring somebody you know and the same thing with the United States. The design build market in the U.S. is growing especially the water market many of the municipalities want to see that bundled together and MWH has that capability.

So it maybe a slight departure but it's still going to be a very focused part of our business being not integrated consulting but complementing it..

Thank you. And we'll take next question from the line of Mona Nazir from Laurentian Bank. Please go ahead..

So just a couple for me, just firstly turning towards your EBITDA guidance, Q1 was below that target, we mentioned a number of factors in your prepared remarks including project mix from higher competition putting some pressure on fees. And I know last quarter you saw some margin compression due to lower utilization, I did see stocking level static.

I know and double rate is going to come into picture with a little bit lower margin, please speak about confidence that margins will pick up in your legacy business and how much of a variance between your actual margin this quarter and expectation with kind of confined the Q1 period and can you envision right sizing, seeing socking more if you're expecting stability in Canada in 2016? Thank you..

So certainly we feel that there was some I would say more unusual issues on the first quarter in the P3 projects and the design build projects where biding it was higher degree of a higher number of those projects we were bidding and certainly that has an impact on margins because we do bid those projects at a lower margin.

The increases pressure that is certainly something that we feel now work through but unfortunately that will continue through because in the Oil & Gas the clients are trying to be as efficient as possible that just means we need to be as efficient as possible with regards to how we manage those projects.

I think our guidance says that we’ll be at the lower end of our range in growth margin but we still believe that it’s going to be within that range. So, it certainly had an impact that basically connects right down to our EBITDA margin, but we do see us continuing on, but albeit at that lower end..

And just turning to the organic growth I know your original guidance for 2016 was based on from increased infrastructure spend and we’re seeing that in the U.S.

but Canada I know that’s slower to trickle down and it’s more back and waited over the 10 years is that now factored into your revised outlook or and then just also just --?.

More or less I think in the United States you are right that it is back in focus but it does have an immediate impact with some projects at the state level and that is where we are going to feel we have a good position in the states -- usually the states go ahead and be a little bit more aggressive with their budgeting and their release of some projects once they get some clarity and the FAST Act has provided them some clarity, so even though the FAST Act is a right, it is definitely more back and waited it does have an impact initially at the state level just giving them confidence so that’s one thing.

In Canada in those well an interesting infrastructure program if you read into it the Canadian government actually put an awful lot of money into what I call the north more of the average on first nation communities really investing in those communities and that is a very strong position for us, we have eight partnerships up in both territories in B.C.

and Alberta and that’s going to provide us some opportunities there and that funding is actually very strong and is there now that money is committed. So we do feel we’ve got some opportunities on the short term as well as the programs ramp up, we’re going to have opportunities of a long term..

Okay.

And just lastly turning to M&A is it just safe to assume that as you work to integrate MWH is in a hold out on one medium or a larger transformational acquisitions this year or perhaps next year and just continue with the tuck-ins in the U.S.?.

Yeah, I think that’s logical to assume I mean you never want to say never because an opportunity may come up that is just too good to pass up, but that certainly won’t be where it our focus our attention in integrating and leveraging the opportunities that we have of MWH and those are exciting and it’s going to take time.

But certainly we have platforms now in the U.K., in Australia, in New Zealand that we can now diversify our tuck-in program to other regions globally whereas our tuck in program is more or less delegated toward U.S. and into Canada we now got the opportunity in the U.K., Australia, New Zealand.

So at smaller firms there to build and diversify those processes as well so certainly that will be our focus I think we have now this is a fairly big gulp for us, we want to make sure we do it right and focus on that integration and that will give us some time and certainly than focus on some of the smaller ones..

That’s great. Thank you so much..

Thank you. We will take next question from the line of John Rogers from DA Davidson. Please go ahead..

Couple of things. First of all, in terms of the impact from -- Bob you mentioned in the FAST Act and the new programs in California and another one in Texas as well.

Have you actually start to see benefits from those yet?.

Again but not benefit as in real work, real time projects no but where the benefits are is a lot more people are talking about doing projects and our relationships with our client they are talking to us about that.

So certainly it’s created the optimism it’s created the focus on the projects, so that’s where I guess the benefits are, but say they turned into real projects in the last three weeks or no..

Okay. And I just want to make sure that because it seems like that’s still out ahead of you..

Yes it is, definitely..

And on the other hand the buildings market there are some reports that would suggest that while certainly not declining, but it appears to be peeking out or at least the rate of growth there is well and I noticed that you seem or you seem more active on the institutional side of the business that, any thoughts there?.

Oh great thanks for the Segway John, so this is something we are starting to see the benefit that may be sometimes our investors and shareholders don’t see is.

Now we invested fairly heavily in our buildings group starting about three years ago where we needed to diversify out of healthcare because we saw what happened to our business when healthcare declined.

So we made a real focused intent to get out there and focus into diversify into education in more and more into the commercial with VOA it’s going to add even more strength in that are that groups are now well integrated together, are leveraging their relationships and all those areas are now growing, sparkling in Seattle continue to grow and partner and cross sells through our other areas.

So the buildings grew very quietly we have built an extremely strong much more diversified projects in the United States and are winning work and growing very well..

But you see that market slowing at all?.

No I mean right now we’re as busy as we can be in Texas, our Florida operations are hiring and busy. But right now that is one part of our company that is definitely just picking along very well for us..

And then lastly maybe for Dan, do you have estimate of what your acquisition expenses are going to be with the deals that you I guess completed so far through this year?.

I think I have a -- with respect to transaction costs or?.

Well I guess more transaction costs and those cost elements that you're excluding from your adjusted earnings now?.

I don't have a full picture of that today John, as you know we just closed the transaction, I know that a number of the costs will get capitalized and amortized over the life of say things like our credit facility, there were certainly some transaction related costs for advisory services, legal services, due diligence tax etc.

and those costs just started coming in at the end of Q1 of which you saw some of them.

I don't have a full picture of exactly what that is but it will be in the tens of millions of dollars I can say that, I just don't -- it will be less than a 100 for sure, because the number of those will be capitalized as well, but I don't have a specific number for you today..

And then what about for -- you've given us the first quarter of '15 now, do you have any -- do you know what the number for the full year's 2015?.

2015 transaction costs were pretty low in that, we, on all of these smaller transactions we do, the bulk of our work internally, so getting any -- the biggest costs would have been associated with public legal fees and then some advisory services. So, it would be probably in the same order or magnitude over the quarters.

I don't have it over every quarter at my fingertips here, but I think you could look at the business acquisition notes from our last quarterly reports and get that information..

I'm just trying to think about how you're going to be presenting these numbers now, and, okay..

I think you can find that in our business acquisition note where you'll see transaction costs..

Thank you. And the next question comes from the line of Bert Powell from BMO Capital Markets. Please go ahead..

Just a couple of questions one, the cultural fit with MWH, I just want to make sure, if you can walk us through how you got comfortable and how that aligns with Stantec? And also if the catalyst for the transaction for them was as skewed as for higher age, isn't that a problem that you inherit in terms of the talent being -- not having the duration that you might like?.

With regards to the cultural, culture is always a hard one to define. I've always said, you know it when you feel it, so, certainly it’s been a number of conversations we had with them and I had the opportunity of having some very one-on-one conversations with their people.

And you look at values of the company, you look at what they do, what's important to them, how they run their business, how their leadership manages their business. All that sort of contributes to the culture of the company, so I think we're pretty good at doing that, that's something that we feel that we do analyze well.

The financial due diligence of the company is, I'm not going to say it's easy but it's more black and white, whereas the cultural due diligence is one where you really got to understand what do you mean by culture and I think we do a good job of that.

And I think it’s for the factors that I listed so, we do feel and everything we've seen in the numerous meetings we've had in the last couple of weeks where we're now driven in deeper into the organization, we're very comfortable that we've read that right, so that's good news so far.

With regards to the issue of age of senior people and the runway then being, you're making the assumption though the senior people are the key people.

So some of these people were probably near retirement or probably should have retired, but unfortunately there were no shareholders to buy their shares and the cash flow wasn't there to buy their shares. And that has a tendency of having people hanging on to their careers at the end, maybe longer than they've wanted to.

And that was something we looked at in our due diligence, who those shareholders were, what positions in the company did they have, their leadership is actually very young. Their leadership in the company, deep down into the company is very young.

We were just at their Chicago office couple of weeks ago, and thankfully I was the oldest person in the room, so it was a very young group of leadership. So we're not worried about that, that was part of our due diligence and we looked at those key leaders are still there, we've tied up with the key leaders that we feel we need to tie up.

So, we're pretty comfortable that we have the right people here to run that business..

And just next question, just if I think about the business going forward probably more infrastructure which means at some level more P3s, certainly that'll be the case I guess in Canada and UK, we've got competition, we're throwing construction into the mix, gone are the days where we can think of the EBITDA margins of Stantec of being that 13% to 14% range, are we going to be in a new range, when we give the updated targets, I'm not sure what [indiscernible] the Investor Day in Boston, just if you can give a sense of directionally what you're thinking about that at least today?.

I think the first thing is as MWHs margins as you would have seen in the perspective are slightly lower, we're going to work hard to get them to the same level of Stantec margins in particularly in the U.S. So that's a first part of that.

The second part of that construction margins in this industry as you know are lower, but we will be reporting the and intend to report the construction business separately from the consulting business, so we get more visibility into the relevant margins of the various operating units. So that's our intent going forward.

Whether we have that information available for the Investor Day, I don't think we're going to have that available, first, that's only three weeks out and we're just now just getting our arms around it. We don't have the exact visibility today..

Bottom line, we might have a slight impact, I just don’t think the fact that our margins are at the highest end of our industry, I think that's going to be maintained but it might be slightly lower than what our historical ones have been just because of how that business mix is changing, but certainly we're going to be still at the upper end of that range..

Yes and I was just talking about the competition in there as well as whether that seems like that might be more permanent than not, but maybe just transitory?.

You always have competitions sometimes when markets are slower that competition gets a little hungry that's all..

Thank you. We will take the next question from the line of Sara O’Brien from RBC. Please go ahead..

Can you guys comment on just based on the backlog that you have in the duration for MWH now what the outlook is for revenue, should we still look to the F15 numbers for modeling purposes or is there opportunity for organic growth to come through as early as ’16?.

So it's a question basically is our organic growth of the course Stantec business going to potentially be affected by the acquisition?.

No, is MWH likely to show organic growth relative to what we see in perspective so the CAD1.7 billion or 971 or so net revenue?.

I think what we'll see Sara is, we report that as acquisition growth, but I think we're going to try to do and that was a part of an earlier question as well where we see synergy, so where Stantec and MWH together are winning new work, we will try to keep track of that, this will obviously be difficult, but that is where we would see what we would call organic growth in the traditional sense where neither of us would have won those projects independently, but we win them together.

So we will probably try to classify that and give you that commentary around synergies going forward..

Like I guess, does Stantec still only consider organic growth one year following an acquisition?.

That's how we historically done it and again to date we haven't changed that..

Okay so even if we were classified as acquisition growth, I just wonder if it's the starting point of the perspective revenue is unlikely -- is what you're expecting for F16 or if you would expect that number can increase just based on the current backlog?.

It is based on the expectation of management from MWH and we reviewed that. They have as we indicated earlier the backlog is strong, it's healthy and it's growing. So we expect them to see those revenue targets.

They are in a couple of different markets in the Asia-Pacific region that Bob mentioned and certainly in anything commodity related in those market. But overall the other groups seem to be doing fairly well..

Okay and then maybe Dan if you can comment on first step for integration and sort of the timeline you've seen of synergies, I mean is it more of a cost upfront that is accelerator or do you see some immediate synergies and if you can just qualify what those might be?.

I think Bob mentioned that there have been a number of operational meetings that we've had, we're starting to get more in-depth meeting around almost doing detailed due diligence around integration and what the opportunities are there.

In terms of cost synergies this can be some immediate things we said we’ll try to achieve those cost synergies out to the end of 2017, so we're going incrementally, again there could some early days, they had a shareholder requirements and things like that and an external board.

Some of those will go away pretty quickly, but overtime as we combine and optimize our combined operations, we'll continue to see some costing reduced..

And with regard to the revenue synergies, the meetings we've referenced that Dan referenced and I referenced, there were six different meeting out in the last two weeks with number of their leaders and our leaders and various sectors that we have.

The focus of those meetings aren’t integration, the focus of those meetings aren't above how -- it's about winning work together, what clients do you have, what clients do we have, what projects you chase them that we can help you win that's all we talk about because there is no better way of integrating the Company or getting together and winning the project together.

And that's something we do in all of our -- the opportunities here have been very exciting and I think that's the one thing we’re very -- we see ready is that focus has and already paid dividend where we're going to see client, this week and next week as a combined company working across selling into them.

So certainly we expect to see some of those revenue synergies start flowing in quickly..

Okay.

And is it fair to say then number one is cross selling opportunities and then number two is go after the cost synergies?.

They can over the same time and actually, there have happening at the same time because they’re really in different areas. So in operations the focus is on winning work and combining the companies from maybe a back office perspective the opportunities are cost synergies..

Okay. That’s great. Thank you..

Thank you. The next question comes from the line of Tahira Afzal from KeyBanc..

So Bob I know that you’ve probably been watching the whole Flint, Michigan debacle here in the U.S. We’re talked about under spending on the water infrastructure side in the U.S. in the past.

Are you seeing any of these translate into real movement on infrastructure spending and water picking up here?.

Absolutely I mean, thanks again [indiscernible] because all you need is a disaster to get people actually focused and aware that they are exposed and they need to start investing, so you don’t become another Flint, Michigan. So we’re absolutely seeing our clients are much more open to saying and evaluating what their risk is looking at that.

So absolutely, so every time that happens you get a call from a client saying we’d like you to come in and analyze our system and tell us what our risk is.

So there is water -- that’s why did this, water is such a great area to invest in because I don’t think anybody can complain about having clean water and it’s just a matter of investing in it, with the consent degrees and the capital investment programs out there for infrastructure, yes we’re pretty optimistic that that funding will continue to flow because the need is there..

Got it and just building on that Bob we’ve seen two years of flooding in Texas which is unusual and now that you work there a little more you’ve probably seen it to clearly there is a lot of climate change effect potentially coming through and then probably be compounded as we go forward.

As we’ve gone out with the acquisition under your wing do you see that may be one of the biggest growth areas more on a global level where water is concerned?.

Absolutely, I mean we talked so you’re hitting two real high points, thank you and with water there is a lot of treatment, the waste water the waste water treatment the other huge area for growth is sort of surface water flooding, water resources resiliencies if city.

So instead of going in and fixing municipality or after a flood is protecting it from the flood happening in the first place.

So that resiliency focus and spending money upfront in protection rather than in recovery is where municipalities are starting to put their focus in across the United States into Canada and in you’re right, globally so it is an area that when we are considering where did we want to grow and with who did we want to do that, with MWH was perfect with the dams and hydropower we are working with them now in the Dakota, in the Ohio Valleys and looking at TVA with their flooding and you’re right we now have around 800 people in Texas and they have gone through some the worst floods they have had in the Century.

So that is a huge area for growth in the water resources side which is really something new you, are right it hasn’t been our focus, it more than recovery, for now which is the proactive into the resiliency site of it..

Got it. Okay, Bob.

And last question from me you talked in your written text which you released earlier, on really some transportation competitive pressures are those sort of regionally in one area or is this pretty broad based? And are there as per client is it more public sector P3 oriented, any color would help?.

Yeah, the P3 really depends on what team you are on so really have to be careful who you chose as a partner to go after a project and we are very selective about that and now because we’re getting certainly significantly more mass in the past years, we’re now attracting some of the bigger contractors there.

So we feel that we have improved our capability and more our competitiveness in that area without actually having to lower our fees and margins to get on a team which is usually what you need to do if you are a little bit more inexperienced, as you may be able to price your way now the team. Now we’re experienced and our mass is getting us on teams.

There is some regional focus to that, there is some regional competitiveness where competition is higher in some areas but I would have to say competition is everywhere there is -- and no matter where and especially on the bigger projects and you attract some of the bigger players you have that competition.

For us it’s really important then to get on the right team with the right partner..

I think it’s fair to also say here is as we are pursuing those projects on a design build or P3, we do a significant amount of design and we are putting some of our fees at risk and at lower margin that’s why you’re see some of the lower gross margin happens in P3 markets in Canada as well as the design build transportation markets in the U.S.

where, that’s where you are bidding and pursuing these projects. If we win them then we get an uptick on that margins and successfully, if you don’t, you carry on to the next one..

Got it. Thank you folks and congrats for the acquisitions..

Thank you. We will take our next question from the line of Ben Cherniavsky from Raymond James. Please go ahead..

Can you talk a little bit about how you plan to get the margins higher in MWH? What are some of the specific addressable parts of the business that have room to be managed up and how long that might take?.

I think first off that's not going to be immediate, so that is something we're -- if you really look at the teams that you have and by combing our teams, by combing how we execute projects, we feel we are very efficient at that managing, are managing those projects where we feel again we're very efficient at that, that drives up those gross margins.

So that takes time, it's working through them and their systems and processes, how you -- what team, how you utilize your people across a wider footprint. All those things improve your margins. We've done it before with a lot of companies and it is something that is, it takes months it's not something that you go into the first project and do it.

So it will be something we're pretty confident that we've done it before but it does take a while..

And from a back office perspective Ben, we have to take a very prudent and disciplined approach towards our integration, we're not -- we don't want to break things, so we want to make sure that as we combine our companies we're getting the best of both firms, and that takes some time and from that road we'll be able to optimize both businesses, make sure we're doing the right things there.

So, we're going to be very disciplined about that and be cautious, it’s not about going in and just cutting costs, it's about doing it very [indiscernible] and appropriate approach for what's right for both companies..

And how much of it is productivity related, like where, how would you compare the -- you guys do a very good job of managing your office and lay your productivity utilization rates, et cetera. How does that compare to what you're seeing so far at MWH.

I mean they’re a partnership, lot of more senior seasoned guys who may have been as you say looking to retire, I imagine they're still showing up at work, but you might not get the same productivity out of a hungry young engineer, I mean what -- how does -- is there anything to that at all or do you see an opportunity to improve productivity in those sorts of areas?.

I think there are opportunities Ben for sure, when you look at their business, there labor costs are similar to Stantec's and that makes up the bulk of their cost, so utilization is an area that we will be focusing on and there are some other overhead costs that, marketing and business development and so on that are large on the income statement, so we are focusing on that.

Utilization some of our Asian [ph] rates has some opportunity to increase, so we're focusing on that as well, that’s another part of this integration..

The other question I had was just I'm trying to get a better feel for what you're seeing or what's going on frankly on the construction markets in Canada.

Personally I've been getting more mixed messages, some company say nothing really is happening, it's difficult to say where the ground is going to break and what kind of projects will occur where, how and when, et cetera.

But unless I misinterpreted it, so correct me if I'm wrong, but it sounded like you guys are already seeing some activity in the markets related to stimulus et cetera.

So can you maybe just clarify that for me?.

I think it's more of our thing being proactive and understanding that there is money out there that has been dedicated and identified for certain areas of infrastructure and as I mentioned the Northern aboriginal community and we have the partnership so really we're -- it's like the FAST Act in the United States, we haven't seen any real projects.

We’re excited that there is money there and there is an opportunity there, all you have to do is match the money to the opportunity.

In those communities it's not as clear how that's going to be done, but what we're doing is let's get close to clients, we understand that market very well, we're starting to create some business cases for those communities that go after the money, to make their case for the government that there is a reason for them to access those funds.

That's where we're seeing the opportunity is there but I think you're right in saying it’s a little cloudy how this is going to end, our point is then let's go create it. Let's get out there and find the opportunity, write the business case, access the money, because I think the government isn't even sure how to actually deploy it.

So, I think the money is there, the opportunity is there, clients are there and we see the opportunity in connecting those thoughts..

And nothing has been said about the tragedy of in Fort McMurray and you hate to try to see opportunity in miss-fortune like that, but I mean I imagine there is going to at one point be a lot rebuilding and engineering work that would have to go along with that, do you guys, do you see that being an eventual outcome at some point?.

In that case, in any kind of a disaster there's always the need to go in and help and recovery after that, in Fort McMurray's case, they did an outstanding job of protecting their key infrastructure. So, their water treatment plants, waste water treatment plants, their schools, lot of municipal buildings have all been saved.

But there is a cleanup effort, there's a validation and conditioning to get things back on its feet. There is a rebuilding process, obviously for the 2,800 homes that were damaged, there again, I mentioned the flooding in Southern Alberta. So, what happened is you have to create housing for these people, because it's not going to be overnight.

So in Southern Alberta there were basically mini-cities constructed in industrial areas so that people could live a year or so while their houses are being rebuild, we have that experience, that knowledge in our past history and we're offering our services for the government and we hope we can help..

Yes, well like you say you hope that -- at the same time you hope that you don't have to help, I mean it’s good that they’ve saved a lot of infrastructure so --..

They have and so, I don't think the disaster, it's been a disaster and families are going to be suffering for years, but again I commend the people that protected the key infrastructures there..

Thank you. We'll take the next question from the line of Benoit Poirier [ph] from Desjardins Capital Markets. Please go ahead..

Just my first question is on related to the gross margin in Energy & Resources, so I understand you are comparing against a tough quarter last year because there was a recognition at some piece for certain performance metric, but just wondering does the 45% we saw in the quarter, whether it's kind of sustainable level going forward on the Energy & Resources side?.

Yes, I think it is, and I think one thing we've been very happy with this is the performance in the margins that our group has been able to maintain. So you're right we're comparing against a stronger quarter in Q1 of '15 plus that onetime metric for that one project that was an uptick that again made the comparable little bit out of line.

At 45% going forward we do feel sustainable, that group has got solid work now going forward, we're comforted by that fact, we don't see growth so to speak, but we certainly are now getting to feel that we have stabilized at that level and we can maintain the performance of that level..

I think it's important to note that it's internally our oil and gas business in particular in Canada where the bulk of it is, is achieving the targets that we set out for, so they are in a very difficult environment managing extremely well..

And just for the organic growth prospects for infrastructure and building, obviously you have good performance in Q1, is it kind of a good run rate for 2016?.

Yes, I think that they're all, both of those are good for '16. We don't see anything changing that outlook and certainly that's the areas of our company which again represents almost three quarters of our business that's performing very well..

And on the SG&A side is there -- I know that it increases a little bit year-over-year, is there any opportunity for additional workforce reduction in the certain business segments?.

We monitor our utilization really well, really focused on investing our marketing and business development costs really well, I wouldn't say there's anything significant that we can get in there and dig deeper, at this point in time you got to make sure that you're investing in your business, I say the only weakness that has now impacting us is the mining business where we came off the Jansen project last year.

So there is some reductions there that we're dealing with in Q2, but outside of that I think we're managing the rest of the business pretty well..

And given the change in the tone for energy with the recent spike in commodity.

How does it translates, do you see kind of some renewed momentum and what would drive upward the gross margin for Energy & Resources?.

The gross margin I think we just stated it's probably going to be pretty stable at that level it’s at and you're probably going to need a much more robust market to be able to start charging a little bit higher fees, drive up the margin. And all the clients are still talking to us, we're still having great relationship with them.

The good news is they're starting to look forward and they're starting to try to figure out what they're going to be doing with the capital program, they're talking to us about those programs. So, we have as much optimism as we can at this point in time, let's put it that way..

Thank you. We'll take the next question from the line of Maxim Sytchev from National Bank Financial. Please go ahead..

Couple of quick questions, in terms of integrating MWH and then obviously this is the largest deal you've done, are you doing anything differently from integration perspective relative to what you've done historically just again considering the size?.

Yes, considering the size, they are a mature firms. I mean they had good processes, good systems, they ran good business, they were as for a private company there was a public dealing as you could get, because of that we've got to be a little slower in assuming certain systems will be integrated into ours.

We have to look closely as their processes and control and how they do their work because it's not going to be as simple as a 200 person firm, but clearly we have some more sophisticated systems, they have some very sophisticated systems.

So I would say the biggest thing is not presuming that we think we know what we know, we’ve got to find out, understand, share opportunities. So bottom line it’s just going to take us longer and slower. But the focus is there.

Very clearly we want to get the benefits out of combining the businesses both for best practices as well as cross selling and leveraging the client relationships. So that focus is continuing and going through, now we always said we know the destination, that destination is going to be combined totally integrated.

With MWH that road we’re going to take there we’re going to travel little slower down that road this time..

And I assume that that pace of integration has been impounded in your expectations when you telegraphed the synergies number right?.

And I think we’re -- when I say that the backup for -- there is going to be parts of their company that we will be able to integrate relatively quickly. And then there is other parts of their company that we have to take much slowly.

So that was a generalized statement saying that we’re going to take it slow because there are some pieces that we can feel almost immediately, let’s combine these businesses and move in. Environmental services they have a small group, small is a relative term, its couple of hundred people. We have about 1,400 people in the U.S.

very quickly we can integrate that group into us. Same thing with mining they do mining work and we saw some synergies there. So all that was forecasted owing to perspectives and what we’ve seen so far nothing changes that viewpoint..

Okay. Now the next one.

And then in terms of -- do you have a sense of the percentage overlap in terms of clients or is it so minimum that’s not even worth discussing?.

Yeah I’d say the overlap is there for -- and so first off in water in United States the overlap is really small, we were very surprised, pleasantly surprised and I think it was like five center municipalities where we’re both chasing projects out of probably 50 municipalities. So we are very pleasantly surprised there.

Where we do have clients overlap for example in mining the client overlap was totally separated by different services. So we have -- what they do for the mining clients we don’t do and vice a versa. So where we did have some overlap of clients the overlap of synergies isn’t there.

So certainly when you look at water even in the United States MWH has a very strong presence in what you called West California and up through to Organ and Washington, we have a very strong presence on the east coast.

So combined we now have a dominant presence in the United States and with our combined presence in Texas we have a commanding presence in that state too. So we are pleasantly surprised we felt this going through the perspective, we felt that during our due diligence that’s been confirmed in the last couple of weeks as we dig into the business..

Yeah that’s very positive. And then just actually one from our question on the environment I mean obviously this is the disclosure right now is ex-MWH, but in terms of can you may be highlight what is exposed to, let’s call it maintenance/regulatory spending and then whatever is really required from a CapEx spending perspective on Oil & Gas.

If you can clarify that please?.

Yeah they do very little environmental work Oil & Gas I think they really had Kinder Morgan as a client and one other client in the U.S. There other big clients for environmental services was Honeywell, Boeing, GE, so there business in that is not -- very, very little exposure to the energy side of the business..

Okay. That’s very helpful. Thank you very much..

Thank you. And the next question comes from the line of Anthony Posa [ph] from Scotiabank. Please go ahead..

With reference to MWH and the construction division how do you see it going in future in terms of importance like are you going to expect the maintain the 15% revenue or will it decline overtime and could you give us a bit more color on its future?.

Hard to say at this point in time we’re still trying to understand the construction business as far as we’re seeing, the backlog is very strong in their business, but we are much more focused on just taking on enough work they can do. I don’t see us doing any acquisitions specifically in that space happening.

Anthony, in the next short while certainly we want to grow the consulting business through acquisitions.

So just because of that I would assume and as the consulting business grows the construction business may be a smaller piece going forward, but still see growth opportunities organically certainly for the construction business based on the backlog that they have.

But that business as we said may times is a really different business, you got to be much more careful even on your organic growth to maintain it within a limit that you can manage because just simply going out and hiring a bunch of labors is one thing, but finding the right people to manage those jobs is much more difficult.

So we’re very cautious in that area and that cautiousness probably will result in it being slightly smaller going forward over the next couple of years..

But could we anticipate the price of the acquisition, there was talk about potentially selling it off or did MWH look at selling it off in the past?.

No, the matter of fact MWH is not something that we are committed to as well. It felt that it was very core to their strategy especially as it comes to design built both in the United States, but even more importantly in the United Kingdom where the design built was almost a requirements of the majority of the clients there.

So you needed to bring a construction partner to the table and again if your construction partner is a part of your company they are much more comfortable in that relationship and knowledge. We see that growing business in the United States as well.

MWH saw that, they were positioning themselves for that and so they would never consider selling it, because they see it as strategic investment and again as I said earlier on the call and it's very clear that we feel very differently maybe than some of our competitors, that that difference needs to be maintained, that separation needs to maintain.

We will bundle the services together, we'll combine those services on projects for clients, but in no way does that mean integrating those services because they're different businesses and again MWH has that same philosophy..

And just quickly another question, the U.S. senate recently approved the $11 billion water resource bill and the other talk about authorizing funds for 27 U.S. Army Corps of Engineer projects, could you give us a bit of color like MWH's relationship with the U.S.

Army Corps of Engineers, is it an important client and when you look at those contracts, are they at similar or lower margin than the typical contracts when you deal with government bodies?.

I would say there's a -- from a government cycle work, of course work is I wouldn't say more nearly upper end of that, that's certainly much more of a managed business with a prescriptive profitability. But we -- it's a long client, Corps is a long client of Stantec and it's a long client of MWH.

Again the benefit for us we see is very complementary services to the Corps, our services are much more in the geo technical part of the dams, theirs is much more in the actual design of the dams and levy systems.

So we were very excited about the work with the Corps, we're very excited about the work with PVA because those are complementary services to those clients, and not overlapping, so, all of those bills, all that funding is exactly why we saw the opportunities here of leveraging what they do, so both in the Water Act [ph] and in the Corps investments we have numerous core contracts right now that we feel we can leverage MWH services into it, so we're definitely excited in both those opportunities..

There are no further questions at this time. Please continue with any additional or closing remarks..

Great, thank you again for joining us today. This is an exciting time for our company, our clients and our employees. With the addition of MWH and the numerous other acquisitions that we've added and integrated over the past few years, our solid-solid strategic plan and our strong diversified business model we believe we have a lot to look forward to.

This concludes our call. Thanks again for joining us and we'll see some of you in June 2nd in Boston. Thank you..

Thank you. This concludes today's call. Thank you for your participation. You may now disconnect..