Stantec (TSX:STN) reported first-quarter financial results on Thursday. The transcript from the company's first-quarter earnings call has been provided below.
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Summary
Stantec reported strong Q1 2026 financial performance with net revenue growth of 9.1% to $1.7 billion, driven by 3.6% organic and 7.2% acquisition growth.
The company highlighted significant growth in its water and energy sectors, with organic growth of over 14% and nearly 9%, respectively.
Stantec's adjusted EBITDA increased by close to 14%, and adjusted EPS grew by almost 15% year over year.
The company reported a record contract backlog of $9 billion, representing a 13.2% increase year over year.
Stantec reaffirmed its 2026 financial targets, expecting net revenue growth in the range of 8.5% to 11.5% and adjusted EPS growth of 15% to 18%.
Management highlighted the company's commitment to sustainability, with 68% of total revenue in alignment with the UN Sustainable Development Goals.
The company sees strong opportunities in the US and Canadian markets, driven by infrastructure projects and public sector investments.
Stantec is actively pursuing M&A opportunities while maintaining a disciplined approach to capital allocation.
Full Transcript
OPERATOR
Welcome to Stantec's first quarter 2026 results, webcast and Conference Call Leading the call today are Gord Johnston, President and Chief Executive Officer, and Vito Cummone, Executive Vice President and Chief Financial Officer. Stantec invites those dialing in to view the slide presentation, which is available in the Investors section at Stantec. Today's call is also being webcast. Please be advised that if you have dialed in while also viewing the webcast, you should mute your computer as there is a delay between the call and the webcast. All information provided during this conference call is subject to the forward looking Statements qualifications set out on slide 2, detailed in Stantec Management Discussion and Analysis and incorporated in full for the purposes of today's call. Unless otherwise noted, dollar amounts discussed in today's call are expressed in Canadian dollars and are generally rounded. With that, I'll turn the call over to Gord Johnston. Please go ahead, sir.
Gord Johnston (President and Chief Executive Officer)
Good morning everyone and thank you for joining us today. Our first quarter results reflect a solid start to the year, underpinned by continued strong execution and our diversified platform. We are well positioned to continue building momentum through the balance of the year. Macro trends across water, aging infrastructure, mission critical facilities and the energy transition continue to support strong long term demand for our services. While the operating environment remains dynamic, we remain focused on execution, prioritizing the right work and continually driving strong operational performance. In the first quarter we grew our net revenue to $1.7 billion, up over 9% compared to Q1 2025, driven by 3.6% organic and 7.2% acquisition growth. Organic growth was achieved in all of our regional operating units. Our water and energy and resources businesses achieved over 14% and almost 9% organic growth respectively. Adjusted EBITDA increased close to 14% year over year and our adjusted EBITDA margin increased to 16.9% a year over year increase of 70 basis points. Adjusted EPS grew almost 15% compared to Q1 2025. Looking at our results in each of our geographies in the first quarter, US net revenue increased 11% driven by 12.5% acquisition growth from Page and almost 3% organic growth. Our water business achieved double digit organic growth primarily due to activities on large wastewater treatment projects. In energy and resources, work on a major hydropower dam project contributed to solid organic growth and our infrastructure business continued to deliver growth through data center projects. In the North Central region, we're seeing a number of our major clients consolidating work and awarding larger, more integrated programs to a smaller set of trusted providers like Stantec activity is beginning to ramp up across these programs and we expect this to continue throughout 2026. In Canada, first quarter net revenue grew just over 1% organically strong organic net revenue growth in our water business was driven by biosolids projects and continued momentum on wastewater projects. Robust organic net revenue growth was also achieved in both our energy and resources and buildings businesses through consistent progress on major industrial process projects and public sector investments primarily in civic markets respectively. While our infrastructure business experienced the wind down of certain transit and roadway projects in the quarter, we expect a ramp up of new projects to commence in Q2. Lastly, our global business delivered over 13% net revenue growth in the first quarter driven by almost 8% organic and 3% acquisition growth as well as positive foreign exchange impacts. Our industry leading water business delivered 15% organic growth this quarter through long term framework agreements and public sector investments in water infrastructure across the uk, Australia and New Zealand. The ramp up of new projects in Chile and Peru drove strong organic growth in energy and resources as the growing need for energy transition solutions continues to drive demand in mining for copper and we achieved double digit organic growth in our German infrastructure business due to continued momentum on a major public sector electrical transmission project and increased volume on transit and rail projects. Before handing the call over to Vito, I want to briefly highlight our 19th annual sustainability report which we released in April. Accomplishments from the report Approximately 5.5 billion or 68% of total revenue was generated from work aligned with the UN Sustainable Development Goals. We achieved operational carbon neutrality for the fourth consecutive year while continuing progress towards our Net Zero commitments under Canada's Net Zero Challenge and we maintained an A CDP Climate Score for the eighth consecutive year reflecting sustained external recognition of our climate action efforts. Sustainability is a core driver of stantec's strategy shaping the markets we serve, the projects we pursue and how we deliver work, all of which support long term growth. I'll now turn the call over to Vito to review our first quarter financial results in more detail.
Vito Cummone (Executive Vice President and Chief Financial Officer)
Thank you Gord and good morning everyone. As Gord noted, we achieved solid financial results in the first quarter. Sustained demand across a diverse multi sector platform combined with strong operational execution continues to support these strong Results. In the first quarter we achieved gross revenue of $2.1 billion and net revenue of $1.7 billion, an increase of 9.1% compared to Q1 of 2025. This growth was driven by 3.6% organic and 7.2% acquisition growth. Project margins as a percentage of our net revenue once again remained in line with our expectations at 54%. We achieved an adjusted EBITDA margin of 16.9% in the quarter, a 70 basis point increase compared to Q1 of 2025. The growth in margin was primarily due to lower admin and marketing expenses as a percentage of our net revenue and reflects ongoing disciplined management of our operations and our adjusted eps in the first quarter increased 14.7% to $1.33. Turning to our cash flow, liquidity and capital resources, during the first quarter our net operating cash outflows totaled $2.3 million. The first quarter is typically a seasonally lower quarter for cash flow generation. Further, the Q1 results reflect the expected transitory disruption associated with the financial migration of Page and the higher investment in working capital funding the elevated organic growth in our global region required Our DSO at the end of the first quarter was 74 days, an improvement of 3 days compared to Q1 of the prior year and below our internal target of 75 days. Our net debt to adjusted EBITDA ratio remained at 1.3 times and this is within our internal target range of one to two times and our balance sheet remains very strong, leaving us well positioned for future acquisition growth. I'll now hand the call back over to Gord to discuss our backlog, our recent project wins and our outlook for 2026.
Gord Johnston (President and Chief Executive Officer)
Great. Thanks Vito. At the end of Q1 2026, our contract backlog reached a record of $9 billion, a 13.2% increase year over year representing approximately 13 months of work. Acquisitions completed in 2025 contributed to backlog growth of over 9%, primarily within our buildings business backlog grew 5.4% organically year over year. Most notable year over year organic growth was achieved in our global region which delivered double digit growth of 22%. We also saw strong backlog growth in our water and buildings businesses, both achieving nearly 10% organic growth. I'll note that in the US we continue to see procurement cycle activity picking up as we delivered another quarter of consecutive organic backlog growth. When compared to Q4, 2025 backlog increased over 3% organically, which follows the 3% organic growth that we saw from Q3 to Q4 of last year. I'll now highlight a few projects Stantec secured over the quarter. These wins help demonstrate the breadth of opportunities we're capturing, varying in size, scope and complexity. Drawing upon extensive experience in advanced manufacturing, our buildings team was selected to provide design services during the construction phase of a multi billion dollar semiconductor manufacturing and research and development facility in Idaho. This project includes on site water treatment facilities and five ancillary support buildings. Our infrastructure team, as part of a joint venture, was selected to lead the Design of the first fully electric light rail system in Austin, Texas. This project includes a 10 mile, 15 station transit corridor where we will deliver full multidisciplinary design across tracks, stations, bridges, systems, utilities, drainage and streetscape improvements. In Chile, our Energy and Resources team was selected to provide oversight and quality review for a tailings management facility, reflecting our continued strength in supporting complex mining infrastructure projects. Our scope spans earthmoving, civil piping, geosynthetics and electromechanical systems, and our work will continue through construction and commissioning including tailings, pumps, water systems, piping and electrical components. As we look toward the remainder of the year, we are reaffirming our 2026 financial targets including net revenue growth which is expected to be in the range of 8.5 to 11.5%. With organic net revenue growth in the mid to high single digits driven by strong demand across all geographic reporting segments and business units. In the us organic growth is expected to accelerate, supported by the demand across all five of our business verticals. We are also encouraged by the growing demand in key areas such as data centers and defense as well as in advanced manufacturing. In Canada, we expect to see growth driven by public sector spending plans and continued demand in energy and resources. We continue to see good momentum in defense and other nation building efforts following the recent announcements by the Canadian government. While still in early stages, these programs are expected to contribute to growth well beyond 2026. Related to defence, Stantec has completed work on 16 national defence and Canadian Forces bases across Canada and is currently supporting projects that advance national sovereignty from coast to coast to coast and the Canadian Defence Review recently named STANTEC within its list of top 100 defence companies in 2026. Lastly, Global is expected to maintain strong organic net revenue growth driven by continued high level of activities in our water business under AMP8 and other framework agreements, strong demand in energy and resources and positive demand fundamentals across other global business units. With our continued focus on operational excellence, we expect our adjusted EBITDA margin will continue to expand to a record range of 17.6 to 18.2% and we expect to deliver 15 to 18% growth in adjusted EPS compared to 2025. I would note that these targets do not include any assumptions related to additional acquisitions. Given the unpredictable nature of the timing and size of such transactions on ma, we are starting to see more buyers in the market, particularly private equity. We remain active evaluating opportunities while maintaining our disciplined approach. We continue to see a healthy pipeline of firms coming to market. And we remain confident that MA represents the best use of our capital. As we close out the final year of our 2024-2026 strategic plan, we continue to be grounded in disciplined execution while preparing Stantec for what comes next. We are confident in our positioning and our ability to continue delivering strong performance and long term value for years to come. With that, let me turn the call over to the operator for questions.
OPERATOR
Operator Certainly. And our first question for today comes from the line. Frederick Bastian from Raymond James. Your question please.
Gord Johnston (President and Chief Executive Officer)
Good morning. Good morning. How are you? We're doing good, thank you. Frederick, how are you?
Frederick Bastian (Equity Analyst)
Good, thanks guys. Listen, investors have come to expect Stantec to direct its next dollar of investment towards MA and Gord, you just said as much in your prepared remark. How do you think about share purchases as the current dynamic around AI and just the pressure on public valuation, this narrative and this dynamic evolves. How do you think about share buybacks in this light?
Vito Cummone (Executive Vice President and Chief Financial Officer)
Yeah, thank you Frederick. Maybe I'll take that one. You're absolutely right. I mean at the end of the day, fundamentally we really continue to believe that strategic acquisitions present the highest value creation opportunity for our organization going forward. Stock buybacks are definitely a tool in our capital structure optimization toolbox, if you will. And as you are describing and insinuating, I think frankly at these valuations levels it's becoming increasingly hard to ignore not getting into the market and buying back stock. So look out for that as we move into our open windows here post the quarter. Having said that, the quantums and values contemplated, if you take into account our 2% approved NCIB and the scope of our balance sheet is not overly significant and in no way would impede our M and A strategies. So thank you for the question.
Frederick Bastian (Equity Analyst)
I appreciate, appreciate the answer. Vito, thinking more higher level on I guess on the organic growth front, you still the most excited about the opportunities in the US or I mean based on your comment around Canada and defense spending nation building initiatives, sounds like Canada could be a great area for growth on a go forward basis.
Gord Johnston (President and Chief Executive Officer)
You know I think we see great opportunities both north and south of the border. But you're right, you know, Canada started the year a little bit slow on the organic growth side. But what's interesting is we talked about in the prepared remarks there about how infrastructure pulled back on a couple transportation projects that we had. But we see that filling those being filled up here again in Q2. But other than that, every one of our businesses came into that mid to High single organic growth for the quarter just pulled down a little bit by infrastructure and we're lapping a high comp. It's 12% in Q1 of 25, but if you look at the Canadian business backlog up 6% organically over the year. But then when you look at the opportunities, as you've said with the federal government in the north, our first defense industrial strategy, the Arctic infrastructure Plan, you know, the Build community strong fund, there's just so much good directional activity going in Canada. So, you know, we do feel very good about it. We've talked before about the Arctic over the Horizon award, Grays Bay that we're working on. But there's a lot of opportunities coming up in the North Frederick that we feel really good about not to discount the US at all. And so, you know, we saw that in the US You've seen our backlog, sort of that momentum continue to build in backlog, a little over 3% organic backlog growth this quarter building on about 3% organic backlog growth, you know, in the last quarter. So I think we see that coming and strengthening as well. But so we feel pretty good about North America overall.
Frederick Bastian (Equity Analyst)
Thank you. That's all I have.
Gord Johnston (President and Chief Executive Officer)
Thanks, Gregory.
OPERATOR
Thank you. And our next question comes from the line of Krista Friesen from cibc. Your question, please.
Krista Friesen
Hi, thanks for taking my question. I'm just wondering if you can give a little bit more color in terms of what you're seeing from the Canadian government. A lot of announcements been made. Are we seeing that translate into awards at that point in time? And do you feel like some of the red tape has been cut here in terms of what we've historically seen from the government?
Gord Johnston (President and Chief Executive Officer)
We certainly have seen some awards. Of course, we've all talked about Arctic over the Horizon, but there's a number of additional either proposals that are just that we're waiting for. In fact, what's interesting as we look at the the amount of opportunities, I think you'll see us being pretty discerning as to which ones we pursue because there's so many coming that we'll be looking at it pretty closely. So great opportunities there. You saw that we are named 42 in the top 100 defense defence, Canada's rankings. So just a lot of opportunity coming there. Krista, in terms of has red tape been reduced? Do we see a difference in the permitting process at this point? I think that's still evolving, you know, and we'll see more. But we also note that Prime Minister Carney's coming to Alberta on Friday. So we'll see what he has to say. There certainly had some expectations of an announcement as well, which would be directionally positive for us.
Krista Friesen
Indeed. Okay, that's great. And then just on the M and A side, can you comment what you're seeing in terms of multiples out there for the private companies and how much of a dislocation I guess there is between. Between that market and the public markets and what we're seeing. Thank you.
Vito Cummone (Executive Vice President and Chief Financial Officer)
Yeah, and I'll take that one. Maybe. I mean, we definitely see, you know, when you talk valuations on the M and A side, it's obviously very specific to sectors. You've seen some transactions occur obviously over the last several weeks, and largely in the power side that has you in the, you know, the teens sort of area. So if you look at that compared to obviously where we're trading, there's significant sort of dislocation there. But that's the power assets, I'd say right now with what's going, you know, back to almost. Benoit's question. Excuse me, Frederic's question. Around valuations, we are seeing a dislocation of valuation that I think over time, obviously there'll be some convergence. But it, you know, valuations overall are obviously very company sector specific and. And we'll continue to monitor that and be disciplined as we make our way through.
Krista Friesen
Thank you. Appreciate the color.
Gord Johnston (President and Chief Executive Officer)
Great. Thank you, Christa.
OPERATOR
Thank you. And our next question comes from the line of Benoit Parrier from Desjardins. Your question, please.
Benoit Parrier
Yeah. Good morning, Gord. Good morning, Vito. Just to come back on the U.S. obviously, you've talked about the software start with 2.8% organic growth. I was wondering, any weaker contribution from emergency response and is the retraction in building that we saw, given the completion of certain projects going to impact Q2 as well? I'm just trying to get some thoughts where there's a slowdown on Ilga fund flows or anything else would be appreciated.
Gord Johnston (President and Chief Executive Officer)
So in the buildings business, we did have a soft start to the year in Q1. That said that the backlog in our buildings business, you know, year, year over year, and actually Even quarter over Q1 of this year, over Q4 of last year, you know, we're seeing some positive growth in buildings momentum, you know, similar to in Canada, where infrastructure was the only group that we had that retracted. And because of some project wind downs, it was the same in the States that buildings was the only group we had that retracted a bit organically. Everything else grew. And so as building sort of strengthens here in Q2 in the last half of the year, I think that'll be generally supportive to our overall growth there in the organic growth in the US Overall backlog growth, we talked about sequential growth in this quarter and the previous quarter and both in Canada and the U.S. we actually have a considerable amount of notified awards that hasn't yet been contracted also that will. We'll see that going into backlog here in Q2 and beyond. So we actually feel pretty good about where we are and how the year is going to shape up.
Vito Cummone (Executive Vice President and Chief Financial Officer)
The only other thing I'd add to that Gord is Benoit. With respect to the buildings practice, we're really excited about the page acquisition and obviously our page revenue and business is being reported through our acquisition sort of reporting. But year on year some really nice healthy organic growth in the page business. So those page and our reported organic building sector are working hand in hand and we're very pleased with how that is evolving as we look forward to the balance of the year.
Gord Johnston (President and Chief Executive Officer)
And maybe I just add on with Page, I think our revenue synergies are even exceeding what we had hoped that we would see there. It's the two groups together are very, very strong.
Benoit Parrier
That's great color. And on the global side you were able to achieve 15% organic growth. That was pretty impressive. You call out the strong performance on water, but also the ramp up of projects in Chile and Peru. So just wondering about the sustainability of the double digit performance going forward. Thank you.
Gord Johnston (President and Chief Executive Officer)
You know what, when we look at the water segment with the amp bait, you know we've been talking about that for some time and that just continues to ramp up. So we feel really good about that. Actively hiring everyone we can get our hands on in the uk you would have seen that. Finally now we're able to talk openly about Scottish water because they press released it now how, you know, we're one of the primary design partners there, so that's going to continue to ramp up active hiring. There's. We're hiring a lot in India to support these groups as well. So that's very, very sustainable. When you look into our South American operations, again primarily supporting copper, you know, with the continued run up and need for copper to support energy transition and such, you know, we're seeing really, really strong growth in our mining segment there. Actively hiring there. Interestingly, we're also starting to even more use our Indian, our delivery centers to support our Latin American operations as well. Just because of the, you know, with the growth there it's easier to get some folks elsewhere so we're feeling good about that, really good about our global delivery center as well.
Benoit Parrier
Okay, and where would you be right now in terms of employees in those global centers?
Gord Johnston (President and Chief Executive Officer)
Yeah, so we're sitting just shy right around 2000 people which is where we want it to be sort of by the end of this year. So we might achieve that goal even a little bit early. And so what's interesting is that we, you know, we targeted about 2,000 people and as we continue to grow there, we've actually taken a second office in Pune as well. We've expanded in within our existing office till there's no more space available.
Gord Johnston (President and Chief Executive Officer)
Now we've taken additional real estate and we're starting to hire some people in some other cities as well to support our continued growth. So more to come there.
Vito Cummone (Executive Vice President and Chief Financial Officer)
Yeah, and just a shout out to that team. They're extraordinary and we thank them for their commitment. They are part of Stantec.
Benoit Parrier
Very interesting comments. Thank you very much for your time.
OPERATOR
Thank you, thank you. And our next question comes from the line of Sahabat Khan from ROPC Capital Markets. Your question please.
Patty
Hi, good morning guys. This is Patty on the line for Saba. I'm wondering if I could just get morning. Maybe get a bit more color on the kind of puts and takes and drivers of the pretty good margin expansion in the quarter. Looks like you're tracking at this rate pretty positively against your full year guidance. So looks like some leverage on the administrative and marketing expenses. And was wondering if you could kind of give color on that as well as some of the more mix driven contractions I guess in project margins across the business and maybe the timeline or how you expect those to play out through the rest of the year.
Vito Cummone (Executive Vice President and Chief Financial Officer)
Yeah, Patty, thanks for the question. It's Vito here. I'll take that one. You know, when we talk about margin it always starts with obviously, you know, the right project, the right customer, the right pricing mechanics and then, you know, strong operational execution. And I always go straight to the, you know, the project margin line as the first line of sight there. Project margins were steady this quarter year over year. 54% I think was the number just slightly lower than prior year. And that was largely mix related. Our global business continues to grow, which is wonderful. The margin profile there in some certain sectors, just a bit below maybe other areas. We've talked a little bit about the water business bay incredible volume year over year, slightly lower margins as expected. Obviously very, very pleased with that business and the work the teams are doing. So I would describe project margins evolving in a normal Expanding sort of continuum there. So nothing unusual with that activity. What you're seeing as far as overall margin expansion then really comes down to the admitted market. And you referenced that our admitted market in Q1 was 38.3% of our net revenue and that was just over 100 basis points lower than prior year. And the drivers there really are. We had improved utilization. That's very, very important. So as the teams look to obviously hire and you heard Gord describe the strong demand environment as we move forward while obviously putting people to work and obviously continuing to invest and billable hours and leveraging our back office as appropriate. So we're really pleased with how the operations as it continues to evolve in that regard and managing overall utilization. And then you know, we're getting scale from our operations. So and that's our continued expectations of that. And it's been several quarters that you've been seeing that in effect. And Q1 just continued to manifest that. I think it's the sixth or seventh consecutive quarter perhaps of year over year margin expansion for us. Bottom line, so very, very pleased with our margin performance. And obviously you see that reflected obviously in our full year guidance where we guided to no changes in the guidance. Too early to make any changes. But 17.6 to 18.2 is a real step forward building on the 90 basis point improvement in 2025 versus 2024.
Patty
All right, thanks. That's helpful. Color. And then maybe just kind of going back to the demand environment in the US we could hear your updated thoughts on the outlook for IJA funding and maybe some of the new or the more emerging tailwinds. I think you had recently mentioned that you're working on a handful of kind of hyperscaler data centers representing more than a couple gigawatts of capacity. So just kind of your updated thoughts on that and how you feel about the region going forward and that would be helpful.
Gord Johnston (President and Chief Executive Officer)
Absolutely, yeah. So for iiga, you know, what we've talked about before and you've heard others talk that the, you know, that bill for new awards expires in September of this year. So we're seeing, you know, more and more people talking about trying to get out ahead of time, make sure they get their allocations before September. So, you know, we often get asked, do you think it'll all be allocated by September? That's hard to say because it's harder to get some of the data than it would. But you know, of course important to note that with those IIJA funded projects, even though that program ends at the end of September for new awards. Revenue will continue to be generated on that project for the next three to five years. That's sort of the dynamic, the period of time it takes to process those transportation projects. Parallel with that, you know, the new Surface Transportation act reauthorization, which will provide stable funding for the next five years, is still in process, anticipated to be in that 500 to 600 billion dollars range. We, you know, we're expecting the draft bill from the House is coming. The Senate version is unexpected until June and so it's not expected to pass before the end of the year. But certainly we see, you know, there'll be good bipartisan support for that. You mentioned that the data center is mission critical. Absolutely. You know, that work continues to go. We're working still with the top for five of the top hyperscalers and you know, up to and well over a gigawatt. We talked about in the prepared remarks about this multi billion dollar semiconductor manufacturing and research and development facility in Idaho that we're working on now. So we do see a lot of still great opportunities coming in the US we feel, you see, backlogs are, the momentum is coming there, 3% of growth per quarter over the last couple. So, you know, we feel good about the U.S.
Patty
all right, that's very helpful. Thanks again.
Gord Johnston (President and Chief Executive Officer)
Thanks, Betty.
OPERATOR
Thank you. As a reminder, ladies and gentlemen, if you do have a question at this time, please press star one one on your telephone. Our next question comes from the line of Maxim Sichev from nbcm. Your question, please.
Maxim Sichev
Hi, good morning, gentlemen. I just wanted to circle back to environmental services. Like obviously I realized that very often that segment acts as a sub to other verticals. But how should we think about sort of the inflection point there, especially as Energy and resources is showing some pretty strong organic growth. Thank you.
Gord Johnston (President and Chief Executive Officer)
Yeah, you know, interestingly, we've seen some good projects come into that environmental services group, some with the US Federal government, some with other groups just looking to continue to push that forward. You're right, they do support a lot of newer projects, but they're also engaged in, you know, everything from, you know, the first part of pipelines. We've seen some significant organic backlog growth in Canada in that space. So there's some good things happening in the ES space. You see, you know, organic growth in Q1, you know, a little bit lighter at 1.2%, 1.5 last year. But I think we'll see that begin to continue to increase as we go through the year.
Maxim Sichev
Okay, that's good to hear. And then maybe a question for you to so Page obviously delayed some of the working capital kind of normalization. When should we see kind of, you know, full run rate kind of, you know, similar to Stantex sort of standards. Can you maybe comment there please?
Vito Cummone (Executive Vice President and Chief Financial Officer)
Thanks. Yeah, financial migration was completed here in Q1 so our expectations would be that we are back in line and pretty well on pace here as we move through Q2 and Q3 Maxime. So not concerned about that or don't expect any significant impact moving forward.
Maxim Sichev
Of course, yeah, yeah, makes sense. And then just most sort of a general question, you know, around, you know, AI and procurement methodologies. Are you seeing any pushback or demands from your customer set around, you know, sharing costs or sharing maybe upside from you know, faster design? Do you mind maybe providing any color in terms of how these conversations are going or maybe not. Thank you.
Gord Johnston (President and Chief Executive Officer)
Yeah, so a couple of things there. We've actually partnered with a number of our clients for co creation of some AI applications. You know an example that is down in the U.S. you know, WSSC water in Prince William county, you know, we're kind of partnering with them for the co development of some AI enabled wastewater operations space where we're working with some on digital twin development. Interesting. You know, we're seeing AI, you know, our usage, you know, continue to expand with our client base and you know what we find is it's, it's, it's providing us with some new service opportunities. I'll give you example of that. In Taiwan, we recently worked with our client there and developed a digital twin of a water treatment plant. And we integrated it with some AI driven operational models. So, so Taiwan, of course, very mountainous area. When you get a heavy rain, not only does the water flow down towards the rivers, but so does the sediments. And so that increases turbidity in the water. And so what we do then is using our AI models, we simulate not just the water but the turbidity. Then we've simulated how could the plant operations be varied in order to deal with this water. The beautiful part of it is while we absolutely the AI system could control the operation of the plant from there there's always a person in the middle. This is a public water supply. So we give all that information to the operator, they make their decision and then using the digital twin we can watch the dosing of the chemicals change, we can watch how the plant operations changes. So that's sort of that getting into the operational phase as a new service offering for us. We consult on that Often, but providing this product is new for us, interestingly, it's working really well. And it's one of the reasons that we were recently awarded a really large water treatment plant design in the Middle East. And so the beauty of that is that we're getting new work from it. But there's others and maybe where we've used AI on a. We designed a beach club on a Caribbean island recently and that was a fixed fee job. And so there, you know, we had our fixed fee, we were able to do the design a bit quicker and we did not see, we don't see clients at this point asking for a reduction in that fixed percentage of capital costs. Might that come at some point in the future? Perhaps, but we're not seeing it yet, Max. So we're seeing some good things happening. Happening there.
Maxim Sichev
Absolutely. That's great. Paula, thank you so much.
Gord Johnston (President and Chief Executive Officer)
Gordon, great.
OPERATOR
Thanks. Thank you. As our next question comes from the line of Michael Tumpholm from TD Cowan, your question please.
Michael Tumpholm
Thank you. Good morning. Morning. Just a question about the overall organic growth and the progression from here. Obviously maintaining the mid to high single digit organic growth guidance for full year. Just if you can help maybe us think through how that progression will play out over coming quarters. Like will Q2 get you right into that range or is this more of a building process throughout the year?
Vito Cummone (Executive Vice President and Chief Financial Officer)
Yeah, sorry, no, we expect a sequential organic growth improvement. I mean, it's obviously hard to time quarters and what that might look like, but definitely as we move into the back half of the year and set ourselves up for 2027, our expectations would be that you'd see a ramp through the organic, particularly off the Q1 levels.
Michael Tumpholm
Okay, perfect. That's helpful. And then there was some commentary just a few moments ago about data centers. Gord, I know you've been asked this in the past, but can you give us an update on sort of what percentage of the business that is today, given the growth you're seeing and how you maybe see that looking as we, as we maybe look out to say next year, 2027. Just percentage of overall revenue.
Gord Johnston (President and Chief Executive Officer)
Yeah, you know, it's, it's sitting in around that 3% range. And, and it's certainly growing quickly. So, you know, we could see a doubling, you know, to the 5, 6% range. But you know, one of the things that, that we've talked about before is that I would never want to see it for our company to get up in 15, 20% because, you know, while it's good work and it's high margin work, you Know, we just wouldn't want to have be so exposed to one line of business. So, you know, we'll take the good questions. It's good work. And yeah, I could see it doubling to that 5, 6% range. Okay, that's helpful.
Michael Tumpholm
I will leave it there. Thanks.
Gord Johnston (President and Chief Executive Officer)
Thanks Michael.
OPERATOR
Thank you. And our next question comes from the line of Jonathan Goldman from Scotiabank. Your question please.
Jonathan Goldman
Hey, good morning team. Thanks for taking my questions. Just one for me. The larger projects that you're booking in the U.S. is it possible to quantify or maybe directionally talk about how big those projects are relative to the average size project you do in the US and maybe also if you can talk about how the delivery kind of period or the conversion of those projects would compare to an average size order. And is this part of a bigger trend, moving to more complex and larger projects than in the past?
Gord Johnston (President and Chief Executive Officer)
We are absolutely seeing a number of clients both in Canada and in the US that are sort of bundling large packages of projects together in part because rather than having to run 10 projects, they run two, for example, but they're much larger. So we are seeing the competitive set on those is much different because it's really only the big majors that can pursue those. And so the competitive set is different, which allows a little bit of pricing power in a number of instances. But you know, it's while you know, an average project size might be in the 100 couple hundred thousand dollar range, these ones could be in the hundred to a couple hundred million dollar range like these are. There's some big projects out there for us. It changes the way that we manage them. Like we have a. There's a smaller number of people within stantech and the industry overall that can manage projects of that size. We're fortunate to have more than our fair share of them. So yeah, we do see that being a growing part of the business. What's interesting about those projects is that they do typically take a little longer to ramp up. They go at a high level for multiple years, three, four, five years, and then before they ramp down. So the magic in the Stantec model is being able to service those long duration projects. But as they're ramping up and ramping down, you use your smaller projects to fill in those ramp up and ramp down projects. So that's a little bit of the beauty of the stantec model is that we can service both the smaller projects and the larger projects, keeping our utilization rates up, keeping our people engaged, sort of at all phases.
Vito Cummone (Executive Vice President and Chief Financial Officer)
And GERT all I'd add There is. You know, I love the way that's evolving from a competitive perspective for reasons you've described, but in no way, shape or form, from a diversification perspective or from a concentration perspective does this create an issue for us in any way. The organization is so large across both our sectors and across our geographies that no single project in any way, shape or form makes it problematic from a cycling perspective and overall exposure perspective.
Gord Johnston (President and Chief Executive Officer)
Interesting. And then, Gord, your comment about maybe bundling projects together from. Is this multiple projects from a single customer that are flowing to kind of single source or, you know, one enc rather than a bunch? Or is it multiple phases of a project that they used to be outsourcing to a broader set of suppliers?
Jonathan Goldman
Yeah, it's more a series of projects that they would bring together, you know, where they used to maybe issue, you know, two, three or four requests for proposals, run two, three or four concurrent projects. We're seeing sort of some bundling of multiple, sort of independent projects. But also to your point, in other cases, it's bundling all the phases together. Just so I. Because, you know, for them to go out and procure takes a lot of time and effort as well. So the less times you can go to have to procure, then, you know, the better it is for them. Better it is for us actually as well.
OPERATOR
Interesting. Sounds like a good trend. Thanks for taking my question. I'll get back in queue. Great, thank you. Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Gord Johnson for any further remarks.
Gord Johnston (President and Chief Executive Officer)
Very well. Only to say, you know, thanks to everyone for joining us this morning. I know it's a busy morning there and if you have any follow up questions following today's call, please reach out to Jess Newkirk, our VP of Investor Relations and enjoy the rest of your day. Thank you.
OPERATOR
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
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