Michael Doumet: All righty. Thank you.
Theresa Jang: You’re welcome.
Gord Johnston: Thank you.
Operator: Thank you. One moment for our next question. Our next question comes from Devin Dodge with BMO Capital Markets. Your line is now open.
Devin Dodge: Yeah, thanks. Good morning.
Gord Johnston: Good morning.
Devin Dodge: I wanted to pick up on Michael’s last question there look the headwind from LTIP revaluation clearly a high-class problem to have. I believe there’s been some effort towards insulating this impact from near-term results. Is there a framework or a sensitivity that you can provide in terms of how it changes in the stock price impact and that could cause? And how much of that has been hedged in 2024?
Theresa Jang: Sure. So you’re right. We have put out a total return swaps on a component of our LTIP program. So there’s three tranches of units two of which are based purely on share price movement and one tranch which is a bigger tranch. Unfortunately, that current performance share units that are based on share price movement and our relative TSR. And so we have hedged the majority of the component that is purely sensitive to share price movement. And so even as we’ve been talking through the year about identifying the revaluation impact that’s already net of haven’t hedged as that component of our units. So that — it does make it hard for us. We don’t hedge the performance share units because we can’t get hedge accounting treatment on them and makes the results that even noisier.
So it’s hard to give a sensitivity because every quarter, we accrue another tranche of a three-year program that number then gets multiplied by a share price the whole at number of units you have outstanding gets revalued at the current share price and then we put it through a Monte Carlo simulation to try and peg what that TSR impact is. And now is the pace is that you just can’t give a sensitivity or an estimation for. It’s an accounting requirement. And so it’s hard to say how accurate that that the stimulation process is. And that’s the primary reason that it’s very hard to give an estimation.
Devin Dodge : Okay. Good color. I appreciate a lot of moving part there. Okay. Maybe just switching over to M&A. I was just wondering are you seeing more shared interest from employee-owned firms that maybe finding it challenging to fund their growth plans? And just wondering if those discussions and negotiations with employee-owned firms were they different much from when you’re looking to acquire from a single owner?
Gord Johnston: Yes. We’re absolutely seeing increasing discussions with employee-owned firms and both ZETCON and Morrison Hershfield fell squarely into that category. And one of the a couple of things that are of note there with those discussions. Certainly, what we’re finding is one the key ones is as they’re thinking about shared transition from one generation to the next. And those ones particularly Morrison Hershfield as well as the number of other discussions that we have ongoing are just related to the other folks coming up through the organization those 30 somethings and 40 somethings with not having the ability to acquire shares in many major metropolitan areas, it’s a struggle to buy a house. And so they’re not finding that they’re having the funds to buy in.
So these — as the older generation is retiring there’s not the new guys coming into to take over that firm and interbuy them out lots of interest and saying with different doing that type of work, but just not the ability to defund share purchases. The other thing that we’re seeing with some employee owned firms is that the investment required not so much certainly for growth, but also for some of the digital transformations that we see coming AI increasing demands in both financial and from a knowledge base to keep up with some cyber threats and so on. So we’re seeing a number of employee owned firms beginning to struggle with funding some of those things as well. And so that’s generating a lot of the ongoing conversation. A couple of things though that you mentioned is a talking with an employee firm own firm different then that others may be a public deals and that is true.
The one thing that we find and in a huge benefit for Stantec in these discussions is that employee owned firms are extremely sensitive to culture. They built this firm, they own this firm for many decades. And so who they would transition this firm to from a cultural perspective is very important. And certainly, we’re very comfortable there with the cultural alignment that we bring to a number of these firms. So yes, they are a little bit different.
Devin Dodge: All right. Excellent color. Thanks for that. I’ll turn it over.
Gord Johnston: Thank you.
Operator: Thank you. One moment for our next question. Our next question comes from Maxim Sytchev with NBF. Your line is now open.
Maxim Sytchev: Hi good morning.
Gord Johnston: Good morning.
Maxim Sytchev: And Theresa, all the best on your future endeavors.
Theresa Jang: Thank you.
Maxim Sytchev: I was wondering just impossible to get a bit more color on the energy market, which witnessed a slight retraction. Just curious to see what’s going on there. Thanks.
Gord Johnston: So a couple of things we’re seeing there is certainly, on the renewable side, a lot – still a lot of activity as we talk about pump storage. We talk about solar and wind and some things, when you are seeing some slowdown in some of the offshore wind projects and things seeing some stress in some of the suppliers, equipment suppliers. Also you’re seeing in Western Canada, in Alberta, in particular a pause on new renewables. So that’s our non-new renewable power assets slowing things there a little bit as well. But we – so we’re continuing to monitor all those things. We’re not seeing any particular long-term systemic issues. We still are projecting good organic growth for the year in that sector.
