Stantec Inc. (STN) Earnings Call Transcript

Good morning, and welcome to Stantec's webcast and conference call covering the second quarter of 2026 results. Gord Johnston, our President and Chief Executive Officer, together with Vito Culmone, Executive Vice President and Chief Financial Officer, are leading today's session. Anyone dialing in is invited by Stantec to pull up the slide presentation, which you will find in the Investors section of stantec.com. This call is being webcast as well. One note: if you are on the phone and watching the webcast at the same time, please keep your computer muted, since the call and the webcast do not run in sync. Everything shared on this conference call carries the forward-looking statement qualifications laid out on slide two, described in detail in Stantec's management's discussion and analysis, and incorporated in full for today's call. Except where stated otherwise, figures in Canadian dollars are used for the dollar amounts we discuss today, and those amounts are generally rounded. With that, I will hand things over to Mr. Gord Johnston. Please go ahead, sir.

Good morning, everyone, and thank you for joining us today. The financial results we posted for the second quarter continue to demonstrate how strong our business is. Because Stantec is diversified across both operating regions and sectors, we remain on track to hit our financial targets for the year. During the second quarter, net revenue grew to CAD 1.8 billion, an increase of almost 12% versus Q2 2025, with almost 4% coming from organic growth and 7% from acquisitions. Organic growth was powered by double-digit expansion of approximately 13% in our global region. Our water business, which leads the industry, delivered organic growth of close to 12%. Adjusted EBITDA rose over 17%, and our adjusted EBITDA margin came in at 18.7%, which is a record for Q2 and amounts to a year-over-year increase of 90 basis points. Adjusted EPS was up over 18% against Q2 2025. Turning to how we performed in each of our geographies, U.S. net revenue for the second quarter rose almost 13%, thanks to the Page acquisition and that business's strong performance. Underlying demand remains very strong across our end-markets, supported by long-term investments in infrastructure, energy, transportation, water, and advanced manufacturing facilities. Our water business continued to see demand and work on large wastewater treatment projects. In energy and resources, organic growth was driven by work on a major hydropower dam project, while our infrastructure business grew through data center projects in our north central region and benefited from favorable recoveries on a large transportation project.

Although organic growth didn’t move in the quarter—thanks to some delays and slower ramp-ups on certain projects—we’re already seeing encouraging signs of acceleration in Q3, and we expect that trend to carry through the back half of this year. In Canada, net revenue for the second quarter rose 2.4% organically. Double-digit organic net revenue growth in our water business came from biosolids projects and ongoing momentum on wastewater projects. We also posted robust net revenue growth in both our buildings and environmental services businesses, through public sector investment—mainly in our civic markets and, respectively, an increase in environmental planning in the mining industry. Our infrastructure business kept experiencing a wind-down of certain transit and roadway projects, in line with anticipated project cycles. Finally, our global business delivered over 18% net revenue growth in the second quarter, driven by almost 13% organic and over 2% acquisition growth, plus positive foreign exchange impacts. Our industry-leading water business delivered over 20% organic growth this quarter through long-term framework agreements and public sector investments in water infrastructure across the U.K., Australia, and New Zealand. The wrap-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.

Looking at the year to date, our global operations saw modest growth in the infrastructure business as well, primarily driven by double-digit organic growth in Germany. That came from momentum on a major public sector electrical transmission project, along with higher volume on transit and rail projects. I'll now hand the call over to Vito, who will review our second quarter financial results in more detail.

Thanks, Gord, and good morning, everyone. Solid financial results keep coming, powered by strong operational execution and steady demand across our diversified platform, which spans multiple sectors and regions. At the halfway mark of 2026, we remain firmly on course to meet every one of our financial guidance metrics. Gross revenue for the second quarter came in at CAD 2.2 billion, with net revenue of CAD 1.8 billion, which is an 11.5% rise over Q2 of 2025. That growth came from 3.7% organic growth and 7.1% acquisition growth, reflecting primarily strong results from our global region and from the Page acquisition, respectively. Project margins as a percentage of net revenue rose 30 basis points to 54.5%. Adjusted EBITDA margin for the quarter was 18.7%, up 90 basis points from Q2 of 2025. On a trailing 12-month basis, our adjusted EBITDA margin stands at 18%, which is 80 basis points higher than the prior trailing 12 months. Margin growth continues to be fueled by a methodical, disciplined approach across every aspect of our business. It all begins with a sustained focus on execution and on servicing our clients' needs. The work we do carries meaningful value across all our sectors and regions, and our focus stays on enabling superior outcomes for our clients, all while concentrating on efficient management of our operations and optimization of our discretionary spending.

With net revenue up and margins expanding, adjusted EPS for the second quarter rose 18.4% to CAD 1.61. Now to cash flow, liquidity and capital resources. After the Q1 financial integration of Page, operating cash flows in Q2 came back to a more normal rhythm. Year to date, cash flows from operations came to CAD 116 million. On capital allocation, our strategy hasn't changed. We still believe that disciplined M&A, sustained over a reasonable period of time, remains the greatest source of value creation for shareholders. The pipeline is still robust, despite some short-term dislocation in valuation ranges between public and private entities. With our proven record of disciplined M&A, we expect strategic expansion of the business to keep going. Along those lines — though perhaps at a smaller scale — we're pleased to announce the acquisition of Niche, a 200-person engineering and environmental consultancy firm in Australia. Niche strengthens our environmental services business in the region and supports our ability to help clients advance critical infrastructure and develop projects while protecting and restoring natural environments. This transaction closed effective July 31st. Continued strong operating cash flow and an exemplary balance sheet give us considerable flexibility in our capital allocation activities.

During Q2, we began buying back stock under our NCIB, repurchasing roughly 1.7 million common shares — equal to 1.5% of shares outstanding — at a total cost of about CAD 175 million. Even after that outflow of cash, our ratio of net debt to adjusted EBITDA stayed at 1.3x, which sits inside the 1x to 2x range we target internally. With the buyback activity we saw in Q2, having extra room to maneuver is sensible, so we plan to ask the TSX for permission to enlarge the program past the current 2% cap. Lastly, DSO stood at 75 days when the second quarter ended, in line with our internal target. I'll now turn the call back over to Gord, who will cover our backlog, the project wins we've had recently, and what we expect for 2026.

Okay, thank you, Vito. When Q2 wrapped up, the value of our signed contracts not yet delivered hit an all-time high of CAD 9.2 billion — up 17.5% compared with a year earlier, which works out to roughly 13 months of work. On a year-over-year basis, organic expansion of that backlog came to 7%. Backlog increased across every one of our regions during the quarter. The standout year-over-year gain came from our global region, which posted double-digit growth of nearly 25%. We likewise recorded robust backlog growth in water, which turned in organic growth above 10%. Acquisitions closed in 2025 added almost 8% more to backlog growth, mainly in our buildings business, where growth exceeded 40%. Now I'll walk through a handful of projects Stantec won during the quarter, which show how broad the opportunities are that we're capturing — spanning varied markets, project sizes, and complexity levels. Our buildings team was chosen to deliver architecture, engineering, and integrated design services for Meta's CAD 13 billion data center located in Sturgeon County, Alberta. That win bolsters our data center capabilities and backs the ongoing buildout of Alberta's essential digital infrastructure. Stantec's water team was picked to supply preliminary design and evaluation services for the Drake Water Reclamation Facility in Fort Collins, Colorado — a wastewater treatment plant handling 23 million gallons per day. This job will upgrade vital headworks infrastructure, boosting debris removal and treatment reliability while lessening effects on downstream processes.

Work in Australia for our buildings division is still finishing up, helped along by more money going into social infrastructure. In the quarter, the team was picked to supply engineering services for the Redcliffe Hospital redevelopment in Queensland, which further cements where we stand in the expanding healthcare infrastructure market. The Western Australia Department of Housing and Works also chose the team for a 10-year framework covering engineering and building-related consulting services on non-residential projects, spanning education, healthcare, justice, and other social infrastructure. Looking ahead to the rest of the year, we remain on course for our 2026 financial targets. Given the steady progress achieved so far, we are raising and tightening the adjusted EBITDA margin range we anticipate delivering. Net revenue growth is still expected to land between 8.5% and 11.5%, powered by robust acquisition growth from Page and organic growth throughout our operating regions. Total organic net revenue growth should now come in at a mid-single-digit level, powered by robust demand throughout every geographic reporting segment and business unit. For the U.S., organic net revenue growth is anticipated at a mid-single-digit level. Activity should speed up in the year's second half, backed by demand throughout all five of our business verticals.

The rising activity and momentum we've begun to observe are encouraging—large environmental projects are ramping up, demand tied to water, energy and resources has grown, and key segments like advanced manufacturing and data centers are seeing stronger demand as well. In Canada, we now also anticipate mid-single-digit organic growth, backed by public sector spending plans and sustained demand, especially in water and buildings. Momentum remains considerable around defense and other nation-building projects, and those are still at an early stage. We anticipate those programs will contribute more fully in 2027 and beyond. Last, Global is expected to post high-single-digit organic growth. That growth at Global is fueled by high activity levels in our water business under AMP8 and other framework agreements, robust demand in energy and resources, particularly in Latin America, and favorable demand fundamentals across the remaining global business units. Given our strong margins year-to-date and our ongoing emphasis on operational excellence, we are raising our outlook for adjusted EBITDA margin. For the year, we now expect to deliver 17.8%-18.3%. Lastly, we are keeping our adjusted EPS target for the year at 15%-18% growth, which reflects our confidence in producing strong bottom-line results and long-term shareholder value.

Before we start taking questions, I want to pause and note that this marks my last earnings call in the role of Stantec's President and CEO. As we announced in June, I'll be stepping down from that position effective October 1st and moving into the role of Vice Chair of Stantec's Board of Directors. Leading this company over the past eight and a half years has been an extraordinary privilege, and I feel very proud of everything our teams have achieved together. Demand for our services remains strong at its core, and our platform — diversified, resilient, stable, and multi-sector — puts us in a good position to seize opportunities in the markets we serve. I'm particularly excited to be handing the torch to Susan Reisbord. Susan possesses a deep grasp of our business, our clients, and our people. Having worked closely alongside her, I have full confidence in her capabilities, experience, and energy to guide Stantec into its next chapter. I look forward to remaining close to the company as Vice Chair and to supporting Susan as the team continues to execute on the opportunities that lie ahead. Lastly, I want to express my thanks to our employees, our clients, and all of our analysts and shareholders for their support through the years.

So with that said, I'll hand things over to the operator so we can take your questions. Operator?

Absolutely. At this point, anyone who wants to ask something should dial star one one on their phone. And if we've already addressed what you were going to ask and you'd prefer to drop out of the line, just dial star one one a second time. Today's opening question is from Sabahat Khan of RBC Capital Markets. Go ahead with your question.

Thanks a lot, and good morning. Ahead of diving into my questions, I’d like to offer my congratulations, Gord, on an excellent tenure in your present role, and I wish you the very best as you move on to what comes next.

Thank you very much, Saba. Leading this team for the past eight and a half years has been an extraordinary honor, and I would not have exchanged that experience for anything.

Thanks. Perhaps we could begin with the second-half outlook. For the U.S. segment, it seems you're indicating mid-single-digit organic growth. If I look at the first half — I'd describe it as low-single-digit — that suggests roughly high-single-digit organic growth for the U.S. in the back half. Could you perhaps lay out the building blocks and your confidence in reaching that high-single-digit range across the coming couple of quarters? Thanks.

Yes. Thank you, Saba, for that question. Specifically within the U.S., what we're seeing is that demand isn't the problem. For us in Q2, it's really a matter of timing. Several projects finished up right on schedule and as planned, and a number of projects that we've been awarded and that are in backlog were just somewhat slow to get out of the blocks and get going. Since the quarter ended, we've seen some solid positive momentum. In Q3, a number of those projects have kicked off, and field seasons are underway and so forth. Beyond that momentum, when we look at the back half of the year, we're looking at it from a demand standpoint. The sales funnel is strong, and the soft backlog — both are trending really, really well. Also, if you look at organic backlog growth in the U.S., both year-to-date and year-over-year, both are up in positive organic territory, which further supports that ramp-up and that momentum as we head into the second half of the year, and particularly into 2027. One other thing worth calling out is the Page acquisition. We've discussed it in the prepared remarks and with others over the year — Page is a fantastic company, and they're performing exceptionally well, driving strong acquisition growth.

Following our usual practice, a company’s first year with us gets counted under acquisition growth. In Q3, though, Page is shifting so that it will show up as organic growth during Q3 and Q4 of this year. The projects sitting in our backlog are ramping up, sales are strong, the backlog is strong, and we have solid organic backlog growth in the U.S. both year-to-date and year-over-year. Page is moving from the acquisition category into the organic category. All of that broadly backs our view that organic growth keeps accelerating through the second half of the year, with good momentum carrying into 2027.

Okay, so turning to margin, I’d describe it as roughly 80 basis points of EBITDA margin expansion year over year across the first half. The raised guidance suggests approximately 15 basis points, in round figures. Could you take us through the pluses and minuses behind the assumptions for the full-year outlook, and perhaps explain the gap between the larger amount achieved and the smaller increase in the guide? Thanks.

Hi, Saba, Vito here. We're extremely proud of how far we've come on margin expansion, and you picked that up in what I said earlier. It really comes from every part of our business. Project margins remain solid, and that's entirely about picking the right client, getting the right price, and, of course, executing projects exceptionally well. Our teams are always striving for that. If you look at admin and marketing, those have clearly been falling as a share of total revenue. That obviously mirrors better utilization. On utilization, it's likely one of the factors as we head into the back half, and let me just tie in to what Gord said. We're very confident about the pace of the business going forward. That will demand, and in fact already demands, more headcount and a bigger workforce. What you're seeing in the back half, that moderation in margin expansion versus our year-to-date results, really just reflects the timing of that workforce, especially as we get ready to lean into what should be substantial organic growth in the back half. Still, overall, the momentum behind our margin gains — and there's likely a bit of conservatism baked in there, honestly.

I believe we're now in — what would it be? — perhaps the seventh quarter in a row of margin expansion on a year-over-year basis. Over a trailing 12 months, as I mentioned earlier, we're 80 basis points ahead. That simply makes it possible for us to keep investing in the business as we go forward, and our attention is on making sure those internal investments happen going forward too.

Thanks. That's my final question. From what I can tell, the discussion surrounding Page seems to be moving in a positive direction. Could you perhaps provide the organic growth figure, or simply the growth rate for that business compared with the prior year, maybe for Q1 and Q2 of this year, keeping in mind how it might feed into Stantec's overall results? Thank you, and I'll hand the line over.

Yeah, Saba, that's a tough one for us to do, because the baseline business probably doesn't line up with how we convert over to our IFRS accounting. I'd venture to say it's robust. As Gord alluded to, we probably underreported our Q2 organic by a smidgen, given the way we do things. That is, we shifted a significant amount of our building workforce to the Page-led opportunities that, as Gord has noted, will be reflected in organic going forward. So Q2, probably a little understated. Frankly, we don't get into slicing and dicing those numbers too much. But organic growth in Page, quite robust.

I appreciate that.

Thanks. Moving on, our following question is from Frederic Bastien of Raymond James. Go ahead with what you'd like to ask.

Morning, everyone.

Morning, everyone.

How’s it going? What’s it like for you, Gord?

Getting ready for this quarter and for the earnings call has honestly been quite fascinating. A lot of moments came with the thought that this would be our final time doing it. Still, I'm genuinely delighted that I'll remain on the Board. Our company means a great deal to me. I care deeply about our clients, our people, and the work we do. So for me, staying linked to the company by serving on the Board feels like the best of both worlds.

Thanks. Gord, we’re glad you’ll be staying with us a while longer, and congratulations on a wonderful career. Now, turning to the question. As Vito mentioned earlier, a substantial portion of the margin improvement came from project margins, which is encouraging to see—not all of it is coming from SG&A and cost optimization. How much further can you push those margins? They’ve stayed in the low 54% range for a long time. Is there a chance for Stantec to move them even higher going forward?

Clearly, our main focus remains on delivering excellent results for customers—that's truly the core principle of who we are. In addition to that, naturally, comes strong project execution, an appropriate risk profile, solid value for the work we do, and being clearly transparent about all of it with our client base. We're currently midway through our three-year planning process, so we'll likely have a more thorough—I'd say—coordinated answer on that as we move through the latter part of this year and head toward our Investor Day in December. But I believe bottom-line margins—and it all begins with project margins—and I love that you began there, since ultimately that is the backbone driving the bottom line, and we're extremely confident about it. Given how robust macro demand is throughout our markets, we genuinely can afford to be selective, frankly, regarding some of the clients we take on and so forth. So, very confident about project margins moving forward.

Thanks. My next question concerns M&A activity. We've recently observed a few bids over in the public sector space. One privatization, while the other obviously hasn't gone through so far. But how do you square the valuations you're likely still seeing in the private sector arena, which are probably still high, with the current valuations here in the public sector, and what that could mean regarding opportunities for you to put capital to work? Thanks.

Right. The M&A landscape is extremely busy at the moment. You mentioned several of the usual deals we tend to see in our sector, where public companies are acquiring private ones. There's still some dislocation there—the public markets looking to sell remain somewhat elevated compared with where we sit in the public markets. We're still in the middle of quite a few conversations at various levels, and we have been for a while. In fact, that's one of the areas where I'll keep working closely with Susan and the team. Since we're midway through some of these M&A discussions, we all want to stay involved in a supportive capacity, purely for continuity's sake. Beyond that, I think you noted that we've seen some significant moves on the chessboard in terms of who's being acquired. Some are public, and others I think people are just quietly considering in the background. This is a highly attractive industry, and do I believe more consolidation is likely? I think perhaps it will happen over the next year or so.

Stantec is — we're keenly aware of all of that, and our attention stays on doing what serves Stantec and its shareholders best over the long term.

I appreciate that.

Appreciate that, Frederic.

Thanks. Yuri Lynk from Canaccord Genuity is our next questioner. Please go ahead with your question.

Morning, everyone.

Morning, everyone.

Appreciate you taking my question, and congratulations to Gord and Susan as well. I just want to come back to the U.S. for a moment. Gord, I understand you're seeing some of those delayed projects speed up, but was there a main underlying reason for the initial slowdown you observed in the U.S., and any thoughts on how that may have affected backlog? Organic backlog growth also came in 2.5% below what we've been seeing. So what happened there in the quarter?

Yes, to restate that, I believe timing was the main factor in much of this. When we discuss certain projects that took somewhat longer to launch early in Q2, that was true across each of the various segments to some degree. In environmental services, for instance, we had a sizable program with the US Navy that was somewhat slow to get underway. It is underway now. We had another quite substantial project with a major electrical utility in the US West that launched. Again, we are seeing that progress within our infrastructure group. That one was somewhat slower in Q2 than we would have preferred. A large public transit project in the US South was somewhat slow to get started, and we were in fact pursuing a very, very substantial proposal during Q2 as well. Several of those items simply required somewhat more time to get underway. But I referenced that substantial proposal we pursued in infrastructure. Should it come through, it would affect backlog very favorably. I think this was simply one of those quarters when the stars aligned, perhaps not in the manner you might have hoped.

Over the longer term, though, we truly don't anticipate any adverse effect on the business from it, and we also don't think it ought to say anything about how we'll do in the year's second half.

All right. So, is it fair to expect that organic growth rebound in the U.S. will gather pace across the back half of the year, particularly given that you have a fairly easy comparison in Q4?

Yeah, I believe that's accurate. My expectation is that we'll see solid organic growth during Q3, with that trend gaining more strength as we move into Q4, and then heading into 2027 carrying genuinely strong momentum.

Alright, the final question comes from me. I just want to clarify something regarding SG&A expense. I'm curious whether, considering how the share price moved during the quarter, there was any favorable effect from LTIP in that period?

Pretty negligible. The bulk of our long-term incentive programs are hedged. So basically, whatever valuation comes out of our hedging program gets offset by the mark to market on our RSC. So it's pretty negligible — a small benefit.

All right, I'll hand things over now. Thank you.

Thank you. The next person to ask something is Michael Tupholme of TD Cowen. Go ahead with your question.

Thank you, and good morning to everyone. Gord, my congratulations to you.

Yeah, thank you very much. Looking back on everything we've accomplished across those eight and a half years, it's fascinating — honestly, I feel enormously proud of what all of us together, as a team, have achieved in getting Stantec positioned to succeed moving forward.

Absolutely. The first thing I’d like to ask about is that you’ve fielded plenty of questions on this call regarding U.S. organic growth and the acceleration you anticipate in the second half that would bring you to your full-year mid-single-digit organic growth target. Could we spend a moment on Canada? The situation there is comparable, since organic growth in half one has been somewhat sluggish. Right now you are running below your mid-single-digit organic growth target for the year. How are you viewing the organic growth acceleration in the back half in Canada, and what precisely is driving it?

Yeah. No, thanks. That's a great question. In Canada, we're again seeing solid organic backlog growth both year-to-date and year-over-year. Plenty of projects. We mentioned that CAD 13 billion Meta data center project that's underway. There's a very significant program we're running that's just getting started for a utility in Western Canada. There's a tremendous amount of opportunity in Defense, up in the North, and with some of those nation building projects. We see plenty of support for us going forward. In Canada specifically, though, backlogs in our water and our buildings group look excellent, and we're seeing continued organic expansion there. I'd say we're fairly broad-based in Canada, which supports growth into the second half of the year here.

I believe you've got it right, Gord. In Canada, for the second half, the main forces behind higher organic growth, in our view, should be buildings and water.

Alright, thank you for that. On to my second question. About those better margins — clearly a very strong result. You highlighted several drivers. One item you brought up was optimizing digital strategies, and I'm curious whether you could say a bit more about what was happening during the quarter on that front that helped the margins, and how we should think about that going forward as well.

Sure, I'd say digitization sits right at the heart of the strategies we're pursuing across the whole company. If we consider a few of the back-office opportunities in front of us — accounting, finance, accounts payable — that's consistently been a central piece for us. At the moment, when it comes to bidding and proposals, we're actively embracing digitization and rolling out certain artificial intelligence tools. So all of that is central to what we're talking about, and it will keep being part of our strategy — essentially embedded in our three-year plan.

Okay. That's great. I'll stop at that point. Thanks.

I appreciate it.

Appreciate it.

Thanks. Chris Murray from ATB Cormark is our next caller with a question. Go ahead, please.

Yes, indeed. Thanks, everyone. Good morning. Gord, allow me to add my own congratulations, just as the others have done. I suppose for my first question—we’ve discussed Canada and the U.S. a bit, but the global figure has also been extremely, extremely robust, and as a matter of fact, you’re raising that guidance. Is there anything specific behind that? Could it be that Europe is rebounding somewhat more strongly than you’d anticipated? Any further detail you can share, perhaps separating Europe from New Zealand or Australia, simply so we get a sense of how all of this is fitting together—that would be excellent.

Yes, definitely. We're observing fairly widespread momentum across our worldwide business. Australia is back to organic growth. I don't have that figure in front of me, though I believe it's mid-single digit-ish organic growth there. The U.K. is extremely, extremely robust. Growth in AMP8 is certainly very strong, just as we had anticipated. At present we're posting roughly 15% organic growth in the U.K. Incredibly strong. Another region for us is Europe — absolutely — through our German operations with ZETCON. There we're running in the low 20s when it comes to organic growth rates. Yet if you look at sheer raw numbers, it's Latin America. Given copper demand and the work we're carrying out down there, we're currently seeing organic growth above 50% in our Latin American operations. So, genuinely strong throughout our global operations.

Alright, that's useful, thanks. For the next question — Vito, I'm not sure whether you or Gord would like to weigh in here — but turning to the NCIB: you mentioned possibly raising it and taking a look at it, and then there were your comments on multiples in the private market compared with the public market. Public market valuations right now sit at pretty much 20-year lows. Has any consideration been given to a bigger buyback? If the privates aren't really where you need them to be, it almost seems to make sense. Any thoughts on perhaps pursuing a substantial issuer bid? Maybe moving your leverage to the middle of your range and essentially riding out this valuation gap for the time being?

Chris, like I mentioned during my prepared remarks, continued M&A and growing our portfolio within our regions sits at the heart of what we see as long-term value creation. As Gord has pointed out already, some genuinely attractive opportunities are beginning to emerge, and my expectation is that we will be more active on that portfolio front. We just announced Niche, as you saw. For us, that one is relatively small yet important. Looking ahead over the next 12 months, my prediction would be more M&A compared with the last 12 months, when obviously Page would have been our most significant acquisition. So we feel good about how that develops, notwithstanding what we describe as, obviously, pricing dislocation, and we will stay very disciplined on that. I think SIB is one step further from where we currently are. We have stepped into NCIB. We are going to the regulator now and essentially expanding our program from 2% to 5%. So I just love that flexibility of going from 2% to 5%. That is another meaningful step. It does not mean we are going to execute all the way to 5%, but continuing to have the flexibility with respect to, obviously, where our valuation sits, which as you noted, is not, I think representative of what we believe long-term value is and long-term representation there.

Along the way, we’re going to proceed with carefully considered steps here.