Management’s Discussion and Analysis - stantec.com

1 Index to the Management's Discussion and AnalysisEXECUTIVE SUMMARYCORE BUSINESS AND STR ATEGYCore BusinessBusiness ObjectiveStrategyKEY PERFORMANCE DRIVERS AND CAPABILITIESKey Eternal DriversKey Internal DriversR ESULTSO verall Annual PerformanceSelected Annual InformationResults Compared to 2017 TargetsAcquisitionsDiscussions of OperationsFourth Quarter ResultsQuarterly TrendsStatements of Financial PositionLiquidity and Capital ResourcesOtherOUTLOOKCRITICAL ACCOUNTING ESTIMATES, DEVELOPMENTS, AND MEASURESC ritical Accounting EstimatesAccounting DevelopmentsMaterialityDefinition of Non-IFRS MeasuresRISK FACTORSCONTROLS AND PROCEDURESCORPORATE GOVERNACESUBSEQUENT EVENTSCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS244451111132020212324254044464 85458636364646568787880802 0 17 ANNUAL OF CONTENTS1 Message from the Chair2 Report to Shareholders4 About Stantec6 Business Model10 Industry Position11 Sustainability12 2017 Financial Summary14 2017 Financial Highlights16 Board of Directors and Corporate OfficersM-1 Management's Discussion and AnalysisF-7 Consolidated Financial StatementsAustin Water Treatment Plant #4 Austin, TexasMESSAGE FROM THE CHAIRIn 2017.

2 Stantec achieved our long-standing business objective: to become a top 10 global design firm. With strong leadership, by winning and successfully executing projects on behalf of our clients, and by consistently applying our organic and acquisition growth strategy, we ve earned our position as one of the top firms in our industry. Having achieved our objective in 2017, going forward into 2018 we will continue to evolve. We will work diligently to maintain and improve our position in the global top 10, and we will strive to become a top-tier global design and delivery firm in each of the business lines and geographies where we operate. And we ll remain committed to creating communities, fostering strong client relationships, embracing creativity, and governing the Company transparently and ethically.

3 The Company also refined its brand in 2017 to assist with our emergence as a globally iconic firm. The integration of MWH in North America was completed this year, and the integration of MWH offices outside of North America is well underway. Finally, the board welcomes new president and chief executive officer, Gord Johnston, and offers our gratitude to past president and chief executive officer, Bob Gomes. Both have served the Company with distinction, and both have worked together with the board to ensure a smooth transition. As Gord brings his considerable experience to leading the Company and our executive team, Bob will serve Stantec through his continued membership on the board of directors.

4 As ever, the board and I are grateful to you our shareholders, clients, and employees for your support. Aram H. Keith Chair Stantec Board of DirectorsS TA NTEC Stantec s new president and CEO, I d like to begin my first Report to Shareholders by expressing my excitement about the future of this Company. Thousands of talented employees have driven Stantec s steady growth and our continuous profitability since 1954. And thanks to their contributions in 2017, we achieved our long-standing business objective to become a top 10 global design firm under the leader-ship of my predecessor, Bob Gomes. I m so pleased to lead Stantec forward as we refine our business objective: to be a top-tier global design and delivery firm, working with the world s leading clients on innovative, world-changing projects.

5 Annual Result Highlights Stantec closed 2017 with a increase in gross revenue, increase in net revenue, increase in EBITDA, and increase in adjusted EBITDA compared to 2016. Adjusted diluted earnings per share (EPS) rose from $ in 2016 to $ in 2017; diluted EPS was down from $ in 2016 to $ in 2017 mainly due to the US tax reform, the sale of Innovyze, and some project challenges (detailed below). Fourth Quarter Result Highlights The Company s fourth quarter results were impacted by challenges in our Construction Services operations, including cost increases for certain UK waste-to-energy projects, execution and site condition issues for certain US legacy hard-bid projects, and a provision for a large consulting project in our US Water business.

6 Plus, as a result of US tax reform, we incurred a one-time tax expense of $ million, offset by a revaluation of deferred tax assets and liabilities of $ Year of Accomplishment Results for 2017 were achieved by the efforts of our employees, three acquisitions, and a return to overall organic growth. We also exceeded our targeted US$25 million in cost and revenue synergies from the MWH acquisition and fully integrated MWH s North American Consulting Services. During the year, we sold Innovyze, the water software business we acquired with MWH. The sale proceeds unlocked value for shareholders by repaying over $220 million of our revolving credit facility, which also reduced interest payments on that debt.

7 Our teams secured a number of significant project wins in 2017, including work on the Royal Columbian Hospital Redevelopment Project in New Westminster, British Columbia; the Capital Improvement Program for the City of Sunrise, Florida; a mixed-use entertainment facility for the Colorado Rockies baseball team; Yorkshire Water s Asset Management Programme 7 (AMP7) in the United Kingdom; and a strategic code of practice for self-driving vehicles in of January 1, 2018, we are now branded globally as Stantec, and most offices, including those recently acquired, now have access to common collaboration tools. This increases our 2017 Fourth Quarter and Year End2017 STANTEC ANNUAL REPORT2 REPORT TO SHAREHOLDERS ability to connect the right talent with the right clients and the right projects.

8 And we continue to maintain a strong backlog of projects: $ billion at the end of 2017. Throughout 2018, a primary goal for leadership and employees will be to execute these projects successfully. Looking Forward Our outlook remains positive. In 2018, we expect organic gross revenue growth in the low- to mid-single digits, driven by continued economic growth in the United States, increased infrastructure spending in the United States and Canada, global economic growth, and continued support for alternative project delivery. We are well positioned for 2018 and the years ahead. We go forward as a company 22,000 strong, packed with immense talent and strong client relationships around the world. I look forward to the world-class projects we ll tackle and the communities we ll create.

9 Gord Johnston President and CEO February 21, 2018S TA NTEC MineStewart, British ColumbiaCommunities are fundamental. Whether around the corner or across the globe, they provide a foundation, a sense of place and of belonging. That s why at Stantec, we always design with community in care about the communities we serve because they re our communities too. This allows us to assess what s needed and connect our expertise, to appreciate nuances and envision what s never been considered, to bring together diverse perspectives so we can collaborate toward a shared re designers, engineers, scientists, and project managers, innovating together at the intersection of community, creativity, and client relationships.

10 Balancing these priorities results in projects that advance the quality of life in communities across the globe. Stantec trades on the TSX and the NYSE under the symbol STN. Visit us at or find us on social CONNECT TO PROJECTS ON A PERSONAL LEVEL AND ADVANCE THE QUALITY OF LIFE ACROSS THE ,000 EMPLOYEES400 LOCATIONS6 CONTINENTS2017 STANTEC ANNUAL REPORT4 ABOUT STANTECHow we make a difference in the worldWhat we stand forWhat drives us to do betterWhat we will work to achieve in 2018 How we actCreating communitiesDesign with community in mindWe will be a top-tier global design and delivery firmBuild an inspiring, inclusive work environment that attracts, supports, and develops world-class talent.