Welcome to Stantec's Third Quarter 2018 Earnings Results Conference Call. Leading the call today are Gord Johnston, President and Chief Executive Officer; and Dan Lefaivre, Executive Vice President and Chief Financial Officer. Today's call is webcast, and those dialing in are invited to view the slideshow presentation, which is available in the Investors section of stantec.com. All information provided during this conference call is subject to the forward-looking statement qualification set out on Slide 2, detailed in Stantec's management discussion and analysis and incorporated in full for the purposes of today's call. With that I am pleased to turn the call over to Mr. Gord Johnston.

Thank you. And thanks all of for joining today's call. Just wanted to note that today we have Theresa Jang, our incoming CEO with us here. She's not going to be taking questions or responding, but we just wanted to let you know that she is here with us and we're really glad that she's joining us. Theresa will fill the CFO role as of January 1 of next year when Dan retires. I'll start with a quick overview of the quarter, then Dan will walk us through the earnings. And after that I'll go through some operational highlights. So we're now on Slide 4, for those of you viewing the slideshow. Our results this quarter validate the hard work we've done over the past year to grow organically, ramp up the pace of strategic acquisitions and improve our operational efficiencies. In Consulting Services this quarter we've continued gross and net organic growth, a double-digit increase in adjusted net income and a $0.10 increase in adjusted diluted earnings per share, which reached $0.60. This improved performance in Consulting Services was offset by disappointing results in Construction Services which reduced adjusted diluted earnings per share by $0.16. Last week we closed the sale of our Construction Services group. The sale completes the strategic review we embarked on earlier this year. Our goal was to take a thorough look at Construction Services to optimize the value of the business and offer the best prospects for employees, clients and shareholders. With the divestiture of our construction business we look forward to focusing solely on our consulting business. We'll provide more detail on the sale later on in the call, but for now I'll pass the call to Dan to take us through our Q3 results.

Thank you, Gord. And thank you Theresa for joining us today. I'm confident that investors can expect Theresa to be a solid steward of capital while providing transparent and insightful disclosures on our financial performance. Theresa is a well-known and seasoned CFO and brings significant experience engaging, in engaging with the investment community. She is a very strong addition to our Stantec team. Now let's start with Consulting Services on Slide 6. We achieved solid results in Consulting Services this quarter, as Gord alluded to earlier. Net revenue increased nearly 8% to approximately $848 million when comparing to Q3 '17. We saw organic net revenue growth across all geographies. Looking at our business operating units, once again we have double-digit organic net revenue growth in energy and resources despite the continued oil pipeline project challenges we're seeing in Canada. We also had organic net revenue growth in our Environmental Services and Water business operating units. Though net organic revenue was flat for Water. We saw net organic retraction in both buildings and infrastructure. For buildings, we can attribute this net revenue retraction in our Canadian buildings practice where we've basically wound down a few projects, which was partially offset by growth in our U.S. and our global buildings practices. The retraction in infrastructure is mainly due to an organic net revenue retraction in the transportation sector which can be attributed to large projects wrapping up in the U.S., primarily in Texas and seasonality in some North American markets. This was partly offset by growth in community development. Moving on to Slide 7. Gross margin for Consulting Services was at 53.7% of net revenue. This is slightly down from Q3 '17, mainly due to project mix, competitive pricing pressures and increased revenues from our lower gross margin Energy & Resources business.…

Thank you, Dan. We'll now go to Slide 12, where we'll have a look at Consulting Services in Canada. Gross revenue increased 4.5% and net revenue increased 4.8% in Q3 '18 compared to Q3 '17. We saw organic revenue growth or stability in all of our Canadian business operating units and sectors with the exception of buildings which was impacted by a number of major projects nearing completion. In total, gross organic revenue increased 1.9% and net organic revenue increased 1.7%. Demand for midstream work continues to increase in Canada, and that's leading to growth in our Oil & Gas sector. It also contributed to improvements in our Environmental Services business operating unit. Our Canadian Community Development sector is seeing the benefits of increased urban development. The growth is partially offset by the soft housing market in Alberta. Our Canadian water business is benefiting from public spending for water projects and growth can be attributed to a large dam and reservoir project in Alberta and recent projects in British Columbia. For example, we were recently selected by Metro Vancouver to complete the design, construction management and commissioning consulting engineering services for section of the Coquitlam number 4 water main. That project will provide seismic resistance and meet our water demands until 2050. Moving on to Consulting Services United States on Slide 13. Gross revenue increased 9.7% and net revenue increased 7.3% in Q3 '18 compared to Q3 '17. Organic gross revenue grew 4% and organic net revenue grew 1.8%. We grew organically in all business operating units and sectors with the strongest growth coming from buildings, environmental services and mining. We continue to see activity in airport, rail, highway, transit and bridge projects in the U.S. And in Power, transmission and distribution work remains steady. Our U.S. Buildings practice grew…

Thanks, Gord. I appreciate the kind words. We all know though that we can't do this alone, and I'd like to recognize our strong leadership team, and, importantly, all of the outstanding Stantec teams that make my job so much easier. There's no doubt that we've seen significant changes over the years. And I've been very fortunate to be part of the team of dedicated and committed professionals who have continually adapted and evolved to ensure that we have a strong, that we have strong control processes where we can provide exceptional disclosures to our, to assist our shareholders and really in gaining a better understanding of our business. And I'd also like to thank our business partners and the entire investment community, both the buy side and the sell side who continually challenge us to be better. So with that we'll turn that, turn it over to Brittany, our operator, to start the Q&A.

Thank you. [Operator Instructions] We'll take our first question from Jacob Bout with CIBC. Please go ahead, Jacob.

Hi, good morning. So with the sale of the construction business behind you, can you talk a bit about your, what your acquisition strategy is going to be and what areas you're going to focus on?

Great question. Yes, we, we've been pretty transparent with the markets for this year that we're going to continue with acquisitions in North America. But then we really wanted to build out our footprint that we got from MWH, primarily in the UK, Australia and New Zealand for now. Those were locations where Stantec wasn't present in a meaningful way before MWH joined us. Whereas part of our strategic planning process, we really see that as areas that we're going to continue to focus. We do see that Peter Brett Associates in the UK provides a strong footprint there and diversifies our service offering from just being in the water space, where we were previously. And in Australia, based on customer conditions and the closing of Wood Grieve Engineers in the first quarter of next year, that'll really give us a strong footprint to build upon in Australia.

And then maybe next question here just on EBITDA margins going forward. How should we be thinking about that? Can we revert back to kind of a 13% to 14% range or?

Yes, I'll answer that one, Jacob. The EBITDA margins, I don't expect we'll get back to that 14% range. I think as we –- we've noted many times over the past quarters is that the mix of our business has changed. When were at 14%, 60% of our revenues were coming out of Canada, today only about 30% of our revenues are coming from Canada with lower margin businesses primarily due to geography and some certain sectors like Transportation in the U.S. or lower margin business. So that 11% to 13% that we're targeting for this year for Consulting Services, I expect to be fairly consistent into 2019. Having said that, we haven't quite completed our budgets. We're actually in board meetings this week and we'll be reviewing our budget with the board and providing guidance with our annual report as we report in February. But don't expect it to be materially different from what we're seeing this year but certainly not 14%.

Last question here. That $31 billion Texas plan to protect the shoreline, how big of a deal is that for Stantec?

We see a lot of large projects coming up. The Texas line, I think here you're referring to it. We're very well-known in the space, certainly whether from shoreline protection, dams, levies, with our Mid-Breton project we're doing in Louisiana which is a shoreline sediments diversion project and replenishment. We're very active in the type of work. So we -- we've been tracking it, we're familiar with it and we think we're well-positioned for it.

I'll leave there. Thank you.

Thank you. Thanks Jacob.

Our next question comes from Devin Dodge with BMO Capital Markets. Please go ahead, Devin.

In your prepared remarks you talked about AMP6 activities starting to slow there. I guess how should we be thinking about activities under that program over the next 6 months to 12 months? And do you think ramp up in AMP7 is enough to offset any kind of softness you'd see? I know you mentioned a couple of opportunities that you were awarded recently. Just kind of any color you can provide there would be helpful.

Yes, no, that's great. The AMP7 awards for the strategic consulting are, only 2 have been -- has come out so far to my knowledge and we've been successful in both of them. One thing that a lot of our clients have been trying to do in between the various AMP cycles is as one AMP cycle begins, they enter year 3, 4, historically things have slowed down a little bit as people began to position to get ready for the next AMP cycle. Several of our clients are in the process where they can just roll it over. We have to renegotiate rates. But if they're acceptable, if our performance has been acceptable they can roll that over. So we're at a point where some of our clients are making those decisions here in the near future. We believe that we're well-positioned for those. So we don't see a big hiccup in the AMP6. We're going forward in the next 6 months to 12 months. But those renegotiations or those sort of transitioning to the next AMP cycles are just beginning to start now.

That makes sense. That's helpful. Thank you. Just on the Construction Services sale, can you provide some color on your decision to retain the closing out of one of the waste energy projects in the U.K.? Just trying to get a sense of how much work is remaining? And do you expect to have any recoveries on the project before closing it out?

So the -- there were 3 of those projects, 2 of which are closed out, completely buttoned up and we're done. This last one we're still just working through the plant operations with regards the one piece of equipment in particular. So the vendor of that equipment is engaged in helping us rectify that situation. We've -- the plant has been up, it's been producing well, we're fine-tuning some things now. Our plan at this point, we believe that by mid-January is where we're thinking that we'll have achieved the 30-day testing. That could go a little bit further but certainly it's our -- in our partner's best expectation at this that they will be ramping up this project certainly within Q1.

And then with respect to projects, certainly we are continuing to pursue any mitigation that we may have on this project. There may be some upside but certainly we are not communicating to you anything at this point. If any -- if we do get any upsides as a result of closing of this project then we'll certainly be transparent to [indiscernible].

Okay, okay. And then one last one for me. But when you look out to 2019 I know you're not providing guidance today but I guess which lines of business or geographies do you think are best-positioned to do well for Stantec?

We feel pretty good about the overall infrastructure water, building segment in North America. Certainly we've seen following the midterm elections this week a lot of discussion of infrastructure as a bipartisan effort that could be moved forward, so we feel good about that. We see continued growth in our Latin America. That seems to be very strong for us. And certainly with the -- now that we've acquired Peter Brett Associates, we're already beginning to see a lot of synergies between their clients and the legacy MWH water clients. Our services go back and forth. So I think we're, we should see some good growth in the U.K. And certainly we're very excited about should we close on Wood Grieve Engineers and building our Australia market. So we feel in general positive about 2019.

Okay, great. Thanks guys.

Next question comes from Yuri Lynk with Canaccord Genuity. Please go ahead, Yuri.

Hey, good morning guys. Dan congratulations, I don’t have to tell you this, but enjoy your time of. I'll start with you, Dan. In your prepared remarks you talked about the seasonal decline in utilization in Q4. That happens every year. So I just want to make sure that there's nothing special this quarter that you're calling out and I might have missed.

Yes, no. Thanks, Yuri. There's nothing special that was being called out here. It's just reminder to the market that we do generally see lower utilization in the fourth quarter and therefore our revenue and so on. But I don't expect it to be materially different from prior years.

Okay. I just want to turn to M&A. And you mentioned that UK is a target market. And I found it interesting when you moved on the PBA acquisition ahead of the Brexit in March. So I know you guys haven't seen much impact from Brexit but I'd argue that it hasn't happened yet. And it looks like the negotiations are pretty contentious. So what's so attractive about buying in the UK that you would move on an acquisition like PBA now rather than wait and see what might happen in March when the actual, when the actual exit from EU happens?

Great. No, good question, Yuri. As we've been looking at opportunities to grow through M&A in the UK, we've specifically been looking for firms that we believe would be less susceptible to hard Brexit and an economic downturn. So we're not looking at firms that are, would be engaged in manufacturing or that overall supply chain, not firms that are heavily engaged in retail. PBA is a, fundamentally an infrastructure firm, have some involvement with high-speed rail, some involvement with cross-rail, these sorts of things, certainly involvement in the, with, there's a huge plan going there with regards to hospitals and care centers and so on. So we see PBA as a play really investing in our core infrastructure routes which are complementary to water and not really getting us into some of those areas where, which could be more susceptible to a hard Brexit.

Okay. Lastly for me, just, another good quarter of bookings in the Consulting Services, calculating a close to 1.2 book-to-bill. Do you think you can maintain a book-to-bill in excess of 1 in 2019 on an organic basis?

As we've, we have a pretty comprehensive opportunity pipeline that we use. All our staff use it as they put in opportunities that they see, the timing where they think they might become available and we factor them in. So we do see the opportunity pipeline for projects coming up in 2019 to still be pretty robust. So we still feel positive about going forward into 2019.

[Operator Instructions]. We'll take our next question from it Derek Spronck with RBC. Please go ahead, Derek.

I know you touched on this before but just wanting to get an updated view. Is there any percentage of revenue from the consultancy business that is tied currently to the construction business? And with that, how should we think about organic growth rates in 2019?

Sure, I'll talk about, first about the percentage of work in consulting, tied to the construction business. And primarily that would be in our Water Consulting group. And I'll break it into 2 components, the first would be in the United States where our consulting group does partner with our construction group on design build jobs or those sorts of things periodically. But it's not an exclusive relationship in either direction. So, as we talk with our water leadership in the United States about potential impacts from the divestiture of construction, we don't see that to be significant or mature at all in the United States. The Project that we have been working on together, the design build jobs are nearing or at completion. And there really were no new ones in the hopper to carry us into 2019. In the UK there are some opportunities where our consulting business subcontracts to our construction business. And so the discussions that we've had going forward are that the construction business still requires to have the, those engineering services provided. The construction group there is part of a joint venture. So we see over time could there be some impact there. But certainly as we were looking for a potential suitor to acquire the business, we specifically were not looking for an acquirer that would be part of a large engineering firm that would very quickly want to transition our engineers out. So with this buyer, with Oaktree-GFI we don't see that as an issue. So could there be some impact there going forward? Perhaps. But for now the work still needs to be done and so we can't guarantee what will happen in the future but we couldn't guarantee that before either because we were just part of a joint venture. So we don't see any big material hit there, Derek.

Okay, that's good color. Thanks, Gordon. Just moving on acquisitions. It seems like you've been picking up your activity levels on acquisitions, in particular in the back-half of the year as well with a couple sizeable ones. And I think you mentioned one that you signed last night that seems to be fairly sizeable as well. If I add up all the acquisition both from an employee perspective, including the one that you mentioned on the call, it looks like you've added 1,000 to 1,500 employees in 2018 on an acquisition basis. Is that about right? And how should we be modeling acquisition growth for 2019?

So just to start, we did not announce anything that we signed last night. So maybe I misspoke or it was misinterpreted. The one I was talking about was WGE or Wood Grieve Engineers that we signed some time ago. But we're just in the due diligence process now where we anticipate that closing in Q1 of next year to really build out our Australian business. But you are right, we are - we have certainly cranked up the M&A activity after taking an intentional hiatus, slowdown following the MWH acquisition. We needed some time just to digest that one and work through the integration. But certainly when I was named to take this role, that was something that I wanted to do, was really get M&A going again. So we still, our M&A pipeline is probably as full or fuller than it's ever been because not only are we continuing to look at M&A activity in North America but now we're still looking in Australia, New Zealand and the UK So I would anticipate continued good M&A activity going into next year.

Would you think as it stands right now we're looking at like 2% to 3% lift in net revenue from acquisitions in 2019 or any way to frame it?

I think with the addition of 1300 people in both UK and Australia that that will certainly help the acquisition growth. When you look at the -- all the transactions we did in the first half of 2018 that will also have a bit of a lift. But we are actually working through our budget. So once again in the first quarter we will or once we release our annual results, we'll be -- have a much better view of how much revenue that's going to add. So I think it's probably best to just leave it at that for now and provide a bit more color next quarter on that.

Okay, no. Fair enough. Thanks I'll leave it there and turn it over. Thank you.

Thanks Derek.

Our next question comes from Mona Nazir with Laurentian Bank. Please go ahead, Mona.

Good morning and thank you for taking my questions. I just wanted to turn back to the consulting and the construction kind of overlapping. I know you said that there would not be much overlap or impact on the U.S. side but there could potentially be some on the UK side. And I'm just trying to get a sense of the potential magnitude. And I -- if we're just looking at the construction, once fully divested we expect net revenue to kind of trend down in the, just over $200 million, $220 million range. Would that be -- could that turn into -- overall if we expect some flow through to consultancy, 300, 400, I'm just or is that?

Not at all, Mona. I think the impact will be immaterial that we would see on the elimination of the construction net revenues. We don't expect to see any material impact. And if anything it'll be a blip on the radar certainly but with any decline in our water consulting business as a result of divesting construction. As Gord said, it's not mutually exclusive and we certainly weren't dependent on construction projects to drive our consulting business either in the UK or in the U.S. We don't expect any material impact. And maybe going back to Derek's question a little bit on revenue growth from acquisitions. I think we will expect to see a good portion of that net revenue that is going away from construction replaced by acquisitions into 2019.

Okay, perfect. Because if you -- if we add up the Peter Brett and then the Wood & Grieve, I believe the majority of construction net revenue decline should be offset. Would that be true?

Yes, that's correct. That's what we're thinking it'll be the majority of it. I don't think it'll replace all of it, but certainly will replace a substantial portion of it.

Okay, perfect. And then secondly from me, I'm just wondering once construction is fully divested is there any liabilities or guarantees that are required from your side to Oaktree in regard to current projects or projects that were kind of under your scope and potential overruns in the future?

No. The only thing that we have to resolve is the closing balance sheet with Oaktree and that'll be done over the next 120 days. And so that's subject to obviously anything that comes up in the last month here from September -- from our September financials to October. But no, there is no trailing liability to Oaktree. What we have disclosed is that we will be retaining that one waste energy project as well as the U.K. pension obligations. But those are the only things remaining.

Okay, very helpful. And just lastly, I just want to confirm that the recent acquisitions and targets that you're looking at have no construction exposure, if that's correct. And then on that, has the due diligence process shifted your outlook for the last 3 years?

Yes, so the -- to answer your question, Mona, that is correct, that none of the acquisitions that we've made, nor the ones that we're looking at going-forward have a construction component to them. And in terms of our due diligence processes, over the last number of years we have significantly continued to -- it's a process of continual evolution and enhancement, but we have continued to strengthen our due diligence process. We've hired more people, added to our M&A and due diligence team with not just engineers and architects but also with additional financial and HR people as well. So I believe that we continue to strengthen our due diligence process.

Thank you. That’s it for me. And Dan I just wanted to say, all the best as you start this next chapter and it’s been a pleasure. Thank you.

Thank you, Mona.

Our next question comes from Maxim Sytchev with National Bank Financial. Please go ahead.

Hi. Good morning. And Dan, obviously all the best on retirement. In terms of the couple of questions I had, how should we think about it, the fact that organic growth is kind of matching GDP right now, certainly North America. And I mean typically at this point of the cycle, you would have much strong organic growth because I mean it's later stage, things are getting tighter. I'm just wondering if there is anything structurally that has changed from your perspective in the business that is leading to that slowdown versus the prior economic cycles?

No, I don't see that, Max. In fact as we noted earlier, our book-to-bill is above 1. So we're getting -- we're strengthening where the backlogs are feeling good. We just have to continue to work hard to get that work out the door. And in some cases, we have to add staff in order to continue to build by the hour and get the work out the door. So we are in an active recruiting stage in many of our geographies. Labor markets are tight. And so as with -- we're a pretty diligent and disciplined company along the way. So we're trying our best to not participate in some of the frothiness, that we're seeing some of our competition pay people just to get them in the door because we see -- we believe that would lead to margin erosion in the future. So we're trying to be very disciplined about it.

And I think the other thing that we mentioned Max in call though it is which is we did have, as I mentioned in opening comments, couple of very large transportation projects in the U.S. And you don't replace those projects every day. You've got to work hard to get these big projects. So a couple of those came from the KBR acquisition and those have all been completed and successfully wound up. We also had a couple of large hospital projects in Canada in our buildings practice at, primarily in the Toronto area that have more or less been completed as well. So that organic growth on a quarter-to-quarter basis can be a little lumpy. I wouldn't suggest that because it's slightly lower this quarter that that's the trend. It's just the timing of projects coming in and out of the pipeline.

Okay. Fair enough. And then I had a question in terms of the noncash working capital relative to last year. Is there some noise in relation to construction that maybe you can call out because there was a pretty significant decline versus last year?

Sure. There's no question that our cash generated from operations and free cash flows are down compared to last year. Two primary issues there. One is certainly construction, that probably contributed to about $70 million in reduced cash flow. As you see, it's come through our operating results. It's also impacted cash flows because we're incurring costs but essentially no revenues to complete these problem projects. And secondly, in the Consulting Services, our day sales outstanding has increased from year end the last year. So management is very focused on improving not only getting invoices out the door, but collecting on those invoices. So certainly an area of focus. We saw our DSOs were down a little bit in the third quarter and we're still focusing on getting those further reduced and bringing more cash in the door in Q4 and certainly into Q1.

Okay. And sorry, the $70 million, is that year-to-date or that's LTM?

It's year-to-date.

No, it might be, I think, it's TTM.

Okay, okay, that's helpful. And then in terms of, sorry, the pension obligation that you will have in the UK, can you quantify it in terms of the contribution on a per annum basis?

Sure, the, and I'm just going back to your last question, that $70 million was certainly year-to-date, not TTM. Also it'd be little higher on a TTM basis given we have some traction in Q4 of last year. Sure, the pension contribution is about £4 million on an annual basis from the treatment for the Construction business that we've looked at our cash flows for the UK business. And we certainly will be able to absorb those additional costs going forward. The overall pension obligation is around £40 million. That's payable over the next 20 years. So there's also valuations and reevaluation. So as soon as that, I don't think that the company will actually have to pay the full £40 million because once the investments actually start gaining traction and they reach a level of self-sufficiency, then the obligation will be much less.

Right, okay. No, that's helpful. And the last question just in terms of your interest in Australian M&A. I mean like that market was kind of depressed maybe 4, 5 years ago. Right now it's really kind of roared back. And so your view is that that momentum will continue? Just mindful of the end-markets that are kind of up on a stick recently and then sort of cool down post the transaction closing potentially. So just maybe any thoughts there, please.

Yes, we still see a lot of infrastructure work in the area. Certainly as we continue to look at potential acquisition targets. In some states, very large transportation plans, still we see opportunities there. Additional opportunities in the buildings space as we still see some development. Certainly, the land development in and around some of the major cities, particularly in the southeast, very significant, very robust still. So we do see some positive tailwinds there for the next number of years, Max.

And what about the transaction multiples, because it has been such a hard market?

Transaction multiples have been fairly consistent with what we've seen in North America. They wouldn't have been anywhere outside of the norm that we've seen historically.

Okay. Thank you very much. That's it for me.

[Operator Instructions] We'll take our next question from Michael Tupholme with TD Securities. Please go ahead, Michael.

Thanks, good morning. You were asked earlier about areas you feel good about for 2019 and you went through a list of a number of end-markets and sectors. I don't know if you mentioned energy resources, unless I missed it, but I'm just wondering how you feel about that area going forward? I mean obviously the growth has been very strong there for the last number of quarters. But at some point you're going to start to face tougher comps. So any comment on how we can be thinking about that area going forward?

Yes, certainly. And you're right, in Energy & Resources the type of net revenue growth that we've been seeing, 25%, almost 26% in this quarter up, a little over 26% year-to-date, that's not going to continue. I mean, it just, it can't. And you're right. We maybe have, as we even start to get into the Q4 of '18 we're coming off a higher comp in Q4 '17. So we still see a lot of work there coming up. We're engaged on a number of pieces of work related to the LNG Canada export terminal, our environmental services groups are involved there. The coastal gas link pipeline. We're involved in both the environmental and oil and gas engineering support. We've been doing that for several years. And a lot of the big pipeline jobs we're engaged in. So we do see that continuing. But in terms of organic growth in the 20-plus percent range, I think we'll see that tapering off in 2019.

To a more normalized.

More normalized, yes, yes.

Okay. And then just sort of follow-up on the LNG Canada. Recognizing that typically Stantec would get involved on sort of the front-end of these kinds of projects now with that project moving towards the actual commencement of construction, is your work actually ramping up still there or is it more steady-state or actually tapering off?

Yes. We see good opportunities going forward there. From an engineering perspective we see good opportunities and geotechnical work. Our ports and terminal groups, water resources, transportation, certainly community development is going to be new neighborhoods and new infrastructure put in place to house these people. Environmental and, we see a lot of work going forward whether it's for roads or transmission mains or collector pipelines or any of those things, there's certainly, we see a lot of opportunity going forward there, so.

Okay. And then, apologize if you mentioned this earlier, but with respect to infrastructure and buildings we saw a negative organic growth on a net basis this quarter, I think that's been the case for at least a couple of quarters now. But you sounded quite positive certainly about infrastructure. Just are you expecting sort of an imminent turn in terms of the organic growth turning back into positive territory in those areas?

For buildings, starting with buildings, I think Dan in the U.S. we did have positive organic growth in buildings in,

That's right.

In the quarter. It was really just in Canada where we came off a number of big hospitals that we, while we're working on Calgary Cancer and in those locations it's just more than enough to offset the big projects that turned down.

That's correct.

And there's a number of, still some good opportunities in Canada. So we feel okay about Canada going forward. We're still a bit reserved. On the infrastructure side though, a lot of opportunity out there, light rail, public transit, roadways. So I think in infrastructure, which is our infrastructure group is still primarily dominated by transportation, we're still seeing the big turn down in a number of the big Texas projects that we were -- that we finished up this time next year. We have some good new projects that are on the rail. We talked about Long Island Rail Road and others. So I think that we will see a turn in infrastructure as well going into Q4 but certainly into next -- into next year.

And maybe just that one other thing on that. In a project like Long Island there are requirements where we have to hire other consultants, women, disadvantaged businesses and so on. So that's why you're seeing good organic growth on the gross revenue line, but net revenue we have to sub out some of that work by contract, so on the large transportation projects. So that has a bit of an impact. Certainly we can do all the work, but it's a requirement that we sub some of this out.

Okay. You've been asked a couple of questions about the sale of the construction business and what that might mean in terms of once you separate that. And I think some of those questions were more getting at the revenue opportunity that may sort of be lost or people were wondering about that. And I think you addressed that. But I guess what I'm wondering is are there any dissynergies from a margin perspective for your consulting operations once you -- or now that you've closed the sale of the construction piece? So I'm specifically thinking about MWH's consulting business, any linkage to the construction business? And any kind of synergies on the margin within the consulting business that you will now have going forward?

We've had a good look at that, Michael. And I think there's maybe $1 million of potential moving from having the cost being done internally versus as a subconsultant. But it's not going to be material on certain projects. These are really construction management type projects that we're seeing. So that's over the life of the project. So it's not going to be reflective in any given quarter. But other than that, I'm not really aware of anything that would create that kind of the synergy that you're -- you would think would be material.

Right. And one thing just to clarify again that, the -- as we've talked a little bit about some of the acquisitions we've brought on or planning to bring on, the net revenue that we're generating through these new acquisitions is Dan said, are both the same or losing any construction, not quite as much. But certainly from a gross revenue perspective there will be a big change.

Yes.

Constructors certainly generate significant gross revenues. So, I think you'll see -- as a company that overall gross to net is going to tighten up.

And we will see margin with the -- obviously with the consulting services acquisitions from the poor margins that we've seen in construction to-date, so that too will help. So the revenue replacement is at a much better margin, EBITDA margin then what we're replacing, so.

Good answer. That's a good point. Maybe just to tie all of that together then, your guidance for the Consulting Services business for EBITDA margin has been 11% to 13%. As we look forward is there anything that would cause that to change? Things we just talked about, but other things. I mean, you're going to have maybe some additional integration next year with a lot of the M&A you've done. You mentioned some competitive pressures in the gross margin. Just as we tie it all together, is 11% to 13% still kind of the range or is there a different range we should be thinking about?

I think as I kind of commented earlier is right now I think that makes sense. We don't see anything that's really driving those margins significantly lower. If we get significantly higher revenue and opportunities in the Oil & Gas sector, it's a lower-margin business, so that could drive down the overall EBITDA margin a little bit. But I don't know that I can give you a specific answer today until we get through our budget and our forecasting for 2019 which again will be provided in the annual report. But I don't think it's going to be materially different, Michael.

And it appears there are no further questions at this time.

Great. Well, thank you. And I just like to thank everyone for joining. We'll see several of you, I'm sure, over the next quarter. And look forward to chatting with you no later than our Q4 call, which will be in February. Thanks very much, everyone.

Thank you all for your attention. This concludes today's conference call. All participants may now disconnect.