Q2 2021 WSP Global Inc Earnings Call
[music].
And so on the dams and Michele good morning, ladies and gentlemen, the engineer and a coffee shop.
And you touched you dig and C&I forgive me and Bentley and debate uptake welcome to Ws PS 2021 and second quarter results Conference call.
And now I'd like to turn the meeting over to contain and Weber Investor Relations and with alcohol. Please go ahead Mr. Weber.
Good morning, we hope that you're all safe and doing well. Thank you for taking the time to join the call today during which we will be discussing our 2021 Q2 performance followed by a Q&A session.
As today are on a Sunday they are.
And steel and then let me show our CFO. Please note. The other Scala is also accessible on our website via webcast during the call we'll be making some forward looking statements and actual results could be different from those expressed or implied we undertake no obligation to update or revise any of these statements relevant factors that could cause.
Actual results could differ materially from those forward looking statements are listed in our most recent management discussion and analysis on.
During the call we may refer to certain non <unk> measures. These measures are defined in our management discussion and analysis of the second quarter.
One as well other management discussion and analysis for the year ended December 31st 2020, both of which can be found on SEDAR and on our website.
M D and E. Also includes reconciliations of non <unk> measures to the most directly comparable at various measures management believes that these non <unk> measures provide useful information to investors regarding the corporation's financial condition and results of operations as they provide additional key metrics of its performance. These non.
And I have first measures are not thick and is on the rash rash and do not have any other standardized meaning prescribed under and forests and may differ from similar a little bit and they miss.
Measures as reported by other issuers and accordingly may not be come from these measures should not be viewed as a substitute for the related financial commission prepared in accordance with out there with other Paris with that I will now turn the call over to IDEXX zone.
Thank you Dan Good morning, everyone. I Hope you are all keeping safe and well.
Let me begin by saying and that I'm very proud of our performance and the second quarter and first half of 2021.
Thanks to the passion and dedication of our teams around the globe. We continued to deliver strong results provide high quality service to our clients and win exciting new projects.
Before we go any further let me highlight three key points first as expected we returned to growth in Q2 with net revenues better than expectations and a healthy backlog and a strong project pipeline overall proposal activity continues to be very robust across the business.
And the volume of contract awards not yet included and then backlog is that a record a record high level, notably in the U S. We increased backlog by approximately 75% over June 2020.
Second our recently completed acquisitions are integrating well and are exceeding performance expectations and particular strategic and transformation. Transformative addition of golder.
From above expectations, and Q2, 2021 with double digit organic growth and strong margins as well as a 25% organic growth and its backlog since December 31.2020.
Third we continue to welcome new talent to our leadership teams, reflecting our continued commitment to inclusion and diversity and to creating development opportunities for people.
And I am proud of our accomplishments and upfront, which lead to a true collaboration increased performance and even more value for our clients.
The strong start to 'twenty, 'twenty, one and the growing level of investments and infrastructure and environmental programs around the world make me very optimistic for continued positive momentum for the rest of 2021 and beyond.
As a result, we feel confident and increasing our 2020, one outlook, which we will cover in greater detail later in the call.
Our industry leadership as confirmed by our number one ranking and <unk> top 220, 225 International design firm list ranking at the top of our peer group as a point of price WSB and reflects the dedication of our 55000 professionals.
Our leading positions leading position to buildings transportation power and environmental sectors, where Richard nice as we advance our ranking achieving five positions across the board with number one spot and buildings and transportation.
The expansion of our global footprint and depth of capabilities also Gardner.
Several top 10 regional ranking including a number one spot and the United States and Australia.
Now turning to our management of the global pandemic conditions remain fluid we continue to monitor the situation across all of our operating locations and adapt project delivery and regions experiencing increase restrictions.
We continue to follow our business continuity plans and focus on helping our people be safe and productive whatever day location.
As for other global matters, just this week the United Nations Intergovernmental panel on climate change issued a report that has increased the urgency of reelection and addressing climate change.
The shift towards a low carbon economy remains on market driver for our clients and an imperative for them.
Shortly after we announced our commitment to achieve net zero emissions across our value chain by 2040 total.
<unk> was named for the third year in a row as the most sustainable company and the engineering industry by World Finance magazine.
We were also recognized as one of corporate Knights Best 50, corporate citizens and Canada.
June also startup obligation of WSB annual ESG report entitled accelerating meaningful action.
Our ESG report highlighted.
And that nearly half of our 2020 at global revenues can be classify ask gene revenue.
This is defined as revenues net.
And from services that have a positive and then back on the environment and support the United Nations Sustainable development goals.
And we view this as a significant accomplishment in line with our strategy and commitment to support the world screen transition and a metric that we intend to improve on.
On overtime.
The salt connects to our success and achieving our 2019 'twenty to 'twenty, one strategic ambition of becoming the leading global and environmental consulting firm.
As recent acquisitions like Golar and air Con integrate into WSB, you can clearly see wsb's increased position and this growing market.
Our complementary client base serve risk service offerings and geographical footprint are serving a strong catalyst to winning work and extending our client portfolio.
I am pleased to report that we currently have over 500 opportunities, which we are pursuing together and addition to more than 100 projects sorry awards across our key markets.
We are following with interest the development and the U S Congress as early signs of bipartisan support of the American rescue plan and create a focus on infrastructure investment at levels, we have not seen.
The days of the building of the Interstate system.
While work is still needed to progress to a true funding wsb's well positions position to deliver on a wide range of project work, resulting from disinvestment program and water <unk>.
<unk> bridges and buildings and power infrastructure among others.
<unk> overall proposal activity continues to be very robust and the U S and day volume of contract awards not yet included in backlog at a record high level.
So you could the U K is also experiencing a positive surge as the economy continues to recover faster than predicted accelerating public sector procurement and private sector investment.
And here in Canada, our our excellent win rate on competitive proposal is creating an all time high backlog and strong project pipeline.
I would now like to highlight a few of the major wins during Q2.
Australia has been focused on the improvement of their transportation infrastructure for more than a decade, now and Thats pledge to invest 100 billion Australian dollar and transports infrastructure over the next 10 years.
This quarter <unk> was awarded the detailed design services contract for the F. Six tunnel extension.
Covers the roadway from the Sydney Airport to a co guy right.
The project is.
As part of the stage delivery of debt and six motorway aimed at reducing travel time from the southern areas to Sydney.
Meanwhile, on the UK is putting fresh investment and to public health care facility expansion and improvements, our leading position and health care buildings as gardener significant when India hospitals of the future program part of the government's commitment to build 40 hospitals by 'twenty maturity back.
And my initial budget of $3.7 billion.
Wsb's part of the expert team appointed by the lead teaching Hospital National Health Service Trust to deliver day, New state of the Art Addled Hospital and a new home for the leads children's hospital.
And the U S. W. P Mark a new milestone and our strategy to expand our work and trends and customer centers with the selection by the Metropolitan Transportation Corporation to transitions its trends its rider fair system also known as the Clipper program to a new cutting edge customer service system. This highly traffic.
System processes fares for 'twenty, two transit agencies, and 23 million share payments equating to 50 million U S dollar and transit revenue each month.
Of course, winning work and delivering project leads us to the most important asset of our business our people.
W speak continues its commitment to inclusion and diversity and to recruiting Richard Nizing and appointing talent through internal succession, and advancement and acquisitions and organic hiring.
In Q2, several key leadership appointments were made.
<unk> was named President and CEO of <unk>, and Canada Marie Claude originally joined <unk> Global director of major projects and programs and the executive market Theater Chebec.
Dean Mcgrail was appointed Chief Executive Officer, WSB, and the Middle East Dean previously held the role of managing director of property and buildings for the Middle East business.
Following his tenure as Chief Executive Officer for WSB Middle East Operation.
Rick Shane as accepted the Chief operating officer position, Australia business and other mobility example, and our network.
Magnus Myer Wsb's Seo from Nordics and Central Europe has decided to leave <unk> by the end of the year to pursue other opportunities.
And to fill his role we have appointed two successors and Alina Oberg Oxter.
And you of the Nordics and Erik Van Den Broek.
<unk> of Central Europe and.
And then leading out form the east served as Golders regional President for Europe, and day, Nordics and Eric was also and will continue and.
And the strength role as managing director.
For the Netherlands.
Megan and Vince palette Thats been promoted from our previous position as director of HR, and New U S. Wsb's Global Chief Human Resources Officer.
And again joined WSB and 2017, and that's over 20 years of proven and experience.
When these stolen was appointed to the role of senior Vice President and Global Communications Director when do you serve and a similar role for Goldman prior to joining WSB.
Finally, we are pleased to share that our brand continues to attract talented and passionate new resources, we are experiencing a high application and acceptance rate, which positions us well to continue to meet our project commitments and.
And I will now review our financial results in more detail.
Over to you.
Thanks, Alex and good morning, everyone and very pleased to report on our robust results for the second quarter of 2021 driven by strong performance from recent acquisition and <unk> and our overall business and better than anticipated organic growth, resulting in improved adjusted adjusted EBITDA margin.
Let's start with our top line for the second quarter revenues and net revenue reached $2.6 billion and 2 billion up 19, 3% and 16.3.
So 16, 1%, respectively compared to Q2.2020, the increase was driven by organic growth of three 6%, which is higher than our initial expectations of low single digit organic growth for Q2 the.
The increase in revenue and net revenue was also driven by acquisition growth of 18, 7% across all segment.
Moving to profitability adjusted EBITDA and the quarter reached $342.6 million up $24 one per cent compared to 276 million in Q2, 2020 largely due to the contribution of recent acquisition and the continued good performance of our overall business.
Adjusted EBITDA margin for the quarter reached 16, 9% compared to 15, 8% and Q2.2020, the improvement and adjusted EBITDA margin is mainly attributable to the higher margin profile of recent acquisition and better productivity across the regions.
Our adjusted net earnings for Q2, 2021 were $147 million or $1.26 per share up $35 four per cent and 24, 1% respectively compared to Q2.2012, the increase and these metrics is mainly attributable to higher adjusted.
EBITDA margin.
Our backlog at the end of June 2021 stood at $9.6 billion, representing 11, two months of revenue up 11, 9% and the six month period, mainly due to acquisition growth on a constant currency basis backlog grew organically by $1 one per cent compared to backlog at December.
2020 overall proposal activity continues to be very robust across the business, which is very positive for the rest of the year and beyond.
Moving to our cash position and cash inflows from operating activities for Q2, 2021 amounted to $311 million compared to $510 million in 2020 on a free cash flow basis, we generated $53 million in Q2, 2021 compared to $411 million in 2020.
Lower free cash flow and 2021 was mainly driven by the expected normalization of cash collection and Q2.2021 and also due to 'twenty 'twenty benefited from a deferral of income tax and other remittances and some jurisdictions amounting to approximately $100 million.
For the trailing 12 months ended June 2021 free cash flow amounted to 550.
<unk> $53 million, representing one five times, our net earnings.
DSO at the end of June 2021 stood at a very good level of 70 days.
And as of the end of Q2, our balance sheet remains very strong with a net debt position of $1.3 billion dollar and a net debt to adjusted EBITDA ratio of one point and one during the quarter. We also declare a dividend of 37.5 cents per share for shareholders on record as of June 32021.
<unk>, which was paid on July 15, 2001, with a 56, 2% drip participation. The net cash outlay was $19.3 million. This concludes my remarks on that back to you Alex.
Thank you Elaine.
So given our great performance and the first half of the year.
Strong balance sheet and.
And the positive momentum and our key markets, but high levels of contract award and proposal activity and.
And finally, the performance of our most recent acquisitions, we are and are positioned to increase the adjusted EBITDA range for fiscal 2020. One two at 1.2 dollars 75 billion to 132.5 billion.
And do believe we are positioned favorably to achieve our 22 and 2019.2021 strategic ambitions.
As expected.
In conclusion, I am proud of our teams and their continued dedication to delivering outstanding service to our clients.
The next few months as we build on and on our 2020, two 2020 Force strategy and turn to page two day next chapter and WSB story.
We remain committed to our future ready model and creating a compelling vision supported by focused initiatives that will solidify our position as the premier professional consultancy and our industry.
I'd now like to open the line for questions.
Certainly if you would like to ask a question. Please press star followed by the number one on your telephone keypad.
Your first question will come from Jacob bout from CIBC. Please go ahead. Your line is open.
Good morning wanted to start off.
Want to start off with.
The raise in guidance for the year.
<unk>.
What are the drivers here and so just.
Expected revenue growth and how should we think think about margins, especially given the expectation of higher discretionary spenders.
And as we travel more et cetera.
Well of course over the last eight.
18 months.
Cost containment efforts took place within the BSP, but.
Lot of debt.
Reverted back and and of course, I expect and increase in costs. When we all start to travel again.
And meet in person.
But that said Jacobs and the main driver is that WSB legacy and.
What I mean by W. Still I guess is ex acquisitions for this year and on.
And our existing acquisitions for the year are performing extremely well right now and that's why we felt compelled to.
To increase our options at this point and time.
And are you still thinking of organic growth and share in that kind of 2% to 5% range.
Okay.
I think thats the goal at this point and time, we haven't changed our guidance around our organic growth.
Where we made an adjustment is really on the bottom line and at this point and time.
And we will revisit if we feel we need to later on and the year.
Okay.
Second question is just.
I think the organic there's organic growth retraction in the U S.
When do you expect that to turn and I know you made some comments about.
Contract awards, but when do you expect that to turn.
Look Jacob it's really hard for me to predict how politics will behave and and all of deaths and the next and the second half obviously yesterday.
And that's a proof.
Bill.
And this was not just.
Democrats voting for the Bill and and the Republican and voting against I don't think I've seen as such and bilateral boat and more than a decade and the U S. At this and so I think there's clearly.
There's clearly an agreement and the U S. That's infrastructure spending is a need and the reinvestment and infrastructure and the U S is definitely a need and both parties believe and that so so we'll see how this is progressing and the house.
So it's hard for me to tell you. When this this will be unlocked having said all that what I can tell you is that on our win rate on.
On competitive bids and awards.
And is as high as I ever remember and the U S. So.
We are doing extremely well and we are I think this time around and I think it's fair and I say that we are winning more than our share.
The moment.
So.
And it's work that has been procured.
We won.
But we are just waiting for debt funding to follow suit.
And so I think this is very positive and.
And I think the future should be bright for the U S, but time will tell.
Our global there. Thank you.
Thank you.
Your next question comes from and lap Jorge <unk> from Deutsche Bank debt capital markets. Please go ahead. Your line is open.
Yes, good morning, everyone and congratulations for the good quarter.
If we sell bandwidth growth.
Yes. So if you look at gold there congrats for the good results could you talk about how much of the double digit organic growth driven by golder was driven by cross selling opportunities.
Look it's early days still.
And one on on cross selling and collaboration.
I think I mentioned, we are pursuing a probably a 100 and potential opportunities together. So I think it's very promising.
But I'd say debt right now most.
Of this growth is coming from from legacy Goldurn Youre doing well.
They are performing well and all of the countries.
From from Latin America, although weighted down to Australia, So I think across the patch its been very robust and the mining sector, let's not forget this the mining sector is performing extremely well right now and we expect it to perform like that for for.
And for the foreseeable future. So I think we find that.
We are quite fortunate about the timing of this transaction and we are quite pleased about it.
Okay and could you maybe talk about the contribution from <unk> and the backlog specifically in Q2 and also about the cost synergies, whether you're finding more opportunities or still too early to tell.
Well.
It's early on cost synergies, but I will turn to align to answer the question on a go ahead on backlog.
Goldberg.
And experienced about 25% growth.
And since the beginning of the year and their backlog.
Other backlog is at record.
Record high level currently.
The two I'll explain the momentum and the mining business.
It is actually quite good and we see that converting and good backlog.
And on the synergy side and it will just one quarter and so it's a bit early to tell but we're still committed to that.
We have.
So in December.
Okay, that's great and last one for me with respect to M&A.
We urge and lots of discussion recently about the increase and valuation multiple expected from seller.
Especially with the higher participation from a P firms so given your discipline approach.
Should we expect WSB still remain active in 2020 one.
Look it's always our goal to be active and it's always our goal to be opportunistic we have a very strong balance sheet position.
So if we feel at this point in time and and the future net.
Can create shareholder value.
Bye bye going after targets we will.
We've had over the course of this year, a number of us and formal and informal discussions.
And as I said in the past I think what made US successful is through good times and bad times, we remain disciplined and focus on our strategy. So so it's been Y shield that we we can strike.
And that transaction that will create shareholder value, we will do it.
But clearly we're going to be we will remain disciplined and then and let's not forget as well that we completed the closing of gold there only a quarter ago. So so I think focusing the team on delivering this transaction to our shoulders is the top priority.
Still early days I think after after 60 days to suggest that the integration is completed.
We have a lot of work to do but.
Yes, Indeed, I mean, we continue to have dialogue with firms and if we see we can add.
We will.
Okay. Thank you very much for the time.
Thank you.
Your next question comes from Yuri Lynk from Canaccord Genuity. Please go ahead. Your line is open.
Good morning, guys.
Good morning and are weary.
Hi, guys.
On a follow up on the new outlook.
To characterize it as better than expected profitability and the first half of the year.
And not so much change and your revenue expectations and.
And if thats the case, whereas profitability.
Surprised you and.
Is that do you view that as sustainable.
Yes for the remainder of 2021 and we review this.
Sustainable without a doubt Yuri otherwise I don't think I would have been comfortable to increase our outlook from a bottom line point of view.
Admittedly I was a bit surprise.
Hi.
The recovery faster I've ever UK business, and the fast recovery and our Canadian business.
I was expecting.
Slower pace of recovery, but proposal activity level is strong.
The UK businesses.
And this is doing very well right now so ex Canada.
If it wasn't for the restriction.
The strict restriction and Australia with the shutting down of construction side I think we would have done better and Q2 than what we've shown that to all of you this quarter.
And then and the U S. We continue to thrive I mean, we are we.
And we are.
Generating very strong profit very strong margin profile.
So you combine this.
<unk>.
And the performance of our recent acquisitions, namely colder, but all of the other ones as well.
And you look at this and say look where we are actually performing better than what I had anticipated at the beginning of the year, we all need to remember that.
And we put our operating plan and budget together.
Over the course of the September all the way up to or.
About end of November before and presented to our board. So so.
And this budget and this outlook was.
Seven and eight nine months old and <unk>.
And where we were 708 months ago to compared to where we are today.
Life is different and we feel better about it. So so that's why we felt compelled to to.
And to increase our bottom line outlook.
Okay, that's fair.
Second question from me just on the U S.
What.
And what's kind of changed there or whats the dynamic temporary or not where you would have such a surge and soft backlog, but.
Just slow and converting and the hard backlog as it related to the election and the pending bill all of the above just any any additional color there and that's it.
Yeah, it's all of the above I think the early funding.
That has been that's been fueling estates and the market early on and that's been water.
And that's where we've seen most of the funding going through at this point and diamond and the year.
But we haven't seen as much in transportation and other so so I think.
Our clients are quite keen to get to work.
And and I think there is a general and and collective rich ignition that and enormous amount of work is needed and the U S. Most other infrastructure assets are obsolete.
I think I gave that stat.
And and fast fashion and analyst calls, but I think 75% of bridges and the U S are either ups leads are are in need of significant work. So there is a collective recognition votes from the Democrats Republicans and states that were just needed.
So they are eager to get to work.
But clearly this massive.
This massive funding and bill as I believe.
Creating a bit of a hesitation and at this point and time I think states on waiting to see when and if this will be approved I think yesterday and was very good news and and.
And that's that's clearly that the psychology and is taking place and the country.
Having said all that I think when we put our budgets together last year, we didn't know the outcome of the election, and we didn't know that it would be and been like this.
And then we'd be put forward so.
So don't get me wrong, I think I don't believe our business is waiting on things that we are out of our control to the contrary I think we're.
Hustling very hard.
To to generate the revenue and to generate a profit.
But the.
<unk> and the U S is very strong at the moment with or without a bill and that you know.
Why we feel.
I would say cautiously too.
Optimistic about about the future.
Our U S business.
Okay.
Although Oklahoma channel.
Thank you.
Yeah.
Your next question comes from project Bastien from Raymond James. Please go ahead. Your line is open.
Hi, good morning <unk> on.
On my Thanks, Ed.
Hi, guys just wanted to build on your last question your results for the past.
And for five years do show that you are performing extremely well and the U S.
Which makes me think anything from coming from the proposed infrastructure Bill would be gravy for Wsbiu.
Have you estimated what potential impact this bill could have on your organic growth and the U S.
No we have not.
And.
We have not spread transits.
How this will be approved.
Your guess is as good as mine how this would be funnel.
Your guess is good as mine timing I admit isn't as good as mine so.
I think this is to me.
And I wish I could answer it but to me and I believe this would be an impossible and answered trend.
Question to answer.
Having said all of that time, Inc.
And what I'm, telling the team Dan the out every week when I speak with our U S team leaders.
Our job is to deliver services to our client we have the backlog to deliver.
We need to attract the best talent and this industry and that we should just worry about things that we control.
Of course.
Fred and I'm not going to stand here, telling you that.
This bill is.
This is not going to be very helpful.
Of course, it will be very helpful.
And to what extent time will tell.
But certainly if this goes through I think this is going to be.
Very good news for WSB, but very good news for the industry as a whole.
Okay. Thanks, Alex next question.
Asked you from from a regional perspective, but.
And we've seen the company move up the league table and the environmental sector transportation and buildings.
With your transformation on acquisitions in the past are theyre still sub sectors. Within these three segments, where you would like to bulk up further either organically or inorganically.
Absolutely.
I think we could.
Probably double our transportation business and the U S and she'll still very comfortable about it.
I think there's a lot of room for us to to growth for instance, and.
And Texas and California.
And southeast and the Midwest.
So so we are quite subscale.
And the U S steel and.
And many places.
And the building sector I think in previous calls I mentioned over the last few years, we continued our transformation of our building sector from being non just Anthony.
High rise.
Commercial real estate.
On.
Engineering firm to now being a leading firm and their mission critical work.
Data centers.
And also on the health care health care over the last three years, we've made a number of acquisitions and the U S and elsewhere.
And we're now leading and <unk>.
That sector. So so we continued our transformation and I wish and the perfect went on to continue to.
And to increase our exposure to those sub sectors and in due course.
And then and environment.
I think golden WSB would be creating at 14000 strong environmental practice urge and environmental practice.
But there too there are many countries and take the U S. Again for example, where.
We have 2000 people.
And I believe we could we could grow our president and even more.
But thats true and the U K, that's true and most of our regions if not all of them.
And then finally, you know of course water and I think you know that we have.
No.
And perhaps.
On a relative scale basis, given our sheer size.
A smaller sized presence so we could grow that.
And then that could move on and services project Management program management, and something we would like to growth.
And digital is one that I don't talk much.
During those calls, but when we unveil our strategy in 2022, two and 24 I'll be able to talk more about that so there are a number.
Services sectors and regions and I assume we could.
Neutral growth rate and that's what we're busy doing right now.
Thanks, Alex Great answer and great quarter.
Thank you.
Your next question comes from micro cap on from TD Securities. Please go ahead. Your line is open.
Thanks, and good morning, Alex and all that.
Hello, Michael.
Yes.
My first question relates to the organic growth outlook. So I realize you haven't formally change the 2021 organic growth guidance of 2% to 5%, but I'm wondering if.
Given the better than expected organic growth you saw on the second quarter and what sounds like a positive outlook for the second half of the year.
Should we be focusing on the upper half of that guidance range.
Yeah.
I will leave.
And we'll let you decide.
And how you think you should.
No.
How you should be thinking about organic growth rate, but I think the big question Mark at this point and time, Michael is the U S. I mean, there is no doubt about it.
We are essentially flat.
For the year, so far so so all depends how you know.
<unk> will be performing.
And I'm not trying to hide anything when I look at our organic growth.
Forecast to two 5%.
Given the track record over U S business and frankly.
And our peer group and the U S. I think it's very very consistent and we're all waiting not waiting, but we're all hoping.
C.
And now changing.
Changing direction, so I think again.
The proposal activity level is extremely strong.
Very active and.
And we won we win more than our share of work at this point and time.
But it's more of a question of timing and my personal opinion and it is about the fundamental trends and our U S business at the moment, we just it's a wait and see.
And that's why I think.
Unless I was absolutely certain.
That is true.
We will provide and increase results I felt we should err on the conservative side at this point and time and see how this will.
And how we will be performing.
Okay.
And that's a fair answer.
I know you don't break your business down like this as far as.
Reporting goes but.
You've been increasing your presence in terms of your strategic advisory services offering I'm wondering if you can speak to.
How the growth you have been seeing and that area and that you expect to see and that area. How that compares to the organic growth and the top line growth and other parts of the business.
And also as sort of a follow on to that wondering if.
If you can talk about the extent to which that debt increased presence and that services advisory area.
And strategic advisory area is that part of what is.
Net.
Seeing you deliver these better margins.
Look at it depends you know strategic advisory mean different things to different people, but I will try to explain to you how.
See it personally.
Over the course of the last cycle and we.
When we unveiled our plan in 2018 I had mentioned.
And wanted to increase our.
Non design services.
To get to perhaps like by the end of the cycle approximately half and half between.
Seal and detailed design work from.
From work, where we are providing more of a and advisory type of services and environment would fall into this.
Program project management, and with fallen into this and the more what I would call.
Income that C suite strategic Advisory network would also fall into this like studies.
Analysis.
And data analysis, and we do a lot of this and over the course of the last <unk>.
Michael Michael.
We've we've increase on our.
Our non design work buyer.
Now we're about 50.50, but in reality, it's probably more $55.45 and.
And don't get me wrong or right on our margin profile and design is improving and is increasing so so we will we want to continue to capitalize on our engineering.
Capabilities.
But what I said back then is we will continue to capitalize on what we are good.
Expand on horizon on things that perhaps where we are subscale.
And over the last three years, that's what we've done.
And and if we chose to grow with us because I believe and the growth prospect of those services. So so we invested heavily in and urban.
And.
We invested heavily.
And many other services.
Our non design.
But then when you look at the design and you look at on our healthcare sector, Ms and scoring double digits right now.
So on.
So I think.
I wouldn't want you to leave this call thinking debt.
We are transforming the company and because we don't believe and our core services to the contrary I believe with what's happening and the world and the reinvestment.
And infrastructure that will be taking place in and every contract and think of <unk>.
Actually our design services would be even more important.
But complementing that service with upstream.
Upstream services, where we are there with decline to advise them.
And at the beginning upstream all the way down from our detailed design work and I think that was the strategy and and it's paying off at the moment.
Okay.
Good answer thank you Alex.
And just my last one.
It was mentioned that.
<unk> business grew organically double digits.
And so I guess, maybe maybe a two part question related to that.
First just to help put that double digit growth into perspective can you provide any insight into what sort of prior year comp quarter was up against.
So just just wondering.
Specifically, if they were impacted by the pandemic or or.
And is that part of why the growth was so strong.
And then I think you've maybe already addressed this but but any particular areas that are really that are really driving that growth. I think you mentioned mining, but I'm not sure if there are others as well.
Just before.
And then make hits and 2000 Twenty's from Q1 of 2020 and.
Goldberg during our due diligence obviously, we looked into this but that was up double digit.
And and this was anecdotal dividend debt the business was doing extremely well.
And that by a very strong management team.
<unk> CEO and <unk>.
And of course depend NAMIC hit and our force.
And this was slowed down the way all of US were slowed down so they were not any different but there was some evidence.
That the business was driving and 2019 was also a very strong year for true both her and Thats net net forget that the force we have not.
Disclose those numbers, but so when we based our investment thesis we looked at.
First the performance of 2019, the first quarter of 2020.
And of course took into consideration, what's taking place and the pandemic.
But.
Nevertheless, I think from the last few years. This is a business this was growing year over year over year.
And that's done extremely well.
And so that gave us comfort that we were buying.
A great business.
Great people and.
And frankly, we're only a quarter and but.
Early evidence, that's what we bought and amazing business.
And and to your point about the about the sectors I think what I find quite interesting right now is all of the regions.
Mr and goals of our striping, Canada is performing extremely well.
The U S is performing well.
And Latin America, and is performing well, Australia as well the mining sector without it now is.
Yes.
Okay.
Yes.
Very strong maybe robust so so I think right now I feel debt.
The timing of this acquisition from that'd be any better.
There are other sectors and are doing well as well manufacturing and the U S. For instance, as an example, so.
So I'd say, all and all I think it's just and then.
And our business that <unk>.
Performing.
Very well at the moment.
Alright, Thank you very much.
Yes.
Your next question comes from Dmitry <unk> from Amit <unk> from Baird. Please go ahead. Your line is open.
Hi, and thanks for taking my questions.
I was wondering if you can talk more about the backlog and the U S.
It's a relative it's a big business that you haven't do you have and it was not dependent on infrastructure stimulus and the pause.
And I'm just wondering.
Why clients.
Our hesitant if you will to commit.
<unk> dollars per project and essentially what causes the delay and firming up the backlog in the U S.
Look at that at the end of the day I mean, we.
We could share and thing that the pandemic was net of financial burden to states and municipal and.
Municipalities, but we all know debt since this is a false statement.
Enormous amount of money was pumped.
And the system.
On to.
To deal with this pandemic and of course share that there are some conflicting priorities right now.
And those offices and dose to people and leasing those states and municipalities and governments and.
So I think the fact and the matter of debt funding is coming.
Im not surprise that this perhaps creating some hesitation.
By state and local to get the Green light from a gift to Green light and.
Get going on all of those projects. So I think as I stated before and not a politician.
And from my job my job is to deliver on a hard backlog to convert it and to make sure that we deliver the best services to our clients and.
And to attract the best people to our firm.
But certainly I think that you combine and pandemic with the trillion dollar bill.
Not surprised that it may be create some hesitation to system.
Okay and.
Can you talk.
About free cash flow conversion.
The longer term.
Where would you expect that to be I know your goal January release to target, 100% conversion of free cash flow to what.
<unk> net earnings.
How do you view that given the normalization of the collection cycle.
And the.
Essentially a longer term perspective.
On cash generation versus.
Scott earnings.
Yes, good question Dmitry.
As you said, obviously, we've seen we've seen 2020 is.
A particular year from net cash flow collection, we've seen strong cash flow.
Our objective for 2021 remained to be around 100%. That's the goal and that's the longer term goal as well.
But.
As you know given the normalization of cash flow this put a bit of a headwind.
And on that progression objectives, 100% at least and the short term, but thats just normalization.
And it remains our objective.
So thats the best Guidepost for you to look at that 100% conversion.
Understood. Thank you.
And.
Other question that I have is on integration and I Wonder if you can talk more about.
And what do you generally consider as most risky.
Portion of the integration process and the most time consuming.
Well.
The.
First few months Dimitri on integration and are quite critical.
Because thats when you engage with the work force.
And you know as well as I do that debt, it's human nature to be concerned by changes.
The weakness.
And and therefore converting.
On the workforce and also we're taking the time to come in and change your ambitions and your vision.
What the combined organization would look like but also taking the time to explain.
What it has to be a consultant.
SP.
Does it mean for them and.
And.
Like anything there will be some some good some element of goods and some new and then.
Not so good that's just the nature of.
Jeff.
And our marriage, but at the end of the day, making sure that we embraced a likeminded vision and guiding principle is chi.
And making sure that you explained your culture and you explained.
And what you believe and I think it's very important.
And I find that sometimes integration and are not going to go well.
And as leaders will tend to focus on on.
And on the systems and will tend to focus on.
On tactical stuff for me personally and believes that connecting with the organization.
Making sure that you explained what you stand for and more importantly.
You create an environment and when we could have early wins together is probably.
And the best Testament of what a successful combination should be like.
So that's why.
Making sure that we connect people early on and.
And from J with one another.
Good news and the Bad news I think it's extremely important so.
So that's why I said that we're only on a quarter and two.
And to the integration.
Of course on a lot of work has gone into it.
Free closing, so generally had a head start.
But that period of time is critical.
And Thats why I think we're taking the time to do things.
To do things right to make sure that debt.
We live up to the promises that we.
And we were presented to the culture people.
Okay understood. Thank you.
Your next question comes from Maxim <unk> from National Bank Financial. Please go ahead. Your line is open.
Hi, good morning, gentlemen.
And on Max.
Just a couple of very quick ones from me, Alex <unk>, and obviously, Australia and being very strong drivers of growth for a number of years. It looks like we have plateaued a little bit what are you guys seeing for these two markets.
And the next let's call. It 12 months to 18 months it was possible.
Yeah, well the Nordic countries.
At.
At the end of the day and Max are smaller and science is just and the nature of the of the <unk>.
I mean.
We have now acquired over the last five six years.
Leadership status and the Nordics and by the way we are probably the only international firm and has been able to do that.
The other leading firms in the nordics on local firms headquartered and the Nordics. So.
And so I'm quite proud of that and that.
We havent.
Status and Nordics. So so the goal and the next two to three years and strict and into next year with our newly promoted leader and the Nordics with BTG.
To continue to strive as a firm true.
We raised the bar from a margin point of view.
Two.
To get back on and organic growth agenda, which was a bit more subtle.
And in recent years and.
And then and Australia I think the potential is there we can do to grow there's no doubt about it.
The government of committed.
And now massive investment and infrastructure. So so if we do things right.
And that we can continue to grow on that region without a doubt.
Okay No. That's super helpful. Thank you so much and then last question pertains to.
Lots of discussions right now around inflation and wage pressures and.
And so forth just curious to see if you are seeing this.
In the business at all and.
Yes other.
And any mitigating steps that can be on to taken bye bye. Thank you.
We are we are addressing it.
No.
Some pockets and our business and are requiring.
And more attention and the moment and then others.
So to be totally transparent with you, yes, we we feel that debt.
And some parts of the world.
And signal.
And talent is there and it's there to stay so so we are reacting to it.
So but.
At the same time and I look back at our last quarter, and where were net positive with.
650, new people coming and on board, just and then last quarter alone. So.
So our acceptance rate.
Quite strong actually very strong and probably everywhere around the world.
And and we have been able to reduced.
Our debt.
Time between the open position to get people on the door by by few days just this year alone. So we are improving.
Our process and and processes by levering leveraging best practices.
And our best performing country, right now and debt, regardless the U K.
They are extremely fast.
And the way and they are.
From the time, they open and position that way day, and wind again and.
People and the door I think it's 24 days or something like that some of that that's quite impressive and.
And we've done a lot of work to improve best practices around the world and in that regard zone.
I'm quite pleased with the trajectory at this point and time.
Yes for sure and just maybe to build on this I mean, obviously margin profile is coming and stronger than expected. So what other things you guys are doing internally to enable that margin accretion. Despite the fact that obviously there is some some pressures on some parts of the net of the cost equation.
Well.
And I remember, saying that in 2014 and 15.
For your margins to go up.
You need and a lot of things to go well.
So there are a number of levers that you need to do.
To use and to pull and.
Right direction too to do well so of course productivity is one.
But at the same time also Max you need the help of the market.
And you need.
If the market is not good.
It's quite hard to improve the margin profile and.
And indeed I find that right now we are operating and a good market globally.
And the supply demand dynamic is there.
Yes.
And now to is there essentially so so.
I think governments are all looking to reinvest and infrastructure.
And.
And the lack of talent on to warrant talent that Ive described earlier on.
It's not just happening and our industry is happening and the financial industry, but it's also happening at our clients.
As well so our clients do.
Half of that talent to do the work so so they have to.
And to turn.
Two.
Our consultant like WSB to our system.
I've always said debt.
Consultants tend to do well when there is a catalyst and the marketplace from 2000 and <unk> was an example of that I mean, you saw the business and our space.
Striving.
And on the back of the pandemic.
And Unfortunately, this took place but.
And I think our clients will turn to consultant to assist them again and thats when consultant and tend to do well and it's when net catalysts and the marketplace and <unk> gains.
And what's one and this instance, so so I think it should hopefully serve us well in the future.
And and that's why I think overall, we're we're optimistic.
Yes that makes a lot of Samsung thanks, a lot for the detailed perspective.
Thank you.
Your next question comes from <unk> Khan from RBC Capital markets. Please go ahead. Your line is open.
Alright, great. Thanks, and good morning, there's a bit of commentary earlier on the integration of Golder I guess this being the largest acquisition that you've done during sort of a virtual work environment and are there any and are there any learnings or any issue that were unexpected turn integrate a large acquisition, while folks are working from home and kind of how does that affect.
Your thought process on future large acquisitions until the world over growth.
I think what I've learned and stuffed feasible.
And as possible.
And that's what we've learned and of course, when we announced it.
We were hoping and.
And we had the belief that we could do it and.
And as there no.
So many few months I think I can tell you that I think now I have the conviction that this is feasible and.
And that's possible so.
To me that's the biggest learning experiences that we can do it.
We get and remain very disciplined and very focused laser focus on what we wanted to do and how are we going to do it.
But I think if this wasn't a test case study I think now this is proving to me and the team debt.
We can do this.
Okay, and then hopefully on necessarily Thunder from your kind of the three year strategic plan, but I know you talked a little bit on the last call about reassessing kind of the workspace and productivity and things like that.
Where are you on their review and is that something you might announce before the strategic plan in terms of.
And what kind of real estate and employee talent kind of makes sense going forward.
Well, it's certainly something that we are evaluating.
Very carefully.
Of course.
This is a very fluid situation as you can imagine you see how many companies have you heard debt.
We're expecting people to just come back after labor day weekend and are now looking to push back by police and month, maybe two.
And this is now becoming.
On the new reality, so it's very fluid and.
And.
And I didn't I didn't put too much weight or certainly I didn't want to put too much weight on and making statements six months ago on nine months ago about our real estate so a plant.
Because I just didn't feel it was and.
Telegent enough.
To make such a statement it was so fluid debt.
Figure of debt.
And well being of our employees and their.
It will and being of the firm and our culture was the primary objective here and I said, we will deal with real estate from a plant afterwards once we have.
On the certainty.
With a firm belief.
We determined exactly what we want to do.
And just statistically I believe if I'm not mistaken.
45% of our.
Leases and flow plants, we'll.
We'll come up for renewal and the next cycle.
And the next three years. So this is a great opportunity for us and timing is everything and again you need a bit of luck often time, but more than half of our real estate floor plant will come up for renewal and the next three years. So so as you can imagine.
I'm sure you know and that we are and laser focus on this and we'll look at this very carefully to see what's been.
First for our employees best for our clients and best for our shareholders.
Okay, Great. Thanks, and then just one last quick question commented a bit earlier on the hiring environment on one of your peers noted yesterday that they're seeing from impact on growth from not being able to bring enough people.
How are you kind of generally findings as the availability or and are there any regions, where it is a little bit more competitive set and kind of call. It the sides of the share number of people.
No.
It's competitive everywhere right now.
There is no doubt in my mind debt.
It's competitive environment.
Everywhere you travel so.
I think as I.
And more described earlier on and I think we are revisiting.
Our strategy and the way we are.
We wish to attract individuals.
And my personal belief engineers and professionals and our space, one and be part of a successful firm do you want to work and the most iconic projects and the space.
And so I think that the best thing that we can do is to continue to.
To thrive as a business.
And and.
And take the time to explain two newcomers what we stand for as a business and where we wanted to go as a firm.
But as I stated before in the last quarter.
Statistics I was quite pleased with the outcome.
We have been able to track and a lot of new talent and welcome.
And you to do so in Q3 and Q4.
Alright, thanks very much.
Thank you.
Your next question comes from Ian Gillies from Stifel. GMP. Please go ahead. Your line is open.
Good morning, everyone.
Good morning, and what.
I wanted to follow on Max's question, and specifically around Central Europe, I thought it was interesting debt.
And that you put in and specific group that for that region given some prior comments on growth there and I guess the question is should we consider some of these changes and as precursors for growth and regions that you are becoming increasingly more focused on.
Ed.
Of course.
And at the right time and with the right opportunity I mean, I think it's no secret and we are subscale and central Europe, and what I mean by Central Europe is if you exclude and Nordics per second.
And and of course, you exclude the U K Continental Europe WSB, we are subscale and then we have now.
Now probably close to 2000 people, but you look at the potential Darren and the right circumstances, we would want.
To grow and create a strong operating hub.
But.
And the stars have to be aligned for that to happen.
And historically, we always had a central European leader and a Nordic leader and our UK leader.
And we.
We slowly, but surely move away from that Magnus, leading both <unk> and.
And and Central Europe and.
And predominantly because we had a strong leader and place Magnus and some very strong leader.
And and.
All of the tools and these two blocks to be and are positioned to lead on that cluster.
But now we are reverting back to our original model and Theres nothing wrong with that my personal belief structures are meant to be changing and bringing structure has to change.
On a regular basis to keep the organization and that's those and making sure that.
We performed so so I think a strong leader for Central Europe is good news.
Because we will have somebody focused 100% of the time of this.
I'm on the region and.
And we'll see where it leads us.
No that's really helpful and that's all from me guys. Thank you very much.
Thank you.
Your last question will come from price on from Laurentian Bank Securities. Please go ahead. Your line is open.
Good morning, gentlemen.
Good morning.
Just wanted to start with Alex I think you made the interesting comment early on the call regarding making market share gains and the U S and I'm just trying to get a sense how that.
And that's being achieved and thought through more effective higher activities or anything like from a bidding perspective that you're doing differently.
I guess more importantly, like do you see that trend being sustainable into a potential up cycle in that region.
Yes.
Without getting into too much details we have made some changes and the U S. We have.
And new leader debt.
Took over.
And almost two years ago now.
Todays day and.
And and along side and look we've made a number of leadership changes over the course of the last two years, but more importantly, our approach to client delivery and assess change as well.
I think you've heard us and the past talking about one of our guiding principles.
We have.
And on.
Our local presence with <unk> and <unk>.
International network supporting our local presence and I felt.
In recent years debt, we had moved away from that and the U S.
And that we needed to get closer to our local communities and closer to our markets and so we've made some changes in that regard.
And more laser focus on our local communities and local regions.
Transportation for instance, and some very very local.
Sector.
And unless you are focused on your local communities, it's going to be hard for you to to succeed. So so it's more about culture and it's more about those so refocusing the business and on our guiding principles and.
And making sure that debt.
People were focusing on on delivering locally and the best service possible.
And.
Okay, Great that's super helpful.
My second question.
Sort of goes back to the M&A discussion, we've heard from some of your peers in the quarter that the.
Competition for asset and the U S, it's intensifying and where.
Seeing some entry from.
Financial players bidding up the assets there I'm just wondering first are you seeing.
A similar phenomenon in the U S and secondly on other geography that you operate in.
Are the same things happening or do you still believe that they are.
And that's a high quality assets you can acquire.
More traditional flash and reasonable multiple.
Yes, well not so long ago I think we've we've completed an acquisition and a.
And my personal opinion.
<unk>.
Very attractive.
Multiple soon so I think we are we have been able to achieve that and.
And the past and we'll continue to.
And to do is to remain disciplined to to achieve that.
The notion of financial sponsors being and our industry I mean, the reality is they've been and our industry for as long as I remember.
There is.
A lot of money and the system right now and.
And essentially sponsors our president and our industry, but are equally president and and other industries and that's just the reality of life and they will get and live with that then.
And what there'll be Sps to offer to those firm is very different and what.
P J and offered to sales firms.
And so the visions completely different we're here for the long term.
We want to build something and legs.
And.
And those that believe in that and go through was exaction that they believe and the.
And division that we had suggest and the strength for WSB will join us and knows that.
I have different views may choose to go with the financial sponsor and.
And I think there's room for everybody.
But I can I can get.
And be bothered by what's happening outside of our firm.
My job and our role is to focus on on.
US and what we have to offer and.
And then that's what we're busy doing right now and explaining our story to those smarts.
Great Great. That's Super helpful. That's it from me. Thank you. Thank.
Thank you.
Yeah.
We have no further questions I'd like to turn the call back over to the presenters for any closing remarks.
Okay well. Thank you very much. Thank you for attending the call and thank you for your continued support and we look forward to updating you on our next.
And finally release, thank you very much and advocate day.
This concludes today's call you may now disconnect.
[music].
The host has ended this call goodbye.
A question.
Yes.