Q1 2022 WSP Global Inc Earnings Call

Speaker 2: Good morning Ladies and gentlemen. Welcome to SPIE. '. First quarter 2022 results conference call. I would now turn the meeting over to Quinton weer. Did your advisor Investor Relations? Please go ahead, MR Webber.

Speaker 3: 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 Q1 2022 performance, followed by a Q any session. With us today are Alex on LA, our President and CEO , and now let me show ourceo. Please note that this call is also accessible on our website, IA webcast.

Speaker 3: During the call, we will 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.

Speaker 3: Relevant factors that could cause actual results to differ materially from those forward-looking statements are listed in our management discussion and analysis for the year-end ended December thiry-first twent -twent more.

Speaker 3: Also during the call, we may refer to certain non-IFRS measures. These measures are defined in our management discussion and analysis for the quarter and that April second 2022, which can be found in SEDAR and on our websiteour. mdna also includes reconciliations of non-IFRS measures to the most directly comparable IFRS measures.

Speaker 4: Management believes that these nonifrs measures provide useful information to investors regarding the corporation's financial condition and results of operations as they provide additional keymetrics of its performance. These nonifrs measures are not recognized on our IFRS do not have any standardized meaning prescribed on the IFRS and may differ from similarly name measures as reported by other issues and according ly may not be comparable. These measures should not be viewed as a substitute for the related financial information prepared in accordance with IFRS with that I will now turn the call over to an exexamplethank you clinton ear good morning. Everyone me start by saying that I'm very pleased with our performance in the first quarter of 2020 two.

Speaker 5: These strong results are a testament to the expertise and passion of our teamday in and day out: our 56 thousand employees, when new projects provide strategic advice, designed forward thinking projects and contribute to a more sustainable world, ultimately delivering high quality services toour clients across the gpbebefore going any further, I would like to highlight the following three points. First, our results were robust across our geographies and sectors and ahead of our expectations. Organically, net revenues grew by an impressive 13%, while our continued focus from profitability resulted in an adjusted EBITDA margin increase of 110 basis point compared to 20- 20 onesecond. We continue to witness strong market conditions. Our backlog reach are recurred high of 11 billion, growing organically 6%.

Speaker 5: Year-to-date and 16% year-over-year. Opportunities Abound across all our markets. For instance, there was a significant expansion in public infrastructure investing in the United States. Lastly, we continue to attract the brightest mines. We share our purpose of creating positive impacts in our communities.

Speaker 5: Thanks to our strong brand and carer opportunities across regions and markets. Just shy a 4000 professionals join WSP since the beginning of the year.

Speaker 5: In summary, thanks to our strong organic growth, counting increase in backlog and strong talent attraction, WSP delivered a robust performance in its first quarter.

Speaker 6: On that note, let me now take a moment to highlight a few notable project wins.

Speaker 6: In Ontario WSP and its partners, the on express theam, have been awarded the mbate to expand the gorail network in the greater Toronto and Hamilton regions. The oncore project will transform gorail from a peak period commuter service to a two way, all day rail service with a subway like frequency. With the acquisition of an electrick train fleet, the electrification of 600 kilometers of tracks and the addition of two hundred kilometer new tracks, this is one of the largest regional transit projects in Canadian history. By two thousand and fifty five, gooril will welcome an estimated two hundred million riders per year, making it one of the busiest railways in North America. This contract, to be added to our second quarter backlog, is our four is our fifth major consecutative win in connection with the transformation of the gora network since two thousand and fourteen.

Speaker 5: For WSP. This represents our largest multiyear project ever. one in canadain Italy, WSP and Golder were warded all the environmental surveys and Pac cities and permitting work for offshore energy hub in hiteratic ca.this innovative hub, called the anas project, will combine green hydrogen production systems, floating solar cells and a new type of wind turbines. The anas projects aims to generate 700 megawat of power once it becomes sorry, fully operational, or enough electricity to power over half a million Italian homesin Australia. Wsp cent recently one a contract to re P develoup, a hospital in Melbourne.

Speaker 5: With the 12 story clinical services tower, new mental health and oncology services. This project will transform the delivery of its medical services. Once completed, the hospital will treat 25 thousand more patients each year, in doing so cutting waditing times and reducing pressure on libering hospitals. By working on hospitals and other specializeded building, such as data centers and scientific campuses, bspe continues to expand its specializeded, high-on services and the property and building market.

Speaker 5: In ontaro, lssp will be providing key services for Canada's largest wastewater infrastructure project to datethis project uses a novel collaborative approach to deliver a complex project wherein, by decline, the consultant and the contractor work together to develop the best overall solution.

Speaker 6: In our view, this integrated project deli approach represent the future of procurementour. First quarter not only saw exciting project wins. That marks the one -year anniversary of goldban and WSP joining forces.

Speaker 6: This merger has been a great success on all fronts. Wsp provided leadership position to over 70 of golders's leaders. Our combined expertise as helped us grow our clean revenues through climate-related work such as energy transition, the carbonization adaptation, resilience and ESG reporting.

Speaker 5: For instance- I'm sorry, are integrated on quality services have allowed us to capitalize on the strong demand for environmental services, namely in the mining industry.

Speaker 5: Regarding as G, we continue to lead by example and March published our first time-of-loan report on WB: climate risk and opportunities.

Speaker 5: According to the task force complilimment-related financial disclosures, or tcfv, the leading ESG framework in transparent disclosusure to investors.

Speaker 6: Recently our diversity initiatives in the United States were also acknowledged by influential chapters of the American society of civil engineers.

Speaker 6: To further these initiatives, wsly created. The new position of global inclusion diversity leader awarded to our U K colleague Jane rent and this RA Jin will leverage our U K inclusion diversity strategy and bring new momentum to our worldwide efforts to foster inclusive workplace at all levels of the organization.

Speaker 6: On that will pass it on to now who will review our financial results in greater detail. L thanks, Alex. I'm very pleased to rereport on our strong results for the first quarter of 2020 -.

Speaker 4: Starting with our top line for the quarter revenues and net revenues reached two point seven billion and $2.1 billion, up 29% - 26% respectively compared to Q1 2020 one

Speaker 4: The increase was driven by acquisition growth of ttwenty-two percent, as well as overall record high Q1 organic growth of 13%, of which approximately 4% is due to more billable days in Q1 2022 when compared to Q1 2020 one

Speaker 7: On an annual basis. We would like to remind you that these additional billable days will be offset by less billable days in Q4 2022 versus the prior year of interest. In the last 12 months, our net revenues grew organically by 8%.

Speaker 4: Backlog as of the end of Q1 stood 11: 11 billion dollar, representing twelve point one month of revenues with strong order intake in each of our reportable segment. Our backlog grew organically by 15.8 percentover Q1 2021 and by 6% in the quarter alone. We are witnessing continued high level of activity and favorable win rates across our end market, with a second quarter in a row with over $3 billion of order intake.

Speaker 4: Moving to profitability. For the quarter, adjusted EBITDA reached $325 million, representing an adjusted EBITDA margin of 16%, compared to 14% in Q1 twentthousand and 21. the improvement in adjusted EBITDA margin is the result of strong performance across geographies and end market.

Speaker 4: For Q1 2022, adjusted net earnings stood at one hundred and thirty six million, or one point $16 percent per share, up 45% and 40% respectively from Q1 thousand and twenty one

Speaker 7: The increase in these metrics is mainly attributable to higher adjusted EBITDA.

Speaker 4: Let's now review some cash flow metrics are: free cash outflow in Q1 2022 amounted to one hundred and eighty-five million dollars, trailing 12 months of free cash flow amounted to $376 million, representing zero zero point eight X net earnings attributable to shareholders. The main contributor of outflow in Q1 2022 compared to last year is an additional period of payroll representing approximately one hundred and two thousandy-five million dollar, which will reverse in the second quarter of 2022. overall, except for the additional period of payroll, cash flow is in line with our expectation and reflects the usual seasonality.

Speaker 4: Cash outalso for operating activities of $83 million in the three month period and that April second 2000 and twent two compared to cash in flow of one hundred and 60, three million in Q1 2000 and twenty-one our day sales outstanding stood at 70 days at the end of Q1 2000, twenty two compared to 60 days in 2000 and twenty one and Q at the lower end of our target range of 70 to 70 five days.

Speaker 7: Lastly, our balance sheet continues to be strong, with a net debt to adjusted EBITDA ratio of zero point eight.

Speaker 7: During the quarter, we also declared a dividend of 37.5 cents per share for shareholders on record as of March thirty-first 2021, which was paid on April eighteenth, twentthousand and twenty two.

Speaker 4: With a 50% DRIP participation. The net cash outlay was 2, $21.4 million. In conclusion, our first quarter was a strong start to the year and we are reaffirming the financial outlook for two thousand andtwenty-two issued in our Q4. 2021 press release on that, Alex pect to you.

Speaker 6: Thank you and name. To recap, our team has come together to produce a robust quarter, which is a great start 2020 -two.

Speaker 6: But also to our new 2000 and twent-two 2000 and twenty-four global strategic action plan.

Speaker 6: With the Golden integration essentially behind us and with our strong balance sheet, we can now turn our sightes to the future. Today, everything is in place for us to realize the ambitions for action plan, all in view to become the undisputed leader in our industry.

Speaker 6: As a final note, I would like to invite you to our virtual annual meeting of shoulders, to be held today at 11 o'clock at Eastern time.

Speaker 6: Thank you, and I would now like to open the line for questions.

Speaker 8: certaindly. If you have a question, if you T, please press a Star that one if this question has been answered and you'd like to remove yourself from the queue, please press the out. Our first question comes from the line cheick about, from ciibc. Your questions, Please. Good morning.

Speaker 6: Hello, good morning ning Alex. Very positive opening comments, but stock market seems you pricing in either stag flation or recession for the coming year. Gi given this backdrop, when you look at your backlog?

Speaker 9: What do you think is that risk is far as what could be pushed out or cancellled, and what are your clients indicating? How concerned are they about economic conditions currently?

Speaker 5: Well Thank you, Jacob. This is this is a very good question of. First of all, I think we are not paying too much attention to what's happening to the stock market at the moment. I think we're staying very close.

Speaker 5: To the ground and saying very close to our clients and client sentiment. And right now I must admit that things, things are going very well. I'm not suggesting things are not going to change in this distant future, but at the moment we are being awarded.

Speaker 5: A lot of great work both in the public and also in in the private sector, and this is across the patch as well. This is not just the North American thing. I think you look at our U K operation right now. That is doing extremely well. The backlog is growing, So is Australia, New Zealand, even in Sweden, the Nordics countries and then moving to Canada and the? U's. So I'd say that we have seen organic growth in our backlog year to date across all of the regions and also in all of the sectors, both public and private. So for us this is obviously a great start of the year. The inflation was just not- it's not a concern that as been there only for the last 90 days. I think we were all aware last year that the inflation with there and mostly was there to stay, So So we certainly tried to prepare.

Speaker 6: With that in mind when we started the year-end. And obviously we can only control where we control, but I have to say that what we can control, we feel we're doing well at the moment.

Speaker 9: Okay and then maybe just on your organic growth: strong, I think it was close to 13% in the first quarter. You maintain your full year guidance. I think it's 3, three to 6%. So I understand there's less billable days, but you is the expectation here that you're still going to see IT- those from U's infra in in the second half of the yeari'm just just trying to gaugeyou how conservative we've been here.

Speaker 6: I think, I think we've been. We've always said in past quarters and when we had the opportunity to exchange with all of you that in our mind, this despite them plan we will only take effect on ple would feel the impact of it only in 2023. So we were not.

Speaker 6: Actually thinking that we are going to benefit from the plan in 2022. So I think, said all that, we've never, ever raised our outlook after the first quarter in the past chickup. We believe that in good year, bad years, I think it's very early days to rethink your outlook. so- and you mentioned the billble days, and obviously we know that there will be an impact in Q4, So So we believe at at this time, at this point in time, it's the prudent thing to do to keep our outlook the wayitness. Thank you, Thank you.

Speaker 8: Thank you want line been one for any from these are ident question. Good morning I like. Good morning. I a congrass for a good start. Thank you, good morning, yesand. Obviously, given the riscent pullback in share price and compression of valuation multiple, I was curious to know how does it change your MMA strategy? We know that you've been a discipline acquire accretion is a keep foused, So does it make some mmany opportunity less attractive or would you expect asking prices to go downward?

Speaker 6: Well right now this is not just an industry thing or it's what we're seeing in a stock market is something that we're seeing in in all industries and all sector So.

Speaker 6: I think it's been whileed. You've heard me seeing this before and I think I've said it: in last quarter, WSP were quite agnostic.

Speaker 6: To the market that we are operating in. I think we've always been opportunistic and we've always been in a position to find attractive opportunities in expensive market and less expensive market. So I'm confident, now that we have the integration of Golder behind us, we have a very, very strong balance sheet. I feel good about the operation, in the way we are delivering right now, that the opportunities will come our way and we are going to be able to execute on our plan. So So for me.

Speaker 6: As I just stated, I feel that there will be some opportunities and that we will be able to.

Speaker 6: To take advantage of them. Okay, okay. So that's great color and maybe four LAN. Positive impact from billable days was around four point five percent in Q1. Should we expect a similar impact in Q4? But on the negative side, an is the kind of the magnitude we should expect in the Q4.

Speaker 4: Yes you should, then that's exactly it. Okay okay, that's great. Okay, good congrress. Thank you very much.

Speaker 4: Thanks benwwhat. Thank you going. Thank you on our next question. Come to the line.

Speaker 8: My clo telephone from C D security, the Chief Bush. Please Thank you. Good morning morning when to go.

Speaker 10: two part question regarding the organic growth. I guess, first off, can you talk about what colder would have seen in terms of organic growth within its business in the quarter and then, more looking forward, can you talk about how we should expectorganic growth to trend as we move through the of the year?

Speaker 11: Michael, we are. We're no longer tracking Golder separately- has been fully integrated into our system and business. So it would be would be very difficult for me to give you an indications. What I can tell you is that our Earth environment sector is growing strong.

Speaker 6: So I I think- if I can provide a bit of color- we're seeing the type of growth environment and eart environment that we have seen in last year, So it's a very, very good first quarter for a earrent environment.

Speaker 12: Perfect and then I appreciate the billable daysat impact in the fourth quarter that was just discussed, but for the next few quarters, any any thoughts or color on how we should think about sort of the progression of organic growth? Well despite despitethor, spite the billable days we, the top line, came ahead.

Speaker 5: What we had expected for the first quarter. Having said all that and what I just toldtal Jacob, we believe that it's early days after the first quarter to rethink our outlook. I think we're quite comfortable with the outlookit that we have right now, So So, for the time being, we feel that that's an appropriate level of performance for the company at this point in time.

Speaker 12: It's perfect. And then and then next, just on the headcount: I'm not sure if I heard this correctly in your opening remarks alids, but I thought I heard you say you added 4000 people since, since the beginning of the year. So if I guess, first up that, we just clarify that, because it seemed larger than I I had, what was the case? But secondly, can you also talk more generally about how you're, how you you're managing respectctive talent, retention and attraction? I and was obviously very tightly remarketyeswell. That too, I feel we've done very, very good.

Speaker 5: A lot of good groundwork over the course of the first quarter. Obviously, going into the year, we knew that attracting talent would be the key for us to be able to deliver the year from a top line point of view. So we've done, I feel, extremely well. And again, this is not just one country pulling the company for the organization. I feel all of our large operations have done extremely well in attracting talent So that that bodes well for the remainder of the year. But again, this is early days, So that's why I don't get overly excited by it. Having said all that, I think we, the team, should be commended for the outstanding work that they have done to attract talent to the organization. So obviously Michael, like any other companies and the professional services world of people business, we are putting means to of ground to be able to get people back to the office.

Speaker 5: We have work extremely hard in in the last quarter. Some countries are doing and the regions are doing better than other. I think Europe , for instance, are doing better than North America and bring people back to the office. But we are seeing a change right now in North America and hopefully in Q2 we'll see North America catching up with Europe . Obviously in Asia I think I'm sure you've seen the news that it's a bit more challenging right now in the regions with a lot of cities quarantine, but but hopefully this will be behind us by the end of Q2. But so far I think we're managing it well andwe intend to do equarally well in Q2.

Speaker 12: All right, Thank you very much, Thank you, Thank you. Our next question comes in line now, frederick for ple. Thank you, your questions Please.

Speaker 13: Well my thing, my- I hope you guys are welll. I L the quick question on availlilable days. They seem to have had a this of impact on growth in Canada. anyimpact versus in? Would you mind just walking through the?

Speaker 8: Well ex explain the different? Sure, So the our quarter end varies by region and this is reflective of the systems instead of we have in each region, depending on how we build the platform in each region to M? A mostly. So that's why you see differentces from one region to another in terms of how the impact was in terms of billable days. So, for example, Canada and the? U's was a bit higher where, as the U? K, they have a March thirty-first quarter end, So they had no impact. So that's why. That's why explains the differentces you've seen from one reportable assignment to the other.

Speaker 8: Okay super, that's helpful. Backlog growth pretty, pretty strong on a sequential basis, whetherthere any big projects that would have moved in needle, or is it just representative of just good overall growth across all sizes of projects?

Speaker 11: fredtoric, representative of a general growth and in the whole of arm of our markets. Obviously I mentioned during.

Speaker 11: My the address this morning that H Q2 we will be recording the first phase of the onport projects. So that will have a very positive impact on the canad backlog. This was not part of our Q1 backlog So.

Speaker 11: And this is one of the largest multi-projects that we ever won in Canadian history in our business. So that will be book in Q2. But other than that it's really a general sentiment PR. The backlog is growing pretty much everywhere at the moment.

Speaker 8: Okay and just a quick one to finish it off. Alex is just the strongest operating environment you've seen since joining us that.

Speaker 2: Well I've seen seems like yesterday I joined a firm but I've been going through some piece and valleys obviously, and But I have to say fredtoric, that I look at the growth that we are experiencing right now. I'm looking at the margin improvement that we have been able totor a traight over the last three to five years. I look at also how all of the regions are all pulling in the same direction at the moment and very aligned on the strategic plan and the execution there also. So if it's not the strongest, it's certainly a very good period for the organizing for the company in the firm.

Speaker 8: Let's ask some great turn backthank youthank you as a mindder. If you have a question at this time, Please express ST than one or next question comes in the line to me. C from to your question, pleasehi and thanks for taking my question. I was wondering if you can walk up through potentialally Act of recession, particularly on the commercial clients, by for eachach of your key market market vertical, So transportation for structure Earth environment, probal J and building power and energy and industrythank you.

Speaker 14: That that would require a lot of time. But look at the end of the day. At the moment, if I look at our transportation sector, this is a sector that is mostly public K this fuel by obviously, government spending, and right now we are seeing clearly positive momentum, and we're not only seeing positive momentum in in the U S.

Speaker 11: Or Canada or North America, it that matter. We are seeing governments, generally speaking, reinvesting in the respected countries. So it's something' seeing in the Nordics, what we're seeing in U K, we're seeing in Australian New Zealand. So right now I think we haven't seen this slowing down. The the team at the inflation team, as I mentioned earlier on today on the call, is something that's not certainly not new to us. Obviously 'is something that we see more and more. It's something recordrent, but it's something that we've been talking for the last three to four quarters that there's a lot of background noise. I don't know if we could ute the speaker phone, if that would be possible. Think you very much on the property and building sector. It's it's. I mean we are doing more and more public sector work of especially theicated in the Canadian market, but in the rest of world this is mostly their private.

Speaker 11: Am not trying to deflect the inflation team. I think that's a team that we all have to deal with.

Speaker 5: But so far I think we have been able to work in collaboration with our clients and expect us to hopefully continue to do well in the current environment.

Speaker 14: Thank this does conclude the question-and-answer session of today's program. I'd like to hand the program back the management for any further remarkswell. Thank you very much for attending this call. We really appreciate. Just as a friendly reminder, we will be hosting and holding our shoulder.

Speaker 11: A M call later today at 11 Eastern time, So you're all invited to join them. I would like to wish show great then, looking forward to engaging with all of you on an individual basis or, if not, throw the Q2 call in nine days. Thank you very much and have a great day. Thank leave gentlemen, participation.