Q3 2023 WSP Global Inc Earnings Call
Okay.
Good morning, everyone and welcome to W. West pays third quarter 'twenty to 'twenty three results conference call.
I would now like to turn the meeting over to Quentin weapons Investor Relations. Please go ahead Mr. Weber.
Thank you and good morning, we hope that you're all doing well and thank you for joining the call today, we will be discussing our Q3 2023 performance followed by a Q&A session. Joining us this morning already consolidated our president and CEO and then let me show our CFO. Please note that this call is also accessible on our website via webcast during.
The call, we will be making some forward looking statements actual results could differ from those expressed or implied we undertake no obligation to update or revise any of these big relative.
Relevant factors that could cause actual results to differ materially from those forward looking statements are listed in our MD&A for the quarter that ended September 30 of 2023, which can be found on SEDAR and on our website. In addition, during the call. We may refer to certain non <unk> measures. These measures are and also they are finding our MD&A for the quarter that ended September.
Or do you have to wait when you treat our MD&A includes reconciliations of non <unk> measures to the most directly comparable adverse measures management believes that these the nightlife various measures provide useful information to investors regarding the corporation's finished good financial condition and results of operation as they provide additional metrics of its performance.
It's not my first measures are not recognized under apparatus.
Not have any standardized meaning prescribed by their address and may differ from similarly named measures reported by other issuers and accordingly may not be comparable these measures should not be viewed as a substitute for the related financial information prepared in accordance with IRS I will now turn the call over to Alex.
Thank you Kelly and good morning, everyone.
I'll start by saying that I'm proud of the strong results we achieved.
This year.
These results are in line with our improved financial outlook issued in August, which as a reminder, increase our adjusted EBITDA guidance by more than $100 million, representing over one 9 billion for the full year.
I would like to emphasize the following three highlights.
We generated solid organic growth in net revenues across all of our reportable segments.
Second our backlog remains healthy.
Record level with approximately 12 months of revenues and our backlog organic growth of seven 2%.
The first nine months of 2023 and.
And lastly, we are staying true to our margin expansion strategy and delivering an adjusted EBITDA margin of 19, 1%, which represents a 50 basis point increase when compared to the same quarter last year.
More specifically on organic growth in net revenues the momentum continued to be positive and it was more pronounced in Canada, Australia, and the United Kingdom and New Zealand.
As for backlog and order intake, we benefit from the various stimulus programs being deployed across our key geographies as well as global trends, such as energy transition and decarbonization, which continue to require a strategic expertise.
Significant contracts were awarded in China that in our order intake was strong in the Americas and EMEA I.
I will be sharing a couple of examples in a few moments.
During the last quarter, we provided additional visibility on are you.
<unk> backlog and the upward trends, we were witnessing has persisted.
As a reminder, some backlog representing contract awards not yet included in our reported backlog, mainly because of pending funding confirmation.
Our backlog in the U S grew by approximately 50% year on year and 30% since the beginning of 2023.
This positive dynamic applies in all our core sectors there.
There is a notable increase in demand for our market leading expertise in data centers sustainable infrastructure and renewable projects and awards across multiple WSB verticals and disciplines.
On margin expansion more specifically, we are making great progress, which is the direct results of our focused strategy.
We are therefore, making notable headway towards attaining our stated long term vision of delivering a 20% EBITDA margin.
Before I go over our recent events and recognitions for the third quarter I would like to take a moment to discuss the leadership announcement, we made yesterday.
After a career spanning nearly 35 years, new corn oil has decided to retire from executive life in 2024 to enjoy a quality time with this family I think Lou for his contribution to WSB and wish him a gratifying next chapter in his life, we have initiated the search process for loose successor.
Going back to Q3. It was marked by the first anniversary since our acquisition of wood, Eni, which significantly increase our capacity in the urban environment segments.
Integration is on plan and we continue to find opportunities to scale our service offerings even further.
<unk> leadership in this sector as well acknowledge and I wanted to take a moment to share three prestigious recognitions. We've recently received.
The first was by the engineering news record known as in our annual survey. We went we ranked first amongst the top 225 international design firms for deterred consecutive year.
It is an honor to have once again secure the top spot in this team list.
Strong overall performance is a great Testament to our unwavering commitment to innovation sustainability and addressing today's pressing global challenges.
We also made times magazine's list of the world's best companies in 2023, we are only.
One we are sorry, one of only four Canadian base companies on this year's list and the only one in the engineering sector. The stricter ignition takes into consideration employee satisfaction revenue growth ESG data disclosures in la.
Lastly, we were recognized by Fortune magazine and rented a place on the fortunes change.
The change.
Change the World list. This honor serves to recognize WSB for leading positive change through our activities and business strategies.
We are extremely proud to be the only firm in our space to have been granted this distinction.
Patrick conditions are only obtainable, thanks to the collective effort of our teams around the world.
I am proud of their accomplishment and it is a privilege to work in an industry that is at the forefront of the energy transition and global trends.
Let me begin by focusing on the EV transition as an example, we are feeling a rapid acceleration of EV related activity and growing opportunities in fact this years <unk>.
Energy outlook, North America forecast projected.
That the U S and Canada are expected to invest 12 trillions in renewables and grid infrastructure by 2015, we also see similar investments globally.
We know that the robust electric vehicle market in North America, and the substantial increase in government fundings for the EV battery market in Canada are motivating global clients to choose Ontario, and Quebec for their facilities.
W. S.
His expertise in place to support the full EV battery supply chain.
We're also already providing a range of services, including site selection environmental permitting due diligence and generating design and project management support for the manufacturing of battery parts and battery assembly plants as well as electric vehicle Assembly plants.
<unk> wins to date in 2023 have been robust.
And we are well positioned to continue increasing our revenue stream in this sector.
And is there a transition that is important to highlight is water and clean energy. This is a sector benefiting from a strong market momentum and in which we are well positioned to deliver.
<unk> was recently selected to design the immersive titled in the UK.
This is a beverage with an expected capacity of at least one gigawatt and as the largest publicly led renewable project in the country.
Merci title will likely generate enough power for up to 1 million homes create thousands of local jobs and the green economy and Mega regions of worldwide Center of excellence.
In addition to clean energy to <unk> is expected to provide protection against sea level rise and help create and then hence natural habitats.
Additionally, we constantly make efforts to attract the best professionals in our fields of expertise and enable our talent to work on fascinating.
Next projects.
We continue to leverage our internal global network of professionals and one recent projects I was impressed with was when our healthcare teams from around the Globe joined forces to chart to Decarbonization journeys of mine healthcare systems across six continents.
De carbonization is a preoccupation for all of us at WSB, we firmly believe in the power of uniting to tackle the biggest challenges.
Members of our team across our platform work together proposed solutions aimed at reducing the health care sector as carbon footprint, which represents almost 5% of global carbon emissions.
I wanted to also underscore the work WSB is completing on the New Zealand North oxygen line. This critical route was severely damaged after cyclone Gabriel.
Because we take great pride in assisting clients in all facets of sustainability and climate resilience.
Geotechnical and storm water teams were trilled to be selected to head the remediation work.
They worked relentlessly to provide a resilient railway line and embankments stability for future extreme weather events and operational surface water drainage.
Our world continues to be impacted by natural disasters and I firmly believe there'll be just as an important role to play to support communities.
With close to 150000 active projects per year and a multiple of sectors. We are committed to executing work that supports sustainable and resilient though.
Celia both sorry.
<unk>, taking pride in our leadership grow contribute to a low carbon world and expedite the green transition.
On that note, let me turn it over to Alain who will go over our strong Q3 results in more detail.
Thank you Alex for the first quarter revenues and net revenues reached $3 6 billion to $7 billion respectively. Both.
24% compared to the first quarter of 2022.
We delivered solid net revenue organic growth of six 7% in the water.
Beautiful all reportable segments are.
Our backlog as of September 30 remained robust and stood at $14 $3 billion, representing 12, one months revenue 7%.
Danny.
First nine months of 2020.
Great.
Organic order intake in the third quarter alone reached $4 billion.
Adjusted EBITDA in the quarter stood at $522 million compared to $407 million in the third quarter of 2022, 28% increase adjusted EBITDA margin increased by 50 basis points to 22.
To 19, 1% compared to 18, 6% in the second quarter of 2020 to.
Attributable to our ongoing margin enhancement initiatives.
In the nine month period ended September 30, adjusted EBITDA margin increased by 30 basis points to 17, 2% our capacity to improve our margin profile provides us with the confidence to achieve the strategic plan target to increase adjusted EBITDA margin annually by 30%.
The 50 basis points for.
For the quarter adjusted net earnings stood at $246 million or $1 98 per share. This is an increase of $53 million or <unk> 39 per share respectively compared to the third quarter of 2022.
Cash inflows from operating activities reached $210 million of the nine months.
And at September 30, compared to $207 million in the first nine months of 2022 free cash outflow reached $177 million for the nine month period that ended September 30th we aim for 100% conversion of free cash flow to net earnings for 2023 Onex.
Excluding the continued impact of changes in tax regulation in the U S relating to research and development.
In regards to guidance our financial outlook for 2023 issued in Q2, 2023 press releases reaffirmed and from a modeling perspective acquisition and integration costs are now expected to range between 95 and $105 million given the recent acquisition and further identified.
In conclusion, I am very pleased with our financial performance as we delivered yet another solid quarter that back to you Alex.
Sure.
Thank you and then I will conclude by reiterating that I am pleased with our performance overall, we benefited from positive market dynamics and continue to believe in the strength of our unique global and diversified platform we.
We remain steadfast in our ability to deliver extra expectations. Our pipeline of projects remains robust and we are well positioned to keep growing and capturing market share as I mentioned in the introduction, we significantly increased our financial outlook in August and as of today, we remain confident and committed to.
This guidance, while the macroeconomic and geopolitical political environments are fluid our business is well diversified and resilient and we remain vigilant disciplined and focused.
I trust, our ability to navigate with agility, while focusing our on diligently executing our strategic ambition.
Confidence in our strategy our platform and our people on that note. We will now begin the Q&A session. Thank you.
Thank you.
I would like to ask a question you will need to press star one and one on your telephone and wait for your name to be announced to withdraw your question you're compressed all one on one again, so once again Thats star one on one to ask a question.
Thank you we will now take our first question.
First question is from the line of Jacob bout from CIBC. Please go ahead.
Good morning.
I know Jacob.
Seeing solid organic growth in almost all areas.
But the MDA.
MDA is calling yet.
Difficult market conditions in China.
Can you remind us.
Whats your exposure is to China right now.
Have things improved there got worse and are there any other areas that you could be seeing some softness right now.
Yes, well first of all good morning Jacobs look.
China, we have minimal exposure.
And thats been reducing over the last 12 months.
If you look at mainland China, it's less than 500 people that we have now in China. So it's really de Minimis.
So for US I think it's of course, we renewed.
Our Chinese business suffered from what's happening in the real estate market in China.
Having said all that the Hong Kong, Singapore and Southeast Asia.
Has remained quite quite good.
We're feeling good about the future cross back into the region.
Any other any other areas that you could be seeing any weakness there.
I'm, sorry, I missed that.
Any other areas that youre seeing any type of softness.
You mean globally.
I think got it yes.
Yes, no I'd say that.
At the moment.
I think.
Some of you have already expressed this I think we're I continue to be very impressed with the way our EMEA region has been performing over the course of the first nine months of the year.
It's been very very resilient.
Q I guess, our thanks to our.
Our diversified platform.
So far if I look at the Nordics look at our performance in Central Europe, and the UK, it's been quite the resilience and actually to a certain extent quite robust.
North America, it's been a very good market for us.
Australia, New Zealand continued to perform so overall were.
That's the reason why we've had strong results in Q3 and strong results year to date.
Okay. Okay. That's helpful. And then maybe just as a second question here.
Pretty significant use of working capital during the quarter.
Was this a timing issue and how do you think about DSO levels trending ahead.
Yes.
Hi, Jacob so.
Our target for end of year Jacob is still to be in the range that we've announced we're currently in DSO of 77 days.
70% to 75 days.
So we.
We have experience.
A bit of delay.
<unk>.
In Canada building as a result of the new system, we put in place. This is now under control.
It's just a result of having a new new system learning new ways of working.
So that has impacted Q3, DSO, but we expect to catch up in Q4.
We're committed to do that 100% cash conversion and with the exception of the Canadian situation. The rest of our free cash flow is according to plan. Obviously, we've discussed the section 174 this tax regulation in the U S.
Came into force about two years ago.
We need to keep in mind that this is about a $100 million.
Headwind on our free cash flow year to date versus last year.
So when you compare that to a $600 billion free cash flow business. This is significant.
Rest of the business is doing quite well.
Continuing to be quite focus on cash collection. Our clients are committed we don't see any softness in.
Delays in payment terms and things like that so.
So it's going well, we expect to be within our range by the end of the year.
That's helpful. Thank you.
Okay.
Thank you, we'll now move to our next question.
And this is from the line of Chris Murray from ATB capital markets. Please go ahead.
Yes, thanks folks.
Turning back to the conversation around soft backlog and backlog conversion I guess order intake has been very very strong and we're starting to see that and amongst a work creep up a little bit.
But thinking about whats required to start converting some of that soft backlog I think you've talked about there are some funding issues and I know theres some different discussions in the U S.
Around that can you maybe give us a bit more color on when you think youre going to start converting some of that.
And I guess more importantly, what that will look like as we move into 'twenty. One 'twenty five is that converts.
Yes, Hi, good morning, My first of all I just wanted to clarify a point you just.
Made I mean.
We're not talking about funding issues.
The nuance here is very important that we're talking about funding confirmation, which is slightly different here, we need we need to remember that.
Do you think the U S. For instance, app treat this strength treat this thing.
Funding.
Mccann is and one of them. It's we're talking about a trillion dollar in so far.
Of that trillion dollars, probably around 270 billion has been has been allocated already over 36000 projects. So there are some delays to be expected. When you are trying to deploy such a.
No.
A big number obviously over so many different projects.
So I think it's just normal course of business at this point in time.
But I think on the positive note we are seeing.
The projects being awarded.
Win rate has been has been has been very robust and very strong I think now it's just a matter of getting confirmation around the funding and be able to start the projects.
Alright.
Just maybe following up to that one of the things I guess as we're watching kind of months of backlog kind of creeping into the low 12, it's not the highest you've ever been but but thinking about this additional work coming.
What are the changes in the environment that we've seen how are you finding the ability to recruit and add employees in this marketplace as it started to shift a little bit.
With some of the economic softness or is it still fairly tight tight.
Tight market for talent.
While this year, we will come.
In excess of 10000 newcomers within the company.
Which is a testament of our ability to recruit talent within within the company globally and also we have seen.
Sharp reduction in turnover and now back to close to historical level. So when you combine our ability to recruit and a reduction in turnover I would say that now I think we are.
Obviously, feeling better than perhaps where we were.
18 months ago as a result of it.
Okay.
Alright ill leave it there thank you.
Thank you.
Thank you, we'll now take our next question.
And this is from the line of Michael <unk> from Scotia Bank. Please go ahead.
Hey, good morning.
Just a follow up Mike on that last question. Good morning. So you commented on the sharply lower turnover. So I'm just trying to think about.
The relationship.
With lower turnover to productivity.
Does the benefit of lower turnover have a real time impact the <unk>.
Activity in your opinion or does it lag I'm just trying to think of that dynamic.
Well, obviously turnover is quite expensive.
So youre right to mentioning that that is going to have a positive impact on.
On our productivity, but also.
Recruitment is where you when you recruit you have to train.
So you lose some efficiencies so thats why by reducing your turnover you are in a position just naturally to increase your productivity. So so I think without saying, it's a real real direct impact a one for one.
It's almost direct.
Effectively.
That's helpful and if I caught.
The prepared remarks correctly I think you highlighted.
Our anticipated M&A costs for the year.
And I think that was due to I think what you called further identified opportunities can you comment on that a little bit and just wondering.
Given the higher rate environment, just wondering if that's not challenging M&A at all.
Yes, I could start.
I called the.
The higher costs that we anticipate is explained by two things first we've completed four acquisitions since the beginning of the year. So that was obviously not part of our initial guidance that we've issued at the beginning of 2023. So that's one part the second part which is a good news story.
We're identifying more opportunities in our.
And our acquisition of 2022, namely wood Eni, so that drives a little bit more integration costs, but you've got on the flip side.
The benefit of increased synergy so that's.
Those are essentially the two.
Reason for increased costs and also.
<unk>.
Confirmed the disposal of the lbs business.
Back in Q3, so that too had a bit of cost related to that disposal.
Perfect ill get back in queue. Thank you.
Thank you.
We will now take our next question.
Yes.
This is from the line of Jonathan Lewis from Laurentian Bank Securities. Please go ahead.
Yes.
Good morning.
Good morning.
Wood Eni integration.
Is that complete now and how do you feel the overall double USP is positioned for the next acquisition.
Yes look.
<unk>.
Instead of one year anniversary. So we are very pleased with the way.
With Eni.
<unk> has gone so far but also on the integration front.
Obviously this was.
In terms of numbers the largest acquisition we have completed in our history.
So there is still obviously some.
Some I would say.
Some stream of activities that we continued to complete and must complete jobs like a full integration completed however, I feel that we are in a very very good position at this point in time when you look back on the <unk>.
The effort and what we're able to achieve over the last 12 months. So.
So I think that if your question more specifically is not a roadblock to future acquisition. The answer is absolutely not.
Thank you.
I'd like to just.
Clarify a point on the Americas segment.
The organic growth was a bit slower than some other markets for the quarter.
I recognize there is a large soft backlog and I appreciate your comments on funding.
Do you believe the U S businesses capturing.
As much of a benefit from the infrastructure funding as you would expect at this point.
Yes, the answer the quick answer to your question is yes, absolutely.
Our win rate is up compared.
Compared to.
A year or two ago. So we feel that we are gaining market share in the U S.
So we essentially in other words, winning more than our share at this point in time that we're feeling good about it.
So the answer is yes.
Thanks for your comments.
Thanks, Jonathan.
Thank you we will now take our next question.
Okay.
And this is from Frederic Bastien from Raymond James. Please go ahead.
Hi, good morning.
Good morning, Brian.
I would like to go back to the M&A discussion here are you feeling better about M&A opportunities today than you were maybe.
12 to 18 months ago, you've got you've got higher interest rates slowing industry activity quite a bit here, but.
There are probably fewer players in the sandbox right now which could play to your advantage. So wondering if you could just expand on that please.
Well I think youre right.
I think that.
I think.
I've said it in the past Frederic and you heard me, saying that in the past.
And good markets I feel WSB opportunities too.
To be opportunistic, but equally in tougher markets. If you have a strong balance sheet.
And you have a well run.
Organization.
Running a tight ship.
Good players will also happen opportunities too to be opportunistic.
So my feelings in the current environment.
Change.
That makes sense.
Makes a lot of sense. Thanks.
I think you'd probably have to answer that question every couple of conference call or anything keeping you keeping you up at night.
Well look.
I think it would be it would be wouldn't be transparent too.
To ignore.
Whats happening in the World right now I think we.
We have not mentioned, we don't talk about geopolitics much on our conference call. Because this is not our business.
And we are busy delivering services to our clients we're busy delivering.
Two are.
And then creating an exciting work environment for employees.
But obviously I mean, there's a lot going on.
But at the same time I look at.
The year that we are delivering right now I'm very pleased with our performance.
We are in the middle of our budgetary process right now for 2024.
You know with with what we know today I think I don't expect the market condition in 2000, 2000 and for it to be materially different to 2023 and therefore.
No.
<unk>.
Actually cautiously optimistic about it.
So I think yes, there is a lot happening, but when you look at the underlying trends of Av.
<unk> our company.
I'm feeling good about where we are today.
Thank you that's all I have.
Thank you.
Thank you.
We will now take our next question.
Yes.
This is from Michael Kim from day shutdown. Please go ahead.
Good morning, and congrats on the strong run well, maybe circling back to your comments on the EV supply chain earlier in the call last week Hydro cutback announced a pretty significant investment plan in both size and scope among many others in the province can you maybe give us some more details on ws wsb's expertise in the sector.
And your strategy in attacking the volume of capital that will be entering over the next decade.
Yes look we.
Obviously in the space, we have very strong expertise. We have we have been servicing that you've talked about hydro, Quebec I don't want to talk about specific clients, but we have been working.
With hydro, Quebec for many decades now.
It's a great client.
Have a great relationship.
And we will obviously, we believe that the.
The plan is sound and we received well.
What was announced.
Hi.
But by the New administration, and then by the by the CEO and obviously.
This is early data, but as I said, we feel we are very well positioned.
And and WSB has a strong energy transition player around the world not just in Canada. So I think it bodes well for the future.
That's helpful. That's all for me. Thank you.
Okay.
Thank you.
Yes.
We'll now take our next question.
And this is from the line of Maxim <unk> from NBC. Please go ahead.
Hi, good morning, gentlemen.
Hey, Max.
Alex I was wondering if you had.
Don't mind, maybe commenting on how the scale of your environmental and water practice right now spilling over into.
Beneficial growth in other areas, because obviously given your leadership.
Our position there and that helps I'm just wondering if you can just maybe comment a little bit more in detail on those.
Yes.
You mentioned water sorry. The line is not good. This morning, So you said.
Can you please repeat I'm, sorry, Max I didn't hear.
Yes.
So just in terms of how they are scalable environmental and water business is spilling over in helping you with often protocols.
What you see in terms of what the win rates when our capabilities of being sort of early over the client just maybe any color there. Thank you.
While this has been incredible.
<unk>.
As you know.
We are transforming and had been transforming.
The organization in the company in recent years, if I just look back to 2018, when we announced that we wanted to build that sector.
The time environment, and water was representing less than 10% of our of our topline and today represents north of 30%.
We have an excess of 20000 people working in that space.
And.
We are clearly the leading player.
In the <unk>.
Services I would call soft urgent environmental services like permitting social acceptability studies.
Planning, but then when you talk about their rehabilitate the site rehabilitating sites and remediation. We're clearly are one if not the leading player as well in this space. So so we get into on site or very very early on in the planning of our projects.
And often time this is giving us an opportunity to cross sell our services.
Not in a position to talk about our projects that there was.
Projects that was just awarded to US, but then the next quarter or two I will be spending time, explaining because I think this is this.
A perfect example.
The cross collaboration that is happening right now within WSB I mean, we are in a position now to cross sell environmental work with our building sector with our transportation sector our power sector.
And in the next quarter or two I would like to use this projects as an example to highlight.
Our business model and actually what we intend to do going forward and how we intend to grow our company. So yes. Indeed, Max I think this has been quite strategic for us to get early on.
On sites and on projects in the boardroom with clients.
And the planning phase of our projects and the social acceptability phase of our projects in the permitting phase of a project and be in a position to bring all of our expertise.
To this client so so yes, we're feeling very good about it.
Okay. That's super helpful. And then maybe just a follow up question in terms of the funding dynamic in the U S. If hypothetically there was sort of any change in terms of the leadership.
Like a little bit builds were supported by both parties.
What are your thoughts in terms of.
Visibility off.
Seeing that funding not being changed maybe just any color that you can provide some kind.
Political market.
Yes look I'm.
I'm not.
Our policy collects U S political experts.
The asleep, Max but look we need to remember that.
These were all bi partisan infrastructure.
Funding.
So so I think both side of the aisles, both Republicans and Democrats.
Sure.
In favor of the infrastructure large inflation reduction act that chip acts. So so I don't think that much of that will be impacted by the new leadership at Congress.
Obviously I think it's in the best interest of the country to continue to create jobs and fund projects and fund the various states.
As I said before already $270 billion of the bipartisan infrastructure law.
Act has been has been deployed over 36000 projects.
I think thats.
That's about that.
That theres now sailing.
So I think it should continue going forward.
Okay, absolutely great to hear and then last question quality if I may.
Is it possible to have a different color in terms of sort of the pacing of sort of the CRM rollout globally, because I think he will do between southern stages, just make a bit of an update there. Thank you.
Yes, so see a CRM in the sales.
So our ERP Max.
<unk> multiple.
The module that we're implementing and sales as part of it.
Our rollout plan is based by country. So now we've done Canada and Canada has.
All of the functionality, including the CRM next we will go into U S and UK, which is planned for.
<unk> 2024, and they will get CRM. So the CRM will become available in each country and our new system as we rollout per country that being said, it's not like we don't currently have those systems in place we will have a better system, but we have.
Various CRM in place in each of our countries sold so we do have the ability obviously to track our success.
Our pipeline across the patch.
Okay excellent. Thank you so much that's it for me.
Thank you.
As a reminder, if you would like to ask a question you can press star one and one on your keypad.
Please increase you'll fully and when you ask your questions. So that we can hear you loud and clear.
Thank you we will now take the next question.
Okay.
Next question from the line of Ian Gillies from Stifel. Please go ahead.
Good morning, everyone.
Good morning.
I'm just curious.
When I look at year to date revenue, it's call it 54 ish percent public sector.
Is your is the backlog materially more weighted to call it public sector clients given the amount of spending going on in that.
<unk>.
That part of the market.
No I'd.
I'd say that.
Relatively standalone at this point.
And.
The follow on with respect to the public sector work I suppose is when you think about your employees and bidding for work is there any material difference in how you bid for work depending on whether it's public sector or private sector client or are there any nuances there that are worth highlighting.
The procurement process is typically different.
Obviously.
So the private sector tend to be.
How can I use the word that.
I would like to use probably a bit more dynamic.
Perhaps quicker and the way work is being procured.
And the public sector.
Numerous steps that you need to.
To to go through before our projects as being awarded.
But.
Clearly I think.
Other than that I think we.
It's pretty fluid process, so whether you look at the public sector or private sector.
Perfect. That's really all I had all everything else had been answered thanks very much. Thank.
Thank you.
Yes.
Thank you, we'll now take the next question.
This is from the line of <unk> Khan from RBC capital markets. Please go ahead.
Great. Thanks very much.
A bit of color on the directional topline outlook over the next few years I was hoping to get a better perspective on the margin progression. There. It doesn't have to have anything specific on 24, but as you look across over the next.
123 years can you maybe talk about.
What you expect are going to be the largest contributors to EBITDA margin improvement across.
Operating leverage regional mix, maybe more better utilization just trying to get perspective on as we think about the next one to three years, what the bigger drivers would be a margin improvement in.
Yes.
Right.
I think I've mentioned that in the shoe occasions in the past running a professional services firms and tells us to look at a number of different levers.
One single lever that is going to increase.
Your.
Our margin profile.
Obviously, you need to operate in good markets are supply demand dynamics is very very important I do indeed believe we.
We operate in very good markets.
<unk>.
North of 90% of our EBITDA is generated in the OECD countries.
I've said that in the Boston and I'm repeating it again I feel that thats, our sweet spot for <unk> will continue to operate in those markets.
Number one number two.
You talked about productivity.
Purely.
It's a very important component of our of our of our work.
Third digitalization of our services and technology leveraging technology.
<unk> technology and our platform.
I think I've mentioned that in the past I think if you look over the last decade, we have been able to do a lot more with with a lot less in other words, we are our charge out rate.
For employees per Ftes has increased but I believe 50%.
So that's I think a test.
Testament of how we have been able to become more efficient.
Use technology and increase our rate of our charge off rate.
And thirdly, and that's something that is not.
Often time being discussed but.
The brand.
The company is also important.
I feel that the brand awareness around the world of WSB has gone up.
And I think clients are coming and knock on our door to <unk>.
Wanting to work with WSB.
And I just look at the quality of declines base that we have today.
And strong relationship that we have been able to build with our clients that too has an impact on our margin profile people are willing to pay for quality services and are willing to pay for deep expertise.
And I believe that when you look at the evolution of the firm that's.
You have seen.
Over the last few years, so that's something that there should not be neglected and that we're working extremely hard on.
Okay, great. Thanks, and then you talked a little bit about some of the IHA money and other funding that's coming through as you look ahead to sort of the pipeline stuff thats not quite in our backlog over the next 12 to 18 months, which end markets or those projects concentrated in are they how well aligned our there with your sort of <unk>.
Market mix.
Trying to get understanding of where the initial money is going versus the money that may come 24, 36 months out by end market.
Well.
Something that is well understood, but when you look at the funding.
We tend to talk a lot about water, we tend to talk a lot about power and grid and we tend to talk about EV.
And things like that but when you stop and really take the time to reflect and study.
How what's the plan and the strategy and how money is going to be deployed.
To remind our investors and prospective investors that the vast majority.
The capital will be deployed in roads bridges and transportation projects.
And that's not something that is typically discuss.
<unk>.
You know that WSB as the number one transportation franchise around the world.
So I.
I think we are very well positioned and uniquely positioned to take advantage of that in years to come.
Alright, thanks very much.
Thank you.
Thank you.
We will now take the next question.
Next question from the line of Michael <unk> from TD Securities. Please go ahead.
Good morning.
Good morning.
Maybe one more.
Sort of stab at a margin related question here I know you just to an extent you just addressed this Alex mentioning that there are many levers to margin improvement over time, but just looking at the third quarter, obviously, a very nice increase year over year in terms of.
50 basis points and adjusted EBITDA margins.
That regionally that was primarily driven by the Canada.
Canada segment.
I guess I'm just wondering as we look forward regionally or there is the <unk>.
Spectation that you should be able to complete ritzy gains sort of across the board or do you see greater opportunities relatively speaking in certain specific reasons for the margin improvement going forward.
Good morning, first of all Michael always cautious investors or analysts to look at one quarter and draw any conclusions I think.
You'd rather I'd, rather you look at the long term trends over 12 months at the very least.
And I would say that generally speaking, perhaps with the exception of China, which I mentioned is more challenging at this point in time.
We should expect.
Clearly you have the aspiration to make improvement pretty much everywhere.
In our group.
At this point in time, so that's the goal that's the aspiration that's your objective.
And looking and going into 2024.
I'm not sure.
Revealing relieving any secret at this point in time, but we are seeing only hoping for margin improvement next year.
Got it perfect. Thank you Alex.
Fair point I'm sure I'm sure you're working hard on driving margin improvement next year and beyond and maybe that just maybe feeds into the second question here.
When you unveiled your last three year plan.
You had talked.
Little bit about sort of a longer term aspiration of seeing margin potentially rise over the 20% level EBITDA margins I.
I know you didn't put a timeline on that or give a lot of details around that but I guess I'm just wondering internally.
How youre thinking about that now are you.
I mean, if things have been falling into place. The way you would have hoped and you're on track for.
For that still or any any evolution in your thinking around kind of the longer term.
While we're laser focused on that.
Michael So.
Yeah.
Obviously, we are only in the second year of our three year plan.
We what we had mentioned in the.
<unk>.
When we unveil our plan in 2022 is that we want it.
To generate EBITDA margin between 17, and a half in 18 and a half.
Percents EBITDA margin in this cycle.
I think.
We are confident that we can finish.
Within the range and hopefully we're going to finish in the higher end of that range.
So as I said, we have our eyes set on that targets <unk>.
And the reason why I mentioned it in the last plan, it's because it's it's an aspiration, but it's more than an aspiration that's an objective.
We have not put a timeline on it.
Obviously, because it's extremely hard in the current market environment, and if I look back in 2022 post pandemic.
To make long term predictions.
Anything beyond three years, you know as well as I do it.
It's extremely difficult nobody has a crystal ball, but I can tell you that I'm feeling confident that we're going to reach that goal and it's not going to be in.
And the long term future.
If that makes sense.
Okay. Thanks, Alex.
Thank you.
Thank you and there are no further questions at this time I will hand back to the speakers for any closing remarks. Thank you.
Well. Thank you again for attending our Q3 conference call I look forward to updating you in Q4, thanks for your support and commitment.
I'll be in touch thank you.
Thank you. This does conclude the conference for today. Thank you for participating and you may now disconnect.
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