Q1 2025 WSP Global Inc Earnings Call
Speaker Change: Good day and thank you for standing by. Welcome to the WSP Global First Quarter 2025 Results Conference call.
Speaker Change: At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one and one on your telephone. You will then hear a message, advising your hand is raised.
To withdraw your question, please press star 1-1 again.
Please be advised today's conference is being recorded.
Speaker Change: I'd now like to hand the conference over to your first speaker today, Quentin Weber. Please go ahead. Thank you Sarah. Good morning everyone. Thank you for joining our call today. We will discuss our Q1 2025 performance followed by a Q&A session.
Speaker Change: Alexander Weber, our president and CEO and Adam Michaud, our CFO , are joining us this morning. Please know that this call is also accessible via webcast on our website.
Speaker Change: During the call, we will make forward-looking statements. Actual results could differ from those expressed or implied. We undertake no obligations to update or revise any of these statements.
Speaker Change: Relative factors that could cause actual results to differ materially from those forward-looking statements are listed in the NDA for the quarter ended March 29th, 2025, which can be found on Cedar Plus and on the website.
Speaker Change: In addition, during the call, we may refer to specific non-IAPR measures. These measures are also defining my DNA for the quarter-end is March 29, 2025.
Speaker Change: R&D includes reconciliation of non-Iverse measures to the most directly comparable Iverse measures. Management believes that these non-Iverse measures provide useful information to investors regarding the corporation's financial condition and results of operation as they provide additional critical metrics of its performance.
Speaker Change: These none of our first measures are not recognized on the right for us, do not have any standardized meaning prescribed on the right for us, and may differ from similarly named measures reported by other reshorts, and accordingly may not be comparable.
Speaker Change: These measures should not be considered as a substitute for the related financial care information prepared by IAPRS. With that, I will now turn the call over to add exam.
Alexandre Lerue: Thank you, Contain, and good day everyone. This has been an interesting start of 2025, and I'm eager to share the details of our solid performance for this quarter.
Alexandre Lerue: Overall, we have showcased net revenue and EBITDA slightly ahead of our expectations and let me provide you with additional insights into our performance.
Alexandre Lerue: First, net revenue organic growth to the quarter came in at approximately 5.5% when adjusted for fewer billable days in the US compared to the same period last year.
Alexandre Lerue: In Canada, we delivered 7% organic growth, and with the election now behind us, we are confident that this momentum will continue.
Alexandre Lerue: In the US, which accounts for 40% of our net revenues, we delivered our fourth consecutive quarter of double digit organic growth when adjusted for the same number of billable days.
Alexandre Lerue: This track record demonstrates continued robust level of activity in the first quarter.
Alexandre Lerue: With respect to our recent acquisition of power engineers, the integration is progressing as planned and it continued to perform nicely throughout the quarter with 11% in organic growth and the significant revenue synergies opportunities.
Alexandre Lerue: Our UK business delivered growth in line with expectation and market dynamics I've improved from a year ago.
Alexandre Lerue: In a pack, despite subpar performance, the outlook for the Australian New Zealand remained positive in the medium and longer terms, which is reflected in our backlog growth in the quarter.
Alexandre Lerue: Of interest, Australia's water, power and mining sectors, each achieved strong organic growth this quarter, and the results from the recent federal election is positive.
Alexandre Lerue: Turning to our profitability, we achieved a steady EBITDA margin performance of 16% for the quarter. We delivered sizable increases in Canada and the Americas with our margin improving by 130 basis point and 60 basis point respectively.
Alexandre Lerue: In AMIA and APEC, we absorbed approximately $20 million of continued optimization and restructuring costs which impacted our overall margin by approximately 50 basis points.
Alexandre Lerue: On Cash, I am particularly pleased with our performance, this quarter, building on our 2020-24 momentum.
Alexandre Lerue: Lastly, we are reaffirming with confidence our previously disclosed financial outlook, which includes robust margin improvement and a compelling organic growth profile.
Alexandre Lerue: Despite the current macro environment, we have a good backlog which has increased organically by 3% since the beginning of the year.
Alexandre Lerue: We are driven by a clear strategy, a diversifying resilient platform, and we are proactively taking actions where required, all of which provide confidence and our ability to deliver shoulder value.
Alexandre Lerue: On that note, let me briefly expand on the dynamics across our four core market sectors.
Alexandre Lerue: Our largest market sector, Transport and Infra, continues to perform well with the exception of Asia-Pacific at this time.
Alexandre Lerue: It contributes meaningfully to our backlog, which just give us good visibility for the remainder of the year.
Alexandre Lerue: While we are actively monitoring public and private spending priorities, our deep expertise and diverse range of services in this sector strengthen our resilient and position in TNI as a stable contributor to WSP's ongoing growth.
The same holds true for our diversified client base.
Alexandre Lerue: In the US, for example, our client portfolio spends local and state governmental entities as well as private clients with minimal exposure at the federal level.
Alexandre Lerue: The Americas region led the way for transport infrastructure growth in Q1.
Alexandre Lerue: Recent notable wins include League Design Services for South West Tens Street Connector, and Warward County, Florida, and Multidisciplinary Engineering Services to support the replacement of the Francis Scott Keybridge in Baltimore, Maryland.
Alexandre Lerue: In Canada, strong by urbanization trends continue to drive substantial investment in you and existing infrastructure, bridges, highway, roads, land development, and municipal engineering will present a meaningful portion of our current backlog.
Alexandre Lerue: WSP is also strategically positioned to benefit from Hydro Quebec's plan to invest $10 billion to upgrade the age-ang transmission and distribution infrastructure required to meet current and future electricity needs.
Alexandre Lerue: Investment and water infrastructure is also trending positively across most of our geographies.
Alexandre Lerue: For instance, in the UK, we secured new mandates which united utilities for commercial consultancies, estimation and project management services under the latest AMP 8 funding cycle.
Alexandre Lerue: Shifting to our property and buildings market sector, performance remains solid and forward momentum is building.
Alexandre Lerue: Our businesses in Canada, the US, the UK and the Middle East, which account for about half of our PNB revenues are performing well. Our critical infrastructure and markets, including industrial, advanced manufacturing, data centers and healthcare continue to show strength.
and we are confident that the growth opportunities ahead. [inaudible]
Alexandre Lerue: Notably, Data Center Demand has been a steady contributor. While many of our recent project wins are confidential, we secured another one gigawatt of data center developments in the first quarter from projects around the world.
Alexandre Lerue: These projects cover everything from site acquisition and master planning to land development and building design.
Alexandre Lerue: Moving on to power and energy, where market fundamentals remain favorable, and momentum continues to build. In the first quarter, we recorded double-digit organic growth in this sector, reflecting the sustained demand for our services.
Alexandre Lerue: The underlying drivers of energy investment remain valid, including replacing aging infrastructure, hardening electrical systems against natural events.
Alexandre Lerue: Strengthening grid reliability and security and supporting growing energy demands as data centers, buildings, transportation, and manufacturing shifts to our different energy sources.
Alexandre Lerue: As I mentioned earlier, the integration of power engineers is progressing very well and many of our larger global clients are already able to benefit from our expanded and gene engineering capabilities following the acquisition.
Alexandre Lerue: The backlog is healthy and I'm pleased to know that we recorded two more months of backlog versus last year.
Alexandre Lerue: We also have more than 200 projects in the pipeline that leveraged the combined capabilities of power and WSP to deliver more efficient project execution for clients.
Alexandre Lerue: Of these 200 projects, approximately 40% are with Tom Smith, Albide, The Power, and Energy Sectors.
Alexandre Lerue: Now to our Earth environment sector, our teams continue to seek our new projects globally. Water critical elements, technology deployment and defense amongst others are all areas where our services are high in demand.
Alexandre Lerue: Defense in particular via our long-standing relationship with entities such as the U.S. Navy, Air Force, and Army Corps of Engineers, and many other entities globally remain strong.
Alexandre Lerue: Notably, we were recently appointed to a $1.5 billion 10-year program with the U.S. Air Force to support psych remediation and environmental consulting across its global assets.
A clear endorsement of our capabilities.
Alexandre Lerue: This builds on our ongoing work at the former PE's Air Force Base in New Hampshire, where we support PFAS treatment and ground water management.
Alexandre Lerue: Taking together, our four market sectors continue to reflect our ability to anticipate and respond to the mega-tran shaping our world, from decalvernization and electrification to urbanization and supply chain resilience.
Alexandre Lerue: We remain confident and focused on attaining our financial targets for the year. I will now invite Alain to review our financial results in greater detail.
Alain Michaud: Thanks Alex and hello everyone and please this morning to report on our results for the quarter.
Alain Michaud: For the first quarter revenues and net revenues increased by 22% and 20% respectively, showcasing solid year over year growth.
Alain Michaud: We achieve net revenue organic growth of 3.7% or approximately 5.5% when normalize for fewer for fewer billable days in the US operation compared to the comparable period in 2024.
Alain Michaud: As of March 29, 2025, the backlog reached another new record-high level of $16.6 billion.
Alain Michaud: representing 11.3 months of revenue, up 16.6% in the 12-month period, or 3% organically since the beginning of the year.
Alain Michaud: Moving on to profitability, adjusted a bit down the quarter, grew 500. [inaudible]
Alain Michaud: Group to $533.9 million compared to $446 million in the first quarter of 24, an increase of 19.7%. The adjusted EBITDA margin for the quarter stood at 16%.
Alain Michaud: Canada and the Americas delivered solid margin performance in the quarter. In AMIA and APAC we absorbed right sizing and optimization cost of approximately $20 million, which impacted overall margin by approximately 50 basis point.
Alain Michaud: Or said differently, or adjusted a bit, would have been $554 million versus $534 million absence of these costs.
Alain Michaud: Adjusted net earning for the quarter reached $229 million or $1.76 per share, up 18.2 and 13.5% respectively compared to the first quarter of 2024.
Alain Michaud: The increase is mainly attributable to higher adjusted EBITDA, partially upset by higher interest on long-term debt.
Alain Michaud: As for our cash position, I'm particularly pleased with our strong cash flow generation
Alain Michaud: Free cash inflow was $116 million for the three-month ending.
Alain Michaud: March 29, 2025, representing an improvement of $241 million, compared to free cash outflow of $125 million in the corresponding period in 2024.
Alain Michaud: Driven by improved DSO, sitting at 70 days at the end of the quarter, and $150 million U.S. factoring arrangement, partially upset by higher taxes paid.
Alain Michaud: We achieved a trailing 12 month, a free casual conversion of $1.2 billion, representing 1.6 times net earning.
Alain Michaud: Net debt to adjusted EBITDA ratio stood at 1.8 times incorporating the full 12 month of adjusted EBITDA of all acquired business the net debt to adjusted EBITDA ratio would be 1.7 times.
Alain Michaud: We remain well within our target range of one to two times and our balance sheet is in a strong position.
Alain Michaud: And as Alex mentioned, we reiterate with confidence the financial outlook for 2025 issued in our global strategic action plan press release on February 12, 2025. On that note, back to you, Alex.
Alexandre Lerue: Thank you, Alain. Our results, the squadron mark a good start of our 2025, 2027 Global Strategic Action Plan.
Alexandre Lerue: In a macro environment that continues to be fluid, we are maintaining a vigilant and disciplined approach.
Alexandre Lerue: Our business is built with the flexibility to course correct, seize opportunities and stay focused in any context.
Alexandre Lerue: Our diversified platform across market sectors, geographies and clients has consistently proven its value, helping us mitigate challenges in one area while capitalizing on opportunities in another.
Alexandre Lerue: We remain firmly focused on what we can control. That means tightly managing our business and empowering our teams to continuously bring the best of WSP to our client base.
Alexandre Lerue: Our strategy, our resilient platform and our team's depth of expertise keep driving our business in the right direction. We are being proactive and taking the appropriate steps where and when needed.
Alexandre Lerue: Disposter gives us confidence and our ability to continue delivering value for our shoulders. With that, we can open the lines for questions.
Speaker Change: Thank you. If you would like to ask a question, you'll need to press Star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press Star 1 and 1 again.
Speaker Change: Thank you. Your first question is from the line of Stephen Fisher from UBS, please go ahead.
Stephen Fisher: Thanks, good morning and congratulations on the quarter. Just in terms of the the the guidance
Stephen Fisher: You're looking at, say, the midpoint of growth implies some acceleration in net revenue growth over the course of the year. I'm just wondering if you just give it a sense of the visibility you have to that and how hard it might be now in light of…
Stephen Fisher: Some of the tougher comparisons you have coming up in the United States market against that sort of double-digit growth and some of the macro headwinds that are out there.
Well, look at it.
Stephen Fisher: Historically our first quarter has always been disposed, having said all that.
Stephen Fisher: This year's performance is not any different than the pattern we've seen in the past.
Stephen Fisher: Number one, number two, when I look, not just at the proposal activity level, I'm looking at our self-backlog, but really focusing on our hard-signed backlog.
Stephen Fisher: We have a very good backlog for this year, and I've been quite encouraged by the prompt performance of our Canadian and U.S. business.
Stephen Fisher: But on the opposite side or conversely I would say that
Stephen Fisher: The recent wins in New Zealand and Asia Pacific gave me a higher level of confidence that things should improve as we progress towards the end of the year.
Speaker Change: That's very helpful. And then just as a follow-up on power engineers, I wonder if you could just comment a little bit more about...
Stephen Fisher: The timing of these 200 projects that you have out there and sort of what the potential these have for keeping the double digit growth going in that business. Thank you.
Stephen Fisher: Yeah, look, extremely pleased with the acquisition of power engineers. I've said them previous
Stephen Fisher: There are some transactions that are good to have and some others that are must-do. In our mind power engineers was a must-do transaction that was really propelling us to the stratosphere to be honest with you.
Stephen Fisher: Over the course of the last decade they've had a gig organic growth exceeding 10% for the last 10 years.
Stephen Fisher: So this quarter, obviously without being a surprise, I was pleased to see that at 11% it continues.
Stephen Fisher: and in terms of the synergistic benefits of combining our two businesses together.
Stephen Fisher: I think one point mentioning, as I said earlier on in my address, is that, you know, close to half of the pursuit.
Stephen Fisher: That we're pursuing right now are outside the power and energy sector.
Stephen Fisher: In terms of timing, look, it's difficult to tell you. I mean, we're, you know, it varies and it will continue to vary. But I think after 90 days it's, or I should say, more, more 120 days it's a very, very good start of
of the marriage of those two firms together.
Thank you very much. Thank you.
Thank you.
Speaker Change: Next question is from Sabahat Khan from RBC Capital Markets. Please go ahead.
Speaker Change: Craig, thanks and good morning. Maybe just continuing on the commentary, Alex, to the response to the first question, hoping you could dig in a little bit into sort of the public versus private.
Indications are getting on the public side, just wondering.
Speaker Change: Or some of the government customers, you know, national government customers thinking about stimulus, are you hearing some of that talk if they are worried about the macro. And then on the private side, if you can maybe just give some indication of the type of end markets.
Speaker Change: That are a bit bigger for you on the private side and how are those customers feeling at this point in the macro and the indications are going from them. Thanks.
Speaker Change: Look, it's, as I said, it's a fluid environment, but things also change very, very rapidly. If I take Canada as an example, I would have argued that
Speaker Change: of all the G20 or all the partners of all countries partnering with the US. At some point in time I felt Canada was the least well-position.
Speaker Change: And today, when you look where Canada stands, I do feel that things have improved dramatically.
Speaker Change: and I'm feeling extremely good about the state of the economy in Canada at the moment. Also you look at the fiscal flexibility of the country for instance.
Speaker Change: in Canada. It's one of the best in the G20, surprisingly. And when you look at the past election, I think that the current elect government is committed to continue to spend the infrastructure. So I would say that...
Speaker Change: in the U.S., in Canada, and I mention also in the U.K.
Speaker Change: I feel the public sector were feeling good, feeling well and similarly in the private sector and as I said, you know a year ago going into 2024 we were quite concerned around the UK performance of our operation.
Speaker Change: And today we feel a lot better, a lot more stability, election is behind us, same thing in Canada, election is behind us.
Speaker Change: behind us. So, I would say, from a macro point of view, [inaudible]
Our public sector clients are feeling good.
Speaker Change: Similarly, in the private side, where I see some changes and differences is really in Australia and New Zealand, where the private sector is doing very well. Our property and building sector is continued to thrive.
Speaker Change: The mining sector is we continue to do very well, so is in the water sector but clearly in transportation we demobilize from very large assignment and prior years.
Speaker Change: And we have not seen the backlog or the proposal activity level picking up as fast as we would have liked on the public sector side in transportation and in Asia Pacific.
Thank you.
Speaker Change: Great. And then, you know, there's some commentary about impact on sort of margins and potentially on cash flows from some of the right starting initiatives.
Speaker Change: An A-Pack, and Potentially Nimmie. If you can just talk about some of the initiatives you've built in the path ahead for those two regions, into source like this, right into next year. Thanks.
Yeah, well...
Speaker Change: The beauty of WSP model is one that is based on diversification, number one, and number two, the fact that we have very few, a very low level of fixed costs in our business.
Speaker Change: So, when I live back in 2010, for those of you who were there back then and following our story, when you look at the downturn in oil and gas in 2014,
Speaker Change: When you look at the pandemic in 2020, and now, you know, which is again a very fluid environment, we've always been able to react and course correct the company very rapidly.
Speaker Change: and take decisive actions to really streamline our business and set their business up for future success.
Speaker Change: And this time around, Sabah is not any different when we saw the market.
Slowing down in TNI in Australia and New Zealand.
Speaker Change: One, we felt we needed to take some decisive action in China and in Asia, we did.
Speaker Change: We absorbed the cost, as I said, course correct and set up the business for future success. So this quarter was a lot of that in that region. We absorbed the cost.
Do I expect there may be some more? Yeah.
probably.
We expect some more.
Speaker Change: Because it's something that we've been used to be doing in the past when we felt we needed to, but at the same time we are seeing the backlog growing in those regions and that tells us that the longer term in the medium term it should be a very good operation, a good region for us.
All right, thanks very much for passing by. Thank you.
Thank you.
Speaker Change: Next question is from Yuri Lynk, from Kanagore Generity, please go ahead.
Hey, good morning guys.
Good morning, Harry.
Speaker Change: Maybe just any color on your conversations with your customers in terms of if you're seeing any kind of delayed decision making given the macro uncertainty.
Look!
Speaker Change: I'm not going to sit here telling you that there are no uncertainties. That's not true. Our clients are like you, like me, wondering. And as I said, this is a very fluid environment. Do I feel that it is impacting us directly as a company? The answer is no. No.
because the work that we do is typically...
Speaker Change: Rendered and delivered by our local teams in our respective countries. So I don't have a sense that right now our work is being impacted. But yeah, I mean our clients clearly are wondering like all of us. [inaudible]
Speaker Change: Where this will lead us, having said all that, the proposal and activity level in the US continue to be good.
Speaker Change: in Canada, very strong, without naming names, one of a big, we are doing the design for one of a big automotive players in the world in Canada right now manufacturing plants and
Speaker Change: And the answer of that client is that we're still committed to Canada. We're not going anywhere and we're going ahead with this project. So I do feel that although there are some uncertainties and it's fluid. At the same time, I have a sense.
Speaker Change: and a feeling that the commitment is still there. So, it's overall Yuri, I mean, perhaps as we progress towards the end of the year, I will gain more color. But we need to remember that we're only,
Speaker Change: You know, a month and a half past the liberation days, so I think it's still very fluid, but at the same time, at the moment, the signal I'm getting is that, you know, things are good and people continue to deliver on what they said they would deliver. [inaudible]
Okay.
Speaker Change: The question on the guidance for the full year on EBITDA, there's $50 million between the low end and the high end. You just absorbed $20 million.
Speaker Change: First of all, were these costs contemplated in the guidance, and if not, is it fair not to think maybe the lower end is more likely than not?
Now, that's not a fair assumption they were contemplated.
Speaker Change: Okay, and last one, when will these billable days kind of reverse and boost organic growth, do you know which quarter that would be this year, or if any?
Speaker Change: Yeah, so what happened in Q1 in part is in our inauguration day, which was a new federal holiday that we didn't have last year, so that will not reverse.
Speaker Change: and you should expect a flight reversal in Q4, no movement in Q2 nor Q3. [inaudible]
OK, thanks. Cheers.
Thank you.
Speaker Change: Next question is from Chris Murray from ATB Capital Markets. Please go ahead
Speaker Change: Yeah, thanks. Good morning, gentlemen. There's not a lot of volatility in a lot of parts of the economy, but FX has been moving around a lot. And so a couple of questions on this.
First of all,
Speaker Change: Can you just kind of walk us through what your FF assumptions were with respect to your guidance and how that plays out?
Speaker Change: But then more importantly, just trying to understand if given the volatility that it was seeing, are there any material currency mismatches, whether that you're using international design centers versus maybe North American? [inaudible]
Speaker Change: Contraster, anything like that. So anything that we maybe need to be thinking about and maybe even if you have a chance maybe touching on the hedging policy that would be great.
Speaker Change: Yeah, we hung on the last part of your question obviously, we are operating in more than 50 countries so...
Speaker Change: So we are edging. We have a partial edging strategy. We need to remember that we have natural edges.
Given that we conduct the work.
Speaker Change: and the cost associated with our services is typically delivered in the currency where the work is conducted.
Speaker Change: So, of course, at the end of the day, we have a significant natural edge.
Speaker Change: given our business model. So what we're left with is Debidah or the free cash room, depending on how you want to think about Debidah and free cash though.
Speaker Change: And typically on this, we are going to partially edge our exposure. We're not in the business of
Speaker Change: of of of of of of of of trading currencies and have never been so our goal is not to make a dime on this and our goal is to mitigate our downside as well so we've always taken.
Speaker Change: A very high level approach to all this, which is we chose not to.
Edge, Entirely, our free cash flow.
Speaker Change: and I'm not going to get into the portion that we decide to edge or not.
but high level, that's how we're thinking about hedging. [inaudible]
Speaker Change: The goal is really to mitigate the downside and to...
Speaker Change: Obviously, if we, we, we things turn into a favor, that's great, but that's not the goal, the goal is really...
Speaker Change: to have a diversified and resilient platform. Number one, number two in terms of our resource centers, there's no real benefits or effects benefits of any sorts and all this.
Speaker Change: I when I when considered out that something that you need to think of there's absolutely no real benefit.
and in terms of edging, in terms of effects.
Speaker Change: We do tend to take a view on edging at the time where we present the budget to our board.
Speaker Change: Trying to assess what we know at the time, the average exchange rate for the following year, and we've been doing that since our IPO for that matter. So there's no really secret sauce around this.
We've always been quite practical and pragmatic.
Speaker Change: Sometimes we get it right, sometimes we don't get as right and I would argue that we're not certainly not any better than that.
Speaker Change: Economist of the Major Banks, so we're just trying to be...
Speaker Change: to be very pragmatic at the time where we present the budget to our...
to our board, so that there's no really anything...
Speaker Change: And to look into it here. And the same approach, Chris, as we really saw our guidance for the four year, we take a pragmatic approach, as you recall, in February the effects reality was quite different than it is right now.
Speaker Change: But we took into consideration various assumptions, including origin, fallacy, but also, you know, a reasonable effects environment that could be somehow sustained and expected for the full year. So there's certainly
Speaker Change: Less Upside, you know, if you look at it just purely from where the exchange rate has moved, especially with the US, but we have taken this into consideration with a reasonable and pragmatic approach as we release our guidance.
Speaker Change: You know, maybe some movement around services. You know, is there anything that you see or any discussions you've had with clients that make you think that you're going to have to worry about any sort of care for exposure? Um.
Speaker Change: You know, obviously there may be some insulation pressures on input costs in construction, things like that, but just wondering if there's anything that you see coming down that could impact either professional services or anything of that nature, you know, as you try to work around the globe. .
Thank you.
Speaker Change: Look, with what I know today and my dealings with our clients today, the answer and again very, very pragmatic answer is no.
But I don't have access to the Oval Office.
Speaker Change: Having said all that, Chris, we need to remember that the US, with all of its partners, when you look at services, not physical goods, has a trading surplus.
Speaker Change: And that's not really discussed in the headline news, but around the world we need to remember that the US economy has transformed itself over the last 100 years.
Speaker Change: to be a services industry, so they have a trading surplus.
Speaker Change: with the most countries around the world from a services point of view. [inaudible]
Speaker Change: Is he going to, or is the president going to choose to look into this? I don't have a good answer for you.
Speaker Change: I can't only work with what we can control and right now as I said the beauty of our model is that the work that is conducted in the US is conducted by US citizen and paying taxes in the US and providing revenue.
Speaker Change: at the U.S. government. So we'll see where it leads us, but at the moment I'm not overly concerned now.
All right. That's fair. Thank you, folks.
Thank you.
Speaker Change: Next question, that's from Krista Freeson from CIBC. Please go ahead.
Thank you. Good morning. Thanks for taking my question. Good morning. Good evening. Good evening. [inaudible]
Speaker Change: Just one on A-PAC. It sounds like you're encouraged by the backlog that you're building there. Just wondering if you can speak to the timing in terms of how you're expecting that to translate into maybe a little bit better growth than what we saw this past quarter.
Speaker Change: Very, look, it's embryotic. You know, it's anecdotal, I would say at the moment. I mean, it's the first quarter where we saw good growth and increased proposal activity level.
Speaker Change: Admittedly last year in New Zealand, we thought that the government, the new government, which starts spending money much quicker than it did.
Speaker Change: So I'm a little bit, I just don't want to get ahead of myself and giving you an answer like H2, it's going to be much better.
I'm not prepared to do that [inaudible]
Speaker Change: I'd like to give myself the benefit of a bit more time to see what you two will look like if we're seeing our backlight increasing again.
Speaker Change: And we are seeing more signals from governments that they're willing and ready to spend.
Speaker Change: What really took place in New Zealand was quite extraordinary. Everything stopped.
Speaker Change: with on the back of the election and an hour a year and a half later and we are seeing some find that the government is committed to be spending money.
Speaker Change: And I've spoke to the chief economist of the main bank in New Zealand, a lot of fiscal flexibility in New Zealand. So the concern is not the economy, the concern.
There's not the ability to span. [inaudible]
Speaker Change: I think what has been the issue is the choices that have to be made, and how the capital will be allocated.
Speaker Change: Do I have an optimist view in the medium to long-term view for the region? Absolutely. It's been an incredible region for us.
Speaker Change: But there's been some election, there's been a change in priorities and we just need to go with the flow.
Speaker Change: Take some decisive actions but are we committed to the region longer term? Absolutely, no doubt about that.
Thank you. That was great. I'll pass the line.
Thank you, I expressed them. Thank you.
Speaker Change: Next question is from Benoit Poirier from Desjardins. Please go ahead.
Speaker Change: Yes, thank you very much. Good morning, everyone. First question now that the two elections are over in Canada and the UK. Alex, do you think we could see even an acceleration in organic growth given the strong backlog that you have right now? [inaudible]
Speaker Change: It's, look, my gut answer, gut instinct is yes, but I don't have anything to hold my, it's very difficult to hold my, my hat on, hang my hat on anything at the moment, it's quite fresh.
But just my gut feeling is, yes, I think that...
Speaker Change: Clearly the county government in order to improve productivity there's no doubt Benoit we're going to need to improve the state of infrastructure. If we want to attract foreign investment there's no doubt we need to improve the state of infrastructure in the country.
Speaker Change: So I like to think that there's a real commitment behind that.
Speaker Change: Clearly, one fantastic news if we can say that there's anything positive in the fluid environment that we live in is really there seem to be unity amongst all the provinces. So, uh,
to lower down the tyrus amongst and between the provinces.
Speaker Change: So that will give us, I believe, a real opportunity to do some goods for the country.
Speaker Change: And the same thing in the UK, I think that the Labour Party is committed to infrastructure spending historically has been a great business partners to partner to WSP.
Speaker Change: So as I said earlier on, we feel better, 12 months later than we were feeling last year at the same time. I mean, we feel...
Speaker Change: We feel that we are operating in a more stable environment now that the election is behind us and we're feeling good about where we are positioned at the moment in the UK.
Speaker Change: Okay, and could you talk Alex a little bit about the progress achieved with the Microsoft so far since the big partnership announcement announced at your investor day?
Speaker Change: Yeah, it's progressing extremely well. Obviously, I don't want on in a public forum too.
Speaker Change: to provide our cake recipe to the world, but I can tell you that...
Speaker Change: We have a number of streams that are ongoing right now with a number of client zero, meaning that we've already engaged with the
clients, one or many clients in specific streams. [inaudible]
and Microsoft WSP and those clients have worked jointly.
Speaker Change: to really develop a new way of working in a digital offering and I'm quite encouraged by the progress that has been made so far, so I'm feeling, I'll be honest with you, I'm very excited about.
Speaker Change: If there's one aspect of our strategy, then I'm extremely excited about that, that would be probably top of mine at the moment. Okay, thanks for the time.
Thank you very much, thank you very much.
Thank you.
Speaker Change: Next question is from Michael Tupholme from TD Cowan. Please go ahead.
Thank you. Good morning. Good morning, Michael. Good morning, Michael.
Speaker Change: Just firstly, regarding the roughly $20 million of right sizing costs incurred in your APEC and AMIA regions, I'm wondering if you can break that down across the two regions.
Speaker Change: And secondly, it wasn't completely clear to me at this point is there an expectation on your part that there will be further right sizing costs overcoming quarters or is the current expectation that this is it for now? [inaudible]
Speaker Change: Yeah, I think the way I would answer that, Michael, is in the outset that we provided at the beginning of the year.
We knew the work that we needed to undertake. Thank you.
Speaker Change: Therefore, whether we incur more costs or not in the future quarters is somewhat irrelevant because it's provided in the outlook and it's already included in the outlook that we provided.
Speaker Change: So the answer is do I expect more? Probably yes, but it's already included in the outlook. So the outlook that you've been provided with and I think I've answered that question with another
Speaker Change: colleague of yours, not so long ago, is already embedded in the outlook that we provided. So we're feeling confident and very good about the outlook that we have.
Speaker Change: Number one and number two like your first question was the split between Emia and I would say that a bit more than half.
Speaker Change: Then what we incurred in the quarter was an A-pack, that's the way I would answer it.
Speaker Change: Okay, I appreciate that and I do appreciate that it's been provided to me as you as you previously mentioned in the full.
Speaker Change: in the overall outlook you've given. I guess the reason I was asking is, and we can try to back into this, but to the extent that there are further right sizing costs, this will weigh on margins.
in the future quarters within certain regions.
Speaker Change: So just, but I guess we can drag into that based on.
Speaker Change: No, I understand, I understand, I think the way I would answer this it I don't expect more than what we had anticipated. So if you look, and you remember that I've said never look at our margin profile on any given quarter.
Speaker Change: The Life Cycle of our projects are way more than many days, oftentimes the average Life Cycle of our...
Speaker Change: 200,000 life projects on more than 90 days. So I'd say over the course of this year, at this point, I'm clearly not anticipating anything more than what we were planning in the first place when we disclosed the outlook to you. So,
Speaker Change: So when you look at the midpoint of our outlook, you are seeing margin improvement and I continue to believe we will deliver to you margin improvement this year.
Just got it.
Speaker Change: Secondly, at your recent investor day, you talked about putting an increased focus on growing WSP's advisory services business, recognize that this is a longer-term initiative, but wondering if there's any update in terms of developments so far on that front.
Speaker Change: Well, at the Investor Day, we talked about 6, 5, 6, 7, a high-celled groteria.
Speaker Change: Advisory is one of them, but I can tell you that right now we have six, seven different streams working, specifically on those high.
Speaker Change: Select Groats, Eurea. So, advisory is progressing well. It's early days, right? It's the first quarter of a three-year plan, but clearly, when we identify those six, seven high growth areas.
Speaker Change: We really believe that the longer term and medium term this will pay off and we continue to believe that at this point.
Speaker Change: Perfect. And then just lastly, there hasn't been any discussion yet on the call about potential future M&A opportunities.
Speaker Change: I'm wondering if there's an ability to provide a bit of an update on the landscape and specifically, I guess, curious to understand. In part, if the current macro uncertainty that exists is having any kind of an impact on the acquisition opportunity set at this time.
Yeah, if you recall, at the last quarter, I said...
The Worse.
that
Speaker Change: The worst thing that can happen for M&E environment to be prosper is to have instability.
and Lack of...
Speaker Change: A lack of visibility into the future. And I was not expecting what we've seen in the first quarter, but that looks like what I've said.
Proven to be right, and with a bit of luck. So yeah, I know.
Speaker Change: I have a very, very good understanding of the MNL landscape in our industry.
Speaker Change: And I know the players that either are going to move or would like to move [inaudible]
Speaker Change: But it's just proven to be a very unstable environment at the moment so I think a lot of players are in the sideline and are waiting for good conditions.
Speaker Change: and nobody wants to get the asset for sale in an environment where the environment is not...
Prosper.
Speaker Change: So do I think that things have shifted to the right a little bit? I think so.
Speaker Change: I could tell you I think H2 will be better, but the answer is I don't know. I really don't know. One thing you shouldn't know is that WSP will continue to be very disciplined.
Speaker Change: In the past we have found ways to be opportunistic in difficult environment.
Speaker Change: and I don't believe this time will be any different. If we have an opportunity to...
Speaker Change: And we see a way to create shoulder value for our shoulders, we will. We're clearly open for business, we have a very strong balance sheet supported by strong long-term investors in our stock and
Speaker Change: and the right circumstances, I think the opportunities will come our way. We just need to be patient.
Perfect, I appreciate the time.
Thank you so much, Michael.
Thank you.
Next question is Jonathan Goldman, Scotia Bank, please go ahead.
Jonathan Goldman: Hi, good morning team and thanks for taking my questions. Good morning. Most of them have already been asked but I just had one kind of a high level question. I was wondering if you had a chance to look at Trump's proposed mini budget and if you had any takeaways for the IIA or infrastructure spending in general in the U.S.
Jonathan Goldman: Look, yes, the answer is yes, I've seen it, I've read it, I'm aware that the number of Republican
Longer term, I don't know what the shape? [inaudible]
Jonathan Goldman: The funding will look like. The one thing I know is that both the Republican Party and the Democratic Party are both committed to infrastructure spending.
You cannot...if...if...
Jonathan Goldman: if the real team and their real thesis to repatriate the manufacturing.
Jonathan Goldman: Industry to the US, you're going to need roads, you're going to need bridges, you're going to need power, you're going to need water.
and my understanding as the president has already announced.
Jonathan Goldman: Many trillion dollars of investment in the country. So in order to be successful, you need to have a strong state of the infrastructure in the country. So I don't know what the shape will look like and whether to president will amend.
Jonathan Goldman: The past president program, but the one thing I know is the underlying trends are strong and are supporting this industry and I'm highly confident that the US would continue to invest in infrastructure.
No doubt in my mind.
Speaker Change: Interesting that's good color and maybe following on to that. Have you seen any in-bounds related to reshoring manufacturing to the US so far?
Speaker Change: I think, frankly, it started prior to this year. We have seen a lot of some eye-conductor companies
Speaker Change: Not trying, but have committed to build manufacturing plants in the country. So...
Speaker Change: So we have seen that. Some projects we have won, some others we have lost that's part of life. But the point is yeah we have seen some of that and past years and quarters.
Jonathan Goldman: Interesting. Thanks for the color. I'll get back in cute. Thanks Jonathan.
Thank you.
Jonathan Goldman: Next question is from Maxim Sytchev from NBS, please go ahead [inaudible]
Maxim Sychev: by the law and judgement. Alex has wondering, given the order of volatility and some of the news for while getting from the Middle East, in terms of, I guess, what makes WSP's business sort of feel more resilient than different verses.
Maybe some of the others in this region. Thanks.
Maxim Sychev: Look, we've been, we've, and you're talking specifically about the Middle East Max? Yeah, it's possible, yeah. Okay, so look, we have been in the region for 30 years.
Way before the acquisition of WSP by Geneva in 2012.
Maxim Sychev: So we are now, I would argue, part of the family in the region and have been in the region for so long and we have built an incredible brand in the regions. We are by far the number one player, for instance, in property and building.
So if you look there,
Maxim Sychev: If you look at the skyline in Dubai, I mean WSP has been designing or touching.
Maxim Sychev: You know, more building than any other players in the region. So, so we have been present. We are doing today that Google
Maxim Sychev: We have been involved and are involved with the Louvre in Abu Dhabi.
Maxim Sychev: So all the iconic projects in the regions that we have Dutch and Saudi Arabia.
Maxim Sychev: We're working with most of the large OTEL developers around the world, American and others, developers around the world, so in the region, so we are working with the top-tier blue chip list of clients in the region.
Maxim Sychev: We have taken a very prudent approach as well to the region. We have been very selective in the projects that we are undertaken and I would say that we are well positioned and I look at where we were.
Maxim Sychev: When I started to visit the region in early 2010 and where we are today, I've seen a massive change in our client list.
Maxim Sychev: I've seen a massive change in our profitability and I also have seen a massive change in our payment terms. So I think it's a real testament of the credibility that we have been able to build in the region.
Speaker Change: Yeah, that's a good color, thank you so much. And then quickly, just a quick question around the factoring, do you mind maybe touch you on sort of, you know, the benefits in terms of, you know, increasing the velocity of ARs and so forth. So maybe any data points there would be great things.
Speaker Change: Yeah, it's it's one of our the tool that we have in our toolbox to manage our working capital. The the main benefit is a you know, it's an arbitrage on financing costs. We've got a good deal and and this has been helpful in reducing our. [inaudible]
Speaker Change: Finance Incust by getting our money faster or reducing our debt. So that's the purpose.
Speaker Change: Okay, excellent. That's it for me. Thank you so much. Thank you.
Thank you.
Devin Dodge: Next question is from Devon Dodge, from BMO Capital Markets. Please go ahead.
All right, thanks. Good morning.
Good Morning.
So, Kennedy U.S. generated the strongest growths.
Devin Dodge: for WSP in 2024. It seems like something similar playing out early this year.
Obviously, there's a lot of...
Devin Dodge: Call it over the next six, 12, 18 months. I know you've touched on some of this already. I'm just trying to get a sense if you expect North America to continue to lead the way or growth will be more balanced across the regions as we think about the second half of 25 and into 2026.
Devin Dodge: To try to be as clear as I can be, I expect North America to continue to lead the way.
in 2025.
Devin Dodge: Obviously there are some pluses and minuses last year in Q4.
We had a lot of femur activity. [inaudible]
If you recall, in H2 of last year, [inaudible]
Devin Dodge: Whether this, that the hurricane season will be any different this year I cannot tell you with certainty I don't have a crystal ball so we'll see.
Devin Dodge: We'll see, I can think of that being a plus or a minus, going into H2, we don't know that, but when I look at the more recurrent.
Devin Dodge: Business that we have obviously this year, Power Engineer is not going to be recorded as organic growth but I'm feeling extremely good about our power engineer acquisition and the underlying organic growth that will be recorded this year as acquisition growth.
Devin Dodge: and I'm feeling obviously good about all of our other sectors. I feel that...
Devin Dodge: We've had a very good start of this year, and I expect it to continue. So, in Canada,
Devin Dodge: Look, 7% organic growth in the first quarter was very good. And now that we have the election behind us, I feel even better now. And so let's see what the future will look like, but so far so good.
Okay, good to follow there. Second question.
Speaker Change: We think of WSP as being a builder, so when you, we see that you divest some operations, it always seems to stand out a bit to us, so we recently saw that you sold part of your German operation to a publicly traded peer, can you provide some context for what drove that decision to sell?
Well, you know, he's-
Speaker Change: We are clearly a builder. If you look at our track record in the last ten years, I like to think we're a compounder.
and our Creating Value. Thank you.
Um, um, [inaudible]
and like a fun manager.
When you want to create shoulder value, you buy.
Speaker Change: But there are some times where you feel that perhaps this asset is no longer court your portfolio and you see it as an opportunity to afloat the asset. So is there are there many pieces in our puzzle that I would like to divest at the moment the answer is no.
Speaker Change: That doesn't mean it won't happen in the future but I think that's what should give you some great comfort that WSP were quite pragmatic management team and if we feel we're going to be better off.
Speaker Change: Buying or better off selling, we're not sentimental. We'll do what's right for the company and we're going to do what's right for our shoulders. So, and in this instance
Speaker Change: And we've always been clear in our strategy if we are going to enter a geography or a sector unless I have...
Speaker Change: Strong conviction that we can be a top-tier player. I have no interest in staying in that market.
Speaker Change: And in this instance I concluded that would be extremely hard for us.
Speaker Change: to compete with the large German player in that space and therefore I said let's exit. There's nothing more to it than what I just described.
Devin Dodge.
Speaker Change: Okay, great comments. I appreciate it. I'll turn it over. Thank you. Thank you.
Thank you.
Speaker Change: And the last question today is from Ian Gillies from Stifle. Please go ahead.
Good morning, everyone.
Wunning Ray, Ian.
Speaker Change: Just a quick one from me. I was just hoping to get a bit of an update on the water business and maybe PFAS more specifically, you know, it's a business that was obviously growing quite quickly. I suspect it still is, but it's been a little while since we got an update on that part of the portfolio.
Speaker Change: It's been an area of focus for us, and has been for the last so many years, and will continue to be I just announce.
Speaker Change: One award over the next 10 years with the Department of Defense, so...
Speaker Change: So we're feeling very good about this market. We've experienced tremendous organic growth in recent years.
Speaker Change: and I expect that to continue. If you look in the NR ranking, the way we moved up and how quickly we moved up in recent years, I think it's a testament of what I just described.
Speaker Change: I think we've made tremendous headways in the last few years and I expect in this drought plan to continue to do so.
Speaker Change: I'll leave it there. Thanks very much. Thanks so much.
Speaker Change: Thank you, and there are no further questions, so I will hand back to the speakers for any closing remarks.
Speaker Change: Well, thank you so much. This Ben, as I said, a very interesting start of 2025 and a very fluid environment. But as I said before, WSP, we are focused on what we can control.
Speaker Change: And I'm not afraid to course correct when we feel we need to. We have a very resilient platform, a diversified platform.
Speaker Change: And we feel we have all the tools in our toolbox to be successful and create shoulder value. So I look forward to updating you as the year is progressing and we'll talk next in Q2. So thank you very much and I wish you all a great, great day.
Thank you.
Speaker Change: Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect.
Thank you.
Thank you.