WSP Global Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 9, 2023

Key Takeaways

  • Revenues up 24% YoY to $3.6 billion and adjusted EBITDA up 28% to $522 million, with margins expanding 50 bps to 19.1% and full-year EBITDA guidance reaffirmed above $1.9 billion.
  • Record backlog of $14.3 billion (12.1 months of revenue) with 7.2% organic growth and U.S. sub-backlog up about 50% YoY, driven by infrastructure and energy-transition awards.
  • Organic net-revenue growth of 6.7% in Q3 across all segments, led by Canada, Australia, the U.K. and New Zealand amid stimulus spending and decarbonization trends.
  • Continued progress on margin‐expansion strategy with Wood E&I integration on plan, digital productivity gains and tight cost control positioning WSP to reach its 20% EBITDA‐margin goal.
  • Free cash-flow conversion was hampered by a ~$100 million headwind from U.S. R&D tax rule changes, resulting in a $177 million outflow in the first nine months, though management still targets 100% conversion.
AI Generated. May Contain Errors.
Earnings Conference Call
WSP Global Q3 2023
00:00 / 00:00

There are 13 speakers on the call.

Operator

Good morning, everyone. Welcome to WSP's Third Quarter 2023 Results Conference Call. I would now like to turn the meeting over to Quentin Weber, Investor Relations. Please go ahead, Mr. Weber.

Speaker 1

Thank you, and good morning. We hope that you're all doing well, and thank you for joining the call today. To our Q3 2023 performance followed by a Q and A session. Joining us this morning are Alexandre Leureux, to our President and CEO and Anna Michaud, our CFO. Please note that this call is also accessible on our website, Zazia webcast.

Speaker 1

To Mr. President. 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 statements.

Speaker 1

To the operator. Relevant factors that could cause actual results to differ materially from those forward looking statements are listed in our MD and A for the quarter that ended September 30, 2023, to which can be found on SEDAR and on our website. In addition, during the call, we may refer to certain non IFRS measures. These measures are also defined in our MD and A for the quarter to that end ended September 30, 2023. Our MD and A includes reconciliations of non IFRS measures to the most directly comparable IFRS measures.

Speaker 1

To management believes that these and IFRS measures provide useful information to investors regarding the corporation's financial condition to the end results of our operations as they provide additional key metrics of its performance. These non IFRS measures are not recognized under IFRS, to the operator. Do not have any standardized meaning prescribed under IFRS and may differ from similarly named measures as reported by other issuers to and accordingly may not be comparable. These measures should not be viewed as a substitute for the related financial information prepared in accordance with IFRS. To Alexandre.

Speaker 1

I will now turn the call over to Alexandre.

Speaker 2

Thank you, Cartan, and good morning, everyone. Let me start by saying that I'm proud of the strong results to the company. These results are in line with our improved financial outlook issued in August, which as a reminder, to Increase our adjusted EBITDA guidance by more than $100,000,000 representing over $1,900,000,000 for the full year. To I would like to emphasis the following three highlights. First, we generated solid organic growth in net revenues to the company across all of our reportable segments.

Speaker 2

2nd, our backlog remains healthy to And at record level with approximately 12 months of revenues and a backlog organic growth of 7.2% to the company in the 1st 9 months of 2023. And lastly, we are seeing through to our margin expansion strategy and delivering to an adjusted EBITDA margin of 19.1%, which represents a 50 basis point increase when compared to the same quarter to last year. More specifically on organic growth and net revenues, the momentum continued to be positive to and was more pronounced in Canada, Australia, the United Kingdom and New Zealand. As for backlog and order intake, to We benefit from the various stimulus programs being deployed across our key geographies as well as global trends such as energy transition to and decarbonization, which continue to require our strategic expertise. Significant contracts were awarded in to Canada, and our order intake was strong in the Americas and EMEA.

Speaker 2

I will be sharing a couple of examples in a few moments. To During the last quarter, we provided additional visibility on our U. S. Soft backlog and the upward trend we were witnessing has persisted. To As a reminder, sub backlog represents contract awards not yet included in our reported backlog, mainly because of pending funding confirmation.

Speaker 2

To Our sub backlog in the U. S. Grew by approximately 50% year on year and 30% since the beginning of 2023. To This positive dynamic applies in all our core sectors. There is a notable increase in demand for our market leading to the company's expertise and data centers, sustainable infrastructure and renewable projects and awards across multiple WSP verticals and disciplines.

Speaker 2

To On margin expansion, more specifically, we are making great progress, which is the direct results of a focused strategy. To We are therefore making notable headway towards attaining our stated long term vision of delivering a 20% EBITDA margin. To Before I go over our recent events and recognitions for the Q3, I would like to take a moment to discuss the leadership announcement we made yesterday. To After a career spanning nearly 35 years, Lou Cornhill has decided to retire from executive life in 2024 to enjoy a quality time with this family. I thank Lou for his contribution to WSP and wish him a gratifying next chapter in his life.

Speaker 2

To We have initiated the search process for Lew's successor. Going back to Q3, it was marked by the first anniversary since our acquisition of Wood E and to Tim, which significantly increased our capacity in the Earth and Environment segment. Integration is on plan, and we continue to find opportunities to scale our to service offerings even further. WSP's leadership in the sector is well acknowledged, and I wanted to take a moment to share to 3 prestigious recognitions we recently received. The first was by the engineering news record to known as ENR Annual Survey.

Speaker 2

We ranked 1st amongst the top 225 international design firms to the 3rd consecutive year. It is an honor to have once again secured a top spot in this esteemed list. To our strong overall performance is a great testament to our unwavering commitment to innovation, sustainability and addressing today's to Oppression Global Challenges. We also made Times Magazine's list of the World's Best Companies in 2023. To We are only 1 of we are sorry, 1 of only 4 Canadian based companies on this year's list to the only one in the engineering sector.

Speaker 2

This recognition takes into consideration employee satisfaction, revenue growth, to ESG Data disclosures and impact. Lastly, we were recognized by Fortune Magazine and rented a place on the Fortune's to Change the World list. This honor serves to recognize WSP for leading to 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. To Such recognitions are only attainable, thanks to the collective effort of our teams around the world.

Speaker 2

To I'm 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. To Let me begin by focusing on the EV transition as an example. We are feeling a rapid acceleration of EV related activity to and growing opportunities. In fact, this year's energy outlook, North America forecast projected to That the U. S.

Speaker 2

And Canada are expected to invest $12,000,000,000,000 in renewables and grid infrastructure by 2,050. To We also see similar investment globally. We know that the robust electric vehicle market in North America and the to you. The substantial increase in government fundings for the EV battery market in Canada are motivating global clients to choose Ontario and Quebec to for their facilities. WSP has expertise in place to support the full EV battery supply chain.

Speaker 2

To We are also already providing a range of services including site selection, environmental permitting, to due diligence, engineering, design and project management support for the manufacturing of battery parts and battery assembly plants to our next question. As well as electric vehicle assembly plants. Project wins to date in 2023 have been robust to the highlights is water and clean energy. This is a sector benefiting from a strong market momentum and in which we are well positioned to deliver. To WSP was recently selected to design the Mercy title in the U.

Speaker 2

K. This is a barrage with an expected to the company's capacity of at least 1 gigawatt and is the largest publicly led renewable project in the country. To Mercy Title will likely generate enough power for up to 1,000,000 homes, create thousands of local jobs in the green economy to and make the regions a worldwide center of excellence. In addition to clean energy, the barrage is expected to provide protection against sea level rise to the company and help create an enhanced natural epithet. Additionally, we constantly make efforts to attract to the best professionals in our fields of expertise and enable our talent to work on fascinating and complex projects.

Speaker 2

To We continue to leverage our internal global network of professionals and one recent project I was impressed with was when our to healthcare teams from around the globe join forces to chart the decarbonization journeys of 9 healthcare systems across 6 continents. To Decarbonization is a preoccupation for all of us. And at WSP, we firmly believe in the power to Uniting to tackle the biggest challenges. Members of our team across our platform work together to propose solutions aimed at to reducing the healthcare sector's carbon footprint, which represent almost 5% of global carbon emissions. To I want to also underscore the work WSP is completing on the New Zealand North Auckland line.

Speaker 2

To This critical route was severely damaged after Cyclone Gabriel. Because we take great pride in assisting clients to the operator. In all facets of sustainability and climate resilience, our geotechnical and stormwater teams were thrilled to be selected to head the remediation work. They work relentlessly to provide a resilient railway line and embankment stability for future extreme weather to our Investor Relations and Operational Surface Water Drainage. Our world continues to be impacted by natural disasters, to And I firmly believe WSP has an important role to play to support communities.

Speaker 2

With close to 150,000 active projects per year to in a multiple of sectors, we are committed to executing work that supports sustainable and resiliable resiliable, sorry, to the society taking pride in our leadership role to contribute to a low carbon world and expedite the green transition. To On that note, let me turn over to Alain, who will go over our strong future results in more detail.

Speaker 3

Thank you, Alex. To For the Q1 revenues and net revenues reached $3,600,000,000 $2,700,000,000 respectively, to Both up 24% compared to the Q3 of 2022. We delivered solid net revenue organic growth of 6.7% to the quarter, attributable to all reportable segments. Our backlog as of September 30 remained robust to and stood at $14,300,000,000 representing 12.1 month of revenue with a 7.2 to the Q3. Organic order intake in the 3rd quarter alone to the company.

Speaker 3

Reached $4,000,000,000 Adjusted EBITDA in the quarter stood at $522,000,000 compared to to $407,000,000 in the Q3 of 2022, a 28% increase. To Adjusted EBITDA margin increased by 50 basis points to 19.1% to the company's financial results. Compared to 18.6 percent in the Q2 of 2022, attributable to our ongoing margin enhancement initiatives. To In the 9 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 basis points to 50 basis points.

Speaker 3

For the quarter, adjusted net earnings stood at to $246,000,000 or $1.98 per share. This is an increase of $53,000,000 or $0.39 per share respectively to the Q3 of 2022. Cash inflows from operating activities reached $210,000,000 in the 9 months to End of September 30 compared to $207,000,000 in the 1st 9 months of 2022. Free cash outflow to the company. To reach $177,000,000 for the 9 month period that ended September 30, we aim for 100% conversion of free cash flow to net earnings for 2023 when excluding the continued impact of changes in tax regulation in the U.

Speaker 3

S. Relating to research and development. To In regards to guidance, our financial outlook for 2023 issued in the Q2 2023 press release is reaffirmed. To And from a modeling perspective, acquisition and integration costs are now expected to range between $95,000,000 $105,000,000 to given recent acquisition and further identified opportunities. In conclusion, I'm very pleased with our financial to performance as we delivered yet another solid quarter.

Speaker 3

On that, back to you, Alex.

Speaker 2

To Thank you, Alain. I will conclude by reiterating that I am pleased with our performance. Overall, we benefited from positive market dynamics to We continue to believe in the strength of our unique global and diversified platform. We remain steadfast in our ability to deliver as per expectations. To our pipeline of projects remains robust and we are well positioned to keep growing and capturing market share.

Speaker 2

To 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. To While the macroeconomic and geopolitical environments are fluid, our business is well diversified to the operator and the operator to discuss our ability to navigate with agility while focusing to our shareholders on diligently executing our strategic ambition. I have confidence in our strategy, our platform and our people. To On that note, we will now begin the Q and A session.

Speaker 2

Thank you.

Operator

Thank you. To to questions. Thank you. We'll now take our first question.

Speaker 2

To you.

Operator

First question is from the line of Jacob Bout from CIBC. Please go ahead.

Speaker 4

Good morning.

Speaker 2

To Hello, Jacob.

Speaker 5

So seeing a solid organic growth in almost all areas, but the to The MDAs calling out difficult market conditions in China. Can you remind us what your exposure is to China right now? And to Have things improved there or got worse? And are there any other areas that you could be seeing some softness right now?

Speaker 2

To Yes. Well, first of all, good morning, Jacobs. Look, China, we have minimal exposure to And has been reducing over the last 12 months. So if you look at Mainland China, it's less than 500 people that we have now to China. So it's really de minimis.

Speaker 2

So for us, I think it's, of course, to Our Chinese business has suffered from what's happening in the real estate market in China. To But having said all that, Hong Kong, Singapore and Southeast Asia still has remained quite good. To And then we're feeling good about the future prospect in the region.

Speaker 5

To Any other areas that you could be seeing any weakness or

Speaker 2

I'm sorry, I missed that.

Speaker 5

Any other areas that you're seeing any type of softness? To

Speaker 2

You mean globally? Globally. Yes, I know. I'd say that at the moment and I think to 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 to the Q1 of 2019.

Speaker 2

Okay. Thank you. I guess, our thanks to to our diversified platform. But so far, if I look at the Nordics, look at our performance in Central Europe, to In the U. K, it's been quite resilient and actually to a certain extent quite robust.

Speaker 2

North America has been a very good market for us to And Australia and New Zealand continue to perform. So overall, we're that's the reason why we've had strong results in Q3 And strong results here to date.

Speaker 5

Okay. That's helpful. And then maybe just as a second question here, to Pretty significant use of working capital during the quarter. Was this a timing issue? And how do you think about DSO levels trending ahead?

Speaker 3

To Yes. Hi, Jacob. So the our target for end of year, Jacob, is still to be in the range that we've announced. To We're currently in DSO 77 days, target 70 to 75 days. To So we have experienced a bit of delay in to Canada on billing as a result of the new system we put in place.

Speaker 3

This is now under control. It's just a result of to having a new system, learning new ways of working. So that has impacted Q3 DSO, but we expect to catch up to In Q4, we're committed to do that 100% cash conversion. And with the exception of to the Canadian situation. The rest of our free cash flow is according to plan.

Speaker 3

Obviously, we've discussed the Section 174, the tax regulation in the U. S. To that came into force about 2 years ago. We need to keep in mind that this is about 100,000,000 to headwind in our free cash flow year to date versus last year. So when you compare that to a 600,000,000,000 to Free cash flow business, this is significant.

Speaker 3

The rest of the business is doing quite well. We're continuing to be quite focused on to cash collection. Our clients are committed. We don't see any softness in delays in payment terms and things like that. To So it's going well.

Speaker 3

We expect to be within our range by the end of the year.

Speaker 6

To That's helpful. Thank you.

Operator

Thank you. We'll now move to our next question. To Chris Murray from ATB Capital Markets. Please go ahead.

Speaker 7

To Yes. Thanks, folks. Just turning back to the conversation around soft backlog and backlog conversion. I guess, to Order intake has been very, very strong and we're starting to see that in the months of work creep up a little bit. But thinking about to what's required to start converting some of that soft backlog.

Speaker 7

I think you talked about there are some funding issues and I know there are some different discussions in

Speaker 8

the U. S. To Around that, can you

Speaker 7

maybe give us a bit more color on when you think you're going to start converting some of that? To And I guess more importantly, what that will look like as we move into 'twenty four and 'twenty five as that converts?

Speaker 2

To Yes. Hi, good morning. First of all, I just want to clarify a point you just made. I mean, to We're not talking about funding issues. The nuance here is very important.

Speaker 2

We're talking about funding confirmation, which is slightly different here. To We need to remember that you take the U. S. For instance, they have 3 distinct to funding mechanism and one of them is we're talking about $1,000,000,000,000 And so far to Of that $1,000,000,000,000 probably around $270,000,000,000 has been allocated already over 36,000 projects. To So there are some delays to be expected when you are trying to deploy such to a big number, obviously, over so many different projects.

Speaker 2

So I think it's just a normal course of business at this point in time. To But I think on the positive note, we are seeing projects being awarded and our win rate to 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.

Speaker 8

To All right.

Speaker 7

Just maybe following up to that, one of the things, I guess, as we're watching kind of months of to Backlog kind of creeping into the low 12s. It's not the highest you've ever been. But thinking about this additional work coming, to With the changes in the environment that we've seen, how are you finding the ability to recruit and add to employees in this marketplace. Has it started to shift a little bit with some of the economic softness or is it still a fairly tight market for talent?

Speaker 2

To Well, this year we welcome in excess of 10,000 newcomers to within the company, which is a testament of our ability to recruit talent within the company globally. To And also we have seen a sharp reduction in turnover and now back to close to historical level. To So when you combine our ability to recruit and a reduction in turnover, I'd say that now I think we're obviously feeling better than perhaps to Where we were 18 months ago as a result of it. Okay.

Operator

All right.

Speaker 7

I'll leave it there. Thank you.

Speaker 2

To Thank you.

Operator

Thank you. We'll now take our next question. To you. And this is from the line of Michael Doumet from Scotiabank. Please go ahead.

Speaker 7

Hey, good morning.

Speaker 2

To Just a follow-up

Speaker 7

on that last question. Good morning. So you commented on the sharply lower turnover. So I'm just trying to think about the relationship to With lower turnover to productivity and does the benefit of lower turnover have a real time impact to the productivity in your opinion or does it lag? Just trying to think of that dynamic.

Speaker 2

Well, obviously, turnover is quite expensive. To So you are right in mentioning that, that is going to have a positive impact on our productivity, but also to Recruitment is where you when you recruit, you have to train. So you lose some efficiencies. So that's why by reducing your turnover, you are in a position just naturally to increase your productivity. So I to Without saying it's a real, real direct impact of 1 for 1, it's almost direct effectively.

Speaker 7

To That's helpful. And if I caught the prepared remarks correctly, I think you highlighted higher anticipated M and A costs for the year. To And I think that was due to, I think, what you called further identified opportunities. Can you comment on that a little bit? Just wondering, to Given the higher rate environment, just wondering if that's not challenging M and A at all?

Speaker 3

Yes. I could start, Michael. To The higher cost that we anticipate is explained by 2 things. First, we've completed 4 acquisitions since the beginning of the year. So that was obviously not to part of our initial guidance that we've issued at the beginning of 2023.

Speaker 3

So that's one part. The second part, which to It's a good news story. It's we're identifying more opportunities to our acquisition of 2022, namely Wood E and I. So that drives a little bit more integration costs, but you've got on the flip side, to the benefit of increased synergies. So that's those are essentially the 2 to the reason for increased costs and also we've confirmed the disposal of the LBS business to back in Q3, so that too had a bit of cost related to that disposal.

Speaker 7

Perfect. I'll get back in queue. Thank you.

Operator

To you. We'll now take our next question. This is from the line of Jonathan Lamas from Laurentian Bank Securities. Please go ahead.

Speaker 9

To Good morning. On the Woody and I integration, to Is that complete now? And how do you feel the overall WSP is positioned for next acquisition?

Speaker 2

To Yes. Look, the 1 year anniversary, so we are very pleased with the way to Woody and I performance has gone so far, but also on the integration front. Obviously, this was In terms of numbers, the largest acquisition we had completed in our history. So there's still obviously to some, I would say, some stream of activities that we continue to complete and must complete to have like a to 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 to the effort and what we were able to achieve over the last 12 months.

Speaker 2

So I think that if your question more to Specifically, is that a roadblock to future acquisition? The answer is absolutely not.

Speaker 9

To Thank you. I'd like to just clarify a point on the Americas segment. To The organic growth was a bit slower than some other markets for the quarter. I recognize there is a large soft to backlog and appreciate your comments on funding. Do you believe the U.

Speaker 9

S. Business is capturing as much of a benefit from the infrastructure funding as

Speaker 2

to You would expect at

Speaker 8

this point?

Speaker 2

Yes. The answer like a quick answer to your question is yes, absolutely. To Our win rate is up compared to a year or 2 ago. To So we feel that we are gaining market share in the U. S.

Speaker 2

So we essentially, in other words, to winning more than our share at this point in time, and we're feeling good about it. So the answer is yes.

Speaker 9

Thanks for your comments.

Speaker 2

To you. Thanks, Jonathan.

Operator

Thank you. We'll now take our next question. To Mr. Frederic Bastian from Raymond James. Please go ahead.

Speaker 10

Hi, good morning.

Speaker 2

To Good morning, Fred.

Speaker 10

I would like to go back to the M and A discussion here. Are you feeling to better about M and A opportunities today than you were maybe 12, 18 months ago. You've got higher interest rates slowing to Jack to be quite a bit here, but there are probably fewer players in the sandbox right now, which could play to your advantage. So I'm wondering if you could just expand on that, please.

Speaker 2

To Well, I think you're right. I think that I think I've said it in the past, Frederic, and you heard me saying that in the to Thomas. In good markets, I feel WSP has opportunities to be opportunistic, to But equally in tougher markets, if you have a strong balance sheet and you have a well run to an organization that is running a tight ship. Good players will also have an opportunities to be opportunistic. To So my feelings in the current environment have not changed, if that makes sense.

Speaker 10

To That makes a lot of sense. Thanks. I think you probably have to answer that question every to a couple of conference call, but anything keeping you up at night?

Speaker 2

Well, look, to I think it wouldn't be transparent to ignore to What's happening in the world right now? I think we have not mentioned we don't talk about geopolitics to much on our conference call because this is not our business. And we are busy delivering services to our clients. We're busy delivering to our and then creating an exciting work environment for employees. But obviously, I mean, there's a lot going on.

Speaker 2

To But at the same time, I look at the year that we are delivering right now. I'm very pleased with our to performance. We are in the middle of our budgetary process right now for 2024. And to With what we know today, I think I don't expect the market condition in 2024 to be materially different to 2023. And therefore, to I'm feeling actually cautiously optimistic about it.

Speaker 2

So I think, yes, there's a lot happening. To When you look at the underlying trends of fueling our company, I'm feeling good about where we are today.

Speaker 10

To Thank you. That's all I have.

Speaker 2

Thank you.

Operator

Thank you. We'll now take our next question. To Michael Kippreios from Desjardins. Please go ahead.

Speaker 11

To Good morning and congrats on the strong results. Maybe circling back to your comments on the EV supply chain earlier in the call. Last week, Hydro Quebec announced to a pretty significant investment plan in both size and scope, among many others in the province. Can you maybe give a little more details to WSP's expertise in the sector and your strategy in attacking the volume of capital that we'll be entering over the next decade.

Speaker 2

To Yes. Look, we obviously in this space, we have very strong expertise. To We have been servicing that you talked about Hydro Quebec. I don't want to talk about specific clients, but we have been working to We had Hydro Quebec for many decades now. It's a great client.

Speaker 2

We have a great relationship to We will obviously we believe that the plan is sound and we received well what was announced to the new administration and by the CEO. And obviously, this is early days. To But as I said, we feel we are very well positioned. And WSP is a to strong energy transition player around the world, not just in Canada. So I think it bodes well for the future.

Speaker 11

To That's helpful. That's all for me. Thank you.

Operator

Thank you. We'll now take our next question.

Speaker 8

To the operator.

Operator

And this is from the line of Maxim Sytchev from MBC. Please go ahead.

Speaker 8

To Alex, I was wondering if to You don't mind maybe commenting on how the scale of your environmental and water practice right now is spilling over into to beneficial growth in other areas because obviously given your leadership position there that helps. I'm just wondering if you can just maybe comment a little bit more in detail.

Speaker 2

To You mentioned water. Sorry, the line is not good this morning. So you said to Can you please repeat? I'm sorry, Max. I didn't hear you.

Speaker 8

Yes. No worries. For sure. Just in terms of how the scale of to Environmental and Water business is spilling over and helping you with other verticals at WSP in terms of what the win rates or capabilities are being sort of to the client. Just maybe any color there.

Speaker 8

Thank you.

Speaker 2

Well, this has been incredible. I mean, we've I think we've as you know, to We are transforming and have been transforming the organization and the company in recent years. If I just look back to 2018 when we announced that we wanted to build that sector. At the time, environment and water was to presenting less than 10% of our top line and today represent north of 30%. We have in excess of 20,000 to people working in that space.

Speaker 2

And we are clearly the leading player to In the services, I would call soft or environmental services like permitting, social acceptability studies, to planning, but then when you talk about the rehabilitate site or rehabilitating sites and remediation, I mean, we're clearly 1, if to the leading player as well in the space. So we get into on-site very, very early on in the planning of our projects. And oftentimes, this is giving us an opportunity to cross sell our services. I'm not in a position to talk about a project that there was to projects that was just awarded to us. But in the next quarter or 2, I will be spending time explaining because I think this is to a perfect example of the cross collaboration that is happening right now within WSP.

Speaker 2

I mean, we are in a position now to to cross sell environmental work with our building sector, with our transportation sector, our power sector. To Ann, in the next quarter or 2, I'd like to use this project as an example to highlight to Our business model and actually what we intend to do going forward and how we intend to grow our company. So yes, indeed, Max, to I think this has been quite strategic for us to get early on on-site and on projects and in the boardroom with clients to In the planning phase of our projects and the social acceptability phase of our projects and the permitting phase of our project to I'm being in a position to bring all of our expertise to this client. So yes, we're feeling very good about it.

Speaker 8

To 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 to sort of any change in terms of the leadership because like a lot of these bills were supported by both parties.

Speaker 8

What are your thoughts in terms of to visibility of seeing that funding not being changed. Maybe just any color that you can provide for the benefit of cost? To

Speaker 2

Yes. Look, I'm not a U. S. Political expert, obviously, Max. But Look, we need to remember that these were all bipartisan infrastructure funding.

Speaker 2

To So I think both sides of the aisles, both the Republicans and the Democrats were in favor Of the Infrastructure Lot Inflation Reduction Act, the CHIP Act. So I don't think that much of that will be impacted by the new leadership at to Congress. Obviously, I think it's in the best interest of the country to continue to create jobs to And fund projects and fund the various states. As I said before, already $270,000,000,000 of to The Bipartisan Infrastructure Law Act has been deployed over 36,000 projects, and I think to That's a boat that is now sailing. So I think it should continue going forward.

Speaker 2

To

Speaker 8

Okay. Absolutely. Great to hear. And last question for Ali, if I may. Is it possible to have a bit more color in terms of to sort of the pacing of sort of the CRM rollout globally?

Speaker 8

Because I think you were doing these things sort of in stages. Just maybe a bit of an update there. Thank you.

Speaker 1

To Yes. So CRM, you mean the sales.

Speaker 3

So our ERP MAX, to There's multiple module that we're implementing and sales as part of it. To Our rollout plan is based by country. So now we've done Canada and Canada has to all the functionality, including the CRM. Next, we're going to U. S.

Speaker 3

And U. K, which is planned for to H1 2024 and they will get CRM. So the CRM will become available to the next question. In each country, in our new system as we roll out per country. That being said, it's not like we don't to Currently have those systems in place.

Speaker 3

We'll have a better system, but we have various CRM in place in each of our countries. To So we do have the ability obviously to track our success and our pipeline across the patch.

Speaker 6

To Okay.

Speaker 2

Excellent. Thank you so much. That's it for me. Thank you.

Operator

Thank to questions. To you. We'll now take the next question. To next question from the line of Ian Gillies from Stifel. Please go ahead.

Speaker 12

Good morning, everyone.

Speaker 2

Good morning, Ian. To

Speaker 12

I'm just curious, when I look at year to date revenue, let's call it 54 ish percent public sector. To Is the backlog materially more weighted to, call it, public sector clients given the amount of spending going on to In that part of the market?

Speaker 2

No. I'd say that it's relatively stable at this point. To

Speaker 12

And the follow on with respect to the public sector work, I suppose, is when you think about your employees in bidding to work. Is there any material difference in how you bid for work depending on whether it's a public sector or private sector client or are there any nuances there that are to Rupai Lydian.

Speaker 2

Well, the procurement process is typically different, obviously. To So the private sector tend to be how can I use the word that I'd like to use probably a bit more dynamic to Perhaps quicker in the way work is being procured? In the public sector, there are numerous steps to That you need to go through before our projects is being awarded. But to Shirley, I think other than that, I think we it's pretty fluid process whether you look at the public sector or the private sector.

Speaker 12

To Perfect. That's really all I had. Everything else has been answered. Thanks very much.

Speaker 3

Thank you.

Operator

Thank you. To one. I'll take the next question. This is from the line of Sabahat Khan from RBC Capital Markets. Please go ahead.

Speaker 6

To Great. Thanks very much. I've provided a bit of color on the directional top line outlook over the next few years. I was hoping to get a to a better perspective on the margin progression. It doesn't have to be anything specific on 2024, but as you look across over the next to 1, 2, 3 years.

Speaker 6

Can you maybe talk about what you expect are going to be the largest contributors to EBITDA margin improvement across to operating leverage, regional mix, maybe more better utilization. Just trying to get perspective on as we think about the next 1, 2, 3 years, to what the bigger drivers would be of margin improvement in your outlook.

Speaker 2

Yes. Good morning, Saba. Look, I think I mentioned that in a few occasions in the past, to running a professional services firm and tells us to look at a number of different levers. To It's not one single lever that is going to increase your margin profile. To Obviously, you need to operate in good markets.

Speaker 2

Supply demand dynamics is very, very important. I do indeed believe to We operate in very good markets. North of 90% to our EBITDA is generated in OECD countries. And I've said that in the past and I'm repeating it again. I feel that that's our to the sweet spot for WSP.

Speaker 2

We'll continue to operate in those markets, number 1. Number 2, you talked about productivity. To Clearly, it's a very important component of our work. 3rd, digitalization of our services and to technology, I mean, leveraging technology in our platform. I think I've mentioned that in the past.

Speaker 2

I think if you look over the last decade, to We have been able to do a lot more with a lot less. In other words, we are our charge out rate to Per employees per FTEs has increased by, I believe, 50%. So that's, I think, a testament of how we have been able to become more efficient, to Use technology and increase our rate our charge out rate. To And thirdly, and that's something that is not oftentimes being discussed, but to The brand of the company is also important. I feel that the brand awareness around the world of WSP has gone up.

Speaker 2

To And I think clients are coming and knock on our door to and wanting to work with WSP. To And I just look at the quality of the client base that we have today And the strong relationship that we have been able to build with our clients, that too has an impact on our margin profile. To people are willing to pay for quality services and they are willing to pay for deep expertise. And to I believe that when you look at the evolution of the firm, that's what you have seen over the last few years. To So and that's something that should not be neglected and that we're working extremely hard on.

Speaker 6

To Great. Thanks. And then you talked a little bit about some of the IIJ money and other funding that's coming through. As you look to I had to sort of the pipeline stuff that's not quite in your backlog over the next 12 months, 15 months. Which end markets are those projects concentrated in?

Speaker 6

Are they to How well aligned are they with your sort of end market mix? Just trying to get an understanding of where the initial money is going versus to The money that may come 24, 36 months out by end market.

Speaker 2

Well, something that to It's 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 to take the time to reflect and study how what's the plan and the strategy and how money is going to be deployed. To We need to remind our investors and prospective investors that the vast majority of the capital will be deployed in roads, bridges to the company and transportation projects. And that's not something that is typically discussed. And you know that WSP is the number one to the transportation franchise around the world.

Speaker 2

So I think we are very well positioned to And uniquely positioned to take advantage of that in years to come. Great. Thanks so much. To

Operator

you. Thank you. Thank you. We'll now take the next question.

Speaker 8

To the

Operator

next question from the line of Michael Tupholme from TD Securities. Please go ahead.

Speaker 4

Thanks. Good morning.

Speaker 2

To Good morning.

Speaker 4

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 Q3, obviously, a very nice increase year over to in terms of up 50 basis points on adjusted EBITDA margins. That regionally, that was primarily driven by the Canada segment. To I guess I'm just wondering as we look forward regionally, are there is the expectation that you should be able to continue to gains sort of across the board or do you see greater opportunities relatively speaking in certain specific regions for the margin improvement

Speaker 2

going forward? To Good morning, first of all, Michael. I always cautious investors or analysts to look at 1 quarter and draw any conclusions. I think to I'd rather you look at the long term trends over 12 months at the very least. To And I'd say that generally speaking, perhaps with the exception of China, which I mentioned is more challenging at this point in time, to We should expect and we clearly have the aspiration to make improvement pretty much everywhere in our group to At this point in time, so that's the goal, that's the aspiration, that's the objective.

Speaker 2

And looking and going into 2024, to I'm not sure I'm relieving any secret at this point in time, but we are clearly hoping for margin improvement next year.

Speaker 4

To That's perfect. Thank you, Alex. Fair point.

Speaker 5

I'm sure

Speaker 4

you're working hard on driving margin improvement for next year and beyond. And maybe that just Maybe feeds into the second question here. When you unveiled your last 3 year plan, to You had talked a little bit about sort of a longer term aspiration of seeing margin potentially rise over the 20% level EBITDA margin. To 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, to How you're 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 to For that still or any evolution you're thinking around kind of the longer term opportunity?

Speaker 2

Well, we're laser focused on that, Michael. To So obviously, we are only in the 2nd year of our 3 year plan. To What we had mentioned in the when we unveiled our plan in 2022 is that we wanted to generate EBITDA margin between 17.5% 18.5 percent EBITDA margin in this cycle. To I think we are confident that we're going to finish within the range to 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 target.

Speaker 2

To And the reason why I mentioned it in the last plan, it's because it's an aspiration, But it's more than an aspiration, it's an objective. We have not put the timeline on it, obviously, because it's to extremely hard in the current market environment. And if I look back in 2022 post pandemic to make long term prediction. Anything beyond 3 years, you know as well as I do, to It's extremely difficult. Nobody has a crystal ball.

Speaker 2

But I can tell you that I'm feeling confident that we're going to reach that goal. To And it's not going to be in the long term future if that makes sense.

Speaker 4

To Thanks, Alex.

Speaker 2

Thank you. To you.

Operator

Thank you. And there are no further questions at this time. So I will hand back to the speakers for any closing remarks.

Speaker 6

Thank you.

Speaker 2

To Well, thank you again for attending our Q3 conference call. I look forward to updating you in Q4. To Thanks for your support and commitment, and we'll be in touch soon. Thank you.

Speaker 6

To you.

Operator

Thank you. This does conclude the conference for today. Thank you for participating and you may now disconnect.

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