WSP Global Q1 2026 Earnings Call Transcript

Quartr
Provided by Quartr
May 7, 2026

Key Takeaways

  • Positive Sentiment: Management reported a strong quarter with net revenue up 11% (5% organic), adjusted EBITDA +16.5% to ~CAD 622M (margin 16.8%), adjusted net earnings +26%, and exceptionally high free cash flow conversion (~160%).
  • Positive Sentiment: Backlog hit a new record of nearly CAD 20 billion (≈11.5 months of revenue) after the TRC close, and management says the pipeline remains robust across power, data centers, mining, transport and defense.
  • Positive Sentiment: The strategic acquisition of TRC is integrating as planned—TRC delivered double‑digit organic growth this quarter and its Power backlog rose ~20%—helping create a leading U.S. power & energy franchise alongside POWER Engineers.
  • Negative Sentiment: Leverage rose to 2.3x, above management’s 1–2x target, driven by long‑term debt used to finance TRC; management expects to return to the target range by year‑end.
  • Positive Sentiment: Management highlighted momentum in AI and digital (e.g., Nature Vista), rolled out AI tools to >30,000 employees, has ~90% of adjusted EBITDA on the new ERP, and said it has set aside roughly CAD 100M–200M for R&D/digital—factors it sees as drivers of efficiency and margin expansion.
AI Generated. May Contain Errors.
Earnings Conference Call
WSP Global Q1 2026
00:00 / 00:00

There are 14 speakers on the call.

Speaker 11

Good day, and thank you for standing by. Welcome to the WSP Global first quarter 2026 results. 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 one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised today's conference is being recorded. Now I'd like to hand the conference over to your first speaker today, Quentin Weber. Please go ahead.

Speaker 12

Good day. Thank you for joining our call today. Today, we will discuss our Q1 2026 results and performance, followed by a Q&A session. Alexandre L'Heureux, our President and CEO, and Alain Michaud, our CFO, are joining us this morning. Please note that this call is also accessible via webcast on our website. During the call, we may make forward-looking statements. Actual results could differ from those expressed or implied by them. We undertake no obligation to update or revise any of these statements. Relevant factors that could cause actual results to differ materially from those in the forward-looking statements are listed in our MD&A for the quarter ended March 27, 2026, and for the financial year ended December 31, 2025, which can be found on SEDAR+ and on our website. In addition, during the call, we may refer to specific non-IFRS financial measures.

Speaker 12

These measures are defined in our MD&A for the quarter ended March 27th, 2026. Our MD&A includes reconciliations of non-IFRS financial measures to most directly comparable IFRS measures. Management believes that these non-IFRS and other financial measures provide useful information to investors regarding the corporation's financial condition and results of operations as they provide additional key metrics of its performance. These non-IFRS measures are not recognized under IFRS, do not have any standardized meaning prescribed under IFRS, may differ from similarly named measures reported by other issuers, and accordingly, may not be comparable. These measures should not be considered as a substitute to the related financial information prepared by IFRS. With that, I will now turn the call over to Alexandre.

Speaker 1

Thank you, Quentin, and thank you all for joining us today. Let me start by saying that I'm very pleased with our first quarter. Overall, we delivered a solid performance, meaning net revenue expectations, delivering at the higher end of our profitability range while maintaining strong cash flow conversion. In summary, it's a good start to 2026. Coupled with the recent closing of TRC, a highly strategic acquisition, we are confident about the road ahead. Let me highlight a few key points regarding the quarter. First, net revenue grew by 11% or 5% organically on a like-to-like basis. Our backlog reached a new record of nearly CAD 20 billion during the quarter following the successful close of the TRC acquisition, and the pipeline of opportunities remains strong across our key market sectors.

Speaker 1

Our growth agenda is underpinned by continued investment in talent and technology. We scale our delivery capacity to support demand. Turning to profitability, adjusted EBITDA grew by 16.5% during the quarter. Adjusted EBITDA margin stood at 16.8%, up 80 basis points year-over-year. Finally, adjusted net earnings grew by 26% versus last year. On cash, we continued to deliver strong performance with the trailing 12 months of free cash flow, representing 160% cash conversion, significantly ahead of our target. On the M&A front, TRC delivered double-digit organic growth in the quarter. The integration is progressing as planned. We are already benefiting from the collaboration between our businesses and seizing opportunities across various markets.

Speaker 1

Multiple collaboration opportunities have been identified in the first 2 months of integration, where our teams are leveraging each other's expertise, resources, and client relationship. TRC's Power division is also seeing accelerated growth with nearly 20% growth in backlog, including data centers mandates with electrical engineering and commissioning work for IOUs. With TRC and POWER Engineers, over the last 18 months, we have united 2 leading power and energy franchises in the U.S., setting us apart as a leader in our field and uniquely positioning us to capture growth opportunities in the booming power and energy sector. On the digital and technology front, we are experiencing real momentum in AI-driven projects and products. One concrete example is Nature Vista, our AI-empowered environmental management platform, co-developed with clients and enhanced through our Microsoft partnership.

Speaker 1

It can give asset owners a single live view of their biodiversity environmental obligation across the project lifecycle, from impact assessment through ongoing monitoring, reporting, and disclosure. We have just wrapped up our Global Technical Excellence Conference, known as GTEC, attended by more than 300 WSP professionals globally and many clients from all over the world. The innovative ways our teams are leveraging AI to create value were a central theme throughout the event. In fact, our teams showcased hundreds of examples of how AI, automation, and digital twins are embedded directly into our delivery. The predominant use cases were improving quality and insight, reducing risk, and enabling better decisions, all of which are critical to growth and productivity. With WSP Global scales, we have access to a vast repository of engineering and advisory know-how. This uniquely position us to integrate advanced technology into complex real-world projects.

Speaker 1

In summary, by staying client-focused, investing in our people, and partnering smartly, we are harnessing AI to drive growth, augment our technical excellence, and deliver value for our client. Last but not least, WSP benefits directly from the artificial intelligence tailwind. In fact, our services in power and energy, data centers, mining, and digital, which together represent approximately 1/3 of our net revenues, are all experiencing elevated growth. Let me now provide you with a few comments on our regions. Starting with Canada, we see strong momentum. The regions is delivering robust growth, and the backlog grew by almost 9% in the last 12 months. The pipeline of opportunities remains healthy, with several large projects secured after the quarter, therefore not included in the Q1 2026 backlog.

Speaker 1

These wins include the, I'm sorry, the Quebec City Tramway project to deliver a new tramway across the Quebec City regions, including a 2 kilometers-long tunnel. The project is being delivered under a progressive design build approach, and WSP will lead the design in the co-development phase, including the tramway, guideway, stations, roads, structures, and urban design. Lastly, we are uniquely positioned to capture significant opportunities in the defense sector in Canada and more to come in the second quarter. In the Americas, the U.S. market remains robust. Our hard backlog stands at approximately 13 months of revenues, reflecting sustained demand across key end markets. Our soft backlog continues to grow, reaching approximately CAD 12 billion, with the vast majority supported by MSAs and framework contracts providing strong visibility.

Speaker 1

Our pipeline of opportunities trends positively, growing by approximately 20% year-over-year, with a continued strategic emphasis on large and complex pursuit, notably driven through our Global Client Program. These growth rates are supported by strong and consistent win rates across our businesses, underscoring the strength, relevance, and competitiveness of our service offering. As is typical for framework-based awards and large programs, the timing of conversion from pipeline and awarded frameworks into hard backlog remains dependent on clients' award schedules and funding decisions to overall fundamentals remain very strong. Demand for power and energy is strong, now accounting for approximately a third of our U.S. revenues following the recent acquisition of TRC. Multiple business lines continue to drive growth in the data center markets, supporting the entire value chains from site selections and due diligence to data center design.

Speaker 1

To power commissioning and construction management services. Win rates in this area are 75%, which is excellent news, especially given the fast-track nature of these projects and the constant inflow of extensions and new opportunities. Activity level across transmission and distribution, power generation, large load infrastructure, and project management remain elevated, supported by utilities, hyperscale customer, and energy security priorities. New power generation technologies such as small modular reactors are driving accelerated growth during the strategic cycle with an over 60% CAGR from 2023 through 2025 in our SMR practice, which focuses on upfront environmental, geotechnical, and safety studies associated with siting and early phasing planning. We are currently working on 15 SMR sites at various stages of the siting, due diligence, and licensing process, and the SMR pipeline is very strong with over CAD 100 million of opportunities for WSP.

Speaker 1

Other markets such as transportation, ports, and water are robust. WSP also has been awarded the design service multi-award task order by Sound Transit in Seattle to assist in the delivery of a new line serving the northeastern portion of the Greater Seattle area, which will feature buses every 10-15 minutes. WSP will be providing multidisciplinary design, engineering services, and civil, geotechnical, urban planning, and bridges. The mining and natural resources sector remain a core contributor, especially in Latin America. We continue to secure large-scale mandates covering environmental permitting, water and waste management, and mine closure services for leading global miners, including Glencore, BHP, Codelco, Anglo American, Freeport-McMoRan, and Rio Tinto.

Speaker 1

Recent wins include new project mandates for Glencore in Argentina and infrastructure-related work in North America, including our appointment by Donlin Gold to support a key project in Alaska. Of note, over 60% of our soft backlog in mining in the U.S. has been converted to hard backlog from Q4 2025 to Q1 2026. Moving to EMEA, we have been carefully monitoring our operation in the Middle East. Our people remain safe, and we have not experienced significant project cancellations or delays to date. We are monitoring the situation closely, including any impact on our broader operations. In the U.K., representing approximately 50% of EMEA, the regions has delivered yet another double-digit organic growth quarter. Backlog grew by approximately double digits year-over-year, and our pipeline of opportunities remains healthy.

Speaker 1

In the Nordics, the trend remains positive, especially in Sweden, with mid-single-digit organic growth and a healthy backlog. In Central Europe, we observe healthy market conditions, especially in the Netherlands, Spain, Italy, France and Denmark. In France, we were awarded one of the largest rail projects in Europe, specifically for the Lyon-Turin rail link, to design exploratory tunnels deep under the Alps and determine the best approach to constructing these main rail tunnels. This is expected to change mobility across the continent. Turning to APAC, Australia recorded a 40% increase in backlog in the last 12 months. Property and Building, Transport and Infrastructure are growing with a strong backlog driven by the Transportation, Defense and Aviation sectors. This bodes well for return to organic growth early in the second half of the year, supported by strong wins.

Speaker 1

For example, we were recently awarded the Suburban Rail Loop Stage 1 live, line wide package. This project is a 26 kilometer long new metro line that will provide a rail loop circle, circling Melbourne, connecting various trains and tram lines and is being delivered as an alliance. WSP will be providing design management, rail infrastructure, road and civils, security, building structure, utilities, geotechnical, contaminated land, noise and vibration and drainage services. Another standout achievement this quarter was our flagship win in Australia with the Sydney Metro West underground station project. The project was awarded the project of the year at the Infrastructure Partnerships Australia National Infrastructure Awards. WSP has been appointed to design 5 underground station, a role that gave us the opportunity to help shape the future of Western Sydney communities.

Speaker 1

Our team will take the lead on a range of engineering services, covering everything from station structures and building services to durability, fire and life safety, sustainability and traffic and pedestrian modeling. The Sydney Metro West itself is a 20-kilometer underground railway designed to boost connectivity and deliver fast, reliable and sustainable public transport for the region. In New Zealand, our team delivered a third consecutive quarter of growth. We continue to see ports as a growth market for WSP with several wins in the quarter, most notably the Waiheke Ferry redevelopment project, where WSP is providing wharf side infrastructure support for the introduction of new ferries. To conclude our tour of operation, I would like to reiterate that we are operating in a structurally capacity constrained environment where demand for engineering and advisory expertise is robust, as evidenced by a strong pipeline of opportunities.

Speaker 1

In this context, additionally, we are increasing engagement with our global capability center, including the newly established location in South America, as well as accessing our broader global talent pool. From a leadership standpoint, we have welcomed new talent, including Katus Watson, an industry veteran, as COO of our U.S. operation. Continued investment in talent and digital is important for expanded delivery capacity and supporting growth. With that, I will now turn it over to Alain, who will walk you through our financial results.

Operator

Thank you, Alex, and hello, everyone. I'm pleased to report on our financial results for the quarter. Let me start with growth. For the first quarter, revenue and net revenue increased by approximately 4% and 11%, respectively. Net revenue organic growth stood at approximately 5% when normalized for fewer billable days than in the comparable period of 2025. From a modeling perspective, keep in mind that offsets will take place mostly in Q4 2026. Backlog as of March 27, 2026, reached a new record of approximately CAD 20 billion, up 18% over the 12-month period and representing 11.5 months of revenue. Of interest, when adjusted for billable days, Canada delivered 7.3% of organic growth. The Americas, 5.3%.

Operator

The U.K. delivered another quarter of double-digit organic growth, leading the way for EMEA, reporting 8.4% of organic growth. New Zealand reported a third quarter of growth in a row, and Australia is well on their way to return to growth. Moving on to profitability. Adjusted EBITDA for the quarter grew to approximately CAD 622 million, up 16.5% from Q1 2025, and near the high end of our quarterly outlook range. Adjusted EBITDA margin for the quarter increased by a strong 80 basis points, reaching 16.8%, driven by continued productivity gains and 40 basis points of foreign exchange gain. Adjusted net earnings for the quarter reached CAD 297.7 million or CAD 2.21 per share. This represents a very strong 26% year-over-year increase.

Operator

Free cash flow improved quarter-over-quarter by CAD 50.1 million when adjusted to exclude the benefit of the factoring arrangement concluded in the first quarter of 2025, representing a continued demonstration of our strong focus on cash management while we deliver a 160% conversion of free cash flow to net earning. DSO as of March 27, 2026 stood at 67 days compared to 70 days as of the end of March 2025. Our leverage ratio stood at 2.3 times, above management's target range of 1-2 times. The increase in the ratio is mainly due to the issuance of long-term debt used to finance the acquisition of TRC. As previously mentioned, we expect to be back in our target range by year-end.

Operator

Our calculation of the leverage ratio now include the annualization of the results of recent acquisition for the trailing 12-month period. Regarding our ERP deployment, we've made significant progress this quarter. First, POWER Engineers in Lexica were both onboarded at the start of January. Australia and New Zealand went live successfully in March 2026, and Sweden just went live this week, adding another 4,000 employees to the platform. The ERP now captures nearly 90% of our adjusted EBITDA, making it the backbone of WSP Global operation. Eight acquisitions have been integrated to date, and Ricardo is scheduled to a July go live. With a significant portion of our deployment complete, we are gradually increasing our focus on optimization, automation, and business insight to enhance scalability and financial performance. Turning to our 2026 outlook.

Operator

The financial outlook issued on February 25, 2026 is reiterated, except for the adjusted EBITDA range, which is now expected to be between CAD 3.05 billion and CAD 3.18 billion. As a reminder, in our global strategic action plan released last year, we set an ambition to reach an adjusted EBITDA margin of 19%-20% by 2027. Based on our current progress, we see a path to reach this objective in 2026. For Q2 2026, we expect net revenue to range from CAD 4.1 billion-CAD 4.3 billion and adjusted EBITDA to range from CAD 770 million-CAD 810 million.

Operator

I'd like to remind you that this outlook is intended to help analysts and shareholders refine their perspective on our performance, and using this information for other purposes may not be appropriate. Our outlook has been prepared in light of current FX rate volatility and our full-year assessment, including our hedging posture. Also, our selected financial outlook does not include any acquisition, transaction or disposal that may occur after today. On that, back to you, Alex.

Speaker 1

Thank you, Alain. To close, our first quarter delivered a solid start of 2026. A record backlog and strong pipeline of opportunities continue to underscore the resilience of our globally diversified platform, and we are investing in talent and technology to deliver in a high-demand environment. We are very proud to have completed the strategic and timely acquisition of TRC, and our power and energy service offering is now second to none. Finally, we are tightening our financial outlook, moving into the year with confidence and focus on long-term value creation for our shareholders. With that, I will now open the line for questions.

Speaker 11

Thank you. To ask a question, you'll need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We'll start with our first question. This is from Chris Murray from ATB Cormark Capital Markets. Please go ahead.

Speaker 2

Thanks, folks. Good morning. Maybe the first question I had for you is around some of your commentary around AI. One of the things that we've been debating with a lot of folks, and I'd love your perspective on this, is the fact that as the cost of delivering some of these services come down, there's a bit of a debate as to if that impacts your revenue or if what you're actually seeing is clients are beginning to think about taking on more services and actually you're starting to grow the pie more as opposed to seeing it shrink. Any thoughts around how you're seeing these new tools being able to layer on to what you would call the conventional business and grow the revenue base would be helpful.

Speaker 1

Yeah. Well, let me start. Good morning, first and foremost. It's, this is obviously a very current topic. My personal view on this, and it's shared by my colleague, you mentioned that the cost will go down. Well, first and foremost, I'm not sure that that's going to be the case. What we are seeing right now is that we're living in a world where I think it's suffice to say that weEngineering and the way we design assets in today's world has not been optimized yet. What AI is going to help us here is to augment the quality of the design that we will be providing to our clients. We'll be able to mitigate risk by doing more scenario analysis as we are developing those tools.

Speaker 1

We'll be in a position to offer a more novel way of de-designing assets in today's world. Actually I don't see our revenue stream shrinking. To the contrary, I see us being in a position to offer better quality assets to the world and the local communities where we live. I think, as I said in the last quarter, I see AI as a tool for us to be in a position to provide more quality work as we progress in today's world. I don't see this being a disruptor in the sense that this will reduce hours or reduce the work that we need to do.

Speaker 1

There's so much to do to optimize the design that we do today that any tools will be welcome, number 1. Number 2, we all know that over the next 10 years, not just in the engineering industry, but in all industries, we'll have many baby boomers retiring. We are already capacity constrained. Globally today, this year, you know, the company will be growing between 4%-7% organically. Globally in our industry and the world today, only we are only able to grow the pool of engineers globally in the world by 1%. We are capacity constrained. What if AI would not be a great tool for us to increase our capacity and be in a position to produce more?

Speaker 1

We see again that there is a major infrastructure deficit globally, having a tool that will be in a position to accelerate the design of our assets, I think it's a great thing. I don't see this, again, as I said in the last quarter, as a disruptor. I see this as a tool that will be able to augment the work that we're providing for our clients today.

Speaker 2

Great. That's helpful. Thank you. Along those lines, and I'm not sure who wants to take this one, but thinking about your infrastructure and your spend, I think you're getting to the end of your ERP spend or closer to the end anyway. But I think some of the discussion we've had has been around your asset pool. We call it the legacy of doing, you know, thousands of projects a year. You know, how do you think about what you need in terms of infrastructure to be able to, you know, utilize that? And does that require perhaps additional capital or a different way of accounting for that intellectual property?

Operator

I'm not sure I follow exactly the question, Chris, but as far as just breaking it in pieces, yes, the ERP conversion is 26 is actually the last year with 27 TRC in a few smaller regions. We're nearing the end of the deployment. It's a fully integrated system, as you know, which allows us to track all of our 270,000 projects we do globally, our sales funnel, our 85,000 employees and everything we need to do around our people. This gives us full access to managing the entire company, essentially. I don't foresee at this point from a backbone perspective, other large investment of the like, if that was your question, Chris.

Operator

You may wanna precise if you had other points.

Speaker 2

I think what I'm trying to get at is, as we look at some of this AI development, you know, there's If you think about the long legacy of what you guys have done, there's probably a lot of paper still around. I'm just wondering about, you know, how you think about your digital infrastructure to, you know, capture literally your own history, how to secure that, and does that require additional investments in either information technology or systems?

Speaker 1

Yeah.

Speaker 2

Over the next little while?

Speaker 1

Well, I think if you attended our the unveiling of our strategic plan in February of 2024, we did specify that over the course of this cycle, we will be investing between CAD 100 million-CAD 100 million in R&D, in research and development, certainly to further our agenda on digital. Clearly, we are well on our way on this. In that regard, if your question is do we, do we have on our top of our agenda to really invest in research and development over the course of this cycle? The answer is absolutely yes.

Speaker 2

Okay, I'll leave it there. Thank you.

Speaker 12

Thank you. I'll take the next question. This is from Frederic Bastien from Raymond James. Please go ahead.

Speaker 4

Good morning, everybody. A key component of your AI strategy is to collaborate on new products and services with partners of all sides. I think you wanna obviously grow the ecosystem. You just touched on Nature Vista in your earlier remarks, which you're working on with Microsoft. I was wondering if you could highlight some of the solutions you are developing with smaller startups, please.

Speaker 1

It's something that we're not ready yet, Frédéric, to announce publicly. I can tell you, and I mentioned that actually when we unveiled our strat plan in 2024, that you should expect WSP to announce a number of different ecosystem partnership. I think it's fair to say that right now we are working with a number of startups and smaller size firms with very exciting technology. We are also working internally, you know, with our people because perhaps you had the pleasure of seeing what we've done at the GTEC conference and what we presented to investors at that time.

Speaker 1

We are working on so many exciting, value proposition for clients from an AR point of view internally at WSP. Back to my earlier point with Chris, in this plan, we have set aside, you know, CAD 100 million-CAD 200 million that we intend to invest organically in those ventures and those exciting development that are taking place internally.

Speaker 4

Okay, that's helpful. The other question revolves around APAC. I think if I look at all the your main regions, organic growth is trending well, profit is great. I was a little surprised I mean, I know we were coming out of a negative, you know, contraction, a number of quarters of contraction in APAC, and you're pointing to a positive recovery starting in the second half. Now, as you think about that recovery, is the trajectory primarily dependent on stabilization in Australia or are there other broader regional factors that you see as equally important?

Speaker 1

Yeah. The region, if you look at the main component, New Zealand is back on the growth trajectory. The third quarter on growth. It's probably the last time we mentioned that. This is New Zealand. On Australia, the contraction that we reported in Q1 was as expected. We're comparing to a business in Q1 2025 that was not completely right-sized at the time. Things are doing good, well in Australia. We've seen our backlog growing significantly for a few quarters. We're feeling good about being back in growth trajectory towards the end of Q2. The APAC segment, given the size of Australia within the APAC segment, should be back in growth territory in Q3.

Speaker 1

It's the business is progressing as planned, and we're very excited about the opportunities we're seeing, hitting backlog in Australia.

Speaker 4

Okay. Does that align with your comments? I think, in the last conference call, Alex, you mentioned being more comfortable about or confident about the year ahead than you were 12 months prior. Has that changed with?

Speaker 1

With-

Speaker 4

You know, all the conflicts we're seeing in the Middle East?

Speaker 1

No. My statement stands, Frederic. You know, we look at the pipeline. We look at, I only talked very briefly about Canada, but there's a lot of exciting stuff that is taking place in Canada. As I said, we have one very exciting assignment in the 2nd quarter, which I will talk about on the next analyst call. End of round, when I look at our company and I look at where we are at today, I look at the shape of our Asia Pacific business. I look at the strong performance in the U.K. I look at our book of business in the U.S. and Canada.

Speaker 1

I feel better today than I felt a year ago, despite what we're seeing in the world right now.

Speaker 4

Thank you, both.

Speaker 1

Thank you.

Speaker 13

Thanks, Fred.

Speaker 11

Thank you. Next question is from Sabahat Khan from RBC Capital Markets. Please go ahead.

Speaker 13

Great. Thanks and good morning. On kind of the outlook here, more from the balance sheet perspective, looks like leverage is just above the top end of the range. Can you maybe just walk us through capital allocation at this point? Obviously, you undertook a large transaction. Maybe just talk about how actively you are engaging with your pipeline of opportunities. You know, I'm sure buybacks haven't historically been a focus, but maybe just walk through your capital allocation focus areas and sort of how front and center, sort of the M&A opportunities are for you at this point. Thanks very much.

Speaker 1

Look, I know that M&A is part of our fabric and it's part of our DNA. I'd like to remind our audience today that we have deployed close to, you know, CAD 6 billion-CAD 7 billion in the last 2 years, or I should say 18 months. We have now the number 1 franchise in power and energy. We closed TRC, our largest acquisition in our history in dollar terms in February. I think it's absolutely normal that we are at the top end of our range right now from a leverage point of view. Having said all that, I always and continue to have informal and formal discussion with our pipeline of opportunities.

Speaker 1

That remains very much at the center of our strategy. We intend to benefit from the current environment. The POWER Engineers and TRC Companies integration is progressing extremely well. We are starting to see the benefit of the POWER Engineers acquisition with this quarter, our margin, excluding FX, we see our margin in the U.S. business growing by more than 100 basis points in this quarter alone. We're quite excited about that. We are gonna continue to be on the watch for potential M&A opportunities. As it relates to share buyback and dividend, we've always been quite vocal that we are seeing right now, like, great opportunities out there.

Speaker 1

M&A remains right now, the number 1 priority in terms of capital allocation.

Speaker 13

Okay, great. Just on the power business, maybe hoping for a bit more color on some of the areas, you know, where the demand is coming from. You know, we hear a lot of the thematics around data center, electrification of everything. Maybe we can just talk about where you're seeing the fastest growth in that electricity demand market across power and TRC. Maybe if you can just update us on, you know, I think there was a bit of an opportunity there with revenue synergies as well. Maybe you can talk about whether it's a cross-sell or taking those offerings outside of the U.S. Thanks.

Speaker 1

Yeah. On TRC, obviously, it's early days, but already I mean, first and foremost, where do we see the growth? We now work, Saba, with most, if not all, of the IOUs, one way or the other, in the U.S. And you know that the procurement in the U.S. is obviously more fragmented than it is in Canada, for instance. That's clearly where we see most of the growth on new grids, existing grid, the need for electrification. I find that that's certainly where in the coming years, given that we have the number 1 position now in transmission and in distribution in the United States, that we are going to see most of the growth.

Speaker 1

Certainly on the environmental side, we have seen a major shift, for instance, from sustainability studies, to now really focusing most of our environmental team on the power and energy sector. That's obviously driven by electrification, rising load growth, and data centers, as we've discussed. Let's not forget the basic stuff, which is aging infrastructure. We see that as, you know, as a real opportunity in the coming years, knowing that the lines, many of the lines are too old and they need replacement. You know, that's where, in the coming years, we are gonna see most of the growth for WSP in power and energy.

Speaker 13

Thanks very much.

Speaker 12

Thank you. Next question is from Krista Friesen from CIBC. Please go ahead.

Speaker 8

Hi. Thanks for taking my question. I was just wondering if you can maybe share a little bit more color on the margins. That's great that you think you'll be able to possibly hit the bottom end of your guide a year earlier. Just what's coming in differently or better than what you had anticipated when you initially issued that guidance?

Speaker 1

Yeah. I'll turn to Alain in a second, you know, we are starting to benefit from the investment that we've made in technology in recent years. Alain mentioned that we have now 90% of our EBITDA converted on the new platform, now it's the time to benefit from the investment that we've made, obviously, number one. Number two, the integration of POWER Engineers is progressing extremely well. We have increased, for instance, utilization of that business by 400 or 500 basis points since the acquisitions. Obviously, we have seen a major uptick on profitability of this acquisition, notwithstanding the cost synergies that we will derive from those acquisitions in the coming quarters.

Speaker 1

That's why we have seen a significant increase in profitability in this business, in the first quarter. You look at this, and you look at the world, and you look at the, you know, the work that we do and the elevated brand that we have and the services that we are now able to provide, and that too plays into the increased margins that we are in a position to charge to our clients.

Speaker 1

Certainly, I think the fact of the matter that we may meet, and we have confidence that we may meet our margin goals probably 12 months ahead of what we had planned when we announced our STRAT plan, is a testament of, you know, the work that is going on into the platform right now.

Operator

Yeah. Not much to add, Chris. I think Alex covered everything. You know, if I reflect back on our two, three last strategic cycle, it's good to remind ourselves that in the 2019 to 2021 cycle, we were hoping to get to 15%-16% EBITDA margin. Now we're talking about getting in that 19%-20% zone a year in advance. We're proud of that. It's not one thing. It's not a drastic change that's happening in one quarter. It's important to look at the trend. We've been consistently delivering that margin improvement, every year, for many, many years. We're continuing to be focused on that.

Operator

Proud of to see the progress in Canada and the U.S., over 100 basis points this quarter in the U.S., which is really good. EMEA is on a good trajectory for the rest of the year. When you look at our platform right now, there's probably 60, 70% of it that is deriving or driving, 20% plus margin already. We're feeling good about our targets, and we're gonna continue to push. It's multiple levers, it's not just one thing, but it's multiple levers that we're pushing day in, day out to improve our efficiency.

Speaker 8

Thanks. That's great color. Maybe just on Canada, it sounds like you're continuing to see some pretty solid demand there. Is any of that being driven by the defense spending here in Canada or is it coming from elsewhere? I'll jump back in the queue.

Speaker 1

Yeah. The answer is we are in the early days of this. To be more specific, the answer is yes. As I said, hopefully, during the next analyst call, I'll be able to discuss more about the one or two of those announcement.

Speaker 8

Thank you.

Speaker 11

Thank you. Next question is from Maxim Sytchev from NBFM. Please go ahead.

Speaker 9

Good morning, gentlemen. I was wondering if it's possible to get a bit of an update on the state of U.S. federal spending, kind of like IIJA, and how we should be thinking about sort of, you know, the pacing of that program and anything that you are tracking sort of on the back of that, maybe the Transportation Act, et cetera. Yeah, I guess some, you know, the pulse on the U.S. outlook. Thank you.

Operator

Yeah. I mean, we're tracking progress, obviously, but what we're seeing is definitely a continued investment in basic infrastructure, in road bridges, highways. That continues to be the narrative that we're hearing about the desire of the current administration to keep on pushing on the basic infrastructure, linear infrastructure work, which is the core of what we do in our transportation business in the U.S. IIJA is expiring in October 2026. There's the Surface Transportation Reauthorization that's underway. We're tracking progress. At this point, we don't see any signs at our client level of significant slowdown on anything. I think it's a bit of business as usual, and people are waiting to get updates on that.

Operator

Our view is that obviously, and it's well documented, that the infrastructure, the transportation infrastructure in the U.S. is in deep need for a bit of TLC. Aging infrastructure continue to drive, I think, government investment and the core transportation system. We have no reason to see the future differently based on what we're hearing now.

Speaker 9

Okay. That's great to hear. Maybe one last question. In terms of environmental and water space, and I guess again, like focusing somewhat more in the U.S., if I look at the commentary from others, it seems to be a bit more subdued, based on certainly kind of your growth rates in the U.S. You are doing better there. Is it driven really by the attached rates of your environmental and water services to other verticals? Or what is kind of driving that positive delta, if you can provide a bit more color? Thank you.

Speaker 1

Well, you know, if I look at where the growth is obviously more subdued, there are some U.S. federal agencies like EPA, for instance, that is obviously really down. USAID obviously as well, although WSP was not doing any work with USAID. Same with commercial clients. Some of them are demonstrating caution, sorry. On the flip side, I talked about energy and resources, oil and gas, LNG, pipelines, power transmission, mining and minerals. This is all up, this is all very positive. Talked about critical mission solutions, AI, data centers, warehousing, SMR, where WSP is probably the largest. It's not probably, is the largest environmental service provider in the SMR space in the U.S.

Speaker 1

We work on 15 of them currently. You talk about water, you talk about the commissioning, remediation, cleanup. These are all very active sectors for us on the environmental side. In the round, I think we're a very active player and feel that we're in a very good place right now.

Speaker 9

That's great to hear. Thank you so much.

Speaker 11

Thank you.

Speaker 1

Thanks, Max.

Speaker 11

Next question is from Jonathan Goldman from Scotiabank. Please go ahead.

Speaker 6

Hey, good morning, guys, and thanks for taking my question.

Speaker 1

Morning.

Speaker 6

Good morning. Alex, maybe we could just circle back to the mining. I think it's a couple calls in a row now where you've talked about mining and a positive outlook there. Maybe just to level set us, could you remind us how WSP participates in the mining sector, and then maybe talk about the different opportunities you're seeing, you know, on a regional basis or commodity-wise, that's getting you particularly excited.

Speaker 1

On the mining side, I think it's been a great story since the acquisition of Golder. Just as a friendly reminder, today our mining business is around and close to be 5,000, 6,000 people globally. We are the largest mining consultant in the world. There's not one large mining pit in the world that WSP is not involved in. As a differentiator, WSP is not a large EPCM provider on large mining project. We are, as I said, a mining consultant. In terms of cyclicality, when you have to mobilize, demobilize on large CapEx project, that's not where WSP plays. We're more on the OpEx side, on the consulting side.

Speaker 1

You do see a lot less cyclicality in our book of business than what you would come to expect in a large EPCM provider. It's a key differentiator for WSP, and it's one of our business with the highest margin profile and the highest growth profile, double digits. We really like this sector, and we really like our business in mining.

Speaker 6

Okay. That's great color. Maybe one for you, Alain. I think we're getting a little spoiled now, seeing DSOs come down year-over-year, every quarter. Obviously, you've maintained the range for the year, but maybe you can just help us understand, you know, what's driving the strong performance in Q1, and how should we think about kind of the trajectory for the rest of the year?

Speaker 1

Yeah. I'll turn to Alain in a second, but just as an opening remark, not so long ago, when we were implementing Oracle, I mean, we have seen a small increase in DSOs, and we had said to you that obviously we were going through the implementation, but now we are really benefiting from our significant investment in technology. Perhaps, Alain, you wanna add some color to this?

Operator

Yeah. I mean, the We're happy with the current level. We're within our range. you know, cash and DSO has always been core and central to the way we manage this company, right? We've been proud of our performance there, and it's one of the key metrics that we push internally, 'cause cash is king. We're gonna keep improving. I think the system will provide more visibility, more capacity to keep on driving better performance at that level. In my perspective, it's back on track at the right place and we could expect continued improvement on that front, in the future years.

Speaker 6

Nice to see it showing up in the results. Thanks for taking my questions. I'll get back in queue.

Speaker 1

Thank you.

Speaker 11

Thank you. Next question is from Judah Aronowitz from UBS. Please go ahead.

Speaker 7

Hey, good morning. Thanks for taking my question. You cited in the release that you have more confidence now in the EBITDA guidance, and I think you also took up the guide by a bit more than you beat in Q1. I was curious what's driving that additional confidence. Is it, you know, additional work that's being booked or maybe projects ramping up faster? We're hearing about private sector projects, you know, including data centers moving faster. You know, is it POWER Engineers? I know you mentioned some margin outperformance, so I'm just curious to hear your thoughts. Thanks.

Speaker 1

What I'm going to say will sound funny given the discussions that we've been having together over the last 2 quarters on AI, at the moment our growth is limited by the amount of people that we can hire. We have a very strong backlog, and if we could hire faster, we would be in a position to probably generate more growth. We are, you know, as I said before, you know, the world is uncertain and the world is currently unstable, obviously we're all going into this year with our eyes wide open.

Speaker 1

Having said all that, I look at our book of business, I look at our performance, our cash conversion, the proposal activity level, our win rate, and what I said is that I'm feeling better today than I felt 12 months ago.

Speaker 7

Okay. That's good to hear. You know, I wanted to follow up on the power discussion. Clearly, Pini has been driving growth for you in the Americas. In the power space in the Americas, how much of your work is for utilities? Specifically, how much is transmission lines, given how much work we're seeing in the pipeline there? If you could frame how meaningful a single large transmission project would be for you, and how early you start working on those ahead of construction, that would be helpful.

Speaker 1

That's a lot of questions this morning. Look, it's power delivery represent Power delivery being transmission distribution, and I include in there substation design, grid design and transmission line. I would say in the combined business now would represent probably 60%, 80%, 60%, 70% of our business, the other 30 being distribution, or maybe 60-40, something like that. That's how I would be thinking about this. Yeah, most of our work in the U.S. are done with IOUs at this point, but it's not so much the nature of the work that is exciting, is the fact and the matter that we have relationship with all of the IOUs in the U.S.

Speaker 1

Now that we have acquired TRC, when you combine the client relationship that TRC had or has, and you combine it with the POWER Engineers client relationship, one way or the other, we are touching all of the IOUs in the U.S. We're quite excited about the potential to expand the scope of services that we can offer in that regard.

Speaker 7

Have we lo-

Speaker 11

This is from Devin Dodge, BMO Capital Markets. Please go ahead.

Speaker 3

All right. Hi, good morning. First question is on AI, and more specifically on your usage. Alex, you mentioned many of the projects at GTEC leveraged AI tools, and I think that definitely came through in the sessions we attended. Are there any metrics that you can share for how much employee usage of AI has increased over the last, say, 12 to 24 months? Are there any medium-term targets for how much WSP can leverage those tools?

Speaker 1

The answer is we do not currently track it. I can tell you that this year we have rolled out AI tools to more than 30,000 of our 80,000 employees. I would tell you, and I would venture that the use of AI tools within our business is way more than 30,000 employees. Probably, I don't have a number to give you, but I can tell you that now AI, and that's been part of our work environment for quite some time now. I would venture that the vast majority of our, of our engineers, and frontline employees are using AI in some capacity.

Speaker 3

Okay. Thanks for that. Question two, I was gonna ask about PFAS. Some of the environmental services companies that we speak to are excited about some recent announcements coming out of the EPA and the U.S. Department of Defense, and they've seen a pickup in interest for remediating some sites. Look, I think that optimism is mostly tied to contaminated soil and AFFF cleanup efforts. Just wondering if you're seeing momentum building for PFAS related services in your business that would be in the U.S., but also just more broadly across your regions.

Speaker 1

Absolutely. The answer, the straight up answer is yes, PFAS is high on our agenda. We are, certainly, a major player in that regard.

Speaker 3

Okay, thank you. I'll turn it over.

Speaker 1

Thank you.

Speaker 11

Thank you. Next question is from Ian Gillies from Stifel. Please go ahead.

Speaker 5

Morning, everyone. Just 1 question from me. There's obviously a lot of concern around shifting spending priorities in the U.S. from the government. Can you talk a little bit about how you're positioning yourself for defense spending in the U.S., if at all? It obviously comes in a variety of different forms.

Speaker 1

The answer is absolutely. I just talked about PFAS. That's an example of being involved in military bases and the Department of Defense. Navy cleanup would be another example of that. Yes, we are definitely involved in that regard. If there's an increased spend in defense, we obviously, WSP see this favorably from a book of business point of view in the U.S., but frankly, in Canada and the U.K. and in Australia at this point, we see a lot of momentum building in all of those countries as we speak.

Speaker 5

Perfect. Thanks very much. I will turn it back.

Speaker 1

Thank you.

Speaker 7

Thanks, Ian.

Speaker 11

Thank you. The last question today is from Michael Tupholme from TD Cowen. Please go ahead.

Speaker 10

Thank you. Good morning. Just wanted to follow back up on the Americas region. There's a bit of noise there, obviously, with the billable days impact and then the tough company emergency response side. You mentioned that power and energy is the growth driver this quarter in terms of organic growth. I'm wondering if you can quantify on a normalized basis what the power and energy organic growth was in Americas and what you saw in some of the other market sectors from an organic growth perspective.

Speaker 1

Yeah. I mentioned that right now, TRC is not accounted as organic growth at this point, Michael. For the remainder of this year, TRC will be accounted as acquisition growth. Obviously, the POWER Engineers business as a total revenue of WSP is much smaller than if you normalize the acquisition of TRC. Yeah, I mean, POWER Engineers is now currently generating north of 10% organic growth as we speak.

Speaker 10

Okay. That's helpful. Thank you. Lastly, I realize we're getting on in the call here, but Alex, you did mention briefly defense and said you'd maybe have more to say about that. Wondering if you can just a little bit elaborate on the positioning there and just how we should think about that prior to getting some more commentary.

Speaker 1

WSP, we are one of the only firm having a presence in the north, Northern Canada, so Yellowknife, Yukon. We have a number of offices. A good total number of employees in the region. Obviously we are involved in some capacity with the government, and we will be there when work will be tendered in the north. We are already doing some work in the defense sector, and that's something that may not be known by our investor base, but WSP is one of the largest defense sector service provider in Canada already. If you allow me, Michael, I'd love to talk about it during the analyst call the next quarter.

Speaker 1

I'll have more to talk about, during that call.

Speaker 10

Understandable. Thank you. I'll leave it there.

Speaker 12

Thank you.

Speaker 12

Thank you, Michael.

Speaker 11

Thank you. There are no further questions. I will now hand back to the speakers for closing comments.

Speaker 1

Thank you all for attending our Q1 2026 earnings call. You are also invited to take part in our AGM later this morning, which will be held in person and virtually at 11:00 A.M. Eastern Time today. On that note, I would like to thank you and looking forward to talking to you next quarter. Thank you very much.

Speaker 11

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.

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