Earnings Call: Q2 2021

Aug 10, 2021

Good morning, ladies and gentlemen. Welcome to WSP's 2021 Second Quarter Results Conference Call. I'd now like to turn the meeting over to Conte Weber, Investor Relations. Please go ahead, Mr. Weber. Good morning. We hope that you're all safe and doing well. Thank you for taking the time to join the call today, during which we will be discussing our 2021 Q2 performance followed by a Q and A session. With us today are Alexandreux, our President and CEO and Anna Michaud, our CFO. Please note that this call is also accessible on our website During the call, we will be making some forward looking statements and actual results could be different from those expressed or implied. We undertake no obligation to update or revise any of these statements. Relevant factors that could cause actual results to differ materially from those forward looking statements are listed in our most recent management discussion and analysis. Also during the call, we may refer to certain non IFRS measures. These measures are defined in our management discussion and analysis of the Q2 of 'twenty one as well as our management discussion and analysis for the year ended December 31, 2020, both of which can be found on SEDAR and on our website. Our MD and A also includes reconciliations of non IFRS measures to the most directly comparable IFRS measures. Management believes that these non IFRS 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 under standardized meaning prescribed under IFRS and may differ from similarly named measures as reported by other issuers and accordingly may not be comparable. These measures should not be viewed as a substitute for the related financial information prepared in accordance With that, I will now turn the call over to Alexandre. Thank you, Quentin, and good morning, everyone. I hope you are all keeping safe and well. Let me begin by saying I am very proud of our performance in the second quarter and first half of twenty twenty one. Thanks to the passion and dedication of our teams around the globe, we continue to deliver strong results, provide high quality service to our clients and win exciting new projects. Before we go any further, let me highlight 3 key points. 1st, as expected, we returned to growth in Q2 with net revenues better than expectations, a healthy backlog and a strong project pipeline. Overall proposal activity continues to be very robust across the business and the volume of contract awards not yet included in backlog is at a record high level. Notably, in the U. S, We increased soft backlog by approximately 75% over June 2020. 2nd, Our recently completed acquisitions are integrating well and are exceeding performance expectations. In particular, the Strategic and transformative edition of Goulder performed above expectations in Q2 2021 with double digit organic growth and strong margins as well as a 25% organic growth in its backlog since December 31, 2020. 3rd, we continue to welcome new talent to our leadership teams reflecting our continued commitment to inclusion and diversity and to creating development opportunities for people. I am proud of our accomplishments on that front, which lead to collaboration, increased performance and even more value for clients. The strong start to 2021 and the growing level of investments in infrastructure and environmental programs around the world make me very optimistic continued positive momentum for the rest of 2021 and beyond. As a result, we feel confident in increasing our 2021 outlook, which we will cover in greater detail later in the call. Our industry leadership is confirmed by a number one ranking in ENR's top 225 International Design Firm List. Ranking at the top of our peer group is a point of pride for WSP and reflects the dedication of our 55,000 professionals. Our leading positions leading position to buildings, transportation, power And environmental sectors were recognized as we advanced our ranking, achieving 5 positions across the board with number 1 spots in buildings and transportation. The expansion of our global footprint and depth of capabilities also garnered us several top 10 regional ranking, including a number one spot in the United States and Australia. Now turning to our management of the global pandemic. Conditions remain fluid. We continue to monitor the situation across all of our operating locations and adapt project delivery in regions experiencing increased restrictions. We continue to follow our business continuity plans and focus on helping our people be safe and productive whatever their location. As for other global matters, just this week, The United Nations Intergovernmental Panel on Climate Change issued a report that has increased The urgency of real action in addressing climate change. The shift towards a low carbon economy remains a market driver for our clients and an imperative for WSP. Shortly after we announced our commitment to achieve net 0 emissions across our value chain by 2,040, WSP was named for the 3rd year in a row as the most sustainable company in the engineering industry by World Finance Magazine. We were also recognized as one of Corporate Knight's best 50 corporate citizens in Canada. June also saw the publication of WSP Annual ESG Report entitled Accelerating Meaningful Action. Our ESG report highlighted that nearly half of our 2020 global revenues can be classified as clean revenue. This is defined as revenues earned from services that have a positive impact on the environment and support the United Nations' Sustainable Development Goals. We view this as a significant accomplishment in line with our strategy and commitment to support the world's green transition and a metric that we intend to improve on over time. This all connects to our in achieving our 2019 2021 strategic ambition of becoming the leading global environmental consulting firm. As recent acquisitions like Golder and Ercon integrate into WSP, we can clearly see WSP's increased position in this growing market. Our complementary client base, service offerings and geographical footprint are serving a strong catalyst to winning work and expanding our client portfolio. I am pleased to report that we currently have over 500 opportunities which we are pursuing together in addition to more than 100 projects, sorry, awards across our key markets. We are following with interest the development in the U. S. Congress as early signs of bipartisan support of the American Rescue Plan Act create a focus on infrastructure investment at levels we have not seen the days of the building of the interstate system. While work is still needed to progress to approve funding, WSP is well positioned to deliver on a wide range of project work resulting from this investment program in water, highways, bridges, buildings and power infrastructure among others. Currently, overall proposal activity continues to be very robust in the U. S. And the volume of contract awards not yet included in backlog, It has a record high level. The UK is also experiencing a positive surge as the economy continues to recover faster than predicted accelerating public sector procurement and private sector investment. And right here in Canada, Our excellent win rate on competitive proposal is creating an all time high backlog and strong project pipeline. I would now like to highlight a few of the major wins during Q2. Australia has been focused on the improvement of their transportation infrastructure for more than a decade now and has pledged to invest A100 $1,000,000,000 in transport infrastructure over the next 10 years. This quarter, WSP was awarded the detailed design services contract for the F6 tunnel extension that covers the roadway from the Sydney airport to Kogai Ra. The project is part of a staged delivery of the M6 motorway aimed at reducing travel time from the southern areas to Sydney. Meanwhile, the U. K. Is putting fresh investment into public healthcare facility expansion and improvements. Our leading position in healthcare buildings has garnered us a significant win in the hospitals of the future program, part of the government's commitment to build 40 hospitals by 2,030, backed by initial budget of DKK3.7 billion. WSP is part of the expert team appointed by the lead Teaching Hospital National Health Service Trust to deliver the new state of the art adult hospital and a new home for the Leeds Children's Hospital. In the U. S, WSP marked a new milestone in our strategy to expand our work in transit customer centers with The selection by the Metropolitan Transportation Corporation to transition its Transit Rider Fare System, also known as the Clipper Program, to a new cutting edge customer service system. This highly traffic system processes fares for 22 transit agencies and $23,000,000 fair payments equating to US50 $1,000,000 in transit revenue each month. Of course, winning work and delivering project leads us to the most important asset of our business, our people. WSP continues its commitment to inclusion and diversity and to recruiting, recognizing and appointing talent through internal succession and advancement, acquisitions and organic hiring. In Q2, several key leadership appointments were made. Marie Claude Dumas was named President and CEO of WSP in Canada. Marie Claude originally joined WSP as Global Director of Major Projects and Programs and Executive Market Leader, Quebec. Dean McGrail was appointed Chief Executive Officer of WSP in the Middle East. Dean previously held the role of Managing Director of Property and Buildings for the Middle East Business. Following is Tuner As a Chief Executive Officer for WSP Middle East Operation, Rick Cain has accepted the Chief Operating Officer position in Australia Business another mobility example in our network. Magnus Meyer, WSP's CEO for Nordex and Central Europe has decided to leave WSP by the end of the year to pursue other opportunities. To fill this role, we have appointed 2 successors, Annalina Oberg Boxta, CEO of the Nordics and Erik Van den Broek, CEO of Central Europe. Analina formerly served as Boulder's Regional President for Europe and the Nordics. And Eric was also and will continue in this current role as Managing Director for the Netherlands. Megan Van Pelt has been promoted from her previous position as Director of HR in the U. S. To WSP's Global Chief Human Resources Officer. Megan joined WSP in 2017 and has over 20 years of proven experience. Wendy Stovland was appointed to the role of Senior Vice President, Global Communications Director Wendy served in a similar role for Golder prior joining WSP. Finally, we are pleased to share that our brand continues to attract talented and passionate new resources. We are experiencing a high application and acceptance rate, which positions us well to continue to meet our project commitments. Alain will now review our financial results in more detail. Alain, over to you. Thanks, Alex, and good morning, everyone. I'm very pleased to report on our robust results for the Q2 of 2021, driven by strong performance from recent acquisition and our overall business and better than anticipated organic growth resulting in improved adjusted EBIT margin. Let's start with our top line. For the 2nd quarter, revenues and net revenues reached $2,600,000,000 2,000,000,000 up 19.3% 16.3 percent sorry, 16.1% respectively compared to Q2 2020. The increase was driven by organic growth of 3.6%, which is higher than our initial expectations of low single digit organic growth for Q2. The increase in revenue and net revenue was also driven by acquisition growth of 18.7% across all segments. Moving to profitability, adjusted EBITDA in the quarter reached $342,600,000 up 24.1 percent compared to $276,000,000 in Q2 2020, largely due to the contribution of recent acquisition and the continued good performance of our overall business. Adjusted EBITDA margin for the quarter reached 16.9% compared to 15.8% in Q2 2020. The improvement in adjusted EBITDA margin is mainly attributable to the higher margin profile of recent acquisition and better productivity across the regions. Our adjusted net earnings for Q2 2021 were 147,000,000 or $1.26 per share, up 35.4% and 24.1% respectively compared to Q2 2020. The increase in these metrics is mainly attributable to higher adjusted EBITDA margin. Our backlog at the end of June 21 stood at $9,600,000,000 representing 11.2 months of revenue, up 11.9% in the 6 month period, mainly due to acquisition growth. On a constant currency basis, backlog grew organically by 1.1% compared to backlog at December 2020. Overall proposal activity continues to be very robust across the business, which is very positive for the rest of the year and beyond. Moving to our cash position. Cash inflows from operating activities for Q2 2021 amounted to $311,000,000 compared to $510,000,000 in 2020. On a free cash flow basis, we generated $53,000,000 in Q2 2021 compared to $411,000,000 in 2020. Lower free cash flow in 2021 was mainly driven by the expected normalization of cash collection in Q2 2021. Also due to 2020 benefited from a deferral of income tax and other remittances in some jurisdictions amounting to approximately $100,000,000 For the trailing 12 months ended June 2021, free cash flow amounted to 5 $53,000,000 representing 1.5 times our net earnings. DSO at the end of June 2021 stood at a very good level of 70 days. And as of the end of Q2, our balance sheet remains very strong with a net debt position of $1,300,000,000 and a net debt to adjusted EBITDA ratio of 1.1. During the quarter, we also declared a dividend of $0.375 per share for shareholders on record as of June 30, 2021, This concludes my remarks. On that back to you Alex. Thank you, Alain. So given our great performance in the first half of the year, our strong balance sheet and positive momentum in our key markets at high levels of contract award and proposal activity. And finally, the great performance of our most recent acquisitions, We are in a position to increase the adjusted EBITDA range for fiscal 2021 to $1,275,000,000 to 1,325,000,000. I also believe we are positioned favorably to achieve our 2019 2021 strategic ambitions as expected. In conclusion, I'm proud of our teams and their continued dedication to delivering outstanding service to our clients. For the next few months, as we build on our 2022, 2024 strategy and turn the page To the next chapter in WSP's story, we remain committed to our future ready model and to creating a compelling vision supported by focus initiatives that will solidify our position as the premier professional consultancy in our industry. I would now like to open the line for questions. Your first question will come from Jacob Bout from CIBC. Please go ahead. Your line is open. Good morning. I wanted to start off with the raise in guidance for the year. What are the drivers here? I mean, is it just expected revenue growth? And how should we think about Margins, especially given the expectation of higher discretionary spend as we travel more, etcetera? Well, of course, over the last 18 months, Cost containment efforts took place within WSP, but a lot of that has Reverted back and of course, I expect an increase in cost when we all start to travel again and meet in person. But I'd say, Jacob, that the main driver is that WSP legacy and what I mean by WSP legacy is ex acquisitions for this year And our existing acquisitions for the year are performing extremely well right now, and that's why we felt compelled To increase our outlook at this point in time. And are you still thinking of organic growth this year in that kind of 2% to 5% range? I think that's the goal at this point in time. We haven't changed our guidance around our organic growth. Where we made an adjustment is really in the bottom line at this point in time. And we will revisit if we feel we need to later on in the year. Okay. Second question is just, I think the organic there's organic growth retraction in the U. S. When do you expect that to churn? I know you made some comments about contract awards, But when do you expect that to turn? Look, Jacob, it's really hard for me Predict how politics will behave in all of this in the next in the second half. Obviously, yesterday, the Senate approved the bill. And this was not just Democrats voting for the bill and the Republican voting against. I don't think I've seen such a bilateral vote in more than a decade in the U. S. At the Senate. So I think There's clearly an agreement in the U. S. That infrastructure spending is a need And the reinvestment infrastructure in the U. S. Is definitely a need and both parties believe in that. So we'll see how this is progressing in the house. So it's hard for me to tell you when this will be unlocked. Having said all that, what I can tell you is that Our win rate on competitive bids and awards is as high as I ever remembered in the U. S. So We are doing extremely well and we are I think this time around, I think it's fair if I say that we are winning more than our share So it's work that has been procured that we won, But we are just waiting for the funding to follow. So I think this is very positive. And I think that the future should be bright for the U. S, but time will tell. Great. I'll leave it there. Thank you. Thank you. Your next question comes from Benoit Poirier from Desjardins Capital Markets. Please go ahead. Your line is open. Yes. Good morning, everyone, and congratulations for the good quarter. If we look at the gold Yes. So if you look at Golder, congrats for the good results. Could you talk about how much of The double digit organic growth driven by Goulder was driven by cross selling opportunities? Look, it's early days still, Benoit, on cross selling and collaboration. I think I mentioned we are pursuing Probably 100 potential opportunities together. So I think it's very promising. But I'd say that right now, most This growth is coming from legacy gold. They're doing well. They're performing well in all of The countries from Latin America all the way down to Australia. So I think across the patch, it's been very robust. And the mining sector, let's not forget this, the mining sector is performing extremely well right now and we expect it to perform like that For the foreseeable future, so I think we find that we're quite fortunate about the timing of this transaction and we're quite pleased about it. Okay. And could you maybe talk about the contribution from Golder in the backlog specifically in Q2? And also about the cost Synergies, whether you're finding more opportunities or still too early to tell? Well, it's early on cost synergy, but I will turn to Alain to answer the question. Arne, go ahead. Yes. On backlog, Benoit, Golder has experienced about 25% growth since the beginning of the year in their backlog. Their backlog is at a record high level currently. To Alex's point, the momentum in the mining business It is actually quite good and we see that converting in good luck backlog. And on the synergy side, it's We're just 1 quarter in, so it's a bit early to tell, but we're still committed to when we have completed that the announcement in December. Okay. That's great. And last one for me with respect to M and A. We heard lots of discussion about the increase in valuation multiple expected from seller, especially with the higher participation from PE firms. So given your disciplined approach, should we expect WSP to still remain active in 2021? Look, it's always our goal to be active. It's always our goal to be opportunistic. We have a very strong balance sheet position. So if we feel at this point in time and in the future that we can create shareholder value By going after targets, we will. We've had over the course of this year a number Through good time and bad time, we remain disciplined and focused on our strategy. So if Benoit feel that we can strike A transaction that will create shareholder value, we will do it. But clearly, we're going to be we will remain disciplined. And let's not forget as well that we completed the closing of Golder only a quarter ago. So I think focusing the team on delivering this transaction to our shoulders is the top priority. It's still early days. I think After 60 days to suggest that integration is completed, we have a lot of work to do. But Yes, indeed. I mean, we continue to have dialogue with firms. And if we feel we can add value, we will. Okay. Thank you very much for the time. Thank you. Your next question comes from Yuri Lynk from Canaccord Genuity. Just want to follow-up on the new outlook. It's fair to characterize it as better than expected Profitability in the first half of the year and not so much a change in your revenue expectations? And if that's the case, where has profitability surprised you? And is that do you view that as sustainable? Yes. For the remainder of 2021, we view this as sustainable, without a doubt, Yuri. Otherwise, I don't think I would have been comfortable to increase our outlook from a bottom line point of view. Admittedly, I was a bit surprised by the recovery, the fast recovery of our U. K. Business, Fast recovery of our Canadian business. I was expecting a slower pace of recovery, but Proposal activity level is strong. The U. K. Business is doing very well right now, so is Canada. If it wasn't for the restriction, the strict restriction in Australia with The shutting down of construction site, I think we would have done better in Q2 than what we've shown to all of you this quarter. And then in the U. S, we continue to thrive. I mean, we are Generating very strong profit, very strong margin profile. So you combine this with the performance of our Recent acquisitions, namely Golder, but all of the other ones as well. And you look at this and say, look, we are actually Performing better than what I had anticipated at the beginning of the year. We all need to remember that we put our operating plan and budget together Over the course of September all the way up to or about end of November before we present it to our Board. So This budget and this outlook was 7, 8, 9 months old and where we were 7, 8 months ago So compared to where we are today, life is different and we feel better about it. So that's why we felt compelled to increase our bottom line outlook. Okay. That's fair. Second question for me. Just on the U. S, I mean, What's kind of changed there? What's the new dynamic, temporary or not, where you would have such a The pending bill, all of the above, just any additional color there would be helpful. Yes, it's all of the above. I think the early funding That has been fueling estates in the market early on has been water. So that's where we've seen most of the funding going True. At this point in time in the year, but we haven't seen as much in transportation and others. So I think Our clients are quite keen to get to work. And I think there is a general and a collective recognition that an enormous amount of work is needed in the U. S. Most of Infrastructure assets are obsolete. I think I gave that stat in past analyst calls, but I think 75% of bridges in the U. S. Either obsolete or are in need of significant work. So there is a collective recognition both from the Democrats, Republican and states that work is needed. So they are eager to get to work. But clearly, this massive funding and bill is, I believe, Yes. Creating a bit of hesitation at this point in time. I think states are waiting to see when and if this will be approved. I think Yesterday was very good news. And yes, that's clearly the psychology that is taking place in the country. Having said all that, I think when we put our budget together last year, we didn't know the outcome of the election And we didn't know that there would be a bill like this that would be put forward. So don't get me wrong. I think I don't believe our business is waiting on things that we that are out of our control. To the contrary, I think we're hustling very hard to generate the revenues and to generate the profit. But the environment in the U. S. Is very strong At the moment with or without a bill. And that's why we feel, I would say cautiously to optimistic about the future of our U. S. Business. Your next question comes from Frederic Bastien from Raymond James. Please go ahead. Your line is open. Good morning, Beaumontin. Good morning, sir. Guys, I just want to build on Yuri's last question. Your results for the past 4, 5 years do show that you're performing extremely well in the U. S, which makes me think anything from coming from the proposed infrastructure bill would be gravy For WSP, have you estimated what potential impact this bill could have on your organic growth in the U. S? No, we have not. We have not, Fred, because it's how this will be approved is Your guess is as good as mine. How this will be funneled? Your guess is good as mine. The timing of it is as good as mine. So I think this is to me and I wish I could answer it, but to me, I believe this would be an impossible answer to a question to answer. Having said all that, I think what I'm telling the team day in, day out every week when I speak with our U. S. Team leaders, Our job is to deliver services to our client. We have a backlog to deliver. We need to attract the best talent in this industry and we should just worry about things that we control. Of course, Fred, I'm not going to stand here telling you that this bill is not going to be very helpful. Of course, it will be very helpful. To what extent, time will tell. But certainly, if this It goes through. I think this is going to be very good news for WSP, but very good news for the industry as a whole. Okay. Thanks, Alex. The next question, I think I've asked you from a regional perspective, but We've seen the company move up the league stable in the environmental sector, transportation and buildings With your transformational acquisitions in the past, are there still subsectors within these three segments Where you would like to bulk up further either organically or inorganically? Absolutely. I think we could Probably double our transportation business in the U. S. And feel still very comfortable about it. I think there's A lot of room for us to grow, for instance, in Texas, in California, in Southeast, in the Midwest. So we're quite subscale in the U. S. Still in many places. And the building sector, I think in previous calls, I mentioned that over the last few years, we continued our transformation of our building sector from being known just as a high rise commercial real estate engineering firm to now Being a leading firm in mission critical work, I. E. Data centers and also in the healthcare. Healthcare over the last 3 years, we made a number of acquisitions in the U. S. And elsewhere, and we're now leading in that sector. So we continued our transformation and I wish in the perfect world to continue to increase our exposure to those subsectors in Zuquers. And then in environment, I think Golden WSP would be creating a 14,000 strong environmental practice, urgent environmental practice. But there are 2, there are many countries and take the U. S. Again, for example, where we have 2,000 people. I believe we could grow this our presence even more. But that's true in the UK. That's True. And most of our regions, if not all of them. And finally, of course, water, I think you know that we have Perhaps on a relative scale basis, given our sheer size, A smaller size presence, so we could grow that. And then I could move on in services, project management, program management, something we would like to grow. Digital is one that I don't talk much during those calls, but when we unveil our In 2022, 2024, I'll be able to talk more about that. So there are a number of services, Sectors and regions that I feel we could continue to grow Fred and that's what we're busy doing right now. Thanks, Alex. Great answer and great quarter. Thanks. Thank you. Your next question comes from Michael Tupholme from TD Securities. Please go ahead. Your line is open. Thanks. Good morning, Alice and Ola. My first question relates to the organic growth outlook. So I realize you haven't formally changed the 2021 organic growth guidance of 2% to 5%. But I'm wondering if Given the better than expected organic growth you saw in the second quarter and what sounds like a positive outlook for the second half of the year, Should we be focusing on the upper half of that guidance range? I will leave I will let you decide How you think you should be thinking about organic growth rate? But I think the big question mark at this point in time, Michael, is the U. S. I mean, there's no doubt about it. I mean, we are Essentially flat for the year so far. So it all depends how H2 will be performing. And I'm not trying to hide anything. When I look at our organic growth forecast 2% to 5%, Given the track record of our U. S. Business and frankly of our peer group in the U. S, I think it's very, very consistent and we're all waiting, not waiting, but we're all hoping to see this Changing direction. So I think again, the Both activity level is extremely strong, very active, and we won we win more than our share of work at this point in time. But it's more of a question of timing in my personal opinion than it is about the fundamental trends of our U. S. Business at the moment. Just it's a wait and see. And that's why I think unless I was absolutely certain that H2 will provide increased results. I felt we should on a conservative side at this point in time and see how this will How we will be performing. Okay. That's a fair answer. I know you don't break your business down like this as far as reporting goes, but you've been increasing your presence In terms of your strategic advisory services offering, I'm wondering if you can speak to how the growth you have been seeing in that area and that you expect In that area, how that compares to the organic growth and the top line growth in other parts of the business? And also sort of a follow on to that, wondering if you can talk about the extent to which that increased presence In that service advisory area or strategic advisory area, is that part of what is Seeing you deliver these better margins? Look, it depends. Strategic advisor mean different things to different people, but I will try to explain to you how I see it personally. Over the course of the last cycle, we when we unveiled our plan in 2018, I had mentioned that we wanted to increase our Nondeign services to get to perhaps like by the end of the cycle approximately half and half Between a seal and detailed design work from work where we are Providing more of an advisory type of services and environment would fall into this, program, project management would fall into this. And the more what I would call, we call a C suite strategic advisory network would also fall into this like studies analysis and data analysis. And we do a lot of this. And over the course of the last Cycle, Michael, we've increased our non design work by now we're about fifty-fifty, but In reality, it's probably more 55%, 45%. And don't get me wrong, right? Our margin profile and design is improving And it's increasing. So we will we want to continue to capitalize on our engineering capabilities. But what I said back then is we will continue to capitalize on what we're good, but we're going to expand our horizon on things that perhaps Where we are subscale. And over the last 3 years, that's what we've done. And if we chose to grow it, it's because I believe in the growth prospect of those services. So we invested heavily in Part J and Environment. We invested heavily and many other services that are not designed. But then when you look at design, you look at our healthcare sector is Scoring double digit right now. So I think I want you to leave this call thinking that We are transforming the company because we don't believe in our core services to the contrary. I believe with what's happening in the world and the reinvestment An infrastructure that will be taking place in every country I can think of. Actually, our design services will be even more important. But complementing that service with the upstream services where we are there with the client to advise them At the beginning, upstream all the way down to our detailed design work, I think that was the strategy and it's paying off at the moment. Okay. That's a good answer. Thank you, Alex. And just my last one, It was mentioned that Goulder's business grew organically double digits. So I guess maybe a 2 part Question relates to that. First, just to help put that double digit growth into perspective, Can you provide any insight into what sort of prior year comp Golar was up against? So just wondering Specifically, if they were impacted by the pandemic or and is that part of why the growth was so strong? And then I think you've maybe already addressed this, but any particular areas that are really driving that growth? I think you mentioned mining, but I'm Sure, there are others as well. Just before pandemic hit And in 2020, so Q1 of 2020, Golder during our due diligence, obviously, we looked into this, but was up double digit. And this was anecdotal evidence that the business was doing extremely well, led by a very strong management team, strong CEO and of course the pandemic hit and of course The business was slowed down the way all of us were slowed down, so they were not any different. But there was some evidence That the business was striving. And 2019 was also a very strong year for Bolder. Let's not forget that, of course, We have not disclosed those numbers. But so when we based our investment thesis, we looked at, Of course, the performance of 2019, the Q1 of 2020, and of course, took into consideration what's taking place in the pandemic. But nevertheless, I think for the last few years, this is a business that was growing year over year over year and had done extremely well. And so that gave us comfort that we were buying a great business with great people. And frankly, we're only a quarter in, but early evidence is that's what we bought, an amazing business. And to your point about the sectors, I think what I find quite interesting right now is all of the regions Within gold, there are striping. Canada is performing extremely well. The U. S. Is performing well. The Latin America is performing well, Australia as well. The mining sector, without a doubt, is Very strong, very robust. So I think right now, I feel that the timing of this acquisition could not be any better. But there are other sectors that are doing well as well. Manufacturing in the U. S, for instance, is an example. So I'd say all in all, I think it's just a business that is performing Very well at the moment. All right. Thank you very much. Thank you. Your next question comes from Dmitry Tomlitsky from Veritas. Please go ahead. Your line is open. Hi, and thanks for taking my questions. I was wondering if you can talk more about the backlog in the U. S. It's a big business That you have in the U. S. And it was not dependent on infrastructure stimulus in the past. And I'm just wondering Why clients are hesitant, if you will, to commit hard dollars to projects? And Essentially, what causes the delay in firming up the backlog in the U. S? Look, it's at the end of the day, I mean, we could sit here and think that the pandemic It was not a financial burden to states and municipalities, but we all know that this is a false statement. Enormous amount of money was pumped in the system to deal with this pandemic. And of course, I'm sure that there are some conflicting priorities right now in those state offices and those people leading those states and municipalities and governments. And so I think the fact and the matter that the funding is coming I'm not surprised that this perhaps creating some hesitation by state and local to get the green light or give the green light and get going on all of those projects. So So I think as I stated before, I'm not a politician. That's not my job. My job is to deliver our hard backlog to convert it and to make sure that we deliver the best services to our clients and to attract the best people to our firm. But certainly, I think you combine a pandemic with a $1,000,000,000,000 bill, I'm not surprised that it maybe creates some hesitation in the Okay. And can you talk about free cash flow conversion Longer term, where would you expect that to be? I know your goal, January, is to target 100% conversion of Free cash flow to IFRS net earnings. How do you view that given the Normalization of the collection cycle and essentially a longer term perspective on cash generation versus Earnings? Yes. Good question, Dimitry. As you said, obviously, We've seen 2020 as a year, a particular year from the cash flow collection. We've seen strong cash flow. Our objective for 2021 remains to be around 100%. That's the goal and that's the longer As well. But as you know, given the normalization of cash flow, this put a bit of a headwind On that conversion objective of 100%, at least in the short term, but that's just normalization. It remains our objective for term. So that's the best guidepost for you to look at that 100% conversion. Understood. Thank you. And the other question that I have is on integration. I wonder if you can talk more about What do you generally consider as most risky The 1st few months, Dimitri, of an integration are quite critical, Because that's when you engage with the workforce. And you know as well as I do that it's human nature To be concerned by changes, it's just the way it is. And therefore, converting the workforce And also taking the time to communicate your ambitions and your vision of what the combined organization would look like, But also taking the time to explain what it is to be a consultant at WSP. What does it mean for them? And it's like anything, there will be some good, Some element of good and some element of not so good. That's just the nature of our marriage. But at the end of the day, making sure that we embrace the like minded vision and guiding principle is key. And making sure that you explain your culture and you explain what you believe in, I think it's Very important. I find that sometimes integration are not going to go well because leaders will tend to focus Making sure that you explain what you stand for. And more importantly, you create an environment where we could have early wins together is probably The best testament of what a successful combination should be like. So that's why Making sure that we connect people early on and communicate with one another, the good news and the bad news, I think it's Extremely important. So that's why I said that we're only a quarter into the integration. Of course, a lot of work had gone into it pre closing, so clearly had a head start. But that period of time is critical. And that's why I think we're taking the time to do the things To do things right, to make sure that we live up to the promises that We were presented to the colder people. Okay, understood. Thank you. Your next question comes from Maxim Sytchev from National Bank Financial. Please go ahead. Your line is open. Hi, good morning, gentlemen. Hello, Max. Just a couple of very quick ones for me. Alex, we had Nordics and obviously really being very strong drivers of growth for a number of years. It looks like we've plateaued a little bit. What are you guys seeing for these two markets in the next, Let's call it 12 to 18 months if it's possible. Yes. Well, the Nordic countries are At the end of the day, MAX are smaller in size. It's just the nature of the beast. I mean, We have now acquired over the last 5, 6 years a leadership status in the Nordics. And by the way, we are Probably the only international firm that has been able to do that. The other leading firms in the Nordics are local firms headquartered in the Nordics. So I'm quite proud of that, that we have a strong status in the Nordics. So the goal in the next 2, 3 years and certainly in the next year with our newly promoted leader in the Nordex will be To continue to strive as a firm, to raise the bar from a margin point of view, To get back on an organic growth agenda, which was a bit more subtle in recent years. And then in Australia, I think the potential is there. We can continue to grow. There's no doubt about it. The government have committed massive investment in infrastructure. So if we do things right, I'm confident that we're going to continue To grow in that region without a doubt. Okay. No, that's super helpful. Thank you so much. And then last question pertains Lots of discussions right now around inflation, wage pressures and so forth. Just curious to see if you are seeing this In the business at all? And if yes, are there any mitigating steps that can be undertaken by you? Thank you. We are addressing it. Some pockets in our business are requiring More attention at the moment than others. So to be totally transparent with you, yes, we feel it that In some parts of the world, Larson signaled our talent is there and it's there to stay. So we are reacting to it. So but at the same time, I look back at our last quarter and we're net positive with 650 new people coming in onboard just in the last quarter alone. So acceptance rate It's quite strong actually, very strong and probably everywhere around the world. And we have been able to reduce the time between we open a position to get people in the door by a few days, Just this year alone. So we are improving our process and processes by leveraging best practices. Our best performing country right now in that regard is the U. K. They are extremely fast And the way they are from the time they open a position, the way they and when they get people in the door, I think it's 24 days or something like that. So that's quite impressive. And we've done a lot of work to improve best practices around the world in that regard. So I'm quite pleased with the trajectory at this point in time. Yes, for sure. And just maybe to build on this, I mean, obviously, margin profile is coming in stronger than expected. So what other things are you guys doing internally to enable that Margin attrition despite the fact that obviously there is some pressures on some parts of the cost equation? Well, I remember saying that in 2014, 2015, For your margins to go up, you need a lot of things to go well. So there are a number of levers that you need To do to use and to pull in the right direction to do well. So of course, productivity is 1. But at the same time also, Max, you need the help of the market. You need to if the market is no good, It's quite hard to improve the margin profile. And indeed, I find that right now, we are operating in a good market globally. And the supply demand dynamic is there to is there essentially. So I think governments, they are all looking to reinvest in infrastructure. And the lack of talent or the war on talent that I've described earlier on, it's not just happening in our industry, it's happening in the financial industry, But it's also happening at our clients as well. So our clients don't have The talent to do the work. So they have to turn to A consultant like WSP to assist them. So I've always said that Consultants tend to do well when there's a catalyst in the marketplace. So 2,008 was an example of that. I mean, you saw the business in our space Striving. And on the back of the pandemic, and unfortunately, this took place, But I think our clients will turn to consultant to assist them again. And that's when consultant tend to do well, is when there's a catalyst in the marketplace. And there's clearly There was one in this instance. So I think it should hopefully serve us well in the future. And that's why I think overall we're optimistic. Yes. That makes a lot of sense and thanks a lot for the detailed perspective. Thank you. Thanks, Max. Your next question comes from Sabahat Khan from RBC Capital Markets. Please go ahead. Your line is open. Great. Thanks and good morning. There's a bit of commentary earlier on the integration of Golder. I guess this Being the largest acquisition that you've done during sort of this virtual work environment, are there any learnings or Any issues that were unexpected turn into greater large acquisition while folks are working from home and kind of how does that affect your thought process on future large acquisitions until the world opens up? I think what I've learned is that's feasible and it's possible. That's what we've learned. Of course, when we announced that We were hoping and we had the belief that we could do it. And after So many few months, I think I can tell you that I think now I have the conviction that this is feasible And that's possible. So I think to me that's the biggest learning experience is that we can do it. We're going to remain very disciplined and very focused, laser focused on what we want to do and how we're going to do it. But I think if this was a test or case study, I think now this is proving to me and the team that We can do this. Okay. And then hopefully I'm not seeing thunder from your kind of the 3 year strategic But I know we talked a little bit on the last call about reassessing kind of the workspace productivity and things like that. I guess, where are you in that review? And is that something you might announce before the strategic plan in terms of what kind of real estate and employee count kind of makes sense going forward? Well, it's certainly something that we are evaluating very carefully. Of course, This is a very fluid situation as you can imagine. You see how many companies have you heard that We're expecting people to come back after Labor Day weekend and are now looking to push back by at least a month, maybe 2. I think this is now becoming And that's a new reality. So it's very fluid then. And I didn't put Too much weight or certainly I didn't want to put too much weight on and making statements 6 months ago or 9 months ago about our real estate floor plan, Because I just didn't feel I was intelligent enough to make such a statement. It was so fluid that I figured that the well-being of our employees and the well-being of the firm in our culture was the primary objective here. And I said, we'll deal with real estate floor plant afterwards once we have the certainty With a firm belief of we determine exactly what we want to do. Just statistically, I believe, if I'm not mistaken, Alain, 45% of our leases and floor plans We'll come up for renewal in the next cycle, in the next 3 years. So this is a great opportunity for us. And timing is everything. And again, you need a bit of luck oftentimes, but more than half of our real estate floor plans will come up for renewal in the next 3 years. So as you can imagine, I'm sure you know that we are laser focused on this and we'll look at this very carefully to see what's Best for employees, best for our clients and best for our shoulders. Okay, great. Thanks. And just one last You commented a bit earlier on kind of the hiring environment. One of your peers noted yesterday that they've seen some impact on growth from not being able to bring in enough people. How are you kind of generally finding just the availability? Or are there any regions where it is a little bit more competitive, just setting kind of cost aside, just the sheer number of people? I think it's competitive everywhere right now. There's no doubt in my mind that it's competitive environment Everywhere you travel, so I think as I said or described earlier on, I think we are revisiting Our strategy and the way we wish to attract individuals. And my personal belief, engineers and Professionals in our space want to be part of a successful firm. They want to work in the most iconic projects in the space. So I think that the best thing that we can do is to continue to thrive as a business And take the time to explain to newcomers what we stand for as a business and where we want to But as I stated before, I think the last quarter statistically, I was quite pleased with the outcome. We have been able to attract a lot of new talent and we'll continue to do so in Q3 and Q4. Thanks very much. Thank you. Your next question comes from Ian Gillies from Stifel GMP. I wanted to follow on Max's Question and specifically around Central Europe. I thought it was interesting that you put in a specific group head for that region given some prior comments on growth there. And I guess the question is, should we consider some of these changes as precursors for growth in regions that you're becoming increasingly more focused on? It's of course, at the right time and with the right opportunity. I mean, I think it's no secret We are subscale in Central Europe. And what I mean by Central Europe is if you exclude the Nordics for a second And of course, you exclude the U. K. Continental Europe, WSP, we are subscale. We have now probably close to 2,000 people. But You look at the potential there and the right circumstances we would want to grow and create a strong operating hub. But the stars have to be aligned for that to happen. And historically, We always had a Central European leader and a Nordic leader and a UK leader. We slowly but surely move away from that, Magnus leading both the Nordics and Central Europe. And predominantly because we had a strong leader in place. Magnus is a very strong leader and he had All of the tools in this toolbox to be in a position to lead all of that cluster. But now we're reverting back to our original model And there's nothing wrong with that. In my personal belief, structures are meant to be changing and operating structure has to change On a regular basis to keep the organization on its dose and making sure that We performed. So having a strong leader for Central Europe is good news, because we'll have somebody focus 100% Thank you. Your last question will come from Troy Sun from Laurentian Bank Securities. Please go ahead. Your line is open. Good morning, gentlemen. Good morning. Just wanted to start with Alex. I think you made an interesting comment earlier on the Regarding making market share gains in the U. S, I'm just trying to get a sense how that's being achieved. Is that through more Being sustainable into a potential upcycle in that region? Yes. We've without getting into too much Details, we have made some changes in the U. S. We have a new leader that took over to almost 2 years ago now to this day. And alongside Lou, we've made a number of leadership changes over the course of the last 2 years. But more importantly, our approach to client delivery has changed as well. I think you've heard us in the past talking about one of our guiding principles. We have A local presence with an international network supporting our local presence. And I felt In recent years that we had moved away from that in the U. S. And that we needed to get closer to our local communities and closer to our markets. And So we've made some changes in that regard, having a more laser focus on our local communities and local regions. Transportation, for instance, is a very, very local sector. And unless you are focused on your local communities, it's It's going to be hard for you to succeed. So it's more about culture. It's more about also refocusing the business on our guiding principles and making sure that the people were focusing on delivering locally the best service possible. Okay, great. That's super helpful. I guess my second question just sort of goes back to the M and A discussion. We've heard from some of your peers in the quarter that the competition for asset in the U. S. Is intensifying and We're seeing some entry from financial players bidding up the assets there. I'm just wondering like first, are you seeing A similar phenomenon in the U. S. And secondly, in other geographies that you operate in, are the same things happening? Or do you still believe that they are Yes. Well, not so long ago, I think we've completed an acquisition and In my personal opinion, a very attractive multiple. So I think we are We have been able to achieve that in the past and we'll continue To do to remain disciplined to achieve that, the notion of financial sponsors being in our industry, I mean, the reality is They've been in our industry for as long as I remember. There's a lot of money in the system right now And financial sponsors are present in our industry, but they are equally present in other industries. And that's just the reality of life and We got to live with that. And what WSPS to offer to those firms is very different than what We want to build something, a legacy and those that believe in that and Golder was exactly that. I mean, they believe in the And the vision that we had for this industry and for WSP will join us. And those that I have had different views, may choose to go with a financial sponsor. And I think there's room for everybody. But I can get and be bothered by what's happening outside of our firm. My job and our role is to focus on us and what we have And then that's what we're busy doing right now, explaining our story to those cards. Right, right. That's super helpful. That's it for me. Thank you. Thank you. We have no further questions. I'd like to turn the call back over to the presenters for any closing remarks. Okay. Well, thank you very much. Thank you for attending the call. Thank you for your continued support, and we look forward to updating you at our next quarterly release. Thank you very much and have a great day. This concludes today's call. You may now disconnect.