WSP Global Inc.

Good day and thank you for standing by. Welcome to the WSP Global first quarter 2025 results conference call. 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 1 and 1 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised, today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Quentin Weber. Please go ahead.

Thank you, Sarah. Good morning, everyone. Thank you for joining our call today. We will discuss our Q1 2025 performance, followed by a Q&A session. Alexandre Lerue, our President and CEO, and Adam Michaud, our CFO, are joining us this morning. please know that this call is also accessible via webcast on our website. During the call, we will make forward-looking statements. Actual results could differ 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 the NDNA for the quarter ended March 29th, 2025, which can be found on CDAR Plus and on the website. In addition, during the call, we may refer to specific non-IFRS measures. These measures are also defined in ID and DNA for the quarter ended March 29, 2025. Our MD&A 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 operation as they provide additional critical metrics of its performance. These non-IFRS measures are not recognized under IFRS, do not have any standardized meaning prescribed under IFRS, and 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 for the related financial information prepared by IFRS. With that, I will now turn the call over to Alexandre.

Thank you, Quentin, and good day, everyone. This has been an interesting start of 2025, and I'm eager to share the details of our solid performance for this quarter. Overall, we have showcased net revenue and EBITDA slightly ahead of our expectations, and let me provide you with additional insights into our performance. First, net revenue organic growth for the quarter came in at approximately 5.5% when adjusted for fewer billable days in the US compared to the same period last year. In Canada, we delivered 7% organic growth, and with the election now behind us, we are confident that this momentum will continue. In the US, which accounts for 40% of our net revenues, we delivered our fourth consecutive quarter of double digit organic growth when adjusted for the same number of billable days. This track record demonstrates continued robust level of activity in the first quarter. With respect to our recent acquisition of Power Engineers, the integration is progressing as planned and it continued to perform nicely throughout the quarter with 11% in organic growth and a significant revenue synergies opportunities. Our UK business delivered growth in line with expectation and market dynamics have improved from a year ago. In APAC, despite subpar performance, the outlook for the Australian New Zealand remained positive in the medium and longer terms, which is reflected in our backlog growth in the quarter. Of interest, Australia's water, power, and mining sectors each achieved strong organic growth this quarter, and the results from the recent federal election is positive. Turning to our profitability, we achieved a steady EBITDA margin performance of 16% for the quarter. We delivered sizable increases in Canada and the Americas, with our margin improving by 130 basis point and 60 basis point, respectively. In AMIA and APAC, we absorbed approximately $20 million of continued optimization and restructuring costs which impacted our overall margin by approximately 50 basis points. On cash, I am particularly pleased with our performance this quarter, building on our 2024 momentum. Free cash flow increased by $240 million versus last year, and our DSO stands at 70 days. The strong outcomes reflect our ongoing focus on working capital management and optimization under our new ERP platform. Lastly, we are reaffirming with confidence our previously disclosed financial outlook, which includes robust margin improvement and a compelling organic growth profile. Despite the current macro environment, we have a good backlog, which has increased organically by 3% since the beginning of the year. We are driven by a clear strategy, a diversified and resilient platform, and we are proactively taking actions where required, all of which provide confidence in our ability to deliver shoulder value. On that note, let me briefly expand on the dynamics across our four core market sectors. Our largest market sector, transport and infra continues to perform well with the exception of Asia Pacific at this time. It contributes meaningfully to our backlog which give us good visibility for the remainder of the year. While we are actively monitoring public and private spending priorities, our deep expertise and diverse range of services in this sector are resilient and positioned in TNI as a stable contributor to WSP's ongoing growth. The same holds true for our diversified client base. In the US, for example, our client portfolio spans local and state governmental entities as well as private clients with minimal exposure at the federal level. The Americas region led the way for transport infrastructure growth in Q1. Recent notable wins include LEED design services for Southwest 10th Street Connector and Broward County, Florida, and multidisciplinary engineering services to support the replacement of the Francis Scott Key Bridge in Baltimore, Maryland. In Canada, strong urbanization trends continue to drive substantial investment in new and existing infrastructure. Bridges, highway, roads, land development and municipal engineering represent a meaningful portion of our current backlog. WSP is also strategically positioned to benefit from Hydro-Québec's plan to invest $10 billion to upgrade the aging transmission and distribution infrastructure required to meet current and future electricity needs. Investment in water infrastructure is also trending positively across most of our geographies. For instance, in the UK, we secured new mandates with United Utilities for commercial consultancies, estimation and project management services under the latest M8 funding cycle. Shifting to our property and buildings market sector, performance remains solid and forward momentum is building. Our businesses in Canada, the US, the UK, and the Middle East, which account for about half of our P&B revenues, are performing well. Our critical infrastructure and markets, including industrial, advanced manufacturing, data centers, and healthcare, continue to show strength. and we are confident in the growth opportunities ahead. Notably, data center demand has been a steady contributor. While many of our recent project wins are confidential, we secured another one gigawatt of data center developments in the first quarter from projects around the world. These projects cover everything from site acquisition and master planning to land development and building design. Moving on to power and energy, where market fundamentals remain favorable and momentum continues to build. In the first quarter, we recorded double digit organic growth in this sector, reflecting the sustained demand for our services. The underlying drivers of energy investment remain valid, including replacing aging infrastructure, hardening electrical systems against natural events, strengthening grid reliability and security and supporting growing energy demands as data centers, buildings, transportation, and manufacturing shift toward different energy sources. As I mentioned earlier, the integration of power engineers is progressing very well, and many of our larger global clients are already able to benefit from our expanded engineering capabilities following the acquisition. The backlog is healthy, and I'm pleased to note that we recorded two more months of backlog versus last year. We also have more than 200 projects in the pipeline that leverage the combined capabilities of power and WSP to deliver more efficient project execution for clients. Of these 200 projects, approximately 40% are with clients outside the power and energy sectors. Now to our earth environment sector, our teams continue to secure new projects globally. Water, critical elements, technology deployment, and defense amongst others are all areas where our services are high in demand. Defense in particular via our longstanding relationship with entities such as the US Navy, Air Force, and Army Corps of Engineers, and many other entities globally remain strong. Notably, we were recently appointed to a $1.5 billion 10-year program with the U.S. Air Force to support site remediation and environmental consulting across its global assets, a clear endorsement of our capabilities. This builds on our ongoing work at the former Peace Air Force Base in New Hampshire, where we support PFAS treatment and groundwater management. Taking together, our four market sectors continue to reflect our ability to anticipate and respond to the megatrend shaping our world, from decarbonization and electrification to urbanization and supply chain resilience. We remain confident and focus on attaining our financial targets for the year. I will now invite Alain to review our financial results in greater detail.

Thanks, Alex, and hello, everyone. I'm pleased this morning to report on our results for the quarter. For the first quarter, revenues and net revenues increased by 22% and 20%, respectively, showcasing solid year-over-year growth. We achieved net revenue organic growth of 3.7% or approximately 5.5% when normalized for fewer billable days in the U.S. operation, compared to the comparable period in 2024. As of March 29, 2025, the backlog reached another new record high level of $16.6 billion, representing 11.3 months of revenue, up 16.6% in the 12-month period, or 3% organically since the beginning of the year. Moving on to profitability, adjusted EBITDA in the quarter grew 500%. grew to $533.9 million compared to $446 million in the first quarter of 24, an increase of 19.7%. The adjusted EBITDA margin for the quarter stood at 16%. Canada and the Americas delivered solid margin performance in the quarter, In AMIA and APAC, we absorbed rightsizing and optimization costs of approximately $20 million, which impacted overall margin by approximately 50 basis points. Or said differently, our adjusted EBITDA would have been $554 million versus $534 million absence of these costs. Adjusted net earning for the quarter reached $229 million, or $1.76 per share, up 18.2% and 13.5% respectively compared to the first quarter of 2024. The increase is mainly attributable to higher adjusted EBITDA, partially offset by higher interest on long-term debt. As for our cash position, I'm particularly pleased with our strong cash flow generation this quarter. Free cash inflow was $116 million for the three-month ending of March 29, 2025, representing an improvement of $241 million compared to free cash outflow of $125 million in the corresponding period in 2024, driven by improved DSO sitting at 70 days at the end of the quarter and $150 million U.S. factoring arrangement partially offset by higher taxes paid. We achieved a trailing 12-month of free cash flow conversion of $1.2 billion, representing 1.6 times net earning. Net debt to adjusted EBITDA ratio stood at 1.8 times. Incorporating the full 12 months of adjusted EBITDA of all acquired business, the net debt to adjusted EBITDA ratio would be 1.7 times. We remain well within our target range of one to two times, and our balance sheet is in a strong position. And as Alex mentioned, we reiterate with confidence the financial outlook for 2025 issued in our Global Strategic Action Plan press release on February 12, 2025. On that note, back to you, Alex.

Thank you, Alain. Our results this quarter mark a good start of our 2025-2027 Global Strategic Action Plan. In a macro environment that continues to be fluid, we are maintaining a vigilant and disciplined approach. Our business is built with the flexibility to course correct, seize opportunities, and stay focused in any context. Our Diversify platform across market sectors, geographies, and clients has consistently proven its value, helping us mitigate challenges in one area while capitalizing on opportunities in another. We remain firmly focused on what we can control. That means tightly managing our business and empowering our teams to continuously bring the best of WSP to our client base. Our strategy, our resilient platform, and our team's depth of expertise keep driving our business in the right direction. We are being proactive and taking the appropriate steps where and when needed. This posture gives us confidence in our ability to continue delivering value for our shareholders. With that, we can open the lines for questions.

Thank you. If you would like to ask a question, you'll need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Thank you. Your first question is from the line of Stephen Fisher from UBS. Please go ahead.

Thanks. Good morning and congratulations on the quarter. Just in terms of the guidance, you're looking at, say, the midpoint of growth implies some acceleration in net revenue growth over the course of the year. I'm just wondering if you could just give us a sense of the visibility you have to that and how hard it might be now in light of some of the tougher comparisons you have coming up in the United States market against that sort of double-digit growth and some of the macro headwinds that are out there?

Well, look, historically, our first quarter has always been the slowest. Having said all that, this year's performance is not any different than the pattern we've seen in the past. Number one. Number two, when I look not just at the proposal activity level, I'm looking at our sub backlog, but really focusing on our hard signed backlog. We have a very good backlog for this year. And I've been quite encouraged by the strong performance of our Canadian and U.S. business in the first quarter. And finally, I would say that going into 2025, I was slightly concerned around our Asia-Pacific performance. But on the opposite side, or conversely, I would say that the recent wins in New Zealand and Asia-Pacific gave me a higher level of confidence that things should improve as we progress towards the end of the year.

That's very helpful. And then just as a follow-up on power engineers, I wonder if you could just comment a little bit more about the timing of these 200 projects that you have out there and sort of what the potential these have for keeping the double-digit growth going in that business. Thank you.

Yeah, look, extremely pleased with the acquisition of power engineers. I've said in previous quarters that There are some transactions that are good to have and some others that are must-do. In our mind, Power Engineers was a must-do transaction that was really propelling us to other stratosphere, to be honest with you. Over the course of the last decade, they've had CAGR organic growth exceeding 10% for the last 10 years. So this quarter, Obviously, without being a surprise, I was pleased to see that at 11%, it continues. And in terms of the synergistic benefits of combining our two businesses together, I think one point mentioning, as I said earlier on in my address, is that close to half of the pursuits that we're pursuing right now are outside the power and energy sector. In terms of timing, look, it's difficult to tell you. I mean, it varies and it will continue to vary. But I think after 90 days, or I should say more 120 days, it's a very, very good start of the marriage of those two firms together.

Thank you very much.

Thank you.

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

Great. Thanks, and good morning. Maybe just continuing on the commentary, Alex, in response to the first question, hoping you could dig in a little bit into sort of the public versus private indications you're getting. On the public side, just wondering, are some of the government customers, you know, national government customers thinking about stimulus? Are you hearing some of that talk if they're worried about the macro? And then on the private side, if you can maybe just give some indication of the type of end markets that are a bit bigger for you on the private side and how are those customers feeling at this point in the macro and the indications you're getting from them. Thanks.

Look, as I said, it's a fluid environment, but things also change very, very rapidly. If I take Canada as an example, I would have argued that... of all the G20 or all the partners, of all countries partnering with the US, at some point in time, I felt Canada was the least well positioned. And today, when you look where Canada stands, I do feel that things have improved dramatically and I'm feeling extremely good about the state of the economy in Canada at the moment. Also, you look at the fiscal flexibility of the country, for instance, In Canada, it's one of the best in the G20, surprisingly. And when you look at the past election, I think that the current elect government is committed to continue to spend infrastructure. So I would say that in the US, in Canada, and I mentioned also in the UK, I feel the public sector, we're feeling good, feeling well. And similarly in the private sector. And as I said, a year ago, going into 2024, we were quite concerned around the UK performance of our operation. And today we feel a lot better, a lot more stability. Election is behind us. Same thing in Canada. Election is behind us. So I would say from a macro point of view, our public sector clients are feeling good. Similarly, in the private side, where I see some changes and differences is really in Australia and New Zealand, where the private sector is doing very well. Our property and building sector continues to thrive. The mining sector, we continue to do very well, so is in the water sector. But clearly, in transportation, we demobilized from very large assignments in prior years. And we have not seen the backlog or the proposal activity level picking up as fast as we would have liked on the public sector side in transportation in Asia Pacific.

Great. And then, you know, there's some commentary about impact on sort of margins and potentially on cash flows from some of the right-sizing initiatives. and APAC and potentially NMEA. If you can maybe just talk about some of the initiatives you took and the path ahead for those two regions into sort of like this or into next year.

Thanks. Yeah, well, the beauty of WSP model is one that is based on diversification, number one, and number two, the fact that we have very few, a very low level of fixed costs in our business. So when I look back in 2010, for those of you who were there back then and following our story, when you look at the downturn in oil and gas in 2014, when you look at the pandemic in 2020 and now, which is again, a very fluid environment, we've always been able to react and course correct the company very rapidly. and take decisive actions to really streamline our business and set our business up for future success. And this time around, Saba is not any different. When we saw the market slowing down in TNI in Australia and New Zealand, when we felt we needed to take some decisive action in China and in Asia, we did. We absorbed the cost. as I said, course correct and set up the business for future success. So this quarter was a lot of that in that region. We absorbed the cost. Do I expect there may be some more? Yeah, probably. We expect some more because it's something that we've been used to be doing in the past when we felt we needed to. But at the same time, we are seeing the backlog growing in those regions and that tells us that the longer term and the medium term, it should be a very good operation, a good region for us.

Thanks very much, Apostle. Thank you.

Thank you. Next question is from Yuri Link from Kanagore, Genuity. Please go ahead.

Hey, good morning, guys. Good morning, Harry. Good morning. Maybe just any color on your conversations with your customers in terms of if you're seeing any kind of delayed decision-making given the macro uncertainty.

Look, not going to sit here telling you that there are no uncertainties that's not true our clients are like you like me wondering and as i said this is a very fluid environment do i feel that it is impacting us directly as a company the answer is no because the work that we do is typically rendered and delivered by our local teams in our respective countries. So I don't have a sense that right now our work is being impacted. But yeah, I mean, our clients clearly are wondering, like all of us, where this will lead us. Having said all that, the proposal activity level in the US continued to be good. In Canada, very strong. Without naming names, we are doing the design for one of the big automotive players in the world in Canada right now, a manufacturing plant. And the answer of that client is they were still committed to Canada. We're not going anywhere and we're going ahead with this project. So I do feel that although there are some uncertainties and it's fluid, At the same time, I have a sense and a feeling that the commitment is still there. So overall, Yuri, I mean, perhaps as we progress towards the end of the year, I will gain more colour. We need to remember that we're only, you know, a month and a half past the Liberation Day. So I think it's still very fluid, but at the same time, at the moment, the signal I'm getting is that, you know, things are good and people continue to deliver on what they said they would deliver.

Okay. A question on the guidance for the full year on EBITDA. There's $50 million between the low end and the high end. You just absorbed 20 of these restructuring costs. You're signaling there might be some more to come. First of all, were these costs contemplated in the guidance? And if not, is it fair not to think maybe the lower end is more likely than not?

No, that's not a fair assumption. They were contemplated.

Okay, and last one. When will these billable days kind of reverse and boost organic growth? Do you know which quarter that would be this year, if any?

Yeah, so what happened in Q1, in part, is Inauguration Day, which was a new federal holiday that we didn't have last year, so that will not reverse. And you should expect a slight reversal in Q4, no movement in Q2 nor Q3. Okay, thanks.

Thank you. Thank you. Next question is from Chris Murray from ATB Capital Markets. Please go ahead.

Yeah, thanks. Good morning, gentlemen. You know, there's been a lot of volatility in a lot of parts the economy, but FX has been moving around a lot. And so a couple of questions on this. First of all, can you just kind of walk us through what your effect assumptions were with respect to your guidance and how that plays out? But then more importantly, just trying to understand if given the volatility that we're seeing, Are there any material currency mismatches, whether that, you know, you're using international design centers versus, you know, maybe North American contracts or anything like that? So anything that we maybe need to be thinking about, and maybe even if you had a chance, maybe touching on hedging policy, that would be great.

Yeah, we, on the last part of your question, obviously, we are operating in more than 50 countries. So So we are edging. We have a partial edging strategy. We need to remember that we have natural edges, given that we conduct the work and the cost associated with our services is typically delivered in the currency where the work is conducted. So of course, at the end of the day, we have a significant natural edge. given our business model. So what we're left with is EBITDA or the free cash flow, depending how you want to think about EBITDA and free cash flow. And typically on this, we are going to partially edge our exposure. We're not in the business of trading currencies and have never been. So our goal is not to make a dime on this. And our goal is to mitigate our downside as well. So we've always taken a very high level approach to all this, which is we chose not to edge entirely our free cash flow. And I'm not going to get into the portion that we decide to edge or not. But high level, that's how we're thinking about hedging. The goal is really to mitigate the downside and to, you know, obviously if things turn into our favor, that's great, but that's not the goal. The goal is really to have a diversified and resilient platform, number one. Number two, in terms of our resource centers, there's no real benefits or FX benefits of any sort in all this. I wouldn't consider that that's something that you need to think of. There's absolutely no real benefit. And in terms of edging, in terms of FX, we do tend to take a view on edging at the time where we present the budget to our board, trying to assess with what we know at the time, the average exchange rate for the following year. And we've been doing that since our IPO for that matter. So there's no really secret sauce around this. We've always been quite practical and pragmatic. Sometimes we get it right, sometimes we don't get as right. And I would argue that we're certainly not any better than economists of the major banks. So we're just trying to be very pragmatic at the time where we present the budget to our board. So there's no really anything to look into here.

And the same approach, Chris, as we release our guidance for the full year, we take a pragmatic approach. As you recall, in February, the effects reality was quite different than it is right now. But we took into consideration various assumptions, including our aging policy, but also a reasonable FX environment that could be somehow sustained and expected for the full year. So there's certainly less upside if you look at it just purely from where the exchange rate has moved, especially with the U.S., But we have taken this into consideration with a reasonable and pragmatic approach as we release our guidance. Okay, that's helpful. Thank you.

And then maybe I'll just ask the tariff question. Generally, this has been on kind of more physical goods as opposed to services, but there's been maybe some movement around services You know, is there anything that you see or any discussions you've had with clients that make you think that you're going to have to worry about any sort of care for exposure? You know, obviously, there may be some inflation pressures on input costs in construction, things like that. But just wondering if there's anything that you see coming down that could impact either professional services or anything of that nature, you know, as you try to work around the globe.

Look, with what I know today and my dealings with our clients today, the answer, and again, very, very pragmatic answer is no. But I don't have access to the Oval Office. Having said all that, Chris, we need to remember that the U.S., with all of its partners, when you look at services, not physical goods, as a trading surplus. And that's not really discussed in the headline news, but around the world we need to remember that the US economy has transformed itself over the last 100 years to be a services industry. So they have a trading surplus with most countries around the world from a services point of view. Is he going to or is the president going to choose to look into this? I don't have a good answer for you. I can only work with what we can control. And right now, as I said, the beauty of our model is that the work that is conducted in the U.S. is conducted by U.S. citizens and paying taxes in the U.S. and providing revenue. to the U.S. government. So we'll see where it leads us, but at the moment, I'm not overly concerned now. All right. That's fair. Thank you, folks.

Thank you. Next question, that's from Krista Friesen from CIBC. Please go ahead.

Hi. Good morning. Thanks for taking my question. Good morning, Krista. Just one on APAC. Sounds like you're encouraged by the backlog that you're building there. Just wondering if you can speak to the timing in terms of how you're expecting that to translate into maybe a little bit better growth than what we saw this past quarter.

Look, it's embryonic. It's anecdotal, I would say, at the moment. I mean, it's the first quarter where we saw good growth and increased proposal activity level. Admittedly, last year in New Zealand, we thought that the government, the new government, would start spending money much quicker than it did. So I'm a little bit, I just don't want to get ahead of myself in giving you an answer like H2 is going to be much better. I'm not prepared to do that. I'd like to give myself the benefit of a bit more time to see what Q2 will look like if we're seeing our backlog increasing again. And we are seeing more signals from governments that they're willing and ready to spend. What really took place in New Zealand was quite extraordinary. Everything stopped. on the back of the election and now we're a year and a half later and we are seeing some sign that the government is committed to be spending money. And I've spoke to the chief economist of the main bank in New Zealand, a lot of fiscal flexibility in New Zealand. So the concern is not the economy, the concern is not the ability to spend, I think what has been the issue is the choices that have to be made and how the capital will be allocated. So do I have an optimist view in the medium to long-term view for the region? Absolutely. It's been an incredible region for us, but there's been some elections, there's been a change in priorities and we just need to go with the flow. And that's why we have not been afraid to take some decisive actions. But are we committed to the region longer term? Absolutely, no doubt about that.

Thank you. That was great. I'll pass the line.

Thank you. Thanks, Christophe.

Thank you. Next question is from Benoit Poirier from Desjardins. Please go ahead.

Yes, thank you very much. Good morning, everyone. First question, now that the two elections are over in Canada and the UK, Alex, do you think we could see even an acceleration in organic growth given the strong backlog that you have right now?

Look, my gut instinct is yes. but I don't have anything to hold my, it's very difficult to hold my hats on, hang my hats on anything at the moment. It's quite fresh, but just my gut feeling is yes. I think that clearly the Carney government In order to improve productivity, there's no doubt, Benoit, we're going to need to improve the state of our infrastructure. If we want to attract foreign investment, there's no doubt we need to improve the state of our infrastructure in the country. So I like to think that there's a real commitment behind that. Clearly, one fantastic news, if we can say that there's anything positive in the fluid environment that we live in, is really there seem to be unity amongst all the provinces to lower down the tariffs amongst and between the provinces. So that will give us, I believe, a real opportunity to do some goods for the country. And the same thing in the UK. I think the Labour Party is committed to infrastructure spending, historically has been a great business partners to partner to WSP. So, as I said earlier on, we feel better 12 months later than we were feeling last year at the same time. I mean, we feel that we are operating in a more stable environment now that the election is behind us and we're feeling good about where we are positioned at the moment in the UK.

Okay. And could you talk, Alex, a little bit about the progress achieved with Microsoft so far since the big partnership announcement announced at your investor day?

Yeah, it's progressing extremely well. Obviously, I don't want in a public forum to provide our cake recipe to the world, but I can tell you that We have a number of streams that are ongoing right now with a number of clients zero, meaning that we've already engaged with clients, one or many clients in specific streams. And Microsoft, WSP, and those clients have worked jointly to really develop a new way of working in a digital offering. I'm quite encouraged by the progress that has been made so far. So I'm feeling, I'll be honest with you, I'm very excited about if there's one aspect of our strategy that I'm extremely excited about, that would be probably top of mind at the moment.

Okay. Thanks for the time.

Thank you so much.

Thank you. Next question is from Michael Topham from TD Cowan. Please go ahead.

Thank you. Good morning. Good morning, Michael. Good morning, Michael. Just firstly, regarding the roughly $20 million of rightsizing costs incurred in your APAC and EMEA regions, I'm wondering if you can break that down across the two regions. And secondly, it wasn't completely clear to me, at this point, is there an expectation on your part that there will be further rightsizing costs over coming quarters, or is the current expectation that this is it for now?

Yeah, I think the way I would answer that, Michael, is in the outlook that we provided at the beginning of the year, we knew the work that we needed to undertake. Therefore, whether we incur more costs or not in the future quarters is somewhat irrelevant because it's provided in the outlook and it's already included in the outlook that we provided. So the answer is, do I expect more? probably yes, but it's already included in the outlook. So the outlook that you've been provided with, and I think I've answered that question with another colleague of yours not so long ago, is already embedded in the outlook that we provided. So we're feeling confident and very good about the outlook that we have, number one. And number two, like your first question was, the split between AMIA and I would say that a bit more than half than what we incurred in the quarter was in APAC. That's the way I would answer it.

Okay, I appreciate that. And I do appreciate that it's been provided in the, as you previously mentioned, in the in the overall outlook you've given. I guess the reason I was asking is, and we can try to back into this, but to the extent that there are further right-sizing costs, this will weigh on margins in the future quarters within certain regions. But I guess we can try to back into that based on the full year.

No, I understand. I understand. I think the way I would answer this is that I don't expect more than what we had anticipated. So if you look, and you remember that I've said never look at our margin profile on any given quarter. The life cycle of our projects are way more than 90 days. Oftentimes, the average life cycle of our 200,000 life projects are more than 90 days. So I'd say over the course of this year, At this point, I'm clearly not anticipating anything more than what we were planning in the first place when we disclosed the outlook to you. So when you look at the midpoint of our outlook, you are seeing margin improvement, and I continue to believe we will deliver to you margin improvement this year.

Got it. Secondly, at your recent investor day, you talked about putting an increased focus on

term initiative but wondering if there's any update in terms of developments so far on that front well at the invest today we talked about six five six seven high select growth area advisory is one of them but I can tell you that right now we have six seven different streams working specifically on those high select growth areas so uh so advisory is progressing well it's early days right that's the first quarter of a three-year plan uh but uh clearly uh when we identify those six seven uh high growth area uh we we really believe that that longer term and medium term this will pay off and and we continue to believe that at this point perfect um and then just lastly there

There hasn't been any discussion yet on the call about potential future M&A opportunities. I'm wondering if there's an ability to provide a bit of an update on the landscape and specifically, I guess, curious to understand in part if the current macro uncertainty that exists is having any kind of an impact on the acquisition opportunity set at this time.

Yeah, if you recall, the last quarter I said the worst that the worst thing that can happen for an M&A environment to be prosper is to have instability and a lack of visibility into the future. And I was not expecting what we've seen in the first quarter, but it looks like what I've said has proven to be right and with a bit of luck. Uh, so yeah, I, I know, uh, I have a very, very good understanding of the MNA landscape in our industry. And I know the players that either are going to move or would like to move, uh, but it's just proven to be a very, uh, unstable environment at the moment. So, so I think a lot of players are on the sideline and are waiting for good conditions, uh, to, to, uh, to come back to, to look at, um, taking actions. Nobody wants to sell at a discount, uh, Michael, and nobody wants to, uh, get, uh, get an asset for sell in a, in an environment where, uh, the environment is not, um, prosper. So, uh, do I think that things have shifted to the right a little bit? I think so. Uh, I could tell you I think H2 will be better, but the answer is I don't know. I really don't know. One thing you should know is that WSP, we will continue to be very disciplined. In the past, we have found ways to be opportunistic in difficult environments, and I don't believe this time will be any different. If we have an opportunity to and we see a way to create shoulder value for our shoulders, we will. We're clearly open for business. We have a very strong balance sheet supported by strong long-term investors in our stock. And in the right circumstances, I think the opportunities will come our way. We just need to be patient. Perfect. I appreciate the time. Thank you so much. Thanks, Michael.

Thank you. Next question is from Jonathan Goldman, Scotiabank. Please go ahead.

Hi, good morning, team, and thanks for taking my questions. Good morning. Most of them have already been asked, but I just had one kind of a high-level question. I was wondering if you had a chance to look at Trump's proposed mini-budget and if you had any takeaways for the IIJA or infrastructure spending in general in the U.S.

Look, yes. The answer is yes. I've seen it. I've read it. I'm aware that a number of Republican congressmen would like to amend this. Longer term, I don't know what the shape of the funding will look like. The one thing I know is that both the Republican Party and the Democratic Party are both committed to infrastructure spending. You cannot... If... If the real team and the real thesis is to repatriate the manufacturing industry into the US, you're going to need roads, you're going to need bridges, you're going to need power, you're going to need water, you're going to need all of the above to be successful in attracting foreign investment. And my understanding is the president has already announced many trillion dollars of investment in the country. So in order to be successful, you need to have a strong state of infrastructure in the country. So I don't know what the shape will look like and whether the president will amend the past president program. But the one thing I know is the underlying trends are strong. and are supporting this industry. And I'm highly confident that the US would continue to invest in infrastructure. No doubt in my mind.

Interesting. That's good color and maybe following on to that. Have you seen any inbounds related to reshoring manufacturing to the US so far?

I think, frankly, it started prior to this year. We have seen a lot of semiconductor companies trying to reshore. not trying, but have committed to build manufacturing plants in the country. So we have seen that. Some projects we have won, some others we have lost. That's part of life. But the point is, yeah, we have seen some of that in past years and quarters. Interesting. Thanks for the color. I'll get back in queue.

Thanks, Jonathan.

Thank you. Next question is from Maxim Suchov from NBS. Please go ahead.

Good morning, gentlemen. Alex, I was wondering, given the oil volatility and some of the news we're getting from the Middle East, in terms of, I guess, what makes WSP's business more resilient and different versus maybe some of the others in this region? Thanks.

Look, we've been, and you're talking specifically about the Middle East, Max? Yeah, if it's possible, yeah. Yeah, okay. So look, we have been in the region for 30 years, way before the acquisition of WSP by Geneva in 2012. So we are now, I would argue, part of the family in the region and have been in the region for so long. And we have built an incredible brand in the regions. We are by far the number one player, for instance, in property and building. So if you look at the skyline in Dubai, I mean, WSP has been designing or touching more building than any other players in the region. So we have been present. We are doing today the Guggenheim Museum. We have been involved and are involved with the Louvre in Abu Dhabi. So all the iconic projects in the regions. We have Dutch and Saudi Arabia. We're working with most of the large hotel developers around the world, American and others, developers around the world, so in the region. So we are working with a top tier blue chip list of clients in the regions. We have taken a very prudent approach as well to the region. We have been very selective in the projects that we are undertaking. And I would say that we are well positioned And I look at where we were when I started to visit the region in early 2010 and where we are today. I've seen a massive change in our client list. I've seen a massive change in our profitability. And I also have seen a massive change in our payment terms. So I think it's a real testament of the credibility that we have been able to build in the region.

that's good color thank you so much and then i like uh quickly um just a quick question around the factoring um do you mind maybe touching on sort of you know the benefits in terms of um you know increasing the velocity of ars and so forth so maybe any data points there would be great things yeah it's uh it's one of our the tool that we have in our toolbox uh to manage our working capital the the main benefit is a a

It's an arbitrage on financing costs. We've got a good deal, and this has been helpful in reducing our financing costs by getting our money faster, reducing our debt. So that's the purpose, Max.

Okay, excellent. That's it for me. Thank you so much. Thank you.

Thank you. Next question is from Devin Dodge from BMO Capital Markets. Please go ahead.

All right, thanks. Good morning. Good morning. So Canada and the U.S. generated the strongest growth for WSP in 2024. It seems like something similar playing out early this year. Obviously, there's a lot of geopolitical uncertainty right now, but from what you see today in the firm backlog, soft backlog, projects and procurement, where are you most optimistic about growth prospects and call it over the next six, 12, 18 months. I know you've touched on some of this already. I'm just trying to get a sense if you expect North America to continue to lead the way or if growth will be more balanced across the regions as we think about the second half of 25 and into 2026.

To try to be as clear as I can be, I expect North America to continue to lead the way in 2025. Obviously, there are some pluses and minuses. Last year in Q4, we had a lot of FEMA activity, if you recall, in H2 of last year. Whether the hurricane season will be any different this year, I cannot tell you with certainty. I don't have a crystal ball, so we'll see. We'll see. I can think of that being a plus or a minus going into H2. We don't know that. But when I look at the more recurrent business that we have. Obviously this year power engineer is not going to be recorded as organic growth, but I'm feeling extremely good about our power engineer acquisition and the underlying organic growth that will be recorded this year as acquisition growth. And I'm feeling obviously good about all of our other sectors. I feel that we've had a very good start of this year. And I expect it to continue. And Canada, look, 7% organic growth in the first quarter was very good. And now that we have the election behind us, I feel even better now. And so let's see what the future will look like. But so far, so good.

Okay, good color there. Second question. We think of WSP as being a builder. So when we see that you divest some operations, it always seems to stand out a bit to us. So we recently saw that you sold part of your German operation to a publicly traded peer. Can you provide some context for what drove that decision to sell?

Well, you know, we are clearly a builder. If you look at our track record in the last 10 years, I like to think we're a compounder and are creating value. And like a fund manager, when you want to create shoulder value, you buy, but there are some times where you feel that perhaps this asset is no longer core to your portfolio and you see it as an opportunity to afloat the assets. Are there many pieces in our puzzle that I would like to divest at the moment? The answer is no. That doesn't mean it won't happen in the future. But I think that's what should give you some great comfort that WSP, we're quite pragmatic management team. And if we feel we're going to be better off buying or better off selling, we're not sentimental. We'll do what's right for the company and we're going to do what's right for our shareholders. And in this instance, we felt that this piece of the business is going to be difficult to grow in Germany. And we've always been clear in our strategy, if we are going to enter a geography or a sector, unless I have strong conviction that we can be a top tier player, I have no interest in staying in that market. And in this instance, I concluded that it would be extremely hard for us to compete with the large German player in that space. And therefore, I said, let's exit. There's nothing more to it than what I just described.

Okay. Great comments. I appreciate it. I'll turn it over. Thank you. Thank you.

thank you and the last question today is from ian gillies from steeple please go ahead morning everyone morning just a quick one from me i was just hoping to get a bit of an update on the water business and maybe key fast more specifically you know it's a business that was obviously growing quite quickly i suspect it still is but it's been a bit been a little while since we've got an update on that part of the portfolio

It's been an area of focus for us and has been for the last so many years and will continue to be. I just announced one award over the next 10 years with the Department of Defense. So we're feeling very good about this market. We've experienced tremendous organic growth in recent years and I expect that to continue. If you look in the NR ranking, the way we moved up and how quickly we moved up in recent years, I think it's a testament of what I just described. I think we've made tremendous headways in the last few years, and I expect in this drought plan to continue to do so.

Okay, I'll just leave it there. Thanks very much.

Thank you so much.

Thank you. And there are no further questions, so I will hand back to the speakers for any closing remarks.

Well, thank you so much. There's been, as I said, a very interesting start of 2025 and a very fluid environment. But as I said before, you know, WSP, we are focused on what we can control and are not afraid to course correct when we feel we need to. We have a very resilient platform, diversified platform. And we feel we have all the tools in our toolbox to be successful and create shoulder value. So I look forward to updating you as the year is progressing. And we'll talk next in Q2. So thank you very much. And I wish you all a great, great day. Thank you.

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