WSP Global Inc. (WSP) Earnings Call Transcript & Summary

[Foreign Language] Good day, everyone, and welcome to the 2020 Annual Shareholder Meeting of WSP Global Inc. For the first time in the company's history, we will be holding this meeting virtually. The decision to hold a virtual meeting was made in an effort to contain the spread of the COVID-19 pandemic and to prioritize and support the well-being of all our shareholders, employees and other meeting attendees in line with public authority recommendations. I wish to thank you all for joining us here today and adapting to this new format. Hosting our annual shareholder meeting virtually allows us to give an equal opportunity to all our shareholders to participate in the meeting regardless of their geographic location. Joining me on the webcast today are Pierre Shoiry, Vice Chairman of the Board of WSP; Alexandre L'Heureux, President and CEO of WSP; and Philippe Fortier, Chief Legal Officer, Corporate Secretary of WSP. Also joining us virtually today are the other Board members of WSP, all of which are nominee directors for this annual shareholder meeting. They are Louis-Philippe Carrière, Linda Smith Galipeau, Birgit Nørgaard, Suzanne Rancourt and Paul Raymond. As this is the first time we are holding a virtual meeting, I would like to provide you with some general remarks on the conduct of this meeting. Please note that we have until 12 p.m. Eastern Time to conclude all matters intended to be covered at this meeting. During such time, we will first hold the formal part of the meeting, followed by a brief presentation by Alexandre, and we will conclude with a question period. Should we encounter any technical issue, and we are unable to proceed with the meeting, please be advised that the notice of the annual shareholder meeting has been properly sent to shareholders, a quorum is present, all matters to be voted upon shall be deemed to have been properly put before the meeting, and the meeting will be adjourned. If we adjourn the meeting before the polls are closed, we will keep the web portal open until 12:00 p.m. today to receive votes to the extent it is possible. The meeting agenda contains 5 matters to be voted on during the business part of the meeting, and they are as follows: one, presentation of the audited consolidated financial statements of WSP for the year ending December 31, 2019, and the independent auditor's report thereon; two, election of each of the nominee directors who will serve until the end of the next Annual General Meeting of the shareholders or until their successors are appointed; three, appointment of the independent auditor of WSP for the forthcoming year and the authorization to the directors to fix the independent auditor's remuneration; four, consideration and approval in a nonbinding advisory capacity of the approach to executive compensation policies. And five, consideration of such other business, if any, that may properly come before the meeting. Please note that you will be able to vote on each matter throughout the formal part of the meeting, by casting your vote on the right-hand side of your screen. After we conclude the formal meeting to be conducted -- sorry, after we conclude the formal business to be conducted at the meeting, we will close the polls. [Operator Instructions] Questions pertaining to the business conducted at the meeting will be read allowed at the end of such formal part. All other general questions will be addressed during the question period. If we receive similar questions through the web portal, we will combine them into one question. [Operator Instructions] As always, the meeting will be conducted in both English and French. Consequently, questions can be submitted in either language. Any questions that we do not get to during the time available will be addressed on our company website under the 2020 Annual Meeting of Shareholders page found in the Investors section. Please note that during this meeting, we may be making some forward-looking statements, and the actual results could be different from those expressed or implied, and we undertake no obligation to update or revise any of these forward-looking statements. To hold the formal part of this meeting in French, I have asked Pierre Shoiry to chair that part of the annual Shareholder meeting. But before I hand over to Pierre, please allow me to make a few remarks. The world has changed in the last couple of months. Every day, this ongoing COVID-19 crisis brings a different set of challenges, considerations and a swirl of new what-ifs about what our world will look like tomorrow, next week, next month, next year. As a global community, we have all been impacted by this health crisis. And before I go any further, on behalf of WSP, I would like to thank our health care professionals and other vital frontline key workers who are working so tirelessly to keep us safe and healthy and for their extraordinary courage. From the onset of this crisis and as it continues to evolve, our top priority is ensuring the health, safety and well-being of our employees. During my 40-plus years career, in this industry and in watching WSP evolve through the generations, I have seen my share of disturbances that have impacted our industry, business and economies. However, we are -- this is different. It is different with the uncertain dynamics presented by the current situation. In most of WSP's major hubs, many of our services and many of our projects are considered essential. In addition, drawing on our vast range of experience, our experts are being mobilized to help our clients and communities respond to the unique challenges posed by this epidemic, to which Alex will provide some additional color a little later. On behalf of the Board, I would like to thank our people for continuing to fulfill WSP's role and purpose during these unparalleled times, while juggling complex demands in both their professional and personal lives. Whether they are working remotely or continuing to work on site, our professionals have remained focused on providing excellent client care with compassion to the benefit of the communities in which we operate. I would also like to thank our management for distinguishing themselves as they work through this fast-evolving crisis. Given the breadth and scale of WSP's diversified business model, there are a multitude of different realities to navigate geographically and operationally, which, in themselves, provide our resilience and opportunities. WSP entered this crisis in a strong position. And with Alex and his management team, we have the leadership needed to come out of this pandemic on the other side, an equally strong organization. The people and leadership of this company have made WSP into a global leader it is today. Following the presentation of our 2019 to '21 global strategic plan back in January 2019, we successfully continued to strengthen our organization across all our foundational pillars in view of attaining our ambitious objectives. If you haven't done so already, please do read our 2019 annual report, which demonstrates the fortitude of our client relationships and local knowledge through the featured projects, how the company ranks favorably in our industry and how we advanced several of our leading initiatives such as our sustainability agenda, which is now more relevant than ever. For example, last April, WSP committed to supporting the United Nations Global Compact, a voluntary initiative to promote sustainable development and good corporate citizenship. We also strengthened our sustainability governance at the Board level in 2019 and remain committed to our nonfinancial objectives to ensure that WSP operates in harmony with sustainability principles. Our continuing mindfulness of these issues and efforts to strengthen the organization in these ways create value for all stakeholders as well as trust in our accountability. Whilst we recognize the challenging conditions in the world today and the uncertainty that lies ahead that may impact our strategic ambitions, we are pleased that our business continues to perform well during the first quarter of the year, as can be seen from the results that we released yesterday. This is directly attributable to the resilience we have built over the years as our diversified international consultancy, providing a full range of professional services to a wide varying range of clients. Moreover, the Board is proud to govern a company that continually strives to remain professionally alert, flexible and prepared for changes as they arise. It remains committed to providing shareholder value and achieving this with high standards of corporate governance practices in an ethical, sustainable and safe working environment. It exemplifies its guiding principles underlying the pillars of the strategic plan that I've referred to earlier. Before I turn now to Pierre for the formal part of this meeting, I would like to thank him and the other Board members for their continued support and dedication to WSP during these complex times. I would like to reiterate our thanks to the leadership team and all our employees around the world for their resilience and steadfast devotion to the work that they do to shape the collective future of our clients and communities, which at this time is truly evolving. And finally, to our loyal shareholders, thank you for your trust. Your confidence and vital support during this time provides a solid base from which WSP will persevere and grow. Thank you very much, and now to you, Pierre.

Thank you, Chris. [Foreign Language] Back to you, Chris.

Thank you. Merci, Pierre. Before we move on, I would like to thank our shareholders for putting their trust in us and reelecting us as Board members for an additional year. We will spare no efforts to meet and even exceed your expectations. And it is now my pleasure to ask Alexandre to speak to the meeting. Alexandre?

Thank you, Chris. [Foreign Language] Good morning, and thank you for joining us today for our first ever virtual Annual Shareholder Meeting. [Foreign Language] As we find ourselves in these unprecedented times, I would like to first take a couple of moments to provide an overview of WSP's response to COVID-19. I would like to begin by echoing Chris' sentiment regarding our first responders and frontline workers. We thank you. Your tremendous dedication and relentless spirit during such challenging times. And of course, a sincere thank you to our employees for exemplifying resilience in the face of this pandemic and its incomparable global challenges. Since COVID-19 first affected our Asian operations, specifically those in Mainland China and Hong Kong, and then spread globally in the first quarter of 2020, our top priority has always been and remains to ensure the safety of our people, our clients, and the communities within which we operate in addition to doing our part to slow the spread of the virus. As the global response to preventing the spread of COVID-19 quickly extended to stay-at-home government orders, our comprehensive business continuity plans were put into action, allowing our people to access the technology tools and infrastructure necessary to continue to serve our clients and communities remotely without disruption. To date, we have close to 45,000 employees who are working remotely. Our teams have quickly shifted and embraced the digital approach to deliver projects and pursue new assignments, leveraging existing connectivity and collaboration tools. As Chris mentioned, in most of our major hubs, many of WSP's services or projects are considered essential. Consequently, the work that some of our employees do on job sites and in communities is continuing. On site, employees follow strict safety protocols, while they perform their critical work, including the additional consideration for social distancing. The COVID-19 pandemic is presenting unparallel challenges in modern times. From the health implications of the viral outbreak to the shortage of equipment facilities and supplies to handle its spreads, to associated impacts to communities, businesses and economies, our societal resilience is being tested on many fronts. Drawing on our health care expertise and vast experience providing emergency management services, we are proud that our teams are able to provide critical support to help keep our communities healthy. From advising on health care clients on the creation of isolation wings, temporary quarantines facilities and modular expansions, to working on-site at regional emergency operation centers, we are mobilizing our experts across the world to help clients respond to the unique challenges posed by this dynamic. For example, close to WSP headquarters in Montreal, members of our team are working on a project for an emergency isolation room expansion of the Maisonneuve-Rosemont Hospital. In the United States, our team is supporting the U.S. Postal Service for the complete facility sanitization of the Westchester, New York Mail Processing & Distribution Center in addition to responding to multiple calls for disaster response services at sites across the country as part of our contract to help maintain USPS operations in the face of disruptive emergency events. At the onset of '19, we shared our 2019-2021 global strategic plan, setting our ambitions across our 4 foundational pillars, namely our clients, people and culture, operational excellence and expertise in view of becoming the premier professional consultancy in our industry by the end of this cycle. The strides we have made across these pillars during the past years -- the past year, I'm sorry, have allowed us to continue to strengthen our platform while further fostering our ability to be agile and responsive. Consequently, we have entered 2020 and accompanying uncertainty with a very strong company and business model, which allows us to focus our efforts on seamlessly supporting our clients today and into the future. I will now elaborate on these pillars in further detail, starting with our clients. The value we bring to our clients is anchored in our ability to help them face current challenges as well as the ones to come. This resonates stronger than ever before as the world we know is changing at an unprecedented rate. However, our purpose to future-proof our cities, communities and the environment remains. Through our future-ready program, the advice we offer our clients allows them to see the future more clearly through key trends in climate change, society, technology and resources, further reinforcing our commitment to providing innovative solutions designed to lead the transition to a low carbon, resilient and prosperous economy. In 2019, the future-ready program was operationalized in the U.S., Sweden, Norway, Finland and Denmark, bringing us closer to our 2021 ambition to have the program executed globally. As we navigate through these challenging times, we look forward to bringing our clients our future-ready thinking and capabilities as their partners and trusted advisers. I would like to reaffirm our commitment to being operationally resilient and our continued focus on project delivery and meeting the needs of our clients and communities during this pandemic. One of the ways to achieve this is to facilitate collaboration and communication across our organization. Last year, we worked with our expert to enhance our knowledge sharing and collaboration platform to enable our professionals to consistently bring our best expertise to bear across all of our projects. Our new and improved practice area networks platform was successfully launched across the organization at the beginning of 2020, ensuring that our technical excellence is not limited by geographic location, mobility or time. In today's environment, with most of our workforce working remotely, this platform serves as an efficient tool for staying connecting and collaborating digitally. Next on our people and culture. While our reputation is made up of the exceptional work of our professionals and their unwavering dedication to our clients and communities, providing an environment for our people to deliver on their full potential is at the core of our people and culture strategy regardless of where our people are located. One of the ways to provide this environment is through the right leadership. 2019 has seen some changes within the global leadership team to ensure that it is where it needs to be to lead our people with passion and deliver on our strategic ambitions. Managing a business through a pandemic involve significant challenges. However, I am confident that the global leadership team we have today will guide our people so that we can come out of this pandemic on the other side, equally as strong. Moving on to our operational excellence pillar. As previously mentioned, WSP has entered 2020 in this crisis in a strong position. This is also attributable to our strong financial performance and balance sheet for '19, which placed us on solid footing as we entered this year while delivering significant return to our shareholders. Highlights include 14.4% growth in our net revenue, which stood at $6.9 billion for the year, in line with our 2019 outlook. Consolidated organic growth in net revenues stood at 3.5%, spanning across all reportable segments. In addition to our backlog of $8.1 billion, representing 10.6 months of revenues, we reported an adjusted EBITDA of $1 billion and adjusted EBITDA margin of 15.1%, reaching the high end of the 2019 guidance provided. In terms of the other metrics, we were pleased to report that days sales outstanding, or DSO, continued to decrease and reached 74 days at the end of '19, a 2-day improvement compared to 2018. Our free cash flow for the year came in at $441.6 million or 154% of net earnings beyond our cash flow conversion target of net earnings. At WSP, we take our responsibility for sustainable leadership very seriously, not only in the advice we provide to our clients, but also in our own operations. In '19, we continued to push to the forefront of sustainable transformation, ensuring that the principles we believe in run a common thread through our activities. In addition to WSP's commitment to the United Nations Global Compact that Chris mentioned, 2019 also saw the establishment of an internal task force to achieve the GH -- reduction targets we set out in our strategic plan, comprised of key regional and global leadership. Additionally, this past February, WSP became the first professional services firm in the Americas to secure sustainability-linked terms to our syndicated credit facility, further demonstrating our commitment to deliver on our sustainability ambitions. Lastly, on to our expertise. Growth has always been part of our narrative, whether organic or acquisitives, and naturally, it has a part to play in our 2019-2021 global strategy. Our growth strategy has never been about being the biggest, but rather about how we can create additional value for clients, people and shareholders through an increasingly diversified resilient platform that is better equipped to handle volatility and evolving clients' demands. In 2019, we strengthened our existing capabilities and expanded in new geographic regions with [ Ecol ], which not only strengthen our expertise in the environmental sector but also expanded our geographic presence in the U.S. both identify as areas of growth in 2019-2021 global strategic plan. I would also like to point out that since we announced our global strategy in January of '19, we have added 1,470 employees to our environment platform, representing approximately 16% growth in head count since 2018. Once again, I would like to welcome all of our new colleagues to the WSP family. As the full impact of this pandemic remains unknown, we do not believe that our diversified business model from both a geographic and sector standpoint, our strong balance sheet and regionally empowered leadership model should place us in a solid position to face these continuous challenges head on. And I should say we do believe at our diversified business model. Regarding our financial performance to date, I will not go through our first quarter in detail as we held a quarterly conference call earlier today. However, I will reiterate that we are pleased with the underlying operational performance of our regions as we posted positive organic growth. We generated EBITDA margin in line with our expectation. We experienced strong backlog growth, good cash flow collection and finished the quarter with a solid balance sheet. This performance was still possible despite having one less billable day in the quarter, the impact of the pandemic on our Asian operations, the economic and political uncertainty faced by U.K. operation resulting from Brexit, the adverse direct, indirect impact of our Western Canadian operation following the significant drop in the price of the barrel, all of this occur against the backdrop of the global spread of COVID-19, which resulted in extreme market and currency volatility. As many of our projects and services in our major hubs are considered essential, we have maintained good productivity levels to date, and our clients have generally remained committed to their projects, particularly in the public sector. Since early March, we have started to see improvement in our operation in Hong Kong and Mainland China, which were first to be impacted by COVID-19. As the world gradually begins to reopen businesses as governments stay-at-home orders begin to be lifted, we will monitor market dynamics and leverage best practices from our Asian operation as we work through regional plans to reoccupy our offices. Even though some of our ambitions under our 2019 and 2021 global strategic plan may be impacted, it remains premature to reassess them at this time. As I mentioned earlier this morning, during our Q1 results call, regardless of our global -- regardless of global market dynamics, the underlying principles of our strategy remain very relevant. First, our clients remain at the center of everything that we do. Secondly, we will strive to provide an environment where our people can deliver on their full potential. Third, our aim remains to be a top-tier player in every sector in which we operate as the partner of choice for our clients. And finally, we will continue to build upon our diversified resilient platform regardless of the current environment, all in view of becoming the premier consultancy in this industry. At WSP, we are driven by one question: can we help societies thrive in a world we do not control? The need to help our clients and communities prepare for rapidly changing future and unforeseeable events is at the core of who we are as a company. We share this concern, and more than ever, we know our role. Our experts have continued to exemplify their agility and commitment to delivering solution in an ever-changing environment. I would like to thank the Board for their support and guidance during this difficult time. And I would like to thank our clients and shareholders for their continued support. Our success and ability to come out of this can only be reached through the diligence, passion and commitment of our leaders and employees. I once again thank you for your unwavering dedication and commitments to our clients, our communities and our great organization. Mr. Chairman, up to you.

Merci. Thank you, Alex. Now we would like to open up for shareholder questions. We will start by reading aloud and answering the questions received through the web portal. [Operator Instructions] Please note that we will attempt to answer as many questions as possible within the allotted time. Any questions that we do not get answered during the time available will be addressed on our company website under the 2020 Annual Meeting of Shareholders page found in the Investors section. [Operator Instructions] If we receive similar questions, we will combine them into one question. Your questions should be addressed to the CEO, who will answer, or redirect it as necessary. Thank you.

Thank you, Chris. It appears that no questions have been received through the web portal. I will now take questions from shareholders through the phone line. [Operator Instructions] I would now ask the operator to open the line, please.

[Operator Instructions] And there are no questions over the phone at this time.

Okay. We just received, I think, a question here. I don't know the name nor do I know whether it's a shoulder or proxy holder, but why is WSP sustainability commitment a 25% reduction in GHG emission for '18 to 2030 when the UN IPCC recommends a 45% reduction over this time frame. What is the company's transition plan to pivot away from fossil fuel industries? The question was from [ Will Nash ]. Thank you, Mr. Nash. Look, we are making lead steps into our sustainability commitment, and we have said at the beginning of '18, a 25% reduction in GHG emissions. But that doesn't mean that we are not going to devote and increase this percentage to a higher number as we progress between 2018 and 2030. So clearly, this is our goal. We want to be a leading firm in the space, and we've made great strides already. And I just -- I mentioned a number of initiatives that we were able to deliver in '19, and I will continue to make effort to increase this and to raise the bar as we progress through our number of our future strategic cycle. The next question that I think you asked, what is the company's transition plan to pivot away from fossil fuel industries? Well, we are already -- we have over the years, expanded our horizon in a number of other industries. As noted today and previous annual meetings that we've held, we expanded in transportation. We expanded in a number of different end sector and reduce over time our dependency to fossil fuel industries. Having said that, this is a very relevant industry in the Canadian context, and we are here to serve the clients to the best of our capabilities and capacities. Clearly, we're also playing a major role in renewable energies, and we are doing that not only in Canada but around and across the world. So we like to think that we are trusted advisers to our clients. And we are here to deliver the best services possible to our clients. And that's our aspiration. But over time, indeed, we have reduced in Canada oil and gas exposure in terms of services to less than 5%. Ladies and gentlemen, it appears that there are no more questions. I will now turn it to our Chairman to conclude this meeting, and I once again thank you all for your continued support. Mr. Chairman?

Merci, Alex. We thank you very much for attending this first ever virtual annual shareholder meeting. As we navigate this uncharted landscape, I am very confident that given WSP's legacy, drive to challenge the status quo and determination in the face of any adversity, we will find ways to continue to grow as an organization. And I look forward to seeing you all in person at next year's Annual Shareholder Meeting. Please stay safe, stay healthy. Thank you. Merci.

This concludes today's conference call. You may now disconnect.