WSP posts rosy Q3 revenue and backlog, increases guidance

Dive Brief:

  • Engineering and design giant WSP reported a profit attributable to shareholders of $95.4 million ($127.5 million CAD) for the third quarter, down 9% from the same period last year. The Montreal-based firm posted a revenue of $2.17 billion, up 9.3% year over year, and non-GAAP earnings per share of $1.19 — both beating analysts’ expectations, according to Seeking Alpha
  • The company’s backlog stood at $9.93 billion, up 15.2% from the same period in 2021. WSP has also grown its workforce by about 10,500 people in the past year, roughly two-thirds of whom are from acquisitions and the rest from organic hiring. 
  • “The third quarter results are slightly ahead of our expectations,” WSP CEO and President Alexandre L’Heureux said during a Thursday investor call. “I am very proud of our performance. We had another good quarter with great achievements on many fronts, including a recent reduction in turnover and continued success at increasing our headcount to support our growth journey despite a tight labor market.”

Dive Insight:

WSP adjusted its financial outlook for the year, with increased net revenues now expected to range between $6.58 billion and $6.67 billion. Adjusted EBITDA is now expected to range between $1.13 billion and $1.15 billion. 

The firm’s adjusted EBITDA for Q3 stood at $304.4 million, up 7.8% year over year, and it declared a dividend of 28 cents per share. Its total liabilities, which include debt as well as other obligations such as outstanding retirement benefits, has risen in Q3 to $6.47 billion, an increase of 31.4% from the same period last year.

In the call, L’Heureux highlighted two notable recent project wins. WSP and its partners FXCollaborative Architects and John McAslan + Partners were selected in September to completely redesign Penn Station in New York City. The firm will also provide environmental, health and safety services for various Boeing sites around the world.

L’Heureux also pointed to a series of awards and accolades the firm has nabbed recently, including the No. 1 spot in ENR’s 2022 Top 225 International Design Firms list and Environment Analyst’s Top 100 Environmental & Sustainability Consultancy Firms for 2022.

Buying spree continues

The company continues to emphasize mergers and acquisitions, and since June, it has closed on six businesses, according to L’Heureux. Most recently on Oct. 2, WSP announced the acquisition of Providence, Rhode Island-based structural engineering firm Odeh Engineers

In September, WSP completed its largest acquisition, of the environmental and infrastructure arms of UK-based John Wood Group for $1.81 billion, and also brought on two U.K.-based Capita businesses focused on real estate, infrastructure and environment in September. Earlier this year WSP bought Australian hazardous materials and risk management firm Greencap Holdings and Spanish architecture and engineering firm BOD Arquitectura e Ingeniería

“These acquisitions support our regional and global ambitions by reinforcing our service offerings in key sectors and strengthening our presence in key geographies,” said L’Heureux. “Our M&A activity demonstrates our opportunistic and disciplined approach to acquisition, and we do not see the future to be any different.” 

The firm had also planned to purchase British consulting firm RPS, but after Pasadena, California-based engineering firm Tetra Tech made a bigger offer, WSP in October declined a bidding war.

Looking ahead

Inflation continues to impact the company, according to L’Heureux, but the firm has been able to negotiate rates with owners to account for that increase in the cost of doing business. He also pointed to an expected boost from the Infrastructure Investment and Jobs Act, which could materialize as early as the beginning of next year.

“In the U.S., we continue to be well positioned to win work through the ongoing stimulus plan. Federal funding for highway, transit, energy and water projects among others are being deployed,” L’Heureux said. “The benefit for WSP will play out over several years and may not peak until 2025. We could expect a positive impact in early 2023 due to the timing of awards for the programs continuing through the year, but the situation remains fluid.”

Stock prices stood at $123.90 as of publication time Thursday, up slightly from $123.05 at Wednesday’s market close.

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