WSP WSP Global Inc

WSP Global Inc. (TSX: WSP) (“WSP” or the “Corporation”) today announced financial and operating results for the second quarter ended on July 2, 2022.

A second quarter and first half of the year, with robust organic net revenue growth, record-high level of backlog and significant increase in the number of employees which bolster confidence as the Corporation enters the second half of 2022.

SECOND QUARTER 2022 FINANCIAL HIGHLIGHTS

• Revenues and net revenues for the quarter reached $2.8 billion and $2.1 billion, up 5.0% and 4.0%, respectively, compared to Q2 2021. Net revenue organic growth of 5.0% in the quarter is attributable to all reportable segments, led by the UK with double-digit growth, Canada and Australia.
• Backlog as at July 2, 2022 stood at $11.4 billion, representing 12.5 months of revenues. In the twelve-month period ended July 2, 2022, backlog grew organically by 19.1% across all reportable segments, setting the Corporation in a favorable position for continued future performance.

• Since the start of the year, the number of employees increased by approximately 2,200, with 1,700 in the second quarter alone.
• Adjusted EBITDA in the quarter of $352.2 million, up 2.8%, compared to $342.6 million in Q2 2021. Adjusted EBITDA margin for the quarter reached 16.7%, compared to 16.9% in Q2 2021. Adjusted EBITDA margin was largely stable and in-line with management expectations.
• Earnings before net financing expense and income taxes in the quarter of $170.2 million, down $19.0 million, or 10.0%, compared to Q2 2021, mainly due to office consolidations as part of our real estate strategy resulting in charges against certain leased assets, as well as ERP implementation costs which were new in 2022, and higher integration costs due to recent acquisitions.
• Adjusted net earnings for the quarter of $153.5 million, or $1.30 per share, up $6.2 million and $0.04, respectively, compared to Q2 2021. The respective increases in these metrics are mainly attributable to higher adjusted EBITDA.
• Net earnings attributable to shareholders for the quarter of $89.3 million, or $0.76 per share, compared $120.0 million and $1.03 per share in Q2 2021. The decreases are mainly attributable to non-cash losses in value of investments related to a US-employees' deferred compensation plan compared to gains in the comparable period, charges against leased assets resulting from office consolidations and ERP implementation costs.
• DSO as at July 2, 2022 stood at 73 days, compared to 70 days as at June 26, 2021, in line with our annual target range and at the low end of management's expectations when factoring in seasonality.
• Free cash outflow of $170.4 million for the six-month period. Trailing twelve-months of free cash flow amounted to $337.8 million, representing 0.8 times the net earnings attributable to shareholders. The main contributors to the outflow are the increased investment in net working capital to support organic revenue growth and the slight increase in DSO. In addition, income taxes paid was higher mainly due to changes in tax regulations in the US which delays the deductibility of certain expenses and higher taxable income in some jurisdictions in 2021 for which the related income tax was paid in 2022.
• Cash inflows from operating activities of $42.4 million in the six-month period ended July 2, 2022, compared to $310.8 million in the corresponding period in 2021.

• The net debt to adjusted EBITDA ratio stood at 0.8x, compared to 0.6x as at December 31, 2021, in line with seasonality trends in free cash flows and increase in working capital to support growth.
• Quarterly dividend declared of $0.375 per share, or $44.3 million, with a 48.8% Dividend Reinvestment Plan (“DRIP”) participation.
• The financial outlook for 2022 issued on March 9, 2022 in the Q4 2021 results press release is reiterated as well as key related assumptions.

“I am pleased with our second-quarter results and our performance for the first half of the year,” said Alexandre L’Heureux, WSP's President and CEO. “Our backlog continues to grow significantly and stands at a record-high level, which is in turn fuelling our organic growth across all regions. With 2,200 additional professionals since the beginning of the year, we are in a great position to deliver on our clients’ projects. As we head into the second half of 2022, we feel confident this momentum will carry us through the rest of the year, and we expect to continue to execute our plan with focus and disciplined approach.”

RPS GROUP PLC ACQUISITIONWSP is pleased to note that earlier today it announced that it has reached an agreement with RPS Group plc (“RPS”) on the terms of a cash acquisition pursuant to which a wholly-owned subsidiary of WSP will acquire the entire issued and to be issued share capital of RPS for £2.06 per share in cash (the “Acquisition”).

DIVIDENDThe Board of WSP declared a dividend of $0.375 per share. This dividend will be payable on or about October 15, 2022, to shareholders of record at the close of business on September 30, 2022.

FINANCIAL REPORTThis release includes, by reference, the financial reports for the second quarter of 2022, including the unaudited interim consolidated financial statements and the Management's Discussion and Analysis (“MD&A”) of the Corporation for the second quarter ended on July 2, 2022, which are available on our website at www.wsp.com. These documents are also available on SEDAR at www.sedar.com.

WEBCASTWSP will hold a webcast today at 4:45 p.m. (Eastern Time) to discuss these results and the recently announced transaction. Given the concurrent equity offering, exceptionally, there will be no question-and-answer session.

To join the webcast, please register on https://www.icastpro.ca/kzyv0x or access www.wsp.com/investors. Presentations of the 2022 second quarter results and the transaction are accessible on the webcast platform and under the “Investors” section of the WSP website.

FINANCIAL HIGHLIGHTS

	Second quarters ended						Six-month periods ended
(in millions of dollars, except percentages, per share data, DSO and ratios)	July 2, 2022			June 26, 2021			July 2, 2022			June 26, 2021
Revenues	$	2,764.2		$	2,633.1		$	5,476.0		$	4,737.9
Net revenues(1)	$	2,109.6		$	2,028.8		$	4,209.6		$	3,695.6
Earnings before net financing expense and income taxes	$	170.2		$	189.2		$	327.4		$	318.2
Adjusted EBITDA(2)	$	352.2		$	342.6		$	676.8		$	583.6
Adjusted EBITDA margin(2)		16.7	%		16.9	%		16.1	%		15.8	%
Net earnings attributable to shareholders of WSP Global Inc.	$	89.3		$	120.0		$	184.3		$	207.9
Basic net earnings per share attributable to shareholders	$	0.76		$	1.03		$	1.56		$	1.80
Adjusted net earnings(2)(3)	$	153.5		$	147.3		$	289.9		$	241.5
Adjusted net earnings per share(2)(3)	$	1.30		$	1.26		$	2.46		$	2.09
Cash inflows from operating activities	$	125.4		$	147.4		$	42.4		$	310.8
Free cash inflow (outflow)(2)	$	14.9		$	52.6		$	(170.4	)	$	137.9
As at							July 2, 2022			June 26, 2021
Backlog(4)							$	11,448.8		$	9,632.4
DSO(4)							73 days			70 days
As at							July 2, 2022			December 31, 2021
Net debt to adjusted EBITDA ratio(4)								0.8			0.6

(1)	Quantitative reconciliations of net revenues to revenues are presented below under the caption "Non-IFRS and other financial measures".
(2)	Non-IFRS financial measure or non-IFRS ratio without a standardized definition under IFRS, which may not be comparable to similar measures or ratios used by other issuers. Quantitative reconciliations of non-IFRS financial measures to the most directly comparable IFRS measures are presented below under the caption "Non-IFRS and other financial measures". Adjusted EBITDA margin is defined as adjusted EBITDA expressed as a percentage of net revenues. Adjusted net earnings per share is the ratio of adjusted net earnings divided by the basic weighted average number of shares outstanding for the period. This earnings release incorporates by reference section 19, “Glossary of segment reporting, non-IFRS and other financial measures”, of WSP’s MD&A for the quarter and six-month period ended July 2, 2022, filed on SEDAR at www.sedar.com, which includes explanations of the composition and usefulness of these non-IFRS financial measures and non-IFRS ratios.
(3)	Management has amended its definition of adjusted net earnings, effective January 1, 2022, to exclude impairment charges on long-lived assets and reversals thereof. The comparative period results did not require restatement to apply the current definition as no impairment of long-lived assets was recorded in 2021 nor in the first quarter of 2022. Refer to section 8.8, “Adjusted net earnings” in WSP’s MD&A for the quarter and six-month period ended July 2, 2022 for further explanation.
(4)	This earnings release incorporates by reference section 19, “Glossary of segment reporting, non-IFRS and other financial measures”, of WSP’s MD&A for the quarter and six-month period ended July 2, 2022, filed on SEDAR at www.sedar.com, which explains the composition of the supplemental financial measures, as well as the usefulness of the net debt to adjusted EBITDA ratio, which is a capital management measure composed of the ratio of net debt to adjusted EBITDA for the trailing twelve-month period. Net debt is defined as long-term debt, including current portions but excluding lease liabilities, and net of cash.

RESULTS OF OPERATIONS

	Second quarters ended				Six-month periods ended
(in millions of dollars, except number of shares and per share data)	July 2, 2022		June 26, 2021		July 2, 2022		June 26, 2021
Revenues	$	2,764.2	$	2,633.1	$	5,476.0	$	4,737.9
Less: Subconsultants and direct costs	$	654.6	$	604.3	$	1,266.4	$	1,042.3
Net revenues	$	2,109.6	$	2,028.8	$	4,209.6	$	3,695.6
Earnings before net financing expense and income taxes	$	170.2	$	189.2	$	327.4	$	318.2
Net financing expense	$	45.2	$	23.5	$	72.3	$	31.9
Earnings before income taxes	$	125.0	$	165.7	$	255.1	$	286.3
Income tax expense	$	35.4	$	45.6	$	69.9	$	78.2
Net earnings	$	89.6	$	120.1	$	185.2	$	208.1
Net earnings attributable to:
Shareholders of WSP Global Inc.	$	89.3	$	120.0	$	184.3	$	207.9
Non-controlling interests	$	0.3	$	0.1	$	0.9	$	0.2
Basic net earnings per share attributable to shareholders	$	0.76	$	1.03	$	1.56	$	1.80
Diluted net earnings per share attributable to shareholders	$	0.75	$	1.02	$	1.56	$	1.80
Basic weighted average number of shares		118,041,872		116,854,428		117,967,063		115,332,517
Diluted weighted average number of shares		118,320,713		117,205,800		118,270,851		115,681,656

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION(in millions of dollars)

References to notes refer to notes in the financial statements

As at	July 2, 2022	December 31, 2021
	$	$
Assets
Current assets
Cash and cash equivalents (note 17)	624.0	927.4
Trade receivables and other receivables	1,979.3	1,916.8
Cost and anticipated profits in excess of billings	1,399.6	1,156.4
Prepaid expenses	116.6	141.7
Other financial assets	173.1	169.6
Income taxes receivable	36.8	28.9
	4,329.4	4,340.8
Non-current assets
Right-of-use assets (note 11)	855.4	861.5
Intangible assets	483.3	549.9
Property and equipment	344.7	363.6
Goodwill (note 12)	4,712.0	4,762.3
Deferred income tax assets	212.0	165.1
Other assets	224.7	207.2
	6,832.1	6,909.6
Total assets	11,161.5	11,250.4
Liabilities
Current liabilities
Accounts payable and accrued liabilities	2,075.2	2,217.3
Billings in excess of costs and anticipated profits	789.2	751.1
Income taxes payable	147.4	149.8
Provisions	50.0	77.5
Dividends payable to shareholders (note 16)	44.3	44.2
Current portion of lease liabilities (note 11)	254.3	254.2
Current portion of long-term debt (note 13)	311.7	297.4
	3,672.1	3,791.5
Non-current liabilities
Long-term debt (note 13)	1,482.7	1,479.3
Lease liabilities (note 11)	759.7	766.1
Provisions	220.9	236.2
Retirement benefit obligations	176.9	212.9
Deferred income tax liabilities	105.5	99.2
	2,745.7	2,793.7
Total liabilities	6,417.8	6,585.2
Equity
Equity attributable to shareholders of WSP Global Inc.	4,742.6	4,664.5
Non-controlling interests	1.1	0.7
Total equity	4,743.7	4,665.2
Total liabilities and equity	11,161.5	11,250.4

CONSOLIDATED STATEMENTS OF CASH FLOWS(in millions of dollars)References to notes refer to notes in the financial statements

	Second quarters ended				Six-month periods ended
	July 2, 2022		June 26, 2021		July 2, 2022		June 26, 2021
	$		$		$		$
Operating activities
Net earnings	89.6		120.1		185.2		208.1
Adjustments (note 17)	135.3		98.3		249.1		195.1
Net financing expense (note 9)	45.2		23.5		72.3		31.9
Income tax expense	35.4		45.6		69.9		78.2
Income taxes paid	(65.4	)	(46.8	)	(119.9	)	(72.4	)
Change in non-cash working capital items (note 17)	(114.7	)	(93.3	)	(414.2	)	(130.1	)
Cash inflows from operating activities	125.4		147.4		42.4		310.8
Financing activities
Lease payments (note 11)	(80.8	)	(79.3	)	(162.2	)	(141.2	)
Dividends paid to shareholders of WSP Global Inc.	(22.3	)	(21.7	)	(43.7	)	(41.2	)
Net financing expenses paid, excluding interest on lease liabilities	(19.8	)	(23.1	)	(33.3	)	(27.9	)
Net (repayment) proceeds of long-term debt	(24.6	)	469.8		(31.3	)	457.9
Issuance of senior unsecured notes (note 13)	—		500.0		—		500.0
Issuance of common shares, net of issuance costs (note 14)	—		298.6		0.7		301.2
Dividends paid to a non-controlling interest	(0.5	)	—		(0.5	)	—
Cash inflows (outflows) from financing activities	(148.0	)	1,144.3		(270.3	)	1,048.8
Investing activities
Net disbursements related to business acquisitions	(10.9	)	(1,173.3	)	(21.9	)	(1,218.5	)
Additions to property and equipment, excluding business acquisitions	(25.7	)	(17.4	)	(44.2	)	(30.9	)
Additions to identifiable intangible assets, excluding business acquisitions	(4.3	)	(6.7	)	(7.2	)	(9.7	)
Proceeds from disposal of property and equipment	0.3		8.6		0.8		8.9
Dividends received from associates	0.2		0.1		2.4		0.1
Proceeds from sale of investment in an associate	—		—		—		4.4
Net proceeds from disposal of businesses	0.1		—		1.6		—
Net increase in investments in securities	(1.5	)	(7.3	)	(1.5	)	(7.3	)
Net cash received on a loan from associate	0.1		—		0.4		0.3
Cash outflows from investing activities	(41.7	)	(1,196.0	)	(69.6	)	(1,252.7	)
Effect of exchange rate change on cash and cash equivalents	(3.5	)	(6.6	)	(7.2	)	(14.8	)
Change in net cash and cash equivalents	(67.8	)	89.1		(304.7	)	92.1
Cash and cash equivalents, net of bank overdraft – beginning of period	689.4		437.7		926.3		434.7
Cash and cash equivalents, net of bank overdraft - end of period (note 17)	621.6		526.8		621.6		526.8

All amounts shown in this press release are expressed in Canadian dollars, unless otherwise indicated. All quarterly information disclosed in this press release is based on unaudited figures.

NON-IFRS AND OTHER FINANCIAL MEASURESThe Corporation reports its financial results in accordance with International Financial Reporting Standards ("IFRS"). WSP uses a number of financial measures when assessing its results and measuring overall performance. Some of these financial measures are not calculated in accordance with IFRS. Regulation 52-112 respecting Non-IFRS and Other Financial Measures Disclosure (“Regulation 52-112”) prescribes disclosure requirements that apply to the following types of measures used by the Corporation: (i) non-IFRS financial measures; (ii) non-IFRS ratios; (iii) total of segments measures; (iv) capital management measures; and (v) supplemental financial measures.

In this earnings release, the following non-IFRS and other financial measures are used by the Corporation: net revenues; adjusted EBITDA; adjusted EBITDA margin; adjusted net earnings; adjusted net earnings per share; backlog; free cash flow; days sales outstanding (“DSO”); and net debt to adjusted EBITDA ratio. Additional details for these non-IFRS and other financial measures can be found in section 19, “Glossary of segment reporting, non-IFRS and other financial measures” of WSP’s MD&A for the quarter and six-month period ended July 2, 2022, which is posted on WSP’s website at www.wsp.com, and filed on SEDAR at www.sedar.com. Reconciliations of non-IFRS financial measures and total of segments measures to the most directly comparable IFRS measures are provided below.

Management believes that these non-IFRS and other financial measures provide useful information to investors regarding the Corporation’s financial condition and results of operations as they provide key metrics of its performance. These non-IFRS and other financial measures are not recognized under IFRS, do not have any standardized meanings prescribed under IFRS and may differ from similar computations 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 IFRS.

	Reconciliation of net revenues
	The following table reconciles net revenues to the most comparable IFRS measure:
		Second quarters ended				Six-month periods ended
	(in millions of dollars)	July 2, 2022		June 26, 2021		July 2, 2022		June 26, 2021
	Revenues	$	2,764.2	$	2,633.1	$	5,476.0	$	4,737.9
	Less: Subconsultants and direct costs	$	654.6	$	604.3	$	1,266.4	$	1,042.3
	Net revenues*	$	2,109.6	$	2,028.8	$	4,209.6	$	3,695.6
	* Total of segments measure.

	Reconciliation of adjusted EBITDA
	The following table reconciles this metric to the most comparable IFRS measure:
		Second quarters ended				Six-month periods ended
	(in millions of dollars)	July 2, 2022		June 26, 2021		July 2, 2022		June 26, 2021
	Earnings before net financing expense and income taxes	$	170.2	$	189.2	$	327.4	$	318.2
	Acquisition, integration and reorganization costs	$	22.9	$	17.6	$	43.7	$	18.2
	ERP implementation costs	$	11.9	$	—	$	22.0	$	—
	Depreciation of right-of-use assets	$	69.0	$	69.4	$	140.0	$	130.7
	Amortization of intangible assets	$	33.2	$	34.3	$	66.9	$	57.7
	Depreciation of property and equipment	$	27.0	$	28.8	$	55.7	$	53.5
	Impairment of right-of-use assets	$	14.3	$	—	$	14.3	$	—
	Share of depreciation and taxes of associates	$	2.6	$	2.8	$	5.4	$	4.6
	Interest income	$	1.1	$	0.5	$	1.4	$	0.7
	Adjusted EBITDA*	$	352.2	$	342.6	$	676.8	$	583.6
	* Non-IFRS financial measure.

	Reconciliation of adjusted net earnings
	The following table reconciles this metric to the most comparable IFRS measure:
		Second quarters ended						Six-month periods ended
	(in millions of dollars, except per share data)	July 2, 2022			June 26, 2021			July 2, 2022			June 26, 2021
	Net earnings attributable to shareholders	$	89.3		$	120.0		$	184.3		$	207.9
	Amortization of intangible assets related to acquisitions	$	21.0		$	24.7		$	42.1		$	38.3
	Impairment of right-of-use assets	$	14.3		$	—		$	14.3		$	—
	Acquisition, integration and reorganization costs	$	22.9		$	17.6		$	43.7		$	18.2
	ERP implementation costs	$	11.9		$	—		$	22.0		$	—
	Losses (gains) on investments in securities related to deferred compensation obligations	$	14.5		$	(6.7	)	$	22.4		$	(10.1	)
	Unrealized losses (gains) on derivative financial instruments	$	2.1		$	—		$	(3.5	)	$	(2.0	)
	Income taxes related to above items	$	(22.5	)	$	(8.3	)	$	(35.4	)	$	(10.8	)
	Adjusted net earnings*	$	153.5		$	147.3		$	289.9		$	241.5
	Adjusted net earnings per share*	$	1.30		$	1.26		$	2.46		$	2.09
	* Non-IFRS financial measure or non-IFRS ratio.

	Reconciliation of free cash flow
	The following table reconciles this metric to the most comparable IFRS measure:
		Second quarters ended						Six-month periods ended
	(in millions of dollars)	July 2, 2022			June 26, 2021			July 2, 2022			June 26, 2021
	Cash inflows from operating activities	$	125.4		$	147.4		$	42.4		$	310.8
	Lease payments in financing activities	$	(80.8	)	$	(79.3	)	$	(162.2	)	$	(141.2	)
	Net capital expenditures*	$	(29.7	)	$	(15.5	)	$	(50.6	)	$	(31.7	)
	Free cash (outflow) inflow**	$	14.9		$	52.6		$	(170.4	)	$	137.9
	* Capital expenditures pertaining to property and equipment and intangible assets, net of proceeds from disposal and lease incentives received.
	** Non-IFRS financial measure.

FORWARD-LOOKING STATEMENTS Certain information regarding WSP contained herein may constitute forward-looking statements. Forward-looking statements may include estimates, plans, strategic ambitions, objectives, expectations, opinions, forecasts, projections, guidance, outlook or other statements that are not statements of fact. Forward-looking statements made by the Corporation in this press release include statements about the payment of dividends, our proposed strategy, and our operating performance, financial outlook and prospects, including statements about the 2022-2024 Global Strategic Action Plan. These forward-looking statements are based on a number of assumptions believed by the Corporation to be reasonable as at August 8, 2022, including assumptions about general economic and political conditions; the state of the global economy and the economies of the regions in which the Corporation operates; the state of and access to global and local capital and credit markets.

Although WSP believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. These statements are subject to certain risks and uncertainties and may be based on assumptions that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements, including risks relating to the COVID-19 pandemic. WSP's forward-looking statements are expressly qualified in their entirety by this cautionary statement. The complete version of the cautionary note regarding risk factors, which, if realized, could cause the Corporation's actual results to differ materially from those expressed or implied in forward-looking statements, are included in WSP's MD&A for the year ended December 31, 2021 which is available on SEDAR at www.sedar.com. The forward-looking statements contained in this press release are made as of the date hereof and WSP does not assume any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise unless expressly required by applicable securities laws.

ABOUT WSPAs one of the world’s leading professional services firms, WSP exists to future-proof our cities and environment. We provide strategic advisory, engineering, and design services to clients in the transportation, infrastructure, environment, building, power, energy, water, mining, and resources sectors. Our 57,500 trusted professionals are united by the common purpose of creating positive, long-lasting impacts on the communities we serve through a culture of innovation, integrity, and inclusion. Sustainability and science permeate our work. WSP derived about half of its $10.3B (CAD) 2021 revenues from clean sources. The company’s shares are listed on the Toronto Stock Exchange (TSX: WSP). To find out more, visit wsp.com

FOR ADDITIONAL INFORMATION, PLEASE CONTACT:

Alain MichaudChief Financial OfficerWSP Global Inc.alain.michaud@wsp.com Phone: 438-843-7317