WSP Global Inc

TSX:WSP

Earnings Call Analysis

WSP Reports Strong Q2 2024 Financial Performance and Increases 2024 Outlook

WSP delivered a robust second quarter with revenues reaching $4 billion, up by 8.5% compared to Q2 2023. Adjusted EBITDA rose by 12.6% to $520 million, enhancing the EBITDA margin by 50 basis points to 17.4%. Adjusted net earnings increased 21% to $1.89 per share. Cash inflows from operations improved to $203 million from $85 million last year. Free cash flow also saw a turnaround with a $75 million positive inflow. Due to this strong performance, WSP raised its 2024 financial outlook, now targeting net revenues between $11.4 billion and $11.8 billion, and adjusted EBITDA between $2.1 billion and $2.14 billion, aiming for an 18.3% EBITDA margin.

Introduction and Highlights

In its recent earnings call, WSP reported impressive financial results and a robust outlook for the remainder of the year. The company achieved a remarkable 12.6% increase in Adjusted EBITDA, reaching $520 million, and an EPS of $1.89, up 21% from the previous year. These strong performance metrics have led WSP to raise its financial outlook for 2024, with net revenues now expected to range between $11.4 billion and $11.8 billion, and an anticipated EBITDA margin of 18.3%.

Regional Performance Overview

Regionally, WSP experienced strong organic growth across Canada, the Americas, and EMEA, though APAC was reported to be lagging. Particularly remarkable was the double-digit growth in the U.S. and Canada, driven by infrastructure, healthcare, and data center projects. The company noted a backlog of $14.7 billion, indicative of strong demand for its diversified services.

Productivity and Change Initiatives

WSP has successfully implemented several productivity initiatives, including a simplification program and a rigorous project selection process, which have contributed to a 50 basis point margin expansion. The company is also witnessing improved free cash flow dynamics, reporting inflows of $75 million in the last quarter—an improvement of $133 million year-over-year.

Mergers and Acquisitions Strategy

M&A activity remains a cornerstone of WSP’s growth strategy. The company completed several acquisitions, including Communica, Proxion, 1A Ingenieros, and AKF Group, adding critical expertise in various sectors. The integration of these acquisitions is on track, enhancing WSP’s capabilities and market presence globally.

Sustainability and ESG Commitments

WSP continues to focus heavily on sustainability and ESG initiatives, winning multiple awards, including the Sustainability Impact Award for the second consecutive year. The company reported that 63.4% of its revenue is linked to Sustainable Development Goals (SDGs), highlighting its commitment to environmental and social governance.

Future Outlook

Looking ahead, WSP is confident in achieving its 2024 financial goals, supported by strong market conditions and a dynamic pipeline of opportunities. The company is positioned well to leverage its global platform and industry-leading expertise to continue delivering shareholder value. Strategies for the forthcoming period include enhancing margin profiles, optimizing cash positions, and capitalizing further on acquisition opportunities.

Earnings Call Transcript 2024-Q2

[Operator]

Good morning, everyone. Welcome to WSP's Second Quarter 2024 Results Conference Call. I would now like to turn the meeting over to Quentin Weber, Investor Relations. Please go ahead, Mr. Weber.

[Quentin Weber, executive]

Good morning, and thank you for joining us today. We will discuss our Q2 2024 performance followed by a Q&A session. Alexandre L'Heureux, our President and CEO; and Alain Michaud, our CFO, are joining us this morning.

Please note 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 our MD&A for the quarter that ended June 29, 2024, which can be found on SEDAR and on our website.

In addition, during the call, we may refer to specific non-IFRS measures. These measures are also defined in our MD&A for the June 29, 2024 quarter. 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 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.

[Alexandre L'Heureux, executive]

Thank you, Quentin, and good day, everyone. I'm pleased to share some exciting updates about our performance and the great momentum we are generating to keep pushing WSP forward.

We delivered a strong second quarter with sustained organic growth and a significant increase in profitability, which has led us to raise our 2024 financial outlook. We continue to build on our proven track record of successful results, once again showing our ability to generate sustainable financial performance.

This quarter was marked by several achievements with the following three core drivers fueling our robust results. First, we delivered a quality organic growth supported by healthy market conditions in our key regions. This quarter, we achieved notable double-digit organic growth in the Americas with our core end market sectors continuing to bolster our North American business. Our backlog is healthy and overall demand for our services remained solid. We are playing an active role in developing infrastructure mega projects. We are still capitalizing on hyper growth in data center and health care, and our multidisciplinary team and environmental experts is supporting our clients' growing needs related to the green transition, biodiversity and sustainable solution.

Second, we sustain our ability to produce industry-leading profitability. The implementation of various global initiatives, such as our simplification program, rigorous project selection process and improved productivity measures continue to bear fruit. In the last quarter, we reported a 50 basis point margin expansion, and we continue to perform at the top quartile of our stated ambition, which targets a 30 to 50 basis point increase in adjusted EBITDA margin annually.

Third, our sustained progress and focus on transforming our business and our capacity to deliver a strong cash profile are tracking positively. As of Q2 2024, our workforce is leveraging our new ERP, which has now been deployed in key regions that account for approximately 75% of our EBITDA.

Of importance, we remain on plan and budget. As we continue our journey of transformation, we reinforce our financial position heading into the second half, ending the quarter with a superior level of free cash flow compared to the previous year.

Acquisitions remain a critical part of our journey in accelerating our growth and allowing us to expand our capabilities. Since the start of this year, we have been active yet disciplined in executing this pillar of our strategy.

Following the acquisition of Communica and Proxion in the first quarter of the year, we completed the acquisition of 1A Ingenieros in May, a 250 employee Spanish consulting firm mainly active in the power and energy sector and in the integration is progressing as planned. We also welcome 365 professionals through AKF Group, a specialized mechanical, electrical and plumbing firm operating throughout the Eastern United States with an additional complementary presence in Mexico.

In the first half of the year, we announced four acquisitions, adding critical expertise to our portfolio and the pipeline of opportunities remain strong.

Let me now give you a few examples of our most recent project wins. In Canada, WSP provide engineering services for the new state-of-the-art Advanced Medical Research Center at the University of Ottawa. The 7-storey building targets LEED Gold certification leads certification will house the Ottawa Health Innovation Hub, a new strategic initiative created by the region's health research community to connect academia, industry regulators, the region's hospital and affiliated research institutes. Our team will contribute to mechanical and electrical engineering, energy modeling, sustainability and lead services, building science services, landscape architecture, acoustic and municipal planning.

In the U.S., WSP will lead the design of the Seattle-Tacoma International Airport Industrial Wastewater treatment plant. This project will upgrade the treatment of airfield stormwater associated with aircraft fueling and maintenance operations such as de-icing. It includes a new control building, the expansion and partitioning of a large storage lagoon, pump stations, improved operation controls and electrical infrastructure. We will help the project meet its sustainability goals, increase capacity and operational flexibility and achieve permit compliance.

In Europe, we are proud to be part of the Grand Paris Express project in France, where 200 kilometers of new subway lines are being built. WSP will design the tunnels, branches and ancillary structures on Line 15 of this project and work with two key partners. This contract demonstrates our increased presence and potential in Central Europe as well as how quickly our acquisition becomes synergistic since this contract originated from BG acquisition closed in 2023.

While the range of projects our WSP experts consult on and deliver very widely, they all embody our shared purpose of building a more sustainable world. We lead by example to gain our clients' trust and strive to uphold the highest ESG standard in all of our operations. We recently reported on our progress to our 2023 Global ESG report published in May. It provides resounding examples of the extent of our efforts on that front.

We proudly reported an increase in SDG-linked revenue to 63.4% of total annualized gross revenue in 2023, a great indication of our impactful contribution to advancing sustainability through our services with the latest industry best practices and global standards by conducting a double materiality assessment. We now evaluate financial and impact materiality and are working to embed it further in our business strategy.

We also increased our global average employee retention rate by over 1% year-over-year and filled over 3/4 of our global leadership roles with internal candidates, meeting our targets for both objectives. I invite you to read more on WSP impact worldwide by downloading our report.

On ESG progress and deep expertise garnered industry distinctions this quarter. For fourth year, WSP was recognized as one of Canada's Best 50 Corporate Citizens by Corporate Knights. This marked our fourth straight year on the list and our best ranking yet at #5. This accolade follow our earlier appearance on Corporate Knights Global 100 Most Sustainable Corporations list last January.

We also received a record four Environment Analyst's Sustainability Delivery awards, including the Sustainability Impact Award for the second consecutive year. A recognition giving that to a company that walks the talk in advancing its climate leadership and ESG journey.

Finally, WSP won four categories at the U.K. New Civil Engineering Annual Awards, and we were named the 2024 Consultancy of the Year. The judges commended our commitment to excellence, innovation, and our people-first approach. These distinctions highlight our leading scores in governance, environmental metrics, diversity and more.

On that note, I will ask Alain to review our financial results in greater detail.

[Alain Michaud, executive]

Thank you, Alex, and hello, everyone. I'm pleased to report on our strong second quarter results, starting with our top line. For the second quarter, revenues and net revenue reached $4 billion and $3 billion, up 8.5% and 9.1%, respectively, compared to the second quarter of 2023.

Organic growth and net revenue of 8% in the quarter is attributable to all reportable segments, led by the U.S. and Canada with double-digit growth in the U.K. and New Zealand.

As of June 29, 2024, the backlog reached a record level of $14.7 billion, representing 11.9 months revenue following a robust organic order intake of approximately $4.3 billion in the quarter.

Moving on to profitability. Adjusted EBITDA reached $520 million, an increase of 12.6% from the second quarter of 2023, compared to $462 million. Adjusted EBITDA margin for the quarter increased by 50 basis points to 17.4% compared to 16.9% in the second quarter of 2023. The increase is mainly attributable to improved productivity.

Our adjusted net earnings reached $236 million or $1.89 per share, both up 21% compared to the second quarter of 2023. The increase is mainly attributable to higher adjusted EBITDA.

As for our cash position, cash inflows from operating activities of $203 million in the quarter ended June 29, 2024, improved compared to $85 million in the corresponding quarter last year.

Free cash inflow for the quarter ended June 29, '24, was $75 million, an improvement of $133 million compared to free cash outflow of $57 million in the corresponding quarter of 2023.

At the end of June, our DSO stood at 79 days within management's target range.

Our balance sheet remains strong with a net debt position of 1.7x EBITDA within management target range.

The financial outlook for 2024 issued in the Q4 2023 press release has been increased. Net revenues are now expected to range between $11.4 billion and $11.8 billion, and adjusted EBITDA is expected to range between $2.1 billion and $2.14 billion, representing an EBITDA margin of 18.3% at midpoint.

Organic growth calculated on a constant currency basis is now anticipated to be between 6% and 8%. All other key related assumptions are reiterated.

On that, back to you, Alex.

[Alexandre L'Heureux, executive]

Thank you, Alain. We conclude the first half of 2024 in a position of strength with robust financial results and increased financial outlook, dynamic pipeline of M&A opportunities and a strong balance sheet to power our ambitions.

Our path for the second half is clear. We set a solid foundation and are well positioned to build on this momentum as the year progresses. Our key areas of focus remain largely unchanged with efforts geared towards securing quality organic growth, seizing acquisition opportunities while enhancing our margin profile and cash position.

With this approach, we are on track to realize our 2024 goals and I'm confident in our ability to close out the current strategic cycle on a high note.

Being an undisputed leader is well within our reach. We have incredible people, a unique global platform and the right strategy for success. In an industry full with opportunities we are just getting started, and our teams are already hard at work planning our next strategic plan.

I would now like to open the line for questions.

[Operator]

[Operator Instructions] We'll now take our first question. This is from the line of Jacob Bout from CIBC.

[Jacob Bout, analyst]

Maybe to kick it off. Seeing strong organic growth in Canada, Americas and EMEA, but APAC was lower. But when I look at your backlog quarter-on-quarter, strong growth there. Maybe just talk us through how things are looking there? Or is the outlook looking a little better for the second half or for the remainder of the year?

[Alexandre L'Heureux, executive]

Yes. Well, first of all, we're extremely pleased with our performance in the first half of this year, Jacob. I mean I think this is a testament of the diversification and resiliency of our platform, right?

In previous years, we have seen some of the regions perhaps not performing as well as they are now. I can only think of, for example, the Nordics. I'd say last year was more of a quiet year with the war in Iraq -- Iraq, sorry, in Ukraine with Russia, and the cooling off of the regions at that period of time. This year, a bit like late last year, Asia is going through a rough patch. It's a very small portion of our business and our operation. And yes, you're right in pointing out that North America right now is doing extremely well. I'm extremely pleased with our performance of our U.S. business in the last quarter and believe that this will continue. So overall, I think it's looking good.

Perhaps Asia Pacific, a few comments on this. There was an election in New Zealand, which slowed down perhaps the tendering and the procurement of infrastructure project. But we believe that this is temporary, and we'll get back to normal very soon.

[Jacob Bout, analyst]

And maybe my second question here. Just, I know it gets asked every quarter on M&A, but you did a number of smaller acquisitions earlier this year, but maybe just talk through how the pipeline is looking for the mid- to larger-sized acquisitions.

[Alexandre L'Heureux, executive]

Very good question, Jacob. If you recall, when we started the year, the way I described 2023, I said that last year was a year of consolidation, a year of transformation. In the last quarter, we have now our U.S. business and our U.K. business on the new ERP platform. So we have now 75% of our EBITDA converted on the new platform and felt that this was a very, very important milestone to get to.

So now that I feel we have significantly derisked our transformation and ERP conversion, I can tell you now that we're open for business.

[Operator]

I will now take our next question. This is from Benoit Poirier from Desjardins Capital Markets.

[Benoit Poirier, analyst]

Just coming back on the margin question per region. Obviously, strong performance from Canada and Americas. You mentioned some color about Asia, but could you maybe provide more details also for EMEA? You mentioned that the margin performance was due to project performance, but I'm just curious what we should expect from EMEA and also kind of the path toward recovery more specifically in Asia in the second half and kind of the key actions that you are taking in terms to adjust productivity in those two regions?

[Alain Michaud, executive]

Yes. So as it relates to EMEA, margins are down 60 bps on the quarter but flat year-to-date. This is project performance in one specific country where we delivered slightly lower margin on the project level. This is not the case of significant write-offs or problematic projects. So we expect margin growth in EMEA for the full year, and this has been reflected in our revised outlook, Benoit.

As it relates to Asia and APAC specifically, it's important to point how that putting Asia aside, Australia and New Zealand are 120 basis points up in terms of margin for the quarter and about the same for year-to-date. So driving a lot of efficiency on productivity, so utilization, the use of our complementary resource center the Australian team is doing particularly well on that front and New Zealand as well. So we're very pleased with the performance of our ANZ business.

Asia, we expect the situation to continue to be challenging for the remainder of the year, and this has been reflected in our outlook as well. And we are taking action as we see fit to adjust to the situation.

[Benoit Poirier, analyst]

Okay. Perfect. Just in terms of that count, you added about 2,100 people sequentially, obviously, about half came from North America. What should we expect in terms of headcount additions for the remainder of the year in order to achieve your 2024 outlook?

[Alexandre L'Heureux, executive]

Benoit, we are -- I'm so pleased that you're bringing this up. I think we're ahead of plan regarding our hiring. And that combined with a significant reduction in turnover, I feel that we're extremely well positioned for the remainder of 2024. So when you look at the first half, if you look at Q2, now strong organic growth, increased margin profile, significant improvement in free cash flow, growth in EBITDA, reduction in turnover and ahead of plan on hiring, let's put it this way and, a very strong North American performance, let's say that we're feeling good at the moment.

[Benoit Poirier, analyst]

Okay. That's great. And last question for me. On the free cash flow side, you achieved negative $50 million year-to-date. Obviously, we know a bit about the seasonality. But while you still target, I believe, a 100% free cash flow conversion for the year. So could you provide maybe some color, Alain, about what we should expect in Q3 and your confidence to finish the year with a strong performance on the free cash flow side.

[Alain Michaud, executive]

Thank you, Benoit, we're very pleased with the trend that we've posted in Q2 in terms of free cash flow. So the seasonality of our business, as you know, Benoit, that Q2 is always -- we're ramping up and the high growth, obviously, puts working capital on the balance sheet. Q3 is usually a similar type quarter in terms of free cash flow and DSO. And we see, historically, we've seen a sharp reduction in DSO, an increase in free cash flow in Q4. So we expect about the same trend for 2024.

We're pleased with the progress on the ERP and the billing and the collections. So very good trending results so far. Our DSO has increased, yes. But if you look at the historical average the last 5 years, DSO between Q4 and Q2 typically increase by about 5 days. And this quarter, this year, we've seen a 3-day increase and that is despite going live with the new ERP in the U.S. towards the middle of Q1 and the new ERP in the U.K. in the beginning of Q2.

So we're very, very pleased with the performance in those two regions at adapting to the new system. And it's a testament of the lessons learned and improvement we were able to post on that front. And I think it bodes well for the remainder of the rollout on that front. So feeling good about the progress we're making.

[Operator]

Next question is from the line of Michael Tupholme from TD Cowen.

[Michael Tupholme, analyst]

First question is about the U.S., and I guess, specifically, wondering if you can talk about what you're seeing in terms of IIJA activity levels in the U.S. and the ramp-up in IIJA investments, including whether or not you've seen any bottlenecks or slowdowns on that.

[Alexandre L'Heureux, executive]

No, absolutely not, Michael. I mean the flow is great and we're forging ahead on all fronts. I'm not in a position to talk about certain bids that we're working on right now. On the CHIPS Act for instance. But we're whether we are looking at infrastructure project or CHIPS Acts project or the Inflation Act projects, things are going extremely well at this point.

[Michael Tupholme, analyst]

Okay. That's great to hear. And then maybe somewhat related, you mentioned earlier in the call that with respect to New Zealand, you had seen a bit of a slowdown around elections in that country. I'm wondering, when we look at the U.S., have you seen or are you expecting to see any slowdown in activity as we approach the election? And if so, in what areas do you see that likely to happen?

[Alexandre L'Heureux, executive]

The answer is, and this is a personal opinion, Michael, I'm not a specialist in U.S. politics, but my personal opinion is the answer is no. Let's remember that whether the Republican or Democratic, the House in November, they're going to -- they have 2 years left to deploy the capital. So I think -- and that had bipartisan support certainly as it relates to the Infrastructure Act. So I don't believe that this will have an impact.

Remember that WSP, we performed well under the Trump administration and we have performed very well also under the Biden administration. So for us, at the end of the day, I think whether it's a Republican President or a Democrat President, we feel that WSP is very well positioned to take advantage of what will take place over the next few years.

[Michael Tupholme, analyst]

That's helpful. And then maybe just one last one here. Wondering if you can talk about what you're seeing in terms of activity on the private sector side in your Property & Buildings business across key regions. And specifically, as we've seen interest rates start to come down, has that affected activity at all in that area?

[Alexandre L'Heureux, executive]

Last year, we generated double-digit organic growth in our Property $ Building sector, and this year is not any different. The demand in data centers and our work in health care is really fueling the growth at the moment. And indeed, we are seeing an uptick in the private sector activity. So we're -- I'm feeling good, extremely good around this sector at the moment, Michael.

[Operator]

The next question comes from Chris Murray from ATB Capital Markets.

[Chris Murray, analyst]

I guess my first question is just thinking about the rest of the year. I think when you originally released your guidance, you talked about the fact that there'll probably be about a 3% increase just organically just because of the way the days fall in the year. And so when I was thinking about that and looking at kind of historical margin trends kind of second half versus first half, just wondering with where your guidance is, it almost feels like we're going to be call it a kind of flattish year-over-year. But I just wanted to get any thoughts that you may have around how the back half of the year shapes up with that -- with those additional days in there and if there's something that maybe throws the margin profile around a little bit?

[Alain Michaud, executive]

Yes. So just to recalibrate a little bit the growth. So we posted 8% in Q2, first half 6.4% as highlighted, but it's -- there was more billable days in -- less billable days in Q1. So if you normalize that, our growth for the first 6 months is 7%. Our guide is between 6% and 8% for the full year. So that's the organic growth trend. Q4 will have more billable date. So you'll see the reversal of Q1.

In terms of margin, historically, at least the last 2 years, we've seen more emphasis on margin improvement in the second half of the year. We're very pleased with the first half contribution this year with 50 bps improvement in the first 6 months. That's a testament to all of the hard work we've pushed on the second half of 2023 to increase productivity, and it's paying off right now and we expect this to continue to provide some good tailwind in the second half, and we're very committed to that 60 bps plus margin improvement in 2024, which would position us the higher end of the 3-year target we've posted in our strategic plan of 150 basis points. So we're very, very pleased with the trajectory of our margin profile.

[Chris Murray, analyst]

Okay. That's helpful. And then the other piece of this, I was looking at the global corporate costs, and I don't know if this is tied to the ERP completion in a lot of the key regions. But when we looked at the numbers, they actually were -- again, it's a modest number, but it's still marginally below that kind of plus or minus $30 million in the quarter.

Just wondering, with the ERP system in place now or if there's something else going on, like how should we be thinking about global corporate cost over maybe the balance of '24 and through 2025?

[Alain Michaud, executive]

Yes. The slight reduction that you see in the first half is really timing of projects that we've undertaken first half versus we're planning to do second half. So we're still within the range that we've provided in our outlook, Chris. So no sizable change there, although we're probably going to be -- midpoint is probably the right answer there.

The ERP itself, I don't expect impact on that front in '24, but starting '25, I think, it certainly is one more tool in our toolbox to keep driving better margin. So we're currently focusing on the rollout and implementing and refining, recalibrating. But the next stage of the journey is to capture benefit and opportunities as it relates to the system.

[Operator]

[Operator Instructions] The next question is from the line of Frederic Bastien from Raymond James.

[Frederic Bastien, analyst]

Guys, I know that you constantly look at M&A opportunities, but wondering if you're more excited about what you're seeing today perhaps than what you're feeling with like 6 months ago or 12 months ago?

[Alexandre L'Heureux, executive]

The answer is yes, Frederic, more excited now than I was 6 months ago. As I said, the focus last year was really geared to -- we had more of an inward focus last year, consolidating the Wood E&I transaction. And obviously, doing tuck-in acquisition in my mind was not impacting our risk on the transformation that we were going through. But now that we have 75% of our EBITDA converted and given the discussion that I've had in recent months, I'm feeling a lot better today than I was 6 months to a year ago.

[Frederic Bastien, analyst]

Awesome. The other question I have regards the strong organic growth that you displayed in the Americas and the U.S. was -- I assume this is coming from a number of sectors, but was transportation infrastructure the bulk of the growth that you've seen there?

[Alexandre L'Heureux, executive]

I wouldn't say bulk, but very strong growth, I would say, across the patch at the moment, Frederic. I feel that we're firing from all cylinders right now. And I'm glad that you're bringing up organic growth. We have worked extremely hard over the course of the last 24 months to really raise the bar from an organic growth point of view because we believe we -- they are not mutually exclusive. We believe we've been a good acquirer, a great acquirer in the past from an M&A point of view. But equally, we wish to demonstrate to our investors that we can generate strong organic growth as well.

So with that in mind, I mean, what we're aiming at is to really generate very good inorganic growth and also very good organic growth. That's the goal that we have in mind at the moment.

[Frederic Bastien, analyst]

Well, you should delivering so on both fronts. That's all I have.

[Alexandre L'Heureux, executive]

Thank you, Frederic.

[Operator]

Next question is from the line of Maxim Sytchev from NBF.

[Maxim Sytchev, analyst]

Alex, I just had one quick follow-up in terms of M&A. I'm curious to see if there is a bit of multiple differential right now between what you might be seeing in the U.S. versus Continental Europe? Or is it just a function of kind of size in the platform that really is going to be driving the differential multiples?

[Alexandre L'Heureux, executive]

Yes. I think, Max, geography is not as much. It's more the sector that, in my personal opinion, will drive the margins -- not the margins, I'm sorry, the multiple differential. And obviously, this is the law of math, obviously, in very high growth, high-return sectors, you can expect to pay a higher multiple than perhaps in other sectors. But also the size of the platform will also have an impact on this.

So what I would tell you is that not much has changed, actually. And the formal and informal discussion that I've had with firms and Continental Europe and in the Nordics and in other places has been healthy. So I do expect us to get back to it now that we have significantly derisked our transformation.

[Operator]

We'll take our next question. This is from Sabahat Khan from RBC.

[Sabahat Khan, analyst]

Just a question, I guess, on the kind of the margin outlook here. I think some of the commentary from the team has been that 20% is much more within reach today than when you initially talked about it. Maybe just as a reminder, given where you're at 18.3%, if you can just remind us of maybe the bigger buckets of opportunities that you have within your business that would drive the margin higher, that would be helpful.

[Alexandre L'Heureux, executive]

Yes. Well, the #1 lever, obviously, Saba, is you have to operate in good markets. And with the exception of Asia, which represents a very, very small portion of our book of business, we are operating in great markets. The supply-demand dynamics in Canada, in the U.S. and the U.K., now in the Nordics, I feel better around Sweden. Same with Australia and New Zealand. We're clearly feeling good that we are operating in the right markets at the moment, number one.

Number two, we've made a significant push in running a tighter ship as a company over the last 12 months. Not that we were not in the past, but we feel we can always improve, and that has paid off, number two.

Number three, we are going, I believe, to benefit from the transformation that is taking place over the course of the last 24 months. And I'm hopeful, and I'm looking at Alain in the eyes as I'm talking, that we are going to be able to generate the synergistic benefits of being on one platform globally and running a more optimal business. Number three as well, and we'll talk more about that when we roll out our next strat plan. I mean also we're leveraging technology in a big way right now. And we believe that in the next 3 years, there'll be a lot of formidable things that will happen to our industry, and we want to be at the forefront of that and we want to lead from the front.

So that's why I'm feeling good about the 20% margin profile. And it's certainly a goal that we have in mind and that we have not forgotten and we're 200% focused on at the moment.

[Sabahat Khan, analyst]

Okay. Great. And just a follow-up on the comment around the right markets. I guess, is this just a process where the smaller market that you're not focused on will naturally just become deemphasized and partly through M&A? Or is there, as you look across your portfolio, is there end markets that might be a bit just not interesting anymore or regions like Asia, where you might just deemphasize that naturally through sort of the way projects are going? Just any comment on how you view the portfolio today.

[Alexandre L'Heureux, executive]

I like our portfolio. I feel at the moment, we, Saba, and I've mentioned it in the past and I'll mention it again, in excess of 90% of our profit are generated in OECD countries and our strategy hasn't changed. So if I had an opportunity to grow our presence in Continental Europe, I would. This is a great place to do business. And in the U.S., we are subscale in many parts of the U.S. and in many sectors. So you should expect us to continue to focus on our U.S. business.

There's room for us to grow in Australia. There's room for us to grow in New Zealand and even Canada, where we have, I'd like to thank the leading presence. I feel there's ample room for us to continue to grow. So I expect us to not deemphasize the markets that we're in. Obviously, when a country or a region is going through a rougher patch just in relative terms, obviously, the region is taking -- is having a lesser presence than perhaps the others that are growing. But other than that, I think that's where we stand. We really like our footprint at the moment, and we intend to pursue that in that direction.

[Sabahat Khan, analyst]

Okay. And then just one last quick one. There was some discussion earlier around just some of the seasonality in Q4 with extra day. And I know you haven't noticed any slowdown in the U.S. But I guess just in terms of Q3 versus Q4, do you typically see in the election year where maybe things pause a little bit in Q3 or a little bit in Q4 along the time of the election? Just thinking if we should consider that for our models when we think about H2 in terms of shift between those 2 quarters at all.

[Alexandre L'Heureux, executive]

I would not, Saba.

[Alain Michaud, executive]

I would keep the same seasonality that we've highlighted in our outlook in February.

[Operator]

We'll take our next question. This is from Ian Gillies from Stifel.

[Ian Gillies, analyst]

As it pertains to the European environmental business, and it's obviously been what I believe to be an above-average grower over the last number of years on an organic basis. Are you seeing anything coming down the pipe that would cause that narrative to change or any headwinds in that business at the moment?

[Alexandre L'Heureux, executive]

No, not at this point, obviously. Clearly, we're not aware of anything at this point that would change that in the immediate term, obviously, Ian. But actually, I feel that if everything remains the same, we should do better going forward because the integration of a firm of 6,000, 7,000 people like Wood E&I combined with an integration of 6,000, 7,000 people at Golder in addition to all the tuck-ins that we completed in recent years, that required a lot of work from an integration point of view and that can oftentimes distract our operation from being outward-focused and perhaps being a bit more inward focused.

So if any, now that we're past that, I'm feeling, assuming everything stays the same, I'm feeling very good about the sector.

[Ian Gillies, analyst]

No, that's helpful. And maybe just drilling down into that division a little bit. I'm just curious whether you've seen any step change in demand or any change in how you're trying to position for PFAS work in the U.S. because that seems to be topical still.

[Alexandre L'Heureux, executive]

It's the flavor of the day. I'm not going to lie. And we have won many awards. Obviously, most of our work in that regard is with the Department of Defense. And in recent months, we have secured many awards. So I think we're forging ahead on that front. And I feel we have excellent capabilities in that regard to really forge ahead and take a leadership position.

[Ian Gillies, analyst]

That's helpful. And then if I could sneak in one last quick one just based on the prior question. In previous calls, I think you had mentioned on wanting to add capacity in the U.S. and geographically, like I think it was specifically Texas and Florida. Would that still hold true today or is there new regional geographies in the U.S. that we should be thinking about as well?

[Alexandre L'Heureux, executive]

Look, we historically, given our footprint and the acquisition that we completed, we've always been perhaps had a larger presence or a more important presence in the Northeast. So, and I would say in the last 5, 6, 7 years, we've grown organically in a very significant way out west. But if I had to guess, I think we -- if you look at the Midwest and the Midwest of the United States, I feel we're subscale. I talked about the Southern states in a number of occasions, I feel we're subscale. And clearly, California on its own, it's a country. So we could double in size and not have a problem.

So the reality is, I think we have a lot of room to maneuver, perhaps with the exception of the Northeast, where we have a larger presence, and we're feeling good about the platform that we have.

[Operator]

And I will now hand the conference back to the speakers for any closing remarks. Thank you.

[Alexandre L'Heureux, executive]

Well, thank you for attending the call today. Thank you for all your great questions, and we look forward to updating you as we embark into our second half of this year and look forward to updating you on our plans going forward. Thank you very much, and I wish you a great day.

[Operator]

Thank you. This concludes today's conference. Thank you for participating, and you may now disconnect.