How does the reported cash conversion cycle compare to the industry average, and does it indicate any balance‑sheet risk?

Answer

The press release you quoted does not contain the specific cash‑conversion‑cycle (CCC) figure for WSP Global Inc., nor does it give the industry benchmark that would let us directly compare the two. Because the CCC is a balance‑sheet‑related metric that is calculated from items that appear in the quarterly or six‑month financial statements (namely Days Sales Outstanding, Days Inventory and Days Payables), the information needed to answer the question is simply not present in the excerpt you provided.

Below is a step‑by‑step guide to how you could evaluate the comparison and the balance‑sheet risk once the missing data is obtained, together with a contextual overview of what to expect for a firm like WSP that operates in the professional‑services sector.

1. What the Cash‑Conversion‑Cycle Measures

Cash‑Conversion‑Cycle (CCC) = DSO + DI – DPO

A shorter CCC (fewer days) indicates that the firm converts its operating inputs into cash quickly, which is generally a sign of a strong balance sheet. A longer CCC suggests cash is tied up for longer periods, potentially creating liquidity pressure if the firm cannot meet its short‑term obligations.

2. Typical CCC Benchmarks for the Professional‑Services Industry

Note: These ranges are derived from publicly‑available filings of comparable North‑American professional‑services firms (e.g., AECOM, Jacobs, SNC‑Lavalin) and are meant as a reference point rather than a strict rule.

3. How to Assess WSP’s CCC vs. the Industry

1. Locate the CCC in WSP’s filing
   
   • The quarterly earnings release (or the accompanying Management Discussion & Analysis) often includes a “Cash‑Conversion‑Cycle” line item.
     
   • If not disclosed, you can compute it yourself using the balance‑sheet and income‑statement data:
     

[
\text{DSO} = \frac{\text{Accounts Receivable}}{\text{(Revenue/365)}}
]

[
\text{DI} = \frac{\text{Inventory}}{\text{(COGS/365)}}
]

[
\text{DPO} = \frac{\text{Accounts Payable}}{\text{(COGS/365)}}
]

Then combine as shown above.

1. Compare to the benchmark

   • If WSP’s CCC is within the 30‑70‑day range for engineering‑consulting firms, it is in line with peers.
     
   • If it is substantially higher (e.g., > 90 days), that would suggest cash is tied up longer than typical for the sector, flagging a potential balance‑sheet strain.

2. Trend analysis

   • Look at the change from Q1 2025 to Q2 2025 (or YoY). A declining CCC signals improving cash‑flow efficiency; an increasing CCC could be a warning sign, especially if the rise is not offset by a proportional increase in cash on hand.

4. What a “Long” CCC Might Imply for Balance‑Sheet Risk

Bottom line: A longer-than‑average CCC is the primary red flag for balance‑sheet risk because it means the firm must finance a larger “cash‑in‑the‑bank” gap between paying for resources and receiving cash from customers. If the firm does not have sufficient liquidity (e.g., cash on hand, revolving credit facilities), it could face covenant breaches or need to raise additional capital under less‑favorable terms.

5. Practical Next Steps for You

1. Retrieve the full earnings release (or the 10‑Q filing) for the quarter ending June 28 2025.
   
2. Locate the cash‑conversion‑cycle figure—if it is disclosed, note the absolute value and any commentary on the trend.
   
3. If not disclosed, compute the CCC using the formulas above and the balance‑sheet numbers for:
   
   • Accounts Receivable (net of allowances)
     
   • Inventory (if any)
     
   • Accounts Payable
     
   • Revenue and COGS (or “Cost of services” for a pure‑service firm).
     
4. Benchmark the result against the 30‑70 day range typical for engineering‑consulting firms.
   
5. Assess risk:
   
   • Compare the CCC to WSP’s historical values (e.g., Q2 2024, Q2 2023).
     
   • Review the company’s liquidity position (cash & cash equivalents, available credit facilities, debt‑to‑EBITDA ratio).
     
   • Look for any management commentary on working‑capital initiatives (e.g., “improved collections”, “revised billing schedule”).
     

If after these steps you find that WSP’s CCC is substantially above the industry norm and increasing, you would flag a balance‑sheet risk that warrants closer monitoring—especially if the firm’s cash‑reserve coverage ratio is thin. Conversely, a CCC at or below the industry average, coupled with stable or improving cash reserves, would suggest limited balance‑sheet exposure.

TL;DR

• The press release you provided does not disclose the cash‑conversion‑cycle, so a direct comparison cannot be made from the information at hand.
  
• To evaluate the metric, you’ll need the detailed quarterly (or six‑month) financial statements where the CCC can be either read directly or calculated from receivables, inventory, and payables.
  
• Industry‑average CCC for engineering‑consulting firms typically falls in the 30‑70 day range.
  
• If WSP’s CCC is above that range (or rising), it could signal balance‑sheet risk because cash is tied up longer, increasing reliance on external financing.
  
• If it’s within or below the range, the balance sheet is likely healthy, assuming adequate cash reserves and credit lines.
  

Action: Pull the full filing, compute or locate the CCC, benchmark it, and then assess liquidity and covenant coverage to determine whether any balance‑sheet risk exists.