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[Foreign Language] Good afternoon, ladies and gentlemen. [Foreign Language] Welcome to WSP's Fourth Quarter of 2017 Results Conference Call. I would now like to turn the meeting over to Isabelle Adjahi, Vice President, Investor Relations and Communications. [Foreign Language] Please go ahead Ms. Adjahi.
Thank you and good afternoon, everyone. Thanks for taking the time to join the call to discuss our Q4 and fiscal 2017 performance. We will first make a few remarks and then we will follow this by a Q&A session. Joining me today are Alexandre L'Heureux, our President and CEO; and Bruno Roy, our CFO. Please note that we will be recording the call and that we would post it on our website tomorrow. Before we start the call, I want to mention that we will be making some forward-looking statements and that 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. Now, I will turn it over to Alexandre. Alex?
Thank you, Isabelle and good afternoon, everyone. We are really pleased with our 2017 performance and as such, the main points I would like you to take away from this call are the following.Firstly, organic growth as you know is the lifeblood of any company and the underlying measure of its strength. I am pleased to report that we posted strong results for the year, with organic growth in net revenues across all of our major hubs. In other words, organic growth and net revenue was 17% in Australia, 12% in the Nordics, 10.4% in the America, 4% in the U.K., and 2.1% in Canada. We are very proud of this performance. Secondly, beyond revenue growth, we posted record high backlog, in line adjusted EBITDA and solid cash flow generation. This, along with a strong balance sheet, puts us on solid ground as we enter 2018. Thirdly, we met or exceeded all of our 2017 outlook metrics. And finally, all of the above positions us well to meet our 2015-2018 strategic plan targets. In parallel, we have already started to work on our 2019-2021 strategic cycle, which we will announce in the first part of next year. Let me now address all of these points in more detail. Organically, 2017 has seen growth in net revenues across all of our reportable operating segments. This past year, we have won projects on varying sizes and complexities, giving us the opportunity to provide lasting solution for the development and the betterment of the communities within which we operate. This growth has also been nurtured by our ability to seize various opportunities for our clients as a result of our capacity to cross-sell our expertise, translating into improved project delivery and higher margins. This proves not only that we are a trusted adviser to our clients but also a strategic partner. Let me make a few comments on our fourth quarter and full year financial performance, which Bruno will discuss in greater detail. Our strong growth this quarter was mainly driven by the U.S. as a result of FEMA disaster assessment and inspection related services, which surpassed forecast and propelled net revenues and organic growth in net revenues beyond our expectations. During this period, we mobilized experts to support many counties and cities across the United States and its territories with their monitoring and recovery programs. Net revenues were $1.5 billion, up 11.4% year-over-year, while organic growth in net revenues amounted to 8.1%. Adjusted for FEMA-related net revenues in excess of our expectation, we would have posted 1.6% organic growth this quarter. We are pleased with this performance since Q4 2017 has 4 less billable days compared to the same period in '16, which we had anticipated, would have translated in negative organic growth in net revenues for the quarter. For the year, adjusting again for FEMA-related net revenues, organic growth in net revenues would have been 4.4%, still above our target range as Canada and Australia exceeded our expectations. Adjusted EBITDA was $140 million, with adjusted EBITDA margin of 9.5%, lower when compared to Q4 2016, due mainly to having 4 less working days. As you recall, this is the opposite effect we noted in the first quarter of '17, where we had 5 extra billable days, which positively impacted our margin profile. As such, the 9.5% margin should not be analyzed on a standalone basis. Instead, the annualized adjusted EBITDA margin is a better indicator of our performance. At 10.4%, we are in line to reach our 2018 target of 11%. Lastly, our backlog reached its highest level ever and stood at $6.4 billion, representing approximately 10.1 months of revenues. Let me now move to our operational performance in fiscal '17. During the past year, we acquired 10 companies, adding over 5,000 employees to our workforce, expanding our geographical presence in New Zealand while strengthening our expertise in Latin America, the Nordics, the U.K. and Australia. All of this year's acquisitions were financed using our balance sheet. Opus actually marked our 100th acquisition since our 2006 IPO, and let me take this opportunity to welcome all of our new colleagues to the WSP family. The year culminated with the successful rebranding of all of our operations worldwide as WSP, united around one vision, one strategy and one brand by leveraging our guiding principle and operating model, which is a great market differentiator. We will continue to raise the bar and offer the best to our clients, employees and shareholders in 2018 and beyond. Looking at the performance of our regions, Canada posted organic net revenue growth of 2.1% in '17 and 12.3% adjusted EBITDA margin before global corporate cost, ahead of our expectations. This was reflected with the Canadian leadership team's execution of the operational restructuring plan initiated in '16. Our backlog in Canada has also increased organically 10.9% compared to the same period last year. Significant project wins, notably the contract pertaining to the rehabilitation of Canada's Parliament Hill Centre Block, several contracts with Ontario's Ministry of Transportation, and WSP portion of the fourth transit joint venture Metrolinx contract for Regional Express Rail program in Toronto, helped Canada's backlog to reach over $1 billion. With an expanding top line of opportunities, particularly in the infrastructure sector, we expect further momentum and are optimistic about the long-term prospect in the Canadian market.The Americas operating segment posted strong 10.4% organic growth in net revenues for the year, coming mainly from the FEMA-related revenues in the U.S. Adjusted for these revenues, the Americas operating segment would have reported organic growth in net revenues of 4.6%. This region delivered adjusted EBITDA and adjusted EBITDA margin before global corporate cost of $220.2 million and 13.3% respectively. Once again, the highest among all of our reportable operating segments. The pipeline of opportunities for the Americas remains healthy and we are pleased to have been selected to provide services related to the development of the Giant Magellan Telescope, the first of the next generation of giant, ground-based telescopes. This project was won through the collaboration of our team in the U.S. and Latin America, with the recently acquired Poch team in Chile. Across the pond, the EMEIA operating segment delivered organic net revenue growth of 4.6%, in line with our expectations. We had a very strong year in the Nordics, delivering organic growth in net revenues of approximately 12%. While Brexit continues to create some uncertainty in the U.K., the region nevertheless delivered slightly over 4% organic growth for the year. Following the end of fiscal '17, WSP U.K. was appointed to lead the development of 2 of the 4 new stations as part of the high-speed two-rail network, highlighting our worldwide expertise in the field and adding to our backlog. Continuing in EMEIA, in both the Middle East and South Africa, most performance metrics were down compared to '16, in line with our expectations. Adjusted EBITDA margin of 9.9% for the year was slightly below our expectation and was due mainly to isolated and timely related matters. Our APAC operating segment posted organic net revenues of 7.1% for the year. Looking specifically at Australia, operations performed ahead of expectation, with significant organic net revenue growth while our Asian operation continued to be impacted by a slowdown in the private property market. The recent acquisition of Opus is expected to generate cost synergies which should positively impact the performance of the region in '18. Integration is progressing according to plan. Globally, 2017 was a rewarding year as we strengthened our business around the globe while pursuing our acquisition strategy. I would like to thank all of our leaders and employees for this outstanding performance and for their continued dedication. Bruno will now review our fiscal financial results in more detail and share our 2018 outlook. Bruno?
Thanks, Alex and hello, everyone. I'm pleased to share our results for the fourth quarter and for fiscal 2017. Before I jump in though, let me say that we are very pleased with our results. Our organic growth was very strong at 6.2% for fiscal '17. We have a number of initiatives in the pipeline to carry this momentum in 2018 and beyond. Our adjusted EBITDA margins are, at the end of 2017, where we expected them to be at 10.4%. We're tracking well towards the 11% target and again, we have a number of initiatives in the pipeline to get us there. Our DSOs have remained healthy at 79 days and this, despite our strong organic growth rate. We are working hard on all our processes from client selection to invoice collection to further improve our working capital performance. Our free cash flow for the full year was nearly $300 million, for an earnings conversion ratio of 139%, reflecting our strong operational discipline. Our balance sheet remained strong at 1.8x net-debt-to-EBITDA, and this even with our making 10 acquisitions without issuing any equity in 2017.All in, as Alex mentioned earlier, we are entering -- we are very much entering 2018 on our front foot. Let me now get into the details.Our reportable operating segments delivered year-over-year constant currency growth in net revenues for both the quarter and the full year. For the fourth quarter, revenues and net revenues were $2 billion and $1.5 billion, respectively, a solid growth of 8.7% and 11.4% compared to the same period in 2016. Organic growth in net revenues was 8.1% on a constant currency basis. Adjusted for FEMA-related revenues in excess of our expectations, organic growth in net revenues for the quarter would have been at 1.6%. For the full year, revenue and net revenues were $6.9 billion and $5.4 billion, growing at 8.8% and 9.4%, respectively. Organic growth amounted to 6.2%. Adjusted for FEMA-related revenues in excess of our expectations, that figure would still have been 4.4%, better than we had hoped. Let's move on to adjusted EBITDA. For the fourth quarter, adjusted EBITDA was $140 million, up $4.7 million or 3.5%. Our adjusted EBITDA margin was 9.5% as compared to 10.2% last year. This was essentially due, as Alex mentioned, to having 4 less billable days compared to Q4 2016. For the full year, adjusted EBITDA was $555.2 million, up 11.3%, with adjusted EBITDA margin at 10.4%, up from 10.2% in 2016. Turning to adjusted net earnings. As anticipated, our results were impacted by the U.S. Tax Cuts and Jobs Act enacted in December 2017. This act revised the U.S. corporate income tax regime and lowered the U.S. federal corporate tax rate from 35% to 21%, effective January 1, 2018. This resulted in the corporation recording a $16 million noncash income tax expense in Q4 '17 to reduce the value of its net U.S. deferred tax assets. Although the enactment of this act will have a positive impact on WSP's consolidated effective income tax rate and cash income tax rate in 2018 and onwards, the recording of the $16 million noncash expense increased our effective tax rate to 51.5% for the quarter and 32.4% for fiscal '17. As such, for fiscal '17, our adjusted net earnings were $233.9 million or $2.28 a share, up 4.6% and 2.7% respectively compared to '16. Excluding the noncash income tax expense resulting from the U.S. Tax Reform, adjusted net earnings would have stood at $249.9 million or $2.44 per share, up 11.7% and 10.0% respectively compared to '16. For the full quarter, adjusted net earnings per share were $39.4 million or $0.38 per share. These again were impacted by the U.S. Tax Reform, which represents a 16% share tax hit as well as 4 less billable days when compared to Q4 2016. I'll now review a few cash flow metrics. For the year, cash flow from operating activities stood at $395.4 million compared to $386.8 million in 2016. Our free cash flow for the year came in at $296.1 million or 138.8% of net earnings, beyond our cash flow conversion target of 100% of net earnings. At 1.8x, our net debt to adjusted EBITDA ratio remained within our target range of 1.5x to 2x and this, despite our making 10 acquisitions without raising any equity in 2017. This provides us with sufficient leverage to continue investing in organic growth initiatives and strategic acquisitions. Lastly, our day sales outstanding were a healthy 79 days at the end of 2017, similar to last year. While we remain committed to a DSO target of less than 80 days, our 2018 outlook range is 80 to 85 days is reflective of the worldwide [indiscernible] trends. During the quarter, we also declared a dividend of $0.375 per share to shareholders of record as of December 31, 2017, which was paid on January 15, 2018. With a 49.7% DRIP participation, the net cash outlay was $18.2 million. Net-net, as Alex mentioned, we have delivered and in many cases, overdelivered on all our 2017 financial outlook metrics.I'd like now to take a few moments to discuss the outlook for our anticipated 2018 performance, which is aimed at assisting analysts and shareholders in refining their perspective on our performance. This outlook has been prepared based on foreign exchange rates effective yesterday, March 14. Also, please do keep in mind that we have not considered any acquisitions, disposals or any other transactions that may occur after today's date. As we have mentioned earlier, our FEMA-related revenues significantly impacted organic growth and net revenues for '17. These revenues, due to their nature, cannot be predicted with any measure of accuracy. As such, taking into consideration FEMA-related net revenue was generated in '17, in excess of our expectations and not anticipated to reoccur in '18. We foresee 2018 consolidated organic growth in net revenues in the 1% to 4% range. We anticipate net revenues to be in the $5.7 billion to $5.9 billion range and our adjusted EBITDA to be between $610 million and $660 million. As in the past, our adjusted EBITDA would be subject to seasonality, quarterly adjusted EBITDA will therefore range from 18% to 29% of the total annual adjusted EBITDA. Turning to tax. We expect our fixed tax rate for fiscal 2018 to be in the 23% to 25% range, significantly lower than in previous years as a result of the U.S. Tax Reform. DSOs are expected to remain in the 80 to 85-day range. We also expect amortization of intangible assets related to acquisitions to be between $60 million and $70 million, while capital expenditures should range between $115 million to $125 million. In 2018, we continue to target the net debt to adjusted EBITDA ratio ranging between 1.5x to 2x, excluding potential 2018 acquisitions. We also anticipate between $40 million and $50 million in acquisition and reorganization costs, driven both by integration based on operation optimization and real estate consolidation. Global corporate cost in 2018 should range between $75 million and $80 million compared to $59 million in 2017. This is mainly due to higher anticipated costs associated with the expansion of our existing key employee retention programs as well as to a series of group initiatives expected to fuel organic growth and operating margin improvement. Alex will now comment on the operational outlook for each of the regions. Alex, over to you.
Thank you, Bruno. Let's start our 2018 operational outlook with Canada. We expect our Canadian operation to build on their strong 2017 results and improve operating margin across most market segments. With backlog over $1 billion at the end of '17 and good prospects for '18, we anticipate steady organic growth in net revenues in the low to mid-single-digit range. In the Americas, infrastructure spending in the U.S. is anticipated to remain robust and the integration of Poch and ConCol are expected to deliver synergies that should lead to improvement in operating margin. We anticipate organic growth to be in the mid to high single-digit throughout the first 3 quarters of the year, followed by negative organic growth in net revenues in Q4 '18 due to the substantial FEMA net revenues recognized in Q4 '17, for which we cannot anticipate will reoccur in '18. As a whole, we anticipate organic growth in net revenues for the Americas operating segment in the low single-digit in 2018. In the EMEIA region, the Nordics region is expected to deliver solid results in 2018. Organic growth in net revenues is anticipated to range in the mid- to high-single digits. Operating margin improvement is also anticipated as the significant increase in headcount experienced in 2017 should translate into higher utilization rates in '18. U.K.'s growth for '18 will be driven by large public sector work. Despite continuing concern over Brexit, we will -- we still anticipate modest organic growth in net revenues in the low-single digits, with the bulk of it concentrated in the second and third quarters of '18. Lastly, in the EMEIA region, prospects for the Middle East and South African operation remain muted for '18. Both regions are anticipated to deliver negative organic growth in net revenues as we foresee difficult economic conditions in both geographies persisting in '18. Of note, these 2 regions represented less than 6% of our 2017 net revenues. On a consolidated basis, the EMEIA region is anticipated to post organic growth in net revenues in the low-single digits. In APAC, we anticipate another solid year for the ANZ region, with organic growth in net revenues expected in the mid- to high-single digits, with the infrastructure market segment at the forefront of the growth prospect for '18. In Asia, a continuing slowdown in the building market is anticipated to lead to negative organic growth in net revenues for the year. We will be deploying cost containment efforts to limit margin deterioration as well as other action plans to remediate the situation going forward. On a consolidated basis, we anticipate the APAC region to deliver organic growth in net revenues in the low-single digits for '18. Before we open the line for questions, I would like to give you a brief update on our M&A strategy. As often mentioned in the past, M&A is a key element of our growth strategy and we intend to be an active but disciplined player in our industry. We will continue to focus on identifying possible targets, both private and publicly listed across various sectors and geographies, ensuring that strategy and culture are in line with ours. With a 1.8x leverage ratio and $850 million in available short-term capital resources, we seek to react to opportunities as and when they arise. What our priorities in terms of geographic regions and sectors but the U.S. clearly remains an important market for us. We have also mentioned our interest in Europe, particularly in Continental Europe. From a sector perspective, our attention remains on our existing end markets, including buildings, transportation and environment. We also contemplate expanding our expertise in the water and energy sectors. In conclusion, we will remain focused on driving global organic growth and improving margins, leveraging our global know-how and winning work while pursuing our long-term growth strategy focused on our technical expertise, hence being optimistic for '18. In addition to being the first choice for our clients, our 2015-2018 strategic plan by the end of '18 has a target of 45,000 employees, annualized $6 billion in net revenue and an 11% adjusted EBITDA margin. We remain confident that we will attain these objectives. Now, I would like to open the line for questions.
[Operator Instructions] Your first question comes from the line of Mona Nazir from Laurentian Bank.
So firstly, I just wanted to just -- it's more of a housekeeping but you mentioned multiple times on the call and throughout the MD&A that the lower billable days had an impact on the quarter. I'm not sure if you have this information but if billable days had been the same versus the last year, what would have margins been?
Mona, it's Bruno. Four billable days indeed, had a very significant impact on our quarter. If you think about it, we have 4 less days to offset all our fixed cost. Now, the impact of that is very hard to estimate but -- and it -- I mean, it would depend on the assumptions you make so that's why we didn't publish anything on that. But very significant impact on our numbers and the ballpark, $0.15 to $0.20 per share on EPS.
But if look, Mona, on the impact that the additional 5 days had in the first quarter and similarly, you look at the fourth quarter and what the impact of the 4 days have and it's -- on a relative term, it's very, very similar. But we haven't published that, obviously.
Okay. And then secondly, just turning to organic growth. You just mentioned the organic growth for the year in excess of 4%, and that's kind of stripping out the FEMA related work. And that's in a year where we did not see any significant boost to infrastructure spending in the U.S. and in Canada with some of the stimulus programs. If these programs do come to fruition and commence, I'm just wondering, how should we think about this organic growth and what do you think is a cap? I'm just trying to get a sense of realistic expectations, because I know there's a lot of excitement about the impact in the space.
It's hard to put a number on this. It's hard to put a cap on it, Mona. It's hard to predict if and when there'll be a boost. Canada, you know that, I mean, it's been slow out of the gate over the last 18 months or certainly since the federal elections. So it's really hard to put a number or put your finger on what should a cap look like. I think we're entering the year with a good backlog, certainly in Canada and in the U.S. and that's what we essentially put our forecast on. I mean, we're pleased with the way we are entering '17 -- '18, I'm sorry, and the way we finished the year. And frankly, for us, that's all that matters. If a boost comes along the way, clearly, I mean, this would bode -- will bode well for the organization but right now, I cannot count on it.
And just lastly for me. Despite continuous ongoing acquisition activity, some of which have been pretty large scale, you've been able to consistently increase your margin profile over the last few years. We saw a 40-basis-point improvement in 2015 and '16, another 20 basis points this year. And just taking the midpoint of your guidance range, expecting another solid improvement into 2018. I understand when you're making acquisitions, there's some low hanging fruit, but wondering if you could comment on your ability to take margins higher in the current environment and I'm just trying to get a handle, is it the complementary resource centers that you touched on, on the analyst day, is it the M&A synergies? Is it the complexity of the work that garners a higher multiple? Is there anything that I'm missing?
Well you take just the North American markets in '18, I think it's fair -- in '17, I'm sorry Mona. It's fair to say we haven't been very active on the M&A front. We have been -- I mean, we just tucked in a smaller piece, a satellite location of the Opus acquisition into Canada, so we'll see what -- where we'll end up on this. But you look just 60%, 65% of the business is still very much North American-centric. And we were able, over time, to increase the margin profile. You take Canada as a prime example, you look at our '16 performance and you look at our '17 performance. I mean, we've made enormous amount of effort in better time selection, better project selection, mission-critical work, cost-containment in our corporate cost, attracting the best talent in the industry. So I think it's not just a matter of realizing cost synergies as part of our M&A strategy, it's -- and you know that's not the primary reason why we do deals. We do deals because we want to complement our existing platform with additional expertise and strengthen our platform. So the point I'm making is, it's not just an M&A play, the increase in margin. It's also a good amount of work that we're putting in the platform to improve our margin profile. And as part of our '19 to '21 plan, I mean clearly, this also would be at the heart of our strategy.
Your next question comes from Frederic Bastien from Raymond James.
I was wondering on the FEMA work that you did, was there any EBITDA drag that might have impacted results from this incremental work you did?
Very marginal. What really makes a difference in our fourth quarter number, Fred, is really the 4 days. So we lost 4 days in one of our best quarters of the year and we won 5 days in the worst quarter of this year. Q1, as you know, is our worst quarter always. Of course, it's going to do funny things on margins. That's why we strongly recommend you look at the full year margin, which normalizes all these things and at 10.4% we're in a very good place.
Okay, great. Obviously, a lot of volume out of that FEMA assignment. How did you perform on that job? And I was wondering, does that open up the door for more work with federal agencies down the road or was that just really a onetime gain that you got there?
Look, we've been working with FEMA for 22 years, Fred, so -- but only once in the last 15 years we've reached that peak level that we've reached in '17. And that's why I just want to caution our analysts and investment community that they don't happen every year. I mean last year, the U.S. sustained 3 different hurricanes and we don't see that every year. So I think we performed extremely well. It's been a long-term relationship. Typically our long 5 years assignment, I think we're going to be up for rebid in the next few years. So time will tell but I think we've done a very good job. And I think actually, our employees should be commended for their work.
What I was trying to get to, Alex, more on the -- I don't know if the several federal agencies the U.S. has -- they talk to each other, anything like that. But would that -- I assume you did commendable work there, I mean, would that open up the door for more opportunities? I believe that you guys are subscale in federal work, so wondering what that does to your prospects there.
Yes, I think I wouldn't count on it. It certainly cannot hurt, Frederic. I think it's -- as I said, I think we've had a long-lasting relationship with this federal agency. I mentioned before that, at the Investor Day and on numerous analysts calls, that government services is something that at some point, we need to explore or we will explore. But right now, I think it's fair to say that it's a small portion of our total book of business.
Okay, that's helpful. You note in your prepared comments, some delays in project starts in the U.K. buildings. I mean, can you provide a bit more color on that, please?
It's been just that the market over the last 18 months or let's say 2 years, has cooled off. Frankly, the market cooled off before the vote on Brexit. It's something that we were expecting, the U.K. market on the private side had been hot for many, many years and I think that the market has taken a pause. But at the same time, we're not seeing the dip that the country has seen post the recession in 2007, 2008. So I don't want you to think that we are seeing the marketplace the way the market reacted post-recession in '18 -- in 2008, I'm sorry.
We also -- Fred, on the fourth quarter, we also had -- there was a single large project in property buildings that was meant to start in December, where the start was actually in January. And that made an actual difference in the result because it was a very large project and it's been launched in January. So there's a little bit of timing in there.
Okay, that's what I was mostly referring to. And my last one, in terms of your outlook for margin expansion and all that stuff, do you expect each of your operating regions to improve on their 2017 results in terms of EBITDA margin?
I'm not going to go country-by-country. You know we operate in 40 countries, but I'd say our major hubs, that I hope in order to get -- that the aim, I should say, rather than hope, we want to -- we have a plan to get there. To get to 11% margin, I mean, most of our larger hub will have to contribute. So on that front, I think it's fair to say that, that's where we're aiming at.
Your next question comes from Benoit Poirier from Desjardins Capital Markets.
Just to come back on the previous question on the margins. I understand that you won't provide any specific color to any regions. You're aiming for a bump in every region, but is there any regions where you expect maybe a higher contribution than others, Alex and Bruno?
Look, I mean, we haven't disclosed that and I don't want to start disclosing. We've provided an outlook to assist you. I'm not going to start -- I wouldn't want to start disclosing a forecast on any of the regions. I think I'm providing an outlook for the company. But I think it's fair to say, Benoit, that the aim obviously in every region is to improve. It's to improve, so I hope and expect that we would be in our Asia Pacific, like Australia and New Zealand, that we would be improving. I think in Asia will be challenging clearly as I said that during my address. In the U.K. and the Nordics, we will continue to try to do better. In Canada equally, we are hopeful that we're going to improve our margin profile and in the U.S. So I think we're -- clearly, to get to 11% as I said before, we'll have and we'll meet our major hubs contributing to the equation.
Okay, that's perfect. And now when we look at your global corporate costs, you've been -- you've done a good job in the past of managing the corporate cost. Now for the year, you expect $75 million, $80 million, you mentioned a good explanation on why. If I look in percentage of net revenues, this comes up from almost 1% to 1.3%. So is the 1.3% is the way we should look at post 2018? Or we should expect basically, the global corporate cost to come down post this year?
They should come down of course, as we go out and get scale, right? The bump in this year is really related to our long-term incentive plan that we've broadened within the company, so we have more folks on the LTIP. And again, to make sure that we keep our terrific leaders across all regions on the farm, so to speak. So that's the difference, frankly. That and frankly, the other thing is the share price appreciation. So it's been a little bit more expensive to have share-based incentive programs because our share price has done really well last year.
Yes. Would you be able, Bruno, to quantify what would be the contribution from the LTIP and also the stock price impact?
We probably won't go there. It gets a bit too granular, but assume it's because we've done well last year.
I think to your first question, Benoit, the way I would answer it is the way we approach corporate cost is really, every year, it's a bottom-up approach. When you said it's between 1% and 1.3% of net revenue, I mean, for this year, it's a good matrix but next year, it could be different. I mean, we always aim to reduce our corporate cost, we always aim to run a tighter ship, so I wouldn't use this as like, the normal, if you want a rundown of the run rate, I should say, of our corporate cost. Next year, I mean, we're going to revisit our corporate cost, we're going to revisit our business and if we reduce and be more effective and more efficient, we will be.
Okay. And just a quick question on the seasonality. Obviously, you had 5 more billable days in Q1, 4 less in Q4. So if we look at seasonality for 2018, should we compare apple-to-apple or basically in Q1 2018, you're going to be facing a tough compare, given you benefited with 5 less billable days back in Q1?
I'm delighted to say that we will have exactly the same number of days in each of the quarters as we had in 2017. So these biases will be gone in 2018.
Okay, that's clear. And last for me, could you mention any color about your pipeline for M&A prospect, how it has changed versus last quarter and any change in the strategy?
No, we completed -- as you know, we closed in on our Opus acquisition in October. I mean, in order to reach our plan, we're going to need to, as you know, I mean, this is ongoing discretion and we always try to have a healthy pipeline of prospects. So I'd say that it hasn't changed year-over-year. I think my job is obviously to engage with my colleagues around the world and try and find firms that share our vision, share our culture and would complement very well, our existing platform. And together, we can raise the bar as an organization. So I'd say that it was an active year in our industry last year, with large transactions taking place. But there's also room for medium size, smaller size but I expect also larger size transaction just in the years to come. So the point I'm making is having ongoing discussions is healthy and you always learn something, and we'll continue to do that, but the target pipeline is good.
Your next question comes from Yuri Lynk from Canaccord Genuity.
Just the clarification on your organic growth outlook, that's -- so it's 1% to 4%, that's on top of the number that includes the FEMA.
Yes.
Yes, it is.
Okay, so that quite a good outlook for '18. Has your outlook -- how has your outlook for organic growth for '18 evolved over the last 6 to 9 months?
I think it's evolved like, pretty well. I mean, it's been -- you look at the year and the way we progressed from the first quarter to the end of this year, and we are pleased. And you look at our backlog and the growth in our backlog, year-over-year and we're -- frankly, as I said before, I think that's the reason why I feel we're entering 2018 with, I would say, confidence. It's difficult to predict what will happen 12 months from now but we're entering the year with confidence, with a strong balance sheet, so I feel that things are evolving well.
I guess my point was, you delivered about 1% to 4% guidance, which is what I think most people expected, but that's on top of a tough comp. So it's a -- I guess you guys are feeling good about it.
I'm feeling that we have good momentum right now and we need to push the organization, and that's what we do. And as I said before, we have a good backlog right now, so of course, in spite and despite of the FEMA excess in revenue we generated, I think that if we could reach that level, we'd be very pleased. I think it would be a good achievement as you stated.
Yes, sure. This quarter, the first quarter of '18, we're lapping last year where you had some extra working days. The Americas segment for example, you had almost 13% organic growth last year. You're calling mid- to high, so I just want to make sure that -- that seems like a very tough comp.
We'll have the same number of billable days in Q4 '18 as we had -- in Q1 '18 as we had in Q1 '17. So we won't have that bias.
Okay, I got it. Last one for me, what levers do you have left to pull in terms of getting to your 11% margin i.e. is it better leverage on SG&A? Is it the OpEx? Just how should we be thinking about your journey to 11%? And then once we get there, how do you feel about pushing it potentially beyond that?
It's a 3-year cycle, so when we disseminated our plan in '15, we have many initiatives in the work that we wanted to do action in order to get to our 11% margin. So this is not something that we are starting this year. There are not necessarily initiatives that we started this year that will get us to the 11%. This is ongoing initiatives around better client selection, better project selection, working on mission-critical work that will leverage our expertise, that will allow us to increase our fee on those jobs, and that's what we've been able to do. And as I said before, it's an ongoing effort to manage your utilization within the company, being more efficient and more agile in the way we manage utilization and project management. I mean, project management is the heart of what we do. I mean, our project managers have to be trained and we have to attract and retain the best in the industry. So I'd say that it's a number and I said that before if you recall, Yuri, and I don't remember when but a number of conference call, increasing margin in the people business, 42,000 people in 41 countries, it's a number of initiatives, it's not one single thing that will get you to 11%. In every country, the initiative might be different because in Australia, the requirement would be completely different than what is required in the U.S. to increase the margin profile. So you don't approach it holistically. Country by country, we have planned to increase the margin profile. I'm giving you an example but that doesn't mean it's this, but in Australia maybe, its corporate cost that we need to improve. In the U.S. maybe, it's project management. In Canada, it's going to be something else. So I think we have a plan by country of where we need to get to and we monitor it and we try as hard as we can to deliver on the plan.
Your next question comes from Derek Spronck from RBC Capital Markets.
Just in terms of your backlog as it matures and you had a nice pickup in your backlog this quarter as well, can you talk a little bit about the quality of the backlog in terms of the anticipated margins that you see within that backlog and just the overall qualitative aspects on it?
Yes, I tried to answer that question perhaps differently, the question that Yuri was asking. I think we're entering the year with a backlog, I think it's a good backlog. It's not just about the amount of it. As you're entering the year and you look at your backlog, you look at your recent win and you look at the projects that you were able to secure and I'd say that we are entering the year feeling good about the backlog that we have. And hopefully, with this backlog, that will get us to our 11% margin, that's the goal by the end of '18.
So within that backlog, you're effectively seeing the benefit of projects, better project selection and perhaps, leveraging your expertise in certain segments.
Yes, I mean, we're seeing -- Alex gave the example of the Magellan Telescope in Chile, which is again, a highly technical job that we'll be doing from this year onward. It's also a job that we would have never won in the past, frankly, right? And that we won this time around because of our team [indiscernible] WSP in LatAm and the team at Poch in Chile and with the help of our team in the U.S. So again, technical expertise, relationships and local presence, and this is a terrific example of our strategy to work.
Okay. And just moving onto your guidance metrics. Last year, you provided guidance for EBITDA, adjusted EBITDA and you came in at the high end of the range. I mean, for all intents and purposes, it seemed like you hit basically in line, most metrics. Maybe there were some positive aspects that came in ahead but when you look at your 2018 guidance level, it's a pretty wide range. You said -- would you consider that partly due to a level of conservatism and just trying to get a thinking of within that range, if things kind of go according to plan, would you be coming in closer to the higher end of that range versus the midpoint or the low end of that range?
Look, it's on a -- consistently over the years, we've provided this outlook. And just to provide you with assistance, when we look at where we're headed as a company, $610 million to $660 million EBITDA, we consider it to be a wide range. We work in 41 countries with a number -- 100,000 live projects we're about. So I think you need to be careful at the same time to provide too tight of a range. I think we're comfortable with this. Last year, we finished at the high end of it. I look back at where we finished the year this year and look back at for instance, at the mid-range of where we are guiding you right now, and I feel it's a pretty, pretty, pretty good increase year-over-year percentage-wise from where we will finish the year to where we want to end the year. So I think it's a good place to be. And if we feel over the course of the year that we can reduce the range, I mean, we will do that for sure.
Okay. And just one last one for myself. On the acquisition front, you mentioned U.S. being an area of interest. Water could be different -- could be several different sizes of acquisitions that could come to fruition. I mean, would you be willing at this point to do something more transformational, a major type of acquisition? Would that be in the cards if it was the right acquisition?
Absolutely. That's as far as I can say. I mean, if the stars are aligned and it meets all of our -- checking all of the boxes, absolutely.
[Operator Instructions] Your next question comes from Maxim Sytchev from National Bank Financial.
Just more of a general question on M&A. I think if you look at present transactions of size, it seems to me that the multiples are creeping up. And obviously, historically you've been very mindful in terms of what you pay for the deals, is it fair to say that maybe on a go-forward basis, you might be looking at some potential asset that would have a turnaround component to that? Or this is still not part of your thinking in terms of M&A?
Well we've -- over time, we've always tried to be opportunistic, Max. So again, we like to buy good business, good businesses with strong expertise. The first thing that we're looking at is, does this firm have good people with good expertise? And sometimes, some firms, despite having great expertise and great people, they may run into a tough period, and that happens. So of course if the opportunity was presenting itself, we would look. That doesn't mean we will do something. But as in the past, we've always been open and thinking outside the box and we'll continue to do that.
Okay, that's helpful. In terms of I mean, one of the bigger trends, especially for some of the larger peers that we see in the industry right now, there is a big push on digital, Alex. I'm wondering if you don't mind sharing some kind of high-level thoughts on these initiatives, maybe for yourself and how WSP sort of comps versus some of the competitors in the space right now, if it's possible.
Digital, Max, means different things to different people, obviously, and clearly in '18 in parallel, executing on our last year of the strategic cycle in parallel, we're preparing our next 3-year strategy. And if you allow me, I'd like to come back to you when we have formalized our view on our digital strategy. But intuitively, I believe that already, WSP is doing a lot internally. If you look at the amount of outstanding work that we do in the various countries where we operate, every time I visit a country, I'm always -- it's mind-boggling to see what our people are doing. It's pretty special and I believe that -- and from that, I reserve the right to change my mind over the course of the strategic cycle that we are undertaking. But I believe this strategy will come from within. I believe the solution on digital will come from within as opposed to potentially outside. I think we already -- I mean, we are doing a lot of things with our clients that are technologically advanced. If I talk about automated vehicle I think we do a lot of great things already. So if you allow me, I'd like to get back to that question which I understand is high on your priority list. I get this question often but I'd like to really take the time to take it offline with our professional internally and get back to you on this.
That makes perfect sense. And maybe just last question for Bruno. In terms of the CapEx spend in 2017, it was slightly less relative to what you had forecast. Was there a reason for the variance? And is there just a sort of a spillover effect into 2018? And maybe you can talk about the initiatives that were pushed back or forward, maybe just any color there, please.
It's a bit of both, Max. But a big part of the change here is improved discipline on CapEx. We've been tighter in terms of our real estate, in terms of our IP, in terms of managing our pipeline. That's one thing we've done and pretty proactively. The second is there's been a bit of a spillover as well onto early '18. And as you look at our outlook for next year, we're ranging at $115 million to $125 million on CapEx. This reflects that. This also reflects the fact that we [ indiscernible ] 5,000 more professionals last year and there's a bit of integration to be done there and will need a bit of CapEx. So again, our range for 2018 is going to be $115 million to $125 million.
We have no further questions. I'll turn the call back to the presenters.
Okay, well, thank you for attending our Q4 2017 and we look forward to updating you in the next quarter and the quarters ahead on our performance in '18. So thanks for your support. I'm looking forward to speaking with you again. Thank you.
This concludes today's conference call. You may now disconnect.