WSP Global Inc
TSX:WSP
Earnings Call Analysis
Q4-2023 Analysis
WSP Global Inc
In the fourth quarter, the company's dedication to operational excellence delivered significant net revenue growth of 22% and an enhanced margin profile, which robustly increased by 150 basis points, hitting a noteworthy 19%. This performance caps off a year of solid consolidation and fruitful strategic acquisitions, leading to robust results that align with the higher end of the company's financial outlook.
The company's appetite for growth was marked by the onboarding of new expertise from acquisitions like Wood E&I and Golder, amplifying its scope to cater to burgeoning sectors driven by water, energy transition, smart infrastructure, and climate change concerns. This strategic direction bolstered business volume by over 20%, reinforcing the company's ability to ride the wave of rising global trends and consumer demand in these crucial areas.
With double-digit organic growth in transportation and infrastructure, thanks in part to stimulus programs like the U.S. Bipartisan Infrastructure Bill, the company is ideally positioned to benefit from growing global demands in various sectors, including healthcare, hospitality, and data centers—catalysts for what was termed 'hyper growth.'.
WSP's inclusion in Corporate Knights' Global 100 Most Sustainable Corporations underscores its strong commitment to sustainability and ESG matters, which not only enhances its reputation but aligns with global demand for environmentally conscious initiatives.
The full-year analysis paints a picture of relentless growth with a 21-22% increase in revenues and net revenues amidst robust organic growth across segments. The adjusted EBITDA experienced an 18% quarterly and 26% annual growth thanks to strong project performance and productivity enhancements, resulting in a substantial EBITDA margin gain, well beyond the strategic goal.
The company's financial stewardship is evident in its record-breaking quarterly free cash flow of $610 million and an impressive annual increase of 40%. Meanwhile, the Net debt to adjusted EBITDA ratio remained at a healthy 1.5x, demonstrating adept management of liabilities.
Looking ahead, the company forecasts net revenues for 2024 to reach between $11.2 billion and $11.7 billion, with the adjusted EBITDA estimated between $2.05 billion and $2.13 billion. This anticipation of continued prosperity reflects a clear, forward-thinking strategy aimed at analysts and shareholders alike.
Beyond 2024, the company sets its sights on delivering a 20% EBITDA margin, a vision that has now evolved into a mission. Investments in technology platforms like ERP are expected to yield significant long-term dividends by bolstering business efficiency and insight quality.
Efficiency improvements and a strong people-focused culture have positioned the company to improve productivity, with initiatives like professional staff mobility and reduced turnover accounting for a notable positive impact. These efforts are central in driving towards a 100% free cash flow conversion target, despite facing tax headwinds amounting to an anticipated $100 million in 2024.
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Good morning, everyone. Welcome to WSP's Fourth Quarter and Fiscal 2023 Results Conference Call.I would now like to turn the meeting over to Quentin Weber, Investor Relations. Please go ahead, Mr. Weber.
Thank you for attending the call today. We will be discussing our Q4 and fiscal 2023 performance followed by a Q&A session. Joining us this morning are Alex L'Heureux, our President and CEO; and Alain Michaud, our CFO. Please note that this call is also accessible on our website via webcast. During the call, we will be making some forward-looking statements and 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 year that ended December 31, 2023, which can be found on SEDAR and on our website. In addition, during the call we may refer to certain non-IFRS measures.These measures are also defined in our MD&A for the year that ended December 31, 2023. Our MD&A includes reconciliations of non-IFRS measures set for 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 key 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 named measures 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.I will now turn the call over to Alex L'Heureux.
Thank you, Quentin, and good day, everyone. I am pleased to present our fourth quarter and strong annual results. I will also use the opportunity to provide an update on key milestones we achieved in the second year of our 2022-2024 Global Strategic plan. Starting with our fourth quarter performance. Our core operations continued to deliver solid net revenue growth and our margin profile improved by a very robust 150 basis points to reach 19% compared to the fourth quarter of 2022. We have also seen a good level of cash flows and our business continued to capture many strategic wins, which I will cover later. Turning to fiscal 2023. The consistency and rigor we applied in our operations have translated into strong financial performance. First, net revenues are up 22% or nearly $2 billion resulting from strategic acquisitions and healthy organic growth of 7.3%. This was achieved with the contribution of all of our reportable segments.Also, a record high order intake of $15.1 billion continues to reflect positive market conditions. Second, adjusted EBITDA is up 26% or nearly $400 million. Adjusted EBITDA margin stands at 17.6%, up 55 basis points surpassing our yearly margin expansion ambition of 30 basis points to 50 basis points. We delivered beyond expectations and remain laser focused on profitability as we pursue our ambitious target of reaching a 20% adjusted EBITDA margin. Third, adjusted net earnings are up 24% or $1.15 per share stemming from accretive acquisitions and continued significant productivity gains. We are proud of these results as they demonstrate our strong execution in a year of significant consolidation and transformation activities. Overall, we delivered robust results at the high end of our financial outlook range, which as you will remember, was revised upwards significantly in August 2023.Let me now make a few remarks on each of our 4 strategic pillars namely people, expertise, clients and operational excellence. On people, we are now one of the largest engineering and professional services firms with close to 67,000 deeply talented employees who are positioned globally to solve the world's most complex challenges. We persist in advancing on several initiatives to become an even more unified WSP and deliver an even better employee experience. We are transforming our organization with a new ERP that has been deployed in some of our key segments and is now being leveraged by approximately 30,000 employees in Canada and in the U.S. and we are planning its implementation in other regions. On expertise, we strengthened our presence in key markets.Our proven experience identifying and integrating industry leading brands led to the creation of a nearly 20,000 people strong earth and environment franchise, most of it in the last 2 years as we welcomed new colleagues from Wood E&I and Golder amongst others. Our global platform is positioned favorably to address clients' future needs as water, energy transition, net zero commitment, smart infrastructure and climate change remain critical areas of focus. On clients, we increased our volume of business by over 20% through a combination of organic and strategic acquisitions. This growth is attributable to a disciplined and focused execution of business plans across all our sectors and the substantial focus we put on our global client care program.Lastly, on operational excellence, we drove stellar performance and efficiency through our multiple margin expansion initiatives. We hone in our productivity metrics while ensuring that our organization remains agile, leverages our excellent centers and efficiency delivers on our projects. On top of strengthening our platform, we are future proving WSP to support our growth ambitions. WSP is uniquely diversified with top tier sectors built through our history. The first, transportation and infrastructure delivered double-digit organic activity levels in the U.S., U.K., Canada, the Middle East, Australia and New Zealand. This is a testament to our leading expertise in bridges, mass transit, highways and rail. WSP continues to be exceptionally well positioned to benefit from the various stimulus programs being deployed globally.On that, we continue to see positive momentum stemming from the Bipartisan Infrastructure Bill in the U.S. The biggest opportunities for this bill and other stimulus programs globally are in roads, bridges and major transportation projects. This is fully aligned with WSP's leading transportation and infrastructure sector. Moving on to our property and building sector. Our focus in the recent past has been on diversification and we see high demand for our services in Canada, the U.S., U.K. and Australia more so in hyper growth sectors such as health care, hospitality, entertainment, data centers, mission-critical and in manufacturing. Lastly, and as I mentioned earlier, we have efficiently aided our strategic earth and environment sector, which is benefiting from robust momentum across all our geographies.We have the privilege of providing expertise and advice to clients on most ESG related matters, including water scarcity, biodiversity, earth sciences, biomass, environmental permitting and social acceptability just to name a few. Our future is not short of growth opportunities as global trends point to higher demand in all these fields of expertise. A good example of that being the energy transition and the drive toward carbon neutrality for power generators and consumers. Across our portfolio, we are awarded projects to support wind and solar generation as well as planning, designing and managing programs for the build-out and upgrade of transmission and distribution lines. For example in the U.S., we won a project known as Propel New York Energy, a collaboration between the New York Power Authority and New York Transco.The project entails building out the transmission grid in New York contributing to the achievement of the city's clean energy transition goal of having a 0 emission electric grid by 2040. WSP's scope of work includes environmental planning and permitting, stakeholder engagement, civil and electrical design and overall project management. This adds to the work WSP is delivering for Champlain Hudson Power Express and Clean Path New York. Combined, these represent nearly $20 billion of new electric grid infrastructure investment in New York in less than 2 years with WSP playing a pivotal role in the delivery of all 3 projects. In the U.K., WSP has been appointed by National Gas to develop best practice guidelines on the design and build of a new hydrogen network. In Sweden, we are supporting clients to develop hybrid energy solutions combining wind, solar and hydrogen for more reliable and carbon free energy system.We are also helping with the expansion of offshore wind development in Taiwan to reach a target of 5 gigawatt of renewable generation. The energy transition provides a broad range of opportunities. Just recently, we were awarded the entire multidisciplinary design for Volkswagen's largest facility worldwide and their only plant in North America. This is one of the largest battery facilities globally and we are leveraging our global expertise from active electric battery projects in Sweden, Italy and Southeast Asia to deliver. I would now like to share a few of our recent accolades. WSP has been included in Corporate Knights' prestigious Global 100 Most Sustainable Corporation in the world for 2024 and ranked the 12th most sustainable corporation. This acknowledgment is a testament of WSP commitment to sustainable business practices as well as gender diversity.We earned placement on the Dow Jones Sustainability North America Index for the first time. This industry standard recognizes the Top 20 sustainability performers amongst the 600 largest companies in the U.S. and Canada based on long-term economic, environmental and social criteria. WSP's inclusion is an additional tribute to our dedication to build a more sustainable world. WSP was also recognized as the world's leading environmental and sustainability consulting firm in Environment Analyst's annual state of the industry report. We are proud of our ongoing progress on the sustainability journey and I congratulate all of our teams for these achievements.On that note, let me turn it over to Alain, who will go over our results in more detail.
Thank you, Alex. I'm very pleased to report on our strong results for both the fourth quarter and the full year. Starting with our top line. For the fourth quarter, revenues and net revenues reached $3.7 billion and $2.8 billion, up 5% and 8%, respectively, compared to Q4 2022. Net revenue organic growth of 5.1% in the quarter is attributable to all reportable segments. Globally, net revenue organic growth would be approximately 6.5% when excluding the significantly lower demand for emergency response services as the hurricane season generated a notable decrease in inspection activity. For the Americas, excluding the same item, our operation delivered strong organic growth of 8.6%. For the full year, revenue and net revenue reached $14.4 billion and $10.9 billion, up 21% and 22%, respectively, compared to 2022 reaching the high end of our latest net revenue outlook range for the year of $10.7 billion to $11 billion.The increase was due to sizable acquisition growth of 12.3% and healthy organic growth of 7.3%, which was pulled from all reportable segments. Organic order intake reached a record high level of $15.1 billion for the year resulting in a backlog as of December 31, 2023 of $14.1 billion or 11.8 months of revenue, up 8.2% in the year. Moving on to profitability. Adjusted EBITDA in the quarter grew to $525 million compared to $446 million in the fourth quarter of 2022, an increase of 18%. Adjusted EBITDA margin for the quarter increased by a robust 150 basis points to 19% compared to 17.5% in the fourth quarter of 2022. The increase is mainly attributable to strong project performance and significant productivity initiatives. For the full year, adjusted EBITDA grew to $1.92 billion, up 26% compared to $1.53 billion in 2022 reaching the high end of management's latest outlook range of $1.9 billion to $1.93 billion.In 2023, the adjusted EBITDA margin increased by 55 basis points to 17.6% against the previous year beyond the higher end of the corporation 2022-2024 strategic ambition to increase the adjusted EBITDA margin by 30 bps to 50 bps annually. For the quarter, adjusted net earnings reached $248 million, up $39 million or 18% compared to the fourth quarter of 2022. And for the year, adjusted net earnings increased by 24% to $860 million or $6.90 per share. The increase is mainly due to higher adjusted EBITDA, which is partially offset by the impairment of long-lived assets resulting from our ongoing optimizations as part of our real estate strategy. On this front, we're very pleased with the progress and are well on track to exceed our 2024 goal of reducing by 20% our real estate costs and footprint.I'll now review a few cash flow metrics. Free cash flow for the quarter was $610 million, a record cash flow generation in a quarter. Free cash flow for the year ended December 31, 2023 was up 40% to $433 million compared to $309 million in 2022. Free cash flow represents 110% of net earnings attributable to shareholders when excluding higher income tax paid due to tax regulation in the U.S., which delayed the deductibility of R&D expenses. Of interest, the situation on this specific U.S. regulation remains fluid and should a change occur, it could positively impact our free cash flow. DSO as of the end of the year stood at 76 days compared to 73 days as of December 31, 2022. We have stabilized the DSO situation in Canada following the implementation of our new ERP and are devoting effort to normalizing DSO in the first half of 2024. Net debt to adjusted EBITDA ratio stands at 1.5x within management's target range of 1x to 2x.Lastly, I will comment on our 2024 financial and operational outlook. Before I start, I'd like to remind you that the outlook for our anticipated '24 performance is aimed at assisting analysts and shareholders in refining their perspective on our performance. It has been prepared based on foreign exchange rates effective February 28, 2024 and also note that we have not considered any acquisition, disposal or any other transaction that may occur after today. For '24, we anticipate net revenue to be in the $11.2 billion to $11.7 billion range and adjusted EBITDA between $2.05 billion and $2.13 billion range representing a midpoint target EBITDA margin of 18.3% or approximately 65 basis points higher than 2023. We expect the consolidated net revenue organic growth on a constant currency basis to range between 5% and 8%.We continue to see positive market fundamentals across our operation and anticipate mid- to high single-digit organic growth for Canada and the Americas and mid-single digit for EMEIA and the APAC regions. This reflects our current assessment of market condition and our continued ambition to increase our margin in line with our '22 strategic financial ambition. First quarter '24 will have 2 less billable days than the first quarter of '23 while the fourth quarter of '24 will have 2 additional billable days than the fourth quarter of 2023. The impact on the quarterly organic growth is expected to be approximately negative 3% in Q1 2024 and approximately 3% positive in Q4 2024. As of note, we aim for 100% conversion of free cash flow to net earning in 2024 and we manage our capital structure to maintain a net debt to adjusted EBITDA ratio between 1x and 2x.Other items of our '24 outlook, including quarterly distribution, seasonality, tax rate and others are described in our press release. In conclusion, we're very proud of our accomplishment in 2023 in a year of significant consolidation and transformation delivering strong results ahead of our expectation. We feel ready to seize opportunities in '24 and beyond.Now back to you, Alex.
Thank you, Alain. I'm very satisfied with our performance in 2023 as we concluded a year of significant growth, consolidation and transformation. We have substantially completed the integration of our recent strategic acquisitions. We have a strong balance sheet to support our ambitions and I am confident in our ability to deliver on our 2024 financial goal. Beyond 2024, we stand firm on our strategic aspiration to deliver a 20% EBITDA margin. We added 85 points to adjusted EBITDA margin since the launch of our strategic plan and our 20% ambition is clearly within reach. Based on the midpoint of our financial outlook, we aspire to deliver 150 basis points improvement in the 2022-2024 strategic cycle and we continue to foresee margin improvement opportunities.There are many ways for us to grow and push even further as the markets remain fragmented, the pipeline is healthy, and we intend to continue to scale and expand the franchise by consistently adapting to client needs. To have the platform, the discipline, the people -- we have the platform, the discipline, the people and we have the desire to grow. The future is bright for WSP. I would like to conclude by thanking our employees around the world. Their talent, work ethic and dedication to what really matters for our clients, for our communities and for us strongly contributed to 2023's success.On that note, we will now begin the Q&A session. Thank you.
[Operator Instructions] We'll now take our first question from the line of Yuri Lynk from Canaccord Genuity.
Just a question on your end markets. I mean certainly transportation and infrastructure very strong market for WSP last year. But just curious how your newly formed earth and environmental services platform performed? And any perspectives on Wood as it's been fully integrated now?
This is a great question, Yuri. Indeed, as you just mentioned, transportation continues to perform extremely well for us. This is perhaps one of our most mature sector. When you look back on history, we have been driving this sector for a fairly long time. And when you look at the bipartisan bill in the U.S., this is by far and oftentimes it's probably tenfold the size of the water funding. So clearly I think we're extremely pleased to be performing in transportation. Equally in the building sector, this was a strong performance for us and I'm extremely proud of how we were able to diversify that sector. Sometimes you need a bit of luck and also some vision. And between 2015 and 2020 just before COVID, we really ventured and completed acquisition in other subsectors than the high rise commercial sector and commercial market.And today, it's clearly paying off especially in the health care sector, in the mission-critical work that we do. So we're obviously feeling good also about the building sector and we intend to continue to grow that sector going forward. Lastly, this is perhaps our youngest sector or the newcomer in the family. When you look back at where we were in 2018, earth and environment was representing less than 10% of our revenue. If my memory is not failing me, it was 6%, 7%, 8%, something along those lines. And if you look just at the start of COVID in early 2020, just in North America alone we had approximately something like 2,000 people between Canada and the U.S. And when we completed the Golder acquisition, completed Ecology & Environment and also completed the Wood E&I business; this headcount grew to 12,000 people just in North America alone.So I don't spend much time talking about it, but we are extremely proud of the integration work and the consolidation work that has been going on in the background. If you look at the work that we've done in 2023, we have now our North American platform on the new ERP and we have a very strong earth and environment practice with at the moment the best operating margin in our group. So all that to say that I'm very proud of the consolidation and the work that we've done over the last 12 to 18 months.
That's helpful. Maybe I'll just push a little more on that point. I mean because you've made such a big strategic shift into earth and environment with the acquisitions, could you provide us with the organic backlog growth in that sector and just your expectations for 2024?
Yes. Very strong organic growth that we are expecting in 2024 in range with transportation and property and building.
We'll now take our next question from the line of Jacob Bout from CIBC.
My question is just on your M&A pipeline. You had a very busy first half in '23, but it seems like the pace of M&A has slowed and maybe just talk through that. I know it's lumpy, but is there a lack of appropriate targets out there, factor valuation? Just maybe some thoughts there.
No, no, absolutely not. I think it's not about the weak pipeline or the weak backlog of potential acquisitions. As I just described, I think in the course of the last 18 months, 24 months, we completed 2 very significant acquisitions; 1 being a partnership with 3,000 shareholders, another one a carve-out from a publicly listed company on the London Stock Exchange. That Jacob, does require a lot of work. We're very pleased with the performance of that sector, as I stated, our highest gross margin in our group so we're feeling extremely good about it. But suffice to say that we needed the attention and care and we needed to deliver the good. It's one thing to write a check, but it's another to integrate 12,000 people into a group.So I feel we worked very hard and in parallel completed last year Calibre, which allowed us to enter a new market in Australia. And equally we were able to complete a significant acquisition in Switzerland, which is now allowing us to be a top tier player in the country. So I feel in parallel we were busy, but I just didn't want us to be distracted and not deliver the good on the acquisition that we had completed. And as I stated, I feel now that we are at a point where our integrations have been successful. I'm pleased with the results. I'm very pleased with the leadership that we have in place. So we have a strong balance sheet. So now again it's probably the time for us to start thinking about what the future may look like for us.
Maybe just a follow-on here and I guess following on the discussion with Yuri there. But just on mix, obviously there was a big portion of earth and environment. But do you feel like you're properly rightsized or where do you think you're lacking in this current environment?
We're going to continue to diversify our pillars. I think if put simply in 2012 when GENIVAR and WSP came together, we created one of the leading franchise in the property and building sector. When WSP completed the acquisition of Parsons Brinckerhoff, instantly we created a leading franchise in the transportation and infrastructure sector. And equally now I think with Wood and Golder, we created a strong brand in the earth and environment sector. So as you can see, we took a very deliberate and disciplined approach of building our sectors and building our company and we're going to continue to grow those sectors and adjacent sectors to create a more diversified platform over time.
We'll now take our next question from the line of Michael Doumet from Scotiabank.
Fantastic work on the margins and I know you guys have discussed this in your prepared remarks, but I wanted to know or maybe just wondering if you guys can help us break down some of the major drivers in the margin expansion in Q4 and how you view the anticipated margin expansion in 2024? And I guess just as a follow-up given the outsized anticipated margin expansion into 2024, do you have a better sense on the timing of when you can reach that target of 20%?
Well, to put it simply. I think when we communicated our 2022-2024 strategic plan, we mentioned that our long-term vision was to reach 20%. If you fast forward 2, 3 years now, I feel it's no longer a long-term vision. It's a short-term to midterm vision.
Perfect. Maybe sticking on margins here. If I do look back and compare maybe the '23 margins versus those of 2021, solid margin progression in Canada and EMEIA. Margins are down in APAC, I would assume that's China. So I guess the first question is, is the headwind there abating? And then if I look to the Americas, margins there have been relatively flat. So just curious of what explains that and if you think you're turning the corner.
Look, I think I'm extremely pleased of our performance on the absolute, but I am even more pleased of our performance on a relative basis and let me explain to you what I mean by that. Of course when you look at the absolute number, I'm proud of where we stand and the work that was accomplished. But what I'm extremely proud of is the trajectory of the company. When you look at 2022, our margin expansion reached 30 basis points. In 2023, our margin expansion reached 55 basis points. And if you look at the mid-range of our outlook for 2024, we're hoping for something along those lines of 65 basis points. So in total, this would be an increase of 1.5% in our EBITDA margin over the course of our strat plan. But it's just that we're growing stronger and I'm extremely proud of that and I'm extremely pleased of that. We're seeing a consistent improvement in the way we operate the company and that's something that we should be pleased of.
We'll now take our next question from the line of Jonathan Lamers from Laurentian Bank.
Just picking up on that discussion on the margin. So thank you, Alex, for sharing that the 20% target is now short to medium term and discussing the consistent improvement in the way that WSP is now operating. My question is could you provide a little bit more detail on what's providing you confidence in this level of margin expansion for 2024 specifically and over the coming years? Alain mentioned the productivity improvements and the ERP implementation.
Well, I'm feeling confident because of the work that has taken place in the last 2 years of our strategic cycle. Last year I mentioned it was a year of consolidation and a year of transformation. Today, we have our North American business, which represents roughly 60% to 65% of the EBITDA of the company on the new platform. We intend to migrate other large segments and countries of operation on to the platform this year. In parallel of that, we integrated 2 of the largest acquisition we ever completed as a company and yet we delivered 7.3% of organic growth combined with a strong margin improvement. So there's not a whole lot not to like about the performance in 2023. And all I can assure you of is that we're going to continue to drive the business to raise the bar as a company and to raise the bar as an industry. So that's how we feel about the company right now.
Okay. And a question on the ERP system implementation. Is that now live in the U.S. and when do you expect to go live in the U.K?
It's live in the U.S. and we intend to be live in the second half of this year for the U.K.
Just switching topics. Stimulus funding for transportation in particular appears to be an exciting opportunity for 2024. We saw good growth in the backlog in the Americas in 2024. Are you expecting a positive impact to your backlog over 2024 based on the customer discussions and what you can see?
Well, look, I mean there's continued momentum in the U.S. and elsewhere so clearly we're feeling good about it. And I think I talked about this earlier on on the call, people tend to focus a lot of their time and energy on the water sector, which in total represent $35 billion of the total funding and in transportation we're talking about $350 billion. So it's tenfold the amount that will be allocated to water and WSP is the leading franchise worldwide in transportation. So I feel we are uniquely positioned to take advantage of what's going on around the world right now.
We'll now take our next question from the line of Devin Dodge from BMO Capital Markets.
In 2023, our headcount was roughly flat year-over-year if you exclude acquisitions and divestitures suggest that the 7% organic revenue growth was largely from some sort of pricing productivity and mix shift to higher value services. Just wondering do you expect these dynamics to carry over into 2024 or could we see a bit more headcount additions this year?
Directionally, I think this is a fair assumption. I think what I am trying to say here is that we want to extract the value of the incredible platform that we have now so where possible if we can do more with less, this is fantastic news and 2022 is an example of that. We increased productivity. We significantly invested in the platform and technology. So we're going to continue to drive the business to achieve those results.
Okay. Makes sense. Second question on the ERP rollout. I believe WSP spent about $130 million on this implementation to-date and I think you're planning another $60 million to $80 million in 2024. So just a 2-part question. One is, is there much left to do after 2024? And then the second part is that when you guys were evaluating undertaking this project, what sort of payback were you expecting to generate from this investment?
Yes. So we devoted a lot of effort in 2023, as you know, doing the rollout in Canada and preparing our 2 next larger regions to go live in 2024, which was the U.S. and the U.K. as Alex pointed out, which will happen in a short period of time. So that's what we've done. The effort right now is focused on delivering the rest of the platform, which will happen in the first half of 2025. So I would say that the bulk of our investment if I include '24 will have been done. We'll have some left in '25 for sure, but you should start seeing a decrease in the spending as you've seen in '24. So that's the expectation. We're in line with the investment that we had announced in our strat plan in early 2022.So we continue to be on time, on budget so we're very pleased about it. Very proud of our team going through the transformation. And in terms of payback, I mean you need to do those investments to ensure the resiliency of your platform and gain insight and run a stronger business. So we see great value on that front. We see great value in the quality of the insight we'll win, we'll earn with the platform and how it's going to help us to drive further the business. And obviously as you look into the way we're organized, if we could make the various back end of the firm a bit more efficient and more focused on bringing value, that's the intention. So we think that this will bring significant benefit for the long term of the company.
We'll now take our next question from the line of Benoit Poirier from Desjardins.
Congrats for the strong results. Just to come back on the EBITDA margin, obviously you were able to achieve a 55 bps improvement in 2023. You're looking for almost 65 bps improvement in 2024. You were clear that this was a transformational year with M&A, also with ERP implementation. So I'm just curious that now that the ERP implementation will be almost away towards the end of 2024, what could we expect in terms of EBITDA improvement post 2024? Could we be thinking at the north of 65 bps? And I'm just wondering about the definition of short to medium term.
Well, Benoit, I mean we need to keep some good news for later. So obviously we are in the last year of our strat plan and kidding aside, this is a year for us where we need to reflect on where we want to take the company forward. So come February next year when we roll out our next 3-year plan, we will be in a position to provide you with more details related to what we intend to do, what are our financial aspiration and, as I said, where we want to take the business forward. But suffice to say that I think it's fair to say internally, if I speak to Alain or I'm thinking about the company myself, all of the significant investment that we've made in the company in recent years; making sure that we run a very tight ship as an organization, very selective in the projects that we undertake, reduce the margin erosions on certain jobs; I think the future is bright for the company. And I clearly have now my sight on reaching that goal of reaching 20% margin. So a few years ago this was a vision, today is a mission.
Okay. And looking at productivity, 2023 you were able to deliver strong performance despite the flattish headcount. It looks like that there is more potential towards improving productivity going forward. Could you maybe share some examples of what could be done in terms of further improving productivity?
Well, I think professional and staff mobility is a very simple example of that. I think we are becoming more and more effective in the way that we mobilize and demobilize our team so there's a lot less downtime. And I feel that we have eliminated silos around and across the organization. So now we are in a position to pull resources for instance from Bogota Metro in Colombia and remobilize that workforce on other large assignments globally. So these are examples where we are able to save lost time and we are able to become more efficient, number one. Number two, this year we reduced our turnover by 200 basis points. That's not de minimis, Benoit. Hiring and training new individuals is extremely expensive because you're losing time. So by reducing our turnover, we were able to be more efficient in the way that we deliver work and that too is having a great impact on our productivity. So I think there's a number of different initiatives that we can tackle, but we are laser focused on making sure that we're creating a great people environment within the company to continue to perform.
Okay. And with respect to your stock backlog, could you maybe provide some color about how it materialized in Q3? I think last quarter you said that it increased 30% since the beginning of 2023 and about 50% increase in Q3. So I'm just curious to get an update on the stock backlog.
Directionally, the same.
Okay. And last one for me. DSOs, you were able to finish the year at 76. It looks like that you expect stabilized DSO towards 72, 79 days. So could you provide some color longer term whether you could come down back to low 70. And maybe, Alain, if you could talk a little bit about free cash flow conversion we should be expecting in 2024 given the legal tax implication.
Yes. Most of the improvement will come from North America, Benoit, for self-explanatory reasons. We converted the North American platform to a new ERP and this is a timing issue and we clearly intend to revert back to normal levels fairly quickly.
And on free cash flow, Benoit, the target is 100% free cash flow conversion. And on the tax side, the headwind that we faced in '23 was about $150 million. We anticipate little lower in '24 to around about $100 million. So that's our intention for '24.
We'll now take our next question from the line of Frederic Bastien from Raymond James.
Guys, I was super pleased with the strong performance of your EMEIA region, which you attribute to the performance in the U.K. and Central Europe. Would you mind giving us a bit more color on how well these regions did?
Yes. We certainly do not mind because this is good news. I mean the U.K. continues to surprise us. And you know what when you have strong leadership, basically you have strong performance and we have a very strong team in our U.K. business. So we continue to commend them for their outstanding work. And in Central Europe I think this is no secret, Frederic, that this is a region of interest for us. We continue to scatter the region to find the right acquisitions. BG was the start of that last year and we continue to look for good firms in the region. But the performance of that business has improved significantly over time again because of strong leadership from our team members, but also because we are able to grow our business and attract good talent. So this is clearly an area of focus for us and we'll continue to grow that region over time.
That actually leads to my next question about your successes in hiring and retaining talent. Can you spend a bit of time explaining how well you performed in 2023 and what your aspirations are for this year?
Well, I think creating the best people brand is our #1 objective as a company, Frederic. It starts with our people. This is our #1 guiding principles. Our greatest assets are people and our reputation so we're clearly not negotiable around this theme. So we continue to invest significantly in our people. I think we've talked in length on this call around the investment that we're making in technology. We talked about the ERP today, but we are investing in many other areas of the company. We're trying to create a new working environment that is more reflective of the current market condition. Life has changed and we need to adjust as a company. We just cannot stay static. So we have made significant investment for instance in real estate. Next month we will be opening our revamped largest European office space in London. So we are making investment in our people to make sure that we create the best working environment and that's not going to stop. We feel that that's money well spent and that will continue in 2024.
We'll now take our next question from the line of Maxim Sytchev from NBF.
Just 1 quick follow-up, if I may. In terms of the U.K. market, I mean we've seen some of the competitors in the space showing pretty poor performance. What are you guys doing differently in that market specifically?
I think we have a very strong matured organization and we have a very strong bench and a very strong leadership team and we definitely like the sector in which we operate right now, Max. I think we are by far, in my personal opinion, the leading franchise in property and building. Same in the rail sector, WSP is the reference in the rail sector in Europe and elsewhere and we know how relevant this sector can be in the broader -- in the old continent essentially. And lastly, we have scale. We have scale and over time if you look at our performance in EMEIA, if you go back to the acquisition of WSP in 2012 when the margin were about 7%; we continued to diversify the business, we continued to invest in the company and we continued to increase performance. And today you look at our U.K. performance, I mean the margins have more than doubled over the course of the decade. So I think it's a great testament of the work that we were able to achieve.
Thank you. There are no further questions at this time. So I will hand back to the speakers for any closing remarks. Thank you.
Well, thank you very much. Again we're extremely pleased with the performance of our quarter and the full year 2023. And we look forward to updating you going forward at our next quarterly release. On that note, I would like to wish you a good day and thank you for your invaluable support in 2023. Bye bye.
Thank you. This does conclude today's conference. Thank you for participating and you may now disconnect.