WSP Global Inc. (WSPOF) CEO Alexandre L'Heureux on Q1 2019 Results - Earnings Call Transcript

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About: WSP Global Inc. (WSPOF)
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Earning Call Audio

WSP Global Inc. (OTCPK:WSPOF) Q1 2019 Earnings Conference Call May 14, 2019 4:00 PM ET

Company Participants

Isabelle Adjahi - Senior Vice President of Investor Relations

Alexandre L’Heureux - President and Chief Executive Officer

Bruno Roy - Chief Financial Officer

Conference Call Participants

Rahul Malhotra - CIBC

Yuri Lynk - Canaccord Genuity Limited

Mark Neville - Scotiabank

Benoit Poirier - Desjardins Capital Markets

Christopher Murray - AltaCorp Capital Inc.

Derek Spronck - RBC Capital Markets

Maxim Sytchev - National Bank Financial, Inc.

Michael Tupholme - TD Securities

Operator

Good afternoon, ladies and gentlemen. Welcome to the WSP's First Quarter 2019 Results Conference Call. I would now like to turn the meeting over to Isabelle Adjahi, Senior Vice President, Investor Relations and Communications. Please go ahead, Ms. Adjahi.

Isabelle Adjahi

Good afternoon and thank you for taking the time to join us today to discuss our Q1 2019 performance. We will first make a few remarks, and then we will open the line for Q&A session.

With me today are Alexandre L’Heureux, our President and CEO; and Bruno Roy, our CFO.

Please note that the call is being webcasted and we will make it available on the website. During the call, we will be making some forward-looking statements and the actual results could be different from those expressed or implied, and we undertake no obligation to update or revise any of these statements.

With that, I will now turn the call over to Alexandre L’Heureux. Alex.

Alexandre L’Heureux

Thank you, Isabelle, and good afternoon, everyone. I’m pleased with our Q1 performance, which will be -- we will discussing in detail in a few moments. There are three points I would like to highlight today. First, we are pleased with our Q1 financial performance as it met our target set out in our 2019 outlook and provide a good start to our 2019 and 2021 strategic cycle.

We posted solid overall organic growth and net revenues, which demonstrates how our diversification across markets and geographies provide solid foundation for sustainable growth. Second, our backlog continues to grow organically and we have added a few major projects to our portfolio, which bodes well for the remainder of 2019.

Third, on the M&A front after a full quarter of combined activities with Louis Berger, we are now executing on our integration efforts according to plan. We have already began noticing the impact stemming from the collaboration of our teams and the synergistic benefits of the transaction. In parallel, we’ve continued with our acquisition program with a series of tuck in acquisition helping to strengthen our expertise in Australia, the U.S and Western Europe.

Let me start with a few comments on our Q1 financial performance. As a reminder, effective January 1, 2019, we have adopted IFRS 16-Leases using modified retrospective method for which no restatement of prior-year financial statement was required. We will discuss the full impact of this adoption in a few minutes.

For the first quarter, net revenues were $1.7 billion, up 13.2% year-over-year. On a constant currency basis, organic growth and net revenue stood at 3.2% in line with our expectations. Adjusted EBITDA was $216.9 million with adjusted EBITDA margin reaching 13%. Most of the increase being attributable to IFRS 16. Without the IFRS 16 adjustment, adjusted EBITDA would have stood at $153.1 million with a 9.2% adjusted EBITDA margin. Finally, our backlog which stood at $7.9 billion at the end the quarter represent approximately 10.7 months of revenues, grew 1.4% organically compared to Q4 of '18.

Let's now move to our regional operational performance. Organic growth in net revenues from our Canadian operation although slightly positive at .7% was impacted by provincial election in Ontario and Alberta, which resulted in the start of some projects being delayed. On a pre-IFRS 16 basis, adjusted EBITDA margin before global corporate cost stood at 10.1% an improvement compared to the same period in '18 and in line with our expectation including IFRS 16 and amounted to a 15.5%.

Our Americas reportable segment posted negative organic growth in net revenue of .5% and a 10.6% pre-IFRS adjusted EBITDA margin before global corporate cost and including IFRS 16 and amounted to 14.6%. Excluding the impact of FEMA on 2018 results, we would've posted positive organic growth of 5.3% for the quarter.

Our EMEIA reportable segment delivered organic growth in net revenues of 5.7% and pre-IFRS adjusted EBITDA margin before global corporate cost of 10.6% of net revenues, slightly above our expectations. Including IFRS 16 it amounted to 13.6%.

Our U.K operation posted higher than anticipated organic growth and net revenues which were continuing its strong showing from 2018. The Nordics operation performed as anticipated and continue to focus on improving operating margins. Our APAC reportable segment posted organic growth in net revenues of 6.9% and pre-IFRS 16 adjusted EBITDA margin before global corporate cost at 10.2% of net revenues. Including IFRS, the IFRS adjustment amounted to 14.3%. This performance which was slightly above our expectation was mainly driven by our Australian operation, which posted strong organic growth in net revenues for the quarter.

Now that we have discussed our regional performance, the second element I want to highlight is how the depth and the breadth of our expertise combined with our collaborative approach and its translating into major project wins across the globe. Let me highlight a few of these wins. In Canada, as part of the East West connectors joint-venture partnership, we were selected to provide design engineering services related to the $2.6 billion Ottawa consideration line LRT extension project.

In the U.S., WSP was selected for the design of the $2.2 billion North Carolina 540 Highway Project in Raleigh. As a lead designer for the construction joint-venture, WSP will also provide management permitting and construction drawings for the entire project.

Finally, in New Zealand, following outstanding collaboration between our New Zealand and our Australian colleagues, our consortium has been selected as the preferred tenderer for the Auckland City Rail Loop Stations and Tunnels. This is New Zealand's largest transportation infrastructure project ever with an overall value of $NZ4.4 billion and this achievement is the direct result of combining legacy local depth of expertise with our rail capability in Australia. These are just a sample of some of the projects we won and we are optimistic about the continued growth of our backlog.

Third, we have carried on with our M&A activities. Since the beginning of the year in line with our strategy, we completed four acquisitions being SEPIAGC, PGP [ph] and Indigo in Europe as well as Leach Wallace Associates in the U.S. Although not large, they each bring specific expertise or access to specific geographies. These acquisition totaling approximately 300 employees were financed using our available cash and credit facilities. I would like to officially welcome our new colleagues to the WSP family.

Finally, I would like to briefly mention the impact of IFRS 16, which we adopted as of January 1 of '19. Although this does not change our way of doing business or alter our cash flows, the main impact of IFRS 16 are two-fold. One on our balance sheet that results in a significant increase to both assets and liabilities, and also in our P&L, our operating lease expenses are replaced by depreciation expense on the right to use assets and an interest expense on our lease liability.

As a result, we haven't updated some metrics of our 2019 outlook and of our 2019 and 2021 global strategic plan, which Bruno will go through in a few minutes. Bruno will share these update with you in a few minute, but first he will review our Q1 financial results in more details. Bruno?

Bruno Roy

Thanks, Alex and afternoon, everyone. I’m pleased to comment on our results for the first quarter of 2019. Overall, we are pleased with our Q1 financial results. Organic growth in net revenues were 3.2% in line with our expectations. Adjusted EBITDA margin was at 13%. Trailing 12 month free cash flow amounted to $453.8 million, representing 173% of net earnings attributable to shareholders.

DSOs have remained stable at 78 days in line with Q1 2018. Finally our balance sheet has remained solid with a net debt to adjusted EBITDA ratio incorporating a full 12 months adjusted EBITDA for acquisitions of 1.7x. Now let me dig into the details.

For the first quarter, revenues and net revenues were $2.2 billion and $1.7 billion, respectively, an increase of 13.8% and 13.2% compared to 2018. Adjusted EBITDA for the period stood at $216.9 million, up $83.4 million or 62.5% compared to Q1 '18. This increase mainly is the result of the adoption of IFRS 16. Excluding the impact of the adoption of IFRS 16-Leases, adjusted EBITDA would have stood at $153.1 million.

IFRS 16 also had an impact on adjusted EBITDA margin, which came in at 13%. Excluding IFRS 16, adjusted EBITDA margin would have been 9.2%, slightly higher than Q1 2018. Adjusted net earnings were $70.2 million or $0.67 per share, up 27% and 26% respectively compared to 2018. Including the impact of the adoption of IFRS 16-Leases, adjusted net earnings would have stood at $75.5 million or $0.72 per share.

Net earnings attributable to shareholders amounted to $63.6 million or $0.61 per share. On a diluted basis, up 28% and 27%, respectively compared to Q1 2018. Excluding the impact of the adoption of IFRS 16-Leases net earnings attributable to shareholders would have stood at $68.9 million or $0.66 per share. Our backlog stood at $7.9 billion, representing approximately 10.7 months of revenue, up $194 million or 2.5% compared to the previous quarter. Organically, our backlog grew at 1.4% when compared to Q4 '18.

Turning to the balance sheet. We ended the quarter with a DSO 78 days in line with seasonality and comparable to Q1 '18. Incorporating a full 12 months adjusted EBITDA for all acquisitions, our net debt to EBITDA ratio came in at 1.7x, slightly lower than Q1 than Q4 2018. Excluding the impact of the adoption of IFRS 16-Leases, incorporating a full 12-month adjusted EBITDA for acquisitions, net debt to adjusted EBITDA ratio would have stood at 1.9x.

We also declared a dividend of $0.375 per share to shareholders on record as at March 31, 2019, which was paid April 15, 2018. With a 50% Dividend Reinvestment Plan participation, the net cash outflow was $19.7 million.

Before turning it back to Alex, I wanted to highlight the impact of IFRS 16 on both our 2019 outlook and our 2019, 2021 global strategic plan. For 2019 outlook, IFRS 16 had an impact on adjusted EBITDA, which we now forecast to be ranging between $950 million and a $1 billion. Adjusted EBITDA seasonality fluctuations, which we now forecast to range between 20% and 30% with Q1 being the lowest and Q3 being the highest. And net debt to adjusted EBITDA ratio which we now forecast to be ranging between 1x to 2x.

In order to facilitate comparison, we’ve provided a reconciliation for Q1, 2019 that you can compare what our results are under IFRS 16 versus what they would have been excluding IFRS 16. You can find the reconciliation in the slide deck accompanying this presentation, which is posted on our website in the Investor Relations section.

For the 2019, 2021 strategic plan, updates to reflect the impact of IFRS 16 are as follows: adjusted EBITDA margin is now forecasted to be between 14% and 15% and net debt to adjusted EBITDA ratio is forecasted to be between 1x and 2x.

Alex, back to you.

Alexandre L’Heureux

Okay. Thank you, Bruno. I would like now to open the line for questions. Thank you.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Your first question comes from the line of Jacob Bout from CIBC. Please go ahead.

Rahul Malhotra

Hi. Good afternoon, Alex and Bruno. This is Rahul on for Jacob.

Alexandre L’Heureux

Okay. Hi.

Bruno Roy

Hi, Rahul.

Rahul Malhotra

So maybe just starting with the revised 2019 outlook target, if we annualize the positive IFRS 16 EBITDA impact in Q1 '19, so that comes out to about like $255 million, while the revised 2019 EBITDA outlook bumps up by about $210 million. So what explains that delta?

Bruno Roy

So, good question, Rahul. We are working with a portfolio of 500 offices as you know. And over the course of the year, we will add some leases, we will also renegotiate some and we will terminate others. Think about the fact for instance, we are integrating the Louis Berger, and we will consolidate the Louis Berger teams in many of our offices. So a number of leases is going to move around quite a bit over the course of the year. Adding to that effects and the mix, as such as very -- its not a static number, it's a very dynamic number and as such you can't annualize simply by multiplying by four. At this stage, $210 million is our best estimate for the impact on the full-year.

Rahul Malhotra

Right. Okay. That’s helpful. And maybe just on the Louis Berger integration. So how that’s coming along and when could we anticipate seeing the benefit of synergies to margin? Would that be more towards the back end of the year or …?

Alexandre L’Heureux

Yes, we closed the transaction late in the year like the last month of the year in '18 and now we’re in May. So, obviously, in the first quarter it was quite hard to reflect some of those either revenue synergies or cost synergies to the transaction. I think we provided in the outlook and in the past -- in our press release when we released Louis Berger the type of cost synergies and the amount of cost synergy we were hoping to realize in the first year. And so far what I can tell you is that the integration is going very well. The U.S team is already working closely with the Louis Berger team and equally in the Middle East and all the other major hubs, we do expect certainly in the Middle East and integration completed anytime soon. So whereas and the Louis Berger is going to take a bit more time to bring them on our systems and then more harmonize the benefits and so on and so forth. But what I can tell you is that we're tracking on plan and on budget on what we’ve disclosed at the time of the acquisition.

Rahul Malhotra

Okay. Perfect. Thank you.

Alexandre L’Heureux

Thank you.

Bruno Roy

Thank you.

Operator

Your next question comes from the line of Yuri Lynk from Canaccord. Please go ahead.

Yuri Lynk

Hi. Good morning. Good afternoon, I should say. Alex, on Louis Berger acquisition, what should we make up of the higher cost structure of the business? Is that something that's -- it can't be altered too much or is the goal -- part of the synergy goal to realign that cost structure, so that it's more consistent with the rest of your operations?

Alexandre L’Heureux

It's to realign it. We -- essentially is to replicate what we’ve done. And in the old days with for instance, Parsons Brinckerhoff are -- with Michelle when Michelle at the time of the acquisition we were delivering 6%, 7% margin and now they’re in line with our U.K business. So, I think obviously we’re going to need a bit of time. But we saw a lot of potential in the Louis Berger acquisition, lots of expertise. But we believe that their cost base was acute compared to ours and we believe that we could bring them up to our standard essentially. But this will take a bit of time.

Yuri Lynk

And is that primarily real estate?

Alexandre L’Heureux

No, it's people, it's real estate, it's IT, it's consulting fees, it's betting activity as well project selection, project management. So I think I may have said that in a few occasions and in past conference call, it's not one lever that will really get the bar up to where we’re at. It's a number of initiatives and a number of different jurisdictions to get to get the margin level closer to ours. But nothing to similar to Parsons Brinckerhoff when we acquired the business at 7%, 8% and essentially brought them up to where we’re at today.

Yuri Lynk

Okay. Last quick one for me, a bit of nitpicking, but the new 2021 target, if I take the midpoint of the EBITDA margin, it doesn’t really imply much of an increase from the midpoint of the 2019 EBITDA margin, whereas pre-IFRS there was a bit more of an improvement implied. Any reason why?

Alexandre L’Heureux

Well, because of the previous question we’ve from Rahul at CIBC, I mean, clearly I think when we look at the spread between the two, in the first quarter we are reporting IFRS 16 and as such, I mean this is a moving target for all companies and I'm hopeful that we’re going to get more visibility as we progress in the next two quarters. And be able to adjust accordingly if we need to. I think the essence of the message that I think you should all get today's that we haven't changed our targets. Fundamentally, they’re the same and this is obviously an accounting -- its accounting gymnastic, but it's not changing our cash flow profile. It's not changing our debt level nor its changing our aspiration for 2021.

Yuri Lynk

Okay. That’s clear. And I appreciate the color. Thank you.

Alexandre L’Heureux

Okay. Thank you.

Operator

Your next question comes from the line of Mark Neville from Scotiabank. Please go ahead.

Mark Neville

Hi. Good afternoon. Maybe just to follow-up on that and I apologize sort of to beating at the [indiscernible], but the difference between the Q1 impact and the annualized number, it will really just be a function of what you negotiate, and what you get rid off with Louis Burger and at least you add during the year, there's really nothing more than that?

Alexandre L’Heureux

And then effects and there obviously.

Mark Neville

Okay, but that’s essentially it?

Alexandre L’Heureux

Yes.

Mark Neville

Okay. Maybe just some -- then on the cash flow, the lease payments in the, again, the $65 million in the quarter, the financing activities, is there a number you can provide us with for the year, or does that sort of move in line with the impact on the EBITDA as well?

Alexandre L’Heureux

Something that I think we -- we will take this offline with Bruno. I think the best thing to do is to get back to you on this question. [Indiscernible] while they’re looking into it or while he's looking into or afterwards.

Mark Neville

Yes, okay. And maybe just one last one, I guess, just on the working capital, again, this based on where you at the end of last year and sort of the target for this year, I guess, again that would imply a couple of days of investment. Again, is that sort of the right interpretation?

Bruno Roy

Yes, on working capital. So we added a couple of days versus Q4 of last year and it's an annual [ph] seasonality.

Mark Neville

Again, but at the end of the year it's sort of 78 to 83, call it 80 days, I guess so there would be again, the expectation [indiscernible] maybe some of that for this year right versus 80?

Alexandre L’Heureux

If you look back to our outlook that we provided, I think the goal is to finish the year below 80 days. And that hasn't changed.

Mark Neville

Okay. Thanks. I will turn it over.

Operator

Your next question comes from the line of Benoit Poirier from Desjardins Capital Markets. Please go ahead.

Benoit Poirier

Yes. Thank you very much. Just related to EMEIA you previously -- you were previously expecting a low single-digit for the year, but you reported 5.7% in the quarter, so very good performance. So is the region more resilient than your initial expectation? What does explain the strong performance versus initial expectations for EMEIA?

Alexandre L’Heureux

Well, frankly speaking and to be totally transparent, Benoit, and I mentioned it to my commentary, I mean, the U.K performed better than we had expected. You need to remember, I mean, you start to budget -- you put the budget together in the fall, you get it approved by your Board in December and then you get into the new year. Not Really knowing what external factor could impact your business. We all know and that's a fact that the private sector has been cooling off little bit in the U.K and we are aware of this. So we’ve taken a prudent approach regarded to -- in regards to the U.K. And I think at this point in time it would be premature and probably recollect to make -- to change our estimates at this point of time, given that there's a lot of uncertainty out there still. But if we see that things are changing over the course of the year and we have more confidence, I mean, really we will update you on it.

Benoit Poirier

Okay. And for Canada you mentioned some delays in terms of project starts with respect to the election. So are you confident that those delays will be basically recover in the Q2 and the back half of the year. So would you expect a low to mid single-digit for Canada for the year, still Alex?

Alexandre L’Heureux

It's always been -- always hard to recover what you know you've lost in any given quarter in the past. But as I mentioned, we were awarded the LRT in Ottawa. So that’s a good news for us and I feel now that the plan has been communicated by the conservative government in Ontario and I feel that things are -- I mean the plan and the vision for the province has been communicated that hopefully now activities will pick up again. And we will finish the year in a good note.

Benoit Poirier

Okay. And Australia if we look at the APAC, you mentioned that the region is pretty solid these days. What about New Zealand, is it performing in line with Australia, or is there any change in terms of outlook for New Zealand, Alex?

Alexandre L’Heureux

Yes, there is not a change on the outlook. The utilization in the first quarter was a bit low in New Zealand. But we just been awarded one of the -- I think the largest transportation project ever procured in the country. So -- and we’re like the sole designer on it. So we are obviously feeling good about New Zealand and that's just reinforcing our belief that OPUS was a good acquisition.

Benoit Poirier

Okay. Perfect. And last one for me. Any color on the M&A pipeline, right now, Alex?

Alexandre L’Heureux

Lets we have the right aspiration, when I look at the next three years the company clearly we’ve am ambitious plant. And I mentioned it when we have unveiled it in January, that a good portion of that will have to go through. We will have to come through acquisition. So I still believe that that's the case. The pipeline is as good as it's ever been, have had a lot of active and informal discussion with third-parties and I’m confident that this point in time that we will deliver on the acquisition book.

Benoit Poirier

Okay. Thank you very much for your time.

Alexandre L’Heureux

Thank you.

Operator

Your next question comes from the line of Chris Murray from AltaCorp. Please go ahead.

Christopher Murray

Thanks. Bruno, I was wondering if we could turn back to your thoughts around your leverage metrics and I noticed that as you reported that the EBITDA for this quarter, of course with the trailing number. You don’t include the new leases liabilities. Just wondering how you’re thinking about how those go on to the balance sheet, I they really just move on balance sheet, and not really that different, but how does that impact your metrics? So for here you’re from now and you’ve got like for like how should we see that -- those metrics evolving. And I guess the second part of that is do these changes -- how do they flow through on your credit agreements?

Alexandre L’Heureux

First off, we -- what we do trail the year is simply show the numbers including IFRS 16, so the 1.7x figure, which includes the uptick in EBITDA and keeps the net debt level the same. And we will show at without IFRS 16 which is 1.9x, which removes the $68.8 million in this case for this quarter. So we will keep it as it is for the year, so we will show you both numbers throughout the remaining quarters. So that else we can see it by yourselves. Second part of the question?

Christopher Murray

It was with the changes you’ve got the additional liabilities around the lease liabilities that come on balance sheet now, did those changes fall into your debt covenants or anything like that or is that something that might have to be renegotiated at an earlier day?

Alexandre L’Heureux

No, it's something that we will be looking at with the banks over the course of the year.

Christopher Murray

Okay. Sounds good. And just a couple of questions. Just interest expenses, is it fair to assume the reduction, I guess it was -- is that the same sort of thing around the pension liability with the stock-based liability, the reason that the interest expense was so low in the quarter?

Alexandre L’Heureux

Yes.

Christopher Murray

Okay, good. And then just for asking, just the -- not only you remove the occupancy cost from your operating expenses, is to fair to think that you’re stabilizing now at a level that that’s good or is there additional costs you think you can take out of the system?

Alexandre L’Heureux

You mean, WSP legacy or Louis Berger or the combination of both?

Christopher Murray

Well, the -- with the combination of it. I’m just trying to think about if the run rate in Q1 is more indicative of what we should be expecting as we go through the year.

Alexandre L’Heureux

Look, we have the aspiration to grow and I’m going to use the old outlook between our margin profile between 11.5 to 12.5, and what I'm not suggesting they’re going to grow -- we are going to grow the margin profile an equal incremental. So depending the type of job that we're working on, the backlog that we’re burning, obviously this is having an impact on our margin profile. So I think, I’ve always said in the past that looking at one given quarter and extrapolate it over a year is dangerous. You need to look at trends, you need to look at on an annual basis what we've been delivering. So what I’m saying is we have the aspiration this year to grow our margin profile a bit higher than what we completed the year at, which was 11%. But is it going to be 11.2 %, is it going to be 11.3%, is it going to be 11.5%? Is it -- I mean at this -- as we are more talking about the decimals at this point in time, but we are working at improving the margin profile, Chris.

Christopher Murray

All right. Fair enough. Thanks, guys.

Alexandre L’Heureux

Thank you.

Operator

Your next question comes from the line of Derek Spronck from RBC. Please go ahead.

Derek Spronck

Okay. Good afternoon. As you increase the scope and depth of your expertise, are you finding more and more opportunities to export your design bank across your regional segments?

Alexandre L’Heureux

What do you mean by design bank, I’m sorry.

Derek Spronck

Well, if you are doing a transit project in Australia, you acquire a certain level of knowledge and then can you export that into other regions? Are you finding opportunities …?

Alexandre L’Heureux

Absolutely. I mean, right now I cannot disclose it, but there's one or two bids that we’re working on where we have three regions assisting one big one at this point in time. And our part of the bidding process and that’s a real project. So the answer is absolutely.

Derek Spronck

Does that make you more efficient then and more competitive at the bid table in terms of what you are able to offer for …

Alexandre L’Heureux

Yes, I would argue, yes. Definitely. I mean, you take the rail project that we just been awarded in New Zealand, this was not just a product of Australia, New Zealand, we had specialists from outside the region to assist from the bid. So, obviously, from a CG point of view, it's really increasing our range -- our the pointing system around quality of our work, but also around price, definitely.

Derek Spronck

And do you see more and more opportunity to leverage that in the future?

Alexandre L’Heureux

Always. I mean, that’s the thesis of our platform. I mean to foster collaboration and to leverage the platform. I mean, that’s the goal of any single professional services firm, not just in our industry, but you take the accounting firms, you take the law firms, you take the management consulting firms, every year they aim at improving this and fostering global collaboration.

Derek Spronck

Okay, great. And then just on the backlog. Was that -- the $200 million pickup, was that largely organic growth or was that pickup from …?

Alexandre L’Heureux

No, year-over-year the backlog grew 0.8% organically and 1.8%, if my memory is not failing me quarter-over-quarter, so that’s the organic growth and the remaining was acquisition growth. And …

Derek Spronck

Okay. And how do you see the backlog trending? I know it's probably difficult, but any insight for the rest of the year around the backlog?

Alexandre L’Heureux

Look, we -- that the wins I just talked about, at least two of them have not been included in the backlog. So this will obviously increase the backlog in the next quarter. Obviously, this is a moving target, but if you know with the recent wins, clearly we are feeling okay about the backlogs route at this point of time.

Derek Spronck

Great. Thank you.

Alexandre L’Heureux

Thank you.

Operator

[Operator Instructions] The next question comes from the line of Maxim Sytchev from National Bank Financial. Please go ahead.

Maxim Sytchev

Hi. Good afternoon.

Alexandre L’Heureux

Hi, Max.

Bruno Roy

Hey, Max.

Maxim Sytchev

Just a quick question, Alex, I think there was a mention of Sweden and the drive to improve the margins. Do you mind maybe expanding a little bit on the geography in terms of what are you doing and the progress you’re seeing right now?

Alexandre L’Heureux

Yes. If you look back, Max, the recent years and you could go all the way back to 2015 and look at our annual MD&A, you’ve seen that the margin profile in Sweden has come down. And that’s results of a number of different factor. One being external, more fierce competition. Also procurement process which was -- which has changed over the last five, six, seven years, there are more design build work, more fixed price work. But mostly it's been self inflicted, if you ask me, my personal opinion. In Sweden, we’ve been extremely busy doubling the business. We in the last two, four years added a 1,000 people through acquisition and 2,000 organically. And if you look back and remember the history, I mean many times where we were posting double-digit organic growth in any given year and that for many years in a row. And that makes a total on your margin profile. You have to train those 2,000 people that are joining your firm, you need to train that 1,000 people that is joining you through acquisition and that has an impact on utilization and the vast majority of our work in Sweden is time and material. So utilization is by far the biggest key -- the key influencer on our margin. So I’m not trying to find some excuses, but now that we’ve -- we build this platform in Sweden, now it's the time to have a -- I mean, work focus on our profitability and really get this utilization back up. And that’s the goal for this year and the years to come in Sweden and in the Nordics.

Maxim Sytchev

Okay. That’s very helpful, Alex. And then, in terms of -- do you mind reminding us the exposure to public versus private sector in that geography?

Alexandre L’Heureux

Look, I will get back to you with a more detail, but right now it sits about two-third, one-third, approximately. But I can get back to you with more of the exact number. I will ask Isabelle to get back to you. But from a high-level its around two-third, one-third public versus private.

Maxim Sytchev

Okay. That’s great. And then on -- just going back to Canada, I know, I mean, obviously you just mentioned that you expect the back half to pick up, but I mean is that what you’re seeing right now in Q2, or is this still something that you have to backfill a little bit for the back half to see a better growth. Just trying to get the timing right for Canada?

Alexandre L’Heureux

Yes. To be transparent with you in April, we haven't seen May yet. Obviously, we are right in the middle of it. April, look like March and February. But you know that, that’s not necessarily our single that things are not changing. I mean, in Canada seasonality and the winter is having a big impact on our utilization rate in our level of activity. So I think it's a bit premature, Max, to conclude that the year, the back end is not going to be good because April was slow.

Maxim Sytchev

Okay. You get -- the structurally you still feel pretty confident?

Alexandre L’Heureux

Yes, structurally we have a good backlog. And we have a good backlog and you know we didn’t win the ramp in Montreal, but if recall, I said you lose some and you win some and we were quite ecstatic to won a project very similar to the ramp in Montreal, but this time in Ottawa. So that’s looking good for us.

Maxim Sytchev

Yes, absolutely. And then just one quick question for Bruno, if I may. Just wanted to clarify your commentary around the noncash working capital. When you were talking about positive contribution, you’re talking about the overall not just on the DSOs, right? When we look at the cash flow statement, so that you still expect a positive contribution from noncash working capital for the combined 2019, is that how we should be thinking about this or not?

Bruno Roy

Yes.

Maxim Sytchev

Okay. Okay.

Bruno Roy

I wanted to get back Max on the split. Its 40 private, 60 public. So I was not too far, but a bit of.

Maxim Sytchev

Okay. Thank you so much.

Operator

Your next question comes from the line of Michael Tupholme from TD Securities. Please go ahead.

Michael Tupholme

Thank you. Good afternoon.

Alexandre L’Heureux

Hello, Michael.

Bruno Roy

Hi.

Michael Tupholme

Just a question about the Americas region. So I know you had the higher than usual FEMA related work in the prior year. Just wondering as we think about the balance of 2019, is there anything over the Q2 through Q4 period in 2018 of that nature that we need to be mindful of?

Alexandre L’Heureux

So in Q1 -- so as you remember, the big chunk of our work with FEMA was over the fall of 2017. It bled into the first quarter of 2018, hence the explanation on organic growth for U.S. We had a little bit of work in Q2 as well, but less material.

Michael Tupholme

Okay. And then when you reported your fourth quarter and gave us the outlooks for the various regions, as far as the Americas region, you were talking about mid to high single digits growth for the full-year. So did that factor in, I guess, the reported -- sort of slower reported growth you saw in the first quarter when you gave us that guidance?

Bruno Roy

Yes, it did.

Michael Tupholme

Okay. So we should see the Americas region pick up as we go forward here. I know the backlog I guess for Americas that will support that idea as well?

Bruno Roy

They are mid to higher single-digit. Growth range hasn’t changed. So the same as we said.

Michael Tupholme

Perfect. Okay. That’s all I have. Thanks.

Bruno Roy

Thank you.

Operator

There are no further questions at this time. I will turn the call back over to management for closing remarks.

Bruno Roy

Thank you. When circling back on the question on the impact of free cash flow, whether its $65.4 million, could be annualized? The answer there is the same of the adjustment for the EBITDA as well that number was -- the number for the first quarter. It will be very dynamic number as we add, as we retire, as we initiate new leases and also as this number is impacted by effects. So hard to say [indiscernible] buyback for. That’s all.

Alexandre L’Heureux

Thank you, Bruno. I would like to thank you. Please do not hesitate to contact us directly, should you have any additional questions and I look forward to updating you at our next conference call. So thank you everyone and have a good evening.

Operator

This concludes today's conference call. You may now disconnect.