[Non-English content]. Good morning ladies and gentlemen. [Non-English content] . Welcome to WSP's fourth quarter and fiscal 2021 results conference call. I'd now like to turn the meeting over to Quentin Weber, Senior Advisor, Investor Relations. [Non-English content] . Please go ahead, Mr. Weber.
Good morning. We hope that you're all safe and doing well. Thank you for taking the time to join the call, during which we will be discussing our Q4 and fiscal 2021 performance, our outlook for 2022, followed by a Q&A session. This will be followed by, at 9:30 A.M. by a three-hour webcast, where we will present in detail our 2022-2024 global strategic action plan and long-term vision. With us today are Alexandre 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 be different 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 most recent management's discussion and analysis. During the call, we may refer to certain non-IFRS measures. These measures are defined in our management's discussion and analysis for the year end, December 31st, 2021, which can be found on SEDAR and on our website. Our MD&A also includes reconciliations of non-IFRS measures to the most directly comparable IFRS measures. Management believes that these non-IFRS measures provide useful information to investors regarding the corporation's financial condition and results of our operations 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. With that, I will now turn the call over to Alexandre.
Thank you, Quentin, and good morning, everyone. As we gather today, I would like to begin by acknowledging the humanitarian crisis taking place in Ukraine. We are deeply troubled by the conflict, and our thoughts are with all those who are impacted, including many of our colleagues who have relatives and other loved ones in harm's way. We are closely monitoring the situation in Ukraine and the sanctions which have been imposed in recent days. We can confirm that WSP has no employees or offices in Russia, Ukraine, and Belarus. While we have a limited number of ongoing assignments involving projects in Russia, we have decided to exit such assignments for which we have a non-material exposure. Furthermore, we will no longer be pursuing any further assignment in Russia.
Putting these unfortunate events aside, I am excited to be here today, sharing with you our results for Q4 and 2021, but also proudly bringing closure to our 2019-2021 strategic cycle and introducing our future-ready 2022-2024 strategic action plan, along with an ambitious long-term vision. Let me start with our results, for which I would like to highlight a key few points or a few key points, I should say. First, the fourth quarter delivered very strong results across all financial metrics. Organic net revenue grew by almost 10% in the quarter, and our Adjusted EBITDA margin increased by 140 basis points versus 2020. For the full year, our results are equally strong due to both the strong performance of our platform and the solid contribution of recent acquisitions.
Our adjusted net earnings per share grew by more than 40%, and our balance sheet and cash collection remain strong. Second, market conditions continue to be highly favorable, and throughout 2021, proposal activity resulted in a record high backlog with an overall organic growth of 10% year-over-year. The demand of our core sectors is growing, and we are well-positioned to leverage those opportunities. Third, the addition of Golder has been a great success on all fronts. Golder is finishing the year with a strong profitability and an impressive 8% organic growth, making 2021 one of the strongest years in its history. The integration is nearing completion, and we are proud of the great talent that we have welcomed into the organization.
As we enter 2022, we are seeing a growing number of collaborative opportunities across our key business lines of transportation and infrastructure, earth and environment, and properties and buildings. In summary, we could not have hoped for a better finish to 2021, capping off a solid year of achievements. Our efforts to lead by example in ESG continue to be recognized. I am proud to share we recently qualified for inclusion in the S&P Global Sustainability Yearbook, a recognition of our strong position in our industry. We're able to deliver strong rankings, and we're also awarded an Industry Mover Award for recording the strongest improvement in our industry. We're also recently recognized as a global market leading provider of ESG and sustainability consulting services in the Verdantix Green Quadrant: ESG & Sustainability Consulting 2022 report.
Many ESG and sustainability consultancy firms were assessed on their ability to deliver a wide range of ESG services and support their clients in implementing sustainability in their business, and we were honored to be named as one of the top-ranking companies, confirming our position at the forefront of our industry. On the acquisitions front, we remain active and most recently added in-depth policy, financial, technical, and international development expertise to our leading sustainability strategy and resilient infrastructure capabilities to our acquisition of Climate Finance Advisors LLC. Let's now cover a few exciting project wins. With investment in the clean energy industry scaling up, we are in a great position to capitalize on this market and have recently been awarded more than CAD 100 million in work as a direct result of leveraging our global expertise across the entire project lifecycle for high voltage.
Direct current power transmission system, one of these projects supports a high-profile leading-edge CAD 11 billion Clean Path New York infrastructure program. When completed, this will deliver more than 7.5 million MWh of emissions-free energy to New York City. Leveraging our global footprint is also delivering success for our multinational global clients program. WSP was recently awarded a project to complete the permitting for 14,000 km of cable connecting North and South America for Google. The cabling will run from the East Coast of the U.S. to Argentina and will be the longest in the world capable of running from a single power source, I should say, bringing greater reliability and bandwidth in South America. Moreover, we continue to work with the Toronto Transit Commission as we provide multidisciplinary services for the electrification and charging infrastructure of eight bus depot.
This is an integral part of TTC's drive to decarbonize their fleets and power their buses using clean energy. This is a great example of having a direct impact contributing to the green transition. Before turning to Alain, I would like to take a moment to review a successful 2019-2021 strategic cycle. Through the deliberate evolution of our core pillars and the dedication and resilience of our people, I am extremely proud to report that we have delivered our 2019-2021 strategic ambitions with over CAD 8 billion of net revenues and Adjusted EBITDA margin of 16.8%, significantly above our three-year target range of 15%-16% and a strong balance sheet resulting from robust cash flow generation standing at 175% of cumulative three-year net earnings, which provide ample financial flexibility.
Our 2019-2021 success demonstrates the strength of our diversified platform, the relevancy of our services to our clients, and the strong alignment with market trends driving the world economy. We now have a robust balance sheet and a healthy backlog that can support growth, representing a solid foundation on which to build our next strategic cycle. Alain will now review our quarterly financial results and where we finished the year in addition to covering our 2022 outlook. Alain, over to you.
Thanks, Alex. I'm very pleased to report on our strong results for the fourth quarter of 2021, driven by record high organic growth, solid improvement in Adjusted EBITDA margin, and stronger cash flow than expected, deleveraging further our balance sheet. For the full year, our results are above expectations, resulting from the combined strong contribution of our platform and our recent acquisition. Let's now review our results, starting with our top line. For the fourth quarter, revenues and net revenue reached CAD 2.9 billion and CAD 2.1 billion, up 28.6% and 27.2% respectively compared to Q4 2020. The increase was driven by acquisition growth of 22% as well as overall record high Q4 organic growth of 9.7%, our best quarter of the last two strategic cycle, with many regions posting low to mid-teen organic growth.
Revenue and net revenue for the year reached CAD 10.3 billion and CAD 7.9 billion, up 16.8% and 14.7% respectively compared to 2020. The Golder acquisition was the main contributor to the acquisition growth and net revenues of 15.3%, while net revenue organic growth of 3.3% was in line with our expectations. We have seen a gradual increase in organic growth throughout the year, with H2 posting 7.1% of organic growth versus the same period in 2020. Let's move on to our profitability. For the fourth quarter, Adjusted EBITDA reached CAD 361 million, representing an Adjusted EBITDA margin of 16.8% compared to 15.5% in Q4 2020.
The increase in margin is attributable to the higher margin profile of recent acquisition, continued focus on productivity, and margin improvement initiatives. For the full year, Adjusted EBITDA reached CAD 1.32 billion, up 25.5% compared to CAD 1.05 billion in 2020. Adjusted EBITDA exceeded the higher end of our Q3 2021 improved financial outlook range, and exceeded the higher end of the range of our original 2021 EBITDA outlook by more than CAD 65 million based on the midpoint. For the quarter, adjusted net earnings stood at CAD 172 million or CAD 1.46 per share, up 85% and 78% respectively from Q4 2020. The increase in these metrics is mainly attributable to the higher Adjusted EBITDA.
For the year, our adjusted net earnings stood at CAD 593 million or CAD 5.09 per share, up 50% and 42% respectively from 2020. The increase in these metrics is also mainly attributable to higher Adjusted EBITDA. Backlog as of December 31st, 2021, stood at CAD 10.4 billion, representing 11.8 months of revenue. We're glad to report that our backlog grew organically in each of our reportable segments in 2021, representing an overall organic growth of 10% with CAD 3.3 billion of order intake in the fourth quarter alone. The Americas reportable segment was showing a flat organic growth in backlog at the end of Q3 versus December 2020. With the strong order intake in Q4, year-over-year organic growth in backlog is now standing at 7.6%.
In addition, we are continuing to see significant momentum in the volume of unfunded contract awards, which is showing year-over-year increase of approximately 70%. I will now review a few cash flow metrics. Our free cash flow in Q4 2021 was very strong at CAD 370 million, which represent a record high Q4 free cash flow generation. Free cash flow for the year came at CAD 646 million, representing 1.4x our net earnings. Cash inflows from operating activities stood at CAD 1.06 billion compared to CAD 1.13 billion in 2020. The variance is mainly explained by the fact that 2020 benefited from a deferral of income tax and other remittances in some jurisdiction.
From a modeling perspective, note that Q1 2022 free cash flow will be impacted by the strong collection of the fourth quarter of 2021 and by an additional period of pay compared to Q1 2021, representing approximately CAD 125 million. This situation will reverse in Q2 2022, and do not impact our objective to generate free cash flow above net earnings. Our day sales outstanding stood at 66 days at the end of 2021, compared to 63 days as of the end of 2020, and significantly outperform our outlook range of 73-77 days. Lastly, our net debt to adjusted EBITDA ratio stood at 0.6 times compared to 0.1 time as of December 31st, 2020, mainly due to the acquisition of Golder.
Strong free cash flow in 2021 resulted in a net debt to Adjusted EBITDA ratio lower than our expectation. During the quarter, we also declared a dividend of CAD 0.375 per share for shareholder of record as of December 31st, 2021, which was paid on January 17, 2022. With a 51.5% DRIP participation, the net cash outlay was CAD 21 million. Let me now comment on the 2022 financial and operational outlook and assumptions. Before I do so, I'd like to remind you that the outlook for our anticipated 2022 performance is aimed at assisting analysts and shareholders in refining their perspective on our performance. It has also been prepared on foreign exchange rates effective March 9, 2022.
Also, please do bear in mind that we have not considered any acquisition, disposal, or any other transaction that may occur after today's date. We anticipate net revenue to be in the CAD 8.25 million-CAD 8.75 million range, and to post organic growth in net revenue in the 3%-6% range. Adjusted EBITDA is expected to range between CAD 1.43 billion and CAD 1.49 billion. We also anticipate our quarterly distribution of Adjusted EBITDA to be slightly different than prior years, in part because Q1 2022 will have one more week than the prior year, and Q4 2022 will have one less week than the prior year. For a modeling perspective, our press release dated March 9, 2022, provides the range of Adjusted EBITDA by quarter.
Turning to tax, we expect that our effective tax rate for fiscal 2022 to be in the range of 25%-29%, and we anticipate net capital expenditures to range between CAD 160 million and CAD 180 million. Moreover, we anticipate depreciation of right-of-use asset, property and equipment, and amortization of software to range between CAD 450 million and CAD 470 million. Amortization of intangible assets related to acquisition is expected to range between CAD 75 million and CAD 85 million dollars. We also anticipate between CAD 50 million and CAD 60 million in acquisition, integration, and reorganization costs, driven by the cost to integrate our recent acquisition. The corporation initiated the design and implementation of a global cloud-based ERP solution with broad capabilities.
Due to recent development in accounting standard, customization and configuration costs can no longer be capitalized, and therefore, they will be expensed as incurred along with other implementation costs. ERP implementation costs for 2022 are expected to range between CAD 45 million and CAD 55 million based on the current deployment schedule. Turning to debt, the corporation will continue to manage its capital structure to maintain a net debt to Adjusted EBITDA ratio between one and two. Lastly, we anticipate that head office costs will range between CAD 95 million and CAD 110 million in 2022. In conclusion, we are very proud of our accomplishment in 2021, finishing the year with a strong balance sheet, a robust backlog, and a workforce that has grown organically by 9% in 2021. We feel ready to tackle opportunities in 2022. On that, Alex, back to you.
Thank you, Alain. As we enter 2022, the key markets we operate in will continue to shape spending and investment in the future. All signs point to an increasing demand for high-quality engineering and consulting services around the globe. Many of you will be joining us shortly for a virtual Investor Day event where we will fully discuss our plans and expectations for the next three years. I look forward to sharing more with you later today. For those unable to participate, I would like to provide you with a brief summary of our strategy. First, let me say that in the process of developing our 2022-2024 global strategic plan, the long-term vision for our company became strikingly clear.
As we look through the lens of our diverse stakeholders, and given that many of the world's most compelling transformational trends are well aligned with WSP's strengths, expertise, and service offerings, we believe WSP is uniquely positioned to create an enduring legacy of greater impact. As such, our long-term vision sets our destination for WSP to be the undisputed leader in our industry and puts us on a trajectory with aspiration to double in size, achieve sustainable industry-leading organic growth, and realize EBITDA margins above 20%. Our path is clear. We cannot predict with certainty when we will arrive at this ambitious destination, but I can assure you we will get there. With this in mind, we develop our 2022-2024 global strategic action plan to set us on a course to advance toward our long-term vision. Three forces drive our organization. ESG, innovation, and technology.
First, our plan is underpinned by our unwavering commitment to ESG. Over the next three years, we intend notably to make significant progress towards achieving our previously announced 30, 2030 science-based GHG emission reduction targets and to continue to grow our clean revenues to more than half of our business. As for innovation, this is part of WSP's DNA. Put simply, we innovate because the world doesn't stand still. There's never been a greater opportunity to enable resilience. When it comes to technology, we bring a digital mindset to every project with the objective of leveraging creative digital solutions to create efficiencies in our business and augment the value of clients' asset. Beyond the accelerators, the core of our plan is the continued evolution of our four pillars, people and culture, clients, expertise, and operational excellence.
If I can summarize a strategic action plan in four words that encapsulate what we are aiming to achieve, it would be foster, lead, elevate, and transform. Over the next three years, we will continue to create value for our stakeholders by evolving our foundational pillars to first foster the ingenuity of our people. Second, to lead through technical excellence and expertise. Third, to elevate the standard in client experience and drive leading performance and efficiency through lastly the transformation of our company to leverage the scale of our organization.
We will make key investment in our business practices, technology, and workplace to further increasing our agility and capacity to capture market opportunities. As for our financial ambitions, over the next three years, we aspire to grow significantly through robust organic growth and the discipline acquisition strategy, while delivering improved margin profile, bringing us one step closer to our long-term vision. By 2024, we intend to grow net revenues in excess of 30%, Adjusted EBITDA by 40% and adjusted net earnings per share by 50%. These were some highlights of our strategic action plan that will be soon covered in greater detail on our 9:30 Eastern time call for our Investor Day. On a final note, I would like to sincerely thank our employees, our board of directors, as well as our clients and shareholders for their continued support. I would now like to open the line for questions.
Thank you. As a reminder, if you would like to ask a question, please press Star and One on your keypad. And to cancel your request, you can press the Hash key. So that's Star and One to ask a question.
Our first question today is from the line of Jacob Bout from CIBC. Please go ahead. Your line is open.
Good morning.
Hello.
First question.
Good morning.
Yeah. First question is just on organic growth. You know, appears to be accelerating here up 4% Q3, 10% Q4. But your guidance for 2022 is 3%-6%, appears conservative. Is that just a function of tougher comps in the back half of the year? You know, how should we be thinking about the shaping of organic growth in 2022?
No, I disagree, Jacob. I think I don't think it's conservative. It's just the fact that globally and given our project mix and our geographical footprint, Q3 and Q4 tend to be our strongest quarters, whereas Q1 and Q2 tend to be perhaps from a seasonality point of view perhaps the quarters that are not contributing as much to the total net revenue of the company on an annual basis. That is highlighted in the outlook that we provided when you look at the seasonality and the Adjusted EBITDA fluctuation. Q1 and Q2 are actually smaller quarters than the last two.
I think on a 12-month basis, I'm sorry, I'm comfortable with the outlook that we provided.
Okay. The guidance implies margin expansion in 2022. You know, there's a lot of moving parts there, but how do we reconcile it with some of the factors like wage inflation, you know, higher discretionary spend as we come out of the pandemic, cost of reopening, that type of thing?
Yeah. Well, all of the above is factored in. The wage inflation, as you described it, is factored in our margin improvement. In previous calls, we had mentioned that we had made some decision throughout the year, this year to make adjustments in our business, to deal with wage inflation. We're gonna continue to be extremely proactive with this. But I am comfortable that despite the wage inflation, we are going to be able to increase our margin profile going into 2022.
Okay. How does mix play into that?
I'm sorry, I missed the question, Jacob.
Sorry, how does mix play into that?
The mix?
Yes.
Well, the mix I think going into 2022, our backlog at the moment, and across the board in Q4, our backlog grew double digit in every single region where we operate. I'd say that right now, all of our regions are pulling in the same direction. I think this is positive, and that's why I'm comfortable going into 2022 that we have the right project mix and the right footprint mix, if that makes sense.
Okay. All right. Thank you for that, Alex. I'll save my questions on the strategic outlook for later on today.
Thank you so much.
Thank you. The next question is from the line of Frederic Bastien from Raymond James. Please go ahead.
Hi. Good morning, everybody. It was really great to see organic revenue and backlog grow the way they did in Q4, which sets you up nicely for this year. I am gonna try to ask one question about your new strategic plan. What stood out for me is really the 20% margin goal you set out for the long term. Also the gains you believe you can make on an annual basis. I think it was 30-50 basis points, and I am not sure if that is what is implied for 2022. I mean, we talked about inflation and all that stuff, what levers can you pull to get you there?
What are the big buckets where you're gonna pull from to continue to improve margins?
There are a number of levers, Frederick, that are allowing us to increase our margin profile. I think we don't talk enough about this, but the expertise that we bring to the table over the years, I mean, we have invested in a lot of smart hires organically. You know, within WSP, we are talking about two M&A strategy. One is companies and firms that are joining our platform, but also our M&A strategy around our talent acquisition. Over the years, we've hired incredible talent and leaders to the firm, and that is just raising the bar from that point of view.
I think we've hired a lot of great rainmakers that have incredible relationship with clients. I just take an example, our head of federal in the U.S., who joined us less than 18 months ago. We didn't have a person like that before, used to be the CEO of the Army Corps of Engineers. With great relationship, great know-how, and has been able to very quickly assemble a very great team. That obviously is playing into the services that we can offer, the expertise that we can offer, and the price also that we can charge for the services that we are offering. Our margin profile, Frederic, improvement is not about cost-cutting.
It's about increasing the quality of services that we are offering. As a result of this, we are in a position to charge more for our services, number one. Number two, you know, we are at the moment flying the plane and changing the engine at the same time, meaning that we continue to transform the organization. We have been doing that for many years in a row now. I just look at our project delivery initiatives. Clearly, you know, our margin erosion is reduced and is reducing year over year. What that means is we are becoming more efficient in delivering project. That's two reason.
One is, we want to hire and attract the best talent in the industry, number one. Two, we are investing in technology to provide our professionals with the best tool. I think digital is also playing a big role into the margin improvement of our business. I could go on and on like this and talk to you about 10 other levers, but we have a real game plan about this. If I mention that you know we are now seeing the path to a 20% EBITDA business, it's because I believe in it.
Now, that's a great answer, and I think, you know, it's really a reflection of your continued transition movement to the, you know, professionalize the firm and continue to, you know, hit high water marks there. The other one I would wanna just dig into is the ERP system that you started implementing. How long of a process do you think that will take? And are there, you know, regions that are being transformed more radically than perhaps others? Or how are you going about it?
Salut, Fred. I'll take that one. So the ERP, it's first of all, it's a journey, so we've kicked off the project in early September. So we're moving to a global ERP across the organization. It's the first part, the first journey is Canada. So we'll go one step at a time. We'll not try to convert every single country we run in one shot. So it's a prudent approach to this conversion. It's amazing. We were talking about margin improvement. The ERP alone, yes, there's the implementation effort, but there's also efficiency that will come from it, increase insight on the business, better access to data.
That's the beginning of the journey, Fred, on that front, starting with Canada, in 2022 and beyond.
Okay. Thanks for the color. I'll talk later. Thank you.
Thank you, Frederic.
Thank you. The next question is from the line of Yuri Lynk from Canaccord Genuity. Please go ahead.
Good morning. Alex, we saw a notable uptick in new awards in the fourth quarter. Wondering if you could share your thoughts on how the macro situation has evolved over the last six to nine months?
The way I would put it simply, Yuri, is, you know, I obviously feel better going into 2022 than I was feeling when we went into 2021. If we put things in perspective and make an analogy again, a plane analogy again, I think, you know, last year when we went into 2021, I feel and felt we were flying pretty blind, where now, I think we are going into 2022 with our eyes wide open, and we see clearly. There's not a whole lot of fog ahead. I think, you know, what you've seen in Q4 is, for instance, in the U.S., the conversion of our soft backlog into hard backlog. That's a great comfort.
You know, I feel quarter- over- quarter, I was telling you, well, our soft backlog is growing, and our proposal activity is growing, and the proposal activity level has never been so good than. At the same time, I couldn't tell you that that proposal activity level was converting into hard backlog and a green light to start billing hours on that backlog. In Q4, what we have seen is perhaps the beginning of that conversion of soft backlog into now hard backlog. How this will play out in 2022, I hope that this will continue. I don't expect the U.S. infrastructure build to play much into 2023. I think—2022 , I'm sorry, Yuri. I think it's more of a 2023 event.
However, given the sheer size of soft backlog that we were able to win and assemble in 2021, the fact that we are seeing this converting into hard now, I thought that this was really positive, and it's a great way to start the year.
Okay. Thanks for the color.
So, so t o- be more specific on the answer, from a macro point of view, what I felt was quite comforting is, as I said before, I think during my address or another question that I answered, all of our regions showed double-digit organic growth in Q4 in the backlog. That was good. It's not just one country or one region that is pulling, you know, the company at the moment.
Okay. That's helpful. Maybe just shifting a little bit to your outlook. I don't know if I'm nitpicking, but it seemed to me in the past that M&A featured a little bit more prominently in your past strategic plans where you would sometimes you know, put headcount goals and stuff like that in the slide deck. No mention of that. So just wondering if you anticipate being as acquisitive during the next cycle as you were in the past.
Yeah. Well, I'll answer that very clearly. The last part of your question, and I'll answer the first part. The answer is absolutely. There is absolutely no reason why we should not be as active and hopefully more active than in the past. I think the pipeline is healthy. I think we see a lot of opportunities. I think market volatility and uncertainty will bring and will provide opportunity for WSP. I think you know my view on this. In my mind, whether the market is sound and good or whether the market is tough and challenging, there's always opportunity for us to be opportunistic. We have delivered the balance sheet much quicker than we were all anticipating. We're now 0.5x EBITDA.
We've already almost delivered entirely the Golder acquisition. We have every intention to be active on the acquisition front. I hope I made that clear. The reason why I didn't talk about headcount in the last plan, Yuri, is because I haven't been able to deliver the headcount that we had. If there is one metric in each and every plan that we rolled out, the last plan and the plan before, is we have not been able to deliver the headcount. Trying to forecast headcounts when I look back at the last two plans that I have not been able to deliver, I thought that this was not a wise thing to do.
I asked myself why we have not delivered the headcount in this plan and last plan, and frankly, I think it's good news. I think we are now. If you look at the fee revenue that we are generating per employee over the last two, three plans, if I go back all the way back to 2012 to our 2015 plan, and then our 2015 plan to our 2018 plan, and now our 2018- 2021, you see a constant increase of increased fee revenue generated per employee, per FTE. Consistently over the last decade, we have been doing a lot more with a lot less.
I'm saying that in a very respectful way to our professionals, we are in a position now per FTE to do and generate a lot more fee revenue per employees. I think it's the reason being that we are able to answer an earlier question that I answered, we are able to charge more for our services per employee. We are able to generate more EBITDA per employee. We are able to leverage technology to our advantage, and we are more efficient along the way. I moved away in this plan from headcount. I will continue to signal the headcount that we will be acquiring, as we are completing more acquisitions, Yuri, to you to assist you.
I felt it important to strike the right balance between headcount growth, digital investment, and margin and organic growth improvement. That's the reason why you see a small nuance in the plan.
Very good. I appreciate the color, and I'll turn it over there.
Okay, thank you.
Thank you. The next question is from the line of Michael Tupholme from TD Securities. Please go ahead.
Thank you. Good morning.
Hello, Michael.
Hi, Alex. I guess the first question is a follow-up question on the margin improvement that you're forecasting or guiding to for 2022. I'm wondering if you can comment on whether or not there are any particular regions that are expected to play a greater role than others in terms of driving the margin improvements you expect in 2022.
Look, Michael, it's going to be a fairly boring answer, but we've gone through an extensive strategic process review with each and every country in the group. When I mean every country, I mean every country. You know, we're not factoring any margin reduction in any of our countries at the moment. We are actually all pulling in the same directions. We feel as an organization that we can do better, and I think I signaled that to you in the past. I see a path for us to do better. Everybody within the organization is pulling in the same direction.
Today, if you intend to participate in our or listen in to our investor day, you will hear from most of our leaders leading our biggest regions and they will all call for margin improvement. I'd say that the margin improvement effort is a global effort, not just one effort by one individual or one country. We're all pulling in the same direction.
Okay, fair enough. You were asked about inflationary pressures earlier in the call. Alex, I'm wondering if you can comment a little bit more specifically on what you're actually seeing in terms of inflationary pressures within the business. Any more specific detail that you can provide? I'm also wondering about what that means as far as what you're seeing in terms of billing rates across the broader engineering consulting industry, in view of just general inflationary pressures, really that are broad-based.
Well, it's a very good question. I think I mentioned before that we are very proactive on that point. Investing in our people is always top of agenda for us. Over the course of 2021, we were not afraid to make adjustment, as we saw fit, I should say. Meaning that, you know, even though we have annual salary review processes, I mean, I didn't wanna wait a year to adjust our platform. And I think that's, you know, a testament of our agility and flexibility. Along the way in 2021, we've made and decided to make adjustment in some countries to reflect that the workforce and the market dynamics were revolving very rapidly.
I'm not gonna be afraid to do the same in 2022. The good news is that this is not just a WSP-centric matter. I think it's felt within the industry. It's felt by our clients. There are external forces outside of our industry impacting our business. The cost of construction have gone up as well as a result of it. I think it's fair to say that, you know, we are also in a position to work with our clients also to share the burden on this.
I'm feeling comfortable, Michael, that you know, given the relationship that we have with our client base, given the visibility that we have going into 2022, that we are in a position to manage the inflation, and we have enough visibility ahead to look at that pressure and be able to deal with it.
Okay. No, that's definitely helpful. Thank you. Maybe just one follow-on to that, Alex. When we look at the 3%-6% organic growth guidance you provided for 2022, to what extent does that range really reflect increased volumes of work versus actually factoring in an assumption around higher pricing for your services? Or would the higher pricing, if that happens, be over and above this 3%-6%?
I think it's factoring everything you just described. I think we were looking at this backlog. Some of that backlog is short term. Some of that backlog that was awarded is longer term beyond and above 2022. I'm feeling comfortable looking ahead with what we know today that the 4%-6% is a good and appropriate forecast for 2022, given the seasonality that we will experience in Q1, Q2, Q3, and Q4. As in the past, if we feel that we need to adjust the outlook, we will. In 2021, Michael, we adjusted our outlook twice. Of course, I don't intend to adjust our outlook twice every year for the next three years.
That's not what I am telling you. Last year, as I said, we were going into 2021 fairly blind. This time around, I feel we have enough visibility, and I'm feeling good about the 4%-6%. The power of WSP is our diversity and diversification. You're never gonna see a massive spike in organic growth. But at the same time, I'd be surprised if you'd see massive downward pressure unless all of our countries are going through a very difficult time all at once. That 4%-6% is a number that I'm feeling good about.
Okay, thank you for the answers.
Mm-hmm.
Thank you. The next question is from the line of Dimitry Khmelnitsky from Veritas. Please go ahead.
All right. Good morning, and thanks a lot for taking my call. I'd like to ask a question about the 200 basis points margin improvement over the next three years. Can you perhaps provide the key drivers for that margin improvement by the order of their magnitude? In terms of most important aspect and then, you know, and so on, and then less important.
You mean country by country, our 55 countries?
No, no.
No, I mean.
Sorry, yeah, that would be too long of a question.
Yeah.
the 30-50 basis points per year improvement over the next three years, you know-
Yes.
What are the clear reasons driving it in terms of, you know, number one most important, number two most important, et cetera?
I believe clearly the optimization of our company, the project delivery initiative that we have underway within the company is one very important one. Perhaps the most important one, I mentioned that earlier on, was the talent that we bring to the table and the price that we are able to charge for our services. You know, if I look back to where we were a decade ago, we're already in 2022, and I look back at the WSP acquisition in 2012. Today, this year is going to be the tenth-year anniversary of our acquisition of WSP.
I look at the expertise that we have been able to add to our existing platform has been extraordinary in the last decade. Clearly, there's a benefit to that. We have been able to be more upstream with our clients. We have been able to increase the price that we are charging for our services. Frankly, our clients are pleased to be paying that price because I believe they are getting a great service. That is proven by the free cash flow that we are able to convert on an annual basis as a percentage of our earnings per share. You know, we have been consistently able to reduce the time between our invoice and the time we collect the cash.
This is the best satisfaction survey that you can think of. When your clients are paying you quickly, it's because they are happy to pay you, and they are satisfied with the service that you are rendering. I think, you know, the expertise that we have been able to assemble in this platform is great, and I expect this to continue. As I said before, we continue to transform the organization in such a way that we are now seeing, and we continue to see margin improvement if we do this well. That's why our long-term vision calls for 20% EBITDA margin. If we do this right and we execute right in the next few years, I am confident that one day we can get there.
Got it. Okay, thank you. The next question is, can you describe what are the concrete benefits that the ERP system would provide to WSP that you don't have today or that could be improved in terms of perhaps winning more work, increasing efficiencies internally at project execution? If you could spell out those key concrete benefits, that would be helpful.
Well, let me just say that to start with, we already have a great platform. We already feel that we have a great organization from an operational excellence point of view. If we want to continue to raise the bar and continue to challenge the status quo in the organization, we also have to continue to invest in technology, and we need to continue to invest into the company and our people. The reason why we are doing this is, you know, it's part of the journey of WSP. We wish to continue to build more commonality, to continue to leverage best practices. An example of that will be global collaboration with our global clients. I talked about...
In my address, I talked about, you know, a project that we will be doing for Google between an American and South American team, you know, providing and leveraging the platform by having global technical tools to better work together has to be part of our equation and our strategy. That's why we feel that the investing even more in the company will bring fruits and will bring some benefits to the business. We think the timing is right. We think that, you know, we are at the time and the place in our company to do this, and I'm confident that we have the team to deliver it.
The ERP, for example, using your Google example, if I can explore that further, would that enable you to better share information between WSP and your clients and put, you know, a lot of data sharing kind of in real time on the same platform?
Absolutely, especially as it relates to project delivery. To have dashboard that we will be able to share among ourselves, but also their clients will be important. Actually, you know, we are using more and more technology to exchange information with our clients, and therefore, the continued investment in technology in our firm is to us not an option, but a requirement. Absolutely.
Thank you. There are no further questions at this time, so I'll hand the call back to Alexandre for some closing remarks.
Well, thank you very much for attending this call. I look forward to hopefully hearing from you in 30 minutes at our three hour and a half Investor Day. We'll be talking soon. Thank you very much, and talk to you later.
Thank you. This does conclude the conference for today. Thank you for participating, and you may now disconnect your lines.