Alithya Group (TSX:ALYA) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
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Access the full call at https://teams.microsoft.com/meet/262195437374574?p=TRsdfjwHGcM9YiVmw4
Summary
Alithya Group has restructured its reporting segments into Enterprise Transformation and Industry Services and Solutions to better align with its strategic focus on high-value integration services.
Q1 results showed a 15.4% YoY revenue decline to $105.1 million with gross margin dropping to 30.4%, driven by longer client decision cycles and utilization issues.
The company initiated a strategic review to explore options like mergers, privatization, or continued operation as a public entity, citing undervaluation by the public market.
Bookings totaled $89.0 million with a book-to-bill ratio of 0.85, with 70% of bookings from new business, but with delays in the Salesforce practice affecting U.S. results.
Management remains optimistic about demand in enterprise applications, AI enablement, and new client acquisitions, despite current market headwinds and longer deal cycles.
Full Transcript
Paul Raymond, Board Member
Thank you, Dominic, and good morning everyone. Bonjour and thank you for joining us today. I have three things I'd like to highlight today, so first I would like to step back and provide some context around where Alithya Group stands today. Over the last several years we've fundamentally transformed Alithya Group. We have strengthened our industry focus, built significant partnerships with industry-leading enterprise partners and hyperscalers. We have expanded our digital transformation capabilities, built differentiated expertise in enterprise applications, cloud, data and AI, enhanced our smartshore delivery model, and significantly improved the breadth of our service portfolio. The business we operate today is very different from the company we were several years ago, and we need to remember that one quarter cannot capture that. In line with these changes, and to reflect the transformation of Alithya Group towards higher value integration services, we've made a change to our reporting segments. These new segments provide greater visibility into our strategic growth areas, which will help investors understand the evolution of our portfolio and more accurately reflect where we are creating value for our clients and how we operate.
Pierre and Bernard will provide further details on our new reporting segments shortly. The Q1 results: While the first quarter results were softer than expected due to longer client decision-making and conversion cycles, our pipeline quality remains healthy and late-stage opportunities continue to build. Our challenge today is not a lack of opportunity, it is converting those opportunities more quickly. And finally, three: the strategic review launched by the Board this past July 27th.
The Board initiated this review from a position of confidence in our strategy and in the business we have built. Our view is that the transformation accomplished over recent years has created a stronger and more valuable company. The Board concluded that the current public market valuations may not fully reflect the intrinsic value of the company, nor adequately support its next phase of growth. The review will evaluate a broad range of alternatives including, but not limited to, a merger or other business combination, a privatization, a sale of the company, a recapitalization, strategic investment or partnerships, or continuing to operate as a publicly listed company. The company has engaged Scotiabank as its financial advisor for the strategic review process. As you would expect, we will not comment on specific parties, alternatives or process developments, but what I can tell you is that our client commitments are unchanged and our team remains focused on quality delivery. Management is fully engaged in running the business and executing our strategy. As we proceed with the review, we enter this phase from a position of strength.
Demand for enterprise applications, digital transformation, AI enablement and modernization remains strong. We have a robust recurring client base, healthy pipeline, numerous new logos every year, and a business portfolio significantly stronger than it was just a few years ago, and we intend on continuing to grow this business. I will now turn it over to Pierre for the financial highlights.
Pierre Blanchette, Chief Financial Officer
Thank you, Paul, and good morning everyone. Before discussing the results, I want to provide more details on how we are now reporting our segment information as of April 1, 2026. Following the integration of a recent business acquisition and a business divestiture, we began reporting our financial results under a new segment structure, to better refine our operational structure and how management assesses performance and allocates resources. We now have two reportable segments based on areas of service: Enterprise Transformation and Industry Services and Solutions.
The first one, Enterprise Transformation, provides consulting, implementation, integration and managed services for leading enterprise platforms including Microsoft, Oracle and Salesforce. Services span ERP, EPM, CRM, HCM, SCM and AI-enabled business transformation. Our second segment, Industry Services and Solutions, helps organizations address industry-specific business challenges and achieve broader business transformation through AI, cloud and digital innovation.
We combine sector expertise with strategic consulting, advisory services, build, and hyperscaler cloud migration across AWS and Microsoft Azure. Alithya Group guides clients from strategy and planning through implementation, organizational change and sustained value realization. Comparative figures include a third segment reflecting the results of Datum, which was sold on March 31, 2026 as part of the Datum transaction. Now turning to the quarter, revenues were $105.1 million, down 15.4% year over year.
Client retention remained healthy, with 77.4% of revenues generated from clients we served in the same quarter last year, and we signed 37 new clients in the quarter. Gross margin was $31.9 million, down 19.8% from $39.8 million, and gross margin as a percentage of revenues was 30.4% compared to 32.1% last year. The decrease reflects lower utilization rates resulting from deal signatures taking longer than expected, lower tax credits and salary increases that came into effect at the beginning of this fiscal year.
Looking at our performance by segment, Enterprise Transformation revenues were $62.6 million, down $3.2 million, or 4.9% year over year. The decrease reflects certain clients' projects reaching maturity and lower billable hours, partially offset by a full quarter of ... Gross margin as a percentage of revenue decreased, mainly due to lower utilization caused by delays in new project starts and salary increases. Industry Services and Solutions revenues were $42.5 million, down $11.7 million, or 21.6% year over year, reflecting certain clients' projects reaching maturity and reduced revenue from government contracts and the financial services sector in Quebec. Gross margin as a percentage of revenues decreased mainly due to lower utilization, tax credits and salary increases. The divestiture of Datum accounted for a further $4.2 million of revenue decline. Turning to SG&A in the quarter, SG&A totaled $28.3 million, a decrease of $2.3 million, or 7.5% year over year, primarily driven by lower variable compensation, professional fees, share-based compensation and recruitment and training costs.
Savings from the Datum divestiture were partially offset by a full quarter of ... This resulted in SG&A as a percentage of revenues of 27% compared to 24.6% for the same period last year. Adjusted EBITDA was $5.4 million, or 5.2% of revenues, compared to $11.6 million, or 9.4% last year. The decrease reflects the lower revenue and gross margin described earlier, partially offset by lower SG&A. Net loss for the quarter was $2.4 million, or $0.03 per share, compared to net earnings of $0.2 million, or nil per share in the same period last year.
The variance was driven mainly by decreased gross margin and a lower income tax recovery, partially offset by lower SG&A, acquisition and integration costs, amortization, and a foreign exchange gain. Adjusted net earnings came in at $2.9 million, or $0.03 per share, compared to $6.5 million, or $0.07 per share in the prior year, a decrease of 56%. Turning to cash flow and financial position, net cash used in operating activities was $4.8 million in the quarter, an increase of $0.6 million compared to $4.2 million in the same quarter last year, mainly reflecting the net loss and $8.3 million of unfavorable working capital changes tied to timing of payments collection and lower revenue. Our net debt to trailing twelve-month adjusted EBITDA ratio was 2.9 times, remaining in a comfortable position overall.
Lower revenue volume and reduced utilization impacted the profitability in the quarter, partially offset by lower SG&A. We remain focused on aligning our cost structure with the current revenue level while preserving our capacity to invest. I will now turn things over to Bernard for our operational highlights.
Bernard Dockrill, Senior Vice President & Chief Operating Officer
Good morning to everyone with us today. We'd like to begin by thanking the Alithya Group team for the continued commitment and contribution towards achieving our strategic objectives. From an operating perspective, the quarter showed pressure on conversion timing but also clear evidence that our portfolio is shifting toward the areas where we believe Alithya Group can create stronger, more scalable value through enterprise transformation, AI-enabled services and industry-led solutions, and more value-based commercial models.
Alithya Group's first quarter bookings amounted to $89.0 million, which translated into a book-to-bill ratio of 0.85 for the quarter. Adjusting for the revenues from two large long-term contracts, the book-to-bill ratio would have been 0.92 for the quarter. On a trailing twelve-month basis, bookings amounted to $405.1 million, which translated into a book-to-bill ratio of 0.88. Adjusting for the revenues from the two long-term contracts, the trailing twelve-month book-to-bill ratio would have been 0.96.
While these levels reflect the longer decision cycles we are seeing in the market, we believe the composition of bookings is important. Activity continues to be supported by new business, new clients, and opportunities aligned with their strategic growth priorities. We achieved higher bookings in the commercial and professional services sector this quarter, while bookings in the manufacturing sector were lower as we continue to see contracts taking longer to sign due to the macroeconomic environment.
Also of note, over 70% of our total first quarter bookings were related to new business, including 28% from new customers. In addition, a higher proportion of bookings were associated with fixed price or fixed fee contracts compared with prior quarters, reflecting our continued evolution toward commercial models that better capture the value of AI enablement, repeatable delivery assets, and smartshoring. Now, looking at these results through the lens of our new reporting segments, starting with the Enterprise Transformation segment, first quarter bookings for Enterprise Transformation amounted to $61.2 million, translating into a book-to-bill ratio of 0.99 for the quarter. This performance reinforces the strategic importance of the segment, where demand is tied to enterprise applications, complex transformation programs, and AI-enabled modernization initiatives. Our Oracle practice signed an $11.7 million U.S. dollar contract with a global engineering construction leader. Alithya Group is helping the client modernize its global workforce operations through a transformative Oracle HCM initiative designed to create a more connected, efficient, and scalable employee experience while supporting the evolving needs of its global business.
This win illustrates the impact of our recent investment in the construction and engineering sector together with the capabilities added to the Everidge acquisition last year. Turning to our Microsoft practice, we saw continued momentum in our AI and Copilot adoption practice. We supported the deployment of more than 300,000 Microsoft 365 Copilot licenses globally, influenced deployment decisions well beyond the licenses we directly manage. Through these engagements, Alithya Group is helping clients improve access to information, reduce time spent on routine tasks, and achieve measurable gains in productivity and service delivery.
We're also seeing demand evolve from initial pilots to enterprise-scale adoption. In parallel, Alithya Group is developing custom, industry-specific AI agents built on our clients’ data; we believe the greatest opportunities for value creation lie Our Salesforce practice had a softer quarter versus prior quarters in terms of revenue as several projects were completed and new project starts were delayed. We do not believe this reflects a longer-term trend, as the pipeline of qualified opportunities continues to increase, including new opportunities resulting from cross-selling into our existing client base.
Turning to our Industry Services and Solutions segment, first quarter bookings for Industry Services and Solutions amounted to $27.8 million, which translated into a book-to-bill ratio of 0.64 for the quarter, or 0.78 when adjusting for the revenues from the two long-term contracts. While the segment was more affected by delayed starts and market-specific headwinds, we remain disciplined in the segment and are prioritizing opportunities where our industry expertise, proprietary IP, and delivery qualifications support sustainable margins.
Within the nuclear energy sector, demand remains steady and we're taking on more significant projects with existing clients. We continued investing in a proprietary work management analytics tool, Casi, adding an agentic AI layer enabling users to retrieve critical data in natural language and make decisions faster. Within financial services and insurance, we continue to experience headwinds, particularly in the Quebec market, as engagements within several of our clients came to completion and new engagements are taking longer to start.
However, our client relationships remain strong with renewals secured across key accounts, and we believe the sector can return to growth as budgets normalize. Finally, our AWS practice gained traction as we invested in deepening the partnership, building on the AWS migration and modernization competency we achieved earlier this year. We are opening doors across industry with new agreements signed in Canada and the U.S. during the quarter. We remain committed to our partnership with AWS and continue to scale our cloud and data capabilities across our Industry Services and Solutions segment.
Overall, the quarter reflected the macro market conditions where decisions are taking longer, alongside progress in the areas where we have chosen to invest. While parts of our business remain in transition, we are encouraged by the momentum we are building, our industry-led offerings, AI capabilities, enterprise application expertise, and our ability to win new clients. I will now turn it back to Paul for closing comments.
Paul Raymond, Board Member
Thank you, Bernard. So before we open the line, I want to step back one last time because a single quarter can overshadow what this company has actually become. As you can see in our new reporting segments, we've transformed the company over the past few years. Today we're a leading North American digital transformation platform operating at scale with deep expertise in the complex, highly regulated industries where precision and trust matter most: financial services, health care, regulated manufacturing, the public sector, and energy.
Furthermore, we are encouraged by the rapidly growing number of AI enablement projects we are undertaking and the growing percentage of fixed price projects in our bookings. We interpret these developments as a precursor to more AI-driven, outcomes-based projects in our industry. As procurement organizations slowly adapt, what will not change is our focus on our clients and on our people and on the business we run every day. And I would like to take this opportunity to thank them for their trust and commitment.
And with that, we will now open the lines for questions.
OPERATOR
Dominick. Ladies and gentlemen, we will now begin the question-and-answer period. As discussed earlier, only questions from the financial community will be addressed. To raise or lower your hand, please press star followed by five. You will hear a confirmation once your hand is raised. When it's your turn to speak, your line will be unlocked and you will hear a notification. At that point, please unmute yourself by pressing star followed by six. First question will be from Jerome at Desjardins Capital Markets.
You can go, Jerome.
Jerome, Analyst at Desjardins Capital Markets
Thanks for taking my questions. First one I have is I'm wondering whether there were some one-timers in the quarter that would explain the performance, something that may not recur in the coming quarters.
Pierre Blanchette, Chief Financial Officer
Thanks for the question, Jerome. The biggest thing was utilization. As we've mentioned, we are waiting for some larger projects to start and of course we have highly qualified people we want to hang on to. So when they're not being used it really impacts the gross margins and revenue and everything else that goes with it because you're carrying the cost without having the revenue coming for it. So that's the big thing. There were some minor changes from a tax perspective and annual salary increases that start April 1.
But the biggest thing was the utilization.
Jerome, Analyst at Desjardins Capital Markets
Thank you. Second one for me is in the U.S. we've seen a change in the trend in the quarter. Is there something specific that would explain that?
Bernard Dockrill, Senior Vice President & Chief Operating Officer
Can you be more specific, Jerome?
Jerome, Analyst at Desjardins Capital Markets
Yeah, sorry. Well, the growth in the U.S., I think, was not as good this quarter as it was in the previous quarter.
Bernard Dockrill, Senior Vice President & Chief Operating Officer
Good morning. Yeah, to answer your question, really the softness in the U.S. market was really, as I mentioned, in the Salesforce space we had a slow down with projects that we had planned to start that kind of led to some of the utilization issues that Paul talked to as a one-timers there as well. So I'd say the biggest single factor in the U.S. results, which is now part of the enterprise Salesforce practices, including the Enterprise Transformation results that we presented there, is the Salesforce startup.
With that said, as I mentioned, the pipeline for opportunities, and I'll highlight through our cross-selling activities with existing clients, we've got a robust pipeline of new opportunities that we're pursuing there that, you know, keep us committed to that space.
Jerome, Analyst at Desjardins Capital Markets
Thank you. And last one for me, respectfully. Why does it make sense to sell the company now or to explore the strategic review? I mean, it seems like you're saying the issues are temporary, but it's not exactly easy for a buyer to see that. So if you can explain that a bit further, please.
Paul Raymond, Board Member
Thanks for the question. First, I mean, as we announced previously, the board initiated the review to evaluate a broad range of alternatives. So it includes mergers, combinations, privatization. Sale is only one of those options. Recapitalizing or maybe do nothing. We believe that the company is not being valued at what it's worth, which is impacting our ability to grow. We went public to finance growth and being able to use our stock as a currency and we can't right now. So despite everything that we've done since going public 2018, the company's worth less today on paper than it was eight years ago. So we're looking at all of our options. It's the right thing to do. The board should be looking at things like that on a regular basis.
So that's why we did it.
Jerome, Analyst at Desjardins Capital Markets
Okay, nice and cool.
Paul Raymond, Board Member
Welcome. Thank you for the question.
OPERATOR
Thank you. Next question will be from Kevin Krishnaratne at Scotiabank. Please press star followed by six. Kevin, press star-six again.
Kevin Krishnaratne, Analyst at Scotiabank
Hello, can you hear me?
OPERATOR
Yeah, yeah, can hear you now.
Kevin Krishnaratne, Analyst at Scotiabank
Yeah, perfect. Sorry about that. Good morning. You mentioned some stats on the call: 70% of bookings from new business. I don't know if that's a new sort of disclosure or number you provided. Just curious how that's been trending and what's sort of driving the new business opportunities for you.
Bernard Dockrill, Senior Vice President & Chief Operating Officer
Yeah, thanks, Kevin, for the question. So the new business is really just new opportunities outside of—so it excludes everything that's not a change request or an add-on or renewal. So new projects, new areas within existing clients as well as with new clients. And we have provided color in the past kind of on the renewals. So last quarter was a heavy renewal quarter. If you compare it to this quarter, we had less renewals and more of the pipeline bookings were associated with new projects, new engagements.
And I highlighted the 28, 28, 29% that was from new clients as well.
UNKNOWN Analyst
Okay, gotcha. And then the second on the bookings, you talked about you're seeing a higher number or a higher mix of fixed-price deals. I'm wondering if you can give a number on, you know, how much of your business is fixed price or any way to understand how that type of business has been trending over the past couple quarters.
Paul Raymond, Board Member
Do you want to mention business's fixed price?
Bernard Dockrill, Senior Vice President & Chief Operating Officer
It's the fixed price and fixed price-like, because, you know, we have certain engagements where we are on a time and material basis, but it's on a—we look at it from a fixed engine. So it runs around the 40%. That's it, that's all. And it's been growing.
UNKNOWN Analyst
Okay, thank you for that. The next question I just wanted to flip to. You did talk about the different verticals that were stronger and software, and I know you talked about some of the cross-sell opportunities. So I'm just curious, how are deal sizes in the pipe trending, and do you think there's a good line of sight to book-to-bill ultimately crossing over the one turns level? And in the coming quarters, what is the, you know, the opportunity set in your pipeline looking like?
Bernard Dockrill, Senior Vice President & Chief Operating Officer
Well, I won't provide any guidance on kind of where we see the bookings to go. The pipeline is stronger quarter over quarter as deals take longer to close. We're still adding deals at the same volume we were adding them before, so there's a little bit of lag as we take longer. So the upside of bookings being lower is the pipeline of—and again, as Paul said earlier, late-stage opportunities, because they've been delayed, has grown.
UNKNOWN Analyst
Gotcha. Just the last one without providing—I know you don't give guidance—but as we think about the next quarter, are there any one-time items or bigger projects that occurred, you know, in the prior-year period that we should be aware of that could impact you on the top line? Like any projects that might be ramping down? Just any color to help us there. Thanks.
Paul Raymond, Board Member
Yeah, no, like you said, we're not going to provide guidance, but for us right now it's business as usual. Folks are focused on business, trying to close these—accelerate the deals in the pipeline, and while the process goes on in parallel. So.
UNKNOWN Analyst
Okay, no, thanks. Appreciate it. I'll pass it past the line. Thank you.
OPERATOR
Thank you. Perfect. As a reminder, to raise a little hand, please press star followed by five. Next question will be from Vince Galicio at Barrington Research. To open your mic, press star followed by six.
Paul Raymond, Board Member
Hey Vince.
Vince Galicio, Analyst at Barrington Research
So, Paul, the US market has been, you know, relatively strong for some quarters—this quarter a little bit not so much. But do you see this as a cyclical thing, or do you think the US is a structurally stronger market for you? And should you be putting more resources into the US from a relative standpoint?
Paul Raymond, Board Member
So, yeah, thanks for the question, Vin. So on the Q1 numbers, as Bernard was saying, the biggest impact we had was really in our Salesforce business, where we're in between—we're waiting for some projects to start and others finish. So we had a lot of people not being billable. So that hurts utilization and revenue and margin. So we had to go through that, which makes it a very soft quarter for us. On the second part, the US is the largest market in the world for our services, so yes, it's been a focus of ours.
If you look for the past eight years, we've gone from zero to more than half of our business coming from the US. We will keep investing there. The last acquisition we did was in the US. Now, that being said, the specialties that we've built there, we're deploying globally. So the stuff that—and that's why we're reporting the business differently. This is actually how we run the business today. So we have our Enterprise Application Transformation team that is driving this transformation at some of our clients, and we can leverage our ISSG team to open up doors in accounts where we have these long-term relationships.
So the intent is to still leverage the long-term relationships from our ISSG group all over the world to bring in our higher-value, higher value-creating assets that we've built over time. So, yeah, definitely, we definitely want to grow the US market, and it's just natural—it's larger than every other market that we're in. So it should have a dominating position eventually.
Vince Galicio, Analyst at Barrington Research
And in Canada, do you have visibility to an improvement in the government IT spending side?
Paul Raymond, Board Member
So in Canada there's several things going on. As Bernard was saying, the Quebec market—I would take it separate from everything else. Our energy nuclear business is doing extremely well and growing, and financial services outside of Quebec are also. Well, in Quebec, we made a conscious decision a couple years ago to get out of the government, lower-margin business where price is the only deciding factor. Now, we do some work with the government; we will keep doing some public sector work, but we're focused on the higher-value services like what we've built in the US and what we're building in Canada as well. So there is some transformation going on there. But at the same time, there are some headwinds in Quebec specifically that we're addressing.
Vince Galicio, Analyst at Barrington Research
And one last one, Pierre, what was the contribution of Everg in the quarter?
Pierre Blanchette, Chief Financial Officer
In the quarter? I don't have that number. It's integrated in our enterprise transformation segment.
Paul Raymond, Board Member
Basically, after a year, Vince, we—we integrate the businesses. We track them for 12 months and then they're fully integrated into the—
Pierre Blanchette, Chief Financial Officer
And from a comparability purpose, we had two months in the prior-year quarter of Everg, and now we have three months. So there's a one-month difference. It's not material.
Vince Galicio, Analyst at Barrington Research
Thank you, gentlemen. Thanks for that.
OPERATOR
Thank you. Ladies and gentlemen, at this time we have no other question, which concludes our conference call for today. We would like to thank you for attending and ask that you please disconnect your lines. Thank you, and have a great day.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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