Alithya Group Q2 2026 Earnings Call Transcript

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Provided by Quartr
November 14, 2025

Key Takeaways

  • Positive Sentiment: U.S. growth acceleration: U.S. revenues rose 34.8% YoY to US$63.1M and now account for over half of consolidated revenue, driven by organic demand in enterprise transformation and the rapid integration of the eVerge acquisition.
  • Positive Sentiment: Improving margins and profitability: Consolidated gross margin increased to 34.4% (from 30.6% a year ago) and Q2 adjusted EBITDA was CAD 12.8M (10.3% of revenue), with trailing 12‑month adjusted EBITDA exceeding CAD 52M.
  • Negative Sentiment: Non‑cash impairment and net loss: Alithya recorded a CAD 38M non‑cash impairment (Quebec and industry solution CGUs), producing a Q2 net loss of CAD 31M despite positive operational results.
  • Neutral Sentiment: Bookings, pipeline and delivery model changes: Q2 bookings were CAD 90.9M (quarterly book‑to‑bill 0.73, TTM 0.91), the pipeline grew double digits, sales cycles are lengthening and deals are being phased, while smart‑shore capacity expanded to ~13% of the workforce.
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Earnings Conference Call
Alithya Group Q2 2026
00:00 / 00:00

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Operator

Good morning. Welcome to Alithya's second quarter of fiscal 2026 results conference call. I would now like to turn the meeting over to Alithya's management team. Please go ahead.

Dominic Blais
Dominic Blais
Senior Advisor Public Relations at Alithya Group Inc

Thank you for joining us today for Alithya's second quarter fiscal 2026 results conference call. The press release, along with the DNA containing condensed financial statements and related notes, was published this morning and is now accessible on our website. The webcast presentation can also be found on our website in the investors' section. Please be advised that this call will contain forward-looking statements, which are subject to various risks and uncertainties that may cause actual results to differ materially from those anticipated. These statements include our estimates, plans, expectations, and statements regarding future growth, operational results, performance, and business prospects that do not solely relate to historical facts.

Dominic Blais
Dominic Blais
Senior Advisor Public Relations at Alithya Group Inc

These statements may also refer to future events, including expectations around client demand, business opportunities, leveraging our services, IP, AI, and expertise to meet client needs, excelling in a competitive market, achieving our three-year strategic plan, and deploying our smart shoring capabilities. For more information, please refer to the cautionary note included in our presentation and the forward-looking statements and risks and uncertainties section of our DNA, which are accessible on our website. All figures discussed on today's call are in CAD unless otherwise stated, and we may refer to certain indicators that are non-IFRS measures. Please refer to the cautionary note included in our presentation and to the non-IFRS and other financial measures section of our DNA for more detail. Presenting this morning are Paul Raymond, Alithya's President and Chief Executive Officer, Bernard Dockrill, Chief Operating Officer, and Pierre Blanchette, Chief Financial Officer.

Dominic Blais
Dominic Blais
Senior Advisor Public Relations at Alithya Group Inc

I will now turn the call over to Paul Raymond. Paul.

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

Thank you, Dominic. Good morning, everyone, and thank you for joining us today. Before we begin, I want to take a moment to thank our clients for their trust and to recognize the dedication of our teams across all of Alithya. Our people's commitment to excellence continues to drive our success and deliver meaningful impacts for our clients. Alithya is not small; it is focused. Our second quarter operational results demonstrate the benefits and long-term potential of our strategy as we continue to execute our plan. Our company has transformed, and we are seeing the benefits of this approach in a challenging economic environment. Despite Q2 being our summer quarter, Alithya has continued to progress on many fronts. The first KPI that should stand out from our second quarter is our gross margins. We continue to work our way up the value chain.

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

Our gross margin percentage is now above many large integrators in our sector. This is not luck. Our focus on higher value services has now reached a maturity level that enables us to differentiate at a larger scale and fight above our weight. We win on the quality of our services and our delivery reputation. This brings us to the second KPI that should retain your attention. Our revenues have decreased in the past as our shift to higher value projects has replaced some of our past commodity services. However, in Q2, despite market uncertainties and a wavering economy, it is not our global year-over-year revenue growth of 11.5% that should hold your attention, but rather our industry-leading 34.8% growth in our U.S. operations. This impressive result by most standards comes from a combination of organic growth and the rapid integration of our eVerge acquisition. We realigned our U.S.

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

Operations a few years ago with our long-term strategy. Since then, our enterprise application and transformation services have become a key differentiator and a strategic priority for clients looking to leverage enterprise-wide AI solutions. It is also showing the potential of our platform in the largest market in the world for these services, the U.S.A. When you combine this strategic focus with strong execution, you get these growth results. This realignment is the same that we are implementing across all our operations. Finally, the third KPI that should pique your interest is the continued progress of our adjusted EBITDA margins and cash flow generation. Our trailing 12 months' adjusted EBITDA is now over CAD 52 million, which is a new high watermark for Alithya. Our transformation into a high-value, trusted advisory has brought us to this point at just the right time. The industry is evolving fast.

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

AI is influencing everything we do, and our clients are looking for value creation and new ideas more than ever. Cost savings will only get you so far. We have demonstrated that we can be the trusted advisor to accompany our clients in their AI-driven digital transformation. We know our model is scalable. You could say Alithya has arrived. Before I pass it over to Pierre, I will also mention the non-cash impairment charge we took in the second quarter as part of the ongoing repositioning of our business. With that, I'll pass it over to Pierre to provide some financial highlights for the second quarter of fiscal 2026, followed by Bernard to share some operational updates. Pierre?

Pierre Blanchette
Pierre Blanchette
CFO at Alithya Group Inc

Thanks, Paul. Good morning, everyone. I'm happy to join this conference call and highlight some of the company's achievements this past quarter. Our second quarter of fiscal 2026 was marked by year-over-year growth with improvement across several of our key metrics. Let's begin with a review of these numbers. In the second quarter, consolidated revenue came in at CAD 124.3 million, up CAD 12.8 million, or 11.5% on a year-over-year basis. Looking at our continued profitability, we are reporting another quarter of year-over-year improvement on gross margin in dollars and as a percentage of revenues. Gross margin reached 34.4% in the quarter, up from 30.6% last year. This performance reflects our focus on delivering higher value services, improving utilization rates across four geographies, and leveraging efficiently our smart shoring capabilities. Let's look at our performance by region, starting with Canada.

Pierre Blanchette
Pierre Blanchette
CFO at Alithya Group Inc

Revenues in Canada reached CAD 55.2 million in the second quarter, down CAD 4.4 million, or 7.4% on a year-over-year basis. The decrease in revenue was due primarily to reduced revenues from government contracts and certain clients' projects reaching maturity, partially offset by revenues from the acquisition of XRM Vision, higher billing rates, and a continued recovery in the banking sector. Our gross margin in Canada as a percentage of revenue increased compared to the same quarter last year, mainly due to a positive margin contribution from XRM Vision, higher hourly billing rate, a decrease in the use of subcontractors, and an increase in utilization rates. On a sequential basis, gross margin as a percentage of revenue also increased. In the U.S., revenues increased by $16.3 million, or 34.8%, to $63.1 million.

Pierre Blanchette
Pierre Blanchette
CFO at Alithya Group Inc

The increase is due primarily to organic growth in enterprise transformation services, higher billing rates in certain areas of the business, revenue from the eVerge acquisition, and a favorable U.S. dollar exchange rate. The U.S. now represents over 50% of our revenues. Gross margin as a percentage of revenues from our U.S. operation increased compared to the same quarter last year, primarily due to increased utilization rates, increased use of our smart shoring capabilities, and higher billing rates. In our international business, revenue was slightly higher versus prior year, with lower gross margin as a percentage of revenue. The increase in revenue was primarily due to organic growth in enterprise transformation services. International gross margin as a percentage of revenue decreased compared to the same quarter last year, mainly due to one client's project coming to maturity, which historically had a higher gross margin.

Pierre Blanchette
Pierre Blanchette
CFO at Alithya Group Inc

When looking at the geographies we operate in, our U.S. operation continued to represent a growing share of total revenues. Combined with our ongoing expansion of smart shoring capabilities, this has contributed to a stronger consolidated gross margin aligned with our strategic objectives. Now looking at SG&A expenses, we are continuing to focus on optimizing our cost structure to ensure greater efficiency and long-term performance. In the second quarter, SG&A amounted to CAD 31.3 million, an increase of CAD 4.5 million, or 28% year-over-year. The increase in SG&A primarily reflects costs associated with the acquisition completed since the same quarter last year, increased employee compensation, professional fees, and share-based compensation. This is partially offset by a decrease in information technology and communication costs and business development costs. SG&A as a percentage of revenue increased to 25.2% in Q2 compared to 23.2% in the same quarter last year.

Pierre Blanchette
Pierre Blanchette
CFO at Alithya Group Inc

On a sequential basis, SG&A increased by $0.7 million from $30.6 million. The increase takes into account salary increases that came into effect at the beginning of our fiscal year and expenses from our recent acquisitions. Looking at adjusted EBITDA, we are reporting $12.8 million, or 10.3% of revenues in Q2, up compared to $9.3 million, or 8.3% of revenues last year. The increase was due primarily to increased gross margin, partially offset by increased SG&A. As Paul mentioned, this represents an adjusted EBITDA of over $52 million on a trailing 12-month basis. Net loss for the second quarter was $31 million due to an impairment charge of $38 million. The variation includes an impairment charge of $26.5 million from the Quebec portion of the Canadian cash-generating unit and $11.5 million from the industry solution cash-generating unit.

Pierre Blanchette
Pierre Blanchette
CFO at Alithya Group Inc

This impairment became necessary for both cash-generating units as we continue our repositioning to align with our long-term strategic plan, just like we did with our U.S. operation over the past few years. Our adjusted net earnings came in at CAD 9.5 million, or CAD 0.10 per share, year-over-year, representing an increase of CAD 4.2 million. Finally, turning to our cash flow and financial position, the cash generating from operating activities in Q2 was CAD 11.7 million, offset by non-cash items of CAD 10.6 million, resulting in a net cash from operating activity of CAD 1.1 million in the quarter, a decrease of CAD 1.9 million compared to the same quarter last year. As part of our capital allocation strategy, we put in place a normal course issuable bid in the quarter, which allows us to purchase shares under certain conditions determined by the TSX.

Pierre Blanchette
Pierre Blanchette
CFO at Alithya Group Inc

As of September 30, 2025, net debt increased by CAD 28.1 million to CAD 122 million from CAD 94 million as of March 31, 2025. This change is mainly driven by the acquisition of eVerge and the payment of a balance of sale. Our leverage ratio stands at 2.3 times net debt over our trailing 12-month adjusted EBITDA, compared to 2.4 times for the first quarter. I will now let Bernard share the operational highlights.

Bernard Dockrill
Bernard Dockrill
COO at Alithya Group Inc

Thank you, Pierre, and good morning to everyone with us today. Our results truly highlight the depth of our expertise across our teams and our ability to demonstrate value for our clients amidst uncertain market conditions. In the second quarter, we delivered year-over-year double-digit revenue growth in our global operations. As Paul and Pierre highlighted, our U.S. segment grew by 34.8% year-over-year. This is a result of our focused strategy within this market, as we expect it to grow faster than others. The acquisition of eVerge has accelerated this growth, along with continued demand for our services. Bookings for the quarter were CAD 90.9 million. This translates into a book-to-bill ratio of 0.73 for the quarter and 0.91 on a trailing 12-month basis.

Bernard Dockrill
Bernard Dockrill
COO at Alithya Group Inc

The book-to-bill ratio for the quarter is 0.80 when revenues from the two long-term contracts signed as part of an acquisition in the first quarter of fiscal year 2022 are excluded, and 1.01 on a trailing 12-month basis. We also signed 22 new clients during the quarter, including a global leader in engineering and construction within our Oracle practice in collaboration with our recently acquired eVerge team. By combining Alithya's multi-pillar approach with the enhanced human capital management capabilities from eVerge, we have opened new doors, enabling us to pursue opportunities that were previously out of reach for both parties. The uncertainty in the market continues to result in longer sales cycles and many larger engagements being contracted in multiple smaller phases, which has impacted bookings in the quarter.

Bernard Dockrill
Bernard Dockrill
COO at Alithya Group Inc

As we look forward, we are focused on solutions that deliver the greatest value to our clients and continue to be in demand. This is reflected in our pipeline, which grew by double digits over the same quarter last year. The largest increase in our pipeline is for new business within existing clients and a larger proportion of higher value project services. One area in which we receive growth potential is our AWS-related services, as organizations continue to transition from legacy systems toward cloud-based solutions. Our teams deliver high-value cloud migration and modernization projects, leveraging proven, repeatable processes. Our recent work with Benamon, a major Canadian mutual insurance and financial services company, is a testament to our expertise. We deployed our cloud migration factory methodology to migrate several applications to AWS. The project was delivered on budget and ahead of schedule, achieving immediate savings and operational stability for Benamon.

Bernard Dockrill
Bernard Dockrill
COO at Alithya Group Inc

As Paul said, we are not small; we are focused. That starts with our focus on being experts in the industries we serve and our commitment to stay current with the latest trends, technologies, and tools so we can best support our clients. For example, for a global B2B food company, our experts in FDA regulatory requirements migrated their on-premise ERP applications to the cloud on time and under budget, solving several complex manufacturing challenges. For a global pharmaceutical manufacturer, we completed a multi-site ERP implementation, leveraging our custom pharmaceutical solution and deep sector expertise to align our clients' operations with FDA and USDA validation requirements. We also enabled our client with AI-powered tools so they can harness the robust capabilities at scale.

Bernard Dockrill
Bernard Dockrill
COO at Alithya Group Inc

To ensure our teams remain at the forefront of innovation, we've invested in continuous learning, including AI-related competencies, accumulating over 5,000 hours of training during the second quarter. To help our clients get the most out of their investments in technology, we continue to invest in our IP proprietary frameworks to accelerate the time to value for our clients. Our diverse portfolio of IP spans multiple business applications and industries and differentiates Alithya in the market. For example, our Alithya Food Express Accelerator is a proprietary framework designed to support rapid deployment of D365 for food and beverage manufacturers. For Raskin Foods, a leading contract manufacturer, we are leveraging this IP and our industry expertise to implement D365 for finance and supply chain.

Bernard Dockrill
Bernard Dockrill
COO at Alithya Group Inc

Similarly, within the healthcare sector, we're developing the Alithya Vital program, a strategic enabler that combines Oracle ERP, human capital management, supply chain management, advanced analytics, and AI tailored for healthcare. Vital will empower healthcare systems to harness data to address challenges related to labor productivity, workforce scheduling, and cost of care. Another example is our Microsoft Copilot-enabled data agents we develop for our clients operating in complex manufacturing environments, helping them overcome limitations within their existing systems by enabling fast, accurate access to detailed inventory data. Our focus continues with our partnerships among leading solution providers, including Oracle, Microsoft, AWS, and Salesforce. Our track record, commitment, and investment with these providers enables us to provide our clients with the right solutions for their business challenges, including the adoption of GenAI and agents.

Bernard Dockrill
Bernard Dockrill
COO at Alithya Group Inc

Oracle invited Alithya, among a select few tier-one partners, to assist in building AI agents for Oracle Fusion Cloud applications. I'm proud to say that two of our agents, a sourcing assistant agent and a resource manager assistant agent, will be available on Oracle's marketplace and will be accessible to all Fusion customers. Our commitment, expertise, and ability to innovate is recognized by our partners. In October, we were named finalists in the 2025 Oracle Partner Awards in the Global Industry Solutions category for health and life sciences. We earned this nomination for our work implementing workforce scheduling at Oklahoma State University Medical Center, becoming the first healthcare client to implement this solution. As we execute our focus growth strategy, we continue to build our global talent pool through our smart shore delivery centers.

Bernard Dockrill
Bernard Dockrill
COO at Alithya Group Inc

Following our recent acquisitions, we now have more than 13% of our workforce in our smart shore centers. We have access to the top talent and can scale to deliver global projects with higher margins and fewer contractors. In summary, we continue to make steady progress on all pillars of our growth strategy and remain focused on executing our plan. I will now turn it back to Paul for closing remarks.

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

Thank you, Bernard. As you can see, it was a positive quarter for Alithya. We continue to demonstrate our ability to create value for our clients, our employees, and our shareholders. Our financial position is strong, providing us with the flexibility to execute on our strategic plan. As we believe our shares are significantly undervalued, we will continue to use our cash wisely and buy back our stock when appropriate, reinforcing our confidence in Alithya's long-term value and our commitment to delivering shareholder returns. We will now open the line for questions. Joelle?

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star, followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Jérome Dubreuil with Desjardins. Your line is now open.

Jérome Dubreuil
Jérome Dubreuil
Analyst at Desjardins

Hey, bonjour tout le monde. Thanks for taking my questions. The first one is on the U.S. results. Very strong. Congrats there. I'd like to dive a bit there. Maybe if you can talk about which verticals are working best, because we haven't seen resumption in discretionary spending with some of your peers. Maybe we can talk about the verticals and if there's significant cross-selling from past deals too.

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

Good morning, Jérome. Thanks for the question. I'll comment on the first part, and then I'll let Bernard comment on the industries. I think what people misunderstand about our business, coming back to what I said at the beginning, we're different than the other players. We are really focused on niche, high-end market for solutions that are in very high demand for large organizations who want to roll out enterprise-wide AI. If you want to roll out AI at scale, you need data. You need one source of truth. Many organizations in the past years have gone through acquisitions, divestitures, consolidations, and most organizations, regardless of how well they run IT, have multiple different systems with different sources of data, and they're struggling to get all their data in one place to leverage AI like it should be.

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

Rolling out an ERP platform is a great way of getting there. You can see that these hyperscalers, Microsoft, Oracle, AWS, I mean, you name them, are putting a lot of money and adding capabilities to their platforms around AI. We see huge demand for those services around what we do. That is the bulk of what we do today. We have gradually gotten there. Of course, the U.S. being the largest market in the world, and where the most investments in AI are going into, it is influencing demand for our services. In terms of the industries, I will let Bernard comment on that because he is more familiar with the funnel and how we are doing.

Bernard Dockrill
Bernard Dockrill
COO at Alithya Group Inc

Yeah. Thanks, Jérôme, for the question. First, I'll start. The U.S. had good results, a lot of it's driven by our enterprise application and transformation practice and our Microsoft practices. As you know, we focus there in the healthcare space on the Oracle side and in the process manufacturing. We saw a couple of examples I used around food and beverage. These organizations are looking to take advantage of AI and other things. To get there, they do need to modernize the backend. You've seen some of that there. One of the big drivers in the quarter was our EPM practice. That's our enterprise performance management practice, where we see large multi-billion global organizations. They're looking to get better insights from their financial information for planning and whatnot. That's an area where we've seen growth.

Bernard Dockrill
Bernard Dockrill
COO at Alithya Group Inc

You actually hit on it as well. Over the last 18 months, we've been really focused on cross-selling and getting our teams to develop that motion to be able to bring more to our clients from other areas of the business. That has driven some of our growth as well as we're seeing more of that. That is going to continue to be a focus for us as we move forward.

Jérome Dubreuil
Jérome Dubreuil
Analyst at Desjardins

That's great. Second question for me is on the bookings that week or this quarter. We're wondering if we should be expecting some slowing down of the organic growth next quarter, or maybe it was just some maybe one-time event like with the government business in Canada. If you can comment on that and what this double-digit pipeline growth exactly means. Thanks.

Bernard Dockrill
Bernard Dockrill
COO at Alithya Group Inc

Yeah. Thanks, Jérôme. Bookings and probably what I said in the call, there's two things we're seeing is decisions are taken longer than they have traditionally. That's some of the uncertainty in the market that we're seeing. The other phenomenon we're seeing is large deals are getting broken up into smaller phases. Typically, we would have had an 18-month booking. It'll end up being a three or a four-month one. That impacts the booking side of the house. We're seeing some of that in the market. The pipeline, as I mentioned, and some of this is a direct result of the cross-selling activities, where we're seeing pipeline growth of new business within our existing clients. Again, typically, that's a higher win rate business from where we've already established the relationship there. We're seeing that there, but just in the past quarter.

Bernard Dockrill
Bernard Dockrill
COO at Alithya Group Inc

Q2 traditionally has been a softer quarter for us in bookings just due to the fiscal years of our key partners that we work with. It is a slower quarter. They go through a restructuring typically in the summertime. We do see some softness there in Q2.

Jérome Dubreuil
Jérome Dubreuil
Analyst at Desjardins

Thank you.

Operator

Your next question comes from Gavin Fairweather with Cormark. Your line is now open.

Gavin Fairweather
Gavin Fairweather
Managing Director and Co-Head of Institutional Equity Research at Cormark

Oh, hey, good morning. Thanks for taking my questions and congrats on the strong results.

Gavin Fairweather
Gavin Fairweather
Managing Director and Co-Head of Institutional Equity Research at Cormark

Maybe just to start on your macro comments about longer sales cycles and projects being kind of chopped up into smaller pieces, curious how much that applies to the U.S. as well as Canada. I think your prior commentary was that the macro environment was kind of a tale of two markets with the U.S. continuing to be quite strong. Curious for any differences you're seeing between the two main geographies in the current state.

Bernard Dockrill
Bernard Dockrill
COO at Alithya Group Inc

Yeah. Thanks, Gavin. Good question. When I look at the pipeline and the growth in the pipeline, we've got growth across all geographic segments. The same comment with the existing clients. We're seeing that in Canada as well as the U.S. on that, as well as the proportion that's in more of the project services work versus the traditional consultant work that we've done in Canada. A little more of a switch there on that. I don't see anything unique to Canada or the U.S. I just think kind of where we are in our evolution, we're further ahead in the U.S., and we're seeing the results there earlier than we will see them in Canada.

Gavin Fairweather
Gavin Fairweather
Managing Director and Co-Head of Institutional Equity Research at Cormark

Appreciate that. Maybe just on the U.S. gross margin, I know you do not specifically disclose it, but I suspect, and I think you have talked about it being kind of around that 40% previously. I am curious if you are seeing further upside opportunities there. I mean, you kind of rang off all the different drivers of strong performance this quarter in terms of utilization and smart shoring and higher value projects. Do you see an ability to drive that further, or are we kind of topping out on U.S. gross margin?

Bernard Dockrill
Bernard Dockrill
COO at Alithya Group Inc

Yeah. As I look at the U.S. theme across the company, there are some areas of business that we're operating very well, but there are areas that I still see opportunity to increase utilization. Also, when I look at the smart shoring operations, those are areas for improvement in certain areas where I think we can do more as we look at the business and we're pursuing new business and we're bidding on new business, we are structuring our deals with a larger portion of that being done smart shore. That, I do believe, provides some upside there. In other areas, we're kind of at the targets where we expect to be.

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

Maybe, Gavin, I'll add to what Bernard was just saying, that every proposal that we put in now has an offshore component. You've seen the steady growth of that. We're over 13% now. We've stated in the past, kind of our long midterm view is to get to 30%. That alone is going to be improving gross margins across the board as we keep pushing that.

Gavin Fairweather
Gavin Fairweather
Managing Director and Co-Head of Institutional Equity Research at Cormark

That's great. Very helpful. Maybe just lastly on Canada, we've talked about you walking away from some lower margin work and being very deliberate about the work that you're going after. You discussed the work that you did in the U.S. business several years ago to really kind of transform the margins higher. Maybe you can just discuss kind of your longer-term plans for the Canadian business and how you're thinking about the ability to kind of transform that to look more like the U.S. and what kind of timelines you think you can execute on that.

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

Yeah. Great. Thanks for the question. If you look back at the U.S., it took us about three years from the start of the major shift to get to where we're at today. We're in the middle of that in Canada. It's going faster in some areas than others. Yeah, the plan is that within the next couple of years, we're going to be there. That's the plan.

Gavin Fairweather
Gavin Fairweather
Managing Director and Co-Head of Institutional Equity Research at Cormark

Appreciate that, Gavin.

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

Hopefully, all this tariff issues and free trade stuff and everything else, all the noise around it goes away between now and then, which would also help, I think.

Gavin Fairweather
Gavin Fairweather
Managing Director and Co-Head of Institutional Equity Research at Cormark

Yes, that would be nice. Thanks so much for passing on.

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

Thank you.

Operator

Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Vince Colicchio with Barrington Research. Your line is now open.

Vincent Colicchio
Vincent Colicchio
Managing Director at Barrington Research

Yeah, Paul, you had mentioned that the Q2 tends to be a slow booking quarter. Curious, thus far in the current quarter, how bookings are trending?

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

Good morning, Vince. Thanks for the question. I can't comment on the current quarter, but Q2, which is our summer months for us, always slower. As Bernard was saying, there are three factors. One is the summer months, obviously, a lot of less people working. Despite that, we did better than last year. Year over year, our bookings have grown in the summer, which is a good sign. The other two things are if you look at our strategic partners, these hyperscalers, whether it's Microsoft, Oracle, these other guys, our bookings tend to follow their year-end. Their year-end is in a different quarter than ours. Typically, if you look at the quarters where we have the highest bookings, they usually tend to align with their year-end. If you look at where Oracle's finishing, that's usually a good quarter.

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

Where Microsoft finishes, that's usually a good quarter. I can't comment on the current bookings. Sorry.

Vincent Colicchio
Vincent Colicchio
Managing Director at Barrington Research

No worries. What are your thoughts?

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

The funnel is strong. As Bernard's saying, the funnel is growing, so.

Vincent Colicchio
Vincent Colicchio
Managing Director at Barrington Research

Okay. What are your thoughts on how well you're leveraging AI to generate programming efficiencies?

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

I think we're doing well. I think there's always room for improvement. I look at our operations today, Vince, and 13% for us, there are about 3,000 people, so just under 400 people in our smart shore centers. If you had asked me this question two years ago, I thought we'd be three times larger by now. I think we've maintained that size just because of the use of the AI tools. I think our people are much more efficient in our smart shore centers than they were two years ago. You also have to remember that our people in our smart shore centers aren't commodity. I mean, we don't do maintenance and support and these types of things. We have Oracle experts and Microsoft experts and AI experts that support our clients around the world. By definition, these people use these tools every day.

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

We are also helping Microsoft and Oracle integrate AI tools into their own platforms that we end up using after. I think we are ahead of the curve on that. Is there room to improve? Always. There is always room to improve. We like to stay, we like to believe we are in front of the parade, and we want to stay there.

Vincent Colicchio
Vincent Colicchio
Managing Director at Barrington Research

Last question. In Canada, the government contract business was weak in the quarter. Do you have any expectations for rebound there?

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

Yeah, great question, Vince. As we said in the past, we are deliberately exiting some low-margin government business. It was a conscious decision. You might say it's difficult because it impacts our revenues in Canada, as Pierre was mentioning. By the same token, our margins are growing. The idea is, as we do that, as we do that transformation, how do we focus on the higher-margin government projects? We are winning some. We are growing our government business in areas of higher-margin projects instead of the lower-margin commodity stuff where you're only competing on price. When you compete on price, there's always somebody cheaper, and you never win in the long term. You can't invest in the new things we want to do. We made a conscious decision there. It reduces, but we're still winning some very interesting projects.

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

We've won several around Microsoft. We were talking about XRM earlier. We've won some project management or Microsoft project-type stuff with some large organizations in the government that want to improve their project management. That's a very common theme right now in government circles. You're also looking at there's going to be massive investments in defense in the future. There are many announcements today, but before that trickles down into the machine, I think you're several quarters away before that impacts the business. It usually takes time to trickle down. The big announcements sound good, but they usually take quite some time to trickle down into the machine.

Vincent Colicchio
Vincent Colicchio
Managing Director at Barrington Research

Thanks, Paul.

Paul Raymond
Paul Raymond
President and CEO at Alithya Group Inc

Oh, thank you for the question.

Operator

There are no further questions at this time. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and ask that you please disconnect your lines.

Executives
    • Pierre Blanchette
      Pierre Blanchette
      CFO
    • Dominic Blais
      Dominic Blais
      Senior Advisor Public Relations
    • Bernard Dockrill
      Bernard Dockrill
      COO
    • Paul Raymond
      Paul Raymond
      President and CEO
Analysts
    • Gavin Fairweather
      Managing Director and Co-Head of Institutional Equity Research at Cormark
    • Jérome Dubreuil
      Analyst at Desjardins
    • Vincent Colicchio
      Managing Director at Barrington Research
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