Alithya Group Q2 2027 Earnings Results & Report

Alithya Group EPS Results

• Actual EPS: C$0.05
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Alithya Group Revenue Results

• Actual Revenue: C$103.37 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

We are trusted advisors who provide AI-centric strategic consulting and digital transformation services. We help solve business challenges that enable our clients to unlock new opportunities, modernize processes, and gain efficiencies. We leverage a world-class team of passionate industry experts, AI-based IP solutions, the latest digital technologies, a solid understanding of mission critical business applications and a partner ecosystem to accelerate results. We've built a foundation of success that includes a specialized global delivery network to provide end-to-end solutions. We strive to make a difference. We are Alithya.

Alithya Group Q2 2027 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Revenue fell 16.8% year over year to CAD 103.4 million, while adjusted EBITDA declined to CAD 8.3 million from CAD 12.8 million and adjusted net earnings fell 51.8% to CAD 4.6 million.
• Positive Sentiment: Cost reductions supported sequential improvement: SG&A was down CAD 3.1 million from the prior quarter, and adjusted EBITDA rose to CAD 8.3 million from CAD 5.4 million, lifting its margin to 8% from 5.2% despite slightly lower revenue.
• Positive Sentiment: Bookings increased 22% sequentially to CAD 108.2 million, with book-to-bill of 1.05, or 1.12 excluding two long-term contracts. Enterprise Transformation led with a 1.17 book-to-bill, and 48% of bookings were fixed-price or fixed-fee; management said project starts and conversion will shape the revenue recovery, typically over about two quarters.
• Negative Sentiment: Industry Services and Solutions revenue fell 21.5% year over year amid reduced Quebec government spending, weakness in financial services, and a shift away from lower-margin work; the segment also recorded a CAD 30.4 million non-cash goodwill impairment. Operating cash flow was CAD 0.9 million, and net debt to trailing adjusted EBITDA rose to 3.2 times from 2.9 times at the prior quarter-end.

Presentation

[Operator]

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. 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 risk and uncertainties sections of our MD&A, which are accessible on our website.

[Operator]

All figures discussed on today's call are in Canadian dollars 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 MD&A for more details. The conference call will be followed by a question-and-answer period. 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. Presenting this morning are Paul Raymond, Alithya's President and Chief Executive Officer, Bernard Dockrill, Chief Operating Officer, and Pierre Blanchette, Chief Financial Officer. I will now turn the call over to Paul.

[Paul Raymond, President and CEO at Alithya]

Thank you, David, and good morning, everyone. Before turning to the floor, a brief word on the strategic review. The process is active and progressing as planned, and the board remains fully engaged with the support of our external advisors. As you would expect, we will not comment on timing, parties, or potential outcomes. What I can tell you is that the management's mandate has not changed. Run the business and keep building value. This quarter shows we are doing exactly that.

[Paul Raymond, President and CEO at Alithya]

I would like to highlight three things. First, we've reset our cost base, and it is showing up in our earnings. SG&A was CAD 25.2 million, down CAD 3.1 million from the first quarter and CAD 6.1 million from last year. Revenue was slightly lower than in the first quarter, yet adjusted EBITDA rose from CAD 5.4 million to CAD 8.3 million, and our margin improved from 5.2% to 8%.

[Paul Raymond, President and CEO at Alithya]

That reflects the operating leverage we have built. As volumes recover, more of each additional revenue dollar will reach the bottom line. Second, demand is converting. Bookings were CAD 108.2 million, up 22% from the first quarter, for a book-to-bill ratio of 1.05, or 1.12 when adjusting for the two long-term contracts. Enterprise Transformation, our largest segment, posted a book-to-bill of 1.17 and grew revenue 2.7% sequentially. Third, we are actively reshaping the quality of our portfolio. In the Industry Services and Solutions group, and particularly in Quebec, as explained before, we are moving away from price-driven, lower-margin work towards higher-value engagements while working through reduced government spending and softness in financial services. That weighs on revenue in the near term, and it is reflected in the non-cash goodwill impairment Pierre will discuss. However, it also leaves us with a much cleaner business.

[Paul Raymond, President and CEO at Alithya]

At the same time, our bookings mix continues to shift towards fixed-price work. 48% of this quarter's bookings were fixed price. As clients move from AI experimentation to implementation, the fixed-price models let us capture the value of our IP, SmartShore, and AI-enabled delivery, and positions us for outcomes-based pricing. I would like to use this opportunity to thank our teams for their discipline and our clients for their trust. With that, I will turn it over to Pierre, followed by Bernard. Pierre?

[Pierre Blanchette, CFO at Alithya]

Thank you, Paul, and good morning, everyone. Revenues were CAD 103.4 million, down 16.8% year-over-year. Client retention remained healthy, with 82.6% of revenues generated from clients we served in the same quarter last year, and we signed 24 new clients during the quarter. Gross margin was CAD 32.5 million, down 24.1% from CAD 42.8 million, and gross margin as a percentage of revenues was 31.4% compared to 34.4% last year. The decrease primarily reflects the lower revenue, lower utilization rates, changes in project mix, lower tax credits, and the impact of a non-recurring IP sale recognized in the prior year. Looking at our performance by segment, Enterprise Transformation revenues were CAD 64.4 million, down CAD 6.4 million, or 9% year-over-year.

[Pierre Blanchette, CFO at Alithya]

The decrease was mainly due to client projects reaching maturity, lower performance in certain area of the business, and a non-recurring IP sale recognized in the prior year, partially offset by favorable foreign exchange impact. Industry Services and Solutions revenues were CAD 39 million, down CAD 10.6 million, or 21.5% year-over-year, mainly reflecting certain client projects reaching maturity and reduced revenues from lower-margin engagements. The divestiture of Datum accounted for a further CAD 3.9 million of the year-over-year revenue decline. Turning to SG&A. In the quarter, SG&A totaled CAD 25.2 million, a decrease of CAD 6.1 million, or 19.5% year-over-year, including the impact of the Datum divestiture. The decrease was mainly due to lower employee compensation costs, including workforce reductions and variable compensation, as well as lower professional fee and share-based compensation. SG&A represented 24.4% of revenues compared to 25.2% last year.

[Pierre Blanchette, CFO at Alithya]

Adjusted EBITDA was CAD 8.3 million, or 8% of revenues, compared to CAD 12.8 million, or 10.3% last year. The decrease primarily reflects the lower margin, partially offset by the lower SG&A. Net loss for the quarter was CAD 25 million, or CAD 0.26 per share, compared to a net loss of CAD 31 million, or CAD 0.32 per share, in the same period last year. During the quarter, we recorded a CAD 30.4 million impairment charge related to the goodwill in our Industry Services and Solutions segment related to our restructuring in Quebec. This accounting adjustment had no impact on our cash position and is unrelated to our strategic review process. We also finalized the assessment of the contingent consideration related to the eVerge acquisition, resulting in a CAD 5.9 million reduction in its fair value.

[Pierre Blanchette, CFO at Alithya]

Adjusted net earnings came at CAD 4.6 million, or CAD 0.05 per share, compared to CAD 9.5 million, or CAD 0.10 per share, in the prior year, a decrease of 51.8%. Turning to cash flow and financial position. Net cash from operating activities was CAD 0.9 million in the quarter, compared to CAD 1.1 million in the same quarter last year. Our net debt to trailing 12-month adjusted EBITDA ratio was 3.2x, compared to 2.9x at the end of the first quarter. in September 2026, our Normal Course Issuer Bid program ended, and it was not renewed. Overall, the quarter showed sequential improvement in both gross margin and adjusted EBITDA, while the year-over-year results continued to reflect lower revenue volume and utilization. We remain focused on aligning our cost structure with current revenue levels while preserving our ability to invest in strategic growth areas.

[Pierre Blanchette, CFO at Alithya]

I will now turn to Bernard for our operational highlights.

[Bernard Dockrill, COO at Alithya]

Thank you, Pierre, and good morning, everyone. I would like to begin by thanking the Alithya team for their continued contribution and commitments to our clients. This morning, I will cover our bookings and provide some insights into each of our operating segments. Starting with our bookings. Alithya's second quarter bookings amounted to CAD 108.2 million, translating into a book-to-bill ratio of 1.05. Adjusting for the revenues from the two long-term contracts, the book-to-bill ratio was 1.12. On a trailing 12-month basis, bookings amounted to CAD 422.5 million, which translated into a book-to-bill ratio of 0.97. Adjusting for the revenues from the two long-term contracts, the trailing 12-month book-to-bill ratio was 1.05. New business accounted for 71% of second quarter bookings, with 18% coming from new clients, where we added 24 new clients to our portfolio.

[Bernard Dockrill, COO at Alithya]

Fixed price and fixed fee bookings were 48% of total bookings, including six of our 10 largest bookings in the quarter within the Enterprise Transformation segment. These bookings reflect the evolution of our commercial models to better capture the value of AI enablement, Alithya's accelerators, and SmartShore. Second quarter bookings were driven by our Enterprise Transformation segment, where bookings amounted to CAD 75 million, translating into a book-to-bill ratio of 1.17 for the quarter. Within this segment, we see momentum around AI-driven Enterprise Transformation, where we had wins in healthcare with our Oracle ERP offerings, including two new U.S.-based hospital systems, and in the manufacturing sector with our Microsoft D365 ERP offerings. Request Foods selected Alithya for its finance systems transformation, recognizing our deep expertise in the food and beverage sector and our experience helping clients transform the business with Microsoft D365.

[Bernard Dockrill, COO at Alithya]

Also, in collaboration with Microsoft, we see increasing demand for Copilot adoption services. Since fiscal 2025, we have delivered 169 Microsoft 365 Copilot engagements across 103 unique clients. This is where Alithya differentiates itself. We pair AI transformation with the adoption, governance, and change management work that turns deployments into business outcomes for our clients. For example, for a large state agency, we are applying conversational AI and policy-based automation to simplify a complex monthly timesheet process and help reduce processing time and errors while improving consistency. Microsoft also recognizes Alithya's leadership in this space and selected Alithya to participate in the AI apps and agents innovation tour in North America, which focuses on Copilot and agents, how they can help transform business processes.

[Bernard Dockrill, COO at Alithya]

Before turning to our Industry Services and Solutions segment, I want to address our Salesforce practice, which was a source of softness in the first quarter and remained a headwind this past quarter. Longer client decision cycles in that market have affected both bookings and revenue, and that softness is also reflected in the eVerge contingent consideration adjustment Pierre described. We continue to pursue several late-stage Salesforce opportunities to return this practice to growth, although timing will depend on when clients make their decisions. For our Industry Services and Solutions segment, second quarter bookings amounted to CAD 33.3 million, translating into a book-to-bill ratio of 0.85. Adjusting for the revenues from the two long-term contracts, the book-to-bill ratio for the quarter was 1.02.

[Bernard Dockrill, COO at Alithya]

Bookings within this segment were driven by extensions and renewals in our Quebec operations, new engagements within the Ontario nuclear sector, and an extension for our services with AWS, where we continue to scale our cloud and data capabilities. This segment continues to be more affected by market-specific headwinds, namely reduced Quebec government spending and weakness in the banking sector. We remain committed to this segment and disciplined in prioritizing opportunities where our industry expertise, proprietary IP, and delivery qualifications address specific business challenges for our clients and support sustainable margins. Across both segments, our pipeline of qualified higher confidence opportunities remains stable as we build momentum in our industry-led offerings, AI capabilities, enterprise application expertise, and our ability to win new clients. The key variable remains timing of client decisions and project starts, which is where we are focused on converting.

[Bernard Dockrill, COO at Alithya]

Utilization, operational efficiency, including the leverage of AI and smart shoring, remain our principal levers to protect gross margin as volumes recover. With bookings exceeding revenue this quarter, the pace at which these awards convert into billable work is now the main driver of our revenue trajectory. Our delivery teams are working with clients to accelerate mobilization and project start dates, particularly on the larger engagements signed in recent quarters. Before turning it back to Paul, I would like to take the opportunity to welcome the PTG team to Alithya. PTG joins our Oracle practice, strengthening our premier cloud and enterprise project portfolio management capabilities. With more than 40 years of experience, PTG expands our ability to support complex, project-driven organizations, particularly in engineering and construction. I will now turn it back to Paul for closing comments.

[Paul Raymond, President and CEO at Alithya]

Thank you, Bernard. As you have heard today, the second quarter reflects the continued discipline of our teams and the relevance of the capabilities we have built. Our reduced SG&A expense demonstrate our focus on operating efficiently, while solid bookings provide an encouraging indicator of client demand and the opportunities ahead of us. We remain focused on what we control, discipline execution, quality delivery, stronger client relationships, and the continued advancement of our higher value offerings. I would like to thank our teams for their continued dedication and our clients for their trust and collaboration. With that, we will now open the line for questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. As discussed earlier, only questions from the financial community will be addressed. To raise or lower your hand, please press star five. You will hear a confirmation once your hand is raised. When it is your turn to speak, your line will be unlocked, and you will hear a notification. At that point, please unmute yourself by pressing star six. The first question is from Jérôme Dubreuil of Desjardins. As a reminder, please press star followed by six to unmute yourself.

[Paul Raymond, President and CEO at Alithya]

You are on mute, Jérôme.

[Operator]

Jérôme, can you hear us? Please press star six.

[Jérôme Dubreuil, Analyst at Desjardins]

Hey, good morning. [Non-English content]. Can you hear me?

[Operator]

Yep.

[Paul Raymond, President and CEO at Alithya]

Yes, can hear you.

[Jérôme Dubreuil, Analyst at Desjardins]

All right, great. Good morning. Thanks for taking my question. There was a bit of a sequential stabilization top line and the book-to-bill back above one. What are you telling the prospective buyers in terms of the pipeline or maybe the timing for re-acceleration of the revenue?

[Paul Raymond, President and CEO at Alithya]

We're not giving guidance on the call, Jérôme. But, I mean, usually when you look at our book-to-bill, if you look at it traditionally, our revenue usually takes about two quarters to convert the ramp-ups of these projects. So usually when you have a book-to-bill above one, you know that couple of quarters further down the road, you're going to see that reflected in the revenue.

[Jérôme Dubreuil, Analyst at Desjardins]

Yeah, fair enough. Thank you. The second one is, if we have a scenario in which Alithya stays public, what will be the near-term strategy? Is it to continue focusing on containing the cost, maybe on the SG&A, like you've been in the quarter, or look at more growth opportunities?

[Paul Raymond, President and CEO at Alithya]

I am not going to speculate on the process or the outcome of it, Jérôme, but what I can say is that we are sticking to our plan. I mean, we have been executing on this for quite some time now, of converting to higher value business. We can see it now in our higher value segments. It is now more than half of the business of the company and growing. The lower margin business is almost all gone.

[Paul Raymond, President and CEO at Alithya]

We are going to see that growth kicking in as well. Whether we are public or private, it does not change our focus on the type of business we are going after. We are positioning ourselves for the future. The future is AI-driven. That means that we need to transform how we bill, how we go get margin and create value for our clients. We believe that outcomes-based is out there. We are not there yet.

[Paul Raymond, President and CEO at Alithya]

Nobody is, honestly. Even the clients are not too sure how to buy outcomes-based today, but we believe fixed-price projects is the interim to that, and we are pushing very hard on that, as you can see in our bookings in the quarter. There is no change in the destination, regardless of the outcome of the process.

[Jérôme Dubreuil, Analyst at Desjardins]

Yeah. Thank you. Maybe last one for me. If you can comment on whether there were any one-timers or non-recurring items having an impact on the EBITDA line this quarter.

[Paul Raymond, President and CEO at Alithya]

I'll let Pierre comment on that. I don't believe so.

[Pierre Blanchette, CFO at Alithya]

No, no. There's a straightforward quarter, Jérôme.

[Jérôme Dubreuil, Analyst at Desjardins]

Okay. That's clear. Thank you. That's all for me.

[Paul Raymond, President and CEO at Alithya]

Thank you.

[Operator]

Thank you. The next question will be from Vince Colicchio from Barrington Research. Please press star followed by six and go ahead.

[Vince Colicchio, Analyst at Barrington Research]

Hello, Paul. Can you hear me?

[Paul Raymond, President and CEO at Alithya]

Yeah, yeah. Good morning, Vince.

[Vince Colicchio, Analyst at Barrington Research]

Good morning. How meaningful are the AI productivity gains you're seeing in your practices at this point? And what are your thoughts in terms of, will we start seeing that show up in your project margins in the near future? Do you expect a give and take with customers? How should we expect that to play out?

[Paul Raymond, President and CEO at Alithya]

I will let Bernard comment. Maybe we can take it from the fixed price versus time and material perspective, Vince.

[Bernard Dockrill, COO at Alithya]

Yeah. Thanks for the question, Vince.

[Vince Colicchio, Analyst at Barrington Research]

Sure.

[Bernard Dockrill, COO at Alithya]

Very good question. Definitely clients are expecting to get some part of the gains from AI. You can see in the market, in the buying, in the IT service space, it is a big topic. That is why we are pushing hard on it, as we renegotiate, negotiate contracts, especially in our large Enterprise Transformation projects, is to do them on a fixed-price basis. We are very confident in our rigor and governance on delivery, and that allows us to, as we see further gains from AI and even our SmartShore still, we can retain a portion of that and expand our gross margins as we go forward.

[Bernard Dockrill, COO at Alithya]

Definitely, clients are expecting a piece of the gains from AI, and that is what is pushing a lot of the decision-making and delaying some of the decision-making of how that comes through to the lack of understanding in the market right now and what gains are available.

[Vince Colicchio, Analyst at Barrington Research]

Thanks for that. Then a follow-up. When you implement Microsoft and Oracle solutions, such as ERP systems, and you see process change opportunities where you could implement AI, are you able to expand projects and sort of use the existing project as a channel to get more AI business?

[Bernard Dockrill, COO at Alithya]

Yeah. Vince, as we look at this now, all of our Enterprise Transformation projects are really enterprise AI transformation projects. AI is a big piece of it. It's not in the initial requirements from our clients. It's built into the solutions and how we enable AI through the transformation. Then with follow-on work as well, if you go back to clients that have implemented in the past, they've got the foundations for it going back, and as new agents and other opportunities exist, we can go back and look at those revenue opportunities as well.

[Vince Colicchio, Analyst at Barrington Research]

Then last for me, as far as bookings, nice to see things take a change for the better in terms of book-to-bill. How are things trending on the booking side in the current quarter thus far?

[Paul Raymond, President and CEO at Alithya]

Yeah, we don't give that perspective, Vince. We'll give that at the end of the quarter.

[Vince Colicchio, Analyst at Barrington Research]

Okay. Thank you, Paul.

[Paul Raymond, President and CEO at Alithya]

All right. Thanks, Vince.

[Operator]

Thank you very much. There are no further questions at this time. That would conclude our conference call for today. We would like to thank you for attending and ask that you please disconnect your lines. Have a good day.

Participants

Analysts

• Paul Raymond, President and CEO at Alithya
• Pierre Blanchette, CFO at Alithya
• Bernard Dockrill, COO at Alithya
• Jérôme Dubreuil, Analyst at Desjardins
• Vince Colicchio, Analyst at Barrington Research