What Alithya Group (ALYA) Said on Its Q2 Earnings Call

Key Points

• Revenue and earnings declined year over year: Q2 revenue fell 16.8% to CAD 103.4 million, while adjusted EBITDA dropped to CAD 8.3 million. Cost cuts helped margins improve sequentially to 8%, up from 5.2% in Q1.
• Bookings exceeded revenue: Quarterly bookings rose 22% from Q1 to CAD 108.2 million, for a 1.05 book-to-bill ratio. Alithya is shifting toward higher-margin work, including fixed-price projects, while Salesforce delays and Quebec restructuring weigh on results.
• Strategic review remains underway: CEO Paul Raymond said the board and external advisers are progressing as planned, but offered no details on timing or possible outcomes. A CAD 30.4 million noncash goodwill impairment contributed to a CAD 25 million net loss.

Alithya Group TSE: ALYA reported lower second-quarter revenue and earnings from a year earlier, but cost reductions helped lift adjusted earnings and margins from the preceding quarter as bookings exceeded revenue.

Revenue fell 16.8% year over year to CAD 103.4 million. Adjusted EBITDA declined to CAD 8.3 million from CAD 12.8 million a year earlier, though it rose from CAD 5.4 million in the first quarter. The adjusted EBITDA margin was 8%, compared with 10.3% a year earlier and 5.2% in the first quarter.

President and CEO Paul Raymond said the company’s strategic review remains active and is progressing as planned. The board is engaged with external advisers, he said, declining to comment on timing, parties or potential outcomes.

Cost cuts support sequential improvement

Selling, general and administrative expenses fell to CAD 25.2 million, down CAD 6.1 million, or 19.5%, from a year earlier. CFO Pierre Blanchette attributed the decrease primarily to lower employee compensation costs, including workforce reductions and variable compensation, as well as lower professional fees and share-based compensation. The decline also included the impact of the Datum divestiture.

Gross margin fell to CAD 32.5 million, or 31.4% of revenue, from CAD 42.8 million, or 34.4%, a year earlier. Blanchette cited lower revenue and utilization, changes in project mix, lower tax credits and a nonrecurring intellectual property sale in the prior-year period.

Alithya recorded a net loss of CAD 25 million, or CAD 0.26 per share, compared with a loss of CAD 31 million, or CAD 0.32 per share, a year earlier. The latest quarter included a CAD 30.4 million noncash goodwill impairment in the Industry Services and Solutions segment, related to restructuring in Quebec. Blanchette said the charge was unrelated to the strategic review.

Adjusted net earnings fell 51.8% to CAD 4.6 million, or CAD 0.05 per share. The company also reduced the fair value of contingent consideration related to the eVerge acquisition by CAD 5.9 million. Net cash from operating activities was CAD 0.9 million, while the ratio of net debt to trailing 12-month adjusted EBITDA rose to 3.2 times from 2.9 times at the end of the first quarter.

Bookings rise as company shifts project mix

Second-quarter bookings totaled CAD 108.2 million, up 22% from the first quarter, producing a book-to-bill ratio of 1.05. The ratio was 1.12 when adjusted for revenue from two long-term contracts. On a trailing 12-month basis, bookings were CAD 422.5 million and book-to-bill was 0.97, or 1.05 on the same adjusted basis.

COO Bernard Dockrill said new business represented 71% of quarterly bookings, including 18% from new clients. Alithya added 24 clients during the quarter. Fixed-price and fixed-fee work represented 48% of bookings.

Dockrill said customers expect to share in productivity gains from artificial intelligence, but fixed-price contracts can allow Alithya to retain a portion of those gains and potentially expand gross margins. Raymond described fixed-price projects as an interim step toward outcomes-based pricing.

Enterprise Transformation revenue fell 9% year over year to CAD 64.4 million, but rose 2.7% sequentially. The segment generated CAD 75 million in bookings, for a book-to-bill ratio of 1.17. Dockrill cited wins involving Oracle enterprise software for two U.S. hospital systems and Microsoft business software for food company Request Foods.

Dockrill said the Salesforce practice remained a headwind because of longer client decision cycles, affecting bookings and revenue. The company is pursuing several late-stage opportunities, he said, but their timing depends on client decisions.

Quebec restructuring weighs on revenue

Industry Services and Solutions revenue declined 21.5% to CAD 39 million, reflecting maturing projects and reduced revenue from lower-margin work. The segment recorded CAD 33.3 million in bookings, for a book-to-bill ratio of 0.85, or 1.02 after adjusting for revenue from the two long-term contracts.

Raymond said Alithya is moving away from lower-margin, price-driven work, particularly in Quebec, while contending with reduced government spending and financial-services weakness. Dockrill said the pace at which booked work becomes billable is the main driver of the company’s revenue trajectory.

Asked about the timing of a revenue recovery, Raymond declined to provide guidance. Historically, he said, project ramp-ups typically take about two quarters to convert into revenue. He also declined to discuss bookings trends in the current quarter.

About Alithya Group (TSE:ALYA)

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.

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