Alithya Group, Inc. Class A ((TSE:ALYA)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Alithya Group, Inc. Class A painted a mixed picture of the company’s performance. On the positive side, there was strong growth and performance in the U.S. market, driven by successful integration of acquisitions and increased operational efficiency. However, challenges in the Canadian segment, such as revenue decline and lower utilization, as well as an increased net debt, tempered the overall sentiment.
U.S. Market Growth
The U.S. market was a standout performer for Alithya, achieving a remarkable 17.3% growth. This double-digit profitable growth was primarily driven by the company’s Oracle and Microsoft practices, highlighting the strength and strategic focus in these areas.
Revenue and Adjusted EBITDA Growth
Alithya reported a consolidated revenue increase of 2.7% year-over-year, reaching $124.2 million. Adjusted EBITDA also saw a significant rise, growing by 15.6% to $11.6 million, indicating improved profitability and operational efficiency.
Successful Integration of Acquisitions
The company successfully integrated its acquisitions of eVerge and XRM Vision, which contributed to growth and opened new opportunities. These integrations had a notable impact, particularly on the company’s smart shore centers.
High Gross Margin
Alithya’s gross margin improved slightly to 32.1%, up from 31.9% the previous year. This improvement was attributed to increased efficiencies and a strategic focus on a higher-value business mix.
Strong Performance in Healthcare Sector
The healthcare sector was another area of strength, with Alithya completing significant projects for clients like Virtua Health and Cigna. These projects, using Oracle solutions, enhanced operational efficiency and financial insights for the clients.
Smart Shore Capabilities Expansion
The company expanded its smart shore capabilities, reaching a new high with 13% of employees in smart shore locations. This expansion significantly contributed to Alithya’s operational efficiency.
Positive Cash Position
Alithya executed the eVerge acquisition with a 100% cash approach, maintaining a strong cash position. This strategic move positions the company well for future acquisition opportunities.
Canadian Revenue Decline
In contrast to the U.S., the Canadian segment faced challenges, with revenues declining by 8.5%. This was primarily due to reduced government contracts and the maturity of a major transformation project.
Lower Utilization and Margins in Canada
The Canadian segment also experienced decreased utilization rates and lower tax credits, resulting in a drop in gross margin, further highlighting the challenges faced in this region.
Book-to-Bill Ratio Challenges
Alithya’s book-to-bill ratio for the quarter was 0.95, indicating slower project conversion compared to previous periods. This metric suggests potential challenges in maintaining project momentum.
Increased Net Debt
The company’s net debt increased by $24.3 million to $118.3 million, with a leverage ratio of 2.4x net debt to trailing 12 months adjusted EBITDA, reflecting a cautious approach to financial management.
Forward-Looking Guidance
Looking ahead, Alithya’s management provided optimistic guidance, highlighting a year-over-year improvement in adjusted EBITDA and gross margin as a percentage of revenue. The focus remains on high-value services and efficiency gains, with notable revenue growth expected in the U.S. market. The company emphasized its strategic priorities, including industry expertise and smart shoring, despite the challenges faced in the Canadian segment.
In summary, Alithya Group’s earnings call showcased a company navigating through a mix of strong U.S. market performance and challenges in Canada. The successful integration of acquisitions and expansion of smart shore capabilities are positive indicators for future growth, while the increased net debt and Canadian revenue decline present areas for improvement. Overall, the sentiment was balanced, with optimism for continued growth and strategic focus in key areas.