Alithya Group ((TSE:ALYA)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Alithya Group’s recent earnings call highlighted a robust quarter characterized by record adjusted EBITDA margins and significant bookings, particularly in the financial services sector. Despite these achievements, the company faces challenges, including a revenue decline in Canada and lower gross margins in its U.S. and international segments, indicating areas for potential improvement.
Record Adjusted EBITDA Margin
Alithya achieved a milestone by delivering its highest adjusted EBITDA margin since going public. This accomplishment marks a pivotal point in the company’s three-year strategic plan, underscoring its commitment to financial growth and efficiency.
Strong Q3 Bookings
The company reported impressive Q3 bookings totaling $138.4 million, with a book-to-bill ratio of 1.2x revenue. This marks substantial growth in the financial services and insurance sectors, reflecting Alithya’s strengthening market position.
Sequential Organic Growth
Alithya experienced sequential organic growth across all geographies, which contributed positively to its financial performance. This growth indicates a successful expansion strategy and operational effectiveness.
Successful Integration of XRM Vision
The acquisition of XRM Vision has proven beneficial in scaling Alithya’s Microsoft smart shoring capabilities and creating valuable cross-selling opportunities, enhancing its service offerings and market presence.
Gross Margin Achievement
Alithya reached a record gross margin level of 32.3%, a testament to increased operational efficiencies and a strategic shift towards a higher-value business mix.
Revenue Decline in Canada
Canadian revenues saw a 9.3% year-over-year decline, attributed to the maturity of a major client’s project and reduced revenues from government contracts, highlighting a potential area for strategic focus.
Lower Gross Margin in the U.S.
The U.S. segment faced a decrease in gross margin percentage due to declines in digital adoption subscription revenues, pointing to challenges in adapting to changing market demands.
Slight Decrease in International Revenues
International revenues experienced a slight downturn following the conclusion of a UK project, contributing to a reduced gross margin, signaling a need for strategic attention to maintain international growth.
Forward-Looking Guidance
Looking ahead, Alithya aims to sustain its strategic growth trajectory, targeting a gross margin of 33% to 35% over the next three years. The company plans to maintain strong cash flow and a healthy financial position, with a leverage ratio of 2.6x net debt to trailing 12-month adjusted EBITDA, despite industry challenges, particularly in government contracts.
In summary, Alithya Group’s earnings call reveals a quarter of significant achievements and challenges. While the company recorded strong EBITDA margins and bookings, issues in revenue streams from Canada and lower gross margins in the U.S. and international segments highlight areas for potential improvement. Alithya remains committed to its strategic plan, aiming for continued financial strength and operational efficiency.
