Full Transcript: Alithya Group Q1 2027 Earnings Call

Alithya Group (TSX: ALYA ) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

Access the full call at Summary Alithya Group has restructured its reporting segments into Enterprise Transformation and Industry Services and Solutions to better align with its strategic focus on high-value integration services. 4%, driven by longer client decision cycles and utilization issues. The company initiated a strategic review to explore options like mergers, privatization, or continued operation as a public entity, citing undervaluation by the public market. S.

results. Management remains optimistic about demand in enterprise applications, AI enablement, and new client acquisitions, despite current market headwinds and longer deal cycles. Full Transcript Paul Raymond, Board Member Thank you, Dominic, and good morning everyone. Bonjour and thank you for joining us today.

I have three things I'd like to highlight today, so first I would like to step back and provide some context around where Alithya Group stands today. Over the last several years we've fundamentally transformed Alithya Group. We have strengthened our industry focus, built significant partnerships with industry-leading enterprise partners and hyperscalers. We have expanded our digital transformation capabilities, built differentiated expertise in enterprise applications, cloud, data and AI, enhanced our smartshore delivery model, and significantly improved the breadth of our service portfolio.

The business we operate today is very different from the company we were several years ago, and we need to remember that one quarter cannot capture that. In line with these changes, and to reflect the transformation of Alithya Group towards higher value integration services, we've made a change to our reporting segments. These new segments provide greater visibility into our strategic growth areas, which will help investors understand the evolution of our portfolio and more accurately reflect where we are creating value for our clients and how we operate. Pierre and Bernard will provide further details on our new reporting segments shortly.

The Q1 results: While the first quarter results were softer than expected due to longer client decision-making and conversion cycles, our pipeline quality remains healthy and late-stage opportunities continue to build. Our challenge today is not a lack of opportunity, it is converting those opportunities more quickly. And finally, three: the strategic review launched by the Board this past July 27th. The Board initiated this review from a position of confidence in our strategy and in the business we have built.

Our view is that the transformation accomplished over recent years has created a stronger and more valuable company. The Board concluded that the current public market valuations may not fully reflect the intrinsic value of the company, nor adequately support its next phase of growth. The review will evaluate a broad range of alternatives including, but not limited to, a merger or other business combination, a privatization, a sale of the company, a recapitalization, strategic investment or partnerships, or continuing to operate as a publicly listed company. The company has engaged Scotiabank as its financial advisor for the strategic review process.

As you would expect, we will not comment on specific parties, alternatives or process developments, but what I can tell you is that our client commitments are unchanged and our team remains focused on quality delivery. Management is fully engaged in running the business and executing our strategy. As we proceed with the review, we enter this phase from a position of strength. Demand for enterprise applications, digital transformation, AI enablement and modernization remains strong.

We have a robust recurring client base, healthy pipeline, numerous new logos every year, and a business portfolio significantly stronger than it was just a few years ago, and we intend on continuing to grow this business. I will now turn it over to Pierre for the financial highlights. Pierre Blanchette, Chief Financial Officer Thank you, Paul, and good morning everyone. Before discussing the results, I want to provide more details on how we are now reporting our segment information as of April 1, 2026.

Following the integration of a recent business acquisition and a business divestiture, we began reporting our financial results under a new segment structure, to better refine our operational structure and how management assesses performance and allocates resources. We now have two reportable segments based on areas of service: Enterprise Transformation and Industry Services and Solutions. The first one, Enterprise Transformation, provides consulting, implementation, integration and managed services for leading enterprise platforms including Microsoft, Oracle and Salesforce. Services span ERP, EPM, CRM, HCM, SCM and AI-enabled business transformation.

Our second segment, Industry Services and Solutions, helps organizations address industry-specific business challenges and achieve broader business transformation through AI, cloud and digital innovation. We combine sector expertise with strategic consulting, advisory services, build, and hyperscaler cloud migration across AWS and Microsoft Azure. Alithya Group guides clients from strategy and planning through implementation, organizational change and sustained value realization. Comparative figures include a third segment reflecting the results of Datum, which was sold on March 31, 2026 as part of the Datum transaction.

4% year over year. 4% of revenues generated from clients we served in the same quarter last year, and we signed 37 new clients in the quarter. 1% last year. The decrease reflects lower utilization rates resulting from deal signatures taking longer than expected, lower tax credits and salary increases that came into effect at the beginning of this fiscal year.

9% year over year. The decrease reflects certain clients' projects reaching maturity and lower billable hours, partially offset by a full quarter of... Gross margin as a percentage of revenue decreased, mainly due to lower utilization caused by delays in new project starts and salary increases. 6% year over year, reflecting certain clients' projects reaching maturity and reduced revenue from government contracts and the financial services sector in Quebec.

Gross margin as a percentage of revenues decreased mainly due to lower utilization, tax credits and salary increases. 2 million of revenue decline. 5% year over year, primarily driven by lower variable compensation, professional fees, share-based compensation and recruitment and training costs. Savings from the Datum divestiture were partially offset by a full quarter of...

6% for the same period last year. 4% last year. The decrease reflects the lower revenue and gross margin described earlier, partially offset by lower SG&A. 2 million, or nil per share in the same period last year.

The variance was driven mainly by decreased gross margin and a lower income tax recovery, partially offset by lower SG&A, acquisition and integration costs, amortization, and a foreign exchange gain. 07 per share in the prior year, a decrease of 56%. 3 million of unfavorable working capital changes tied to timing of payments collection and lower revenue. 9 times, remaining in a comfortable position overall.

Lower revenue volume and reduced utilization impacted the profitability in the quarter, partially offset by lower SG&A. We remain focused on aligning our cost structure with the current revenue level while preserving our capacity to invest. I will now turn things over to Bernard for our operational highlights. Bernard Dockrill, Senior Vice President & Chief Operating Officer Good morning to everyone with us today.

We'd like to begin by thanking the Alithya Group team for the continued commitment and contribution towards achieving our strategic objectives. From an operating perspective, the quarter showed pressure on conversion timing but also clear evidence that our portfolio is shifting toward the areas where we believe Alithya Group can create stronger, more scalable value through enterprise transformation, AI-enabled services and industry-led solutions, and more value-based commercial models. 85 for the quarter. 92 for the quarter.

88. 96. While these levels reflect the longer decision cycles we are seeing in the market, we believe the composition of bookings is important. Activity continues to be supported by new business, new clients, and opportunities aligned with their strategic growth priorities.

We achieved higher bookings in the commercial and professional services sector this quarter, while bookings in the manufacturing sector were lower as we continue to see contracts taking longer to sign due to the macroeconomic environment. Also of note, over 70% of our total first quarter bookings were related to new business, including 28% from new customers. In addition, a higher proportion of bookings were associated with fixed price or fixed fee contracts compared with prior quarters, reflecting our continued evolution toward commercial models that better capture the value of AI enablement, repeatable delivery assets, and smartshoring. 99 for the quarter.

This performance reinforces the strategic importance of the segment, where demand is tied to enterprise applications, complex transformation programs, and AI-enabled modernization initiatives. S. dollar contract with a global engineering construction leader. Alithya Group is helping the client modernize its global workforce operations through a transformative Oracle HCM initiative designed to create a more connected, efficient, and scalable employee experience while supporting the evolving needs of its global business.

This win illustrates the impact of our recent investment in the construction and engineering sector together with the capabilities added to the Everidge acquisition last year. Turning to our Microsoft practice, we saw continued momentum in our AI and Copilot adoption practice. We supported the deployment of more than 300,000 Microsoft 365 Copilot licenses globally, influenced deployment decisions well beyond the licenses we directly manage. Through these engagements, Alithya Group is helping clients improve access to information, reduce time spent on routine tasks, and achieve measurable gains in productivity and service delivery.

We're also seeing demand evolve from initial pilots to enterprise-scale adoption. In parallel, Alithya Group is developing custom, industry-specific AI agents built on our clients’ data; we believe the greatest opportunities for value creation lie Our Salesforce practice had a softer quarter versus prior quarters in terms of revenue as several projects were completed and new project starts were delayed. We do not believe this reflects a longer-term trend, as the pipeline of qualified opportunities continues to increase, including new opportunities resulting from cross-selling into our existing client base.

78 when adjusting for the revenues from the two long-term contracts. While the segment was more affected by delayed starts and market-specific headwinds, we remain disciplined in the segment and are prioritizing opportunities where our industry expertise, proprietary IP, and delivery qualifications support sustainable margins. Within the nuclear energy sector, demand remains steady and we're taking on more significant projects with existing clients. We continued investing in a proprietary work management analytics tool, Casi, adding an agentic AI layer enabling users to retrieve critical data in natural language and make decisions faster.

Within financial services and insurance, we continue to experience headwinds, particularly in the Quebec market, as engagements within several of our clients came to completion and new engagements are taking longer to start. However, our client relationships remain strong with renewals secured across key accounts, and we believe the sector can return to growth as budgets normalize. Finally, our AWS practice gained traction as we invested in deepening the partnership, building on the AWS migration and modernization competency we achieved earlier this year. S.

during the quarter. We remain committed to our partnership with AWS and continue to scale our cloud and data capabilities across our Industry Services and Solutions segment. Overall, the quarter reflected the macro market conditions where decisions are taking longer, alongside progress in the areas where we have chosen to invest. While parts of our business remain in transition, we are encouraged by the momentum we are building, our industry-led offerings, AI capabilities, enterprise application expertise, and our ability to win new clients.

I will now turn it back to Paul for closing comments. Paul Raymond, Board Member Thank you, Bernard. So before we open the line, I want to step back one last time because a single quarter can overshadow what this company has actually become. As you can see in our new reporting segments, we've transformed the company over the past few years.

Today we're a leading North American digital transformation platform operating at scale with deep expertise in the complex, highly regulated industries where precision and trust matter most: financial services, health care, regulated manufacturing, the public sector, and energy. Furthermore, we are encouraged by the rapidly growing number of AI enablement projects we are undertaking and the growing percentage of fixed price projects in our bookings. We interpret these developments as a precursor to more AI-driven, outcomes-based projects in our industry.

As procurement organizations slowly adapt, what will not change is our focus on our clients and on our people and on the business we run every day. And I would like to take this opportunity to thank them for their trust and commitment. And with that, we will now open the lines for questions. OPERATOR Dominick.

Ladies and gentlemen, we will now begin the question-and-answer period. As discussed earlier, 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.

When it's your turn to speak, your line will be unlocked and you will hear a notification. At that point, please unmute yourself by pressing star followed by six. First question will be from Jerome at Desjardins Capital Markets. You can go, Jerome.

Jerome, Analyst at Desjardins Capital Markets Thanks for taking my questions. First one I have is I'm wondering whether there were some one-timers in the quarter that would explain the performance, something that may not recur in the coming quarters. Pierre Blanchette, Chief Financial Officer Thanks for the question, Jerome. The biggest thing was utilization.

As we've mentioned, we are waiting for some larger projects to start and of course we have highly qualified people we want to hang on to.