Q4 2021 Alithya Group Inc Earnings Call
Standard.
Good morning, ladies and gentlemen.
Welcome to the Lithia Q4, and fiscal 2021 results conference call.
I would now like to turn the meeting over to original Andrews. Please go ahead Ms Andrews.
Thank.
Chris Good morning, everyone and thank you for joining us for <unk> fourth quarter and fiscal 2021 results conference call. The press release and MD&A with complete financial statements and related notes were issued earlier today and are posted on our website.
A webcast presentation in fiscal 2021 annual review can also be found on our website.
In the investors section presenting this morning are Paul Raymond Alicia its president and Chief Executive Officer, and Claude Thibault Chief Financial Officer. Following their comments, we will open the call for questions before we begin I would like to specify that this conference call is intended for the financial community.
Also please be advised.
This call will contain statements that are forward looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated.
Please refer to the cautionary note on our presentation and to the forward looking statements and the risks and uncertainties sections of our MD&A available on our website.
Tito let let me remind you that all figures expressed on today's call are in Canadian dollars, unless otherwise stated and be aware that we will refer to certain indicators that are non <unk> measures. Please refer to the cautionary note on our presentation and to the non <unk> measures section of our MD&A for more details.
Now I would like to turn the call over to Paul Raymond.
Thank you Rachel and good morning, everyone rule.
I'm very happy to be with you here today to share our Q4 results Phil.
Fiscal 2021 was anything but normal we remain focused on being there for our people for our clients building the necessary Trust.
For more let keeps the lithia top of mind when complex mission critical work needs to get done.
Throughout the year, we made decisions and investments with a view that Alicia would emerge from the pandemic stronger and better positioned than ever to successfully pursue our growth strategy our fourth quarter results prove this right.
Before.
Before providing some color on the quarter I want to take a minute to review our latest acquisition <unk> was this past April our 3 D and explain the transformational impact that this deal will have on our lithia for at least the next 10 years.
Because of the RSP transaction, we could say that we are starting our 'twenty 'twenty 2.
The year that began this past April with the wind in our backs. Indeed, this acquisition and its associated long term contracts was a milestone deal for many reasons I'd like to highlight 4 of those reasons for you now.
First.
This transformational acquisition added 210 year contracts.
Tracts that combined will add approximately $600 million in total guaranteed revenue over the next 10 years starting on April 1.
Of this year.
Once we are done with the expected ramp up period of these contracts will be generating significant high value recurring revenue for a very.
Fiscal line.
Second with nearly 600, new professionals coming from our 3 D. We now have more than 3000 billable professionals in an industry where qualified personnel are scars. This is also very positive.
The 2 historic contracts with Minerva remember this is the company results.
<unk> from the merger of the catch that in SSG and are now the largest mutual insurance company in Canada, and Quebec, All our Canadian.
Telecommunications and media leader.
Strengthen our presence in both of those industries.
These same industries are going through a significant digital transformation phases and will require a trusted partner more than.
Lastly, the transaction was immediately cash flow positive, reducing <unk> debt to adjusted EBITDA ratio and pointing to further deleveraging of our balance sheet.
So before I move on to discuss our fourth quarter results I can already tell you that our <unk> integration within the <unk> current structure is progressing well.
And allowing for notable short and mid term synergies, we are repeating our successful formula of buying quality companies and accelerating their growth.
Now, let's talk about our fourth quarter performance.
Last year at this time, we were preparing for a period of great uncertainty, but 1 in which the underlying demand for digital transformation.
<unk> services was accelerating.
Today I am pleased to report the great work that our teams have been doing that led to these quarterly results by executing our strategic plan with discipline.
Here are 3 examples that illustrate what I'm talking about.
Our revenues increased 6.5%.
To a record $78 million in the quarter the percentage increase would have been 7.7% assuming a constant us dollar exchange rate. This is strong organic growth in our industry, where most players are showing year over year declines.
Q4 bookings reached $92.8 million, which translate.
Into a book to Bill ratio of 1.2 or 3 this reflects once again, our well established reputation as a trusted advisor in digital transformation, we started disclosing bookings and book to Bill ratios in the first quarter of fiscal 2021 to offer insight into the trends and visibility about our new projects and volume.
Volume of new business over time.
In mind that these numbers do not include the <unk> acquisition and associated long term contracts as the transaction closed after the end of fiscal 2021, our 3 these numbers will start being accounted for in our first quarter of 2022.
Thirdly as.
Our adjusted EBIT increased 61, 8% from last year, as we continue to benefit from organic growth or acquisitions and operational synergies quarter over quarter.
Let's take a closer look at what is happening in our practices and geographies.
In the United States, we are very happy to see.
<unk> quarterly growth of our revenues from $27.6 million to $29.7 million. Despite a year over year decline, we can see that <unk> U S activities are recovering from the pandemic as we see traction in specific industries like food and beverage healthcare finance and retail.
Sequential we're pleased to see that our Microsoft and Oracle enterprise solution implementations are giving our existing and new customers. The digital tools that they need to become more agile productive and innovative in order to sustain their vision in a fast changing highly competitive post COVID-19 market.
Now turning to Europe, we.
Also see stabilization of their activities with the addition of new major clients, including in the aerospace industry.
Such as Airbus.
On a sequential basis revenues in Europe were essentially flat with a decrease of $100000.
In Canada, we saw fourth quarter organic growth both.
We also have a year and sequentially, we see solid momentum both among our private sector and public sector clients.
More specifically in Canada, our teams who service our government clients performed very well as an example, we won a significant contract worth $12.4 million to assist.
Just the Quebec government Ministry acre that government Ministry, sorry, and providing project management services for their internal initiatives. This is 1 of the largest government contracts Lithia has been awarded in Quebec in recent years. This new contract combined with our recently acquired status as a preferred service provider or cloud solutions to Quebec public organization.
Both yield is a clear demonstration of the trust we have gained with our public sector clients, that's the Olympia way.
In the energy sector. We were also awarded a very significant contract. This past quarter. It consists of a multi year agreement with a 10 year $10 million initial value for plant level.
<unk> operational technology cyber security consulting services in the North American manufacturing and utilities sector.
Excuse me.
<unk> portfolio includes decades of work in regulatory compliance, including assisting other top tier customers to identify and address cyber security challenges and to implement strategies.
To improve system resilience.
This brings me to highlight that 1 of our areas of focus is to strengthen our existing practices..1 of the best examples of this is our digital solution Center.
I spoke to you about it in my opening remarks last quarter, but I would like to highlight that with the acquisition of <unk> our.
<unk> solution Center now comprises more than 500 professionals specializing in the transformation and modernization of custom systems geared towards new technologies to meet today's most pressing digital transformation needs.
We are also strength strengthening our expertise in key practice areas such.
As a business intelligence agility management infrastructure operational security cloud services, Ashish learning Iot just to name a few.
In the past quarters, you have also seen our cross selling strategy pay off.
We have won multiple cross geography, and cross industry enterprise projects.
<unk> as a result of these efforts on leveraging past acquisitions to accelerate organic growth.
Before I pass it over to quote I'd like to discuss 2 other items diversification and then M&A.
As I indicated before our exposure to our top client has been significantly reduced in the past 2 years even.
Even though we continue as their strategic partner as evidenced by organic growth of 17% and Canada, while reducing our client concentration.
We are managing a growing business and thanks to the diversification in the range of high value services offered by Alicia we will prioritize and continue to strength our.
Our industry and geographic presence, our expertise our integrated services offering and our positioning in the value chain.
Doing so will allow us to pursue our development and market segments experiencing rapid growth diversification of our services our customers and our regional presence has also embolden the leap.
EPS the solidly face this crisis.
Over the next few years growth will continue to be driven by existing and new clients through value added services by investing in our talent and with greater scale from complementary and transformational acquisitions.
As we witnessed during the past year Alicia is built on strong.
Stations, and we are ready to face potential headwinds to come.
As I've mentioned before acquisitions remain an important component of our long term growth strategy, considering the scale of our existing platform.
Acquisitions were integrated quickly and smoothly and allowed for immediate focus on cross selling.
<unk> accelerating growth and graduate efficiencies.
I'll now ask flow to go over some of the financial highlights both.
Thank you Paul and good morning.
Let's review certain Q4 highlights.
As Paul already mentioned revenues in the fourth quarter increased 6.5% to $78 million.
As compared to $73.2 million for the same quarter last year.
The percentage increase would have been 7.7%.
<unk> at constant U S dollar exchange rate.
On a sequential basis. We are also reporting a notable increase moving from $76 million.
Third quarter.
2 again $78 million in the fourth quarter.
More specifically.
<unk> revenues in Canada increased by $7.2 million or.
Or 19%.
To $45.4 million.
General organic growth in most areas.
And the growth at certain key clients accounted for the bulk of the increase in revenues.
The acquisition of Mosquito on February 1 of last year.
Only accounts for additional revenues of $1.2 million in the quarter.
Meaning that the remaining $6 million after a year.
Year of Covid is.
Is true organic growth.
Looking at the U S and Europe.
As Paul also mentioned, we are seeing a notable recovery.
Yes.
In the U S. The year over year decrease is almost entirely explained by the negative currency variation.
In other words when expressed in U installers, our American activities are basically stable year over year.
However, those revenues are increasing on a sequential basis by $2.1 million.
From $27.6 million in the third quarter of this year and.
Despite an unfavorable currency impact.
Zero $9 million.
And the ongoing negative impacts.
The COVID-19 pandemic.
Conversely in Europe.
Despite a year over year decrease because of Covid impacts revenues in Q4.
And that sequentially stable.
And in line with the third quarter pointing to some stabilization in that geography.
Gross margin increased by $2.6 million or 12% to.
To $23.5 million.
During the fourth quarter.
Yeah.
Gross.
There are tens of percentage of revenues increased to 31% during the same period.
The percentage increase was driven primarily by increased gross margin from Canada and the U S.
Due in part to improving productivity rates.
And the changing mix of revenues.
As well.
Margin non governmental wage subsidies in Canada, and the U S, which were partially offset by the negative impacts.
The U S dollar exchange rate.
And the impact of increased cost on 1 large project.
Okay.
SG&A expenses totaled $21.7 million.
<unk> is an increase of zero point $2 million or 0.9%.
From $21.5 million last year.
This small increase was primarily driven by increases in Canada.
Including 0.3 million relating to the Kita acquisition.
Largely.
Actually offset by decreases in the U S and price.
Adjusted EBITDA amounted to $3.3 million an increase.
Greece of 61, 8% compared to the same quarter last year.
As explained above this variation is attributable to higher revenues and gross margin.
And largely stable SG&A expenses on a consolidated basis.
As in previous quarters, our accounting operating loss of $2.6 million.
Must be viewed against our noncash depreciation and amortization expense of $3.5 million.
Before which.
We are actually reporting a positive operating profit.
Revenues for the year amounted to $287.6 million and.
An increase of $8.6 million compared to revenues of $279 million last year.
When looking at the whole.
All year.
<unk> revenues were obviously impacted by Covid.
<unk> discussed, especially in the U S.
On the other hand fiscal 2021 was the first year with a full 12 months of our 3 acquisitions of the previous year.
Namely metric <unk>.
<unk> and mosquito.
That obviously means more revenues, but what our financial statements don't tell is the organic growth within these acquisition.
Which was a remarkable 28%.
Those are great examples of our M&A approach to find successful niche companies and give them the support.
Schools and the critical mass to accelerate their success.
Now turning to our liquidity and financial position.
Net cash flow used in operating activities amounted to $2.2 million in the fourth quarter.
Including negative working capital variations of $3 million.
Meaning that P&L elements and themselves generated positive cash flow in the quarter.
Those negative working capital variations occurred.
Part in the wake of our notable sequential growth in revenues.
We ended the quarter again and solid financial position.
At the end of March we had $21.1 million of net bank borrowings.
Which is net of our $10 million in cash and restricted cash.
It is an improvement of $5.8 million compared to a net bank debt of $26.9 million at the end of March 2020.
Yeah.
In closing a quick word on the paycheck protection program in the United States.
As you may have seen in our financial statements out of the $7.9 million in PPP loans, which was received last year.
$1.9 million have been forgiven and recognized in our P&L.
Regarding the balance of approximately $6 million.
While we believe we fully complied with all of these programs forgiveness guidelines and conditions.
Have you has the money the PPP money for qualifying expenses, we are waiting to receive formal forgiveness.
Chris.
Recognizing it through our P&L.
Overall, as we appear to be emerging from the more in certain phases of the pandemic. We are in good financial position to.
To keep pursuing our business plan and objectives with renewed momentum.
Turning back to the book.
Hello.
So to summarize 1 we have just had a record quarter on the top line with solid organic growth and improve margins and based on Gartner. His latest projections, we remain focused on the fastest growing sectors of our industry.
Our U S operations are also growing and improving.
Thank you <unk> and.
And 3 our integration of <unk> has started on April 1.2021 and will be included in our fiscal 2022 year starting Q1.
So quota and I will now be pleased to answer any questions. You may have and I'll turn it back to you Chris.
Thank you.
Ladies and gentlemen in order to ask a question for Star then the number 1 on your telephone keypad.
We will follow up with just a moment to compile the Q&A roster.
Your first question comes from Paul steep.
Of Scotia.
Moving cyclical Canada.
Great. Good morning, Hey, Paul could you talk just to go back to our 3 day for a second can you remind us of the outlook on the ramp up period for the incremental $36 million in new contracts the timing of that and then maybe we can get close to jump in and just talk about.
<unk> had the synergy plan and the ramp up there that we should think about for our 3 deal for the course of the next few years.
Sure. Thanks, Matt Thanks, Paul.
So when we when we announced that we said it would take 12 to 24 months to ramp up to get the 60 million.
Combined the existing plus the new 36.
However.
Guarantee so we have that we have mechanisms in the contract to make sure that if we don't get to the minimums. They get added to the subsequent year and so on so it's none of its lost in the total of $600 million in guarantee.
Net.
As you can imagine we're working very hard at the accelerating net ramp up and we're very happy where we're at so far.
Maybe Paul if I may so that means the contractual commitment applies to the first year as well.
So there aren't Mccann isms too.
2 accounts, where that ramp up period, but.
When you divide the $600 million by 10 years, the individual year target is the same for all years.
So it's not loss just to be clear on that point.
Does that answer your question Paul.
That helps on the first part I guess.
The second part is just thinking about the synergies and respecting that we have normal times, you've laid out your normal integration plan I just want to get you to just re clarify how you're thinking about that in this.
Maybe different environment that we're all operating in temporarily and how you'd maybe see those synergies.
Ramping and then I've got 1 quick follow up to.
To go back to Q4.
Yes, so usually our plan is always to complete our integrations within 12 months and in this case. It started on the first day of a new fiscal year. So the plan is to have it completed before the end of the fiscal year.
Okay.
And as you can imagine given the size of the complexities are more around integrating back office systems, and so on and so forth, but from a business integration It's day 1 day.
Day, 1 these people on our email and our sales structure and our delivery structure, we're selling together, we're going after business together everybody has been <unk>.
<unk>, so that was day, 1 but some of the back office stuff takes more time because of the systems integration.
Great and then just on the new bookings that you secured in the quarter again, maybe talk to us a little bit about what you've seen in terms of either mix of service offerings service line, whether it's.
Oracle, Microsoft or digital transformation.
What the complexion of that just sort of looks like it if it's changed.
Given the where we're at in the current world. Thanks.
Excellent. Thank you. Thank you for the question Paul we're actually seeing very strong demand across all of our all of our practices.
<unk> higher value practices.
<unk>.
As you know over the past 3 years, we've transformed the business significantly and were seeing the reflection of that in our gross margins in the quarter were back up above 30% and thats. Despite the fact, as we mentioned that our U S business isn't back to where it was pre COVID-19 yet they are.
We're getting there that should we loved the trend we're seeing in the U S.
So when the when our U S operations are back to where they were pre COVID-19.
It's very positive.
Indicator of the future a trend that we like.
Our bookings like I said were solid across the board.
We're also a lot more selective on the.
A business that we go after because of the strong demand. So we can focus on those value added services that digital transformation cloud ERP, it's really been across the across the board.
And in all our geographies as well.
Great. Thanks very much.
If you if you go.
Type of day.
<unk> latest the latest numbers that Paul maybe maybe a segue. If you look at we really focus on the enterprise systems and the services category. If you look at the Gartner chart.
That's where they are predicting the most significant growth for the next 2 years and even though last year. They said the market actually shrunk.
We generated.
Organic growth during that period year over year, which is which is kind of indicative of where our business is right now.
Again, if he would like to ask a question.
Star then the number 1 on your telephone keypad.
Next question comes from Kevin Krishna.
Back of the genre of Canada. Your line is open.
Hey, there good morning, gentlemen question free maybe leading off with the the focus that you have on sort of higher growth areas of it spending you had a really good. Thank you called out organic growth of 17% in Canada in the quarter can you talk about sort of what drove.
That in our in the disclosure that you talk about as a benefit from certain clients in the quarter can you just unpack that growth there in the quarter and then how do we think about you know rough rough guideline on where do you see organic growth.
Now over the course of this here in Canada, just given you know.
Any focus on some of the higher growth higher value areas of it spending thanks.
Hey, good morning, Kevin. Thank you for the question.
So.
I'll take the 2 questions 1 was on the kind of the bookings more more.
More qualitative on the bookings and then on the organic growth.
So on the bookings as I was saying.
Several very large contracts, it's really across the board.
Our client concentration as I was saying earlier is actually going down. So if you think of our of our let's say our top 8 customers that 3 or 4 years ago was 75.
Europe core revenues is now closer to 30% of our revenue so very good diversification.
Very good.
Bookings in all of our higher value practices and Thats why were seeing it reflected in our gross margins.
And given most of the growth has been coming from Canada, you can say that the.
Percentage the most change in the business has been happening in Canada in terms of margin profile, which is again very positive based on our historical.
And the historical nature of our relationships.
On the organic growth front, if you look back the past 4 quarters, it's been going up gradually.
Every quarter and.
The low looking as had been very strong. So we don't see any reason why that should slow down we like where we're at we think.
A lot of people in Germany during the pandemic cut themselves to greatness, we invested in growth and we're seeing it paying off and we like our perspectives for next year.
Especially given our 3 day.
<unk> hit our Q1 numbers, which they werent in last year. So again, we have growth coming from that and from the new <unk>. The new the 2 new contracts that we signed.
Okay. Thanks for that Paul So it sounds like you know you've got a lot of lot of different things going in the business arent thinking like you mentioned the.
I'm wondering if you can just comment on you know what could what day.
What are you cautious what what are you looking at in terms of your cautious outlook in the press release, you mentioned, you're still very cautious on the outlet. So I'm just wondering.
What are the things you are looking for aware what areas of potential weakness.
Is that something on the revenue side or are you talking about.
Potentially maybe on the Opex side given.
It's hard to to not hear stories of did that.
Demand for Tech talent being strong and you know I'm wondering you know.
When you talk about that cautious outlook on the guidance that what you're referring to.
Yeah. Thanks, Kevin It's a great question. There are 2 things 1 is that I'm very cautious about the macro level, what's going to happen with the pandemic.
We're seeing you know even in the U K, where they were ahead of everybody on the on the vaccinations were seeing an uptick in new cases with any with the younger younger people because of the value.
Various.
Nobody really knows at this point the long term effects.
The vaccine or the variance so I'm kind of we're keeping a close eye on that 1 the return to normal as I would call it or a post COVID-19 is a very variable speed.
Variable.
Speed by by country and by region. So were falling all of that very closely even though we've been able to manage around that it's been.
We have to be very sensitive to that I think is as a company and as a country.
It's it's a it's out there and we just have to keep track of.
Yeah.
We know how to manage it in that area, but it's still keep that in the back of my mind and the other 1 is our people.
So we've been hiring.
Like Crazy and we've been able to attract people because of the type of projects that we do if you remember from past calls 1 of our strategies as.
Shifting to higher value projects and businesses.
Is to attract and retain the best people. So we've been able to do it but if you look at our growth and everything that we're seeing in the market and the new initiatives finding people I think is gonna be a an industry wide challenge in the coming in the coming months. So.
As part of like where we're at but keep it or keeping an eye on it.
Okay. So on that on that point, then how do we think about them.
Are your current sort of opex at low levels. What are you baking in in terms of your views on where where costs could go if you had to remain competitive.
With that with that great talent base that you have.
So that's a good follow up Kevin in that you know we've completed many acquisitions as Covid was saying you know our SG&A has gone up because of these acquisitions in the past year, we were much more focused on.
On the generating.
Gross.
Dan than cutting costs. So as these integrations take place our SG&A is going to go down over time gradually our 3 D. Over the next 12 months is also going to go down significantly from an SG&A perspective.
So we know we're gonna be freeing up some.
Some room.
<unk> work there.
To keep our people happy and keep recruiting and keep keep growing so we see opportunities there.
Okay, right and I guess I'm, not saying you did allude to in your in your remarks that utilization rates are ticking higher D. Do you ever provide commentary on what those utilization rates are.
Maybe not specific number but just broadly were where they are now versus maybe last quarter.
We don't but you can you can kind of.
The duck because it varies tremendously by business, Kevin It's actually a very good question. So in some of our businesses. So for example on the ERP.
Limitation side, our gross margins are very high because it's a project there is a start at the beginning we control who we put on it that people come from various different locations that work on several projects at the same time so.
When you look at our gross margins in our ERP business, it's tied directly.
Productivity. So how many hours. These people are bidding on those projects go straight to the bottom line is that cost doesn't change it in other areas, where we are at a time and materials basis, while the utilization there is more important but I think our gross margin is really the bigger the bigger item that we track because gross.
Margins basically means that we're doing a better job on productivity, we're working on better higher value projects, and that's really where we're pushing the business because we know as we grow that the difference is going to translate to the bottom line would be with the scale that we're getting.
Okay, great Yeah, that's very helpful.
It's pretty much for all the answers I'll pass the line.
Thank you Kevin.
Your next question comes from Gavin Fairweather of core Mark Canada, Yeah.
Your line is open.
Oh here that combined.
Hey, good morning Devin.
I just had a follow on absolutely Kevin.
Thanks for kind of questioning around utilization and it's good to hear some of your commentary of the green shoots in the momentum that's kind of returning to the U S business.
I'm not sure Paul or cloud if you could just comment on you know how how much slack you feel like is in that business I guess I'm trying to think about it.
Moving back towards your targets.
And whether that would drive you know kind of.
Quarterly billings up into the 35.49 range do you think that that's reasonable given the given the businesses and the work force that you have there.
So maybe I'll give you a bit more detail that Gavin. Thank you for the question. If you look at the utilization or the productivity.
As we call it and you go back and look at last year.
The U S and I think that's where the biggest the biggest impact is.
When the pandemic hit and everything stopped everywhere a lot of companies. We're letting go a lot of people.
We took a different.
Current route we applied for and received a PPP program in the U S.
As a bit of a CW S. In Canada for the same thing and we use that to hang onto our people. It did not compensate for the decrease in productivity by any stretch of imagination, but it was it was there to.
Activity purpose and we.
Leveraged it so we hung on to the high quality people that we know that we're that we're needing now and we're seeing it with the organic growth of the business is picking up so instead of fighting to hire people, we already have them. So so yes, we're hiring we're adding new people for new project, but a lot of.
Servicing underlying business, we already have the expertise. So if you go back and look at our gross margins in the U S year over year, you'll see a big decrease there it's ramping back up so 1 way of looking at it is every point of gross margin that we added in the U S go straight to the bottom line because we already.
Do you have the people and it's increasing the productivity of those people for the projects that we have so so that's why we're we're happy with what we're seeing from a trending perspective in the U S and we know that.
As I said every every additional point of gross margin that we get there is a day.
Correct.
Trickles.
The exit of the bottom line, they're pretty fast so we see that as a positive.
Yeah, that's great and then maybe for cloud you know I think that you were hoping to have you know kind of news on the PPP loan forgiveness I guess by the end of your fiscal year or at your reported Q4 can.
Down behind us on the timing, there and any change to kind of your reading the tea leaves there.
Thank you.
I wish I would know in terms of timing.
Everybody, we talk to be lawyers, who are familiar with this.
There is some consultants that are.
You just from coming expert to that or even our own bank in the U S that deals with the SBA in terms of processing the files they do not know.
For the amounts for the loans, which are above $2 million, which were singled out.
Having to go through more.
Scrutiny in diligence and audit we do not know we just don't know the day volume moving there.
It appears to be very high.
We're basically waiting.
But I would reiterate that as far as we know and again talking to all these people I just.
<unk> mentioned the day, we arent exactly.
Actually the kind of companies that the SBA wanted to support.
Through last year.
And we did exactly what they wanted us to do keep the people in our.
On our payroll through the.
Beyond certain phases.
So.
So I guess, it's a matter of time, but we don't know the answer to that.
Yeah.
Okay and then just lastly for me I think I caught in your prepared remarks, you were talking about a fixed price project in Canada, where where maybe there is a bit of a gross margin hit this quarter I think you called it out in Q3, 2 can you just remind us kind of won not propping up and do you feel like it.
It doesn't sound like it.
The material overall, but do you feel like that that project is now kind of in hand and.
And price it can be kind of breakeven from a gross profit line going forward.
Yeah, Thanks, Kevin I'll, let <unk> comment on the financials of it but yes. The project is under control and know what's not over it should be over soon.
So.
Ill investing in that project. So again, our margins would have been even higher without that.
And again I just wanted to remind you that we're investing in it because we're getting some IP out of it and IP.
IP that we're going to be reselling in marketing.
With the help of the customers. So we see it as a <unk>.
So we're staying in the long term and are ready to take a short term hit on it.
Yes.
So, yes, there could be impacts over the coming quarters with that continuing a project we're negotiating with the clients.
As we as Paul mentioned, we saw that as an investment in.
Positive our IP. That's the reason we got into that project in the first place, but it should not have material impacts going forward.
Okay. That's it for me thanks, so much.
Thanks, Kevin.
Okay.
Okay.
We have time for a couple of more questions operator, thank you.
Thank you.
Your next question comes from Nick Agostino, a French Bank Securities Canada.
Yes. Thank you good morning, so just focusing some granularity or.
Please go on your bookings number.
You know what.
I'm not sure I think you guys said that you started providing bookings really throughout all of fiscal 2021, and apologies I haven't seen but can you disclose what the bookings growth was like if we compare fiscal.
Color Q4, 2021 versus fiscal Q4, 2020, just to get a sense of how your book is starting to grow and then also when I look at I.
I guess the seasonality on your bookings.
If we talk in terms of calendar.
This this quarter.
The $92.3 being your calendar Q1 equivalent you also had a strong calendar Q4.
But we see when we think about the market in general we see stronger demand in calendar Q2, and Q4 I'm. Just wondering are you seeing that type of trend.
Quarterly as we sit here.
Largely through your your your next quarter itself in other words.
Is your bookings following the overall.
Market on a calendar basis or if the answer is no is that reason why you kind of provide a little bit of a cough.
Trendy commentary earlier on when it comes to.
I guess, the pandemic and the macro level stuff.
Yes. Thanks, Thanks for the question Nick.
We did not reported bookings in 2020 for the simple reason that it was.
It was prior to us rolling out.
Our new Microsoft CRM platform. So we had multiple different systems from different companies tracking bookings and we did not feel comfortable of sharing a number that we would have to change and modify in the future and qualifying whatever so so this was the first year that we actually reported book.
Bookings every quarter.
[noise] scenarios ruptured and consistent fashion so.
I wish I could give you more color on that but but I can't.
However, I know that you'll be able to compare Q1 next year with you on that.
That's my first comment the second is we don't we report our bookings quarterly, but really we look at it on an annual basis because.
It's.
Depending on the industry, depending on especially last year with the pandemic. It was all over the place, but government government contracts tend to come in more in the March April timeframe because of their fiscal year end net new fiscal year, starting so so we see changes there it varies by.
And as history.
It varies.
Based on what's happening in the general economy last year, a lot of companies, but a lot of stuff on hold so it was kind of interesting that we have this strong of a booking.
Report despite that so we're very happy with the number on that.
<unk> 3 for the year is very impressive.
And thats without as I mentioned without Arthur <unk>. So I can already tell you that Q1 numbers that are going to be very strong and if you just take that 1 so we're very positive.
We're very positive on where the bookings are in my concern really is more of a macro level.
At 1 point, the heck's going to happen with Covid and they if somebody had a crystal ball tell me I'd be very happy.
Okay, and then just 1 other quick follow ups.
Obviously, the bookings number is very much appreciated can you just highlight where the backlog sits overall.
So again, so if you if you look at the bookings over the past year. That's in the backlog. If I include Q1. The backlog is going to be is going to be quite impressive, adding 600 million at least Q1 from the <unk> deal.
But we did have contracts prior to.
To this reporting here. So we'll try to give you more color on the total backlog at the end of Q1, and then Nick I think it's a great question, we'll just have to make sure that the stuff from the previous year's as well is well structured to reported appropriate.
Okay that'd be great. Thank you.
Okay. Thank you.
Okay.
Maybe a last question there Chris.
Your final question comes from Amir is that echelon partners, Canada Youre line is low.
Great. Thanks for taking my questions Congrats on a strong quarter guys.
Alright, Thanks, Mike.
Maybe I'll do a question and a follow up I just wanted to circle back on.
T D.
Can you walk us through <unk>.
EBITDA contribution as you guys like Cramp 60 million net revenues closed you mentioned like a 12 month integration period. So how do we think about the dollar EBITDA number in the second year can you guys like give us a range or refresh.
Refresh on their knees.
Sure. Thanks, Andrew I'll, let that Claude refreshment.
February.
It's a tough 1.
Yeah.
It's a tough questions.
Obviously, we know these numbers are.
<unk>.
The.
My comments on our.
You know 3 acquisitions.
The previous fiscal year.
I mean, the momentum we see that the <unk> playbook and approach to M&A that is working well.
We do not see reasons to.
We have different expectations with with our <unk>, which was a great company to start with great momentum great clients great people.
So the number we disclosed for the trailing 12 months.
When we announced the acquisition that's a baseline.
Your line for US you can be positive on that number because of what I just said.
Historically gross margins are lower than than the lithia, because they're probably their business model is where we were a few years ago.
We are working to change that.
2 different levels.
Again, you can be looking out for that but the baseline will be would be somewhat more.
More conservative in terms of the SG&A again.
Sure.
Yes.
We.
We're keeping some of their.
Sales marketing, where we're really keeping that the best elements they had great.
Great 2 things they were doing over there to back office is a different story, our Oracle, we're using oracle internally as some of you may know.
That's a very solid very complete tool for.
Construct larger organization so over the next 12 months, they're going to be coming over.
<unk> Oracle and <unk>.
So unfortunately I can't remember.
Though the numbers, but we're not we're not disclosing that level of details.
Maybe I can add.
Over on the on the gross.
Much of that comment that the when we say the gross margin this low over there.
But because of the type of business because of the employee split it. So they have a higher percentage of subcontractors versus employees, where the opposite and so.
So we were at the same place they were 5 years ago. So we know how to do that migration going towards.
Awards are permanent that workforce of people that we want to invest in and grow with so that's part of our transition plan over there as well, let's say getting their gross margin is up by transforming the workforce that they have.
Great and my follow up I guess.
Related to that can you sort.
Margin goes through your current staffing levels, and maybe high level utilization rates.
We're seeing a lot of companies have trouble with their talent acquisition with.
With a very tight market, how does that sort of look for you guys.
I'm not sure if you could sort of quantify if it's constraining your sales growth.
That's it for any thanks.
Alright, great great Great question, the hammer on the on the.
The people side I mean, if you just go back a year, we were around 2000 people.
We're over 3000 now so that should give you a pretty good idea not only the people coming in from our 3 D which are about.
600.
But the growth that we're getting with the additional people. So we are hiring significantly.
We are very happy with what's happening in terms of finding people even in challenging times were very successful at finding people and finding the right people and 1 of the reasons.
<unk> for that.
Coming back to your last question.
Is whether we're turning down business I'd say, we're selecting business instead of turning it down you used to be and there is a lot of companies out there that go after anything and everything we have a strategic plan to focus on higher value business, where we can build trust.
<unk> long term relationship with our customers. So we've moved away from a lot of the lower margin stuff sub contracting and so on and so forth that focus on projects and high value projects and Thats why youre seeing our gross margins today in line with the best in class in our industry. I mean, we are above 30% I think.
We can do better.
We're working very hard on that based on our business mix.
So to me, it's not growing at all cost its profitable growth.
And in the right areas, because we want to we want to be at this for a very long time. So we're not looking at the short term quick wins were really looking at the long term.
The good business.
And is that.
That we know is going to help us grow the company and grow a quality company. So so we're not.
We're turning down the business, we don't want I guess, it would be a way of.
Putting it but no. Our recruiting is is going to be a challenge for the whole industry and we think we're doing pretty well.
Okay.
There are no further questions anytime.
Anytime I need something.
We added 1000 people in a year of Admiral at our size, we think it's a good year.
Okay.
And that was today's final question.
I will now return the call to Mr. Wang.
Thank you, Chris and thank you everybody for being with us today.
Very very strong quarter, we're very happy with it.
A safe and happy and enjoyable summer and make sure you take some time off thank you.
This concludes today's conference call. Thank you for your participation you may.
Now disconnect.
Okay.
Okay.
[music].
Non.
[music].
Yes.
[music].