Q3 2024 Alithya Group Inc Earnings Call
www.kinstlinger.com Good morning, ladies and gentlemen. Welcome to Alithya's third quarter fiscal 2024 results conference call. I would now like to turn the meeting over to Alithya's management. Please go ahead.
Good morning, ladies and gentlemen, welcome to Lithia is third quarter fiscal 'twenty 'twenty four results conference call I would now like to turn the meeting over to our lithium management. Please go ahead.
Speaker Change: Good morning, and thank you once again for joining us for Alithya's third quarter fiscal 2024 results conference call. The press release and MD&A with complete financial statements and related notes were issued this morning and are now posted on our website. The webcast presentation can also be found on our website in the investors section.
Good morning, and thank you once again for joining us for our Lee just third quarter fiscal 'twenty 'twenty four results conference call.
The press release and MD&A with complete financial statements and related notes were issued this morning, and I'll now posted on our website.
The webcast presentation can also be found on our website in the investors section.
Speaker Change: Please be advised that this call will contain statements that are forward-looking and which are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. These statements include, without limitation, our estimates, plans, expectations, and other statements regarding the future growth, results of operations, performance, and business prospects of Alithya that do not exclusively relate to historical facts or which refer to future events, including statements regarding our expectations of our clients' demands for our services and our ability to take advantage of business opportunities and meet our goals set in our current and next three-year strategic plan. For more information, please refer to the cautionary note in our presentation and to the forward-looking statements and risk and uncertainty sections of our MD&A, available on our website.
Please be advised that this call will contain statements that are forward looking and which are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated.
These statements include without limitation, our estimates flat expectation and other statements regarding the future growth results of operation performance and business prospects. The leach out there do not exclusively related to historical facts.
Or which refer to future events, including statements regarding our expectations of our clients demand for our services and our ability to take advantage of business opportunities and to meet our goals set in our current next three year strategic plan.
For more information please refer to the cautionary notes in our presentation and to the forward looking statements and the risk and uncertainties sections of our MD&A available on our website.
Speaker Change: All figures discussed on today's call are in Canadian dollars unless otherwise stated, and we may refer to certain indicators that are non-IFRS measures. Please refer to the cautionary note in our presentation and to the non-IFRS and other financial measures section of our MD&A for more details. Presenting this morning are Paul Raymond, Alithya's President and Chief Executive Officer, and Claude Stippel, Chief Financial Officer. I will now turn the call over to Barna Emel. Paul? Yes, Simeon.
All figures discussed on today's call are in Canadian dollars, unless otherwise stated and we may refer to certain indicators that are non as far as metrics. Please refer to the cautionary note that our presentation and then on ISR and other financial measures section of our MD&A for more.
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Presenting this morning are Paul Raymond Alicia as President and Chief Executive Officer, and Claude spoke Chief Financial Officer.
I will now turn the call over to Butler ml, Paul Good morning, everyone and thank you for joining us this morning.
Paul Steep: Good morning, everyone, and thank you for joining us this morning. I'm very pleased to share the details of our team's robust performance in the third quarter of fiscal 2024. With sequential revenue and margin growth, as well as other notable achievements in our Q3, we have many positive trends to talk about today. So I'd like to begin this morning by highlighting three critical areas that summarize our third quarter achievements. First, Alithya set an internal record for gross margin as a percentage of revenues in Q3, as well as a record adjusted EBITDA margin. Second, we made considerable progress in reducing our SG&A expenses while also generating a notable positive cash flow in Q3. Additionally, we continued to reduce our debt in alignment with ongoing targeted initiatives. Third, Q3 was another strong quarter for bookings, and when excluding the two long-term contracts, we achieved a book-to-bill ratio of 1.2 and saw sequential revenue growth in all our geographies. Now, let's take a closer look at these achievements.
I was very pleased to share the detail of our teams robust performance in the third quarter of fiscal 2024.
With sequential revenue and margin growth as well as other notable achievements in our Q3, we have many positive trends to talk about today.
So I'd like to begin this morning by highlighting three critical areas that summarize our third quarter achievements.
Alicia set an internal record for gross margin as a percentage of revenues in Q3 as well as record adjusted EBITDA margins.
Second we made considerable progress in reducing our SG&A expenses, while also generating notable positive cash flow in Q3. Additionally, we continued to reduce our debt in alignment with ongoing targeted initiatives.
Third Q3 was another strong quarter for bookings and when excluding the two long term contracts, we achieved a book to bill ratio of 1.2 and saw sequential revenue growth in all our geographies.
Let's take a closer look at these achievements.
Last November we highlighted gross margin as a source of pride and disclosing our Q2 results in the third quarter that upward trend continued with gross margins as a percentage of revenue, reaching 31, 3%, which is the highest smart debate and alleviates history as a publicly traded company.
Paul Steep: Last November, we highlighted gross margin as a source of pride in disclosing our Q2 results. In the third quarter, that upward trend continued, with gross margins as a percentage of revenue reaching 31.3%, which is the highest mark to date in Alithya's history as a publicly traded company. That result is the fruit of a targeted initiative aimed at maximizing gross margins and higher value services, which includes more permanent employees in our mix and achieving better utilization. Smartshore operations also help us in building stronger project teams for our clients by enabling us to balance senior people with junior ones. This is a win-win situation because it also allows us to train our junior employees and to prepare them for career opportunities, which is a central element of our internal promise to our people. Q3 also saw continued improvement in SG&A expenses as our disciplined approach continues to deliver positive results. In fact, year over year, our expenses decreased by 5.4% in the third quarter, complemented by positive cashflow and further debt reduction.
That result is the fruit targeted initiatives aimed at maximizing gross margins and higher value services.
Which includes more permanent employees in our mix and achieving better utilization rates.
Our smart shoring operations currently account for 6% of our assigned people, but we continue to bolster and position our operations to take on a more substantial role in the quarters ahead.
Smart shore operations also serve us in building stronger project teams for our clients by enabling us the balance senior people with junior ones. This is a win win situation because it also allows us to train our junior employees and to prepare them for career opportunities, which is a central element of our internal promise to our people.
Q3 also saw continued improvement in SG&A expenses as our disciplined approach continues to deliver positive results in fact year over year, our expenses decreased by five 4% in the third quarter complemented by positive cash flow and further debt reduction.
Paul Steep: With these new efficiencies reducing our spending, we also seized the opportunity to increase our credit facility, ensuring future flexibility for addressing both organic growth and potential M&A. As mentioned in my introduction, our posted-adjusted EBITDA margin in Q3 was also a record achievement for Alithya, driven by both our gross margin performance and reduced SG&A expense. On the bookings front, our performance was also strong, and our pipeline continues to be solid. Our book-to-bill ratio of 1.2 is also very encouraging when compared to the past 10 quarters. Over and above our Q3 bookings, we have signed multiple new contracts, including a $12 million deal at the start of Q4 with a large U.S. health care provider that operates a network of hospitals, surgery centers, and physician practices across the U.S. This is one of the largest Oracle contracts that Alithya has signed to date. Also in Q4, in the healthcare and government sector, we won two additional large deals with major Quebec-based health agencies. One is a Microsoft project, and the other one is an Oracle initiative.
With these new efficiencies, reducing our spending we also sees the opportunity to increase our credit facility, ensuring future flexibility for addressing both organic growth and potential M&A.
As mentioned in my introduction, our posted adjusted EBITDA margin. In Q3 was also a record achievement for Alicia driven by both our gross margin performance and reduced SG&A expenses.
On the bookings front. Our performance was also strong and our pipeline continues to be solid our book to Bill ratio of 1.2 is also very encouraging when compared to the past 10 quarters.
Over and above our Q3 bookings, we havent signed multiple new contracts, including a $12 million deal at the start of Q4 with a large U S heart health care provider, which operates a network of hospitals surgery centers and physician practices across the US This is one of the largest oracle contracts that <unk> signed to date.
Also in Q4 into health care and government sector. We went two additional large deals with major Quebec based health agencies, one is Microsoft project and the other one is an Oracle initiative.
Regarding the latter the contract win showcases how our cross border collaboration and acquisition strategy serves as a catalyst for growth our long history of successful Oracle finance it supply chain implementations in the U S. Private health care systems, coupled with our extensive knowledge of the public health care system in Quebec allowed us.
Paul Steep: Regarding the latter, the contract win showcases how our cross-border collaboration and acquisition strategy serves as a catalyst for growth. Our long history of successful Oracle finance and supply chain implementations in the U.S. private health care systems, coupled with our extensive knowledge of the public health care system in Quebec, allowed us to demonstrate our proven abilities to the client. We are particularly pleased with these new large wins because they demonstrate the effectiveness of our cross-border collaboration on the part of our global Oracle health care practice.
Demonstrate our proven abilities to the client.
We are particularly pleased with these new large client large wins because they demonstrate the effectiveness of our cross border collaboration on the part of our global Oracle Health care practice.
Now, let's look at revenue growth.
Paul Steep: Now let's look at revenue growth. Although lower compared to our historical standards, we experienced sequential revenue growth in all our geographies during the third quarter. In Canada, despite ongoing softness in the banking sector, we saw some stabilization in Q3 in respect to our billable projects. We also continue to fine-tune our approach to the public sector by selectively choosing the projects that we want to bid on rather than reducing our prices as a response to an increasingly competitive market.
Although lower compared to our historical standards, we experienced sequential revenue growth in all our geographies in the third quarter.
In Canada, despite ongoing softness in the banking sector. We saw some stabilization in Q3 in respect to our billable projects.
We also continue to fine tune our approach that public sector by selectively choosing the projects that we want to bid on rather than reducing their prices as a response to an increasingly competitive market.
We are also seeing benefits from more fixed price projects in the government sector, which makes it easier for us to manage and allocate our workforce for optimal utilization and cost management.
Our partnership with AWS also continues to develop and mature in the cloud space and we see the potential for significant revenue potential moving forward in the United States, both our Microsoft and Oracle practices and project sizes continue to grow our profitability also continues to increase relative to our.
Paul Steep: We are also seeing benefits from more fixed-price projects in the government sector, which makes it easier for us to manage and allocate our workforce for optimal utilization and cost management. Our partnership with AWS also continues to develop and mature in the cloud space, and we see the potential for significant revenue potential moving forward. In the United States, both our Microsoft and Oracle practices and project sizes continue to grow.
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The success of our Oracle and Microsoft business is bolstered by a significant increase in multi pillar projects for both practices driven by concerted efforts to increase cross collaboration by combining two or more of our high value offerings.
And as we head into the fourth quarter of fiscal 'twenty four.
Our Oracle practice is preparing to engage in a plethora of projects on the books as the delivery of these new wins start ramping up.
Paul Steep: Our profitability also continues to increase relative to our projects. The success of our Oracle and Microsoft business is bolstered by a significant increase in multi-pillar projects for both practices, driven by concerted efforts to increase cross-collaboration by combining two or more of our high-value offerings. And as we head into the fourth quarter of Fiscal 24, our Oracle practice is preparing to engage in a plethora of projects on the books as the delivery of these new wins start ramping up. Also, in the U.S., our Enterprise Solutions Group completed 26 go-lives in the third quarter.
Also in the U S. Our enterprise solutions Group completed 26 go lives in the third quarter in response to demand. The group continues to add technical resources further leveraging our smart your operations to train personnel capable of addressing a growing needs.
Finally, we're seeing increasing interest in Microsoft co pilot training being offered to our clients in the United States in our industry is seeing overwhelming interest in artificial and tariff diligence as a concept as of now however that interest has not translated into substantial revenue generation, but current and potential.
Clients are growing increasingly curious about its future potential.
Paul Steep: Finally, we're seeing increasing interest in Microsoft co-pilot training being offered to our clients in the United States, and our industry is seeing overwhelming interest in artificial intelligence as a concept. As of now, however, that interest has not translated into substantial revenue generation, but current and potential clients are growing increasingly curious about its future potential. Technology is in a constant state of evolution, and Alithya strives to always remain on the crest of that wave.
Technology is in a constant state of evolution and Alenia strives to always remain on the crest of that wave.
Currently our AI driven revenues are focused on sales of our IP solutions targeting automation and hyper automation, including industry specific solutions, such as computer vision fraud detection process automation legacy modern <unk> and many others.
Our subscription and software revenue is currently represent 12% of our total revenues as clients express greater interest and willingness to harness the power of AI to increase their efficiency, we intend to increase that proportion accordingly.
Paul Steep: Currently, our AI-driven revenues are focused on sales of our IP solutions, targeting automation and hyper-automation, including industry-specific solutions such as computer vision, fraud detection, process automation, legacy modernization, and many others. Our subscription and software revenues currently represent 12% of our total revenue. As clients express greater interest and willingness to harness the power of AI to increase their efficiency, we intend to increase that proportion accordingly. This brings me to another topic that I would briefly like to discuss this morning, which is our Alithya Awareness Campaign with C-suite leaders. Alithya has no interest in selling products and services that don't address the business needs of our clients.
This brings me to another topic that I would briefly like to discuss this morning, which is our <unk> awareness campaign with C suite leaders.
<unk> has no interest in selling products and services that don't address the business needs of our clients. This premise is the driving force behind the elite awareness campaign, which we deployed across our business lines to ensure our leaders are in direct alignment with those responsible for making important spending decisions and client organizations. The <unk>.
Jack This is to ensure that we have an accurate understanding of our clients' mid and long term strategies as well as their most critical priorities and challenges in doing so we significantly enhance our ability to identify potential opportunities for greater value creation down the road.
Alenia remains a human centric business with clients, who turned to us as a trusted advisor for strategic advice enterprise transformation and business enablement.
The key to it all is the skills of our people and we are proud that globally, our client satisfaction score average over the past four fiscal years has been higher than 90%.
Paul Steep: This premise is the driving force behind the Alithya Awareness Campaign, which we deployed across our business lines to ensure our leaders are in direct alignment with those responsible for making important spending decisions in client organizations. The objective is to ensure that we have an accurate understanding of our clients' mid and long-term strategies, as well as their most critical priorities and challenges. In doing so, we significantly enhance our ability to identify potential opportunities for greater value creation down the road. Alithya remains a human-centric business with clients who turn to us as a trusted advisor for strategic advice, enterprise transformation, and business enablement.
Now before I turn things over to Claude <unk>, Our Chief Financial Officer, I will close by emphasizing that our strategic alignment and selecting course adjustments as we go on continue to improve our overall positioning.
So as we enter the final quarter of our current three year strategic plan. We are confident that we are well positioned for the future while navigating through the current economic environment.
Longer term next three year plan will take effect on April one 2024, it will be inspired by the maturity agility and adaptability of the elite team.
For over 30 years now we have been highly successful in helping our clients to leverage technology that addresses their business challenges. The desire to continue doing so drives us more than ever today as technology evolves at an ever increasing speed.
Paul Steep: The key to it all is the skills of our people, and we are proud that globally, our client satisfaction score average over the past four fiscal years has been higher than 90 percent. Now, before I turn things over to Claude Sebald, our Chief Financial Officer, I will close by emphasizing that our strategic alignment and selective course adjustments as we go on will continue to improve our overall position in the economy. So, as we enter the final quarter of our current three-year strategic plan, we are confident that we are well positioned for the future while navigating the current economic environment. In the longer term, our next three-year plan will take effect on April 1st, 2024. It will be inspired by the maturity, agility, and adaptability of the Alithya team.
I look forward to discussing details of that plan with you in the coming months. So thank you once again for your time and interest this morning, Claude over to you.
Mr. Pablo good morning.
As Paul mentioned Alicia reported in Q3 notable performance improvements on a number of fronts.
Consolidated revenues came in at $125 million again, a sequential increase in all geographies.
$2 million in total, which also represents a smaller year to your year over year reduction versus what we reported in our second quarter.
If we dive a little deeper we can see that revenues in Canada stabilized with a small sequential increase to $68 million in Q3.
We continued to see softness in technology investments in the Canadian banking sector.
But when we look at revenues for specific financial services clients, we can see some stabilization.
Claude Sebald: I look forward to discussing the details of that plan with you in the coming months. So thanks to you once again for your time and interest this morning. Claude, over to you.
In the U S revenues increased sequentially from $45 $7 million to $47 1 million.
Despite this recovery, we continue to see weaker conditions.
Claude Sebald: Good morning. As Paul mentioned, Alithya reported notable performance improvements on a number of fronts in Q3. Consolidated revenues came in at $120.5 million, again a sequential increase in all geographies of $2 million in total, which also represents a smaller year-over-year reduction versus what we reported in our second quarter. If we dive a little deeper, we can see that revenues in Canada stabilized, with a small sequential increase to $68 million in Q3. However, we continue to see softness in technology investments in the Canadian banking sector.
In certain areas of the it services sector.
Notably in digital Skilling and change enablement services.
Well already discussed our great normalized book to Bill ratio of one two for the quarter, but I wanted to take a minute to make sure the difference between that number and the gross booked.
Book to Bill ratio is well understood.
If you remember the large acquisition of spring 2021, and the large 10 year agreements signed with its two main shareholders.
We reported $600 million of bookings at that time.
The issue is that we now have those recurring revenues and our quarterly actuals, but we are not.
Reporting any new bookings anymore.
Therefore, structurally understates, our book to Bill ratio on a gross basis.
Claude Sebald: But when we look at revenues for specific financial services clients, we can see some stabilization. In the U.S., revenues increased sequentially from $45.7 million to $47.1 million. Despite this recovery, we continue to see weaker conditions in certain areas of the IP services sector, notably in digital scaling and change enablement services. Paul already discussed our great normalized book-to-bill ratio of 1.2 for the quarter, but I want to take a minute to make sure the difference between that number and the gross book-to-bill ratio is well understood. We reported $600 million in bookings at that time, but we didn't report any new bookings anymore, which therefore structurally understates our book-to-bill ratio on a gross basis.
This is why we provide you with a normalized ratio, which excludes the long term recurring revenues.
In order to provide a better indication on how we are doing with regards to the revenues, which we do have to replace going forward.
That being said, even our gross ratio in Q3 is above one.
Which is very positive going forward.
Back to our results with regards to gross margin I noted back in November are challenging it is to increase it.
During lower revenue quarters.
However, we achieved sequential improvement again, despite another quarter in the current softer revenue cycle.
Gross margin as a percentage of revenues increased to 31, 3% in Q3 up from 30% in the same quarter last year.
On a sequential basis gross margin percentage.
Increased notably in comparison to the 29, 4%.
<unk> in the second quarter.
Claude Sebald: This is why we provide you with a normalized ratio, which excludes the long-term recurring revenues, in order to provide a better indication of how we are doing with regard to the revenues which we do have to replace going forward. That being said, even our gross ratio in Q3 was above 1, during lower revenue quarters. However, we achieved sequential improvement again, despite another quarter in the current softer revenue cycle. On a sequential basis, gross margin percentage increased notably in comparison to the 29.4% reported in the second quarter. This notable increase is mainly due to the ongoing executions of multiple internal initiatives, such as Better Individual Project Management and Discipline.
This notable increases mainly due to the ongoing execution of multiple internal initiatives.
From better individual project management and discipline.
To better utilization management with continued focus on car.
Your margin offerings.
In Canada, our gross margin increase is mainly due to higher margin offerings and better utilization and a proportionately larger decrease in the use of subcontractors compared to permanent employees.
As for the U S. Our gross margin increase is also the result of higher station rates and improved project performance.
As we mentioned last quarter. This gross margin performance bodes very well for when we see our revenues returned to a more typical.
Historical organic growth better.
Now looking at SG&A expenses, we also experienced notable improvements for consecutive quarters, and we are happy to see our cost improvement efforts continue to bear fruit.
Claude Sebald: In Canada, our gross margin increase is mainly due to higher margin offerings and better utilization and a proportionally larger decrease in the use of subcontractors compared to permanent employees. As for the U.S., our gross margin increase is also the result of higher delineation rates and Improved Project Performance. As we mentioned last quarter, this gross margin performance bodes very well for when we see our revenues return to a more typical, historical organic growth pattern. Now looking at SG&E expenses, we also experienced notable improvements for consecutive orders, and we are happy to see our cost improvement efforts continue to bear fruit. Total gross SGA expenses in the third quarter totaled $29.5 million, a decrease of $1.7 million, or 5.4%, compared to $31.2 million in the same quarter last year, which is a notable decrease when looking at the numbers on an annualized basis.
Total gross SG&A expenses in the third quarter totaled $29 $5 million, a decrease of $1 7 million or five 4%.
Compared to $31 $2 million in the same quarter last year.
Which is a notable decrease when looking at numbers on an annualized basis.
This decrease is mainly due to a reduction in employee compensation costs as we continue our ongoing review I believe you discussed structure.
Which was partially offset by certain seasonal timing and initiative driven increases.
While discussing as G&A expenses I would like to take a moment to come back to our decision to consolidate trading under T effects and to delist from the NASDAQ exchange.
Claude Sebald: This decrease is mainly due to a reduction in employee compensation costs, which was partially offset by certain seasonal, timing, and initiative-driven increases. While discussing his Gini expenses, I would like to take a moment to come back to our decision to consolidate trading on the TSX and to delist from the NASDAQ exchange. This decision was based on our opinion that the limited benefits derived from being dual listed no longer justify the administrative costs and efforts of maintaining NASDAQ.
This decision was based on our opinion that a limited benefits derived from being dual listed.
No longer justified the administrative costs and efforts of maintaining the NASDAQ listing.
Between listing fees themselves D&O insurance compliance the Sox audit.
Legal and other costs, we are talking about overtime of almost $1 million annually.
Not counting the time spent by our employees internally.
Deconsolidation of the trading volume on the T S X and the associated increase in liquidity should that be overlooked as an additional benefit for our shareholders.
Claude Sebald: Between listing fees themselves, DNO insurance, compliance, the SOX audit, legal, and other costs, we are talking about an annual cost of almost $1 million. The consolidation of the trading volume on the TSX and the associated increase in liquidity should not be overlooked as an additional benefit for our shareholders. Now back to Q3 performance. Overall, as a result of increased revenues and gross margin dollars on a sequential basis, representing an increase of $3 million or 46% compared to Q2. Our improved financial performance also resulted in a number of interesting metrics. And while our adjusted EBITDA in dollars is slightly lower than Q3 last year, as already mentioned, we should note the following. Our unadjusted EBITDA, at $7.2 million, is actually higher than last year, in addition to inbound by $5.1 million from the second.
Now back to Q3 performance overall as a result of increased revenues and gross margin dollars on a sequential basis as well as good control over expenses, our third quarter, adjusted EBITDA amounted to $9 $5 million representing an.
An increase of $3 million or <unk>, 46% compared to Q2.
As Paul mentioned earlier, our Q3 adjusted EBITDA margin was seven 8% representing a record high.
Our improved financial performance also resulted in a number of interesting metrics.
And while our adjusted EBITDA in dollars is slightly lower than Q3 last year as already mentioned.
We should note the following.
Our unadjusted EBITDA at $7 $2 million is actually higher than last year.
In addition to rebounding by $5 $1 million from the second quarter.
Secondly, our adjusted net earnings at $3 $9 million or <unk> <unk> per share.
He has also hired in Q3 last year and rebounding from a negative adjusted net loss.
Claude Sebald: Secondly, our adjusted net earnings of $3.9 million, or $0.04 per share, are also higher than Q3 last year and rebound from a negative adjusted net loss in the second quarter. Also, this is the first time that we are reporting a positive operating income, as defined in our financial statement. Indeed, operating income is defined after acquisition and reorganization costs and after depreciation and amortization, which are non-cash and non-recurring amounts, respectively, but which had historically been fairly high amounts for Alithya.
In the second quarter.
Also it is the first time that we are reporting a positive operating income as defined in our financial statements.
Indeed operating income is defined after acquisition and reorganization costs.
And after depreciation and amortization.
Which are noncash and nonrecurring amounts respectively.
But which had historically been fairly high amounts for lithia.
Our performance improvements have now taken us back into positive territory.
This other accounting measure.
We would also point out our accounting net loss of only $2 5 million, which is improving significantly from negative $9 $2 million in the second quarter.
Claude Sebald: Our performance improvements have now taken us back into positive territory on this other accounting method. We would also point out our accounting net loss of only $2.5 million, which is improving significantly from a negative $9.2 million in the second quarter. At this new level, we believe we may not require a big bump in revenues or continued declines in acquisition and reorganization costs or in depreciation and amortization, which remains a short-term objective and which we know would be a game changer for certain categories of potential investors, even though this is just accounting and we have actually been cash flow positive for years. Of note, our accounting net loss, at $2.5 million, is the smallest in almost three years, despite higher interest expenses currently.
At this new level, we believe we may not require a big bump in revenues for continued declines in acquisition and reorganization costs.
Or in depreciation and amortization.
Or even interest to get to a positive accounting net profit.
Which remains a short term objectives.
And which we know we'd be a game changer for certain categories of potential investors.
Even though this is just accounting and we have actually been cash flow positive for years.
Of note our accounting net loss of $2.5 million is the smallest in almost three years. Despite.
Despite higher interest expenses currently.
Lastly, considering our $9 5 million of adjusted EBITDA in our $7 4 million of cash generated from operating activities.
Before working capital variations this translates into a great cash flow conversion of above 75%.
Claude Sebald: Lastly, considering our $9.5 million of adjusted EBITDA and our $7.4 million of cash generated from operating activities, and all these highlights are again achieved despite reporting lower year-over-year revenues in the third quarter. Turning to liquidity and financial position on page 12. Net cash generated by operating activities was $15.6 million, which combined with other cash flow elements resulted in a net debt reduction of $11.5 billion in the third quarter, plus an uncommitted accordion of $50 million, to April 2026 with options for one-year extensions thereafter.
And all of these highlights again being achieved despite reporting lower year over year revenues in the third quarter.
Turning to liquidity and financial position on page 12.
Net cash generated by operating activities was $15 $6 million, which combined with other cash flow elements resulted in a debt net debt reduction that 11 $5 billion over the third quarter.
At the end of Q3, we announced that we had increased our existing revolving credit facility to $140 million.
Plus an uncommitted accordion of $50 million two.
April 2026 with options for one year extensions thereafter.
Claude Sebald: Although this increased availability is not currently required, it provides the company with adequate access to capital to continue an accelerated growth path both organically and through acquisition. Back to you, Paul. Thank you, Claude.
Although this increased availability is not currently required it provides the company with adequate access to capital to.
To continue an accelerated growth path both.
Both organically and through acquisitions.
Back to you Paul.
Thank you <unk>, so let's recap the three notable areas of achievement from our third quarter first Alithia set an internal record on gross margin as a percentage of revenues in Q3 as well as record adjusted EBITDA margin.
Paul: So let's recap the three notable areas of achievement from our third quarter. First, Alithya set an interim record on gross margin as a percentage of revenues in Q3, as well as an adjusted EBITDA margin of record. Second, we made significant progress in addressing our SG&E expenses while also generating notable positive cash flow in Q3, and we continued to reduce our debt in alignment with our ongoing initiatives. And, third, Q3 was another strong quarter for bookings when excluding long-term contracts with a book-to-bill ratio of 1.2. Now we'll be happy to take questions, Julie. Thank you. Ladies and gentlemen, should you have a question, please press the star followed by the number on your touchtone. If you'd like to withdraw your question, please press the star followed by the number on your touchtone. If you're using a speakerphone, please leave the handset before pressing any key.
We made significant progress in addressing our SG&A expenses, while also generating notable positive cash flow in Q3 and continued to reduce our debt and alignment with our ongoing initiatives.
And finally third Q3 was another strong quarter for bookings when excluding the long term contracts with a book to Bill ratio of one point to now.
Now, we will be happy to take questions Julie.
Thank you ladies and gentlemen should you have a question. Please press the star followed by the one on your Touchtone phone if you like to withdraw your question. Please press the star followed by the two.
Using a speaker phone please lift the handset before pressing any keys one moment. Please for your first question.
Your first question comes from Rob Goff from Echelon. Please go ahead.
Good morning, and thank you for taking our questions.
And congratulations as well on the Q4 contract wins.
Thank you Ron discussed.
Could you discuss how we might see those Q4 contract wins translate into revenues.
Paul: One moment, please, for your first question. Your first question comes from Rob Guff from Echelon. Please go ahead.
And also on the revenue side can you talk to where in.
In Canada, you are now seeing sequential revenue growth how might we look at that going forward.
Rob Guff: Good morning, and thank you for taking our questions. And congratulations as well on the Q4 contract win. Thank you, Ron.
Great. Thanks for the question Rob So.
Large contracts that we signed in Q4.
Our like our normal ERP, there theyre all large ERP of projects. So usually the ramp up will take a few months or a quarter to get going so contracts winning in Q4, you can expect a ramp up to start in Q1 of the next fiscal year. It usually takes a few months to ramp them up.
Rob Guff: Could you discuss how we might see those Q4 contract wins translate into revenues? And also, on the revenue side, can you talk about where in Canada you're now seeing sequential revenue growth? How might we look at that going forward?
Ron: Thanks for the question, Rob. So, the large contracts that we signed in Q4 are like our normal ERP. They're all large ERP projects. So, usually, the ramp up will take a few months or a quarter to get going. So, for contracts won in Q4, you can expect the ramp up to start in Q1 of the next fiscal year. So, it usually takes a few months to ramp them up.
But at that.
That full scale. These are multi year very large projects that usually have ongoing revenue after that so being in Canada, we see that as very positive. They are in the government sector. So the government business will be growing faster than the financial services from what we're seeing right.
Now we've seen a stabilization in the financial sector, but it's still there's still challenged so we.
Speaker Change: But at that full scale, these are multi-year, very large projects. We expect the other areas are probably going to grow faster going forward. Does that answer your question, everyone? Yes, it does.
We expect the other areas are probably going to grow faster going forward.
Does that answer your question Laura.
It got us and if I may one more on the on the revenue side of things could you talk to your.
Sales.
Pipeline Rfps outstanding and that in prior quarters, you talked to your participating in larger Rfps I suspect that one of those was actually booked in Q4, but could you talk to your current pipeline.
Speaker Change: And if you may, one more on the revenue side of things. Could you talk about your sales pipeline RFPs outstanding in that in prior quarters, you talked to, you're participating in larger RFPs. I suspect that one of those was actually booked in Q4, but could you talk to your current customers?
Sure, Yes that current pipeline is very healthy.
Like I mentioned before we're signing bigger deals in the one the the $12 million. One for example is one of our largest.
Pure ERP.
Speaker Change: Sure, yeah, the current pipeline is very healthy, like I mentioned before, we're signing bigger deals, and the $12 million one, for example, is one of our largest peer ERP contracts that we've signed. The other win, we will announce it as soon as the contract is signed, but again, significantly larger.
Contracts that we've signed the other win.
We will announce it as soon as the contract sign but again again significantly larger.
So <unk>.
The experience, we have with our track record of delivering ERP projects. You know I mentioned the go lives every quarter and maybe it goes unnoticed, but 26 go lives on ERP projects.
I mean, many companies don't do that in any year, we do that in a quarter. So if you can imagine.
Speaker Change: So, you know, the experience we have with our track record of delivering ERP projects, you know, I mentioned the goalies every quarter, and maybe it goes unnoticed, but 26 goalies on ERP projects. Many companies don't do that in a year. We do that in a quarter.
A company going through an ERP implementation is quite a challenge on its own so to be able to do that many in a quarter is the is I mean.
That software team they are doing an incredible job so because of that track record we have access.
And our scale, we have access to much larger ERP projects than we did 345 years ago. So we're leveraging that into new.
Speaker Change: So if you can imagine, you know, a company going through an ERP implementation is quite a challenge on its own. So to be able to do that many in a quarter is the thing I mean. That software team, they're doing an incredible job.
New.
Verticals new geographies. The reason we wanted the two large health care ones in Quebec was because of our experience with hospitals in the U S.
These things come together at some point, that's where we are today. So I think we're very well positioned to leverage that going forward.
Speaker Change: So because of that track record, and our scale, we have access to much larger ERP projects than we did three, four, five years ago. So we're leveraging that into new, Very good Thank you. You're welcome.
Very good thank you.
Thank you you're welcome.
Your next question comes from Jay <unk> from Deutsche Bank. Please go ahead.
We have a little bit.
Thanks for taking my questions.
Let's start with the margin improvement side, indeed, higher utilization with lower revenue revenue is quite unusual so good to see.
Can you maybe describe some of the initiatives in qualitative terms, maybe that are that have been implemented.
Speaker Change: Your next question comes from Jérôme Dubreuil from Desjardins. Please go ahead. Hello, Paul and Claude, good morning. Are you talking about revenue specifically, Jerome? Or gross margin? Yeah, yeah.
Just a general change in mindset.
So you're talking about revenue specifically Andrew.
Gross margin, yes, so so.
Jerome Dubreuil: So, you know, we talked about it last quarter. I've been talking about it as part of our strategic plan. If you remember, two years ago, we said one of the things that we believed we could really change was by doing higher-value type projects, which inherently generate higher gross margins. So it's a combination of several things.
We talked about it last quarter I have been talking about it as part of our strategic plan. If you remember you go back two years, we said one of the things that we believed we could we could really change was by.
Doing higher value type projects, which inherently generate higher gross margins. So it's a combination of several things one is the type of projects that we go after.
Jerome Dubreuil: One is the type of projects that we go after. Two is the mix of having more permanent people, experts, and fewer subcontractors. And three, leveraging our smart shore operations.
It's the mix of having more permanent people experts and less subcontractors and three.
Leveraging our smart sure.
Operation So when we do these larger projects like the one that we just announced we have much better control over where we do the work how we do the work who we do the work with.
Jerome Dubreuil: So when we do these larger projects like the one that we just announced, we have much better control over where we do the work, how we do the work, who we do the work with, so we can use our people more, we can leverage, are lower cost centers. We have better control over utilization. So these are all things that will have a huge impact on gross margin going forward. So even though our revenue has been going down, most of the stuff that has stopped or that we got rid of or that you see softer revenue coming from is in the lower margin areas. Because large organizations, the first place they cut when they reduce spending is all of the temporary stuff, right? The time and material, temporary, subcontractors, stuff that's easy to stop. Whereas projects, once they get going, are very difficult to stop because, typically, they have a very high impact on business. Their business outcomes are tied to the project, and the project's a multi-year initiative, and you don't stop an ERP project in the middle. So we're seeing that now.
So we can use our people more we can leverage.
Our lower cost centers, we can.
We have better control over utilization. So these are all things that have a huge impact on gross margin going forward. So even though our revenue has been going down most of the stuff that has stopped there that we got rid of or that you see you see softer revenue coming from us in the lower margin areas because large organization in the first place they cut.
When they reduced spending is.
All of it attempts stuff right that time and material temporary subcontractors stuff, that's easy to stop whereas projects once they get going very difficult to stop because typically they have a very high impact on business. Their business outcomes are tied to the project and the projects are multiyear initiatives and you don't start with ERP project and the <unk>.
Middle.
So we're seeing that now so where we see the softness in the lower margin <unk>.
Jerome Dubreuil: So where we see the softness in the lower margin business, you know, it's actually helping us from a margin perspective. And maybe Paul, I would add.
Is this.
Is that it's actually helping us from a margin perspective.
Maybe Paul I would add yes.
Paul: Yeah. Looking at Alithya from 2017, when we went public after fiscal 2017, up to fiscal 2023, so before this current year where we're seeing the impacts of the slowdown, our organic CAGR, so our organic growth has been 12% on average, much higher. So we really took the opportunity with slower revenue growth that we've seen in recent quarters, we really took that opportunity to look at how we manage projects, you know, implement best practices in terms of, Yeah, not sexy usually comes with profitable, so good to hear. In terms of maybe we kind of all expect a re-acceleration in terms of the top line. You know, it's the case with the contracts you've been talking about, the same for global peers. Do you think that you need to hire ahead of the demand increase or if, you know, maybe the labor market is a bit looser right now and allows you for more just-in-time hiring than you have done in the past? So we tried to; it's an interesting question.
So either one.
Looking at Alicia from 2017, where when we went public after fiscal 2017 up to fiscal 2023, so before disk or at year, where we're seeing the impacts of the slowdown our organic CAGR. So our organic growth has been 12% on average.
And on top of that you add our acquisitions our growth.
Growth from acquisitions, which has been obviously.
Much higher so we really took.
The opportunity with slower revenue growth that we've seen in recent quarters, we really took that opportunity to look at our how we manage projects.
Implement best practices in terms of.
Tracking projects, we organize meetings internal meetings two to do a better job at that really focusing on individual individual project performance. So this is not very sexy when you think about it but it really makes a difference.
In a slower growth phase, which we believe will end the sooner or later, but it's really been an opportunity to take the time to look how we do these things and you can see the impact as well in addition to everything Paul that I mentioned.
Yes.
<unk> usually comes with profitable so good to hear.
In terms of.
Maybe we can all expect a re acceleration in terms of topline.
It's the case with contracts you've been you've been talking about the same for our global peers.
Do you think that you need to hire ahead of the demand increase.
Are you maybe the labor market is a bit looser right now and allows you for more just in time hiring debt, which he has done in the past.
We tried to.
It's interesting question. So there are two ways of looking at it.
Speaker Change: So there are two ways of looking at it. The hiring is really tied to the type of business that we do. So when we're more focused on projects and higher value offerings, we have a lot more lead time, and a lot more structure around who we hire, and why, and hire for the long term, as opposed to a lot of the short term, lower margin business where a client wants somebody to help them out next week, right, which becomes very reactive type hiring. So our model has been a lot more about hiring for what's coming. You have to time it well; you don't want to hire too far ahead of time. But we hire for what's coming, what's in the pipeline, and hire more intelligently. And we also have our own academies where we hire graduates right from school and train them. That's a three-month process to train them for projects.
The hiring.
It is really tied to the type of business that we do so when we when we're more focused on projects in our higher value offerings. We have a lot more lead time and a lot more structure around who we hire and why and are higher for the long term as opposed to a lot of the short term lower margin business, where a client wants.
Somebody to help them out next week, right, which becomes very reactive type hiring so.
Our model has been a lot more on the hiring for what's coming.
You have to time, it well you don't want to hire too far ahead of time.
But we hire for what's coming what's in the pipeline.
Hire more intelligently and we also have our own academies, where we hire graduates right from school and train them. That's a three month process to train them for projects. So we have a pretty good balance on that front in terms of what we need and how we prepare for it.
Speaker Change: So we have a pretty good balance on that front in terms of what we need and how we prepare for it. Great. And then last one on the margins still, you know, given the nature of the work you're doing.
Great and then last one on the margins fell.
Given the nature of the work Youre doing.
Speaker Change: You know, we kind of remember the past margin guidance you had. Is it fair to say that there are still relatively low-hanging fruits that you're seeing in terms of efficiency improvement? Yeah, well, I think the biggest low-hanging fruit that I've talked about in the past is leveraging more of our smart shoring operations, which we're growing slowly but surely. We see huge potential there. And again, it's a pure cost structure at play.
We cant remember the past margin guidance you had its fair to say that they are still relatively low hanging fruit that you're seeing in terms of efficiency improvement.
Yeah, well I think the biggest low low hanging fruit that I've talked about in the past is leveraging more of our smart shoring operations, which were growing slowly but surely.
We see huge potential there and again, it's a pure cost structure.
At play we have a very highly qualified people in our centers our global.
Speaker Change: We have very highly qualified people in our centers and global delivery who we're growing intelligently. But yeah, we see significant opportunity there for improved gross margin, everything else being equal. That's it. Thank you.
Global delivery that we're growing into.
Intelligently.
But yes, we see significant opportunity there for improved gross margin everything else being equal.
Yes.
Yes.
Your next question comes from Kevin whether from car Mark. Please go ahead.
Hey, just following on on the trend of gross margins curious if theres more upside to utilization or more subcontractors that you can take out is there further upside on that front are we pretty optimized here in the quarter.
Speaker Change: Hey, just following on from Marj, there's more upside. There's still opportunities there, Gavin. We still have some subcontractors on some projects, and there's always room for improvement on utilization. So, yes, still opportunities there. Okay, and then in your prepared remarks, you mentioned the pricing environment a little bit. Thank you. I was hoping to get that question.
There's still opportunities there again, but we still have.
Some subcontractors on some projects and there's always there's always room for improvement on utilization, so yes still opportunity there.
Okay and then in your prepared remarks, you touched on the pricing environment, a little bit I was hoping to just get a little bit of color in terms of what you're seeing from a competitive perspective on pricing for work out there in the pipeline.
Got it. Thank you I was hoping to get that question.
So what we're seeing we have.
Significant present in financial sector, and it's hurt us in the last couple of quarters because of the slow down and you're all seeing the lay offs.
Banks are doing.
Speaker Change: So what we're seeing, you know, we have a significant presence in the financial sector, and it's hurt us in the last couple of quarters because of the slowdown. And you're all seeing the layoffs that banks are doing, and so on and so forth. So we, what we've noticed is picking those projects where value is more important than just the price. And by that, I mean, depending on the type of projects we bid on, the evaluation criteria around value and capability to deliver are more important than just the price. Because when you do these large ERP projects, I mean, getting the lowest bidder doesn't mean you're going to have a successful project. So we're very choosy. We win what we go after more often than not.
And so on and so forth so we.
What we've noticed is.
Typically in a in recessionary times, the government spend more and you can again, if you read the papers you see all of these these significant investments going into the governor that modernization of our infrastructure new roads.
Trains and now all of this so what happens is people, who typically don't bid on government business all of a sudden because everything else is drawing up we're saying well, let's shift and bid on government projects. So.
The price pressure, we're seeing is coming more in the.
From non traditional players that we're seeing showing up.
In areas they don't typically.
Compete in and of course when these these players come in to try to get in they they undercut our underprice or try to win the business by cost cutting.
Unfortunately, what they don't realize and we've seen this before by the way. This is not a first unfortunately is when you sign a long term contract, especially in the government area that are very very structured very strict in how you price and how you increase rates in whatever you can't have a three year long loss leader it doesn't make any sense. So so for us it's really.
<unk>.
Being very picky in choosing the projects that we bid on which we've done in the past and I think we're very good at.
Speaker Change: So I think we're well positioned to fight that, and we're seeing it in our gross margins. We've been able to maintain and improve our margins despite that phenomenon, which we think is going to be temporary, normally reset your salary. Correct. A little bit. It's taking a little bit of pressure off, but we've always been competitive, and on April 1st, every year, we do it, and it's the same thing this year. We look at the market; we have a lot of market data for all of our geographies, and we try to be competitive. The idea is, you know, you want to, you want to hang on to people.
The thickness projects, where value is more important than just the price and by that I mean, it is depending on the type of projects. We bid on the evaluation criteria is around value and capability to deliver are more important than just the price because when you do these large ERP projects.
Getting the lowest bidder it doesn't mean, you're going to have a successful project. So we're very choosy.
We win what we go after more often than not so so I think we're well positioned there to fight that and we're seeing it in our gross margins, we've been able to maintain and improve our margin despite that phenomenon, which we think is going to be temporary.
Got it good to hear it makes sense.
Yes, It does I think you'd normally reset your salaries for the internal work for US on April 1st if you could just.
Kind of the the macro environment, whether it's taking up a little bit of pressure off.
Of your labor cost.
It's taking a little bit of pressure off but we've always been competitive and on April one every year. We've done it the same thing. This year, we look at the market we have a lot of market data for all of our geographies.
We try to be competitive the ideas.
You want to you want to hang on to the people were doing well.
Speaker Change: We're doing well. We're always looking at resizing the team or shuffling based on where the demand is. So to me, those are two separate issues.
We're always looking at.
The re sizing the team or shuffling based on where the demand is so to me. Those are two separate issues. One is you have to take care of the people that you have and make sure that they want to be here and they're well compensated and then you have to adjust in the areas where demand is lower so I think we do a very good job at that.
Speaker Change: One is you have to take care of the people that you have and make sure that they want to be here and they're well compensated. And then you have to adjust in the areas where demand is lower. So I think we do a very good job at that. Great, and then just lastly for me, maybe for Claude, with Kappa still being a little bit elevated.
Great and then just lastly for me maybe for cloud.
Would you view the working cap is still being a little bit elevated exiting calendar 'twenty. Three I think there was a 20 million outflow last quarter and we got about.
Claude: The short answer is yes, we can still have improvements if you look at our historical cycles. Um, you know, I'm expecting that to be stable going forward at worst. It's going to go up and down quarter to quarter, but the general trend is where we are now, if not slight improvements still to come. But it really... It depends on timing.
Maybe eight or nine back this quarter.
Yes.
Short answer is yes, we can still have improvements if you look at our historical cycles.
You know I'm expecting that.
That to be stable going forward at worse, it's going to go up and down quarter to quarter, but the general trend is.
Where we are now if not slight improvements still to come.
But it really.
Really depends on timing as I, often say, we were basically a 2 million dollar per day business now that the scale, we're at so $2 million going out $2 million coming in.
Claude: As I often say, we were basically a $2 million per day business now at the scale we're at. So $2 million going out, $2 million coming in. A little bit more coming in than going out, obviously, but $2 million. If we just slip a couple days on both fronts in the wrong direction, it adds up to millions of dollars.
A little bit more coming in than going out, obviously, but that $2 million. If we just slipped a couple of days.
On both fronts in the wrong direction that adds up to millions of dollars. So we did a great job in Q3.
Speaker Change: So we did a great job in Q3. We're going to keep going. So, yeah, I'm certainly working towards more, you know, more improvements there. Got it. Thanks so much, Alpaca.
Now we're going to keep at it.
So yes.
Certainly working towards more.
Sure.
More improvements there.
Got it thanks, so much I'll pass the line.
Speaker Change: Thank you, Gavin. Your next question comes from Vincent Coletio from Barrington Research. Please go ahead. Yes, good morning, Paul. Where are you?
Thank you Kevin.
Your next question comes from Vincent Colicchio from Barrington Research. Please go ahead.
Sure.
Oh, yes, good morning, Paul.
Good morning, Vince.
Vincent Coletio: Could you remind me where you are currently on your offshore footprint? And what are you doing precisely to grow your exposure? And also, are you considering an acquisition to accelerate the present? So today, offshore, we're in India, Eastern Europe, and Morocco. It's about 6% of our total delivery workforce. The last time we accelerated growth in our offshore capability was through an acquisition. We're always looking at that, Vince, it's something of interest to us, but it would have to come with some North American or European-based customers, right? So our target markets are really North America and Western Europe, and of course, you add in the UK and the similarities; we already have clients there, but from a delivery standpoint, any opportunity that we have to accelerate the growth of those centers, we're looking at them and working on them today, So we have a lot of other initiatives internally ongoing to accelerate that. Maybe I would also add events.
Where are you could you remind me where you are currently on your offshore footprint.
And what are you doing precisely to grow the exposure.
Also are you considering an acquisition to accelerate the presence.
So today offshore were in India.
Eastern Europe, and Morocco, it's about 6% of our total delivery workforce.
We the last time, we we accelerated growth in our.
Our offshore capability was through an acquisition, we're always looking at that.
Vince it's something of interest to us, but it would have to come with some north American or European based customers right. So we are looking.
Our target markets are really North America.
The Western Europe and of course, yet in the UK and us.
<unk>, we already have clients, there, but from a delivery standpoint.
Any opportunity that we have to accelerate the growth of those those centers, we were looking at and working on them today, but both acquisition and organically by the way. So we have a lot of other initiatives internally ongoing to accelerate that.
Maybe I would add also events.
As we've reported it's been a couple of quarters are softer revenues to to increase our usage of near shoring resources is much easier to do when the Europe on the upswing in terms of revenues because in those situations youre looking for resources anywhere and you need them fast.
Vincent Coletio: As we've reported, you know, it's been a couple of quarters of softer revenues. Increasing our usage of new shore resources is much easier to do when you're up on the upswing in terms of revenues, because in those situations, you're looking for resources anywhere, and you need them fast. So, That's probably where you're going to start seeing acceleration, significant acceleration, in our offshore and nearshore usage. And Paul, I think you referred to generative AI; you're not seeing meaningful revenue as yet on that side of the business.
That's probably.
Really where youre going to start seeing acceleration significant acceleration to our offshore and near shore usage.
As opposed to what we've achieved.
And Paul I think you referred to.
Generative AI is not youre, not seeing meaningful revenue as of yet in that side of the business.
Speaker Change: Are you experiencing a growing, could you kind of qualitatively discuss how much you're seeing a growing collaboration with clients on that front? There's a lot of talking going on, Vince, so all of our clients want to hear about it. I talked earlier about our executive awareness campaign that we're doing. We're meeting with a lot of senior executives. Everybody wants to talk about it. Everybody's looking for..., you know, some kind of pilot project to do.
Are you experiencing a growing could you sort of.
Qualitatively discuss.
How much you're seen as growing collaboration with clients on that front.
So there's a lot of a lot of talking happening Vin So all of our clients want to hear about it.
I talked earlier about our executive awareness campaign that we're doing we're meeting but a lot has senior exec every everybody wants to talk about it everybody is looking for.
No.
Some kind of a pilot project to do but then between talking about it getting decisions to actually get projects going we're seeing a big lag. We still have we I mean, we have some AI projects ongoing but I'm not seeing the growth that the hype would justify so it's going to come in but I think it's going to be very gradual.
Speaker Change: But in between talking about it, and getting decisions to actually get projects going, we're seeing a big lag. We still have, I mean, we have some AI projects ongoing, but I'm not seeing the growth that the hype would justify. So it's going to come, but I think it's going to be very slow. And then lastly, any help on the sort of, uh... sequential revenue growth you may see in Q4. Good question, but we tried not to comment on the forward-looking stuff in this. I mean, we've seen quarter over quarter that financial services kind of flattened out, so that's good, and we're seeing some sequential growth. The bookings are solid. So, you know, if bookings are any indication.
And then lastly, any help on the sort of.
Sequential revenue growth you may see in the Q4.
Good question, but we try not to comment on the.
Forward looking stuff against I mean, we we've.
We've seen quarter over quarter that.
Financial services kind of flattened out so that's good and we're seeing some sequential growth the bookings are solid.
So.
Bookings are any indication.
I'd say that'd be the best the best way to look at it.
Speaker Change: I'd say that'd be the best way to look at it. Okay, thank you. Nice quarter. Thank you. Ladies and gentlemen, as a reminder, should you have a question, please press the star followed by the number.
Okay. Thank you nice quarter.
Thank you.
Ladies and gentlemen, as a reminder, should you have a question. Please press the star followed by the one.
Speaker Change: Your next question comes from John Schahel from National Bank. Please go ahead. Hey, good morning, and thanks for taking my question. So, Paul, could you maybe talk about your staff utilization for this quarter and how we should think about it in the next quarter and or one or two? Thanks, John.
Your next question comes from John <unk> from National Bank. Please go ahead.
Hey, good morning, and thanks for taking my question.
Paul could you maybe talk about your staff utilization for this quarter and how should how we should think about it in the next quarter and one or two.
Okay. Thanks, John Yeah. So so utilization is of course something that we track it's it's.
Paul: Yeah, so utilization is of course, something that we track. It's, it's, It's kind of, it's not 100%, you know, it's not the only KPI we track. It's one of them because, of course, we have a lot of fixed price projects where utilization is looked at differently. So that's one thing.
It's kind of.
It's not 100%.
It's not the only kpis we track it is one of them because of course, we have a lot of fixed price projects, where utilization is looked at differently. So that's one thing I think you are one thing to consider is Q3 for US includes December the December holidays, and the way the way.
Paul: I think one thing to consider is, you know, Q3 for us includes December, the December holidays, and the way the calendar, the way Christmas and New Year's felt this year, I think we had a lot more vacation in December. We had some clients also shut down for longer periods in December. So that, again, would hit our utilization. January, there are fewer vacations in January this year because of how the calendar is set up, so I would assume that's going to be a bit better. February has an extra day this year, but then again, March; the Easter holidays are in March this year; they were in April last year.
The calendar the way Christmas and new year's fell this year I think we had a lot more vacation in December we had some clients also shut down for longer periods in December so that again would hit our utilization.
January they are less vacations in January of this year again because of how the calendar set up so I would assume that's going to be a bit better February has an extra day. This year, but then again in March dig out Easter holidays are in March. This year were in April last year. So you have to take all of those things in consideration because they will impact utilization.
Speaker Change: So you have to take all those things in consideration because they will impact utilization, but no, we're positive. We like where we are right now. Okay, and could you talk about, I mean, yes, go ahead.
But.
Delaware, we're positive we like we like where we're at right now.
Okay and could you talk about.
Yes go ahead.
Speaker Change: I was just to repeat the same concept, as we've said many times today, we achieve such a good performance on utilization in quarters where we're in a slower revenue cycle, which is very hard to do. So when we go back to the upswing, obviously, we're looking for resources everywhere, so it's... We're, uh, we're, optimistic that we can do better on that, measured, just mathematically Okay. That's making a lot of sense. Could you maybe talk about the M&A environment and your pipeline? How should we think about the valuation versus last year?
No. It was just to repeat the same concept as we've said many times to date, we achieved such a good performance on utilization in quarters, where we are in the slower revenue cycle.
Which is very hard to do.
So when we go back to the upswing.
Obviously, we're looking for resources.
Everywhere so it's.
We're.
Optimistic that we can do better on that.
Measured just mathematically speaking.
Okay.
That's making a lot of sense.
Could you maybe talk about the M&A environment in terms of our pipeline how should how should we think about the valuation versus last year.
Speaker Change: So, if you look at our historical M&A track record, we haven't done an acquisition in a year and a half right now. So everything that we're doing now is around integrating and getting efficiencies out of past acquisitions. We're actively looking. We've got an interesting funnel of acquisitions. However, the prices on quality assets, and I've mentioned this in the past, are not coming down. I mean, there's some stuff out there that kind of has fire sales, but the quality assets that we're interested in, their prices are not coming down, so we're being very selective and very disciplined, looking at these and where they would impact and how they would help.
So if you look at our historical M&A track record, we haven't done an acquisition in a year and a half right now so everything that we're doing now is around integrating and getting efficiencies out of past acquisitions.
We're actively looking we've got an interesting funnel of acquisitions. However.
Prices on quality assets and I've mentioned this in the past are not coming down I mean, there's some stuff out there.
And on fire sales, but the quality assets that we're interested in.
Prices are not coming down so we're being very selective and very disciplined around looking at these and nowhere they would impact and how it would help.
Speaker Change: But no changes on the multiples from what we're seeing, and thank you, Apollon. And there are no further questions at this time. I will turn the call back over to Paul Raymond for closing remarks. Thank you, Julie, and thank you everybody for joining us this morning. Happy Valentine's Day. Enjoy the rest of the week. Ladies and gentlemen, this concludes your conference call for today. We thank you for joining us, and you may now disconnect your lines. Thank you.
No no changes on the multiples of what were seeing.
Okay. Thank you I'll hop line.
Yeah.
And there are no further questions at this time I will turn the call back over to Paul Raymond for closing remarks.
Thank you Julia and thank you everybody for joining us this morning happy Valentine's day enjoy the rest of the week.
Ladies and gentlemen, this concludes your conference call for today, we thank you for joining and you may now disconnect your lines. Thank you.
Yeah.
Yeah.