Q2 2025 Alithya Group Inc Earnings Call
Unknown Executive: Good morning, ladies and gentlemen, and welcome to the Alithya Second Quarter Fiscal 2025 Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator.
Good morning, ladies and gentlemen, and welcome to the <unk> second quarter fiscal 2025 results conference call at.
Speaker Change: At this time all lines are in a listen only mode.
Speaker Change: Following the presentation, we will conduct a question and answer session.
Speaker Change: If at any time during this call you acquire immediate assistance. Please press star Zero 40, operator.
Unknown Executive: This call is being recorded on Thursday, November 14, 2024.
Speaker Change: Call is being recorded and Thursday November 14th 2024.
Unknown Executive: I would now like to turn the conference over to Alithya Management. Please go ahead.
Speaker Change: I would now like to turn the conference over to ALLETE can management. Please go ahead.
Unknown Executive: Thank you.
Speaker Change: Thank you.
Unknown Executive: Good morning, and thank you once again for joining us for Alithya's second-quarter Fiscal 2025 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.
Speaker Change: Good morning, and thank you once again for joining us for <unk> second quarter fiscal 2025 results conference call.
Speaker Change: Press release, and MD&A with complete financial statement and related notes were issued this morning and are now posted on our website.
That presentation can also be found on our website in the investors section.
Unknown Executive: 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 operation, performance, and business prospects of Alithya that do not exclusively relate to historical facts. These statements can also refer to future events, including those regarding our expectation of our clients' demands for our services, our ability to take advantage of business opportunities, to leverage our service offering, IP, AI, and expertise to meet clients' needs, to stand out and excel in a competitive market, and to meet our goals set in our three-year strategic plan, as well as our ability to deploy our smart-shoring capability.
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.
Speaker Change: These statements include without limitation, our estimate plan expectation and other statements regarding future growth results of operation performance and business prospects of ALLETE, yet do not exclusively related to historical facts.
Speaker Change: These statements can also refer to future events, including those regarding our expectation of our clients' demands for our services our ability to take advantage of business opportunities.
Speaker Change: Our leverage our service offering IP AI and expertise to meet clients' needs to stand out and excel in a competitive market and to meet our goals. That's in our three year strategic plan as well as our ability to deploy it with smart shrink of the bill.
Unknown Executive: For more information, please refer to the cautionary note in our presentation and to the forward-looking statements and risks and uncertainties section of our MD&A, available on our website. All figures discussed on today's call aren't 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.
Speaker Change: For more information please refer to the cautionary note in our presentation and to the forward looking statements and the risks and uncertainties section of our MD&A available on our website.
Speaker Change: All figures discussed on today's call are in Guinea than dollars unless otherwise stated and we may refer to certain indicators that are non ifr metrics.
Speaker Change: Please refer to the cautionary cautionary note in our presentation and to the non Io forests, and other financial measures section of our MD&A for more detail.
Unknown Executive: Presenting this morning are Claude Raymond, Alithya's President and Chief Executive Officer, Bernard Dockrill, Chief Operating Officer, and Debbie Gregorio, Interim Chief Financial Officer.
Speaker Change: Presenting this morning are but really more elitist, president and Chief Executive Officer.
Speaker Change: Bernard and Dawn Farrell, Chief operating Officer, and Debbie do you recall interim Chief Financial Officer.
Paul Raymond: I will now turn the call over to Paul. Paul?
Paul Paul: I will now turn the call over to Paul Paul.
Paul Raymond: Thank you, Benjamin.
Paul Paul: Thank you Beth and good morning, everyone and thank you for joining us today.
Paul Raymond: Good morning, everyone. And thank you for joining us today. I'd like to begin by highlighting three notable achievements from the second quarter of our fiscal 2025 year.
Paul Paul: I'd like to begin by highlighting three notable achievements from the second quarter of our fiscal 2025 year.
Paul Raymond: I will then turn things over to Bernard to bring down the specifics of our operational performance, followed by Debbie to cover some of the financial highlights. First, I want to commend our team for the continued improvement in our profitability and for delivering a double-digit adjusted EBITDA increase. This was done in a difficult economic environment for discretionary technology spending and, given our current client base and type of work, you could say that most of our strategic and critical projects would fall in the discretionary spending category. When we take a closer look at our large digital transformation projects, once they get started, we know they seldom stop.
Paul Paul: I will then turn things over to Bernard to break down the specifics of our operational performance followed by Debbie to cover some of the financial highlights.
Paul Paul: First I want to commend our team for the continued improvement in our profitability and for delivering a double digit adjusted a bit. The increase this was done in a difficult economic environment for discretionary technology spending and given our current client base and type of work you could say that most of our strategic and critical.
Paul Paul: <unk> would fall in the discretionary spending category.
When we take a closer look at our large digital transformation projects. Once they get started we know they seldom stop and we deliver on our promises which is reflected in the excellent scores received by our client satisfaction surveys, which contribute to our high value reputation and future work.
Paul Raymond: And we deliver on our promises, which is reflected in the excellent scores received on our client satisfaction surveys, which contribute to our high value reputation and future work. However, because of the current economic environment, newer projects, especially the large ones are much slower to kick off and this impacts our quarterly booking. As a reminder, while we stay focused on moving opportunities down our funnel on a daily basis, Our trailing 12 months booking and total backlog are better measures of our future success. So despite this economic environment and seasonally softer summer months, we have delivered year-over-year growth in all areas of the business, except within our Quebec client base.
Paul Paul: However, because of the current economic environment newer projects, especially the large ones are much slower to kickoff and this impacts our quarterly bookings.
Paul Paul: As a reminder, while we stay focused on moving opportunities down the funnel on a daily basis, our trailing 12 months bookings and total backlog are better measures of our future success.
Paul Paul: Despite this economic environment and seasonally softer summer months, we have delivered year over year growth in all areas of the business, except for within our Quebec client base.
Paul Raymond: and our backlog is strong. Furthermore, we have significantly improved our adjusted net earnings, which amounted to $5.3 million in Q2, an increase of $5 million year-over-year. This is the result of our team's continued focus on reductions in SG&A expenses and higher value services mix. As we continue to deleverage and to diligently manage our net cash from operating activities, we are in better position to address acquisition opportunities that may present themselves. Second, our gross margin as a percentage of revenue increased again year-over-year. This achievement was fueled by increasing demand for Alithya's higher margin services, improved utilization of our workforce, and continued SmartShore progress.
And our backlog is strong.
Paul Paul: Furthermore, we have significantly improved our adjusted net earnings which amounted to $5 $3 million in Q2, an increase of $5 million year over year.
Paul Paul: This is the result of our team's continued focus on reductions in SG&A expenses and higher value services mix.
Paul Paul: As we continue to deleverage and to diligently manage our net cash from operating activities. We are better positioned to address acquisition opportunities that may present themselves.
Paul Paul: Second our gross margin as a percentage of revenue increased again year over year.
Paul Paul: This achievement was fueled by increasing demand for Lithia is higher margin services improve utilization of our workforce and continued smart short progress.
Paul Raymond: And third, despite growth challenges with a handful of clients in Quebec, we saw continued share gain across many of our business lines, particularly in the Canadian renewable energy sector, as well as in our Oracle and Microsoft implementation. We continue to grow and solidify our partnerships with industry-leading technology providers. And as we gain greater traction in higher margin segments, Alithya's reputation as a trusted advisor with increasingly specialized expertise continues to grow.
Paul Paul: Third despite growth challenges with a handful of clients in Quebec, We saw continued share gains across many of our business lines, particularly in the Canadian renewable energy sector.
Paul Paul: As well as in our Oracle and Microsoft implementations.
We continue to grow and solidify our partnerships with industry, leading technology providers and as we gain greater traction in higher margin segments elite gives reputation as a trusted advisor with increasingly specialized expertise continues to grow.
Paul Raymond: And on that note, I will now turn things over to Bernard to provide more details about our second quarter operational performance.
Paul Paul: I will now turn things over to Bernard to provide more details about our second quarter operational performance Bernard.
Bernard Dockrill: Bernard. Thank you, Paul.
Bernard Farrell: Thank you Paul Good morning, and thank you for joining our call today.
Bernard Dockrill: Good morning, and thank you for joining our call today. Despite softer revenues in the second quarter, largely attributable to spending reductions at a handful of clients in Quebec, particularly in the financial services and public sectors, we maintained our focus on improving gross margins by strengthening billable utilization and leveraging smart short capabilities, while providing more higher value offerings to our clients. Geographically, on a positive note for our Canadian-based activities, our legacy application modernization services position us well to take advantage of the growing demand in the market. Our partnership with AWS, specifically related to Blue Age and application modernization, continues to deliver results and something that we are very excited about.
Bernard Farrell: By your software revenues in the second quarter, largely attributable to spending reductions at a handful of clients in Quebec, particularly in the financial services and public sectors. We maintained our focus on improving gross margins by strengthening billable utilization and leveraging smart short capabilities well.
Bernard Farrell: Providing more higher value offerings to our clients.
Bernard Farrell: Geographically on a positive note for a Canadian based activities.
Bernard Farrell: Legacy application modernization services.
Bernard Farrell: Isn't as well to take advantage of the growing demand in the market.
Bernard Farrell: Our partnership with AWS, specifically related to Blue age and application modernization continues to deliver results and it's something that we're very excited about.
Bernard Dockrill: Through our continued investment with our partner and commitment to developing industry-leading capabilities, Alithya has established itself as a trusted implementation partner for AWS BlueEdge technology. The partnership has resulted in several projects with higher margins in Canada, particularly in mainframe modernization space, a rapidly growing market where we have developed a robust pipeline of opportunities. Blue Age is a specialized technology, and Alithya is currently one of AWS's top partners in terms of certifications and specializations. Also in Canada, as demand for clean energy continues to rise, our revenues in this sector have increased as we see the demand for specialized services increasing.
Bernard Farrell: Our continued investment with our partner commitment to developing industry leading capabilities.
Bernard Farrell: He has established itself as a trusted implementation partner for AWS Blue age technology.
Bernard Farrell: The partnership has resulted in several projects with higher margins in Canada.
Bernard Farrell: Mainframe modernization space, a rapidly growing market, where we have developed a robust pipeline of opportunities.
He did a specialized technology and at least he is currently one of Aws's top partners in terms of certifications and specializations.
Bernard Farrell: Also in Canada as demand for clean energy continues to rise our revenues in this sector have increased as we see the demand for specialized services increasing.
Bernard Dockrill: Supported by a pipeline of several opportunities in the various stages, particularly in operational technology, cybersecurity, as well as control and digital systems. which has been refined over decades of engagement with key clients in the nuclear sector.
Bernard Farrell: Supported by a pipeline of several opportunities in the various stages, particularly in operational technology cyber security as well as control and digital systems, which has been refined over decades and engagement with key clients in the nuclear sector.
Bernard Dockrill: Now let's take a look at the U.S. Revenues in the second quarter increased by 2.3% over the prior year because of organic growth from enterprise transformation initiatives in collaboration with our leading technology partners, including Microsoft and Oracle, and due to a favorable U.S. dollar exchange rate impact. We are pleased with our new bookings in the second quarter in the U.S., where bookings exceeded one times revenue for the quarter, reflecting strong demand and a healthy pipeline for our services. Specifically, we saw a strong demand for enterprise transformation, Microsoft Dynamics 365. Microsoft indicated in their last disclosure that they expect Dynamics 365 revenue growth to be in the mid to high teens, driven by continued growth across all work Dynamics is an area where Alithya is well positioned to capitalize on opportunities alongside Microsoft, leveraging our long history of successful business transformations and our industry specialization.
Bernard Farrell: Now, let's take a look at the U S.
Bernard Farrell: Revenues in the second quarter increased by two 3% over the prior year because of organic growth from enterprise transformation initiatives in collaboration with our leading technology partners, including Microsoft and Oracle and due to a favorable U S dollar exchange rate impact.
Bernard Farrell: We are pleased with our new bookings in the second quarter in the U S where bookings exceeded one times revenue for the quarter.
Bernard Farrell: Selecting strong demand a healthy pipeline for our services.
Bernard Farrell: Specifically, we saw strong demand for enterprise transformation, Microsoft dynamics 365.
Bernard Farrell: Microsoft, indicating their last disclosure that they expect dynamics 365 revenue growth to be in the mid to high teens driven by continued growth across all workloads.
Speaker Change: Dynamics is an area, where lithia is well positioned to capitalize on opportunities alongside Microsoft.
Speaker Change: Leveraging our long history of successful business transformations and our industry specialization.
Bernard Dockrill: For example, we are investing in our offerings related to Microsoft Dynamics 365 Contact Center, expanding our capabilities in line with long-term demand signals. Microsoft Dynamics 365 Contacts. is a Microsoft CoPilot First Contact Center solution that delivers generative AI to every customer engagement channel. also related to dynamics. This time on the ERP side, Microsoft has purchased an Alithya-developed accelerator, Alithya Edge, with the intention of integrating it into Core Dynamics 365 process manufacturing and distribution functionality, specifically to address the U.S. Food and Drug Administration requirements. Microsoft has acquired IP from Alithya on several occasions to incorporate into Dynamics 365, emphasizing the strength of our long-term collaborative partnership.
Speaker Change: For example.
Speaker Change: We are investing in our offerings related to Microsoft dynamics 365 contact center, expanding our capabilities in line with long term demand signals.
Speaker Change: Microsoft Dynamics 365 contact center.
Speaker Change: There's a Microsoft co pilot first contact center solution.
Speaker Change: It was January of AI every customer engagement channel.
Speaker Change: Also related to dynamics.
This time on the ERP side Micros.
Speaker Change: Microsoft was purchased at Lithia developed accelerator Lithia edge with the intention of integrating it to core dynamics 365 process manufacturing and distribution functionality, specifically to address the U S food and drug administration requirements.
Microsoft was acquired IP from Lithia on several occasions to incorporate into dynamics 365.
Speaker Change: Emphasizing the strength of our long term collaborative partnerships.
Bernard Dockrill: Similarly, Alithya has licensed the Microsoft Utility to assist clients in the automated migration of Robotic Process Automation Platforms, or RPA, to their Microsoft Power Automate Platform. This utility is available on the Microsoft Marketplace and is creating a pipeline of new opportunities for Alithya as we seek lower cost solutions for hyperautomation needs. On the Microsoft Learning side, we also continue to assist our clients in improving their AI preparedness through our Change Enablement Service offering. In relation to our Oracle Cloud Transformation Services, our business continues to grow in line with the advancement of our industry diversification strategy, as we see our pipeline of future opportunities in life sciences, manufacturing, financial services, and professional services increase.
Speaker Change: Similarly, Lithia is licensed to Microsoft utility to assist clients in the automated migration of robotic process automation platforms or rps to their Microsoft power automated platform.
Speaker Change: This utility is available on the Microsoft marketplace is creating a pipeline of new opportunities for Lithia as we see lower cost solutions for hyper automation needs.
Speaker Change: On the Microsoft Learning side, we also continue to assist our clients and improving their AI preparedness through our change enablement service offerings.
Speaker Change: In relation to our Oracle cloud transformation services, our business continues to grow in line with the advancement of our industry diversification strategy as we see our pipeline of future opportunities in life Sciences manufacturing financial services and professional services increase.
Bernard Dockrill: Additionally, we're seeing a positive trend in Oracle managed services demand, where Alithya has garnered credibility, including in respect to the expansion of our SmartShore delivery center. Multi-year managed services options are now included in many of our implementation proposals, and we continue to build a pipeline of standalone managed service opportunities. We also see increasingly exploring options as support for on-premise ERP platforms is phased out. We see this trend as a significant opportunity for Alithya to capitalize on growing demand for enterprise transformation and cloud migration expertise.
Speaker Change: Additionally, we are seeing a positive trend and Oracle managed services demand.
Speaker Change: Olympias garner credibility, including with respect to expansion of our smart store delivery centers.
Speaker Change: By year managed services options are now included in many of our implementation proposals and we continue to build a pipeline of Standalone managed service opportunities.
Speaker Change: We also see increasingly exploring options to support for on premise ERP platforms is phased out.
Speaker Change: We see this trend is a significant opportunity for lithia capitalize on growing demand for enterprise transformation and cloud migration expertise.
Bernard Dockrill: Before I turn it over to Debbie, I would like to take the opportunity to recognize the Alithya team for their contributions to these efforts, and continue to focus on cost containment profitability to the challenging market conditions.
Speaker Change: Before I turn it over to Debbie I would like to take the opportunity to recognize the lithia team for their contributions to these efforts and continued focus on cost containment profitability certain challenging market conditions with that let me turn it over to Debbie.
Debbie Gregorio: With that, let me turn it over to Debbie. Merci Bernard. Good morning, everyone. And thank you for joining us today. First, consolidated revenues came in at $111.5 million, a year over year decrease of 5.9% from $118.5 million for the second quarter of Fiscal 2024. Despite the current situation regarding our revenue performance, approximately 84% of Alithya's Q2 sales came from existing clients, which we had in Q2 of last year. It demonstrates a strong client relationship, trust and satisfaction in Alithya services, regardless of market trend. We are reporting another quarter of continued performance regarding gross margin as a percentage of revenue.
Speaker Change: Let's see back now.
Debbie: Everyone and thank you for joining us today.
Debbie: Consolidated revenues came in at $111 $5 million a year over year decrease of five 9% from <unk>.
Debbie: $118 $5 million for the second quarter of fiscal 'twenty 'twenty four.
Debbie: Five the current situations regarding our revenue performance approximately 84% of at least hits Q2 sales came from existing clients, which we had in Q2 of last year.
Debbie: It demonstrates our strong client relationships trust and satisfaction and at least your services regardless of market trends.
Debbie: We are reporting another quarter of continued performance regarding gross margin as a percentage of granting.
Debbie Gregorio: increasing to 30.6% up from 29.4% in Q2 of last year. As noted during our Investor Day presentation in September, our focus remains on improving gross margin by leveraging previously outlined initiatives and prioritizing high value options.
Debbie: Increasing to 36% up from 29, 4% in Q2 of last year.
Debbie: As noted during our Investor day presentation in September.
Debbie: Focus remains on improving gross margin by leveraging previously outlined initiatives and prioritizing high value offerings.
Debbie Gregorio: From a geographic perspective, let's start with Canada, where Bernard addressed some of the challenges we face in our Canadian business. Revenues decreased to $59.6 million in Q2, 4 by 12.2% when compared year over year. However, when we look at our gross margin in Canada, we can see that compared to the same quarter last year, it increased. This is mainly due to higher billing rates and a proportionally larger decrease in the use of subcontractors compared to permanent employees.
From a geographic perspective, let's just start with Canada, where Bernard interest some of the challenges we face in our Canadian business.
Debbie: Revenues decreased to $59 $6 million in Q2 or by 12, 2% when compared year over year.
Debbie: However, when we look at our gross margin in Canada, we can see that compared to the same quarter last year. It increased.
Debbie: This is mainly due to higher billing rates and a proportionately large a decrease in the use of subcontractors compared to permanent employees.
Debbie Gregorio: As for U.S. revenues, increased by $1.1 million or 2.3% to $46.8 million in Q2. Due primarily to organic growth in certain areas of our business, including a favorable US dollar exchange rate impact of $800,000 between the two periods. Our gross margin as a percentage of revenues decreased slightly compared to the same period last year due to decrease in software revenues, which historically have a higher gross margin.
Debbie: As for U S revenues increased $1.1 million or two 3% to $46 $8 million in Q2.
Debbie: Due primarily to organic growth in certain areas of our business, including a favorable U S dollar exchange rate impact of $800000 between the two periods.
Debbie: Our gross margin as a percentage of revenues decreased slightly compared to the same period last year due to a decrease in software revenues, which historically have a higher gross margin.
Debbie Gregorio: Our revenues from international operations also increased year over year. In fact, they increased 5.8% when compared to Q2 of fiscal 2024.
Debbie: Our revenues from international operations also increased year over year.
Debbie: In fact, they increased eight five excuse me five 8% when compared to Q2 of fiscal 'twenty to 'twenty four.
Debbie Gregorio: Now looking at SG&A expenses. We are consistently and carefully optimizing our cost structure to ensure efficiency and long-term performance. In the second quarter, SG&A expenses amounted to $25.9 million, a decrease of 13.6% year-over-year. The decrease is in large part due to reduced employee compensation expenses, including variable compensation, as well as the optimization of our cost structure to gain efficiency. SG&A expenses as a percentage of revenues came in at 23.2% in Q2, compared to 25.3% for the same period last year. Overall, thanks to the above performance on cost management, our second quarter adjusted EBITDA amounted to $9.3 million, a 44% increase year over year.
Debbie: Now looking at SG&A expenses, we are consistently and carefully optimizing our cost structure to ensure efficiency and long term performance.
Debbie: In the second quarter, SG&A expenses amounted to $25 $9 million, a decrease of 13, 6% year over year.
The decrease is in large part due to reduced employee compensation expenses, including variable compensation as well as the optimization of our cost structure to gain efficiencies.
Debbie: SG&A expenses as a percentage of revenues came in at 23, 2% in Q2 compared to 25, 3% for the same period last year.
Debbie: Overall, thanks to the above book.
Debbie: Performance on cost management, our second quarter, adjusted EBITDA amounted to $93 million of 44% increase year over year.
Debbie Gregorio: This is significantly higher than the same period last year when our revenues were notably higher. Again, this reflects our rigorous approach to not losing ground on the progress we've made in terms of operational performance, and it will position us well once we return to our higher historical revenue level. As our adjusted net earnings came in at $5.3 million, representing an increase of $5 million, or five cents per share year over year. I would point out that our accounting net loss of negative $270,000 in Q2, improved significantly from negative $9.2 million in the same period last year.
Debbie: This is significantly higher than the same period last year, when our revenues were notably higher.
Debbie: Again this reflects our rigorous approach to not losing ground on the progress we've made in terms of operational performance and it will position us well once we return to our prior historical revenue levels.
Debbie: As our adjusted net earnings came in at $5 $3 million, representing an increase of $5 million or five cents per share year over year.
Debbie: I would point out that our accounting net.
Loss of a negative.
$278000 in Q2 improved significantly from negative $9 $2 million in the same period last year.
Debbie Gregorio: Net cash generated by operations, operating activities of $3 million represented an increase of 117.3% year over year. As of September 30, 2024, when combined with other cash flow elements, this resulted in a total long-term debt reduction of $8.4 million to $109 million. Alithya's net debt decreased to $97 million in Q2, down from $109 million at the end of fiscal 2024, primarily as a result of the decrease in long-term debt, harshly offset by an increase in cash. Our goal is to continue deleveraging by diligently managing our net cash from operating activities in order to focus on debt reduction.
Debbie: Net cash generated by operations operating activities of $3 million represented an increase of one one.
Debbie: 173 point.
Debbie: 117, 3% year over year.
Debbie: As of September 30th 'twenty 'twenty four when combined with other cash flow elements. This resulted in a total long term debt reduction of $8 $4 million 209 million.
Debbie: ALLETE is net debt decreased to $97 million in Q2 down from 100 of $9 million at the end of fiscal 'twenty 'twenty four primarily as a result of the decrease in long term debt, partially offset by an increase in cash.
Debbie: Our goal is to continue deleveraging by diligently managing our net cash from operating activities in order to focus on debt reduction.
Debbie Gregorio: Our deleveraging will provide for good positioning when the right acquisition opportunity presents itself.
Debbie: Deleveraging will provide for good positioning when the right acquisition opportunity presents itself.
Paul Raymond: With that, I'll pass it back to Paul. Thank you, Debbie.
Speaker Change: With that I'll pass it back to Paul.
Paul Paul: Thank you Debbie.
Paul Raymond: So before jumping to questions, I'd just like to take this opportunity to thank Debbie for her commitment and support over the past few months as our interim CFO. She's kept us on the right path and helped position the team for the arrival of our new CFO, Nicolas Lapuet. As announced this morning, Nicolas will join us starting December 9. Nicola brings a wide range of experience in leadership roles focused on strategic transformation, operational excellence and accelerating growth through M&A.
Paul Paul: Jumping to questions I'd, just like to take this opportunity to thank Debbie for her commitment and support over the past few months as our interim CFO.
Paul Paul: She has kept us on the right path and help position the team for the arrival of our new CFO.
As announced this morning, Nikola will join US starting December nine.
Paul Paul: Nicola brings a wide range of experience in leadership roles focused on strategic transformation operational excellence and accelerating growth through M&A.
Paul Raymond: I look forward to having the opportunity to guest Alithya's performance. with him.
Paul Paul: I look forward to having the opera <unk> alleviates performance.
Paul Paul: But with him and I will now turn to questions.
Unknown Executive: And I will now turn to questions. Thank you so much.
Paul Paul: Yeah.
Speaker Change: Thank you so much and ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your thoughts John Fallon and you'll hear a prompt that your head has been raised should you wish to decline from the polling process. Please press the star followed by the number two and if you're using.
Unknown Executive: And ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchtone phone and you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. And if you're using a speakerphone, please lift the handset before pressing it.
Speaker Change: Speaker phone please lift the handset before pressing any key.
Graham Smith: And our first question comes from the line of Gavin Fairweather of Pormark Security. Please ask your question.
And our first question comes from the line of Gavin Fairweather with core Mark Security. Please ask your question.
Graham Smith: Hi guys, this is Graham Smith on for Gavin. My first one on Quebec. This is Graham on for Gavin.
Hi, guys. This is Graham Smith, I'm, sorry, Kevin Mike.
Speaker Change: My first one already out in Tibet.
Paul Raymond: The first thing I just wanted to ask about was on Quebec. Can you guys just give a bit more color on what you're seeing in the pipeline so far in Q4? Any color on that would be appreciated. Yeah, thanks, Graham, for the question. As I did mention on that, we did see kind of continue from last quarter, the slow bookings in Quebec. But as I did highlight on the AWS, and what we're seeing some larger transformation stuff to the pipeline, that's a lot of those deals are in the Quebec market. So I would say the pipeline remains where we expected it to be, just the deals have taken a little longer to get to closure.
Speaker Change: Graham on for Gavin.
Speaker Change: The first thing I just wanted to ask about was on Quebec.
Speaker Change: Could you guys just give a bit more color on what youre seeing in the pipeline. So.
Speaker Change: So far in Q4.
Speaker Change: Any color on that would be appreciated.
Speaker Change: Yeah. Thanks, Gregg for the question.
Speaker Change: Didn't mention though that we did see kind of continued from last quarter the slow bookings in Quebec.
Speaker Change: But as I did highlight on the AWS and what we're seeing in some larger transformation subsequent pipeline. That's a lot of those deals already in the Quebec market. So I would say the pipeline remains where we expected it to be just the deals have taken a little longer to get to closure.
Graham Smith: That's great, thanks.
Speaker Change: That's great. Thanks.
Graham Smith: And then just on the offshore mix in the quarter, can you just kind of describe, you know, how that's progressing in terms of like the cadence of it?
And then just on the offshore mix in the quarter could you just kind of describe how that's progressing in terms of like the cadence of it.
Paul Raymond: What's the kind of outlook of that? Yeah, that'd be helpful. Yeah, thanks, Graham. Smart showing continues to be a key focus point for us. You know, with the limited growth, it gets a little more difficult to move stuff to Smart Show, but you've seen in some of the SG&A reductions and whatnot, we continue to find opportunities to move more of our effort there. And as we look forward, most of our proposals out the door now have a significant Smart Show component to them as well. So we do expect that will continue to grow in quarters ahead.
Speaker Change: The kind of the outlook of that.
Speaker Change: Yeah that'd be helpful.
Craig: Yeah. Thanks, Craig.
Craig: <unk> continues to be a key.
Craig: The focus point for us.
With the limited growth it gets a little more difficult to move stuff just mark Schober <unk> seen in some of the SG&A reductions and we.
Craig: We continue to find opportunities to move more of our our effort there and as we look forward.
Craig: Most of our proposals out the door now have a significant smart short component to them as well so we.
Craig: We do expect that will continue to grow in quarters ahead.
Graham Smith: Great, thanks.
Speaker Change: Great. Thanks, and just last one for me.
Paul Raymond: And just the last one for me, you know, the growth margins kind of dip in the quarter, I know it's a summer quarter, but maybe you can just kind of discuss a bit more in detail where utilization was versus kind of targets.
Speaker Change: I'll start and just kind of dip in the quarter.
Speaker Change: Summer quarter, but.
Speaker Change: Maybe you can just kind of discuss a bit more in detail where utilization was versus kind of targets.
Paul Raymond: Maybe any more kind of detail on changes in capacity that you guys are considering. Yeah, you hit it on it with, you know, the summer months having a little bit lower utilization with vacation. And we do see opportunities as we look at the next quarter. Again, another quarter of vacation period with the December holidays, and November here in the US. But we do see the opportunities to continue to improve our utilization targets as well.
Speaker Change: And maybe any more kind of detail on changes in capacity that you guys are considering.
Speaker Change: Okay.
Speaker Change: On it with the.
Speaker Change: The summer months, having a little bit lower utilization with vacation.
Speaker Change: Do you see opportunities as we look at the next quarter again, another quarter of vacation period with the December holidays.
Speaker Change: In November here in the U S but.
Speaker Change: We do see the opportunities to continue to improve our utilization targets as well.
Graham Smith: That's great, thanks, El Paso on.
Speaker Change: That's great. Thanks, I'll pass along.
Unknown Executive: Thank you so much.
Speaker Change: Thank you so much and our next question comes from the line of Rob Goff with Bantam. Your line is now open.
Robert Goff: And our next question comes from the line of Rob Goff of Ventum.
Robert Goff: Your line is now open. Good morning, and thank you for taking my question. Hey, good morning, Robert.
Rob Goff: Good morning, and thank you for taking my question.
Hey, good morning, Robert.
Rob Goff:
Robert Goff: Perhaps a follow up question on the Quebec outlook, could you talk to where you see or when you see stabilization or potentially a return to year-on-year or Q-on-Q growth? Great question, Rob. You know, this is an area where I said that the pipeline's still there. Our win rates haven't really changed. So it's not that we're losing deals. It's just the deals have taken longer to close. We continue. And also, we mentioned that our analyst call back in September as well, because we change our mix of services, the deals we're going after are larger deals. Just by nature, these larger deals are more complex.
Perhaps a follow up question on the Quebec outlook could you talk to where you see or where do you see stabilization or potentially a return to.
Rob Goff: Year on year, our Q on Q growth.
Rob Goff: Yeah, Great question Rob.
Rob Goff: An area, where I said the pipeline is still there our win rates haven't really changed so it's not that we're losing deals. It's just the deals are taking longer to close.
We continue.
Rob Goff: And also we mentioned at our analyst call.
Rob Goff: Back in September as well as we change our mix of services. The deals we're going after are larger deals just by nature of these larger deals are more complex areas.
Paul Raymond: There's more buyers involved in the decision making on the clients, and they do take a little longer to close.
Rob Goff: More buyers involved in the decision, making on the clients and they do take a little longer to close.
Robert Goff: As I said before, the pipeline remains healthy, and we do see that, you know, as the market starts changing, we will return to growth in Quebec. Very good.
Rob Goff: Okay.
Rob Goff: Said before the pipeline remaining remains healthy and we do see that.
Rob Goff: The market start to change and we will return to growth in Quebec.
And perhaps if you could turn to south of the border can you talk to how you see momentum in the U S revenues.
Paul Raymond: And perhaps if you could turn to south of the border, can you talk to how you see momentum in the U.S. revenues? Like it was very notable that you're recording year-on-year growth, but do you see that potentially accelerating as we look forward? Yeah, so our strategy remains, you know, we're really focused on the higher mix work. So the business transformation, we've got very strong relations with our partners. We talked about the industry first strategy we have, I'll refer back to what I talked about Oracle Cloud, we put in place in our last planning cycle, industry diversification strategy.
Speaker Change: Notable that you're recording year on year growth, but do you see that potentially accelerating as we look forward.
Speaker Change: Yes. So our strategy remains you know, we're really focused on a higher mix works on that business transformation, we've got very strong relationships with partners.
We talked about the industry first strategy, we have I'll refer back to what I talked about the Oracle cloud we've put in place.
Speaker Change: Last planning cycle industry diversification strategy.
Paul Raymond: And we've seen some really good progress building up our pipeline and some new industries. Typically, we were very focused on the healthcare space, but we've been able to move into life sciences, manufacturing, professional services, some financial services. So we're seeing that grow. And then as well, in the enterprise transformation, as companies are starting to get back into some discretionary spending, you know, we saw it in the Microsoft dynamic space in the last quarter, those deals are starting to come, we're seeing signature on those deals, and our win rates are very positive there as well. Also, I talked with the Customer Contact Center with Microsoft.
Speaker Change: And we've seen some really good progress building up our pipeline and some new industries. Typically we were very focused on the health care space, but we've been able to move into life Sciences manufacturing professional services. Some financial services, so were seeing that growth.
Speaker Change: And then as well in the enterprise transformation.
Speaker Change: Companies are starting to get back into some discretionary spending.
Speaker Change: Todd and the Microsoft dynamic space in the last quarter those deals are starting to come back.
Speaker Change: The signature on those deals.
Speaker Change: And our win rates are very positive there as well.
Speaker Change: Also I thought the customer contact center with Microsoft.
Paul Raymond: This is a new area where Microsoft has made some recent investments, and we're investing alongside them in our capabilities to capitalize on those opportunities. So, I do see as the market changes and more of this discretionary spending is freed up, we will continue to see growth in those markets. Great. Thank you.
Speaker Change: A new area, where Microsoft has made some recent investments and we're investing alongside them and our capabilities to capitalize on those opportunities. So I do see as the market changes and more discretionary spending.
Speaker Change: Freed up we will we will continue to see growth in those markets.
Speaker Change: Okay. Thank you I'll jump back in queue.
Robert Goff: I'll jump back into Thank you so much.
Thank you so much.
Jerome Dubreuil: And our next question comes from the line of Jerome Dubreuil of Desjardins. Your line is now open. Hello, everyone. Thanks for taking my questions. I got a few as well. The first one is on the co-pilot implementation. I'd like to know where we are in terms of the roadmap, maybe the ramp up of interest. Are we just only talking about pilot projects? Or are we seeing actual implementation? And if you can talk about maybe the kind of early appetite and whether this could spur an inflection and demand? Yeah, I think when we look at AI in general, generative AI, in addition to just co-pilot, you know, these are the things that are embedded in other deals.
Speaker Change: And our next question comes from the line of Jerome deploy and specialty your line is now open.
Speaker Change: So both of them on the thanks for taking my questions I've got it here as well.
Speaker Change: The first one is on the co pilot implementation I'd like to to nowhere, where we are in terms of the roadmap maybe the ramp up of interests are we just only talking about pilot projects or are we seeing actual implementation and if you can talk about maybe the kind of early appetite.
Speaker Change: And whether that could spur an inflection in demand.
Speaker Change: No I think when we look at.
The AI in general generative AI. In addition to just co pilot.
Speaker Change: These are the things that are embedded in other deals it's not specifically just the AI opportunity.
Paul Raymond: It's not specifically just an AI opportunity. So when we talk about the Microsoft Contact Center, it's really based on a co-pilot first strategy from Microsoft. So AI is embedded in the solutions. And a lot of our, I'll refer back to what we talked about our product development, we talked about on our analyst call, Investor Day back in September, in our product development, embedding more AI into our products. And that's creating more revenue opportunities for us. versus discrete, you know, AI opportunities. I'm not sure, Paul, if you have anything else that you want to add on that?
Speaker Change: So when we talked about the Microsoft contact Center, it's really based on a co pilot for strategy for Microsoft.
Speaker Change: It's embedded in our solutions.
Speaker Change: And a lot of our Oh, where for Baxter at what we talked about our product development. We've talked about all of our fall Investor day back in September and our product development embedding more AI into our products and that's creating more revenue opportunities for us.
Speaker Change: Versus discrete AI opportunities.
Speaker Change: Yeah that helps that you want and I think I think that's a great way to put it Jerome.
Paul Raymond: I think that's a great way to put it, Jerome. It's more and more part of everything that we do, the specific individual AI initiatives.
Speaker Change: More and more part of everything that we do that specific individual initial.
Initiatives.
Paul Raymond: Okay, thanks. Second, I have is I'm wondering if there's if there's a link between the lower SG&A that we're seeing the quarter and the slower bookings. In other words, are there less investments being made in sales right now and we could be seeing an impact on SG&A when when things start picking up again, or that's not the right way to think about it and, and the the improvement is there to stay? No, the SG&E improvements is not coming from reductions in sales and business development. If anything, we're doubling down in certain areas there. It's more in our operational efficiencies and other areas of the business.
Speaker Change: Okay. Thanks.
Second I have.
As I'm wondering if there's if there's a link.
Between the lower SG&A that we're seeing in the quarter and the slower bookings.
Speaker Change: In other words are there less investments are being made in sales right now and we could be seeing in back on SG&A when when things start picking up again or that's not the right way to think about it and.
Speaker Change: And the improvement is there to stay.
Speaker Change: No the yesterday and the improvement is not coming from <unk>.
Speaker Change: Reductions in sales and business development.
Speaker Change: We're doubling down in certain areas there.
Speaker Change: It's more on our operational efficiencies in other areas of the business.
Jerome Dubreuil: Great. Thanks. And last one for me.
Speaker Change: That's great. Thanks, and last one for me I'm wondering if you can talk a little more about your your nuclear business that that's been a topic that's picking up interest in capital markets. So wondering if you can maybe discuss your exposure.
Jerome Dubreuil: I wonder if you can talk a little more about your nuclear business. That's been a topic that's been picking up interest in capital markets. So I'm wondering if you can maybe discuss your exposure. And how do you see growth in that particular segment evolve in the coming quarters? Yeah, so the revenue growth this quarter, if you recall, we discussed a fairly large booking we had last in Q1. So we're seeing the benefits of that on the revenue side there. But again, talking more in pipeline, where we're seeing some investments, specifically here in Canada, where our focus is in Ontario.
How do you see growth in that particular segment of all.
Speaker Change: In the coming quarters. Thanks.
Speaker Change: Yes, so the revenue growth this quarter.
Speaker Change: You may recall, we didn't discuss it fairly large booking we had lost in Q1.
Speaker Change: So we're seeing the benefits of that in the revenue side, there, but again I'll talk more on pipeline, where we're seeing some investments specifically in Canada will be our focus is in Ontario.
Paul Raymond: And then we've seen a strong pipeline growth in that space. I do believe there's also opportunities in other geographies in which we operate. That's kind of white space for us. We're seeing how we can kind of pivot into those places south of the border, where there are some investments in maybe SMR technology around nuclear, where we've kind of set ourselves apart in the Ontario market. So some opportunity there. I wouldn't say there's anything right now, south of the border, anything like that, that's driving a lot of pipeline that's really in Canada, where we're seeing the growth right now.
Speaker Change:
Speaker Change: And then we see a strong pipeline growth in that space.
Speaker Change: I do believe there is also opportunities in other geographies in which we operate.
Speaker Change: It's kind of white space for us, where what sort of how we came back.
Speaker Change: And to those places south of the border where there are some investments in may the SLR technology.
Speaker Change: Around nuclear will be.
Speaker Change: We set ourselves apart in the Ontario market so.
Speaker Change: Some opportunity there I wouldn't say, there's anything right now south of the border anyway.
Speaker Change: Driving a lot of pipeline Thats really in Canada, where we're seeing the growth right now.
Unknown Executive: They are super cool.
Speaker Change: Now political.
Unknown Executive: Thank you so much.
Speaker Change: Thank you so much.
John Shaw: And our next question comes from the line of John Shaw of National Band. Your line is now open. Hey, good morning, guys. Thanks for taking my question. I just have a quick similar question to Rob regarding your US market. And based on the customer verticals you have in that market, any impact to your business from the election results? It seems like the new administration is going to cut down the government spending. So is the government vertical a big one for you in the US? Actually, that's one vertical where you have very, very small exposure to in the US market.
Speaker Change: Our next question comes from the line of John <unk> with National Bank. Your line is now open.
Speaker Change: Hey, good morning, guys. Thanks for taking my question I just have a quick similar question to raw regarding your U S market and based on the customer verticals you have in that market any impact to your business from the election result, it seems like the new administration is going to cut down the government spending so is the government vertical a big one for you in the U S.
Speaker Change: Yeah.
Speaker Change: Actually that's one vertical where you have a very very small exposure to in the U S market.
Paul Raymond: It's really in our digital adoption branch of business enablement, where we have some very small contracts. Most of our business is in the commercial sector in the US market.
Speaker Change: Really in our digital adoption broad business enablement, where we have some very small contracts.
Most of our businesses in the commercial sector in the U S market.
Paul Raymond: Okay, that's great to know. And could you also maybe elaborate a bit more on the high margin services you mentioned that helped improve the quarters profitability? So what is the nature of those services? Are they multi-year, long-term contract or short-term? Yeah, great question. Again, we look to move away from some of the lower margins because more of that monetized consulting business into, you know, more of the enterprise transformation, business transformation and managed services business. You know, the enterprise transformations, they drive higher margins on a higher bill rates. And of course, in the managed services, where we can drive higher utilizations, more smart shore operations, we're able to drive higher margins there as well.
Speaker Change: Okay, that's great to know and could you also maybe elaborate a bit more on the high margin services, you mentioned to help to improve the quarter's profitability. So what is the nature of those services are the multi year long term contract with short term based.
Speaker Change: Yes, great question.
Speaker Change: We look to move away from some of the lower margin business because more of the.
Speaker Change: Monetize consulting business into more of the enterprise transformation business transformation and managed services business.
Speaker Change: The enterprise transformation stage.
Speaker Change: Our margins are higher bill rates and of course in the managed services, where we can drive higher utilizations more smart shore operations, we're able to drive higher margins there as well. So it's really kind of that mix of services and more and up market and the strategic consulting where we're helping our clients with their enterprise architecture and there had been a road.
Paul Raymond: So that's really kind of that mix of services and more. And upmarket and strategic consulting, where we're helping our clients with their enterprise architecture and their road mapping on what to do, which also leads into more of that enterprise transformation and managed services work as we're, we're leading them in the design phase, if you will.
Speaker Change: Mapping or what's the deal, which also leads into more of that enterprise transformation and managed services workers wear or leaving them in the design phase if you will.
Debbie Gregorio: Okay, thanks. And last one for me is that any way can help us to quantify the reduction in variable compensation this quarter? Just a modeling question. I'm not sure the question, I understand, John, what can you be more specific? Yeah, yes, because in the prepared remarks, I think you guys, you guys mentioned that SG&A had saw a reduction in variable compensation as well as a optimization for efficiency gains. So could you help us to maybe break down the contribution, the relative contribution of the two drivers in dollar terms? So I'll let Debbie give you, try to get a bit of...
Speaker Change: Okay. Thanks, and last one for me is there any way you can help us to quantify the reduction in variable compensation. This quarter just a modeling question.
Speaker Change: Hey, guys Im not sure.
Question.
Speaker Change: Stan Jon what.
Speaker Change: Can you be more specific.
Speaker Change: Yes, yes, because in the prepared remarks alright. Thank you guys. You guys mentioned SG&A had saw a reduction in variable compensation as well as a compensation for efficiency gain so could you help us to maybe break down the contribution the relative contribution of the two drivers in dollar terms.
Speaker Change: Okay.
Speaker Change: So I'll, let Debbie give you tried to get a bit of.
Speaker Change: Uh huh.
Debbie Gregorio: visibility on what we can share, but most of it is tied to share based compensation and the like. So Yeah, tied to our share based compensation, there's, you know, some variables and because the commission and some other triggers that within the compensation, we kind of look at it more as, you know, a year to date and where we are on that and adjust accordingly within, you know, within our records every quarter based on our view of the company's performance annually. And some of it is tied to the reductions in commissions tied to reduction of sales, so kind of linear adjust.
Speaker Change: Visibility on what we can share, but most of it is tied to our share based compensation.
Like so.
Speaker Change: Yeah tied to our share based compensation that there's some some variables and cause the commission.
Speaker Change: And some other triggers that are within the compensation, we kind of look at it more as a year to date and where we are on that and adjust accordingly within within our our records every quarter based on an RFP.
Speaker Change: Companys performance annually and some of it is tied to the reductions in commissions tied to reduction of sales so kind of a linear Roger.
John Shaw: and thanks for the call at the PASA line. Okay, no problem. Thank you.
Speaker Change: Okay. Thanks for the color of the path alone.
Speaker Change: Okay. Okay.
Unknown Executive: Thank you so much.
Speaker Change: Thank.
Speaker Change: Thank you so much and our next question comes from the line of Stevia coil of Scotiabank. Your line is now open.
Divya Goyal: And our next question comes from the line of Divya Goyal of Scotiabank. Your line is now open. Good morning, everyone. So building on to some of the questions that have already been asked, I have two here. One is, could you actually elaborate the nature of the discretionary work that you have done? And I think in one of the questions, you said you're seeing a slight uptick in the nature of the discretionary work. Could you help us understand what does it look like and what is the level of visibility that you have for the, say, coming quarters in the kind of work that you're signing for the discretionary basis?
Good morning, everyone.
Moving onto some of the questions that have already been asked.
Speaker Change: I have two here.
Speaker Change: One is could you actually elaborate the nature of the discretionary work that you have done and I think in one of the questions. You said you are seeing a slight uptick in the nature of the discretionary work could.
Speaker Change: Could you help us understand what does it look like and what is the level of visibility that you have.
For the sake coming quarters in the kind of work that you are signing on the display or the discretionary basis.
Paul Raymond: So maybe I can give it a little bit more color on that statement that I made, Divya. Great question, thank you. Most of the work that we do. is discretionary to some degree. So when a client starts an ERP project, it usually takes several years to come to the decision to start it because it is a major, major endeavor that's going to impact the whole company and usually takes a few years. So they have flexibility on when they start the project. Usually they'll start it based on when they want to finish, which is tied to the end of the quarter, the end of a year or an integration of an acquisition or things like that.
So maybe I can give you a little bit more color on that statement that I made that there'd be a great question. Thank you.
Speaker Change: Most of the work that we do.
Speaker Change: Is discretionary to some degree so when a client starts an ERP project. It usually takes several years.
Speaker Change: To come to the decision to start it because it is a major major endeavor, that's going to impact the whole company and usually it takes a few years so.
Speaker Change: They have flexibility on when they start the project usually that'll start it based on when they want to finish which is tied to the end of the quarter or the end of the year or an integration of an acquisition or things like that so so they have some flexibility on when they decide to do the work, which is why I say, it's discretionary now by the St.
Paul Raymond: So they have some flexibility on when they decide to do the work, which is why I say it's discretionary. Now, by the same token, once they get started on these projects, they are critical and never stop or very seldom stop. So that's why we're seeing some delays in booking some of our larger projects. And of course, as we're growing, if you look at the type of deals that we signed now versus five years ago, the deals are much larger. So we're seeing that right now in Quebec as as larger projects finish, you know, there's a delay in the startup of the new projects, they will have to do them at some point.
Speaker Change: Hogan once they get started on these projects they are critical and never stop our very seldom stops. So that's why we're seeing some delays in booking some of our larger projects and of course as we're growing if you look at the type of deals that we signed now versus five years ago. The deals are much larger.
Speaker Change: Sure.
Speaker Change: So we're seeing that right now in Quebec as larger projects finish.
Speaker Change: There's a delay in the startup of the new projects. They will have to do them at some point, but we're seeing some some delays on when they get them started so that's why that I don't know if that answers your question, but that's kind of what I meant by discretionary.
Paul Raymond: But we're seeing some some delays on when to get them started. So that's why I don't know if that answers your question. But that's kind of what I meant by discretionary.
Paul Raymond: I know that's helpful. Obviously, that's a trend in the industry. I was wondering if there are a lot of consulting engagements in the mix, and is that also causing some weakness in this booking that you potentially historically saw but are not seeing reviving in the near term? On the consulting side, you know, a lot of that beginning of the tougher market conditions where clients were able to, but Paul talked about with these larger projects, once they start, they go through fruition, they don't necessarily get stopped midterm. But some of the smaller consulting engagements, it's very easy for clients through tougher times to stop midstream, right, and end a smaller consulting agreement.
Speaker Change: And no. That's that's helpful. Obviously, that's a trend in the industry I was what I was wondering if there are a lot of consulting engagements in the mix and is that also causing some weakness in the bookings.
Speaker Change: Potentially historically saw but are not seeing it.
Speaker Change: The widening in the near term.
Speaker Change: Okay.
Speaker Change: On the consulting side.
A lot of that at the beginning of the tougher market conditions, where clients were able to what Paul talked about one of these larger projects once they.
Speaker Change: Start when they go through fruition, they don't necessarily get stopped mid term, but some of the smaller consulting engagements, it's very easy for our clients through a tougher times to stop midstream right.
Speaker Change: And a smaller consulting agreement so that was kind of early on that we saw in some of the market challenges.
Paul Raymond: So that was kind of early on, we saw in some of the market challenges. Now, you know, those deals, I think, are still signing at the pace that they were before. I will say that our focus being on higher margin business, there are some opportunities that we've walked away from, because they don't hit our profile of what we we want to achieve as far as our profit That's helpful. But it does sound like your client base is going. So that's actually pretty good traction there.
Speaker Change: All those deals I think are still signing at the pace.
Speaker Change: They were before I will say that our focus being on higher margin business.
Speaker Change: There are some opportunities that we've walked away from because they don't fit our profile of what we want to achieve as far as our profitability.
Speaker Change: That's helpful, but it does sound like your client base is growing so that's actually pretty good traction. There just one question on the SG&A front and I know that it's already like its been asked then variations here, but with respect to the sales reduction and the share count reduction.
Divya Goyal: Just one question on the SG&A front. And I know this, it's already like, it's been asked in variations here. But with respect to the sales reduction and the share comp reduction, Are you potentially, will you potentially have to rehire and is that something that will eventually pick up as the business picks up or would you be able to continue to sustain and manage with the existing workforce with increase in variable compensation going forward? I just, as Divya, if I understand your question correctly, you know, right now, no, we don't have to hire to pick up on the demand.
Speaker Change: Are you potentially will you potentially have to re hire and is that something that we.
Speaker Change: It will eventually pick up as the business picks up or would you be able to continue to sustain and manage with the existing workforce with increase in variable compensation going forward.
Speaker Change: Yeah.
Speaker Change: Right.
Speaker Change: Studios I should if I.
Speaker Change: I understand your question correctly you know.
Speaker Change: Right now no we don't have to hire to pick up on the demand of course, as we continue to grow and the opportunity to grow we will always be looking to expand in this area, but from where we are right now it's not as if we go back to my comment before we did reduce our SG&A around business development. If anything we've found pockets, where we see opportune.
Paul Raymond: Of course, as we continue to grow and the opportunities grow, we will always be looking to expand in this area, but from where we are right now, it's not as if we, going back to my comment before, we didn't reduce our SG&A around business development. If anything, we've found pockets where we see opportunities and we've further invested there. So, I don't think that there's something we need to do around that area to accomplish our short-term goals, but also long-term, yeah, absolutely, we'll continue to grow in this area. That's very helpful.
Lisa.
Speaker Change: Further invest in there. So I don't think that there is something we need to do around that area to accomplish our short term goals.
Speaker Change: But also like long term yeah, absolutely we will continue to grow in this area.
Speaker Change: That's very helpful. Thanks for the clarification and that's all for me.
Divya Goyal: Thanks for the clarification, and that's all for me.
Unknown Executive: Thank you, Namir. Thank you so much.
Speaker Change: Thank you Denise.
Speaker Change: Thank you so much and our next question comes from the line of Vincent Colicchio of Barrington Research. Your line is now open.
Vincent Colicchio: And our next question comes from the line of Vincent Colicchio of Barrington Research. Your line is now open. Yes, Paul, last quarter, I believe the banking vertical was was stable. Could you give us a sense, more color on what happened this quarter and what the outlook would be? And I imagine your question specifically this time around the Quebec market, is this where you're looking? Excuse me? Is it specifically to the banking sector in Quebec that you were referring to? Yes, exactly. We talked about it? Yes. Yeah, I think if we look back over a year ago, we had a very large transformation project, one client that came to an end, a successful end.
Vincent Colicchio: Yes, Paul last quarter I believe the banking vertical was stable.
Vincent Colicchio: Could you give us a sense more color on what happened this quarter and what the outlook would.
Vincent Colicchio: <unk>.
Vincent Colicchio: Yes.
Vincent Colicchio: Now to your question, specifically, that's all around the Quebec market.
Vincent Colicchio: Where youre looking.
Vincent Colicchio: Yeah.
Specifically to the banking sector in Quebec that you were referring to yes exactly.
Vincent Colicchio: Yes.
Yeah, No I think if we look back over a year ago, we had a very large transformation project with one client that came to an end successful land.
Paul Raymond: And it's really still having to try to backfill that revenue that that went away almost a year ago. Now, in this market conditions, that's been more of a challenge. And tied to some of these deals taking a little longer to get signature and get started. It's been a little slower recovery than we originally expected.
Vincent Colicchio: And it's really still having to try to backfill that revenue that went away.
Vincent Colicchio: Almost a year ago now in this market conditions, that's been more of a challenge.
Vincent Colicchio: And tied to some of these deals taking a little longer to get signature it gets started.
Vincent Colicchio: It's been a little slower recovery than we originally expected.
Paul Raymond: That's in Quebec, just to be clear. Like Bernard said earlier, bookings in the US are solid. Same thing in Ontario and doing well.
But that shouldn't come back to Dennis just to be clear.
Speaker Change: Bernard said earlier, our bookings in the U S are solid and the same thing in Ontario, what are doing well. So there's really two a handful of clients in Quebec.
Paul Raymond: So it's really up to a handful of clients in Quebec.
Paul Raymond: and a question on the your acquisition pipeline is it currently substantial and how are valuations currently? We have a very healthy funnel. Like I said, there's always three factors, right? The right acquisition at the right time for the right price. You're seeing the transactions in the market right now for larger companies. We've done very well in the past at finding niche, high profitable, highly profitable companies that play well into our platform and our mix of services. So we're keeping our focus on that. And you saw our balance sheet, we've deleveraged over $30 million over the last year.
And.
Speaker Change: Question on the <unk>.
Speaker Change: The acquisition pipeline as it currently substantial and how evaluations currently.
Speaker Change: We have a very healthy funnel.
Speaker Change: Like I said, there's always three factors right the right acquisition.
The right time for the right price.
Speaker Change: Youre seeing the transactions in the market right now for larger companies.
Speaker Change: We've we've done very well in the past that finding niche high profitably is profitable.
Speaker Change: Highly profitable companies.
Play well into our platform and our mix of services. So we are keeping our focus on that and you saw our balance sheet. We we have deleveraged over $30 million over the last year. So I think we're under we're under two five times now in terms of our.
Paul Raymond: So I think we're under 2.5 times now in terms of our EBITDA ratio. So I think we have a very healthy balance sheet to keep our M&A. activities going. So we're very satisfied with where the funnel is. Thank you, Paul. Thank you, Vince.
Speaker Change: Did the debt to EBITDA ratio. So I think we have a very healthy.
Speaker Change: Balance sheet to a deeper.
Keep our M&A.
Speaker Change: Activities, So we're very satisfied with where the finalists.
Paul Paul: Thank you Paul.
Paul Paul: Thank you Vince.
Paul Paul: Yeah.
Rob Goff: Thank you so much. And we have a follow-up question from Rob Goff of Phantom. Please ask your question.
Thank you so much and we have a follow up question from Rob Goff of fandom. Please ask your question.
Rob Goff: And thank you again. A bit more of a detailed modeling question, perhaps. Are you finding any trending in accounts receivables or account payables as we look at your working capital? No, I think we continue to generate cash from operations. If you look sequentially over, we've reduced WIPT amount. Those working process in Q2 went into our accounts receivable and they'll be collected within the normal course of business. So we do keep an eye on that and we do maximize the cash from operations and just diligent work on that front. No, I think, Rob, if you look at the balance sheet, you'll see that in the past year, quarter over quarter, we've done a great job, team has done a great job.
Rob Goff: And thank you again, a bit more of a detailed modeling question. Perhaps are you finding any trending in accounts receivables our account payables as we look at your working capital.
Speaker Change: No I think we continue to generate cash from operations. If you look sequentially over we reduced with the Mount those as a work in process in Q2.
Speaker Change: Went into our accounts receivable and they'll be collected within the normal course of business. So we do keep an eye on that and we do maximize that the cash from operations and the just stay diligent to work on that front.
Speaker Change: No I think Rob if you look at the balance sheet Youll see that in the past year.
Speaker Change: Quarter over quarter, we've done a great job team has done a great job.
Rob Goff: making sure we we're collecting on time or DSO is low and we're the leverage Thank you.
Speaker Change: Making sure we were collecting on time, our DSO is low and deleverage.
Speaker Change: Okay.
Speaker Change: Okay.
Unknown Executive: Thank you so much.
Speaker Change: Thank you so much and.
Unknown Executive: And presenters, there are no further questions at this time.
Speaker Change: And presenters there are no further questions at this time I would now like to turn the call to Paul for closing remarks.
Paul Raymond: I would now like to turn the call to Paul for closing. Thanks, Omae. Thank you very much, everybody, for joining us today and looking forward to talking in the near future.
Paul Paul: Thanks for me. Thank you very much everybody for joining us today and looking forward to talking in the near future.
Unknown Executive: Ladies and gentlemen, this concludes today's conference calls. Thank you for participating and you may now disconnect. Have a good day.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating and you may now disconnect have a good day.
Paul Paul: Okay.
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