Q3 2025 Alithya Group Inc Earnings Call
Okay.
Emily: Good morning, My name is Emily and I will be your conference operator today at this time I would like to welcome everyone to our Lithia third quarter's fiscal 'twenty 25 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question.
Emily: During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press star two.
Emily: Thank you and you may begin your conference.
Speaker Change: Good morning, and thank you once again for joining us for <unk> third quarter fiscal 'twenty 25 results conference call.
Speaker Change: Press release, and MD&A with complete financial statements and related notes were issued this morning, and I'll now posted on our website.
Speaker Change: The webcast presentation can also be found on our website in the investors section.
Speaker Change: Please be advised the difficult 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 our estimate plan expectation and statements regarding the future growth operations result.
Speaker Change: Formats and business prospects that do not solely relate to historical facts.
Speaker Change: These statements May also refer to future events included including expectations around client demand business opportunities leveraging our services.
Speaker Change: <unk> AI and expertise to meet client needs.
Speaker Change: And in that competitive market, achieving a three year strategic plan and deploying our smart joint at the building.
Speaker Change: For more information please refer to their cautionary notes in our presentation into the forward looking statements and the risks and uncertainties section of our MD&A.
Speaker Change: Available on our website.
Speaker Change: All figures discussed on today's call are in Canadian dollars.
Speaker Change: Yes, otherwise stated and we may refer to certain indicators that are non <unk> measures.
Speaker Change: Please refer to the cautionary cautionary notes in our presentation and to the non ISR and <unk>.
Speaker Change: Are there financial measures section of our MD&A for more details.
Speaker Change: Presenting this morning are but I M O N E S President and Chief Executive Officer.
Bernard: Bernard doctrine, Chief operating officer, and he called it our chief financial.
Speaker Change: Lobster.
Speaker Change: I will now turn the call over to call him all Paul Thank you Benjamin and good morning, everyone. Thank you for joining us today.
Speaker Change: I have the privilege of beginning this call by highlighting our notable third quarter achievements, some of which were new records for the team.
Speaker Change: I will now turn things over to Bernard <unk>, our Chief operating officer to break things down further followed by Nicola.
Speaker Change: Our new Chief Financial Officer, who will provide the financial highlights that said I would like to take this opportunity to introduce you to Nicholas who joined at least yet this past December.
Nicola: Nicola is a CPA and CFA with nearly 30 years of experience in finance, having worked with public and private multinational companies operating in entertainment and technology media mining and manufacturing. He's also led to several local and international acquisitions.
Nicola: Nicola will eat it we just finance function acquisition initiatives and Investor Relations as we continue implementing our fiscal 2020 five 'twenty 'twenty seven strategic plan.
Nicola: So please do not hesitate to reach out to Nicholas after the call.
Nicola: Now back to the results.
Nicola: We are proud to disclose that the Olivia team delivered a record quarter on several fronts, including posting the highest adjusted EBITDA margin since going public which is like a key milestone of our three year plan.
Nicola: Q3 was also exercised watermark for gross margin as a percentage of revenue, reflecting the outcome of our focus on delivering higher value services to our clients. In addition to very strong third quarter bookings, which Bernard will address shortly we are also pleased with the sequential organic growth.
Nicola: Are we all experienced in all our geographies.
Nicola: I would also like dimension our satisfaction with the early contribution is gained from the XR ambitious acquisition completed on December 1st.
Nicola: That acquisition is contributing to scale of our Microsoft Smart shoring capabilities and the development of cross selling opportunities has already shown great promise.
Speaker Change: We are delighted to welcome Felix let me die XR envisions leader and the whole <unk> team to the Aleve your family.
Speaker Change: This acquisition aligns with our strategic plan to integrate companies offering high value complementary services for our clients.
Speaker Change: By bringing the XR envisions talented Microsoft focused experts will unite two top Microsoft dynamic partners strengthening our asset based solutions that are smart shrink capabilities across North America in Morocco. This.
Speaker Change: This integration expands our talent pool, and reinforces our ability to capitalize on global market opportunities. Additionally, XR envisioned as accelerators designed to streamline financial reconciliations between finance and project teams are a valuable complement to our existing solutions.
Speaker Change: I'll now turn things over to Bernard to provide some specifics of our third quarter performance Bernard.
Bernard: Thank you Paul Good morning, and thank you for joining our call today.
Bernard: Q3 was a strong quarter for Lithia and a positive step forward as we continue to execute on the priorities, we set forth at our three year strategic plan.
Bernard: Our organizational change initiatives are driving profitable growth.
Bernard: Seeing promising trends in our targeted industries.
Bernard: To build on the progress we have made over the past quarters.
Bernard: Despite some headwinds in our industry, we delivered sequential growth as a result of our disciplined focus on the initiatives outlined in our three year strategic plan.
Bernard: Q3 was one of our strongest booking quarters since April one 2021, when we signed a very large 10 year engagement with two major clients.
Bernard: Our Q3 bookings of $138 $4 million represents a book to Bill ratio of one two times revenue for 1.3 or four times revenue when adjusting for the large commercial agreement signed in April 2021.
Bernard: Our book to Bill ratio over the trailing 12 months zero point 97 times revenue.
Bernard: Or one one times revenue when adjusting for the same commercial agreement.
Bernard: As a result of our Q3 bookings our backlog is now approximately 17 months of revenues based on our trailing 12 months revenue.
Bernard: We're also encouraged by the fact that our bookings are fairly consistent so the proportion of our revenues across our geographies.
Bernard: Digitally over one third of the $138 $4 million in Q3 bookings came from Williams in financial services and insurance, including strong bookings in banking.
Bernard: Highlighting our return to growth in this vertical after several slower quarters.
Bernard: Finally, a higher proportion of our Q3 bookings were a result of sales of high value enterprise transformation engagements, including in the Canadian market.
Bernard: We continue to focus on expanding our smart store capabilities and at the end of Q3 nine 3% of our professionals are based in our smart shore centers.
Paul: As Paul mentioned.
Speaker Change: Position of Exterran vision broadens, our smart sourcing capabilities in Morocco.
Speaker Change: Although we are still early in the integration we have identified several opportunities for leveraging these new capabilities and delivering our client services and our back office support.
Speaker Change: Our acquisition strategy continues to be a driver for increasing our smart shoring delivery.
Speaker Change: Such immediate contributions underlying the importance that acquisitions play in our overall business strategy.
Speaker Change: As I discussed during our last Investor day in September one of our four pillars and a differentiator for reaching our strategic targets is to leverage our industry first strategy.
Speaker Change: Over the past several months, we've been asking on that front to further leverage our subject matter expertise and our target industries.
Speaker Change: This included a realignment of our business structure in Quebec, creating closer collaboration between our sales and delivery teams in each of the industries we serve.
Speaker Change: These industry teams are supported by our strong practices and partnerships with Microsoft Oracle AWS and others.
Speaker Change: Most importantly, the greater effectiveness that realignment have been embraced by our clients with greater visibility and confidence in the depth of our consolidated expertise and our commitment to their mission.
Speaker Change: Q3 also saw the signing of multiple proof of concepts for IP and AI, our journey basically initiatives.
Speaker Change: These included several application modernization poc's with our rapid suite IP.
Speaker Change: Intelligent document processing, our mailroom automation efforts with rapid capture as well as several digital adoption initiatives for expanded use of Microsoft co pilot.
Speaker Change: Many of these co pay ratios originated from our co pilot Academy, we ran for our clients in past quarters, and we are now helping our clients take the next step.
Speaker Change: Switching to enterprise transformation, where we have seen a strong demand for our services.
Speaker Change: Specifically within our Oracle Division Q3 was a strong quarter with revenue gross margin and EBITDA, all exceeding expectations and our client satisfaction rate remains very positive.
Speaker Change: Line of caps.
Speaker Change: The positive impact of our work with division was driven by the successful implementation of five large ERP and HCM payroll projects, but all went live at the end of Q3.
Speaker Change: This included the regional Medical Center, where we completed the first implementation in the world and the health care environment of oracles, new workforce scheduling application to manage nurse scheduling.
Speaker Change: Successful implementation positioned well positions lithia well for future opportunities in this space.
Speaker Change: Our Oracle enterprise performance management or ECM business also contributed to the strong results within our Oracle practice.
Speaker Change: Many of our largest Q3 bookings in the Oracle Division.
Speaker Change: The APM initiatives with larger organizations.
Speaker Change: We remain focused on diversification with I mean, the Oracle practice and have adopted a hybrid industry and functional Cup. The go to market model targeting healthcare professional services manufacturing and financial services.
Speaker Change: We are seeing positive early results from this model within our pipeline and bookings, including signing our largest Oracle managed services contract to date and.
Speaker Change: And we expect to continue to see dividends from these investments in our next fiscal year.
Speaker Change: With that I'll turn things over to Nicolas to provide financial information regarding our Q3 achievements niccolo.
Pam: Let's see Pam and good morning, everyone.
Speaker Change: I'm very happy to join this conference call for the first time ability as CFO and to highlight some of the company's significant achievements this past quarter.
Pam: These past few months since I joined the company has been very rewarding.
Pam: Had the privilege of meeting highly skilled colleagues and witnessed firsthand the opportunities ahead for alethia.
Pam: That said, let's begin with a review of our consolidated revenues.
Pam: In the third quarter consolidated revenues came in at $116 8 million down $4 7 million or three 9% on a year over year basis.
Pam: Sequential basis revenues were up $4 $3 million or three 8% versus the second quarter of this year with organic growth in all of our geographies.
Pam: XR envision was reported for only one month in our results and contributed approximately $800000 in revenues for the quarter.
Pam: Clients recurrence remains very high with approximately 87% of villages Q3 revenues coming from clients that we add in the same quarter last year.
Pam: That is an excellent indicator of the trust our clients have in us and a good indication of long term stability.
Pam: Looking at profitability, we are reporting another quarter of continued improvement on gross margin as a percentage of revenue.
Pam: Gross margin reached 32, 3% a record level for our lithium in the quarter up 100 basis points from 31, 3% last year and up 170 basis points from 36% in the second quarter of this year.
Pam: On a sequential basis the increase in gross margin came from all geographies of our business.
This performance comes from increased efficiencies and our continued evolution towards a higher value business mix two key priorities identified during the September 2024, Investor day presentations.
Pam: I will now turn to a review of our performance by region, starting with Canada.
Pam: Revenues in Canada reached $61 7 million in Q3 down $6 3 million or nine 3% on a year over year basis.
Pam: The decrease in revenue was primarily due to one clients major transformation project, reaching maturity and a reduction in revenues from certain government contracts, partially offset by a recovery in the banking sector and the contribution of <unk> in the quarter.
Pam: Of note, while down year over year revenues in Canada were up sequentially from the second quarter by three 4%.
Pam: Looking at our gross margin in Canada, we saw improvement compared to the same quarter last year due to higher efficiencies and hourly billing rates, a greater proportion of higher value services and are proportionately larger decrease in the use of subcontractors compared to permanent employees.
Pam: In the U S revenues increased by $1 7 million or three 8% to $48 $8 million.
Pam: The increase is due primarily to organic growth in enterprise transformation services supports revenues and a $1 $3 million favorable exchange rate impact between the two periods.
Pam: Our U S gross margin as a percentage of revenue decreased compared to the same quarter last year, primarily due to a decrease in digital adoption subscription revenues, which historically at a higher gross margin percentage.
Pam: In our international business revenues were slightly down by $200000 versus prior year with a lower gross margin as a percentage of revenue mainly due to the end of a project in the UK.
Pam: Overall from a geographical perspective, we saw a higher proportion of revenues in the U S versus the prior year, which positively impacted our consolidated gross margin and is in line with our strategic plan.
Pam: Now looking at SG&A expenses, we are continuing to focus on optimizing our cost structure to ensure greater efficiency and long term performance.
Pam: In the third quarter SG&A expenses amounted to $28 8 million.
Pam: A decrease of $700000 or two 4% year over year.
Pam: The decrease in SG&A expense was driven mainly by decreases in professional fees occupancy cost and recruiting fees, which has been partly offset by an increase in employee compensation costs, resulting primarily from higher variable compensation and the addition of the SRM SG&A.
Pam: SG&A as a percentage of revenue was 24, 9% in Q3 compared to 24, 5% in the same period last year due to revenue deleverage.
Pam: Looking at our adjusted EBITDA as Paul mentioned at the beginning of the call adjusted EBITDA margin reached a record level of eight 9% in Q3.
Pam: That's compared to seven 8% last year and up sequentially from eight 3% in the second quarter of this year.
Pam: Our third quarter, adjusted EBITDA amounted to $10 3 million.
Pam: An eight 7% increase year over year.
Pam: Again this reflects the progress we made on our operational performance and on cost optimization.
Pam: Our adjusted net earnings came in at $5 $7 million, representing an increase of $1 4 million or <unk> <unk> per share year over year.
Pam: Finally, let's take a look at our cash flow and financial position.
Pam: Net cash from operating activities remained strong reaching $11 $7 million in the quarter, a decrease of $3 $9 million versus the prior year, which was essentially due to working capital of aggregations.
Pam: As of December 31, 2024.
Pam: The amount of $208 million and our leverage ratio reached $2 six times net debt to trailing 12 months adjusted EBITDA, although within alethia its targeted leverage levels.
Pam: The sequential increase in net debt of approximately 12 million reflects the acquisition of <unk>.
Pam: And the unfavorable FX impact on our U S dollar denominated debt, which has been partially offset by the positive cash flow generation in the quarter.
Pam: Therefore, our liquidity remains strong with cash on hand, and availability under our credit agreement amounting to $63 $7 million.
Pam: Our goal is to continue deleveraging by managing our net cash from operating activities in order to focus on debt reduction.
Pam: Deleveraging will continue the business positioning us to position us well for capital deployment for the right business acquisition opportunities.
Pam: In terms of financial flexibility I would like to conclude and highlighting that we extended the maturity of our $140 million senior credit facility from April 2026 to April 2020 set.
Pam: We obtained good support from our banking partners, and we remain well positioned for future growth.
Pam: I will now pass it over to Paul for concluding remarks. Thank you Nicholas as you can all see our key indicators are moving in the right direction, we had record bookings and a return to sequential revenue growth. We had a record gross margins and EBITDA as a percentage of revenue and we had strong cash flow in a very complementary high value acquisition.
Pam: But the most important takeaway should be that.
Paul: The measurable progress in advancing our core pillars of our three year strategic plan.
Paul: We will now open it up for questions Emily.
Paul: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on you touched on film you'll hear from that your head has been raised should you wish to decline from the polling process. Please press star followed by the two if.
Paul: If you are using a speaker phone please lift the handset before pressing any keys. Your first question comes from Gavin Fairweather from Cormack. Please go ahead.
Gavin Fairweather: Oh, Hey, good morning, and congrats on the strong results, maybe we can just start on on the bookings number obviously was impressive and quite strong and you called out a bit of a rebound in banking and insurance. Maybe you can just discuss those those sectors in particular, which I know, it's been a little bit slower for you.
Gavin Fairweather: And the momentum that you saw in the quarter and whether you think that is sustainable.
Gavin Fairweather: Yes definitely.
Gavin Fairweather: As we've talked in past quarters, there had been some headwinds.
Canadian banking market.
Gavin Fairweather: We did see a rebound last quarter with some very positive bookings there.
Gavin Fairweather: I think as we go forward the pipeline remains strong I think there's a lot of uncertainties in the market. So we remain cautious.
Gavin Fairweather: To build on our pipeline that I think.
Gavin Fairweather: We will generate some positive results in the future.
Gavin Fairweather: That's great and then maybe just on gross margins and obviously <unk> seen some nice strength on that front.
Gavin Fairweather: How do you think about the gross margin trajectory from here I mean, I know ex our ambition is accretive on that front, but if you start to see banking and insurance coming back or will that.
Gavin Fairweather: Place a bit of a headwind on gross margins given that there there can be more sub contracting in those sectors. How how would you think about that.
Gavin Fairweather: Hi, Kevin Thanks for the question, but if you go back to our strategic plan. The goal is to keep growing that we're seeing it now as Bernard was mentioning in the mix of business. The new business that we're winning is higher gross margin. So I mean that is the long term goal and long term trend that we're aiming at.
Gavin Fairweather: Our three year plan has us getting to 33% to 35%. So we think thats achievable within the next three years. So that's what we're pushing towards.
Speaker Change: Got it that's helpful. And then maybe we can just touch on competition I think last quarter, you called out some pricing pressure in particular in the government space It looks like you've.
Speaker Change: And I've walked away from some business there and in terms of a little bit lost revenue year over year in the quarter maybe.
Speaker Change: Maybe you can discuss that sector that also competitive dynamics that you're seeing elsewhere in terms of pricing trends are win rates.
Speaker Change: Yes, thanks, Kevin.
Speaker Change: As we look at the the public sector, specifically a lot of our public sector business is here in Quebec.
Speaker Change: We have remained disciplined in not chasing lower margin business. So.
Speaker Change: Thanks cool down in the market, we saw more competition in this market and there was a lot of pressure on rates.
Speaker Change: And our focus has been on the profitable growth. So we focus on those deals that were not just solely awarded to the lowest price vendor, but had a strong quality component and where we were able to differentiate.
Speaker Change: So kind of that second part of your question around competition that has been driving the rate pressures.
Speaker Change: I think our ability to remain disciplined and focus on those areas, where we differentiate with our quality of services and our capabilities has allowed us to continue.
Speaker Change: Continuing to drive the margins that we're looking for but there is a headwind.
Speaker Change: On the volume of bookings because of that.
Speaker Change: Yeah, Yeah, I mean, nice to see EBITDA basically sitting on a record despite that.
Speaker Change: Maybe just lastly for me an extra embolden you know you've had it in the fold for a few months here any kind of.
Speaker Change: Surprises her initial impressions are things, which have proven to be a better than expected.
Speaker Change: Integration of the business, maybe provide a bit more of an update on that front that'd be helpful.
Speaker Change: Nothing nothing surprising we're sticking to the plan the Gavin I guess, everybody is kind of watching the radar screen of what's going to happen with tariffs and everything we don't see direct impacts to us, but some of our clients might be impacted down the road, but again juries out everybody is everybody has an opinion on it.
Speaker Change: So we're focusing on the things we control.
Speaker Change: That's it for me thank you.
Speaker Change: Alright, thank you.
Speaker Change: And the next question comes from <unk> from Scotiabank. Please go ahead.
Speaker Change: Good morning, everyone I, just wanted to get a bit.
Speaker Change: More color in terms of.
Speaker Change: What is the longer term plan for Canada like maybe some of your peers you started seeing a little bit more positive momentum you didn't notice positive bookings momentum last quarter on financial services sector, but given your strategic plan and the way things are going where do you see Canada trending for yourself over the coming quarters.
Speaker Change: Thanks for the question of <unk>.
We saw growth in all of our geographies this past quarter and as Bernard was mentioning a big chunk of that in financial services in Canada.
Speaker Change: So if we if you look at our long term plan, our three year plan that we just we published and we're working towards but we expect growth in all of our geographies. However, we expect the U S to grow faster.
Speaker Change: Our type of business is not subject to the tariffs and everything that we're hearing and we're seeing we're still.
Bernard: As Bernard was saying.
Bernard: Have a very strong funnel and we're seeing a lot of opportunity out there. So.
Speaker Change: I think we're at the beginning and I mentioned this in the past I think we're at the beginning of a trend of Modernisation. The larger more legacy type systems, leveraging AI to modernize that we have many proof of concepts ongoing in that area. So so no we are.
Bernard: We're confident on the future.
Bernard: That's perfect and just one more question if you could provide a little bit complementary on the.
Bernard: Broader consolidation trends across.
Bernard: Canadian technology services sector, and how do you see yourself progression.
Bernard: As an acquirer and a target.
Bernard: Over the coming quarters and that'll be awesome. Thank you.
Bernard: Yeah, it's been it's been an interesting year, we track.
Bernard: We're running out of comps the track.
Bernard: You all saw the news that the last two three.
Bernard: Just in the last quarter that the privatized so.
Speaker Change: Yes, we're going to be one of the last mohicans as they say.
Speaker Change: We love our positioning I think it just goes to show that our company is significantly undervalued compared to what's happening in the market. So I think it's a great investment opportunity.
Speaker Change: We're still finding if you look at the type of acquisitions, we've done like the one we recently completed but we are very good at finding what I would call. The the diamonds in the rough with the jewels out there that these niche companies that fit very well into our platform that we can position for growth and then that's how we found <unk>.
Speaker Change: <unk> It was a mutual decision they wanted to sell to us and we wanted to buy them. So it was really.
Speaker Change: <unk>.
Speaker Change: Hey, good.
Speaker Change: A very good acquisition there are many others like that out there I think it's we put a lot of work in defining those at identifying those we have a very healthy funnel.
Speaker Change: So I think theres going to be a lot of noise on the larger transactions, but I think there is still a lot of these smaller niche companies out there that are looking for a platform like ours.
Speaker Change: Two to join and to expand because they can't do it alone so I see that as a positive.
Speaker Change: Being the last man standing.
Speaker Change: Thank you.
Speaker Change: And the next question comes from <unk> <unk> from <unk>. Please go ahead.
Speaker Change: We bought Alterra mountain, Thanks for taking my questions. The first one.
Speaker Change: Maybe for Nicola if you can maybe tell.
Speaker Change: Tell us maybe what are the key priorities you will be working on what are the assessments.
Speaker Change: You've been given I'm wondering if there's any change in terms of the financial management of the company that are that we should be expecting.
Speaker Change: Well. Thank you John for the question so as.
Speaker Change: Yes.
Speaker Change: I joined about two months ago I've had the chance to initially I guess my first priority for me was to really sort of learned on the business and thats something that industry have been in multiple industries, but spent to learn the people in meat and try to like just sea worthy.
Speaker Change: Pockets of value are and where the growth opportunities are.
Speaker Change: In terms of my focus.
Speaker Change: Chance to come in right. After the company like disposed a three year plan. So I'm really going to essentially tried to focus on those metrics, which is first of all focusing on the internal.
Speaker Change: And now let tax and financial planning analysis to make sure that we support the managements and support the organic growth targets I guess, that's what is going to be one big first priority for me and obviously the other part of the line as the M&A growth that we've put forward. So I'm going to spend a lot of my time as well in terms of support.
The M&A.
Speaker Change: And finally, the Hep C supporting the team here in terms of messaging to the financial community.
Speaker Change: So today, so that's been quite a journey for me.
Speaker Change: Sort of that I've seen firsthand that there's quite a bit of opportunities ahead, and I'm pretty pleased to join.
Speaker Change: Joining the team and happy to speak to you all in the future.
Speaker Change: Yes, thanks for this.
Speaker Change: Follow up for me.
Speaker Change: You did mention.
Speaker Change: That you still have one big clients kind of affecting the year on year comparison that you have.
Speaker Change: But at the same time you're reporting.
Speaker Change: Very good bookings in the quarter very noticeable there.
Speaker Change: When should we be expecting that the big clients.
Speaker Change: Taking off what will be lapping.
Speaker Change: Is this something that's going to be gradual or and then all at once or how should we be expecting this this big contract to run off.
Speaker Change: Thanks for the question Jerome and yes. This is a contract that ramped up over several quarters. It peaked and then ramped down over several quarters.
Speaker Change: I think we will see the effects of it nikolaj. We're looking through this earlier this week, probably another couple of quarters.
Speaker Change: But we do have a pipeline around.
Speaker Change: Around that that we may see some bounce back on that as well, but from that original project Theres still another couple of quarters, where we had declining revenues.
Speaker Change: That project ramped out.
Speaker Change: So a very large project in our portfolio.
Speaker Change: Thank you very much.
Speaker Change: Once again, if you have a question. Please press star one and the next question comes from John <unk> from National Bank. Please go ahead.
John: Hey, good morning, guys. Thanks for taking my question I just wanted to ask about the lumpiness of the bookings because it sounds like there are a couple of large deals this quarter. So in terms of the future bookings should we expect a smooth recovery or should we still expect some fluctuation in our booking numbers on a sequential basis.
Speaker Change: Yeah.
Speaker Change: Yeah. Thanks, John So I I Should've mentioned it earlier I, usually always do with my speaking notes.
Speaker Change: If you look we published two numbers, we published the trailing 12 months end to end the quarterly for the simple reason that very often.
Speaker Change: We have these large projects that can swing a quarter, one way or the other so something that was supposed to be signed in December as they get signed in January So our Q2 looks really bad in our Q3 looks really good. So you really have to look at it on a 12 month basis, just because of.
Speaker Change: Different quarterly and then depending on which the software companies involved like if we work with Oracle in a given project. They have a different year end that Microsoft or Amazon or Azure. So whenever there is a third party involved usually around their year end. There is there are more and more projects being signed so my recommendation is.
Speaker Change: Look at this on a 12 months basis I know Bernard if you want to add to that.
Speaker Change: Yes.
Speaker Change: Okay that makes perfect sense in terms of the those new bookings this quarter, how should we think of Paul maybe you have a margin profile and whether you know that your strong gross margin EBITDA margin could be maintained in next one or two quarters.
Speaker Change: Yeah, I would say our focus has been on changing the mix of the work that we're going after so our bookings aligned to that priority going after higher value services.
Speaker Change: So I think our goal is to continue the trends as Paul mentioned before or our gross margin target for a three year plan was 33% to 35%.
Speaker Change: We're tracking to that and the bookings that we have in our pipeline are supporting our priority is to get there.
Speaker Change: Okay and in terms of the future acquisitions, given the completion of the SRM and what are some of the areas of interest where we think the future acquisition comp from in other words, what are some some of the capability that you look to acquire or enhance.
Speaker Change: So yes. Thanks for the question there are many.
Speaker Change: My My recommendation is if you if you have a chance it's on our website, we actually have our strategic plan, we published there and we explain it in a lot of detail what we're looking for by geography by <unk>.
Speaker Change: By business mix by vertical by technology.
Speaker Change: Really I mean, we go to market by a vertical right. So we have a financial services practice in manufacturing practice and so on and so forth. So we're in close conversation continually with our clients in terms of what they need and where they're going and where they see.
Speaker Change: Where do you see that they need to help in the strategic mission critical systems that they need to deploy so.
Speaker Change: For example, the ERP side. So every organization is an ERP that is it need to revert to renew with improve it leveraged at data from it. So today we're.
Speaker Change: A premium partner to Microsoft and Oracle in some key verticals. There are other verticals that we could go in there are complementary services around that especially around leveraging the data so the AI type.
Speaker Change: Stuff that we do so again a lot of opportunities there.
Speaker Change: We are not in Sap's today that would be an interesting area to get into and a few others. I mean that you know that our brand names out in the industry that our clients are looking for that.
Speaker Change: We would be glad to.
Speaker Change: AD as a practice so that's part of our shopping list. These are things that were out there looking for and.
Speaker Change: And trying to get it done for the right price.
Speaker Change: Okay. Thanks for the colors are maybe one last question for me I know Paul you mentioned the tariff situation is not going to impact our business now that makes sense to me as well, but the same Taiwan understand there's also a ongoing trend from one of our Canadian business is too to source from Canadian providers do you think that's going to create some.
Speaker Change: Tailwind for you.
Speaker Change: I hope so I hope so I guess you got to be careful with that because we also have a very strong U S customer base.
Speaker Change: European customer base. So we like to believe we have a strong proximity model. So you know our local clients buy from our local people.
Speaker Change: And then we figure out how to deliver the best cost effective way possible. So.
Speaker Change: Whenever things like this happen we've been through this in the past and we've managed through it. So if it does if it if it helps us.
Speaker Change: Oh the battery.
Alright, Thanks again copper line.
Speaker Change: Okay. Thank you.
Speaker Change: And we have a follow up question from Zealand's away from digital Bank. Please go ahead.
Speaker Change: Okay.
Speaker Change: Hey, I'm back yes, just a follow up almost the same question as John but more on the government side you know we've been.
Speaker Change: Hearing governments.
Speaker Change: Talking about tapering more of them are the local suppliers.
Speaker Change: And correct me, if I'm wrong, but I think your government business is much bigger than Canada, and indeed in the U S. I'm wondering if you've had.
Speaker Change: Maybe starting to hear some green shoots or maybe some.
Speaker Change: Some easier conversation with your government counterparts.
Speaker Change: No worries, it's the same answer as to John's questions.
Speaker Change: I can I can give you some color because I am part of other.
Speaker Change: Unrelated to the to our Lithia.
Speaker Change: <unk>.
<unk> hundred which is the organization of the Ceos here in Quebec give you. Some color I know there are a lot of a lot of discussions between the business community and the local governments across Canada in terms of how to better use local companies.
Speaker Change: The speed at which they can do that I mean is.
Speaker Change: Bodies guests, but there is some.
Speaker Change: There is some desire to do it but that would mean changing procurement laws changing many things and how the government buys in our government agencies buys like hydro, Quebec for example, how they buy.
Speaker Change: I don't know if you saw on the news this morning about changing construction codes. So you can use more wood for higher buildings you go to the Scandinavian countries. They can bill at an 18 story building out of wood. So Canada is going to have a lot of excess wood with these these terrorists in Quebec for example, you're only allowed to do five stories. So they would have to change there.
Speaker Change: Construction goes at a loss. So I think there is a desire there is a lot of talk around it.
Speaker Change: Change these things in many different jurisdictions.
Speaker Change: Between the desire and the actual changes happening, we'll see it's a lot.
Speaker Change: Simpler on the in the private sector of making those changes.
Speaker Change: And then again, maybe the tariff situation is going to be resolved in a few months and all of that stuff goes away. So it's anybody's guess right now, but yes. There is some talk about that in many areas.
Speaker Change: Yes.
Speaker Change: Zero.
Speaker Change: At this time, we have no other questions I will now turn the conference back to Paul Campbell for any closing remarks.
Speaker Change: Well again, thank you everyone for joining us today and I'd invite you. If you have any additional question not hesitate to reach out to the Nicholas after the call. Thank you.
Speaker Change: Ladies and gentlemen. This concludes the conference you may now disconnect your lines.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.