Earnings call transcript: Alithya Q3 2025 misses EPS forecast, stock dips

Alithya Group Inc. (ALYA) reported its third-quarter earnings for 2025, revealing a significant earnings per share (EPS) miss. The company posted an EPS of -0.32, falling short of the forecasted 0.0134 by a wide margin. This substantial deviation led to a negative market reaction, with the stock closing down 1.74% at $1.69, nearing its 52-week low of $1.4.

Key Takeaways

• Alithya reported a significant EPS miss, with a surprise of -2488.06%.
• The company’s stock price fell by 1.74% following the earnings release.
• Record gross margin and adjusted EBITDA margin despite revenue decline.
• Strong client retention and new product innovations highlighted.
• Concerns over revenue decline from a major client project.

Company Performance

Alithya’s overall performance in Q3 2025 was mixed. While the company achieved record gross and EBITDA margins, it experienced a year-over-year revenue decline of 3.9%. Sequentially, revenues grew by 3.8%, indicating some recovery. The company emphasized its strong client retention, with 87% of revenues coming from existing clients, and highlighted its strategic innovations in IP and AI initiatives.

Financial Highlights

• Revenue: CAD 115.8 million, down 3.9% year-over-year.
• Earnings per share: -0.32, missing the forecast significantly.
• Gross margin: 32.3%, up 100 basis points year-over-year.
• Adjusted EBITDA margin: 8.9%, up from 7.8% last year.

Earnings vs. Forecast

Alithya’s EPS of -0.32 fell short of the expected 0.0134, resulting in a surprise of -2488.06%. This large miss contrasts with typical quarterly variations and suggests operational challenges or unexpected costs.

Market Reaction

Following the earnings announcement, Alithya’s stock declined by 1.74%, closing at $1.69. This movement brings the stock closer to its 52-week low, reflecting negative investor sentiment. The decline is notable compared to broader market trends, indicating specific concerns about the company’s performance.

Outlook & Guidance

Looking ahead, Alithya remains focused on its three-year strategic plan targeting gross margins of 33-35%. The company anticipates growth across all geographies, with a particular emphasis on the U.S. market. Strategic acquisitions and potential opportunities in SAP and complementary service areas are also on the horizon.

Executive Commentary

CEO Paul Raymond remarked, "We had record bookings and a return to sequential revenue growth," highlighting the company’s operational achievements. CFO Nicolas Lavoie added, "Our goal is to continue deleveraging by managing our net cash from operating activities," emphasizing financial discipline.

Risks and Challenges

• Revenue decline from a major client project could impact future performance.
• Market saturation and competition in the technology sector pose ongoing risks.
• Macroeconomic pressures and potential supply chain disruptions could affect operations.
• The company’s ability to maintain high margins amidst revenue challenges remains uncertain.

Q&A

During the Q&A session, analysts inquired about the banking sector recovery and the company’s gradual revenue decline from a large client project. Management discussed their disciplined approach to government sector contracts and potential benefits from "buy local" initiatives.

Full transcript - Alithya Group inc Class A (ALYA) Q3 2025:

Emily, Conference Operator: Good morning. My name is Emily, and I will be your conference operator today. At this time, I would like to welcome everyone to Alithya’s third quarter fiscal 2025 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. If you would like to ask a question 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. Thank you, and you may begin your conference.

Benjamin, Unspecified, Alithya: Good morning, and thank you once again for joining us for Alithya’s third 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. 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 our estimates, plan, expectation, and statements regarding the future growth, operations results, performance, and business prospects that do not solely relate to historical facts.

These statements may also refer to future events, including expectations around client demand, business opportunities, leveraging our services, IP, AI, and expertise to meet client needs, excelling in a competitive market, achieving our three-year strategic plan, and deploying our smart shoring capability. For more information, please refer to the cautionary note in our presentation and to the forward-looking statements and risks and uncertainties sections of our MD&A available on our website. All figures discussed on today’s call are in Canadian dollar, 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 detail. Presenting this morning are Paul Raymond, Alithya’s President and Chief Executive Officer, Bernard Dockrill, Chief Operating Officer, and Nicolas Lavoie, Chief Financial Officer.

I will now turn the call over to Paul Raymond. Paul.

Paul Raymond, President and CEO, Alithya: Thank you, Benjamin, and good morning, everyone. Thank you for joining us today. I have the privilege of beginning this call by highlighting our notable third-quarter achievements, some of which were new records for the team. I will then turn things over to Bernard Dockrill, our Chief Operating Officer, to break things down further, followed by Nicolas Lavoie, our new Chief Financial Officer, who will provide the financial highlights. That said, I would like to take this opportunity to introduce you to Nicolas, who joined Alithya this past December. Nicolas 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 several local and international acquisitions. Nicolas will lead Alithya’s finance function, acquisition initiatives, and investor relations as we continue implementing our Fiscal 2025-2027 strategic plan.

Please do not hesitate to reach out to Nicolas after the call. Now, back to the results. We are proud to disclose that the Alithya team delivered a record quarter on several fronts, including posting the highest adjusted EBITDA margin since going public, which is a key milestone of our three-year plan. Q3 was also a high-water mark 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 that we all experience in all our geographies. I would also like to mention our satisfaction with the early contributions gained from the XRM Vision acquisition, completed on December 1st.

That acquisition is contributing to scale our Microsoft and smart shoring capabilities, and the development of cross-selling opportunities has already shown great promise. We are delighted to welcome Felix Robitaille, XRM Vision’s leader, and the whole XRM team to the Alithya family. This acquisition aligns with our strategic plan to integrate companies offering high-value, complementary services for our clients. By bringing in XRM Vision’s talented Microsoft-focused experts, we unite two top Microsoft dynamic partners, strengthening our asset-based solutions and our smart shoring capabilities across North America and Morocco. This integration expands our talent pool and reinforces our ability to capitalize on global market opportunities. Additionally, XRM Vision’s accelerators, designed to streamline financial reconciliation between finance and project teams, are a valuable complement to our existing solutions. I will now turn things over to Bernard to provide some specifics of our third-quarter performance. Bernard.

Bernard Dockrill, Chief Operating Officer, Alithya: Thank you, Paul. Good morning, and thank you for joining our call today. Q3 was a strong quarter for Alithya, and a positive step forward as we continue to execute on our priorities we set forth in our three-year strategic plan. Our organizational change initiatives are driving profitable growth, and we’re seeing promising trends in our targeted industries and continue to build on the progress we have made over the past quarters. 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. Q3 was one of our strongest-looking quarters since April 1, 2021, when we signed a very large 10-year engagement with two major clients. Our Q3 bookings of CAD 138.4 million represent a book-to-bill ratio of 1.2 times revenue, or 1.34 times revenue when adjusting for the large commercial agreement signed in April 2021.

Our book-to-bill ratio over the trailing 12 months is 0.97 times revenue, or 1.1 times revenue when adjusting for the same commercial agreement. As a result of our Q3 bookings, our backlog is now approximately 17 months of revenues based on our trailing 12 months’ revenue. We are also encouraged by the fact that our bookings are fairly consistent to the proportion of our revenues across our geographies. Additionally, over one-third of the CAD 138.4 million in Q3 bookings came from wins in financial services and insurance, including strong bookings in banking, highlighting a return to growth in this vertical after several slower quarters. Finally, a higher proportion of our Q3 bookings were a result of sales of high-value enterprise transformation engagements, including in the Canadian market.

We continue to focus on expanding our smart shoring capabilities, and as of the end of Q3, 9.3% of our professionals are based in our smart shoring centers. As Paul mentioned, the acquisition of XRM Vision broadens our smart shoring capabilities in Morocco. Although we are still early in the integration, we have identified several opportunities for leveraging these new capabilities in delivering our client services and our back-office support. Our acquisition strategy continues to be a driver for increasing our smart shoring delivery, and such immediate contributions underline the importance that acquisitions play in our overall business strategy. 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. Over the past several months, we’ve been acting on that front to further leverage our subject matter expertise in our target industries.

This included a realignment of our business structure in Quebec, creating closer collaborations between our sales and delivery teams in each of the industries we serve. These industry teams are supported by our strong practices and partnerships with Microsoft, Oracle, AWS, and others. Most importantly, the greater effectiveness that realignment has been embraced by our clients, with greater visibility and confidence in the depth of our consolidated expertise and our commitment to their mission. Q3 also saw the signing of multiple proof of concepts for IP and AI, or GenAI, based initiatives. These included several application modernization POCs with our RapidSuite IP, intelligent document processing, or mailroom automation efforts with RapidCapture, as well as several digital adoption initiatives for expanded use of Microsoft Copilot.

Many of these Copilot initiatives originated from the Copilot Academies we ran for our clients in past quarters, and we are now helping our clients take the next step. Switching to enterprise transformation, where we have seen a strong demand for our services. 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 at 9 out of 10. The positive impact in our Oracle division was driven by the successful implementation of five large ERP and HCM payroll projects that all went live at the end of Q3. This included a regional medical center where we completed the first implementation in the world in a healthcare environment of Oracle’s new Workforce Scheduling Application to manage nurse scheduling. This successful implementation positions Alithya well for future opportunities in this space.

Our Oracle Enterprise Performance Management, or EPM, business also contributed to the strong results within our Oracle practice. Many of our largest Q3 bookings in the Oracle division included EPM initiatives with larger organizations. We remain focused on diversification within our Oracle practice and have adopted a hybrid industry and functional competency go-to-market model targeting healthcare, professional services, manufacturing, and financial services. We have seen positive early results from this model within our pipeline and bookings, including signing our largest Oracle managed services contract to date, and we expect to continue to see dividends from these investments in our next fiscal year. I will now turn things over to Nicolas to provide financial information regarding our Q3 achievements. Nicolas.

Nicolas Lavoie, Chief Financial Officer, Alithya: [Foreign language] Bernard and good morning, everyone. I’m very happy to join this conference call for the first time as Alithya’s CFO and to highlight some of the company’s significant achievements this past quarter. These past two months since I joined the company have been very rewarding, and I’ve had the privilege of meeting highly skilled colleagues and witnessed firsthand the opportunities ahead for Alithya. That said, let’s begin with a review of our consolidated revenues. In the third quarter, consolidated revenues came in at CAD 115.8 million, down CAD 4.7 million, or 3.9% on a year-over-year basis. On a sequential basis, revenues were up CAD 4.3 million, or 3.8%, versus the second quarter of this year, with organic growth in all of our geographies. XRM Vision was reported for only one month in our results and contributed approximately CAD 800,000 in revenues for the quarter.

Client recurrence remained very high, with approximately 87% of Alithya’s Q3 revenues coming from clients that we had in the same quarter last year. That is an excellent indicator of the trust our clients have in us and a good indication of long-term stability. Looking at profitability, we are reporting another quarter of continued improvement on gross margin as a percentage of revenues. Gross margin reached 32.3%, a record level for Alithya in the quarter, up 100 basis points from 31.3% last year and up 170 basis points from 30.6% in the second quarter of this year. 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.

I will now turn to a review of our performance by region, starting with Canada. Revenues in Canada reached CAD 61.7 million in Q3, down CAD 6.3 million, or 9.3%, on a year-over-year basis. The decrease in revenue was primarily due to one client’s 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 XRM in the quarter. Of note, while down year-over-year, revenues in Canada were up sequentially from the second quarter by 3.4%. Looking at our gross margin in Canada, we saw improvement compared to the same quarter last year due to higher efficiencies in hourly billing rates, a greater proportion of higher-value services, and a proportionally larger decrease in the use of subcontractors compared to permanent employees. In the U.S., revenues increased by CAD 1.7 million, or 3.8%, to CAD 48.8 million.

The increase is due primarily to organic growth in enterprise transformation services, support revenues, and a CAD 1.3 million favorable exchange rate impact between the two periods. 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 had a higher gross margin percentage. In our international business, revenues were slightly down by CAD 200,000 versus prior year, with a lower gross margin as a percentage of revenue, mainly due to the end of a project in the U.K. 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.

Now looking at SG&A expenses, we are continuing to focus on optimizing our cost structure to ensure greater efficiency and long-term performance. In the third quarter, SG&A expenses amounted to CAD 28.8 million, a decrease of CAD 700,000, or 2.4%, year-over-year. The decrease in SG&A expense was driven mainly by decreases in professional fees, occupancy costs, 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 XRM SG&A. 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. Looking at our adjusted EBITDA, as Paul mentioned at the beginning of the call, adjusted EBITDA margin reached a record level of 8.9% in Q3. That’s up compared to 7.8% last year and up sequentially from 8.3% in the second quarter of this year.

Our third quarter adjusted EBITDA amounted to CAD 10.3 million, an 8.7% increase year-over-year. Again, this reflects the progress we made on our operational performance and on cost optimization. Our adjusted net earnings came in at CAD 5.7 million, representing an increase of CAD 1.4 million, or CAD 0.02 per share, year-over-year. Finally, let’s take a look at our cash flow and financial position. Net cash from operating activities remained strong, reaching CAD 11.7 million in the quarter, a decrease of CAD 3.9 million versus the prior year, which was essentially due to working capital variations. As of December 31, 2024, the net debt amounted to CAD 108 million, and our leverage ratio reached 2.6 times net debt to trailing 12-month adjusted EBITDA, all within Alithya’s targeted leverage levels.

The sequential increase in net debt of approximately CAD 12 million reflects the acquisition of XRM and the unfavorable FX impact on our US dollar denominated debt, which has been partially offset by the positive cash flow generation in the quarter. Therefore, liquidity remains strong, with cash on hand and availability under our credit agreement amounting to CAD 63.7 million. Our goal is to continue deleveraging by managing our net cash from operating activities in order to focus on debt reduction, as deleveraging will continue to position us well for capital deployment for the right business acquisition opportunities. In terms of financial flexibility, I would like to conclude in highlighting that we extended the maturity of our CAD 140 million senior credit facility from April 2026 to April 2027. We obtained good support from our banking partners as we remain well-positioned for future growth.

I will now pass it over to Paul for concluding remarks.

Paul Raymond, President and CEO, Alithya: Thank you, Nicolas. 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 record gross margins and EBITDA as a percentage of revenue, and we had strong cash flow and a very complementary high-value acquisition. The most important takeaway should be the measurable progress in advancing the core pillars of our three-year strategic plan. We will now open it up for questions. Emily.

Emily, Conference Operator: 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 your touchstone phone. You’ll hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Gavin Fairweather from Cormark. Please go ahead.

Gavin Fairweather, Analyst, Cormark: Oh, hey, good morning, and congrats on the strong results. Maybe we can just start on the bookings number. Obviously, it was impressive and quite strong, and you called out a bit of a rebound in banking and insurance. Maybe you can just discuss those sectors in particular, which I know had been a little bit slower for you, and the momentum that you saw in the quarter and whether you think that is sustainable.

Bernard Dockrill, Chief Operating Officer, Alithya: Yeah, definitely. As we’ve talked in past quarters, there had been some headwinds, specifically in the Canadian banking market. We did see a rebound last quarter with some very positive bookings there. 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 but continue to build on a pipeline that I think will generate some positive results in the future.

Gavin Fairweather, Analyst, Cormark: Great. Maybe just on gross margins, I mean, obviously, I’ve seen some nice strength on that front. How do you think about the gross margin trajectory from here? I mean, I know XRM Vision is accretive on that front, but if you start to see banking and insurance coming back, will that place a bit of a headwind on gross margins, given that there could be more subcontracting in those sectors? How would you think about that?

Paul Raymond, President and CEO, Alithya: Hi, Gavin. Thanks for the question. If you go back to our strategic plan, I mean, the goal is to keep growing that. We’re seeing it now, as Bernard was mentioning, in the mix of business, and the new business that we’re winning is higher gross margins. I mean, that is the long-term goal and long-term trend that we’re aiming. Our three-year plan has us getting to 33%-35%. We think that’s achievable within the next three years. That’s what we’re pushing towards.

Gavin Fairweather, Analyst, Cormark: Got it. That’s helpful. 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 kind of walked away from some business there in terms of a little bit less revenue year-over-year in the quarter. Maybe we can discuss that sector and then also competitive dynamics that you’re seeing elsewhere in terms of pricing trends or win rates.

Bernard Dockrill, Chief Operating Officer, Alithya: Yeah, thanks, Gavin. As we look at the public sector, specifically a lot of our public sector businesses here in Quebec, we have remained disciplined on not chasing lower margin business. As things cool down in the market, we saw more competition in this market, and there was a lot of pressure on rates. Our focus has been on the profitable growth. We focus on those deals that were not just solely awarded to the lowest price vendor, but had a strong quality component and were able to differentiate. That second part of your question around competition has been driving the rate pressures. 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 to drive the margins that we’re looking for.

There is a headwind on the volume of bookings because of that.

Gavin Fairweather, Analyst, Cormark: Yeah, yeah. I mean, nice to see EBITDA basically sitting at a record despite that. Maybe just lastly for me on XRM Vision, you’ve had it in the fold for a few months here. Any kind of surprises or initial impressions, things which have proven to be better than expected or integration into the business? Maybe provide a bit more of an update on that front. That’d be helpful.

Paul Raymond, President and CEO, Alithya: Nothing surprising. We’re sticking to the plan, Gavin. I guess everybody’s kind of watching the radar screen of what’s going to happen with the tariffs and everything. We don’t see direct impacts to us, but some of our clients might be impacted down the road. Again, jury’s out. Everybody has an opinion on it. We are focusing on the things we control.

Gavin Fairweather, Analyst, Cormark: That’s it for me. Thank you.

Nicolas Lavoie, Chief Financial Officer, Alithya: All right. Thank you.

Emily, Conference Operator: The next question comes from Divya Goyal from Scotiabank. Please go ahead.

Divya Goyal, Analyst, Scotiabank: Good morning, everyone. I just wanted to get a little bit more color in terms of what is the longer-term plan for Canada. Obviously, some of your peers have started seeing a little bit more positive momentum. You did notice positive bookings momentum last quarter in financial services sector. Given your strategic plan and the way things are going, where do you see Canada trending for yourself over the coming quarters?

Paul Raymond, President and CEO, Alithya: Thanks for the question, Divya. We saw growth in all of our geographies this past quarter. As Bernard was mentioning, a big chunk of that in financial services in Canada. If you look at our long-term plan, our three-year plan that we just published and we are working towards, we expect growth in all of our geographies. However, we expect the U.S. to grow faster. Our type of business is not subject to the tariffs and everything that we are hearing. We are seeing, as Bernard was saying, a very strong funnel, and we are seeing a lot of opportunity out there. I think we are at the beginning. I mentioned this in the past. I think we are at the beginning of a trend of modernization of the larger, more legacy-type systems, leveraging AI to modernize that. We have many proof of concepts ongoing in that area.

No, we’re confident on the future.

Divya Goyal, Analyst, Scotiabank: That’s perfect. I just had one more question. If you could provide a little bit of commentary on the broader consolidation trends across the Canadian technology services sector, and how do you see yourself positioned as an acquirer and a target over, say, the coming quarters? That’ll be all for me. Thank you.

Paul Raymond, President and CEO, Alithya: Yeah, it’s been an interesting year. We’re running out of comps to track. You all saw the last two, three, I guess, in the last quarter that privatized. I guess we’re going to be one of the last Mohicans, as they say. 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. I think it’s a great investment opportunity. We’re still finding, if you look at the type of acquisitions we’ve done, like the one we recently completed, we’re very good at finding what I would call the diamonds in the rough or the jewels out there, these niche companies that fit very well into our platform that we can position for growth. That’s how we found XRM. It was a mutual decision.

They wanted to sell to us, and we wanted to buy them. It was really a very good acquisition. There are many others like that out there. I think we put a lot of work into finding those and identifying those. We have a very healthy funnel. I think there is 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 to join and to expand because they cannot do it alone. I see it as a positive. I like being the last man standing.

Divya Goyal, Analyst, Scotiabank: Thank you.

Emily, Conference Operator: The next question comes from Jérome Dubreuil from Desjardins. Please go ahead.

Jérome Dubreuil, Analyst, Desjardins: [Foreign language]. Thanks for taking my questions. The first one, maybe for Nicolas, if you can maybe tell us maybe what are the key priorities you will be working on? What are the assessments you’ve been given, wondering if there’s any change in terms of the financial management of the company that we should be expecting?

Nicolas Lavoie, Chief Financial Officer, Alithya: Thank you, Jérome, for the question. As you know, I joined about two months ago, so I’ve had the chance to initially, I guess, my first priority for me was to really sort of learn on the business. I’m not from that industry. I’ve been in multiple industries, but it’s been to learn, meet the people, and try to see where the pockets of value are and where the growth opportunities are. In terms of my focus, I had the chance to come in right after the company disclosed a three-year plan. I’m really going to essentially try to focus on those metrics, which is, first of all, focusing on the internal analytics and financial planning analysis to make sure that we support the management and support the organic growth targets. I guess that’s what’s going to be one big first priority for me.

Obviously, the other part of the plan is the M&A growth that we’ve put forward. I’m going to spend a lot of my time as well in terms of supporting the M&A. Finally, obviously, supporting the team here in terms of messaging to the financial community. Today, it’s been quite a journey for me. I’ve sort of seen firsthand that there’s quite a bit of opportunities ahead, and I’m pretty pleased to join the team and happy to speak to you all in the future.

Jérome Dubreuil, Analyst, Desjardins: Yeah, thanks for this. Follow-up for me, you did mention that you still have one big client kind of affecting the year-on-year comparison that you have. At the same time, you’re reporting very good bookings in the quarter, very noticeable there. When should we be expecting that the big client taking off will be lapping? Is this something that’s going to be gradual and then all at once? How should we be expecting this big contract to run off?

Bernard Dockrill, Chief Operating Officer, Alithya: Thanks for the question, Jérome. Yeah, this is a contract that ramped up over several quarters, and it peaked and then ramped down over several quarters. I think we’ll see the effects of it. Nicolas and I were looking through this earlier this week. Another couple of quarters of stuff. We do have a pipeline around that that we may see some bounce back on that as well. From that original project, there’s still another couple of quarters where we had declining revenues as that project ramped down. It’s a very large project in our portfolio.

Jérome Dubreuil, Analyst, Desjardins: Thank you very much.

Emily, Conference Operator: Once again, if you have a question, please press star one. The next question comes from John Xiao from National Bank. Please go ahead.

John Xiao, Analyst, National Bank: Good morning, guys. Thanks for taking my question. I just want to ask about the lumpiness of the bookings because it sounds like there are a couple of large deals this quarter. In terms of the future bookings, should we expect a smooth recovery, or should we still expect some fluctuation of booking numbers on a sequential basis?

Paul Raymond, President and CEO, Alithya: Yeah, thanks, John. I should have mentioned it earlier. I usually always do in my speaking notes. If you look, we published two numbers. We published the trailing 12 months and the quarterly for the simple reason that very often we have these large projects that can swing a quarter one way or the other. Something that was supposed to be signed in December gets signed in January. RQ2 looks really bad, and RQ3 looks really good. You really have to look at it on a 12-month basis just because of different quarterly ends. Depending on which software company is involved, like if we work with Oracle on a given project, they have a different year-end than Microsoft or Amazon. Whenever there is a third party involved, usually around their year-end, there are more projects being signed.

My recommendation is to look at this on a 12-month basis.

I don’t know, Bernard, if you want to add to that.

Bernard Dockrill, Chief Operating Officer, Alithya: No, yeah.

John Xiao, Analyst, National Bank: That makes perfect sense. In terms of those new bookings this quarter, how should we think about maybe the margin profile and whether your strong gross margin, EBITDA margin could be maintained in the next one or two quarters?

Bernard Dockrill, Chief Operating Officer, Alithya: Yeah, no, I’d say our focus has been on changing the mix of the work that we’re going after. Our bookings align to that priority of going after higher value services. I think our goal is to continue the trends. As Paul mentioned before, our gross margin target for a three-year plan was 33%-35%. We’re tracking to that. The bookings that we have in our pipeline are supporting our priorities to get there.

John Xiao, Analyst, National Bank: Okay. In terms of the future acquisitions given the completion of the XRM, what are some of the areas of interest where we think the future acquisition could come from? In other words, what are some of the capabilities you look to acquire or enhance?

Paul Raymond, President and CEO, Alithya: Yeah, thanks for the question. There are many. My recommendation is if you have a chance, it’s on our website. We actually have our strategic plan we published there. We explain in a lot of detail what we’re looking for by geography, by business mix, by vertical, by technology. Really, I mean, we go to market by vertical, right? We have a financial services practice, a manufacturing practice, and so on and so forth. We’re in close conversation continually with our clients in terms of what they need and where they’re going and where they see that they need help in the strategic mission-critical systems that they need to deploy. For example, the ERP side. Every organization has an ERP. They either need to renew it, improve it, leverage the data from it.

Today, we’re 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. The AI-type stuff that we do. Again, a lot of opportunities there. We are not in SAP today. That’d be an interesting area to get into. And a few others, I mean, you know, that are brand names out in the industry that our clients are looking for that we would be glad to add as a practice. That’s part of our shopping list. These are things that we’re out there looking for and trying to get it done for the right price.

John Xiao, Analyst, National Bank: Thanks for the colors. Maybe one last question for me. I know Paul mentioned that the tariff situation is not going to impact our business. That makes sense to me as well. At the same time, I understand there’s also an ongoing trend from a lot of Canadian businesses to source from Canadian providers. Do you think that’s going to create some growth tailwind for you?

Paul Raymond, President and CEO, Alithya: 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 and European customer base. We like to believe we have a strong proximity model. Our local clients buy from our local people, and then we figure out how to deliver the best cost-effective way possible. Yeah, whenever things like this happen, we’ve been through this in the past, and we’ve managed through it. If it helps us, all the better.

John Xiao, Analyst, National Bank: Great. Thanks for getting on the top of the line.

Paul Raymond, President and CEO, Alithya: Yeah, thank you.

Emily, Conference Operator: We have a follow-up question from Jérome Dubreuil from Desjardins. Please go ahead.

Jérome Dubreuil, Analyst, Desjardins: Hey, I’m back. Just to follow up, almost the same question as John, but more on the government side. We’ve been hearing governments talking about favoring more of the local suppliers. Correct me if I’m wrong, but I think your government business is much bigger in Canada than in the U.S. I’m wondering if you’ve had maybe starting to hear some green shoots or maybe some easier conversation with your government counterparts there. No worries. It’s just the same answer as to John’s questions.

Paul Raymond, President and CEO, Alithya: I can give you some color because I’m part of other unrelated to Alithya. I’m a member of QG100, which is an organization of CEOs here in Quebec. Give you some color. I know there are a lot of discussions between the business community and the local governments across Canada in terms of how to better use local companies. The speed at which they can do that, I mean, is anybody’s guess, but there is some desire to. That would mean changing procurement laws, changing many things in how the government buys and how government agencies buy, like Hydro-Québec, for example, how they buy. I don’t know if you saw in 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 build an 18-story building out of wood.

Canada is going to have a lot of excess wood with these tariffs. In Quebec, for example, you’re only allowed to do five stories. They would have to change the construction codes and the laws. I think there’s a desire. There’s a lot of talk around it to change these things in many different jurisdictions. I think between the desire and the actual change is happening, we’ll see. It’s a lot simpler in the private sector of making those changes. Then again, maybe the tariff situation is going to be resolved in a few months and all that stuff goes away. It’s anybody’s guess right now, but yes, there is some talk about that in many areas.

Jérome Dubreuil, Analyst, Desjardins: [Foreign language]

Paul Raymond, President and CEO, Alithya: [Foreign language], Jérome.

Emily, Conference Operator: At this time, we have no other questions. I will now turn the conference back to Paul Raymond for any closing remarks.

Paul Raymond, President and CEO, Alithya: Thank you, everyone, for joining us today. I’d invite you, if you have any additional questions, not to hesitate to reach out to Nicolas after the call. Thank you.

Emily, Conference Operator: Ladies and gentlemen, this concludes the conference. You may now disconnect your lines.

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