Alithya Group Inc. (ALYA) Earnings Call Transcript & Summary

[Interpreted] Hello. Ladies and gentlemen. Welcome. My name is Christine Garon. I am Senior Legal Counsel and Assistant Corporate Secretary at Alithya. Welcome to our Annual General Meeting of Shareholders, which will be held virtually. The presentations that you will be listening to here today will take place in English and French. Simultaneous interpretation is available for you. You can listen to our presentations in English, in French or even in the original language as spoken. And sometimes it will be in French and sometimes it will be English. To change the language, please click on the language of your choice on your playback screen. A recording will also be available on our website after the meeting. The presentations you attend, live translation is also available. You can, therefore, listen to our presentations in French and English or in the original language spoken by the speakers, which will switch from French to English from time to time. To change the language of the presentations, please click on the name of the language of your choice at the top of the broadcast screen. A playback of the webcast will be available on our website after the meeting. I would now like to bring to your attention the cautionary statement appearing on this slide of our presentation. During the meeting, we may make forward-looking statements that are subject to certain risks and uncertainties, which may be beyond Alithya's control and could cause actual events or results to differ materially from those expressed or implied in such statements. Those risks and uncertainties are described in our continuous disclosure documents available on SEDAR+ and EDGAR, including our annual and quarterly MD&A. We ask that you refer to and consider the risks and uncertainties that apply to Alithya and not place undue reliance on such statements. Please also note that certain measures contained in our presentations are non-IFRS measures. And that since such measures have no standardized meaning prescribed by IFRS, they are unlikely to be comparable to similar measures presented by other issuers. We refer you to our MD&A for further information, including a description of each measure, why management believes it is useful information and when applicable, a reconciliation to the closest IFRS measure. Also, unless otherwise indicated, all dollar amounts in today's presentations refer to Canadian dollars. I'd like to invite Pierre Turcotte to open our meeting, Chair of our meeting.

[Interpreted] Thank you very much, Christine. Ladies and gentlemen, welcome to our annual AGM of shareholders. First of all, I would like to begin by acknowledging that Alithya is located and on unceded indigenous lands. We recognize [indiscernible] this nation, which is recognized as the custodians of the lands and orders on which we gather here today. [indiscernible] Montreal, which is historically known as a gathering place from a First Nation. Today, it is home to a diverse population of indigenous and other people. We respect the continued connections with the past, present and future in our ongoing relationships with indigenous and other people within the Montreal community. And also to comply with our ESG standards and maximize the number of participants at the meeting, Alithya decided to hold its virtual meeting, at which all shareholders regardless of the geographical location will have an equal opportunity to participate and vote. Alithya remains committed to providing a form for all shareholders to properly participate, vote and communicate adequately during the meeting via the Lumi online platform. Therefore, all the information required to participate in meeting was sent to shareholders in advance of the meeting. I'm now pleased to introduce you to my colleagues who are present at today's meeting and who will be able to answer any questions you may have. Paul Raymond, President and CEO, Chief Executive Officer; Claude Thibault, Chief Financial Officer; and Christine Garon, Senior Legal Counsel and Assistant Corporate Secretary. I'd also like to welcome the director nominees who are attending this virtual meeting. In accordance with the notice of meeting that you received, we will cover the following items: the receipt of the audited consolidated financial statements of Alithya for the financial year ended March 31, 2023, and the auditor's report thereon. The election of the directors and the appointment of the auditor for the year ending March 31, 2024 and the authorization of the Board of Directors to fix its compensation. Afterwards Paul Raymond will present a review of the year, followed by a question period. In accordance with Alithya's bylaws, I will act as President of the meeting. And I have appointed Christine Garon as the Secretary. In addition, I appoint [indiscernible] and Isabelle Vachon, both representatives of TSX Trust Company, which is Alithya's transfer agent and they have been appointed as scrutineers for the meeting. Before we proceed, I'd like to ask the Secretary of the Meeting to confirm if the meeting is duly constituted to conduct the business for which it was convened and to explain certain important aspects of procedures. Christine?

[Interpreted] Thank you, Mr. Turcotte. Okay. Before the meeting, I received confirmation from the scrutineers to the effect that a copy of the notice of meeting was sent to all shareholders entitled to vote at the meeting. A copy of the meeting documents as well as the affidavit confirming the mailing thereof will be tabled in the record of the meeting. With regards to quorum on the basis of the proxies received on behalf of the persons named by management, more than 2 shareholders holding approximately 88.25% of the rights to vote are represented here in -- at the meeting. Therefore, I confirm there is a quorum, I therefore declare this meeting duly called and constituted to conduct the meeting of -- the business of on the agenda, and I ask the scrutineer to provide their final report as soon as finalized. With regards to the vote, I would like to remind you that each proposal must be approved by a majority of votes cast. To facilitate the process of this virtual meeting, we asked certain employees duly appointed as proxy holders to move and second today's proposals. Before we begin, I'd like to highlight certain basic features of the platform, such as how to view our presentation, how to vote and how to ask questions at the meeting. In order to view our presentation while you're listening to the webcast, you can click on the button broadcast or on the arrows. You can also change the language of the presentation by clicking on the name of the language of your choice, French, English or original which is the original version of the presenter's speeches. The platform also allows you to submit your vote online on each proposal that will be submitted to a vote. However, as explained in our notice of meeting, only registered shareholders and duly appointed and registered proxy holders who joined the meeting using their control number, will be able to vote and ask questions. In order to simplify the voting procedure, Mr. Turcotte will open the polls on all of the items of business for which the vote is required and at the same time will present each of the proposals. This will, therefore, give you as much time as you need to be able to vote while he introduces each proposal. After the presentation of the last proposal, he will remind you to submit your vote if you haven't already done so, and then the polls will close. Once that -- once he declares the poll is open, you will see the voting tab appear at the top of your screen. To vote, choose one of the available voting options and a confirmation will appear. You may change or cancel your vote by selecting another voting option or the option cancel at any time before Mr. Turcotte declares the polls closed. To submit a question, please click on the messaging table or tab, rather at the top of your screen and write your question in the field provided for you. You should receive a receipt confirmation once your question has been submitted. Although you may submit questions at any time during the meeting, we kindly ask that you wait until the end of the formal part of the meeting because submitting questions are not related to that part of the meeting. We will be pleased to answer your questions after our presentations. Please also note that we'll take a note of questions received during the presentations, and we will group them together if they are similar before submitting them to the Chair for the meeting for response or to the relevant person at the time. If ever there are technical difficulties, the meeting will be adjourned for a few moments to allow us to resolve the situation. They said if we're unable to resume the meeting within reasonable time. We may have to adjourn the meeting until a later date, which will then be communicated publicly. That's the end of the presentation of procedures and functionalities for the platform. I'd now like to turn the floor back over to Pierre for the rest of the meeting.

[Interpreted] Thank you very much, Christine. Let's begin this formal portion of the meeting with our first item on the agenda, Alithya's audited consolidated financial statements for the year ended March 31, 2023, including the auditor's report and the MD&A. These documents are available on our website as well as on SEDAR and EDGAR. A copy was also sent to all shareholders who requested one. I'd like to ask the Secretary of the meeting to table these documents in the record of the meeting. Let's now move to the second item on the agenda, the election of Directors. I now declare the polls open for the items of business on which a vote is required. Please click on the voting tab at the top of your screen to be able to vote, and please don't hesitate to vote while I present and submit each items to a vote. The Board has set the number of directors to be elected at the meeting to 8. The experience and expertise of each candidate is described in Alithya's management information circular. Management proposes the following candidates and that they be elected as directors. Dana Ades-Landy, André Brosseau, Robert Comeau, Lucie Martel, Paul Raymond, Ghyslain Rivard, Lee Thomas and myself Pierre Turcotte. We'd also like to take advantage of this opportunity to sincerely thank Ms. Melissa Gilbert and Mr. James Renacci, who are not standing for reelection. Thank you very much to both of you for your valuable contribution over the past years. As explained in Alithya's management information circular, only the persons nominated in accordance with the advanced notice bylaw, maybe proposed as director nominees. I was informed in this regard before the meeting that no other director nominations were received in accordance with the advanced notice bylaw. 8 director nominees for election on the Board of Directors of Alithya.

My name is [ Natalie Robichaud ], and I'm a proxy holder. I propose the nomination of each of the 8 persons that you name for election as a Director of Alithya.

Thank you, [ Natalie ]. I will now ask someone to second the proposal.

Hi, Mr. Turcotte. My name is [ Renee Bureau ], and I'm a proxy holder. I second the proposal.

Thank you, [ Renee ]. Before we continue, I would like to address diversity within our Board of Directors. As of March 31, 2023. Three of the 10 directors of Alithya self-identify as women, representing 30% of the board. Two of the 8 nominee directors proposed for reelection at this year annual meeting of shareholders self-identify as women. If our nominee directors are elected, women would, therefore, represent 25% of the quorum. While this would result in a decrease of gender diversity on the Board, Alithya nevertheless, maintains its firm commitment towers, diversity and expects that its Board of Directors will again reach a level of at least 30% of person who self-identify as women by or prior to the next Annual General Meeting. The third item on the agenda is the appointment of the auditor for the year ending March 31, 2024, and the authorization of the Board of Directors to fix its compensation. The management and Board of Directors of Alithya proposed that KPMG be appointed as auditor of Alithya for the fiscal year ending March 31, 2024. I will now ask if someone wants to make the necessary proposal for the nomination of KPMG.

My name is [ Natalie Robichaud ], and I'm a proxy holder. I propose that KPMG be appointed as auditor of Alithya for the year ending March 31, 2024, and that the Board of Directors be authorized to fix its compensation.

Thank you, Natalie I will now ask someone to second the proposal.

Mr. Turcotte. My name is [ Renee Bureau ] and I'm a proxy holder, I second the proposal.

Thank you Renee. [Interpreted] Let's now move on to questions on the agenda. These are motions to vote on. Please, if you have a question. [Operator Instructions] Christine, do we have any questions relating to any of the items of business on today's meeting?

[Interpreted] Mr. Turcotte, I confirm that we have not received any questions related to items of business belong in today's meeting.

[Interpreted] Thank you very much, Christine. Because there are no questions, we will now ask you to vote if this has not already happened, we will wait several seconds to allow all shareholders and proxy holders to submit their votes, after which we will close the polls. [Voting]

The polls are now closed with respect to voting on all of the motions. I ask the scrutineers to table the results and provide their final report as soon as finalized. The final results will be publicly disclosed shortly after the meeting. That being said, based on the proxies received on behalf of the person named by management, we can, however, confirm the preliminary result. The scrutineers indicated before meeting that each director nominee received at least 95.26% of the vote cast by proxies received on behalf of the person named by management. As such, on this basis, I declare each of director nominees duly elected sends our congratulation to all of directors. [Interpreted] The scrutineers also indicated before the meeting that 95.26% of the votes expressed on behalf of people for the voting and the votes cast by proxies received and were named by management. I declare this basis. KPMG. So the scrutineers have indicated before the meeting that 99.80% of the votes cast by proxies received on behalf of the person named by management are in favor of the appointment of KPMG as auditors. I declare this proposal adopted, therefore KPMG is appointed for the year ending March 31, 2024, the Board of Directors is authorized to fix its remuneration. Before ending the formal portion of the meeting, I'd like to ask the Secretary if there are any questions with regards to this portion.

[Interpreted] Thank you, Mr. Turcotte, I confirm that no questions related to this part of the meeting have been received.

[Interpreted] Thank you, Christine. Since we have no questions. I declare the formal portion of this meeting closed. I'd now like to invite registered shareholders and duly appointed and registered proxy holders to submit their general questions via the online platform. Questions will be addressed at the end of the meeting. And so please submit your questions if you have any. Before turning the floor over to our President and Chief Executive Officer, I would like to express on behalf of the Board my sincere appreciation to all of Alithya professionals for its management team -- and its management team for their steadfast commitment to protecting the interest of all of our stakeholders during the past year. In fiscal 2023, Alithya achieved remarkable growth and performance. The end of our 3-year strategic plan is approaching. And we have achieved most of our objectives. Paul Raymond, our President and CEO, will speak to these in a short moment. Before turning over the floor to him, I would like to take the moment to tell you that Alithya published its ESG report this morning for the 2023 fiscal year. This report is the second ESG disclosure document belonging to Alithya's and Alithya [indiscernible] deal with important environmental, social and governance issues. So I'd like to thank all members of the Alithya team who collaborated to gather the necessary data to create this report for our shareholders. It includes information on policies and programs that we continue to develop and implement in order to act with integrity. Last year at this very moment, we proudly launched our first ESG report. At the same time, we announced our commitment to act with integrity by developing a solid rigorous ESG strategy designed to adapt to the challenges and the opportunities presented by the current global context. Over the past year, we've invested significant time and resources in studying the results of this first report and respond accordingly. Our second ESG report released earlier today, features increased transparency across the board and includes detailed calculations of our carbon footprint. We have also addressed each of the ESG topics that we consider to be priorities by comparing our progress with measurements and assessments carried out by a credit to third parties. These were obtained from the Sustainability Accounting Standards Board, the SASB, which is a not-for-profit organization seeks to serve as a link between companies and investors. With respect to the disclosure of relevant sustainability information. The SASB standards help us to identify the most important subsets of financial performance and sustainability issues and allow us to take actionable steps to achieve the objectives of our upcoming ESG strategy, which seems to be very promising. We are proud of the progress that we have made. But we also know that we must remain vigilant to ensure that all aspects of our ESG priorities are addressed in our pursuit of carbon neutrality. I'd encourage you to review our latest ESG report as soon as you have the opportunity. We thank you for your trust and for your support, and for everything that you do with us. And now dear shareholders, I'm very happy to turn the floor over to our President and CEO, Paul Raymond. Thank you very much. Paul, over to you.

Thank you Pierre and Christine, and thank you all for joining us this morning. I'm pleased to be here this morning to share Alithya's performance highlights with you once again both in terms of recapping our fiscal 2023, which ended March 31 and in accentuating some of the most notable achievements of our first quarter of fiscal 2024. We closed out our 2023 fiscal year on a very high note, capping off the campaign with the achievement of several financial milestones set out in our 3-year strategic plan, which will come to a close at the end of our current fiscal year. I am thrilled to share that we passed the $0.5 billion milestone in terms of annual revenues for the first time in fiscal 2023. And that trend has continued forward through the first quarter of fiscal 2024. Revenues increased 19% to reach $522 million and more than 80% of those revenues we're generating from existing clients who have entrusted Alithya with broadening the scope of their important digital technology projects. That said, we also added 144 new clients to our portfolio, and our bookings exceeded $525 million for the fiscal year for a book-to-bill ratio of 1.15 when excluding recurring revenue from the 2 long-term contracts signed in 2021 with Beneva and QMI. Furthermore, our adjusted net earnings increased 39% in fiscal 2023, which translates into an adjusted net earnings per share of $0.16 compared to $0.12 in the previous year. Adjusted EBITDA increased 60% to $36 million or 6.9% of revenues. As for our gross margin as a percentage of revenues, it also increased to 29% compared to 26.5% in the previous year. Given those trends, we're excited about our positioning and potential for continued growth in our current fiscal year. Simultaneously, we continue to grow and cultivate our smart shoring operations, which currently account for 5% of our global workforce. In doing so, we will create further value for our shareholders as we leverage those operations to address growing demand for our services. The momentum of fiscal 2023 carried us forward into our first quarter of fiscal 2024, which closed on a positive note with a year-over-year revenue increase of 3.8% for $131.6 million. We also continued to generate healthy cash flow that allows us to further reduce our debt. Despite some headwinds affecting our financial services sector in Canada, Q1 bookings for our global operations reached $111 million, and we added 32 new clients across our global operations. Bookings were particularly strong in the U.S., where there is increased demand for our Oracle practice services from the healthcare sector. Likewise, our Microsoft practice is seeing strong bookings and new projects in alignment with Microsoft's advancement of technology solutions geared specifically towards the manufacturing sector. In Europe, we also experienced strong growth in bookings, and we continue to invest in our Morocco and Eastern Europe operations in order to expand our smart shoring delivery capabilities. I would like to take a moment to acknowledge the tragic events in Morocco following last week's Earthquake. We have reached out to our professionals to offer our support and to let them know that the Moroccan people are in our hearts during this difficult time. Getting back to the expansion of our smart shoring delivery capabilities. By doing so, we will continue to improve our gross margins, which is a primary focus of our current strategic plan. In fact, we have implemented multiple measures to that end, and we continue to hover around our minimum target of 30%. We're also very proud of the prestigious recognitions that we've received in recent months for the quality of our global services. In May, Alithya received a prestigious Mercuriades award in the training and workforce development category for the Alithya Leadership Academy. An initiative in partnership with McGill University's faculty of management. The collective intelligence and expertise of our teams was also validated with 8 nominations in the combined 2023 Microsoft Partner of the Year & Impact Awards, and we also received another recognition as a Microsoft InnerCircle partner. Our collective intelligence is paving the road to a very bright future as we continue to innovate. Alithya professionals are continuously leveraging emerging technologies, including generative artificial intelligence to enhance our products and services. For several years, our revolutionary AI-FI Trade Surveillance application has been transforming the way our clients compliance teams operate. It's a solution that allows clients to monitor 100% of their exchange-traded derivatives, while ensuring regulatory adherence and the mitigation of reputational risk. We're pleased to announce that since July 1, AI-FI Trade Surveillance has been monitoring all derivatives trading at a Big Canadian Six bank, where it had also been used for fixed income and ForEx exchange -- Foreign exchange Trade Surveillance for more than 4 years. Additionally, we are excited about the future of our RAPID suite proprietary software. RAPID suite tools are already deployed in some of the sectors that we service where they can be used to scan, extract and transform unstructured data from a multitude of sources. For example, a major U.S. health insurance provider has been a key client for many years, and they are now leveraging the power of RAPID suite tools. RAPID suite already uses AI to extract and export more accurate and comprehensive results for our clients. But with the addition of generative AI programs like GPT-4, with its advanced reasoning capabilities and sophisticated large language models, we expect that RAPID suite will soon have the capacity to learn by itself and to adapt in real time. That powerful innovation will be a game changer for clients who turn to Alithya for solutions offering cost savings, competitive advantage, minimal errors, increased agility and better decision-making. Another example of how Alithya is leveraging the power of AI tools developed by its partners. For Microsoft, for example, we'll soon be launching Microsoft 365 copilot. Putting next-generation AI to work by combining the power of large language models with data from Microsoft 365 apps like Word, Excel, PowerPoint, Outlook, Teams and more to unleash more powerful productivity tools. With Alithya digital adoption expertise, we're joining this revolution by extending copilots features through our digital adoption platform to allow organizations to easily extract proprietary information and curate content in Azure OpenAI. This will facilitate the essential trouble-free long-term management and distribution of knowledge for our clients, held back by state-of-the-art AI services. Our innovative new plug-in provides users with direct access to professional services via Microsoft Copilot, allowing them to access workshops, assessments, knowledge, resources, live support, instructor-led training for copilot and a multitude of business applications and effective digital onboarding. Those are just a few examples of our innovation at work, and we are really excited about the future. As I previously alluded to, our current 3-year strategic plan will come to a close at the end of our current fiscal year. Accordingly, we are well into the process of preparing our next 3-year strategic plan, which we will implement on April 1, 2024. In order to build on the successes of our current plan, that process includes interviews with all of our stakeholders to ensure that our mission and vision for the years ahead remain closely aligned with those of our clients, our employees, our investors and our partners. Our strategy would also continue to focus on leveraging synergies obtained through the integration of our past acquisitions, while maintaining our disciplined approach to potential further acquisitions of the right companies at the right time for the right price. I would also like to take a moment to highlight the addition of 2 new senior executives at Alithya this past year. Both individuals will be instrumental not only in overseeing the day-to-day operations of our growing company, but also in guiding us towards the achievement of priorities established in our next 3-year strategic plan. In January, Bernard Dockrill took the reins as Alithya's Chief Operating Officer, replacing Claude Rousseau, who retired after more than 8 years of service during which he guided Alithya through more than 13 acquisitions. In carrying the torch forward, Bernard's operational experience is ideally suited to leading our operations group and his extensive international track record aligns perfectly with our culture of growth and excellence. In April, we also announced the appointment of Giulia Cirillo as Alithya's Chief Human Capital Officer. Giulia's vast experience will be instrumental in strengthening Alithya's culture of collaboration and ownership and in cultivating the well-being and professional development of our people as we continue to grow. [Interpreted] In order to conclude, I'd like to thank our staff. Our main team is truly what makes us move forward. It is clear that we can continue to push the company forward. We are essential players for clients and everyone else. Thank you very much for being here this morning. Pierre the floor back to you.

[Interpreted] Thank you very much, Paul, for this presentation. We've had an impressive year and it's very promising for the next years to come. Thank you. It is now question period. [Operator Instructions] Christine, have we received any questions?

[Interpreted] Mr. Turcotte, I confirm that we have not received any questions.

[Interpreted] Thank you, Christine. Ladies and gentlemen, dear shareholders. This is the end of our question period. And this is also the end of the meeting of shareholders for 2023. Thank you very much for having been with us today, and we look forward to seeing you in 2024. Thank you very much, and have a great rest of your day. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]