Alithya Group (TSE:ALYA) reported third-quarter fiscal 2026 results highlighted by bookings above CAD 130 million, positive net earnings, and stronger operating cash flow, while consolidated revenue was essentially flat year over year and profitability measures were modestly lower.
Quarterly results: revenue nearly flat, adjusted EBITDA slightly lower
For the third quarter of fiscal 2026, Alithya posted consolidated revenue of CAD 115.2 million, down CAD 0.6 million, or 0.5%, from the prior-year period. Gross margin was 31.7% of revenue, down from 32.3% a year earlier.
Net earnings were CAD 0.7 million, up CAD 4.4 million year over year, which management attributed primarily to a lower impairment of goodwill than in the prior-year quarter. Adjusted net earnings were CAD 5.1 million, or CAD 0.05 per share, compared with CAD 5.7 million, or CAD 0.06 per share, last year.
Segment performance: Canada down, U.S. up on eVerge acquisition
Revenue trends diverged across Alithya’s operating segments:
- Canada: Revenue was CAD 54.0 million, down CAD 7.7 million, or 12.5%. Blanchette said the decrease was primarily due to reduced revenues from public sector contracts and certain client projects reaching maturity, partially offset by contributions from the XRM Vision acquisition. Despite lower revenue, Canadian gross margin as a percentage of revenue increased year over year, helped by a proportionally larger reduction in subcontractor use versus permanent employees, a positive margin contribution from XRM Vision, and a shift away from lower gross margin clients toward higher-value offerings, partially offset by slightly lower utilization.
- United States: Revenue rose CAD 6.2 million, or 12.7%, to CAD 55.0 million, driven by the acquisition of eVerge and organic growth in enterprise transformation services, partially offset by an unfavorable U.S. dollar exchange rate. U.S. gross margin as a percentage of revenue declined due to lower utilization, partially offset by increased use of “Smart Shoring” and reduced subcontractor reliance.
- International: Revenue increased CAD 1.0 million, or 19.2%, to CAD 6.2 million due primarily to organic growth in enterprise transformation services and favorable foreign exchange. International gross margin percentage declined as one client project that historically had a higher gross margin moved to maturity.
On the cost side, SG&A expenses totaled CAD 28.5 million, down 1% year over year, and improved sequentially by CAD 2.8 million, which management said was mainly due to variable compensation.
Bookings and pipeline: CAD 130.9 million, renewals and strategic wins
Management repeatedly pointed to bookings as a key leading indicator. COO Bernard Dockrill said quarterly bookings were CAD 130.9 million, translating into a book-to-bill ratio of 1.14 for the quarter and 0.9 on a trailing 12-month basis. Excluding revenue from two long-term contracts signed as part of an acquisition in the first quarter of fiscal 2022, the book-to-bill ratio was 1.26 for the quarter and 1.0 on a trailing 12-month basis.
By segment, bookings were CAD 62.1 million in Canada, CAD 56.6 million in the U.S., and CAD 12.2 million internationally. Dockrill highlighted more than CAD 52 million in renewals, spanning long-term accounts in Canada and international markets across industries including financial services and energy.
Among new wins, Dockrill cited a $9 million U.S. engagement with University Hospital in Newark, New Jersey, to implement Oracle Cloud (including ERP, HCM payroll, supply chain, and EPM). Management described it as Alithya’s first U.S. public healthcare engagement with a public academic health center. The company also referenced additional Oracle Cloud work with a large international organization involving a complex, multi-country HCM implementation.
On the pipeline, management said the volume of opportunities remained “healthy,” with cross-selling efforts focused on core industries and positive momentum in commercial and business services, including capabilities added through eVerge (Salesforce).
Cash flow, leverage, and share repurchases
Alithya generated net cash from operating activities of CAD 25.5 million, up CAD 13.8 million year over year. Blanchette attributed the improvement mainly to CAD 17.4 million in favorable changes in non-cash working capital items and CAD 7.4 million of other non-cash adjustments and net financial expenses.
The company continued share repurchases under its normal course issuer bid. As of December 31, 2025, Alithya had repurchased 347,000 shares for cancellation.
Net debt was CAD 101.9 million at December 31, compared with CAD 94.0 million as of March 31, 2025. Management attributed the increase primarily to higher long-term debt related to the eVerge acquisition, offset by CAD 21 million of repayments in the third quarter. The leverage ratio was 1.9 times net debt over trailing 12-month adjusted EBITDA, down from 2.3 times in the second quarter. CEO Paul Raymond said adjusted EBITDA-to-debt stood at 1.9 and emphasized continued debt reduction.
Datum IP spin-off plan and management’s view on AI demand
Raymond announced the signing of an agreement to spin off Alithya’s equity interests related to Datum Consulting Group in exchange for a minority stake (under 25%) in a venture led by Amar Bukkasagaram, Alithya’s senior vice president of data solutions. Management said the partnership will focus on specialized AI-based solutions for the healthcare industry.
On the call, management clarified it is not receiving cash for the spin-off; rather, Alithya is contributing assets and receiving equity in exchange. Blanchette added that, in connection with the transaction, Alithya expects to repurchase roughly 2.5 million Class A shares from Bukkasagaram, with proceeds used to fund Datum’s working capital needs. Management said additional information would be made public once finalized and noted the venture includes other assets and partners.
In the Q&A, Raymond said Datum historically performed well for Alithya, but the company believed certain IP assets were “under leveraged” inside a services-first organization. He described the spin-off as an attempt to unlock value via a more product-focused structure; management did not disclose margin details beyond saying the assets had “very good” gross margins.
Raymond also addressed investor concerns about generative AI displacing IT services work, arguing that AI is “eliminating tasks, not outcomes,” and that clients hire Alithya for accountability and delivery of complex transformations, including risk management, security, regulatory requirements, and change management. He added that while AI can increase productivity, it shifts work toward review, validation, integration, and analysis, and the company is investing in training. Dockrill also highlighted a Microsoft Copilot specialization, which he said validates Alithya’s expertise across Microsoft 365 Copilot.
Management did not provide forward guidance, but said it was encouraged by bookings, a “strong funnel,” and ongoing strategic focus on higher-value services, including Smart Shoring, where Dockrill said 13.9% of Alithya’s professionals are now located.
About Alithya Group (TSE:ALYA)
Alithya Group Inc is a leader in Strategy and digital transformation, with professionals in Canada, the us, and Europe. Its integrated offering is laid out as follows: Strategy, custom solutions, Microsoft solutions, and Oracle solutions. Clients entrust the company with their strategic projects across Banking, Investment and Insurance, Energy, Manufacturing, Retail and Distribution, Telecommunications, Transportation, Professional Services, Healthcare, and Government sectors. Geographically, it derives a majority of revenue from Canada.
