Alithya Group inc 6-K, filed Aug 10, 2023
Alithya Group inc (ALYAF)
6-K
2023-08-10
For: 2023-06-30
View Original
Added on
July 04, 2026
About this 6-K
Alithya Group inc filed this 6-K on August 10, 2023.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the month of: August 2023
Commission File Number: 001-38705
ALITHYA GROUP INC.
(Translation of Registrant’s name into English)
1100, Robert-Bourassa Boulevard, Suite 400
Montréal, Québec, Canada H3B 3A5
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☐ Form 40-F ☒
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
This Form 6-K shall be deemed incorporated by reference in the Registrant’s Registration Statements on Form S-8, Reg. Nos. 333-228487 and 333-265666.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ALITHYA GROUP INC. | ||
| /s/ Nathalie Forcier | ||
| Name: Nathalie Forcier | ||
| Title: Chief Legal Officer and Corporate Secretary | ||
Date: August 10, 2023 | ||
EXHIBIT INDEX
| 99.1 | |||||
| 99.2 | |||||
| 99.3 | |||||
| 99.4 | |||||
 | ||
Interim Consolidated Financial Statements of Alithya Group inc. For the three months ended June 30, 2023 and 2022 (unaudited) | ||
Exhibit 99.1
TABLE OF CONTENTS
Interim Consolidated Statements of Operations and Comprehensive Loss | |||||
| Notes to Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | |||||
2.Basis of preparation | |||||
9.Net financial expenses | |||||
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
The accompanying notes are an integral part of these interim consolidated financial statements.
| For the three months ended June 30, | ||||||||||||||||||||
| (in thousands of Canadian dollars, except per share data) (unaudited) | 2023 | 2022 | ||||||||||||||||||
| Notes | $ | $ | ||||||||||||||||||
| Revenues | 11 | 131,595 | 126,764 | |||||||||||||||||
| Cost of revenues | 7 | 93,502 | 92,700 | |||||||||||||||||
| Gross margin | 38,093 | 34,064 | ||||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Selling, general and administrative expenses | 7 | 32,499 | 28,927 | |||||||||||||||||
| Business acquisition, integration and reorganization costs | 8 | 1,105 | 1,882 | |||||||||||||||||
| Depreciation | 7 | 1,668 | 1,579 | |||||||||||||||||
| Amortization of intangibles | 6,824 | 4,699 | ||||||||||||||||||
| Foreign exchange gain | (128) | (164) | ||||||||||||||||||
| 41,968 | 36,923 | |||||||||||||||||||
| Operating loss | (3,875) | (2,859) | ||||||||||||||||||
| Net financial expenses | 9 | 3,220 | 1,793 | |||||||||||||||||
| Loss before income taxes | (7,095) | (4,652) | ||||||||||||||||||
| Income tax expense (recovery) | ||||||||||||||||||||
| Current | 201 | (116) | ||||||||||||||||||
| Deferred | (51) | (372) | ||||||||||||||||||
| 150 | (488) | |||||||||||||||||||
| Net loss | (7,245) | (4,164) | ||||||||||||||||||
| Other comprehensive (loss) income | ||||||||||||||||||||
| Items that may be classified subsequently to profit or loss | ||||||||||||||||||||
| Cumulative translation adjustment on consolidation of foreign subsidiaries | (1,412) | 1,615 | ||||||||||||||||||
| (1,412) | 1,615 | |||||||||||||||||||
| Comprehensive loss | (8,657) | (2,549) | ||||||||||||||||||
| Basic and diluted loss per share | 6 | (0.08) | (0.04) | |||||||||||||||||
Alithya Group inc. – Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | | 2 | ||||
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
The accompanying notes are an integral part of these interim consolidated financial statements.
| As at | June 30, | March 31, | ||||||||||||||||||
| (in thousands of Canadian dollars) (unaudited) | 2023 | 2023 | ||||||||||||||||||
| Notes | $ | $ | ||||||||||||||||||
| Assets | ||||||||||||||||||||
| Current assets | ||||||||||||||||||||
| Cash | 27,139 | 22,583 | ||||||||||||||||||
| Accounts receivable and other receivables | 84,893 | 92,453 | ||||||||||||||||||
| Unbilled revenues | 19,076 | 23,420 | ||||||||||||||||||
| Tax credits receivable | 9,942 | 9,944 | ||||||||||||||||||
| Prepaids | 8,491 | 7,680 | ||||||||||||||||||
| 149,541 | 156,080 | |||||||||||||||||||
| Non-current assets | ||||||||||||||||||||
| Tax credits receivable | 14,442 | 12,108 | ||||||||||||||||||
| Other assets | 1,047 | 1,111 | ||||||||||||||||||
| Property and equipment | 7,111 | 8,724 | ||||||||||||||||||
| Right-of-use assets | 8,171 | 9,353 | ||||||||||||||||||
| Intangibles | 96,427 | 104,335 | ||||||||||||||||||
| Deferred tax assets | 6,244 | 5,997 | ||||||||||||||||||
| Goodwill | 164,509 | 166,393 | ||||||||||||||||||
| 447,492 | 464,101 | |||||||||||||||||||
| Liabilities and Shareholders' Equity | ||||||||||||||||||||
| Current liabilities | ||||||||||||||||||||
| Accounts payable and accrued liabilities | 84,675 | 91,263 | ||||||||||||||||||
| Deferred revenues | 20,668 | 22,275 | ||||||||||||||||||
| Current portion of lease liabilities | 4,976 | 3,873 | ||||||||||||||||||
| Current portion of long-term debt | 3 | 90,977 | 12,808 | |||||||||||||||||
| 201,296 | 130,219 | |||||||||||||||||||
| Non-current liabilities | ||||||||||||||||||||
| Contingent consideration | 12 | 6,886 | 7,037 | |||||||||||||||||
| Long-term debt | 3 | 36,094 | 114,382 | |||||||||||||||||
| Lease liabilities | 12,668 | 14,643 | ||||||||||||||||||
| Deferred tax liabilities | 8,816 | 8,632 | ||||||||||||||||||
| 265,760 | 274,913 | |||||||||||||||||||
| Shareholders' equity | ||||||||||||||||||||
| Share capital | 4 | 311,770 | 311,967 | |||||||||||||||||
| Deficit | (148,645) | (141,481) | ||||||||||||||||||
| Accumulated other comprehensive income | 3,198 | 4,610 | ||||||||||||||||||
| Contributed surplus | 15,409 | 14,092 | ||||||||||||||||||
| 181,732 | 189,188 | |||||||||||||||||||
| 447,492 | 464,101 | |||||||||||||||||||
Alithya Group inc. – Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | | 3 | ||||
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the three months ended June 30, (in thousands of Canadian dollars, except share data) (unaudited) | ||||||||||||||||||||||||||||||||||||||||||||
| Notes | Shares outstanding | Share capital | Deficit | Accumulated other comprehensive income (loss) | Contributed surplus(a) | Total | ||||||||||||||||||||||||||||||||||||||
| Number | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Balance as at March 31, 2023 | 95,195,816 | 311,967 | (141,481) | 4,610 | 14,092 | 189,188 | ||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | (7,245) | — | — | (7,245) | ||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | (1,412) | — | (1,412) | ||||||||||||||||||||||||||||||||||||||
| Total comprehensive (loss) income | — | — | (7,245) | (1,412) | — | (8,657) | ||||||||||||||||||||||||||||||||||||||
| Share-based compensation | 5 | — | — | — | — | 836 | 836 | |||||||||||||||||||||||||||||||||||||
| Share-based compensation granted on business acquisition | 5 | — | — | — | — | 885 | 885 | |||||||||||||||||||||||||||||||||||||
| Cash settlement of RSUs issued as share-based compensation | 5 | — | — | — | — | (371) | (371) | |||||||||||||||||||||||||||||||||||||
| Issuance of Subordinate Voting Shares from settlement of RSUs | 4,5 | 14,707 | 33 | — | — | (33) | — | |||||||||||||||||||||||||||||||||||||
| Shares purchased for cancellation | 4 | (65,939) | (230) | 81 | — | — | (149) | |||||||||||||||||||||||||||||||||||||
| Total contributions by, and distributions to, shareholders | (51,232) | (197) | 81 | — | 1,317 | 1,201 | ||||||||||||||||||||||||||||||||||||||
| Balance as at June 30, 2023 | 95,144,584 | 311,770 | (148,645) | 3,198 | 15,409 | 181,732 | ||||||||||||||||||||||||||||||||||||||
| Balance as at March 31, 2022 | 92,725,616 | 305,222 | (111,654) | (947) | 7,130 | 199,751 | ||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | (4,164) | — | — | (4,164) | ||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | 1,615 | — | 1,615 | ||||||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | — | — | (4,164) | 1,615 | — | (2,549) | ||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | 593 | 593 | ||||||||||||||||||||||||||||||||||||||
| Share-based compensation granted on business acquisitions | — | — | — | — | 137 | 137 | ||||||||||||||||||||||||||||||||||||||
| Shares purchased for cancellation | (178,230) | (627) | 97 | — | — | (530) | ||||||||||||||||||||||||||||||||||||||
| Total contributions by, and distributions to, shareholders | (178,230) | (627) | 97 | — | 730 | 200 | ||||||||||||||||||||||||||||||||||||||
| Balance as at June 30, 2022 | 92,547,386 | 304,595 | (115,721) | 668 | 7,860 | 197,402 | ||||||||||||||||||||||||||||||||||||||
(a) The Company reclassified comparative figures as at March 31, 2023 in order to correct an immaterial balance sheet presentation misstatement resulting in an increase in contributed surplus and a decrease in contingent consideration in the amount of $2,120,000.
The accompanying notes are an integral part of these interim consolidated financial statements.
Alithya Group inc. – Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | | 4 | ||||
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these interim consolidated financial statements
| For the three months ended June 30, | ||||||||||||||||||||
| (in thousands of Canadian dollars) (unaudited) | 2023 | 2022 | ||||||||||||||||||
| Notes | $ | $ | ||||||||||||||||||
| (note 10) | ||||||||||||||||||||
| Operating activities | ||||||||||||||||||||
| Net loss | (7,245) | (4,164) | ||||||||||||||||||
| Adjustments for: | ||||||||||||||||||||
| Depreciation and amortization | 8,492 | 6,278 | ||||||||||||||||||
| Net financial expenses | 9 | 3,220 | 1,793 | |||||||||||||||||
| Share-based compensation | 5 | 1,721 | 730 | |||||||||||||||||
| Unrealized foreign exchange gain | (344) | (277) | ||||||||||||||||||
| Realized foreign exchange loss on repayment of long-term debt | — | 58 | ||||||||||||||||||
| Impairment of property and equipment and right-of-use assets and loss on lease termination | 7 | 1,383 | — | |||||||||||||||||
| Settlement of RSUs | 5 | (371) | — | |||||||||||||||||
| Other | 18 | — | ||||||||||||||||||
| Deferred taxes | (51) | (372) | ||||||||||||||||||
| 6,823 | 4,046 | |||||||||||||||||||
| Changes in non-cash working capital items | 10 | 774 | (13,843) | |||||||||||||||||
| Net cash from (used in) operating activities | 7,597 | (9,797) | ||||||||||||||||||
| Investing activities | ||||||||||||||||||||
| Additions to property and equipment | (195) | (753) | ||||||||||||||||||
| Additions to intangibles | (41) | (352) | ||||||||||||||||||
| Restricted cash | — | 3,254 | ||||||||||||||||||
| Business acquisitions, net of cash acquired | — | (814) | ||||||||||||||||||
| Net cash (used in) from investing activities | (236) | 1,335 | ||||||||||||||||||
| Financing activities | ||||||||||||||||||||
| Increase in long-term debt, net of related transaction costs | 30,763 | 40,543 | ||||||||||||||||||
| Repayment of long-term debt | (29,165) | (6,678) | ||||||||||||||||||
| Repayment of lease liabilities | (971) | (888) | ||||||||||||||||||
| Shares purchased for cancellation | 4 | (149) | (530) | |||||||||||||||||
| Financial expense paid | 9 | (2,995) | (1,562) | |||||||||||||||||
| Net cash (used in) from financing activities | (2,517) | 30,885 | ||||||||||||||||||
| Effect of exchange rate changes on cash | (288) | 260 | ||||||||||||||||||
| Net change in cash | 4,556 | 22,683 | ||||||||||||||||||
| Cash, beginning of period | 22,583 | 17,655 | ||||||||||||||||||
| Cash, end of period | 27,139 | 40,338 | ||||||||||||||||||
| Cash paid (included in cash flow from (used in) operating activities) | ||||||||||||||||||||
| Income taxes paid | 235 | — | ||||||||||||||||||
Alithya Group inc. – Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | | 5 | ||||
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022
(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)
1. GOVERNING STATUTES AND NATURE OF OPERATIONS
Alithya Group inc. (together with its subsidiaries, “Alithya” or the “Company”) is a leader in strategy and digital transformation. Alithya's integrated offer is based on five main pillars: business strategy, business applications implementation, application services, data and analytics, and digital skilling and change enablement. The Company deploys solutions, services, and expert consultants to design, build and implement innovative and efficient solutions for the complex business challenges of its clients, tailored to their business needs in the financial services, insurance, healthcare, government, renewable energy, manufacturing, telecommunications, transportation and logistics, and professional services sectors.
The Company’s Class A subordinate voting shares (the “Subordinate Voting Shares”) trade on the Toronto Stock Exchange (“TSX”) and on the NASDAQ Capital Market (“NASDAQ”) under the symbol “ALYA”.
The Company’s head office is located at 1100, Robert-Bourassa Boulevard, Suite 400, Montréal, Québec, Canada, H3B 3A5.
2. BASIS OF PREPARATION
Statement of Compliance
These interim condensed consolidated financial statements have been prepared in accordance with IAS 34 - Interim Financial Reporting. They do not include all of the information required in annual financial statements in accordance with International Financial Reporting Standards ("IFRS"), and should be read in conjunction with the annual audited consolidated financial statements for the year ended March 31, 2023. The Company applied the accounting policies adopted in its most recent annual audited consolidated financial statements for the year ended March 31, 2023, except for changes as detailed below.
These interim consolidated financial statements were approved and authorized for issue by the Board of Directors (the “Board”) on August 9, 2023.
Basis of Measurement
These interim consolidated financial statements have been prepared under the historical cost basis except for
•Identifiable assets acquired and liabilities and contingent liabilities resulting from a business combination which are generally measured initially at their fair values at the acquisition date;
•Lease obligations, which are initially measured at the present value of the lease payments that are not paid at the lease commencement date;
•Equity classified share-based payment arrangements which are measured at fair value at grant date pursuant to IFRS 2, Share-Based Payment; and
•Derivatives, which are initially recognized at fair value on the date the derivative contract is entered into and are subsequently re‑measured at their fair value at the end of each reporting period.
Alithya Group inc. – Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | | 6 | ||||
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022
(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)
2. BASIS OF PREPARATION (CONT’D)
ACCOUNTING STANDARD AMENDMENTS EFFECTIVE FOR THE YEAR ENDING MARCH 31, 2024
The following amendments to existing standards were adopted by the Company on April 1, 2023:
Amendments to IAS 8, Definition of Accounting Estimates
In February 2021, the IASB amended IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors to introduce a new definition of “accounting estimates” to replace the definition of “change in accounting estimates” and also include clarifications intended to help entities distinguish changes in accounting policies from changes in accounting estimates. This distinction is important because changes in accounting policies must be applied retrospectively while changes in accounting estimates are accounted for prospectively. The amendments are effective for annual periods beginning on or after January 1, 2023. Earlier application was permitted. The amendment of IAS 8 had no impact on the Company’s interim consolidated financial statements.
Amendments to IAS 12 - Income Taxes
On May 7, 2021, the IASB issued amendments to IAS 12 - Income Taxes to narrow the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences. As a result, companies will be required to recognize a deferred tax asset and a deferred tax liability for temporary differences arising on initial recognition of a lease and a decommissioning provision. The amendments apply for annual reporting periods beginning on or after January 1, 2023. Earlier application was permitted. The amendment of IAS 12 did not have a material impact on the Company’s consolidated financial statements. Furthermore, the amendment of IAS 12 has no impact on the consolidated statements of financial position and the changes in our income taxes note disclosure will be reflected in the annual consolidated financial statements for the year ended March 31, 2024.
Amendments to IAS 1 and IFRS Practice Statement 2, Disclosure of Accounting Policy Information
In February 2021, the IASB issued amendments to IAS 1 - Presentation of Financial Statements and IFRS Practice Statement 2 - Making Materiality Judgements. The amendments help entities provide accounting policy disclosures that are more useful to primary users of financial statements by:
•Replacing the requirement to disclose “significant” accounting policies under IAS 1 with a requirement to disclose “material” accounting policies. Under this, an accounting policy would be material if, when considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence decisions that primary users of general purpose financial statements make on the basis of those financial statements.
•Providing guidance in IFRS Practice Statement 2 to explain and demonstrate the application of the four-step materiality process to accounting policy disclosures.
The amendments shall be applied prospectively. The amendments to IAS 1 are effective for annual periods beginning on or after January 1, 2023. Earlier application was permitted. Once an entity applies the amendments to IAS 1, it is also permitted to apply the amendments to IFRS Practice Statement 2. The Company will update its accounting policy information disclosures in its annual consolidated financial statements for the year ended March 31, 2024.
Alithya Group inc. – Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | | 7 | ||||
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022
(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)
2. BASIS OF PREPARATION (CONT’D)
FUTURE ACCOUNTING STANDARDS
At the date of authorization of these interim consolidated financial statements, certain new standards, amendments and interpretations, and improvements to existing standards have been published by the IASB but are not yet effective and have not been adopted early by the Company. Management anticipates that all the relevant pronouncements will be adopted in the first reporting period following the date of application. Information on new standards, amendments and interpretations, and improvements to existing standards, which could potentially impact the Company’s consolidated financial statements, are detailed as follows:
NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
IAS 1 - Presentation of Financial Statements
On January 23, 2020, the IASB issued amendments to IAS 1 - Presentation of Financial Statements, to clarify the classification of liabilities as current or non-current. For the purposes of non-current classification, the amendments removed the requirement for a right to defer settlement or roll over of a liability for at least twelve months to be unconditional. Instead, such a right must have substance and exist at the end of the reporting period. After reconsidering certain aspects of the 2020 amendments, the IASB reconfirmed that only covenants with which a company must comply on or before the reporting date affect the classification of a liability as current or non-current. Additional disclosure will be required to help users understand the risk that those liabilities could become repayable within twelve months after the reporting date. The amendments also clarify how a company classifies a liability that includes a counterparty conversion option. The amendments state that: settlement of a liability includes transferring a company’s own equity instruments to the counterparty; and when classifying liabilities as current or non-current, a company can ignore only those conversion options that are recognized as equity. The amendments to IAS 1 apply retrospectively and are effective for annual periods beginning on or after January 1, 2024, with earlier application permitted. Management is currently evaluating the impact of the amendment on its consolidated financial statements.
3. LONG-TERM DEBT
The following table summarizes the Company’s long-term debt:
| As at | June 30, | March 31, | ||||||||||||
| 2023 | 2023 | |||||||||||||
| $ | $ | |||||||||||||
Senior secured revolving credit facility (the "Credit Facility") (a) | 78,362 | 82,512 | ||||||||||||
Secured loans (b) | 17,256 | 13,192 | ||||||||||||
Subordinated unsecured loans (c) | 20,000 | 20,000 | ||||||||||||
Balance of purchase price payable with a nominal value of $12,370,000 (US$9,345,000), non-interest bearing (4.4% effective interest rate), payable in annual installments of $4,123,000 (US$3,115,000), maturing on July 1, 2025 | 11,861 | 11,993 | ||||||||||||
Unamortized transaction costs (net of accumulated amortization of $1,282,000 and $1,184,000) | (408) | (507) | ||||||||||||
| 127,071 | 127,190 | |||||||||||||
| Current portion of long-term debt | 90,977 | 12,808 | ||||||||||||
| 36,094 | 114,382 | |||||||||||||
Alithya Group inc. – Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | | 8 | ||||
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022
(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)
3. LONG-TERM DEBT (CONT’D)
(a) The Credit Facility is available to a maximum amount of $125,000,000 which can be increased under an accordion provision to $140,000,000, under certain conditions, and can be drawn in Canadian and the equivalent amount in U.S. dollars.
The advances bear interest at the Canadian or U.S. prime rate, plus an applicable margin ranging from 0.25% to 1.00%, or bankers’ acceptances or SOFR rates, plus an applicable margin ranging from 1.50% to 2.25%, as applicable for Canadian and U.S. advances, respectively. The applicable margin is determined based on threshold limits for certain financial ratios.
The Credit Facility matures on April 1, 2024 and is renewable for additional one-year periods at the lender’s discretion. As the maturity date of the Credit Facility is within twelve months after the reporting date, it has been classified under the current portion of long-term debt as a current liability in the statement of financial position (note 12).
As at June 30, 2023, the amount outstanding under the Credit Facility includes $78,362,000 (March 31, 2023 - $82,512,000) payable in U.S. dollars (US$59,200,000; March 31, 2023 - US$61,000,000).
The Company has an additional operating credit facility available to a maximum amount of $2,647,000 (US$2,000,000), bearing interest at U.S. prime rate plus 1.00%. This operating credit facility can be terminated by the lender at any time. There was no amount outstanding under this additional operating credit facility as at June 30, 2023.
(b) The secured loans issued by Investissement Québec to finance the Company’s refundable tax credits have the following terms and conditions:
| As at | June 30, | March 31, | ||||||||||||||||||
| 2023 | 2023 | |||||||||||||||||||
| $ | $ | |||||||||||||||||||
| Year of related Refundable Tax Credit | Repayable on the earlier of the date of receipt of the refundable tax credits receivable and | Bearing interest at | ||||||||||||||||||
| 2022 | March 31, 2024 | Prime rate + 1.00% | 8,719 | 8,719 | ||||||||||||||||
| 2023 | March 31, 2025 | Prime rate + 1.25% | 8,537 | 4,473 | ||||||||||||||||
| 17,256 | 13,192 | |||||||||||||||||||
The maximum amount that can be financed for the 2022 and 2023 refundable tax credits is the lesser of 90% of the eligible refundable tax credits and $8,776,000 for 2022 and $10,670,000 for 2023.
(c) The subordinated unsecured loans with Investissement Québec, in the amount of $20,000,000, mature on October 1, 2025. The first $10,000,000 bears fixed interest rates ranging between 6.00% and 7.25% and the additional $10,000,000 bears interest ranging between 7.10% and 8.35%, determined and payable quarterly, based on threshold limits for certain financial ratios. Under the terms of the loans, the Company is required to maintain compliance with certain financial covenants which are measured on a quarterly basis.
(a)(c) The Company was in compliance with all of its financial covenants as at June 30, 2023 and March 31, 2023.
Alithya Group inc. – Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | | 9 | ||||
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022
(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)
4. SHARE CAPITAL
The following table presents information concerning issued share capital activity for the period:
| Subordinate Voting Shares | Multiple Voting Shares | |||||||||||||||||||||||||
| Number of shares | $ | Number of shares | $ | |||||||||||||||||||||||
| Beginning balance as at April 1, 2023 | 87,871,568 | 307,110 | 7,324,248 | 4,857 | ||||||||||||||||||||||
| Shares purchased for cancellation | (65,939) | (230) | — | — | ||||||||||||||||||||||
| Settlement of RSUs | 14,707 | 33 | — | — | ||||||||||||||||||||||
| Ending balance at at June 30, 2023 | 87,820,336 | 306,913 | 7,324,248 | 4,857 | ||||||||||||||||||||||
During the three months ended June 30, 2023, the following transactions occurred:
•The purchase for cancellation of 65,939 Subordinate Voting Shares under the Company's normal course issuer bid for a total cash consideration of $149,000 and a carrying value of $230,000. The excess of the carrying value over the purchase price in the amount of $81,000 was recorded to retained earnings.
•14,707 RSUs were settled and 14,707 Subordinate Voting Shares were issued with a carrying value of $33,000, which was reclassified from contributed surplus.
5. SHARE-BASED PAYMENTS
Stock options
The following tables present information concerning outstanding stock options issued by currency:
| Number of stock options | Weighted average exercise price (CAD) | |||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||
| Beginning balance as at April 1, 2023 | 3,400,696 | 3.23 | ||||||||||||||||||||||||
| Forfeited | (38,000) | 3.42 | ||||||||||||||||||||||||
| Ending balance as at June 30, 2023 | 3,362,696 | 3.22 | ||||||||||||||||||||||||
| Exercisable at period end | 1,954,814 | 3.34 | ||||||||||||||||||||||||
| Number of stock options | Weighted average exercise price (USD) | |||||||||||||||||||||||||
| $ | ||||||||||||||||||||||||||
| Beginning balance as at April 1, 2023 | 1,084,175 | 2.55 | ||||||||||||||||||||||||
| Forfeited | (35,100) | 2.41 | ||||||||||||||||||||||||
| Ending balance as at June 30, 2023 | 1,049,075 | 2.55 | ||||||||||||||||||||||||
| Exercisable at period end | 457,375 | 2.68 | ||||||||||||||||||||||||
Included in the 1,954,814 stock options exercisable issued in Canadian dollars, 505,264 stock options are available to purchase Multiple Voting Shares as at June 30, 2023.
Alithya Group inc. – Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | | 10 | ||||
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022
(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)
5. SHARE-BASED PAYMENTS (CONT’D)
Deferred Share Units (“DSUs”)
The following table presents information concerning the outstanding number of DSUs for the period:
| Number of DSUs | ||||||||||||||
| Beginning balance as at April 1, 2023 | 666,974 | |||||||||||||
| Granted to non-employee directors | 67,940 | |||||||||||||
| Granted to employees | 304,688 | |||||||||||||
| Ending balance as at June 30, 2023 | 1,039,602 | |||||||||||||
During the three months ended June 30, 2023, 67,940 fully vested DSUs, in aggregate, were granted under the Long-Term Incentive Plan (“LTIP”) to non-employee directors of the Company at a fair value of $2.17, per DSU, for an aggregate fair value of $147,000.
During the three months ended June 30, 2023, 304,688 DSUs, in aggregate, were granted under the Share Unit Plan (“SUP”) at a grant date fair value of $2.30, per DSU, for an aggregate fair value of $701,000. Share-based compensation expense was recorded as at March 31, 2023 as the related services were performed and the performance conditions were met at that date.
As at June 30, 2023, included in the 1,039,602 DSUs are 734,914 DSUs issued under LTIP and 304,688 DSUs issued under the SUP.
Restricted Share Units (“RSUs”)
The following table presents information concerning the outstanding number of RSUs for the period:
| Number of RSUs | ||||||||||||||
| Beginning balance as at April 1, 2023 | 181,498 | |||||||||||||
| Granted | 311,246 | |||||||||||||
| Settled | (181,498) | |||||||||||||
| Ending balance as at June 30, 2023 | 311,246 | |||||||||||||
During the three months ended June 30, 2023, 311,246 RSUs, in aggregate, vesting over three years from the date of grant, were granted under the SUP at a grant date fair value of $2.30, per RSU, for an aggregate fair value of $716,000.
During the three months ended June 30, 2023, 181,498 RSUs issued under the LTIP were settled. 14,707 RSUs were settled through the issuance of 14,707 Subordinate Voting Shares, with a carrying value of $33,000. The balance was settled for a total cash consideration of $371,000.
Alithya Group inc. – Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | | 11 | ||||
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022
(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)
5. SHARE-BASED PAYMENTS (CONT’D)
Performance Share Units (“PSUs”)
The following table presents information concerning the outstanding number of PSUs for the period:
| Number of PSUs | ||||||||||||||
| Beginning balance as at April 1, 2023 | 855,383 | |||||||||||||
| Granted | 1,349,752 | |||||||||||||
| Forfeited | (14,600) | |||||||||||||
| Ending balance as at June 30, 2023 | 2,190,535 | |||||||||||||
During the three months ended June 30, 2023, 1,349,752 PSUs, in aggregate, vesting three years from the date of grant, were granted at a grant date fair value of $2.30, per PSU, for an aggregate fair value of $3,104,000.
Share-Based Compensation expense
Total share-based compensation expense for the period ended June 30, 2023 and 2022 is summarized as follows:
| For the three months ended June 30, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| $ | $ | |||||||||||||
| Stock options | 185 | 226 | ||||||||||||
| Share purchase plan – employer contribution | 357 | 331 | ||||||||||||
| Share-based compensation granted on business acquisitions | 885 | 137 | ||||||||||||
| DSUs | 184 | 135 | ||||||||||||
| RSUs | 15 | — | ||||||||||||
| PSUs | 452 | 232 | ||||||||||||
| 2,078 | 1,061 | |||||||||||||
6. EARNINGS PER SHARE
| For the three months ended June 30, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| $ | $ | |||||||||||||
| Net loss | (7,245) | (4,164) | ||||||||||||
Weighted average number of Shares outstanding (a) | 95,190,628 | 92,650,549 | ||||||||||||
| Basic and diluted loss per share | (0.08) | (0.04) | ||||||||||||
The potentially dilutive outstanding equity instruments, which are DSUs, RSUs and vested options in the money mentioned in Note 5, were not included in the calculation of diluted earnings per share since the Company incurred losses and the inclusion of these equity instruments would have an antidilutive effect.
Alithya Group inc. – Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | | 12 | ||||
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022
(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)
7. ADDITIONAL INFORMATION ON CONSOLIDATED LOSS
The following table provides additional information on the consolidated loss:
| For the three months ended June 30, | ||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
| Expenses by Nature | ||||||||||||||||||||||||||
| Employee compensation and subcontractor costs | 117,842 | 115,817 | ||||||||||||||||||||||||
Tax credits (a) | (2,391) | (2,744) | ||||||||||||||||||||||||
| Licenses and telecommunications | 2,543 | 2,293 | ||||||||||||||||||||||||
| Professional fees | 1,757 | 1,819 | ||||||||||||||||||||||||
| Other expenses | 4,867 | 4,442 | ||||||||||||||||||||||||
| Impairment of property and equipment and right-of-use assets and loss on lease termination | 1,383 | — | ||||||||||||||||||||||||
| Depreciation of property and equipment | 998 | 668 | ||||||||||||||||||||||||
| Depreciation of right-of-use assets | 670 | 911 | ||||||||||||||||||||||||
| 127,669 | 123,206 | |||||||||||||||||||||||||
| Expenses by Function | ||||||||||||||||||||||||||
| Cost of revenues | 93,502 | 92,700 | ||||||||||||||||||||||||
| Selling, general and administrative expenses | 32,499 | 28,927 | ||||||||||||||||||||||||
| Depreciation | 1,668 | 1,579 | ||||||||||||||||||||||||
| 127,669 | 123,206 | |||||||||||||||||||||||||
8. BUSINESS ACQUISITION, INTEGRATION AND REORGANIZATION COSTS
| For the three months ended June 30, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| $ | $ | |||||||||||||
Acquisition costs (a) | — | 1,079 | ||||||||||||
Integration costs (b) | 739 | 615 | ||||||||||||
Reorganization costs related to modifications to cost structure (c) | 166 | 188 | ||||||||||||
Employee compensation on business acquisition (d) | 200 | — | ||||||||||||
| 1,105 | 1,882 | |||||||||||||
(a) The acquisition costs consisted mainly of professional fees incurred in relation to business acquisitions.
(b) For the three months ended June 30, 2023, integration costs were mainly related to termination of leases of vacated premises previously acquired as part of business combinations (June 30, 2022 - mainly for transition costs related to system integration).
(c) Reorganization costs related to modifications to cost structure consisted of employee termination and benefits costs.
(d) Employee compensation on business acquisition included deferred cash consideration from the acquisition of U.S.-based Datum Consulting Group, LLC and is international affiliates.
Alithya Group inc. – Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | | 13 | ||||
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022
(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)
9. NET FINANCIAL EXPENSES
The following table summarizes net financial expenses:
| For the three months ended June 30, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| $ | $ | |||||||||||||
| Interest on long-term debt | 3,021 | 1,235 | ||||||||||||
| Interest on lease liabilities | 189 | 217 | ||||||||||||
| Amortization of finance costs | 98 | 83 | ||||||||||||
| Interest accretion on balances of purchase price payable | 127 | 148 | ||||||||||||
| Financing fees | 52 | 129 | ||||||||||||
| Interest income | (267) | (19) | ||||||||||||
| 3,220 | 1,793 | |||||||||||||
10. SUPPLEMENTARY CASH FLOW INFORMATION
Changes in non-cash working capital items are as follows:
| For the three months ended June 30, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| $ | $ | |||||||||||||
| Accounts receivable and other receivables | 6,718 | 7,462 | ||||||||||||
| Unbilled revenues | 4,246 | (12,090) | ||||||||||||
| Tax credits receivable | (2,354) | (2,747) | ||||||||||||
| Prepaids | (932) | (393) | ||||||||||||
| Other assets | 61 | 36 | ||||||||||||
| Accounts payable and accrued liabilities | (5,668) | (4,863) | ||||||||||||
| Deferred revenues | (1,297) | (1,248) | ||||||||||||
| 774 | (13,843) | |||||||||||||
During the three months ended June 30, 2023, non-cash investing and financing activities included additions to right-of-use assets and lease liabilities in the amount of $454,000 (June 30, 2022 - $293,000).
The Company changed comparative figures in the consolidated statements of cash flows to conform to the current period’s presentation by presenting interest paid in the amount of $1,562,000 as financing cash flows instead of operating cash flows. This change was disclosed in the change in accounting policy note in the annual audited consolidated financial statements for the year ended March 31, 2023.
Alithya Group inc. – Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | | 14 | ||||
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022
(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)
11. SEGMENT INFORMATION
The following tables present the Company's operations based on reportable segments:
| For the three months ended June 30, 2023 | ||||||||||||||||||||||||||
| Canada | U.S. | International | Total | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| Revenues | 76,987 | 49,244 | 5,364 | 131,595 | ||||||||||||||||||||||
| Operating income by segment | 7,971 | 8,441 | 712 | 17,124 | ||||||||||||||||||||||
| Head office general and administrative expenses | 11,530 | |||||||||||||||||||||||||
| Business acquisition, integration and reorganization costs | 1,105 | |||||||||||||||||||||||||
| Foreign exchange loss (gain) | (128) | |||||||||||||||||||||||||
| Operating income before depreciation and amortization | 4,617 | |||||||||||||||||||||||||
| Depreciation and amortization | 8,492 | |||||||||||||||||||||||||
| Operating loss | (3,875) | |||||||||||||||||||||||||
| For the three months ended June 30, 2022 | ||||||||||||||||||||||||||
| Canada | U.S. | International | Total | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| Revenues | 78,557 | 44,265 | 3,942 | 126,764 | ||||||||||||||||||||||
| Operating income by segment | 7,157 | 5,519 | 370 | 13,046 | ||||||||||||||||||||||
| Head office general and administrative expenses | 7,909 | |||||||||||||||||||||||||
| Business acquisition, integration and reorganization costs | 1,882 | |||||||||||||||||||||||||
| Foreign exchange loss (gain) | (164) | |||||||||||||||||||||||||
| Operating income before depreciation and amortization | 3,419 | |||||||||||||||||||||||||
| Depreciation and amortization | 6,278 | |||||||||||||||||||||||||
| Operating loss | (2,859) | |||||||||||||||||||||||||
Alithya Group inc. – Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | | 15 | ||||
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022
(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)
11. SEGMENT INFORMATION (CONT’D)
Information about revenues
An analysis of the Company’s revenues from customers for each major service category is as follows:
| For the three months ended June 30, 2023 | ||||||||||||||||||||||||||
| Canada | U.S. | International | Total | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| Consulting services - time and materials arrangements | 66,468 | 29,017 | 4,402 | 99,887 | ||||||||||||||||||||||
| Consulting services - fixed-fee arrangements | 7,604 | 8,387 | 962 | 16,953 | ||||||||||||||||||||||
| Subscription, software and other revenues | 2,915 | 11,840 | — | 14,755 | ||||||||||||||||||||||
| 76,987 | 49,244 | 5,364 | 131,595 | |||||||||||||||||||||||
| For the three months ended June 30, 2022 | ||||||||||||||||||||||||||
| Canada | U.S. | International | Total | |||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| Consulting services - time and materials arrangements | 65,561 | 28,437 | 3,903 | 97,901 | ||||||||||||||||||||||
| Consulting services - fixed-fee arrangements | 9,772 | 5,054 | 39 | 14,865 | ||||||||||||||||||||||
| Subscription, software and other revenues | 3,224 | 10,774 | — | 13,998 | ||||||||||||||||||||||
| 78,557 | 44,265 | 3,942 | 126,764 | |||||||||||||||||||||||
Major customer
During the three months ended June 30, 2023, one client generated more than 10% of total revenues for $15,448,000 (June 30, 2022 - one client generated more than 10% of total revenues for $17,528,000). As at June 30, 2023, no customer represented more than 10% of total accounts receivable and other receivables (March 31, 2023 - one major customer amounted to $10,777,000 or 11.7%).
12. FINANCIAL INSTRUMENTS
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s activities are financed through a combination of cash flows from operations, borrowings under existing Credit Facility, issuance of debt and issuance of equity instruments. In order to manage its exposure to liquidity risk, the Company’s primary goal is to maintain an optimal level of liquidity through an active management of assets and liabilities as well as cash flows. As at June 30, 2023, the Company has an unused capacity of $46,638,000 under its Credit Facility of $125,000,000, which expires on April 1, 2024. As at June 30, 2023, the carrying amount of the liabilities of the Company having a maturity of less than one year amount to $201,296,000, some of which bear interest as disclosed in Note 3.
The Company’s ability to meet the obligations associated with its financial liabilities that will require settlement in less than one year is contingent on its ability to maintain adequate credit facilities. The Company anticipates to renew the Credit Facility, in the normal course of business, in amounts which will be sufficient, and on acceptable terms and conditions, prior to its expiration on April 1, 2024. There is no assurance that the Company will be successful in renewing the Credit Facility and be able to meet the obligations associated with its financial liabilities that will require settlement in less than one year.
Alithya Group inc. – Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | | 16 | ||||
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022
(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)
12. FINANCIAL INSTRUMENTS (CONT’D)
Fair Value of Financial Instruments
Financial instruments recorded at fair value on the interim consolidated statements of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
•Level 1 - Valuation based on quoted prices observed in active markets for identical assets or liabilities.
•Level 2 - Valuation techniques based on inputs that are quoted prices of similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a valuation model that are observable for that instrument; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
•Level 3 - Valuation techniques with significant unobservable market inputs. A financial instrument is classified at the lowest level of the hierarchy for which a significant unobservable market input has been considered in measuring fair value.
The carrying amount of cash, accounts receivable and other receivables, other assets, accounts payable and accrued liabilities and long-term debt bearing interest at variable rates approximates fair value.
The Company has designated as an effective hedging instrument an interest rate swap for a nominal amount of $30,000,000 maturing on August 30, 2025 to fix the variability in interest rates on a designated portion of borrowings under its Credit Facility. Under the interest rate swap agreement, the Company pays interest based on a fixed rate of 3.97%, and receives interest based on the actual one-month BA/CDOR rate. The fair value of derivatives instruments is estimated by discounting expected cash flows using one month BA/CDOR forward rates (level 2). The fair market value of the interest rate swap agreement as at June 30, 2023 is not material.
The contingent consideration related to business combination is payable in U.S. dollars based on the achievement of growth in excess of the trailing twelve months gross margin for earn-out periods ending on July 1, 2023, 2024 and 2025 and is included in Level 3 of the fair value hierarchy. The fair value was determined at $6,886,000 (US$5,202,000) considering the expected earn-out payments, discounted to present value using a risk-adjusted discount rate of 5.8% as at June 30, 2023. There were no significant changes in the assumptions for the quarter ended June 30, 2023.
The fair value of the long-term debt bearing interest at fixed rates is estimated by discounting expected cash flows at rates that would be currently offered to the Company for debts of the same remaining maturities and conditions (Level 2). For both June 30, 2023 and March 31, 2023, the Company has determined that the fair value of the Credit Facility, the secured loans and the balances of purchase price payable are not significantly different than their carrying amount.
The following table summarizes the carrying amount of the financial liabilities included in the long-term debt and measured at amortized cost:
| As at | June 30, | March 31, | ||||||||||||
| 2023 | 2023 | |||||||||||||
| $ | $ | |||||||||||||
| Credit Facility | 78,362 | 82,512 | ||||||||||||
| Secured loans | 17,256 | 13,192 | ||||||||||||
Subordinated unsecured loans (a) | 20,000 | 20,000 | ||||||||||||
| Balances of purchase price payable | 11,861 | 11,993 | ||||||||||||
| 127,479 | 127,697 | |||||||||||||
(a) As at June 30, 2023, the fair value of the subordinated unsecured loans, bearing interest at fixed rates, was approximately $18,774,000 (March 31, 2023 - $19,038,000).
Alithya Group inc. – Interim Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 | | 17 | ||||
 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya Group inc. For the three months ended June 30, 2023 | ||
Exhibit 99.2
Table of Contents
| Page | |||||||||||
| 1. | |||||||||||
| 2. | Forward-Looking Statements | ||||||||||
| 3. | |||||||||||
| 4. | |||||||||||
| 5. | |||||||||||
| 6. | |||||||||||
| 7. | |||||||||||
| 7.1 | |||||||||||
| 7.2 | |||||||||||
| 7.3 | |||||||||||
| 7.4 | |||||||||||
| 7.5 | |||||||||||
| 7.6 | Adjusted Net Earnings and Adjusted Net Earnings per Share | ||||||||||
7.7 | |||||||||||
7.8 | |||||||||||
| 8. | Bookings and Backlog | ||||||||||
| 9. | |||||||||||
| 9.1 | |||||||||||
| 9.2 | |||||||||||
| 9.3 | |||||||||||
| 9.4 | |||||||||||
| 9.5 | |||||||||||
| 9.6 | Long-Term Debt and Net Debt | ||||||||||
| 9.7 | |||||||||||
| 9.8 | |||||||||||
| 10 | |||||||||||
| 10.1 | Normal Course Issuer Bid | ||||||||||
| 11. | |||||||||||
| 12. | |||||||||||
| 13. | |||||||||||
| 14. | |||||||||||
| 15. | |||||||||||
| 16. | |||||||||||
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | |||||
1. Basis of Presentation
This Management’s Discussion and Analysis (“MD&A”) provides a review of the results of operations, financial condition and cash flows for Alithya Group inc. for the three months ended June 30, 2023. References to “Alithya”, the “Company”, the “Group”, “we”, “our” and “us” in this MD&A refer to Alithya Group inc. and its subsidiaries or any one or more of them, unless the context requires otherwise. This document should be read in conjunction with the information contained in the Company’s interim consolidated financial statements (the "Q1 Financial Statements") and accompanying notes for the three months ended June 30, 2023 and 2022, as well as the audited consolidated financial statements and MD&A for the fiscal year ended March 31, 2023. These documents, as well as the Company's Annual Information Form, and additional information regarding the business of the Company, are available under the Company’s profile on the System for Electronic Document Analysis and Retrieval (“SEDAR+”) at www.sedarplus.com and the Electronic Data Gathering, Analysis and Retrieval system (“EDGAR”) at www.sec.gov.
For reporting purposes, the Company prepared the Q1 Financial Statements in Canadian dollars in accordance with IAS 34 - Interim Financial Reporting of International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Unless otherwise indicated, all dollar (“$”) amounts and references in this MD&A are in Canadian dollars and references to “US$” are to U.S. dollars. Variances, ratios and percentage changes in this MD&A are based on unrounded numbers.
This MD&A contains both IFRS and non-IFRS financial measures. See section 5 titled “Non-IFRS and Other Financial Measures”.
Unless otherwise stated, in preparing this MD&A, the Company has considered information available to it up to August 9, 2023, the date the Company’s Board of Directors (“Board”) approved this MD&A and the Q1 Financial Statements.
2. Forward-Looking Statements
This MD&A contains statements that may constitute “forward-looking information” within the meaning of applicable Canadian securities laws and “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and other applicable U.S. safe harbours (collectively “forward-looking statements”). Statements that do not exclusively relate to historical facts, as well as statements relating to management’s expectations regarding the future growth, results of operations, performance and business prospects of Alithya, and other information related to Alithya’s business strategy and future plans or which refer to the characterizations of future events or circumstances represent forward-looking statements. Such statements often contain the words “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “could,” “would,” “will,” “may,” “can,” “continue,” “potential,” “should,” “project,” “target,” and similar expressions and variations thereof, although not all forward-looking statements contain these identifying words.
Forward-looking statements in this MD&A include, among other things, information or statements about: (i) our ability to generate sufficient earnings to support our operations; (ii) our ability to take advantage of business opportunities and meet our goals set in our three-year strategic plan; (iii) our ability to maintain and develop our business, including by broadening the scope of our service offerings, entering into new contracts and penetrating new markets; (iv) our strategy, future operations, and prospects, including our expectations
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 2 | ||||
regarding future revenue resulting from bookings and backlog; (v) our ability to service our debt and raise additional capital and our estimates regarding our financial performance, including our revenues, profitability, research and development, costs and expenses, gross margins, liquidity, capital resources, and capital expenditures; (vi) our ability to realize the expected synergies or cost savings relating to the integration of our business acquisitions, and (vii) the potential return to pre-COVID-19 pandemic operations.
Forward-looking statements are presented for the sole purpose of assisting investors and others in understanding Alithya’s objectives, strategies and business outlook as well as its anticipated operating environment and may not be appropriate for other purposes. Although management believes the expectations reflected in Alithya’s forward-looking statements were reasonable as at the date they were made, forward-looking statements are based on the opinions, assumptions and estimates of management and, as such, are subject to a variety of risks and uncertainties and other factors, many of which are beyond Alithya’s control, and which could cause actual events or results to differ materially from those expressed or implied in such statements. Such risks and uncertainties include but are not limited to those discussed in the section titled “Risks and Uncertainties” of this MD&A, the MD&A for the year ended March 31, 2023, as well as in Alithya’s other materials made public, including documents filed with Canadian and U.S. securities regulatory authorities from time to time and which are available on SEDAR+ at www.sedarplus.com and EDGAR at www.sec.gov. Additional risks and uncertainties not currently known to Alithya or that Alithya currently deems to be immaterial could also have a material adverse effect on its financial position, financial performance, cash flows, business or reputation.
Forward-looking statements contained in this MD&A are qualified by these cautionary statements and are made only as of the date of this MD&A. Alithya expressly disclaims any obligation to update or alter any forward-looking statements, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by applicable law. Investors are cautioned not to place undue reliance on forward-looking statements since actual results may vary materially from them.
3. Business Overview
Alithya advises in strategy and digital transformation with professionals in Canada, the U.S. and internationally. The Company guides and supports its clients in their pursuit of innovation and excellence, and the achievement of their business objectives through the optimal use of digital technologies.
Alithya’s collaborative teams deploy solutions and services focused on five main pillars: business strategy, business applications implementation, application services, data and analytics, and digital skilling and change enablement. Through the optimal use of digital technologies, Alithya provides consulting and digital technology services to clients in the financial services, insurance, healthcare, government, renewable energy, manufacturing, telecommunications, transportation and logistics, and professional services sectors.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 3 | ||||
Business Offerings
Alithya’s business offerings in each of its reportable segments include a comprehensive range of digital technology services to address client needs:
•Business Strategy. Alithya leads clients through essential decision-making processes regarding strategic consulting, digital transformation, business agility, enterprise architecture, organizational performance, and more.
•Application Services. Alithya’s experts guide clients through all facets of cloud and infrastructure, control systems software engineering, cyber security, digital applications development, intelligent document processing, legacy systems modernization, quality assurance, and more.
•Business Applications Implementation. Working with key industry partners, including some of the world’s largest vendors of cloud-based Enterprise Solutions, Alithya’s experts help clients deploy company-wide systems, including Enterprise Resource Planning (ERP), Enterprise Performance Management (EPM), Customer Relationship Management (CRM) and Human Capital Management (HCM).
•Data and Analytics. Leveraging specialized IT systems and software, Alithya’s data professionals help clients gain business insight and drive better decision-making through AI and machine learning, big data, business intelligence, internet of things, operational intelligence, and more.
•Digital Skilling and Change Enablement. Alithya’s digital skilling service and change enablement provides everything our clients and their employees need to adopt new technologies.
Geographically, Alithya’s operations span across Canada, the U.S. and internationally, providing a full spectrum of strategy and digital technology services with deep expertise in a range of technologies and business domains.
Competitive Environment
For many companies, digital systems and infrastructures are among their most important and strategic assets. Not only do these assets require significant investments, but they increasingly serve as key differentiators and drivers of growth for customers.
Accordingly, businesses are seeking solutions that allow them to maintain their ability to differentiate themselves from competitors with proprietary business processes, combined with product customization. That is where digital transformation comes into play, inviting companies to make a shift in their approach and to evolve from traditional information technologies to flexible digital technologies.
As businesses’ technology spending continues to increase, digital technology firms such as Alithya are striving to deliver innovative thinking and in-depth vertical industry expertise, while facilitating business process transformation through the use of the most optimal technologies.
Alithya believes it is well positioned to respond to these trends in clients’ investments in digital technology. Alithya’s business model is built on a philosophy of offering flexible and creative solutions, enabling clients to
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 4 | ||||
realize maximum benefits from their digital technology investments. Alithya positions itself as an agile trusted advisor and consulting partner capable of delivering rapid results for its clients.
Alithya’s competitors in each of its reportable segments include systems integration firms, contract programming companies, application software companies, cloud computing service providers, large or traditional consulting firms, professional services groups of computer equipment companies, infrastructure management and outsourcing companies and boutique digital companies. In addition, Alithya competes with numerous smaller local companies in the various geographic markets in which it operates.
Alithya competes based on the following principal differentiating factors: vision and strategic advisory ability, digital services capabilities, performance and reliability, quality of technical support, training and services, responsiveness to client needs, reputation and experience, financial stability and strong corporate governance and competitive pricing of services.
Alithya also relies on the following measures to compete effectively: (a) investments to scale its services practice areas; (b) a well-developed recruiting, training and retention model; (c) a successful service delivery model; (d) intrapreneurial culture and approach; (e) a broad referral base; (f) continual investment in process improvement and knowledge capture; (g) investment in infrastructure and research and development; (h) continued focus on responsiveness to client needs, quality of services and competitive prices; and (i) project management capabilities and technical expertise.
4. Strategic Business Plan
Alithya has adopted a three-year strategic plan which sets as a goal to consolidate its position as to become a North American digital transformation leader.
According to this plan, Alithya’s consolidated scale and scope should allow it to leverage its geographies, expertise, integrated offerings and position on the value chain to target the fastest growing IT services segments. Alithya’s specialization in digital technologies and the flexibility to deploy enterprise solutions and deliver solutions tailored to specific business objectives responds directly to client expectations. More specifically, Alithya has established a three-pronged plan focusing on:
•Increasing scale through organic growth and strategic acquisitions by:
◦Generating profitable organic growth through innovation, higher-value offerings and client-relationships based on trust;
◦Completing value enhancing business acquisitions by way of a North American geographic expansion to complement current market presence, including geography, while progressively adding major integrated enterprise solutions offerings and selected specialized expertise;
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 5 | ||||
•Achieving best-in-class employee engagement by:
◦Fostering a culture of collaboration, diversity and ownership;
◦Cultivating employee well-being and personal growth;
◦Investing in the development of its leaders and employees;
•Providing its investors, partners and stakeholders with long-term growing return on investment by:
◦Strengthening its existing relationships with clients, as a key trusted advisor, by generating long-term value;
◦Investing in innovation and higher value service offerings;
◦Acting responsibly, with a sustainable and respectful vision for its stakeholders and articulating its Environmental, Social and Governance framework and priorities.
5. Non-IFRS and Other Financial Measures
Alithya reports its financial results in accordance with IFRS. This MD&A includes certain non-IFRS and supplementary financial measures and ratios to assess Alithya's financial performance. These measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. These measures should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with IFRS.
The non-IFRS measures used by Alithya are described below:
EBITDA and EBITDA Margin
"EBITDA" refers to net income (loss) before adjusting for income tax expense (recovery), net financial expenses, amortization of intangibles, and depreciation of property and equipment and right-of-use assets.
"EBITDA Margin" refers to the percentage of total revenue that EBITDA represents for a given period.
Management believes that EBITDA and EBITDA Margin are useful measures for investors as they provide an indication of the results generated by Alithya’s main business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration non-cash depreciation and amortization. For a reconciliation of net loss to EBITDA, see section 7.8 titled “EBITDA and Adjusted EBITDA”.
Adjusted Net Earnings and Adjusted Net Earnings per Share
"Adjusted Net Earnings" refers to net income (loss) before adjusting for amortization of intangibles, impairment of intangibles and goodwill, impairment of property and equipment and right-of-use assets, share-based compensation, business acquisition, integration and reorganization costs, and the income tax effects of these items.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 6 | ||||
"Adjusted Net Earnings per Share" is calculated by dividing Adjusted Net Earnings by the weighted average number of outstanding Class A Subordinate Voting Shares ("Subordinate Voting Shares") and Class B Multiple Voting Shares ("Multiple Voting Shares"), excluding potentially dilutive outstanding equity instruments, during the period.
Management believes that Adjusted Net Earnings and Adjusted Net Earnings per Share are useful measures for investors as they allow comparability of operating results from one period to another, prior to taking into consideration non-cash items and business acquisition, integration and reorganization costs, which can vary significantly from period to period. These measures provide an indication of the results generated by Alithya’s main business activities prior to taking into consideration the non-cash and other items listed above which have resulted primarily from acquisitions and their subsequent integrations. For a reconciliation of net loss to Adjusted Net Earnings, see section 7.6 titled “Adjusted Net Earnings and Adjusted Net Earnings per Share”.
Adjusted EBITDA and Adjusted EBITDA Margin
"Adjusted EBITDA" refers to net income (loss) before adjusting for income tax expense (recovery), net financial expenses, foreign exchange, amortization of intangibles, depreciation of property and equipment and right-of-use assets, impairment of intangibles and goodwill, impairment of property and equipment and right-of-use assets, share-based compensation, business acquisition, integration and reorganization costs, internal ERP systems implementation, and other redundant and non-recurring items.
"Adjusted EBITDA Margin" refers to the percentage of total revenue that Adjusted EBITDA represents for a given period.
Management believes that Adjusted EBITDA and Adjusted EBITDA Margin are useful measures for investors as they allow comparability of operating results from one period to another. These measures provide an indication of the results generated by Alithya’s main business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration the non-cash and other items listed above. For a reconciliation of net loss to Adjusted EBITDA, see section 7.8 titled “EBITDA and Adjusted EBITDA”.
Constant Dollar Revenue and Constant Dollar Growth
"Constant Dollar Revenue" is a measure of revenue and revenue by geographic location before foreign currency translation impacts. This measure is calculated by translating current period revenue and revenue by geographic location in local currency using the exchange rates in the equivalent period from the prior year.
"Constant Dollar Growth" is a measure of revenue growth and revenue growth by geographic location, expressed as a percentage, before foreign currency translation impacts. This measure is calculated by dividing Constant Dollar Revenue as described above with prior period revenue.
Management believes that Constant Dollar Revenue and Constant Dollar Growth are useful measures for investors as they allow revenue to be adjusted to exclude the impact of currency fluctuations to facilitate period-to-period comparisons of business performance. For a reconciliation of revenues to Constant Dollar Revenue by geographic location, see section 7.1 titled “Revenues”.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 7 | ||||
Net Debt
"Net Debt" refers to long-term debt, including the current portion, less cash and restricted cash. For the calculation of Net Debt, see section 9.6 titled “Long-Term Debt and Net Debt”. Management believes that Net Debt is a useful measure for investors as it provides an indication of the liquidity of the Company.
Other Financial Measures
The other financial measures used by Alithya are described below:
"Gross Margin as a Percentage of Revenues" is calculated by dividing gross margin by revenues.
"Selling, General and Administrative Expenses as a Percentage of Revenues" is calculated by dividing selling, general and administrative expenses by revenues.
"Bookings" refers to the amount of signed revenue agreements during the period, which includes new contracts, including those acquired through acquisitions, as well as renewals, extensions and changes to existing contracts. Management believes information regarding bookings can provide useful trend insight to investors regarding changes in the volume of new business over time.
"Book-to-Bill Ratio" is calculated by dividing Bookings by revenues, for the same period. Management believes this measure allows for the monitoring of the Company’s backlog and offers useful insight to investors on how the business varies and evolves over time. This measure is best used over a long period as it could fluctuate significantly from one quarter to the other.
"Backlog" refers to the amount of future revenue stemming from signed revenue agreements, which includes new contracts, including those acquired through acquisitions, as well as renewals, extensions and changes to existing contracts, expressed as a number of months of trailing twelve-month revenue, as at a given date. Backlog differs from the IFRS definition of remaining performance obligations, as disclosed in the Company's consolidated financial statements, as backlog also includes time and materials arrangements without stated ceilings and contracts with original expected durations exceeding one year. Management believes that backlog information can provide useful trend insight to investors regarding changes in management’s best estimate of future revenue stemming from signed revenue agreements.
"Days Sales Outstanding" ("DSO") refers to the average number of days it takes for the Company to convert its accounts receivable and other receivables (net of sales taxes) and unbilled revenues, less deferred revenues, into cash. Management believes this measure provides useful insight to investors regarding the Company's liquidity.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 8 | ||||
6. Financial Highlights
| Results of Operations | Three months ended June 30, | |||||||||||||||||||||||||
| (in $ thousands) | 2023 | 2022 | ||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
| Revenues | 131,595 | 126,764 | ||||||||||||||||||||||||
| Gross Margin | 38,093 | 34,064 | ||||||||||||||||||||||||
Gross Margin as a Percentage of Revenues (1) | 28.9 | % | 26.9 | % | ||||||||||||||||||||||
Selling, General and Administrative Expenses | 32,499 | 28,927 | ||||||||||||||||||||||||
Selling, General and Administrative Expenses as a Percentage of Revenues (1) | 24.7 | % | 22.8 | % | ||||||||||||||||||||||
| Net Loss | (7,245) | (4,164) | ||||||||||||||||||||||||
| Basic and Diluted Loss per Share | (0.08) | (0.04) | ||||||||||||||||||||||||
Adjusted Net Earnings (2) | 1,677 | 2,719 | ||||||||||||||||||||||||
Adjusted Net Earnings per Share (2) | 0.02 | 0.03 | ||||||||||||||||||||||||
Adjusted EBITDA (3) | 9,055 | 6,198 | ||||||||||||||||||||||||
Adjusted EBITDA Margin (3) | 6.9 | % | 4.9 | % | ||||||||||||||||||||||
| Other | June 30, | March 31, | ||||||||||||
| (in $ thousands, except Backlog and DSO) | 2023 | 2023 | ||||||||||||
| $ | $ | |||||||||||||
| Total Assets | 447,492 | 464,101 | ||||||||||||
Non-Current Financial Liabilities (4) | 55,648 | 136,062 | ||||||||||||
Total Long-Term Debt | 127,071 | 127,190 | ||||||||||||
Net Debt (5) | 99,932 | 104,607 | ||||||||||||
Backlog (1) | 16 months | 16 months | ||||||||||||
DSO (1) | 49 days | 54 days | ||||||||||||
| Shares, Stock Options and Share Units Outstanding | August 8, | |||||||
| 2023 | ||||||||
| Subordinate Voting Shares | 88,445,257 | |||||||
| Multiple Voting Shares | 7,324,248 | |||||||
Options (6) | 4,409,271 | |||||||
| Deferred Share Units ("DSUs") | 1,039,602 | |||||||
| Restricted Share Units ("RSUs") | 311,264 | |||||||
| Performance Share Units ("PSUs") | 2,190,535 | |||||||
2 This is a non-IFRS financial measure. Refer to section 5 titled “Non-IFRS and Other Financial Measures” for an explanation of the composition and usefulness of this non-IFRS financial measure and to section 7.6 titled “Adjusted Net Earnings and Adjusted Net Earnings per Share” for a quantitative reconciliation to the most directly comparable IFRS measures.
3 This is a non-IFRS financial measure. Refer to section 5 titled “Non-IFRS and Other Financial Measures” for an explanation of the composition and usefulness of this non-IFRS financial measure and to section 7.8 titled “EBITDA and Adjusted EBITDA” for a quantitative reconciliation to the most directly comparable IFRS measures.
4 Non-current financial liabilities include the long-term portion of the long-term debt, the long-term portion of lease liabilities, and contingent consideration.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 9 | ||||
5 This is a non-IFRS financial measure. Refer to section 5 titled “Non-IFRS and Other Financial Measures” for an explanation of the composition and usefulness of this non-IFRS financial measure and to section 9.6 titled “Long-Term Debt and Net Debt” for a quantitative reconciliation to the most directly comparable IFRS measures.
6 Includes 505,264 stock options to purchase Multiple Voting Shares.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 10 | ||||
For the three months ended June 30, 2023:
•Revenues increased 3.8% to $131.6 million, compared to $126.8 million for the same quarter last year.
•82% of revenues were generated from clients which we had in the same quarter last year.
•Gross margin increased 11.8% to $38.1 million, compared to $34.1 million for the same quarter last year.
•Gross margin as a percentage of revenues increased to 28.9%, compared to 26.9% for the same quarter last year.
•Adjusted EBITDA increased 46.1% to $9.1 million, or 6.9% of revenues, compared to $6.2 million, or 4.9% of revenues, for the same quarter last year.
•Net loss was $7.2 million, or $0.08 per share, compared to a net loss of $4.2 million, or $0.04 per share, for the same quarter last year. The increased net loss is in part due to an impairment of property and equipment and right-of use assets of $1.4 million, as part of an ongoing review of our real estate strategy following changes in working conditions.
•Adjusted Net Earnings decreased $1.0 million, or 38.3%, to $1.7 million, compared to $2.7 million for the same quarter last year. This translated into Adjusted Net Earnings per Share of $0.02, compared to $0.03 for the same quarter last year.
•Net cash from operating activities was $7.6 million, representing an increase of $17.4 million, from $9.8 million of cash used in operating activities for the same quarter last year.
•Q1 bookings(1) reached $111.3 million, which translated into a book-to-bill ratio(1) of 0.85. The book-to-bill ratio would be 0.99 if revenues from the two long-term contracts signed as part of an acquisition in the first quarter of fiscal year 2022 were excluded.
•Backlog represented approximately 16 months of trailing twelve-month revenues as at June 30, 2023.
•Signed 32 new clients.
1 This is an other financial measure. Refer to section 5 titled “Non-IFRS and Other Financial Measures” for an explanation of the composition of this other financial measure.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 11 | ||||
7. Results of Operations
| For the three months ended June 30, | ||||||||||||||||||||||||||
| (in $ thousands, except for per share data) | 2023 | 2022 | ||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
| Revenues | 131,595 | 126,764 | ||||||||||||||||||||||||
| Cost of revenues | 93,502 | 92,700 | ||||||||||||||||||||||||
| Gross margin | 38,093 | 34,064 | ||||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||
| Selling, general and administrative expenses | 32,499 | 28,927 | ||||||||||||||||||||||||
| Business acquisition, integration and reorganization costs | 1,105 | 1,882 | ||||||||||||||||||||||||
| Depreciation | 1,668 | 1,579 | ||||||||||||||||||||||||
| Amortization of intangibles | 6,824 | 4,699 | ||||||||||||||||||||||||
| Foreign exchange gain | (128) | (164) | ||||||||||||||||||||||||
| 41,968 | 36,923 | |||||||||||||||||||||||||
| Operating loss | (3,875) | (2,859) | ||||||||||||||||||||||||
| Net financial expenses | 3,220 | 1,793 | ||||||||||||||||||||||||
| Loss before income taxes | (7,095) | (4,652) | ||||||||||||||||||||||||
| Income tax expense (recovery) | ||||||||||||||||||||||||||
| Current | 201 | (116) | ||||||||||||||||||||||||
| Deferred | (51) | (372) | ||||||||||||||||||||||||
| 150 | (488) | |||||||||||||||||||||||||
| Net loss | (7,245) | (4,164) | ||||||||||||||||||||||||
| Basic and diluted loss per share | (0.08) | (0.04) | ||||||||||||||||||||||||
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 12 | ||||
7.1Revenues
The following table reconciles Constant Dollar Revenue(1) to revenues by geographic location:
| For the three months ended June 30, | ||||||||||||||||||||||||||||||||||||||
| (in $ thousands, except for percentages) | 2023 | 2022 | % (2) | |||||||||||||||||||||||||||||||||||
| Total Alithya revenue as reported | 131,595 | 126,764 | 3.8 | % | ||||||||||||||||||||||||||||||||||
| Variation prior to foreign currency impact | 1.6 | % | ||||||||||||||||||||||||||||||||||||
| Foreign currency impact | 2.2 | % | ||||||||||||||||||||||||||||||||||||
| Variation over previous period | 3.8 | % | ||||||||||||||||||||||||||||||||||||
| Canada | ||||||||||||||||||||||||||||||||||||||
| Constant dollar revenue | 76,987 | 78,557 | (2.0) | % | ||||||||||||||||||||||||||||||||||
| Foreign currency impact | — | |||||||||||||||||||||||||||||||||||||
| Canada revenue as reported | 76,987 | 78,557 | (2.0) | % | ||||||||||||||||||||||||||||||||||
| U.S. | ||||||||||||||||||||||||||||||||||||||
| Constant dollar revenue | 46,781 | 44,265 | 5.7 | % | ||||||||||||||||||||||||||||||||||
| Foreign currency impact | 2,463 | |||||||||||||||||||||||||||||||||||||
| U.S. revenue as reported | 49,244 | 44,265 | 11.2 | % | ||||||||||||||||||||||||||||||||||
| International | ||||||||||||||||||||||||||||||||||||||
| Constant dollar revenue | 4,982 | 3,942 | 26.4 | % | ||||||||||||||||||||||||||||||||||
| Foreign currency impact | 382 | |||||||||||||||||||||||||||||||||||||
| International revenue as reported | 5,364 | 3,942 | 36.1 | % | ||||||||||||||||||||||||||||||||||
2 Constant Dollar Growth, which is a Non-IFRS measure. See section 5 titled “Non-IFRS and Other Financial Measures” for an explanation of the composition and usefulness of this non-IFRS financial measure.
Revenues amounted to $131.6 million for the three months ended June 30, 2023, including $5.9 million from Datum Consulting Group, LLC and its affiliates (“Datum”) (the “Datum Acquisition”), following its acquisition by the Company on July 1, 2022, representing an increase of $4.8 million, or 3.8%, from $126.8 million for the three months ended June 30, 2022.
Revenues in Canada decreased by $1.6 million, or 2.0%, to $77.0 million for the three months ended June 30, 2023, from $78.6 million for the three months ended June 30, 2022. The decrease in revenues was mainly caused by current economic conditions, and in particular, reduced business activities in the banking sector.
U.S. revenues increased by $4.9 million, or 11.2%, to $49.2 million for the three months ended June 30, 2023, from $44.3 million for the three months ended June 30, 2022, due primarily to increased revenues of $4.8 million from the acquisition of Datum's U.S. business, partially offset by decreased revenues from digital skilling and change enablement services, which were particularly adversely affected by the current economic conditions in the U.S. The increased revenues include a favorable US$ exchange rate impact of $2.5 million between the two periods.
International revenues increased by $1.5 million, or 36.1%, to $5.4 million for the three months ended June 30, 2023, from $3.9 million for the three months ended June 30, 2022, mainly due to revenues of
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 13 | ||||
$1.2 million from the acquisition of Datum's international business. The increased revenues include a favorable foreign exchange rate impact of $0.4 million between the two periods.
7.2Gross Margin
Gross margin increased by $4.0 million, or 11.8%, to $38.1 million for the three months ended June 30, 2023, from $34.1 million for the three months ended June 30, 2022. Gross margin as a percentage of revenues increased to 28.9% for the three months ended June 30, 2023, from 26.9% for the three months ended June 30, 2022. On a sequential basis, gross margin as a percentage of revenues decreased only slightly, compared to 29.9% for the fourth quarter of last year, despite salary increases that came into effect at the beginning of this fiscal year.
In Canada, gross margin as a percentage of revenues increased, compared to the same quarter last year, due to higher average revenue per employee and increased revenues from higher margin offerings.
In the U.S., gross margin as a percentage of revenues increased, compared to the same quarter last year, as a result of a positive margin impact from the acquisition of Datum's U.S. business, higher average revenue per employee, and improved project performance in other areas of the business. Gross margin as a percentage of revenues also increased on a sequential basis, mainly due to improved project performance in certain areas of the business, compared to the fourth quarter of last year.
International gross margin as a percentage of revenues increased compared to the same quarter last year, and on a sequential basis, mainly as a result of a positive margin impact from the acquisition of Datum's international business.
7.3Operating Expenses
7.3.1Selling, General and Administrative Expenses
Selling, general and administrative expenses include salary, wages and other benefits for selling and administrative employees, occupancy costs, information technology and communications costs, share-based compensation, professional fees, public listing and investor fees, and other administrative expenses.
Selling, general and administrative expenses totaled $32.5 million for the three months ended June 30, 2023, representing an increase of $3.6 million, or 12.3%, from $28.9 million for the three months ended June 30, 2022. Selling, general and administrative expenses, as a percentage of revenues, amounted to 24.7% for the three months ended June 30, 2023, compared to 22.8% for the three months ended June 30, 2022, driven mostly by a $1.4 million impairment of property and equipment and right-of-use assets, a $1.0 million increase in non-cash share-based compensation, $0.8 million in expenses from Datum, and an unfavorable US$ exchange rate impact of $0.7 million, partially offset by reductions in other expense categories. On a sequential basis, selling, general and administrative expenses decreased by $3.5 million and as a percentage of revenues, compared to $36.0 million, or 26.4% of revenues, for the fourth quarter of last year.
In Canada, expenses increased by $2.0 million, or 12.4%, to $18.5 million for the three months ended June 30, 2023, from $16.5 million for the three months ended June 30, 2022, due primarily to a $1.4 million impairment of property and equipment and right-of-use assets, as discussed above, and increases of
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 14 | ||||
$1.0 million in non-cash share-based compensation, $0.3 million in information technology and communications costs, including $0.2 million related to specific discretionary projects, and $0.1 million in travel costs as activities are returning to pre-Covid-19 levels. These increases were partially offset by decreases of $0.3 million in professional fees, $0.2 million in occupancy costs, $0.2 million in employee training costs, and $0.2 million in recruiting fees.
U.S. expenses increased by $1.4 million, or 12.4%, to $13.0 million for the three months ended June 30, 2023, from $11.6 million for the three months ended June 30, 2022. The increase was due primarily to increased expenses of $0.8 million from Datum, and increases of $0.5 million in occupancy costs, $0.3 million in information technology and communications costs, $0.2 million in business development costs, and $0.1 million in travel costs, partially offset by a $0.3 million decrease in recruiting fees. The increased expenses include an unfavorable US$ exchange rate impact of $0.7 million.
International expenses increased by $0.1 million, or 9.7%, to $0.9 million for the three months ended June 30, 2023, from $0.8 million for the three months ended June 30, 2022.
7.3.2Share-Based Compensation
Share-based compensation is included in cost of revenues and selling, general and administrative expenses and is detailed in the table below:
| For the three months ended June 30, | ||||||||||||||||||||||||||
| (in $ thousands) | 2023 | 2022 | ||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
| Stock options | 185 | 226 | ||||||||||||||||||||||||
| Share purchase plan – employer contribution | 357 | 331 | ||||||||||||||||||||||||
| Share-based compensation granted on business acquisitions | 885 | 137 | ||||||||||||||||||||||||
| DSUs | 184 | 135 | ||||||||||||||||||||||||
| RSUs | 15 | — | ||||||||||||||||||||||||
| PSUs | 452 | 232 | ||||||||||||||||||||||||
| 2,078 | 1,061 | |||||||||||||||||||||||||
Share-based compensation amounted to $2.1 million for the three months ended June 30, 2023, representing an increase of $1.0 million, from $1.1 million for the three months ended June 30, 2022. The increase in share-based compensation was driven primarily by increased expenses related to share-based compensation granted on business acquisitions and increased expenses related to PSUs.
7.3.3Business Acquisition, Integration and Reorganization Costs
Business acquisition, integration and reorganization costs amounted to $1.1 million for the three months ended June 30, 2023, representing a decrease of $0.8 million, from $1.9 million for the three months ended June 30, 2022, driven primarily by a decrease of $1.1 million in business acquisition costs, related mainly to professional fees in connection with the Datum Acquisition, partially offset by increases of $0.1 million in integration costs, related primarily to the termination of leases of vacated premises in the current quarter
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 15 | ||||
compared to systems integration costs last year, and $0.2 million in employee compensation on business acquisition, consisting mainly of contingent consideration related to the Datum Acquisition.
7.3.4 Depreciation
Depreciation totaled $1.7 million for the three months ended June 30, 2023, compared to $1.6 million for the three months ended June 30, 2022. These costs consisted primarily of depreciation of Alithya’s property and equipment, which increased by $0.3 million, and right-of-use assets, which decreased by $0.2 million.
7.3.5Amortization of Intangibles
Amortization of intangibles totaled $6.8 million for the three months ended June 30, 2023, compared to $4.7 million for the three months ended June 30, 2022. These costs consisted primarily of amortization of customer relationships recognized on acquisitions, which increased by $1.2 million, and amortization of software, which increased by $0.8 million. The increases resulted primarily from the amortization of intangibles recognized on the acquisition of Datum.
7.3.6Foreign Exchange Gain
Foreign exchange gain amounted to $0.1 million for the three months ended June 30, 2023, compared to $0.2 million for the three months ended June 30, 2022.
7.4Other Income and Expenses
7.4.1Net Financial Expenses
Net financial expenses are summarized in the table below:
| For the three months ended June 30, | ||||||||||||||||||||||||||
| (in $ thousands) | 2023 | 2022 | ||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
| Interest on long-term debt | 3,021 | 1,235 | ||||||||||||||||||||||||
| Interest on lease liabilities | 189 | 217 | ||||||||||||||||||||||||
| Amortization of finance costs | 98 | 83 | ||||||||||||||||||||||||
| Interest accretion on balances of purchase price payable | 127 | 148 | ||||||||||||||||||||||||
| Financing fees | 52 | 129 | ||||||||||||||||||||||||
| Interest income | (267) | (19) | ||||||||||||||||||||||||
| 3,220 | 1,793 | |||||||||||||||||||||||||
Net financial expenses amounted to $3.2 million for the three months ended June 30, 2023, representing an increase of $1.4 million, or 79.7%, from $1.8 million for the three months ended June 30, 2022, driven mainly by increased variable interest rates, which accounted for the increase in interest on long-term debt, partially offset by interest income earned on a special one time commercial agreement.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 16 | ||||
7.4.2Income Taxes
Income tax expense was $0.2 million for the three months ended June 30, 2023, representing an increase of $0.7 million, from a recovery of $0.5 million for the three months ended June 30, 2022, due primarily to a decrease in deferred tax recovery in certain jurisdictions, partially offset by an increase in current tax expense, as a result of increased taxable income in certain jurisdictions.
7.5Net Loss and Loss per Share
Net loss for the three months ended June 30, 2023 was $7.2 million, representing an increase of $3.1 million, from $4.2 million for the three months ended June 30, 2022. The increased loss was driven by increased selling, general and administrative expenses, including an impairment charge of $1.4 million on property and equipment and right-of-use assets, increased net financial expenses, increased depreciation and amortization, and increased income tax expense, partially offset by increased gross margin and decreased business acquisition, integration and reorganization costs in the three months ended June 30, 2023, compared to the three months ended June 30, 2022. On a per share basis, this translated into a basic and diluted net loss per share of $0.08 for the three months ended June 30, 2023, compared to a net loss of $0.04 per share for the three months ended June 30, 2022.
7.6Adjusted Net Earnings and Adjusted Net Earnings per Share
The following table reconciles net loss to Adjusted Net Earnings:
| For the three months ended June 30, | ||||||||||||||||||||||||||
| (in $ thousands) | 2023 | 2022 | ||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
| Net loss | (7,245) | (4,164) | ||||||||||||||||||||||||
| Business acquisition, integration and reorganization costs | 1,105 | 1,882 | ||||||||||||||||||||||||
| Amortization of intangibles | 6,824 | 4,699 | ||||||||||||||||||||||||
| Share-based compensation | 2,078 | 1,061 | ||||||||||||||||||||||||
| Impairment of property and equipment and right-of-use assets | 1,383 | — | ||||||||||||||||||||||||
| Income tax expense related to above items | (2,468) | (759) | ||||||||||||||||||||||||
Adjusted Net Earnings (1) | 1,677 | 2,719 | ||||||||||||||||||||||||
| Basic and diluted loss per share | (0.08) | (0.04) | ||||||||||||||||||||||||
Adjusted Net Earnings per Share (1) | 0.02 | 0.03 | ||||||||||||||||||||||||
Adjusted Net Earnings amounted to $1.7 million for the three months ended June 30, 2023, representing a decrease of $1.0 million, or 38.3%, from $2.7 million for the three months ended June 30, 2022. As explained above, increased gross margin and the contribution from the acquisition of Datum were partially offset by increased selling, general and administrative expenses, increased depreciation of property and equipment and right-of-use assets, increased income tax expense and increased net financial expenses. This translated into Adjusted Net Earnings per Share of $0.02 for the three months ended June 30, 2023, compared to $0.03 for the three months ended June 30, 2022.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 17 | ||||
7.7Segment Reporting
Operating income by segment refers to operating income before head office general and administrative expenses and business acquisition, integration and reorganization costs, which are not considered when assessing the underlying financial performance of the reportable segments. Head office general and administrative expenses are expenses and salaries related to centralized functions, such as global finance, legal, human resources and technology teams, which are not allocated to segments. This measure also excludes the effects of depreciation, amortization and foreign exchange loss (gain).
The following tables present the Company's operations based on reportable segments:
| For the three months ended June 30, 2023 | ||||||||||||||||||||||||||
| (in $ thousands) | Canada | U.S. | International | Total | ||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| Revenues | 76,987 | 49,244 | 5,364 | 131,595 | ||||||||||||||||||||||
| Operating income by segment | 7,971 | 8,441 | 712 | 17,124 | ||||||||||||||||||||||
| Head office general and administrative expenses | 11,530 | |||||||||||||||||||||||||
| Business acquisition, integration and reorganization costs | 1,105 | |||||||||||||||||||||||||
| Foreign exchange loss (gain) | (128) | |||||||||||||||||||||||||
| Operating income before depreciation and amortization | 4,617 | |||||||||||||||||||||||||
| Depreciation and amortization | 8,492 | |||||||||||||||||||||||||
| Operating loss | (3,875) | |||||||||||||||||||||||||
| For the three months ended June 30, 2022 | ||||||||||||||||||||||||||
| (in $ thousands) | Canada | U.S. | International | Total | ||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| Revenues | 78,557 | 44,265 | 3,942 | 126,764 | ||||||||||||||||||||||
| Operating income by segment | 7,157 | 5,519 | 370 | 13,046 | ||||||||||||||||||||||
| Head office general and administrative expenses | 7,909 | |||||||||||||||||||||||||
| Business acquisition, integration and reorganization costs | 1,882 | |||||||||||||||||||||||||
| Foreign exchange loss (gain) | (164) | |||||||||||||||||||||||||
| Operating income before depreciation and amortization | 3,419 | |||||||||||||||||||||||||
| Depreciation and amortization | 6,278 | |||||||||||||||||||||||||
| Operating loss | (2,859) | |||||||||||||||||||||||||
For a discussion of revenue variances by segment, refer to section 7.1 titled “Revenues”.
Operating income by segment in Canada increased by $0.8 million, or 11.4%, to $8.0 million for the three months ended June 30, 2023, from $7.2 million for the three months ended June 30, 2022, due to increased gross margin.
Operating income by segment in the U.S. increased by $2.9 million, or 52.9%, to $8.4 million for the three months ended June 30, 2023, from $5.5 million for the three months ended June 30, 2022. The increase in operating income by segment was due to increased revenues and gross margin, partially offset by increased
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 18 | ||||
selling, general and administrative expenses, all stemming primarily from the acquisition of Datum's U.S. business, as described above.
Operating income by segment internationally increased by $0.3 million, or 92.4%, to $0.7 million for the three months ended June 30, 2023, from $0.4 million for the three months ended June 30, 2022. The increase in operating income by segment was due to increased revenues and gross margin, stemming primarily from the acquisition of Datum's international business, as described above.
7.8EBITDA and Adjusted EBITDA
The following table reconciles net loss to EBITDA and Adjusted EBITDA:
| For the three months ended June 30, | ||||||||||||||||||||||||||
| (in $ thousands) | 2023 | 2022 | ||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
| Revenues | 131,595 | 126,764 | ||||||||||||||||||||||||
| Net loss | (7,245) | (4,164) | ||||||||||||||||||||||||
| Net financial expenses | 3,220 | 1,793 | ||||||||||||||||||||||||
| Income tax expense (recovery) | 150 | (488) | ||||||||||||||||||||||||
| Depreciation | 1,668 | 1,579 | ||||||||||||||||||||||||
| Amortization of intangibles | 6,824 | 4,699 | ||||||||||||||||||||||||
EBITDA (1) | 4,617 | 3,419 | ||||||||||||||||||||||||
EBITDA Margin (1) | 3.5 | % | 2.7 | % | ||||||||||||||||||||||
| Adjusted for: | ||||||||||||||||||||||||||
| Foreign exchange gain | (128) | (164) | ||||||||||||||||||||||||
| Share-based compensation | 2,078 | 1,061 | ||||||||||||||||||||||||
| Business acquisition, integration and reorganization costs | 1,105 | 1,882 | ||||||||||||||||||||||||
| Impairment of property and equipment and right-of-use assets | 1,383 | — | ||||||||||||||||||||||||
Adjusted EBITDA (1) | 9,055 | 6,198 | ||||||||||||||||||||||||
Adjusted EBITDA Margin (1) | 6.9 | % | 4.9 | % | ||||||||||||||||||||||
1 Non-IFRS measure. See section 5 titled “Non-IFRS and Other Financial Measures” for an explanation of the composition and usefulness of this non-IFRS financial measure.
EBITDA amounted to $4.6 million for the three months ended June 30, 2023, representing an increase of $1.2 million, or 35.0%, from $3.4 million for the three months ended June 30, 2022. EBITDA Margin was equal to 3.5% for the three months ended June 30, 2023, compared to 2.7% for the three months ended June 30, 2022.
Adjusted EBITDA amounted to $9.1 million for the three months ended June 30, 2023, representing an increase of $2.9 million, or 46.1%, from $6.2 million for the three months ended June 30, 2022. As explained above, increased gross margin and the contribution from the acquisition of Datum were partially offset by increased selling, general and administrative expenses. Adjusted EBITDA Margin was 6.9% for the three months ended June 30, 2023, compared to 4.9% for the three months ended June 30, 2022.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 19 | ||||
8. Bookings and Backlog
Bookings during the three months ended June 30, 2023 were $111.3 million, which translated into a book-to-bill ratio of 0.85 for the quarter. The book-to-bill ratio would be 0.99 if revenues from the two long-term contracts signed as part of an acquisition in the first quarter of fiscal year 2022 were excluded.
Management believes information regarding bookings can provide useful trend insight to investors regarding changes in the volume of new business over time. However, contracts typically provide termination clauses at the option of the customer. Furthermore, modifications of the scope of work and demand-driven usage may occur. As such, the amount of the contract actually realized could materially differ from the initial bookings amount.
As at June 30, 2023, backlog represented approximately 16 months of trailing twelve-month revenues. The backlog includes revenue agreements for projects which may extend beyond twelve months.
Management believes that backlog information can provide useful trend insight to investors regarding changes in management’s best estimate of future revenue stemming from signed revenue agreements. However, contracts typically provide termination clauses at the option of the customer. Furthermore, modifications of the scope of work and demand-driven usage may occur. There can be no assurance that subsequent cancellations or scope adjustments will not occur, that the backlog will ultimately result in earnings, or when the related revenues and earnings from such backlog will be recognized. As such, the amount of the contract actually realized could materially differ from the amount included in backlog at a given date.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 20 | ||||
9. Liquidity and Capital Resources
9.1Consolidated Statements of Cash Flows
Alithya’s ongoing operations and growth are financed through a combination of operating cash flows, borrowings under its existing credit facility, secured loans and a subordinated unsecured loan, and the issuance of equity. Alithya seeks to maintain an optimal level of liquidity through the active management of its assets and liabilities, as well as its cash flows. The following table summarizes Alithya’s cash flow activities for the three months ended June 30, 2023 and 2022:
| For the three months ended June 30, | ||||||||||||||||||||||||||
| (in $ thousands) | 2023 | 2022 | ||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||
| Net cash from (used in) operating activities | 7,597 | (9,797) | ||||||||||||||||||||||||
| Net cash (used in) from investing activities | (236) | 1,335 | ||||||||||||||||||||||||
| Net cash (used in) from financing activities | (2,517) | 30,885 | ||||||||||||||||||||||||
| Effect of exchange rate changes | (288) | 260 | ||||||||||||||||||||||||
| Net change in cash | 4,556 | 22,683 | ||||||||||||||||||||||||
| Cash at the beginning of the period | 22,583 | 17,655 | ||||||||||||||||||||||||
| Cash at the end of the period | 27,139 | 40,338 | ||||||||||||||||||||||||
9.2Cash Flows - Operating Activities
For the three months ended June 30, 2023, net cash from operating activities was $7.6 million, representing an increase of $17.4 million, from $9.8 million of cash used in operating activities for the three months ended June 30, 2022. The cash flows for the three months ended June 30, 2023 resulted primarily from the net loss of $7.2 million, plus $14.0 million of non-cash adjustments to the net loss, consisting primarily of depreciation and amortization, net financial expenses, share-based compensation, and impairment of property and equipment and right-of-use assets, partially offset by the cash settlement of RSUs and unrealized foreign exchange gain, and $0.8 million in favorable changes in non-cash working capital items. In comparison, the cash flows for the three months ended June 30, 2022 resulted primarily from the net loss of $4.2 million, plus $8.2 million of non-cash adjustments to the net loss, consisting primarily of depreciation and amortization, net financial expenses, and share-based compensation, partially offset by deferred taxes and unrealized foreign exchange gain, and $13.8 million in unfavorable changes in non-cash working capital items.
Favorable changes in non-cash working capital items of $0.8 million during the three months ended June 30, 2023 consisted primarily of a $6.7 million decrease in accounts receivable and other receivables and a $4.2 million decrease in unbilled revenues, partially offset by a $5.7 million decrease in accounts payable and accrued liabilities, a $2.4 million increase in tax credits receivable, a $1.3 million decrease in deferred revenues, and a $0.9 million increase in prepaids. For the three months ended June 30, 2022, unfavorable changes in non-cash working capital items of $13.8 million consisted primarily of a $12.1 million increase in unbilled revenues, a $4.9 million decrease in accounts payable and accrued liabilities, a $2.7 million increase in tax credits receivable, a $1.2 million decrease in deferred revenues, and a $0.4 million increase in prepaids, partially offset by a $7.5 million decrease in accounts receivable and other receivables.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 21 | ||||
9.3Cash Flows - Investing Activities
For the three months ended June 30, 2023, net cash used in investing activities was $0.2 million, representing an increase of $1.5 million, from $1.3 million of cash generated for the three months ended June 30, 2022. The cash used in the three months ended June 30, 2023 resulted primarily from purchases of property and equipment as part of the ordinary course of business. In comparison, the cash flows the three months ended June 30, 2022 resulted primarily from a decrease in restricted cash, partially offset by the acquisition of Trafic 3W Inc. on April 1, 2022 and purchases of property and equipment as part of the ordinary course of business.
9.4 Cash Flows - Financing Activities
For the three months ended June 30, 2023, net cash used in financing activities was $2.5 million, representing an increase of $33.4 million, from $30.9 million of cash generated for the three months ended June 30, 2022. The cash flows for the three months ended June 30, 2023 resulted primarily from $29.2 million in long-term debt repayments, $3.0 million in net financial expenses paid, $1.0 million in repayments of lease liabilities, and $0.1 million in shares purchased for cancellation, partially offset by $30.8 million in proceeds from long-term debt, net of related transaction costs, as described in section 9.6. In comparison, the cash flows for the three months ended June 30, 2022 resulted primarily from $40.5 million in proceeds from long-term debt, net of related transaction costs, partially offset by $6.7 million in long-term debt repayments, $1.6 million in net financial expenses paid, $0.9 million in repayments of lease liabilities, and $0.5 million in shares purchased for cancellation.
9.5Capital Resources
Alithya’s capital consists of cash, long-term debt and total equity. Alithya’s main objectives when managing capital are to provide a strong capital base in order to maintain shareholders’, creditors’ and other stakeholders’ confidence and to sustain future growth and development of the business, to maintain a flexible capital structure that optimizes the cost of capital at an acceptable risk level and preserves the ability to meet its financial obligations, to ensure sufficient liquidity to pursue its organic growth strategy and undertake selective acquisitions, and to provide returns on investment to shareholders.
In managing its capital structure, Alithya monitors performance throughout the year to ensure anticipated working capital requirements and maintenance capital expenditures are funded from operations, available cash and, where applicable, bank borrowings.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 22 | ||||
9.6 Long-Term Debt and Net Debt
The following table summarizes the Company’s long-term debt:
| As at | June 30, | March 31, | ||||||||||||
| (in $ thousands) | 2023 | 2023 | ||||||||||||
| $ | $ | |||||||||||||
Senior secured revolving credit facility (the "Credit Facility") (a) | 78,362 | 82,512 | ||||||||||||
Secured loans (b) | 17,256 | 13,192 | ||||||||||||
Subordinated unsecured loans (c) | 20,000 | 20,000 | ||||||||||||
| Balance of purchase price payable with a nominal value of $12,370,000 (US$9,345,000), non-interest bearing (4.4% effective interest rate), payable in annual installments of $4,123,000 (US$3,115,000), maturing on July 1, 2025 | 11,861 | 11,993 | ||||||||||||
| Unamortized transaction costs (net of accumulated amortization of $1,282,000 and $1,184,000) | (408) | (507) | ||||||||||||
| 127,071 | 127,190 | |||||||||||||
| Current portion of long-term debt | 90,977 | 12,808 | ||||||||||||
| 36,094 | 114,382 | |||||||||||||
(a) The Credit Facility is available to a maximum amount of $125,000,000 which can be increased under an accordion provision to $140,000,000, under certain conditions, and can be drawn in Canadian and the equivalent amount in U.S. dollars.
The advances bear interest at the Canadian or U.S. prime rate, plus an applicable margin ranging from 0.25% to 1.00%, or bankers’ acceptances or SOFR rates, plus an applicable margin ranging from 1.50% to 2.25%, as applicable for Canadian and U.S. advances, respectively. The applicable margin is determined based on threshold limits for certain financial ratios.
The Credit Facility matures on April 1, 2024 and is renewable for additional one-year periods at the lender’s discretion. As the maturity date of the Credit Facility is within twelve months after the reporting date, it has been classified under the current portion of long-term debt as a current liability in the statement of financial position.
As at June 30, 2023, the amount outstanding under the Credit Facility includes $78,362,000 (March 31, 2023 - $82,512,000) payable in U.S. dollars (US$59,200,000; March 31, 2023 - US$61,000,000).
The Company has an additional operating credit facility available to a maximum amount of $2,647,000 (US$2,000,000), bearing interest at U.S. prime rate plus 1.00%. This operating credit facility can be terminated by the lender at any time. There was no amount outstanding under this additional operating credit facility as at June 30, 2023.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 23 | ||||
(b) The secured loans issued by Investissement Québec to finance the Company’s refundable tax credits have the following terms and conditions:
| As at | June 30, | March 31, | ||||||||||||||||||
| (in $ thousands) | 2023 | 2023 | ||||||||||||||||||
| $ | $ | |||||||||||||||||||
| Year of related Refundable Tax Credit | Repayable on the earlier of the date of receipt of the refundable tax credits receivable and | Bearing interest at | ||||||||||||||||||
| 2022 | March 31, 2024 | Prime rate + 1.00% | 8,719 | 8,719 | ||||||||||||||||
| 2023 | March 31, 2025 | Prime rate + 1.25% | 8,537 | 4,473 | ||||||||||||||||
| 17,256 | 13,192 | |||||||||||||||||||
The maximum amount that can be financed for the 2022 and 2023 refundable tax credits is the lesser of 90% of the eligible refundable tax credits and $8,776,000 for 2022 and $10,670,000 for 2023.
(c) The subordinated unsecured loans are with Investissement Québec, in the amount of $20,000,000, mature on October 1, 2025. The first $10,000,000 bears fixed interest rates ranging between 6.00% and 7.25% and the additional $10,000,000 bears interest ranging between 7.10% and 8.35%, determined and payable quarterly, based on threshold limits for certain financial ratios. Under the terms of the loans, the Company is required to maintain compliance with certain financial covenants which are measured on a quarterly basis.
(a)(c) The Company was in compliance with all of its financial covenants as at June 30, 2023 and March 31, 2023.
Total long-term debt as at June 30, 2023 decreased by $0.1 million, to $127.1 million, from $127.2 million as at March 31, 2023, due primarily to a decrease of $4.2 million in drawings under the Credit Facility, partially offset by an increase of $4.1 million in the secured loans.
As at June 30, 2023, cash amounted to $27.1 million and $78.4 million was drawn under the Credit Facility and classified as current portion of long-term debt, as it matures on April 1, 2024. In comparison, as at March 31, 2023, cash amounted to $22.6 million and $82.5 million was drawn under the Credit Facility and classified as long-term debt. As at June 30, 2023, the Company has an unused capacity of $46,638,000 under its Credit Facility of $125,000,000, which expires on April 1, 2024. As at June 30, 2023, the carrying amount of the liabilities of the Company having a maturity of less than one year amount to $201,296,000, some of which bear interest as disclosed in Note 3 of Alithya's interim consolidated financial statements.
The Company’s ability to meet the obligations associated with its financial liabilities that will require settlement in less than one year is contingent on its ability to maintain adequate credit facilities. The Company anticipates to renew the Credit Facility, in the normal course of business, in amounts which will be sufficient, and on acceptable terms and conditions, prior to its expiration on April 1, 2024. There is no assurance that the Company will be successful in renewing the Credit Facility and be able to meet the obligations associated with its financial liabilities that will require settlement in less than one year.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 24 | ||||
The following table reconciles long-term debt to Net Debt(1):
| As at | June 30, | March 31, | ||||||||||||
| (in $ thousands) | 2023 | 2023 | ||||||||||||
| $ | $ | |||||||||||||
| Current portion of long-term debt | 90,977 | 12,808 | ||||||||||||
| Non-current portion of long-term debt | 36,094 | 114,382 | ||||||||||||
| Total long-term debt | 127,071 | 127,190 | ||||||||||||
| Less: | ||||||||||||||
| Cash | 27,139 | 22,583 | ||||||||||||
| 27,139 | 22,583 | |||||||||||||
Net Debt | 99,932 | 104,607 | ||||||||||||
During the three months ended June 30, 2023, Alithya's Net Debt decreased primarily as a result of the increase in cash.
9.7 Contractual Obligations
Alithya is committed under the terms of contractual obligations which have various expiration dates, primarily for the rental of premises and technology licenses and infrastructure. Please refer to section 10.7 of Alithya's MD&A for the year ended March 31, 2023 for an overview of such obligations as at such date. There have been no material changes with respect to contractual obligations since March 31, 2023 outside of Alithya’s ordinary course of business.
9.8Off-Balance Sheet Arrangements
Alithya uses off-balance sheet financing for operating commitments for technology licenses and infrastructure. Please refer to section 10.8 of Alithya's MD&A for the year ended March 31, 2023 and Note 14 of the annual audited consolidated financial statements for the same period for an overview of such arrangements as at such date. There have been no material changes with respect to off-balance sheet arrangements since March 31, 2023 outside of Alithya’s ordinary course of business.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 25 | ||||
10. Share Capital
In the context of the discussion on share capital, Alithya Group inc. will be referred to as the “Company”. The details of Alithya's share capital are fully described in Note 4 of Alithya's interim consolidated financial statements.
10.1Normal Course Issuer Bid
On September 14, 2022, the Company’s Board of Directors authorized and subsequently the TSX approved the renewal of the Company's normal course issuer bid ("NCIB"). Under the NCIB, the Company is allowed to purchase for cancellation up to 2,491,128 Subordinate Voting Shares, representing 5% of the Company’s public float as of the close of markets on September 8, 2022.
The NCIB commenced on September 20, 2022 and will end on the earlier of September 19, 2023 and the date on which the Company will have acquired the maximum number of Subordinate Voting Shares allowable under the NCIB or will otherwise decide not to make any further purchases. All purchases of Subordinate Voting Shares are made by means of open market transactions at their market price at the time of acquisition.
In connection with the NCIB, the Company entered into an automatic share purchase plan (“ASPP”) with a designated broker. The ASPP allows for the designated broker, to purchase for cancellation Subordinate Voting Shares, on behalf of the Company, subject to certain trading parameters established, from time to time, by the Company.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 26 | ||||
11. Eight Quarter Summary
| For the three months ended | |||||||||||||||||||||||||||||
| (in $ thousands, except for per share data) | Sep 30, | Dec 31, | Mar 31, | Jun 30, | Sep 30, | Dec 31, | Mar 31, | Jun 30, | |||||||||||||||||||||
| 2021 | 2021 | 2022 | 2022 | 2022 | 2022 | 2023 | 2023 | ||||||||||||||||||||||
| Revenues | 105,277 | 109,713 | 119,974 | 126,764 | 128,933 | 130,780 | 136,224 | 131,595 | |||||||||||||||||||||
| Cost of revenues | 76,804 | 81,456 | 88,891 | 92,700 | 91,173 | 91,562 | 95,492 | 93,502 | |||||||||||||||||||||
| Gross margin | 28,473 | 28,257 | 31,083 | 34,064 | 37,760 | 39,218 | 40,732 | 38,093 | |||||||||||||||||||||
| 27.0 | % | 25.8 | % | 25.9 | % | 26.9 | % | 29.3 | % | 30.0 | % | 29.9 | % | 28.9 | % | ||||||||||||||
| Operating expenses | |||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 24,885 | 25,002 | 26,204 | 28,927 | 30,421 | 31,196 | 35,978 | 32,499 | |||||||||||||||||||||
| Business acquisition, integration and reorganization costs | 689 | 857 | 6,128 | 1,882 | 2,741 | 1,290 | 12,166 | 1,105 | |||||||||||||||||||||
| Depreciation | 1,247 | 1,400 | 1,235 | 1,579 | 1,602 | 1,634 | 1,721 | 1,668 | |||||||||||||||||||||
| Amortization of intangibles | 3,450 | 3,438 | 4,017 | 4,699 | 6,708 | 7,397 | 8,693 | 6,824 | |||||||||||||||||||||
| Foreign exchange (gain) loss | (42) | (27) | (25) | (164) | 64 | 163 | 96 | (128) | |||||||||||||||||||||
| 30,229 | 30,670 | 37,559 | 36,923 | 41,536 | 41,680 | 58,654 | 41,968 | ||||||||||||||||||||||
| Operating loss | (1,756) | (2,413) | (6,476) | (2,859) | (3,776) | (2,462) | (17,922) | (3,875) | |||||||||||||||||||||
| Net financial expenses | 1,075 | 1,203 | 1,352 | 1,793 | 2,301 | 2,664 | 2,577 | 3,220 | |||||||||||||||||||||
| Loss before income taxes | (2,831) | (3,616) | (7,828) | (4,652) | (6,077) | (5,126) | (20,499) | (7,095) | |||||||||||||||||||||
| Income tax (recovery) expense | (54) | (130) | (575) | (488) | (5,642) | 379 | (506) | 150 | |||||||||||||||||||||
| Net loss | (2,777) | (3,486) | (7,253) | (4,164) | (435) | (5,505) | (19,993) | (7,245) | |||||||||||||||||||||
| Basic and diluted loss per share | (0.03) | (0.04) | (0.08) | (0.04) | — | (0.06) | (0.21) | (0.08) | |||||||||||||||||||||
Quarterly variances in Alithya's results are due primarily to the timing of acquisitions. Quarterly variations can also be attributed to seasonality. The revenues generated by Alithya's consultants are impacted by the number of working days in a particular quarter, which can vary as a result of vacations and other paid time off and statutory holidays. Similarly, customer information technology investment cycles are also affected by the seasonality of their own operations.
Over the eight-quarter period, revenues have generally increased mainly due to business acquisitions, and organic growth in most areas of the Company’s business. Fluctuations in gross margin over the previous eight quarters can be attributed to a steady migration towards higher value-added services since the acquisitions of Vitalyst, LLC ("Vitalyst") and Datum on January 31, 2022 and July 1, 2022, respectively, offset by the negative impacts of the COVID-19 pandemic, and the April 1, 2021 acquisition of R3D Consulting Inc., whose revenues historically show a higher proportion from billable subcontractors. Selling, general and administrative expenses have generally increased mainly from business acquisitions, net of synergies, and additional costs associated with carrying out the strategic business plan. These expenses decreased in the first quarter of this year, mainly as a result a review of Alithya's cost structure initiated in the fourth quarter of fiscal 2022, and the modifications undertaken and reorganization costs incurred in the quarters that followed. As a percentage of consolidated revenues, total selling, general and administrative expenses have increased moderately as certain business activities return to pre-Covid-19 levels and due to the higher historical selling, general and administrative expense percentage of Vitalyst. Other expenses, such as business acquisition, integration and reorganization costs, depreciation, amortization of intangibles, and income tax (recovery) expense, have also varied as a result of business acquisitions and the subsequent integration activities and requirements.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 27 | ||||
12. Critical Accounting Estimates
The preparation of Alithya’s consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the amounts reported as assets, liabilities, income and expenses in the consolidated financial statements. Actual results could differ from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which they occur and in any future periods affected.
The Q1 Financial Statements have been prepared in accordance with the accounting policies adopted in the most recent annual audited consolidated financial statements for the year ended March 31, 2023. The accounting policies have been applied consistently by all entities of the Company.
13. Accounting Standard Amendments Effective for the Year Ending March 31, 2024
The following amendments to existing standards were adopted by the Company on April 1, 2023:
Amendments to IAS 8, Definition of Accounting Estimates
In February 2021, the IASB amended IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors to introduce a new definition of “accounting estimates” to replace the definition of “change in accounting estimates” and also include clarifications intended to help entities distinguish changes in accounting policies from changes in accounting estimates. This distinction is important because changes in accounting policies must be applied retrospectively while changes in accounting estimates are accounted for prospectively. The amendments are effective for annual periods beginning on or after January 1, 2023. Earlier application was permitted. The amendment of IAS 8 had no impact on the Company’s interim consolidated financial statements.
Amendments to IAS 12 - Income Taxes
On May 7, 2021, the IASB issued amendments to IAS 12 - Income Taxes to narrow the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences. As a result, companies will be required to recognize a deferred tax asset and a deferred tax liability for temporary differences arising on initial recognition of a lease and a decommissioning provision. The amendments apply for annual reporting periods beginning on or after January 1, 2023. Earlier application was permitted. The amendment of IAS 12 did not have a material impact on the Company’s consolidated financial statements. Furthermore, the amendment of IAS 12 has no impact on the consolidated statements of financial position and the changes in our income taxes note disclosure will be reflected in the annual consolidated financial statements for the year ended March 31, 2024.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 28 | ||||
Amendments to IAS 1 and IFRS Practice Statement 2, Disclosure of Accounting Policy Information
In February 2021, the IASB issued amendments to IAS 1 - Presentation of Financial Statements and IFRS Practice Statement 2 - Making Materiality Judgements. The amendments help entities provide accounting policy disclosures that are more useful to primary users of financial statements by:
•Replacing the requirement to disclose “significant” accounting policies under IAS 1 with a requirement to disclose “material” accounting policies. Under this, an accounting policy would be material if, when considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence decisions that primary users of general purpose financial statements make on the basis of those financial statements.
•Providing guidance in IFRS Practice Statement 2 to explain and demonstrate the application of the four-step materiality process to accounting policy disclosures.
The amendments shall be applied prospectively. The amendments to IAS 1 are effective for annual periods beginning on or after January 1, 2023. Earlier application was permitted. Once an entity applies the amendments to IAS 1, it is also permitted to apply the amendments to IFRS Practice Statement 2. The Company will update its accounting policy information disclosures in its annual consolidated financial statements for the year ended March 31, 2024.
14. New Standards and Interpretations Issued but Not Yet Effective
At the date of authorization of the interim consolidated financial statements, certain new standards, amendments and interpretations, and improvements to existing standards have been published by the IASB but are not yet effective and have not been adopted early by the Company. Management anticipates that all the relevant pronouncements will be adopted in the first reporting period following the date of application. Information on new standards, amendments and interpretations, and improvements to existing standards, which could potentially impact the Company’s consolidated financial statements, are detailed as follows:
IAS 1 - Presentation of Financial Statements
On January 23, 2020, the IASB issued amendments to IAS 1 - Presentation of Financial Statements, to clarify the classification of liabilities as current or non-current. For the purposes of non-current classification, the amendments removed the requirement for a right to defer settlement or roll over of a liability for at least twelve months to be unconditional. Instead, such a right must have substance and exist at the end of the reporting period. After reconsidering certain aspects of the 2020 amendments, the IASB reconfirmed that only covenants with which a company must comply on or before the reporting date affect the classification of a liability as current or non-current. Additional disclosure will be required to help users understand the risk that those liabilities could become repayable within twelve months after the reporting date. The amendments also clarify how a company classifies a liability that includes a counterparty conversion option. The amendments state that: settlement of a liability includes transferring a company’s own equity instruments to the counterparty; and when classifying liabilities as current or non-current, a company can ignore only those conversion options that are recognized as equity. The amendments to IAS 1 apply retrospectively and are effective for annual periods beginning on or after January 1, 2024, with earlier application permitted. Management is currently evaluating the impact of the amendment on its consolidated financial statements.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 29 | ||||
15. Risks and Uncertainties
Alithya is subject to a number of risks and uncertainties and is affected by a number of factors which could have a material adverse effect on Alithya's financial position, financial performance, cash flows, business or reputation. These risks should be considered when evaluating an investment in Alithya and may, among other things, cause a decline in the price of the Subordinate Voting Shares.
Such risks and uncertainties include, but are not limited to, those discussed in the section entitled “Risks and Uncertainties” of the Company's MD&A for the fiscal year ended March 31, 2023, all of which are hereby incorporated by reference.
16. Management’s Evaluation of Our Disclosure Controls and Procedures
Disclosure Controls and Procedures
The Company has established and maintains disclosure controls and procedures designed to provide reasonable assurance that the material information relating to the Company is made known to the Chief Executive Officer and Chief Financial Officer by others, particularly during the period in which annual and interim filings are prepared and that information required to be disclosed by the Company in its annual, interim filings or other reports filed or submitted by the Company under Canadian and U.S. securities laws is recorded, processed, summarized and reported within the time periods specified under those laws and the related rules. The effectiveness of these disclosure controls and procedures, as defined under National Instrument 52-109 – Issuers’ annual and interim filings (“NI 52-109”) adopted by Canadian securities regulators and in Rule 13a-15(e) and 15d-15(e) under the U.S. Securities Exchange Act of 1934, as amended, was evaluated under the supervision of and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer as at the end of the Company’s most recently completed financial year ended March 31, 2023. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as at March 31, 2023.
Internal Control over Financial Reporting
The Company has also established and maintains adequate internal control over financial reporting, as defined under NI 52-109 adopted by Canadian securities regulators and in Rule 13a-15(f) and 15d-15(f) under the U.S. Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, and effected by management and other key employees, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as issued by the IASB. The effectiveness of the Company’s internal control over financial reporting was evaluated under the supervision of and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer as at the end of the Company’s most recently completed financial year ended March 31, 2023 based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s internal control over financial reporting was effective as at March 31, 2023.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 30 | ||||
Changes in Internal Control over Financial Reporting
There has been no change in the Company’s internal control over financial reporting during the quarter ended June 30, 2023, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Limitations on Effectiveness of Disclosure Controls and Procedures and Internal Control over Financial Reporting
The Company’s management recognizes that any disclosure controls and procedures and internal control over financial reporting, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Because of their inherent limitations, disclosure controls and procedures and internal control over financial reporting may not prevent or detect all errors or misstatements on a timely basis.
| Management’s Discussion and Analysis of Financial Condition and Results of Operations of Alithya | |||||
For the three months ended June 30, 2023 | | 31 | ||||
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Paul Raymond, President and Chief Executive Officer of Alithya Group inc., certify the following:
1.Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Alithya Group inc. (the "issuer") for the interim period ended June 30, 2023.
2.No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3.Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4.Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5.Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings
(a)designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i)material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii)information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b)designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
5.1Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is that of the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013).
5.2N/A
5.3Limitation on scope of design: The issuer has disclosed in its interim MD&A
(a) the fact that the issuer’s other certifying officer(s) and I have limited the scope of our design of DC&P and ICFR to exclude controls, policies and procedures of
(i) N/A
(ii) N/A; or
(iii) a business that the issuer acquired not more than 365 days before the last day of the period covered by the interim filings; and
(b) summary financial information about the proportionately consolidated entity, special purpose entity or business that the issuer acquired that has been proportionately consolidated or consolidated in the issuer’s financial statements.
6.Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2023 and ended on June 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
Date: August 10, 2023
/s/ Paul Raymond
___________________________
Paul Raymond
President and Chief Executive Officer
2
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Claude Thibault, Chief Financial Officer of Alithya Group inc., certify the following:
1.Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Alithya Group inc. (the "issuer") for the interim period ended June 30, 2023.
2.No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3.Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4.Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5.Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings
(a)designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i)material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii)information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b)designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
5.1Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is that of the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013).
5.2N/A
5.3Limitation on scope of design: The issuer has disclosed in its interim MD&A
(a) the fact that the issuer’s other certifying officer(s) and I have limited the scope of our design of DC&P and ICFR to exclude controls, policies and procedures of
(i) N/A
(ii) N/A; or
(iii) a business that the issuer acquired not more than 365 days before the last day of the period covered by the interim filings; and
(b) summary financial information about the proportionately consolidated entity, special purpose entity or business that the issuer acquired that has been proportionately consolidated or consolidated in the issuer’s financial statements.
6.Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on April 1, 2023 and ended on June 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
Date: August 10, 2023
/s/ Claude Thibault
___________________________
Claude Thibault
Chief Financial Officer
2