Alithya reports strong third quarter results following Edgewater acquisition
Alithya's revenues for the quarter ending on December 31 were up 44%, to $52 million, two months after the strategy and digital consultancy’s acquisition of Edgewater Technology. Meanwhile, gross margin as a percentage of revenues increased to 28.4% at the Montreal-based firm.
On November 1, Alithya announced the acquisition of Wakefield, Massachusetts–based business and tech consultancy Edgewater. The move added 400 employees and six US offices, as well as an additional Montreal location, boosting Alithya’s headcount to more than 2,000 people. Prior to the merger, Alithya had seven offices in Canada, as well as four in France.
On November 2, Alithya Group went public, listing on the Nasdaq and TSX. The firm had previously brought in experienced chief financial officer Claude Thibault to prepare the company for listing. The Q3 report is the first disclosure of financial results since those momentous occurrences at the company.
"With only two months of contribution in the quarter, the impact of the transformational acquisition of Edgewater Technology (Alithya USA) was already significant to our revenues, margin and adjusted EBITDA,” Paul Raymond, chief executive officer of Alithya, said. “The full potential of the platform created with this acquisition will be more apparent in the next few quarters as we capture the full benefits of the operational synergies and continue to leverage cross-selling opportunities."
Raymord also said new business opportunities were arising from the company’s increased post-merge scale, gaining new contracts due to added expertise, as well as the ability to target larger projects.
Revenues in Q3 grew 44%, increasing to $58.2 million from $40.4 million in the same period in 2017. Of that increase, $18 million was from two months of revenue from Alithya USA - the erstwhile Edgewater. The release states that growth in revenue from the acquisition was offset by slowdowns and delayed starts on a number of projects, as well as a continued reduction in lower margin business.
Breaking down revenues by geography, Canada, the US, and Europe respectively accounted for 64.9%, 28.2%, and 6.9% of revenue. In the previous year, 92.9% of revenue was from Canada, and 7.1% from Europe.
Gross margin increased 73% to $16.5 million in Q3 from the previous year, with Alithya USA accounting for $7.4 million. The growth was once against offset by a slowdown in certain projects. Meanwhile, gross margin as a percentage of revenues increased 3.7% to 28.4% as the company pursues a strategy of higher-valued added revenue streams.
Adjusted EBITDA was $1.3 million in the three months ending December 31, decreasing 58.6%, from $3.2 million in the same quarter last year. Recurring and non-recurring expenses from being a public company were tagged as the cause, as well as costs related to business expansion. EBITDA margin was 2.3%, down from 7.9% last year.
Meanwhile, net loss was $5.4 million - or $0.12 per share - increasing from $600,000 the previous year.
As synergies from the acquisition materialize, Alithya remains “comfortable” with a previously stated outlook of revenue between $300-320 million and annualized adjusted EBITDA of $22-24 million in the year following the deal's close.
“We are excited about the future and our capacity to deliver solid returns to our shareholders," Raymond said.
