Alithya Group Inc. (NASDAQ:ALYA) Q4 2019 Earnings Conference Call Transcript

Jun 19, 2019 • 09:00 am ET

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Alithya Group Inc. (NASDAQ:ALYA) Q4 2019 Earnings Conference Call Transcript

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Q & A
Operator
Operator

Thank you. (Operator Instructions) Your first question comes from the line of Amr Ezzat from ECHELON Partners. Please go ahead.

Analyst
Amr Ezzat

Good morning. Thanks for taking my questions. Guys, you briefly touched on that in your prepared remarks, but can you give us more color on the dynamics in Canada? It does look flat sequentially. I believe you said it's just like clients rescheduling projects here and there last quarter. Is there anything to read into that?

Executive
Paul Raymond

Thank you, Amr. Thank you for the question. No, you're correct. If you look at a high level, it looks like it's flat. However, when you dig a bit deeper and you look at what's been happening -- look at the last three years of our business. We've gone from a very time-and-material-oriented consulting business to a majority of our business today coming from digital transformation. So when you have delays at major customers, typically what they will delay are the time and material, the consulting job, the subcontracting jobs which as you've seen in the past, those can kind of stop on a dime.

However, the digital transformation projects where we're doing an ERP project or moving a customer to the cloud, you can't stop those projects in the middle of them. So the majority of our business today compared to three years ago is now in the digital transformation space. So all of the slowdowns that we've seen in Canada in some of our major customers have typically been in the lower-margin subcontractor type business whereas all of the new business that we've won to replace that has been on the higher margin digital transformation stuff. So we're actually very happy with the new business that we're signing.

Analyst
Amr Ezzat

Great. Well, actually on that, your gross margin continues to expand nicely and I think, Claude, you mentioned, in the US it's like 37.3%. Any chance Canada can get there? Or like -- when you look at your Canadian business, what's like peak margins there the long-term?

Executive
Paul Raymond

Thanks, Amr. It's Paul. I can answer that one again. And again, we see those types of margins in our digital transformation projects, which is why we want to move towards that in the long term, even in Canada.

Analyst
Amr Ezzat

Understood. Maybe switching gears to the US. Any color you can give us on what drove the organic growth? Specifically, can you also give us like an update on the Oracle business in the US?

Executive
Paul Raymond

Sure. Thanks.

So the -- when we did this acquisition, the premise for it is that we saw a tremendous opportunity in the cross-selling opportunities in the business and the trends we saw in our customers, both on the Microsoft Cloud transformation, the ERP side and on the Oracle side. And the premise was that we had a strong Oracle Cloud practice, whereas in the US, we had a strong Oracle EPM practice which we believe needed some tweaking, which is what we've done.

And the team did an incredible job on the integration