Alithya Group Inc (ALYA) 2023 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to Alithya's Fourth Quarter and Fiscal 2023 Results Conference Call.

I would now like to turn the meeting over to Alithya's management. Please go ahead.

Good morning, and thank you once again for joining us at Alithya's fourth quarter and fiscal 2023 results conference call. The press release and MD&A with complete financial statements and related notes as well as annual regulatory documents were issued this morning and are now posted on our website. The webcast presentation can also be found on our website in the Investors section.

Please be advised that this call will contain statements that are forward-looking and, which are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. These statements include, without limitation our estimates, plans, expectations, and other statements regarding the future growth, results of operations, performance and business prospects of Alithya that do not exclusively relate to historical facts or which refer to the characterizations of future events including statements regarding our expectations of clients' demands for our services and our ability to take advantage of business opportunities and meet our goals set in our 3-year strategic plan. For more information, please refer to the cautionary note in our presentation and to the forward-looking statements and risks and uncertainties section of our MD&A available on our website.

All figures discussed on today's call are in Canadian dollars, unless otherwise stated. And we may refer to certain indicators that are non-IFRS measures. Please refer to the cautionary note in our presentation and to the non-IFRS measures section of our MD&A for more details.

Presenting this morning are Paul Raymond, Alithya's President and Chief Executive Officer; and Claude Thibault, Chief Financial Officer.

I will now turn the call over to Paul Raymond. Paul?

(foreign language) Good morning, and thank you all for joining us on the call this morning to discuss Alithya's robust fourth quarter and fiscal 2023 financial performance. First off, I would just like to take a moment to mention our new recently launched brand platform. As part of our ongoing integration efforts, the new platform consolidates our vast competencies and collective intelligence behind a powerful singular voice that will better resonate with our clients, employees and shareholders.

Years of sustained growth has led to a proliferation of knowledge and expertise. Our redesigned website now offers a more concise picture of who we are and what we can do for our clients as they navigate through a rapidly evolving digital world. The robust performance that we will be highlighting this morning demonstrates how the collective intelligence of our teams contributes to the continued health and relationships with our clients, which ultimately creates greater long-term value for our shareholders.

That noted, let's start by highlighting a few milestones for this quarter that we are particularly proud of. First off, we passed the $0.5 billion milestone in terms of annual revenues, which brings us closer to our strategic plan target and provides us with the scale we need to better accompany our clients and their largest, most critical initiatives.

Secondly, our pipeline and bookings continue to grow with Q4 bookings reaching $124 million. Our clients have demonstrated an unwavering loyalty and trust in our people. In fact, over 80% of our revenues we're generating from existing clients we had at this time last year. We are -- and we started working with 32 new clients in the fourth quarter. Those additions brings our fiscal 2023 total to 144 new clients.

Thirdly, we continue to improve our year-over-year gross margins as a percentage of revenue, which stands at 29.9%. This represents a 400 basis points increase over last year. And finally, our adjusted EBITDA grew from Q3 to end Q4 at $10.5 million. This represents a 73% increase compared to the same quarter last year.

Now let's look at these achievements in some greater detail. Our fourth quarter revenues increased by 13.5% over Q4 fiscal 2022 and sequentially by 4.2% over Q3, raising our revenues to $136.2 million for the quarter. That achievement was largely driven by growth in all areas of our operations. Our Canadian Q4 revenues experienced a year-over-year increase of 7.5% or $5.7 million in Q4. And as predicted in previous meetings, we are starting to see pressure, especially in the banking sector to focus on efficiency driven projects and longer decision-making on larger projects.

Based on conversations with senior leadership of those clients, we remain confident in our long-term technology investment commitments. In the United States, our enterprise solutions implementation business unit had a great quarter. This, despite recently -- recent quarterly results from top cloud infrastructure providers, indicating that businesses are looking for ways to trim cloud costs. April and May are also showing strong bookings as those are the year-ends for both Microsoft and Oracle. It should also be noted that we are seeing some software providers getting out of the services business to focus on higher-margin product sales. We see this as a very positive development for us.

In the U.S., our clients across the board continue to grow their projects beyond enterprise cloud implementations with strong new demand for additional strategy and post-implementation services. Our Oracle practice had a strong finish in terms of revenue, with Q4 being the highest grossing quarter of the fiscal year. Many of the clients requesting our help in implementing the Oracle suite of apps are in the healthcare sector, where Gartner is forecasting a 9.5% increase in spending in the coming year. That positions us very nicely for further growth.

As for our Microsoft practice, our strong Q4 revenue performance includes fresh revenue generated by the integration of our 2 most recent acquisitions, both completed during the 2022 calendar year. That said, we are also seeing growing demand for hyper-automation services, which is a disciplined approach that clients use to rapidly identify a best and automate as many business and IT processes as possible. Thanks to our data acquisition in July 2022, we are well positioned in robotic process automation, modern BI platforms and intelligence document processing, which incorporates the latest AI developments.

According to Gartner, the process agnostic technologies enabling hyper-automation will experience a 15% to 30% increase in terms of worldwide revenues between 2021 and 2026. It should also be noted that the last 2 acquisitions contributed $45.9 million to our fiscal 2023 year or approximately 50% of our growth. The U.S. now represents over 36% of our overall business. Our performance continues to advance towards the realization of the milestone established by our strategic plan. In fiscal 2023, our revenues increased by an industry-leading 19.5% to $522.7 million compared to $437.9 million last year.

Now looking at gross margins. We experienced a 31% year-over-year increase in Q4. Gross margin as a percentage of revenue increased to 29.9% and those achievements were driven by continued increases in revenues from permanent employees versus subcontractors and an ongoing focus on higher-value business. This has also resulted in higher average revenue per employee. Another contributor to gross margin improvement is our push to increase sales of subscription-based services. Subscription, software and other revenues now represent 12% of our total revenues compared to 6.7% a year ago for the same period.

In terms of adjusted EBITDA, we are proud to report a 73% increase over our Q4 2022 performance or $10.5 million for the 3 months ended March 31, 2023. Once again, contributions from our latest acquisitions were also incremental. Our business continues to be fueled by strong bookings in all of our geographies. During the last quarter of our fiscal year, we continued to fill our healthy pipeline and projects for the quarters to come. Fiscal 2023 bookings reached $525.4 million, which translates into a book-to-bill ratio of 1.15 when we exclude the 2 large 10-year contracts signed in April 2021. And we now have a backlog which represents over 16 months of revenue. We also took great strides towards the fulfillment of objectives outlined in our long-term strategic plan.

As we continue to implement measures designed to move us up the value chain and to improve efficiencies, we see continued opportunities ahead to increase our profitability profile. We continue to closely monitor global economic factors and potential shortening variations across our markets, and we remain focused on a disciplined approach to our long-term plan of building a trusted global digital transformation advisory firm. With 32 new clients added in the fourth quarter and 144 added this past fiscal year, we believe that our mission, vision and business approach are conducive to achieving that long-term goal.

I would now like to turn the meeting over to Claude Thibault, Alithya's Chief Financial Officer, who will expand on the financial highlights that I have outlined. Claude?

Thank you, Paul. Good morning. Revenues for the quarter amounted to $136.2 million, an increase of 13.5% or $6.2 million compared to revenues of $120 million for the fourth quarter of last year. Our last 2 acquisitions completed respectively on February 1 and July 1, 2022, contributed revenues of $11.9 million during this fourth quarter. Excluding the impact of the 2 acquisitions, organic growth in Q4 was 8.1%. For the full fiscal year, revenues amounted to $522.7 million, including $45.9 million from the 2 latest acquisitions, representing an increase of 19.4% year-over-year and passing the $0.5 billion mark for the first time.

Back to the fourth quarter. In Canada, revenues increased organically by 7.5% to $81.2 million due to growth in all areas. In the U.S., revenues increased 22% to $49.3 million, due primarily to increased revenues from the acquisition of Vitalyst, which contributed 1 additional month of revenues in the fourth quarter compared to the prior year. Revenues from Datum's U.S. business, organic growth in all areas and a favorable U.S. dollar exchange rate impact of $3.1 million between the 2 periods. As for our international operations, they also reported a strong quarter in terms of growth, increasing 41.2% due to good organic growth in activity levels and revenues from the acquisition of Datum's International businesses.

Now let's look at our Q4 gross margin, which overall increased by 31% or by $9.6 million to $40.7 million, up from $31.1 million last year. As a percentage of revenues, our fourth quarter consolidated gross margin increased to 29.9% from 25.9% for the same period last year. The increase in gross margin percentage in Canada is derived from increased revenues from permanent employees relative to subcontractors and from higher margin offerings. In the U.S., gross margin as a percentage of revenues increased as a result of 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 compared to the third quarter, mainly due to improved project performance in certain areas of the business. Our consolidated gross margin percentage on a sequential basis remains very close to the third quarter despite the fact that employer benefits reset on January 1, which always weighs notably on margins in Q4 and which means we had compensating improvements at different other levels.

Now looking at SG&A. Total gross SG&A expenses in the fourth quarter totaled $36 million, an increase of $9.8 million or 37.3% compared to $26.2 million in the same quarter last year. The increase is mainly explained by our latest acquisitions for $1.5 million. The special noncash impairment charge of $2.8 million, stemming from our reduced real estate footprint, an increase in share-based compensation of $2 million and an unfavorable U.S. dollar impact of $0.9 million. We also had increases in certain discretionary elements partially offset by ongoing reductions to our cost structures.

Overall, as a result of increased revenues and gross margin, partially offset by increased SG&A expenses, our fourth quarter adjusted EBITDA amounted to $10.5 million, an increase of 73% or $4.5 million compared to an adjusted EBITDA of $6 million during the same quarter last year. We are introducing a new financial metric with our Q4 reporting. In recent years, mainly due to our strategy of growth by acquisitions, Alithya has been reporting net losses on an accounting basis. This accounting net loss is mainly created by amortization of intangibles by acquisition, integration and reorganization front and by share-based compensation, most of which are noncash and nonrecurring expenses directly attributable to past individual acquisitions.

In addition, we had in this fourth quarter 2 notable specific P&L charges, which are also noncash and nonrecurring, mainly the write-down in right-of-use assets and the recording of an earn-out consideration payable related to the data and acquisition, totaling $13 million. Adjusting our accounting net loss for the above, we are reporting in Q4 of fiscal 2023 and adjusted net earnings of positive $4.1 million or $0.04 per share compared to an adjusted net earnings of $2.2 million or $0.02 per share for Q4 of last year.

The quarter-over-quarter increase in adjusted net earnings represents $1.8 million or 81.3%. For the whole fiscal year, Alithya is reporting an adjusted net earnings per share of $0.16, up from $0.12 per share last year. We will be going forward reporting this number, which we believe provides a better appreciation of Alithya's ongoing performance.

Looking at long-term trends on Slide 9. We can see the impact of our acquisitions, and more importantly, of our sustained organic growth achieved over the past several quarters. We can also see an even stronger progression in terms of gross margin dollars. Our long-term adjusted EBITDA trend also reflects our growth and gross margin improvements. With sustained organic and acquisition growth, our continuing long-term initiatives to generate higher gross margins and a steady focus on SG&A, we believe that we remain on target to achieving our 3-year financial objectives.

Now turning to liquidity and financial position on Page 11. Net cash generated from operating activities was $4.4 million and $8.1 million improvement from $3.7 million used during the same period last year. Also, cash flow for operations before working capital variations amounted in Q4 to $8 million. Out of $10.5 million of adjusted EBITDA, which represents a notable cash flow conversion percentage. With the corresponding overall debt reduction and considering our improved trailing 12-month EBITDA performance, Q4 marks another quarter with declining leverage ratios.

Now back to you, Paul.

(foreign language). So Q4 takeaways, continued revenue growth, margins growing faster than revenues, solid bookings and backlog, improving revenue per employee, strong DSO and cash flow. We have a solid client base with over 80% repeat business, and we are adding important strategic plans every quarter. We are very happy with our long-term perspective, but always keeping an eye on possible temporary slowdown in the late projects we are seeing in the banking sector. We are entering the new fiscal year with many efficiency opportunities ourselves, and we have a strong cash generation profile that positions us well to be patient.

More importantly, we are maintaining our focus and efforts on gradually improving gross margin and SG&A performance, which should lead to an improved bottom line, even in the current economic context we are all witnessing. As you can see by our rapid deleveraging, we are very well positioned to execute on the last year of our strategic plan and to continue our disciplined approach to quality acquisitions.

We will now take questions. Lara?

(Operator Instructions) First question comes from Gavin Fairweather at Cormark Securities.

Congrats on your progress. Just maybe to start out on the macro. It sounds like kind of on balance, the demand picture remains pretty positive and the backlog is certainly quite healthy. But just given the evolving environment, maybe you can just touch on any kind of segments of the business where you're starting to see a bit more sluggishness. And you touched on the financial sector, I'm kind of curious how big of a vertical that is for you? And any other areas that maybe you would call out?

Gavin, it's an ongoing concern of mine every day. I read the newspapers like everybody, keep asking our team what they're seeing where our bookings keeping getting solid. I think we expect to see some slowdowns in banking just because of everything that we're seeing in the U.S. I think the banking crisis in the U.S. is not over. You saw with another increase in Canada yesterday. So to me, it's kind of inevitable that we'll see some slowdown in banking at some point.

So -- but again, it's a small portion of our business today. It's more in Canada than the U.S. for us. We don't have banking clients in the U.S. today. We have a few in Canada. But everybody that we talk to, and I talk to clients and senior executives there on a regular basis at these institutions, and they're all committed to their long-term plans. I think they're all kind of triaging out what they're going to do short term and how to focus on more efficiency initiatives like RPA, robotic process automation and things like that. So far so good. But I'm definitely keeping an eye on it.

Okay. Great to hear. And then maybe just on your new kind of backlog calculation. Is that -- so that 16 months, is that just kind of the aggregate value of backlog compared to kind of your current production. Maybe just help us about how to think about that metric? Is some of that backlog kind of longer term as part of the R3D contracts, maybe a bit of context there.

So yes. So this is what I would qualify as hard backlog. These are signed contracts with confirmed commitments. It does not include what I would call an MSA or a blanket contract where we renew every year, very large engagements. So this is really committed hard backlog that we have contracts with committed revenue. And we believe it's a bit understated. This is the first time we do it. So we try to be on the conservative side. So as we integrate the new acquisitions and get a better handle on it, we think is conservative for now.

Okay. That's great. And then maybe just on Smart storing. Can you just provide an update on your proportion of resources, which were kind of offshore exiting fiscal '23, kind of your hiring efforts year-to-date and maybe if you have a target you could share for the next fiscal year on where you can move that to?

Yes, it's just over 6% today. Our objective is to be at 10% by the end of the fiscal year.

Great. And then maybe just before I pass the line, Claude, you mentioned the health and benefit and payroll tax was a reset in the first calendar quarter, which provides a headwind to sequential gross margins. Can you just quantify that impact so we can get some kind of the underlying margin trend?

Sorry, I missed the beginning of the question.

Just the reset of the health and benefit taxes, maybe for Claude, can you quantify that? So when we look at the sequential gross margin in health and benefit for the underlying trend?

Well, the -- my calculations are Q3 to Q4 of Alithya, which is calendar Q4 to calendar Q1. So the reset occurs on Jan 1. So we're easily talking a couple percentage points on gross margin. So anywhere 1.5% to 2.5% depending on mix of revenues and geographies, but it's in that ballpark, yes. So then it eases off, we have new employees being hired all the time. So those are not affected. So it's a partial impact. As you go into the year, it depends on the salary of the employees, higher paid employees, hit the ceiling before and vice versa. So the -- there's probably not much really occurring from Q4 to Q1. A little bit, not much. It's mainly then into Q2 and Q3.

Next question comes from Deepak Kaushal at BMO Capital Markets.

Just Paul, you mentioned you still feel confident about your strategic targets. I think you -- in the past, you mentioned $600 million target for fiscal '24. Can you give us a sense of how much you're expecting that to come from GAAP M&A? And maybe just a bit of an update on the M&A environment as you see it?

Sure. So thanks for the question, Deepak. Historically, we've been 50-50. So that's kind of the ballpark we look at. It varies because some years, we've done more acquisition. Right now, we haven't done any in the past 12 months. So we usually target 50-50. We've been very patient. As you can see, we're generating a lot of cash. We're deleveraging fast. There's some nice targets out there. And the environment right now, we find is getting extremely favorable to us because the -- in the past, there were a lot of private equities, very aggressive in our industry in acquiring some targets that we might have looked at in the past that we passed because the multiples were kind of crazy.

We're actually seeing that kind of reverse and come around. So we're seeing a lot of funds deleveraging and then a little bit like what you're seeing in the commercial real estate market right now. We're seeing some interesting opportunities coming to the table that people want to move fast on. So I think we're in a great position. We demonstrated and showed the chart that we can do very accretive acquisitions and deleverage very fast. We're very disciplined. So I kind of like the environment out there right now for us to find some interesting targets. And we know we have the balance sheet to be patient. So I like where we are right now."

Okay. Fantastic. That's helpful. And then just on the margin targets, I think your target was 9% to 13% EBITDA margin, still have aways to go there, but it sounds like you have some improvements in gross margin and your target to get to 10% of -- I think target to go from 6% to 10% that's versus contract employees. Is that right?

Yes. So we're close to 8% right now. So we think we're within striking distance to getting there, Deepak.

Okay. And so where is the other improvement coming from? Is there any coming from SG&A or is it all on the permanent versus (inaudible)?

Yes. There are 3 main things. The SG&A portion, there's a lot of onetime stuff in this past quarter that kind of creates a little bit of a disturbance, but we see some significant upside there. We've set our target is to get to 20% and lower of SG&A. So you have a few points -- a couple of points right there. We think that we have a big upside on gross margins by moving more of our work to smart shoring. We're at 6% right now. The objective is get to 10% by the end of the fiscal year and also in the change of the business mix, right?

You've seen we're doing more and more of the higher value stock as we reduce, again, the subcontractors focus on our people and high-value projects. So those things combined, we think that we think we can get there. I mean, if you look at the cash generation that we have right now, even if revenues were flat, I mean, let's say, the whole industry melting down for everybody, revenues were flat, we would still be generating $30 million of cash, which means we'd be deleveraging really fast. And at some point, if I look at the stock of our company, we're probably the best deal out there.

So I think we have all the tools to get to where we want to be on the strat plan. We're still looking at the 50-50 M&A and organic growth. We still have some -- we see some very interesting improvement opportunities from an efficiency perspective given our scale that we have today. So we like the position we're in right now.

Okay. That's fantastic. And if I may ask one last question. Pretty strong growth in Europe, maybe if you can unpack that a bit, what's organic, what's inorganic? And what are the segments in Europe you're seeing and the opportunities there going forward?

Maybe Claude just the what's organic versus M&A in Europe.

In Europe?

Yes.

It's very small. The acquisition part Datum's revenue base was largely in the U.S. So they had a few customers in U.K. and a few customers in Australia, it's really minimal. So the bulk of the increase is really our French operation really turning the corner and doing well. It's probably 4:1 or something like that to -- if you split up the increase.

Okay. And how do you see opportunities to expand in Europe? Again, this is all a lot of this aviation industry. Are you looking at more verticals or geographies beyond France? How should we think of that?

I think we're -- we have a good foothold in Europe. I think there are opportunities to expand that significantly. We would look to expand Europe if it could come with an expansion of our smart shoring operations at the same time, right? So we see significant opportunities for growth in Europe and in North America. Each time we grow that, we have the opportunity to grow our Smart Shoring capability at the same time. So we're looking -- the sweet spot would be acquisitions that do both, right, that complete our offering, high margin that add to both our on-site and smart shoring capabilities. And there are some of those in Europe as well. They're going through the exact same economic cycle we're seeing in North America. So we're seeing some nice opportunities there as well.

Next question comes from Jerome Dubreuil at Desjardins.

Thanks for the color on backlog. We're asking on this -- in these macro -- with this macro uncertainty at this time. So good to hear that backlog is rather firm. Just taking another point, how easy is it for clients to defer the orders that are in the backlog at this time?

Thanks, Jerome, for the question. It's not as much of the orders in the backlog that are easy to defer because most of those are already booked their projects undergo and things that are already on the go is the new bookings. We had one client that we signed recently. They committed to a multimillion-dollar ERP project. It's signed, but they want to start in September. All right. So, it's that type of it.

So it's the newer contracts that we're signing. We're seeing some of them saying, I've heard you to book right now and sign, but I want to start in a couple of months. So I think it's going to be more on newer bookings of large projects that you're going to see those types of things, Jerome. And that's in fact anecdotal, it's 1 project, but still.

Yes. Interesting. And then a bit of a cleanup item here. Were there particular costs related to the rebranding in the quarter? And is it material at all?

It was not material. It was all done internally by our own people.

Okay. And then just to clarify your point on the pressure in banking, you point out pressure is mostly in the U.S., but then you're mostly exposed to Canada. I just want to clarify how exposed do you think you are to this trend.

That's what I'm saying. I'm kind of cautiously optimistic because right now, we have little exposure in the U.S. But as you all saw, the quarterly reporting from the Canadian banks, they're all taking massive write-downs, and they're all being very cautious. So I'm being very cautious as well. I'm following this. So I think there is some collateral damage in Canada from what we're seeing in the U.S. Interest rates are still rising in Canada. So at some point, I think there's going to be some impact on the real estate industry in Canada, which -- and that's going to have an impact on the bank. So we're keeping a really close eye on it. I think everybody is being very cautious right now in the Canadian banking side.

Next question comes from Vincent Colicchio at Barrington Research.

Yes. Paul, a few for me. So what higher-margin areas in Canada. Hello.

Yes. Yes. We hear you, Vince.

Yes, yes. So what higher-margin areas in Canada had the strongest growth in the quarter? Can you give us some color there?

Good question. So we have growth kind of across the board in the last quarter in Canada. The -- I'd say that the highest growth was probably in our government business, which from a gross margin perspective isn't the highest, but from a net margin perspective is actually very good. So that was a strong area of growth. Another strong area of growth was our multiyear, our very large multiyear contract that we signed 1.5 years ago, that's still growing. Both those clients are going through some significant integration.

QMI recently announced the acquisition of Freedom Mobile. So there's going to be some significant integration projects coming from that and starting. Beneva is still going through the integration of the insurance companies, the merger there. So that's also generating some interesting projects. So it's really a combination of many things, Vince. It's tough to single out one thing.

And regarding Datum and Vitalyst, are you cross-selling synergies meeting your expectations?

On the Datum side, absolutely. On the Vitalyst side, it's a bit slower. Just because that's one -- and I mentioned this in the past, one of the areas where clients are reducing spend is on training right now. So we did a lot of that. However, we have 2 -- there are 2 parts of the business in that acquisition. One is the e-learning. And the other one is where we're going to be integrating. I mean, you're hearing a lot about generative AI right now.

One of the big tools that Microsoft is going to be launching is called co-pilot. That's an area that we see significant growth for us with all our clients and the rollout and leveraging of copilot in the Microsoft environment that uses generative AI for everything from Word to PowerPoint to coding to anything to do with the dynamics in Office suite. So we see a lot of potential upside on that.

And Claude, one for you. You did mention the organic growth in the quarter. Curious if you have that in constant currency?

Yes. It's around a couple of percentage points of positive impact from currency in Q4. Q4 over Q4.

Next question comes from John Shao at National Bank.

So I understand the macro environment looks tough, and a lot of enterprises today are talking about new cost reduction efficiency improvement. I'm just curious if Alithya could actually monetize from this opportunity given there's such a rush?

John, yes, like I was saying earlier, we do a lot of that in the robotic process automation portion. So you kind of have a convergence right now that we see as very positive in that there is a shortage of qualified labor, and there's a need for efficiency. So a lot of these automation projects, which in the past weren't a very high priority, are now becoming a very high priority. So that's something that we see as very positive for us, everything to do with hyper-automation.

And the other piece, of course, is outsourcing more stuff, right? So outsourcing projects, reducing costs, transforming some CapEx in the OpEx. So all these things that we're -- that we can offer our clients that we see as very positive for us.

Okay. I think you also mentioned the labor. So my question is on -- is actually on the labor market, whether it has any impact on your higher activity so far? It seems like it's been a while since people talk about this topic.

I think there's a lot of noise around many things right now out there. It's still for qualified technology people, it's still a high demand environment. I don't think people realize that now. We have the advantage now that we can leverage our smart shoring. So that's taking a bit of the pressure off. So we can hire people remotely now that they're still some of the gaps. The other piece that's also helping us right now is, as I was saying, we're reducing the subcontractors and moving that more to permanent employees.

And the other thing that we're doing, which comes back to how we're improving gross margin is we're being very selective on profitable growth. So we're being very selective on the projects that we bid on, which puts less pressure on the hiring on the people side and brings us more benefit in terms of the type of projects we do and the value they generate. So we're trying to combine all those things to make the situation more manageable.

The next question comes from Divya Goyal at Scotiabank.

I had to get some color on some of the industries where you think Alithya is currently not servicing and untapped from that side. So this is an industry where you're looking to grow and expand and you did provide quite a lot of color in some of the previous questions. So if you could elaborate on that.

Yes. Thanks, Divya. So there's a few factors right now that we see where we're already there, but we see tremendous opportunity for growth. One is healthcare and health insurance, right? So Canada and the U.S., a little bit different, but we see significant opportunity for growth in the healthcare industry, both on the provider side and the payer side. It's an industry that's going through tremendous transformation right now. We're very well positioned. As you know, we're the top player in healthcare and Oracle on that side. We also are involved on the Microsoft side with some of these hospitals.

And with the data acquisition that we did, we're very involved in the payer side and the modernization side. And this is an area where we actually use artificial intelligence to accelerate the modernization of a transformation and where we provide as a subscription-based service. So again, we see a big upside for that. And as you saw from the growth in our subscription-based revenue, it's also a very high-margin repeatable solution that we like. So healthcare is definitely a healthcare both payer and provider is an area that we see tremendous growth for us going forward.

This might sound counterintuitive, but I think there's going to be some growth opportunities in banking as well. I think the RPA offering that we have is going to become extremely popular in the next 12 to 24 months in the banking industry. So we're staying very close to that one. The telecom industry is also not finished with consolidation, you're seeing such significant projects happening there. So I think that's an area that we can do a lot more. And finally, manufacturing, our Microsoft business just had a stellar few months of bookings. So we think the whole process manufacturing side of the house is also another area we can -- even though we're #1 in Microsoft in that area in North America, we think we can do better there as well.

Yes, that's definitely good color and definitely good growth improvement there. You briefly mentioned, Paul, about the Quebecor Freedom Mobile acquisition and like the potential projects that could come out of that. Are those potentially baked into your bookings numbers right now? And could you quantify them at all or would that come later as they start to integrate?

So some are in already, Divya, but some were still -- we want to make sure before we put them into the backlog, that it follows our definition of hard backlog, right? So I think we're conservative right now, but it's not going to differ materially.

No, that's helpful. One last one here on the integration. So for the Datum and the Vitalyst have those acquisitions or any of the other -- or all the other previous acquisitions have they all now been integrated or are you still in the process of completing the integration?

So we track integrations at multiple different levels. The administrative stuff, the benefits, the e-mail infrastructure, the tools, the financials, so the sales operators. So there's a lot of different levels of integration. So out of the operational stuff. So how do we go to clients and integrate it in the management team, the e-mail, the access to the tools that that's done. There's always some stuff to do, especially around our financial systems because you want to make sure that the employees who are coming on board aren't penalized in the change in the transition.

And as you know, depending on which time of the year you transition into their systems, their resets with the IRS and the Canadian equivalent in somebody's paycheck, pretty bad. So we try to avoid that. So typically, we do those on January 1 or April 1 when we have a system at the end of the fiscal year. So we usually do those once a year based on the calendar. So no, the integrations are going and going forward to the plan.

There are no further questions. I will now turn the call back over to Paul Raymond for closing remarks.

Thank you, Lara. Thank you, everybody, for joining us today. (foreign language) and looking forward to talking to you soon.