Alithya Group Inc (OTC: ALYAF)

Alithya Group Inc (OTC: ALYAF) is a professional services firm specializing in IT solutions and digital technologies. The company focuses on strategic consulting, enterprise transformation, and business enablement. Its strategic consulting division offers expertise in digital strategy, organizational performance, cybersecurity, enterprise architecture, and change management.

Positive Growth Prospects

• Improved Profitability and Cost Efficiency: Despite a decline in revenues, Alithya demonstrated strong bottom-line improvements in Q2-2025. The company achieved a 44% increase in Adjusted EBITDA, reaching CAD 9.3 million, compared to CAD 6.5 million in the same quarter last year. This improvement was driven by a reduction in Selling, General, and Administrative (SG&A) expenses, which decreased by 13.6% to CAD 25.9 million. Effective cost management, including reductions in employee compensation, professional fees, and business development costs, contributed to this enhanced profitability.
• Enhanced Gross Margin Performance: Alithya successfully increased its Gross Margin as a Percentage of Revenues from 29.4% in Q2-2024 to 30.6% in Q2-2025. This improvement was largely attributed to higher hourly billing rates and a strategic reduction in subcontractor reliance, particularly in Canada. Although gross margin in the U.S. saw a slight dip due to lower software revenues, international operations experienced an improvement, reflecting the company’s ability to optimize project execution and profitability across regions.
• Strong Liquidity and Cash Flow Management: The company significantly improved its cash flow position, generating CAD 3.0 million in net cash from operating activities in Q2-2025, compared to a cash outflow of CAD 17.3 million in the same quarter last year. This positive shift reflects better working capital management, reduced expenses, and a more disciplined approach to financial operations. The company’s focus on maintaining liquidity also positions it well for future investments and debt reduction efforts.
• Strategic Expansion and Market Growth: Alithya’s strategic focus on high-value services and disciplined execution resulted in revenue growth in the U.S. and international markets. The company signed 25 new clients in the quarter, demonstrating its ability to attract new business despite a challenging economic environment. Additionally, its backlog represented approximately 16 months of trailing twelve-month revenues, indicating a strong pipeline of future projects. This aligns with its long-term growth strategy, which includes leveraging AI, expanding smart-shoring capabilities, and exploring acquisitions.

Growth Challenges

• Declining Revenues and Market Challenges: Alithya faced a 5.9% decline in revenues, dropping to CAD 111.5 million from CAD 118.5 million in the same quarter last year. The Canadian market was particularly impacted, with revenues falling by 12.2% due to the maturity of a major client transformation project and reduced government contract revenues. Although the company achieved revenue growth in the U.S. and international markets, it was not sufficient to offset the overall decline.
• Reduced Bookings and Growth Limitations: The company reported Q2 bookings of CAD 84.0 million, translating to a Book-to-Bill Ratio of 0.75. This ratio indicates that new contract signings were lower than revenues, raising concerns about future revenue sustainability. Even when adjusting for long-term contract exclusions, the ratio stood at 0.85, still below the desired level for consistent growth. The decline in bookings could pose challenges in maintaining revenue momentum in the coming quarters.
• Net Loss Despite Profitability Gains: While Alithya improved its profitability metrics, it still reported a net loss of CAD 0.3 million for the quarter. Although this represents a significant improvement from the CAD 9.2 million net loss in the same period last year, the company has yet to achieve consistent profitability. The lingering losses highlight ongoing financial pressures, particularly as revenue declines continue to impact overall earnings.
• Dependence on Cost-Cutting for Profitability: Much of Alithya’s profitability gains were achieved through cost reductions rather than revenue growth. The company’s focus on reducing SG&A expenses, including variable compensation and professional fees, played a key role in improving Adjusted EBITDA and net earnings. However, reliance on cost-cutting measures rather than organic revenue expansion may not be a sustainable long-term strategy, particularly if revenue pressures persist.

Technical Observation (on the daily chart):

The stock has recently broken out above key moving averages (21-day at USD 1.30 and 50-day at USD 1.21) with strong volume, signaling bullish momentum. A bullish crossover in MAs supports the uptrend, but the RSI at 75 suggests the stock is overbought and may see a short-term pullback. Key resistance is at USD 1.56, and a sustained move above this level could drive further gains. Support lies at USD 1.30 and USD 1.21. Overall, the trend is bullish, but caution is warranted due to potential short-term consolidation.

Alithya demonstrated strong profitability improvements in Q2-2025, with a 44% rise in Adjusted EBITDA and enhanced gross margins driven by cost efficiencies and higher billing rates. The company also strengthened its cash flow and liquidity while expanding in the U.S. and international markets. However, revenue declined by 5.9%, primarily due to weaker performance in Canada and reduced government contracts. Additionally, bookings were lower than revenues, and despite profitability gains, the company still reported a net loss. While strategic cost management has bolstered short-term performance, sustained growth will depend on reversing revenue declines and securing stronger bookings. 

As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘Watch’ rating has been given to Alithya Group Inc (OTC: ALYAF) at the current market price of USD 1.56 as of February 27,2025 at 07:02 AM PST. 

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is February 25,2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.