Alithya Group inc.

Good morning and thank you once again for joining us for Alita's fourth quarter and fiscal 2024 results conference call. The press release and MD&A with complete financial statements and related notes 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 future growth, results of operation, performance, and business prospects of Alita that do not exclusively relate to historical facts. or which refer to future events, including statements regarding our expectation of our clients' demand for our services, our ability to take advantage of business opportunities, to leverage our service offering, IP, AI, and expertise to meet clients' needs, and to meet our goals set in our three-year strategic plan, as well as our ability to deploy our smart shoring capabilities. For more information, please refer to the cautionary note in our presentation and to the forward-looking statements and risk and uncertainty 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 and other financial measures section of our MD&A for more details. Presenting this morning are Paul Rehman, Aletheia's President and Chief Executive Officer, Bernard Dockrill, Chief Operating Officer, and Claude Thibault, Chief Financial Officer. I will now turn the call over to Paul Rehman. Paul?

Bonjour and good morning, everyone. Thank you for joining us today. This is an exciting time for Aletheia as Q4 marks the end of a year characterized by the continued progress of higher value services for our clients. and greater operational efficiencies internally. As this quarter also marks the end of our fiscal year, we will focus on three main areas today. One, our Q4 results. Two, a look at our 2024 fiscal year. And three, an overview of our new three-year plan, which took effect this past April 1st. So let's begin with our Q4 results. Our fourth quarter results reaffirm our ability to improve our business despite challenging market conditions. Our clients recognize the growing value of our services.

This can be seen in the ongoing progress of our margins.

Our Q4 gross margins, our adjusted EBITDA margin, and our net margins were all new highs for Aletheia. 2.4 was also a quarter of robust bookings. In fact, when excluding the two very long-term contracts, we achieved a book-to-bill ratio of 1.27. These are all very encouraging signs. I'm particularly proud of our team's results despite the challenging conditions in our industry. I will now turn things over to Bernard Dockrell, our Chief Operating Officer, to discuss some of the projects and initiatives behind those numbers, followed by Claude Sabot, our Chief Financial Officer. I will then come back at the end to comment on our new three-year plan.

Bernard? Thank you, Paul.

Our strong Q4 bookings were fueled by large wins in the healthcare and cybersecurity sectors. This includes a groundbreaking multi-million dollar contract for services to the health and social services industry in Quebec. Over the next five years, we'll be implementing a cloud-based Oracle ERP system designed to revolutionize supply chain processes across the products. The project will be delivered in partnership with LGS, an IBM company who will serve as a system integrator. This is the type of project that stands as a testament to our strategic approach, and we continue to gain traction in the healthcare sector in North America by leveraging our extensive business transformation expertise. Overall, our sense is that the low growth of the Canadian market in recent quarters is about to reverse. Some large banking clients have recently adopted a renewed focus on stalled projects, which suggests to us that the industry in general is beginning to recover and that we will see growth in the financial services sector in terms of IP spending by the end of the fiscal year. In Canada, the shift to cloud computing is progressing steadily. The increasing demand for legacy application modernization and client requests for assistance in leveraging our IP solutions The application migration, intelligent document processing, and quality assurance, among other services, presents us with opportunities to grow our revenues. Additionally, this growth allows us to leverage more of our smart shoring capabilities. In the U.S., revenues were up Q4 and accounted for 39% of Lithia's overall revenue stream. This is up from 37% a year ago. Those increased revenues were softened by an unfavorable foreign currency impact which Claude will discuss a little later. Nevertheless, Q4 in the U.S. was a high watermark for fiscal 2024 in terms of revenue, gross margin, and contribution to EBITDA. The U.S. market accounts for 47% of our overall operating income in Q4. This is up from 38% a year ago. Both our Microsoft and Oracle ERP practices continue to grow in the U.S., and Alithea is seen as a high-quality and trusted partner. In April, a major international wholesaler went live with an Alithea-implemented Microsoft Dynamics 365 finance and supply chain management solution for their packaging and distribution operations for North America and Europe. This was the client's third deployment with Alithea, and the project enabled the client to retire multiple legacy systems as part of a digital transformation journey. The successful completion of that project is a testament to the type of collaborative partnerships that drive the successful projects of our Microsoft practice, not only for ERP, but also for business intelligence, Azure, and training solutions. Q4 also saw positive growth and momentum in our Oracle business, including another significant win with a large energy-based network of five hospitals employing more than 18,000 people. Compromising Oracle Cloud Enterprise Performance Management, Enterprise Resource Planning, Supply Chain Management, and human capital management, our extensive experience in deploying similar systems positioned us ideally for this project. This $12 million U.S. dollar contract represents a lift to the largest healthcare win in the U.S. to date. It is also a logical step forward in our upward penetration of larger healthcare facilities across North America, with more than 120 enterprise solution implementations in that sector in recent years. As major digital transformations continue to unfold in the U.S. market, our operations remain vigilant in pursuing these large opportunities. I would now like to take a minute to expand on the bigger picture in terms of our smart shoring strategy and progress. Currently, over 8% of our overall workforce is located outside of our main geographies in the U.S., Canada, and France. With opportunities to create more value for our clients in Olympia, our intent is to continue ramping up our SmartSharing capabilities going forward. SmartShare options are now a common pillar to many of our active engagements and pursuits, providing access to a large, cost-efficient talent pool in our established locations. This additional capability enables us to compete where we may not have competed previously and provide greater value to our clients. For example, with many organizations deeply involved in migrations to the cloud, AWS signed an agreement with Alithea in Q4 to retain our SmartShort team for the provision of cloud migration services. Alithea has been actively involved in the AI landscape for several years. We are proactively investing in our clients' AI upskilling with offerings such as our Alithea Co-Pilot Academy to become a trusted leader in this sector as well. The Alithea Co-Pilot Academy is a comprehensive training program to benefit both beginners and advanced users. The weekly program, led by Alithea experts, includes hands-on sessions and workshops that provide a deeper understanding of Microsoft Copilot's functionalities and best practices. We also continue to invest in AI-assisted IP. While many businesses have been eager to put the cart before the horse, Alithea is well-positioned to help its clients prepare, capture, and structure their data using a proprietary rapid capture tool to extract the most value. It's an exciting time for technology, and as organizations complete their preparations and approach the start of their AI journeys, Alithea will be there to accompany them. Smart shoring and AI provide a great segue into discussions about our new three-year plan, which Paul will cover later, as they are both critical components of that plan. I will now pass it over to Claude to go over some financial metrics.

Claude? Thank you, Bernard. Good morning. As mentioned, our fourth quarter fiscal 2024 was highlighted by continued performance improvements on many levels. Consolidated revenues came in at $120.5 million, a year-over-year decrease, but a small sequential improvement versus the third quarter. Despite the current general market conditions in the technology services industry, approximately 84% of Aletheia's Q4 sales came from existing clients. which we had in Q4 of last year. This demonstrates strong client relationships, trust, and satisfaction in Aletheus services, regardless of market trends. If we dive a little deeper, we can see that revenues in the U.S. increased sequentially by 7% to $50.4 million due to organic growth, although partially offset by a negative U.S. dollar variation. On a year-over-year basis, Q4 revenues in the US also increased by 2.4%. On a sequential basis, our international revenues increased as well, by 2%. Now in Canada, we still faced some challenges, as shown by our revenue numbers, both sequentially and year-over-year. Revenues decreased 5% sequentially to $64.6 million, or 20.4% year-over-year. Those numbers reflect the fact that our clients in the Canadian financial sector are generally in a lower IT investment cycle, although we are seeing stabilization in terms of spending levels. In regard to gross margin as a percentage of revenues, however, we are reporting a fourth consecutive quarter of improvement. I noted in previous quarterly calls how challenging it is to increase gross margin during lower revenue cycles. However, we achieved sequential progression again, despite another quarter in a softer revenue context, and despite Q4 always posing a special challenge because of the annual reset of payroll benefits. Specifically, gross margin as a percentage of revenues increased to 32.1%, a record high. and up from 29.9% in the same quarter last year. On a sequential basis, gross margin percentage also increased in comparison to the 31.3% reported in the third quarter. Our gross margin percentage increased in all geographies year-over-year and sequentially, mainly due to higher value services, higher utilization, improved project performance, and geography mix. And this, again, despite the employer benefit reset of January 1st. Now, looking at SG&E expenses, we have also witnessed significant improvements for consecutive quarters, and we are happy to see our cost control efforts continuing to bear fruit. Total gross SG&E expenses in the fourth quarter amounted to $29.6 million, a decrease of 17.7%, year-over-year, which is a notable decrease when looking at numbers on an annualized basis, even when considering the non-recurring impairment charge of last year. SGN expenses as a percentage of revenues came in at 24.6% in Q4 compared to 26.4% for the same period last year, namely a reduction of $6.4 million, driven mainly by reduced salary expenses, decrease in share-based compensation, and a reduction in impairment. Overall, thanks to the above performance on cost management, our fourth quarter adjusted EBITDA amounted to $10.5 million, which is slightly higher than the same period last year when our revenues were notably higher and an all-time high. This shows very clearly how much progress we've made in terms of operational performance and how much our profitability could be as soon as we return to our higher historical revenue levels. We would also like to point out that at 8.7% of adjusted EBITDA margin, we are within a couple hundred thousand dollars of the three-year goal we had set of reaching a minimum EBITDA margin of 9% by the end of fiscal 2024. Considering Aletheia's overhead profile, and again considering the current low revenue environment, We are quite confident that this performance is setting a strong base and great momentum for the next phase of our strategic plan. Also, our record high adjusted net earnings at $6.1 million, or 6 cents per share, increased by 49% year-over-year and 40% sequentially. I would also point out our accounting net income of positive $2.3 million, which has improved significantly from negative $20 million in the same period of last year, even though Q4 last year had been impacted by certain non-recurring elements. Of note, we are reporting positive accounting net earnings for the first time since becoming public in 2018, a positive trend which we have been calling out for a while. We got some help in the quarter from a non-recurring element, but we did move closer to reaching that milestone regardless. The market will surely appreciate seeing a positive accounting net earnings amount, but as a reminder, we have actually been always cash flow positive despite recording accounting losses just because of high depreciation and amortization charges. Finally, considering our $10.5 million of adjusted EBITDA, and our $9.7 million of cash generated from operating activities before working capital variations, this translates into strong cash flow conversion of 92%. Of note, this is despite the fact that we had over $2 million of severance in Q4, which is excluded from adjusted EBITDA, while obviously impacting cash flow, and which we expect to be decreasing going forward. With regards to our fiscal 2024 12-month results, we wish to point out a few metrics achieved despite the cyclical decline in revenues already discussed. Indeed, we achieved an overall improvement in our adjusted EBITDA margin, which came from a 140-point improvement in gross margin and a $5 million reduction in SG&E expenses. In closing, let's discuss our liquidity and financial position. Net cash generated by operating activities was $9.7 million, representing an increase of $5.3 million, or 120%, year-over-year. As of March 31, 2024, when combined with other cash flow elements, this resulted in total long-term debt reduction of $9.8 million to $117.4 million, and in our net debt to EBITDA multiple, falling back below three times. I will now pass it back to Paul to discuss our new three-year plan.

Paul? Thank you, Claude.

Our new three-year plan took effect on April 1st, and we will be holding an investor day in September to present the detailed plan to all of our stakeholders. But in summary, our plan aims to achieve a scale and scope which will allow us to leverage our geographic presence, our expertise, our integrated offerings, and our leadership positions to target higher value IT segments. Key to that process is our ability to continue building relationships of trust with our clients, our people, our investors, and our partners. We currently have valuable client relationships which include both large industry and government organizations in our target markets. By amplifying the value we provide, we will create greater awareness and interest of Aletheia's extensive slate of innovative solutions and services. Demand for both business and technology consulting is being driven by organizations' need to accelerate their digital transformation. As organizational efficiency and optimization projects now rule the day, clients are shifting their emphasis towards cost control, efficiencies, and automation. Alethea is perfectly positioned to answer those needs. Most business leaders believe in the potential of AI and generative AI, but many are still without clarity on how to use it, either on a larger scale or on how to mitigate the associated risks. We see this challenge as a source of future growth for our business as clients reach out for assistance in understanding and harnessing its potential with respect to their products, their services, and their operations. Our new three-year plan also lays out strategies for Aletheia to achieve between 5% and 10% of annualized organic growth while increasing our EBITDA to a range of 11% to 13%. It also includes objectives to acquire complementary businesses totaling $150 million in revenues over the next three years. We have a healthy funnel of high-value complementary acquisition targets, and we will continue to focus on the United States, Canada, and Western Europe. Moving forward, our intent is to also deliver an increasing percentage of our business using AI-based tools and our smart shoring centers. We believe the scaling up of our smart shoring operations will provide us with a greater pool of qualified experts and margin improvements while opening new doors to provide services in areas where we do not currently compete. Finally, our new three-year plan also lays out steps towards achieving net zero emission certifications. In conclusion, as I have said in the past, there will be more technology in our lives 10 years from now. Technology is once again poised to change the way we work and live, and Leithia is excited to be in a trusted position to help all of our stakeholders harness the tremendous promises of these new technologies.

We will now be happy to take questions. Operator?

Thank you. Ladies and gentlemen, should you have a question, please press the star followed by the one on your touchtone phone. If you'd like to withdraw a question, please press the star followed by the two. If you're using a speakerphone, please leave the handset before pressing any keys. Bernard Dockrill will be managing the Q&A session today. One moment, please, for your first question. Your first question comes from Gavin Fairweather from Carmark Securities. Please go ahead.

Hi there. This is Graham on for Gavin. I just wanted to ask about the cadence of the SmartShore hires. I know last quarter you said it was about 5% to 6% of the workforce, and now I think you mentioned it was over 8%. I know there's been some restructurings, like some headcount reduction, but maybe if you could just give a bit more color on that jump in the percentage of SmartShore full-time employees, that'd be great. Thanks.

Great. Thanks, Graham, and good morning. This is Bernard Dockrell. As Julie mentioned, Paul Raymond is actually touring our SmartShare centers right now and is unable to take the call today. So Claude and I will be fielding your questions. And just timely, Graham, with the SmartShare question. Yeah, so we did say roughly now in our total workforce, about 8%, a little over 8% is now in our smart shore centers and our non-core centers out of the US, Canada, and France. And we see that continuing to grow. It definitely is a priority for us. As Claude mentioned in the last call, you know, when we're seeing a lack of the higher end growth, it is more difficult to ramp up in those centers. as we're not hiring as many. But we are happy with the progress we're making, and we've got continued initiatives to continue this progress in future quarters.

That's great. Thanks. And then just on the bank projects that are sort of starting to come online, you maybe give us a bit more color. Is that like something that's going to happen in the second half of, or I guess the first half of fiscal 25, or is that? It's going to sort of take a few more months as they start to take these dormant products back online. Thanks.

Yeah, great question. We have been seeing a lot more activity on some of the projects that were stalled in previous quarters. So they haven't yet turned into bookings or revenue. But we do anticipate from the activity we're seeing that we will see some of these things come to fruition in the second half of this fiscal year.

Amazing. And then just one more for me. So gross margins were obviously very strong this quarter despite the seasonality with the payroll and benefits. Is that primarily on strong project execution? Would you attribute that more to that jump in the percentage of smart shoring? Maybe just more color on that would be great.

Yes. There's a number of factors that are impacting our gross margins. Definitely our delivery excellence and our delivery, project delivery is improving. So margins are going there. The smart shoring has a positive impact in creating tailwinds there, as well as our utilization. We've been able to continually step up our utilization. And finally, the last thing is automation. We're seeing more automation in our projects, which allows us to replace labor completely, which has a great impact on our gross margins.

That's amazing. I'll pass the line. Thanks.

Your next question comes from Jérôme Dubreuil from Desjardins.

Please go ahead.

Bonjour tout le monde. Thanks for taking my questions, Bernard. Good to hear your voice. First question is on the margin guidance for the longer term. You know, the question a lot of people are likely to have is, what are the assumptions behind the long-term guidance on margins, you know, in the past? you know, it's been a challenge to achieve this, but now we're really seeing good momentum. So are there assumptions in terms of organic growth resuming soon? And second part is, do you see further low-hanging fruit for you to meet that objective? Thanks.

Yes, thanks, Earl, for the question.

Yeah, we look forward, and we don't give guidance on the future, but, you know, We do see the ability to have more of the smart shoring. As we discussed earlier, when we get more growth, it's easier to ramp up quicker in the smart shoring. We're seeing our clients much more open to doing more offshore as they're looking to get more for their dollar, as well as our utilization. We have made great improvements on our utilization. That gets harder and harder the more improvements you make, but there is still some room there, we think, that we can continue to get better there. And as I mentioned before, our delivery excellence, we put a lot of programs in place over the last year, and we've seen great rewards from that in doing that. So I continue to expect that we'll see some there. But on the growth side, the market's a challenging market right now, as you're seeing with interest rates. But we are seeing some activity that makes us feel that the second half of the year, we may return to the growth levels that we were at previously.

Great. Second question for me, just a clarification, is the healthcare deal with the government in Quebec included in the quarters booking?

Yes, that deal, the two deals I mentioned in my remarks there, the healthcare deal in Quebec as well as the large healthcare deal that we had in the U.S., both of those deals were in our Q4 bookings and provided a good uplift to those bookings in the quarter.

That's good to hear. And finally, for me, are you happy with the current mix of managed services? I mean, a lot of companies in the space have been using a higher mix of managed services in order to get better utilization. Is this something you're looking at to kind of transition your model towards or you're happy with the current mix?

Definitely managed services provides a lot of advantages to our work, not just in the you know, the margins on the managed services work, but also the long-term nature of managed service contracts. So a lot of the implementation work we do, a lot of our ERP implementation work we do, we're more proactive on including managed service options in those agreements, which create a tail to those agreements. So definitely we'd like to see more managed services. It does provide advantages to our... to our services mix that also reduce risks in future orders as well.

So it is part of our strategy to increase that. Great. Thanks a lot.

Your next question comes from Rob Jeff from Ashland. Please go ahead.

Good morning and congratulations on the margin performance. It's very impressive. Thank you. You're welcome. Perhaps going back to the ERP win in Quebec, can you discuss how you're working with Oracle and IBM and the broader scope of that contract? And with that contract, would your share of that contract be relatively consistent with the win announced in the US in terms of scale?

If you can clarify your question as far as the relative scale to the U.S., the contract in Canada is slightly larger than the one that we had in the U.S. from our portion, and it is a consortium where we are one player in that delivery team. LGS is the system integrator, and, of course, Oracle is the software provider.

I hope that answered your question.

Sure. And is this a partnership that could be pursuing similar contracts in other provinces?

Oracle is one of our primary partners. So we do a lot of work with Oracle through our Oracle Cloud with ERP, specifically in healthcare and also in the EPM space. So that's a partnership that's been around for a long time. And even with LGS here in Quebec and other areas, we have partnered in the past. And as we look at every deal, we look at every deal independently and what is the best solution for our client. And if that involves partnering, we'll look at the partnering ecosystem and pick the best partner for the individual opportunity that we have. But definitely where we are right now with LGS, this is a very positive partnership that we have going.

And Cass, in terms of Canada, you're talking about the increased activity with the banks and how that's a second half consideration. Do you see Canada returning to year-on-year growth in the second half?

As you know, we don't provide guidance, but with the activity we're seeing and what we started here in the first quarter, we've had some good workings in Canada. in Quebec and outside of Quebec. So I do see from the activity, our pipeline is strong. One of the things we're seeing is larger deals in our pipeline, more strategic deals. Of course, those deals take longer to close. There's more people involved on the client side in the decision-making. They're more relaxed.

But it provides us with very positive forecasts as we look forward.

Thank you.

Your next question comes from John Shahul from National Bank.

Please go ahead.

Good morning. Thanks for taking my question. On smart shoring, could you maybe remind us what needs to be done here to potentially close down the gaps relative to your peers who have a much higher mix? And how should we think about the pace of acceleration on that front?

Thanks for your question, John. And yeah, SmartShore, there's a few things that we're looking at. There's, first of all, our client delivery, which is the primary focus of our SmartShore. And then also internally on some of our internal operations and moving more of that to our SmartShore centers. So we have two threads, if you will, that we're pursuing to grow those centers. As I mentioned before, as we look at new contracts that we're signing with our clients, There's more and more SmartShore delivery built into those contracts. In some of our past contracts, it's tough to move because we've contracted sometimes on where we deliver the work from. So we're limited there. But as we grow and we renew these contracts, we are accelerating that. And as I mentioned before, our clients are very interested in it. I think in most industries right now, they're looking for further savings, further operational efficiencies. And smart shoring is one of the levers we can pull. Of course, it's not the only lever. We're looking more at the automation front as well to drive further efficiencies for both us and our clients. But as we do grow and we sign these new contracts, I do expect that our smart shoring percentage will continue to go in the right direction.

Okay. Thanks for the colors. In terms of the demand environment, it sounds like demand is about to return. On that note, how should we think about your staff utilization or capacity to potentially take on more projects?

Yeah, great question. There's only so much you can do with utilization. At some point, it's having the right skills available for the new projects coming on. So we are very actively analyzing our pipeline and ensuring that what we have is available as a bench capacity aligned to the work we're seeing demands from our clients. So that's kind of the key activity to make sure we can do that. But also, you know, going to the market, bringing on new talent as we bring on these new deals. You know, the deal here that we signed here in Quebec requires us to hire as well. We didn't have all that capacity sitting idle. So as we do that, we bring them on. Of course, that has a little bit of an impact to your utilization. When you bring on the team, you have training ramp up where folks may not be available. So some of that has a bit of a headwind on that.

But I do see as we grow, there will be a little bit improvement in the utilization as it stabilizes.

Got it.

Thanks again for the callers that popped the line.

Your next question comes from Vincent Colicchio from Barrington Research. Please go ahead.

Yes. Bernard, are you seeing... Engagements ramp in alignment with your expectation, and in particular, I'm interested in the two large healthcare deals you signed last quarter.

As far as our ramp up on that?

Yeah, is it ramping according to plan?

Yes. So again, large initiatives, they're multi-year initiatives, so it's not all ramping up at one time. So we'll take a quarter or two before they ramp up probably to peak capacity. And the large deal in Quebec, of course, it's a five-year implementation. It has a managed services tail on it as well for several years. So, you know, the revenue is spread over that period of time. But the deal in the U.S., we are ramping that up, and it'll ramp up over the next two quarters or so.

And then overall, are you seeing a slowing and ramping to an extent? Slowing of new projects? Yes, yes, new projects.

A little bit of dynamics that are going on. One of the things we see in our pipeline is, especially in the ERP space, we're bidding on more multi-pillar contracts. So contracts that include ERP, SCM, HCM, EPM. And of course, those are larger, more complex There's a lot more buyers involved in the decision-making, the lines of business, the IT. So they take a little longer to close, but they're larger as well. So it's a good outcome for us. And again, the two big wins that we had in Q4, specifically in our Oracle practice, That did take a lot of energy of the team there to close those deals. So right now we're refilling the cupboard, if you will, with new deals in that space as we did close successfully a couple of big deals which impact our pipeline.

And then the digital training business has been a laggard. Is that now on firmware footing?

Yeah, very interesting question, Vincent. We look at our digital adoption practice and you may have seen the press release on our Co-Pilot Academy. That's that group combined with our Microsoft team delivering that. So we are seeing a bit of an uptick there as we look at the AI space. There's a lot of adoption around AI. The market is looking for help on how does it fit in. So this is a co-pilot academy, something we put together to not only train our internal people, but our clients and prospects on AI. We do see a lot of demand in our digital adoption team with AI training.

Okay, thanks for answering my questions.

Thank you.

Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Divya Goyal from Scotiabank. Please go ahead.

Good morning, everyone. Nice to speak to you here, Bernard. I wanted to get some more color on the datum acquisition. There was a pretty sizable recovery on the earn-out recorded in the numbers this morning when we were reviewing them. Trying to understand a little bit And are there additional ?

Could there be a potential ?

I apologize. You broke up at the end. Could you repeat the last half of the question?

Yeah. I was just here.

I wanted to get a little more in the numbers that were released this morning. Are they scheduled and could we expect further recovery based on that deal?

Yeah, I still can't hear you Divya, but I believe your questions around data, the data acquisition and the earn out and the progress we've made there and what we looked at there. Yes, that was the one-time adjustment there was with regards to the earn out there based on our results in the last year. As we look to the forecast and part of that data acquisition was the rapid suite of products. And there's a couple of things in the rapid suite that right now have a lot of traction in the market. You've heard Paul talk a lot before about the rapid capture. which is a utility which is AI-enabled for capturing paper and other unstructured data and bringing that into systems. There's a lot of demand for that. Some of the existing clients actually have ramped up their usage of that product, so we see positive trends there. We also, with the rapid BRX tool that we have from that acquisition, which helps with legacy application modernization, you heard in my remarks, I spoke a little bit about some pickup on what we're seeing in both the Canadian and the U.S. market around the move to the cloud. That tool is core to what we're seeing there. So we're seeing some opportunities this year. that bundled with some of our other capabilities as well. So taking what we got from the Datum acquisition, bundling it with our AWS and our Microsoft practices, there is a lot of activity right now. So I do think the next year could show different outcomes than what you saw in the last year.

Maybe Bernard. Yeah. Go ahead. Sorry, I just wanted to add. I think you asked about future adjustments and what we did in Q4 reflects our most recent forecast for datum. The earn-out period ends next year. So this reflects our most recent forecast. So we are not expecting right now to have further adjustments to the earn-out. If that was the question, I also could not hear you very well.

My apologies. It's probably the network here. Yeah, I was actually trying to understand the earnouts that are scheduled for datum. Are there further earnouts scheduled? It sounds like you're not expecting recoveries, but are there further earnouts scheduled for datum?

Yes. So we have a, as I said, the earnout period ends next year, June 30th. So we are currently expecting to make a payment on the earnout based on the good performance of the of that acquisition, as Bernard explained very well.

That's helpful. And I know you don't provide the net earnings guidance, but obviously this time the net earnings look pretty healthy. Could you provide some directional cadence on how should we expect to see net earnings in the quarters ahead?

Maybe, Bernard, I can answer this one? Yes. If you look at our financial statements, you can see that what has been keeping us from reaching positive accounting net earnings has been mainly amortization and depreciation, and also integration, acquisition, and reorganization costs. In the most recent year, we've made reductions in headcount, and we've had some severance charges fairly significant, and also interest charges is is something we need to look at. So all these buckets are expected to decrease going forward. As we go forward, amortization depreciation goes down. We're paying down debt, as I explained, so interest is going down. The interest rate has also gone down a bit, as you saw recently. And finally, we've reached a comfortable level for now in terms of reductions to SG&A. So that too, Siren's payments should be going down. So if you look at our information for Q4, you can see the amount, the non-recurring amount that helped us becoming positive, which obviously will not be there going forward, but we're still aiming to become net earnings positive over the coming quarters.

And that's helpful. And last question that I wanted to get a little bit more color on, Bernard and Claude, either or Paul, for that matter. The M&A that you have put in your strategic plan and expect that to be close to $150 million, are there certain skill sets or proficiencies that you're looking to acquire, or is that an expansion across geographies, if you could provide some color on that? And that'll be all from me. Thank you.

Thanks, Stevie. Maybe I'll start, Claude, and I'll let you add on at the end. So definitely M&A, we did give ourselves a target over the next three years. And as you know, we want accretive acquisitions. So we're looking for the right targets, and that will dictate kind of how we perform against that target. But really, as we look at the market, you know, where we are today in Canada, the U.S. and Western Europe, that is a big part of the IT spend globally. So our focus is going to remain where we are today in those markets, with a focus on the U.S. being the largest of those markets. Really, it's a space we want to see the opportunity for growth. When it comes to our service offering, it's really to extend where we are today. So there's, you know, we have a good play in ERP today, but there's other ERP packages out there that we would love to have those capabilities so we can be a little broader there, especially in certain industries, which kind of lead to some of the other packages that we don't support today. And then the service offering, we want to, you know, We're looking at the whole strategy of a trusted advisor for our clients. So when we do an ERP implementation or other things, we want to be able to support them in their other areas. So there's some gaps in our service offerings around those spaces, whether it's data and AI, love to strengthen our cloud capabilities in certain areas. So we're looking for those services along in those geographies.

I'm not sure if you want to add something to that. No, that's very well put. Thank you. Thank you, Divya.

And there are no further questions at this time. I will turn the call back over to Bernard for closing remarks.

Well, thank you once again for your time this morning and your interest, and have a great day. Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for joining, and you may now disconnect your lines. Thank you.