Alithya Group inc

8.7 Segment Reporting

Operating income by segment refers to operating income before head office general and administrative expenses, business acquisition, integration and reorganization costs, depreciation and amortization and foreign exchange loss (gain), which are not considered when assessing the underlying financial performance of the reportable segments as they are not directly related to the segment’s operations. Head office general and administrative expenses are expenses and salaries related to centralized functions, such as global finance, legal, human capital, and technology teams, which are not allocated to segments.

The following tables present the Company's operations based on reportable segments:

(a)The recovery of $(2,829,000) included in Business acquisition, integration and reorganization costs relates to the U.S. segment. The reorganization costs included in Business acquisition, integration and reorganization costs mostly relate to the Canada segment.

(b)The recovery of $(3,827,000) included in Business acquisition, integration and reorganization costs relates to the U.S. segment. The reorganization costs included in Business acquisition, integration and reorganization costs mostly relate to the Canada segment.

(c)The recovery of $(5,567,000) from the contingent consideration adjustment included in Business acquisition, integration and reorganization costs and the impairment of goodwill relate to the U.S. segment. The reorganization costs included in Business acquisition, integration and reorganization costs mostly relate to the Canada segment.

(d)The recovery of $(3,827,000) from the contingent consideration adjustment included in Business acquisition, integration and reorganization costs relates to the U.S. segment. The reorganization costs included in Business acquisition, integration and reorganization costs mostly relate to the Canada segment.

For a discussion of revenue variances by segment, refer to section 8.1 titled “Revenues”.

Operating income by segment in Canada increased by $4.9 million, or 61.9%, to $12.9 million for the three months ended March 31, 2025, from $8.0 million for the three months ended March 31, 2024, due to decreased employee compensation and subcontractor costs on increased revenues, mainly due to increased efficiencies, a positive margin contribution from XRM Vision since the acquisition, and a $1.0 million tax credit recovery from a previous acquisition, offset by lower tax credits compared to the fourth quarter of last year.

Operating income by segment in the U.S. increased by $3.5 million, or 34.8%, to $13.8 million for the three months ended March 31, 2025, from $10.3 million for the three months ended March 31, 2024, primarily due to increased revenues, increased efficiencies, and improved project performance, partially offset by lower digital adoption subscription revenues, which historically had a higher contribution.

Operating income for the international segment decreased by $0.3 million, or 33.8%, to $0.5 million for the three months ended March 31, 2025, from $0.8 million for the three months ended March 31, 2024, primarily due to decreased tax credits and increased licenses and telecommunication and other expenses.

Operating income by segment in Canada increased by $7.4 million, or 22.6%, to $40.3 million for the twelve months ended March 31, 2025, from $32.9 million for the twelve months ended March 31, 2024, primarily due to decreased employee compensation and subcontractor costs, decreased other expenses, and a $1.0 million tax credit recovery from a previous acquisition, partially offset by decreased revenues.

Operating income by segment in the U.S. increased by $6.9 million, or 20.9%, to $39.7 million for the twelve months ended March 31, 2025, from $32.8 million for the twelve months ended March 31, 2024, primarily due to increased revenues, increased efficiencies, and improved project performance, partially offset by lower digital adoption subscription revenues, which historically had a higher contribution.

Operating income for the international segment decreased by $0.7 million, or 27.1%, to $1.8 million for the twelve months ended March 31, 2025, from $2.5 million for the twelve months ended March 31, 2024, primarily due to decreased tax credits and increased licenses and telecommunication and other expenses.