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 (recovery), depreciation and amortization, foreign exchange loss (gain) and impairment of goodwill and intangibles, 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 contingent consideration adjustment, representing a loss of $2,998,000 included in business acquisition, integration and reorganization costs, and the impairment of intangibles relate to the U.S. segment.

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

(a)The contingent consideration adjustment, representing an unrealized gain of $5,358,000 and an unrealized loss of $3,270,000 relate to the Canada and the U.S. segments, respectively. The reorganization costs included in business acquisition, integration and reorganization costs, relate mostly to the Canada segment.

(b)Impairment of goodwill in the amount of $26,500,000 relates to the Canada segment and impairment of goodwill and intangibles in the amounts of $9,723,000 and $4,905,000, respectively, relate to the U.S. segment.

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

For a discussion of revenue variances by segment, refer to section 8.1 titled “Revenues”. For additional discussion on business acquisition, integration and reorganization costs (recovery) and on impairment of goodwill and intangibles, refer to sections 8.3.3 and 8.3.6, respectively, and titled accordingly.

Operating income by segment in the U.S. decreased by $3.8 million, or 27.8%, to $10.0 million for the three months ended March 31, 2026, from $13.8 million for the three months ended March 31, 2025, primarily due to increased employee compensation and subcontractor costs and increased licenses and telecommunication costs, partially offset by increased revenues and a positive margin contribution from eVerge.

Operating income by segment in Canada decreased by $1.3 million, or 10.3%, to $11.6 million for the three months ended March 31, 2026, from $12.9 million for the three months ended March 31, 2025, due to decreased revenues, partially offset by the recognition of non-refundable tax credits related to previous years available for carryforwards and decreased employee compensation and subcontractor costs.

Operating income for the international segment increased by $1.6 million, or 314.3%, to $2.1 million for the three months ended March 31, 2026, from $0.5 million for the three months ended March 31, 2025, primarily due to increased revenues, partially offset by increased employee compensation and subcontractor costs.

Operating income by segment in the U.S. increased by $6.8 million, or 17.2%, to $46.5 million for the twelve months ended March 31, 2026, from $39.7 million for the twelve months ended March 31, 2025, primarily due to increased revenues and a positive margin contribution from eVerge since its acquisition on May 31, 2025, partially offset by increased employee compensation and subcontractor costs and increased licenses and telecommunication costs.

Operating income by segment in Canada decreased by $6.7 million, or 16.7%, to $33.6 million for the twelve months ended March 31, 2026, from $40.3 million for the twelve months ended March 31, 2025, primarily due to decreased revenues, partially offset by the recognition of non-refundable tax credits related to previous years available for carryforwards, decreased employee compensation and subcontractor costs and a positive margin contribution from XRM Vision.

Operating income for the international segment increased by $1.8 million, or 101.0%, to $3.6 million for the twelve months ended March 31, 2026, from $1.8 million for the twelve months ended March 31, 2025, primarily due to increased revenues, partially offset by increased employee compensation and subcontractor costs and licenses and telecommunication costs.