Alithya Group Inc
TSX:ALYA
Alithya Group Inc
TSX:ALYA
Price:
1.36
CAD
Market Closed
Market Cap:
CA$135.7m
Add Note
Add Target
Capture your thoughts and set a target
Decide at what price you'd be comfortable buying and we'll help you stay ready.
Based on
Margin of Safety
0%
10%
20%
30%
40%
50%
Your Price Target
Linked to
current price
· In Buy Zone
Loading
Note attached
Choose the stock you wish to monitor with a price target
Popular Picks
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
Bank of America Corp
NYSE:BAC
|
US |
|
Mastercard Inc
NYSE:MA
|
US |
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
Pfizer Inc
NYSE:PFE
|
US |
|
Nike Inc
NYSE:NKE
|
US |
|
Visa Inc
NYSE:V
|
US |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
Coca-Cola Co
NYSE:KO
|
US |
|
Verizon Communications Inc
NYSE:VZ
|
US |
|
Chevron Corp
NYSE:CVX
|
US |
|
Walt Disney Co
NYSE:DIS
|
US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Alithya's Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions] Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward looking and subject to a number of risks and uncertainties that could cause the actual results to differ materially from those anticipated. I would like to remind everyone that this conference call is being recorded on Wednesday June 19, 2019. I will now turn the conference over to Gladys Caron, Vice President Communications and Investor Relations. Please go ahead.
Thank you. Good morning, everyone, and thank you for joining us for Alithya's Fourth Quarter and Year-end Conference Call. The press release and MD&A with company's financial statements and related notes were issued earlier today and are posted on our website at alithya.com. The accompanying webcast presentation can also be found on our website in the Investors section. Presenting this morning are Paul Raymond, President and Chief Executive Officer; and Claude Thibault Senior Vice President and Chief Financial Officer. Following their comments, we will open the call for questions. Before we begin, I would like to specify that this conference call is intended for the financial community. Also please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. Please refer to the Risks and Uncertainties section of our MD&A available on our website for more detail. Let me remind you as well that all figures expressed in today's call are in Canadian dollars unless otherwise stated and be aware that we will refer to those -- to certain indicators that are non-IFRS measures. Please refer to our MD&A for more details. I would like now turn the call over to Paul.
Thank you, Gladys. Good morning, everyone, bonjour. I'm very happy to be with you today to share our latest results. Let we began with a brief overview of the last quarter. We were very pleased by our results for the fourth quarter, and we see increasingly positive trends and indicators in the business for the coming quarters. Our results for the fourth quarter are progressing well from the previous reporting period. Our results were driven by solid contribution from our U.S. acquisition and our continued transition to higher value-added services. Although, we had slowdowns and delayed projects in some of our existing clients in Canada, these were compensated by similar increases from new digital transformation projects with new and existing clients. It is also important to note that our results were impacted by the additional expenses linked to becoming a new public issuer. Our revenues for the quarter were up 79.5% or $32.1 million to $72.6 million compared to $40.5 million for the same period a year ago. This growth was essentially driven by the contribution from the U.S. acquisition with solid organic growth. Our rapid and efficient integration allowed us to generate growth early on after the closing of the transaction. In Canada, our operations continued its ongoing transformation, as temporary softness among some larger customers was offset by important digital transformation wins with new and existing customers. If we take a step back and look at the numbers only 3 years ago, where we had approximately 75% of our revenue coming from a handful of customers, we are much more diversified today with only 1 client representing more than 10% of our revenues. So together, with our U.S. acquisition, our efforts to gradually increasing client and segment diversification is paying off. We are building the business for the long-term and have clearly created a strong foundation to do so. From a macro perspective, I wanted to share with you some recent industry insights. Gartner's recent forecast suggests that global IT spending is expected to increase by only 1.1% in 2019, down from 4% in 2018. Gartner reports that uncertain economic and political environments and trade wars are impacting growth in IT spending. However, they also mentioned that IT services and enterprise software segments, the 2 segments in which we operate, will expand at much higher growth rates of 3.5% and 7.1%, respectively. These are the segments we are targeting. In terms of our operations, the integration of our U.S. operation is progressing very well. It is a great shift for us all around. Its contribution exceeded our expectations so far.As mentioned before, organic revenue growth in the fourth quarter was 6% in U.S. dollars on a comparable basis. Profitability also improved significantly as opposed to an important loss last year. Also note that additional synergies will be realized, as we continue to decrease the corporate expenses related to our U.S. operations. As we pursue the integration and progressively generate more cross-selling opportunities, the full potential of this acquisition will continue to materialize over the coming quarters.As a result of this acquisition, Alithya has stepped into the U.S. market with a solid foundation based on our expert's excellent reputation. The combination of the 2 companies' expertise in implementing Microsoft and Oracle cloud solutions now make Alithya a significant player in the North American market and provides access to a new tier of customers. And we are not the only ones saying this. As we have been named recently, as was announced yesterday, by Microsoft as a global finalist in the 2019 Microsoft Dynamics 365 or cloud solutions for Finance and Operations Partner of the Year award. We are honored to be recognized among a global field of top Microsoft partners for excellence and innovation and implementation of customer solutions based on Microsoft cloud technologies. Cloud will -- sorry, Claude will now review our Q4 results and finance position, and I will be back for the conclusion. Claude?
Thank you, Paul, and good morning. Please turn to Page 5. Since Paul has already covered our top line positive variations, I will focus on some other financial statement highlights. Gross margin more than doubled in the fourth quarter, increasing to $21.3 million compared to $8.9 million in the corresponding quarter last year. The significant growth was primarily driven by the contribution from the U.S. acquisition. As a percentage, gross margin increased to 29.3% from 22.1% for the same quarter last year. The significant increase was primarily due to the USA acquisition, which had a robust margin of 37.3%. In line with our long-term strategy to transition the business towards higher value-added revenue streams, our operations in Canada and France also showed good improvement with overall gross margin increasing by 80 basis point -- points, sorry. During the fourth quarter, SG&A went up by $11.2 million, mainly coming from the U.S. but also from Alithya Canada, as we incurred additional costs as a result of our stock market listing and corporate transformation. Interestingly, if you look at the Edgewater public filings of last year on a pro forma basis, the combined adjusted SG&A of USA and Alithya decreased by approximately $4 million in Q4 of this year compared to the same quarter last year. We also have some additional reductions coming over the next quarters as integration continues. With respect to our adjusted EBITDA, it increased 14.6% in the fourth quarter from $1.9 million to $2.2 million. The positive contribution from the USA acquisition was partially offset by a combination of nonrecurring and recurring expenses associated with becoming a public company and expanding the business. Consequently, we reported a net loss of $2.7 million or $0.08 per share compared to a net loss of $3.4 million or $0.15 per share for the same period last year. This quarter's net loss of $2.7 million must be viewed in relation to a similar amount of amortization of intangibles from previous acquisitions among other noncash elements. Now turning to our liquidity and financial position on Page 6. On January 22, 2019, we closed a new $60 million revolving credit facility coming with an additional $15 million accordion option. We are pleased to have increased and secured a significant credit facility for 3 years, which is a testament to the confidence in our business plan and what we have achieved in recent years. This new agreement provides us with great financial flexibility to pursue our development strategy through organic growth and acquisitions. Alithya ended the year in a healthy financial position. As of March 31, 2019, we had only $8.7 million of net bank debt with $16.3 million in cash, short-term deposits and restricted cash and a total debt of $22.3 million including long-term debt, a balance of sale from a previous acquisition and the current portion of long-term debt. Please turn to Page 7 for our outlook. We are maintaining our objective of achieving revenues in the range of $300 million to $320 million and adjusted EBITDA in the range of $22 million to $24 million on a run rate and pro forma basis by the third quarter of fiscal 2020. I will now turn it back to Paul.
Thank you, Claude. Merci. In conclusion, our U.S. acquisition has allowed us to reach important milestones with revenue of just over $200 million in 2019 and a current run rate of approximately $300 million. We therefore enter fiscal 2020 with great confidence, as we now benefit from an expanded, high-value service offering in North America and Europe with the scale to target larger top-tier customers. In addition, we continue to look for complementary acquisitions to expand our offering and geographic coverage and better serve our customers. We will leverage our extended footprint to accelerate our growth and enhance our profitability as well as offer our people bigger and better opportunities. This strategy will allow us to grow and deliver our long-term vision of becoming a leading North American strategy and digital transformation leader. I also wanted to take this opportunity to thank all of our customers for their trust in us. And I would also look to thank all of the Alithya team for the incredible dedication, work and passion. This amazing team, now with the contribution of our U.S. employees, has allowed us to create a powerful platform in the digital transformation industry. So we will now be pleased to answer any questions you may have. Jessa?
[Operator Instructions] Your first question comes from the line of Amr Ezzat of Echelon Partners.
Guys, you briefly touched on that in your prepared remarks, but can you give us more color on the dynamics in Canada? Those look flat sequentially. I believe you said it's just like clients rescheduling projects here and there last quarter, was there anything to read into that?
Thank you, Amr. Thank you for the question. No, you're correct. If you -- if you look at a high level, it looks like it's flat. However, when you dig it bit deeper, and you look at what's been happening, look at the last 3 years of our business, we've gone from a very time- and material-oriented consulting business to a majority of our business today coming from digital transformation. So when you have delays at major customers, typically what they will delay are the time and material, the consulting job, the subcontracting jobs, which as you've seen in the past, those can kind of stop on a dime. However, the digital transformation projects where we're doing an ERP project or moving a customer to the cloud, you can't stop those projects in the middle of them. So the majority of our business today compared to 3 years ago is now in the digital transformation space. So all of the slowdowns that we've seen in Canada, in some of our major customers have typically been in the lower margin subcontractor-type businesses, whereas all of the new business that we won to replace that has been on the higher-margin digital transformation stuff. So we're actually very happy with the new business that we're signing.
Great. Well, actually on that -- your gross margin continues to expand nicely. And I think Claude, you mentioned in the U.S., it's like 37.3%. Any chance Canada can get there? Or like when you look at your Canadian business, what's like peak margins there long term?
Thanks, Amr. It's Paul. I can answer that one again. And again, we see those types of margins in our digital transformation projects, which is why we want to move towards that in the long term, even in Canada.
Understood. Maybe switching gears to the U.S. Any color you can give us on what drove the organic growth? Specifically, can you also give us like an update on the Oracle business in the U.S.?
Sure. So the -- when we did this acquisition, the premise for it is that we saw tremendous opportunity in the cross-selling opportunities in the business, and the trends we saw in our customers, both on the Microsoft cloud transformation, the ERP side, and on the Oracle side. And the premise was that we had a strong Oracle cloud practice, whereas in the U.S., we had a strong Oracle EPM practice, which we believe needed some tweaking, which is what we've done. And the team did an incredible job on the integration and doing the plan that we wanted to do, which basically has resulted in -- if you remember when we toured several months ago and we were talking about the U.S. for the next year, we thought that the growth on the Microsoft side would offset the decrease in the Oracle side. And what we're actually seeing is because of the work we've done, we're seeing growth on both groups in the U.S, which is why you're seeing these strong numbers in organic growth coming from the U.S.. So we're seeing growth all around.
Great. On the -- I just wanted to touch on the SG&A side. If I'm looking at your fiscal Q3 number on a pro rata basis, I guess, because you only had 2 months' worth of Edgewater, it seems like your SG&A is flat sequentially Q3 and Q4, just wondering how comfortable you are with your ability to drive that number down in the U.S. division. I think last we spoke, we were talking about $5 million in annualized savings. Is that target still intact?
Yes, it is. But we're getting to a point where a fair chunk of that amount has been realized. So we still have a few hundreds of thousands that we're targeting per quarter over the next year or so. We're still fine-tuning our integration strategy. We -- as you know, we have a fairly aggressive and ambitious acquisition strategy, including in the U.S. So we're still fine-tuning the structure we want to have going forward that will impact those synergies that are still to come. And we do not provide a more precise number than that for that reason, but we think we still have some improvements coming indeed.
Okay. Great. Maybe one last one, and I'll pass the line. Paul, on the M&A side. I guess to the extent that you can, can you give us an update on how the environment's evolved since the call?
Well, I think the biggest change is now that the U.S. integration, the bulk of it's behind us. As you can see from the numbers, we're very happy with how things are looking in the U.S. As we've stated in the long-term plan, we will be making acquisition. I think the team is ready now to do the next one. So we just have to make sure that we do it at the right conditions, right? So the right company with the right culture at the right price, and we're really sticking to our discipline around that. But we're working very hard at it.
Your next question comes from the line of Maher Yaghi from Desjardins.
I wanted to ask you first on Canadian operations results if you strip out the TELUS acquisition. How much organic growth you would estimate you had in the quarter?
Thank you, Maher. The TELUS acquisition was not material. It's -- it was a very -- it's doing very well, but it's not -- but it was not material in those numbers. A lot of the growth we're seeing in Canada, as I mentioned, is the result of those digital transformation projects, and some of it is the cross selling from the new business that we acquired in the U.S. So we're actually closing Microsoft and Oracle digital transformations in Canada, which is -- was part of our plan, going faster than expected.
Okay. Great. So if you look at one particular client that you -- I'm not sure if you want to talk about who is the client. I know who the client is, but let's keep the client random, let's say. When you look at that client specifically and their order pattern and their contract pattern, do you expect continued decline in the business that you're seeing from that particular client or we've hit the bottom you think in terms of revenue generation per month?
Yes. Thanks, Maher. As you can imagine, we're not going to comment on a specific customer. However, what I can say is that wherever we've lost business or delayed business for customers, it's not because we lost to somebody else. We still have very good relationships with all of our customers and sticking by them.
Have you -- do you believe that the work that you're doing for that particular client is now, as you said, more towards only digital transformation or if there is still some body shop-type revenues that you could still lose in the coming quarters?
Listen, we're focusing very much on transforming the business. As I mentioned earlier, the majority of our revenues today come from our digital transformation business, so the higher-margins stuff. We're pushing really hard in that direction for many reasons. One, the margins are much better of course; two, that market segment is growing much faster; three, those projects are a lot more interesting for our people because once you get into a project, you increase the stickiness around what you do. And this is where our customers are spending more and more money today as they're moving more towards the digital transformation projects on how to get to the next level rather than investing in legacy-type stuff. So we're basically following the customers, right? We want to make sure that we stay with them in this new trend. And we're really pushing the whole business that way and working our -- with our customers to get them there as well, all of them.
Okay. And when you look at -- you certainly have been able to replace some of the lost revenues from some of these legacy -- let's say, legacy clients. Can you talk about geographically, have you been able to penetrate new metropolitan areas in Canada? Or you still require some M&A, let's say, in Western Canada in order to improve your hit rate ratio?
Yes. So our strategy has always been to follow our customers. So if you look at where we're winning business, it's really where we have a strong geographical presence, and we're going to continue to do that. We're not in the -- our approach has been to avoid, kind of build it, they will come type thing. So before we find a new major customer outside of our current metro areas, it will probably go through a local acquisition of a strong presence. So we're looking everywhere, so the acquisitions, as I've mentioned before, we're really looking for complementary acquisitions with strong management teams in the current metros that we're in and in the current practices that we have. And we're also looking to add a few metro areas and a few practices based on what our customers are saying that they want. So we're looking, we're looking.
Okay. So the U.S. has, as you mentioned, had nice growth, 6%. It's quite a nice change from the declines we saw when the business was independent. How much more lift in organic revenue growth you expect the Edgewater business to produce in the future quarters? And just related to that in the background, can you talk a little bit about your bookings on a segmented basis, so let's say, U.S., Canada, how bookings have been behaving? And any kind of -- any number you can throw at us here in terms of book to bill, that would be helpful.
We can't give you numbers now just because we want to make sure when we give you the numbers they'll be accurate. And we can keep them out of the data every quarter, so they're system-driven. So as you know, we're in the process of integrating the U.S. operations now into our systems. So once that is done, we'll be able to give you data on a regular basis. In terms of growth, we've tried to avoid giving quarterly guidance. That's why we gave the annual guidance of where the business is going. We're still confident in where we want to go as a business for the next 12 months. And we're really sticking to our longer-term plan, the 3- to 5-year outlook. Our plan is really to double the business in the next 3 to 5 years. If it's 5 years, it's probably going to be 50-50 organic and acquisition. If it's shorter, well, it means probably more acquisitions. But for us, it's important to keep that healthy organic growth rate in the operations. And so there's a strong focus on that. But I can't give you a number today. If I could, I would have. But not...
But not there. One last question I had is on your targets. So you talked about your guidance. You're pretty much there on in terms of revenue. But in terms of EBITDA, we're still missing, let's say, $3 million, $4 million a quarter. So can you talk a little bit about how you bridge the gap between what your current adjusted EBITDA run rate is and your -- the number that you need to hit so that you can achieve your guidance in Q3 2020? Where is it going to come from, cost? How much of it is cost? How much of it is growth in revenue?
Okay. So it's basically going to come from all 3 areas. We have some organic growth built into our numbers. We have some margin progression built into our numbers. What you need to know is Q4 is historically our weakest quarter in terms of gross margin performance and also SG&A expenses because it's the first quarter of the calendar year with some reset of the employer contributions on payroll, which is our largest expense. And also in terms of SG&A run rate, we're also, as I said before, expecting some improvements there. We still have the significant amounts of, as I said, recurring and some nonrecurring expenses pursuant to all the transactions, financings, listings we did and we're continuing to do that into that fourth quarter. So really I will not give any more precise numbers than that, but it's going to be a combination of all 3 factors. And writing our internal model we -- as I said, we reiterated our target for those numbers.
Sure. And so the progression from Q4 into Q3 2020, are there periods where we should see much bigger improvement in EBITDA? Or it's going to be steadily improving throughout this period?
We have...
I mean is there any significant cost that you're going to bring out in, let's say, 2 quarters or 3 quarters from now? Or is it going to be slow improvement in EBITDA towards the $5 million, $6 million per quarter?
Yes. We have some -- the more significant changes will be in Q3 indeed because of when we will phase out the U.S. head office costs that we want to phase out still. So there is a bit of a backload to Q3 indeed. But the other factors will come in gradually.
Your next question comes from the line of Deepak Kaushal from GMP Securities.
I've got a few follow-ups to some of the previous questions. Paul, just first of all, thinking of the U.S. Oracle business in particular. How much of that growth has been driven by your Canadian cloud capabilities in Oracle being transferred into the U.S. and how's that progressing. Like any examples you can give cite or metrics you can offer on that?
Thanks, Deepak. We're not splitting it out or reporting it separately anymore. What I can say, it's both. So it -- we've had growth in our Microsoft business, we have growth in our U.S. EPM business -- U.S. and Canadian EPM business and also growth in the Oracle ERP cloud business. So it's really all cylinders.
And the growth in the ERP -- Oracle ERP cloud, are you seeing that in the U.S. yet, or is that still an opportunity to come? I mean obviously it's an opportunity to come, but have you started to see it yet?
It's starting. Our read on the market in general is that the Oracle cloud ERP was behind the Microsoft. But as with most of these large providers, they -- the companies, the Oracle and the SAPs of the world are catching up and investing massively in those practices and the marketing of those practices and the -- so no, we're very positive.
Okay. Excellent. And I assume that the EPM business that you're winning in Canada, that's with existing customers? Or are you able to -- are you starting to pull in new customers with that?
It's actually both.
Excellent. Okay. And then just in terms of the U.S. market in particular, now that you've had a couple of quarters under your belt with the teams down there, what would you say are the top 3 or 5 verticals markets or industries that really have the most growth opportunity? And where you're the most focused?
Well, we're seeing opportunities in all of the markets that we're in, in the U.S. right now. If you look at the Microsoft business traditionally, it's been more on -- in the manufacturing world. And as you saw from the announcement from Microsoft yesterday that we posted on our website, we're actually the finalist as a global -- their global top provider for the -- on the operations side. So really the financial packages, the operations in the ERP world, which is great news for us and great visibility. On the Oracle side, financial services is a big target for us on the EPM. So the EPM, when you think about it, it's really the very large companies typically that use that. So we have an incredible customer list in the U.S. of these Fortune 1000 companies that use our EPM services. To us, those are all great targets for other types of services. And in Canada, same thing. We have a lot of big brand customers who are users of the traditional Hyperium or EPM world. We're really seeing it across the board.
Okay. And then how about health care, like the vertical markets like health care, chemicals. I know those are some good strong markets for the -- for Edgewater?
Yes. So like the chemical -- so when I say manufacturing, I -- it encompasses that because basically the companies are either producing chemicals, they're producing chickens, they're producing energy bars. We really have some of everything in there. So, no, it's quite impressive. The customer list that we have in our ERP business is quite impressive.
Okay. Great. And then for Claude, I think, Amr had asked the question, but I don't know if I caught it. If I remember correctly on the cost synergies, you guys were targeting a $5 million out-of-the-gate cost synergies, and you -- I don't know if you signaled that you've achieved that or that you got more to come, or that you think you can achieve more than the $5 million? Can you perhaps, remind me of the context on the cost side?
Yes. So you -- that number came almost a year ago. That's USD 5 million of annual synergies we were expecting from the current levels the USA acquisition had a year ago. In my notes, I said if you add up the 2 sides of the border, this year versus last, we reduced cost by $4 million. That's adjusted SG&A. That's in Canadian dollars. So reality is we've -- that's per quarter, yes. So we've beat that number handily already. And as I said, we have some more coming, but most of it is behind us now. The heavy lifting has been done. And it's the combination, I shouldn't say it's all corporate SG&A. They had also a fairly heavy structure in terms of divisional SG&A, operational SG&A. And we've made some improvements there as well.
Okay. Excellent. That's helpful color. And then for Paul, or you, Claude, back on the M&A side. You highlighted the revolver, the line of credit you have available, $60 million. I think you have $12 million or so on -- in cash on the balance sheet and aggressive -- so when we -- when we're understanding aggressive at acquisitions, like how much capital do you expect or target you think you can deploy over the next 12 months?
I can give it a try and Paul can add to that. It's -- it depends. We have a number of targets we're looking at, some smaller ones, some midsize, some larger ones. So it really depends, which ones will fall into place faster depending on negotiations, depending on the context and so on and so forth. So we have -- we could be using up all that capital fairly quickly. We're looking mainly at profitable acquisitions. We're not so much after money-losing turnaround situations. So if we add the EBITDA to the company, our bank has already indicated they're more than willing to increase our facility. It would be our decision how much leverage we want to use in specific context. And then we can always go back to the market if need be. But we can go some way with our credit facility only.
And we like to be disciplined, Deepak. So we have a healthy balance sheet. We like that. It gives us a lot of flexibility. So our intention is to keep it healthy.
Okay. That's helpful. And can you remind me then in terms of net debt EBITDA ratio target, like would you max out it 2, 2.5, 3, like what do you think?
No, below 3 for sure. 2 to 2.5 depending on the quality of targets we could -- and synergies. We could temporarily go to the higher-end of that range. But 2 to 2.5 is about it, yes, as a long term.
And is Europe figure high on the list, or is it still mostly North America, Canada and U.S.?
So we're still focused on North America for the current strategic plan.
Okay. Excellent. Well, that's it for me. Congratulations on getting your year-end done, Q4, as a public company and look forward to the next quarter.
Thank you, Deepak.
[Operator Instructions] Your next question comes from the line of Suthan Sukumar of Eight Capital.
I guess the first question for me is that -- is on the ongoing traction that you guys are seeing with cross-selling Edgewater expertise into Canada. Can you guys kind of speak to what's been driving some of the booking strength here in Canada compared to when you look at ERP versus EPM here in Canada? And do you see these trends also continuing post the quarter?
Yes. Sure. Thank you for the question. So we're seeing in Canada a traction on both the ERP and the EPM. The EPM, our thesis when we did this acquisition was that there was a huge opportunity for cross selling these services. Our -- if you look at the vision of the company to become the trusted adviser of our customers, that means we have to be able to help them in all of their key challenges in their digital transformation. If you take them individually, EPM is used by most very large organizations and if you look at your current customer base, we have a lot of those types of customers in Canada and in the U.S. So the EPM service offering was something that was quite scarce in Canada as a whole. So having that for us now is big differentiator for some of our existing customers and new customers as well. So that was a great addition for us on the Canadian side. The ERP -- that the cloud ERP is accelerating, I mean, we're seeing it. I think the whole industry is talking about it, and that's why I think in -- Gartner's latest research is saying that's basically the segment that's going to grow the fastest in 2019. So we believe we're very well positioned with the 2 solutions that we have, which we think are the 2 market leaders right now. There are other solutions that we're looking at because we think that even if they're not a market leader today, they might be in 2 years. So we're trying to plan for the future, and that's why I like to talk about our long-term plan, when we talk about organic growth and we talk about acquisitions. We're really building something for the long-term here, and we're being very disciplined about what we go after. So we're very pleased with the traction we're seeing in the cross-selling side of things.
That's helpful. Secondly, you guys touched on higher value revenues in Canada this quarter. In the past, you've touched on aspirations to move into kind of higher value project management work and also option to sell kind of in-house developed IP solutions. Can you speak to what's been driving that performance here in Canada? And what the opportunity is kind on the IP side and on those higher value types of work?
Sure. It's coming from several different locations. If you look at the last 3 acquisitions that we've done in Canada, they were all in the higher-end digital transformation space. And those are performing very well. And we're seeing acceleration in that. We also launched a few years ago a fintech lab and a couple of years ago, a digital solution center. Those offerings are growing at double digit, which is very encouraging to us because that's where the market -- I mean it basically confirms what we were seeing, and it confirms where our customers are going. What we -- and what we like about that is that it's growing as fast as the traditional business is reducing. So we're actually replacing lower-margin business with higher-margin business, which is stickier, which we really like.
Okay. And guys my last question is on the M&A side. I am curious to know what you guys are seeing from an M&A perspective. What are your thoughts on the current valuation environment? And what does your current pipeline looks like today?
The pipeline is healthy. I think the fact that we went public back in November is also giving us a lot of visibility -- new visibility that we didn't have before. So we're actually getting a lot of unsolicited approaches from companies. Our acquisition model is a bit different than many other consolidators. We're really not just the roll-up play. We're looking for quality companies with quality management that wants to stick around, where we can act as an accelerator for them. So that attracts a certain type of company and people. So that's why I say when we're very disciplined about our approach, we really want to find those companies. Those companies actually were doing very well in terms of the multiples we're seeing, are in line with what we've done traditionally. Because those people are joining us for different reasons. They are not joining us to cash out. They're really joining us to grow faster.
And there are no further questions at this time. Ms. Caron, I turn the call back over to you.
Thank you. And thank you for being on the call today and don't hesitate to call us if you have any additional questions. And we look forward to speaking with you at the next quarterly call. Have a nice day. Thank you.
Merci.
Thank you. This concludes today's conference call. You may now disconnect.