High-value insurance-focused intellectual
property portfolio
MONTREAL, June 1, 2022
/CNW Telbec/ - Alithya Group inc. (TSX: ALYA) (NASDAQ: ALYA)
("Alithya") is pleased to announce that it has entered into a
binding agreement to acquire US-based Datum Consulting Group, LLC
and its affiliates ("Datum" or "the Company") for a purchase price
of up to US$45.5 million
(C$57.5 million), including potential
earn-out considerations of up to US$13.0
million (C$16.4 million).
Datum is a leader in IP enabled digital transformation services
for data rich insurers and other regulated entities such as state
governments. The Company services the world's foremost insurers
including 6 of US' top 10 health insurers.
Founded in 2004 and headquartered in Indianapolis, the Company specializes in
application modernisation and data migration with the use of
leading-edge software and services focused on information capture,
content management and application and rules modernization. Datum
employs over 150 professionals and supports its global clients from
the United States, Europe, India
and Australia.
Paul
Raymond, President and Chief Executive Officer,
Alithya:
"I am proud to welcome Amar Bukkasagaram and the whole Datum
team to the Alithya community. In Datum, we found a culture and
vision in strong alignment with Alithya's values and corporate
objectives along with a global team of experts who service the
world's leading insurance companies. Datum's highly skilled team as
well as its suite of 14 proprietary products and cloud-based
software as a service (SaaS) offering will help us add scale in
these areas as we continue our growth and transformation
initiatives. The Company serves the foremost American and
European insurers, including 6 of US' top 10 health insurers. Datum
has invested to productize institutional knowledge into software
products which can scale rapidly in other industries as well."
Claude
Rousseau, COO, Alithya:
"Datum is a great addition to Alithya, and I look forward to
working with Amar Bukkasagaram and the Datum team. Datum's domain
expertise regarding insurance industry business processes fosters a
trusted advisor relationship with clients to enable impactful
digital transformations. Datum's workforce consists of insurance
subject matter experts with extensive experience working with
Healthcare, Property and Casualty, and Life Annuity insurance
companies. This new specialized business unit will be highly
complementary to our existing ones and will allow for multiple
cross-selling opportunities."
Mr. Amar Bukkasagaram, President
and Founder, Datum:
"I am thrilled for Datum to be joining Alithya, a growing
world-class organization. Our new business unit will contribute to
the strategic global expansion by Alithya currently under way, and
the synergies will allow our clients to benefit from years of
R&D and co-development with insurers of our suite of 14
proprietary products, now implemented throughout our customer base.
Our team brings two-sided expertise encompassing cloud and
decentralized platforms, as well as current low code platforms such
as PEGA and modern cloud platforms (GCP and Azure). Furthermore,
the global InsurTech market is expected to grow US$1.8 billion annually to US$22.1 billion between 2019 and 2027 as per
Grandview Research. Long before the COVID-19 pandemic, insurers
were investing in digital transformation spurred by the rise of
startups. Those investments took on new urgency as the pandemic
forced businesses to abruptly shift to digital operations. We are
well positioned to take advantage of this context for the benefit
of our clients as part of the Alithya community."
For the twelve-month period ended December 31, 2021, Datum generated revenues of
approximately US$18.0 million
(C$22.7 million) and Adjusted
EBITDA(1) of approximately US$6.0
million (C$7.6 million).
(1) Non-IFRS financial measure. Please refer to the "Non-IFRS
Measures" section at the end of this press release.
Strategic Rationale
- Enables Alithya to deepen its insurance industry expertise with
proprietary modernization systems.
- Enhances Alithya's recurring revenue profile given focus
on higher margin, proprietary, cloud-based SaaS and software
product offerings, in an industry going through significant digital
transformation and modernization.
- Allows Alithya to capitalize on the current fundamental
digital transformation needs expressed by large insurance and
financial services companies worldwide.
- Enables Datum's employees and management to accelerate personal
and business growth opportunities within Alithya.
- Represents four years of efforts invested to productize
the Company's institutional knowledge into its RAPID suite of
products, which are powered by Artificial Intelligence and Machine
Learning business models and accelerators.
- Enables all clients to modernize data capture, content, and
business processes with a product suite that is a key
differentiator for the Company, having been built with the
input of insurers and deployed among multiple clients.
- Datum's customer base to provide strong entry points to
cross-sell Alithya's services.
- Datum to bring a multi-sided expertise encompassing IP
based, legacy platforms modernization, and modern rules
engines, as well as current low code platforms such as PEGA
and modern cloud platforms (GCP and Azure). This
modernization practice and SaaS offering is very complementary
to Alithya automated software testing solution
GoTestTM.
Financial Highlights
- Purchase price of up to US$45.5
million (C$57.5 million),
including estimated IFRS 16 lease liabilities of US$0.5 million (C$0.6
million) and including potential earn-out payments of up to
US$13.0 million (C$16.4 million).
- Transaction immediately accretive.
- Over C$470 million in pro
forma revenues(1) for the twelve-month
period ended December 31,
2021.
(1) Pro forma revenues also include R3D Conseil Inc. and
Vitalyst LLC prior to their date of acquisition by Alithya.
Acquisition Terms and
Financing
Subject to the conditions and adjustments set out in the
purchase agreement, the purchase price consists of the following:
(i) an upfront cash consideration of approximately US$13.7 million (C$17.3 million); (ii) an upfront
consideration of US$4.0 million
(C$5.1 million), payable by the
issuance of 1,867,262 Class A subordinate voting shares of Alithya,
(iii) deferred cash consideration of approximately US$10.3 million (C$13.0 million) and deferred share
consideration of US$4.0 million
(C$5.1 million), both payable over
three years, and (iv) potential earn-outs of up to US$13.0 million (C$16.4
million), based on annual gross profit increases, also
payable in cash (75%) and shares (25%) over three years.
The upfront cash consideration is expected to be financed
by a C$2.5 million add-on to
Investissement Québec's subordinated unsecured loan, and the
remainder through Alithya's C$125
million revolving credit facility. The number of Class A
shares issuable as consideration for the acquisition is calculated
using a price of C$2.7287, being the
15-day VWAP ending on May 27, 2022.
An aggregate maximum of up to 5,251,674 Class A shares, including
the shares issued at closing, the shares issued as part of the
deferred share consideration and the potential earn-out shares, is
issuable under the transaction.
Closing of the
Acquisition
The closing of the transaction is expected to take place on
July 1, 2022 and is subject to
customary conditions for a transaction of this nature, including
approval from the Toronto Stock Exchange.
Financial Advisor
Scotiabank acted as sole financial advisor on the acquisition
for Alithya, and Consilium Partners acted as financial advisor for
Datum Consulting Group, LLC.
Conference Call
Information
Alithya will hold a conference call and live webcast to discuss
the transaction on Wednesday, June 1,
2022, at 9:00 a.m. Eastern time. The call is for
financial analysts and investors. Participants can hear the
conference call by dialing (888) 440-2069 or (438) 803-0525,
passcode 1735627. The webcast is accessible at
https://www.icastpro.ca/bk9cnj.
About Alithya
Alithya is a North American leader in strategy and digital
transformation, employing a dedicated and highly skilled workforce
of 3,600 professionals in Canada,
the United States, and
internationally. Since its founding in 1992, Alithya's capacity,
size, and capabilities have continuously evolved, guided by a
long-term strategic vision to become the trusted advisor of its
clients. The company's integrated offer is based on four pillars of
expertise: business strategies, enterprise cloud solutions,
application services, and data and analytics. Alithya deploys
leading-edge solutions, services, and skills as one of the most
prominent consulting firms, driving successful digital change as a
trusted advisor to customers in a variety of sectors, including
financial services, manufacturing, renewable energy,
telecommunications, transport and logistics, professional services,
healthcare, government, and beyond.
Forward-Looking
Statements
This press release contains statements that may constitute
"forward-looking information" within the meaning of applicable
Canadian securities laws and "forward-looking statements" within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995 and other applicable U.S. safe harbours (collectively
"forward-looking statements"). Statements that do not exclusively
relate to historical facts, as well as statements relating to
management's expectations regarding the future growth, results of
operations, performance and business prospects of Alithya, and
other information related to Alithya's business strategy and future
plans, or which refer to the characterizations of future events or
circumstances represent forward-looking statements. Such statements
often contain the words "anticipates," "expects," "intends,"
"plans," "predicts," "believes," "seeks," "estimates," "could,"
"would," "will," "may," "can," "continue," "potential," "should,"
"project," "target," and similar expressions and variations
thereof, although not all forward-looking statements contain these
identifying words.
Forward-looking statements are presented for the sole purpose of
assisting investors and others in understanding Alithya's
objectives, strategies and business outlook as well as its
anticipated operating environment and may not be appropriate for
other purposes. Although management believes the expectations
reflected in Alithya's forward-looking statements were reasonable
as at the date they were made, forward-looking statements are based
on the opinions, assumptions and estimates of management and, as
such, are subject to a variety of risks and uncertainties and other
factors, many of which are beyond Alithya's control, and which
could cause actual events or results to differ materially from
those expressed or implied in such statements. Such risks and
uncertainties include but are not limited to the possible failure
to realize anticipated benefits of the transaction, including
potential synergies, the integration of Datum's business, the loss
of certain key personnel and clients of Datum, potential
undisclosed costs or liabilities associated with the transaction
and other risks and uncertainties discussed in the section titled
"Risks and Uncertainties" of Alithya's Management's Discussion and
Analysis for the quarter ended December 31,
2021 and Management's Discussion and Analysis for the year
ended March 31, 2021, as well as in
Alithya's other materials made public, including documents filed
with Canadian and U.S. securities regulatory authorities from time
to time and which are available on SEDAR at www.sedar.com and EDGAR
at www.sec.gov. Additional risks and uncertainties not currently
known to Alithya or that Alithya currently deems to be immaterial
could also have a material adverse effect on its financial
position, financial performance, cash flows, business or
reputation.
Forward-looking statements contained in this press release are
qualified by these cautionary statements and are made only as of
the date of this press release. Alithya expressly disclaims any
obligation to update or alter any forward-looking statements, or
the factors or assumptions underlying them, whether as a result of
new information, future events or otherwise, except as required by
applicable law. Investors are cautioned not to place undue reliance
on forward-looking statements since actual results may vary
materially from them.
Non-IFRS Measures
This press release includes certain measures which have not been
prepared in accordance with IFRS. Adjusted EBITDA is a non-IFRS
measure. This measure does not have any standardized meaning
prescribed by IFRS and are therefore unlikely to be comparable to
similar measures presented by other companies. This measure should
be considered as supplemental in nature and not as a substitute for
the related financial information prepared in accordance with IFRS.
Please refer to the Management's Discussion and Analysis for the
quarter ended December 31, 2021 for a
description of such measure, a reconciliation to the most directly
comparable IFRS financial measure and calculated amounts.
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SOURCE Alithya