CGI stories development with strategic deal with AI and acquisitions By Investing.com

CGI Inc. (NYSE: GIB), a pacesetter in IT and enterprise consulting companies, reported a constructive fourth quarter in its fiscal yr 2024, with income development and strategic acquisitions signaling a powerful emphasis on digital and synthetic intelligence (AI) capabilities. The corporate’s income rose to $3.7 billion, marking a 4.4% enhance year-over-year. Web earnings for the quarter had been notable at $436 million, with a margin of 11.9%, and diluted earnings per share (EPS) elevated by 8.5% to $1.91. CGI’s outlook stays strong, with plans to additional put money into AI and pursue further mergers and acquisitions (M&A).

Key Takeaways

• CGI reported This fall income of $3.7 billion, a 4.4% enhance year-over-year, with a internet earnings margin of 11.9%.
• The corporate achieved a book-to-bill ratio of 104%, with a backlog of $28.7 billion.
• Diluted EPS grew to $1.91, an 8.5% enhance from the earlier yr.
• CGI declared a quarterly money dividend of $0.15 per share, payable on December 20, 2024.
• Strategic development by acquisitions and investments in AI and digital capabilities are central to CGI’s plan.

Firm Outlook

• CGI plans to proceed aligning investments with shopper demand, which has elevated by 20% year-over-year throughout companies.
• The corporate’s service choices, significantly in AI and generative AI, will see a $1 billion funding.
• CGI goals to reinforce its managed companies and IP options, with a powerful demand for these companies.
• A sturdy pipeline of potential M&A targets is being pursued.

Bearish Highlights

• CGI Federal’s bookings in methods integration and consulting (SI&C) had been solely 85%, reflecting slower procurement processes throughout election years.
• The monetary sector confirmed flat development in This fall.

Bullish Highlights

• Important contracts secured embrace two from the US Patent and Trademark Workplace value as much as $119 million.
• A 20-year settlement with the Northern Eire Courts and Tribunal Service for enterprise transformation.
• Partnerships and improvement models established in Germany and modernization tasks with Mackenzie Investments.

Misses

• There have been challenges within the SI&C phase resulting from election yr dynamics.
• Canadian operations confronted margin pressures however are anticipated to rebound after changes.

Q&A Highlights

• CGI’s federal enterprise mannequin is 100% onshore, positioning the corporate favorably within the present political local weather.
• The corporate’s disciplined strategy to acquisitions focuses on monetary returns and cultural match.
• AI utilization in tasks has elevated by 10%, contributing to effectivity and value financial savings.

CGI’s fourth quarter outcomes replicate an organization that’s efficiently navigating a posh world market, with a transparent deal with strategic development areas similar to AI and digital transformation. The corporate’s monetary well being and strategic path recommend a continued trajectory of development and innovation, as CGI leverages its robust shopper relationships and strong service choices to satisfy the evolving calls for of the worldwide market.

InvestingPro Insights

CGI Inc.’s (NYSE: GIB) robust fourth-quarter efficiency is additional supported by key monetary metrics and insights from InvestingPro. The corporate’s market capitalization stands at a powerful $25.16 billion, reflecting its important presence within the IT companies business.

One of the vital notable InvestingPro Suggestions is that CGI has an ideal Piotroski Rating of 9, indicating robust monetary well being and operational effectivity. This aligns nicely with the corporate’s reported development in income and earnings, in addition to its strategic deal with AI and digital capabilities.

The corporate’s P/E ratio of 21.39 means that traders are prepared to pay a premium for CGI’s earnings, probably resulting from its robust market place and development prospects. That is additional supported by the truth that CGI is buying and selling close to its 52-week excessive, with its present value at 93.91% of the height.

CGI’s income for the final twelve months as of Q3 2024 was $10.61 billion, with a development price of three.47%. This average development is in keeping with the corporate’s reported 4.4% year-over-year enhance in This fall income. Furthermore, CGI’s working earnings margin of 16.43% for a similar interval demonstrates its potential to keep up profitability whereas investing in development initiatives.

It is value noting that administration has been aggressively shopping for again shares, which could possibly be seen as an indication of confidence within the firm’s future prospects. This aligns with CGI’s reported plans for continued funding in AI and pursuit of strategic acquisitions.

For traders in search of extra complete evaluation, InvestingPro presents further suggestions and insights. At present, there are 12 further InvestingPro Suggestions out there for CGI, offering a deeper understanding of the corporate’s monetary place and market efficiency.

Full transcript – CGI Inc (GIB) This fall 2024:

Operator: Good morning, girls and gents. Welcome to the CGI’s Fourth Quarter Fiscal 2024 Convention Name. I’d now like to show the assembly over to Mr. Kevin Linder, SVP of Investor Relations. Please go forward, Mr. Linder.

Kevin Linder: Thanks, Joelle, and good morning. With me to debate CGI’s fourth quarter and monetary 2024 outcomes are Francois Boulanger, our President and CEO; and Steve Perron, Government Vice President and CFO. This name is being broadcast on cgi.com and recorded stay at 9:00 A.M. Japanese Time on Wednesday, November 6, 2024. Supplemental slides in addition to the press launch we issued earlier this morning can be found for obtain together with our fiscal 2024 MD&A, audited monetary statements and accompanying notes, all of which have been filed with each SEDAR+ and EDGAR. Please word that some statements made on the decision could also be forward-looking. Precise occasions or outcomes could differ materially from these expressed or implied and CGI disclaims any intent or obligation to replace or revise any forward-looking statements, whether or not because of new info, future occasions or in any other case. The whole Secure Harbor assertion is accessible in each our MD&A and press launch in addition to on cgi.com. We advocate our traders learn it in its entirety. We’re reporting our monetary ends in accordance with Worldwide Monetary Reporting Requirements or IFRS. As all the time, we may even talk about non-GAAP efficiency measures, which must be seen as supplemental. The MD&A comprises definitions of every one utilized in our reporting. The entire greenback figures expressed on this name are Canadian, except in any other case famous. I am going to now flip it over to Steve to overview our This fall financials after which Francois will touch upon our full yr efficiency and enterprise and market outlook. Steve?

Steve Perron: Thanks, Kevin, and good morning, everybody. CGI as soon as once more delivered robust ends in our fourth quarter of fiscal 2024 in what continued to be a dynamic and difficult macro atmosphere. In This fall, we delivered $3.7 billion of income, up 4.4% year-over-year or up 2% when excluding the influence of international change. The strongest CGI segments had been Northwest and Central East Europe at 7.5% fixed forex development. UK and Australia at 7.2%. Asia Pacific at 6.2% and US Federal at 5%. From an business perspective, we proceed to have the very best development in authorities, representing 4.7% fixed forex development this quarter. This was adopted by manufacturing retail and distribution at 3.3%, pushed from North America. Monetary companies in Europe and communications in North America remained challenged in step with the present market situations. Our IP continued to develop at a sooner tempo with 3.7% fixed forex development within the quarter. As a proportion of complete income, IP represented 22.9%, up 30 foundation factors year-over-year. In This fall, bookings had been $3.8 billion for a book-to-bill ratio of 104%. Guide-to-bill ratios had been 85% for enterprise and strategic IT consulting and system integration, given the continued softness in discretionary spending and 120% for managed companies that can drive internet new recurring income. On a trailing 12-month foundation, our book-to-bill ratio was 109%. On the identical foundation, managed companies had a book-to-bill ratio of 117% and SI&C book-to-bill ratio was 100%. Our world backlog reached $28.7 billion or 1.9 occasions income, reflecting our total enterprise resilience. Turning to profitability. Our efficiency this quarter as soon as once more demonstrated our working self-discipline. Earnings earlier than earnings taxes had been $592 million for a margin of 16.2%, up 30 foundation factors year-over-year. Adjusted EBIT within the quarter was $600 million, representing a margin of 16.4%, up 10 foundation factors year-over-year. The rise is especially resulting from another out there day to invoice and financial savings generated from our value optimization program. These had been partially offset by prior yr’s changes for R&D tax credit in France and the influence of decrease utilization throughout the monetary companies largely in Europe and communication and utilities in North America. Margins had been strongest within the following segments. Asia Pacific at 28%, Canada at 22%, Finland, Poland and Baltics at 19%, US Federal at 18% and US Industrial and State Authorities at 16%. Our efficient tax price within the quarter was 26.4%, up from 25.7% final yr, impacted by the tax credit score changes and the rise within the UK statutory price. We count on our tax price for future quarters to be within the vary of 25.5% to 26.5%. Web earnings had been $436 million for a margin of 11.9%, up 10 foundation factors year-over-year. Diluted EPS was $1.91, representing a rise of 8.5% year-over-year. When excluding particular gadgets, internet earnings had been $439 million. This represents a margin of 12%, secure year-over-year. On the identical foundation, diluted EPS was $1.92, an accretion of seven.3% when in comparison with This fall final yr. Within the quarter, money supplied by working actions was $629 million, representing a powerful 17.2% of complete income. DSO was 41 days within the quarter, three days higher than final yr. In This fall, we used our money to speculate $82 million into our enterprise, make investments $492 million for enterprise acquisition upon the completion of the acquisition of Aeyon and compensation of this debt and make investments $49 million to purchase again our inventory. Earlier than the top of the quarter, we issued $750 million of public Canadian senior notes. The proceeds had been used to repay present debt as deliberate and for basic company functions. We proceed to ship a powerful return on invested capital at 16%, in keeping with the prior yr, demonstrating our proficiency and self-discipline on deployment of capital. On the finish of the quarter, CGI had $3 billion of money available and entry to extra if wanted. As a part of our worthwhile development technique, CGI capital allocation priorities stay centered on investing again within the enterprise and pursuing accretive acquisitions. The corporate additionally has the pliability to make use of a portion of its free money circulation for the repurchase of its inventory and for the distribution of dividends to additional improve worth for shareholders. Yesterday, CGI’s Board of Administrators authorised a money dividend of $0.15 per share. This dividend is payable on December 20, 2024, to shareholder of file as of the shut of enterprise on November 20, 2024. Earlier than turning the decision over to Francois, I wish to spotlight just a few changes that had been made efficient October 1st. Germany is now its personal phase and our operations in Scandinavia are actually mixed with our Northwest and Central East Europe phase. Beginning subsequent quarter, we are going to start reporting on this new construction and we are going to present restated historic knowledge at the moment. Now I’ll flip the decision over to Francois to debate the perception on the quarter and the yr in addition to the outlook for our enterprise and markets. Francois?

Francois Boulanger: Thanks, Steve, and good morning, everybody. I’m happy to be right here in the present day to overview the fiscal 2024 outcomes achieved by our excellent workforce around the globe. I additionally need to acknowledge George Schindler, who retired as of October 1st, following an almost 40-year profession at CGI. Thanks, George, in your management and guiding our firm over the previous eight years as CEO, together with the supply of the robust outcomes for fiscal 2024. CGI’s efficiency for the yr demonstrated our potential to execute on our plan in a dynamic market atmosphere. Earnings expanded by a better recurring income combine in addition to proactive operational excellence actions. Money from operations stay strong because of sustained high quality supply for purchasers and bookings represented 109% book-to-bill ratio for the final 12 months with each reporting phase at or above 100% ratio. With reference to income, development progressively elevated within the again half of the yr, ending This fall with 4.4% year-over-year development or 2% on a relentless forex foundation. We additionally additional our purchase technique by closing chill mergers, a significant acceleration over fiscal 2023. We started the yr by merging with Miami-based Momentum Consulting to increase our digital and knowledge choices in our manufacturing, retail and distribution sectors. In Canada, we acquired the credit score union enterprise of Celero increasing our companies to greater than two-thirds of credit score unions nationwide. And we acquired Aeyon and CGI Federal, deepening our digital and AI-based choices, for nationwide safety and civilian company purchasers. I wish to warmly welcome all new consultants who joined CGI from these mergers. Every year, our plans are designed to create worth for all three of CGI stakeholders. This deal with in search of the most effective equilibrium amongst our purchasers, our consultants and our shareholders is key to our technique and planning. With this precept in thoughts, I’ll overview the annual efficiency highlights by stakeholder beginning with purchasers. CGI’s deep and trusted shopper relationships stay essential to our development agenda. Once more, this yr, shopper satisfaction was up on each dimension we measure. Actually, two of the very best rated rating had been associated to the standard of {our relationships}. This contains CGI’s dedication to purchasers in addition to their intent to interact us once more sooner or later. Each of those scores, which come from signed shopper assessments, had been at file excessive ranges of over 9.6 out of 10. The experience, insights and dedication of our consultants and professionals make this excessive diploma of shopper satisfaction attainable. Thanks to all workforce members worldwide for partnering with purchasers to assist them obtain tangible enterprise and mission outcomes. Now turning to our consultants and professionals. CGI’s tradition of possession is exclusive out there and enabled us to retain and entice the most effective expertise. This was demonstrated this yr as we noticed extra of our consultants and professionals change into CGI shareholders, rising from 85% to 87% year-over-year. This engagement as homeowners is why we name our staff, CGI companions. Subsequent (LON:), the general satisfaction of our individuals elevated once more this yr now at 8.9 out of 10. This consequence demonstrates the deep engagement of our CGI companions. Purchasers proceed to quote this engagement as a key issue for why our individuals present up in a different way as an extension of their very own groups. This makes a big distinction, particularly as shopper navigate change and prioritize their enterprise and mission objectives. Lastly, the enter of our individuals factored into a number of third-party recognitions for CGI similar to rankings for greatest locations to work in quite a few international locations and our inclusion on the Time Journal World’s Finest Firm Listing. And for our shareholders in fiscal 2024, we proceed to proactively handle the basics of our enterprise to deepen our resilience and our capability to create added worth for shareholders. On a full yr foundation, fixed forex development included 7.5% development in our Northwest and Central East Europe phase, 6.1% in Asia Pacific, 4.4% in UK and Australia. And from a companies perspective, 5.2% in our IP-based income portfolio and three.4% in managed companies. On the profitability aspect, we additionally continued to enhance on a year-over-year foundation with our outcomes persevering with to position us within the prime quartile of our IT companies peer group. Adjusted EBIT was up 4.5% for a margin of 16.5%, up 30 foundation factors. Adjusted internet earnings had been up 5.1% for a 12% margin. Adjusted EPS was up 7.8% at $7.62. And money generated from operations was over $2.2 billion, representing 15% of income. Sustained shopper demand for managed companies and IP contributed to those robust outcomes and in addition drove our complete bookings. Once more this yr, bookings surpassed $16 billion as purchasers proceed to show to CGI for well being and progressing their digital and innovation agendas whereas lowering their value base. Second half managed companies bookings had been significantly robust at practically $5.3 billion up by greater than $1 billion in comparison with the primary half of the yr. This uptick was led by wins in manufacturing and authorities, each with second half bookings up 16% in comparison with H1. These bigger longer-term engagements proceed to require a tailor-made mixture of our end-to-end choices, notably for CGI’s IP options in addition to world supply. For instance, in This fall, the US Sample and Trademark Workplace awarded CGI 2 monetization contracts, protecting a spread of safety, effectivity and mission-oriented companies. The tasks have a complete potential worth of US$119 million and increase CGI’s momentum IP companies to assist the company foster innovation and allow financial development. One of many world’s largest producers entered into an settlement with CGI to collectively launch a global improvement unit primarily based in Germany to assist group-wide digital tasks and assist their builders in step with the corporate’s rising demand for software program efficiency. By means of this initiative, the shopper goals to develop new IT methods sooner and extra effectively. CGI’s architects, builders and consultants will ship companies and options grounded in know-how experience and manufacturing data to assist the shopper speed up enterprise outcomes in step with their digitalization imaginative and prescient and technique. The Division of Justice, Northern Eire Courts and Tribunal Service awarded CGI a 20-year settlement to function enterprise transformation supply accomplice. Our consultants will assist modernize the justice system and improve effectivity and enhance service entry. And we entered into a brand new long-term settlement to rework the transaction processing operate of Mackenzie Investments. That is the most recent in a sequence of operational enhancements Mackenzie is making to additional modernize and digitize its platforms and processes. As a part of the brand new expanded relationship, Mackenzie will transition nearly all of its transaction processing companies for account and plan administration to CGI. This may enable Mackenzie to leverage CGI’s progressive capabilities and redefining processes and integrating superior degree of clever automation into workflows. In consequence, Mackenzie will be capable of speed up the pace, high quality and effectivity of its shopper servicing capabilities, together with sooner transaction occasions. Wanting forward, our marketing strategy for fiscal yr 2025 contains ongoing and new investments in our end-to-end companies to allow our consultants to tailor essentially the most related options for purchasers. These investments are aligned to the shopper demand we see in our pipeline, which is up 20% on a year-over-year foundation throughout all of our companies. In managed companies, we are going to proceed to evolve our partnership fashions backed by CGI’s monetary power to create compelling choices. This contains embedding extra AI to unlock new methods to assist drive effectivity and innovation for purchasers. CGI’s managed companies stay in excessive demand as a result of it permits our purchasers to generate value financial savings, deepen agility to navigate the dynamic atmosphere and advance the digital initiatives. For CGI, managed companies ship long-term recurring income, which improves our resilience by all financial cycles. For IP, we are going to proceed to put money into our options portfolio to satisfy rising shopper expectations for innovation and embedded AI performance. In collaboration with groups around the globe, we’re progressing a number of generative AI proof-of-concept to deal with widespread use instances throughout a number of IPs, together with for in-demand performance, similar to suggestions on subsequent greatest actions. Our IP worth proposition offers purchasers with digital accelerators with decrease capital prices. For CGI, IP offers recurring income with a better margin profile. And in enterprise and strategic IT consulting and methods integration, we are going to focus the place discretionary spending will proceed, similar to advisory companies and cloud, cybersecurity and accountable use of AI. Our SI&C worth proposition offers purchasers with the actionable recommendation and implementation capabilities they should understand enterprise worth. For CGI, SI&C offers a shopper entry level, which creates future alternatives to ship CGI’s full vary of companies. Throughout our portfolio of companies, our marketing strategy additionally incorporates investments to additional our innovation agenda, significantly in AI and GenAI, in step with our beforehand introduced $1 billion AI funding. CGI stays nicely positioned globally as a number one trusted accomplice to assist purchasers on an end-to-end foundation from defining their methods to implementing AI-powered platforms and options. Our pipeline of AI alternatives continues to develop, significantly for knowledge consulting, cloud migration, proof-of-concepts and focused use case implementation that drive enterprise outcomes. Examples of current awards leveraging AI contains the Authorities of Canada chosen CGI to develop and deploy a digital assistant software to assist clear a backlog of over 200,000 payroll instances thereby lowering processing time and enhancing consumer expertise. UK’s community rail expanded their proof-of-concept for CGI’s machine imaginative and prescient IP to reinforce their operational effectivity and steady asset monitoring. And a clear power know-how firm within the US chosen CGI to construct a data-driven analytics platform utilizing AI and machine studying for proactive plant monitoring and optimization. Our specialists stay engaged in authorities initiatives around the globe to bolster CGI’s dedication to accountable and moral AI practices. Actually, throughout This fall, CGI signed the European Fee’s AI Act Pledge to assist form the digital way forward for Europe. Lastly, our fiscal 2024 marketing strategy contains continued funding in M&A to speed up our depth and breadth and geographic segments. The M&A atmosphere stays extra favorable as macroeconomic and geopolitical dynamics proceed to reshape the consolidation actions throughout the IT companies business. We’re in energetic dialogue with a bigger variety of merger targets in any respect phases of our pipeline. And as all the time, we can be disciplined to guarantee that all CGI mergers can be accretive to every of our stakeholders. In closing, purchasers throughout industries proceed to put money into the monetization and optimization of the know-how with a purpose to remodel their enterprise worth chains in addition to their working volumes. CGI stays nicely positioned as one of many few main world corporations with the size, attain, insights and capabilities to assist purchasers ship the tangible enterprise outcomes they require from their digital technique investments. Our robust efficiency in fiscal 2024, mixed with our resilience as an organization and our confirmed construct and purchase development technique underpinned our plan for delivering worthwhile development within the yr forward. Thanks in your continued curiosity and assist. Let’s go to the query, Kevin.

Kevin Linder: Thanks, Francois. Joelle, we will now ballot for questions.

Operator: Thanks. Women and gents, we are going to now start the question-and-answer session. [Operator Instructions] Your first query comes from Richard Tse with Nationwide Financial institution Monetary. Your line is now open.

Richard Tse: Sure, thanks. With respect to your press launch, you had a press release in there that appears to sort of emphasize acquisitions a bit extra. That is form of my learn. Is it honest to say that you’re going to be extra energetic within the subsequent 12 months than the final 12 months in the case of deploying capital on acquisitions right here.

Francois Boulanger: Like I stated, we’ve — we — the pipeline is fairly full on the M&A aspect. We’re speaking with a bigger variety of prospects. So it is going nicely on that aspect. However once more, closing them, it is a totally different story. We have to agree on the value. And it must make some sense for us. So like I am saying, we’ve an excellent pipeline. We’re working with a number of totally different targets. However will we come to an settlement with that, that is nonetheless within the making. However we’re fairly constructive on that aspect.

Richard Tse: Okay. After which with respect to AI, in the case of your pipeline, what is the mixture of enterprise that has aidings or GenAI tied to it? And the way would that examine to love the prior yr right here?

Francois Boulanger: You heard in regards to the proof-of-concept that we did and among the mandates that we acquired, like instance, with the federal government of, the federal authorities with the payroll instances. We’ve increasingly more of those proof-of-concept. And in addition we’re utilizing increasingly more AI internally additionally for our managed companies. In order that’s additionally one thing we’re engaged on. And on the IP aspect, we’re utilizing increasingly more GenAI on our IP companies. So it is rising naturally yr versus final yr and the expectation and that can proceed sooner or later.

Richard Tse: Okay. After which final one for me. As GenAI does scale, what do you do when it comes to sort of retraining the workforce or in your hiring practices? Simply making an attempt to know how that form of labor market will shift and the way you will form of prepare forward of that wave right here.

Francois Boulanger: Sure. If you happen to keep in mind final yr, I do know George introduced, and it is already now a yr within the making in our $1 billion of funding in AI. And that $1 billion of funding was additionally to coach our individuals on these instruments. In order that’s going fairly nicely. We had some fundamental coaching for all of the members, all of the CGI companions in CGI, however we had additionally extra in-depth coaching for extra technical coaching for our builders and programmers within the firm. In order that’s going nicely and that can proceed sooner or later. And naturally, on the hiring aspect, naturally, we’re hiring individuals with the proper abilities on the AI aspect. So no downside on this aspect.

Richard Tse: Okay. Thanks.

Operator: Your subsequent query comes from Divya Goyal with Scotiabank (TSX:). Your line is now open.

Divya Goyal: Good morning, everybody.

Francois Boulanger: Hello, Divya.

Divya Goyal: Francois or possibly Steve both or in case you may present a bit bit extra shade on the bookings for this particular quarter. I famous there was a slight weak point within the bookings reported this quarter. So simply making an attempt to know what’s the broader sentiment that you just’re seeing throughout the worldwide enterprises and if there’s one thing to name out for there?

Francois Boulanger: I can begin, and Steve, you may give some shade additionally in your aspect. However as you realize, bookings is all the time lumpy. And we had some contracts that did not hit the top of the quarter, however we really feel that we’ll have some excellent news once more within the subsequent couple of weeks. However I am going to take the instance of CGI Federal. They did not end earlier than — they completed under 100%. And once more, this yr was a yr of election within the US Federal. So naturally we see a bent these years of election that the administration will decelerate among the procurement to attend to see if their priorities will change. In order that’s one of many influence that we noticed within the quarter. I do not know, Steve, when you have different examples, however all the time — you all the time see some lumpiness within the yr.

Steve Perron: Sure. And within the quarter, managed companies, the bookings had been robust at 120%. The tasks, so the SI&C aspect was 85%, however while you take a look at it from a final 12-month perspective, it was $100 million. So I feel it is higher to have a look at it from — actually from a final 12-month perspective.

Divya Goyal: That is useful. On this particular dialogue on the CGI Federal, that’s truly an fascinating subject that I am certain you will most likely get much more questions on. However how do you see that a part of the enterprise usually evolve. I do know up to now when George has commented on this dialogue, I perceive that the spending picks up early on, slows down nearer to election after which slowly picks up once more. Nevertheless, with this new potential authorities coming in, how do you see issues shifting and altering and will the tariffs probably influence CGI negatively if in any respect?

Francois Boulanger: No, I do not see that. Initially, as you realize, we’re coping with the Federal Authorities for 40 years. So we all know the shopper. And I’d say that each time {that a} change of presidency is going on, priorities are altering. And when priorities are altering, guess what, they want IT to realize their enterprise objectives. So the expectation we’ve is that, no, we do not see any adverse even opposite when the brand new administration will are available, precedence will change, and we’ll have a whole lot of dialogue on how IT may also help them as a result of, as you realize, IT is a driver for all of this and so they’ll want some IT companies to assist them to realize their priorities.

Divya Goyal: That is very useful. Only one final query. The corporate clearly continues to generate fairly important revenues from the federal government sector. Do you see that shifting in any respect within the near-term? And in case you may present just a few shade on the banking and monetary companies sector globally, how are you seeing that? And I am going to cross the road with that. Thanks.

Francois Boulanger: Sure. No, authorities, I feel was robust in 2024 and we’re seeing it proceed to be robust in 2025. A whole lot of governments internationally are persevering with to do some investments and they should proceed. So we see that as constructive. On monetary sector, it was, This fall was largely flat, and we had some discount initially of the yr, largely flat now in This fall. With the charges coming down and the rates of interest coming down and with the banks that slowed down among the discretionary bills up to now, we really feel that maybe we will see a bounce again on that aspect. As a result of, once more, you can’t retain these investments for a very long time. So they should make investments again of their enterprise. And so we’re seeing some lights on the finish of the tunnel on the monetary sector aspect.

Divya Goyal: Thanks a lot.

Operator: Your subsequent query comes from Jerome Dubreuil with Desjardins. Your line is now open.

Jerome Dubreuil: Thanks for taking my questions. First one is in your Microsoft (NASDAQ:) apply. I could be mistaken, however and do not hesitate to push again on this, however we do not see you as a lot in Microsoft accomplice rankings, relative to friends possibly and this apply appears prefer it could be fairly necessary in an AI world, particularly AI enterprise. If you happen to can possibly begin by qualifying the relative power of your Microsoft apply and in case you assume this must be an even bigger focus going ahead?

Francois Boulanger: Initially on Microsoft. Microsoft is an actual large accomplice of ours. And truly, I’d say that it is the primary accomplice for CGI. So we’ve a whole lot of consultants having this dialogue on Microsoft. And we’re utilizing their instruments like CoPilot that we deploy and utilizing it every day. In order that’s not an issue. For certain, we must be, as you realize, our price, we’ve an impartial worth. So we’re working with all of them, and we’re not only a Microsoft store, however we’re additionally utilizing different know-how like AWS and Google (NASDAQ:). So it is — we’re able to providing all these applied sciences to our purchasers.

Jerome Dubreuil: That is nice. Thanks. Second query on M&A, totally different angle, however keep in mind final quarter, you commented in your goal a number of for acquisitions of round onetime income. Possibly in case you can make clear this remark. It looks like it distinction possibly a bit bit with the feedback you have been making on M&A in the present day.

Steve Perron: When it comes to the touch upon the pricing, you imply, the onetime income?

Jerome Dubreuil: Sure, appropriate. On the goal multiples for M&A.

Steve Perron: So, look, in case you look simply on the current one we did with CGI Federal, Aeyon, you will notice, and you’ll see it within the monetary assertion, you will notice that we paid greater than onetime income. So it is all relative to what you are buying, clearly. We’ve paid greater than onetime income as a result of we consider we will generate a great return on it. So it is all a part of the return we will generate on the transaction. However no there’s not a hard and fast restrict of onetime income in any respect. Actually, Aeyon proves it in a different way as a result of we paid greater than that.

Francois Boulanger: Sure. And once more an instance of Aeyon is within the Federal US Federal sector, particularly within the protection aspect. And we thought that it was an excellent acquisition and we see a whole lot of development on that aspect and a whole lot of capabilities. So we had been able to pay extra. And we’re nonetheless pondering it will likely be accretive to all stakeholders of the corporate.

Jerome Dubreuil: Sure, is sensible.

Francois Boulanger: Thanks.

Operator: Your subsequent query comes from Stephanie Worth with CIBC (TSX:). Your line is now open.

Stephanie Worth: Good morning.

Francois Boulanger: Hello, Stephanie.

Stephanie Worth: Waiting for fiscal ’25. Hello. Friends have been guiding to sort of a continuation of the present demand atmosphere. Is that this cheap primarily based on what you are listening to from purchasers? It seems like possibly you are seeing just a few inexperienced shoots right here. How ought to we take into consideration the demand atmosphere evolving over 2025?

Francois Boulanger: We do not see essentially materials adjustments but on the atmosphere versus what we noticed within the final quarter. I feel managed companies remains to be very robust. We’ve and I had a whole lot of dialogue with CEOs internationally that they’re about discovering methods to have some value financial savings. So that also proceed to be fairly robust on that aspect. However on the, as you realize, on the enterprise consulting, a bit like Steve alluded, a bit bit nonetheless smooth on the SI&C particularly within the enterprise consulting. In order that’s the place we nonetheless see that for now, the atmosphere or the demand atmosphere, it might probably nonetheless be a bit smooth on the enterprise consulting. So we’ll be naturally near it, however on the managed companies, that continued to be fairly robust.

Stephanie Worth: That is sensible. After which possibly you may discuss a bit bit in regards to the US Industrial and State Authorities. It appears just like the book-to-bill was 100% of each the quarter and the yr. How ought to we take into consideration what is going on on in that vertical?

Francois Boulanger: A whole lot of dialogue and we’ve massive potential offers with particularly on the state and native aspect that, once more, it is a query of timing. So we’ve a whole lot of dialogue. We’ve a whole lot of bids occurring, however the timing of when closing them might be lumpy. And so I am not nervous essentially about that. And I feel we’ll — you will see sooner or later some bounce again on that aspect. Identical factor a bit on the monetary sector. We’ve a giant monetary sector within the US business. And once more like I used to be saying it was smooth a bit on the discretionary bills aspect. So now like I used to be saying with the charges — rates of interest happening, we expect that the monetary sector will begin once more to purchase IT companies sooner or later.

Stephanie Worth: Excellent. Thanks very a lot.

Operator: Your subsequent query comes from Surinder Thind with Jefferies. Your line is now open.

Surinder Thind: Thanks. I might like to the touch base on simply the continued softness within the discretionary spend. Simply any incremental shade which you could present there? I do know that you just talked about that throughout the SI&C that bookings might be fairly lumpy. However once I truly take a look at absolutely the greenback worth, it is under something that you just guys booked even through the pandemic. So simply making an attempt to know what’s precisely occurring in that line merchandise.

Francois Boulanger: Nicely, I feel it is two issues. Like I used to be saying within the monetary sector, the place we’re fairly robust in enterprise consulting aspect. They slowed down within the final two years, proper, with the rate of interest going up. In order that had an influence to us, particularly instance in Europe. We’re fairly robust or stronger in enterprise consulting. We noticed that some slowdown on the monetary sector on the enterprise consulting. In order that’s actually the place it is coming from. And we expect that we’re on the finish of it with particularly within the monetary sector, however we have to see within the subsequent couple of quarters. Nevertheless it’s actually, I’d say, it is the atmosphere. And we’re not the one one that you just see that elsewhere that the enterprise — the enterprise consulting aspect might be smooth. So I do not assume we’re totally different than the remainder of the business and we’ll see if it is coming again fairly quickly.

Surinder Thind: After which as a follow-up right here, once we take into consideration the enterprise mannequin and sort of what’s occurred on this cycle, there was much more, I’d say, shopper deal with managing prices. Clearly, that is helped the managed companies aspect. I assume it has been a bit more difficult for the SI&C aspect of the equation. Given your extra onshore kind supply mannequin, if we stay on this present smooth atmosphere, is there a threat that we see under business development in that line merchandise on condition that your rivals arguably have a broader world supply or a decrease value footprint.

Francois Boulanger: No, I do not, under no circumstances. Initially, we’ve a pretty big footprint in APAC and Asia Pacific. So we’ve no downside in any respect to take new managed companies and delivering from Asia Pac, and we’ve some a number of ones signed within the final yr. In order that proceed to be in our offshore and world supply mannequin is fairly resilient. And so we have no downside with that. However we nonetheless assume that having our proximity mannequin helps to be near our purchasers and having the proper relationship with our purchasers. So I do not assume and I do not see any problem with our mannequin.

Surinder Thind: Okay. That is useful. After which — and the ultimate query right here, maybe, following up on among the earlier commentary across the acquisitions. At what level do you maybe consider the goal return on funding that you just want within the sense that, is it a hard and fast quantity right here that from an absolute perspective or while you sort of take into consideration others within the house which have been much more energetic. Is that one thing it’s essential be cognizant of as you attempt to maybe construct extra capabilities or even when it is purchase extra capabilities, whether or not it’s within the AI house or something like that.

Francois Boulanger: I am going to begin and Steve maybe you may put some extra shade. However for certain, we all the time have been disciplined in our acquisition and it must be accretive, like I stated, for all of our stakeholders. In order that’s why we can’t purchase to purchase one thing, however we have to consider that it’ll carry a return to the stakeholders like I stated. And so financially, but in addition for the shopper, present purchasers and new purchasers. So I do not know, Steve, on the monetary aspect.

Steve Perron: Yeah. Simply once we take a look at acquisition, sure, there’s a return, however there may be additionally the tradition. We need to guarantee that once we do a deal, and we wish to say that one plus one equals three. We wish the merger to make sense and to generate greater than the standalone entities. So that is the aim. And it isn’t solely a monetary ingredient, clearly, we’re wanting quite a bit on the tradition of the corporate to guarantee that it might match with CGI and it might be nicely built-in as a result of while you’re paying for one thing, you need to just remember to’re going to get finally, the one plus one equal three. So it isn’t solely monetary, it is a mixture of components. And we’re, as Francois talked about, actually, actually diligent. We need to guarantee that the acquisition will profit all stakeholders.

Surinder Thind: Thanks.

Steve Perron: Thanks.

Operator: Your subsequent query comes from Steven Li with Raymond (NS:) James. Your line is now open.

Steven Li: Thanks. Hey, Francois. Hey, Steve. Hello. First query is on Canadian margins. It was down fairly a bit year-over-year. Something altering there? And might we rebound this yr?

Francois Boulanger: Sure, I feel we would have liked to do some adjustment in This fall. So we had some a little bit of utilization challenges that we deal with. And so I’d say which you could count on some bounce again sooner or later.

Steven Li: Okay. Excellent. And, Francois, beneath Trump administration, what’s the places and takes on a few of your bigger contract automobiles just like the EPA? Is it too early to inform or the place are you able to see some offsets?

Francois Boulanger: Too early to inform. And once more I am going to return Steven to the primary remark I had. When you could have change within the politics aspect, it can change naturally among the priorities that they’ve. However we’re largely in all of the businesses on the federal authorities, civilian aspect and on the protection aspect. So relying on the priorities, we are going to regulate correctly. However we see that like I used to be saying change of — largely change of priorities and extra work for us. So I see that as a chance.

Steven Li: Acquired it. After which on the dividend, is there any formal dividend coverage set at this level like rising it with free money circulation yearly?

Steve Perron: No. Look, as you nicely know, the dividend, it is the accountability finally of the Board. Clearly, we began issuing a dividend as a result of the Board perceive the worth for some shareholders. And what we will say is that we are going to overview diligently every quarter, the dividend, to start with, the declaration and in addition the quantity and that will be achieved diligently. However let’s do not forget that our priorities are when it comes to money allocation is de facto on development and development funding within the enterprise and in addition in accretive M&A and we additionally need to proceed to be energetic on our share repurchase program. So however I can — we will verify that the Board clearly worth and perceive nicely the worth of the dividend for the shareholders.

Steven Li: Acquired it. After which a fast one. Did you say how a lot AI bookings was through the quarter? I feel I missed that.

Francois Boulanger: No. We did not put AI bookings. Once more, it is obscure how a lot reserving we’ve. We’re utilizing AI for many — increasingly more of our tasks. I feel that the variety of tasks that we’re utilizing AI went up by one other 10% this quarter. So and we’re utilizing it in managed companies and within the SI&C. So we do not have essentially quite a few bookings that we may give.

Steven Li: Acquired it. Excellent. Thanks.

Francois Boulanger: Thanks.

Operator: Your subsequent query comes from Thanos Moschopoulos with BMO Capital Markets. Your line is now open.

Thanos Moschopoulos: Hello. Good morning.

Francois Boulanger: Hello, Thanos.

Thanos Moschopoulos: Initially, possibly increasing on the final level. Are you able to remark simply when it comes to possibly among the particular ways in which you are utilizing AI internally and the runway when it comes to what that might imply for effectivity and margins. I imply has it been largely round cogeneration, round automating shopper assist or what are among the early methods you have been utilizing it?

Francois Boulanger: Sure. Nicely, we’re utilizing it naturally within the — our managed companies with machine studying and to optimize a few of our processes, IT processes. In order that’s bringing naturally some value financial savings that we’re sharing with the purchasers. In order that’s one facet. In our IP, we’re additionally utilizing increasingly more of our AI to do some improvement such as you had been saying to do some testing additionally. In order that’s one other manner we’re utilizing AI. And I’m saying we’ve increasingly more proof-of-concept or like I used to be giving the instance within the speech with purchasers, particularly the place we’re putting in some AI to assist them in their very own automation or monitoring of asset, for instance. So it is all space, however and we’re additionally utilizing, Steve is it, instance on the monetary, on this finance division and the HR and the interior processes. So see how we will scale back the price.

Thanos Moschopoulos: Nice. And as we take into consideration margins heading into 2025. What are among the places and takes you might name out. So on the one hand, your managed companies combine is rising, which must be useful, I’d assume, for margins. Alternatively, SI&C is being impacted by lighter utilization. So as an instance if the spending atmosphere stays establishment, barring an uptick. I imply how would you consider your alternatives on the margin entrance?

Francois Boulanger: I feel while you’re it, you noticed that in This fall, we’re in some area in Europe, the margin is a bit weaker than the typical of the corporate. So we nonetheless assume there we will have some enchancment year-over-year. So we’re working with the groups to see how we will enhance the margin there. So I am constructive on the margin for subsequent yr. However naturally, it relies upon additionally the place the SI&C will go. However I feel we’re able to enhancing the margin if all the pieces goes nicely.

Thanos Moschopoulos: Nice. I am going to cross the road. Thanks.

Francois Boulanger: Thanks.

Steve Perron: Thanks.

Operator: Your subsequent query comes from Paul Treiber with RBC Capital Markets. Your line is now open.

Paul Treiber: Thanks very a lot and good morning. Simply needed to the touch on M&A and the M&A atmosphere. You talked about it is extra favorable. I hoped in case you can elaborate on that. Does that replicate the smooth discretionary atmosphere opening up potential alternatives, or is there one thing else that is serving to the atmosphere right here?

Francois Boulanger: For certain like we all know with the SI&C that may be a bit softer. It is placing stress to a few of these firms. And so a few of them must do one thing and that is why we’ve maybe extra dialogue than we had up to now. So with this atmosphere that we nonetheless assume it may be proceed from the subsequent couple of quarters. We see that as a chance to have this dialogue. And a few of this dialogue was dialogue we had up to now. And truly, we weren’t agreeing on instance on the value. And now we’ve new dialogue with the identical targets and the costs are extra cheap, if I can say. So that is the sort of market atmosphere that we’re seeing within the M&A aspect. And we expect that this can proceed for some future quarters.

Paul Treiber: Secondly, simply relating to GenAI, simply hoping in case you can present replace on what you are listening to from prospects when it comes to the influence of GenAI on buying selections. It looks like firms are doing a whole lot of testing and analysis of GenAI. Has it modified the — their willingness to buy from distributors from IT companies? Are you seeing a shift to extra willingness to attempt to construct homegrown or inner options and in addition simply the place are they from a testing perspective? Are they transferring previous testing and beginning to make deployments?

Francois Boulanger: No, it is under no circumstances. They want us to do these proof-of-concept, this testing. They want us to organize their knowledge to be able to utilizing the proper manner of AI. And so they want our capabilities and our data about these two. So it is actually extra a driver of future development for us as a result of, once more, it is — they want individuals with the proper know-how and the proper experience and we’ve that. In order that’s for me extra a chance to develop sooner or later than the rest.

Paul Treiber: Okay. Thanks for taking the query.

Francois Boulanger: And that is what we’re seeing at the least now within the pipeline and all that.

Operator: Your subsequent query comes from Robert Younger with Canaccord Genuity. Your line is now open.

Robert Younger: Good morning. Thanks for taking the query. One other M&A query, I additionally famous possibly a barely greater precedence on M&A within the supplies and the monologue. And so possibly simply Francois beneath your tenure as CEO, do you count on to place extra emphasis on M&A? Is there going to — do you count on to have extra depth beneath your tenure or — I perceive the pipeline remains to be very robust and energetic. I perceive that you’ll have related self-discipline and I perceive that the valuations are doubtless a bit extra constructive, however do you count on to be extra — put extra emphasis there?

Francois Boulanger: Our technique was all the time the build-and-buy technique and develop 50% by natural and 50% by acquisition. So it is all the time have been within the forefront in our technique. So, sure, I am going to put a whole lot of deal with this. And, sure, we expect that the atmosphere is fairly good for M&A. So we can be as energetic as attainable on that aspect. However on the similar time, we are going to keep disciplined, and we can’t purchase only for shopping for. We have to purchase the proper one. However once more like Steve was saying, Aeyon, we had been prepared to purchase attrition value as a result of we thought it was the proper acquisition and we’ll by no means be shy to pay a better value if it is making sense for us.

Robert Younger: Okay. After which up to now, I feel my sense has been that you’ve got prevented massive acquisitions the place there’s a massive infrastructure part. I feel that was due to sensitivity across the influence to your valuation. It looks like that nook of the market has a a lot better valuation given AI. And so is that one thing that you’d proceed to keep away from? Or is that one thing you would be extra prepared to have a look at?

Francois Boulanger: Sorry, I missed the beginning, you are saying on the AI aspect, you are saying?

Robert Younger: Up to now, my understanding is that you’ve got prevented some bigger acquisitions due to a big infrastructure part like knowledge facilities, et cetera. And now that that is a extra extremely helpful a part of the market. I am simply curious if that is one thing that you’d contemplate or is that also one thing that you’d keep away from? Or am I simply mistaken in that assumption?

Francois Boulanger: Bob, pure infra, we’d not essentially have an interest about it. We’ve some infrastructure enterprise. We nonetheless have some, I’d say, 10% of our enterprise is infrastructure. However shopping for infrastructure enterprise solely, that is not our curiosity. If we’ve an organization the place they’ve some infra, we can’t be shy to have a look at it, however we’d not purchase infrastructure pure enterprise, no curiosity on that aspect.

Robert Younger: Okay. After which final one, only a fast one. Wanting again to the final time the Trump administration got here in. I keep in mind there was a whole lot of stress on H1B, and your onshore and modeling benefited from that? Like do you consider that as one thing would possibly repeat itself? Or are you occupied with your relative on-share offshore combine how which may change after which I am going to cross the road.

Francois Boulanger: On Federal aspect, if I am speaking the federal enterprise it is —

Steve Perron: It is onshore.

Francois Boulanger: It is onshore. It is 100% delivered onshore. And we’re additionally utilizing some near-shore actions or a area like Lafayette like Southwest Virginia. In order that’s our mannequin since many years to ship particularly on the Federal Authorities aspect, onshore or nearshore, however within the US. So we did not use offshore for that facet of the enterprise.

Robert Younger: So then that will be a constructive for you, proper?

Francois Boulanger: Sure, for certain.

Robert Younger: Okay. Thanks.

Steve Perron: Sure, our metro market mannequin, as you talked about, and the supply mannequin we’ve at CGI, clearly, as you stated, if it turns into tougher to make use of offshore from the US, clearly, for us, our members are residents of the US. And our companions are citizen within the US. And clearly it is going to be, for us, it will not create any points.

Robert Younger: Okay, thanks. .

Francois Boulanger: Thanks.

Operator: Subsequent query comes from Suthan Sukumar with Stifel. Your line is now open.

Suthan Sukumar: Good morning, gents.

Francois Boulanger: Suthan?

Suthan Sukumar: One query. Sure. Good morning, gents. One query for me is in your shopper pipeline. I feel you famous earlier within the remarks that it’s up over 20% for subsequent yr throughout all sectors. And it looks like your mixture of internet new enterprise appears to be choosing up as nicely year-over-year. Are you able to converse a bit bit about what’s underscoring that? What verticals and capabilities are you seeing success on the brand new enterprise aspect? And who’re you displacing?

Francois Boulanger: Who’s we’re displacing, I feel, we’re competing towards all the foremost gamers. In order you realize, so typically it may be one or the opposite. So we do not have essentially one specifically that we’re displacing. As for brand new enterprise, you are proper. Fairly good within the new enterprise. And I feel we’ll — it is a focus that we’re making an attempt to do increasingly more to win in new purchasers. And we expect that instance, as you realize, we received a giant contract final yr with Circle Okay on the retail aspect. And we proceed to see retail as one space the place we will win extra new enterprise as a result of, once more, they want some value financial savings and methods of lowering their value construction. And that is what we did there and we will showcase that to different purchasers. In order that’s our space. I feel monetary sector will nonetheless be fairly energetic on the managed companies aspect. And so we’re speaking with present but in addition new purchasers on the monetary sector aspect to see how we will showcase our managed companies and our offshore capabilities.

Suthan Sukumar: Okay. Nice. And one fast one for me. On SI&C, it is clearly nonetheless smooth, however on a full yr foundation, I feel it appears comparatively extra resilient than a few of your friends. Are you able to converse a bit bit about what adjustments are you seeing within the discretionary demand image now versus possibly a yr in the past? Any new pockets of power of weaknesses that you just’re saying?

Francois Boulanger: Nicely, I’d say on the power aspect, for certain, AI is a spot the place we’ve a whole lot of consulting and ask from purchasers assist them on the AI aspect. In order that’s a spot the place we’re seeing some development. And we expect that we are going to proceed to see some development on that aspect. Different locations like I used to be alluding in my speech, once we speak about cybersecurity, for instance, is one other place the place nonetheless a whole lot of demand on the enterprise consulting aspect methods to assist them with all of the threats that we’re seeing on the earth.

Suthan Sukumar: Okay. Nice. Thanks for taking my questions. I am going to cross the road.

Operator: There aren’t any additional questions at the moment. I’ll now flip the decision over to Kevin for closing remarks.

Kevin Linder: Thanks, Joelle, and thanks everybody for collaborating. As a reminder, a replay of this name can be out there both by way of our webcast or by dialing 1-888-660-6264 and utilizing the passcode 25981. As nicely a podcast of this name can be out there for obtain inside just a few hours. Observe-up questions might be directed to me at 1-905-973-8363. Thanks once more, everybody, and sit up for talking quickly.

Francois Boulanger: Thanks.

Operator: Women and gents, this concludes your convention name for in the present day. We thanks for collaborating and ask that you just please disconnect your traces.

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