CGI Inc. Q4 FY2024 earnings call

CGI delivered strong Q4 results with $3.7 billion revenue. Key segments showed growth. Bookings were $3.8 billion with a book-to-bill ratio of 104%. Profitability was strong with adjusted EBIT margin 16.4%. Acquisitions included Momentum Consulting, Celero's credit union business, Aeyon, and CGI Federal. Client satisfaction was high with two key scores at record highs. Consultant engagement increased with more becoming shareholders. Focus on AI investments with multiple proof-of-concepts and GenAI initiatives.

In the fourth quarter of Fiscal 2024, CGI delivered $3.7 billion in revenue, up 4.4% year-over-year or 2% when excluding foreign exchange. The strongest segments were Northwest and Central East Europe at 7.5% constant currency growth, UK and Australia at 7.2%, Asia Pacific at 6.2%, and US Federal at 5%. IP continued to grow at a faster pace with 3.7% constant currency growth in the quarter, representing 22.9% of total revenue.

CGI expects to be more active in M&A over the next 12 months with a full M&A pipeline. Continued investment in AI with $1 billion plan, including training and hiring. Managed services to evolve partnership models with AI integration. IP to invest in solutions portfolio with embedded AI. Business and strategic IT consulting to focus on advisory services, cloud, cybersecurity, and AI.

Macro environment challenges and soft discretionary spending. Election impacts on US Federal spending with potential slowdowns. Softness in financial services and communications in some regions. Potential impact of tariffs on CGI Federal business, but no negative expected.

Q: Is CGI expected to be more active in acquisitions in the next 12 months?

A: Francois Boulanger said the M&A pipeline is full, with many prospects, but closing depends on agreement on price and making sense for CGI.

Q: What's the mix of business with AI/GenAI in the pipeline?

A: Francois Boulanger mentioned increasing proof-of-concepts and internal use of AI, with more in managed services and IP.

Q: How does CGI prepare for GenAI in terms of workforce?

A: $1 billion AI investment includes training for all partners and in-depth training for developers, with hiring of AI-skilled people.

Q: Color on Q4 bookings weakness?

A: Francois Boulanger cited lumpiness in bookings, US Federal election impact, and some contracts not hitting the quarter end.

Q: Evolution of CGI Federal business post-election?

A: Francois Boulanger expects no negative impact, with new administration needing IT to achieve priorities.

Q: Strength of Microsoft practice?

A: Francois Boulanger said Microsoft is a top partner, with use of tools like CoPilot, and CGI uses multiple technologies.

Q: Target multiples for acquisitions?

A: Steve Perron said acquisitions are not limited to one-time revenue, as seen with Aeyon, where they paid more than one-time revenue for accretive value.

Q: Demand environment for fiscal 2025?

A: Managed services strong, but business consulting still soft, with hope for bounce back in financial sector.

Q: AI impact on SI&C margin?

A: Francois Boulanger expects margin improvement with AI use in managed services and IP.

Q: M&A environment favorability?

A: Francois Boulanger said softer discretionary spending is opening M&A opportunities with more reasonable pricing.

Q: GenAI impact on purchasing decisions?

A: Francois Boulanger said GenAI is a driver for future growth, with clients needing CGI's expertise for proof-of-concepts.

Q: Emphasis on M&A under Francois Boulanger?

A: Francois Boulanger said M&A is part of build-and-buy strategy, with focus on accretive and disciplined acquisitions.

Q: AI infrastructure acquisitions?

A: Francois Boulanger said pure infrastructure acquisitions not of interest, but open to companies with infrastructure if accretive.

Q: H1B impact on onshore model?

A: Francois Boulanger said US Federal business is onshore/nearshore, so no issues with H1B changes.

Q: Client pipeline growth?

A: Client pipeline up over 20% in 2025, with success in retail, AI consulting, and cybersecurity.

Q: SI&C resilience vs peers?

A: Francois Boulanger said CGI's onshore/nearshore model and AI consulting are sources of resilience.