CGI Inc. Q1 FY2025 earnings call

• Julie Godin was appointed Executive Chair of CGI Board of Directors. Serge Godin is now Co-Chair focusing on transformational acquisitions. - Signed a new merger agreement with BJSS in the U.K. - Q1 revenue up 5.1% YOY; EPS accretion 15% adjusted. - Initiated cost realignment actions in Europe, incurring CAD8 million in Q1 with another CAD42 million expected by Q3. - Strong cash from operations at CAD646 million, 17.1% of total revenue. - Over 87% of consultants are shareholders; client satisfaction at 9.5 out of 10. - Bookings CAD4.2 billion, book-to-bill ratio 110%. - Extended NCIB program, approved quarterly dividend, and repurchased stock.

In Q1, CGI delivered CAD3.8 billion of revenue, up 5.1% year-over-year or 2.7% when excluding the impact of foreign exchange. In constant currency, U.S. federal grew 14%, Canada 5.9%, Asia-Pacific 5.2%, and U.K. and Australia 3.2%. North American operations grew at 6.9% while European operations were down 0.8% due to slower market conditions. IP revenue represented 21.6% of total revenue, down 40 basis points year-over-year. Margins were strongest in Asia-Pacific at 32.5%, Canada at 24.1%, and U.K. and Australia at 16.5%.

• Expect tax rate for future quarters to be in the range of 25.5% to 26.5%. - Continues to pursue accretive acquisitions, with recent merger with BJSS and ongoing interest in other opportunities. - Dividend of CAD0.15 per share payable on March 21, 2025.

• Macro-economic slowdown and geopolitical uncertainty in Europe impacting discretionary spending. - Softness in the MRD sector in Europe affecting short-term SI&C spending. - Integration challenges of recent acquisitions potentially impacting margins.

Q: Paul Treiber asked about M&A pipeline and capacity, and softness in Germany.

A: Francois Boulanger said no pause in M&A, Germany has short-term pressure but still opportunities.

Q: Jerome Dubreuil asked about M&A era and strategy tweaks.

A: Francois Boulanger said strategy is build and buy, environment more open for acquisitions.

Q: Surinder Thind asked about lumpiness in bookings and GCCs.

A: Francois Boulanger said SI&C bookings uptick, GCCs growing demand.

Q: Divya Goyal asked about U.K. acquisition and U.S. federal.

A: Francois Boulanger said U.K. acquisition boosts presence, U.S. federal has opportunities with cost reduction needs.

Q: Robert Young asked about agentic AI and infrastructure.

A: Francois Boulanger said agentic AI has implementation, infrastructure is part of end-to-end services.

Q: Thanos Moschopoulos asked about U.K. acquisition metrics and margins.

A: Francois Boulanger said wait for MD&A, SI&C heavy but managed services potential.

Q: Stephanie Price asked about U.S. federal margins and Europe.

A: Francois Boulanger said U.S. federal margin pressure from Aeyon integration, Europe has manufacturing and government concerns.

Q: Richard Tse asked about acquisition capital and brand elevation.

A: Francois Boulanger said no acquisition target, brand elevation long-term.

Q: Tyler DuPont asked about bookings and cash flow.

A: Francois Boulanger said bookings have momentum, cash flow conversion expected around 15% long-term