Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CGI Inc (GIB, Financial) reported a revenue increase to $3.7 billion, up 1.3% year-over-year, with strong growth in segments like Northwest and Central East Europe and Asia Pacific.
- The company achieved a book-to-bill ratio of 117% for the quarter, with notable strength in US federal, UK, Australia, and Western and Southern Europe.
- Earnings before income taxes were $594 million, representing a margin of 16.2%, up 80 basis points year-over-year.
- CGI Inc (GIB) announced two strategic acquisitions, expanding its capabilities in Canada and the US federal government sector.
- The company initiated a dividend program, reflecting its strong financial position and commitment to returning value to shareholders.
Negative Points
- CGI Inc (GIB) experienced softness in certain verticals such as financial services and communication in Western and Southern Europe and North America.
- There is a continued slowdown in systems integration and consulting (SI&C) services, impacting overall growth.
- The company noted delays in the timing of decisions for stand-alone SI&C projects, reflecting cautious client spending.
- The macroeconomic environment remains dynamic, with clients exercising caution in their spending, affecting the pace of project conversions.
- CGI Inc (GIB) faced challenges in the French market due to a wait-and-see approach from clients amidst political uncertainties.
Q & A Highlights
Q: George, the dividend has been something that's been talked about for a while. Can you shed some color on why now is the right time to initiate the dividend?
A: George Schindler, President, CEO, Director: We've been discussing the dividend over the years. The Board determined that we could include the dividend as an added mechanism of returning value to our shareholders while maintaining our overall cash priorities to drive EPS growth. It's a matter of maturity. Steve Perron, CFO, added that the strong cash position allows for this without changing our strategy, which prioritizes internal investment and M&A.
Q: Any color on what you're seeing in the M&A environment?
A: George Schindler, President, CEO, Director: Valuations are holding even with PE being slightly more active. Many sellers believe this is the right time to combine entities. We are having discussions at all stages of our pipeline, including later stages, and are receiving more inbound calls, mostly from smaller companies. It's a pretty active environment.
Q: Can you touch on your comments about seeing incremental signs of stability ahead and the recovery in the demand environment?
A: George Schindler, President, CEO, Director: It's a combination. Discretionary spending picking up augments growth, but managed services projects are offsetting slower demand in SI&C. Clients are making decisions on digitization, and we play on both cost savings and growth sides. However, caution still prevails, especially on bigger deals.
Q: Regarding the Aeyon acquisition, does it come with any IP, and does it open new relationships in the US Fed space?
A: George Schindler, President, CEO, Director: Aeyon opens new avenues, particularly in national security, where spending is significant. They specialize in data analytics, business operations, finance, and logistics. They also bring complementary government-wide contract vehicles. No IP is involved; it's straight SI&C.
Q: Can you elaborate on the potential drivers of margins?
A: George Schindler, President, CEO, Director: Margin improvement comes from cost optimization and business mix, including managed services and global delivery. IP as a percentage of revenue is increasing. We still have tailwinds from cost optimization and continuous improvement opportunities in geographies and project execution.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
