CGI(GIB) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 fiscal 2026, the company reported revenue of CAD 4.1 billion, an increase of 7.7% year-over-year, or 3.4% when excluding foreign exchange impacts [5] - Adjusted EBIT was CAD 655 million, up 7.1% year-over-year, with a margin of 16.1%, down 10 basis points [9] - Adjusted net earnings were CAD 461 million, with a margin of 11.3%, and diluted EPS was CAD 2.12, an increase of 8% compared to Q1 last year [10] - Cash generated from operations was CAD 872 million, representing 21.4% of total revenue, with DSO improving to 37 days [10][11] Business Line Data and Key Metrics Changes - The APAC delivery center reported growth of 5.8%, driven by managed services [5] - The UK and Australia segment grew by 31% due to the acquisition of BJSS, enhancing the company's service offerings [5] - The Western and Southern Europe segment saw a growth of 9%, led by the acquisition of Apside [7] - Managed services had a book-to-bill ratio of 122%, indicating strong demand [8] Market Data and Key Metrics Changes - Bookings in the quarter reached CAD 4.5 billion, resulting in a book-to-bill ratio of 110% [7] - The U.S. commercial and state government segment had a book-to-bill ratio of 169% [7] - The government sector pipeline of opportunities increased by 30% compared to the previous year [16] Company Strategy and Development Direction - The company is focused on a build and buy strategy, emphasizing investments in AI and strategic acquisitions [12][22] - The capital allocation priorities include investing back into the business, pursuing accretive acquisitions, and share buybacks [12][22] - The company aims to leverage its local presence and global scale to enhance client relationships and service delivery [12][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the U.S. federal market despite recent shutdowns, viewing it as a long-term opportunity [34] - The company anticipates gradual improvement in various industries and geographies, driven by strong client demand for AI and digital transformation [28] - Management highlighted the importance of trust and industry knowledge in navigating the current geopolitical and economic landscape [27] Other Important Information - The board approved a quarterly cash dividend of CAD 0.17 per share, payable on March 20, 2026 [12] - The company has CAD 2.4 billion in capital resources available and a net debt leverage ratio of 1, indicating strong balance sheet capacity [12] Q&A Session Summary Question: Impact of AI volatility on acquisitions - Management stated that AI remains an enabler for future growth and does not change their M&A strategy [32][33] Question: U.S. federal government business outlook - Management believes the federal government remains a strong client despite recent shutdowns, viewing it as a long-term market [34] Question: Margins in U.S. federal business - Margins were impacted by the shutdown, but management expects improvement as operations normalize [40][41] Question: Vendor consolidation trends - Management noted an increase in vendor consolidation among clients, providing opportunities for the company [45][46] Question: Enterprise AI adoption cycle - Management indicated that while many companies have deployed AI tools, realizing outcomes requires addressing data quality and infrastructure challenges [49][56] Question: Internal AI use and margin improvement - Management confirmed that AI is already contributing to efficiency and margin improvements, with expectations for continued gains [60][61]