CGI(US:GIB)2023-11-08 18:44Financial Data and Key Metrics Changes - In Q4, the company reported revenue of $3.51 billion, an increase of 8% year-over-year, or 2.2% when excluding foreign exchange impact [30] - Earnings before income taxes were $558 million, up 14.8% year-over-year, with a margin of 15.9%, an increase of 90 basis points [33] - Net earnings improved to $414 million, up 14.4% year-over-year, with a diluted EPS of $1.76, representing a 16.6% increase year-over-year [34] Business Line Data and Key Metrics Changes - The company achieved $4 billion in bookings for the quarter, up 10% year-over-year, with a book-to-bill ratio of 114% [32] - Managed services accounted for 60% of total bookings, up from 52% in the prior year, indicating a shift towards longer-term recurring revenue [32] - Intellectual Property (IP) revenue growth was 4.1% in constant currency, with the majority from software as a service arrangements [31] Market Data and Key Metrics Changes - Constant currency growth was 3.4% in Europe and 1.1% in North America, with growth across four of five sectors, particularly in health and government [30] - Government sector revenue represented 37% of total revenue, up 200 basis points from the previous year, driven by increased spending on IT services [30][58] - The global backlog reached a record $26.1 billion, representing 1.8 times revenue, indicating strong future revenue potential [32] Company Strategy and Development Direction - The company plans to continue investing in end-to-end services and managed services to drive cost savings and digital transformation for clients [43] - M&A remains a strategic priority, with a focus on building scale and capabilities, particularly in AI and digital transformation [51][61] - The company initiated a cost optimization program aimed at improving operational efficiencies and reducing SG&A costs [35][57] Management's Comments on Operating Environment and Future Outlook - Management noted that clients are facing significant pressure from overlapping market dynamics, requiring them to reduce spending while progressing on digitization [41] - The company expects government investments to accelerate, providing a stable growth platform amid economic uncertainties [58] - Management expressed confidence in delivering double-digit EPS accretion and incremental margin expansion in fiscal 2024 [64] Other Important Information - The company reported cash provided by operating activities of $629 million, representing 17.9% of total revenue, an increase of 28.6% year-over-year [36] - The company has a strong balance sheet with a net debt to capitalization ratio of 20.4% and $3.1 billion in cash readily available [37] Q&A Session Summary Question: What is the outlook for constant currency growth given the strong managed services bookings? - Management indicated that while there is strength in managed services, there is still some softness in systems integration and consulting (SI&C) due to slower decision-making processes [70][80] Question: How does the company view the strength in the government vertical? - Management attributed the strength to increased government spending on IT services, particularly in response to new policy initiatives [58][81] Question: What are the expectations for margin expansion from the cost optimization initiatives? - Management expects the cost optimization program to drive higher efficiency and profitability, with a focus on automation and global delivery [57][81] Question: How is the company prioritizing M&A compared to investments in AI? - Management stated that both M&A and AI investments are prioritized, with M&A expected to enhance AI capabilities [104][105]