• Revenue: $3.8 billion, up 5.1% year-over-year or 2.7% in constant currency.
• Bookings: $4.2 billion for a book-to-sales ratio of 110%.
• Global Backlog: $29.8 billion, equivalent to 2 times revenue.
• Earnings Before Income Taxes: $592 million, margin of 15.6%, up 100 basis points year-over-year.
• Net Earnings: $439 million, margin of 11.6%, up 80 basis points year-over-year.
• Diluted EPS: $1.92, an increase of 15% year-over-year.
• Cash from Operations: $646 million, representing 17.1% of total revenue.
• Return on Invested Capital: 16.2%, up 30 basis points.
• Dividend: Quarterly cash dividend of $0.15 per share.

• Warning! GuruFocus has detected 5 Warning Sign with GIB.

Release Date: January 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• CGI Inc (NYSE:GIB) reported a revenue increase of 5.1% year-over-year, or 2.7% in constant currency, demonstrating strong financial performance.
• The company achieved a book-to-bill ratio of 110% in Q1, indicating robust demand for its services.
• Net earnings rose to $439 million, with a margin of 11.6%, up 80 basis points year-over-year.
• CGI Inc (NYSE:GIB) announced a new merger agreement in the UK, expanding its footprint and capabilities in key commercial industries.
• The company continues to generate strong cash flows, with $646 million in cash from operations, representing 17.1% of total revenue.

Negative Points

• European operations reported a revenue decline of 0.8% in constant currency, largely due to slower markets in Germany and France.
• IP revenue represented 21.6% of total revenue, down 40 basis points year-over-year due to recent business acquisitions.
• The company incurred $8 million in costs in Q1 related to restructuring in Europe, with an additional $42 million expected by Q3.
• There is ongoing pressure in the manufacturing sector, particularly in Europe, affecting discretionary spending.
• The effective tax rate increased to 29% from 26.1% last year, impacting net earnings.

Q & A Highlights

Q: Can you speak to your M&A pipeline and capacity? Do you need to pause to integrate recent acquisitions? A: No, we don't need to pause. The recent acquisitions in the UK and US are manageable due to our solid operations in these countries. Financially, we have a strong balance sheet and the capacity to deploy more capital, so future acquisitions are not hindered.

Q: Germany was mentioned as having softness. Is this a new trend, and is the revenue mix different there? A: The softness is not new and is largely due to the MRD sector's challenges in Europe. While there is short-term pressure on discretionary spending, we have signed significant managed services contracts in Germany, indicating ongoing interest in cost-saving solutions.

Q: Is there a new era of M&A, or has the strategy changed? A: It's not a new era; our strategy remains to grow through build and buy. The current market environment, with less private equity competition, presents more opportunities for acquisitions, which we aim to capture.

Q: Can you discuss the lumpiness in SI&C bookings and trends you're seeing? A: SI&C bookings increased this quarter, surpassing 100%. While there is pressure in Europe, particularly in consulting, we see an uptick in bookings, especially in the financial sector, as banks resume investments.

Q: What are the broader growth plans for the UK and Europe following the recent acquisition? A: The acquisition in the UK significantly expands our presence, particularly in the commercial sector. We aim to grow further in Europe, including Germany and France, by targeting strategic acquisitions that align with our long-term goals.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.