Q2 2024 CGI Inc Earnings Call

Operator: Good morning, ladies and gentlemen. Welcome to CGI's second quarter fiscal 2024 conference call. I would now like to turn the meeting over to Mr. Kevin Linder, SVP of Investor Relations. Please go ahead, Mr. Linder.

Good morning, ladies and gentlemen, welcome to Cgi's second quarter fiscal 2024 conference call I would not like to turn the meeting over to Mr. Kevin Linda S. V. P of Investor Relations. Please go ahead Mr. Linda.

Kevin Morris Linder: Thank you, Joelle, and good morning. With me to discuss CGI's second quarter fiscal 2024 results are George Schindler, our President and CEO, and Steve Perron, Executive Vice President and CFO. This call is being broadcast on cgi.com and recorded live at 9am Eastern Time on Wednesday, May 1st, 2024. Supplemental slides, as well as a press release we issued earlier this morning, are available for download along with our Q2 MD&A, financial statements, and accompanying notes, all of which have been filed with both CedarPlus and Edgar.

Kevin Morris Linder: Thank you Joelle and good morning, with me to discuss <unk> second quarter fiscal 2024 results are George Schindler, our president and CEO and Steve <unk> Executive Vice President and CFO.

Kevin Morris Linder: Call is being broadcast on CGI Dot Com and recorded live at nine a M. Eastern time on Wednesday May one 2024.

Kevin Morris Linder: Supplemental slides as well as the press release, we issued earlier. This morning are available for download along with our Q2 MD&A financial statements and accompanying notes all of which have been filed with both SEDAR plus an acre.

Kevin Morris Linder: Please note that some statements made on the call may be forward-looking. Actual events or results may differ materially from those expressed or implied, and CGI disclaims any intent or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Kevin Morris Linder: Please note that some statements made on the call may be forward looking.

Kevin Morris Linder: Actual events or results may differ materially from those expressed or implied and CGI disclaims any intent or obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise.

Kevin Morris Linder: The complete safe harbor statement is available in both our MD&A and press release, as well as on CGI.com. We recommend our investors read it in its entirety. We are reporting our financial results in accordance with International Financial Reporting Standards, or IFRS. As always, we will also discuss non-GAAP performance measures, which should be viewed as supplemental. The MD&A contains definitions of each one used in our reporting. All of the dollar figures expressed on this call are Canadian, unless otherwise noted. I'll now turn it over to Steve to review our Q2 financials, and then George will comment on our business and market outlook.

Kevin Morris Linder: <unk> Safe Harbor statement is available in both our MD&A and press release as well as on CGI Dotcom, we recommend our investors read it in its entirety.

Kevin Morris Linder: We are reporting our financial results in accordance with international financial reporting standards or <unk> as always we will also discuss non-GAAP performance measures, which should be viewed as supplemental.

Kevin Morris Linder: The MD&A contains definitions of each one used in our reporting.

Kevin Morris Linder: All of the dollar figures expressed on this call are Canadian unless otherwise noted.

Kevin Morris Linder: I'll now turn it over to Steve to review, our Q2 financials, and then George will comment on our business and market outlook Steve.

Steve Perron: Thank you, Kevin. And good morning, everyone.

Steve: Thank you, Kevin and good morning, everyone.

Steve Perron: I'm pleased to share with you the results of our second quarter of Fiscal 2024. In Q2, we delivered $3.7 billion of revenue, up 0.7% year over year, and stable when excluding the impact of foreign exchange. The strongest CGI segments were... UK and Australia at 5.1% constant currency growth, and Asia Pacific at 5%. Northwest and Central East Europe with 4.2% and U.S. commercial and state government at 4.1%. From an industry perspective, we have the highest growth in government with 5.7% constant currency growth, while we continue to experience softness in industries more sensitive to interest rates, particularly in the banking subsectors. In addition, the majority of our geographies were negatively impacted by one less billable day in the quarter.

Steve: I am pleased to share with you the results of our second quarter fiscal 2024.

Steve: In Q2, we delivered $3 $7 billion of revenue.

Steve: 0.7%.

Steve: Over a year or stable when excluding the impact of foreign exchange the.

Speaker Change: The strongest CGI segments, where.

Speaker Change: UK and Australia at five 1% constant currency growth.

Steve: Asia Pacific at 5%.

Steve: North West and Central East Europe, with four 2% in U S commercial and state government at four 1%.

Steve: From an industry perspective, we had the highest growth in government with five 7% constant currency growth, while we continue to experience softness in industries more sensitive to enter risk rate, particularly in the banking sub sectors.

Steve: In addition, the majority of our geographies were negatively impacted by one less billable day in the quarter.

Steve Perron: IP as a percentage of total revenue was 22% in the quarter. Our IP continues to resonate with clients, with the vast majority contracted as longer-term recurring engagements with over 60% delivered as software as a service. Our overall bookings in the quarter were $3.8 billion for a book-to-bill ratio of 100% and 113% on a trailing 12-month basis. Booking ratios for the quarter were led by Finland, Poland, and the Baltics at 127%. Western and Southern Europe at 115%, and the UK and Australia at 109%.

Steve: IP as a percentage of total revenue was 22% in the quarter.

Steve: Our IP continues to resonate with clients with vast majority contracted as longer term recurring engagements with over 60% delivered as software as a service.

Steve: Our overall bookings in the quarter were $3 8 billion for a book to bill ratio of 100% and 113% on a trailing 12 month basis.

Steve: Booking ratios for the quarter were led by.

Steve: Finland, Poland and Baltics at 127%.

Steve: Western and southern Europe.

Steve: 115%.

Steve: In UK and Australia at 109%.

Steve Perron: Global backlog reached $26.8 billion, or 1.9 times revenue, helping to support our overall business resilience. Turning to profitability, We continue to manage with discipline despite the current macro environment, delivering solid year-over-year improvements. Earnings before income taxes were $577 million for a margin of 15.4%, up 20 basis points year over year. Adjusted EBIT in the quarter was $628 million, up $28 million year over year. This represents a margin of 16.8%, up 60 basis points year over year, mainly as a result of a larger proportion of IP-based revenues and benefits being realized from our previously announced cost optimization program. This program, which was primarily focused on SG&E, has now concluded as planned.

Steve: Global backlog reached $26 8 billion or one nine times revenue, helping to support our overall business resilience.

Steve: Turning to profitability.

Steve: We continue to manage with discipline. Despite the current macro environment delivering solid year over year improvements.

Steve: Earnings before income taxes were $577 million for a margin of 15, 4% up 20 basis points year over year.

Steve: Adjusted EBIT in the quarter was $628 million up $28 million year over year.

Steve: This represents a margin of 16, 8% up 60 basis points year over year.

Steve: As a result of a larger proportion of IP based revenues and benefits being realized from our previously announced cost optimization program.

Steve: This program, which was primarily focused on SG&A as now concluded as planned.

Steve Perron: We delivered strong margin geographically as follows: Asia-Pacific at 31%, North America at 17%, and Europe at 14%.

Steve: We delivered strong margin geographically as follows.

Steve: Asia Pacific at 31%.

Steve: North America at 17% and.

Steve: And Europe at 14%.

Steve Perron: Our effective tax rate in the quarter was 26.1%, and we expect our tax rate for future quarters to be in the range of 25 to 26.5%. Net earnings were $427 million, for a margin of 11.4%, a 10 basis points improvement year-over-year. Diluted EPS was $1.83, representing an increase of 4% year-over-year when compared to $1.76 in Q2 last year. When excluding specific items, net earnings improved to $459 million, up $24 million when compared to Q2 last year, for a margin of 12.3%, up 60 basis points. Specific items for the quarter were mainly expenses associated with the cost optimization program. On the same basis, diluted EPS was $1.97, an accretion of 8.2% when compared to Q2 last year.

Steve: Our effective tax rate in the quarter was 26, 1% and we expect our tax rate for future quarters to be in the range of 25 to 26, 5%.

Steve: Net earnings were $427 million for a margin of 11, 4% up 10 basis points year over year diluted EPS was $1 83, representing an increase of 4% year over year when compared to $1 76.

Steve: In Q2 last year.

Steve: When excluding specific items net earnings improved to $459 million up $24 million when compared to Q2 last year.

Steve: Our margin of 12, 3% up 60 basis points.

Steve: Specific items for the quarter were mainly expenses associated with the cost optimization program.

Steve: On the same basis diluted EPS was $1 97, and the accretion of eight 2% when compared to Q2 last year.

Steve Perron: In the quarter, cash provided by operating activities was $502 million, up 7% year-over-year, representing 13.4% of total revenue. On a trading 12-month basis, cash provided by operating activities was $2.1 billion, also up 7% year-over-year, representing 14.6% of total revenue. The ESO was 40 days in the quarter, five days better than our target, mainly due to quality delivery and our mix of business. As a reminder, Q2 generally produces the lowest DSO each year due to a higher volume of IP maintenance payments from clients.

Steve: In the quarter cash provided by operating activities was $502 million up 7% year over year, representing 13, 4% of total revenue.

Steve: On a trailing 12 month basis cash provided by operating activities was $2 $1 billion also up 7% year over year, representing 14, 6% of total revenue.

Steve: DSO was 40 days in the quarter five days better than our target.

Steve: Mainly due to quality delivery and our mix of business.

Speaker Change: As a reminder, Q.

Steve: Q2, generally produces the lowest DSO each year due to a higher volume of IP maintenance payments from clients.

Steve Perron: In Q2, we used our cash to invest $103 million in our business, including in AI, and invest $260 million to buy back our stock. In the quarter, we continue to deliver a strong return on invested capital at 15.9%, up 30 basis points year over year, demonstrating our proficiency and discipline on the deployment of capital, looking ahead with $2.8 billion of cash ready to be deployed and access to more if needed. Our capital allocation priorities are, first, investing in our business.

Steve: In Q2.

Steve: We used our cash to invest $103 million into our business, including an AI.

Steve: And <unk> $260 million to buyback our stock.

Steve: In the quarter, we continued to deliver a strong return on invested capital at 15, 9% up 30 basis points year over year, demonstrating our proficiency and discipline on deployment of capital.

Steve: Looking ahead with two $8 billion of cash readily available and access to more if needed.

Steve: Our capital allocation priorities are first investing in our business.

Steve Perron: Second, pursuing and closing accretive acquisitions by leveraging CGI's strong balance sheets, evidenced by a leverage ratio of 1.1 and a net debt to capitalization ratio of 16.4. Finally, as appropriate, cash will be used to repurchase our stock or pay down our debt. Now, I will turn the call over to George to further discuss the insights on the quarter and outlook for our business and markets. George.

Steve: Second pursuing and closing accretive acquisitions by leveraging cgi's strong balance sheets, evidenced by a leverage ratio of one one and then net debt to capitalization ratio of 16 four.

Steve: Finally, as appropriate cash will be used to repurchase our stock and are paying down our debt.

Steve: Now I will turn the call over to George to further discuss the insights on the quarter and the outlook for our business and markets George.

George D. Schindler: Thank you, Steve, and good morning, everyone. In the second quarter, our team again embodied CGI's discipline and agility by prioritizing actions for delivering shareholder value and partnering with clients to position CGI for profitable growth opportunities. With continued strong profitability and cash generation, our financial strength reflects CGI's resilience and capacity to invest in our build and buy growth strategy. Our team's disciplined management practices contributed to our strong balance sheet, even as macroeconomic uncertainty continued to impact some of the industries where our clients operate.

George D. Schindler: Thank you, Steve and good morning, everyone.

George D. Schindler: In the second quarter, our team again and body <unk> discipline, and agility by prioritizing actions for delivering shareholder value and partnering with clients to position CGI for profitable growth opportunities.

George D. Schindler: With continued strong profitability and cash generation, our financial strength reflects cgi's resilience and capacity to invest in our build and buy growth strategy.

George D. Schindler: Our team's disciplined management practices contributed to our strong balance sheet.

George D. Schindler: Even as macroeconomic uncertainty continue to impact some of the industries, where our clients operate.

George D. Schindler: Margin improved as we grew the mix of recurring revenue, with IP revenue up 6.5% in constant currency and managed services revenue up 2.1% on the same basis. Additionally, planned actions completed through the cost optimization program also contributed to the margin experience.

George D. Schindler: Margin improved as we grew the mix of recurring revenue with IP revenue up six 5% in constant currency and managed services revenue up two 1% on the same basis.

George D. Schindler: As planned actions completed through the cost optimization program also contributed margin expansion.

George D. Schindler: Utilization was up year over year as we continue to align talent to those industries that are growing, such as government, transportation, and utilities. Delivery quality remained high, and client satisfaction again increased across every dimension we measure. Clients continue to partner with us to address their most complex enterprise and ecosystem-wide digitization initiatives. This operational excellence has also led to deeper employee engagement, as a proportion of employees who are shareholders rose to 87%, further expanding our culture of ownership, which is a differentiator for client partnerships and CGI talent attraction and retention.

George D. Schindler: Utilization was up year over year as we continued to align talent to those industries that are growing such as government transportation and utilities.

George D. Schindler: Delivery quality remained high and client satisfaction again increased across every dimension we measure.

George D. Schindler: Clients continue to partner with us to address their most complex enterprise and ecosystem wide digitization initiatives.

George D. Schindler: This operational excellence also lead to deeper employee engagement as a proportion of employees, who are shareholders rose to 87%.

George D. Schindler: Further expanding our culture of ownership, which is a differentiator for client partnerships and CGI talent attraction and retention.

George D. Schindler: In Q2, the diversity of new client awards affirmed CGI's positioning as the go-to partner for driving outcomes; large project awards contributed to the higher proportion of SINC bookings in the quarter. We also saw increasing demand for our emblematic business and strategic IT consulting offering, including CGI's framework for responsible use of AI, as well as change management and CIO advisory services. Client demand for managed services remains robust, in line with the buying trends we have seen over the past year.

George D. Schindler: In Q2, the diversity of new client awards affirmed <unk> positioning as the go to partner for driving outcomes.

George D. Schindler: Large project awards contributed to the higher proportion of <unk> bookings in the quarter. We also saw increasing demand for our emblematic business and strategic consulting offerings, including Cgi's framework for responsible use of AI as well as change management and CIO Advisory services.

George D. Schindler: Client demand for managed services remains robust in line with the buying trends, we have seen over the past year importantly on a trailing 12 month basis. The managed services bookings were up $1 6 billion compared to the same period, a year ago for 21% increase.

George D. Schindler: Importantly, on a trailing 12-month basis, managed services bookings were up $1.6 billion compared to the same period a year ago, for a 21% increase. However, we do see clients continue to exercise caution in their spending on IT services, which is most acute in the banking and manufacturing subset.

George D. Schindler: We do see clients continue to exercise caution and they're spending on it services, which is most acute in the banking and manufacturing Subsectors. However.

George D. Schindler: However, this cautionary approach is not diminishing clients' interest across every industry to explore with CGI the opportunities for cost efficiencies through managed services and for ROI-led system integration projects. We also see an industry-wide trend related to timing of decisions, notably delays for large engagements with enterprise clients. We remain well positioned as the partner of choice to help clients achieve the tangible and trusted business outcomes they seek. Examples of awards in the quarter included Local Tapiola, one of the largest insurance and financial services companies in Finland, extended its strategic managed services partnership with CGI for five years in an agreement valued at $284 million.

George D. Schindler: However, this cautionary approach is not diminishing clients' interests across every industry.

George D. Schindler: Floor with CGI the opportunities for cost efficiencies through managed services and for ROI led system integration project.

George D. Schindler: We also see an industry wide trend related to timing of decisions, notably in delays for large engagements with enterprise clients.

George D. Schindler: We remain well positioned as the partner of choice to help clients achieve tangible and trusted business outcomes. They seek.

George D. Schindler: Example awards in the quarter included local copy Ola one of the largest insurance and financial services companies in Finland extended their strategic managed services partnership with CGI for five years, and an agreement valued at $284 million.

George D. Schindler: CGI will apply new technologies, including AI and automation, to help drive operational efficiencies across their enterprise. The Digital Department of the UK Government Cabinet Office appointed CGI as a strategic digital transformation delivery partner in an agreement valued at $162 million. As part of this new partnership, CGI will provide a range of consulting, data, and digital services to help the government innovate and drive value from digitization. The U.S. Department of State's Bureau of Consular Affairs renewed its 10-year agreement with CGI to deliver visa services across nine countries in the Asia-Pacific region.

George D. Schindler: CGI will apply new technologies, including AI and automation to help drive operational efficiencies across their enterprise.

George D. Schindler: The digital department of the UK government Cabinet office appointed CGI as a strategic digital transformation delivery partner and an agreement valued at $162 million.

George D. Schindler: As part of this new partnership <unk>.

George D. Schindler: <unk> will provide a range of consulting data and digital services to help the government innovate and drive value from Digitization.

George D. Schindler: The U S Department of state's Bureau of Consular Affairs renewed its 10 year agreement for CGI to deliver visa services across nine countries in the Asia Pacific region.

George D. Schindler: Under the $75 million award, CGI will continue to leverage CGI Atlas 360, our AI-powered customer relationship management and business process IP to help the Bureau efficiently facilitate these applications, and the City of New York expanded its partnership with CGI in a five-year base plus two option years agreement to maintain the city's parking violation system, which runs on CGI's Advantage Collections IP platform. Under this contract, CGI will partner with the city's Department of Finance to administer the adjudication, payment, and collection processes for summons violations issued by the city.

George D. Schindler: Under the $75 million award, we will continue to leverage CGI Atlas III 60, our AI powered customer relationship management and business process IP to help the bureau efficiently facilitate piece of applications.

George D. Schindler: And the city of New York expanded its partnership with CGI and our five year base plus two option year agreement to maintain the city's parking violations system, which runs on <unk> advantage collection IP platform.

George D. Schindler: Under this contract CGI will partner with the city's department of finance to administer the adjudication payment and collection processes for summons violations issued by the city.

George D. Schindler: Through the use of the CGI platform, the city expects to collect nearly $1 billion in annual revenue. Looking ahead now to the demand environment Client budgets indicate continued investment in digitization over the next year, according to CGI's most recent proprietary research. When we asked clients about their budget plans, more than 70% indicated they intend to sustain or increase their IT budgets. CGI's pipeline over the next year validates this finding as the value of new opportunities grew by nearly 30% on a year-over-year basis.

George D. Schindler: Through the use of the CGI platform.

George D. Schindler: <unk> expects to collect nearly $1 billion in annual revenue.

George D. Schindler: Looking ahead now to the demand environment.

George D. Schindler: Client budgets indicate continued investments in digitization over the next year. According to CGI as most recent proprietary research.

George D. Schindler: When we ask clients about their budget plans more than 70% indicated they intend to sustain or increase their it budgets.

George D. Schindler: <unk> pipeline over the next year validates this finding as the value of new opportunities grew by nearly 30% on a year over year basis.

George D. Schindler: This overarching finding is part of the preliminary insights we've identified based on more than 1,800 discussions with current and prospective clients. More than 80% of our discussions were with C-level business and IT executives at organizations located in every geography in which we operate. These annual Voice of Our Clients discussions were initiated during the second quarter as part of our strategic planning process and concluded just a few weeks ago.

George D. Schindler: This overarching finding as part of the preliminary insights we've identified based on more than 800 discussions with current and prospective clients.

George D. Schindler: More than 80% of our discussions were with C level business and it executives at organizations located in every geography in which we operate.

George D. Schindler: Annual voice of our clients discussions were initiated during the second quarter as part of our strategic planning process and concluded just a few weeks ago.

George D. Schindler: There are three preliminary findings that we see shaping client demand over the next 12 months. These findings underscore the tight alignment between CGI's current investment priorities and those of our clients. First, clients across industries have indicated their intent to rebalance their business priorities from primarily cost savings to a renewed focus on also driving revenue growth. Second, executives noted that the alignment gap between business and IT within their organizations has largely been eliminated.

George D. Schindler: There are three preliminary findings that we see shaping client demand over the next 12 months.

George D. Schindler: These findings underscore the tight alignment between <unk> current investment priorities and those of our clients.

George D. Schindler: <unk> clients across industries have indicated their intent to rebalance their business priorities from primarily cost savings to our renewed focus on also driving revenue growth.

George D. Schindler: Second executives noted that the alignment gap between business and it within their organizations as largely been eliminated.

George D. Schindler: And digital leaders in every industry has significantly widen the gap with their peers and realizing the benefits of Digitization.

George D. Schindler: And, digital leaders in every industry have significantly widened the gap with their peers in realizing the benefits of digitization. Relating to the first finding, business executives globally cited driving revenue growth as their top priority for the next year. This is closely followed by the need to drive innovation and introduce new products and services. Both of these priorities are new to the Top 5 this year.

George D. Schindler: Relating to the first finding business executives globally cited driving revenue growth as their top priority for the next year. This is closely followed by the need to drive innovation and introduce new products and services both of these priorities our news.

George D. Schindler: <unk> this year.

George D. Schindler: Well, these top business priorities are growth-oriented. Business and IT executives maintain their focus on modernization, optimization, and Cost Contro, each of which ranked within the top five priorities across most industry sectors.

George D. Schindler: With these top business priorities are growth oriented business and it executives maintained their focus on modernization optimization.

George D. Schindler: Cost control.

George D. Schindler: <unk> ranked within the top five priorities across most industry sectors.

George D. Schindler: This resurgence and growth as a client priority, along with continued focus on efficiencies, is well aligned to CGI's end-to-end services and solutions portfolio. We expect this dual focus client agenda to drive an expansion of new opportunities for both SINC and Holistic Managed Services over the coming year. Moving to the second preliminary finding of our client interviews, business and IT are now tightly aligned. Client executives noted that the alignment gap has effectively been eliminated.

George D. Schindler: This resurgence in growth is a client priority along with continued focus on efficiencies as well aligned to Cgi's end to end services and solutions portfolio.

George D. Schindler: We expect this dual focus client agenda to drive an expansion of new opportunities for both Si and C and holistic managed services over the coming year.

George D. Schindler: Moving to the second preliminary finding of our client interviews business in it or now tightly aligned as client executives noted that the alignment gap has effectively been eliminated.

George D. Schindler: Over the past six years of research, this is the first time there's been such a steep increase in the alignment ratings, indicating a new shared agenda between business and IT teams. We believe the primary driver for this finding is the combination of business efficiency focus and the promising potential of digital technologies, including AI and cloud. For CGI, this alignment is expected to generate larger value engagements as business and IT address enterprise transformations to integrate technology and operations.

George D. Schindler: Over the past six years of research. This is the first time there has been such a steep increase in the alignment ratings, indicating a new shared agenda between business and it teams.

George D. Schindler: We believe the primary driver for this finding is the combination of business efficiency focus and the promising potential of digital technologies, including AI and cloud.

George D. Schindler: For CGI. This alignment is expected to generate larger value engagements as business and it addressed enterprise transformations to integrate technology and operations, we see early signs of larger value opportunities within our pipeline as the average deal size increased significantly for enterprise clients as compared to this time lag.

George D. Schindler: We see early signs of larger value opportunities within our pipeline as the average deal size increased significantly for enterprise clients as compared to this time last year. And lastly, digital leaders are increasingly realizing the benefits of digitization and widening the gap compared to those organizations in the earlier stages.

George D. Schindler: Last year.

George D. Schindler: And lastly, digital leaders are increasingly realizing the benefits of digitization and widening the gap compared to those organizations and the earlier stages.

George D. Schindler: This enables digital leaders to accelerate investments in driving revenue growth. Our findings show these digital leaders are more successful in expanding their data strategies, modernizing legacy systems and applications, driving agility into their business models through a higher reliance on managed services, and implementing advanced technologies, including generative AI. For digital leaders, this will drive increasing demand for all CGI services as they reinvest savings garnered from their modernization and optimization initiatives into new capital spending to drive future growth.

George D. Schindler: This enables digital leaders to accelerate investments in driving revenue growth.

George D. Schindler: Our findings showed these digital leaders are more successful in expanding their data strategies modernizing legacy systems and applications driving agility into their business models through a higher reliance on managed services and implementing advanced technologies, including generative.

George D. Schindler: For digital leaders this will drive increasing demand for all CGI services as they reinvest savings garnered from the modernization and optimization initiatives into new capital spending to drive future growth.

George D. Schindler: For those organizations in the earlier stages of their digitization, the expanding gap in producing ROI will continue to generate new demand for CGI's end-to-end services, with a stronger emphasis on transformative managed services and the full suite of our IP business solutions. These three preliminary findings are connected by the continuing critical role of technology and digital acceleration.

George D. Schindler: And for those organizations in the earlier stages of their digitization, expanding gap and producing ROI, we'll continue to generate new demand for <unk> end to end services.

George D. Schindler: A stronger emphasis on transformative managed services and the full suite of our IP business solutions.

George D. Schindler: These three preliminary findings are connected by the continuing critical role of technology and digital acceleration.

George D. Schindler: Again this year, nearly three-quarters of our clients cited digital acceleration as the most impactful macro trend for their organization, with CEOs rating the impact the highest. Not surprisingly, the rise in client interest in AI and Gen AI solutions amplifies the importance of digitization across all aspects of society. CGI continues to progress our AI investments, focusing first on talent development and hiring, which is already enabling us to enhance our end-to-end service offerings and strengthen our operations.

George D. Schindler: Again this year nearly three quarters of our clients cited digital acceleration as the most impactful macro trend for their organization.

George D. Schindler: The CEO is rating the impact the highest.

George D. Schindler: Not surprisingly the rise in client interest for AI and <unk> solutions amplifies the importance of digitization across all aspects of society.

George D. Schindler: CGI continues to progress our AI investments focusing first on talent development and hiring which is already enabling us to enhance our end to end service offerings.

George D. Schindler: And strengthen our operations.

George D. Schindler: For example, we are improving the quality and speed of service delivery and software development for our clients through the use of Gen-AI, embedding AI across our IP portfolio, and leveraging Gen-AI for more efficient development and maintenance of our 150 plus business solutions. Leveraging Gen AI to enhance our bid and proposal capacity, and experimenting and applying Gen-AI to optimize internal processes and transactions, including in our procurement, risk, and HR functions. In Q2, our bookings that integrated AI technologies were again over $200 million, including wins with a large US financial and mortgage institution to create a cohesive gen AI strategy to drive portfolio wide technical capabilities, the global car manufacturer to design and create data and AI platforms and products, multiple European space industry clients to leverage real time AI to improve data transmission rates in lunar and deep space missions, and a multinational telecommunications company to deliver AI powered solutions for cost savings and improve customer satisfaction.

George D. Schindler: For example, we are improving the quality and speed of service delivery and software development for our clients through the use of Jenna.

George D. Schindler: Embedding AI across our IP portfolio, and leveraging <unk> for more efficient development and maintenance of our 150 plus business solutions.

George D. Schindler: Leveraging <unk> AI to enhance our bid and proposal capacity in.

George D. Schindler: And experimenting and implying gen AI to optimize internal processes and transactions, including in our procurement risk and HR functions.

George D. Schindler: In Q2, our bookings that integrated AI technologies, where again over $200 million.

George D. Schindler: Including wins with a large U S financial and mortgage institution to create a cohesive <unk> strategy to drive portfolio wide technical capabilities.

George D. Schindler: The global car manufacturer to design and create data and AI platforms and products.

George D. Schindler: Multiple European space industry clients to leverage real time, AI to improve data transmission rates and lunar and deep space missions and.

George D. Schindler: And a multinational telecommunications company to deliver AI powered solutions for cost savings and improve customer satisfaction.

George D. Schindler: Notably, bookings in the quarter utilizing our global alliance partnerships are up double digits year over year. Our client interview findings highlight that overall implementation of Gen AI remains in the early and experimental stages, but it is ubiquitous, with nearly 80% of clients stating that they are actively exploring AI technologies. In line with this demand, CGI's active engagements that incorporate AI continue to increase across all lines of search.

George D. Schindler: Notably bookings in the quarter utilizing our global alliance partnerships are up double digit.

George D. Schindler: Year over year basis.

George D. Schindler: Our client enter your findings highlight that overall implementation of journey remains in the early and experimental stages, but it is ubiquitous with nearly 80% of client, stating that they are actively exploring AI technologies.

George D. Schindler: In line with this demand cgi's active engagements that incorporate AI and continue to increase across all lines of service.

George D. Schindler: Turning to the buy side of our profitable growth strategy, we continue to prioritize investments in M&A to deepen our resilience and serve as a catalyst for future organic growth. We are in active dialogue with merger targets at each stage of our pipeline. We remain committed to merging with like-minded companies that are complementary to our geographic footprint, client base, and end-to-end portfolio capability. Our strategy remains focused on a range of merger opportunities from natural market to transformation.

George D. Schindler: Turning to the buy side of our profitable growth strategy, we continue to prioritize investments and M&A to deepen our resilience and serve as a catalyst for future organic growth. We are in active dialogue with merger targets at each stage of our pipeline.

George D. Schindler: Remain committed to emerging with like minded companies that are complimentary to our geographic footprint client base and <unk>.

George D. Schindler: <unk> portfolio of capabilities.

George D. Schindler: Our strategy remains focused on a range of merger opportunities for metro market transformation.

George D. Schindler: As always, we will be disciplined to make sure that all mergers create value for each stakeholder. Our operational strength, stability, and financial capacity will enable us to move quickly with discipline on the right opportunity. In closing, now more than ever, CGI's culture, capabilities, and commitment to deliver tangible and trusted business outcomes are highly valued by clients as they navigate the current market environment. We are well positioned to remain a partner and expert of choice for clients, an empowering environment for our consultants and professionals, an engaged, ethical, and responsible corporate citizen, and an investment of choice for our shareholders.

George D. Schindler: As always we will be disciplined to make sure that all mergers create value for each stakeholder.

George D. Schindler: Our operational strength stability and financial capacity will enable us to move quickly with discipline on the right opportunities.

George D. Schindler: In closing now more than ever Cgi's culture capabilities and commitment to deliver tangible and trusted business outcomes are highly valued by clients as they navigate the current market environment.

George D. Schindler: We are well positioned to remain a partner and expert of choice for clients and empowering environment for our consultants and professionals and engaged ethical and responsible corporate citizen.

George D. Schindler: <unk> of choice for our share.

George D. Schindler: Given our operational strength, resilient model, talented team, and the alignment of our priorities with those of our clients, we remain committed to driving shareholder value through the disciplined execution of our strategy. Thank you for your interest and support. Now, Kevin, we'll go to the questions.

George D. Schindler: Given our operational strength resilient model talented team and the alignment of our priorities with those of our clients, we remain committed to driving shareholder value through the disciplined execution of our strategy.

Speaker Change: You for your interest and support let's go to the questions now Kevin.

Kevin Morris Linder: Thanks, George. If you're well, we can now poll for questions.

Speaker Change: George well, we can now pull for questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Richard Tse with National Bank Financial. Your line is now open.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone, you'll hear a prompt that Johan has been raised should you wish to decline from the polling process. Please press star followed by the Q. If you are using a speaker phone. Please lift the handset before pressing any keith.

Speaker Change: First question comes from Richard Tse with National Bank Financial Your line is now open.

Richard Tse: Yes, George. George, I was wondering if you could maybe talk about, you know, the extent of kind of expectations for a second half pickup that are predicated on sort of rates coming down across the board. Like, you did a great setup in terms of the opportunity down the road. I'm just kind of curious to see, you know, in the shorter term, what's sort of really driving that pickup here.

Richard Tse: Yes. Thank you.

Richard Tse: George I was wondering if you could maybe talk about the extent of kind of expectations for a second half pickup that are predicated on sort of rates coming down across the board.

Richard Tse: That's a great setup in terms of the opportunity down the road I'm, just kind of curious to see.

Richard Tse: Short term, what's really driving that pickup here.

George D. Schindler: Yeah, no, it's a great question. I don't necessarily have the clarity that I'd like to have on that. The green shoots are increasing in most industries and geographies for new project work, but they're just not uniform or consistent right now. So in the short term, it really is still overall managed services and IP demand that's generating the opportunities. But, you know, as I mentioned, it's still offset by some cautionary spending SINC and overall slow procurement decision making. So, and even project startup. So it's just not it's not uniform yet. We don't have that that clarity of visibility.

George D. Schindler: Yes, no it's a.

Speaker Change: Great question.

Speaker Change: Not have necessarily the clarity that I would like to have on that.

Speaker Change: The green shoots are increasing in most industries and geographies for new project work, but theyre, just not uniform or consistent right now so the short term. It really is still overall managed services and IP demand as what's what's generating.

Speaker Change: The opportunities but.

Speaker Change: As I mentioned.

Speaker Change: It's still offset by some cautionary spending.

Speaker Change: And overall slow procurement decision, making so and even project startups. So it's just not it's not uniform yet and we don't have that.

Speaker Change: The clarity of visibility.

George D. Schindler: Okay, fair enough. You've obviously done a very good job at taking margins up over the course of the past few years. Has your business changed in the way the mix of service delivery, meaning sort of on a geographic basis, are more customers willing to sort of offshore to get more attractive pricing? Or is it pretty much the same as it was a year or two years ago?

Speaker Change: Okay fair enough.

Speaker Change: Obviously, a very good job at taking margins up over the course of the past few years.

Speaker Change: Has your business changed in the way the mix of service delivery, meaning sort of on a geographic basis are more customers willing to use our offshore and I get.

Speaker Change: More attractive pricing.

Speaker Change: Is it pretty much the same as it was a.

Speaker Change: A year or two years ago.

George D. Schindler: No, I would say that we've seen an ongoing trend to move more work offshore, what I would still say is a global delivery model. So it's not just offshore, but certainly offshore. And you've seen that consistently grow faster than the rest of our business again this quarter showing that growth. But also the near shore centers, which continue to pick up specifically in Eastern Europe, Southern Europe, and even in Latin America. So it really is a combination of factors.

Speaker Change: No I would say that we've seen an ongoing trend to moving more of our work.

Speaker Change: What I would still say is a global delivery model. So it's not just offshore, but certainly offshore and you've seen that.

Speaker Change: Consistently grow faster than the rest of our business again.

Speaker Change: And this quarter showing that that growth, but but also the near shore centers, which continue to to pick up specifically in eastern Europe, Southern Europe, and even in Latin America. So.

Speaker Change: It really is a combination of factors. So we always had a global delivery, but I think it's even.

George D. Schindler: So we always had global delivery, but I think it's even more powerful now in the way we deliver our solutions. And, of course, automation continues to play a role and will continue to evolve as we drive more technologies into the delivery that we do for our clients.

Speaker Change: More powerful now and the way we deliver our our solutions and of course automation continues to play a role and we will continue to evolve as we as we drive more technology.

Speaker Change: Technology technologies into the delivery that we do for our clients.

George D. Schindler: Okay, and just one quick last one for me. Can you talk about sort of staffing levels here as we look ahead to next year and maybe the degree of wage inflation and how it may have moderated here recently?

Speaker Change: Okay, and just one quick last one for me.

Speaker Change: Can you talk about sort of staffing levels here as we look ahead to next year.

Speaker Change: Maybe the degree of wage inflation and how it may have moderated here recently.

George D. Schindler: Yeah, well, wage inflation has certainly moderated in most countries in which we operate. And you know, we have a couple of different levers that we use. One is what we just discussed around global delivery, in rotating some of our work and then rotating our people to the higher-end work so that we can get the additional wage rates in various locations. We also have our intellectual property that we can leverage.

George D. Schindler: Yeah, well, I mean,

Speaker Change: Yes, well I mean wage inflation has certainly moderated in most countries in which we operate.

Speaker Change: And we have a couple of different levers that we use one is what we just discussed around global delivery.

Speaker Change: And rotating some of our work and then rotating our people to the higher end work that we can get the additional wage rates in various locations. We also have our intellectual property that we can leverage and so that that allows us not to be so linear to people.

George D. Schindler: And so that allows us not to be so linear with people and salaries. And so we've got a couple of ways to manage that as we continue to build out the company. So that doesn't factor in in a big way as I look at the next year.

Speaker Change: And.

Speaker Change: Salaries and so we've got a couple of ways to manage that.

Speaker Change: As we continue to build out the company so.

Speaker Change: It's that doesn't factor in in a big way as I look at.

Speaker Change: Next the next year.

Speaker Change: Sounds great. Thank you.

Operator: Your next question comes from Daniel Chen with TD Cowan. Your line is now open.

Speaker Change: Your next question comes from Daniel Chan with TD Cowen. Your line is now open.

Daniel Chan: Hi George, the U.S. federal bookings came in a little bit weaker again for the second quarter. I think the expectation was for it to accelerate as we get closer to the elections.

Daniel Chan: Good morning, George the U S. Federal bookings came in a little bit weaker again, I think for the second quarter in a row now I think the expectation was that for it to accelerate as we get closer to the elections any color on that.

George D. Schindler: Any color on that?

George D. Schindler: Yeah, here's what I would say. I went back, and I looked at this, and you know, it's cyclically a light booking quarter for us, just due to the federal government procurement cycle in the US. There are many more RFPs in this quarter, and we have a large number of outstanding RFPs out there. And then the award in the second half, maybe they'll ship that to more awards in Q3.

Daniel Chan: Yes, here's what I would say I went back I looked at this and six.

George D. Schindler: Cyclically, a light booking quarter for us.

George D. Schindler: Just due to the federal.

George D. Schindler: Government procurement cycle in the U S.

Speaker Change: There are many more rfps in this quarter and we have.

Speaker Change: A large number of outstanding.

Speaker Change: Rfps out there and then the award in this in the second half maybe.

Speaker Change: Maybe the shift that more awards in Q3.

George D. Schindler: That's certainly something that we're looking at. But I'll just remind you, our trailing 12-month book-to-bill in US federal government is at 136%. So yes, it was 72% in the quarter, but I think our average in this quarter is usually between 70 and 80%, and we're right in that spot. So yeah, the election is, you know... [inaudible] or less, the SoulSource Bridge Awards. They just haven't happened yet. So we'll look for that in the second half of the year.

Speaker Change: That's certainly something that that were looking at but I'll just remind you our trailing 12 month book to Bill in U S. Federal is at 136%. So yes. It was 72% in the quarter, but I think our average in this quarter is usually between 70 and 80% and were right in that place. So yes. The election is.

Speaker Change: Isn't necessarily having the effect that I thought it might have.

Speaker Change: It will have an effect as we move through the.

Speaker Change: The year end and get closer and one of the phenomenon that we're seeing is that there are a lot more bridges for longer periods of time, just given the the concern about how that election cycle and the stability might might occur so a lot of our outstanding.

Speaker Change: <unk> right now or.

Speaker Change: Or less sole source bridge awards, they just haven't happened yet so.

Speaker Change: So we'll look for that in the second half of the year.

George D. Schindler: Yeah, thanks for all those details. That makes sense. Maybe a question on the margin side of things, obviously, the margin of strength you mentioned from a higher mix of IP, just wondering if there's anything else to call out there and whether you think the margin profile is this the run rate going forward, or if there's more to go.

Speaker Change: Thanks for all those details that makes sense.

Speaker Change: Maybe a question on the margin side of things obviously the margin strength you mentioned from a higher mix of IP. Just wondering if there's anything else to call out there and whether you think the margin profile of this is the run rate going forward or if there's more to go.

George D. Schindler: Yeah, so here's what I'd say, you know, it's a combination of the improved IP business mix but also the cost optimization. That's what's driving some of this margin. Some of that will stick because of the cost optimization. It certainly has that payback.

Speaker Change: Yes, so here's what I would say, it's a combination of the improved IP business mix, but also.

Speaker Change: The cost optimization, that's what's driving some of this margin.

Speaker Change: Some of that will stick because of the cost optimization, certainly has that payback, but some of that is going to be offset by continued investments in AI business development and the growing mix of <unk>. So as we move as things pick up you're going to see that change a little bit we're still committed to the.

George D. Schindler: But some of that's going to be offset by continued investments in AI, business development, and the growing mix of SINC. So as we move, as things pick up, you're going to see that change a little bit. We're still committed to the incremental margin expansion, but we had a nice uptick in this current quarter just given what's going on. So some of that should be sustainable. And then we'll continue to expand. But some of that, we're going to give up for the right reasons, investing in AI, business development, and what we believe will be a return of the SINC here. And you heard that in part in the voice of the client insights I shared.

Speaker Change: Incremental margin expansion, but we had a nice uptick in this current quarter just given.

Speaker Change: What's going on so some of that is sustainable and then we will continue to expand that some of that we're going to give up for the right reasons on investing in AI business development and <unk>.

Speaker Change: And what we believe will be a return of ESI and see here and you heard that some of that voice of the client.

Speaker Change: Insights I shared.

George D. Schindler: One more, if I may. You mentioned that the sales cycles remain a little bit longer than expected. I just wonder if you can reconcile that with one of the findings in your recent client survey saying that there's good alignment between business and IT. You would assume that when there's good alignment, you would get these projects approved faster. What do you think is causing that slight disconnect? It's a good question. I kind of...

Speaker Change: One more if I may.

Speaker Change: You mentioned that the sales cycles remain a little bit longer than expected. Just wondering if you can reconcile that with one of the findings and your recent client survey, saying that there's good alignment between business and it.

Speaker Change: You would assume that when there's good alignment you would get these projects approved faster and what do you think is causing that slight disconnect.

George D. Schindler: It's a good question. I kind of highlighted that. The finding, historically, has led us to believe that there are bigger deals. So businesses typically do shorter ROI deals. IT tends to do big modernization, but it's more focused on technology.

Speaker Change: It's a good question I kind of highlighted that the finding historically has led us to believe that there are bigger deals.

Speaker Change: So business typically.

Speaker Change: They do shorter ROI deals.

Speaker Change: It tends to do big modernization, but it's more focused on technology and as you said not always 100% aligned but when they get aligned.

George D. Schindler: And as you said, not always 100% aligned. But when they get aligned, it drives bigger ROI, quite frankly, less price sensitive, more outcome focused deals, but it's at the highest levels. So it's transformative, it affects everybody. We've been, I've personally been championing some of these through the process. And there are a lot of different stakeholders within the organization to get aligned. So even though business and IT agree, you still have to get the individuals and the sign off because it's gonna hit more departments across the organization. So the more complex deals, just by their nature, take longer. And so that's what we're seeing. And again, this is fresh information, so it's more about going forward than where we've been.

Speaker Change: It drives bigger ROI quite frankly, less price sensitive more outcome focused deals, but it's at the highest levels. So it's transformative it affects everybody.

Speaker Change: Ben.

Speaker Change: I've personally been.

Speaker Change: Championing some of these through the process and there is a lot of different stakeholders within the organization to get get aligned so even though business in I'd agree you still have to get the individuals and the and the sign up because its going to hit more departments across the organization. So the more complex deals just by their nature.

Speaker Change: Take longer.

Speaker Change: And so that's what we're seeing and again this is the fresh information. So it's more about the go forward, then and where we've been.

Speaker Change: Sure.

Speaker Change: Thanks Ross.

Speaker Change: Yep.

Operator: Your next question comes from Paul Treiber with RBC Capital Markets. Your line is now open.

Speaker Change: Your next question comes from Paul Treiber with RBC capital markets. Your line is now open.

Paul Michael Treiber: Thanks very much. Good morning, George. In regards to AI and gen AI, it does seem like everyone is evaluating it at this point. Do you believe that there may be a pause related to other initiatives, just as companies are trying to evaluate AI relative to those other initiatives?

Paul Michael Treiber: Thanks, very much morning.

Paul Michael Treiber: Good morning, George.

Paul Michael Treiber: In regards to AI and <unk> AI. It does seem like everyone is evaluating it at this point.

Paul Michael Treiber: You believe that there may be a pause related to other initiatives just as companies are trying to evaluate.

Paul Michael Treiber: Relative to those other initiatives.

George D. Schindler: It's a great question. I'm not sure if that's exactly what I see. What I do see is, you know, given kind of where we've been economically, everybody's been a little more focused on cost-cutting and saving. And so I think most organizations are taking advantage of that current backdrop to do that investigative work. And so I don't think they're necessarily related one for one.

Speaker Change: It's a great question I'm not sure if that's exactly what I see what I do see is.

Speaker Change: Given kind of where we've been economically everybody has been a little more focused on the cost.

Paul Michael Treiber: <unk>.

Paul Michael Treiber: Cutting in saving and so I think that.

Paul Michael Treiber: Most organizations are taking advantage of that current backdrop to do that investigative work and so I don't think they're necessarily.

George D. Schindler: But I do agree with you that evaluation will drive, and we see that as a catalyst for driving the next wave of digital spending. And when I say digital spending, it's not just discrete AI spending; it's the next wave of digitization. Most of the CEOs that I speak with, COOs I speak with, and heads of lines of business, they all talk about, you know, they think of this as just the next iteration of what technology can bring them.

Paul Michael Treiber: Related one for one but I do agree with you.

Paul Michael Treiber: That evaluation will drive we see that as a catalyst for driving the next wave of digital spending and when I say digital spending is not just discrete AI spending yes.

Paul Michael Treiber: The next wave of Digitization most of the Ceos that I speak with Ceos, I speak with and and heads of lines of business. They all talk about.

Paul Michael Treiber: They think of this as just the next iteration of what technology can bring to them and so.

George D. Schindler: And so they're viewing it pretty holistically, not just as discrete services. I think that's also why you don't see just this big spending indiscriminately on AI. I think they're really thinking about that as the next wave of where they're going with digital.

Paul Michael Treiber: We're viewing it.

Paul Michael Treiber: And a pretty holistic way.

Paul Michael Treiber: Not just as the discrete services I think Thats also why you don't see just as big.

Paul Michael Treiber: Spending indiscriminately.

Paul Michael Treiber: I think they are really thinking about that.

Paul Michael Treiber: The next wave of where theyre going with digital.

George D. Schindler: That's helpful. Regarding AI, you call it a number of internal use cases. Where do you see, or what magnitude of potential efficiencies do you see AI driving over time?

Speaker Change: That's helpful.

Speaker Change: Regarding AI you call it a number of internal use cases.

Paul Michael Treiber: Where do you see.

Paul Michael Treiber: What magnitude.

Paul Michael Treiber: Pencil.

Paul Michael Treiber: <unk> do you see AI driving over time.

George D. Schindler: Yeah, well, it definitely will dry out some over time. Right now, it's really still discreet. So holistically, you're not seeing a lot yet dropping to the bottom line, but the reason you go through this work is to actually get to that point. So that's why I highlighted some of those areas. Right now, it's less about cost and just more about effectiveness and efficiency. So you think about the bid generation element I spoke about.

Speaker Change: Yes, well definitely will it will drive some overtime right now.

Paul Michael Treiber: Its really still discrete so holistically youre not seeing a lot, yes, yet dropping to the to the bottom line, but the reason you go through this work is to actually get to that point. So that's why I highlighted some of those areas.

Paul Michael Treiber: Right now, it's less about cost and just more about effectiveness and efficiency. So you think about the.

Paul Michael Treiber: The bid.

Paul Michael Treiber: Third generation element I spoke to it's really about getting better quality of our bids out there so leveraging all of our information and making that available so.

George D. Schindler: It's really about getting better quality bids out there, so leveraging all of our information and making that available so that individuals can spend their time really crafting that and customizing that for the individual client opportunity. So it's more about that than it is right now about cost savings. I think over time, you're gonna see some of that. And by the way, this is what we see a lot of our clients looking at. They're really now looking at this as more about the business impact of this, not just from a cost savings perspective but from an opportunity perspective of driving the business forward. So that's what we see right now.

Paul Michael Treiber: That the individuals can spend their time really crafting that and and customizing that for the individual client opportunity. So it's more about that than it is right now about cost savings I think.

Paul Michael Treiber: Over time, Youre going to see some of that and by the way. This is what we see a lot of our clients looking at they're really now looking at this as more about the business.

Paul Michael Treiber: Packed to this not just from a cost savings but from a.

Paul Michael Treiber: And opportunity perspective of driving the business forward. So.

Paul Michael Treiber: That's what we see right now.

George D. Schindler: And then one last one for me, just in terms of the M&A environment, you know, there's news around several companies for sale, and it spreads across, you know, the quality and valuation spectrum. What are your thoughts in terms of leaning one way or the other in terms of or deviating from your historical tendency to lean more either towards quality or more towards, you know, lower valuations? Yeah, well.

Speaker Change: And then one last one for me just in terms of the M&A environment.

Speaker Change: There's news around.

Speaker Change: Several companies for sale.

Speaker Change: And it spreads across the quality and valuation spectrum, what's your thoughts in terms of leaning one way or the other in terms of or deviating from your historical.

Speaker Change: <unk> to lean more towards quality or more towards.

Paul Michael Treiber: A lower valuations.

George D. Schindler: Yeah, well, you know, at the end of the day, we're resolute in making sure that we're going to drive the EPS accretion and do that in a definitive way throughout the process. So I've mentioned this before.

Speaker Change: Yes, well at the end of the day, we're resolute and making sure that we're going to drive the.

Paul Michael Treiber: The EPS accretion and do that with a definitive way.

Paul Michael Treiber: Throughout the process. So I've mentioned this before.

George D. Schindler: It's why areas like, you know, the gross margins, the rate equation versus the salary equation become very important. You can do a lot on the SG&A side; you can't do as much on the gross margin side. And that runs the gamut, then, right? Because you can have companies that are stronger and companies that aren't that are in that manner. But, you know, we do see and assess all the market deals on an ongoing basis, and we'll act when there's something that makes sense for us and our shareholders.

Paul Michael Treiber: <unk> areas like.

Paul Michael Treiber: The gross margins the rate equation versus the salary equation become very important you can do a lot on the SG&A side, you can't do as much on the on the gross margin side. So.

Paul Michael Treiber: Then that runs the gamut then right because you can have companies that are stronger and companies that arent that are in that manner.

Paul Michael Treiber: We do see in SaaS, how all the market deals on an ongoing basis.

Paul Michael Treiber: And we will act when there is something that.

Paul Michael Treiber: That makes sense for us and our shareholders.

Speaker Change: Thanks for taking the questions.

Speaker Change: Yes.

Paul Michael Treiber: Okay.

Operator: Your next question comes from Robert Young with Canaccord Genuity. Your line is now open.

Paul Michael Treiber: Your next question comes from Robert Young with Canaccord Genuity. Your line is now open.

Robert Young: Good morning. Just a couple of questions around utilization. The headcount dropped year over year and quarter over quarter. Just trying to understand the dynamic. Is there a shift towards low cost where you're hiring? Or is it, are you just experiencing more attrition, or hiring is not offsetting the attrition? And then how is that dynamic impacting your utilization? I think you said utilization had improved.

Robert Young: Good morning, just a couple of questions around utilization.

Robert Young: The head count drop year over year and quarter over quarter.

Robert Young: Just trying to understand the dynamic is there a shift towards low cost where you are hiring or is it are you just is there more attrition we're.

Robert Young: We're hiring is not offsetting the attrition and then how is that dynamic impacting your utilization I think you said utilization has improved.

George D. Schindler: Yeah, utilization is actually up. You know, a big part of that drop is us getting ahead of it on cost optimization. As you're probably aware, two-thirds of that cost optimization was focused on SG&A. It's why you can see that even though you see a drop in employees, you don't see a drop in revenue. At least we're staying consistent with the revenue. And then, you know, I think in general, we're not as linear because of some of that IP.

Robert Young: Yes utilization is actually up bank, a big part of that drop.

Robert Young: Is.

Robert Young: As us getting ahead of it on the cost optimization.

Robert Young: As Youre, probably aware two thirds of that customer optimization was focused on SG&A.

Robert Young: It's why you can see that even though you see the drops and the people you don't you don't see a drop in the revenue.

Robert Young: At least we're we're staying consistent with the revenue.

Robert Young: And then.

Robert Young: I think in general we're not as linear because of some of that IP and so you see the IP growing faster and not be independent necessarily on the people, having said that yes, we are seeing some of that shift to global delivery.

George D. Schindler: And so you see the IP growing faster and not necessarily being dependent necessarily on people. Having said that, yeah, we are seeing some of that shift to global delivery. Interestingly enough, to get the same revenue, you actually have a higher headcount when you're using global delivery. So that's not really what's going on at the current point in time. But utilization is up, and that's what you see ultimately in the margin, despite the deceleration in revenue. Yeah, it is fair to say that there are more benefits.

Robert Young: Interestingly enough that actually to get the same revenue you actually have a higher head count when you're using global delivery. So that's not really the whats going on.

Robert Young: One point in time, but utilization is is up and that's what you see ultimately in the in the margin despite the.

Robert Young: The deceleration on the revenue.

George D. Schindler: It isn't fair to say that there's more benefit to come from utilization, just, you know, some of these, you don't have as many new employees coming in, maybe maturing, you know, the consultants you have today.

Robert Young: Is it fair to say that theres more benefit to come from utilization.

Robert Young: Some of these.

Robert Young: Don't have as many new employees coming in maybe maturing.

Robert Young: The consultants you have today.

George D. Schindler: I don't necessarily, I don't necessarily see that I think, you know, we've got a great team, we continue to train and, and, you know, reskill our talent, we're doing a lot around the AI reskilling talent, we're bringing new talent in all the time, including through closing some of the outsourcing deals. Over 100 new employees joined us through several outsourcing, outsourcing agreements. This quarter, attrition is under control, and it is down on a year over year basis. And it's, and it's right in the range that we expect. So other than cost optimization, that's, I think we're managing it very well.

Speaker Change: I don't necessarily.

Speaker Change: I don't necessarily see that I think.

Speaker Change: We've got we've got a great team, we continue to train and.

Speaker Change: <unk>.

Speaker Change: Re skill our talent, we're doing a lot around the AI reskilling of.

Speaker Change: Talent were bringing new talent and all the time, including through controlling through some of the outsourcing deals over 100, new employees joined us through several outsourcing outsourcing agreements this quarter and attrition.

Speaker Change: Is under control and is down.

Speaker Change: On a year over year basis, and it's in it's right in the range that we would expect so.

Speaker Change: Other than cost optimization.

Speaker Change: I think we're managing it very well.

George D. Schindler: Okay, and this last one for me is, I think you said that large project awards were a bigger than normal contribution to SI&C bookings, and what exactly does that mean? Is that a long-term composition change, or maybe just unpack that, and then I'll pass the line. Yeah, yeah, it's more, you know...

Speaker Change: Okay, and then last one for me is I think you said.

Speaker Change: Said that large project awards were.

Robert Young: A big or a bigger than normal contribution to ethane C bookings and what does that what exactly does that mean is that is that a long term composition change or maybe just unpack that and then I'll pass the line.

George D. Schindler: Yeah, yeah, it's more, you know, it's more just a phenomenon in the quarter, and I mentioned it because it did drive kind of a change when you look at our managed services bookings were down versus what I'm talking about in the pipeline and the sentiment, and it just was a function of some higher concentration of SINC bookings that were large, essentially what I would call recurring TNM project renewals. So they show up in the SINC, but they're really large projects with TNM recurring revenue.

Speaker Change: Yes, yes, it's more.

Speaker Change: It's more just a phenomenon in the quarter and I.

Speaker Change: <unk> it because it did drive kind of a change when you look at our managed services bookings were down versus.

Speaker Change: What I'm talking about in the pipeline and the sentiment in it.

Speaker Change: It was.

Robert Young: A function of some higher concentration of <unk> bookings.

Robert Young: We're large essentially what I would call recurring PNM project renewal, so they show up and the SMC, but theyre really large project PNM recurring revenue.

George D. Schindler: And then we had some timing delays on several larger managed services deals that I mentioned. So I think it's more of a phenomenon of just a quarter. It's why we always look at bookings on a trailing 12-month basis, and why I highlighted the strong trailing 12-month bookings in managed services are just a function of where we are right now.

Robert Young: And then we had some timing delays on several larger managed services deals that I mentioned, so I think it's more of a phenomenon just a quarter. It's why we always look at bookings on a trailing 12 month basis, why I highlighted the strong trailing 12 months bookings in <unk> and managed services.

Robert Young: As a function of where we are right now.

Speaker Change: Okay. Thanks.

Robert Young: Yes.

Operator: Your next question comes from Jerome Dubreuil with Desjardins. Your line is now open.

Robert Young: Your next question comes from Jeff Holmes and play with.

Jeff Holmes: Line is now open.

Jerome Dubreuil: Hi, thanks for taking my questions. I'm trying to reconcile what we are hearing from other companies in the ecosystem. We heard from Microsoft just last week that they are boosting their Azure CapEx as a result of strong demand, but that's not exactly what we're seeing in IT services. Do you think there's a chance that maybe enterprises are directing bigger portions of their budget through maybe the data center or cloud power that you might not benefit as much from right now, but that may eventually come back to boost them?

Jeff Holmes: Hi, Thanks for taking my questions.

Jeff Holmes: I'm trying to reconcile what we are hearing from from other companies in the ecosystem, we heard from Microsoft.

Jeff Holmes: Just last week that they are boosting their capex as a result of strong demand.

Jeff Holmes: Not exactly with what we're seeing in 19 services do you think there is there is a chance that maybe enterprises are directing bigger portion of their budget through maybe.

Jeff Holmes: The data center and cloud power that you might not benefit as much from right now, but that may eventually come back to boost demand.

George D. Schindler: I think, you know, it's a good question. I do think that some of what we see our clients doing is preparing for the future. And so they're back to setting up their data strategies, their architectures, and ultimately their infrastructure to allow for that next wave of digital spending. So maybe, in this case, we're on the tail end of that. And I think you saw that even in the slowdown in the other direction.

Speaker Change: I think it's a good.

Speaker Change: Good.

Speaker Change: Good question I do think that some of what we see our clients doing is preparing for the future and so they're back to.

Speaker Change: Setting up their data strategies their architectures and ultimately their infrastructure to allow for that next wave of digital spending. So maybe in this case, we're on the on the tail end of that and I think you saw that even on the slowdown on the on the other direction. So.

George D. Schindler: So I think that's what we're seeing. So time will tell. Like I said, we're not seeing anything uniform or consistent yet. But I think that matches some of the sentiment you hear from you heard from me on our voice of our clients feedback that we just got.

Speaker Change: I think thats what what.

Jeff Holmes: We are seeing.

Jeff Holmes: So.

Jeff Holmes: Time will tell like I said.

Jeff Holmes: We're not seeing anything uniform and consistent yet, but but I think thats.

Jeff Holmes: It matches some of the sentiment you here from you heard from me on our voice of the clients.

Jeff Holmes: Feedback we just people.

George D. Schindler: Second question for me, you provided guidance at the beginning of the year in terms of double-digit TPS growth. Not that consensus is there right now, but can we agree that double-digit TPS growth would be the higher end of your updated expectations?

Speaker Change: Second question for me.

Speaker Change: You provided at the beginning of the year our guidance in terms of double digit EPS growth. Not then that consensus is there right now, but can we agree that double digit EPS growth would be at the higher end of your updated expectations.

George D. Schindler: Yeah, well, obviously, we don't give guidance. But, you know, double-digit EPS accretion does remain a target for us. You know, we do have the tail end of the cost optimization and improved business mix. But, you know, I think what we're looking for is some return to improvement in market conditions, which would then allow us to reach that.

Speaker Change: Yes, well, obviously, we don't give we don't give guidance but.

Speaker Change: Double digit EPS accretion does remain a target for us we do have the tailwind of the cost optimization.

Speaker Change: Improved business mix, but.

Speaker Change: I think what we're what we're looking for is <unk>.

Speaker Change: Some return to improvement in the market conditions, which would then allow us to see that.

Speaker Change: Be able to reach that.

George D. Schindler: And then last for me, maybe one for Steve, can you remind us of the CAD USD impact in terms of your reporting, obviously offset because of the costs that are in USD as well, but maybe a bit of a tailwind in the coming quarters with the weak hurricane currency?

Speaker Change: Great and then last for me, maybe one for Steve can you remind us of the CAD USD.

Speaker Change: Impact in terms of your reporting obviously offsets because of cost that are in Europe, as well, but maybe a bit of a tailwind in the coming quarters with the weaker currency.

George D. Schindler: Yeah, in the next quarter, because if you look at the last quarter, the US dollar versus the previous year, it was not positive. But currently, yes, with the current exchange rate, you would see a positive sign coming from the FX in Q3. Great, thank you. Your next question comes from Thanos Moschopoulos.

Speaker Change: Yes, and in the next quarter, because if you look at it.

Speaker Change: Last quarter.

Speaker Change: In fact, the U S dollar versus the previous year.

Speaker Change: It was it was not positive but currently yes with the current exchange rate you would see you would see a positive sign coming.

Speaker Change: Coming from D effects in Q.

Speaker Change: Q3.

Speaker Change: Great. Thank you.

Operator: Your next question comes from Thanos Moschopoulos with PMO Capital Markets. Your line is now open. George, you referenced the growth in

Speaker Change: Your next question comes from panels Moshe <unk> with BMO capital markets. Your line is now open.

Moshe: Hi, good morning.

Moshe: Hi, Sean.

Moshe: Yes, George you referenced the growth in IP, maybe just clarify what's driving that is a lot of that we didn't pick government given where we are in the cycle or is it from some other sectors as well.

Thanos Moschopoulos: Yeah, Thanos, you hit that one right there. There certainly is. Highest growth was in government, both in North America but increasingly in Europe. We had some nice growth in Europe as well, both in bookings and revenue. Operations-focused. That's where a lot of our IP plays.

Moshe: Yes on US you hit that one right. There certainly is a highest growth was in government.

Moshe: Both in North America, and increasingly in Europe, We had we had some nice.

Moshe: Growth in Europe, as well both in the bookings and the revenue.

Moshe: Operations focus.

Moshe: Where a lot of our IP plays so HR payroll.

George D. Schindler: So HR payroll, secure data, document handling, data intelligence solutions. We also had some growth in banking as well, Trade 360, and Wealth 360. But think really more focused on those operational systems, just given where we are. So that's what's continuing to generate the growth. Great.

Moshe: Secured data document handling data intelligence solutions.

Moshe: We also had some growth in banking as well trade 360, <unk> 360, so but think really more focused on those operational systems, just given where we are.

Moshe: So that's what's continuing to generate the growth.

George D. Schindler: And it seems like your R&D investments in IP are up a good amount year for year. Is a lot of that focused on AI or other areas of investment as well? Yeah, well, we actually had a 30 percent increase in the CGI-funded investments to enable IP within our AI, so everything from momentum to the customer advance and other elements. And again, just to remind you that, you know, some of that is just a reallocation and reprioritization of the spend as we go through that. But yeah, AI will continue to be a driver, as I mentioned.

Moshe: Great.

Speaker Change: It seems like your R&D investments on IP and cyclical demand year over year, there's a lot of that focused on.

Speaker Change: AI or others as well.

Speaker Change: Yes, well, we actually had a 30 plus percent increase in the CGI funded investments to enable IP within our AI.

Speaker Change: So everything from momentum to the customer advance and other elements and again just to remind you that some of that is just a reallocation re prioritization of the spend as we as we go through that but yes. AI is we will continue to be a driver is as I mentioned.

Speaker Change: Okay.

Speaker Change: Thanks George.

Speaker Change: Yes.

Operator: Your next question comes from Divya Goyal with Scotiabank. Your line is now open.

Speaker Change: Your next question comes from David <unk> with Scotiabank. Your line is now open.

Divya S. Goyal: Good morning, everyone. Hey George, I actually wanted to get a little bit more color on this H2 optimization. I know when we were talking about it last quarter, it looked like there could be more upside coming out of H2. But considering where the rate environment is right now, do you think it's fair to build in any sizable optimization whatsoever? Or should we expect flattish growth for the remaining quarters ahead?

David: Good morning, everyone.

David: George I actually wanted to get a little bit more color on this.

David: Two optimization I know it when at the time of the last quarter, we were talking about it it looked like there could be more upside coming out of its too, but considering where the rate environment is right. Now do you think it's fair to build in any sizable optimization whatsoever or should we expect a flattish growth for this remain.

David: In quarters ahead.

George D. Schindler: Yeah, well, you know, as you know, Divya, we don't give, we don't give guidance. But just again, what I see, I just don't see the clarity right now. The pipeline looks strong, the interest is there, and we're getting in front of our clients, which is extremely important. But there are green shoots; it's just that they're not very consistent, even across industries or geography. So, right now, I can't really, I can't really call it that maybe it shifts to the second half of the calendar year versus our fiscal year. I don't know.

Speaker Change: Yes, well.

Speaker Change: As you know David we don't give.

Speaker Change: Don't give guidance, but.

Speaker Change: Just again, what I see I, just don't see the clarity right now the pipeline looks strong. The interest is there we're getting in front of our clients, which is extremely important but and there are green shoots just theyre not very consistent.

George D. Schindler: Even across industries or geography so.

George D. Schindler: So right now.

Speaker Change: I can't really I can't really call that maybe it shifts to the second half of the calendar year versus our fiscal year I don't know, but.

George D. Schindler: But, but that's what I see right now. I'm just sharing. That's why I share the metrics that we have, you know, where the pipeline is, where the bookings are. And, and then, of course, what we're hearing on the voice of the client. So, which, which, you know, is positive on a go forward basis, I just don't know when some of that's going to show up.

George D. Schindler: But that's that's what I see right now I'm, just sharing as why share the metrics that we have.

Speaker Change: Where the pipeline is where the bookings are.

Speaker Change: And and then of course, what we're hearing on the voice of the client so.

Speaker Change: Yeah.

Speaker Change: Is positive on a on a go forward basis I, just don't know when some of that is going to show up.

George D. Schindler: Yeah, no, that's a fair comment. And I wanted to get a little bit, I know you talked about margin sustainability and you gave some commentary here on margins. What is a fair run rate for margins now that the cost optimization program is predominantly behind us?

Speaker Change: Yes.

Speaker Change: Thats, a fair comment and I wanted to get a little bit I know you talked about the margin sustainability and you gave.

Speaker Change: Commentary here on margins.

Speaker Change: <unk> is a fair run rate for margins now that the cost optimization program is predominantly behind us.

George D. Schindler: It's a good question, but ultimately, as George mentioned, yes, we will have an uptake in the margin with the cost optimization, probably not to the level that you saw this quarter because, as George mentioned, we continue to invest. We want to invest in AI. We want to train our folks. We are standing in the right place to continue to ultimately prove the EPS. That's the ultimate goal, but something like 20 bps would make sense.

Speaker Change: Steve.

Steve: From it's a good question, but.

Steve: Estimate Lee as George mentioned.

Steve: Yes.

George D. Schindler: We'll have.

Steve: And uptake into margin with the cost optimization.

Steve: Probably not to the level that you saw this quarter because as George.

Steve Perron: George mentioned.

George D. Schindler: We continue to invest we want to invest in AI, we want to train our folks.

Speaker Change: And so we are spending at the right place.

George D. Schindler: To continue into Midland crude.

George D. Schindler: The EPS thats the ultimate goal.

George D. Schindler: But something like 20 bps, what would make sense.

George D. Schindler: Yeah, no, that's helpful. One question on the BFSI weakness. George, you did mention that the BFSI segment. We have been hearing commentary from some of the global banks indicating increased investments in IT. Are you seeing that show up in your bookings given the stronger SINC bookings? Are you seeing more momentum on the AI side? Or is it broadly digital core modernization where you see more of that spend coming out?

Speaker Change: Yeah, No that's helpful.

Speaker Change: One question on the BFS side weakness. So George you did mention that the BSI segment saw some weakness.

George D. Schindler: I've been hearing commentary from some of the global banks, indicating increased investments in IP are you seeing that show up in your bookings given the stronger <unk> bookings are you seeing more momentum on the AI side or is it broadly digital modernization, where you see more of that spend coming out.

George D. Schindler: We're still seeing a lot more in the digital and general modernization projects. That's what we're seeing. Again, we're seeing some elements of some of that spending, but it's still early days. And so I'd say more on the modernization. I think people are still setting up for what that next wave of digital spending is going to be.

George D. Schindler: We're still seeing a lot more in the digital.

Speaker Change: In general modernization projects, that's what we're seeing.

George D. Schindler: Again, we're seeing some elements of the.

George D. Schindler: Some of that spending but it is still early days and so I would say more it's on the on the modernization I think people are still setting up for what that next wave of digital spending is going to be.

George D. Schindler: That's helpful. And my very last question here is, considering where the stock price is today as compared to where it was a few weeks ago, do you think there are any plans to expedite the share buybacks?

George D. Schindler: Yeah.

Speaker Change: Its helpful and my very last question here is considering where the stock price is today as compared to where it.

Speaker Change: It was a few weeks ago do you think there are any plans to expedite the share buybacks.

George D. Schindler: Yeah, well, as we've always discussed, our capital allocation priorities don't change. So investing in the business is number one, accretive acquisitions number two, but to the extent that we have the capital available, and I believe we do, Steve, yeah, we would be looking to return that through share buybacks. And we don't base it primarily on price, because we're basing it on where we're going as a company, but certainly we'll, we'll be, you should expect us to continue to be aggressive on all fronts. That's very helpful. Thank you

Speaker Change: Yes.

George D. Schindler: As we've always discussed our capital allocation priorities don't change so investing in the business is number one accretive acquisitions number two but.

Speaker Change: To the extent that that we have.

George D. Schindler: The capital available and I believe we reduce Steve Yes, we would we would be looking to return that through share buybacks and we don't base. It primarily on price because we're basing it on where we're going as a company, but certainly we will we will be.

Speaker Change: You should expect us to continue.

George D. Schindler: To be aggressive on all fronts.

Speaker Change: That's very helpful. Thank you.

Speaker Change: Uh huh.

Operator: That's very helpful. Thank you. Your next question comes from Stephanie Price with CIBC. Your line is now open.

George D. Schindler: Your next question comes from Stephanie price with CIBC. Your line is now open.

Stephanie Doris Price: Hi, good morning. Hi Stephanie. Hey, I was looking at your comments on bookings converting into revenue. I think you made a comment

Stephanie Doris Price: Hi, good morning.

Stephanie Doris Price: Thanks, Stephanie.

Stephanie Doris Price: I was hoping you could comment on bookings converting into revenue I think you made a comment to an earlier question just talking about slow project start up what are you seeing in terms of that managed services pipeline converting over.

George D. Schindler: Yeah, well, you know, we are seeing a lot of decent growth. If you look at some of the geographies and some of the industries where we're seeing growth, a lot of that is now being driven by managed services. It's just being offset by some of that slower SINC spending. And, and as that returns, I think, you know, it's gonna, it's gonna be an accelerator, because we are starting to see good growth on the managed services side. Okay, great.

Stephanie Doris Price: Yes, well, we are seeing a lot of.

George D. Schindler: A lot of decent growth if you look at some of the geographies and some of the industries, where we're seeing growth.

George D. Schindler: Lot of that is now being driven by the managed services, it's just being offset by.

George D. Schindler: By some of that slower.

George D. Schindler: <unk> spending and and as that returns I think.

George D. Schindler: It's going to it's going to be an accelerator because we are starting to see.

George D. Schindler: Good growth on the managed services side.

George D. Schindler: And then just in terms of IP revenue, there was a comment that 60% of IP is now SaaS-based. I'm curious if you could talk a little bit about the evolution of those IP solutions. I know a lot of them, you know, might have been considered mature, or you've had them for a long time.

Speaker Change: Okay, Great and then just in terms of IP revenue. There was a comment that 60% of IP is now SaaS space I'm curious if you could talk a little bit about the evolution of those those IP solutions I know a lot of them might have been considered mature you've had them for a long time interestingly SaaS based.

George D. Schindler: Interesting that they're now SaaS based. Yeah, yeah, no, I think there's a bit of a resurgence from both the introduction of some of the new technologies, including AI, into some of these operational, intellectual property elements, and then offering them as software as a service has given some of them a new life. And we've also spent some time combining some of our independent IPs and then offering that as a software as a service that has increased opportunity and demand for the IP.

Speaker Change: Yeah, Yeah, no I think there is a.

George D. Schindler: A bit of a resurgence from both the.

Speaker Change: Introducing some of the new technologies, including AI and to some of these operational inlet.

George D. Schindler: Intellectual property elements, and then offering them as a software as a service is given some of them.

George D. Schindler: Our new life and we've also spent some time combining some of our independent Ips.

George D. Schindler: And then offering that as a software as a service that has increased opportunity and demand for the IP. So.

George D. Schindler: So, we've been pretty rigorous about going through an architecture review and continuing to invest only in those IPs that we think do have a future. And, you're seeing the results of it these last several quarters.

George D. Schindler: And we've been pretty rigorous are going through an architecture review.

George D. Schindler: And and continuing to invest only in those Ips that we think do have that future and youre seeing the results of it.

George D. Schindler: These last several quarters.

Speaker Change: Great. Thank you very much.

Operator: Your next question comes from Suthan Sukumarwistiful. Your line is now open.

Speaker Change: Your next question comes from Suzanne So Kumar with Stifel. Your line is now open.

Suthan Sukumar: Good morning, gentlemen. The first question I have is, you know, your partner ecosystem. You know, I've been seeing more headlines in recent years about, about partnerships. Just kind of curious about what role your partner ecosystem has been having on your business and in terms of driving client relationships and growth overall.

Suthan Sukumar: Good morning Gents.

Suthan Sukumar: First question I have is.

Speaker Change: I guess on your partner ecosystem, you have been seeing more headlines in recent periods about.

Suthan Sukumar: Partnerships.

Suthan Sukumar: Kind of curious on on what role your partner ecosystem has been having on your business in terms of driving client relationships and growth overall.

George D. Schindler: Yeah, no, it's a good question. They're an important element, an increasingly important element in the ecosystem, and certainly for CGI. It's why we elevated that whole process several years ago, and that continues to pay dividends. You saw that the bookings from that network were up double digits in the quarter and will continue to play an important role. And we have a unique position with some of those partners in that we do have those 150 plus intellectual property solutions, which are attractive.

Speaker Change: Yes, no. It's a good question, an important element and an increasingly important element.

George D. Schindler: And the and the ecosystem and certainly for CGI.

George D. Schindler: It's why we elevated that whole process several years ago.

George D. Schindler: And that continues to pay dividends you saw that the.

George D. Schindler: The bookings from that network is up double digit.

George D. Schindler: In the quarter and we will continue to play an important role and we have a unique position with with some of those partners and that we do have those 150 plus.

George D. Schindler: Intellectual property solutions, which are attractive there are synergistic working together on those so they're not generic.

George D. Schindler: They're synergistic, working together on those. So they're not just generic announcements. They're very specific opportunities. Having said that, you may have seen that we've made some of those announcements in the past. You'll expect to see more of those types of partnerships because I think they are an important part of the ecosystem. Now, having said that, we'll continue to be agnostic and work with our clients to find the right solution for them.

George D. Schindler: Announcements, they're very specific opportunities, having said that you've seen that we've made some of those announcements in the past.

George D. Schindler: <unk>.

Speaker Change: To see more of those types of.

Speaker Change: Our partnerships because I think they are an important part of the ecosystem.

George D. Schindler: Now having said that.

Speaker Change: We will continue to be agnostic.

George D. Schindler: Stick and work with our clients and what the right solution is for them.

George D. Schindler: Great, thank you. Next question, I guess, is just more on capital allocation optionality, you know, just in terms of returning, you know, cash back to shareholders, you know, beyond the NCIB, would a dividend ever be an option you would consider longer term?

Speaker Change: Okay, great. Thank you.

Speaker Change: Next question I guess, just more on capital allocation Optionality just in terms of returning cash.

George D. Schindler: Cash back to shareholders beyond the NCI b, what a what a dividend ever.

George D. Schindler: Ever be an option you would consider longer term.

George D. Schindler: Well, you know, given where we are and what I just shared with you about the voice of the clients, AI as a catalyst for growth, the opportunity that continues to be out there and emanate from the position, that's not the number one place that we would go to drive the accretion we believe shareholders are looking for.

George D. Schindler: Well, given where we are and.

George D. Schindler: What I just shared with you with the voice of the clients.

George D. Schindler: As a catalyst for growth.

George D. Schindler: The opportunity that continues to be out there on an M&A for the physician.

George D. Schindler: That's not the number one place that we would go to drive the accretion. We believe shareholders are looking for so thats and Thats. We review it regularly with the board that's the current thinking of the board but.

George D. Schindler: So that's and that's, you know, we review it regularly with the board. That's the current thinking of the board. But, you know, that were I to change, I would share it, but not not right now.

George D. Schindler: If that were if that were to change would share it but not not right now.

George D. Schindler: Okay, great. And just one quick one for me, you know, given your ambitions around growing your IP business and also M&A as a growth driver, is there potential for, you know, pure play deals for deals around pure play IP and software? Yeah, you know, what

Speaker Change: Okay, Great and just one quick one for me.

George D. Schindler: Given your ambitions around you're growing your IP business and also.

George D. Schindler: MMA.

George D. Schindler: Growth driver.

George D. Schindler: Is there potential for pure play deal for deals around pure play IP and software.

George D. Schindler: Yeah, you know, what we have found when we look at, you know, pure software. I don't, we evaluate them often. The issue is that they don't necessarily have the relationships with the clients that we're looking for. When we're looking at M&A, we're looking to complement and expand the relationships we have with clients so we can sell the full suite of CGI services. And a lot of the pure play software just doesn't have that. Now, there are some firms that are closer to that. We're looking at how to make that happen.

George D. Schindler: Yes.

George D. Schindler: What we have found when we look at.

George D. Schindler: Pure software I don't.

George D. Schindler: We evaluate them often.

George D. Schindler: The issue is that they don't necessarily have the relationships with the clients that were looking for when we're looking at M&A, we're looking to.

George D. Schindler: Complement and expand the relationships we have with clients. So we can sell through the full suite of CGI services and a lot of the pure play software just don't have that.

George D. Schindler: And, in general, you don't see that. Same thing with pure AI firms. You know, there's a lot of firms that, you know, are masquerading as AI firms, but they're not really. At the end of the day, they're not really AI firms. And that's the issue with software firms. Do they have that relationship with the clients?

George D. Schindler: Now there are some firms that are closer to that we're looking at.

George D. Schindler: How to how to make that happen.

George D. Schindler: And but in general you don't see that same thing on pure AI firms.

George D. Schindler: There is.

George D. Schindler: You've got to sit through a lot of firms that are masquerading as AI firms, but theyre not really.

George D. Schindler: At the end of the day, they're not really AI firms and that's that's the issue with software firms do they have the relationship with the clients.

Speaker Change: Okay, great. Thank you.

George D. Schindler: Mhm last logos.

Operator: Your next question comes from Jason Kupferberg with Bank of America.

George D. Schindler: Your next question comes from Jason Kupferberg with Bank of America.

Jason Kupferberg: Your line is now.

Jason Kupferberg: Hi, good morning, George and Steve. This is Tyler DuPont on behalf of Jason.

Jason Kupferberg: Alright, good morning towards let's see if this is Tyler on for Jason. Thanks for taking my questions. I know, we're sort of putting up on time, so I'll try to be quick here.

Tyler Dupont: I know this has sort of been asked before as well, but to put a slightly different spin on it but based on my back of the envelope math it looks like FNC Rev declined for the first time in quite a few quarters of strong growth.

Tyler Dupont: I know you commented on green shoots that you're seeing.

Tyler Dupont: But when we think about sort of an inflection positive.

Tyler Dupont: Are you seeing that more of the <unk> phenomenon <unk> or just any trends there.

Tyler Dupont: Thanks for taking the questions. I know we're sort of putting up on time. So I'll try to be quick here. I know this is sort of an afterthought as well, but to put a slightly different spin on it, based on my back of the envelope math, it looks like SINC revs declined for the first time in quite a few quarters of strong growth. I know you commented on the green shoots that you're seeing. But when we think about sort of an inflection positive, are you seeing that more as a three Q phenomenon, four Q, or just any trends there? Worth considering as we look through 2024.

Tyler Dupont: As we look through 2024.

George D. Schindler: Yeah, and that's what I try to explain. It's difficult to predict. I'm not going to predict. We don't give guidance. That's why I share with you the data points that I have. And what we're really just focused on is staying in front of our clients with value propositions that will help them now and in the future. But I don't really have an answer there.

Tyler Dupont: Yes, and Thats what.

George D. Schindler: I've tried to explain it's difficult to predict I'm not going to predict we don't give guidance.

George D. Schindler: Thats why I shared with you the.

George D. Schindler: The data points that I have.

George D. Schindler: And what we're really just focused on staying in front of our clients with the value propositions that will help them now and in the future so but.

George D. Schindler: I don't I don't really have.

George D. Schindler: An answer there.

Tyler Dupont: Understandable. That makes sense. I appreciate the color there.

Speaker Change: Understandable that makes sense I appreciate the color there.

Speaker Change: Just as a follow up it looks like as we're continuing to see sort of an increase in larger and longer duration deal ways.

Speaker Change: Can you just may be balance the difference between what you're seeing from the TPB growth side on the ATB growth side as we look at CGI as a whole how should we anticipate.

George D. Schindler: And just as a follow-up, it looks like, you know, as we're continuing to see sort of an increase in larger and longer duration deal wins, can you just maybe balance the difference between what you're seeing from the TDB growth side and the ACB growth side as we look at CGI as a whole? You know, how should we anticipate this trend to evolve, and any sort of disconnect? How long should that last between those two growth rates? Any sort of trends that are worth calling out?

George D. Schindler: This brings to our.

George D. Schindler: Evolve and sort of any disconnect alongside that lapsed between those two growth rates any sort of trends there worth calling out.

George D. Schindler: Yeah, well, you know, it's interesting. I guess maybe what I should come back to is what I shared with you from the voice of the client, that there's more of a dual focus agenda that's coming into shape, so both the cost savings and the growth drivers. And so I think you're going to see that normalized back to something that you're going to have the stronger SINC growth for point projects but also those larger transformative managed services deals. So that's what I would say that that data point would point to.

Speaker Change: Yes, well.

George D. Schindler: It's interesting I guess, maybe where I come back to is what.

George D. Schindler: What what I shared with you from the voice of the client that there is a more of a dual focus agenda.

George D. Schindler: Into shape, so both the cost savings and the growth drivers and so I think youre going to see that normalize back to something that youre going to have the.

George D. Schindler: Stronger ASI and see growth for.

George D. Schindler: For point projects, but also those larger transformative managed services deals so.

George D. Schindler: That's what I would I would say that that data point would would point to.

Tyler Dupont: Okay, great. Thanks a lot. I appreciate it. Thank you.

Speaker Change: Okay, great. Thanks, a lot I appreciate it.

Speaker Change: Thank you.

Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star 1. There are no further questions at this time. I will now turn the call over to management.

Speaker Change: Ladies and gentlemen, as a reminder, should you have a question. Please press star one.

Operator: Yeah.

Operator: There are no further questions at this time I will now turn the call over to management.

Kevin Morris Linder: Thank you, Joelle, and thank you everyone for participating. As a reminder, a replay of the call will be available either via our webcast or by dialing 1-888-660-6264 and using the passcode 43710.

Speaker Change: Thank you Joelle and thanks, everyone for participating as a reminder, a replay of the call will be available either via our webcast or by dialing one 880, 86606264 and using the pass code <unk> 710, as well a podcast of this call will be available for download within a few hours.

Operator: As well, a podcast of this call will be available for download within a few hours. Follow-up questions can be directed to me at 1-905-973-8363. Thanks again, everyone, and I'm looking forward to speaking soon. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. The Ultimate Parody Site! Thanks for watching! [inaudible]

Operator: Follow up questions can be directed to me at one $905 90, 703, <unk> hundred <unk> III. Thanks, again, everyone and looking forward to speaking soon.

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