Q1 2025 CGI Group Inc Earnings Call
Operator: Good morning, ladies and gentlemen. Welcome to CGI's Q1 fiscal 2025 conference call. I would like to turn the meeting over to Mr. Kevin Linder, SVP of Investor Relations. Please go ahead, Mr. Linder.
Kevin Linder: Thank you, Sylvie, good morning. With me to discuss CGI's Q1 of fiscal 2025 results are François Boulanger, our President and CEO, Steve Perron, Executive Vice President and CFO. This call is being broadcast on cgi.com, recorded live at 9:00 AM Eastern Time on Wednesday, 29 January 2025. Supplemental slides, as well as the press release we issued earlier this morning, are available for download along with our Q1 MD&A, financial statements, and accompanying notes, all of which have been filed with both SEDAR+ and EDGAR. 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, 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.
Speaker Change: Thank you Sylvia and good morning, with me to discuss <unk> first quarter fiscal 2025 results, our Francois Boulanger, our president and CEO and Steve <unk> Executive Vice President and CFO. This call is being broadcast on CGI Com and recorded live at nine a M. Eastern time on Wednesday January 29th.
Speaker Change: 2025 supplemental slides as well as the press release, we issued earlier. This morning are available for download along with our Q1 MD&A financial statements and accompanying notes all of which have been filed with both SEDAR plus and Edgar.
Speaker Change: Please note that some statements made on the call maybe 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 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. We are also hosting our annual general meeting this morning, so we hope you'll join us live via the broadcast at 11:00 AM. Now I'll turn the call over to François for some introductory remarks. François?
Speaker Change: Complete safe Harbor statement is available in both our MD&A and press release as well as on CGI Dot com.
Speaker Change: We recommend our investors read it in its entirety, where.
Speaker Change: We are reporting our financial results in accordance with international financial reporting standards ARIA for US 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.
Speaker Change: All of the dollar figures expressed on this call are Canadian unless otherwise noted we're also hosting our annual general meeting. This morning. So we hope you'll join US live via the broadcast.
Speaker Change: And I am now I will turn the call over to Francois for some introductory remarks Francois.
François Boulanger: Thank you, Kevin, and good morning, everyone. Today, in line with the long-term succession plan of CGI, Julie Godin was appointed Executive Chair of CGI Board of Directors, effective following today's annual general meeting of shareholders. CGI's founder, Serge Godin, is now the Co-Chair of the Board and will continue to focus on transformational acquisitions and on large-scale engagements with clients. During our annual general meeting this morning, Serge and Julie will provide further remarks on this key milestone. In addition, we announced this morning the signing of a new merger agreement. I will discuss this in my remarks. Now I'll turn the call over to Steve to review the Q1 financial results. Steve?
Francois Boulanger: Thank you, Kevin and good morning, everyone.
Speaker Change: To date in line with the long term succession plan of CGI has really got any was appointed executive chair of CGI Board of directors effective following today's annual general meeting of shareholders.
Speaker Change: <unk> is now the core chair of the board and we will continue to focus on transformational acquisitions and on large scale engagements with clients.
Speaker Change: During our annual General meeting this morning, SaaS and Judy will provide further remarks on this key milestone.
Speaker Change: In addition, we announced this morning, the signing of a new merger agreement how will discuss this in my remarks.
Speaker Change: Now I'll turn the call over to Steve to review the Q1 financial results Steve.
Steve Perron: Thank you, François. Good day, everyone. CGI once again delivered strong results in our Q1 of 2025. Before I begin, I would like to remind everyone about the adjustments we made to our reporting segments starting this quarter. Germany is now its own segment, and our operations in Scandinavia are now combined with our Northwest and Central East Europe segment. In Q1, we delivered CAD 3.8 billion of revenue, up 5.1% year over year, or up 2.7% when excluding the impact of foreign exchange. In constant currency, the CGI segments with strongest growth were US Federal at 14%, Canada at 5.9%, Asia Pacific at 5.2%, and UK and Australia at 3.2%. In constant currency, our North American operations grew at 6.9% this quarter, while our European operations reported a change of -0.8% compared to last year, largely due to slower market conditions, mainly in Germany and France.
Speaker Change: And good day everyone.
Speaker Change: CGI once again delivered strong results in our first quarter of fiscal 'twenty.
Speaker Change: Before I begin I would like to remind everyone about the adjustment we made to our reporting segments starting this quarter.
Speaker Change: Jeremy is now its own segment and our operation in Scandinavia are.
Speaker Change: Now combined with our north West and Central East Europe segment.
Speaker Change: In Q1, we delivered three $8 billion of revenue.
Speaker Change: Five 1% year over year are up two 7% when excluding the impact of foreign exchange.
In constant currency, the CGI segments with strongest growth, where U S federal at 14%.
Speaker Change: Canada at five 9%.
Speaker Change: Asia Pacific at five 2% in UK and Australia at three 2%.
Speaker Change: In constant currency.
Speaker Change: Our North American operations grew at six 9% this quarter, while our European operation reported a change of minus <unk>, 8% compared to last year, largely due to slower market conditions, mainly in Germany and France.
Steve Perron: From an industry perspective, constant currency revenue growth was led by government at 7.9% and financial services at 5.5%, driven by strong performance in North America. We experienced continued softness in the manufacturing sector, particularly in Europe. IP revenue grew in 7 of our 8 proximity segments on the strength of continued client interest for our business solutions. IP represented 21.6% of total revenue, down 40 basis points year-over-year due to recent business acquisitions. In Q1, bookings were CAD 4.2 billion for a book-to-bill ratio of 110%. Our North American and Europe operations each had identical book-to-bill ratio at 110%. When looking at service type, book-to-bill ratios were 107% for managed services and 114% for business and strategic IT consulting and system integration. On a trailing 12 months basis, our book-to-bill ratio was 108%.
Speaker Change: From an industry perspective constant currency revenue growth was led by government at seven 9% and financial services at five 5% driven by strong performance in North America.
Speaker Change: We experienced continued softness in the manufacturing sector, particularly in Europe.
Speaker Change: IP revenue grew in seven of our eight proximity segment on the strength of continued client interest for our business solutions.
Speaker Change: It represented 21, 6% of total revenue down 40 basis points year over year due to recent business acquisition.
Speaker Change: In Q1 bookings were $4 $2 billion for a book to bill ratio of 110%.
Speaker Change: Our North American and Europe operation each add it didn't take hold book to bill ratio at 110%.
Speaker Change: When looking at service type book to Bill ratios were 108, 7% for our managed services and 114% for our business and strategy consulting and system integration.
Speaker Change: On a trailing 12 months basis.
Speaker Change: Our book to Bill ratio was 108%.
Steve Perron: On the same basis, managed services had a book-to-bill ratio of 113%. FINC book-to-bill ratio was 101%. Our global backlog reached CAD 29.8 billion or 2 times revenue, providing good revenue visibility. Turning to profitability, our results once again demonstrated our ability to manage our operations with discipline. Earnings before income taxes were CAD 592 million, for a margin of 15.6%, up 100 basis points year over year. Adjusted EBIT in the quarter was CAD 612 million, representing a margin of 16.2%. The favorable impacts generated from last year cost optimization programs were offset by the temporary dilutive impact of recent business acquisitions and lower billable utilization with some regions of continental Europe. Margins were strongest in the following segments. Asia Pacific at 32.5%, Canada at 24.1%, and UK and Australia at 16.5%.
Speaker Change: On the same basis managed services had a book to bill ratio of 113% N S. I N C book to Bill ratio was 101%.
Speaker Change: Our global backlog reached $29 $8 billion or two times revenue, providing good revenue visibility.
Speaker Change: Turning to profitability.
Speaker Change: Our results once again demonstrated our ability to manage our operation with discipline.
Speaker Change: Earnings before income taxes were $592 million for a margin of 15, 6% up 100 basis points year over year.
Speaker Change: Adjusted EBIT in the quarter was $612 million, representing a margin of 16, 2%.
Speaker Change: Favorable impacts generated from last year cost optimization program.
Speaker Change: Offset by the temporary dilutive impact of recent business acquisition, and lower billable utilization with some region.
Speaker Change: Continental Europe.
Speaker Change: Margin were strongest in the following segments.
Speaker Change: Asia Pacific at 32, 5%.
Speaker Change: Dana that at 24, 1% in UK and Australia at 16, 5%.
Steve Perron: Our effective tax rate in the quarter was 25.9%, down from 26.1% last year, and we expect our tax rate for future quarters to be in the range of 25.5% to 26.5%. Net earnings were CAD 439 million for a margin of 11.6%, up 80 basis points year over year. Diluted EPS was CAD 1.92, representing an increase of 15% year over year. Adjusted net earnings were CAD 449 million. This represents a margin of 11.9% stable year over year. On the same basis, diluted EPS was CAD 1.97, an accretion of 7.7% when compared to Q1 last year. This quarter, we initiated targeted actions in Europe, mainly in Germany, to realign our cost structure with current market conditions. As such, we incurred CAD 8 million of costs in Q1, and we expect to incur another CAD 42 million to finalize these actions by Q3.
Speaker Change: Our effective tax rate in the quarter was 25, 9% down from.
Speaker Change: From 26, 1% last year, and we expect our tax rate for future quarters to be in the range of $25 five to 26, 5%.
Speaker Change: Net earnings were $439 million for a margin of 11, 6% up 80 basis points year over year.
Speaker Change: That EPS was $1.92, representing an increase of 15% year over year.
Speaker Change: Adjusted net earnings were $449 million.
Speaker Change: This represents a margin of 11, 9% stable year over year.
Speaker Change: On the same basis diluted EPS was $1.97 and accretion of seven 7% when compared to Q1 last year.
Speaker Change: This quarter, we initiated targeted actions in Europe, mainly in Germany to realign our cost structure with current market conditions.
Speaker Change: We incurred $8 million up cost in Q1, and we expect to incur another $42 million to finalize these actions by Q3.
Steve Perron: DSO was 38 days in the quarter, 3 days better than last year, contributing to the CAD 646 million in our cash from operations, a strong 17.1% of total revenue. Over the last 12 months, CGI has generated close to CAD 2.3 billion, up nearly CAD 200 million compared to the same period last year. In Q1, we used our cash to invest CAD 83 million into our business, invest CAD 30 million for business acquisitions, representing the initial payment for the Daugherty acquisition, invest CAD 153 million to buy back our stock, and return CAD 34 million to our shareholders under our recently initiated dividend program. We continued to deliver a strong return on invested capital at 16.2%, up 30 basis points, demonstrating our proficiency and discipline on deployment of capital. In line with our capital allocation strategy and priorities, earlier today, we announced that CGI entered into a new agreement for merger in the UK.
Speaker Change: DSO was 38 days in the quarter three days better than last year contributing to the $646 million in our cash from operations.
Speaker Change: Strong 17, 1% of total revenue.
Speaker Change: Over the last 12 months.
Speaker Change: <unk> generated close to $2 $3 billion up nearly $200 million compared to the same period last year.
Speaker Change: In Q1, we use our cash to invest $83 million into our business.
Speaker Change: <unk> $30 million toward business acquisition, representing the initial payment for the <unk> acquisition.
Speaker Change: And that's $153 million to buyback our stock.
Speaker Change: And returned $34 million to our shareholders under our recently initiated dividend program.
Speaker Change: We continue to deliver a strong return on invested capital at 16, 2% up 30 basis points, demonstrating our proficiency and discipline on deployment of capital.
Speaker Change: In line with our capital allocation strategy and priorities earlier today, we announced that CGI entered into a new agreement for a merger in the UK.
Steve Perron: François will provide more commentary on the merger in a few minutes. Yesterday, our board of directors approved the extension of our NCIB program until February 2026, authorizing us to repurchase for cancellation up to 20.2 million shares over the next 12 months. CGI's board of directors also approved a quarterly cash dividend of CAD 0.15 per share. This dividend is payable on 21 March 2025 to shareholders of record as of the close of business on 14 February 2025. As communicated in the past, in consistent with our profitable growth strategy, CGI's capital allocation priorities remain focused on investing back in the business and pursuing accretive acquisitions. Now, I will turn the call over to François to further discuss the insights on the quarter as well as the outlook for our business and markets. François?
Speaker Change: So I will provide more commentary on the merger in a few minutes.
Speaker Change: Yesterday, our board of directors approved the extension of our NCI program until February 2026, authorizing us to repurchase for cancellation up to $20 2 million shares over the next 12 months.
Speaker Change: And CGI as board of Directors also approved a quarterly cash dividend of <unk> 15 per share.
Speaker Change: This dividend is payable on March 21, 2025 to shareholders of record as of the close of business on February 14 2025.
Speaker Change: As communicated in the past and consistent with our profitable growth strategy.
Speaker Change: Capital allocation priorities remain focused on investing back into the business and pursuing accretive acquisitions now.
Speaker Change: Now I will turn the call over to console to further discuss the insights on the quarter as well as the outlook for our business and markets.
François Boulanger: Thank you, Steve. I am pleased with our team's performance in Q1 as we continue to successfully execute on our build and buy profitable growth strategies. We began the fiscal year in a strong position with positive momentum on a year-over-year basis. Revenue grew 5.1%, or 2.7% on a constant currency basis. EPS accretion was 15%, or 7.7% on an adjusted basis, resulting from a higher recurring revenue mix as well as proactive operational excellent actions. Cash from operation reached nearly CAD 650 million, or 17.1% of revenue, for an improvement of 110 basis points as a result of sustained quality delivery and business economics. In Q1, we also continued to see rising levels of engagement with our stakeholders. More than 87% of our 91,000 consultants and professionals are now CGI shareholders, up from 86% this time last year.
Speaker Change: Thank you, Steve Hi, I'm pleased with our team's performance in the first quarter as we continued to successfully execute on our build and buy profitable growth strategy.
Speaker Change: We began the fiscal year in a strong position with positive momentum on a year over year basis.
Speaker Change: Revenue grew five 1% or two 7% on a constant currency basis.
EPS accretion was 15% or seven 7% on an adjusted basis, resulting from a higher recurring revenue mix as well as proactive operational excellence actions.
Speaker Change: And cash from operation reached nearly $650 million or 17, 1% of revenue.
Speaker Change: For an improvement of 110 basis points as a result of sustained quality delivery and business excellence.
Speaker Change: And the quarter. We also continue to see rising levels of engagement with our stakeholders.
Speaker Change: More than 87% of our 91000 consultants and professionals are now CGI shareholders up from 86% This time last year.
François Boulanger: Client satisfaction levels again rose, now at 9.5 out of 10, with one of the highest scores being the intention of clients to engage CGI again in the future. The high satisfaction and deep confidence clients have in CGI's people and capabilities drove strong bookings in Q1, representing 110% book-to-bill ratio. Q1 bookings continued to be led by wins within our two largest industry sectors of government and financial services. In Q1, we saw an uptick in financial services as some clients reinitiated investments that were previously paused. Booking in this sector was 123% of revenue, an increase of more than 40% compared to the same quarter last year. In the government sector, bookings increased more than 40% on a sequential basis, resulting in a Q1 book-to-bill of 124%. This increase was a result of a stronger client focus on driving monetization and operational efficiency.
And in client satisfaction levels again roles now at nine five out of 10.
Speaker Change: With one of the highest scores being the intention of clients to engage CGI again in the future.
Speaker Change: The highest satisfaction and deep confidence clients have in <unk> people and capabilities.
Speaker Change: With strong bookings in Q1, representing a 110% book to Bill ratio.
Speaker Change: First quarter bookings continued to be led by wins within our two largest industry sectors of government and financial services.
Speaker Change: In the quarter, we saw an uptick in financial services as some clients who initiated investments that were previously Pos.
Speaker Change: Booking in this sector was we're honored 23% of revenue an increase of more than 40% compared to the same quarter last year.
Speaker Change: And the government sector bookings increased more than 40% on a sequential basis, resulting in a Q1 book to bill of 124%.
Speaker Change: This increase was a result of a stronger a stronger client focused on driving monetization and operational efficiency.
François Boulanger: We expect this trend to continue as governments around the world adapt their IT priorities in line with evolving mission and policy priorities. Representative client awards in the quarter included SkyAlyne, a leading provider of military pilot and aircrew training in Canada, selected CGI as its strategic technology partner to design a next generation of aircrew training for the Royal Canadian Air Force. Under the 25-year agreement, CGI will deliver a comprehensive suite of innovative, secure services, including cybersecurity, business consulting, and cloud computing. In Wales, the Hywel Dda University Health Board initiated a 10-year, GBP 75 million strategic partnership with CGI to drive the digital transformation of healthcare to improve patient outcomes. CGI's consultants will partner with the board to streamline operations, modernize systems and processes, and deliver innovative solutions such as AI integration.
Speaker Change: We expect this trend to continue as governments around the world adapt their it priorities in line with evolving mission and policy priorities.
Speaker Change: Represented the final awards in the quarter included Skyline, and leading provider of military pilots and aircrew training in Canada selected.
Speaker Change: Selected CGI as a strategic technology partner to design. The next generation of aircrew training for the Royal Canadian Air Force.
Speaker Change: Under the 25 year agreement CGI will deliver a comprehensive suite of innovator.
Speaker Change: Security services, including cyber security business consulting and cloud computing.
Speaker Change: And wells the <unk> University held board initiated at 10 year 75 million pounds strategy. It's a partnership with CGI today to drive the digital transformation of health care to improve patient outcomes.
Speaker Change: <unk> consultants will partner with our board to streamline operations modernize systems and processes and deliver innovative solutions such as AI integration.
François Boulanger: The Swedish Tax Agency extended its partnership with CGI to deliver advanced eID and electronic signature services. The agreement reinforces CGI roles in providing secure, innovative digital solutions that enhance citizen access to government services while ensuring efficiency and compliance in Sweden's national digital ecosystem. Multiple North American banks extended their partnerships with CGI for consulting and systems integration services to design, build, and deploy projects across multiple lines of business. We continue to see some clients exercising caution in their discretionary spending, primarily in Europe and the MRD sector. However, client interest remains strong across every industry to explore with CGI the opportunities for driving modernization and operational efficiency to manage services and IP. CGI remains well positioned as a partner of choice to help clients achieve the tangible and trusted business outcomes they seek.
Speaker Change: The Swedish tax engine EMC extended its partnership with CGI to deliver advanced EIB and electronic signature services.
Speaker Change: The agreement reinforces CGI roles in providing secure innovative digital solutions that enhance citizens access to government services, while ensuring efficiency and compliance and Sweden's national digital ecosystem.
Speaker Change: And multiple north American banks extended their partnerships with CGI for consulting and systems integration services to design build and deploy projects across multiple lines of business.
Speaker Change: We continue to see some clients exercising caution and our discretionary spending primarily in Europe and the <unk> sector. However, client interest remains strong across every industry to explore with CGI the opportunities are driving monetization and operational efficiency through managed services.
Speaker Change: Pete.
Speaker Change: CGI remains well positioned as a partner of choice to help clients achieve tangible and trusted business outcomes. They seek.
François Boulanger: In fact, over the past 6 months, CGI has earned a record number of third-party analyst endorsements, which rank our expertise and capabilities in worldwide leading and major player categories. These reports and rankings cover our services related to AI, data modernization, cloud, cybersecurity, and business consulting. CGI also achieved new partnership levels in Q1 with several emerging alliances, including Snowflake and Databricks. Since the start of the fiscal year, we also progressed our strategic priority to pursue accretive acquisitions. In December, we expanded our positioning with Fortune 500 clients in the US by merging with Daugherty, a professional services firm specializing in AI, IT consulting, and business advisory services. Through the merger, our footprint increased in metros such as St. Louis, Atlanta, Minneapolis, and Chicago. I would like to warmly welcome the 1,100 new consultants who joined CGI from Daugherty.
Speaker Change: In fact over the past six months CGI as earned a record number of third party analysts endorsements with shrank, our expertise and capabilities and worldwide, leading and major player categories.
Speaker Change: These reports and rankings cover our services related to AI data modernization cloud cyber security and business consulting.
Speaker Change: <unk> also achieved new partnership levels in Q1, with several emerging alliances, including Snowflake and data outbreaks.
Since the start of the fiscal year, we also progress our strategic priority to pursue accretive acquisitions.
Speaker Change: In December we expanded our positioning with fortune 500 clients in the U S by emerging with Dorothy <unk>.
Speaker Change: So services firm specializing in AI.
Speaker Change: Consulting and business Advisory services.
Speaker Change: Through the merger, our footprint increase and metros, such as St. Louis Atlanta, Minneapolis and Chicago.
Speaker Change: I would like to warmly welcome the 1100, new consultants, who joined CGI from Dougherty.
François Boulanger: This morning, we announced a newly signed acquisition agreement, which will close in the coming weeks, pending regulatory approvals. BJSS is one of the largest independent IT and software engineering consultancies in the UK. This acquisition will accelerate our UK-wide expansion strategy to deepen our presence in key commercial industries such as retail, financial services, and energy and utilities. Upon completion, more than 2,400 highly skilled consultants will join CGI, bringing deep expertise in a range of services such as technology service strategy, customer experience design, software engineering, and AI. Through our buy strategy, we will continue to prioritize investment and aim at building critical mass in strategic metro markets in all CGI geographies. Our goal is to gradually grow this presence to mirror the economic sector distribution in each metro market and to deploy our full range of services and solutions.
Speaker Change: And this morning, we announced our newly signed acquisition agreements, which will close in the coming weeks pending regulatory approvals.
Speaker Change: BJ assess as one of the largest independent IP and software engineering Consultancies in the UK.
Speaker Change: This acquisition will accelerate our UK wide expensive strategy to deepen our presence in key commercial industries, such as retail financial services and energy and utilities.
Speaker Change: Up in completion more than 2400 highly skilled consultants will join CGI, bringing deep expertise and a range of services such as technology.
Speaker Change: Strategy customer experience design software engineering Nai.
Speaker Change: Two our buy strategy, we will continue to prioritize investment aimed at building critical mass and strategic Metro markets and all CGI geographies. Our goal is to gradually grow this presence to mirror the economic sector distribution in each metro market and to deploy our full range of <unk>.
Speaker Change: Services and solutions.
François Boulanger: We remain in dialogue with a number of firms, both metro markets and transformational opportunities. As always, we will be disciplined to ensure that mergers will be accretive to each of our stakeholders. Looking ahead, we continue to be well positioned to partner with clients as they evolve their strategies to address the ongoing macro trends within their geographies and industries. Client interest remains high for the value proposition CGI can deliver through our end-to-end offerings. This positioning is validated by CGI's pipeline of opportunities, which is up 20% compared to this time last year. In terms of client buying patterns, we continue to see some diversification by geographic region, which aligns well with CGI's greatest strengths, particularly our client relationship proximity model, our end-to-end portfolio of services, and our global delivery network. In combination, these assets enable us to quickly adapt to evolving client needs.
Speaker Change: We remain in dialogue with a number of firms both ventral market and transformational opportunities as always we will be disciplined to ensure that mergers will be accretive to each of our stakeholders.
Speaker Change: Looking ahead, we continue to be well positioned to partner with clients as they evolve their strategies to address the ongoing macro trend.
Speaker Change: Within their geographies and industries.
Speaker Change: Client interest remains high for the value proposition CGI can deliver to our end to end offerings.
This positioning is validated by <unk> pipeline of opportunities, which is up 20% compared to this time last year.
Speaker Change: In terms of client buying patterns, we continue to see some diversification by geographic region, which aligns well with CGI is greatest strengths, particularly our client relationship proximity model our end to end portfolio of services and our global delivery network and.
Speaker Change: In combination these assets enabled us to quickly adapt to evolving client needs.
François Boulanger: With this in mind, I will provide commentary on the demand environment in our North American and European operations. Starting in North America. Across commercial industries, clients are sustaining their focus to drive operational resilience and innovation to capitalize on emerging growth opportunities. Given these priorities, our pipeline remains strong overall, with a notable uptick for our managed services offerings. Demand remains strong for our CGI Credit Studio IP, which is a cloud-native platform that centralizes services across the full credit lifecycle from originations to collections. Government sector clients in North America are balancing tight budgets with the need for IT modernization and improving citizen services. Cybersecurity and cloud migration also are critical areas of investment as agencies work to enhance operational efficiency and mitigate risk in an uncertain environment. In the government sector, our pipeline for managed services opportunities remains high and continues to rise.
Speaker Change: With this in mind I will provide commentary on the demand environment in our North American and European operations.
Speaker Change: Starting in North America across commercial industries clients are sustaining their focus to drive operational resilience and innovation to capitalize on emerging growth opportunities.
Speaker Change: Given these priorities our pipeline remains strong overall with another notable uptick for our managed services offerings.
Speaker Change: Also demand remains strong for our CGI credit studio IP, which is a cloud native platform that centralized services across the full credit lifecycle from originations to collections.
Speaker Change: Government sector clients in North America are balancing tight budgets with the need of.
Speaker Change: Our IP monetization and improving citizen services.
Speaker Change: <unk> security and cloud migration also our critical areas of investment as agencies work to enhance operational efficiency and mitigate risks and uncertain environment.
Speaker Change: And the government sector, our pipeline for managed services opportunities remains high and continues to rise CGI governments ERP solutions continue to be in high demand with pipelines rising compared to this time last year.
François Boulanger: CGI Government's ERP solutions continue to be in high demand, with pipelines rising compared to this time last year. Turning now to Europe. The macroeconomic landscape continues to be defined by slower economic growth and geopolitical uncertainty. Clients continue to turn to CGI to help navigate these pressures, particularly across commercial industries where they are focused on driving operational efficiency and addressing regulatory requirements. As a result, our managed services and IT pipelines across commercial industries remain strong. For example, the pipeline for CGI's financial crime detection solution is up by more than 50% compared to this time last year. In the government sector, our pipeline is high and rising as clients are focused on modernization as well as e-governance platforms and green IT solutions.
Turning now to Europe, the macroeconomic landscape continues to be defined by slower economic growth and geopolitical uncertainty clients.
Speaker Change: Clients continue to turn to CGI to help navigate these pressures, particularly across commercial industries, where they are focused on driving operational efficiency and addressing regulatory requirements.
Speaker Change: As a result, our managed services and IP pipelines across commercial industries remained strong.
Speaker Change: For example, the pipeline for CGI as financial crime detection solution is up by more than 50% compared to this time last year.
Speaker Change: And the government sector, our pipeline is high and rising as clients are focused on monetization as well as E governance platforms and Green solutions.
François Boulanger: Macro level uncertainty is prompting government to adopt more efficiency-driven IT investments, with cybersecurity remaining a critical priority given the increasing risk to critical infrastructure and citizen data. These regional buying trends will continue to favor CGI as a partner of choice, given our focus on value propositions that deliver trusted, tangible business outcomes that are designed to help clients generate operational efficiency and accelerate transformation, notably through our IP and managed services. Among managed services offerings gaining momentum right now is that of global capability centers or GCCs. CGI has 20 years of experience with GCC models, particularly for clients in banking, retail, and communications. Our global delivery centers of excellence enable full-scale application development and operation with a proven track record of success. Our value proposition focuses on GCCs as strategic extensions of the client's organization to drive efficiency, resilience, scalability, and growth in a fast-changing business landscape.
Speaker Change: Macro level uncertainty is promising government to adopt more efficiency driven it investments with cyber security remains a critical priority given the increasing risk to critical infrastructure and citizen data.
Speaker Change: These Richard all buying trends will continue to favor CGI is a partner of choice given our focus on value propositions that delivered trusted tangible business outcomes that are designed to help clients generate operational efficiencies and accelerate transformation, notably through our IP and Mt.
Speaker Change: Services.
Speaker Change: Among managed services offerings, gaining momentum right now is that our global capability centers or gcc's.
Speaker Change: CGI has 20 years of experience with GCC models, particularly for clients in banking retail and communications.
Speaker Change: Our global delivery centers of excellence enable full scale application development and operation with a proven track record of success.
Speaker Change: Our value proposition focuses on gcc's, a strategic extensions of the clients organization to drive efficiency resilience scalability and growth in a fast changing business landscape.
François Boulanger: Naturally, across all industries, we remain deeply engaged with clients on their AI and GenAI strategies and implementation. Over the past quarter, we have continued to see clients moving from investigation to implementation to drive efficiency, process automation, and legacy monetization. As previously shared, we are integrating AI and GenAI technologies into our engagements, and our pipeline of AI opportunities continues to grow, particularly for responsible AI advisory services, data integration, and platform monetization. Booking in Q1, the integrated AI technologies included: a global healthcare and insurance company selected CGI to support their enterprise intelligent automation platform and help build the foundation for their agentic AI strategy. The City of Edinburgh Council is collaborating with CGI to conduct comprehensive AI discovery sessions to identify and evaluate AI use cases for a wide range of missions, from social services care to emergency and crisis management.
Speaker Change: Naturally across all industries, we remain deeply engaged with clients on their III and Jen AI strategies and implementation.
Speaker Change: Over the past quarter, we have continued to see clients moving from investigation to implementation to drive efficiency process automation and legacy monetization.
Speaker Change: As previously shared we are integrating AI and <unk> AI technologies into our engagements in our pipeline of AI opportunities continues to grow, particularly for responsible AI advisory services data and integration and platform monetization.
Speaker Change: Booking in Q1 that integrated AI technologies included.
Speaker Change: Global Health care and insurance company selected CGI to support their enterprise intelligent automation platform and help build the foundation for <unk> AI strategy.
Speaker Change: The city of Edinburgh Council is collaborating with CGI to conduct comprehensive AI discovery sessions during the defy and evaluate AI use cases for a wide range of missions from social services care to emergency and price management.
François Boulanger: One of the world's leading financial services providers selected CGI to further their digital transformation by extending process automation with AI features, as well as through our alliances with Google and Blue Prism. We continue to progress on our AI investments in line with our three-year plan. We are on track with this plan to strengthen our expertise, offerings, delivery, and positioning. Our investment plan includes continued initiatives such as advancing our training and tooling for developers and consultants, integrating AI and GenAI into our portfolio of IP solutions, enhancing our managed services and consulting offerings and methodologies, and with our clients, we are innovating to drive new business value through industry-specific use cases, the establishment of AI factories, improvement of user experience, and to generate operational efficiencies. In closing, we are off on a strong start for the year and reiterate our confidence in our fiscal 2025 plan.
And one of the world's leading financial services providers selected CGI to further their digital transformation by extending process automation with AI features as well as true our alliances with Google and Blue Prism.
Speaker Change: We continue to progress on our AI investments in line with our three year plan.
Speaker Change: We are on track with this plan to strengthen our expertise offerings delivery and positioning.
Speaker Change: Our investment plan includes continued initiatives such as advancing arent training and tooling for developers and consultants.
Speaker Change: Integrating AI and <unk> into our portfolio of IP solutions, and then saying our managed services and consulting offerings and mythologies and with our clients. We are innovating to drive new business value through industry specific use cases, the establishment of AI factories improvement of user experience and.
Speaker Change: To generate operational efficiencies.
Speaker Change: In closing we are off on a strong start for the year and reiterate our confidence in our fiscal 2025 clients.
François Boulanger: CGI remains well-positioned as one of the few leading global firms with the scale, reach, insights, and capabilities to help clients deliver the new business outcomes they require for their digital strategies. We remain committed to achieving our strategic aspiration of doubling CGI over the next five to seven years through the disciplined execution of our build and buy profitable growth strategy. Thank you for your continuing interest and support. Let's go to the questions. Kevin?
Speaker Change: CGI remains well positioned as one of the few leading global firms with the scale reach insights and capabilities to help clients deliver their new business outcomes.
Speaker Change: They require for their digital strategies.
Speaker Change: And we remain committed to achieving our strategic aspiration of doubling CGI over the next five to seven years through the disciplined execution of our build and buy profitable growth strategy.
Kevin: Thank you for your continuing interest and support let's go to the question Kevin. Thank.
Kevin Linder: Thank you, François. Sylvie, we can now poll for questions.
Speaker Change: Thank you Francois Sylvie, we can now poll for questions.
Operator: Thank you. Ladies and gentlemen, if you do have any questions, please press star followed by one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to withdraw from the question process, please press star followed by two. If on a speakerphone, you will need to lift the handset first. Your first question will be from Paul Treiber at RBC Capital Markets.
Speaker Change: Thank you ladies and gentlemen, if you do have any questions. Please press star followed by one on you touched on.
Speaker Change: You will hear a prompt that Johan has been raised.
Speaker Change: Should you wish to withdraw from the question process. Please press star followed by two and if on a speaker phone you will need to lift the handset first.
Speaker Change: Your first question will be from October at RBC capital markets.
Paul Treiber: Thanks very much, and good morning. It is nice to see the acquisition announced this morning. Just hoping that you could speak to your M&A pipeline and capacity. You deployed a fair amount of capital in the last couple of months. Do you need to take a pause to integrate those acquisitions, or do you have the capacity to continue to make acquisitions here in the short term?
Thanks, very much and good morning, it's nice to see the acquisition announced this morning.
Speaker Change: Hoping that you could speak to your M&A pipeline and capacity.
Speaker Change: You deployed a fair amount of capital in last couple of months do you need to take a pause to integrate those acquisitions would you have the capacity to continue to make acquisitions here in the short term.
François Boulanger: Thanks, Paul, for the question. No, we don't need to do a pause. These acquisitions, like this one that we announced this morning, is in the UK. A long time we didn't do one in the UK. The UK team is ready for this integration. The one that we did before was in the US. The fact that we have a solid operation in all these countries. Each of these countries have the capabilities of doing these integrations. We don't see any problem on that side. As you know, on the financial side, naturally, we have the solid balance sheet and the capabilities to deploy more capital. That's not stopping for the future.
Speaker Change: Thanks, Paul for the question no we don't need to do a pause in this these acquisition like this one that we announced this morning is in the UK a long time, we didn't do one in the U K. So.
Speaker Change: The UK team is ready for this integration and although that the one that we did before was in the U S. So the fact that we.
Speaker Change: Have a solid operation and all of these countries in all of these.
Speaker Change: Each of these countries.
Speaker Change: Have the capabilities of doing these integrations. So we don't see any problem on that side and as you know on the financial side by and naturally we have the.
Speaker Change: The solid balance sheet and the capabilities to deploy more capital so thats not the stopping for the future.
Paul Treiber: Looking at your business by the various regions, Germany, you called out softness there. Was it softer than usual this quarter, or has Germany been a drag on growth for the last several quarters? Is the mix of revenue different in Germany? Is it more short-term SI&C than other regions?
Speaker Change: And then looking at your business by the various regions in Germany, and you called out softness there was it softer than usual this quarter or is Germany being a drag on growth for the last.
Speaker Change: Quarter is and as the mix of revenue different than Germany isn't more short term ethane C than in other regions.
François Boulanger: No, not necessarily a different mix, for sure, there's strong in the MRD side. As you know, MRD, especially in Europe, has more difficulties. That's why we see some short-term pressure on some of the discretionary spending there. I would say, and you heard in the last quarter, we did sign a big managed services contract with a large manufacturer in Germany. They're still listening a lot to see how we can bring some cost saving. They are listening on that side. For sure, on the short term, I would say SI&C, we see that they are reducing the spending or be cautious to see what will happen in the next quarters. Okay, thanks for taking the questions. Thanks, Paul Treiber.
Speaker Change: No not necessarily.
Speaker Change: Current mix, but for sure there is.
Speaker Change: Strong in the <unk> side and so.
Speaker Change: As you know, especially.
Speaker Change: Especially in Europe.
Speaker Change: More difficulties. So so that's why we see some.
Speaker Change: Short term pressure on some of the discoveries discretionary spending there.
Speaker Change: But I would say and you heard in the last quarter, we did sign a big managed services contract with a large manufacturer in Germany. So.
Speaker Change: They are still very.
Speaker Change: They are listening a lot for to see how we can bring some cost saving so they are listening on that side, but the pressure on the short term I would say as IMC.
Speaker Change: We see that they are reducing their spending or be cautious.
Speaker Change: To see what will happen in the next quarters.
Speaker Change: Okay. Thanks for taking the questions.
Operator: Thank you. Next question will be from Jerome Dubreuil at Desjardins. Please go ahead.
Paul: Thanks, Paul.
Speaker Change: Next question will be from me gentlemen July at <unk> Bank. Please go ahead.
Jerome Dubreuil: Jerome Dubreuil, thanks for taking my questions. Another one on M&A. I guess what everyone wants to know today is this a new era of M&A? Is there maybe their appreciation of the benefits that M&A is bringing, or I know you like to signal stability, but is it just the multiples that have changed or there's a bit of a tweak in terms of the strategy there?
Speaker Change: The volatile demand thanks for taking my question.
Speaker Change: Another one on M&A I.
Speaker Change: I guess, what everyone wants to know today is.
Speaker Change: Is this a new era of M&A.
Speaker Change: Is there may be better appreciation of the benefits that.
Speaker Change: But M&A is bringing ore.
Speaker Change: I know you'd like to signal stability, but is it just the multiple that <unk> change or there's a bit of a tweak in terms of.
Speaker Change: The strategy there.
François Boulanger: Yeah, no, it's not a new era. Our strategy is to grow to build and buy, so that didn't change. I think the environment did change. I think we have a certain alignment of stars, where the pressure on the market, on the SI&C, for example, I think is putting pressure on some of these targets to think more about perhaps selling the business. We see less private equity competition that we were seeing in the past. Even some of them are thinking about even selling their piece of the business. That's why I think it's really the environment that is more open for these acquisitions. That's why we want to be sure that we will capture these opportunities.
Speaker Change: Yes, no it's not it's.
Speaker Change: It's not.
Speaker Change: You know our strategy is to grow by two build that bias. So that been unchanged I think the environment did change I think we have a certain alignment of stars.
Speaker Change: Where.
Speaker Change: The.
Speaker Change: The pressure on the market on DSI and see for example, I think.
Speaker Change: As is.
Speaker Change: Putting pressure on some of these targets two to think more about.
Speaker Change: Perhaps selling the business and that we see less private equity competition that we were seeing in the past so even some of them are thinking about even selling there.
Speaker Change: Their piece of the business. So that's why I think it's really.
Speaker Change: The environment that is more and.
Speaker Change: More open for for these acquisition and that's why.
Speaker Change: We want to be sure that we we will capture these opportunities.
Jerome Dubreuil: Thank you. That's clear. Another one, François, you've been in the role since October. Are there maybe other tweaks in terms of strategy that you're adopting? You're talking about new partnerships with some software providers. Am I sensing that the company is maybe a bit of a faster follower for new tech or business as usual?
Speaker Change: Thank you that's clear and another one.
Speaker Change: Plus the way you've been you've been in the role.
Speaker Change: Over or are there may be other tweaks in terms of strategy that you're adopting you're talking about new partnerships with some of the software providers <unk> sensing.
Speaker Change: The company is maybe a bit of a faster follower for four new tack or business as usual.
François Boulanger: No, I think we were always fast on applying new technology. I think what we're pushing a bit more, to be honest, is on the branding. We want to be sure that people understand, and companies and clients and future clients understand our capabilities. That's why we want to be sure also that we're working closely with our large partners. That's why you're seeing more news on that, but it's not a change of applying new technology or not, that we were always there to apply new technology.
Speaker Change: No I think we were always.
Speaker Change: Passed on.
Speaker Change: The new technology, I think what we're pushing a bit more to be honest is on the branding and so we want to be sure that people understand.
Speaker Change: And companies and clients and future clients understand our capabilities and so that's why we want to be sure also that we're working closely with our large partners.
Speaker Change: And so thats why youre seeing more news on that but it's not a change of.
Speaker Change: <unk> new technology are not that we were always there.
Speaker Change: Two applying new technology.
Speaker Change: Okay.
Jerome Dubreuil: Merci beaucoup.
Speaker Change: No political.
Operator: Merci. Thank you. Next question will be from Surinder Thind at Jefferies. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Next question will be from Sarah Anderson at Jefferies. Please go ahead.
Surinder Thind: Thank you. Can you perhaps talk a little bit about the lumpiness in the bookings that we're seeing, especially within SI&C? It just seems to be a bit more lumpy than it has been historically, and just what trends you're seeing underneath that.
Speaker Change: Thank you.
Can you perhaps talk.
Speaker Change: Talk a little bit about the lumpiness in the bookings that we're seeing especially within <unk>.
Speaker Change: So you can see.
Speaker Change: It seems to be a bit more lumpy than it has been historically and just.
Speaker Change: What trends youre seeing underneath that.
François Boulanger: Yeah. Actually, SI&C booking did increase versus last quarter. Last quarter, we were below 100%, and we are higher than 100% this quarter on the SI&C side. At the same time, like I was saying, a bit the pressure that we're seeing, example in the MRD side in Europe, we're seeing some pressure still especially in the consulting side. That's why you'll still perhaps see some lumpiness on that side. At least this quarter, we saw an uptick on the bookings on the SI&C side. The other thing also on the federal side or the US Federal, our Q1 and Q2 is always the historical our lowest booking quarter with the Q3 and Q4 on the highest side. That's a trend that you can see also on an annual basis.
Speaker Change: Yes.
Speaker Change: Actually assign see booking did increase versus versus last quarter. So last quarter, we were.
Speaker Change: Below a 100% then we are higher than 100% this quarter on the <unk> side. So so.
Speaker Change: To be honest, we are seeing an uptick but at the same time like I was saying a bit the.
Speaker Change: The pressure that we've seen as an example in the <unk> side in Europe.
Speaker Change: We.
Speaker Change: We're seeing some pressure still in the <unk>.
Speaker Change: Especially in the consulting side.
Speaker Change: So thats why.
Speaker Change: Youll still perhaps see some lumpiness on that side.
Speaker Change: But at least.
Speaker Change: This quarter, we saw an uptick on the bookings on the ESI and seed side. So.
Speaker Change: The other thing also on the on the federal side or the U S. Federal Q1, and Q2 or Q1, and Q2 is always be historical our lowest bookings quarter with Q3 and Q4 on the highest side. So that's a trend that you can see also on.
Speaker Change: Annual basis.
Surinder Thind: Just to clarify the comment there, is the messaging that if we were to exclude Germany, there's an overall improvement in the demand environment for discretionary spend or not? I just want to make sure.
Just to clarify the comment there is the messaging that if we were to exclude Germany. There is an overall improvement in the demand environment for discretionary spend or Nox.
François Boulanger: I would say, yeah. Like I was saying, MRD is at this pressure. I'll give you the other side on the financial sector. On the banking, we are seeing an uptick on the SI&C side. With the interest rate coming down, the banks, for example, are coming back and doing some investment on the SI&C. They don't have any choice. They delay some of these investments in the past quarters when interest rates were going up. Now that they are going down, they have regulatory pressures and changes to do. They don't have any choice to implement new solutions. We are seeing an uptick on that side.
Speaker Change: I would say yes.
Speaker Change: Like I was saying Mardi is up as pressure, but I'll give you the other side on the financial sector.
Speaker Change: On the banking, we are seeing an uptick on the ESI side.
Speaker Change: The interest rates coming down.
Speaker Change: The banks for example are coming back and doing some investment on the science.
Speaker Change: They don't have any choice.
Speaker Change: The delay some of these investments in the past quarters when interest rates were going up but now they are going down they have regulatory pressures and changes to do and so they don't have any chose to implement.
Speaker Change: New solutions. So we are seeing an uptick on that side.
Surinder Thind: That's helpful. Then on the commentary on the GCCs, the Global Capability Centers, it sounds like there's growing interest there. Does that impact the global delivery model in the sense that there's increased demand for offshore, and we should begin to see more of a mix shift there? Any color there would be helpful as well.
Speaker Change: Yes.
Speaker Change: That's helpful and then on the commentary on the Gcc's the global capabilities to errors.
Speaker Change: It sounds like there is there is growing interest there does that impact the global delivery model in the sense it.
Speaker Change: There's increased demand for offshore and we should begin to see more of a mix shift there.
Speaker Change: Any color there would be helpful as well.
François Boulanger: Yeah. You see that we're still growing in India, and that will continue. The model, when I was saying managed services are still in demand, it's true, and it's continued to be big in demand. People to see how we can help them reducing their cost. GCCs is one of the areas on how to reduce the cost. We have a lot of clients asking us to help them in creating their own GCC or creating ourself a GCC that can be transferred back to the clients or even a lot of these captive already created by clients where they're asking help. Our Indian colleagues and operations will help clients directly in India to help them achieving their own objective on their India captives.
Speaker Change: But you'll see that we're still growing in India and that will continue and.
Speaker Change: And on the model in one hour same managed services is still in demand.
Speaker Change: True and that's continued to be bigger than the management people and.
Speaker Change: Okay.
Speaker Change: See how we can help them, reducing their costs and Gcc's is one of the area on how to resolve to reduce our costs. So we have a lot of.
Speaker Change: Clients, asking us to help them in creating their own GCC or creating ourself at GCC that can be transferred back to their clients or even a lot of these captive already created by by clients, where they are asking help.
Speaker Change: And so.
Speaker Change: Our Indian.
Speaker Change: Colleagues and operations will help clients directly.
Speaker Change: And in India to to to help them achieving their own objectives on the India captives.
Surinder Thind: Thank you.
Speaker Change: Thank you.
Operator: Thank you. Next question will be from Divya Goyal at Scotiabank. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Next question will be from Doug <unk> at Scotiabank.
Speaker Change: Scotiabank. Please go ahead.
Divya Goyal: Good morning, everyone.
Speaker Change: Good morning, everyone.
François Boulanger: Good morning.
Divya Goyal: François, I wanted to get a little more color on the acquisition that's announced. As per the press release, CGI already has a significant footprint in UK. Now with this acquisition, the footprint expands. I'm just trying to understand, what is the company's broader growth plans across UK and European region, given the German restructuring, the UK acquisition? If you could provide some color on the growth broadly across that region. Thank you.
Speaker Change: One more.
Speaker Change: More color on the acquisition that announced so.
Speaker Change: Really there is no CPI already has a significant footprint in the UK now with this acquisition that footprint expand so I'm just trying to understand what is the company's broader growth plan across UK and European region, given the German restructuring the UK acquisitions, if you could provide some color.
Speaker Change: On the growth broadly across that region. Thank you yeah. Thanks.
François Boulanger: Yeah. Thanks. BJSS is mostly a company in UK, so they have very limited business outside the UK. They're strong on the commercial side. If you remember in the past, we always said we want to acquire in UK, and we were targeting to target companies that we would be more heavier on the commercial side, and that was the idea with this one. For UK, to a certain point, it is a game changer, because first of all, it's increasing UK by, I would say, on the headcount, perhaps 30% to 35% more people in the UK, and like I'm saying, in the commercial area. UK is where I'm saying we have some difficulties in Germany, and UK is actually doing well. We see some growth. We continue to see future growth in the UK. It was perfect timing.
Speaker Change: BJ assess is mostly a company.
Speaker Change: In UK. So they have very very limited business outside the U K and there are strong on the commercial side and then if you.
Speaker Change: You remember in the past, we always said.
Speaker Change: We are we want to acquire.
Speaker Change: Okay, and we were targeting to.
Speaker Change: <unk> companies that we would be more heavier on the commercial side and that was the idea with this one and four UK to a certain point it is a game changer.
Speaker Change: Because first of all it's increasing the UK by I would say on the head count, perhaps 30% to 35, 4% more people in the UK and I am saying.
Speaker Change: In the commercial area and UK is nowhere.
Speaker Change: We have some.
Speaker Change: Difficulties in Germany, and UK, it's actually going well.
Speaker Change: We see some growth we continued to see future growth in the U K and so it was.
Speaker Change: Perfect timing, but also like I am always saying it needs two to dance. So we were able to to to convince LBJ assess to emerge with us and I think that will be great for the UK organization.
François Boulanger: Also, like I'm always saying, it needs two to dance. We were able to convince BJSS to merge with us. I think that will be great for the UK organization.
Divya Goyal: That's great. Are you also planning to grow across Europe? Right now you are okay, like the way the segments are structured across Europe?
Speaker Change: And are you also planning to grow across Europe or right. Now you are okay like the way the segments are instructed across Europe.
François Boulanger: No, like I'm saying, the buy strategy is 50% of our strategy, our growth strategy. For sure, we're still looking in countries like Germany. Germany is a country that we want continue to grow. These pressure or market pressure actually is putting some opportunities on potential acquisitions. We are there for the long term. If we're seeing some good targets in Germany or in France or in Scandinavian countries, we will look at them and see if it's making sense to trigger that.
Speaker Change: Yes.
Speaker Change: I am saying.
Speaker Change: By strategy is 50% of our strategy our growth strategy. So for sure we are still.
Speaker Change: Looking in countries like Germany, Germany is a country that we want to continue to grow.
And.
Speaker Change: It means pressure our market pressure actually is putting some opportunities on potential acquisition. So we are there for the long term and so.
Speaker Change: If we're seeing some good targets.
Speaker Change: In Germany, or in France, or our Scandinavian countries.
Speaker Change: We will look at them.
Speaker Change: If its making sense to trigger that.
Divya Goyal: That's great. I'll just ask one more question here. The US Federal as a segment grew pretty well this quarter, and you did mention that it was partly driven by the growth in the transformational projects. However, with obviously DOGE and the new administration, I know a lot is in the flux, but what is your take on some of these new bookings and some of these new opportunities that you are seeing evolving across that specific business segment? That's all for me. Thank you.
Speaker Change: That's great I'll just ask one more question here so the U S. Federal segment group pretty well this quarter and you did mention that it was partly driven by the growth in the transformation project.
Speaker Change: However, with obviously <unk> and the New administration I know a lot is in flux, but what is your take on some of these new bookings and some of these new opportunities that you see evolving across that.
Speaker Change: Business segment and that's all for me. Thank you.
François Boulanger: Yeah. Again, on the federal side, with DOGE, for sure, if they want to achieve their targets and priorities, they will need IT to be capable of reducing costs. Costs most on the US Federal is people. They will need to bring automation, AI, and new systems to be capable of reducing some of these costs. We're seeing still this as opportunity to grow and helping them to achieve their objectives.
Speaker Change: Yeah.
Speaker Change: But I guess on the furlough side.
Speaker Change: With <unk> for sure.
Speaker Change: Want to achieve their targets and priorities they will need it.
Speaker Change: To be too.
Speaker Change: To be capable of reducing costs and all.
Speaker Change: And of course, most of the U S Federal is people.
Speaker Change: They will need to bring automation and AI.
Speaker Change: And new systems to be capable of reducing some of these costs. So we're seeing still this as opportunity to grow and helping them.
Speaker Change: To achieve their objectives.
Divya Goyal: Thank you.
Speaker Change: Thank you.
Operator: Thank you. Next question will be from Robert Young at Canaccord Genuity. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Next question will be from Robert Young of Canaccord Genuity. Please go ahead.
Robert Young: Hi, good morning. Maybe a double-pronged AI question. First part would be around, you mentioned in your prepared remarks, agentic AI, which is a growing buzzword, and you announced an award with UiPath. First part would be trying to get a better sense of what your efforts are around agentic AI and what the opportunities are. The second part would be just over the last couple of days, all this new information that suggests that it's going to get cheaper to run AI models. Maybe just give us some initial thoughts on the impact on the IT services business in general, and CGI more specifically.
Robert Young: Hi, good morning.
Robert Young: Maybe a double pronged AI question.
Robert Young: First part would be around you mentioned in your prepared remarks, a gentex AI, which is.
Robert Young: Our growing buzzword you announced.
Robert Young: An award with UI pack and so just first part would be trying to get a better sense of what your efforts are around a gen tick AI and what the opportunities are and then the second part would be just over the last couple of days. All this new information that suggests that it's going to get cheaper to run AI models. Maybe if you can just give us some initial thoughts on.
Robert Young: The impact on there.
Robert Young: The VIP services business in general and CGI more specifically.
François Boulanger: Okay. Thanks, Robert, for the question. I'll start with the second part, with the announcement. For sure, I think some validation still needs to continue on that side. We'll see what's happening. We are seeing that as good news. I think any new initiatives to reduce the cost of AI will always be good news for the end clients. We are one of the end clients. Plus, also we are helping clients to implement AI. If the technology is cheaper and becoming cheaper, I think that it's good news for everybody, including on our side. On agentic AI, for sure, we continue our discussion with our alliances partner like Salesforce and Google and UiPath. We already started to implement some of it, even internally in some of our managed services solutions. Right?
Robert Young: Okay. Thanks, Robert for the question.
Robert Young: I'll start with the second part.
<unk>.
Robert Young: For sure I think some validation still needs to continue on that side, we will see.
Robert Young: Whats happening, but we are seeing that as a good news I think.
Robert Young: Any new.
Robert Young: Initiatives to reduce our cost of AI.
Robert Young: We'll always be a good use for the end clients.
Robert Young: And we will and we are one of the clients plus we'll also we are helping clients to implement AI. So so.
Robert Young: Technology is cheaper and becoming cheaper I think thats a good news for everybody.
Robert Young: <unk>, including <unk>.
Robert Young: On our side.
Robert Young: On edge and take AI pressure, we continue our discussion with our alliance partner like Salesforce, and Google and the new Ipass.
Robert Young: We already started to implement some of it even internally in some of our managed services.
Robert Young: Solutions right we are.
François Boulanger: We are managing a large mandate for clients, and we are realizing that some of agentic AI can help us on specific processes. That's something that we continue to investigate and starting even to do some implementation, and we are seeing some benefit on that side.
Robert Young: Yes.
Robert Young: Managing large large mandate for our clients and we are realizing some of the agency to AI.
Robert Young: Help us on specific processes. So so thats something that we continue to.
Robert Young: To investigate and starting even to do some some implementation and we are seeing some benefits on that side.
Robert Young: Do you get a sense that the bottleneck for deployment is cost, or is it finding the right solutions? Does cost move the revenue related to AI for CGI higher, or is it more about finding the right applications and use cases?
Robert Young: Do you get the sense that the bottleneck for deployment as cost or is it finding the right solutions.
Robert Young: As costs move like the revenue related to AI for CGI higher or is it more about finding the right applications and use cases.
François Boulanger: Like I'm saying, we are always trying to have industry-specific use cases and not just implementing AI for AI. Some of the experience or contract that we signed in the past when we were saying, example, the federal Canadian, when we implement AI to help them to reduce their bottleneck that they had with their payroll system. That's the kind of implementation we're talking about. When they're seeing benefits and cost saving, it's not a showstopper for clients. For sure, it needs to be applied, and it needs to be relevant application for them, and actually bringing some cost reduction. Now that if the tool or if the tooling will reduce in cost in the future, that's just other benefits for the end clients.
Robert Young: But I can say.
Robert Young: We are always trying to have a industry specific use cases.
Robert Young: And not just implementing AI or AI use some some of the experience or contracts that we signed in the past when we were saying example.
Robert Young: The federal Canadian.
Robert Young: We implement AI to help them to reduce their bottleneck that they had with their payroll system. So that's the kind of implementation we're talking about them. When they are seeing the benefits and cost savings, it's not necessarily it's not a showstopper for our clients.
Robert Young: So for sure it needs to be applied.
It needs to be relevant application for them.
Robert Young: And naturally, bringing some some cost reduction and now that if the tool or after tooling.
Robert Young: To reduce cost in the future. That's just that there are other benefits for the end clients.
Robert Young: Okay, a second question. At the last quarter, I asked you a little bit about your strategic footings as it relates to infrastructure and whether that would be an impact on M&A targets. I just want to maybe broaden that up a little bit. Maybe just talk about infrastructure. I think you said it was 10% of the business there about. Is that something that CGI is still working down? Is that a headwind to growth, or have you changed your thought process there? Is that something that, given the higher value placed on infrastructure, is that something you'd be willing even in some cases to see grow now past the line?
Speaker Change: Okay, and then a second question I mean last quarter actually a little bit about your.
Robert Young: Strategic.
Robert Young: Putting that as it relates to infrastructure and whether that would be an impact on M&A targets. So I just want maybe broaden that up a little bit maybe you can just talk about infrastructure. I think you said it was 10% of the business thereabouts is that something that CGI is still working down is that a headwind to growth or is it have you changed your thought process there.
Robert Young: Or is that something that.
Robert Young: Even.
Robert Young: Moving to higher value placed on infrastructure is that something you'd be willing even in some cases to see grow now I'll pass the line.
François Boulanger: Okay. Thanks for the question. Infrastructure, what we said in the past is that we wanted to go a bit asset-light, and we didn't want necessarily to sign infrastructure deals just for the infrastructure deals. We continue to have data centers, and we will continue to have data centers because, first of all, we have our IP, and we are running our IPs also in our own data centers. That's the first thing. Second, in these managed services contract that we're signing, we are signing sometimes full managed services. Not just the applications, but also the infrastructure. That we will continue to do in the future. That's not something we want to stop. We're really an end-to-end services company, and so our strategy is to continue to sell end-to-end, including infrastructure business.
Robert Young: Okay. Thanks.
Question, So infrastructure, what we said in the past is that we wanted to go a bit.
Robert Young: Asset light and we didn't want necessarily to sign infrastructure deals just for the infrastructure deals, but we continue to have data centers and we will continue to have data centers because.
Robert Young: First of all we have our IP and that we are running our Ips also.
Robert Young: Our own data centers. So that's the first thing in second and these managed services contracts that we're signing.
Robert Young: Signing sometimes full managed services so not just the applications.
Robert Young: But also the infrastructure and that we will continue to do in the future and so that's not.
Robert Young: That's not.
Something we want to stop and all we're really an end to end.
Robert Young: Services company and so our strategy is to continue to sell end to end, including infrastructure business. Okay.
Robert Young: Okay. Thanks. I will pass the line.
Speaker Change: Okay. Thanks, I'll pass the line.
Operator: Thank you. Next questions will be from Thanos Moschopoulos at BMO Capital Markets. Please go ahead.
Speaker Change: Thank you next question questions will be for the panels multiples at BMO capital markets. Please go ahead.
Thanos Moschopoulos: Hi. Regarding the UK acquisition, are there some financial metrics you can share, or should we just wait for next quarter's MD&A?
Speaker Change: Hi regarding the UK acquisition are there some financial metrics you can share perfectly vessels for next quarter's MD&A.
François Boulanger: I think we'll be waiting for next quarter MD&A because, again, it's still not closed yet. We will close it in the next couple of weeks, hopefully, if we have all the authorization. Just perhaps what I can say is that on the revenue side, we are talking, like I would say mostly.
Speaker Change: I think it will be waiting for next quarter MD&A.
Speaker Change: Cause again.
Speaker Change: It is still not closed yet we will close it in the next couple of weeks.
Speaker Change: Weeks, hopefully if we have the.
Speaker Change: All of the authorization.
Speaker Change: Just price what I can say is that on the revenue side.
Speaker Change: We are talking like I would say, let's say 275 million pounds.
Steve Perron: 275 million.
François Boulanger: Okay.
Speaker Change: Okay.
Thanos Moschopoulos: That's annual?
Speaker Change: That's very helpful.
François Boulanger: On an annual business.
Thanos Moschopoulos: Annual business.
Speaker Change: New business annual business, yes, okay.
François Boulanger: Yeah.
Thanos Moschopoulos: Great. Just to clarify, is it very heavily weighted to S&C or is there a good size managed services component in there as well?
Speaker Change: Great and just to clarify is it fairly very heavily weighted test IMC or is there a good size that managed services component in there as well.
François Boulanger: I would say it's perhaps a bit more SI&C than managed services.
Speaker Change: I would say, it's perhaps a bit more ethane C that managed services.
Thanos Moschopoulos: Okay.
François Boulanger: Again, the idea of one thing, they have great client relationship, and one of the fits that we're seeing with us is the fact that they don't have offshoring. Now that we have these client relationship, we will be able to sell a lot more offshoring to these clients, and that's really the idea. Yes, there are more assignments to see today, but we think that we will be able to sell a lot more managed services now to these clients.
Speaker Change: And again the idea of.
Speaker Change: One thing they have great client relationship.
Speaker Change: And one of the.
Speaker Change: Fifth that we're seeing with US is the fact that they don't have offshoring.
Speaker Change: Now that we have these client relationships.
Speaker Change: We will be able to sell a lot more offshoring to these clients and thats really the either so yes. They are more ensign see today, but we think that we will be able to sell a lot more managed services to these clients.
Thanos Moschopoulos: Great. Finally, just how should we think about the margin trajectory, just given the puts and takes? Obviously with the recent tuck-in acquisitions, should we assume margins being flat year-over-year, maybe down a little because you're going to be integrating, or what trajectory would you assume?
Speaker Change: Great.
Speaker Change: Finally, just how should we think about the margin trajectory just given some puts and takes.
Speaker Change: Obviously with the recent tuck in acquisitions.
Speaker Change: Should we assume kind of margins being kind of flat year over year, maybe down a little because youre going to be integrating what trajectory.
Speaker Change: Okay.
François Boulanger: Yeah, I think, with the margin, with the acquisition for sure as you know, we need to integrate these companies. That will put some bit of pressure on the margin. On the other side, we are doing some actions to improve the margin in some places like Germany, where we have some utilization pressure there. I would say that one can offset the other. I don't think I will see big changes in the EBIT margin.
Speaker Change: Yes, I think.
Speaker Change: With.
Speaker Change: The margin what the acquisition for sure as you know.
Speaker Change: We need to integrate these these companies so that will put some bit of pressure on the margin on the other side.
Speaker Change: We are doing some actions to improve.
Speaker Change: The margin in some in places like.
Speaker Change: <unk>, Germany.
Speaker Change: Where where you know.
Speaker Change: We have some utilization pressure there so so I would say that.
Speaker Change: One can offset the other I don't think we'll see big changes in the in the EBIT margin.
Thanos Moschopoulos: Great. I'll pass it on. Thank you.
Speaker Change: Okay, Great I'll pass the line. Thank you.
Operator: Thank you. Next question will be from Stephanie Price at CIBC. Please go ahead.
Speaker Change: Thank you next question will be from Stephanie price with CIBC. Please go ahead.
Stephanie Price: Hi, good morning.
Stephanie Price: Hi, Good morning, I following on <unk> question there.
François Boulanger: Hi.
Stephanie Price: Just following on Thanos' question there. Margins in the US Federal business seemed a bit weaker than normal. Was this a result of the margin profile at Aeyon and how should we think about those US Federal margins going forward?
Speaker Change: U S federal business seemed a bit weaker than normal but this is a result of the margin profile at Aon and how should we think about margins going forward.
François Boulanger: Yeah. You have it. That's really because of Aeyon acquisition. You see a lot of growth, but some pressure on the margin, and it's because of this acquisition that we need to integrate. We signed at the end of September. Integration in the federal government is taking a bit more time than other area because of some authorization that we need to have from the client side. The expectation is that you'll see some improvement quarter-over-quarter on their EBIT margin.
Stephanie Price: Yeah. So.
Stephanie Price: That's.
Stephanie Price: You have it that's really because of an acquisition.
Stephanie Price: Lot of growth.
Stephanie Price: But some pressure on the.
Stephanie Price: The margin and that's because of that with this acquisition that we need to integrate.
Stephanie Price: We signed at the end of September integration and the federal government is taking a bit more time than other area because of some authorization that we need to have from the client side. So but the expectation is that youll see some improvement quarter over quarter on their EBIT margin.
Stephanie Price: Okay, perfect. Then maybe more broadly, can you talk a bit more about what you're seeing in Europe? It sounds like the slowdown right now is just in a few regions. What are clients saying in the rest of Europe, and how do you think about the region going forward?
Speaker Change: Okay, perfect and then maybe more broadly can you talk a bit more about what youre seeing in Europe. It sounds like the slowdown right now just in a few regions.
Speaker Change: And the rest of Europe, and how do you think about the region going forward.
François Boulanger: Well, I think in Europe, as you know, I would say two things. On the manufacturing, we see some concern. At least they're questioning what's the future, especially example with tariffs that the US are talking about. Will that have a major impact or not on some of these clients? That's really what I'm hearing from clients. I would say also on the government side, example, we'll have election in Germany, in France, some discussion on the government side. That can have an impact. We didn't see it yet, but that can have a certain impact. That's really what we're hearing in Europe. On the other side, like I'm saying, always a lot of discussion, talking about how we can help them on the cost saving. A lot of discussion on managed services still in Europe.
Speaker Change: I think in Europe as you know.
Speaker Change: I would say two things on the manufacturing we see some some concern will I believe they're questioning where.
Speaker Change: What's the future, especially example, with Paris.
Speaker Change: That you are talking about will that have a major impact or not.
Speaker Change: On some of these clients. So that's that's really.
Speaker Change: What I am hearing from clients and I would say also on the government side.
Speaker Change: <unk>.
Speaker Change: Some.
Speaker Change: Example, we will have election in Germany.
Speaker Change: France.
Speaker Change: Some some some discussion on the government side, so that can have an impact we didn't see it yet but that can have a certain impact.
Speaker Change: So that's that's really what we're hearing in Europe, but on the other side I am saying.
Speaker Change: Always a lot of discussion.
Speaker Change: Talking about about how we can help them on the cost savings and so so very a lot of discussion on managed services still in Europe.
Stephanie Price: Great. Thank you very much.
Speaker Change: Great. Thank you very much.
Operator: Thank you. Next question will be from Richard Tse at National Bank Financial. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Next question will be from Richard Tse of National Bank Financial. Please go ahead.
Richard Tse: Yes, thank you. You've obviously, I think, picked up the pace of acquisitions. Just wondering if you can maybe share with us, whether you have it or not, do you have a target with respect to the amount of capital you want to deploy this year on acquisitions?
Richard Tse: Yes. Thank you.
Richard Tse: So you've obviously I think picked up the pace of acquisitions. Just wondering if you can maybe share with us whether you have it or not do you have a target with respect to the amount of capital you want to deploy this year on acquisitions.
François Boulanger: No, we don't have necessarily a target. We are generating more than, what, CAD 2.3 billion of cash from operations, investing back CAD 400 million in the business. We have, what, CAD 1.7, 1.8, 1.9 billion of free cash flow. The dividend is very low, 30 what? CAD 34 million per quarter. We still have a lot of dry powder to do acquisition. Again, also we have the balance sheet and our leverage ratio is very low. We still have a lot of capacity for larger acquisitions. No, we don't have necessarily a number. The only cap I would say to you is that when we're saying that we're 3 times leverage, that's really at the top and we're very far from that. Kevin, see what the-
Richard Tse: We don't no we don't have necessarily a target.
Richard Tse: We are generating.
Richard Tse: More than $2 3 billion of cash from operations.
Richard Tse: <unk> back.
Richard Tse: For $100 million.
Richard Tse: So we have 171819.
Richard Tse: By the end of cash from free cash flow and so and the dividend is very low.
Richard Tse: $34 million per month per quarter or per quarter. So we still have a lot of.
Richard Tse: Dry powder to do to do acquisition and and again also.
Richard Tse: We are.
Richard Tse: We have the balance sheet that our leverage ratio is very low. So we still have a lot of capacity for a larger acquisition. So no.
Speaker Change: We don't have necessarily a number and.
Richard Tse: The only caveat I would say to you is that we.
Richard Tse: When we're saying that we're at 3.3 times leverage that's really at the top and we're very far from that Kevin, Steve where I'll have to look from the from <unk>.
Kevin Linder: Look, from a net basis, we are at 0.47 and from a gross debt to EBITDA basis, we're about at 1.2.
Richard Tse: Net basis were <unk> 47 from.
Richard Tse: Our gross debt to EBITDA basis, we're about that one too.
François Boulanger: We have a lot of space for other ones, including a transformational acquisition.
Richard Tse: So we have a lot of space for auto ones, including that transformational acquisition.
Richard Tse: Okay. I appreciate your comments on elevating the brand. Obviously you probably have done a lot of work in terms of identifying opportunities. When it comes to elevating the brand or some of these other initiatives that you've put in place since taking over the CEO role, can you help us understand the amount of incremental growth you're targeting to achieve from these all new incremental initiatives that you've put in place since taking over that role?
Richard Tse: Okay.
Richard Tse: And then I appreciate your comments on elevating the brand.
Richard Tse: Obviously, you probably have sort of done a lot of work in terms of identifying opportunities. So when it comes to elevating the brand or some of these other initiatives that you've put in place since taking over the CEO role can you help us understand.
The kind of amount of incremental growth youre targeting to achieve from these new incremental initiatives that you've put in place since taking over that role.
François Boulanger: Well, no, I don't have necessarily a target. When we're talking branding and all that, it has a long-term objective. We didn't necessarily put a number related to these actions. It's really to improve the branding, especially in places where we're still perhaps the best-kept secret. Still in the US, I think we still need to do more on that. That's with the marketing group and with our leader there, Susan Balding. We will continue to do some good work.
Richard Tse: Yeah.
Richard Tse: No I didn't I don't have necessarily a target.
Richard Tse: These these kind of one were talking branding and all that.
Richard Tse: Our long term objectives. So so.
Richard Tse: It's really.
Richard Tse: Within the necessary put.
Richard Tse: Number related to these actions.
Richard Tse: So it's really to improve the branding, especially in places where we're still in or perhaps the best kept secret. So still in U S. I think we still need to do more on that and that's with the marketing group.
Richard Tse: Sure.
Richard Tse: As far as either there Susan involving.
Richard Tse: We will continue to do some some.
Richard Tse: Good work.
Richard Tse: Yeah.
Richard Tse: Okay. Just the last one from me. Some of your competitors, I'm talking to price competition in the market. Is that something that you may be seeing? Is it sort of a temporary thing given the backdrop with respect to the MRD or SI&C, or is it something a bit more structural? That's it for me. Thanks.
Richard Tse: Yeah.
Speaker Change: Okay and then just the last one for me some of your competitors in talking to price competition in that market is that something that you may be seeing and if so is it a sort of a temporary thing given the backdrop with respect to MLD rsi and see or is it something a bit more structural and that's it for me. Thanks.
François Boulanger: I would think it's not structural. Especially in the managed services, we don't see a pressure there. In our managed services, if we can show to them the business case and the outcomes for them, that's making sense and they'll pay the bit for the value. I think in some places where it's the discretionary spending that went down, for sure, we'll have some pressure to reduce some of the rates to be capable of taking out some of the utilization pressure. I would say overall, pricing is not necessarily an issue where clients are still ready to pay for value.
Richard Tse: I would think not.
Speaker Change: Not structural.
Speaker Change: Ill.
Speaker Change: Most of our especially in the managed services, we don't we don't see pressure there and our managed services. If we can show to them the business case and the outcomes for them.
Speaker Change: The bill, that's making sense and they'll pay for the value I think on the <unk> in some places where its the discretionary spending that went down for sure will add some pressure.
Speaker Change: To reduce some of the rates to be capable of.
Speaker Change: Taking out some of the utilization pressure, but I would say overall.
Speaker Change: Pricing is not necessarily an issue of people clients are still ready to pay for value.
Speaker Change: Okay.
Kevin Linder: Shelby, we have time for one more question, please.
Speaker Change: Shelby we have time for one more question. Please.
Operator: Certainly. Our last question will be from Jason Kupferberg at Bank of America US. Please go ahead.
Speaker Change: Certainly.
Speaker Change: Our last question will be from Jason Kupferberg.
Speaker Change: Bank of America. Please go ahead.
Tyler DuPont: Hi, good morning, Francois, Steve. This is Tyler DuPont for Jason. Thanks for taking the questions here. Try to be fast knowing that that's the last one. I wanted to ask about initial demand trends and spending applications for 2025, particularly from a bookings context. On an LTM basis, it looks like book-to-bill definitely appears healthy, 1.08 this quarter. This is the Q2 of year-on-year declines. Obviously, they're very modest, still it's the Q2 declines in the LTM metric. Just how do you juxtapose the modestly softening bookings number with the solid top-line growth that you're putting up, and how does that translate into 2025 client spend?
Speaker Change: Hi.
Speaker Change: Morning, Steve This is Tyler on for Jason Thanks for taking the questions here tend to be fast knowing that that's the last one.
Speaker Change: Wanted to ask about initial demand trends and spending applications for 2025, but particularly from a bookings context.
Speaker Change: On an LTM basis, it looks like book to Bill definitely appears healthy one point I'll wait this quarter.
But this is the second quarter of year on year declines, obviously, they're very modest but still the second quarter declines in this and the LTM metric just how do you juxtapose the modestly softening bookings number with the solid topline growth that you are putting up and how does that translate into 2025 client spend.
François Boulanger: Yeah. You are right, though, on the last one, the booking went down, but some of it is timing. Again, we had some discussion with some clients that were not able to close for the quarter. We will not close a deal just to close a deal to have a booking at the end of the quarter. We have some still good discussion on some of these large contracts, and you will see some closing of them in the future. We still see a lot of momentum on the managed services. I do not see necessarily a problem there. You are right that on the SI&C, some lumpiness, but this quarter, we did see an uptick on the SI&C. We finished with, I think it is 114% of book-to-bill on the SI&C side. Versus last quarter, we were under 1 on the SI&C side.
Speaker Change: Yeah.
Speaker Change: You are right down last one among the booking went down but some of it is timing and.
Speaker Change: Again, we had large.
Speaker Change: We have some some some discussion with.
Speaker Change: Some clients that didn't.
Speaker Change: We're not able to to to close for the quarter and then we wont close a deal just to close a deal to have the bookings at the end of the quarter. So so we have some still good discussion on some of these.
Speaker Change: Large contract in.
Speaker Change: Youll see some some closing of them.
Speaker Change: In the future.
So we still see a lot of momentum on the managed services. So I don't see necessarily a problem there and you're right.
Speaker Change: On the ESI and see some lumpiness, but this quarter, we did see an uptick.
Speaker Change: <unk> C. We finished with.
Speaker Change: 114% book to Bill on the ESI in CSI, so versus last quarter, we were under one.
François Boulanger: We are seeing still some momentum on that side, and we'll see in the future, but we're still comfortable with bookings for the future.
Speaker Change: <unk> C side. So so we are seeing still some momentum on that side and we will see in the future, but we're still we're still comfortable with.
Speaker Change: With bookings.
Speaker Change: From from from for the future.
Tyler DuPont: That's helpful. It's great to see the SI&C going above 1. Just as a follow-on, just want to ask about cash flow expectations as we look through the year. During Q1, free cash flow was pretty strong. It looked like on a revenue conversion basis around just shy of 15%, which in my understanding is sort of the medium-term or long-term target for you guys. Wondering if you could just touch on cash flow in Q1. How should we look at conversion through 2025? Should we be thinking more than 15% on a full-year basis, or, I know there's timing and everything there, but just love to get your thoughts.
Okay. That's helpful. It's great to see that AMC going above one.
Speaker Change: Also just as a follow on just wanted to ask about cash flow expectations as we look through the year during the quarter free cash flow was pretty strong it looks like on a revenue conversion basis around just shy of 15%, which in my understanding and sort of the medium term or long term target for you guys wondering if you could just touch on cash flow in the quarter.
Speaker Change: How should we looked at conversion through 2025 should we be thinking.
Speaker Change: More than 15 on a full year basis, or I know, there's timing and everything there, but just love to get your thoughts.
François Boulanger: Thank you for the question. I think if we say that on a long-term basis, 15% makes sense. Obviously, in the quarter, cash from ops was 17%, but it was with some improvement of the DSO. On a long-term basis at 15%, it makes sense.
Speaker Change: Thank you for your question I think.
Speaker Change: If we say that on a long term basis, 15%.
Makes sense.
Speaker Change: Obviously in the quarter the cash from ops.
Speaker Change: It was 17.
Speaker Change: But it was with some improvement of the DSO. So on a long term basis at 15% that makes that it makes sense.
Speaker Change: Yes.
Tyler DuPont: Great. Appreciate it.
Speaker Change: Great I appreciate it.
François Boulanger: Thank you.
Speaker Change: Thank you.
Operator: Please proceed, sir.
Speaker Change: Please proceed thank you.
Kevin Linder: Okay. Thank you. Thank you, everyone, for participating. As a reminder, a replay of the call will be available either via our website or by dialing 1-888-660-6264 and using the passcode 28413. 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 look forward to speaking soon.
Speaker Change: Thank you everyone for participating as a reminder, a replay of the call will be available either via our website or by dialing one 880 86606264 and using the pass code to wait for one three as well a podcast of this call will be available for download within a few hours follow up question.
Speaker Change: As can be directed to me at one 905, 9700, III <unk> III <unk> III. Thanks, again, everyone and look forward to speaking soon.
Kevin Linder: Thank you.
Kevin Linder: Thank you, sir.
François Boulanger: Thank you.
Speaker Change: Okay. Thank you.
Operator: Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we ask that you please disconnect your lines.
Speaker Change: Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we ask that you. Please disconnect your lines.
Speaker Change: [music].
Speaker Change: Okay.