Q2 2025 CGI Group Inc Earnings Call
Operator: Good morning, ladies and gentlemen. Welcome to CGI's second quarter fiscal 2025 conference call.
Good morning, ladies and gentlemen, welcome to Cgi's second quarter fiscal 2025 conference call and I would like to turn the meeting over to Mr. Kevin Linda as VP of Investor Relations. Please go ahead Sir.
Kevin Linder: And I would like to turn the meeting over to Mr. Kevin Linder, SVP of Investor Relations. Please go ahead, sir. Thank you, Sylvie, and good morning.
Thank you Sylvia and good morning, with me to discuss <unk> second quarter fiscal 2025 results, our Francois Boulanger, our president and CEO and Steve Pearl Executive Vice President and CFO.
Kevin Linder: With me to discuss CGI's second quarter fiscal 2025 results are Francois Boulanger, our President and CEO, and Steve Perron, Executive Vice President and CFO. This call is being broadcast on CGI.com and recorded live at 9 a.m. Eastern time on Wednesday, April 30, 2025.
This call is being broadcast on CGI Com and recorded live at nine a M. Eastern time on Wednesday April 30th 2025 supplemental slides as well as the press release, we issued earlier. This morning are available for download along with our Q2 MD&A financial statements and accompanying notes all of which have been filed with both SEDAR plus.
Kevin Linder: Supplemental slides, as well as a press release we issued earlier this morning, are available for download, along with our Q2 MD&A, financial statements, and accompanying notes, all of which have been filed with both Cedar Plus 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, 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. The complete Safe Harbour Statement is available in both our MD&A and press release, as well as on CGI.com.
And Edgar.
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.
The complete Safe Harbor statement is available in both our MD&A and press release as well as on CGI Dotcom and.
Kevin Linder: We recommend our investors read it in its entirety.
We recommend our investors read it in its entirety.
Kevin Linder: 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 reporting our financial results in accordance with international financial reporting standards or <unk>.
As always we will also discuss non-GAAP performance measures, which should be viewed as supplemental.
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.
Steve Perron: Now I'll turn the call over to Steve to review our Q2 financial results.
Now I'll turn the call over to Steve to review, our Q2 financial results Steve. Thank.
Steve Perron: Steve. Thank you, Kevin. And good day, everyone. CGI continued to operate with discipline in our second quarter of fiscal 2025. In Q2, we delivered $4 billion of revenue, up 7.6% year over year, or up 3.3% when excluding the impact of foreign exchange. Growth was mainly driven by recent business acquisitions, partially offset by one less available day-to-bill in most segments, equating to approximately 0.8%. In Consent Currency, the CGI client proximity segments with strongest growth were UK and Australia at 12.1%, which includes just over one month of BJSS revenue. And across our US segments, combined growth was 7.2%, primarily driven by our Aon and Doherty merger investments.
Steve Pearl: Thank you, Kevin and good day everyone.
Steve Pearl: CGI continue to operate with discipline and our second quarter of fiscal 2025.
Steve Pearl: In Q2.
Steve Pearl: We delivered $4 billion of revenue up seven 6% year over year or up three 3% when excluding the impact of foreign exchange.
Steve Pearl: Growth was mainly driven by recent business acquisitions, partially offset by one less available day to bill in most segments equating to approximately 8%.
Steve Pearl: In constant currency.
Steve Pearl: CGI client proximity segments with strongest growth were UK and Australia at 12, 1%, which includes just over one month of P. J S. S revenue.
Steve Pearl: And across our U S segments combined growth was seven 2%, primarily driven by our a M and dougherty merger investments.
Steve Perron: Geographically, our North American operation grew at 6.4%. In Europe, our operation grew at 0.7% given softer market conditions, particularly in the manufacturing sector. And demand remains strong for global delivery, specifically our Asia-Pacific operation, with revenue up 6.8%. From an industry perspective, constant currency revenue growth was led by government at 6.5% and financial services at 6.1%, partially offset by continued softness in continental Europe, particularly in the MRD and telecommunications sectors. IP revenue grew in five of our eight proximity segments on the strength of continued client interest for our business solution. IT represented 21.5% of total revenue down 90 basis points year over year due to the dilutive impact of recent business acquisitions.
Steve Pearl: Geographically, our North American operation grew at 6.4 person.
Steve Pearl: In Europe, our operation grew at <unk>, 7%, given softer market conditions, particularly in the manufacturing sector.
Steve Pearl: And demand remains strong for our global delivery, specifically, our Asia Pacific Operation with revenue up six 8%.
Steve Pearl: From an industry perspective constant currency revenue growth was led by government at six 5% and financial services at six 1%, partially offset by continued softness in continental Europe, particularly in the Mardi and telecommunication sectors.
Steve Pearl: IP revenue grew in five of our eight proximity segments on the strength of continued client interest for our business solution.
Steve Pearl: It represented 21, 5% of total revenue down 90 basis points year over year due to the dilutive impact of recent business acquisitions.
Steve Pearl: In Q2 bookings were $4 $5 billion for a book to bill ratio of 112%.
Steve Perron: In Q2, bookings were $4.5 billion for a book-to-bill ratio of 112%. Octobel was strong in North America at 124%. Europe was 101%. When looking at service type Book-to-bill ratios were 122% for managed services and 98% for business and strategic IT consulting and system integration. On a trading 12-month basis, book-to-bill ratios for North America and Europe were 111% and 110%, respectively. On the same basis, managed services had a book-to-bill ratio of 122%, and the FINC book-to-bill ratio was 97%.
Steve Pearl: Book to Bill was strong in North America at 124%.
Steve Pearl: Europe was 101%.
Steve Pearl: When looking at service type.
Steve Pearl: Book to Bill ratios were 122% for our managed services.
Steve Pearl: And 98% for business and strategic consulting and system integration.
Steve Pearl: On a trailing 12 month basis.
Steve Pearl: Book to Bill ratio was for North America, and Europe were 111% and 110% respectively.
Steve Pearl: On the same basis.
Steve Pearl: Managed services at a book to Bill ratio of 122% and the Si ANC book to Bill ratio was <unk> 97 per cent.
Our global backlog reached $31 billion or two times revenue.
Steve Perron: Our global backlog reached $31 billion, or two times revenue.
Steve Pearl: Turning to profitability.
Steve Perron: Turning to Profitability. Adjusted EBIT in the quarter was $666 million, up 5.9% year over year, for a margin of 16.5%. Earnings before income taxes were $583 million for a margin of 14.5%, down 90 basis points year over year, mainly due to restructuring and acquisition related costs. Our effective tax rate in the quarter was 26.2 percent, stable compared to last year, and we expect our tax rate for future quarters to be in the range of 25.5 to 26.5 percent. Adjusted net earnings were $481 million, up $21 million year-over-year, for a margin of 11.9%. On the same basis, diluted EPS was $2.12, an accretion of 7.6% when compared to Q2 last year.
Steve Pearl: Adjusted EBIT in the quarter was $666 million up five 9% year over year for a margin of 16, 5%.
Steve Pearl: Earnings before income taxes were $583 million for a margin of 14, 5% down 90 basis points year over year, mainly due to restructuring and acquisition related costs.
Steve Pearl: Our effective tax rate in the quarter was 26, 2% stable compared to last year, and we expect our tax rate for future quarters to be in the range of 25, 5% to 26, 5%.
Steve Pearl: Adjusted net earnings were $481 million up $21 million year over year for a margin of 11, 9%.
Steve Pearl: On the same basis diluted EPS was $2 12.
Steve Pearl: Accretion of seven 6% when compared to Q2 last year.
Steve Pearl: Net earnings were $430 million for a margin of 10, 7%.
Steve Perron: Net earnings were $430 million for a margin of 10.7%. Diluted EPS was $1.89, representing an increase of 3.3% year over year. We remain in constant dialogue with our clients regarding the evolving business dynamics they are facing. to remain strong. We regularly assess these dynamics and take proactive actions to expand shareholder value for the benefit of our stakeholders, namely our shareholders. as such.
Steve Pearl: Diluted EPS was $1 89, representing an increase of three 3% year over year.
Steve Pearl: We remain in constant dialogue with our clients regarding the <unk> business dynamics they are facing.
Steve Pearl: To remain strong we regularly assess these dynamics and take proactive actions to expand shareholder value for the benefit of our stakeholders, namely our shareholders.
Steve Pearl: As such <unk>.
Steve Perron: CGI increased the scope of our previously announced restructuring program, most of which continues to be targeted within our continental Europe operations. In the quarter, we incurred $44 million of costs, and we expect to incur an additional $137 million to implement these actions over the next few quarters. These actions will impact approximately 1.5% of CGI employees. As always, we will treat those impacted fairly and with respect.
Steve Pearl: <unk> increased the scope of our previously announced restructuring program most of which continues to be targeted within our continental Europe operations.
Steve Pearl: In the quarter, we incurred $44 million of costs, and we expect to incur an additional $137 million to implement these actions over the next few quarters.
Steve Pearl: These actions will impact approximately one 5% of CGI employees.
Steve Pearl: As always we will treat those impacted fairly and with respect.
Steve Pearl: Turning to cash.
Steve Perron: Burning to Cash We generated $438 million in our cash from operation, representing 11% of total revenue, unfavorably impacted by $101 million in restructuring and business acquisition related payments. ESO was 40 days in the quarter, identical to last year.
Steve Pearl: We generated $438 million and our cash from operations, representing 11% of total revenue.
Steve Pearl: On February <unk> impacted by $101 million, and the restructuring and business acquisition related payments.
Steve Pearl: DSO was 40 days in the quarter identical to last year.
Steve Pearl: In Q2.
Steve Perron: In Q2, we invested $100 billion into our business, including in AI. $1.56 billion for business acquisitions. $345 million to buy back our stock. and return $34 million to our shareholders under our dividend program. We continue to deliver a strong return on invested capital at 15.4%, down 50 basis points year over year, mainly as a result of the capital allocated to recent business acquisition, which are in the process of being integrated.
Steve Pearl: We invested $100 million into our business, including an AI.
$156 billion for business acquisitions.
Steve Pearl: $345 million to buyback our stock.
Steve Pearl: And returned $34 million to our shareholders under our dividend program.
Steve Pearl: We continue to deliver a strong return on invested capital at 15, 4% down 50 basis points year over year, mainly as a result of the capital allocated to recent business acquisition, which are in the process of being integrated.
Steve Pearl: Yesterday, our board of directors approved a quarterly cash dividend of <unk> 15 per share.
Steve Perron: Yesterday, our board of directors approved a quarterly cash dividend of 15 cents per share. This dividend is payable on June 20, 2025 to shareholders of records as of the close of business on May 16, 2025. As communicated in the past and consistent with our profitable growth strategy, CGI's capital allocation priorities remain focused on investing back in the business and pursuing accretive acquisition.
Steve Pearl: This dividend is payable on June 22025 to shareholders of record as of the close of business on May 16 2025.
Steve Pearl: As communicated in the past and consistent with our profitable growth strategy.
Steve Pearl: Cgi's capital allocation priorities remain focused on investing back into business and pursuing accretive acquisitions.
Francois Boulanger: Now I will turn the call over to <unk> to further discuss the insights on the quarter as well as the outlook for our business and markets Francois.
Francois Boulanger: Now, I will turn the call over to Francois to further discuss the insights on the quarter, as well as the outlook for our business and markets.
Francois Boulanger: Francois? Thank you, Steve. And good morning, everyone. I am pleased with our team's discipline execution of our profitable growth strategy during the second quarter and throughout the first half of the fiscal year. Our operational rigor again enabled us to deliver solid results in the quarter, underscoring CGI's resilience as many clients began to navigate a more unpredictable business environment compared to the first quarter.
Francois Boulanger: Thank you, Steve and good morning, everyone.
Francois Boulanger: I am pleased with our team's disciplined execution of our profitable growth strategy during the second quarter and throughout the first half of the fiscal year.
Francois Boulanger: Our operational rigor again enabled us to deliver solid results in the quarter underscoring Cgi's resilience as many clients began to navigate our more predictable business environment compare to the first quarter.
Francois Boulanger: Today, I will focus our performance for the first half of the year there.
Francois Boulanger: Today, I will focus our performance for the first half of the year, the current market environment and the outlook. Year over year for the first half of 2025, revenue was up 6.3% or 3% on a constant currency basis to more than $7.8 billion. just that EBIT was up 5.3% to $1.28 billion. Trusted EPS was up 7.4% to $4.08. And on a trailing 12-month basis, cash from operations totaled over $2.2 billion, up nearly $100 million compared to the previous year. Given the ongoing strength of our balance sheet and confidence in CGI's positioning as a trusted partner during all economic cycles, we invested $2.3 billion during the first half, including $183 million invested back into the business to drive future growth.
Francois Boulanger: The current market environment and the outlook.
Francois Boulanger: Year over year for the first half of 2025 revenue was up six 3% or 3% on a constant currency basis to more than seven 8 billion.
Francois Boulanger: Adjusted EBIT was up five 3% to $1 $28 billion.
Francois Boulanger: Adjusted EPS was up seven 4% to $4 eight.
Francois Boulanger: And on a trailing 12 month basis cash from operations totaled over $2 $2 billion up nearly $100 million.
Francois Boulanger: Compared to the previous year.
Francois Boulanger: Given the ongoing strength of our balance sheet and confidence in Cgi's positioning as a trusted partner during all economic cycles, we invested $2 $3 billion during the first half, including $183 million invested back into the business to drive future growth.
Francois Boulanger: $1.6 billion towards business acquisitions. $498 million for share repurchase and $68 million return to shareholders through our dividend program.
Francois Boulanger: One $6 billion toward business acquisitions for.
Francois Boulanger: $498 million for share repurchase and.
Francois Boulanger: And $68 million returned to shareholders through our dividend program.
Francois Boulanger: Our capital allocation priorities remain focused on progressing our build and buy profitable growth strategy. By continuing to reinvest in our business, we are expanding our portfolio of in-demand offerings in areas such as AI and generative AI, cybersecurity, cloud, and IT services. By furthering our M&A strategy, we are expanding and deepening CGI's local presence in key metro markets around the world.
Francois Boulanger: Our capital allocation priorities remain focused on progressing our build and buy profitable growth strategy.
Francois Boulanger: By continuing to reinvest in our business, we are expanding our portfolio of <unk> offerings in areas, such as AI and generative AI cyber security cloud and it services.
Francois Boulanger: By furthering our M&A strategy, we are expanding and deepening CGI as local presence in key metro markets around the world.
Francois Boulanger: In the second quarter, we completed three acquisitions Vijay assess to expand our UK wide presence in commercial industries, such as financial services and to deepen our presence and government.
Francois Boulanger: In the second quarter, we completed three acquisitions. We JSS to expand our UK wide presence in commercial industries, such as financial services, and to deepen our presence in government. Novatec to expand our presence in Germany and Spain across commercial industries, including financial services. and Momentum Technologies to grow our public sector presence in Quebec City.
Francois Boulanger: No <unk> to expand our presence in Germany, and Spain across commercial industries, including financial services.
Francois Boulanger: And momentum technologies to grow our public sector presence in Quebec City.
Francois Boulanger: I would like to warmly welcome the nearly 3,000 new consultants who joined CGI from these mergers. Additionally, at the end of the quarter, we announced an exclusivity agreement to acquire APSID, a leading AI, cloud engineering and digital services firm headquartered in France. Upon successful closing, which is expected in June, more than 2,500 professionals would join CGI, deepening our local presence in France, Canada, Portugal, Belgium, Morocco, and Switzerland. Following the successful closing of AXID, the five mergers we announced this fiscal year will increase the total number of metro markets where CGI is at scale. This is a critical element of CGI's growth strategy to ensure we are in proximity with existing and new clients to understand and adapt to their needs.
Francois Boulanger: I would like to warmly welcome nearly 3000, new consultants, who joined <unk> from these mergers.
Francois Boulanger: Additionally, at the end of the quarter, we announced an exclusivity agreement to acquire <unk>, a leading AI cloud engineering and digital services firm headquarter in France.
Francois Boulanger: Up in successful closing, which is expected in June more than 2500 professionals.
Francois Boulanger: CGI deepening our local presence in France, Canada, Portugal, Belgium, Morocco and Switzerland.
Francois Boulanger: Following the successful closing of exit that five mergers we announced this fiscal year will increase the total number of metro markets, where CGI has that scale.
Francois Boulanger: This is a critical element of <unk> growth strategy to ensure we are in proximity with existing and new clients to understand and adapt to their needs.
Francois Boulanger: To progress our profitable growth strategy, we will continue to prioritize investments aimed at building critical mass in key metro markets and all CGI geographies.
Francois Boulanger: To progress our profitable growth strategy, we will continue to prioritize investments aimed at building critical mass in key metro markets and all CGI geographies. We remain in dialogue with a number of firms, both metro market and transformational opportunities. As always, we will be disciplined to ensure that mergers will be accretive to each of our stakeholders.
Francois Boulanger: We remain in dialogue with a number of firms both metro markets and transformational opportunities.
Francois Boulanger: As always we will be disciplined to ensure that mergers will be accretive to each of our stakeholders.
Francois Boulanger: Turning now to the market environment, starting with bookings.
Francois Boulanger: Turning now to the market environment, starting with booking. CGI ended the first half with bookings of $8.6 billion, up $700 million year over year. This was driven by expanded modernization project, which helped clients realize operational efficiencies, notably through managed services and IP. For the first half, managed services bookings exceeded $5 billion, up 21% year over year. Additionally, in Q2, IP solutions designed to help clients achieve business objectives drove 134% IP book to bill. From an industry perspective, we saw strength in financial services with 157% book-to-bill and government at 108%. Globally, we continue to see early signs in Q2 of renewed client spending in the banking sector.
Francois Boulanger: CGI ended the first half with bookings of $8 6 billion up $700 million year over year.
Francois Boulanger: This was driven by expanded modernization project, which help clients realize operational efficiencies, notably true managed services and IP.
Francois Boulanger: For the first half managed services bookings exceeded $5 billion.
Francois Boulanger: Up 21% year over year <unk>.
Francois Boulanger: Additionally, in Q2 IP solutions designed to help clients achieve business objectives drove a 134% IP book to Bill.
Francois Boulanger: From an industry perspective, we saw strength in financial services with 157% book to Bill.
Francois Boulanger: Government at 108%.
Francois Boulanger: Globally, we continue to see early signs in Q2, our renewed client spending in the banking sector.
Francois Boulanger: Banks remain focused on modernizing core systems and processes to manage services in IP. Government Awards were notable in local government, particularly for our industry-leading IP solutions, which embed AI, data privacy, and cybersecurity. Representative Klein wins in the second quarter included the state of California awarded CGI US a seven year 524 million US dollar engagement to modernize and unify its payroll and HR systems through the implementation of the CGI Advantage platform. The European Space Agency selected CGI Germany to develop advanced AI solutions to automate and streamline satellite mission operations. CGI consultants will combine domain expertise with AI models to help the agency optimize mission planning and bring satellites to orbit faster and with greater precision.
Francois Boulanger: Banks remained focus on modernizing core systems and processes to manage services and IP.
Francois Boulanger: Government Awards were notable and local government, particularly for our industry, leading IP solutions, which embed AI data privacy and cybersecurity.
Francois Boulanger: Represent that the client wins in the second quarter included the state of California awarded CGI, <unk>, and seven year, and 524 million U S. Dollar engagement to modernize on unify its payroll and HR systems through the implementation of the CGI advantaged platform.
Francois Boulanger: The European Space Agency selected CGI, Germany to develop advanced AI solutions to automate and streamline satellite mission operations.
Francois Boulanger: CGI consultants will combine domain expertise with AI models to help the agency optimize mission planning and bring satellite store a bit faster and with greater precision.
Francois Boulanger: A leading US financial institution expanded their strategic partnership with CGI to establish a dedicated global capability center in India. The GCC will help accelerate the bank's capacity to launch innovative offerings, leverage AI solutions for business outcomes, and improve scalability and access to talent. This agreement underscores CGI's deep expertise and value-added solutions for consumer lending, trade finance, and capital markets. and one of the largest retail banks in France selected CGI's dynamic process 360 platform to serve as a core technology supporting their digital transformation. This CGI IP helps organizations data size and streamline their end to end business processes so they can operate more efficiently.
Francois Boulanger: A leading U S financial institution expanded their strategic partnership with CGI to establish a dedicated global capability Center in India.
Francois Boulanger: The GCC will help accelerate the banks Capa city to launch innovative offerings.
Francois Boulanger: Leverage AI solutions for business outcomes, and improve scalability and access to talent.
Speaker Change: This agreement underscores CGI has deep expertise and value added solutions for consumer lending trade finance and capital markets.
Speaker Change: And one of the largest retail banks in France selected CGI as dynamic process 360 platform to serve as the core technology supporting their digital transformation.
Speaker Change: This CGI IP helps organizations data size and streamline their end to end business processes. So they can operate more efficiently.
Speaker Change: Over the past few months there has been an uptick in uncertainty as clients globally considered the implications of macroeconomic and geopolitical dynamics, most notably related to tariffs.
Francois Boulanger: Over the past few months, there has been an uptick and uncertainty as clients globally consider the implications of macroeconomic and geopolitical dynamics, most notably related to tariff. Across industries, our clients are navigating a fast changing and challenging business environment. Many clients are balancing strategic caution with operational urgency. This dual business agenda is not new, but the pace and intensity of change has accelerated, and it's shaping the IT priorities and investment. Despite this cautionary approach across some industries and client organizations, overall client interest remains strong for CGI's managed services, which help clients realize cost saving and drive business transformation.
Speaker Change: Across industries, our clients are navigating fast changing and challenging business environment.
Speaker Change: Many clients are balancing strategy caution with operational urgency.
Speaker Change: This dual business agenda is not new but the pace and intensity of change as accelerated and its shaping the it priorities and investments.
Speaker Change: Despite this cautionary approach across some industries and client organizations overall client interest remains strong for CGI as managed services, which help clients realized cost savings and drive business transformation.
Francois Boulanger: As a result, the pipeline of managed services opportunities is up by more than 15% compared to this time last year.
Speaker Change: As a result, the pipeline of managed services opportunities is up by more than 15%.
Speaker Change: Third to this time last year.
Speaker Change: Specific to our U S federal operations.
Francois Boulanger: Specific to our U.S. federal operation. For more than 40 years, CGI Federal has supported U.S. government agencies in using technology and innovation to achieve efficiencies and deliver outcomes aligned to their mission. In line with recent administration initiatives, we are collaborating closely with our clients to provide all requested inputs on our current state portfolio of projects. More importantly, our team is proposing bold ideas to help the client and the administration achieve additional cost efficiencies, including through the use of commercial approaches, emerging technologies, and outcome-based contracting. For context, CGI Federal constituted 14% of our global revenue in fiscal 2024.
Speaker Change: For more than 40 years, CGI federal as reported U S government agencies, and using technology and innovation to achieve efficiencies and deliver outcomes aligned to their missions.
Speaker Change: In line with recent administration initiatives, we are collaborating closely with our clients to provide all requested inputs on our current state portfolio of projects.
Speaker Change: More importantly, our team is proposing bold ideas to help the client at the administration achieve additional cost efficiencies, including through the use of commercial approaches.
Speaker Change: <unk> technologies and outcome based contracting.
Speaker Change: For context, CGI federal constituted 14% of our global revenue in fiscal 2024.
Francois Boulanger: The vast majority of this revenue is earned from IT and business process services, much of which uses CGI IP, such as Momentum. And just 2% of our federal revenue is derived from discrete consulting services. We remain well positioned as a strategic partner for helping the U.S. administration achieve their objectives. In fact, this month, the Federal Aviation Administration announced that CGI Federal was selected to develop, deliver, and operate a modernized Notice to Airmen, or NOTAM, system. This critical system communicates more than 4 million temporary changes annually to pilots and flight planners in areas such as run rate closures and airspace restrictions.
Speaker Change: The vast majority of this revenue is earned from it and business process services much of which users CGI IP such as momentum.
Speaker Change: And just 2% of our federal revenue is derived from discrete consulting services.
Speaker Change: We remain well positioned as a strategic partner for helping the U S administration achieved their objectives and.
Speaker Change: In fact this month the federal Aviation administration announced that CGI federal was selected to develop deliver and operate and modernized notice to airmen or no time system.
Speaker Change: This critical system kind of indicates more than 4 million temporary changes annually two pilots and flight planners in areas such as run rate closures and aerospace restrictions.
Francois Boulanger: CGI federal also has extensive experience in building systems that foster transparency and prevent fraud. In line with the administration's priorities, we announced earlier this week the launch of a new government wide platform to help federal agencies detect and prevent potential improper payments before they happen. This new platform brings together real-time risk investigation, AI-powered predictive analytics, and robust core financial integration. We remain fully committed to helping our government clients in the U.S. and around the world deliver the right technology services to enable more efficient and effective delivery of government services to taxpayers. As we look to the second half of the year, client demand across geographies and industries is strong for digital transformation, even with the cautionary approaches client are currently taking.
Speaker Change: CGI Federal also has extensive experience in building systems that foster transparency and prevent fraud.
Speaker Change: In line with the administration's priorities, we announced earlier this week the launch of a new government wide platform to help federal agencies, the tech and prevent potential improper payments before they happen.
Speaker Change: This new platform brings together real time risk and litigation.
Speaker Change: High powered predictive analytics and robust core financial integration.
Speaker Change: We remain fully committed to helping our government clients in the U S and around the world deliver the right technology services to enable more efficient and effective delivery of government services to taxpayer.
Speaker Change: As we look to the second half of the year client demand across geographies and industries is strong for digital transformation, even with the cautionary approaches client are currently taking.
Speaker Change: Technology remains at the heart of achieving the objectives of companies and governments in particular demand for monetization data cyber security and AI are viewed as more important than ever to helping clients achieve their ambitions.
Francois Boulanger: Technology remains at the heart of achieving the objectives of companies and governments. In particular, demand for monetization, data, cybersecurity, and AI are viewed as more important than ever to helping clients achieve their ambitions.
Francois Boulanger: These overarching findings are part of the early insights we identify from our discussion our leaders held during Q2 with more than 1,800 client executives as part of our annual planning. I would like to share three insights we see shaping client demand in the near term. First, the evolution of industry value chains continues to accelerate. Three quarters of executives see their industries being reshaped by digitization. and over half said that macro trends are highly impacted their business models, which is requiring new approaches to value creation. The second finding reveals that structural constraints are hindering tangible ROI from digitization.
Speaker Change: These overarching findings are part of the early insights we ended up buying from our discussion our leaders held during Q2 with more than 1800 client executives as part of our annual planning.
Speaker Change: I would like to share three insights, we see shaping client demand in the near term.
Speaker Change: First the evolution of the industry value chains continues to accelerate.
Speaker Change: Three quarters of executives see their industry is being reshaped by Digitization.
Speaker Change: And over half said that macro trends are highly impacted their business models, which is requiring new approaches to value creation.
Speaker Change: The second finding reveals a structural constraints are enduring tangible ROI from Digitization.
Francois Boulanger: Globally, only 35% of executives stated their digital implementations are achieving the ROI they expected, essentially flat compared to last year. Nearly half of executives noted that the complexity of legacy systems and processes are slowing the adoption of emerging technologies and limiting measurable outcomes. Lastly, executives are exploring how they will advance transformation. Many executives are rethinking how their organization will deliver transformation, moving more toward managed services and ecosystem partnerships. Naturally, AI continues to be viewed as a key lever for driving this innovation. Compared to last year, more organizations are implementing traditional and generative AI. Overall, however, the maturity of AI adoption remains in early stages.
Speaker Change: Globally, only 35% of executives stated their digital implementations are achieving the ROI there expected essentially flat compared to last year.
Speaker Change: Nearly half of executives noted that the complexity of legacy systems and processes are slowing the adoption of emerging technologies and limiting measurable outcomes.
Speaker Change: Lastly executives are exploring holiday will advance transformation. Many executives are rethinking how their organization will deliver transformation moving more towards managed services and ecosystem partnerships.
Speaker Change: Naturally AI continues to be view as a key lever for driving this innovation.
Speaker Change: Compared to last year more organizations are implementing traditional and generative AI.
Speaker Change: Overall, however, the metro VT of AI adoption remains in early stages.
Francois Boulanger: The clear takeaway from these findings is that the shift toward outcome-focused delivery is a permanent one and represents significant opportunities for CGI. Again, the backdrop of the challenging business environment, many clients are seeking fewer partners who can bring not just technical expertise, but industry context, business alignment, and operational scale, including flexible managed services capability. CGI is this partner. Our combination of local relationships and global scale with deep industry expertise and end-to-end offerings enables clients to achieve tangible business outcomes. Our robust managed services and IP solutions, particularly in monetization and AI integrations, are outcome focused and help clients to close the gap.
Speaker Change: There are clear takeaway from these findings is that the shift towards outcome focused delivery.
Speaker Change: As a permanent one and represents seven extent are presented fees for CGI.
Speaker Change: Again, the backdrop of the challenging business environment.
Speaker Change: Many clients are seeking fewer partners, who can bring not just technical expertise, but industry context business alignment and operational scale.
Speaker Change: Including flexible managed services capabilities.
Speaker Change: Is this partner.
Speaker Change: Our combination of local relationships and global scale with deep industry expertise and end to end offerings enables clients to achieve tangible business outcomes.
Speaker Change: Our robust managed services and IP solutions.
Speaker Change: Kelly and monetization and AI integrations are outcome focus and help clients to close that gap.
Francois Boulanger: from the strategy to execution to tailor transformation to strategy. CGI roles as a digital transformation partner to clients has never been more vital.
Speaker Change: The strategy to execution through tailored transformation strategies.
Speaker Change: CGI roles as a digital transformation partner to clients has never been more vital.
Francois Boulanger: Thank you to our now 94,000 CGI partners around the world for your continued commitment to the success of our clients. In closing, we have a resilient model with a diversified mix of geographies, economic sectors, and end-to-end services and solutions to enable profitable growth now and in the future. We have world-class talent with deep understanding of our industry domains and expertise in technology. We have proven value propositions and trusted relationships that are well aligned to evolving client demands. We have a proven track record for operational excellence and for tracking and for taking proactive actions to expand shareholder value.
Speaker Change: Thank you to our now 94000 CGI partners around the World for your continued commitment to the success of our clients.
Speaker Change: In closing.
Speaker Change: We have a resilient model with a diversified mix of geographies economic sectors and end to end services and solutions to enable profitable growth now in the future.
Speaker Change: We have world class talent with deep understanding of our industry domain and expertise and technologies.
Speaker Change: We have proven value propositions and trusted relationships are well aligned to evolving client demand.
Speaker Change: We have a proven track record for operational excellence and for tracking and for taking proactive actions to expand shareholder value.
Francois Boulanger: and we have a strong balance sheet to execute on our capital allocation priorities to advance our build and buy profitable growth strategy.
Speaker Change: And we have a strong balance sheet to execute on our capital allocation priorities to advance our build and buy profitable growth strategy. Thank.
Francois Boulanger: Thank you for your interest and support.
Speaker Change: Thank you for your interest and support let's go through the question now Kevin Sylvia.
Kevin Linder: Let's go to the question now, Kevin. Sylvie, we can now poll for questions, please. Thank you, sir. Ladies and gentlemen, if you do have any questions, please press star followed by 1 on your touch-tone phone. You will hear a prompt that your hand has been raised. But should you decide to decline from the polling process, please press star followed by 2. And if you're using a speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star 1 now if you have any questions.
Speaker Change: Sylvia we can now pull for questions. Please thank you Sir.
Speaker Change: Ladies and gentlemen, if you do have any questions. Please press star followed by one on your Touchtone phone you will hear a prompt that youre Han has been raised but should you decide to decline from the polling process. Please press star followed by two and if you are using a speakerphone you will need to lift the handset first before pressing any Keith. Please go ahead and press star one now.
Speaker Change: If you have any questions.
Speaker Change: First question will be from Stephanie price at CIBC. Please go ahead.
Stephanie Price: First question will be from Stephanie Price at CIBC. Please go ahead. Hi, good morning. First question is just on the US Federal. Just wondering how the US Federal contract growth has trended since the change in administration? Are you seeing changes in consumer behavior there and you know, maybe not spending to the ceiling on some of the contracts or task orders coming in more slowly?
Stephanie Price: Hi, good morning.
Speaker Change: First question Stephanie.
Speaker Change: Hi, just on the U S. Federal just wondering how the U S. Federal contract growth has trended from potential administration.
Speaker Change: Changes in consumer behavior there.
Speaker Change: Maybe not spending ceiling on some of the contracts that are task orders coming in Marcellus just still a context on yes go ahead. Please.
Francois Boulanger: Just a little context on US Federal here, please. Yeah, so thanks, Stephanie, for the question. So what do we see on the bookings, if we're talking bookings? For sure, you saw the booking, we're at 40% book-to-bill. What's happening is that, you know, instead of signing, you know, a renewal, a five-year renewal, or three years renewal, what's happening is that they'll sign bridge contract to continue their work, right, but not necessarily doing big renewal until they'll have a better understanding on the new processes and the new way that they would procure in the future. So that's really what we see.
Speaker Change: Please.
Speaker Change: Yeah. So thanks.
Speaker Change: Thanks, Tiffany final question, so when do we see.
Speaker Change: Bookings if were talking bookings.
Speaker Change: <unk> you.
Speaker Change: So the booking at we're at 40% book to Bill what's happening is that.
Speaker Change: Instead of.
Speaker Change: Signing and a renewal of a five year renewal or two years, where new whats happening is that they will.
Speaker Change: <unk> signed bridge contract to continue their work right.
Speaker Change: But not necessarily doing big renewal until they will have a better understanding.
Speaker Change: New processes in the new way that they would the broker in the future. So so that's that's really what we want we see but as as I indicated when its time they.
Francois Boulanger: But as I indicated, when it's time, you know, they don't have any choice to sign new projects, they will sign it, like I was talking about the no-time system, and the new platform for fraud detection. You know, at this point in time, they need to move on, and especially if it's bringing, you know, outcome-based objective that they wanted to achieve, they will continue to buy.
Speaker Change: They don't have any.
Speaker Change: Twice to sign new projects, they will find it like I was talking about the no Tam in our system and the new platform for fraud detection and not disappoint in time, they need to move on and they and especially if it's bringing.
Speaker Change: Outcome base.
Speaker Change: Objective that they wanted to achieve data will continue.
Speaker Change: <unk> bye.
Speaker Change: That makes sense.
Francois Boulanger: That makes sense. And then just maybe on the administrative side of the US federal business, are you seeing anything there? Are DSOs being pushed, invoice approvals taking longer, anything like that? No, no, and even, you know, year over year, my understanding, Steve, that ESO did drop and did drop. Yeah, so so we are quite diligent and looking at and it was our first thing that we checked, Stephanie, obviously. But on that front, no, there is no delay on payments and it's regular business.
Speaker Change: And then just maybe on the administrative side of the U S. Federal business are you seeing anything there. Our DSO has been pushed invoice appeared well is taking longer or anything like that.
Speaker Change: Now even.
Speaker Change: Year over year in my understanding Steve the DSO did drop and then dropped yet so we are quite diligent in looking at and it was our first thing that we check this if any obviously, but.
Speaker Change: But on that front no there is no deviation.
Speaker Change: Delayed on payments and has triggered our business.
Stephanie Price: Thank you very much.
Speaker Change: Great. Thank you very much.
Speaker Change: The next question will be from Richard Tse at National Bank Financial. Please go ahead.
Richard Tse: Next question will be from Richard Tse at National Bank Financial. Please go ahead. Yes, thank you. So obviously, the environment is challenging. But you know, when you talk to your customers broadly, what are the conditions they're saying that would make them return to their normal cadence of services spent? Is it just kind of some certainty on tariffs? Or is it something else beyond that?
Richard Tse: Yes. Thank you.
Speaker Change: So obviously the environment is challenging but when you talk to your customers broadly.
Speaker Change: What are the conditions, they are saying that would make them return to their normal cadence of services spend is it just kind of some certainty on tariffs or is it something else beyond that.
Francois Boulanger: I it's not just tariff but but it's the overall environment and you know where we're going so because we saw in some places example in Europe even before the tariff discussion that especially example in in industry like manufacturing that you know they were seeing sign of slowdown in in the market and all that they had some cost pressure already to manage so so they had tendency to wait a bit where the environment or where the economy would go before especially on the short-term projects right the science project consulting so consulting slowdown and some of the project implementation but on the other side right on the managed services it's it's it was always still relevant and understanding how we can help them in the cost-saving side so that's how we we signed some large deal like like I was saying last quarter with with Volkswagen on the on the outsourcing side or the managed services side so so you know it's really you know when they'll they'll see some some sign of not recovery but at least more certainty about the market they they will come back in the market and we saw an example in the financial sector we are seeing growth in the financial sector it came back especially in Canada with the rates that went down and and we saw some good growth on that sector and so other sectors will naturally wait to see if how when the market will come back.
Speaker Change: Bye.
Speaker Change: It's not just tariff, but that's the overall environment.
Speaker Change: Where we're going so because what we saw in some places example in Europe, even before the tariff discussion that.
Speaker Change: Especially example, an industry like manufacturing.
Speaker Change: They were seeing sign of slowdown in the market and all that they had some cost pressure already to manage.
Speaker Change: So they have tendency to.
Speaker Change: Wait a bit.
Speaker Change: Where the environmental where the economy would go before especially on the short term projects.
Speaker Change: Projects ride the Si and C project consulting so consulting slowdown.
Speaker Change: And some of the project implementation, but on the other side right on the managed services.
Speaker Change: It was always still relevant in understanding how we can help them and the cost savings side. So that's how we we signed some large deal like like I was saying last quarter with with Volkswagen on the.
Speaker Change: On the outsourcing side or the managed services side.
Speaker Change: So it's really <unk>.
Speaker Change: <unk> they'll see some some sign of recovery, but at least more sensitive about the market.
Speaker Change: <unk>.
They will come back in the market and we saw that the example in the financial sector.
Speaker Change: We are seeing growth in the financial sector. It came back.
Speaker Change: Special and gather with the rates that went down and we saw some good growth on that sector.
Speaker Change: And so other sectors will naturally a wait to see if when.
Speaker Change: When the.
Speaker Change: The market will come back.
Speaker Change: Okay, and then I know the current environment and macro does it change.
Francois Boulanger: Okay, and then under the sort of current environment and macro does it sort of change your capital allocation ranking? Like do acquisitions move up that ranking or buybacks like sort of help me understand how you're thinking about that? But for sure, it's creating opportunities on the M&A side. Because again, we would naturally, as you know, we have a strong balance sheet. But it's not necessary, everybody has a strong balance sheet. And some companies where we're seeing that, you know, they it's a little bit more difficult. So especially the ones that are pure S&C companies, where they and they don't have managed services, and they don't necessarily have the capability to invest in managed services.
Speaker Change: Capital allocation ranking two acquisitions move up that ranking or buybacks.
Speaker Change: Help me understand how you're thinking about that.
Speaker Change: For sure, it's creating opportunities on the M&A side.
Speaker Change: Because again, we would naturally as you know we have a strong balance sheet.
Speaker Change: But it's not necessarily everybody who has a strong balance sheet and some companies are we seeing that.
Speaker Change: It's a little bit more difficult, so, especially they want that are pure ethane C companies.
Speaker Change: We're a day and they don't have managed services and they don't necessarily have the capability to invest in managed services. So they are at a point now they're thinking okay. What's the next move and that these are these potential are.
Francois Boulanger: So it's, they are at the point now they're thinking, okay, what's the next move? And that these are these potential are coming good targets for us to look at.
Speaker Change: Coming good targets for us to look at.
Speaker Change: And just last one from me is there a certain target of Calgary you wanted to deploy on acquisitions here over the next.
Francois Boulanger: And just the last one for me, is there a certain target of capital you want to deploy on acquisitions here over the next 12 months? I am saying, you know, we are generating, you know, 2 million, 2 billion of cash, where, you know, free cash flow of 1.6, 1.7 billion of free cash flow. And as you know, so we are also very low on the leverage side. So we have the capabilities of, again, continue to do more acquisition and even transformational work. Okay, great.
Speaker Change: 12 months.
Speaker Change: But as I am saying.
Speaker Change: We are generating.
Speaker Change: $2 million 2 billion of cash.
Speaker Change: Free cash flow of one point.
Speaker Change: $1 7 billion of free cash flow and as you know.
Speaker Change: So we are also.
Speaker Change: Very low on the leverage side. So we have the capabilities of again continued to do more acquisition and even transformational one.
Speaker Change: Okay, great. Thank you.
Speaker Change: Next question will be from Steven Li of Raymond James. Please go ahead.
Steven Li: Next question will be from Steven Li at Raymond James. Please go ahead. Hey, thank you.
Speaker Change: Thank you.
Francois Boulanger: I want to ask about the acquisition. So BJSS and Doherty, can I say they are mostly SIMC versus managed services? Yes, both of them are way more SINC than managed services. And that, you know, when I was talking about the example on the M&A, that's that's clear example, I'll take BJSS, great company with a great relationship in the UK. But you know, they were stuck on just capable of delivering SINC. And some of their clients were asking for managed services capabilities that they were not able to deliver. And now, since they are with us and CGI, now they can present managed services as one of their offerings.
Steven Li: I want to ask about the acquisition so BJ.
Speaker Change: And <unk>.
Speaker Change: Can I add.
Speaker Change: Mostly si and C versus managed service.
Speaker Change: Yes.
Speaker Change: Both of them are.
Speaker Change: A way more ethane than managed services and that when I was talking about the example.
Speaker Change: On the M&A. That's that's clear example, I'll take BJ ISS, Great company with great relationship and.
Speaker Change: In UK.
Speaker Change: But were there were stock.
Speaker Change: Capable of delivering S IMC and some of their clients, whereas asking for.
Speaker Change: Managed services capabilities that they were not able to deliver and now since they are from narrow with us and CGI now they can present.
Managed services as one of their offering and already we see some momentum and good meetings with clients, where we're showcasing.
Francois Boulanger: And already we see some momentum and good meetings with clients where we're showcasing these activities. A lot of these BJSS clients, and same thing for Doherty, we were able to bring them to India and see our capabilities there. And they were already very impressed with what we have.
Speaker Change: These activities a lot of these BJ SaaS clients and same thing for Dougherty, where we're able to to bring them to India and CR Cri.
Speaker Change: CR capabilities, there and there were already very impressed with what we have so again nothing signed yet, but that's the kind of strategy that we have.
Francois Boulanger: So again, nothing signed yet. But that's the kind of strategy that we have when we're buying these, I would say, you know, larger companies, you know, 1,500, 2,500, in the case of BJSS, you know, size company, where they have good relationship. And now we can sell a lot more in these companies.
Speaker Change: When we are buying these.
Speaker Change: I would say.
Speaker Change: Larger companies.
Speaker Change: 502500, and in the case of <unk>.
Speaker Change: Our size company, where they have a good relationship and now we can sell a lot more in these companies.
Francois Boulanger: Okay, so yeah, so I appreciate the upside there, potentially. But going back to the co-SINC business, can I ask how they are doing in this market? Like, for example, this quarter, they're booked to bill, can I assume they were at least one times for these two companies? Harvey, I would need to look. We're not at that level of detail. But I would say to you that, for sure, managed services overall, we had a book to bill. And what, Steve? 122. 122 book to bill for managed services overall, and just below one overall for SINC.
Speaker Change: Okay. So yeah. So I appreciate the upside there potentially.
Speaker Change: But going back to the <unk> business can I ask how they're doing in this market like for example, this quarter. The book to Bill can I assume they were at least one times for these two companies.
Speaker Change: Harvey.
Speaker Change: We need to look at we're.
Speaker Change: We're not at that.
Speaker Change: Level of detail, but I would say to you that.
Speaker Change: For sure managed services overall, we had a book to Bill.
Speaker Change: And what does Steve 120 to 122 book to Bill for our managed services overall and just below one overall for.
Speaker Change: For <unk>.
Speaker Change: Okay, I guess, what I'm trying to guide.
Francois Boulanger: Okay, I guess what I'm trying to get at is the like on an organic basis the bookings from BJSS and Doherty, would that have contributed to be to your overall bookings? Thank you. Yeah, for sure. I know for sure they had bookings and it did contribute, but I'll take BJSS. BJSS is only one month, right? Yeah. So we have only one month of booking on BJSS.
Speaker Change: Like on an organic basis, the bookings from <unk> <unk> with <unk>.
Speaker Change: It has contributed to the to your overall bookings.
Speaker Change: Yes for sure now consolidate had bookings.
Speaker Change: <unk> contributed but I'll take <unk>, it's only one month right. So we have only one month of booking.
Speaker Change: <unk>.
Francois Boulanger: But for Doherty, we have a full quarter of bookings coming from Doherty. Okay, got it.
Speaker Change: Dorothy we have a full quarter of bookings coming from Dougherty.
Speaker Change: Okay got it and then last question for me like the the bigger restructuring.
Francois Boulanger: And then last question for me, like the the bigger restructuring, but you alluded to in the MD&A, does that have any implications on margins year over year? How much of an improvement in margins should we expect year over year? Thank you. Yeah, you know, most of the restructuring will be in the continental Europe. For sure, it will improve the utilization of these countries. So naturally, it will help to improve also the EBIT margin, but I don't have necessarily a target or something. I don't know, in Europe. Obviously, we want to grow that and that's why we're taking the action.
Speaker Change: You alluded to in the MD&A.
Speaker Change: Does that have any implications on margins year over year, how much of an improvement in margin should we expect year over year. Thank you.
Speaker Change: Yeah.
Speaker Change: Most of the.
Speaker Change: The restructuring will be in the continental.
Speaker Change: Europe for sure it will improve.
Speaker Change: Utilization.
Speaker Change: Of these countries. So naturally will help to improve also the EBIT margin, but I don't have necessarily a target or something.
Speaker Change: I don't know Steve.
Speaker Change: You can see in the MD&A that margin that we're.
Damian: Hey, Damian.
Speaker Change: In Europe, obviously, we want to grow with that and Thats why were taking the action we want to make sure that.
Francois Boulanger: We want to make sure that, you know, we are a strong company and we want to make sure that they come back with a higher margin than right now what they can achieve. And take the Scandinavian one. You know, we did some of the restructuring already in the last couple of quarters and you see a good uplift on the EBIT margin. 200 BITS more in Scandinavia. So we're not saying that we're going to achieve that necessarily rapidly for the other country, but that's a goal, right? We know we can generate the 16% that you're used to.
Speaker Change: We are a strong company and we want to make sure that.
Speaker Change: They come back with.
Speaker Change: With a higher margin than right now what the can achieve and take take the Scandinavian one.
Speaker Change: We did some of the restructuring already in the last couple of quarters and you see a good uplift on the on the on the.
Speaker Change: On the EBIT margin 202 hundred bps more.
Speaker Change: In Scandinavia.
Speaker Change: We're not saying that we're going to achieve that unnecessarily.
Speaker Change: Leave four four.
Speaker Change: For the other country, but that cycle right. We know we can generate.
Speaker Change: The 16% that you're used to.
Francois Boulanger: That's our target.
Speaker Change: That's that's our target.
Speaker Change: Thank you.
Speaker Change: Next question will be from sorry, Jonathan at Jefferies. Please go ahead.
Surinder Thind: Next question will be from Surinder Thind at Jeffrey's. Please go ahead. Thank you.
Speaker Change: Okay.
Jonathan: Thank you.
Francois Boulanger: Following up on the expansion of the restructuring initiative, I assume it is, can you help me understand kind of what changed relative to where your thoughts were last quarter? And then is it primarily like within SINC and primarily onshore delivery within continental Europe, or just any other color would be helpful? Yeah, no, it's, it's, you're touching it, it's, it's, it's really in the SINC, in the business consulting side, also a bit, it's continued to be soft on on that side. And so, you know, we decided that we needed to do a bigger program to be sure that, you know, we are improving the utilization in these countries.
Jonathan: Following up on the expansion of the restructuring initiatives.
Jonathan: I assume it is can you help me understand kind of what changed relative to where your thoughts for last quarter.
Jonathan: And then is it primarily like within <unk>. So you can see in primarily onshore delivery within continental Europe or just any other color would be helpful.
Jonathan: Yes.
Speaker Change: Youre assessing that.
Jonathan: And ESI and see.
Jonathan: And that business consulting side also.
Jonathan: <unk> to be.
Jonathan: Soft on that side and so.
Jonathan: We decided that we needed to do a bigger program to be sure that the.
Jonathan: We are improving the utilization in these countries.
Francois Boulanger: So that's really why, why we're doing it. And, and, and at the same time, also, it's not just to improve the utilization, but, you know, we are doing more and more and more with some of the automation on some of the SG&A. So we will have also some restructuring in the SG&A area, because again, versus some of our investment that we did, for example, with the use of AI.
Jonathan: So that's really why we're doing it in and at the same time also it's not just to improve the utilization, but we are doing more and more and more with some of the automation.
Jonathan: On some of the SG&A. So we will have also some.
Jonathan: As our restructuring in the SG&A area, because again versus some of our investment that we did at.
For example, with the use of AI.
Jonathan: That's helpful and then related to that.
Francois Boulanger: That's helpful. And then related to that, any color on just how we think about the demand for where delivery services are, one of the things that kind of came out of the pandemic was is companies may be focused a bit more on cost. Unknown Speaker Obviously, you're seeing some benefits within the managed services. But for SIT projects, are they then asking for more offshore delivery? Or how should we think about that dynamic is on the cost conscious? But you know, Yeah, that's a good question. You saw the growth in India. We continue to grow rapidly in India, faster than anywhere else.
Jonathan: Any color on how.
Jonathan: How we think about.
Jonathan: The demand for where delivery services are.
Jonathan: One of the things that kind of came out of the pandemic requires us.
Jonathan: Companies, maybe focus a bit more on cost.
Jonathan: Obviously, you're seeing some benefits within the managed services, but for.
Jonathan: <unk> projects are they've been asking for more offshore delivery or how should we think about that dynamic.
Jonathan: On the cost conscious.
Jonathan: Yeah, that's a good question.
Jonathan: You saw the growth in India, we continue to grow.
Jonathan: Rapidly in India faster than anywhere else and for sure it's not just.
Francois Boulanger: And for sure, it's not just for managed services, but it's also for SIC. And it's not just because of cost. Yes, cost is a portion of it, but it's also for talent. And that's also a place where we have a lot of talent, and we are using that talent to deliver across the world. So yes, it's cost, but it's also expertise that we still have a lot of expertise in India, and we're using a lot of India for delivering all line of business.
Jonathan: It's not just for.
Jonathan: Managed services, but it's also for resi and <unk> and it's not just because of cost yes cost is a portion of it by a social for talent and.
Jonathan: Thats.
Jonathan: That's also a place where we have a lot of talent and we are using that talent to deliver across the world. So so yes its cost, but it's also expertise that is.
Jonathan: That we still have a lot of expertise in India, and we're using a lot of and therefore delivering.
Jonathan: All lines of business.
Jonathan: And I think I'll leave it there.
Francois Boulanger: And I think I'll leave it there. Thanks for listening.
Speaker Change: Okay. Thanks.
Speaker Change: Next question will be from Mcdonalds <unk> BMO capital markets. Please go ahead.
Thanos Moschopoulos: Next question will be from Thanos Moschopoulos at BMO Capital Markets. Please go ahead. Hi, good morning. First of all, maybe just to clarify a point. As of right now, have there been any meaningful contract cancellations or non rules in US federal or nothing of that nature to go out? nothing, nothing meaningful that happened on that side. No. Okay. And U.S. state, is that looking status quo?
Speaker Change: Hi, good morning.
Speaker Change: First of all maybe just to clarify points.
Speaker Change: As of right now have there been any meaningful contract cancellations of nonrenewals in federal or nothing of that nature to call out.
Speaker Change: Nothing nothing meaningful that happened on that side.
Speaker Change: Okay.
Speaker Change: And U S state is that looking status quo or have you seen any change in demand.
Francois Boulanger: Or have you seen any change in demand and, you know, with the new administration at the federal level, anything happening on the state side? on the State Department level. Yeah, no, sorry about states, states, per se, like, just given that there's, you know, the US federal government's obviously, you know, changing education. Okay, yeah, the state and locals. No, we didn't. Yeah, no.
Speaker Change: With the new administration.
Speaker Change: <unk> at the federal level anything happening on the state side.
Speaker Change: On the state Department level.
Speaker Change: No.
Speaker Change: Sorry, I got states states per se, but just given that there is the federal government's obviously.
Speaker Change: Yes, the state and local which we then yes, no and like I was indicating we just sign ups.
Francois Boulanger: And like, like I was indicating, we just signed a 500 million US deal with the state of California. And so no, it's, it's still pretty good on that side, for sure. They'll, they're looking at solutions to, for cost savings, like, like anything else. And, and, and so, you know, that's what we're talking with them. But for now, the states and locals are still continue to spend, and we don't, we don't see a slowdown on that side.
Speaker Change: $500 million U S. A deal with the state of California.
Speaker Change: And so now it's still pretty good on that side for sure.
Speaker Change: We're looking at solutions too.
Speaker Change: For our cost savings like.
Speaker Change: Like anything else.
Speaker Change: And so.
Speaker Change: That's what we're talking with them, but for now the states are locals are still continuing to spend and we don't we don't see a slowdown on that side.
Speaker Change: Okay last one from me is just on the pricing environment, you mentioned using more AI for automation.
Francois Boulanger: Okay, last one for me is just on the pricing environment. You mentioned using more AI for automation, and you know, your peers are doing the same, obviously. And, you know, given that, and given that we're in a bit of a more challenging environment, what are you seeing as far as you know, pricing on the large managed services deals you're pursuing? Well, you know, like I'm saying in pricing, when it's time to price and especially in managed services, as you know, you know, the clients are expecting savings, right? And and they want savings from from from their side versus what they are delivering.
Speaker Change: Your peers are doing the same obviously given that and given that we're in a bit of a more challenging environment.
Speaker Change: What are you seeing as far as pricing.
Speaker Change: Large managed services deals you're pursuing.
Speaker Change: Yes.
Speaker Change: I'm, saying in pricing when it's time to price, especially in managed services as you know the clients are expecting savings right and day one savings.
Speaker Change: From from their side versus what they are delivering so so.
Francois Boulanger: So, so AI is an extra another tool to be used for for delivering some of these savings. So, you know, I would say that we're using it, it's contributing to give cost saving to the client. And actually also to help us to improve our bottom line. So so it's for now, I would say it's a share, share, say, share benefit that we're sharing with our clients.
Speaker Change: Is that an extra another tool to be used for for delivering some of these savings. So I would say that we are using it is contributing to.
Speaker Change: <unk> cost savings to the client and actually also to help us to improve our bottom line. So it's for now I would say, it's a sure sure.
Speaker Change: Sure benefit that we're sharing with our clients.
Speaker Change: Great I'll pass along takes us off.
Francois Boulanger: Great, I'll pass it along.
Francois Boulanger: Thanks for us all. I've done enough.
Speaker Change: Thanks Dennis.
Speaker Change: Next question will be from Paul Treiber RBC capital markets. Please go ahead.
Paul Treiber: Next question will be from Paul Treiber at RBC Capital Markets. Please go ahead. Oh, thanks very much. And good morning. Just a question on the morning. Just a question on the timeframe for the ramp in managed services bookings to lead to revenue growth? Is it a couple of quarters before you expect revenue from the new bookings? Or just giving the environment, you know, our customer signing, but then there's a longer timeframe to actually deploy? No, I would say, you know, a couple of quarters is making sense. It's always depending from one to the other. But But on average, I would say that that's a good average.
Speaker Change: Oh, thanks, very much and good morning, just a question on that.
Speaker Change: Hey, good morning, just a quick.
Speaker Change: On the timeframe for the ramp in managed services bookings.
Speaker Change: Lead to revenue growth as it is it a couple of quarters before you expect.
Speaker Change: From the new bookings.
Speaker Change: Or just given the environment our customers signing but then there's a longer timeframe.
Speaker Change: To actually deploy.
Speaker Change: No I would say.
Speaker Change: A couple of quarters is making sense.
Speaker Change: It's always depending from one or the other but on average I would say that that's a good average.
Speaker Change: And some of them in the past.
Francois Boulanger: And some, you know, of them in the past did the finish and already now when we are seeing growth, because again, managed services, we are seeing the growth year over year, coming from managed services. So, so, so, and, you know, example, the two that I, I talked about, about the large bank in the US. And, and, and even the one that because there's some point, it's a long term contract with the state of California. You know, you'll see that example, state of California, we already started the work.
Speaker Change: The Phoenician in.
Speaker Change: Already now and we are seeing growth because again managed services, we are seeing the growth.
Speaker Change: Year over year coming from managed services.
Speaker Change: So so.
Speaker Change: Examples of two debt.
Speaker Change: I talked about about the large bank in the U S.
Speaker Change: And even the one that because there is some point that is a long term contract with the state of California.
Speaker Change: Youll see that for example, the state of California, We have already started the work so.
Francois Boulanger: So, so you will see some growth coming from, from these acquisitions, or these contract in the next couple of quarters.
Speaker Change: So we'll.
Speaker Change: We will see some growth coming from from these acquisitions are these.
Speaker Change: Contract in the next couple of quarters.
Francois Boulanger: Could you speak to the relationship between SINC and managed services in terms of, are they completely independent or do you see, you know, with the slowdown in SINC, is that a leading indicator that there may be headwinds facing managed services at some point in the future? Like, is the SINC in preparation in any ways for future managed services or are they completely independent? I, not at all. They're for me, they're complete independent. Because again, even, I would say in a in a time like today, where yes, we have some Edwin's coming from SINC, and especially on the consulting side, you know, on contrary, you know, on the on the managed services, you know, it's very active.
Speaker Change: And then could you speak to the real.
Speaker Change: Relationship between ethane and managed services in terms of are they are they completely independent or do you see.
Speaker Change: The slowdown in ethane C is that a leading indicator that maybe headwinds facing.
Speaker Change: Managed services at some point in the future like is the SMC and preparation it anyways for future managed services or are they completely independent.
Speaker Change: Alright.
Speaker Change: For me they are completely independent because again, even I would say.
Speaker Change: Times like today, where yes, we have some headwinds coming from ESI and see and then especially on the consulting side.
Speaker Change: On contrary.
Speaker Change: On the managed services.
Speaker Change: Sure.
Speaker Change: It's very active.
Francois Boulanger: And, and, you know, the, the client always, and, you know, I did the tour of Europe a couple of months ago. Every client wants to understand how we can help them to improve their bottom line and reduce costs. And, and that's always relevant. And so they will listen to our, to the offering that we have on that track.
Speaker Change: And.
Speaker Change: The client always.
Speaker Change: Did the tour of Europe, a couple of months ago.
Speaker Change: Every client wants to understand how we can help them to improve their bottom line and reduce costs.
Speaker Change: And that's always relevant and.
Speaker Change: And so they will listen to our to the offering that we have on that product.
Francois Boulanger: Thanks for taking the questions.
Speaker Change: Thanks for taking the questions.
Speaker Change: Okay.
Speaker Change: Next question will be from the via <unk> at Scotiabank. Please go ahead.
Divya Goyal: Next question will be from Divya Goyal at Scotiabank. Please go ahead.
Speaker Change: Good morning, everyone.
Divya Goyal: Good morning, everyone. There have been some questions on restructuring asked already, I just wanted to get the specific clarification. So are you seeing some of these restructured costs, predominantly onshore getting moved to offshore or GCCs? And are you seeing increased hiring in GCCs as you move those costs from onshore operations to offshore operations? All right. Some of it, yes, we're offshoring more. And that's true, especially on the on the SG&A side, because we are also doing some restructuring on the SG&A. And one thing, yeah, across the world, and some of that exercise will be to move more of these, of these SG&A to India, for example, in Asia Pac.
Speaker Change: Hi, there.
Speaker Change: There have been some questions on restructuring asked already I just wanted to get clarification. So are you seeing some of these.
Speaker Change: Sure.
Speaker Change: Cost predominantly onshore getting moved to offshore or GCC and are you seeing increased hiring in GCC.
Speaker Change: As you move those costs from onshore operations to offshore operations.
Speaker Change: Some of it yes, we're offshoring more.
Speaker Change: And that's true, especially on the <unk>.
Speaker Change: The SG&A side, because we are also doing some restructuring on the SG&A.
Speaker Change: And what I'm, saying across the world and some of that exercise will be to move more of these.
Of these SG&A to two to India. For example in Asia Pac Sun is also related to some automation that we're doing more and that's done with our Indian teams, but some of it is also just to improve.
Francois Boulanger: Some is also related to some automation that we're doing more. And, you know, that's done with our Indian teams. But some of it is also just to improve the utilization, for example, in some of the countries where they are doing, let's say, more business consulting, for example. And with the slowdown that we saw, you know, it's putting pressure on their utilization rates. And we need to do some action there. To improve. Sounds good.
Speaker Change: Utilization for example in some of the countries, where they are doing let's say more business consulting for example, and then with the slowdown that we saw.
Speaker Change: It's putting pressure on their utilization rates and we need to do some action there to improve.
Speaker Change: Yeah.
Speaker Change: Sounds good.
Divya Goyal: On the US, on the US front, and specifically the US federal front, the company Aon to acquire, it was a pretty interesting acquisition. How are you seeing that acquisition or the results of that acquisition trending currently, given all that's going on with Doge and broader US federal and the tariff related concerns across the US? Yeah, thanks, Divya. Aon is, you know, a great acquisition in the defense sector in the US federal and you know, that's a sector that we don't see necessarily slow down on that side. And that's true for US federal and it's true across across the world.
Speaker Change: The U S.
Speaker Change: The U S front and specifically the U S Federal front the company.
Speaker Change: Acquire it wasn't pretty interesting acquisition, how are you seeing that acquisition on the result of that acquisition trending currently given all that's going on with Dolby and broader U S federal and the tariff related concerns across the U S.
Speaker Change: Yes.
Speaker Change: Thanks.
Speaker Change: Aon is.
Speaker Change: Great acquisition.
Speaker Change: The defense sector in the U S federal and.
Speaker Change: That's a sector that we don't see.
Speaker Change: Necessarily a slowdown on that side and that's true for U S Federal and is true across across the world.
Divya Goyal: We are seeing in governments across the world, you know, more investment that will be done in the defense sector. And, and so, you know, that's, that's opportunities for us. Naturally, we're not in the frontline, but we are in the back office of a lot of these defense ministry across the world, including us. And that's why we did the the acquisition of Aon. And we're saying that we see that we'll have good opportunities in the future. And in the defense side. And thank you so much.
Speaker Change: We are seeing and governments across the world more investment that will be done in the defense sector and and so.
Speaker Change: Thats opportunities for us naturally we're not in the frontline, but we are in the back office of a lot of these defense ministry across our world, including U S. And that's why we did the acquisition of <unk> and we are seeing that that we see that we'll have.
Speaker Change: Are there opportunities in the future and the defense side.
Speaker Change: And thank you so much and my last question just on M&A, you briefly mentioned and I know you've said this isn't in the past that you would continue to look at potential Council made an acquisition.
Divya Goyal: And my last question just on M&A, you, you briefly mentioned, and I know you've said this in the in the past, that you would continue to look at potential transformative acquisitions.
Divya Goyal: Or is there a geography or a capability set that you have in mind when you're looking at acquisitions, specifically on the transformative, it would have to be a pretty acquisitions, if you were to do that. So what is the thought process on that front? And that'll be it for me. Thank you. Yeah, okay. Thanks, Divya. For sure, on the transformational side, you know, and again, we're not, you know, we will look at all the industries, all the geographies. But for sure, you know, the sweet spot would be in the US, especially US commercial, that would be a sweet spot if we can find a more transformational one in that side.
Speaker Change: Geography, or a capability set that you have in mind when you're looking at acquisitions, specifically on the transfer made it it would have to be a pretty sizable acquisition. If you were to do that so what is the thought process on that front and that'll be it for me. Thank you yeah. Okay. Thanks <unk>.
Speaker Change: The pressure on the transformational side.
Speaker Change: And again, we're not at all.
Speaker Change: We will look at all the industry all of the geographies.
Speaker Change: But for sure in the sweet spot would be in the U S, especially the U S commercial.
Speaker Change: That would be our sweet spot if we can find more.
Speaker Change: Transformational one in that side.
Divya Goyal: Germany is another one that, you know, would be a good sweet spot to find a transformational one. But again, you know, we're not, we will look at all the assets and potential assets across the world to see if, you know, we can bring a very good return on a transformational one in other geography, naturally, we'll look at it also. Thanks, Francois.
Speaker Change: Germany is another one that would be a good sweet spot to find trends.
Speaker Change: Transfer one initial one but.
Speaker Change: But again.
Speaker Change: We will look at all the assets and potential assets across the world to see if we can bring.
Speaker Change: Bring a very good return on that transformation with one other geography naturally we will look at it also.
Francois Boulanger: Thanks Francois.
Speaker Change: Okay.
Speaker Change: Thank you next.
Robert Young: Thank you. Next question will be from Robert Young at Canaccord. Please go ahead. Hi, good morning. I think I've heard you mention utilization more times in this call than recently. And so maybe some commentary around utilization where you think the trend is there.
Speaker Change: Next question will be from Robert Young of Canaccord. Please go ahead.
Robert Young: Hi, good morning.
Speaker Change: I think I've heard you mentioned utilization.
Robert Young: And more times in this call them then.
Robert Young: Recently, and so just maybe some commentary around utilization, where you think the trend is there.
Francois Boulanger: Is it possible, or maybe we talk about the difference in utilization across managed services and consulting, whether that's utilization that could be portable, can you, in a slowdown in consulting, can you move people into managed services? And then maybe if you could just broaden that out, just on the other near-term headwinds on margins, how we should think about that, because it seems as though there may be higher pricing pressure and maybe some margin pressure from recent M&A, if you could just wrap that into a margin outlook for the near-term, that would be helpful. Okay, thanks, Robert, for the question.
Robert Young: Is it possible or maybe you could talk about the difference in utilization across the maintenance services and consulting whether that utilization that could be portable can you and a slowdown in consulting can move people into managed services.
Robert Young: And.
Robert Young: And then maybe if you could just broaden that out just on the other near term headwinds on margins, how we how we should think about that.
Robert Young: Seems as though there may be higher pricing pressure and maybe some margin pressure from recent M&A. If you could just wrap that into our margin outlook for the near term that would be helpful.
Speaker Change: Alright, Thanks, Robert for the question Yeah.
Francois Boulanger: Yeah, first of all, you're right. You know, we are looking every time to see how we can move people from SINC to managed services when it's feasible, naturally. So when we're looking at utilization, yes, we have some soft spot in some areas, like I was saying, in continental Europe. But it's not stopping us that, you know, we are looking at globally, and seeing how we can, you know, move some people from one place to the other to fulfill needs from clients. As for margin, for sure, you know, again, on the short term, we have some tailwinds and headwinds.
Speaker Change: First of all you are right we are.
Speaker Change: Looking every time to see how we can move people from from Si and C to managed services when it's feasible nationally so when we're looking.
Speaker Change: Looking at utilization, yes, we have some soft spot in some area like I was saying in continental Europe.
Speaker Change: But it's not stopping us that we are looking at it globally.
Speaker Change: And seeing how we can.
Speaker Change: Move some some some.
Speaker Change: Some people from form.
Speaker Change: From one place to the other to fulfill needs from clients asphalt margin pressure.
Speaker Change: Again on the short term, we have some tailwind and headwinds like you are saying we are we did several M&A.
Francois Boulanger: Like you're saying, you know, we did several M&A acquisitions. So naturally, we need to integrate them in CGI. And sometimes it's taking sometimes to improve their EBIT margin to the level of or the standard of CGI. And that's taking can take several quarters to come to that. On the restructuring, again, in some countries, it's taking a certain time to action these restructuring. So it will take some places a couple of quarters. So I would say that, you know, you can see an improvement on the EBIT margin, but not necessarily in a very short term. But I would continue to say that in the medium term, you know, we all we want to improve some of these EBIT margin in Europe and bring it back on their historical margin that they had in the past.
Speaker Change: Acquisitions, so naturally we need to integrate them and our.
Speaker Change: And CGI and sometimes it's taking sometimes to improve their EBIT margin to the level of.
Speaker Change: Or the standard of CGI.
Speaker Change: That's taking it can take several quarters to come to that.
Speaker Change: On the on the restructuring.
Speaker Change: Again in some countries, it's taking a certain time.
Speaker Change: To action.
Speaker Change: These.
Speaker Change: Yes to action these.
Speaker Change: These restructuring so it will take some place there was a couple of quarters. So I would say that you can see an improvement on the EBIT margin, but not necessarily in a very short term, but I would.
Speaker Change: To say that in the medium term, we all we want to improve some of these EBIT margin in Europe and bring us back on their historical.
Speaker Change: The margin that they had in the past.
Francois Boulanger: But we need to go through these actions before. Okay, thanks.
Speaker Change: But we need to go through these actions before.
Speaker Change: Okay. Thanks, and then for a second question. When you are talking about takeaways from customer discussions you highlighted more focus on outcome focused delivery and you also mentioned I think I think it was related to U S. Federal I think you mentioned, maybe a subtle shift towards outcome based.
Francois Boulanger: And then for a second question, when you're talking about takeaways from customer discussions, you highlighted more focused on outcome focused delivery. And you also mentioned, I think, I think it was related to US Federal. I think you mentioned maybe a subtle shift towards outcome based contracting. And I was just, is there a change in the way US Federal is looking at contracting based on pricing related to outcomes and how that might change CGI? If that's, you know, any in any way, a large factor here, and then I'll pass the line. Yeah, no, thanks. No, it's a good question.
Speaker Change: Contracting and I was just is there a change in the way U S. Federal is looking at contracting based on pricing related to outcomes and how that might change CGI if thats.
Speaker Change: Any in any way a large factor here and then I'll pass the line.
Speaker Change: Yeah. Thanks for taking my question.
Francois Boulanger: I know we have already just perhaps over the 50% of our contract with the federal government that's outcome-based contracting. And again, our understanding is that they want to push more on that level, right? So, as you know, also one of the contracting method that they have is cost plus. And what we're hearing, at least, and understanding with their discussion is that they would like to move out of these cost plus contracts. How easy it will happen or how fast it will happen, I don't know. But that's really, and that's the focus of DOGE. DOGE wants to go more and more and more on outcome-based contracting.
Speaker Change: We have already.
Speaker Change: Just perhaps over the 50% of our contract with the federal government.
Speaker Change: Outcome based contracting and again, our understanding is that they want to push more.
Speaker Change: On that level right. So as you know also one other contracting method that they have.
Speaker Change: As cost plus and what we're hearing at least an understanding where their discussion is that they would like to move.
Speaker Change: Out of these are cost plus contracts.
Speaker Change: It will happen faster it will happen I don't know.
Speaker Change: But that's really that's the focus of those those wants to go more and more and more on outcome based.
Francois Boulanger: We don't have any issue with that approach. We like even that approach, because it's a shared benefit approach when we're doing that kind. And that's really what they want to achieve. So, that's the kind of conversation we have with them. And that will continue in the future. And again, we're not afraid. And I think that's the right way of going, anyway. Okay, thanks.
Speaker Change: Contracting we don't have any issue with that approach, we like even that approach because it's a share so share benefit approach and one that we're doing that.
Speaker Change: And Thats really what they want to achieve so so so that's the kind of conversation we have with that.
Speaker Change: We will continue in the future and again, we're not afraid and I think that's the right way of going anyway.
Speaker Change: Okay. Thanks, I'll pass the line.
Francois Boulanger: I'll pass the line.
Jerome Dubreuil: Right, Sylvie, we have time for one more question, please. Certainly. Our next question then will be from Jerome Dubreuil at Desjardins. Hello, everyone. The first question is on the bookings, you know, they were they were strong in the context. And I'm looking to find more about the average duration of contracts as a whole, you talked about it for the US federal side. So maybe a similar line of thought as Paul had, I'm looking for for a color on what bookings means for for your future revenue. So are the stronger bookings maybe in part due to longer duration of contracts, any color that would be helpful.
Speaker Change: Sylvia we have time for one more question. Please certainly.
Speaker Change: Our next question will be from Jay <unk> at Deutsche Bank.
Speaker Change: On the first question.
Speaker Change: <unk> is on the bookings there were there were strong in the context and I'm looking to find more about the average duration of contract as a whole you talked about it for the U S. Federal side. So maybe a similar line of thought as Paul had I'm looking for color on what bookings means for your future revenue so are the.
Speaker Change: Stronger bookings, maybe in part due to longer duration.
Speaker Change: Contracts any color there would be helpful.
Francois Boulanger: Well, for sure, you know, we have a multi year contract, you know, like I was saying, the large bank in the US, the state of California is, you know, multi year contract. And like I was saying, also on the federal side, federal side where they had multi years in the past, and I'm not saying they won't come back to multi years. But in this, in this environment, it's mostly bridge contract that we signed a lot of bridge contracts, outside a couple of larger ones, but a lot of bridge contracts. So as you know, Jerome, you know, managed services will have tendency to be multi year contract versus SIC will be, you know, shorter term contracting.
Speaker Change: For sure.
Speaker Change: We have a multiyear contract.
Speaker Change: Like I was saying the large bank in the U S. The state of California.
Speaker Change: And a multiyear contract.
Speaker Change: And like I was saying also on the federal side.
Speaker Change: Total size, where they had multi years in the past and I'm not saying they won't come back to multi years, but in this in this environment.
Speaker Change: It's mostly bridge contract that we signed a lot of bridge contract outside a couple of larger one but a lot of bridge contract. So as you know.
Speaker Change: Zero.
Speaker Change: Managed services will have tendency to be multi year contract versus I think it.
Speaker Change: It will be shorter term.
Speaker Change: Contracting.
Speaker Change: Thank you.
Francois Boulanger: Thank you. A follow up for me. In terms of maybe, I don't know if you want to call it sobering or just hosting more data in local countries or the US. I think infrastructure is not necessarily your favorite business to invest in. I wonder if this is different this time if governments or local corporations are trying to diversify their source of data. Is this a potential area of attractive business for you? Very good question, you know, we had always had some some some infrastructure business. So we're still you know, yes, it shrink a lot in the last several years, but we're still at 10 ish percent of infrastructure business.
Speaker Change: Follow up for me.
Speaker Change: In terms of maybe I don't know if you want to call. It suffering AI are just hosting more data in local countries out of the U S.
Speaker Change: I think infrastructure is not necessarily your favorite business to invest then I wonder. If this is different this time if governments are local corporations are trying to diversify their source of data.
Speaker Change: Potential area of attractive business for you.
Speaker Change: Yes.
Speaker Change: Very good question.
Speaker Change: We had always.
Had some some some.
Speaker Change: Our structure business. So we are still yes, it shrink a lot in the last several years, but we're still at 10 ish percent of.
Speaker Change: And infrastructure business, we're offering our IP.
Francois Boulanger: We're offering our IP on a SaaS model on our premises, and in public cloud. And we're still having, you know, some full managed services where we are going doing the infrastructure business also for our clients. For sure, you're right, that's a lot more discussion about the data sovereignty and digital sovereignty. And for sure, we'll stay close to this. And if it's asking us, because again, we'll always be close to our clients. And if our clients ask more on prem, on prem services, we will be there to support that. Thank you.
Speaker Change: On the SaaS model on our premises.
Speaker Change: <unk>.
Speaker Change: In public cloud.
Speaker Change: And we're still having some some full managed services, where we are doing the infrastructure business.
Speaker Change: Business also for.
Speaker Change: For our clients for sure you're right that a lot of more discussion about data sovereignty and.
Speaker Change: Total sovereignty and for sure we will stay close to this and if it's asking us because again, we will always be.
Speaker Change: Close to our clients and therefore, our clients ask more on Prem.
Speaker Change: On Prem services.
Speaker Change: We'll be there to support them.
Speaker Change: Thank you and maybe one last for me if.
Francois Boulanger: And maybe one last for me. If you had a guidance that was for the year, would you have changed it today? Wow, Jerome, that's that's a good way of trying.
Speaker Change: If you had a guidance that was for the year would you have changed it today.
Speaker Change: Wow.
Speaker Change: That's a good way of China.
Francois Boulanger: That's a new one, right? Like, I won't give guidance, that's for sure. You know, the the, if I would say from Q1 to Q2, you know, a lot of things happen, right? You know, when we talk at the end of January versus some discussion didn't happen, or some macro trend, or micro dynamic, were not there necessarily, or I was not looking at them like that at the end of January. It's a moving, it's a dynamic environment. So it's moving pretty very fast. And so it's, that's why also we're not, we don't want to give guidance, because again, it's very difficult to do that.
Speaker Change: Right.
Speaker Change: Yes.
Speaker Change: As al.
Speaker Change: Like.
Speaker Change: I won't give guidance that's for sure.
Speaker Change: The if I would say from Q1 to Q2.
Speaker Change: A lot of things happen right.
Speaker Change: When we talked at the end of January versus some discussion in the happen or some macro trends while macro dynamic we're.
Speaker Change: We're not there necessarily or I was not looking at them like that at the end of January.
Speaker Change: It's moving it's a dynamic environment. So it's moving prady very fast and so that's why also we're not we don't want to give guidance because again, it's very difficult.
Speaker Change: To do that but again at the end of the day, we have a lot of opportunities.
Francois Boulanger: But again, at the end of the day, you know, we have a lot of opportunities that we're working on. And a lot of, you know, you know, it's, you know, we have a lot of, yeah, discussion with clients, and we can see a lot of opportunities on the market.
Speaker Change: We're working on and a lot of.
Speaker Change: And though we have a lot of.
Speaker Change: Yes discussion with clients and we can see a lot of opportunities on the market.
Speaker Change: I appreciate it.
Francois Boulanger: Appreciate it. Merci beaucoup.
Kevin Linda: This does conclude our question period for today I would like to turn the call back over to Kevin Linda.
Kevin Linder: This does conclude our question period for today.
Kevin Linder: I would like to turn the call back over to Kevin Linder. Thanks, everyone, for participating. And 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 95409. As well, a podcast on 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.
Kevin Linda: Thanks, everyone for participating and 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 95, <unk> hundred nine as well a podcast on this call will be available for download within a few hours follow up questions can be <unk>.
Kevin Linda: <unk> to me at one 905, 973, <unk> hundred 60, <unk> III. Thanks, again, everyone and look forward to speaking soon.
Speaker Change: Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.
Operator: Thank you, sir.
Operator: Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending.
Operator: And at this time, we do ask that you please disconnect your lines.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yes.