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01/11 04:27
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents mixed signals. Financial performance shows growth in adjusted EPS and revenue, but restructuring costs impact cash flow negatively. The Q&A highlights uncertainties, such as the lack of guidance and a shift towards bridge contracts, while acquisitions and managed services present growth opportunities. The market reaction is likely to be neutral, as positive and negative factors balance each other out.
Revenue $4 billion, up 7.6% year-over-year (up 3.3% excluding foreign exchange); growth driven by recent business acquisitions, partially offset by 1 less available billing day.
Adjusted EBIT $666 million, up 5.9% year-over-year, margin of 16.5%.
Earnings Before Income Taxes $583 million, margin of 14.5%, down 90 basis points year-over-year due to restructuring and acquisition-related costs.
Adjusted Net Earnings $481 million, up $21 million year-over-year, margin of 11.9%.
Diluted EPS (Adjusted) $2.12, an increase of 7.6% year-over-year.
Net Earnings $430 million, margin of 10.7%, diluted EPS of $1.89, representing an increase of 3.3% year-over-year.
Cash from Operations $438 million, representing 11% of total revenue, unfavorably impacted by $101 million in restructuring and business acquisition-related payments.
Return on Invested Capital 15.4%, down 50 basis points year-over-year mainly due to capital allocated to recent business acquisitions.
Global Backlog $31 billion, or 2x revenue.
Bookings $4.5 billion for a book-to-bill ratio of 112%, strong in North America at 124%.
First Half Revenue More than $7.8 billion, up 6.3% year-over-year (3% on a constant currency basis).
First Half Adjusted EBIT $1.28 billion, up 5.3% year-over-year.
First Half Adjusted EPS $4.08, up 7.4% year-over-year.
Trailing 12-Month Cash from Operations Over $2.2 billion, up nearly $100 million compared to the previous year.
Investments in First Half $2.3 billion, including $183 million invested back into the business, $1.6 billion for business acquisitions, $498 million for share repurchase, and $68 million returned to shareholders through dividends.
New Product Offerings: CGI is expanding its portfolio in areas such as AI and generative AI, cybersecurity, cloud, and IT services.
Market Expansion: CGI completed 3 acquisitions: BJSS, Novatec, and Momentum Technologies, enhancing its presence in the U.K., Germany, Spain, and Quebec City. An exclusivity agreement to acquire Apside is expected to close in June, adding over 2,500 professionals.
Client Engagements: Notable client wins include a USD 524 million engagement with the state of California for payroll and HR systems modernization, and a contract with the European Space Agency for AI solutions.
Operational Efficiencies: Managed services bookings exceeded $5 billion, up 21% year-over-year, indicating strong demand for operational efficiencies.
Strategic Shifts: CGI is increasing the scope of its restructuring program, targeting operations in Continental Europe, with expected costs of $137 million.
Market Environment Risks: Clients are navigating a fast-changing and challenging business environment, influenced by macroeconomic and geopolitical dynamics, particularly related to tariffs.
Regulatory Risks: CGI Federal's operations are closely tied to U.S. government initiatives, which may be subject to changes in administration priorities and regulations.
Operational Risks: The company is increasing the scope of its restructuring program, particularly in Continental Europe, which may impact employee morale and operational efficiency.
Supply Chain Challenges: Recent business acquisitions have led to integration challenges, which could affect operational performance and profitability.
Economic Factors: Softer market conditions in Europe, particularly in the manufacturing sector, may hinder growth and profitability.
Client Spending Caution: Clients are exhibiting strategic caution in their spending, which may affect CGI's revenue growth and project bookings.
Legacy System Complexity: Complexity of legacy systems is slowing the adoption of emerging technologies, limiting measurable outcomes for clients.
Revenue Growth: In Q2, CGI delivered $4 billion of revenue, up 7.6% year-over-year, driven by recent business acquisitions.
Acquisitions: CGI completed 3 acquisitions in Q2: BJSS, Novatec, and Momentum Technologies, expanding its presence in key markets.
Investment in AI: CGI invested $100 million into AI and generative AI to drive future growth.
Restructuring Program: CGI increased the scope of its restructuring program, incurring $44 million in costs with an expected additional $137 million.
Capital Allocation Strategy: CGI's capital allocation priorities focus on investing back into the business and pursuing accretive acquisitions.
Future Revenue Expectations: For the first half of 2025, revenue was up 6.3% year-over-year, with expectations of continued strong demand for digital transformation.
Profitability Outlook: Adjusted EBIT for the first half of 2025 was $1.28 billion, with a focus on maintaining margins amid restructuring costs.
Bookings: CGI ended the first half with bookings of $8.6 billion, indicating strong demand for managed services and IP solutions.
Tax Rate Guidance: CGI expects its effective tax rate for future quarters to be in the range of 25.5% to 26.5%.
Cash Flow Expectations: Trailing 12-month cash from operations totaled over $2.2 billion, indicating strong operational cash generation.
Quarterly Cash Dividend: $0.15 per share, payable on June 20, 2025, to shareholders of record as of May 16, 2025.
Total Returned to Shareholders via Dividend Program: $34 million in Q2 2025.
Total Returned to Shareholders via Dividend Program (First Half 2025): $68 million.
Share Repurchase Investment in Q2 2025: $345 million.
Total Share Repurchase Investment (First Half 2025): $498 million.
The earnings call reflects a positive sentiment with strong financial performance, including a 29% increase in net income and growth across all segments. The Q&A highlights optimism about synergies from the RF Capital acquisition and confidence in achieving accretion sooner than expected. Although there are concerns about investment income reduction and unclear management responses, the overall outlook remains positive with favorable acquisition strategies, strong core earnings, and a robust dividend payout ratio.
The earnings call summary and Q&A indicate strong demand in AI services, growing pipelines in managed services and SI&C, and strategic M&A activities. Positive trends in revenue per employee and client spending, combined with a focus on AI and automation, suggest a favorable outlook. Concerns about the federal sector and management's vague responses on growth specifics are noted but outweighed by overall positive developments. No drastic negative factors were present, supporting a positive sentiment.
The earnings call reveals strong financial performance, strategic growth through acquisitions, and a positive outlook on AI investments and partnerships. Despite challenges in separating organic from acquisition growth and some regional headwinds, CGI's focus on modernization and client-centric approach is promising. The Q&A session highlights optimism in partnerships and AI as competitive advantages, with ongoing share buybacks adding further investor confidence. Overall, the sentiment leans positive, with expectations of continued growth and strategic investments driving stock price upwards.
The earnings call shows a mixed picture: strong financial metrics with record bookings and revenue growth, but concerns over restructuring costs and lack of guidance. The Q&A reveals uncertainties in U.S. Federal contracts and capital allocation. While acquisitions are performing well, the lack of detailed guidance and restructuring impacts create uncertainty. The positive aspects like share repurchases and dividend returns are offset by these concerns, leading to a neutral sentiment.
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