UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2024

Commission File Number 000-29716

 

 

CGI INC.

(Translation of registrant’s name into English)

 

 

1350 René-Lévesque Boulevard West

25th Floor

Montreal, Quebec

Canada H3G 1T4

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

☐ Form 20-F ☒ Form 40-F

 

 

 

INCORPORATION BY REFERENCE

Exhibits 99.1, 99.2 and 99.4 to this Form 6-K shall be deemed incorporated by reference in the Registrant’s Registration Statements on Form S-8, Reg. Nos. 333-197742, 333-220741, 333-261831 and 333-261832.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

     CGI INC.
     (Registrant)
Date: November 6, 2024   By:  

 /s/ Benoit Dubé

     Name:   Benoit Dubé
     Title:   Executive Vice-President,
      Legal and Economic Affairs, and
      Corporate Secretary
Table of Contents

Exhibit 99.1

 

LOGO

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

November 6, 2024

BASIS OF PRESENTATION

This Management’s Discussion and Analysis of the Financial Position and Results of Operations (MD&A) is a responsibility of management and has been reviewed and approved by the Board of Directors. This MD&A has been prepared in accordance with the rules and regulations of the Canadian Securities Administrators. The Board of Directors is ultimately responsible for reviewing and approving the MD&A. The Board of Directors carries out this responsibility mainly through its Audit and Risk Management Committee, which is appointed by the Board of Directors and is comprised entirely of independent and financially literate directors.

Throughout this document, CGI Inc. is referred to as “CGI”, “we”, “us”, “our” or “Company”. This MD&A provides information management believes is relevant to an assessment and understanding of the consolidated results of operations and financial condition of the Company. This document should be read in conjunction with the audited consolidated financial statements and the notes thereto for the years ended September 30, 2024 and 2023. CGI’s accounting policies are in accordance with International Financial Reporting Standards (IFRS Accounting Standards) as issued by the International Accounting Standards Board (IASB). All dollar amounts are in Canadian dollars unless otherwise noted.

MATERIALITY OF DISCLOSURES

This MD&A includes information we believe is material to investors. We consider something to be material if it results in, or would reasonably be expected to result in, a significant change in the market price or value of our shares, or if it is likely that a reasonable investor would consider the information to be important in making an investment decision.

FORWARD-LOOKING STATEMENTS

This MD&A contains “forward-looking information” within the meaning of Canadian securities laws and “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other applicable United States safe harbours. All such forward-looking information and statements are made and disclosed in reliance upon the safe harbour provisions of applicable Canadian and United States securities laws. Forward-looking information and statements include all information and statements regarding CGI’s intentions, plans, expectations, beliefs, objectives, future performance, and strategy, as well as any other information or statements that relate to future events or circumstances and which do not directly and exclusively relate to historical facts. Forward-looking information and statements often but not always use words such as “believe”, “estimate”, “expect”, “intend”, “anticipate”, “foresee”, “plan”, “predict”, “project”, “aim”, “seek”, “strive”, “potential”, “continue”, “target”, “may”, “might”, “could”, “should”, and similar expressions and variations thereof. These information and statements are based on our perception of historic trends, current conditions and expected future developments, as well as other assumptions, both general and specific, that we believe are appropriate in the circumstances. Such information and statements are, however, by their very nature, subject to inherent risks and uncertainties, of which many are beyond the control of the Company, and which give rise to the possibility that actual results could differ materially from our expectations expressed in, or implied by, such forward-looking information or forward-looking statements. These risks and uncertainties include but are not restricted to: risks related to the market such as the level of business activity of our clients, which is affected by economic and political conditions, additional external risks (such as pandemics, armed conflict, climate-related issues and inflation) and our ability to negotiate new contracts; risks related to our industry such as competition and our ability to develop and expand our services to address emerging business demands and technology trends (such as artificial intelligence), to penetrate new markets, and to protect our intellectual property rights; risks related to our business such as risks associated with our growth strategy, including the integration of new operations, financial and operational risks inherent in worldwide operations, foreign exchange risks, income tax laws and other tax programs, the termination, modification, delay or suspension of our contractual agreements, our expectations regarding future revenue resulting from bookings and backlog, our ability to attract and retain qualified employees, to negotiate favourable contractual terms, to deliver our services and to collect receivables, to disclose, manage and implement environmental, social and governance (ESG) initiatives and standards, and to achieve ESG commitments and targets, including without limitation, our commitment to net-zero carbon emissions, as well as the reputational and financial risks attendant to cybersecurity breaches and other incidents, including through the use of artificial intelligence, and financial risks such as liquidity needs and requirements, maintenance of financial ratios, our ability to

 

© 2024 CGI Inc.    Page 1

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

declare and pay dividends, interest rate fluctuations and changes in creditworthiness and credit ratings; as well as other risks identified or incorporated by reference in this MD&A and in other documents that we make public, including our filings with the Canadian Securities Administrators (on SEDAR+ at www.sedarplus.ca) and the U.S. Securities and Exchange Commission (on EDGAR at www.sec.gov). Unless otherwise stated, the forward-looking information and statements contained in this MD&A are made as of the date hereof and CGI disclaims any intention or obligation to publicly update or revise any forward-looking information or forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. While we believe that our assumptions on which these forward-looking information and forward-looking statements are based were reasonable as at the date of this MD&A, readers are cautioned not to place undue reliance on these forward-looking information or statements. Furthermore, readers are reminded that forward-looking information and statements are presented for the sole purpose of assisting investors and others in understanding our objectives, strategic priorities and business outlook as well as our anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes. Further information on the risks that could cause our actual results to differ significantly from our current expectations may be found in section 10—Risk Environment, which is incorporated by reference in this cautionary statement. We also caution readers that the risks described in the previously mentioned section and in other sections of this MD&A are not the only ones that could affect us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial could also have a material adverse effect on our financial position, financial performance, cash flows, business or reputation.

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

KEY PERFORMANCE MEASURES

The reader should note that the Company reports its financial results in accordance with IFRS Accounting Standards. However, we use a combination of GAAP, non-GAAP and supplementary financial measures and ratios to assess the Company’s performance. The non-GAAP measures used in this MD&A do not have any standardized meaning prescribed by IFRS Accounting Standards and are therefore unlikely to be comparable to similar measures presented by other issuers. These measures should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with IFRS Accounting Standards.

The table below summarizes our most relevant key performance measures:

 

Growth  

Revenue prior to foreign currency impact (non-GAAP) – is a measure of revenue before foreign currency translation impacts. This is calculated by translating current period results in local currency using the conversion rates in the equivalent period from the prior year. Given that we have a strong presence globally and are affected by most major international currencies, management believes that it is helpful to adjust revenue to exclude the impact of currency fluctuations to facilitate period-to-period comparisons of business performance and that this measure is useful for investors for the same reason. A reconciliation of the revenue prior to foreign currency impact to its closest IFRS Accounting Standards measure can be found in sections 3.4. and 5.4. of the present document.

   
    Constant currency revenue growth (non-GAAP) – is a measure of revenue growth before foreign currency translation impacts. This is calculated by translating current period results in local currency using the conversion rates in the equivalent period from the prior year. Management believes its use of this measure is helpful for investors to facilitate period-to-period comparisons of our business growth.
   
    Bookings – are new binding contractual agreements including wins, extensions and renewals. In addition, our bookings are comprised of committed spend and estimates from management that are subject to change, including demand-driven usage, such as volume-based and time and material contracts, as well as price indexation and option years. Management evaluates factors such as prices and past history to support its estimates. Management believes that it is a key indicator of the volume of our business over time and potential future revenue and that it is useful trend information to investors for the same reason. Information regarding our bookings is not comparable to, nor should it be substituted for, an analysis of our revenue. Additional information on bookings can be found in sections 3.1. and 5.1. of the present document.
   
    Backlog – includes bookings, backlog acquired through business acquisitions, backlog consumed during the period as a result of client work performed as well as the impact of foreign currencies to our existing contracts. Backlog incorporates estimates from management that are subject to change and are mainly driven from bookings. Backlog is adjusted when there are reductions in contractual commitments, resulting from client decisions, such as contract terminations. Management tracks this measure as it is a key indicator of our best estimate of contracted revenue to be realized in the future and believes that this measure is useful trend information to investors for the same reason.
   
    Book-to-bill ratio – is a measure of the proportion of the value of our bookings to our revenue in the quarter. This metric allows management to monitor the Company’s business development efforts during the quarter to grow our backlog and our business over time and management believes that this measure is useful for investors for the same reason.
   
    Book-to-bill ratio trailing twelve months – is a measure of the proportion of the value of our bookings to our revenue over the last trailing twelve-month period as management believes that monitoring the Company’s bookings over a longer period is a more representative measure as the services and contract type, size and timing of bookings could cause this measurement to fluctuate significantly if taken for only a three-month period and as such is useful for investors for the same reason. Management’s objective is to maintain a target ratio greater than 100% over a trailing twelve-month period.

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

Profitability   Specific items – include acquisition-related and integration costs and the cost optimization program. Acquisition-related costs mainly include third-party professional fees incurred to close acquisitions. Integration costs are mainly comprised of expenses due to redundancy of employment and contractual agreements, cancellation of acquired leased premises and costs related to the integration towards the CGI operating model. The cost optimization program mainly includes costs related to termination of employment and vacated leased premises.
   
    Earnings before income taxes – is a measure of earnings generated for shareholders before income taxes.
   
    Earnings before income taxes margin – is obtained by dividing our earnings before income taxes by our revenues. Management believes a percentage of revenue measure is meaningful for better comparability from period-to-period.
   
    Adjusted EBIT (non-GAAP) – is a measure of earnings excluding specific items, net finance costs and income tax expense. Management believes its use of this measure, which excludes items that are non-related to day-to-day operations, such as the impact of specific items, capital structure and income taxes, is helpful to investors to better evaluate the Company’s core operating performance. This measure also allows for better comparability from period-to-period and trend analysis. A reconciliation of the adjusted EBIT to its closest IFRS Accounting Standard measure can be found in sections 3.6. and 5.6. of the present document.
   
    Adjusted EBIT margin (non-GAAP) – is obtained by dividing our adjusted EBIT by our revenues. Management believes its use of this measure, which evaluates our core operating performance before specific items, capital structure and income taxes when compared to our revenues, is relevant to investors for better comparability from period-to-period. This measure demonstrates the Company’s ability to grow in a cost-effective manner, executing on our Build and Buy strategy. A reconciliation of the adjusted EBIT to its closest IFRS Accounting Standards measure can be found in sections 3.6. and 5.6. of the present document.
   
    Net earnings – is a measure of earnings generated for shareholders.
   
    Net earnings margin – is obtained by dividing our net earnings by our revenues. Management believes a percentage of revenue measure is meaningful for better comparability from period-to-period.
   
    Diluted earnings per share (diluted EPS) – is a measure of net earnings generated for shareholders on a per share basis, assuming all dilutive elements are exercised. See note 21 of our audited consolidated financial statements for additional information on earnings per share.
   
   

Net earnings excluding specific items (non-GAAP) – is a measure of net earnings excluding acquisition-related and integration costs and the cost optimization program. Management believes its use of this measure best demonstrates to investors the net earnings generated from our day-to-day operations by excluding specific items, for better comparability from period-to-period. A reconciliation of the net earnings excluding specific items to its closest IFRS Accounting Standards measure can be found in sections 3.8.3. and 5.6.1. of the present document.

   
    Net earnings margin excluding specific items (non-GAAP) – is obtained by dividing our net earnings excluding specific items by our revenues. Management believes its use of this measure, which evaluates our core operating performance when compared to our revenues, is relevant to investors to assess their returns and for better comparability from period-to-period. This measure demonstrates the Company’s ability to grow in a cost-effective manner, executing on our Build and Buy strategy. A reconciliation of the net earnings excluding specific items to its closest IFRS Accounting Standards measure can be found in sections 3.8.3. and 5.6.1. of the present document.

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

    Diluted earnings per share excluding specific items (non-GAAP) – is defined as the net earnings excluding specific items on a per share basis. Management believes its use of this measure is useful for investors as excluding specific items best reflects the Company’s ongoing operating performance on a per share basis and allows for better comparability from period-to-period. The diluted earnings per share reported in accordance with IFRS Accounting Standards can be found in sections 3.8. and 5.6. of the present document while the basic and diluted earnings per share excluding specific items can be found in sections 3.8.3. and 5.6.1. of the present document.
   
    Effective tax rate excluding specific items (non-GAAP) – is obtained by dividing our income tax expense by earnings before income taxes, before specific items. Management believes its use of this measure allows for better comparability from period-to-period of its effective tax rate on its operations, and is useful for investors for the same reason. A reconciliation of the effective tax rate excluding specific items to its closest IFRS Accounting Standards measure can be found in sections 3.8.3. and 5.6.1. of the present document.
Liquidity   Cash provided by operating activities – is a measure of cash generated from managing our day-to-day business operations. Management believes strong operating cash flow is indicative of financial flexibility, allowing us to execute the Company’s growth strategy.
   
    Cash provided by operating activities as a percentage of revenue – is obtained by dividing our cash provided by operating activities by our revenues. Management believes strong operating cash flow compared to our revenues is a key indicator of our financial flexibility to execute the Company’s growth strategy.
   
    Days sales outstanding (DSO) – is the average number of days needed to convert our trade receivables and work in progress into cash. DSO is obtained by subtracting deferred revenue from trade accounts receivable and work in progress; the result is divided by our most recent quarter’s revenue over 90 days. Management tracks this metric closely to ensure timely collection and healthy liquidity. Management believes that this measure is useful for investors as it demonstrates the Company’s ability to timely convert its trade receivables and work in progress into cash.
Capital Structure   Net debt (non-GAAP) – is obtained by subtracting from our debt and lease liabilities, our cash and cash equivalents, short-term investments, long-term investments and adjusting for fair value of foreign currency derivative financial instruments related to debt. Management believes its use of the net debt metric to monitor the Company’s financial leverage is useful for investors as it provides insight into its financial strength. A reconciliation of net debt to its closest IFRS Accounting Standards measure can be found in section 4.5. of the present document.
   
    Net debt to capitalization ratio (non-GAAP) – is a measure of our level of financial leverage and is obtained by dividing the net debt by the sum of shareholders’ equity and net debt. Management believes its use of the net debt to capitalization ratio is useful for investors as it monitors the proportion of debt versus capital used to finance the Company’s operations.
   
    Return on invested capital (ROIC) (non-GAAP) – is a measure of the Company’s efficiency at allocating the capital under its control to profitable investments and is calculated as the proportion of the net earnings excluding net finance costs after-tax for the last twelve months, over the last four quarters’ average invested capital, which is defined as the sum of shareholders’ equity and net debt. Management believes its use of this ratio is useful for investors as it assesses how well it is using its capital to generate returns.

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

REPORTING SEGMENTS

The Company is managed through the following nine operating segments: Western and Southern Europe (primarily France, Spain and Portugal); United States (U.S.) Commercial and State Government; Canada; U.S. Federal; Scandinavia and Central Europe (Germany, Sweden and Norway); United Kingdom (U.K.) and Australia; Finland, Poland and Baltics; Northwest and Central-East Europe (primarily Netherlands, Denmark and Czech Republic); and Asia Pacific Global Delivery Centers of Excellence (mainly India and Philippines) (Asia Pacific).

Effective October 1, 2023, as part of the Cost Optimization Program (see section 3.6.2. of the present document), the Company centralized some internal administrative activities under a corporate function, which were previously presented in revenue under the Asia Pacific segment. The Company has restated the Asia Pacific segmented information for the comparative period to conform with this change.

See sections 3.4., 3.7., 5.4. and 5.5. of the present document and to note 29 of our audited consolidated financial statements for additional information on our segments.

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

MD&A OBJECTIVES AND CONTENTS

In this document, we:

 

  ·   

Provide a narrative explanation of the audited consolidated financial statements through the eyes of management;

 

  ·   

Provide the context within which the audited consolidated financial statements should be analyzed, by giving enhanced disclosure about the dynamics and trends of the Company’s business; and

 

  ·   

Provide information to assist the reader in ascertaining the likelihood that past performance may be indicative of future performance.

In order to achieve these objectives, this MD&A is presented in the following main sections:

 

  Section

 

   

 

Contents

 

  

Pages 

 

   

1.  Corporate

Overview

    1.1.    About CGI   9
  

 

1.2.

   

 

Vision and Strategy

  

 

10

  

 

1.3.

   

 

Competitive Environment

  

 

12

   

2.  Highlights and Key

Performance

Measures

    2.1.    Selected Yearly Information and Key Performance Measures   13
  

 

2.2.

   

 

Stock Performance

  

 

14

  

 

2.3.

   

 

Investment in Subsidiaries

  

 

16

  

 

2.4.

   

 

Long-Term Issuer Credit Rating and Notes Issuance

  

 

16

   

3.  Financial Review

    3.1.    Bookings and Book-to-Bill Ratio   17
   
     3.2.    Foreign Exchange   18
   
     3.3.    Revenue Distribution   19
   
     3.4.    Revenue by Segment   20
   
     3.5.    Operating Expenses   23
   
     3.6.    Earnings Before Income Taxes   24
   
     3.7.    Adjusted EBIT by Segment   25
   
     3.8.    Net Earnings and Earnings Per Share   27
   

4.  Liquidity

    4.1.    Consolidated Statements of Cash Flows   29
  

 

4.2.

   

 

Capital Resources

  

 

33

  

 

4.3.

   

 

Contractual Obligations

  

 

33

  

 

4.4.

   

 

Financial Instruments and Hedging Transactions

  

 

33

  

 

4.5.

   

 

Selected Measures of Capital Resources and Liquidity

  

 

34

  

 

4.6.

   

 

Guarantees

  

 

35

  

 

4.7.

   

 

Capability to Deliver Results

  

 

35

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

  Section

 

   

 

Contents

 

   Pages 
   

5.  Fourth Quarter

Results

   

 

5.1.

   

 

Bookings and Book-to-Bill Ratio

   36
  

 

5.2.

   

 

Foreign Exchange

   37
  

 

5.3.

   

 

Revenue Distribution

   38
  

 

5.4.

   

 

Revenue by Segment

   39
  

 

5.5.

   

 

Adjusted EBIT by Segment

   42
  

 

5.6.

   

 

Net Earnings and Earnings Per Share

   44
  

 

5.7.

   

 

Consolidated Statements of Cash Flows

   46
   

6.  Eight Quarter Summary

 

    A summary of the past eight quarters’ key performance measures and a discussion of the factors that could impact our quarterly results

 

   48
   

7.  Changes in Accounting Policies

 

    A summary of accounting standards adopted and future accounting standard changes.

 

   50
   

8.  Critical Accounting Estimates

    A discussion of the critical accounting estimates made in the preparation of the audited consolidated financial statements.   52
   

9.  Integrity of Disclosure

   

 

A discussion of the existence of appropriate information systems, procedures and controls to ensure that information used internally and disclosed externally is complete and reliable.

   55
   

10.  Risk Environment

 

    10.1.

 

   

Risks and Uncertainties

   57
   10.2.    Legal Proceedings   70

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

1.  Corporate Overview

1.1. ABOUT CGI

Founded in 1976 and headquartered in Montréal, Canada, CGI is a leading IT and business consulting services firm with approximately 90,250 consultants and professionals worldwide. We use the power of technology to help clients accelerate their holistic digital transformation.

CGI has a people-centered culture, operating where our clients live and work to build trusted relationships and to advance our shared communities. Our consultants and professionals are committed to providing actionable insights that help clients achieve their business outcomes. CGI’s global delivery centers complement our proximity-based teams, offering clients added options that deliver scale, innovation and delivery excellence in every engagement.

End-to-end services and solutions

CGI delivers end-to-end services that help clients achieve the highest returns on their digital investments. We call this ROI-led digitization. Our insights-driven end-to-end services and solutions work together to help clients design, implement, run and operate the technology critical to achieving their business strategies. Our portfolio encompasses:

 

  i.

Business and strategic IT consulting, and systems integration services: CGI helps clients drive sustainable value in critical consulting areas, including strategy, organization and change management, core operations and technology. Within each of these areas, our consultants also deliver a broad range of business offerings to address client executives’ priorities, including designing and advancing strategies for the responsible use of artificial intelligence (AI), sustainable supply chain management, environmental, social and governance (ESG), mergers and acquisitions, and more. In the area of systems integration, we help clients accelerate the enterprise modernization of their legacy systems and adopt new technologies to drive innovation and deliver real-time and insight-driven customer and citizen services.

 

  ii.

Managed IT and business process services: Working as an extension of our clients’ organizations, we take on full or partial responsibility for managing their IT functions, freeing them up to focus on their strategic business direction. Our services enable clients to reinvest, alongside CGI, in the successful execution of their digital transformation roadmaps. We help them increase agility, scalability and resilience; deliver operational efficiencies, innovations and reduced costs; and embed security and data privacy controls. Typical services include: application development, modernization and maintenance; holistic enterprise digitization, automation, hybrid and cloud management; and business process services.

 

  iii.

Intellectual property (IP) business solutions: CGI’s portfolio of IP solutions are highly configurable “business platforms as a service” that are embedded within our end-to-end service offerings and utilize integrated security, data privacy practices, provider-neutral cloud approaches, and advanced AI capabilities to provide immediate benefits to clients. We invest in, and deliver, market-leading IP to drive business outcomes within each of our target industries. We also collaborate with clients to build and evolve IP-based solutions while enabling a higher degree of flexibility and customization for their unique modernization and digitization needs.

Deep industry and technology expertise

CGI has long-standing and focused practices in all of its core industries, providing clients with a partner that is not only an expert in IT, but also an expert in their respective industries. This combination of business knowledge and digital technology expertise allows us to help our clients navigate complex challenges and focus on value creation. In the process, we evolve the services and solutions we deliver within our targeted industries and provide thought leadership, blueprints, frameworks and technical accelerators that help client evolve their ecosystems.

Our targeted industries include financial services (including banking and insurance), government (including space), manufacturing, retail and distribution (including consumer services, transportation and logistics), communications and utilities (including energy and media), and health (including life sciences). To help orchestrate our global posture across these

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

industries, our leaders regularly participate in cabinet meetings and councils to advance the strategies, services and solutions we deliver to our clients.

Helping clients leverage technology to its fullest

Macro trends such as supply chain reconfiguration, climate change and energy transition, and demographic shifts including aging populations and talent shortages require new business models and ways of working. At the same time, technology is reshaping our future and creating new opportunities.

Accelerating digitization provides the inclusive, economically vibrant, and sustainable future our clients’ customers and citizens demand. Leveraging technology to its fullest helps clients to lead within their industries. Our end-to-end digital services, industry and technology expertise, and operational excellence combine to help clients advance their holistic digital transformation.

Through our proprietary Voice of Our Clients research, we analyzed the characteristics of leading digital organizations and found these common attributes:

 

  ·   

Strategic alignment and business agility: Digital leaders have highly agile business models to address digitization and are better at aligning and integrating business and IT operations to support and execute strategy.

 

  ·   

Digitization: They have mature strategies to leverage data and digitization to achieve business model resilience, are less challenged by legacy systems, and extend their digitization strategy to their external ecosystem.

 

  ·   

Data, automation and AI: They adopt a holistic data strategy for the enterprise and ecosystem and have a higher rate of being in progress with or having implemented both traditional and generative AI.

 

  ·   

Data privacy and protection: They produce greater results from their data privacy and protection strategy, which also extends to their external ecosystem. Their cybersecurity programs are highly mature in terms of connected assets.

Digital leaders across industries seek new ways to evolve their strategy and operational models and use technology and information to improve how they operate, deliver products and services, and create value.

CGI helps clients adopt leading digital attributes and design, manage, protect and evolve their digital value chains to accelerate business outcomes.

Quality processes

Our clients expect consistent service wherever and whenever they engage us. We have an outstanding track record of on-time, within-budget delivery as a result of our commitment to excellence and our robust governance model—CGI’s Management Foundation.

Our Management Foundation provides a common business language, frameworks and practices for managing operations consistently across the globe, driving continuous improvement. We also invest in rigorous quality and service delivery standards including the International Organization for Standardization (ISO) and Capability Maturity Model Integration (CMMI) certification programs, as well as a comprehensive Client Satisfaction Assessment Program, with signed client assessments, to ensure high satisfaction on an ongoing basis.

1.2. VISION AND STRATEGY

CGI is unique compared to most companies, as our vision is based on a dream: “To create an environment in which we enjoy working together and, as owners, contribute to building a company we can be proud of.” This dream has motivated us since our founding in 1976 and drives our vision: “To be a global, world-class end-to-end IT and business consulting services leader helping our clients succeed.”

In pursuing our dream and vision, CGI has been highly disciplined throughout its history in executing a Build and Buy profitable growth strategy comprised of four pillars that combine profitable organic growth (Build) and accretive acquisitions (Buy):

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

Pillar 1: Win, renew and extend contracts

Pillar 2: New large managed IT and business process services contracts

These first two pillars relate to driving profitable organic growth through the pursuit of contracts with new and existing clients in our targeted industries. As such, CGI engages with new and existing clients on four levers in our portfolio of end-to-end services and solutions: Business and Strategic IT Consulting, Systems Integration, Managed Services and IP-based services. Successes in these pillars reflect the strength of our end-to-end portfolio of capabilities, the depth of expertise of our consultants in business and IT, client satisfaction in our delivery excellence, and the appreciation of the proximity model by our clients, both existing and potential.

Pillar 3: Metro market acquisitions

Pillar 4: Large, transformational acquisitions

The third and fourth pillars focus on growth through accretive acquisitions. The third pillar for metro market acquisitions complements the proximity model and helps to provide a fuller range of end-to-end services. The fourth pillar for large transformational acquisitions helps to further expand our geographic footprint and reach the critical mass required to compete for large managed IT and business process services contracts and broaden our client relationships. Both the third and fourth pillars are supported by three levers. First, is our range of end-to-end services that allow us to consider a broad range of acquisitions. A second lever is CGI’s industry sector mix that helps us mirror the IT spend of each metro market over time. A final lever across pillars three and four focuses on IP-based services firms that offer consulting services and managed services that leverage their solutions.

CGI will continue to be a consolidator in the IT and business consulting services industry by being active across these four pillars.

Executing our strategy

CGI’s strategy is executed through a business model that combines client proximity with an extensive global delivery network to deliver the following benefits:

 

  ·   

Local relationships and accountability: We live and work near our clients to provide a high level of responsiveness, partnership, and innovation. Our local consultants and professionals speak our clients’ language, understand their business and industries, and collaborate to meet their goals and advance their business.

 

  ·   

Global reach: Our local presence is complemented by an expansive global delivery network that ensures our clients have 24/7 access to best-fit digital capabilities and resources to meet their end-to-end needs. In addition, clients benefit from our unique combination of industry domain and technology expertise within our global delivery model.

 

  ·   

Committed experts: Two of our key strategic goals are to be our clients’ partner and expert of choice. To achieve this, we invest in developing and recruiting professionals with extensive industry, business and in-demand technology expertise. Individually and collectively, each of our experts embody partnership behaviors in all they do by being consultative and building trusted relationships with each other, our clients, shareholders, and within our communities. In addition, a majority of consultants and professionals are also owners through our Share Purchase Plan, which, combined with the Profit Participation Plan, provide an added level of commitment to the success of our clients.

 

  ·   

Everyday innovation: Our approach to client engagements is to continuously bring forward actionable insights that support clients’ ROI-led digitization priorities. Through our client satisfaction program, we regularly assess the degree to which clients find that CGI introduced applicable innovation to the engagements we deliver for them, including through our ideas, processes, tools and offerings. We also scale innovative solutions co-created with clients through a global governance model.

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

  ·   

Comprehensive quality processes: CGI’s investment in quality frameworks and rigorous client satisfaction assessments has resulted in a consistent track record of on-time and within-budget project delivery. With regular reviews of engagements and transparency at all levels, the Company ensures that client objectives and its own quality objectives are consistently followed at all times. This thorough process enables CGI to generate continuous improvements for all stakeholders by applying corrective measures as soon as they are required.

 

  ·   

ESG strategy: At CGI, our ESG strategy is key to contributing to our strategic goal to be recognized by our stakeholders as an engaged, ethical and responsible corporate citizen within our communities. Our commitments align with the United Nations (UN) Global Compact’s 10 principles and the Science Based Target initiative (SBTi) and we are recognized by leading international indices, including EcoVadis, Carbon Disclosure Project (CDP) and Dow Jones Sustainability Indices (DJSI). We prioritize partnerships with clients, while also collaborating with educational institutions and local organizations, on three global priorities: people, communities and climate. We demonstrate our commitment to a sustainable world through projects delivered in collaboration with clients and through operating practices, supply chain management, and community service activities.

1.3. COMPETITIVE ENVIRONMENT

As market dynamics and industry trends continue to increase client demand for ROI-led digitization, CGI is well-positioned to serve as a digital partner and expert of choice. We work with clients across the globe to implement digital strategies, roadmaps and solutions that help clients transform the customer/citizen experience, drive the launch of new products and services, and deliver efficiencies and cost savings.

CGI’s competition is comprised of a variety of firms, from local companies providing specialized services and software, government pure-plays to global business consulting and IT services providers. All of these players are competing to deliver some or all of the services we provide.

Many factors distinguish the industry leaders, including the following:

 

  ·   

Depth and breadth of industry and technology expertise;

 

  ·   

Local presence and strength of client relationships;

 

  ·   

Extensive and flexible global delivery network, including onshore, nearshore and offshore options;

 

  ·   

Breadth of digital IP solutions;

 

  ·   

Total cost of services and value delivered;

 

  ·   

Ability to deliver practical innovation for measurable results; and

 

  ·   

Consistent on-time, within-budget delivery everywhere clients operate.

CGI is one of the leaders in the industry with respect to the combination of these factors. CGI is one of few firms with the scale, reach, and capabilities to meet clients’ enterprise business and technology needs.

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

2.

Highlights and Key Performance Measures

2.1. SELECTED YEARLY INFORMATION & KEY PERFORMANCE MEASURES

 

  As at and for the years ended September 30,    2024    2023    2022   

Change

2024 / 2023

   

Change

2023 / 2022

 

In millions of CAD unless otherwise noted

 

Growth

           

Revenue

    14,676.2    14,296.4    12,867.2    379.8    1,429.2
           

Year-over-year revenue growth

    2.7%    11.1%    6.1%          
           

Constant currency revenue growth

    0.9%    8.0%    10.5%          
           

Backlog1

    28,724    26,059    24,055    2,665    2,004
           

Bookings

    16,044    16,259    13,966    (215)    2,293
           

Book-to-bill ratio

    109.3%    113.7%    108.5%    (4.4%)    5.2%
           

Profitability

                         
           

Earnings before income taxes

    2,291.0    2,197.9    1,967.0    93.1    230.9
           

Earnings before income taxes margin

    15.6%    15.4%    15.3%    0.2%    0.1%
           

Adjusted EBIT2

    2,415.8    2,312.7    2,086.6    103.1    226.1
           

Adjusted EBIT margin

    16.5%    16.2%    16.2%    0.3%    —%
           

Net earnings

    1,692.7    1,631.2    1,466.1    61.5    165.1
           

Net earnings margin

    11.5%    11.4%    11.4%    0.1%    —%
           

Diluted EPS (in dollars)

    7.31    6.86    6.04    0.45    0.82
           

Net earnings excluding specific items2

    1,765.9    1,680.0    1,487.9    85.9    192.1
           

Net earnings margin excluding specific items

    12.0%    11.8%    11.6%    0.2%    0.2%
           

Diluted EPS excluding specific items (in dollars)2

    7.62    7.07    6.13    0.55    0.94
           

Liquidity

                         
           

Cash provided by operating activities

    2,205.0    2,112.2    1,865.0    92.8    247.2
           

As a percentage of revenue

    15.0%    14.8%    14.5%    0.2%    0.3%
           

Days sales outstanding

    41    44    49    (3)    (5)
           

Capital structure

                         
           

Long-term debt and lease liabilities3

    3,308.4    3,742.3    3,976.2    (433.9)    (233.9)
           

Net debt2

    1,819.8    2,134.6    2,946.9    (314.8)    (812.3)
           

Net debt to capitalization ratio

    16.2%    20.4%    28.8%    (4.2%)    (8.4%)
           

Return on invested capital

    16.0%    16.0%    15.7%    —%    0.3%
           

Balance sheet

                         
           

Cash and cash equivalents, and short-term investments

    1,464.4    1,575.6    972.6   

(111.2)

    603.0
           

Total assets

   

16,685.5

    15,799.5    15,175.4   

886.0

    624.1
           

Long-term financial liabilities4

    3,176.9    2,386.2    3,731.3    790.7    (1,345.1)

 

1 

Approximately $11.4 billion of our backlog as at September 30, 2024 is expected to be converted into revenue within the next twelve months, $9.3 billion within one to three years, $3.5 billion within three to five years and $4.5 billion in more than five years.

 

2 

See sections on Adjusted EBIT by Segment, Net Earnings and Earnings per Share Excluding Specific Items and Selected Measures of Capital Resources and Liquidity sections of each year’s respective MD&A for the reconciliation of non-GAAP financial measures.

 

3

Long-term debt and lease liabilities include both the current and long-term portions of the long-term debt and lease liabilities.

 

4

Long-term financial liabilities include the long-term portion of the debt, long-term portion of lease liabilities and the long-term derivative financial instruments.

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

2.2. STOCK PERFORMANCE

 

LOGO

2.2.1. Fiscal 2024 Trading Summary

CGI’s shares are listed on the Toronto Stock Exchange (TSX) (stock quote – GIB.A) and the New York Stock Exchange (NYSE) (stock quote – GIB) and are included in key indices such as the S&P/TSX 60 Index.

 

TSX   (CAD)     NYSE   (USD)
Open:   133.85     Open:   98.10
High:   160.40     High:   118.89
Low:   129.00     Low:   93.07
Close:   155.62     Close:   114.96
CDN average daily trading volumes1:   558,315     NYSE average daily trading volumes:   149,488

1 Includes the average daily volumes of both the TSX and alternative trading systems.

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

2.2.2. Normal Course Issuer Bid (NCIB)

On January 30, 2024, the Company’s Board of Directors authorized and subsequently received regulatory approval from the TSX for the renewal of its NCIB, which allows for the purchase for cancellation of up to 20,457,737 Class A subordinate voting shares (Class A Shares) representing 10% of the Company’s public float as of the close of business on January 23, 2024. Class A Shares may be purchased for cancellation under the NCIB commencing on February 6, 2024, until no later than February 5, 2025, or on such earlier date when the Company has either acquired the maximum number of Class A Shares allowable under the NCIB or elects to terminate the bid.

During the year ended September 30, 2024, the Company purchased for cancellation 6,528,608 Class A Shares for a total cash consideration of $925.2 million, at a weighted average price of $141.72 under the previous and current NCIB. The purchased shares included 1,674,930 Class A Shares purchased for cancellation on February 23, 2024 from the Founder and Executive Chairman of the Board of the Company, as well as a wholly-owned holding company, for a total cash consideration of $250.0 million, and 2,887,878 Class A Shares purchased for cancellation on May 27, 2024 from Caisse de dépôt et placement du Québec (CDPQ), for a total cash consideration of $400.0 million, both by way of private agreements. The repurchase transaction from the Founder and Executive Chairman of the Board of the Company was reviewed and recommended for approval by an independent committee of the Board of Directors of the Company following the receipt of an external opinion regarding the reasonableness of the financial terms of the transaction, and ultimately approved by the Board of Directors. The purchases were made pursuant to two exemption orders issued by the Autorité des marchés financiers and are considered within the annual aggregate limit that the Company is entitled to purchase under its current NCIB.

In addition, the Company paid for and cancelled 68,550 Class A Shares under the previous NCIB for a total consideration of $9.2 million, which were purchased but were neither paid nor cancelled as at September 30, 2023.

On June 20, 2024, the Canadian government enacted new legislation to implement tax measures on equity repurchased by public companies. The legislation requires a company to pay a 2.0% tax on the fair market value of their repurchased shares. This tax liability can be offset by the issuance of new equity during the relevant taxation year. The tax applies retroactively to repurchases and issuances of equity that occurred on or after January 1, 2024. As of September 30, 2024, the Company has complied with this new legislation, and recorded $13.6 million of accrued liabilities related to shares repurchased net of issuance of stock options, with a corresponding reduction to retained earnings.

As at September 30, 2024, the Company could purchase up to 14,803,829 Class A Shares for cancellation under its current NCIB.

2.2.3. Capital Stock and Options Outstanding

The following table provides a summary of the Capital Stock and Options Outstanding as at November 1, 2024:

 

 

 Capital Stock and Options Outstanding

 

   

 

 As at November 1, 2024

 

  
   

Class A subordinate voting shares

      203,856,403  
   

Class B shares (multiple voting)

      24,122,758  
   

Options to purchase Class A subordinate voting shares

      3,780,287  

2.2.4. Dividends

On November 5, 2024, the Company’s Board of Directors approved a quarterly cash dividend for holders of Class A Shares and Class B shares (multiple voting) of $0.15 per share. This dividend is payable on December 20, 2024 to shareholders of record as of the close of business on November 20, 2024. The dividend is designated as an “eligible dividend” for Canadian tax purposes.

Future dividends and the amounts will be at the discretion of the Board of Directors after taking into account the Company’s cash flow, earnings, financial position, market conditions and other factors the Board of Directors deems relevant, and will be communicated on a quarterly basis.

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

2.3. INVESTMENT IN SUBSIDIARIES

On October 10, 2023, the Company acquired Momentum Consulting Corp., an IT and business consulting firm specializing in digital transformation, data and analytics and managed services, based in the U.S. and headquartered in Miami, Florida for a total purchase price of $53.3 million. The acquisition added approximately 175 professionals to the Company.

On July 3, 2024, the Company acquired the assets of Celero Solutions’ credit union business, consisting of master services agreements that span managed services, core banking, digital banking and related IT services, based in Canada, for a total purchase price of $19.1 million. The acquisition added more than 150 professionals to the Company.

On September 13, 2024, the Company acquired Aeyon LLC (Aeyon), a digital transformation, data management and analytics, and intelligent automation services partner to the U.S. Federal Government, based in the U.S. and headquartered in Vienna, Virginia, for a total purchase price of $317.8 million. The acquisition added approximately 725 professionals to the Company.

The Company completed these acquisitions for a total purchase price of $390.2 million.

2.4. LONG-TERM ISSUER CREDIT RATING AND NOTES ISSUANCE

In July 2024, Moody’s Investors Service, Inc. (“Moody’s”) upgraded CGI’s issuer credit rating from Baa1 to A3. S&P Global Ratings (“S&P”) maintained CGI’s issuer credit rating at BBB+.

 

 

Rating Agency

 

   

 

Long-Term Issuer Credit Ratings 1,2

 

   

 

Outlook

 

Moody’s    A3    Stable
S&P    BBB+    Stable

 

1 

As at September 30, 2024.

 

2 

These credit ratings are not recommendations to buy, sell or hold any of the securities referred to, and they may be revised or withdrawn at any time by the assigning rating agency. Ratings are determined by the rating agencies based on criteria established from time to time by them, and they do not comment on market price or suitability for a particular investor.

Issuance of senior unsecured notes

On September 5, 2024, we issued $750.0 million in aggregate principal amount of senior unsecured notes, consisting of $300.0 million aggregate principal amount of 3-year notes and $450.0 million aggregate principal amount of 5-year notes, with the details below:

 

     

 

Notional Amount

 

   

 

Maturity

 

   

 

Coupon Rate

 

2024 3-year CAD Senior Notes1

    $300.0 million     September 7, 2027     3.987% 

2024 5-year CAD Senior Notes2

    $450.0 million     September 5, 2029     4.147% 

 

1 

Interest payable semi-annually on March 7 and on September 7 until maturity.

 

2 

Interest payable semi-annually on March 5 and on September 5 until maturity.

The aggregate net proceeds of the issuances, which were $747.1 million, were mainly used to repay existing indebtedness and for general corporate purposes. The existing indebtedness included senior unsecured notes, which matured on September 12, 2024, in the amount of US$350.0 million.

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

3.

Financial Review

3.1. BOOKINGS AND BOOK-TO-BILL RATIO

Bookings for the year were $16.0 billion representing a book-to-bill ratio of 109.3%. The breakdown of the new bookings signed during the year is as follows:

 

LOGO

Information regarding our bookings is a key indicator of the volume of our business over time. Additional information on bookings can be found in the Key Performance Measures section of the present document. The following table provides a summary of the bookings and book-to-bill ratio by segment:

 

 
   In thousands of CAD except for percentages          Bookings for the year
ended September  30, 2024		       Book-to-bill ratio for the year
ended September 30, 2024
     

Total CGI

        16,044,075     109.3%
     

Western and Southern Europe

        2,925,526     114.8%
     

U.S. Commercial and State Government

        2,565,279     99.8%
     

U.S. Federal

        2,279,672     113.4%
     

Canada

        2,277,135     102.9%
     

Scandinavia and Central Europe

        2,068,257     117.5%
     

U.K. and Australia

        2,053,642     114.5%
     

Finland, Poland and Baltics

        1,001,553     109.8%
     

Northwest and Central-East Europe

        873,011     100.6%

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

3.2. FOREIGN EXCHANGE

The Company operates globally and is exposed to changes in foreign currency rates. Accordingly, as prescribed by IFRS Accounting Standards, we measure assets, liabilities and transactions that are measured in foreign currencies using various exchange rates. We report all dollar amounts in Canadian dollars.

Closing foreign exchange rates

 

 As at September 30,      2024         2023         Change    
       

U.S. dollar

        1.3515          1.3538        (0.2%)   
       

Euro

        1.5064          1.4327            5.1%   
       

Indian rupee

            0.0161            0.0162        (0.6%)   
       

British pound

        1.8111          1.6530        9.6%   
       

Swedish krona

        0.1333          0.1243        7.2%   

Average foreign exchange rates

 

 For the years ended September 30,      2024         2023        Change   
       

U.S. dollar

        1.3609          1.3485        0.9%   
       

Euro

        1.4752          1.4399            2.5%   
       

Indian rupee

            0.0163            0.0164        (0.6%)   
       

British pound

        1.7253          1.6544        4.3%   
       

Swedish krona

        0.1291          0.1270        1.7%   

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

3.3. REVENUE DISTRIBUTION

The following charts provide additional information regarding our revenue mix for the year:

 

LOGO

3.3.1. Client Concentration

IFRS Accounting Standards guidance on segment disclosures defines a single customer as a group of entities that are known to the reporting entity to be under common control. As a consequence, our work for the U.S. federal government including its various agencies represented 13.6% of our revenue for Fiscal 2024 as compared to 13.5% for Fiscal 2023.

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

3.4. REVENUE BY SEGMENT

Our segments are reported based on where the client’s work is delivered from within our geographic delivery model.

The table below provides a summary of the year-over-year changes in our revenue, in total and by segment before eliminations, separately showing the impacts of foreign currency exchange rate variations between Fiscal 2024 and Fiscal 2023. The Fiscal 2023 revenues by segment were recorded reflecting the actual foreign exchange rates for that period. The foreign exchange impact is the difference between the current period’s actual results and the same period’s results converted with the prior year’s foreign exchange rates.

 

                                                                                   
 For the years ended September 30,        

Change

 

    2024       2023         $       %  
   
In thousands of CAD except for percentages              
         
Total CGI revenue      14,676,152        14,296,360        379,792        2.7 % 
         
Constant currency revenue growth      0.9%                             
         
Foreign currency impact      1.8%                             
         
Variation over previous period      2.7%                             
         
Western and Southern Europe                                    
         
Revenue prior to foreign currency impact      2,534,407        2,605,926        (71,519 )       (2.7 %) 
         
Foreign currency impact      65,791                             
         
Western and Southern Europe revenue      2,600,198        2,605,926        (5,728 )       (0.2 %) 
         
U.S. Commercial and State Government                                    
         
Revenue prior to foreign currency impact      2,304,734        2,277,996        26,738        1.2 % 
         
Foreign currency impact      22,575                             
         
U.S. Commercial and State Government revenue      2,327,309        2,277,996        49,313        2.2 % 
         
Canada                                    
         
Revenue prior to foreign currency impact      2,034,371        2,064,659        (30,288 )       (1.5 %) 
         
Foreign currency impact      624                             
         
Canada revenue      2,034,995        2,064,659        (29,664 )       (1.4 %) 
         
U.S. Federal                                    
         
Revenue prior to foreign currency impact      1,983,319        1,935,238        48,081        2.5 % 
         
Foreign currency impact      18,072                             
         
U.S. Federal revenue      2,001,391        1,935,238        66,153        3.4 % 
         
Scandinavia and Central Europe                                    
         
Revenue prior to foreign currency impact      1,626,723        1,648,356        (21,633 )       (1.3 %) 
         
Foreign currency impact      31,449                             
         
Scandinavia and Central Europe revenue      1,658,172        1,648,356        9,816        0.6 % 
         
U.K. and Australia revenue                                    
         
Revenue prior to foreign currency impact      1,519,748        1,455,529        64,219           4.4 % 
         
Foreign currency impact      65,085                             
         
U.K. and Australia revenue        1,584,833          1,455,529         129,304        8.9 % 
         
Finland, Poland and Baltics                                    
         
Revenue prior to foreign currency impact      834,674        828,951        5,723        0.7 % 
         
Foreign currency impact      24,589                             
         
Finland, Poland and Baltics revenue      859,263        828,951        30,312        3.7 % 

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

 For the years ended September 30,         Change
    2024       2023         $       %  
   
In thousands of CAD except for percentages              
         
Northwest and Central-East Europe                                    
         
Revenue prior to foreign currency impact      812,814        755,901        56,913        7.5 % 
         
Foreign currency impact      15,912                             
         
Northwest and Central-East Europe revenue        828,726           755,901           72,825           9.6 % 
         
Asia Pacific                                    
         
Revenue prior to foreign currency impact      959,311        904,038        55,273        6.1 % 
         
Foreign currency impact      (3,166 )                            
         
Asia Pacific revenue      956,145        904,038        52,107        5.8 % 
             
         
Eliminations      (174,880 )       (180,234 )       5,354        (3.0 %) 

For the year ended September 30, 2024, revenue was $14,676.2 million, an increase of $379.8 million or 2.7% over last year. On a constant currency basis, revenue increased by $128.8 million or 0.9%. The increase in revenue was mainly due to organic growth within the government, including higher IP-based revenues, and MRD vertical markets, as well as recent business acquisitions. This was partially offset by lower demand within the financial services and health vertical markets.

3.4.1. Western and Southern Europe

For the year ended September 30, 2024, revenue in the Western and Southern Europe segment was $2,600.2 million, a decrease of $5.7 million or 0.2% over last year. On a constant currency basis, revenue decreased by $71.5 million or 2.7%. The change in revenue was mainly due to lower demand within the financial services vertical market, as well as lower demand and successful completion of projects in the prior year within the MRD vertical market. This was partially offset by organic growth within the government vertical market and one more available day to bill.

On a client geographic basis, the top two Western and Southern Europe vertical markets were MRD and financial services, generating combined revenues of approximately $1,538 million for the year ended September 30, 2024.

3.4.2. U.S. Commercial and State Government

For the year ended September 30, 2024, revenue in the U.S. Commercial and State Government segment was $2,327.3 million, an increase of $49.3 million or 2.2% over last year. On a constant currency basis, revenue increased by $26.7 million or 1.2%. The increase in revenue was mainly due to organic growth within the government and MRD vertical markets, a recent business acquisition and one more available day to bill. This was partially offset by lower demand within the financial services and health vertical markets, the increased use of our Asia Pacific offshore delivery centers for client work, as well as lower IP license sales.

On a client geographic basis, the top two U.S. Commercial and State Government vertical markets were financial services and government, generating combined revenues of approximately $1,515 million for the year ended September 30, 2024.

3.4.3. Canada

For the year ended September 30, 2024, revenue in the Canada segment was $2,035.0 million, a decrease of $29.7 million or 1.4% over last year. On a constant currency basis, revenue decreased by $30.3 million or 1.5%. The change in revenue was mainly due to lower demand in the communications and utilities and financial services vertical markets. This was partially offset by a recent business acquisition within the financial services vertical market.

On a client geographic basis, the top two Canada vertical markets were financial services, and communications and utilities, generating combined revenues of approximately $1,372 million for the year ended September 30, 2024.

 

© 2024 CGI Inc.    Page 21

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

3.4.4. U.S. Federal

For the year ended September 30, 2024, revenue in the U.S. Federal segment was $2,001.4 million, an increase of $66.2 million or 3.4% over last year. On a constant currency basis, revenue increased by $48.1 million or 2.5%. The increase was mainly due to organic growth in managed services engagements and a recent business acquisition.

For the year ended September 30, 2024, $1,825.7 million of revenues within the U.S. Federal segment were federal civilian based.

3.4.5. Scandinavia and Central Europe

For the year ended September 30, 2024, revenue in the Scandinavia and Central Europe segment was $1,658.2 million, an increase of $9.8 million or 0.6% over last year. On a constant currency basis, revenue decreased by $21.6 million or 1.3%. The change in revenue was mainly due to lower demand within the communications and utilities and MRD vertical markets. This was partially offset by profitable organic growth within the government vertical market, including an increase in IP-based revenue.

On a client geographic basis, the top two Scandinavia and Central Europe vertical markets were MRD and government, generating combined revenues of approximately $1,217 million for the year ended September 30, 2024.

3.4.6. U.K. and Australia

For the year ended September 30, 2024, revenue in the U.K. and Australia segment was $1,584.8 million, an increase of $129.3 million or 8.9% over last year. On a constant currency basis, revenue increased by $64.2 million or 4.4%. The increase in revenue was mainly due to organic growth across most vertical markets, predominantly within the government vertical market.

On a client geographic basis, the top two U.K. and Australia vertical markets were government and communications and utilities, generating combined revenues of $1,354 million for the year ended September 30, 2024.

3.4.7. Finland, Poland and Baltics

For the year ended September 30, 2024, revenue in the Finland, Poland and Baltics segment was $859.3 million, an increase of $30.3 million or 3.7% over last year. On a constant currency basis, revenue increased by $5.7 million or 0.7%. The increase in revenue was mainly due to organic growth across most vertical markets. This was partially offset by the successful completion of IP integration projects in the prior year within the health vertical market.

On a client geographic basis, the top two Finland, Poland and Baltics vertical markets were financial services and government, generating combined revenues of approximately $501 million for the year ended September 30, 2024.

3.4.8. Northwest and Central-East Europe

For the year ended September 30, 2024, revenue in the Northwest and Central-East Europe segment was $828.7 million, an increase of $72.8 million or 9.6% over last year. On a constant currency basis, revenue increased by $56.9 million or 7.5%. The increase in revenue was mainly due to organic growth across most vertical markets, including an increase in IP-based revenue.

On a client geographic basis, the top two Northwest and Central-East Europe vertical markets were MRD and government, generating combined revenues of approximately $540 million for the year ended September 30, 2024.

3.4.9. Asia Pacific

For the year ended September 30, 2024, revenue in the Asia Pacific segment was $956.1 million, an increase of $52.1 million or 5.8% over last year. On a constant currency basis, revenue increased by $55.3 million or 6.1%. The increase in revenue was mainly due to the continued demand for our offshore delivery centers across most commercial vertical markets, including the ramp up of a new managed services contract within the MRD vertical market.

 

© 2024 CGI Inc.    Page 22

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

3.5. OPERATING EXPENSES

 

                                                                                                                 
 For the years ended September 30,                     Change
   2024     % of   
  revenue   		    2023       % of   
  revenue   		         $           %    
   
In thousands of CAD except for percentages                        
             
Costs of services, selling and administrative      12,259,730        83.5%        11,982,421        83.8%        277,309        (0.3%)  
             
Foreign exchange loss      653        —%        1,198        —%        (545 )       —%  

3.5.1. Costs of Services, Selling and Administrative

Costs of services include the costs of serving our clients, which mainly consist of salaries, net of tax credits, performance based compensation and other direct costs, including travel expenses. These also mainly include professional fees and other contracted labour costs, as well as hardware, software and delivery center related costs.

Costs of selling and administrative mainly include salaries, performance based compensation, office space, internal solutions, business development related costs such as travel expenses, and other administrative and management costs.

For the year ended September 30, 2024, costs of services, selling and administrative expenses amounted to $12,259.7 million, an increase of $277.3 million when compared to the same period last year. As a percentage of revenue, costs of services, selling and administrative expenses decreased to 83.5% from 83.8%.

As a percentage of revenue, costs of services increased compared to the same period last year, mainly due to higher employee medical costs and prior years adjustments for research & development (R&D) tax credits. This was partially offset by profitable organic growth within the government vertical market, including higher IP-based revenues.

As a percentage of revenue, costs of selling and administrative decreased compared to the same period last year, mainly due to savings generated from the Cost Optimization Program (see section 3.6.2. of the present document).

During the year ended September 30, 2024, the translation of the results of our foreign operations from their local currencies to the Canadian dollar unfavourably impacted costs by $197.5 million, which was offset by the favourable translation impact of $251.0 million on our revenue.

3.5.2. Foreign Exchange Loss

During the year ended September 30, 2024, CGI incurred $0.7 million of foreign exchange losses, mainly driven by the timing of payments combined with the volatility of foreign exchange rates. The Company, in addition to its natural hedges, uses derivatives as a strategy to manage its exposure, to the extent possible.

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

3.6. EARNINGS BEFORE INCOME TAXES

The following table provides a reconciliation between our earnings before income taxes, which is reported in accordance with IFRS Accounting Standards, and adjusted EBIT:

 

                                                                                                     
 For the years ended September 30,                     Change
   2024     % of   
  revenue   		    2023       % of   
  revenue   		         $           %    
             
In thousands of CAD except for percentage                                                      
             
Earnings before income taxes      2,290,951        15.6%        2,197,913        15.4%        93,038        0.2%  
             
Plus the following items:                                                      
             

Acquisition-related and integration costs

      5,866        —%        53,401        0.4%        (47,535)        (0.4%)  
             

Cost Optimization Program

      91,063        0.6%        8,964        0.1%        82,099        0.5%  
             

Net finance costs

      27,889        0.2%        52,463        0.4%        (24,574)        (0.2%)  
             

Adjusted EBIT

       2,415,769        16.5%         2,312,741        16.2%        103,028        0.3%  

3.6.1. Acquisition-Related and Integration Costs

During the year ended September 30, 2024, the Company incurred $5.9 million of acquisition-related and integration costs. These costs were acquisition-related costs related to professional fees of $2.4 million. Integration costs were related to costs of vacating leased premises of $0.9 million, costs of rationalizing the redundancy of employment of $0.7 million, and other integration costs towards the CGI operating model of $1.8 million.

During the year ended September 30, 2023, the Company incurred $53.4 million of integration costs. These costs were related to costs of vacating leased premises of $10.8 million, costs of rationalizing the redundancy of employment of $23.2 million, and other integration costs towards the CGI operating model of $19.4 million.

3.6.2. Cost Optimization Program

During the three months ended September 30, 2023, the Company initiated a cost optimization program (Cost Optimization Program) to accelerate actions to improve operational efficiencies, including the increased use of automation and global delivery, and to rightsize its global real estate portfolio.

As at March 31, 2024, the Company completed its Cost Optimization Program for a total cost of $100.0 million, of which $91.1 million was expensed during the year ended September 30, 2024. These amounts included costs for terminations of employment of $69.5 million and costs of vacating leased premises of $21.6 million.

For the year ended September 30, 2023, these costs were mainly related to vacating leased premises for $6.4 million and costs for terminations of employment for $2.6 million.

3.6.3. Net Finance Costs

Net finance costs mainly include interest on our long-term debt, lease liabilities and financial assets. For the year ended September 30, 2024, the net finance costs decreased by $24.6 million, mainly due to additional interest income from our financial assets and by the scheduled repayment in full in December 2023 of the unsecured committed term loan credit facility.

 

© 2024 CGI Inc.    Page 24

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

3.7. ADJUSTED EBIT BY SEGMENT

 

 For the years ended September 30,         Change
    2024       2023           $        %  
         

In thousands of CAD except for percentages

                    
         

Western and Southern Europe

      334,165        355,578        (21,413 )       (6.0 %) 
         

As a percentage of segment revenue

      12.9%        13.6%                    
         

U.S. Commercial and State Government

      337,325        339,410        (2,085 )       (0.6 %) 
         

As a percentage of segment revenue

      14.5%        14.9%                    
         

Canada

      463,171        477,502        (14,331 )       (3.0 %) 
         

As a percentage of segment revenue

      22.8%        23.1%                    
         

U.S. Federal

      322,698        306,362        16,336        5.3 % 
         

As a percentage of segment revenue

      16.1%        15.8%                    
         

Scandinavia and Central Europe

      150,913        127,320        23,593            18.5 % 
         

As a percentage of segment revenue

      9.1%        7.7%                    
         

U.K. and Australia

      251,662        216,517        35,145        16.2 % 
         

As a percentage of segment revenue

      15.9%        14.9%                    
         

Finland, Poland and Baltics

      133,437        110,583        22,854        20.7 % 
         

As a percentage of segment revenue

      15.5%        13.3%                    
         

Northwest and Central East-Europe

      129,277        101,871        27,406        26.9 % 
         

As a percentage of segment revenue

      15.6%        13.5%                    
         

Asia Pacific

      293,121        277,598        15,523        5.6 % 
         

As a percentage of segment revenue

      30.7%        30.7%                    
         

Adjusted EBIT

      2,415,769        2,312,741        103,028        4.5 % 
         

Adjusted EBIT margin

      16.5%        16.2%                    

For the year ended September 30, 2024, adjusted EBIT was $2,415.8 million, an increase of $103.0 million when compared to the last year. Adjusted EBIT margin increased to 16.5% from 16.2% when compared to last year. The increase in adjusted EBIT margin was mainly due to savings generated from the Cost Optimization Program and profitable organic growth within the government vertical market, including higher IP-based revenues. This was partially offset by higher employee medical costs and prior years adjustments for R&D tax credits.

3.7.1. Western and Southern Europe

For the year ended September 30, 2024, adjusted EBIT in the Western and Southern Europe segment was $334.2 million, a decrease of $21.4 million when compared to last year. Adjusted EBIT margin decreased to 12.9% from 13.6%. The change in adjusted EBIT margin was mainly due to prior years adjustments for R&D tax credits in France. This was partially offset by lower performance based compensation accruals and savings generated from the Cost Optimization Program.

3.7.2. U.S. Commercial and State Government

For the year ended September 30, 2024, adjusted EBIT in the U.S. Commercial and State Government segment was $337.3 million, a decrease of $2.1 million when compared to last year. Adjusted EBIT margin decreased to 14.5% from 14.9%. The change in adjusted EBIT margin was mainly due to higher employee medical costs, an impairment taken on a business solution and the impact of a favourable supplier contract settlement in the prior year. This was partially offset by profitable organic growth within most vertical markets, additional R&D tax credits and savings generated from the Cost Optimization Program.

 

© 2024 CGI Inc.    Page 25

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

3.7.3. Canada

For the year ended September 30, 2024, adjusted EBIT in the Canada segment was $463.2 million, a decrease of $14.3 million when compared to last year. Adjusted EBIT margin decreased to 22.8% from 23.1%. The change in adjusted EBIT margin was mainly due to lower utilization within the communications and utilities market and the temporary dilutive impact of a recent business acquisition within the financial services vertical market. This was partially offset by lower performance based compensation accruals and the savings generated from the Cost Optimization Program.

3.7.4. U.S. Federal

For the year ended September 30, 2024, adjusted EBIT in the U.S. Federal segment was $322.7 million, an increase of $16.3 million when compared to last year. Adjusted EBIT margin increased to 16.1% from 15.8%. The increase in adjusted EBIT margin was mainly due to savings generated from the Cost Optimization Program and additional tax credits. This was partially offset by higher employee medical costs.

3.7.5. Scandinavia and Central Europe

For the year ended September 30, 2024, adjusted EBIT in the Scandinavia and Central Europe segment was $150.9 million, an increase of $23.6 million when compared to last year. Adjusted EBIT margin increased to 9.1% from 7.7%. The increase in adjusted EBIT margin was mainly due to savings generated from the Cost Optimization Program, profitable organic growth within the government vertical market, including an increase in IP-based revenue, and lower performance based compensation accruals.

3.7.6. U.K. and Australia

For the year ended September 30, 2024, adjusted EBIT in the U.K. and Australia segment was $251.7 million, an increase of $35.1 million when compared to last year. Adjusted EBIT margin increased to 15.9% from 14.9%. The increase in adjusted EBIT margin was mainly due to profitable organic growth within the government and communication and utilities vertical markets, as well as savings generated from the Cost Optimization Program.

3.7.7. Finland, Poland and Baltics

For the year ended September 30, 2024, adjusted EBIT in the Finland, Poland and Baltics segment was $133.4 million, an increase of $22.9 million when compared to last year. Adjusted EBIT margin increased to 15.5% from 13.3%. The increase in adjusted EBIT margin was mainly due to profitable organic growth across most vertical markets, savings generated from the Cost Optimization Program and additional tax credits. This was partially offset by the successful completion of IP integration projects in the prior year within the health vertical market.

3.7.8. Northwest and Central-East Europe

For the year ended September 30, 2024, adjusted EBIT in the Northwest and Central-East Europe segment was $129.3 million, an increase of $27.4 million when compared to last year. Adjusted EBIT margin increased to 15.6% from 13.5%. The increase in adjusted EBIT margin was mainly due to profitable organic growth across most vertical markets and savings generated from the Cost Optimization Program.

3.7.9. Asia Pacific

For the year ended September 30, 2024, adjusted EBIT in the Asia Pacific segment was $293.1 million, an increase of $15.5 million when compared to last year. Adjusted EBIT margin remained stable at 30.7%.

 

© 2024 CGI Inc.    Page 26

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

3.8. NET EARNINGS AND EARNINGS PER SHARE

The following table sets out the information supporting the earnings per share calculations:

 

                                                                           

 For the years ended September 30,

 

          

Change

 

  
   2024      2023      $      %  
         

In thousands of CAD except for percentage and shares data

                                    
         

Earnings before income taxes

   

 

2,290,951 

 

   

 

2,197,913 

 

   

 

93,038 

 

   

 

  4.2% 

 

         

Income tax expense

   

 

598,236 

 

   

 

566,664 

 

   

 

31,572 

 

   

 

5.6% 

 

         

 

    Effective tax rate

   

 

26.1% 

 

   

 

25.8% 

 

                  
         

Net earnings

   

 

1,692,715 

 

   

 

1,631,249 

 

   

 

61,466 

 

   

 

3.8% 

 

         

    Net earnings margin

   

 

11.5% 

 

   

 

11.4% 

 

   

 

0.1% 

 

         
         

Weighted average number of shares outstanding

                                    
         

Class A subordinate voting shares and Class B shares (multiple voting) (basic)

   

 

228,074,108 

 

   

 

234,041,041 

 

   

 

(5,966,933) 

 

   

 

(2.5%) 

 

         

Class A subordinate voting shares and Class B shares (multiple voting) (diluted)

   

 

231,672,861 

 

   

 

237,702,081 

 

   

 

(6,029,220) 

 

   

 

(2.5%) 

 

         

Earnings per share (in dollars)

                     

 

         

 

   

 

           

 

         

Basic

   

 

7.42 

 

   

 

6.97 

 

   

 

0.45 

 

   

 

6.5% 

 

         

Diluted

   

 

7.31 

 

   

 

6.86 

 

   

 

0.45 

 

   

 

6.6% 

 

3.8.1. Income Tax Expense

For the year ended September 30, 2024, income tax expense was $598.2 million compared to $566.7 million last year and our effective tax rate increased to 26.1% from 25.8% last year. When excluding tax effects from acquisition-related and integration costs and the Cost Optimization Program, the effective tax rate increased to 26.0% from 25.7%. In both cases, the increase was mainly due to a higher statutory tax rate in the U.K. and lower tax-exempt R&D credits, partially offset by the change in profitability mix in certain geographies.

The table in section 3.8.3. shows the year-over-year comparison of the tax rate with the impact of specific items removed.

Based on the enacted rates at the end of Fiscal 2024 and our current profitability mix, we expect our effective tax rate before specific items to be in the range of 25.5% to 26.5% in subsequent periods.

3.8.2. Weighted Average Number of Shares Outstanding

For Fiscal 2024, CGI’s basic and diluted weighted average number of shares outstanding decreased compared to Fiscal 2023 due to the impact of the purchase for cancellation of Class A Shares, partially offset by the exercise of stock options. The table in section 3.8.3. shows the year-over-year comparison of the weighted average number of shares outstanding. See notes 19, 20 and 21 of our audited consolidated financial statements for additional information.

 

© 2024 CGI Inc.    Page 27

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

3.8.3. Net Earnings and Earnings per Share Excluding Specific Items

Below is a table showing the year-over-year comparison excluding specific items, namely acquisition-related and integration costs and the Cost Optimization Program.

 

                                                                           

 For the years ended September 30,

 

        

Change

 

  
   2024    2023      $      %
         
In thousands of CAD except for percentages and shares data                                    
         

Earnings before income taxes

      2,290,951         2,197,913         93,038         4.2%  
         

Add back:

                                    
         

Acquisition-related and integration costs

      5,866         53,401         (47,535)        (89.0%)  
         

Cost Optimization Program

      91,063         8,964         82,099         915.9%  
         

Earnings before income taxes excluding specific items

      2,387,880         2,260,278         127,602         5.6%  
         

Income tax expense

      598,236         566,664         31,572         5.6%  
         

Effective tax rate

      26.1%        25.8%                    
         

Add back:

   

 

           

 

   

 

           

 

   

 

             

 

   

 

           

 

         

Tax deduction on acquisition-related and integration costs

      763         11,336         (10,573)        (93.3%)  
         

Impact on effective tax rate

      —%        (0.1%)                    
         

Tax deduction on Cost Optimization Program

      22,956         2,240         20,716         924.8%  
         

Impact on effective tax rate

      (0.1%)        —%                    
         

Income tax expense excluding specific items

      621,955         580,240         41,715         7.2%  
         

Effective tax rate excluding specific items

      26.0%        25.7%                    
         

Net earnings excluding specific items

      1,765,925         1,680,038         85,887         5.1%  
         

Net earnings margin excluding specific items

      12.0%        11.8%                    
         

Weighted average number of shares outstanding

                                    
         

Class A subordinate voting shares and Class B shares (multiple voting) (basic)

      228,074,108         234,041,041         (5,966,933)        (2.5%)  
         

Class A subordinate voting shares and Class B shares (multiple voting) (diluted)

      231,672,861         237,702,081         (6,029,220)        (2.5%)  
         

Earnings per share excluding specific items (in dollars)

                                    
         

Basic

      7.74         7.18         0.56         7.8%  
         

Diluted

      7.62         7.07         0.55         7.8%  

 

© 2024 CGI Inc.    Page 28

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

4.

Liquidity

4.1. CONSOLIDATED STATEMENTS OF CASH FLOWS

CGI’s growth is financed through a combination of cash flow from operations, drawing on our unsecured committed revolving credit facility, the issuance of long-term debt, and the issuance of equity. One of our financial priorities is to maintain an optimal level of liquidity through the active management of our assets and liabilities as well as our cash flows.

As at September 30, 2024, cash and cash equivalents were $1,461.1 million. Cash included in funds held for clients was $233.6 million. The following table provides a summary of the generation and use of cash and cash equivalents for the years ended September 30, 2024 and 2023.

 

 For the years ended September 30,    2024      2023      Change  
       

 

In thousands of CAD

 

                           
       

 

Cash provided by operating activities

 

   

 

 

 

 

2,204,983 

 

 

 

 

   

 

 

 

 

2,112,249 

 

 

 

 

   

 

 

 

 

92,734 

 

 

 

 

       

 

Cash used in investing activities

 

   

 

 

 

 

(775,384) 

 

 

 

 

   

 

 

 

 

(561,858) 

 

 

 

 

   

 

 

 

 

(213,526) 

 

 

 

 

       

 

Cash used in financing activities

 

   

 

 

 

 

(1,607,657) 

 

 

 

 

   

 

 

 

 

(1,192,376) 

 

 

 

 

   

 

 

 

 

(415,281) 

 

 

 

 

       

 

Effect of foreign exchange rate changes on cash, cash equivalents and cash included in funds held for clients

 

   

 

 

 

 

34,704 

 

 

 

 

   

 

 

 

 

8,884 

 

 

 

 

   

 

 

 

 

25,820 

 

 

 

 

       
Net (decrease) increase in cash, cash equivalents and cash
included in funds held for clients		   

 

 

 

 

(143,354) 

 

 

 

 

   

 

 

 

 

366,899 

 

 

 

 

   

 

 

 

 

(510,253) 

 

 

 

 

 

© 2024 CGI Inc.    Page 29

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

4.1.1. Cash Provided by Operating Activities

For the year ended September 30, 2024, cash provided by operating activities was $2,205.0 million or 15.0% of revenue compared to $2,112.2 million or 14.8% of revenue for the same period last year.

For the year ended September 30, 2024, the cash provided by operating activities was mainly generated by earnings before amortization, depreciation and impairment and an improvement in our DSO. This was partially offset by the timing of tax instalment payments.

The following table provides a summary of the generation and use of cash from operating activities:

 

 
For the years ended September 30,    2024       2023      Change  
       

In thousands of CAD

                           
       

Net earnings

      1,692,715         1,631,249         61,466   
       

Amortization, depreciation and impairment

      536,859         519,648         17,211   
       

Deferred income tax recovery

      (146,100)         (109,496)         (36,604)   
       

Other adjustments1

      56,513         54,383         2,130   
    

 

 

     

 

 

     

 

 

  
       
Cash flow from operating activities before net change in non-cash working capital items and others      2,139,987         2,095,784         44,203   
       
Net change in non-cash working capital items and others:                           
       

Accounts receivable, work in progress and deferred revenue

      147,781         91,115         56,666   
       

Accounts payable and accrued liabilities, accrued compensation and employee-related liabilities, provisions and long-term liabilities

      27,408         (179,052)         206,460   
       

Income taxes

      (98,207)        105,577         (203,784)  
       

Others2

      (11,986)         (1,175)         (10,811)   
    

 

 

     

 

 

     

 

 

  
       
Net change in non-cash working capital items and others      64,996         16,465         48,531   
     

Cash provided by operating activities

      2,204,983         2,112,249         92,734   

 

1

Comprised of foreign exchange gain, share-based payment costs and gain on sale of property, plant and equipment and on lease terminations.

 

2

Comprised of prepaid expenses and other assets, long-term financial assets (excluding long-term receivables), derivative financial instruments and retirement benefits obligations.

The increase of $92.7 million from our cash provided by operating activities was mostly due to the timing of supplier payments, the earnings before amortization, depreciation and impairment and client collections. This was partially offset by the timing of tax instalment payments.

The timing of our working capital inflows and outflows will always have an impact on the cash flow from operations.

 

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

4.1.2. Cash Used in Investing Activities

For the year ended September 30, 2024, $775.4 million were used in investing activities while $561.9 million were used over last year.

The following table provides a summary of the use of cash from investing activities:

 

 
For the years ended September 30,    2024      2023      Change  
       
In thousands of CAD                           
       
Business acquisitions (net of cash acquired)         (380,313)         (13,039)            (367,274)   
       
Loan receivable      7,508            (15,846)         23,354   
       
Purchase of property, plant and equipment      (109,733)         (159,769)         50,036   
       
Proceeds from sale of property, plant and equipment      5,732         —         5,732   
       
Additions to contract costs      (97,059)         (102,082)         5,023   
       
Additions to intangible assets      (153,907)         (147,200)         (6,707)   
       
Net change in short-term and long-term investments      (47,612)         (123,922)         76,310   
       
Cash used in investing activities      (775,384)         (561,858)         (213,526)   

The increase of $213.5 million in cash used in investing activities during the year ended September 30, 2024 was mainly due to recent business acquisitions. This was partially offset by the net impact of proceeds and purchases of our funds held for clients’ investments, decreased investments in computer equipment and a loan receivable from the prior year.

 

© 2024 CGI Inc.    Page 31

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

4.1.3. Cash Used in Financing Activities

For the year ended September 30, 2024, $1,607.7 million were used in financing activities while $1,192.4 million were used over last year.

The following table provides a summary of the use of cash from financing activities:

 

 For the years ended September 30,    2024      2023      Change  
       
In thousands of CAD                           
       
Increase of long-term debt      747,073         948         746,125   
       
Repayment of long-term debt         (1,154,878)            (79,150)            (1,075,728)   
       
Settlement of derivative financial instruments      38,943         2,921         36,022   
       
Payment of lease liabilities      (146,762)         (161,211)         14,449   
       
Repayment of debt assumed from business acquisitions      (162,146)         (56,994)         (105,152)   
       
Purchase for cancellation of Class A subordinate voting shares      (934,765)         (788,020)         (146,745)   
       
Issuance of Class A subordinate voting shares      76,523         88,316         (11,793)   
       
Purchase of Class A subordinate voting shares held in trusts      (66,847)         (74,455)         7,608   
       
Withholding taxes remitted on the net settlement of performance share units      (15,407)         (13,879)         (1,528)   
       
Net change in clients’ funds obligations      10,609         (110,852)         121,461   
       
Cash used in financing activities      (1,607,657)         (1,192,376)         (415,281)   

The increase of $415.3 million in cash used in financing activities during the year ended September 30, 2024 was mainly driven by the scheduled repayments in full of the unsecured committed term loan credit facility in the amount of $670.4 million (US$500.0 million) and the senior unsecured notes in the amount of $475.8 million (US$350.0 million), by an increase in the settlement of Class A Shares purchased for cancellation and by the repayment of debt assumed from business acquisitions. This was partially offset by the issuance of senior unsecured notes for an amount of $747.1 million (see section 2.4. of the present document) and by the net change in clients’ funds obligations.

4.1.4. Effect of Foreign Exchange Rate Changes on Cash, Cash Equivalents and Cash Included in Funds Held for Clients

For the year ended September 30, 2024, the effect of foreign exchange rate changes on cash, cash equivalents and cash included in funds held for clients had a favourable impact of $34.7 million. This amount had no effect on net earnings as it was recorded in other comprehensive income.

 

© 2024 CGI Inc.    Page 32

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

4.2. CAPITAL RESOURCES

 

   
As at September 30, 2024     Available   
   
In thousands of CAD         
   
Cash and cash equivalents      1,461,145  
   
Short-term investments      3,279  
   
Long-term investments      24,209  
   
Unsecured committed revolving credit facility1      1,496,355  
   
Total2           2,984,988  

 

1 

As at September 30, 2024, letters of credit in the amount of $3.6 million were outstanding against the $1.5 billion unsecured committed revolving credit facility.

 

2

Excludes cash, term deposits and long-term bonds included in funds held for clients for $233.6 million, $50.0 million and $223.2 million, respectively.

As at September 30, 2024, cash and cash equivalents and investments represented $1,488.6 million.

Short-term and long-term investments include corporate bonds with maturities ranging from 91 days to five years, with a credit rating of A- or higher.

As at September 30, 2024, the aggregate amount of the capital resources available to the Company was $2,985.0 million.

As at September 30, 2024, the Company was in compliance with all of its restrictive covenants contained in its senior unsecured notes and its restrictive covenants and ratios contained in its unsecured committed revolving credit facility.

As at September 30, 2024, CGI was showing a positive working capital (total current assets minus total current liabilities) of $1,268.2 million. The Company also had $1,496.4 million available under its unsecured committed revolving credit facility and is generating a significant level of cash, which CGI’s management currently considers will allow the Company to fund its operations while maintaining adequate levels of liquidity.

The tax implications and impact related to the repatriation of cash will not materially affect the Company’s liquidity.

4.3. CONTRACTUAL OBLIGATIONS

We are committed under the terms of contractual obligations which have various expiration dates, primarily related to long-term debt and the rental of premises, computer equipment used in outsourcing contracts and long-term service agreements.

 

           
  Commitment type      Total        

Less than  

1 year  

     

 1 - 3 

 years 

     

 3 - 5 

 years 

     

 More than 

 5 years 

  
           
In thousands of CAD                                               
           
Long-term debt        2,703,694        999        1,111,677        1,050,167        540,851  
           
Estimated interest on long-term debt net of swaps        229,584        51,641        93,663        59,399        24,881  
           
Lease liabilities        620,095        150,252        223,428        150,460        95,955  
           
Estimated interest on lease liabilities        77,203        22,809        31,047        15,866        7,481  
           
Long-term service agreements        398,220        191,651        164,068        42,501        —  
           
Total1        4,028,796        417,352           1,623,883           1,318,393        669,168  

 

1 

Excludes clients’ funds obligations for an amount of $504.5 million payable in less than 1 year.

4.4. FINANCIAL INSTRUMENTS AND HEDGING TRANSACTIONS

We use various financial instruments to help us manage our exposure to fluctuations of foreign currency exchange rates and interest rates. See note 32 of our audited consolidated financial statements for additional information on our financial instruments and hedging transactions.

 

© 2024 CGI Inc.    Page 33

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

4.5. SELECTED MEASURES OF CAPITAL RESOURCES AND LIQUIDITY

 

   As at September 30,      2024           2023     
     
In thousands of CAD except for percentages                
     
Reconciliation between long-term debt and lease liabilities1 and net debt:                
     
Long-term debt and lease liabilities1     3,308,403        3,742,284   
     
Minus the following items:                
     

Cash and cash equivalents

     1,461,145        1,568,291   
     

Short-term investments

     3,279        7,332   
     

Long-term investments

     24,209        17,113   
     

Fair value of foreign currency derivative financial instruments related to debt

     —        14,904   
     
Net debt     1,819,770        2,134,644   
     
Net debt to capitalization ratio     16.2%        20.4%   
     
Return on invested capital     16.0%        16.0%   
     
Days sales outstanding     41        44   

 

1 

As at September 30, 2024, long-term debt and lease liabilities were $2,688.3 million ($3,100.3 million as at September 30, 2023) and $620.1 million ($642.0 million as at September 30, 2023), respectively, including their current portions.

During the year ended September 30, 2024, our long-term debt and lease liabilities decreased by $433.9 million mainly driven by the scheduled repayment in full of the unsecured committed term loan credit facility for an amount of $670.4 million (US$500.0 million) and the scheduled repayment of the senior unsecured notes for an amount of $475.8 million (US$350.0 million) partially offset by the issuance of senior unsecured notes for an amount of $747.1 million (see section 2.4. of the present document).

On October 30, 2024, the unsecured committed revolving credit facility was extended by one year to October 2029 and can be further extended. There were no material changes in the terms and conditions including interest rates and banking covenants.

We use the net debt to capitalization ratio as an indication of our financial leverage in order to realize our Build and Buy strategy (see section 1.2. of the present document for additional information on our Build and Buy strategy). The net debt to capitalization ratio decreased to 16.2% in Fiscal 2024 from 20.4% in Fiscal 2023 mostly due to our cash generation, partially offset by the repurchase of shares and business acquisitions during the last four quarters.

ROIC is a measure of the Company’s efficiency in allocating the capital under our control to profitable investments. The return on invested capital ratio remained stable at 16.0% in Fiscal 2024 when compared to the same period last year.

DSO decreased to 41 days at the end of Fiscal 2024 when compared to 44 days in Fiscal 2023. The decrease was mainly due to improved collections.

 

© 2024 CGI Inc.    Page 34

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

4.6. GUARANTEES

In the normal course of operations, we may enter into agreements to provide financial or performance assurances to third parties on the sale of assets, business divestitures and guarantees on government and commercial contracts.

In connection with sales of assets and business divestitures, the Company may be required to pay counterparties for costs and losses incurred as a result of breaches in our contractual obligations, including representations and warranties, intellectual property right infringement claims and litigation against counterparties, among others.

While some of the agreements specify a maximum potential exposure, others do not specify a maximum amount or a maturity date or survival period. It is not possible to reasonably estimate the maximum amount that may have to be paid under such guarantees. The amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time. No amount has been accrued in the consolidated balance sheets relating to this type of guarantee or indemnification as at September 30, 2024. The Company does not expect to incur any potential payment in connection with these guarantees that could have a material adverse effect on its audited consolidated financial statements.

In the normal course of business, we may provide certain clients, principally governmental entities, with bid and performance bonds. In general, we would only be liable for the amount of the bid bonds if we refuse to perform the project once we are awarded the bid. We would also be liable for the performance bonds in the event of a default in the performance of our obligations. As at September 30, 2024, we had committed a total of $49.4 million for these bonds. We have complied with our performance obligations under all service contracts for which there was a bid or performance bond in all material respects, and the ultimate liability, if any, incurred in connection with these guarantees would not have a material adverse effect on our consolidated results of operations or financial condition.

4.7. CAPABILITY TO DELIVER RESULTS

CGI’s management believes that the Company has sufficient capital resources to support ongoing business operations and execute our Build and Buy growth strategy. Our principal and most accretive uses of cash are: to invest in our business (procuring new large managed IT and business process services contracts and developing business and IP solutions); to pursue accretive acquisitions; to purchase for cancellation Class A Shares and pay down debt. In terms of financing, we are well positioned to continue executing our four-pillar growth strategy in Fiscal 2025.

To successfully implement the Company’s strategy, CGI relies on a strong leadership team, supported by highly knowledgeable consultants and professionals with relevant relationships and significant experience in both IT and our targeted industries. CGI fosters leadership development through the CGI Leadership Institute ensuring continuity and knowledge transfer across the organization. For key positions, a detailed succession plan is established and revised frequently.

As a Company built on human capital, the knowledge of our consultants and professionals are critical to delivering quality service to our clients. Our human resources program allows us to attract and retain the best talent as it provides competitive compensation and benefits, a favourable working environment, training programs and career development opportunities. Employee satisfaction is monitored annually through a Company-wide survey. In addition, a majority of our professionals are owners of CGI through our Share Purchase Plan, which, along with our Profit Participation Plan, allows them to share in the Company’s success, further aligning stakeholder interests.

In addition to capital resources and talent, CGI has established the Management Foundation, which encompasses governance policies, organizational models and sophisticated management frameworks for our business units and corporate processes. This robust governance model provides a common business language for managing all operations consistently across the globe, driving a focus on continuous improvement. CGI’s operations maintain appropriate certifications in accordance with service requirements such as ISO and CMMI certification programs.

 

© 2024 CGI Inc.    Page 35

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

5.

Fourth Quarter Results

5.1. BOOKINGS AND BOOK-TO-BILL RATIO

Bookings for the quarter ended September 30, 2024 were $3,822.6 billion representing a book-to-bill ratio of 104.4%. The breakdown of the new bookings signed during the quarter is as follows:

 

LOGO

The following table provides a summary of the bookings and book-to-bill ratio by segment:

 

 
   In thousands of CAD except for percentages          Bookings for the
three months  ended
September 30, 2024		          Bookings for the
year ended
September 30,  2024		     Book-to-bill ratio for
the year ended
September 30, 2024
       

Total CGI

        3,822,615          16,044,075     109.3%
       

Scandinavia and Central Europe

        861,475          2,068,257     117.5%
       

Canada

        711,206          2,277,135     102.9%
       

Western and Southern Europe

        571,014          2,925,526     114.8%
       

U.S. Federal

        498,983          2,279,672     113.4%
       

U.K. and Australia

        448,692          2,053,642     114.5%
       

U.S. Commercial and State Government

        378,950          2,565,279     99.8%
       

Northwest and Central-East Europe

        203,866          873,011     100.6%
       

Finland, Poland and Baltics

        148,429          1,001,553     109.8%

 

© 2024 CGI Inc.    Page 36

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Management’s Discussion and Analysis | For the years ended September 30, 2024 and 2023

 

 

 

 

5.2. FOREIGN EXCHANGE

The Company operates globally and is exposed to changes in foreign currency rates. Accordingly, as prescribed by IFRS Accounting Standards, we measure assets, liabilities and transactions that are measured in foreign currencies using various exchange rates. We report all dollar amounts in Canadian dollars.

Closing foreign exchange rates

 

 As at September 30,      2024         2023         Change    
       

U.S. dollar

        1.3515          1.3538        (0.2%)   
       

Euro

        1.5064          1.4327            5.1%    
       

Indian rupee

            0.0161            0.0162        (0.6%)   
       

British pound

        1.8111          1.6530        9.6%    
       

Swedish krona

        0.1333