CGI Group (($TSE:GIB.A)) has held its Q1 earnings call. Read on for the main highlights of the call.
Invest with Confidence:
- Follow TipRanks' Top Wall Street Analysts to uncover their success rate and average return.
- Join thousands of data-driven investors – Build your Smart Portfolio for personalized insights.
During CGI Group’s latest earnings call, the overall sentiment was positive, reflecting significant growth in revenue and profitability metrics. The company highlighted strategic acquisitions and high client satisfaction as key areas of success. However, challenges in the European market and a decline in IP revenue were noted as areas of concern.
Revenue and Growth
CGI reported a robust revenue of CAD3.8 billion, marking a 5.1% increase year-over-year, or 2.7% in constant currency. The company saw strong growth in its U.S. federal segment at 14%, Canada at 5.9%, and the Asia-Pacific region at 5.2%, with the U.K. and Australia contributing 3.2% growth.
Book-to-Bill Ratio
The company’s bookings reached CAD4.2 billion, resulting in a book-to-bill ratio of 110%. Both North America and Europe maintained this ratio, indicating stable demand for CGI’s services.
Profitability Metrics
Earnings before income taxes were CAD592 million, reflecting a margin of 15.6%, up by 100 basis points from the previous year. The adjusted EBIT stood at CAD612 million, with a margin of 16.2%, showcasing improved profitability.
Net Earnings and EPS
Net earnings rose to CAD439 million for a margin of 11.6%, an increase of 80 basis points year-over-year. The diluted EPS saw a 15% increase, reaching CAD1.92, highlighting CGI’s strong financial performance.
Cash from Operations
Cash from operations was reported at CAD646 million, representing 17.1% of total revenue. Over the past 12 months, the company generated nearly CAD2.3 billion, an increase of almost CAD200 million compared to the previous year.
Strategic Acquisitions
CGI expanded its market presence through strategic acquisitions, including Daugherty in the U.S. and an agreement to acquire BJSS in the U.K., aimed at strengthening its footprint in key markets and industries.
Strong Client Satisfaction
Client satisfaction levels reached an impressive 9.5 out of 10, with a strong intention from clients to continue engaging CGI in future projects, underscoring the company’s commitment to quality and service excellence.
European Market Challenges
The European operations faced a decline of 0.8% year-over-year, largely due to sluggish market conditions in Germany and France and continued softness in the manufacturing sector, posing challenges to growth.
IP Revenue Decline
IP revenue constituted 21.6% of total revenue, declining by 40 basis points year-over-year, attributed to the impact of recent business acquisitions.
Costs and Utilization Issues in Europe
CGI incurred CAD8 million in costs during Q1 to adjust its cost structure in response to market conditions in Germany, with plans to incur an additional CAD42 million by Q3.
Guidance and Future Outlook
Looking ahead, CGI remains optimistic about its growth trajectory, with CAD3.8 billion in revenue and a book-to-bill ratio of 110%, supported by a CAD29.8 billion global backlog. The company continues to focus on strategic growth, including investments in AI technologies and managed services, despite challenges in the European market.
In conclusion, CGI’s latest earnings call highlighted a generally positive outlook, with significant growth in revenue and profitability, strategic acquisitions, and high client satisfaction. While challenges in the European market and declining IP revenue pose concerns, the company’s strong performance and future plans suggest continued success.
