CGI delivers robust Q4 results with $4 billion revenue, 16.6% margin, and strong future outlook driven by strategic AI initiatives.

OPERATOR - (00:00:00)

Results in accordance with International Financial Reporting Standards or ifrs. As always, we will also discuss non GAAP performance measures which should be viewed as supplemental. The MDA contains definitions of each one used in our reporting. All of the dollar figures expressed on this call. This call are Canadian unless otherwise noted. Now I'll turn the call over to. Steve, to review our Q4 financials and. Then Francois, will comment on our full year performance and business and market outlook.

Steve - (00:00:26)

Steve thank you Kevin and good day everyone. In our fourth quarter of fiscal 2025 we continue to demonstrate discipline in the management of our operation while effectively executing on our strategy of deploying capital to generate superior long term return on investment for our shareholders. This starts with our profitable SINC (Systems Integration and Consulting) offering that we grow organically and are with M&A. Second, to bring our managed services and IP offering to existing or new clients to help them be more efficient. This offering resonates strongly during this more challenging economic period. Finally, our strategy focused on investing in CGI with our share buyback program to increase our EPS while returning cash to our shareholders. In the quarter we delivered $4 billion of revenue up 9.7% year over year or up 5.5% when excluding the impact of foreign exchange. Growth was driven by our recent business acquisition and continued demand for our APAC delivery centers. With this segment reporting growth of 6%. There was also some planned runoff of lower margin work from recent acquisitions in our UK and Australia segment. With our acquisition of BJSS, growth was 28%. This acquisition adds further scale to our UK operations and we can now showcase the breadth of CGI's end to end services to new clients. Across our US segments. Combined growth was 5.7%, primarily driven by our Aeon and Doherty merger investments and our pipeline of opportunities continues to increase as we bring our managed services, IP and offshore delivery capabilities to our new client relationships. IP remains steady sequentially at 20.5% of our total revenue. Even as we add a larger proportion of non IP revenue from recent business acquisitions, the vast majority of our IP continues to be delivered through recurring revenue streams. Bookings in the quarter were close to $4.8 billion for a book to bill ratio of 119%, led by US federal at 185%, US commercial and state government at 136% and Western and Southern Europe at 117%. Of the total booking in the period, 45% were for new business on a trailing twelve month basis. Book to bill was 110% with North America at 120% and Europe at 102% on the same basis. Managed Services had a book to bill ratio of 120% and the SINC (Systems Integration and Consulting) book to bill ratio was 99%. IP book to bill was 107%. Our contracted backlog reached $31.5 billion or two times revenue. Turning to profitability, adjusted EBIT in The quarter was $667 million up 11.2% year over year for an industry leading margin of 16.6%, up 20 basis points including restructuring acquisition related costs of $122 million. Earnings before income taxes were $516 million for a margin of 12.2%. Our effective tax rate in the quarter was 26.1%, 30 basis points less than last year and we expect our tax rate for future quarters to be in the range of 26 to 27%. Adjusted net earnings were $472 million, up $33 million year over year for a margin of 11.8% on the same basis. Diluted EPS was $2.13, an accretion of 11% when compared to Q4 last year. Net earnings were $381 million for a margin of 9.5% and diluted EPS was $1.72. Impacted by restructuring and acquisition related costs in the quarter, we finalized our restructuring program and related expenses in the quarter. Turning to cash, we generated $663 million in our cash from operations, representing 16.5% of total revenue even when incorporating $43 million in restructuring, acquisition and related integration payments. DSO was 45 days in the quarter compared to 41 days in the prior year impacted by recent business acquisitions. In Q4, we continued to allocate our capital and invested $81 million back into our business, which includes strategic investments in Agentic and Genai, $250 million on business acquisitions, $491 million to buy back our stock and in addition we returned $33 million to our shareholders under our dividend program. Yesterday our Board of Directors approved a quarterly cash dividend of $0.17 per share representing a 13% increase. This dividend is payable on December 19, 2025 to shareholder of Records as of the close of business on November 21, 2025. With $2.4 billion in capital resources readily available and a net debt leverage ratio of 1, CGI has the balance sheet strength and capacity to deliver on our profitable growth strategy. CGI's capital allocation priorities have remained consistent, focused on investing back in the business and and pursuing accretive acquisitions. Additionally, we expect to remain very active in our repurchase program. Now I will turn the call over to Francois to further discuss insights on the year and the outlook for our business and markets.

Francois - (00:07:45)

Francois thank you Steve and Good morning everyone. CGI's strong performance in the quarter and in the year demonstrated our team's ability to execute with discipline in an environment that remained largely unchanged given the market dynamics on a year over year basis. Fiscal 2025 performance highlights where revenue increased 4.6% on a constant currency basis with managed services up 6% in constant currency in line with client demand, giving the challenging macroeconomic environment. EPS expanded 8.9% on an adjusted basis through a higher recurring revenue mix as well as proactive operational excellence actions. EPS accretion and share price growth are typically highly correlated, so we believe CGI stock is currently undervalued. Bookings were $17.6 billion, up $1.5 billion with full year book to bill ratios above 100% in both North America and in Europe on the strength of managed services, which were up 12% compared to last year, and cash from operations remained robust at $2.2 billion as a result of sustained quality delivery for clients. In fiscal 2025 we deployed over $3.7 billion and we plan to continue our aggressive use of capital and in 2026, specifically in fiscal 2025, we invested $368 million back into our business, which includes strategic investment in Agentic Engine AI, $1.8 billion on business acquisitions, $1.3 billion to buy back our stock, and we return $135 million to shareholders through dividend payments. As Steve indicated, our Board of directors approved a 13% dividend increase for Q1 2026. Our investments in the Buy strategy remain pivotal to our revenue growth as we closed five acquisitions in fiscal 2025, all accretive within the first year. We expect these mergers to drive future growth as we bring our full offering value proposition to to new clients. These mergers expanded our geographic footprint and our end to end offerings, including in key areas such as AI data, cloud and engineering. Subsequent to the end of the fiscal year, we announced an agreement to acquire Comarch, a leading IT company in Poland. Upon successful completion of the merger, which we will more than double our presence in Poland, we will incorporate new erp, IP solutions and digital transformation services. I would like to warmly welcome all new consultants who have or will join CGI from these mergers. Today I will highlight how CGI is positioned to lead in the next phase of digital transformation, particularly for the majority of our clients who are large enterprise, commercial and government organizations. We are partnering with them to simplify and orchestrate digital complexity in order to advance toward AI driven business transformation. For cgi, AI driven transformation amplifies what we do best, delivering trusted client outcomes faster and scale. In short, we refer to our positioning as being the AI-to-ROI partner for clients to bring this positioning to life. Every day our 94,000 CGI partners are using AI tooling to develop and manage systems jointly with clients. These clients partnerships are based on our operational experience and perspectives on the digital complexity that is a reality for clients. Every organization, every government and every industry runs on an invisible digital infrastructure underpinned by billions of lines of code. This digital ecosystem powers everyday life and it continues to grow in complexity with each business process, regulation and cybersecurity threat. With this Context in mind, CGI's AI strategy is structured around four key pillars. First, embedding AI into our end to end services of consulting, systems integration and managed services to drive continuous innovation that achieves industry tailored business results. Second, leading with AI integrated platforms across cgi, IP and alliance partner technologies to accelerate industrialization and transformation at enterprise scale. Turn uniting talent and AI technologies to amplify and augment human creativity, productivity and potential for both clients and CGI partners And finally, accelerating CGI's internally AI adoption to evolve our processes, systems and delivery to be an organization that is designed by and for humans. Powered by AI, these four pillar strategy creates new opportunities to drive revenue growth and margin improvement on existing and future engagements. I will now talk through each of these pillars starting with embedding AI into our end to end services. In consulting, our AI advisory framework applies CGI's expertise and and change management and process engineering to simplify and rethink how work happens in the future. Offerings like AI launchpad and AI Maturity Assessments help clients identify, prioritize and validate use cases with clear roi. Then our behavior science based methodologies for AI adoption and workforce readiness helps clients implement their strategies and build future ready organizations. From a software development and systems integration perspective, CGI is accelerating delivery by incorporating AI across every phase of system development from requirements to deployment. We continue to train CGI partners on our integrated methodology and on tools such as Google Gemini code assist, Microsoft GitHub, Copilot and OpenAI ChatGPT Enterprise. We are applying these capabilities along with CGI's AI-native platforms of Pulse, AI, Digishore and Navi to accelerate solution delivery and support legacy systems modernization. These tools, when applied with our AI driven Software development methodologies are now major productivity drivers. For example, just in CO generation which typically represents 25% of the system development life cycle, we see efficiency gains of 30% through CGI's managed services. We operate within our clients most complex mission critical environments giving us a unique opportunity to embed AI responsibly, practically and profitably. CGI's managed services engagements have for decades included commitments to deliver ongoing productivity improvements. We have always evolved in line with innovation cycles and delivery models and technology from offshore to cloud. Our default managed services pricing models are outcome based meaning we commit to cost predictability and delivering results not just inputs. This is an approach we are very experienced with. It has contributed to improving profit and reinvesting in capability building. Now advanced AI which we consider to be generative and agentic AI provides us additional levers to do this while continuing to create compelling clients offers. For example, CGI's DigiOps suite helps clients industrialize AI within their managed services to drive efficiency and innovation at scale without disrupting core operations. Our modular approach works with any technology stack including CGI's IP solutions as well as any technology platform our clients use. Today DigiOps is in production for many clients with over 165 AI agents and over 2000 automation workflows across industries such as retail, banking, communication and energy and utilities. TG Ops is becoming a growth driver and margin levers for our managed services engagements. As an example for the run of applications, the bending of the maturity of the business processes, we saw results such as up to 30% productivity gains and up to 40% faster resolution of operational IT request across each of our end to end services. We are integrating AI by design into enterprise workflows and processes instead of using IT as an accessory. With this holistic value chain approach, AI is tightly aligned and tailored to an industry which helps drive continuous innovation and for clients. The second pillar focuses on leading with AI integrated platforms across both CGI IP Solutions and Alliance Partner Technologies. CGI's IP business solutions remain one of our competitive differentiators. In line with our multi year strategy, we continue to invest in embedding advanced AI into our IP solutions with 65% of the strategic IP portfolio incorporating intelligent automation. We currently have a robust ecosystem of operational Agentix Solutions with over 200 AI agents across a wide range of CGI IP solutions, digital enablers and delivery accelerators. A key component of this ecosystem is Pulse AI which is CGI enterprise platform for building and scaling AI and applied intelligence. Pulse AI currently has over 20 industry specific agents that combine complex business reasoning with tools, data and multi agent orchestration to take action, not just generate Dex Turning to CGI alliance strategy, Our approach is intentionally to be highly inclusive. With over 150 relationships with technology companies. This breadth of partnerships ensures CGI remains agile in selecting the best solutions to meet each client's unique needs in terms of technology stack and other business requirements such as addressing digital sovereignty. We collaborate through joint go to market relationships and with all major hyperscalers, Google, AWS and Microsoft, as well as leading software platform providers such as SAP, Salesforce and ServiceNow. We are also expanding our partnerships and client delivery with AI-native firms such as OpenAI, Snowflakes, Nvidia Databricks and Mistral AI. Our global alliance partnerships continue to drive new wins and client relationships. With our fiscal 2025 alliance related bookings up more than 120%, well over half of these wins were new business CGI strength in AI delivery is also earning recognition from industry analysts who influence procurement decisions across industries. Earlier this week we announced that IDC named CGI a leader and worldwide AI Services for State and local governments as a professional services firm. Our third strategy pillar of Uniting Talent in AI Technologies is among our most important investments. Through the use of gen AI platforms, our teams have created more than 8,000 personal productivity agents to learn faster, unlock creativity and drive better results for clients and cgi. Naturally, our delivery of advanced AI services to clients relies on our culture of continuous learning and it requires different skills and new ways of working. We continue to invest in the development of our consultants and experts for both today's needs and as technology innovation evolves. Our approach marries deep industry expertise with tool adoption, structure learning, project rotations and real world experimentation. This hands on access coupled with our AI infused offering is driving tangible productivity gains and accelerating our ability to embed AI within complex client systems for cgi. It's also driving higher revenue per CGI partner as we saw this increase by 5% year over year. This is a trend we expect to continue. Our award winning AI learning and certification programs provide multi tiered role based learning path from AI literacy to advanced vendor certified technical expertise. Currently, approximately 20% of our consultants have expertise in advanced AI and data, bringing this expertise to their work every day with clients continuing to develop and hire talent with these skills remains a top priority for fiscal 2026. Through our holistic talent strategy, CGI's continue to build an organization where advanced AI proficiency is not a specialty but a core capability. The final pillar of our Strategy is accelerating CGI's internal AI adoption to evolve our processes, systems and delivery. Each of our enterprise teams are embedding AI to drive process efficiencies, enable faster decision making and increase productivity. We are currently implementing or improving more than 50 AI solutions. Our most recent internal solutions launch is underway now. The CGI Exchange enables our experts around the world to find, share and leverage reusable assets, innovation and best practices. This new hub will enable increased productivity, more predictable cost and lower risk through proven and repeatable solutions and promote entrepreneurship. One of our core values for fiscal 2026 we are progressing the use of agentic AI within our business processes to drive operational efficiencies, decision intelligence and service innovation. In summary, our positioning and what makes CGI unique for the air wave is not rooted in height, but instead in the confidence we have in our proven ability to anticipate trends, embrace change and grow through nearly 50 years of technology innovation. In fact, our pipeline of opportunities that integrate AI in our offerings increased by nearly $5 billion compared to this time last year. Turning to the outlook, the high degree of market uncertainty continues to contribute to some caution among clients and their discretionary IT spending, notably for SIC projects. However, the need for clients to simplify, modernize and secure complex systems and business processes will continue to increase. This means we do not expect to see a long term trend of IT budget declines. We see most clients rebalancing their spend as managed services and AI integrated services help them reduce operational cost. In most cases, clients are planning to reinvest those savings to fund their backlog of monetization initiatives, all of which require technology partners to realize roi. Demand for managed services remains robust given the challenging economic environment in many of the industries where our clients operate. We see this demand reflected in our pipeline where managed services opportunities are up by more than $11 billion compared to this time last year. Before I conclude, I would like to give an update on our U.S. operations. We continue to work with our clients to help achieve their outcomes. While we are pleased with the Q4 bookings across our U.S. operations, government procurement cycles remain challenging, giving the length of the federal shutdown and its related impacts, including some indirect ones for our state and local government clients. Given this, in our current assumption of a mid November reopening, we expect a revenue impact across our U.S. operations in the next quarter of approximately 60 to $75 million and 15 to $22 million in margin impact. Lastly, specific to the U.S. administration's changes to the H1B visa program, CGI does not have a material number of new applications. Therefore, any potential impact would be manageable. In closing, we remain confident in our profitable growth strategy which is designed to optimize total return on investment for our shareholders through new and expanded engagements to deliver outcomes. Sustained demand for managed services giving economic dynamics continued M and A given the favorable environment and active deployment of capital through our share buyback and dividend programs. Thank you for your continued interest and support. Let's go to the question now. Kevin thanks Francois. Joelle we can now poll for questions. Thank you ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press Star followed by the 1. On your touch tone phone you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press Star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Thanos Moshopoulouf with BMO Capital Markets. Your line is now open.

Thanos Moshopoulouf - Equity Analyst - (00:27:56)

Hi, good morning. Maybe starting off on the federal side, I guess putting aside the shutdown, based on the bookings you saw in the September quarter and based on revenue trends heading into the shutdown, does that change your level of optimism or pessimism with respect to how the federal business. Should do over the next year once the government reopens?

Francois - (00:28:19)

Well, I think, you know, you saw the booking the last quarter 185% so it was a very good booking. Very happy to see that. I think, you know, at a certain point the federal government needs to spend in it and that's what we were seeing and we were seeing a lot of momentum on the on the procurement side, But naturally with this shutdown that that stopped this for in October. So but you know when this will reopen, we think that you know growth will be there because they they need to spend and that's what we were seeing in the summer time frame.

Thanos Moshopoulouf - Equity Analyst - (00:29:00)

Great. And with respect to the discussion, is? There any way for us to think. About the potential margin uplifting you may already be capturing or that you might be able to capture over the next year or two as adopt AI and to what extent you'll be able to get that benefit internally versus having to. Pass it on to customers?

Francois - (00:29:20)

Yeah. So two things for sure. Like we were saying in we're using a lot of AI in our managed services today so that's helping us to to give the benefit to our clients and when new business on that side and improving at the same time our our margin because we are outcome based basis most of the time with, with these clients. A second thing also when I'm talking about what are we doing internally with 'Client Zero' to some point. So, so we will invest and we invest and we continue to invest example in Agentic to optimize some processes. So expectation is that we would see even the CGI SG&A improving in the future with these automations. Great. Thanks Francois.

Thanos Moshopoulouf - Equity Analyst - (00:30:10)

I'll pass the line.

OPERATOR - (00:30:11)

Thanks Daniels. Your next question comes from Robert Young with Canaccor Canada. Your line is now open. Hi, good morning. First question, you noted that the default for CGI is outcome based pricing. If you could just narrow down in on that. Is that like as it relates to managed services or is it the consulting business? I noted some of your peers are highlighting pricing pressure and so is this something that is a protection for CGI as it relates to pricing pressure? You just expand on that and how it compares to some of the peers in the IT services industry. That'd be very helpful. Yeah, thanks Robert for the question. So for sure on the, on the consulting side that's mostly time and material and so that will continue in the future. And again the fact that we have the expertise and especially on the inside, the right expertise now people are looking for that expertise. So while you know, pressure, you'll always have pressure on, on pricing. You know, when you have the right people and the right value to bring to their clients. You know, you know the, the, the price is, is, is a second, second lever and not the first. As for you know we have you know what perhaps 40 or 50% of our sic business or si sorry business where it's fixed price. So using again some of these tools is helping us to, to increase the profit or the margin on our, on our projects while hitting the right price tag or the price point for the client. So, so that's what we see in the SI side And actually on managed services, our majority of managed services contracts are outcome based. And so again it's a negotiation of having it at the right price point for the client and after that and the percentage of saving that they want and after that is to work on, on producing that saving and producing our, our margin needed. So so we you know, while like I'm saying we're seeing these pressure every day, the fact that we're outcome based is an easier way of producing the value for the client and having the right level of profitability for us. Okay, thanks for all that detail. My second question would be around the comment around higher revenue per employee. I think you said it was 5% and that it would improve or that that trend would continue if you could expand on that. Is that being driven by AI or is it maybe better the growth in APAC and the addition of Poland? Maybe you just talk about, you know, where that revenue per employee growth is expected to come from and how it flows down to the operating margins. For sure, with the use of AI, we would expect that this, this revenue per employee will continue to, to, to go up because again the, these, these tools are helping our client to deliver more with, with, with, with their same time. So that's, that will help us to deliver more, more, more opportunities to our clients. So that's how we were looking at it. For sure. The fact of using India and example Poland will also contribute to this. But I would say that I will be also a big factor in this. Okay, thanks for taking the question. Your next question comes from Jerome Dubreuil with Desjardins. Your line is now open. Thanks for taking my questions. The first one is on the forecasting power that bookings bring. You know, historically it has been a bit uneven. Uneven and obviously 119% book to bill is very strong. So I'm wondering if M and A has an impact on the book to bill if or if there's some sort of organic book to bill that, that you can share. Appreciate that your strongest booking deal is US Federal and no M and A there.

Jerome Dubreuil - Equity Analyst - (00:34:27)

But if you can comment, please.

Francois - (00:34:29)

Yeah, but M and A by itself won't touch the booking because again when we're actually doing the acquisition on the merger, you know, them. We are looking at their backlog and that backlog is included in our backlog and it's not going through the book to bill ratio. So. So we are starting to include the wins of these acquisitions at the date that we actually closed the deal. So the before is actually put in the booking in the backlog and not in the bookings. But on the other hand, you know, the fact that we have these acquisitions example bjss, you know, it's helping to accelerate some of our discussion example on the managed services side. And you know we have a lot of clients of BJSS that we were capable of bringing them to India, for example and we did the same thing with Doherty to see our capabilities in the managed services side and that's triggering some bookings on that side. But that's again after the acquisition and not before the acquisition. Jerome. Awesome. That's, that's great color. Second one, I think it was excellent. The prepared remarks were very good in terms of what you're doing to any. I, if you can please maybe communicate. Because the market apparently thinks that there's going to be an impact from AI, that it's going to be automating a lot of the implementation processes that you're exposed to. So I'm wondering if you, what you're telling investors that are concerned by that or if you have data on whether implementation processes can or can't be automated with AI. Yeah, you know, Jerome, like, like I said in the text, you know, we are seeing some savings, we are seeing some automation and again, we are applying them in our day to day operations and to help our clients to achieve the savings. At the same time, you know, we are dealing with very complex clients, you know, banks with, you know, where they have, you know, thousands and thousands of applications, interfaces and that needs to be managed and that still need to have people working on that. And so, you know, I will bring some, some savings, but you'll still need to have people to manage all that. And you know, we are living in a complex world and you need, you need people to, to manage that, that complexity. That said, you know, it will bring some saving and naturally by bringing these savings to clients, it will create new demand and you'll see more, I think more people will look at managed services and looking at specialists and people like us to help them in managing their infrastructure, managing their IT solutions, IT applications and bringing savings to them. So, you know, we're seeing that demand will, will, will go up for that reason and all the savings that they can have also on the running of the application, you know, we are seeing that they'll reinvest it back in there and systems and new systems. You know, we don't see IT budget going down from clients. They'll do more with the same amount or the same budget, but they won't go down. And they'll still need help from specialists like us, who is investing a lot in AI, in our people and our processes to help them succeed. Your next question comes from Stephanie Price with cibc. Your line is now open. Good morning and thanks for the color on CGI's AI strategy. I was hoping you could maybe dig a little bit deeper into the partnership strategy and talk a little bit about who your largest and fastest growing partners are and how you kind of see that partnership strategy evolving over time. Yeah, well, again, like I said, you know, we have, we have partnership with all of them. And the reason is that depending on the region, depending of, of the industry, you know, some partners are better than others. To, to work with and also sometimes it's a choice of a client. So that's why, you know, we are talking to, to all of them where you saw also the announcement that we did this week with you know, Snowflake and servicenow and uipath where we, we, we move up in the, in their evaluation. So, so you know, we are working with all of them and we will continue. So we don't have any preference for, for one or two of them.

Jerome Dubreuil - Equity Analyst - (00:39:32)

Okay. And then you mentioned some planned runoff of lower margin work from recent acquisitions in the prepared remarks. Just hoping you could quantify that or and then talk a little bit about if you expect it to continue into future quarters.

Steve - (00:39:47)

Look, it's Steve here. Stephanie, thank you for the question. In each M&A, as you well know, cgi, we are working for profitable revenue. We want to make sure that when, when we, we are taking a risk in the revenue, we are getting rewards and we are getting the profit out of it. So obviously when we are looking at M&A and integration of company looking at all the projects that they have and some projects are not to our expectation in terms of return in order to be rewarded for all the good work we're doing. And because of that, sometimes we are reducing the activity that we do for some project in terms of the volume. It won't be a material one and usually you will see that in the first year after the acquisition. But that said, I just want to reiterate, you know, we are seeing a lot of synergy by putting these acquisitions together. Like I was saying, a lot of visit to our Asia pack from these clients and you know, we will see some, some longer term contract signed with, with these clients. I'm convinced we see a very good momentum. Thanks for the color. Your next question comes from Surinder Thin with Jefferies. Your line is now open.

Surinder Thin - Equity Analyst - (00:41:28)

Thank you. First of all, can you maybe talk about just the demand trends within sinc? It seems that that part of the business continues to struggle at this.

Francois - (00:41:42)

Yeah, it depends of the, of the area for sure. On the air side, a lot of demand, a lot of consulting on that side and more and more implementation. I think the pure business consulting, that's still some struggle, you know, and you know, especially in places like in France, But I would say that you know, you know, on, on everything that's related to AI. Yes, it continues to be pretty, pretty in demand. So it's, it's, it's really demand depending of the demand. But I would agree that the business consulting is still pretty Flat, if I can say just, just as clarification, I guess, is the idea that we should.

Surinder Thin - Equity Analyst - (00:42:34)

Expect the current growth rates organically to kind of continue. Do you see improvement here? It just seems like, you know, it's hard to get a picture of where. Exactly things are, I guess, and how.

Francois - (00:42:47)

They'Re trending on an organic basis. Yeah, as you know, we're not splitting organic versus inorganic and it's very tough to do it because again, when we are integrating these companies, it's tough to understand what's coming from, from the old, from the acquisition versus versus the legacy cgi, if I can say. And like I was saying, we are seeing good momentum on, on having both together and winning new, new services. You know, as for, you know, example, for sure, I talked about the federal side and again, we have a temporary headwind this quarter or next quarter related to this. And so that's one thing that they know. My yes, it will be tougher in the federal side this the first quarter, but if everything is going well and we can see and of the shutdown, we are expecting to bounce back in the second quarter. That's helpful. And then just on the M and.

Surinder Thin - Equity Analyst - (00:43:55)

A side, just any color commentary on. Just the pipeline of deal, whether you. Might be closer on more deals or how do we think about what you've done in the past year and a half versus maybe how you're thinking about what's coming in the next 12, 18 months. Thanks.

Francois - (00:44:18)

That's a good question. For sure. We're seeing a lot of momentum on that side. We just, like I said, we closed Comarch. We're still waiting for some approvals, but we're expecting really the formal close to happen in the next couple of weeks. And we are talking with a lot of other potential acquisitions. You know, the evaluation went down and you know, so, so we need to take advantage of this, this environment and we will continue to be aggressive on that level. We had a good 2025 and you know, for sure we need to advance. But like I'm saying, we have a lot of opportunities and we think we'll be able to close some of them in 2026.

Surinder Thin - Equity Analyst - (00:45:13)

Got it. So it sounds like, just on just. To clarify the last comment, it sounds like with valuations down, you're willing to.

Francois - (00:45:20)

Be a bit more aggressive on the money front for sure because, you know, the demand are, you know, when before we were talking about, I don't know, people wanted to have two to three times and more on the revenue. These evaluation went down, you know, a lot lower now we're talking 1 to 1.5 times revenue. So it's, it's, it's in our sweet spot. So that's why we think that, you know, we will be very aggressive on that. Like I was saying, the environment, it's a fantastic environment for, for, for that level. It's good also for managed services. Like I'm saying, we are in an environment where people, you know, wants to have savings. So managed services in their way. And I am saying on the evaluation side, for, side, for acquisition, no, they went down. So it's a good, very good opportunity time for us. Thank you. Your next question comes from Paul Triber with RBC Capital Market. Your line is now open.

Paul Triber - Equity Analyst - (00:46:23)

Well, thanks Paul. Good morning. Good morning. Just a follow up question on the. M and A environment. The question is how are you evaluating AI readiness and risks with M and A targets? Is it something that you're proactively looking at in your due diligence or is it less at the forefront?

Francois - (00:46:47)

Again, our, our strategy on M and A, like I always said in the past, we're really focused on buying relationship, client relationship. And that's, that's a focus we'll continue especially in places like in the us Like I said in the past, several places, metro markets or region in the US were still under underrepresented. So we want to have more. So Chicago and the west coast, for example, are good places where we're looking for potential acquisition for like I'm saying, to build a new relationship and client relationship. But for sure, you know, expertise, like expertise is also very important and we are looking at it. And I'll give you the example. BJSS was one that you had a lot of AI expertise, and, and so, so that's one thing that we will also look in these, in these potential merger. What kind of AI expertise that they have because again, that' is in demand today.

Paul Triber - Equity Analyst - (00:47:58)

Secondly, the Canadian federal budget came out last night. The government's making your plans to make a number of large investments. Can you elaborate on CGI's footprint with the Canadian federal government and what you see as opportunities for CGI's growth with the federal government going forward?

Francois - (00:48:18)

For sure. That's a great question, Paul. And yes, when you're reading the budget and the initiatives that they want to do, we see a lot of potential where we can, we can help them. Right? The first one is sovereign cloud. So they want to create a sovereign cloud so that will, you know, have a lot of work to bring activities from public cloud and data from public cloud and solution from public cloud to their sovereign cloud. So a lot of exercise, a lot of work that will need to be done there. You know, they want to do, they want to have a more efficient government. So and they talked about implementing AI in automation. So again they'll need partners like us to help them to create these AI solution and these automation to, to achieve their goal of reducing, reducing expenses. And the other one is defense. And you know, they talked about, you know, investing a lot on the defense side and on the digital and all the IT that needs to be supporting these defense initiatives. And again that's a big portion of our business in other countries like in us in Germany, you know, we are, you know, a NATO partner for it. So we see a lot of potential there and see how we can help them to bring what do we have across the world and what we can bring to them. So it's very important the fact also that, you know, they want to bring back some work in Canada. I think for a company like ours, where we have a very good presence in Canada will be, you know, beneficial and I think we can bring a lot of solutions to the federal government. Thanks for taking the questions. Thanks. Your next question comes from Richard Seawith National Bank. Your line is now open. First of all, about a year ago I think you talked about elevating CGI's brand. And my guess is it was sort of to help you grow the US commercial footprint.

Richard - (00:50:37)

Where are you in that and what. Sort of metrics are you monitoring to assess whether those investments are working? Thanks Richard, for the question. You know, yes, it's still a focus on mine and the company and one the KPIs that you know, we're following the most for that is new business. You know, and this, this quarter we had 45% of our booking that was new business, not necessarily new clients, but new business. And a lot of them were new clients also. So that's how we're managing this. And also the alliances is helping us on that side and having working closer with them is bringing also new new kind of business. You see also what we're doing with the, with the industries analysts like IDC that name us on the state and local for, you know, AI services. So that's the kind of work that we're doing with the marketing team, with the operations to be more visible with these analysts, to be more visible with these partners. And again, the ultimate goal is to sign new deal with existing clients, but also more importantly to bring new clients in. Okay, thanks. And my second question and by the way, the pipeline is up by 30% for these new business, new clients.

Francois - (00:52:13)

Okay, thank you.

Richard - (00:52:15)

My second question has to do with some of your prepared comments on the increased demand in your APAC delivery centers. How does offshore play in terms of the increasing shift to AI? Does it sort of increase or decrease in importance there?

Francois - (00:52:35)

I would think, yeah, two things. First of all, we have the GCC thing, right? So as you know, a lot of companies are looking at opening own GCC or captive in India. So that's, that's, that's demand. We see a lot of demand to help them to create, to create that for them with a transfer optionality at the end of the contract. So that's, that's still, you know, creating a lot of demand in this, in this business. And so we see that continue in the future. As for AI, for sure, you know, you know, we, we balance the number of hiring in India because a lot of, a lot of activities or some of the activities can be done now with AI. So example, when we're doing our development of our ip, it's mostly all done in India, but you know, with some of these tools, AI tools, it's helping us to do, to do some automation on the coding side or the development of the code of these new ip. So that's helping to not having the same number of employees to do the work that was done like two years or three years ago. And finally in the managed services, they have the expertise to manage, to do these managed services. So they have also the expertise of implementing these tools to help us. So like I was saying, digiops. Digiops, you know, who was applying digiops? It's mostly our Indian colleagues who is doing it, we're doing it elsewhere, but a lot of it is also done in India. So I'm seeing still India as an important tool and way of generating revenue for the future. Okay, thank you very much ladies and gentlemen. As a reminder, should you have a question, please press Star one. Your next question comes from Suthan Sukumar with Fifil. Your line is now open. Good morning, gents. Hi guys. Good morning. For my first question, I wanted to touch on AI spending priorities here. You know, what are you seeing with respect to how clients are thinking about their spending priorities when they start to realize some of the initial ROI from early AI, early projects? Just wondering, are you seeing savings being reinvested elsewhere with respect to other buckets of IT spend or are they doubling down on AI and, and more of the underlying modernization work needed by, I think it's both. Right. Some of them, you know, we are doing some investment in AI and if they are seeing the ROI for sure they'll, they'll continue to, to invest on that side. But also, you know, they, they had a backlog on the monetization side, you know, for the last several years. They didn't do a lot of that, a lot of that modernization. So the fact that if they can find saving by the use of AI, at least that's what the clients are telling me when I'm meeting with these CEOs and also what's the voice of our CL saying to us is that they need to find savings to, you know, tackle that the backlog of, of transformation that they didn't do. So we are seeing that demand will continue on that side. The other thing also is on the data itself. Now it's nice to apply, it's nice to having your AI tool looking at your data, but still so much to do on the cleaning of that data and what's making sense, what's not making sense. So that, and the security around the data, who can see what. And so again, a lot of work on that side that needs to be done. So you know, again I'm seeing data AI as a way of companies to resolve their backlog of transformation and they'll need help, they'll need help from companies like ours. Same thing for business processes, same thing for security. Cybersecurity with AI, naturally it's bringing some risk on the cybersecurity and again, they need people like us to help them to manage these risks. Great, thank you for the color. My second question, I just wanted to touch on recent M and A. Can you provide a brief update on sort of how integration is going and how that's tracking to your expectations and with respect to potential synergies, what sort of early traction or potential are you seeing that might be better than what you expected initially with these acquisitions? Yeah, I can start on the, on the say, opportunity side with clients and perhaps Steve, you can give some color on the synergy side. Again, like I was saying, a bit, you know, with the ones that we did example on Doherty in the US in the St Louis and Chicago area. You know, again, a place where we were not that well implemented. You know, we, we have a lot of new clients and new relationships that we created. And again, you know, we are showing to them the Orti was a great sic company but without any managed services offering. And we came in and present to these clients, hey, you still have the opportunity to work with the ortegrate team. But more and more and above that, you know, you are able now to tap on the overall CGI on the managed services for example, and any other capabilities that we have. And it's working. We have several clients where we were able to sign new deals and so. And so it brought not just the revenue from Doherty, but when I'm saying sometimes one plus one equal three, that's what's happening in some of these acquisitions. So it's going well on that side, on the revenue on the top line, on the, on the savings side, saving side. Look, if you look at all the acquisition we did, the ones that we did in the US earlier in the year, obviously that's now all integrated. Bjss and the German one, also novatech that we did in the springtime, it was more integrated during the summer, so now it's integrated. So. So obviously the savings are coming a lot faster when we are using our system, when we are using our processes. And you can see the benefit of the synergies. AppsID was done recently, so not yet all integrated into our processes and system. It's going to be done over the next couple of months and with that obviously margin will improve. It's part of the plan. But still we are quite proud with the situation that we had in Q4 with the margin of 16.6% that we were capable of delivering even during this integration period for a couple of acquisitions.

Steve - (01:00:32)

Great, Perfect. Thank you for taking my questions guys. I'll pass along.

Suthan Sukumar - Equity Analyst - (01:00:36)

Thank you. Thank you for the question.

OPERATOR - (01:00:38)

There are no further questions at this time. I will now turn the call over to management for closing remarks.

Kevin - (01:00:45)

Thanks Joelle and thanks everyone for participating. As a reminder, replay of the call will be available either via our website or by dialing 1-888-660-6264 and using the passcode 14123 as well. A podcast of this call will be. Available for download within a few hours. Follow up questions can be directed to me at 1905-973-8363. Thanks again everyone and look forward to speaking soon. Thank you. Ladies and gentlemen, this concludes the conference call for today. We thank you for participating and ask that you please disconnect your lines.