CGI: Fiscal Q4 Earnings Snapshot

CGI Group Inc. (GIB.A, GIB), a leading global IT and business consulting services firm, recently reported its fiscal fourth-quarter (Q4) 2024 earnings. The company's strong performance in Q4 highlights its resilience and growth potential, making it an attractive investment option for income-focused investors.

CGI's Q4 revenue grew by 4.4% year-over-year (YoY) to CAD 3.66 billion, driven by robust growth in specific industries and geographic regions. The strongest segments were the UK and Australia, with 5.1% constant currency growth, followed by Asia Pacific at 5%, Northwest and Central East Europe with 4.2%, and US commercial and state government at 4.1%. From an industry perspective, government had the highest growth with 5.7% constant currency growth, while banking subsectors experienced softness.


CGI's earnings before income taxes (EBIT) and net earnings both exceeded their historical averages. EBIT grew 6.2% YoY to CAD 592.4 million, surpassing the 5-year average of 5.3%. Net earnings increased by 5.2% to CAD 435.9 million, outpacing the 5-year average of 4.1%. CGI's margins also improved, with EBIT margin up 30 basis points and net margin up 10 basis points compared to Q4 2023. This strong performance positions CGI favorably against industry peers.

CGI's cost optimization program had a positive impact on its Q4 profitability and cash flow. The program, focused on SG&A expenses, resulted in a CAD 28 million increase in adjusted EBIT YoY, with a margin of 16.8%, up 60 basis points. Cash provided by operating activities increased by 7% YoY to CAD 502 million, representing 13.4% of total revenue.


CGI's book-to-bill ratio and backlog in Q4 were both above their historical averages, indicating strong demand for its services. The company reported a book-to-bill ratio of 104.4%, with a backlog of CAD 28.72 billion, representing 1.9x annual revenue. This positions CGI favorably compared to industry peers and suggests robust future growth prospects.

CGI's intellectual property (IP) revenue growth contributed to its earnings expansion in Q4. IP revenue grew 4.2% in constant currency, with a strong book-to-bill ratio of 126%. This growth, coupled with a robust book-to-bill ratio and backlog, indicates CGI's ability to generate stable, recurring income.

CGI's acquisitions and integrations have played a significant role in its earnings growth. The company spent CAD 5.1 million on acquisitions and integrations in F2024, down from CAD 42.1 million in F2023. Despite these costs, CGI's earnings before income taxes grew by 4.2% YoY, indicating that acquisitions are contributing to earnings growth. The sustainability of these contributions depends on CGI's ability to integrate acquired businesses effectively and generate synergies.

CGI's cost optimization programs have had a notable impact on its earnings margins. In Q4-F2024, the company reported adjusted EBIT margins of 16.4%, up 10 basis points YoY, primarily due to benefits realized from these programs. Looking ahead, CGI expects the cost optimization program, along with ongoing management discipline, to provide incremental margin improvement in the second half of the year, enhancing earnings sustainability.

CGI's Q4 earnings expansion was driven by key market trends, including the increasing demand for digital transformation services and the growing need for cybersecurity solutions. The company's strong performance in these areas is reflected in its Q4 revenue growth of 4.4% YoY and earnings before income taxes margin of 16.2%. CGI's ability to capitalize on these trends is sustainable, as the demand for digital services and cybersecurity continues to grow, particularly in the government and banking sectors. Additionally, CGI's focus on intellectual property and recurring revenue streams, such as managed services and software as a service, further enhances the sustainability of its earnings expansion.

In conclusion, CGI's strong fiscal Q4 earnings snapshot highlights the company's growth potential and resilience. Its focus on stable, recurring income, cost optimization, and strategic acquisitions make it an attractive investment option for income-focused investors seeking reliable, long-term returns. As the global IT and business consulting services market continues to grow, CGI's strong performance positions it well to capitalize on market opportunities and deliver consistent earnings growth.