Title of each class: | Trading symbol: | Name of each exchange on which registered: | ||||||
Class A subordinate voting shares | GIB | New York Stock Exchange |
Fees billed and percentage | ||||||||||||||
Service retained | 2022 | 2021 | ||||||||||||
Audit fees | $7,708,142 |
76.30% | $6,990,722 | 67.32% | ||||||||||
Audit related fees(a) |
$942,671 |
9.33% | $1,297,931 | 12.50% | ||||||||||
Tax fees(b) |
$1,394,072 |
13.80% | $2,078,521 | 20.02% | ||||||||||
All other fees(c) |
$57,158 |
0.57% | $17,145 | 0.16% | ||||||||||
Total fees billed | $10,102,043 |
100% | $10,384,319 | 100% |
Commitment type In thousands of CAD |
Total | Less than 1 year | 1 - 3 years | 3 - 5 years | More than 5 years | ||||||||||||
Long-term debt | 3,267,034 |
93,447 |
1,178,103 |
863,125 |
1,132,359 | ||||||||||||
Estimated interest on long-term debt | 313,496 |
87,287 |
100,508 |
62,479 |
63,222 | ||||||||||||
Lease liabilities | 709,201 |
157,944 |
254,219 |
146,694 |
150,344 | ||||||||||||
Estimated interest on lease liabilities | 99,244 |
24,871 |
40,798 |
20,154 |
13,421 | ||||||||||||
Long-term service agreements and other | 250,049 |
146,662 |
83,065 |
20,322 |
— | ||||||||||||
Total | 4,639,024 |
510,211 |
1,656,693 |
1,112,774 |
1,359,346 |
99.1 | Annual Information Form for the fiscal year ended September 30, 2022 | ||||||||||
99.2 | Audited Annual Consolidated Financial Statements for the fiscal years ended September 30, 2022 and September 30, 2021 | ||||||||||
99.3 | Management’s Discussion and Analysis of Financial Position and Results of Operations for the fiscal years ended September 30, 2022 and September 30, 2021 | ||||||||||
99.4 | Certification of the Registrant’s Chief Executive Officer required pursuant to Rule 13a-14(a) | ||||||||||
99.5 | Certification of the Registrant’s Chief Financial Officer required pursuant to Rule 13a-14(a) | ||||||||||
99.6 | Certification of the Registrant’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||||||
99.7 | Certification of the Registrant’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||||||
99.8 | Consent of PricewaterhouseCoopers LLP | ||||||||||
101.0 | Interactive Data File (formatted as Inline XBRL) | ||||||||||
104.0 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.0) |
CGI Inc. | |||||||||||
Date: December 16, 2022 | |||||||||||
By: | /s/ Benoit Dubé | ||||||||||
Name: | Benoit Dubé | ||||||||||
Title: | Executive Vice-President, Legal and Economic Affairs, and Corporate Secretary | ||||||||||
99.1 | Annual Information Form for the fiscal year ended September 30, 2022 | ||||||||||
99.2 | Audited Annual Consolidated Financial Statements for the fiscal years ended September 30, 2022 and September 30, 2021 | ||||||||||
99.3 | Management’s Discussion and Analysis of Financial Position and Results of Operations for the fiscal years ended September 30, 2022 and September 30, 2021 | ||||||||||
99.4 | Certification of the Registrant’s Chief Executive Officer required pursuant to Rule 13a-14(a) | ||||||||||
99.5 | Certification of the Registrant’s Chief Financial Officer required pursuant to Rule 13a-14(a) | ||||||||||
99.6 | Certification of the Registrant’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||||||
99.7 | Certification of the Registrant’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||||||
99.8 | Consent of PricewaterhouseCoopers LLP | ||||||||||
101.0 | Interactive Data File (formatted as Inline XBRL) | ||||||||||
104.0 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.0) |
Exhibit 99.1
Annual Information Form For the fiscal year ended September 30, 2022 December 5, 2022 CGI
Table of Contents |
CORPORATE STRUCTURE |
1 | |||
INCORPORATION AND REGISTERED OFFICE |
1 | |||
SUBSIDIARIES |
1 | |||
CAPITAL STRUCTURE |
1 | |||
Stock Splits |
1 | |||
MARKET FOR SECURITIES, TRADING PRICE AND VOLUME |
2 | |||
Normal Course Issuer Bid and Share Purchases for Cancellation |
2 | |||
Credit Ratings |
2 | |||
CORPORATE GOVERNANCE |
3 | |||
BOARD AND STANDING COMMITTEE CHARTERS AND CODES OF ETHICS |
3 | |||
AUDIT COMMITTEE INFORMATION |
3 | |||
DIRECTORS AND OFFICERS |
3 | |||
Directors |
3 | |||
Executive Committee and Executive Officers |
3 | |||
Ownership of Securities on the Part of Directors and Officers |
5 | |||
DESCRIPTION OF CGIS BUSINESS |
5 | |||
MISSION, VISION AND STRATEGY |
5 | |||
BUSINESS STRUCTURE |
6 | |||
Services Offered by CGI |
7 | |||
Markets for CGIs Services |
7 | |||
Intangible Properties |
8 | |||
Human Resources |
8 | |||
Specialized Skills and Knowledge |
8 | |||
CGI Offices and Proximity and Global Delivery Models |
8 | |||
Commercial Alliances |
9 | |||
Quality Processes |
9 | |||
THE IT SERVICES INDUSTRY |
10 | |||
Trends and Outlook |
10 | |||
COMPETITIVE ENVIRONMENT |
11 | |||
SIGNIFICANT DEVELOPMENTS OF THE THREE MOST RECENT FISCAL YEARS |
11 | |||
Key Performance Measures |
11 | |||
Fiscal Year ended September 30, 2022 |
13 | |||
Fiscal Year ended September 30, 2021 |
14 | |||
Fiscal Year ended September 30, 2020 |
15 | |||
FORWARD LOOKING INFORMATION AND RISKS AND UNCERTAINTIES |
16 | |||
LEGAL PROCEEDINGS |
17 | |||
TRANSFER AGENT AND REGISTRAR |
17 | |||
INTERESTS OF EXPERTS |
17 | |||
ADDITIONAL INFORMATION |
18 | |||
APPENDIX A |
19 |
© CGI Inc. |
2022 ANNUAL INFORMATION FORM i |
This Annual Information Form is dated December 5, 2022 and, unless specifically stated otherwise, all information disclosed in this form, is provided as at September 30, 2022, the end of CGIs most recently completed fiscal year. All dollar amounts are in Canadian dollars, unless otherwise stated.
Corporate Structure
Incorporation and Registered Office
CGI Inc. (the Company, CGI, we, us or our) was incorporated on September 29, 1981 under Part IA of the Companies Act (Quebec), predecessor to the Business Corporations Act (Quebec), which came into force on February 14, 2011, and which now governs the Company. The Company continued the activities of Conseillers en gestion et informatique CGI Inc., which was originally founded in 1976. The executive and registered offices of the Company are located at 1350 René-Lévesque Boulevard West, 25th Floor, Montréal, Quebec, Canada, H3G 1T4. CGI became a public company on December 17, 1986 upon completing an initial public offering of its Class A subordinate voting shares (Class A Shares).
Subsidiaries
The activities of the Company are conducted either directly or through subsidiaries. The table below lists the principal subsidiaries of the Company as at September 30, 2022, each of which is directly or indirectly wholly-owned by the Company. The Company has other subsidiaries that have not been included in the table since they represented, individually, 10% or less of our consolidated assets or consolidated revenue as at September 30, 2022(a), and, in the aggregate, 20% or less of our consolidated assets or consolidated revenue as at September 30, 2022. This table also omits subsidiaries whose primary role is to hold investments in other CGI subsidiaries.
Name of Subsidiary | Country of Incorporation | |
Conseillers en gestion et informatique CGI Inc. |
Canada | |
CGI Information Systems and Management Consultants Inc. |
Canada | |
CGI Payroll Services Centre Inc. |
Canada | |
CGI Technologies and Solutions Inc. |
United States | |
CGI Federal Inc. |
United States | |
CGI Suomi Oy |
Finland | |
CGI Sverige AB |
Sweden | |
CGI Nederland B.V. |
Netherlands | |
CGI IT UK Limited |
United Kingdom | |
CGI France SAS |
France | |
CGI Deutschland B.V. & Co. KG |
Germany |
Capital Structure
The Companys authorized share capital consists of an unlimited number of Class A Shares carrying one vote per share and an unlimited number of Class B shares (multiple voting) (Class B Shares) carrying 10 votes per share, all without par value, of which, as of December 5, 2022, 211,759,994 Class A Shares and 26,445,706 Class B Shares, were issued and outstanding. These shares represent respectively 44.47% and 55.53% of the aggregate voting rights attached to the outstanding Class A Shares and Class B Shares. Two classes of preferred shares also form part of CGIs authorized capital: an unlimited number of First Preferred Shares, issuable in series, and an unlimited number of Second Preferred Shares, also issuable in series. As of December 5, 2022, there were no preferred shares outstanding.
The Company incorporates by reference the disclosure contained under the headings Class A Subordinate Voting Shares and Class B Shares on page 6, and First Preferred Shares and Second Preferred Shares on page 7 of CGIs Management Proxy Circular (Circular) dated December 5, 2022, which was filed with Canadian securities regulators and which is available at www.sedar.com and on CGIs website at www.cgi.com.
Stock Splits
As of December 5, 2022, the Company had proceeded with four subdivisions of its issued and outstanding Class A Shares as follows:
| August 12, 1997 on a two for one basis; |
| December 15, 1997 on a two for one basis; |
| May 21, 1998 on a two for one basis; and |
| January 7, 2000 on a two for one basis. |
(a) | Based on the Companys Annual Audited Consolidated Financial Statements for the fiscal years ended September 30, 2022 and 2021 filed with Canadian securities regulators and which are available at www.sedar.com and on CGIs website at www.cgi.com. |
© CGI Inc. |
2022 ANNUAL INFORMATION FORM 1 |
Market for Securities, Trading Price and Volume
The Class A Shares are listed for trading on the Toronto Stock Exchange (the TSX) under the symbol GIB.A and on the New York Stock Exchange under the symbol GIB. A total of 99,763,291 Class A subordinate voting shares were traded on the TSX during the fiscal year ended September 30, 2022, as follows:
Month |
High(a) ($) |
Low(a) ($) |
Volume | |||
October 2021 |
116.00 | 105.28 | 6,411,789 | |||
November 2021 |
115.23 | 106.36 | 10,232,482 | |||
December 2021 |
114.11 | 107.10 | 8,838,584 | |||
January 2022 |
113.00 | 101.51 | 8,198,624 | |||
February 2022 |
112.96 | 99.26 | 8,656,916 | |||
March 2022 |
105.45 | 99.23 | 10,799,136 | |||
April 2022 |
104.65 | 98.77 | 7,332,410 | |||
May 2022 |
109.10 | 100.26 | 10,801,968 | |||
June 2022 |
108.84 | 95.45 | 8,524,175 | |||
July 2022 |
110.70 | 100.75 | 6,839,411 | |||
August 2022 |
112.25 | 102.89 | 5,476,284 | |||
September 2022 |
106.49 | 101.10 | 7,651,512 |
(a) | The high and low prices reflect the highest and lowest prices at which a board lot trade was executed in a trading session during the month. |
Normal Course Issuer Bid and Share Purchases for Cancellation
On February 1, 2022, CGI announced that it was renewing its normal course issuer bid (NCIB) to purchase for cancellation up to 10% of the Companys public float of its issued and outstanding Class A Shares during the NCIB term that commenced on February 6, 2022 and will expire on February 5, 2023 at the latest. On each of March 1, 2022 and August 1, 2022, the Company completed a private share purchase, each of which is considered within the annual aggregate limit that the Company is entitled to purchase under the NCIB. See Description of CGIs Business Significant developments of the Three Most Recent Fiscal Years Fiscal Year ended September 30, 2022 Normal Course Issuer Bid later in this Annual Information Form.
Credit Ratings
Credit ratings are a way to assess the quality of a companys credit and financial capacity. They are not a comment on the market price of a security or its suitability for an individual investor and are not recommendations to buy, hold or sell our securities. Credit ratings 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. Each credit rating should be evaluated independently of any other credit rating.
Credit ratings are subject to change, based on a number of factors including, but not limited to, our financial strength, competitive position, liquidity and other factors that are not completely within our control. A ratings downgrade could result in adverse consequences for our funding capacity or our ability to access the capital markets.
Credit rating agencies provide a range of services, including one-time ratings when the debt is issued, annual monitoring, and updates to ratings, among other things. In fiscal 2021, we paid Moodys Investors Service, Inc. (Moodys) and Standard & Poors (S&P) for the issuance of a long-term issuer credit rating, credit monitoring, and rating fees for the issuance of our senior unsecured notes described under Significant developments of the Three Most Recent Fiscal Years Fiscal Year ended September 30, 2021 Senior Unsecured Notes later in this Annual Information Form. In fiscal 2022, we paid Moodys and S&P for annual credit monitoring.
Moodys rates both our corporate credit and our senior unsecured notes. Their issuer ratings are forward-looking opinions of the ability of entities to honour senior unsecured financial obligations and contracts.
Moodys long-term debt ratings are forward-looking opinions of relative credit risk of fixed income obligations with an original maturity of eleven months or more. These ratings address the possibility that a financial obligation will not be honoured as promised. Such ratings reflect both the likelihood of default and any financial loss suffered in the event of default.
S&P rates both our corporate credit and our senior unsecured notes. Their corporate credit rating is a forward-looking opinion of our overall financial capacity to pay our financial obligations. It focuses on our capacity and willingness to meet our financial commitments when they are due. It does not apply to any specific financial obligation or credit facility, as it does not take into account the nature of and provisions of the obligation, its standing in bankruptcy or liquidation, statutory preferences or the legality and enforceability of the obligation.
S&Ps senior unsecured note rating is a forward-looking opinion of our creditworthiness for a specific financial obligation, class of financial obligations or financial program. It considers the creditworthiness of guarantors, insurers or other forms of credit enhancement on the obligation and the currency of the obligation and may assess terms like collateral security and subordination that could affect ultimate payment in the event of a default. See Significant developments of the Three Most
© CGI Inc. |
2022 ANNUAL INFORMATION FORM 2 |
Recent Fiscal Years Fiscal Year ended September 30, 2021 Senior Unsecured Notes later in this Annual Information Form.
The table below shows our long-term issuer credit ratings and the credit ratings assigned to our senior unsecured notes.
Rating Agency |
Long-Term Issuer Credit Ratings 1,2 |
Senior Unsecured Notes 1,2
|
Credit Rating Description and Rank
| |||
Moodys | Baa1
(stable outlook) |
Baa1 | Long-term debt rating scale ranges from Aaa to C. Numerical modifiers 1, 2, and 3 rank the investment within its generic category. An outlook of positive, negative, stable or developing ranks the potential direction of the rating over the medium term.
Baa is the eighth highest of 21 ratings. It means the investment is judged to be medium-grade and subject to moderate credit risk, and as such may possess certain speculative characteristics. A1 modifier means that the investment is in the higher end of its generic category. | |||
S&P | BBB+
(stable outlook) |
BBB+ | Long-term debt rating scale ranges from AAA to D. Some ratings may be modified by a plus (+) or minus (-) sign to show relative standing within the major rating categories. An outlook of positive, stable, or negative ranks the potential direction of the rating in the intermediate term, generally up to two years for investment grade.
BBB+ is the eighth highest of 22 ratings. It means that it exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken the issuers capacity to meet its financial commitments on the obligation. |
1 | As at September 30, 2022 |
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. |
Corporate Governance
Board and Standing Committee Charters and Codes of Ethics
CGIs Codes of Ethics, including its Code of Ethics and Business Conduct (which incorporates the CGI Anti-Corruption Policy) and its Executive Code of Conduct, the charter of the Board of Directors and the charters of the standing committees of the Board of Directors, including the charter of the Audit and Risk Management Committee, are annexed as Appendix A to this Annual Information Form.
Audit Committee Information
The Company incorporates by reference the disclosure contained under the heading Expertise and Financial and Operational Literacy on pages 48 to 50 and the disclosure contained under the heading Report of the Audit and Risk Management Committee, on pages 58 and following of CGIs Circular dated December 5, 2022.
Directors and Officers
Directors
The Company incorporates by reference the disclosure under the heading Nominees for Election as Directors relating to the Companys directors contained on pages 11 to 19, and the table on the Board of Directors committee membership on page 46 of CGIs Circular dated December 5, 2022.
Executive Committee and Executive Officers
The following table states the names of CGIs executive officers, their place of residence, their principal occupation within the Company as of December 5, 2022 and, where required, any other previously held positions in the last five years with the Company or one of its direct or indirect subsidiaries, or outside of the Company:
Name and Residence | Principal Occupation with the Company |
Previously held position (last five years) | ||
Jean-Michel Baticle Précy-sur-Oise, Oise, France |
President and Chief Operating Officer, and President, Western and Southern Europe Operations | President and Chief Operating Officer President, Western and Southern Europe Operations President, France, Luxembourg and Morocco Operations | ||
François Boulanger Westmount, Quebec, Canada |
President and Chief Operating Officer | Executive Vice-President and Chief Financial Officer | ||
Mark Boyajian Nashville, Tennessee, United States |
Executive Vice-President and Chief Business Engineering Officer |
President, Canada Operations |
© CGI Inc. |
2022 ANNUAL INFORMATION FORM 3 |
Name and Residence | Principal Occupation with the Company |
Previously held position (last five years) | ||
Caroline de Grandmaison Rueil-Malmaison, France |
President, France and Luxembourg | Senior Vice-President, WSE Paris Energy and Utilities, Communication, Retail and Manufacturing Senior Vice-President, WSE Paris Retail, Manufacturing and Strasbourg Senior Vice-President, WSE Business Consulting Trust | ||
Benoit Dubé Saint-Lambert, Quebec, Canada |
Executive Vice-President, Legal and Economic Affairs, and Corporate Secretary |
| ||
Laurent Gerin Neuilly-sur-Seine, Hauts-de-Seine, France |
President, Southern Europe and Western and Southern Europe Delivery Centers of Excellence | President, Western and Southern Europe Operations Senior Vice-President, Italy, Spain and South French Region | ||
Julie Godin Westmount, Quebec, Canada |
Co-Chair of the Board, Executive Vice-President, Strategic Planning and Corporate Development |
Vice-Chair of the Board, Executive Vice-President, and Chief Planning and Administration Officer | ||
Serge Godin Westmount, Quebec, Canada |
Founder and Executive Chairman of the Board |
| ||
Dirk A. de Groot Voorschoten, Netherlands |
President, Northwest and Central-East Europe Operations | Senior Vice-President, Netherlands | ||
David L. Henderson Vienna, Virginia, United States |
President, Global IP Solutions | President, United States Operations, Commercial and State Government | ||
Timothy J. Hurlebaus Annandale, Virginia, United States |
President, United States Operations, Commercial and State Government | President, United States Operations, Federal | ||
André Imbeau(a) Beloeil, Quebec, Canada |
Founder and Advisor to the Executive Chairman of the Board |
| ||
Bernard Labelle Quebec City, Quebec, Canada |
Executive Vice-President and Chief Human Resources Officer | Senior Vice-President, Global Human Resources and Leadership Institute Senior Vice-President, Global Human Resources | ||
Leena-Mari Lähteenmaa Helsinki, Uusimaa, Finland |
President, Finland, Poland and Baltics Operations | Senior Vice-President, Finland | ||
Kevin M. Linder Burlington, Ontario, Canada |
Senior Vice-President, Investor Relations | Senior Vice-President, Finance and Treasury, and Head of Investor Relations Senior Vice-President, Finance and Treasury Senior Vice-President and Corporate Controller | ||
George J. Mattackal Bangalore, Karnataka, India |
President, Asia Pacific Global Delivery Centers of Excellence |
| ||
Tara McGeehan Flintham Newark, Nottinghamshire, United Kingdom |
President, United Kingdom and Australia Operations |
| ||
Steve Perron Sainte-Julie, Quebec, Canada |
Executive Vice-President and Chief Financial Officer | Senior Vice-President and Corporate Controller Senior Vice-President, Finance and Treasury | ||
George D. Schindler Fairfax, Virginia, United States |
President and Chief Executive Officer |
| ||
Torsten Strass Wiesbaden, Hesse, Germany |
President, Scandinavia and Central Europe Operations | President, Central and Eastern Europe Operations Senior Vice-President, Germany Operations | ||
Guy Vigeant Deux-Montagnes, Quebec, Canada |
President, Canada Operations | Senior Vice-President, Mergers and Acquisitions Senior Vice-President, Strategic Corporate Development |
(a) | Mr. Imbeau is a director and officer of the Company, and holds an interest in the Class B Shares. |
CGIs global strategy is overseen by a management committee (Executive Committee) comprised of the Companys executive officers and certain other key functional employees. The Executive Committee meets at least six times a year and is responsible for enterprise-wide strategy as well as all enterprise policies and operations oversight.
© CGI Inc. |
2022 ANNUAL INFORMATION FORM 4 |
Ownership of Securities on the Part of Directors and Officers
The Company incorporates by reference the disclosure under the heading Principal Holders of Class A Subordinate Voting Shares and Class B Shares on page 8 of CGIs Circular dated December 5, 2022.
Description of CGIs Business
Mission, Vision and Strategy
The mission of CGI is to help its clients succeed through outstanding quality, competence and objectivity, providing thought leadership and delivering the best services and solutions to fully satisfy client objectives in information technology (IT), business processes, and management. In all we do, we are guided by our dream and living by our values to foster trusted relationships and meet our commitments now and in the future.
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):
| 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, our range of end-to-end services which allows us to consider a broad range of acquisitions. A second lever is CGIs industry sector mix, which 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 which 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
CGIs 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 CGI members 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: One of our key strategic goals is 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. In addition, a majority of CGI 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. |
| Comprehensive quality processes: CGIs 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. |
© CGI Inc. |
2022 ANNUAL INFORMATION FORM 5 |
| Environmental, Social and Governance (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 Compacts 10 principles 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. |
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 three common attributes:
| They have highly agile business models and are better at operating as aligned teams between business and IT. |
| They have been faster in modernizing the entire IT environmentincluding through automationwhile assuring security and data privacy. |
| They are addressing business transformation holistically, including culture change, ecosystem touchpoints, and the integration of sustainability objectives. |
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.
Business Structure
During the fiscal year ended September 30, 2022, the Company realigned its management structure, resulting in a reorganization and the creation of two new operating segments, namely Scandinavia and Central Europe (Germany, Sweden and Norway) and Northwest and Central-East Europe (primarily Netherlands, Denmark and Czech Republic) collectively formerly known as Scandinavia and Central and Eastern Europe in the prior fiscal year, and, less significantly, the transfer of our Belgium operations from Western and Southern Europe operating segment to the Northwest and Central-East Europe operating segment. As a result, 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; United Kingdom (U.K.) and Australia; Finland, Poland and Baltics; Northwest and Central-East Europe; and Asia Pacific Global Delivery Centers of Excellence (mainly India and Philippines) (Asia Pacific).
The Company has restated the segmented information for the comparative periods to conform to the new segmented information structure. For additional information on our segments, please refer to sections 3.4., 3.6., 5.4. and 5.5. of CGIs Managements Discussion and Analysis (MD&A) for the fiscal years ended September 30, 2022 and 2021 and to note 28 of our Annual Audited Consolidated Financial Statements for the fiscal years ended September 30, 2022 and 2021, which were filed with Canadian securities regulators and are available at www.sedar.com and on CGIs website at www.cgi.com.
The following table provides a summary of the year-over-year changes in our revenue, in total and by segment before eliminations, for the fiscal years ended September 30, 2022 and 2021:
Reporting Segment Revenue (in thousands of CAD) |
2022 | 2021 | ||
Western and Southern Europe |
2,152,113 | 1,917,760 | ||
U.S. Commercial and State Government |
2,075,321 | 1,800,747 | ||
Canada |
1,981,380 | 1,755,804 | ||
U.S. Federal |
1,750,902 | 1,607,431 | ||
Scandinavia and Central Europe |
1,571,118 | 1,663,470 | ||
U.K. and Australia |
1,291,125 | 1,355,603 | ||
Finland, Poland and Baltics |
729,024 | 768,994 | ||
Northwest and Central-East Europe |
692,859 | 716,183 | ||
Asia Pacific |
799,661 | 680,554 | ||
Eliminations |
(176,302) | (139,753) | ||
Total |
12,867,201 | 12,126,793 |
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Services Offered by CGI
CGI delivers end-to-end services that help clients achieve the digital transformation of their value chains. Together, our end-to-end services and solutions help clients design, implement, run and operate the technology critical to achieving their business strategies.
Our portfolio encompasses:
| Business and strategic IT consulting and systems integration services: CGI helps clients create a path for future growth and sustainable value through business and strategic IT consulting services such as business strategy, business and operating model design, human-centered experience, customer value and operational excellence, organizational change management, sustainability and digital transformation. 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. |
| 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. |
| Intellectual property (IP): CGIs 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 and provider-neutral cloud approaches. 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, and include the following(a): |
| Momentum is an integrated enterprise resource planning (ERP) suite trusted by more than 100 organizations across the three branches of the U.S. federal government, including intelligence and defense organizations. Momentum is used by federally funded non-profit organizations as well. Momentum provides comprehensive capabilities to improve federal back-office operations. Its delivery options include on-premises implementation, managed services hosted in a CGI data center or publicly available cloud, or as a software as a service (SaaS) subscription-based offering. Momentum offers practical support for todays financial, acquisitions and budgeting operations, combined with strategic solutions to position agencies and organizations for the rapidly changing environment of the future. |
| CGI Advantage is a leading ERP solution that helps state and local governments improve their back-office operations enabling digital insights through embedded analytics to better serve citizens and streamlining engagement through a mobile-first design and engaging user experience. Its full suite of ERP capabilities is designed specifically for the public-sector, including financial management, vendor self-service, grants management, performance budgeting, collections, human resources management, case management and procurement. CGI Advantage delivery options include on-premises implementation or managed services hosted in a private or publicly available cloud. |
| CGI CustomerAdvance is an end-to-end outsourcing solution with the ability to deliver individual components to support the needs of clients that require one or more specialized services, particularly those that would like to improve the customer experience using an omni channel solution. It is used in five continents, more than 70 countries and in 39 languages, and its business process services include global call center support, fee processing, cash management and complex scheduling, all supported by a cloud-based customer relationship management software. |
| CGI Collections360 powered by CGIs CACS X, is a SaaS debt relief and recovery offering available in our cloud-native credit platform, CGI Credit Studio. CGI Credit Studio uses the latest technology integration tools, advanced analytics, intelligent automation and machine learning to align operational objectives with the future of default management and is designed to enable continuous change without adding the overhead and complexity of legacy systems. CGI Trade360 delivers all of the software, infrastructure and support resources necessary to power a banks global trade business. Delivered primarily as a SaaS offering, CGI Trade360 enables banks to provide the full range of traditional trade, supply chain (payables and receivables), cash and collateral management services to their customers anywhere, anytime on a single, integrated and global platform. Built uniquely for multi-bank, multi-currency and multi-time zone processing, CGI Trade360 is used in 83 countries and in over 300 bank locations across the globe. |
(a) | CACS, CGI Advantage, CGI Collections360, CGI Credit Studio, CGI CustomerAdvance, CGI Trade360 and Momentum are trademarks or registered trademarks of CGI or its subsidiaries. |
Markets for CGIs Services
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
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2022 ANNUAL INFORMATION FORM 7 |
the services and solutions we deliver within our targeted industries and provide thought leadership, blueprints, frameworks and technical accelerators that help clients 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 industries, our leaders regularly participate in cabinet meetings and councils to advance the strategies, services and solutions we deliver to our clients.
Intangible Properties
We own and use various proprietary intangible assets that include, without limitation, brand names, trademarks, patents and patent applications, copyrights and copyrighted material, trade secrets, domain names, customer lists, know-how, tools, techniques, software, processes and methodologies. We derive value through the use of these assets in our business activities and they are central to our operations.
Our success depends, in part, on our ability to protect our proprietary intangible assets that we use to provide our services. We rely on a combination of contractual and licensing agreements and trademark, copyright, trade secret and patent laws to protect these assets against infringement.
Our general practice is to pursue trademark, patent, copyright or other appropriate IP protection that is timely and necessary to protect and leverage our IP assets for the longest possible period. We will continue to seek appropriate IP protection for our technology, software, methodologies, processes, know-how, tools, techniques and other proprietary intangible assets throughout the various countries within which CGI operates.
Human Resources
As of September 30, 2022, CGI employed approximately 90,000 consultants and professionals worldwide, whom are called members as they are also owners. In order to encourage the high degree of commitment necessary to provide quality and continuity of client service, CGI offers its members a wide range of benefits, including the right for members to invest a percentage of their salary in the purchase of Class A Shares, which the Company will then match dollar for dollar up to a set maximum, the whole pursuant to our Share Purchase Plan. Among the countries in which we currently offer our Share Purchase Plan, approximately 75,600 of our members own Class A Shares. The Company also has a Profit Participation Plan, a short-term incentive plan that pays an annual cash bonus based on achievement of performance objectives and designed to provide CGIs management and members with an incentive to increase the profitability and growth of the Company, as well as a full range of other benefits. In addition, the Company also has long-term incentive plans, including a Share Option Plan and Performance Share Unit Plans, designed to ensure that its leaders interests are closely aligned with those of all shareholders.
Specialized Skills and Knowledge
The skills, expertise and competencies required by clients in the IT industry are constantly evolving. CGI strives to be one step ahead and adopts a proactive approach, not only by recruiting engaged and skilled professionals but, more importantly, by developing and retaining them to meet our clients needs. In addition to training and development activities and participation in professional associations, our talent management strategy includes stretch project assignments (local and abroad), job shadowing, coaching, mentoring and access to leadership and core competencies development programs through CGIs Leadership Institute. Over the years, we have put in place multiple initiatives to meet our clients needs, fulfill our business plans, and maintain and develop professionals of very high calibre for the benefits of our clients, members and shareholders.
CGI Offices and Proximity and Global Delivery Models
CGI serves its clients from offices and through a network of global delivery locations across six continents: North America, South America, Europe, Africa, Asia and Australia. Through our proximity-based business model, CGI is deeply rooted in our clients businesses and communities. We are organized by metro markets in which clients have concentrated footprints, which empowers our local teams to build strong, trusted relationships, providing accountability for delivering client success.
CGIs metro market teams augment their local expertise through skilled resources and experience from across our global operations to provide clients flexible delivery options that balance cost, quality and risk. Our delivery centers enable us to provide our clients with access to the right skills from the right locations at the right time and for the best price. This assures cultural alignment, while providing multilingual services across multiple time zones.
CGIs main offices and delivery centers are listed below:
Canada | ||||||
Burnaby, BC | Halifax, NS | Ottawa, ON | Sherbrooke, QC | |||
Calgary, AB | Markham, ON | Quebec City, QC | Stratford, PEI | |||
Drummondville, QC | Mississauga, ON | Regina, SK | Toronto, ON | |||
Edmonton, AB | Moncton, NB | Saguenay, QC | Victoria, BC | |||
Fredericton, NB | Montréal, QC | Shawinigan, QC |
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United States | ||||||
Albany, NY | Cleveland, OH | Lansing, MI | Sacramento, CA | |||
Annapolis Junction, MD | Columbia, SC | Lawton, OK | San Antonio, TX | |||
Arlington, VA | Columbus, OH | Lebanon, VA | Sterling, VA | |||
Atlanta, GA | Dallas, TX | Los Angeles, CA | Tampa, FL | |||
Austin, TX | Denver, CO | Mobile, AL | Troy, AL | |||
Baltimore, MD | Fairfax, VA | New York, NY | Tucson, AZ | |||
Beavercreek, OH | Hartford, CT | North Charleston, SC | Waterville, ME | |||
Belton, TX | Houston, TX | Oakland, CA | Wausau, WI | |||
Birmingham, AL | Huntsville, AL | Phoenix, AZ | Westerville, OH | |||
Burlington, MA | Knoxville, TN | Pittsburgh, PA | ||||
Charlotte, NC | Lafayette, LA | Plymouth Meeting, PA | ||||
South America | ||||||
Bogotá, Colombia | ||||||
Europe | ||||||
Aarhus, Denmark | Chippenham, U.K. | Le Mans, France | Palma, Spain | |||
Aix-en-Provence, France | Clermont-Ferrand, France | Leatherhead, U.K. | Paris, France | |||
Amiens, France | Cologne (Köln), Germany | Leinfelden-Echterdingen, Germany | Porto, Portugal | |||
Amstelveen, Netherlands | Darmstadt, Germany | Lille, France | Prague, Czech Republic | |||
Amsterdam, Netherlands | Diegem, Belgium | Lisbon, Portugal | Reading, U.K. | |||
Arnhem, Netherlands | Düsseldorf, Germany | London, U.K. | Rennes, France | |||
Ballerup, Denmark | Edinburgh, U.K. | Lyon, France | Riga, Latvia | |||
Berlin, Germany | Eindhoven, Netherlands | Maastricht, Netherlands | Rotterdam, Netherlands | |||
Bertrange, Luxembourg | Erfurt, Germany | Madrid, Spain | Sacavém, Portugal | |||
Bochum, Germany | Espoo, Finland | Málaga, Spain | Sintra, Portugal | |||
Bordeaux, France | Gävle, Sweden | Malmö, Sweden | Solihull, U.K. | |||
Borlänge, Sweden | Glasgow, U.K. | Manchester, U.K. | Stockholm, Sweden | |||
Bratislava, Slovakia | Gloucester, U.K. | Milan, Italy | Strasbourg, France | |||
Braunschweig, Germany | Göteborg, Sweden | Milton Keynes, U.K. | Sulzbach (Taunus), Germany | |||
Bremen, Germany | Grenoble, France | Montpellier, France | Sundsvall, Sweden | |||
Brest, France | Groningen, Netherlands | Munich, Germany | Tallinn, Estonia | |||
Bridgend, U.K. | Hamburg, Germany | Nantes, France | Tampere, Finland | |||
Bristol, U.K. | Helsinki, Finland | Nice, France | Toulouse, France | |||
Brno, Czech Republic | Ivögatan, Sweden | Niort, France | Turku, Finland | |||
Bromölla, Sweden | Karlstad, Sweden | Oslo, Norway | Vilnius, Lithuania | |||
Bucharest, Romania | Krakow, Poland | Östersund, Sweden | Warsaw, Poland | |||
Budapest, Hungary | Lahti, Finland | Ostrava-Pustkovec, Czech Republic | ||||
Chelmsford, U.K | Larmor-Plage, France | Oulu, Finland | ||||
Africa | ||||||
Casablanca, Morocco | Fes, Morocco | Rabat, Morocco | ||||
Asia | ||||||
Bangalore, India | Hyderabad, India | Manila, Philippines | Pune, India | |||
Chennai, India | Kuala Lumpur, Malaysia | Mumbai, India | ||||
Australia | ||||||
Melbourne, Australia | ||||||
Indicates locations where CGI operates delivery centers. |
Commercial Alliances
CGI currently has commercial alliance agreements with various technology and business partners. These non-exclusive commercial agreements with leading technology providers allow the Company to provide its clients with high quality technology and related CGI professional services, often on advantageous commercial terms for our clients. CGIs business partners include prominent hardware, software and cloud service providers.
Quality Processes
CGI holds ISO quality certification for the management of its partnerships with each of its three major stakeholder groups: clients, members and shareholders.
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CGIs ISO 9001 certified operations that are reflected in its Client Partnership Management Framework, its Member Partnership Management Framework and its Shareholder Partnership Management Framework greatly contribute to clearly defining clients objectives, properly scoping projects and identifying and allocating necessary resources to meet objectives. Together, these frameworks allow CGI to more efficiently build clients requirements into its solutions: clients are constantly kept informed, their degree of satisfaction is regularly measured and assessed and members interests are kept aligned with those of CGIs clients and shareholders by providing incentive compensation to managers linked to CGIs results and creating value through share ownership.
The Company began working towards obtaining ISO 9001 certification for the portion of its operations covered by its Project Management Framework (which now forms part of its Client Partnership Management Framework) in 1993 and CGIs Quebec City office was granted ISO 9001 certification in June 1994, which allowed CGI to become North Americas first organization in the IT consulting field to receive ISO 9001 certification for the way in which it managed projects. Beginning in 1995, CGI expanded its ISO 9001 certification throughout its Canadian, U.S. and international offices as well as its corporate headquarters. In the context of CGIs continued high growth rate, its ISO certified quality system has been a key ingredient in spreading its culture, in part because it helps to integrate new members successfully, and in maintaining a high degree of quality of services by applying the same processes into each business unit.
As clients grow and IT projects become increasingly complex, CGI strives to further refine its quality processes while allowing them to branch out across all its activities. CGIs enhanced quality system is simpler and provides the Companys business units with greater autonomy in a context of decentralized activities. Over the years, CGI has also obtained additional ISO certifications and other appraisals, including ISO 27001 certification, which supports its strong information security management system, in more than 90 locations, and CMMI Level 5 certification, which supports its application management and infrastructure management services in its India global delivery centers. Some of CGIs strategic business units maintain additional ISO certifications in accordance with local requirements, including: ISO 20000 Information technology Service management; ISO 14001 Environmental management system; ISO 27701 Privacy information management; and ISO 22301 Business continuity management system.
The IT Services Industry
Trends and Outlook
CGI will continue executing on our Build and Buy growth strategy, expanding through both profitable organic growth (Build) and accretive acquisitions (Buy).
No matter the industry and its associated trends, technology no longer is an enabler, its a business driverand, increasingly, its becoming the business. Any new service, program or efficiency improvement brings the need for additional IT services.
As part of our annual strategic planning activities during the fiscal year ended September 30, 2022, we held 1,675 strategic conversations with business and technology executives in the industries and regions we serve.
In these Voice of Our Clients interviews, executives said again this year that meeting customer and citizen expectations for digital services remains the highest impact trend across industries. Cybersecurity ranked second in impact, rising year-over-year, and customer/citizen experience (CX) ranked third. CX and IT modernization also are among the top IT and business priorities, reflecting strong themes among executives globally.
In line with these trends and priorities is a continued focus on digital transformation. Of the executives we interviewed, 91% have a digitization strategy in place; however, only 25% reported they are producing expected results from such strategies, up from 20% last year.
Helping clients achieve the business results they need from digitization requires significant investments in scale, reach and capabilities. We believe that the potential remains strong to help organizations accelerate their performance with our end-to-end services and solutions including business and strategic IT consulting, systems integration, managed IT and business process services, and intellectual property (IP).
As our clients develop and implement their strategies, spending patterns continue to evolve. We have good visibility into clients expected spending plans based on our Voice of Our Clients interviews.
For example, nearly 60% of clients plan for flat-to-declining operating expense (OpEx) spend over the next year, in part as a response to economic predictions. Correspondingly, clients plan to increase their reliance on managed services by up to 13% over the next 3 yearsa clear and accelerating opportunity for CGI.
At the same time, 86% of clients plan for flat-to-increasing capital expense (CapEx) spend over the next year. Furthermore, 88% of our clients indicated they are having difficulty hiring IT talentleading to more of our clients who plan to externalize the majority of their IT services work.
We believe this demonstrates a large untapped potential market for our end-to-end services and solutions.
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Competitive Environment
As the market dynamics and industry trends continue to increase client demand for 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.
CGIs 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 the client operates. |
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.
Significant Developments of the Three Most Recent Fiscal Years
Key Performance Measures
The Company reports its financial results in accordance with International Financial Reporting Standards (IFRS). However, we use a combination of GAAP, non-GAAP and supplementary financial measures and ratios to assess the Companys performance. The non-GAAP measures used to report our financial results do not have any standardized meaning prescribed by IFRS 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.
The table below summarizes our most relevant key performance measures used in this Annual Information Form:
Profitability |
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. 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 to investors for the same reason. A reconciliation of the revenue prior to foreign currency impact to its closest IFRS measure can be found in section 3.4. and 5.4. of CGIs MD&A for the fiscal years ended September 30, 2022 and 2021.
Adjusted EBIT (non-GAAP) is a measure of earnings excluding acquisition-related and integration costs, net finance costs and income tax expense. Management believes this measure is useful to investors as it best reflects the performance of the Companys activities and allows for better comparability from period to period as well as to trend analysis. A reconciliation of the adjusted EBIT to its closest IFRS measure can be found in section 3.7. and 5.6. of CGIs MD&A for the fiscal years ended September 30, 2022 and 2021.
Adjusted EBIT margin (non-GAAP) is obtained by dividing our adjusted EBIT by our revenue. Management believes this measure is useful to investors as it best reflects the performance of the Companys activities and allows for better comparability from period to period as well as to trend analysis. A reconciliation of the adjusted EBIT to its closest IFRS measure can be found in section 3.7. of CGIs MD&A for the fiscal years ended September 30, 2022 and 2021.
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. Please refer to note 21 of CGIs audited consolidated financial statements for the fiscal years ended September 30, 2022 and 2021, 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. Management believes this measure is useful to investors as it best reflects the Companys performance and allows for better comparability from period to |
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period. A reconciliation of the net earnings excluding specific items to its closest IFRS measure can be found in section 3.8.3. and 5.6.1. of CGIs MD&A for the fiscal years ended September 30, 2022 and 2021.
Net earnings margin excluding specific items (non-GAAP) is obtained by dividing our net earnings excluding acquisition-related and integration costs by our revenues. Management believes this measure is useful to investors as it best reflects the Companys performance and allows for better comparability from period to period. A reconciliation of the net earnings excluding specific items to its closest IFRS measure can be found in section 3.8.3. and 5.6.1. of CGIs MD&A for the fiscal years ended September 30, 2022 and 2021.
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 that this measure is useful to investors as it best reflects the Companys 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 can be found in section 3.8. and 5.6. of CGIs MD&A for the fiscal years ended September 30, 2022 and 2021, while the basic and diluted earnings per share excluding specific items can be found in section 3.8.3. and 5.6.1. of CGIs MD&A for the fiscal years ended September 30, 2022 and 2021.
Effective tax rate excluding specific items (non-GAAP) is obtained by dividing income tax expense, excluding tax deductions on acquisition-related and integration costs, by earnings before income taxes excluding specific items. Management believes that this measure allows for better comparability from period to period. A reconciliation of the effective tax rate excluding specific items to its closest IFRS measure can be found in section 3.8.3. and 5.6.1. of CGIs MD&A for the fiscal years ended September 30, 2022 and 2021. | ||
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 Companys 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 quarters revenue over 90 days. Management tracks this metric closely to ensure timely collection and healthy liquidity. Management believes this measure is useful to investors as it demonstrates the Companys ability to timely convert its trade receivables and work in progress into cash. | |
Growth |
Constant currency growth (non-GAAP) is a measure of revenue growth before foreign currency translation impacts. This growth is calculated by translating current period results in local currency using the conversion rates in the equivalent period from the prior year. 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 to investors for the same reason.
Backlog includes new contract wins, extensions and renewals (bookings), backlog acquired through business acquisitions and adjusted for the backlog consumed during the period as a result of client work performed, cancellation and the impact of foreign currencies to our existing contracts. Bookings and backlog incorporate estimates from management that are subject to change. 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 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 period. This metric allows management to monitor the Companys business development efforts to ensure we grow our backlog and our business over time and management believes that this measure is useful to investors for the same reason. Managements objective is to maintain a target ratio greater than 100% over a trailing twelve-month period. Management believes that monitoring the Companys 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. | |
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 uses the net debt metric to monitor the Companys financial leverage and believes that this metric is useful to investors as it provides insight into its financial strength. A reconciliation of net debt to its closest IFRS measure can be found in section 4.5. of CGIs MD&A for the fiscal years ended September 30, 2022 and 2021.
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 uses the net debt to capitalization ratio to monitor the proportion of debt versus capital used to |
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finance the Companys operations and to assess its financial strength. Management believes that this metric is useful to investors for the same reasons. | ||
Return on equity (ROE) is a measure of the rate of return on the ownership interest of our shareholders and is calculated as the proportion of net earnings for the last twelve months over the last four quarters average shareholders equity. Management looks at ROE to measure its efficiency at generating net earnings for the Companys shareholders and how well the Company uses the invested funds to generate net earnings growth and believes that this measure is useful to investors for the same reasons. | ||
Return on invested capital (ROIC) (non-GAAP) is a measure of the Companys 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 examines this ratio to assess how well it is using its funds to generate returns and believes that this measure is useful to investors for the same reason. |
Fiscal Year ended September 30, 2022
Acquisitions
During the fiscal year ended September 30, 2022, the Company made the following acquisitions through its subsidiaries:
| On October 1, 2021, the Company acquired Array Holding Company, Inc. a leading digital services provider that optimizes mission performance for the U.S. Department of Defense and other government organizations, based in the United States and headquartered in Greenbelt, Maryland. The acquisition added approximately 275 professionals to the Company. |
| On October 28, 2021, the Company acquired Cognicase Management Consulting, a leading provider of technology and management consulting services and solutions, headquartered in Madrid, Spain. The acquisition added approximately 1,500 professionals to the Company. |
| On February 28, 2022, the Company acquired Unico Computer Systems Pty Ltd, a technology consultancy and systems integrator, headquartered in Melbourne, Australia. The acquisition added approximately 130 professionals to the Company. |
| On May 25, 2022, the Company acquired all of the outstanding shares of Harwell Management (Harwell). Based in France, Harwell is a management consulting firm specializing in the financial services industry, headquartered in Paris, France. The acquisition added approximately 150 professionals to the Company. |
The Company completed these acquisitions for a total purchase price of $238.4 million.
| On March 11, 2022, the Company announced that it had entered into an agreement for the acquisition of all of the shares of Umanis SA (Umanis), a digital company specializing in data, digital and business solutions, headquartered in Paris, France. On May 31, 2022, the Company announced that it had acquired control of Umanis by completing a block purchase representing 72.4% of Umanis share capital (excluding treasury shares) and that it had filed with the French financial markets authority (Autorité des Marchés Financiers) the draft mandatory tender offer to purchase the remaining outstanding shares. By July 18, 2022, the Company acquired an aggregate total interest of more than 90.0% of the outstanding shares (excluding treasury shares) and launched a statutory squeeze-out process through which the remaining shares were acquired on July 29, 2022. The transaction values the entire share capital of Umanis at $420.3 million, on a fully diluted basis. This acquisition added approximately 3,000 professionals to the Company. |
Long-Term Debt
On November 1, 2022, the Companys $1,500 million unsecured committed revolving credit facility was extended by one year to November 2027 and can be further extended. There were no material changes in the terms and conditions including interest rates and banking covenants.
For the year ended September 30, 2022, the Company repaid $401.7 million of its long-term debt, mainly driven by the scheduled repayments of senior unsecured notes in the amount of $384.6 million (US$300.0 million). In addition, the Company paid $154.0 million of lease liabilities and used $113.0 million to repay debt assumed from business acquisitions.
On June 14, 2022, the Company completed an offer to exchange all of its outstanding US$1.0 billion in aggregate principal amount of senior unsecured notes, originally issued on September 14, 2021, for an equivalent amount of notes registered with the U.S. Securities and Exchange Commission.
Normal Course Issuer Bid
On February 1, 2022, the Companys Board of Directors authorized and subsequently received regulatory approval from the TSX for the renewal of CGIs NCIB which allows for the purchase for cancellation of up to 18,781,981 Class A subordinate voting shares (Class A Shares) representing 10% of the Companys public float as of the close of business on January 24, 2022. Class A Shares may be purchased for cancellation under the NCIB commencing on February 6, 2022 until no later than February 5, 2023, 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.
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During the year ended September 30, 2022, the Company purchased for cancellation 8,773,244 Class A Shares for $908.7 million at a weighted average price of $103.57 under the previous and current NCIB. The purchased shares included 3,968,159 and 938,914 Class A Shares purchased for cancellation on March 1, 2022, and August 1, 2022 respectively, each from Caisse de dépôt et de placement du Québec, for total aggregate cash consideration of $500.0 million. 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.
As at September 30, 2022, of the 8,773,244 Class A Shares purchased for cancellation, 113,405 Class A Shares remained unpaid for $11.7 million.
As at September 30, 2022, the Company could purchase up to 12,319,503 Class A Shares for cancellation under the current NCIB.
Bookings and Book-To-Bill Ratio
Bookings for the fiscal year ended September 30, 2022 were $14.0 billion representing a book-to-bill ratio of 108.5%. Of the $14.0 billion in bookings signed during this year, 33% came from new business, while 67% came from extensions, renewals and add-ons.
The Companys largest vertical markets for bookings were government, financial services and MRD, making up approximately 38%, 24% and 20% of total bookings, respectively. From a reporting segment perspective, our U.S. Commercial and State Government operating segment accounted for 19% of total bookings, followed by our Western and Southern Europe operating segment at 15%, and Canada, U.K. and Australia operating segments at 14%.
Information regarding our bookings is a key indicator of the volume of our business over time. However, due to the timing and transition period associated with managed IT and business process services contracts, the realization of revenue related to these bookings may fluctuate from period to period. The values initially booked may change over time due to their variable attributes, including demand-driven usage, modifications in the scope of work to be performed caused by changes in client requirements as well as termination clauses at the option of the client. As such, information regarding our bookings is not comparable to, nor should it be substituted for, an analysis of our revenue. Management however believes that it is a key indicator of potential future revenue.
Foreign currency impact
Foreign currency rate fluctuations unfavourably impacted our revenue by 4.4 %, compared to 1.4% during the fiscal year ended September 30, 2021. These contrast with a favourable impact of 0.5% during the fiscal year ended September 30, 2020.
Fiscal Year ended September 30, 2021
Acquisitions
During the fiscal year ended September 30, 2021, the Company made the following acquisitions through its subsidiaries:
| On December 31, 2020, the Company acquired the assets of Harris, Mackessy & Brennan, Inc.s Professional Services Division, a division focused on high-end technology consulting and services for commercial and government clients, based in the United States and headquartered in Columbus, Ohio. The acquisition added approximately 165 professionals to the Company. |
| On May 3, 2021, the Company acquired Sense Corp, a professional services firm focused on digital systems integration and consulting for state and local government and commercial clients, based in the United States and headquartered in St. Louis, Missouri. The acquisition added approximately 300 professionals to the Company. |
The Company completed these acquisitions for a total purchase price of $111.5 million.
Senior Unsecured Notes
On September 14, 2021, the Company issued US$1.0 billion in aggregate principal amount of senior unsecured notes and on September 16, 2021, the Company issued $600 million in aggregate principal amount of senior unsecured notes, with the details below:
Notional Amount | Maturity | Coupon Rate | ||||
2021 5-year USD Senior Notes1 |
US $600.0 million | September 14, 2026 | 1.45% | |||
2021 10-year USD Senior Notes1 |
US $400.0 million | September 14, 2031 | 2.30% | |||
2021 7-year CAD Senior Notes2 |
$600.0 million | September 18, 2028 | 2.10% |
1 | Interest payable semi-annually on March 14 and on September 14 until maturity |
2 | Interest payable semi-annually on March 18 and on September 18 until maturity |
The aggregate net proceeds of the issuances, which were $1,847.3 million, were mainly used to repay in full the amended and restated unsecured committed term loan credit facility entered into in April 2020 in an amount of $1,583.5 million (US$1,250.0 million), and to make scheduled repayments of senior unsecured notes in the amount of $259.7 million.
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Long-Term Debt
On October 29, 2021, the Companys $1,500 million unsecured committed revolving credit facility was extended by two years to October 2026 and can be further extended. There were no material changes in the terms and conditions including interest rates and banking covenants.
For the year ended September 30, 2021, the Company increased its long-term debt by $1,885.3 million, mainly driven by the issuance of senior unsecured notes for an amount of $1,847.3 million, and repaid $1,888.8 million of its long-term debt mainly driven by the repayment in full of the 2020 Term Loan in an amount of $1,583.5 million (US$1,250.0 million), and the scheduled repayments of senior unsecured notes in the amount of $259.7 million. The Company also paid $169.7 million of lease liabilities.
Normal Course Issuer Bid
On January 26, 2021, the Companys Board of Directors authorized and subsequently received approval from the TSX for the renewal of CGIs NCIB which allows for the purchase for cancellation of up to 19,184,831 Class A Shares, representing 10% of the Companys public float as of the close of business on January 22, 2021. Class A Shares may be purchased for cancellation under the current NCIB commencing on February 6, 2021 until no later than February 5, 2022, or on such earlier date when the Company has either acquired the maximum number of Class A Shares allowable under the NCIB or elected to terminate the bid.
During the fiscal year ended September 30, 2021, the Company purchased for cancellation 15,460,465 Class A Shares for $1,519.2 million at a weighted average price of $98.27 under the previous and then current NCIB. The repurchased shares included 4,204,865 Class A Shares purchased for cancellation from Caisse de dépôt et placement du Québec for cash consideration of $400 million. The repurchase was made pursuant to an exemption order issued by the Autorité des marchés financiers, the securities regulator for the Province of Quebec, and is considered within the annual aggregate limit that the Company is entitled to repurchase under the then current NCIB.
As at September 30, 2021, of the 15,460,465 Class A Shares purchased for cancellation, 150,000 Class A Shares remained unpaid for $16.4 million.
As at September 30, 2021, the Company could purchase up to 9,977,266 Class A Shares for cancellation under the then current NCIB.
Bookings and Book-To-Bill Ratio
Bookings for the fiscal year ended September 30, 2021 were $13.8 billion representing a book-to-bill ratio of 114.2%. Of the $13.8 billion in bookings signed during this year, 32% came from new business, while 68% came from extensions, renewals and add-ons.
The Companys largest vertical markets for bookings were government, MRD and financial services, making up approximately 36%, 24% and 21% of total bookings, respectively. From a reporting segment perspective, our Western and Southern Europe and Canada operating segments each accounted for 17% of total bookings, followed by our U.S. Commercial and State Government operating segment at 16% and U.K. and Australia operating segment at 13%.
Information regarding our bookings is a key indicator of the volume of our business over time. However, due to the timing and transition period associated with managed IT and business process services contracts, the realization of revenue related to these bookings may fluctuate from period to period. The values initially booked may change over time due to their variable attributes, including demand-driven usage, modifications in the scope of work to be performed caused by changes in client requirements as well as termination clauses at the option of the client. As such, information regarding our bookings is not comparable to, nor should it be substituted for, an analysis of our revenue. Management however believes that it is a key indicator of potential future revenue.
Foreign currency impact
Foreign currency rate fluctuations unfavourably impacted our revenue by 1.4%. This contrasts with a favourable impact of 0.5% during the fiscal year ended September 30, 2020 and an unfavourable impact of 0.6% during the fiscal year ended September 30, 2019.
Fiscal Year ended September 30, 2020
Acquisitions
During the fiscal year ended September 30, 2020, the Company made the following acquisitions through its subsidiaries:
| On December 18, 2019, the Company acquired all of the outstanding shares of SCISYS Group Plc (SCISYS). SCISYS operates in several sectors, with deep expertise and industry leading solutions in the space and defense sectors, as well as in the media and broadcast news industries, and is headquartered in Dublin, Ireland. This acquisition added approximately 670 professionals to the Company, predominantly based in the U.K. and Germany. |
| On January 20, 2020, the Company acquired all of the outstanding shares of Meti Logiciels et Services SAS (Meti). Based in France, Meti is specialized in the development of software solutions for the retail sector across Europe and works with some of Europes largest retailers. This acquisition added approximately 300 professionals to the Company. |
| On March 31, 2020, the Company acquired all of the outstanding shares of TeraThink Corporation (TeraThink). Headquartered in Reston, Virginia, TeraThink is an IT and management consulting firm providing digitization, |
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enterprise finance, risk management, and data analytics services to the U.S. federal government. This acquisition added approximately 250 professionals to the Company. |
The Company completed these acquisitions for a total purchase price of approximately $273 million.
With significant strategic consulting, system integration and customer-centric digital innovation capabilities, these acquisitions were made to complement the Companys proximity model and expertise across key sectors, including communications, retail, space and defense and government.
Long-Term Debt
On November 5, 2019, the Companys $1,500 million unsecured committed revolving credit facility was extended by one year to December 2024 and can be further extended. There were no material changes in the terms and conditions.
On March 27, 2020, the Company entered into an unsecured committed term loan credit facility with a principal amount of US$750 million expiring in March 2022. Subsequently, the two-year unsecured committed term loan credit facility was amended and restated on April 2, 2020 to increase the principal amount by US$500 million, for a total principal amount of US$1,250 million (2020 Term Loan).
For the year ended September 30, 2020, the Company received through the 2020 Term Loan an amount of $1,764.7 million (US$1,250 million), had a net repayment of $334.4 million under our unsecured committed revolving credit facility and made scheduled repayments of senior unsecured notes in the amount of $65.9 million. In addition, we paid $175.3 million of lease liabilities, of which $165.3 million is related to the adoption of IFRS 16, and used $28.3 million to repay debt assumed from business acquisitions.
Normal Course Issuer Bid
On January 29, 2020, the Companys Board of Directors authorized and subsequently received approval from the TSX for the renewal of CGIs NCIB which allows for the purchase for cancellation of up to 20,149,100 Class A Shares, representing 10% of the Companys public float as of the close of business on January 22, 2020. Class A Shares may be purchased for cancellation under the current NCIB commencing on February 6, 2020 until no later than February 5, 2021, or on such earlier date when the Company has either acquired the maximum number of Class A Shares allowable under the NCIB or elected to terminate the bid.
During the fiscal year ended September 30, 2020, the Company purchased for cancellation 10,605,464 Class A Shares for $1,043.5 million at a weighted average price of $98.39 under the previous and then current NCIB. The repurchased shares included 6,008,905 Class A Shares purchased for cancellation from Caisse de dépôt et placement du Québec for cash consideration of $600 million. The repurchase was made pursuant to an exemption order issued by the Autorité des marchés financiers, the securities regulator for the Province of Quebec, and is considered within the annual aggregate limit that the Company is entitled to repurchase under the then current NCIB.
As at September 30, 2020, the Company could purchase up to 10,037,936 Class A Shares for cancellation under the then current NCIB.
Bookings and Book-To-Bill Ratio
Bookings for the fiscal year ended September 30, 2020 were $11.8 billion representing a book-to-bill ratio of 97.4%. Of the $11.8 billion in bookings signed during this year, 25% came from new business, while 75% came from extensions, renewals and add-ons.
The Companys largest vertical markets for bookings were government, MRD and financial services, making up approximately 36%, 23% and 21% of total bookings, respectively. From a reporting segment perspective, our U.S. Commercial and State Government operating segment accounted for 17% of total bookings, followed by our Western and Southern Europe operating segment at 16% and U.S. Federal operating segment at 15%.
Foreign currency impact
Foreign currency rate fluctuations favourably impacted our revenue by 0.5%. This contrasts with an unfavourable impact of 0.6% during the fiscal year ended September 30, 2019 and a favourable impact of 1.5% during the fiscal year ended September 30, 2018.
Forward Looking Information and Risks and Uncertainties
This Annual Information Form 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 CGIs 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
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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 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, 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, as well as the reputational and financial risks attendant to cybersecurity breaches and other incidents, and financial risks such as liquidity needs and requirements, maintenance of financial ratios, interest rate fluctuations and the discontinuation of major interest rate benchmarks and changes in creditworthiness and credit ratings; as well as other risks identified or incorporated by reference in this Annual Information Form, in CGIs annual and quarterly Managements Discussion and Analysis and in other documents that we make public, including our filings with the Canadian Securities Administrators (on SEDAR at www.sedar.com) and the U.S. Securities and Exchange Commission (on EDGAR at www.sec.gov). For a discussion of risks in response to the coronavirus (COVID-19) pandemic, see section titled Pandemic risks in CGIs Managements Discussion and Analysis for the fiscal years ended September 30, 2022 and 2021. Unless otherwise stated, the forward-looking information and statements contained in this Annual Information Form 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 Annual Information Form, 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 the section titled Risk Environment of CGIs Managements Discussion and Analysis for the fiscal years ended September 30, 2022 and 2021, which is incorporated by reference in this Annual Information Form. We also caution readers that the risks described in the previously mentioned section and in other sections of this Annual Information Form, CGIs Managements Discussion and Analysis for the fiscal years ended September 30, 2022 and 2021 and our other documents and filings 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.
Legal Proceedings
The Company is involved in legal proceedings, audits, claims and litigation arising in the ordinary course of its business. Certain of these matters seek damages in significant amounts. Although the outcome of such matters is not predictable with assurance, the Company has no reason to believe that the disposition of any such current matter could reasonably be expected to have a material adverse effect on the Companys financial position, results of operations or the ability to carry on any of its business activities.
Transfer Agent and Registrar
The Companys transfer agent for the Companys Class A Shares and Class B Shares is Computershare Investor Services Inc. whose head office is located in Toronto, Ontario. Share transfer service is available at Computershares Montréal, Quebec, and Toronto, Ontario, offices as well as at the offices of Computershare Trust Company, N.A. in Canton, MA, Jersey City, NJ and Louisville, KY.
Interests of Experts
The auditor of the Company is PricewaterhouseCoopers LLP (PwC). PwC has confirmed its independence to the Audit and Risk Management Committee of the Companys Board of Directors within the meaning of the Code of ethics of chartered professional accountants (Quebec). PwC is a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and is required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB.
The Company incorporates by reference the disclosure under the heading Fees Billed by the External Auditor on page 60 of CGIs Circular dated December 5, 2022.
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Additional Information
The Company will provide to any person, upon request to the Company, (i) a copy of this Annual Information Form, together with a copy of any document incorporated by reference herein, (ii) a copy of the Annual Audited Consolidated Financial Statements of the Company for the fiscal years ended September 30, 2022 and 2021 together with the accompanying report of the auditor and a copy of any subsequent interim financial statements, (iii) a copy of the Circular dated December 5, 2022 and (iv) a copy of the MD&A for the fiscal years ended September 30, 2022 and 2021.
Additional information regarding, among others, directors and named executive officers compensation and indebtedness, securities authorized for issuance under equity compensation plans and principal holders of the Companys shares, is included in the Circular dated December 5, 2022.
Additional financial information in relation to the fiscal year ended September 30, 2022 is presented in the Annual Audited Consolidated Financial Statements of the Company and in the related MD&A of the Company.
The documents mentioned above are available on SEDAR at www.sedar.com and on the Companys website at www.cgi.com. You can also obtain a copy of such documents by contacting CGIs Investor Relations by sending an e-mail to ir@cgi.com, by visiting the Investors section on the Companys website at www.cgi.com or by contacting us by mail or phone:
Investor Relations
CGI Inc.
1350 René-Lévesque Boulevard West
15th Floor
Montréal, Quebec, Canada
Canada
H3G 1T4
Tel.: +1-514-841-3200
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Appendix A
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Appendix A
Table of Contents
CHARTERS OF THE BOARD OF DIRECTORS AND ITS STANDING COMMITTEES |
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Charter of the Board of Directors |
A-1 | |||
Charter of the Corporate Governance Committee |
A-12 | |||
Charter of the Human Resources Committee |
A-21 | |||
Charter of the Audit and Risk Management Committee |
A-29 | |||
CODES OF ETHICS |
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Code of Ethics and Business Conduct |
A-40 | |||
Executive Code of Conduct |
A-56 | |||
CGI Anti-Corruption Policy |
A-58 |
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Charter of the Board of Directors CGI © CGI Inc. | 2022 ANNUAL INFORMATION FORM A-1
Charter of the Board of Directors
Important note
The CGI Constitution, including the Dream, Vision, Mission, and Values of the CGI Inc., form the fundamental principles of this Charter. This Charter should therefore be read in conjunction with CGIs Constitution.
1. | INTERPRETATION |
Financially Literate means the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Companys financial statements.
Independent Director means a director who meets the independence criteria set out in sections 1.4 and 1.5 of National Instrument 52-110 Audit Committees adopted by the Canadian Securities Administrators, as amended, which is reproduced in Appendix A.
Operationally Literate means having substantial experience in the execution of day to day business decisions and strategic business objectives acquired as a result of meaningful past experience as a chief executive officer or as a senior executive officer in another capacity but with a broad responsibility for operations.
2. | OBJECTIVES |
CGIs shareholders are the first and most important element in the Companys governance structures and processes. At each annual general meeting, the Companys shareholders elect the members of the Companys Board of Directors and give them a mandate to manage and oversee the management of the Companys affairs for the coming year.
In the normal course of operations, certain corporate actions which may be material to CGI are initiated from time to time by the Companys senior management and, at the appropriate time, are submitted to CGIs Board of Directors for consideration and approval. When appropriate, such matters are also submitted for consideration and approval by CGIs shareholders. All such approvals are sought in accordance with the charters of the Board of Directors and standing committees, CGIs corporate governance practices and applicable corporate and securities legislation.
The overall stewardship of the Company is the responsibility of the Board of Directors. In accomplishing the mandate it receives from the Companys shareholders, the Board of Directors may delegate certain of its authority and responsibilities to committees and management and reserve certain powers to itself. Nonetheless, it will retain full effective control over the Company.
3. | COMPOSITION |
3.1 | The majority of the Board of Directors shall be comprised of Independent Directors. The application of the definition of Independent Director to the circumstances of each individual director is the responsibility of the Board of Directors which will disclose on an annual basis whether it is constituted with the appropriate number of directors which are Independent Directors and the basis for its analysis. The Board of Directors will also disclose which directors are Independent Directors or not and provide a description of the business, family, direct and indirect shareholding or other relationship between each director and the Company. |
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3.2 | The Company expects and requires directors to be and remain free of conflictual interests or relationships and to refrain from acting in ways which are actually or potentially harmful, conflictual or detrimental to the Companys best interests. Each director shall comply with the Companys Code of Ethics and Business Conduct that governs the behaviour of members, directors and officers and shall complete and file annually with the Company any and all documents required pursuant to such code with respect to conflict of interests. This matter will also be reviewed annually by the Corporate Governance Committee. The Board of Directors will monitor compliance with said code as well as with the Companys Executive Code of Conduct applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or other persons performing similar functions within the Company. The Board will also be responsible for the review of requests for waivers from compliance with the codes for directors and officers. The Board of Directors will disclose in due time revisions to such codes as well as all waivers and specify the circumstances and rationale for granting the waiver. |
3.3 | The Board of Directors, following advice of its Corporate Governance Committee, is responsible for evaluating its size and composition and establishing a Board comprised of members who facilitate effective decision-making, have appropriate skills and diverse background. The Companys target is to have women represent at least 30% of its directors. The Board of Directors has the ability to increase or decrease its size. |
3.4 | CGIs corporate governance practices require that all members of CGIs Board of Directors be both Financially Literate and Operationally Literate. The members of the Board of Directors who serve on the Companys Audit and Risk Management Committee must be Financially Literate and Operationally Literate in the sense of having the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by CGIs financial statements, and otherwise in keeping with applicable governance standards under applicable securities laws and regulations. |
3.5 | A director who makes a major change in principal occupation will forthwith disclose this fact to the Board of Directors and will offer his or her resignation to the Board of Directors for consideration. It is not intended that directors who retire or whose professional positions change should necessarily leave the Board of Directors. However, there should be an opportunity for the Board of Directors to review the continued appropriateness of the Board of Directors membership under such circumstances. |
3.6 | The Board of Directors is responsible for approving new nominees to the Board. New directors will be provided with an orientation and education program which will include written information about the duties and obligations of directors, the business and operations of the Company, documents from recent Board of Directors meetings and opportunities for meetings and discussion with senior management and other directors. The details of the orientation of each new director will be tailored to that directors individual needs and areas of interest. The prospective candidates should fully understand the role of the Board of Directors and its committees and the contribution expected from individual directors and the Board of Directors will ensure that they are provided with the appropriate information to that effect. In addition, the Board of Directors will ascertain and make available to its members, when required, continuing education as per the business and operations of the Company. |
4. | RESOURCES |
4.1 | The Board of Directors will implement structures and procedures to ensure that it functions independently of management. |
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4.2 | The Board of Directors appreciates the value of having certain members of senior management attend each Board of Directors meeting to provide information and opinion to assist the directors in their deliberations. The Executive Chairman of the Board will seek the Board of Directors concurrence in the event of any proposed change to the management attendees at Board of Directors meetings. Management attendees will be excused for any agenda items which are reserved for discussion among directors only. |
5. | RESPONSIBILITIES AND DUTIES |
The principal responsibilities and duties of the Board of Directors include the following, it being understood that in carrying out their responsibilities and duties, directors may consult with management and may retain external advisors at the expense of the Company in appropriate circumstances. Any engagement of external advisors by the Board of Directors shall be subject to the approval of the Chair of the Corporate Governance Committee.
5.1 | General Responsibilities |
5.1.1 | The Board of Directors will oversee the management of the Company. In doing so, the Board of Directors will establish a productive working relationship with the Executive Chairman of the Board, the Co-Chair of the Board and the Chief Executive Officer and other members of senior management. |
5.1.2 | The Board of Directors will oversee the formulation of long-term strategic, financial and organizational goals for the Company. It shall approve the Companys strategic plan and review same on at least an annual basis. This plan will take into account the opportunity and risks of the Companys business. |
5.1.3 | As part of the responsibility of the Board of Directors to oversee the management of the Company, the Board of Directors will engage in active monitoring of the Company and its affairs in its stewardship capacity. |
5.1.4 | The Board of Directors will engage in a review of short and long-term performance of the Company in accordance with approved plans. |
5.1.5 | The officers of the Company, headed by the Executive Chairman of the Board, the Co-Chair of the Board and the Chief Executive Officer, shall be responsible for general day to day management of the Company and for making recommendations to the Board of Directors with respect to long-term strategic, financial, organizational and related objectives. |
5.1.6 | The Board of Directors will periodically review the significant risks and opportunities affecting the Company and its business and oversee the actions, systems and controls in place to manage and monitor risks and opportunities. The Board of Directors may impose such limits as may be in the interests of the Company and its shareholders. |
5.1.7 | The Board of Directors will oversee how the Company communicates its goals and objectives to its shareholders and other relevant stakeholders. |
5.1.8 | The Board of Directors will oversee the succession planning including appointing, training and monitoring senior management and the Chief Executive Officer in particular. |
5.1.9 | The Board of Directors is responsible for overseeing the Companys Guidelines on Timely Disclosure of Material Information whose purpose is to ensure that communications with the investment community, regulators, the media and the general public about the Company, particularly in respect of material information, are timely, accurate, broadly released in accordance with, and otherwise responsive to, all |
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applicable legal and regulatory requirements. These guidelines will be reviewed annually. The Company has established a Disclosure Committee responsible for all regulatory disclosure requirements and overseeing the Companys disclosure practices. The Disclosure Committee consists of the Executive Chairman of the Board, the Co-Chair of the Board, the Chief Executive Officer, the Chief Financial Officer, the Executive Vice-President, Legal and Economic Affairs and other designated leaders as appropriate. |
5.1.10 | The Board of Directors will oversee the integrity of the Companys internal control and management information systems. |
5.1.11 | The Board of Directors will make sure that the Company adopt prudent financial standards with respect to the business of the Company and prudent levels of debt in relation to the Companys consolidated capitalization. |
5.1.12 | The Board of Directors will also consider and approve: |
i) | transactions out of the ordinary course of business including, without limitation, proposals on mergers, acquisitions or other major investments or divestitures, consistent with the Operational Management Framework of the Company; |
ii) | all matters that would be expected to have a major impact on shareholders; |
iii) | the appointment of any person to any position that would qualify such person as an officer of the Company; and |
iv) | any proposed changes in compensation to be paid to members of the Board of Directors on the recommendation of the Human Resources Committee. |
5.1.13 | The Board of Directors will also receive reports and consider: |
i) | the quality of relationships between the Company and its three stakeholders; |
ii) | changes in the shareholder base of the Company from time to time and relationships between the Company and its significant shareholders; |
iii) | periodic reports from Board of Directors committees with respect to matters considered by such committees; |
iv) | health, safety and environmental matters as they affect the Company and its business; and |
v) | such other matters as the Board of Directors may, from time to time, determine. |
5.1.14 | The Board of Directors will oversee management through an ongoing review process. |
5.1.15 | The Board of Directors will, together with the Executive Chairman of the Board and the Co-Chair of the Board, develop position descriptions for the Executive Chairman of the Board, the Co-Chair of the Board and the Chief Executive Officer. The Board of Directors will also approve the corporate objectives that the Executive Chairman of the Board and the Co-Chair of the Board is responsible for meeting and assess his performance in relation to such objectives. The Board of Directors will raise any concerns related to the performance of the Chief Executive Officer with the Executive Chairman of the Board and the Co-Chair of the Board as appropriate. |
5.1.16 | The Board of Directors will receive a report from its Human Resources Committee on succession planning as set forth in such committees mandate. |
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5.2 | Self-Assessment of the Board of Directors and Peer Review |
The Board of Directors will annually review the assessment of the Board of Directors performance and recommendation provided by the Corporate Governance Committee, and every two years, if deemed advisable by the Board of Directors, conduct a peer review of the Independent Directors. The objective of this review is to increase the effectiveness of the Board of Directors and contribute to a process of continuous improvement in the Board of Directors execution of its responsibilities. It is expected that the result of such reviews will be to identify any areas where the directors and/or management believe that the Board of Directors and/or the directors individually could make a better contribution to the affairs of the Company. The Board of Directors will take appropriate action based upon the results of the review process.
5.3 | Committees |
5.3.1 | The Board of Directors shall appoint committees to assist it in performing its duties and processing the quantity of information it receives. |
5.3.2 | Each committee operates according to a Board of Directors approved written mandate outlining its duties and responsibilities. This structure may be subject to change as the Board of Directors considers from time to time which of its responsibilities can best be fulfilled through more detailed review of matters in committee. |
5.3.3 | The Board of Directors will review annually the work undertaken by each committee and the responsibilities thereof. |
5.3.4 | The Board of Directors will annually evaluate the performance and review the work of its committees, including their respective mandates and the sufficiency of such mandates. |
5.3.5 | The Board of Directors will annually appoint a Lead Director as well as a member of each of its committees to act as Chair of the committee. |
5.3.6 | Subject to subsection 5.3.8, committees of the Board of Directors shall be composed of a majority of Independent Directors. |
5.3.7 | The Board of Directors shall appoint members of committees after considering the recommendations of the Corporate Governance Committee, the Executive Chairman of the Board and the Co-Chair of the Board, the skills and interests of individual Board members, and the diversity of their background (including in terms of gender, ethnicity, age, experience and geographical representation), all in accordance with the mandates of such committees approved by the Board. |
5.3.8 | The Audit and Risk Management Committee of the Company shall be composed only of Independent Directors. All members of the Audit and Risk Management Committee shall be Financially Literate and at least one member shall be a financial expert within the meaning of applicable regulatory requirements and stock exchange rules. |
5.4 | Lead Director |
5.4.1 | The Lead Director shall be an Independent Director. He or she will oversee that the Board of Directors discharges its responsibilities, ensure that the Board of Directors evaluates the performance of management objectively and that the Board of Directors understands the boundaries between the Board of Directors and managements responsibilities. |
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5.4.2 | The Lead Director will chair periodic meetings of the Independent Directors and assume other responsibilities which the Independent Directors as a whole might designate from time to time. |
5.4.3 | The Lead Director should be able to stand sufficiently back from the day-to-day running of the business to ensure that the Board of Directors is in full control of the Companys affairs and alert to its obligations to the shareholders. |
5.4.4 | The Lead Director shall provide input to the Executive Chairman of the Board and the Co-Chair of the Board on preparation of agendas for Board and committee meetings. |
5.4.5 | The Lead Director shall chair Board meetings when the Executive Chairman of the Board and the Co-Chair of the Board are not in attendance, subject to the provisions of the by-laws of the Company. |
5.4.6 | The Lead Director shall provide leadership for the independent directors and ensure that the effectiveness of the Board is assessed on a regular basis. |
5.4.7 | The Lead Director shall set the agenda for the meetings of the Independent Directors. |
5.4.8 | The Lead Director shall report to the Board concerning the deliberations of the Independent Directors as required. |
5.4.9 | The Lead Director shall, in conjunction with the Executive Chairman of the Board and the Co-Chair of the Board, facilitate the effective and transparent interaction of Board members and management. |
5.4.10 | The Lead Director shall provide feedback to the Executive Chairman of the Board and act as a sounding board with respect to strategies, accountability, relationships and other issues. |
5.5 | Review of the Board Mandate |
In order to ensure that this mandate is kept current in the light of changes which may occur in corporate practice or the structure of the Company, the Board of Directors will annually reconfirm this mandate or initiate a review to revise it.
5.6 | Board of Directors and Senior Management Compensation |
The Board of Directors will review further to the recommendation of its Human Resources Committee the adequacy and form of compensation of the senior management and directors each year. The Human Resources Committee shall make recommendations to the Board of Directors for consideration when it believes changes in compensation are warranted. Furthermore, the Board of Directors will ensure the compensation realistically reflects the responsibility and risk involved in being a director.
6. | COMMUNICATIONS |
6.1 | The Board of Directors may from time to time consider and review the means by which shareholders can communicate with the Company including the opportunity to do so at the annual meeting, communications interfaces through the Companys website and the adequacy of resources available within the Company to respond to shareholders through its Investors Relations Department and the Corporate Secretary or otherwise. However, the Board of Directors believes that it is the function of the management to speak for the Company in its communications with the investment community, the media, customers, suppliers, employees, governments and the general public. It is understood that individual directors may from time to time be requested by management to assist with such communications. It is expected that, if |
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2022 ANNUAL INFORMATION FORM A-7 |
communications from stakeholders are made to individual directors, management will be informed and consulted to determine any appropriate response. |
6.2 | The Board of Directors has the responsibility for monitoring compliance by the Company with the corporate governance requirements and guidelines of the Toronto Stock Exchange and the New York Stock Exchange. |
© CGI Inc. |
2022 ANNUAL INFORMATION FORM A-8 |
APPENDIX A © CGI Inc. | 2022 ANNUAL INFORMATION FORM A-9
Appendix A
Definition of Independence under CSA National Instrument 52-110, as amended
1.4 | Meaning of independence |
(1) | An audit committee member is independent if he or she has no direct or indirect material relationship with the issuer. |
(2) | For the purposes of subsection (1), a material relationship is a relationship which could, in the view of the issuers board of directors, be reasonably expected to interfere with the exercise of a members independent judgement. |
(3) | Despite subsection (2), the following individuals are considered to have a material relationship with an issuer: |
(a) | an individual who is, or has been within the last three years, an employee or executive officer of the issuer; |
(b) | an individual whose immediate family member is, or has been within the last three years, an executive officer of the issuer; |
(c) | an individual who: |
(i) | is a partner of a firm that is the issuers internal or external auditor, |
(ii) | is an employee of that firm, or |
(iii) | was within the last three years a partner or employee of that firm and personally worked on the issuers audit within that time; |
(d) | an individual whose spouse, minor child or stepchild, or child or stepchild who shares a home with the individual: |
(i) | is a partner of a firm that is the issuers internal or external auditor, |
(ii) | is an employee of that firm and participates in its audit, assurance or tax compliance (but not tax planning) practice, or |
(iii) | was within the last three years a partner or employee of that firm and personally worked on the issuers audit within that time; |
(e) | an individual who, or whose immediate family member, is or has been within the last three years, an executive officer of an entity if any of the issuers current executive officers serves or served at that same time on the entitys compensation committee; and |
(f) | an individual who received, or whose immediate family member who is employed as an executive officer of the issuer received, more than $75,000 in direct compensation from the issuer during any 12 month period within the last three years. |
(4) | Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because |
(a) | he or she had a relationship identified in subsection (3) if that relationship ended before March 30, 2004; or |
(b) | he or she had a relationship identified in subsection (3) by virtue of subsection (8) if that relationship ended before June 30, 2005. |
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(5) | For the purposes of clauses (3)(c) and (3)(d), a partner does not include a fixed income partner whose interest in the firm that is the internal or external auditor is limited to the receipt of fixed amounts of compensation (including deferred compensation) for prior service with that firm if the compensation is not contingent in any way on continued service. |
(6) | For the purposes of clause (3)(f), direct compensation does not include: |
(a) | remuneration for acting as a member of the board of directors or of any board committee of the issuer, and |
(b) | the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service. |
(7) | Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because the individual or his or her immediate family member |
(a) | has previously acted as an interim chief executive officer of the issuer, or |
(b) | acts, or has previously acted, as a chair or vice-chair of the board of directors or of any board committee of the issuer on a part-time basis. |
(8) | For the purpose of section 1.4, an issuer includes a subsidiary entity of the issuer and a parent of the issuer. |
1.5 | Additional independence requirements |
(1) | Despite any determination made under section 1.4, an individual who |
(a) | accepts, directly or indirectly, any consulting, advisory or other compensatory fee from the issuer or any subsidiary entity of the issuer, other than as remuneration for acting in his or her capacity as a member of the board of directors or any board committee, or as a part-time chair or vice-chair of the board or any board committee; or |
(b) | is an affiliated entity of the issuer or any of its subsidiary entities, is considered to have a material relationship with the issuer. |
(2) | For the purposes of subsection (1), the indirect acceptance by an individual of any consulting, advisory or other compensatory fee includes acceptance of a fee by |
(a) | an individuals spouse, minor child or stepchild, or a child or stepchild who shares the individuals home; or |
(b) | an entity in which such individual is a partner, member, an officer such as a managing director occupying a comparable position or executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions who, in each case, have no active role in providing services to the entity) and which provides accounting, consulting, legal, investment banking or financial advisory services to the issuer or any subsidiary entity of the issuer. |
(3) | For the purposes of subsection (1), compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service. |
© CGI Inc. |
2022 ANNUAL INFORMATION FORM A-11 |
Charter of the Corporate Governance Committee CGI © CGI Inc. | 2022 ANNUAL INFORMATION FORM A-12
Charter of the Corporate Governance Committee
Important note
The CGI Constitution, including the Dream, Vision, Mission, and Values of CGI Inc. form the fundamental principles of this Charter. This Charter should therefore be read in conjunction with CGIs Constitution.
1. | INTERPRETATION |
Committee means the Corporate Governance Committee of the Board of Directors of the Company.
Independent Director means a director who meets the independence criteria set out in sections 1.4 and 1.5 of National Instrument 52-110 Audit Committees adopted by the Canadian Securities Administrators, as amended, which is reproduced in Appendix A.
2. | OBJECTIVES |
The Committee is responsible for: (a) developing the Companys approach to Board governance issues and the Companys response to the corporate governance requirements and guidelines; (b) reviewing the composition and contribution of the Board, its standing committees and members, and recommending Board nominees; (c) overseeing the orientation program for new directors and the continuing education program for directors; (d) carrying out the annual Board of Director self-assessment process; and (e) helping to maintain an effective working relationship between the Board of Directors and management.
3. | COMPOSITION |
3.1 | The Committee shall be composed of a majority of Independent Directors. |
3.2 | The Board of Directors shall appoint an independent director as the Chair of the Committee. If the Chair is absent from a meeting, the members shall select a Chair from those in attendance to act as Chair of the meeting. |
4. | MEETINGS |
4.1 | Meetings of the Committee shall be held at the call of the Chair, but not less than twice annually. Meetings of the Committee may be called by the Chair of the Committee, the Executive Chairman of the Board, the Co-Chair of the Board or the Chief Executive Officer. |
4.2 | The powers of the Committee shall be exercisable by a meeting at which a quorum is present. A quorum shall be not less than two members of the Committee from time to time. Subject to the foregoing requirement, unless otherwise determined by the Board of Directors, the Committee shall have the power to fix its quorum and to regulate its procedure. Matters decided by the Committee shall be decided by majority vote. |
4.3 | Notice of each meeting shall be given to each member, to the Executive Chairman of the Board, to the Co-Chair of the Board, to the Chief Executive Officer and to the Corporate Secretary of the Company. |
4.4 | The Committee may invite from time to time such persons as it may see fit to attend its meetings and to take part in discussion and consideration of the affairs of the Committee, including in particular the Chief Executive Officer. |
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4.5 | The Committee shall appoint a secretary to be the secretary of all meetings of the Committee and to maintain minutes of all meetings and deliberations of the Committee. |
5. | RESPONSIBILITIES AND DUTIES |
5.1 | Role and responsibilities of the Committee Chair: |
5.1.1 | The Chair of the Committee: |
5.1.1.1 | Provides leadership for the Committee by ensuring that: |
(i) | The responsibilities of the Committee are well understood by Committee members and management. |
(ii) | The Committee works as a cohesive team. |
(iii) | Adequate resources and timely and relevant information are available to the Committee to support its work. |
(iv) | The effectiveness of the Committee is assessed on a regular basis. |
(v) | The Committees structure and mandate is appropriate and adequate to support the discharge of the Committees responsibilities. |
(vi) | The scheduling, organization and procedures of Committee meetings provide adequate time for the consideration and discussion of relevant issues. |
5.1.1.2 | Works with the Executive Chairman of the Board, the Co-Chair of the Board and the Corporate Secretary to set the calendar of the Committees regular meetings. |
5.1.1.3 | Has the authority to convene special meetings as required. |
5.1.1.4 | Sets the agenda in collaboration with the Executive Chairman of the Board, the Co-Chair of the Board and the Corporate Secretary. |
5.1.1.5 | Presides at meetings. |
5.1.1.6 | Acts as liaison with management with regard to the work of the Committee. |
5.1.1.7 | Reports to the Board concerning the work of the Committee. |
5.1.1.8 | Exercises the authority specifically delegated to the Chair by the Committee, if any. |
5.2 | General Responsibilities |
BOARD MEMBERS
5.2.1 | Review criteria regarding the composition of the Board of Directors and committees of the Board of Directors, such as size, proportion of Independent Directors, and criteria to determine and promote relatedness as well as the diversity of Board members background, including in terms of gender (with a target of women representing at least 30% of the directors), ethnicity, age, experience and geographical representation), while seeking to facilitate effective decision-making. Given the Board of Directors composition and history of long-term succession planning, no date has yet been set to meet the target of womens representation at Board level but progress will be monitored periodically. |
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5.2.2 | Review criteria relating to tenure as a director, such as limitations on the number of times a director may stand for re-election, and the continuation of directors in an honorary or similar capacity. |
5.2.3 | Review criteria for retention of directors unrelated to age or tenure, such as attendance at Board of Directors and committee meetings, health or the assumption of responsibilities which are incompatible with effective Board of Directors membership; and assess the effectiveness of the Board of Directors as a whole, the committees of the Board of Directors, the contribution of individual directors on an ongoing basis and establish in light of the opportunities and risks facing the Company, what competencies, skills and personal qualities it seeks in new Board members in order to add value to the Company. |
5.2.4 | Recommend to the Board of Directors the list of candidates for directors to be nominated for election by shareholders at annual meetings of shareholders. |
5.2.5 | Recommend to the Board of Directors candidates to fill vacancies on the Board of Directors occurring between annual meetings of shareholders. |
5.2.6 | Recommend to the Board of Directors the removal of a director in exceptional circumstances, for example (a) such director is in a position of conflict of interest or (b) the criteria underlying the appointment of such director change. |
5.2.7 | Ensure that the Board of Directors can function independently of management. To this end, arrange for meetings on a regular basis of the Independent Directors without management present. In such cases, meetings will be chaired by the Lead Director. |
5.2.8 | Carry out the Board of Directors self-assessment process. Review the results of the self-assessment process and provide a report thereof to the Executive Chairman of the Board, the Co-Chair of the Board and the Board of Directors. |
DIRECTOR ORIENTATION AND CONTINUING EDUCATION PROGRAM
5.2.9 | As an integral element of the process for appointing new directors, put in place an orientation and education program for new recruits to the Board of Directors and review from time to time the value and benefit of such program. |
5.2.10 | Maintain and oversee a continuing education program for the Board of Directors. |
COMPLIANCE
5.2.11 | Ensure corporate compliance with applicable legislation including director and officer compliance. |
5.2.12 | Review proposed amendments to the Companys by-laws before making recommendations to the Board of Directors. |
CODES OF BUSINESS CONDUCT
5.2.13 | Periodically review and make recommendations to the Board of Directors with respect to the Companys formal code of ethics and business conduct for its members, directors and officers and its executive code of conduct applicable to the Companys principal executive officer, principal financing officer, principal accounting officer or controller, or other persons performing similar functions within the Company; including the disclosure of the adoption of such codes. |
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5.2.14 | Monitor adherence to the codes and review potential situations related thereto brought to the attention of the Committee by the Corporate Secretary of the Company in order to recommend or not in certain circumstances to the Board of Directors to grant or not waivers from compliance with the codes for directors and officers. The Committee shall also ensure that when such waivers are granted, the Board of Directors shall disclose same in due time and specify the circumstances and rationale for granting the waiver. |
CORPORATE GOVERNANCE PRINCIPLES
5.2.15 | Make recommendations to the Board of Directors as deemed appropriate in the context of adherence to corporate governance guidelines in effect from time to time. |
5.2.16 | In conjunction with the Executive Chairman of the Board and the Co-Chair of the Board, recommend to the Board of Directors the membership and chairs of the committees of the Board of Directors. |
5.2.17 | Review annually the Board/management relationship. |
5.2.18 | Review the companys policies and processes related to companys purpose as an organization, which is to seek the best equilibrium between its three stakeholders and the communities in which its members live and work. |
5.2.19 | On a yearly basis, review the measures applied by the Company to promote diversity, their effectiveness, and annual and cumulative progress made in achieving their objectives. |
5.2.20 | On a yearly basis, review the Companys corporate social responsibility (CSR) policies and practices. |
5.2.21 | Advise the Board of Directors on the disclosure to be contained in the Companys public disclosure documents, such as the Companys annual management proxy circular or annual report, on matters of corporate governance as required by the Toronto Stock Exchange, the New York Stock Exchange or any other applicable exchange or regulator. |
5.2.22 | Generally advise the Board of Directors on all other matters of corporate governance. |
EXTERNAL AND INTERNAL RESOURCES
5.2.23 | Retain such independent external advisors as it may deem necessary and advisable for its purposes. |
5.2.24 | Report to the Board of Directors on its proceedings, reviews undertaken, and any associated recommendations. |
5.2.25 | Have adequate resources to discharge its responsibilities; |
5.2.26 | Have the right, for the purposes of discharging the powers and responsibilities of the Committee, to inspect any relevant records of the Company and its subsidiaries. |
5.2.27 | The Chair of the Committee shall review the opportunity for the Board of Directors of the Company or individual directors to retain external advisors at the expense of the Company in certain appropriate circumstances in carrying out their responsibilities. |
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SHAREHOLDER PROPOSALS
5.2.28 | Review and make recommendations on shareholder proposals to the Board of Directors or refer them to the Executive Chairman of the Board or the Co-Chair of the Board as appropriate. |
5.3 | Other Responsibilities |
The Committee shall carry out such other mandates as the Board of Directors may request from time to time.
5.4 | Review of mandate of the committee |
The Board of Directors should review and reassess the adequacy of the mandate on an annual basis.
5.5 | Compensation |
Members of the Committee shall be entitled to receive such remuneration for acting as members of the Committee as the Board of Directors may determine from time to time.
© CGI Inc. |
2022 ANNUAL INFORMATION FORM A-17 |
APPENDIX A © CGI Inc. 2022 ANNUAL INFORMATION FORM A-18
Appendix A
Definition of Independence under CSA National Instrument 52-110, as amended
1.4 | Meaning of independence |
(1) | An audit committee member is independent if he or she has no direct or indirect material relationship with the issuer. |
(2) | For the purposes of subsection (1), a material relationship is a relationship which could, in the view of the issuers board of directors, be reasonably expected to interfere with the exercise of a members independent judgement. |
(3) | Despite subsection (2), the following individuals are considered to have a material relationship with an issuer: |
(a) | an individual who is, or has been within the last three years, an employee or executive officer of the issuer; |
(b) | an individual whose immediate family member is, or has been within the last three years, an executive officer of the issuer; |
(c) | an individual who: |
(i) | is a partner of a firm that is the issuers internal or external auditor, |
(ii) | is an employee of that firm, or |
(iii) | was within the last three years a partner or employee of that firm and personally worked on the issuers audit within that time; |
(d) | an individual whose spouse, minor child or stepchild, or child or stepchild who shares a home with the individual: |
(i) | is a partner of a firm that is the issuers internal or external auditor, |
(ii) | is an employee of that firm and participates in its audit, assurance or tax compliance (but not tax planning) practice, or |
(iii) | was within the last three years a partner or employee of that firm and personally worked on the issuers audit within that time; |
(e) | an individual who, or whose immediate family member, is or has been within the last three years, an executive officer of an entity if any of the issuers current executive officers serves or served at that same time on the entitys compensation committee; and |
(f) | an individual who received, or whose immediate family member who is employed as an executive officer of the issuer received, more than $75,000 in direct compensation from the issuer during any 12 month period within the last three years. |
(4) | Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because |
(a) | he or she had a relationship identified in subsection (3) if that relationship ended before March 30, 2004; or |
(b) | he or she had a relationship identified in subsection (3) by virtue of subsection (8) if that relationship ended before June 30, 2005. |
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(5) | For the purposes of clauses (3)(c) and (3)(d), a partner does not include a fixed income partner whose interest in the firm that is the internal or external auditor is limited to the receipt of fixed amounts of compensation (including deferred compensation) for prior service with that firm if the compensation is not contingent in any way on continued service. |
(6) | For the purposes of clause (3)(f), direct compensation does not include: |
(a) | remuneration for acting as a member of the board of directors or of any board committee of the issuer, and |
(b) | the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service. |
(7) | Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because the individual or his or her immediate family member |
(a) | has previously acted as an interim chief executive officer of the issuer, or |
(b) | acts, or has previously acted, as a chair or vice-chair of the board of directors or of any board committee of the issuer on a part-time basis. |
(8) | For the purpose of section 1.4, an issuer includes a subsidiary entity of the issuer and a parent of the issuer. |
1.5 | Additional independence requirements |
(1) | Despite any determination made under section 1.4, an individual who |
(a) | accepts, directly or indirectly, any consulting, advisory or other compensatory fee from the issuer or any subsidiary entity of the issuer, other than as remuneration for acting in his or her capacity as a member of the board of directors or any board committee, or as a part-time chair or vice-chair of the board or any board committee; or |
(b) | is an affiliated entity of the issuer or any of its subsidiary entities, is considered to have a material relationship with the issuer. |
(2) | For the purposes of subsection (1), the indirect acceptance by an individual of any consulting, advisory or other compensatory fee includes acceptance of a fee by |
(a) | an individuals spouse, minor child or stepchild, or a child or stepchild who shares the individuals home; or |
(b) | an entity in which such individual is a partner, member, an officer such as a managing director occupying a comparable position or executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions who, in each case, have no active role in providing services to the entity) and which provides accounting, consulting, legal, investment banking or financial advisory services to the issuer or any subsidiary entity of the issuer. |
(3) | For the purposes of subsection (1), compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service. |
© CGI Inc. |
2022 ANNUAL INFORMATION FORM A-20 |
Charter of the Human Resources Committee CGI © CGI Inc. 2022 ANNUAL INFORMATION FORM A-21
Charter of the Human Resources Committee
Important note
The CGI Constitution, including the Dream, Vision, Mission, and Values of CGI Inc. form the fundamental principles of this Charter. This Charter should therefore be read in conjunction with CGIs Constitution.
1. | INTERPRETATION |
Committee means the Human Resources Committee of the Board of Directors of the Company.
Executive Officer means an individual who is:
(a) | a Chair, Co-Chair or President; |
(b) | a leader in charge of a principal business unit or function; or |
(c) | performing a policy-making function in respect of the Company. |
Note: The definition is derived from the definition contained in National Instrument 51-102 adopted by the Canadian Securities Administrators.
Independent Director means a director who meets the independence criteria set out in sections 1.4 and 1.5 of National Instrument 52-110 Audit Committees adopted by the Canadian Securities Administrators, as amended, which is reproduced in Appendix A.
2. | OBJECTIVES |
The Committee is responsible for reviewing and making recommendations to the Board of Directors of the Company for the appointment of officers of the Company and for determining terms of employment of senior executives whose remuneration must be disclosed as per applicable legislation, and such other senior executives as may be proposed by the Executive Chairman of the Board, the Co-Chair of the Board and the Chief Executive Officer. It shall also perform functions such as reviewing succession planning and matters of compensation as well as such other matters the Committee may consider suitable with respect to compensation or as may be specifically directed by the Board of Directors from time to time.
3. | COMPOSITION |
3.1 | The Committee shall be composed of a majority of Independent Directors. |
3.2 | The Board of Directors shall appoint one of the Independent Directors as the Chair of the Committee. If the Chair is absent from a meeting, the members shall select a Chair from those in attendance to act as Chair of the meeting. |
4. | MEETINGS |
4.1 | Meetings of the Committee shall be held at the call of the Chair, but not less than three times annually. Meetings of the Committee may be called by the Chair of the Committee, the Executive Chairman of the Board, the Co-Chair of the Board or the Chief Executive Officer. |
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4.2 | The powers of the Committee shall be exercisable by a meeting at which a quorum is present. A quorum shall be not less than two members of the Committee from time to time. Subject to the foregoing requirement, unless otherwise determined by the Board of Directors, the Committee shall have the power to fix its quorum and to regulate its procedure. Matters decided by the Committee shall be decided by majority vote. |
4.3 | Notice of each meeting shall be given to each member, to the Executive Chairman of the Board, to the Co-Chair of the Board, to the Chief Executive Officer and to the Corporate Secretary of the Company. |
4.4 | The Committee may invite from time to time such persons as it may see fit to attend its meetings and to take part in discussion and consideration of the affairs of the Committee, including in particular the Executive Chairman of the Board. |
4.5 | The Committee shall appoint a secretary to be the secretary of all meetings of the Committee and to maintain minutes of all meetings and deliberations of the Committee. |
5. | RESPONSIBILITIES AND DUTIES |
5.1 | Role and responsibilities of the Committee Chair: |
5.1.1 | The Chair of the Committee: |
5.1.1.1 | Provides leadership for the Committee by ensuring that: |
(i) | The responsibilities of the Committee are well understood by Committee members and management. |
(ii) | The Committee works as a cohesive team. |
(iii) | Adequate resources and timely and relevant information are available to the Committee to support its work. |
(iv) | The effectiveness of the Committee is assessed on a regular basis. |
(v) | The committees structure and mandate is appropriate and adequate to support the discharge of the Committees responsibilities. |
(vi) | The scheduling, organization and procedures of Committee meetings provide adequate time for the consideration and discussion of relevant issues. |
5.1.1.2 | Has the authority to convene special meetings as required. |
5.1.1.3 | Sets the agenda in collaboration with the Executive Chairman of the Board, the Co-Chair of the Board and the Corporate Secretary. |
5.1.1.4 | Presides at meetings. |
5.1.1.5 | Acts as liaison with management with regard to the work of the Committee. |
5.1.1.6 | Reports to the Board concerning the work of the Committee. |
5.1.1.7 | Exercises the authority specifically delegated to the Chair by the Committee, if any. |
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5.2 | General Responsibilities |
5.2.1 | The Committee shall, among other things, have responsibility to advise the Board of Directors on human resources planning, compensation of members of the Board of Directors, Executive Officers and other members, short and long-term incentive plans, benefit plans, and Executive Officer appointments. |
5.2.2 | The Committee shall review and report to the Board of Directors on: |
5.2.2.1 | Managements succession plans for Executive Officers, with special emphasis on the Chief Executive Officer succession; |
5.2.2.2 | Compensation philosophy of the organization, including a remuneration strategy and remuneration policies for the Executive Officer level, as proposed by the Executive Chairman of the Board, the Co-Chair of the Board and the Chief Executive Officer; |
5.2.2.3 | Recommendations to the Board of Directors for the appointment of the Chief Executive Officer and other Executive Officers, corporate objectives which the Executive Officers are responsible for meeting; |
5.2.2.4 | Total remuneration plan including adequacy and form of compensation realistically reflecting the responsibilities and risks of the position for the Executive Chairman of the Board and for the Chief Executive Officer of the Company and, in connection therewith, consider appropriate information, including information from the Board of Directors with respect to the overall performance of the Chief Executive Officer; |
5.2.2.5 | Remuneration for Executive Officers, annual adjustment to executive salaries, and the design and administration of short and long-term incentive plans, benefits and perquisites as proposed by the Executive Chairman of the Board and the Chief Executive Officer; |
5.2.2.6 | Review and recommend any exceptional terms of senior managements employment and termination arrangements; |
5.2.2.7 | Adoption of new, or significant modifications to, pay and benefit plans; |
5.2.2.8 | Appointment of officers and executive officers as appropriate, while considering and promoting the diversity of the executive teams background, including in terms of gender, ethnicity, age and experience; |
5.2.2.9 | Significant organizational changes; |
5.2.2.10 | The Committees proposed executive compensation report to be contained in the Companys annual proxy circular; |
5.2.2.11 | Management development programs for the Company; |
5.2.2.12 | Any special employment contracts or arrangements with officers of the Company including any contracts relating to change of control; and |
5.2.2.13 | Remuneration for members of the Board of Directors and committees thereof, including adequacy and form of compensation realistically reflecting the responsibilities and risks of the positions and recommend changes where applicable. |
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5.2.3 | The Committee shall perform such other duties as may from time to time be assigned to it by the Board of Directors including those relating to compensation of officers and senior employees and the manpower resources of the Company. |
5.3 | Other Responsibilities |
5.3.1 | The Committee shall have the right to retain such independent external advisors as it may deem necessary and advisable for its purposes and to assess and review, on an annual basis or as deemed appropriate, the independence of such external advisors. |
5.3.2 | The Committee shall report to the Board of Directors on its proceedings, reviews undertaken, and any associated recommendations. |
5.3.3 | The Committee shall have adequate resources to discharge its responsibilities. |
5.3.4 | The Committee shall have the right, for the purposes of discharging the powers and responsibilities of the Committee, to inspect any relevant records of the Company and its subsidiaries. |
5.4 | Review of Mandate of the Committee |
The Board of Directors should review and reassess the adequacy of this mandate on an annual basis.
5.5 | Compensation |
Members of the Committee shall be entitled to receive such remuneration for acting as members of the Committee as the Board of Directors may determine from time to time.
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APPENDIX A © CGI Inc. 2022 ANNUAL INFORMATION FORM A-26
Appendix A
Definition of Independence under CSA National Instrument 52-110, as amended
1.4 | Meaning of independence |
(1) | An audit committee member is independent if he or she has no direct or indirect material relationship with the issuer. |
(2) | For the purposes of subsection (1), a material relationship is a relationship which could, in the view of the issuers board of directors, be reasonably expected to interfere with the exercise of a members independent judgement. |
(3) | Despite subsection (2), the following individuals are considered to have a material relationship with an issuer: |
(a) | an individual who is, or has been within the last three years, an employee or executive officer of the issuer; |
(b) | an individual whose immediate family member is, or has been within the last three years, an executive officer of the issuer; |
(c) | an individual who: |
(i) | is a partner of a firm that is the issuers internal or external auditor, |
(ii) | is an employee of that firm, or |
(iii) | was within the last three years a partner or employee of that firm and personally worked on the issuers audit within that time; |
(d) | an individual whose spouse, minor child or stepchild, or child or stepchild who shares a home with the individual: |
(i) | is a partner of a firm that is the issuers internal or external auditor, |
(ii) | is an employee of that firm and participates in its audit, assurance or tax compliance (but not tax planning) practice, or |
(iii) | was within the last three years a partner or employee of that firm and personally worked on the issuers audit within that time; |
(e) | an individual who, or whose immediate family member, is or has been within the last three years, an executive officer of an entity if any of the issuers current executive officers serves or served at that same time on the entitys compensation committee; and |
(f) | an individual who received, or whose immediate family member who is employed as an executive officer of the issuer received, more than $75,000 in direct compensation from the issuer during any 12 month period within the last three years. |
(4) | Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because |
(a) | he or she had a relationship identified in subsection (3) if that relationship ended before March 30, 2004; or |
(b) | he or she had a relationship identified in subsection (3) by virtue of subsection (8) if that relationship ended before June 30, 2005. |
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(5) | For the purposes of clauses (3)(c) and (3)(d), a partner does not include a fixed income partner whose interest in the firm that is the internal or external auditor is limited to the receipt of fixed amounts of compensation (including deferred compensation) for prior service with that firm if the compensation is not contingent in any way on continued service. |
(6) | For the purposes of clause (3)(f), direct compensation does not include: |
(a) | remuneration for acting as a member of the board of directors or of any board committee of the issuer, and |
(b) | the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service. |
(7) | Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because the individual or his or her immediate family member |
(a) | has previously acted as an interim chief executive officer of the issuer, or |
(b) | acts, or has previously acted, as a chair or vice-chair of the board of directors or of any board committee of the issuer on a part-time basis. |
(8) | For the purpose of section 1.4, an issuer includes a subsidiary entity of the issuer and a parent of the issuer. |
1.5 | Additional independence requirements |
(1) | Despite any determination made under section 1.4, an individual who |
(a) | accepts, directly or indirectly, any consulting, advisory or other compensatory fee from the issuer or any subsidiary entity of the issuer, other than as remuneration for acting in his or her capacity as a member of the board of directors or any board committee, or as a part-time chair or vice-chair of the board or any board committee; or |
(b) | is an affiliated entity of the issuer or any of its subsidiary entities, is considered to have a material relationship with the issuer. |
(2) | For the purposes of subsection (1), the indirect acceptance by an individual of any consulting, advisory or other compensatory fee includes acceptance of a fee by |
(a) | an individuals spouse, minor child or stepchild, or a child or stepchild who shares the individuals home; or |
(b) | an entity in which such individual is a partner, member, an officer such as a managing director occupying a comparable position or executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions who, in each case, have no active role in providing services to the entity) and which provides accounting, consulting, legal, investment banking or financial advisory services to the issuer or any subsidiary entity of the issuer. |
(3) | For the purposes of subsection (1), compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service. |
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Charter of the Audit and Risk Management Committee CGI © CGI Inc. 2022 ANNUAL INFORMATION FORM A-29
Charter of the Audit and Risk Management Committee
Important note
The CGI Constitution, including the Dream, Vision, Mission, and Values of CGI Inc. form the fundamental principles of this Charter. This Charter should therefore be read in conjunction with CGIs Constitution.
1. | INTERPRETATION |
Committee means the Audit and Risk Management Committee of the Board of Directors of the Company.
Financially Literate means the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Companys financial statements.
Independent Director means a director who meets the independence criteria set out in sections 1.4 and 1.5 of National Instrument 52-110 Audit Committees adopted by the Canadian Securities Administrators, as amended, which is reproduced in Appendix A.
2. | OBJECTIVES |
The Committee will assist the Board of Directors in fulfilling its oversight responsibilities. In performing its duties, the Committee will maintain effective working relationships with the Board of Directors, management, the internal auditors and the external auditors.
3. | COMPOSITION |
3.1 | The Committee shall consist solely of Independent Directors, all of whom shall be Financially Literate and at least one of whom shall be a financial expert as defined in the applicable corporate governance rules imposed by regulatory bodies. |
3.2 | Following each annual meeting of shareholders, the Board of Directors shall elect three or more directors, who shall meet the independence and experience requirements of the New York Stock Exchange and the Toronto Stock Exchange as well as the other similar requirements under applicable securities regulations, to serve on the Committee until the close of the next annual meeting of shareholders of the Company or until the member ceases to be a director, resigns or is replaced, whichever first occurs. Any member may be removed from office or replaced at any time by the Board of Directors. |
3.3 | The Board of Directors shall appoint one of the members of the Committee as the Chair of the Committee. If the Chair is absent from a meeting, the members shall select a Chair from those in attendance to act as Chair of the meeting. |
4. | MEETINGS AND RESOURCES |
4.1 | Regular meetings of the Committee shall be held quarterly. Special meetings of the Committee may be called by the Chair of the Committee, the external auditors, the Executive Chairman of the Board, the Co-Chair of the Board, the Chief Executive Officer or the Chief Financial Officer of the Company. |
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4.2 | The powers of the Committee shall be exercisable by a meeting at which a quorum is present. A quorum shall be not less than two members of the Committee from time to time. Subject to the foregoing requirement, unless otherwise determined by the Board of Directors, the Committee shall have the power to fix its quorum and to regulate its procedure. Matters decided by the Committee shall be decided by majority vote. |
4.3 | Notice of each meeting shall be given to each member, the external auditors, the Executive Chairman of the Board, the Co-Chair of the Board, the Chief Executive Officer and the Chief Financial Officer of the Company, any or all of whom shall be entitled to attend. Notice of each meeting shall also be given, as the case may be, to the internal auditor who shall also attend whenever requested to do so by the Chair of the Committee or the Corporate Secretary. |
4.4 | Notice of meeting may be given orally or by letter, telephone facsimile transmission, telephone or electronic device not less than 24 hours before the time fixed for the meeting. Members may waive notice of any meeting. The notice need not state the purpose or purposes for which the meeting is being held. |
4.5 | Opportunities should be afforded periodically to the external auditors and, as the case may be, to the internal auditor and the senior management to meet separately with the Committee. In addition, the Committee may meet in camera, with only members of the Committee present, whenever the Committee determines that it is appropriate to do so. |
4.6 | The Committee shall have the authority to retain special legal counselling, accounting or other consultants as it may see fit to attend its meetings and to take part in discussion and consideration of the affairs of the Committee at the Companys expense. |
4.7 | The Corporate Secretary of the Company or designate of the Corporate Secretary shall be the Secretary of all meetings of the Committee and shall maintain minutes of all meetings and deliberations of the Committee. |
5. | RESPONSIBILITIES AND DUTIES |
5.1 | Role and responsibilities of the Committee Chair: |
5.1.1 | The Chair of the Committee: |
5.1.1.1 | Provides leadership for the Committee by ensuring that: |
(i) | The responsibilities of the Committee are well understood by Committee members and management. |
(ii) | The Committee works as a cohesive team. |
(iii) | Adequate resources and timely and relevant information are available to the Committee to support its work. |
(iv) | The effectiveness of the Committee is assessed on a regular basis. |
(v) | The committees structure and mandate is appropriate and adequate to support the discharge of the Committees responsibilities. |
(vi) | The scheduling, organization and procedures of Committee meetings provide adequate time for the consideration and discussion of relevant issues. |
5.1.1.2 | Has the authority to convene special meetings as required. |
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5.1.1.3 | Sets the agenda in collaboration with the Executive Chairman of the Board, the Co-Chair of the Board, the Chief Financial Officer and the Corporate Secretary. |
5.1.1.4 | Presides at meetings. |
5.1.1.5 | Acts as liaison with management with regard to the work of the Committee. |
5.1.1.6 | Reports to the Board concerning the work of the Committee. |
5.1.1.7 | Exercises the authority specifically delegated to the Chair by the Committee, if any. |
5.2 | General responsibilities |
While the Committee has the responsibilities and powers set forth below, it is not the duty of the Committee to plan or conduct audits or to determine that the Companys financial statements are complete and accurate. This is the responsibility of management and the external auditors. Nor is it the duty of the Committee to conduct investigations, or to assure compliance with laws and regulations. The Committee shall review disagreements, if any, between management and the external auditors and shall make recommendations to resolve such disagreements. In the event that any such disagreement persists, the matter will be referred by the Committee to the Board of Directors for a final determination.
5.3 | Review of mandate of the committee |
The Board of Directors and the Committee shall review and reassess the adequacy of this mandate on an annual basis.
5.4 | Publicly disclosed financial information |
5.4.1 | The Committee shall review and recommend for approval by the Board of Directors, before release to the public: |
5.4.1.1 | interim unaudited financial statements; |
5.4.1.2 | audited annual financial statements, in conjunction with the report of the external auditors; |
5.4.1.3 | all public disclosure documents containing audited or unaudited financial information, including any prospectus, the annual information form and managements discussion and analysis of financial condition and results of operations, as well as related press releases, including earnings guidance; and |
5.4.1.4 | the compliance of management certification of financial reports with applicable legislation and attestation of the Companys disclosure controls and procedures. |
5.4.2 | The Committee shall review any report which accompanies published financial statements (to the extent such a report discusses financial condition or operating results) for consistency of disclosure with the financial statements themselves. |
5.4.3 | In its review of financial statements, the Committee should obtain an explanation from management of all significant variances between comparative reporting periods and an explanation from management for items which vary from expected or budgeted amounts as well as from previous reporting periods. |
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5.4.4 | In its review of financial statements, the Committee should review unusual or extraordinary items, transactions with related parties, and adequacy of disclosures, asset and liability carrying values, income tax status and related reserves, qualifications, if any, contained in letters of representation and business risks, uncertainties, commitments and contingent liabilities. |
5.4.5 | In its review of financial statements, the Committee shall review the appropriateness of the Companys significant accounting principles and practices, including acceptable alternatives, and the appropriateness of any significant changes in accounting principles and practices. |
5.4.6 | The Committee shall satisfy itself that adequate procedures are in place for the review of the Companys public disclosure of financial information extracted or derived from the Companys financial statements, and shall periodically assess the adequacy of those procedures. |
5.5 | Financial reporting and accounting trends |
The Committee shall:
5.5.1 | Review and assess the effectiveness of accounting policies and practices concerning financial reporting; |
5.5.2 | Review with management and with the external auditors any proposed changes in major accounting policies, the presentation and impact of significant risks and uncertainties, and key estimates and judgments of management that may be material to financial reporting; |
5.5.3 | Question management and the external auditors regarding significant financial reporting issues discussed and the method of resolution; and |
5.5.4 | Review general accounting trends and issues of accounting policy, standards and practices which affect or may affect the Company. |
5.6 | Internal controls |
5.6.1 | The Committee shall review and monitor the Companys internal control procedures, programs and policies, and assess the adequacy and effectiveness of internal controls over the accounting and financial reporting systems, with particular emphasis on controls over computerized systems. |
5.6.2 | The Committee shall review: |
5.6.2.1 | The evaluation of internal controls by the external auditors, together with managements response; |
5.6.2.2 | The working relationship between management and external auditors; |
5.6.2.3 | The appointments of the Chief Financial Officer and any key financial executives involved in the financial reporting process; |
5.6.2.4 | The review and approval of the Companys hiring policies regarding partners, employees and former partners and employees of the present and former external auditor of the Company; |
5.6.2.5 | Any decisions related to the need for internal auditing, including whether this function should be outsourced and, in such case, approving the supplier which shall not be the external auditors; and |
5.6.2.6 | Internal control procedures to ensure compliance with the law and avoidance of conflicts of interest. |
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5.6.3 | The Committee shall undertake private discussions with staff of the internal audit function to establish internal audit independence, the level of co-operation received from management, the degree of interaction with the external auditors, and any unresolved material differences of opinion or disputes. |
5.7 | Internal Auditor |
The Committee shall:
5.7.1 | Review the mandate and annual objectives of the internal auditor, if the appointment of an internal auditor is deemed appropriate; |
5.7.2 | Review the adequacy of the Companys internal audit resources; and |
5.7.3 | Ensure the internal auditor has ongoing access to the Chair of the Committee as well as all officers of the Company, particularly the Executive Chairman of the Board, the Co-Chair of the Board and the Chief Executive Officer. |
5.7.4 | Review the audit plans, performance and summaries of the reports of the internal audit function as well as managements response including follow-up to any identified weakness. |
5.8 | External Auditors |
5.8.1 | The Committee shall recommend to the Board of Directors the appointment of the external auditors, which firm is ultimately accountable to the Committee and the Board of Directors. |
5.8.2 | The Committee shall i) receive periodic reports from the external auditors regarding the auditors independence, the performance of the auditors, the qualifications of the key audit partner and audit managers, a periodic review of the auditors quality control procedures, material issues arising from the periodic quality control review and the steps taken by the auditors to address such findings, ii) discuss such reports with the auditors, and if so determined by the Committee, iii) recommend that the Board of Directors take appropriate action to satisfy itself as to the independence of the auditors and the quality of their performance. |
5.8.3 | The Committee shall take appropriate steps to assure itself that the external auditors are satisfied with the quality of the Companys accounting principles and that the accounting estimates and judgments made by management reflect an appropriate application of generally accepted accounting principles. |
5.8.4 | The Committee shall undertake private discussions on a regular basis with the external auditors to review, among other matters, the quality of financial personnel, the level of co-operation received from management, any unresolved material differences of opinion or disputes with management regarding financial reporting and the effectiveness of the work of the internal audit function. |
5.8.5 | The Committee shall review the terms of the external auditors engagement and the appropriateness and reasonableness of the proposed audit fees as well as the compensation of any advisors retained by the Committee. |
5.8.6 | The Committee shall review and pre-approve any engagements for non-audit services provided by the external auditors or their affiliates to the Company or its subsidiaries, together with the fees for such services, and consider the impact of this on the independence of the external auditors. The Committee shall determine which non-audit services the external auditors are prohibited from providing. |
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5.8.7 | When a change of auditors is proposed, the Committee shall review all issues related to the change, including the information required to be disclosed by regulations and the planned steps for an orderly transition. |
5.8.8 | The Committee shall review all reportable events, including disagreements, unresolved issues and consultations on a routine basis whether or not there is to be a change of auditors. |
5.8.9 | When discussing auditor independence, the Committee will consider both rotating the lead audit partner or audit partner responsible for reviewing the audit after a number of years and establishing hiring policies for employees or former employees of its external auditor. |
5.9 | Audit Procedures |
5.9.1 | The Committee shall review the audit plans of the internal and external audits, including the degree of co-ordination in those plans, and shall inquire as to the extent to which the planned audit scope can be relied upon to detect weaknesses in internal control or fraud or other illegal acts. The audit plans should be reviewed with the external auditors and with management, and the Committee should recommend to the Board of Directors the scope of the external audit as stated in the audit plan. |
5.9.2 | The Committee shall review any problems experienced by the external auditors in performing the audit, including any restrictions imposed by management or significant accounting issues on which there was a disagreement with management. |
5.9.3 | The Committee shall review the post-audit or management letter containing the recommendations of the external auditors, and managements response and subsequent follow-up to any identified weakness. |
5.10 | Risk management and other responsibilities |
5.10.1 | The Committee shall put in place procedures to receive and handle complaints or concerns received by the Company about accounting or audit matters including the anonymous submission by employees of concerns respecting accounting or auditing matters. |
5.10.2 | The Committee shall review such litigation, claims, transactions or other contingencies as the internal auditor, external auditors or any officer of the Company may bring to its attention, and shall periodically review the Companys risk management programs. In that regard the Committee shall review the Companys major risk exposures and the steps taken by management to monitor, control and report such exposures. |
5.10.3 | The Committee shall review the policy on use of derivatives and monitor the risk. |
5.10.4 | The Committee shall review the related party transactions in line with the New York Stock Exchange rules and regulations and those of any other applicable exchange or regulator. |
5.10.5 | The Committee shall review assurances of compliance with covenants in trust deeds or loan agreements. |
5.10.6 | The Committee shall review business risks that could affect the ability of the Company to achieve its business plan. |
5.10.7 | The Committee shall review uncertainties, commitments, and contingent liabilities material to financial reporting. |
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5.10.8 | The Committee shall review the effectiveness of control and control systems utilized by the Company in connection with financial reporting and other identified business risks. |
5.10.9 | The Committee shall review incidents of fraud, illegal acts, conflicts of interest and related-party transactions. |
5.10.10 | The Committee shall review material valuation issues. |
5.10.11 | The Committee shall review the quality and accuracy of computerized accounting systems, the adequacy of the protections against damage and disruption, and security of confidential information through information systems reporting. |
5.10.12 | The Committee shall review material matters relating to audits of subsidiaries. |
5.10.13 | The Committee shall review cases where management has sought accounting advice on a specific issue from an accounting firm other than the one appointed as auditor. |
5.10.14 | The Committee shall review any legal matters that could have a significant impact on the financial statements. |
5.10.15 | The Committee shall consider other matters of a financial nature it feels are important to its mandate or as directed by the Board of Directors. |
5.10.16 | The Committee shall report regularly to the Board of Directors on its proceedings, reviews undertaken and any associated recommendations. |
5.10.17 | The Committee shall have the right, for the purpose of discharging the powers and responsibilities of the Committee, to inspect any relevant records of the Company and its subsidiaries. |
5.11 | Compensation |
Members of the Committee shall be entitled to receive such remuneration for acting as members of the Committee as the Board of Directors may determine from time to time.
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APPENDIX A © CGI Inc. 2022 ANNUAL INFORMATION FORM A-37
Appendix A
Definition of Independence under CSA National Instrument 52-110, as amended
1.4 | Meaning of independence |
(1) | An audit committee member is independent if he or she has no direct or indirect material relationship with the issuer. |
(2) | For the purposes of subsection (1), a material relationship is a relationship which could, in the view of the issuers board of directors, be reasonably expected to interfere with the exercise of a members independent judgement. |
(3) | Despite subsection (2), the following individuals are considered to have a material relationship with an issuer: |
(a) | an individual who is, or has been within the last three years, an employee or executive officer of the issuer; |
(b) | an individual whose immediate family member is, or has been within the last three years, an executive officer of the issuer; |
(c) | an individual who: |
(i) | is a partner of a firm that is the issuers internal or external auditor, |
(ii) | is an employee of that firm, or |
(iii) | was within the last three years a partner or employee of that firm and personally worked on the issuers audit within that time; |
(d) | an individual whose spouse, minor child or stepchild, or child or stepchild who shares a home with the individual: |
(i) | is a partner of a firm that is the issuers internal or external auditor, |
(ii) | is an employee of that firm and participates in its audit, assurance or tax compliance (but not tax planning) practice, or |
(iii) | was within the last three years a partner or employee of that firm and personally worked on the issuers audit within that time; |
(e) | an individual who, or whose immediate family member, is or has been within the last three years, an executive officer of an entity if any of the issuers current executive officers serves or served at that same time on the entitys compensation committee; and |
(f) | an individual who received, or whose immediate family member who is employed as an executive officer of the issuer received, more than $75,000 in direct compensation from the issuer during any 12 month period within the last three years. |
(4) | Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because |
(a) | he or she had a relationship identified in subsection (3) if that relationship ended before March 30, 2004; or |
(b) | he or she had a relationship identified in subsection (3) by virtue of subsection (8) if that relationship ended before June 30, 2005. |
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(5) | For the purposes of clauses (3)(c) and (3)(d), a partner does not include a fixed income partner whose interest in the firm that is the internal or external auditor is limited to the receipt of fixed amounts of compensation (including deferred compensation) for prior service with that firm if the compensation is not contingent in any way on continued service. |
(6) | For the purposes of clause (3)(f), direct compensation does not include: |
(a) | remuneration for acting as a member of the board of directors or of any board committee of the issuer, and |
(b) | the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service. |
(7) | Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because the individual or his or her immediate family member |
(a) | has previously acted as an interim chief executive officer of the issuer, or |
(b) | acts, or has previously acted, as a chair or vice-chair of the board of directors or of any board committee of the issuer on a part-time basis. |
(8) | For the purpose of section 1.4, an issuer includes a subsidiary entity of the issuer and a parent of the issuer. |
1.5 | Additional independence requirements |
(1) | Despite any determination made under section 1.4, an individual who |
(a) | accepts, directly or indirectly, any consulting, advisory or other compensatory fee from the issuer or any subsidiary entity of the issuer, other than as remuneration for acting in his or her capacity as a member of the board of directors or any board committee, or as a part-time chair or vice-chair of the board or any board committee; or |
(b) | is an affiliated entity of the issuer or any of its subsidiary entities, is considered to have a material relationship with the issuer. |
(2) | For the purposes of subsection (1), the indirect acceptance by an individual of any consulting, advisory or other compensatory fee includes acceptance of a fee by |
(a) | an individuals spouse, minor child or stepchild, or a child or stepchild who shares the individuals home; or |
(b) | an entity in which such individual is a partner, member, an officer such as a managing director occupying a comparable position or executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions who, in each case, have no active role in providing services to the entity) and which provides accounting, consulting, legal, investment banking or financial advisory services to the issuer or any subsidiary entity of the issuer. |
(3) | For the purposes of subsection (1), compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service. |
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Code of Ethics CGI © CGI Inc. 2022 ANNUAL INFORMATION FORM A-40
1. Code of Ethics and Business Conduct
For members, officers and directors of CGI
To the CGI Team
This Code of Ethics and Business Conduct is based on the values and philosophy that have guided CGI successfully since the Companys inception in 1976. It constitutes a unique repository where the combination of CGI policies, guidelines, principles of conduct and best practices have been regrouped under one umbrella document, for the benefit of our members, officers and directors.
CGIs operations have grown significantly and now extend worldwide, and our business environment has become increasingly competitive and complex. The scope and pace of our business requires us to make quick and informed decisions, in a manner consistent with our values.
This Code provides guidance - and a global view - for CGI members, officers and directors to consistently achieve the professionalism that has earned our Company an enviable reputation among our clients and within our industry. It also provides guidance for CGI directors when acting for the Company.
This Code is not meant to be a complete list of ethics and business conduct covering every eventuality. It highlights situations that CGIs members, officers and directors may face in their duties and provides the basic principles to guide their actions. CGI recognizes the importance of supporting these individuals as ethical issues arise, and has an open door policy for resolving such issues with integrity.
Upon joining CGI, all members, as part of their employment contract, undertake to observe this Code in all aspects of their work. Furthermore, annually, all members shall renew such undertaking.
We must always behave responsibly and in line with the Companys core values when working on behalf of CGI for its clients and other stakeholders. By preserving our personal integrity and the professional reputation of CGI, I am confident that together we will succeed in achieving the Companys mission and vision.
Serge Godin
Founder and Executive Chairman of the Board
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IMPORTANT NOTE
The CGI Constitution, including the Dream, Vision, Mission, and Values of the CGI Inc. form the fundamental principles of this Code of Ethics and Business Conduct. This Code should therefore be read in conjunction with CGIs Constitution.
1.1. | Values, Philosophy, Vision and Mission |
Values
CGI has always believed in investing in the future to ensure continued success. From the beginning, the Company has invested in developing a strong corporate culture, based on six core values that reflect its approach to business. These values are quality and partnership, intrapreneurship and sharing, respect, objectivity and integrity, financial strength and corporate social responsibility. These values are at the heart of CGIs success.
They ensure that CGI takes a long-term view on business issues, and builds long-lasting partnerships with its clients.
Philosophy
The success of CGI Inc. and its subsidiaries is based on the knowledge, creativity and commitment of its members. CGI ensures this success by recruiting the most qualified people available. CGIs members share in the risks and rewards of CGIs business as partners of CGI and are committed to its objectives. They take a disciplined approach to their work and constantly strive for excellence to achieve the best results for every client. In exchange, CGI strives to recognize the value of its members by offering them a stimulating work environment that fosters their personal and professional development.
Vision
To be a global world class end-to-end IT and business consulting services leader helping our clients succeed.
Mission
To help our clients succeed through outstanding quality, competence and objectivity, providing thought leadership and delivering the best services and solutions to fully satisfy client objectives in information technology, business processes, and management.
In all we do, we are guided by our Dream, living by our Values to foster trusted relationships and meet our commitments now and in the future.
1.2. | Purpose and Scope of the Code |
This Code of Ethics and Business Conduct (the Code) defines CGIs character and guides the actions and decisions of employees (members), officers and directors of CGI. Compliance with the Code is essential for many reasons and notably to preserve and enhance CGIs reputation and maximize shareholder value. In keeping with CGIs values, the Code outlines the essential rules and guidelines necessary to preserve CGIs enviable reputation among its clients and within its industry. The Code is not meant to be a complete list of ethics and business conduct covering every eventuality. It highlights situations that CGI members, officers and directors may face in their duties. The code is meant to give them a broad and clear understanding of the conduct expected of them, wherever CGI does business. While the specific illustrations are primarily addressed to members, they should be read as being equally applicable to the members of CGIs Board of Directors to the extent that they may be applicable in the circumstances.
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Should a member be confronted with a situation where further guidance is required, the matter should be discussed with the members manager. CGI recognizes its obligation to support its members, officers and directors as ethical issues arise.
In addition, third parties such as consultants, agents and suppliers are required to comply with CGIs Third Party Code of Ethics when acting on CGIs behalf. CGI expects any third party acting on CGIs behalf to respect CGI values and high ethical standards of conduct.
The Third Party Code of Ethics is available on our enterprise portal.
1.3. | Members Conduct and Behavior |
General conduct
Upon joining CGI and annually thereafter, all members are by virtue of the Member Commitment to the Code of Ethics and Business Conduct, which must be signed where permitted locally, subject to the Company Code of Ethics and Business Conduct and related policies and guidelines.
If a member ceases to be employed by CGI for any reason, the Member Commitment specifies which elements continue to apply, namely those related to the confidentiality obligations.
Respect and integrity
All members of CGI support the Companys philosophy and contribute to CGIs development and good reputation by promoting synergy and teamwork, by expressing their ideas and by adopting the highest standards of service quality and integrity. The members of CGI are its ambassadors. They must always behave responsibly and demonstrate courtesy, honesty, civility and respect for other members of CGI, for its clients and for its suppliers, and must never do anything that could harm CGIs reputation or that could otherwise bring CGI into disrepute.
Loyalty
Members are expected to act at all times with diligence and loyalty towards CGI and in such a way as to safeguard CGIs interests. Members should not act in a way or publicly hold a position that might harm the image or reputation of CGI.
Relations with clients
CGIs services often involve visiting or working at a clients place of business. A member working at a clients site must comply with the clients practices and procedures and treat the clients facilities with respect. The member must work as efficiently and meticulously as possible and leave the clients premises and property as he or she found them. As well, members must use the clients information and systems infrastructures for the sole purpose of the clients contract and protect those infrastructures and information at all times.
Members may also be required to follow a clients code of conduct, in addition to following CGIs Code. When faced with an incident that occurs on client premises, members must promptly notify their manager and/or escalade through proper CGI channels.
Relations with competitors
If a member is working with a competitor of CGI on a joint project for a client, the member must avoid any situations that could cause conflicts. The member must respect the roles that the client has assigned to each party and work
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as a team in the clients best interests. CGIs members also have both an ethical and a legal responsibility to portray the Companys competitors fairly and accurately. CGI does not tolerate its members using improper means for gathering information about its competitors.
Maintenance of assets
All members of CGI have a responsibility to protect CGIs assets against loss, theft, abuse and unauthorized use or disposal. If, in the course of his or her work, a member of CGI is supplied with any property belonging to CGI or to a third party, the member must use said property in accordance with CGIs Security and acceptable use policy, and as may otherwise be specified in the binding agreement he or she signed with CGI the member must use said property solely for work-related purposes as specified in the binding agreement he or she signed upon joining CGI. More specifically, the members must use CGIs systems infrastructures in a manner consistent with legal requirements, professional ethics, the policies established by the administrators of CGIs network and of any external networks that the member uses, and must respect the copyrights protecting any software that the member also uses. As well, members must never use the clients systems infrastructures, including the clients software, for any purpose that is not work-related. CGI applies a zero-tolerance policy to any abuse of its systems infrastructures or those of its clients.
At the end of employment, members are required to return all CGI property and assets in their possession to their manager or to a designated CGI representative.
Health and Safety
CGI is committed to complying with all applicable health and safety laws, policies and regulations in order to provide a safe and healthy work environment to all members. In addition, CGI encourages all members to report accidents and unsafe conditions, to follow safety and emergency procedures at their facilities, and to actively promote a culture of safety whenever possible.
Accordingly, members are expected to observe the following rules:
Drug-Free Workplace
CGI maintains a drug-free workplace. Accordingly, in the workplace, members may not:
i. | Use, sell, or possess illegal drugs; |
ii. | Abuse or misuse controlled substances, prescription drugs, or over-the-counter medications; or |
iii. | Abuse alcohol. |
Restrictions on Alcohol Use
With the exception of specially authorized CGI functions, no member may consume, serve, or be under the influence of alcohol while on CGI property or while performing CGI business.
Alcohol may be served at CGI functions only with the prior approval of a Senior Vice President. In such circumstances, CGI strongly encourages members to use discretion, act responsibly, and behave in a manner becoming to the Company. When working in parts of the world where alcohol use or possession is prohibited, CGI members must comply with local laws.
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1.4. | Integrity of Books and Records and Compliance with Sound Accounting Practices |
Preparation of books and records
Accuracy and reliability in the preparation of all business records is of critical importance to the decision-making process and to the proper discharge of financial, legal and reporting obligations. All business records, expense accounts, invoices, bills, payroll and member records and other reports are to be prepared with care and honesty. False or misleading entries are not permitted in CGIs books and records.
Financial transactions
All financial transactions are to be properly recorded in the books of account and accounting procedures are to be supported by the necessary internal controls. In turn, all books and records of CGI must be available for audit.
In relation to CGIs books and records, members must:
i. | not intentionally cause Company documents to be incorrect in any way; |
ii. | not create or participate in the creation of any records that are intended to conceal anything that is improper; |
iii. | properly and promptly record all disbursements of funds; |
iv. | co-operate with internal and external auditors; |
v. | report any knowledge of any untruthful or inaccurate statements or records or transactions that do not seem to serve a legitimate commercial purpose; and |
vi. | not make unusual financial arrangements with a client or a supplier (such as, over-invoicing or under- invoicing) for payments on their behalf to a party not related to the transaction. |
The nature of CGIs business places special importance on the accuracy of time keeping and expense reporting.
Accurate Timekeeping
Client billing, member compensation, and cost estimating depends on CGIs ability to record and account for member time worked accurately.
Accordingly, CGI is committed to accurate total time accounting and reporting within all of its subsidiaries.
All members are required to comply with CGIs timekeeping policy and procedures and any applicable contract requirements. Members must record all time worked daily and submit reports weekly, accurately reflecting all time worked on both direct and indirect projects. Managers are responsible for ensuring that members know the correct project code for each project assignment
Knowingly mischarging your time or falsifying time records violates CGI policy and may also violate the law. No member may knowingly charge time inaccurately or knowingly approve mischarging. Similarly, shifting time worked on one project to another project also is strictly prohibited.
To ensure accurate time reporting, members must be sure that they understand and carefully follow CGIs timekeeping policy and procedures. Members must obtain the correct charge code before starting work on any new direct or indirect project. If a member has any questions regarding time charging, the question should be raised with their manager. In all cases, members must take the steps necessary to ensure that their time records are current, accurate, and complete.
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Expense Reimbursement
Members must honestly and accurately report their business-related expenses for reimbursement. A members signature on an expense report certifies that the information provided is complete and accurate and represents a valid business expense.
Breaches
Suspected breaches of the Code which directly or indirectly affect CGIs business must be reported in accordance with section 1.10 below.
To guide members, CGI has established the Ethics Reporting Policy, commonly referred to as the whistleblower policy. This Policy establishes a process by which any person who has direct knowledge of specific incidents of non-compliance can report such incidents anonymously. This process is in place to protect the incident reporter and to ensure confidentiality of the report.
For more information, please refer to CGIs Ethics Reporting Policy available on our enterprise portal.
1.5. | Confidential Information, Intellectual Property and Privacy |
Definitions
Confidential Information
Confidential Information means:
1. | Information about the Companys business dealings, development strategies and financial results; products or processes; client lists; vendor lists or purchase prices; cost, pricing, marketing or service strategies; results of research and development work, technical know-how, manufacturing processes, computer software; reports and information related to mergers, acquisitions and divestitures; |
2. | Information that relates to intellectual property and may include, but is not limited to business strategies, product marketing and costing information and information provided by suppliers and competitors. In addition, the way the Company puts publicly-known information together, to achieve a particular result, is often a valuable trade secret; |
3. | Personal data of any individual, which refers to any information that can identify an individual either directly or indirectly by reference to an identifier or a combination of several factors, as further defined in CGIs Data Privacy Policy. |
For example, the following information and documents constitute confidential information or documents of CGI or its clients:
i. | methodologies; |
ii. | all information related to: processes, formulas, research and development, products, financials, marketing; names and lists of customers, employees and suppliers as well as related data; computer programs, all software developed or to be developed including flow charts, source and object codes; |
iii. | all information related to projects undertaken by the Company whether they are merger and acquisition or divestiture projects or projects related to large client contracts, including all information obtained in due diligence initiatives, whether such information pertains to CGI or to any third party; |
iv. | all other information or documents that, if disclosed, could be prejudicial to CGI or its clients; and |
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v. | personal data of CGI members or any third party individual as further defined in CGIs Data Privacy Policy. |
Intellectual Property
Intellectual Property (IP) means patents, copyrights, trademarks, trade secrets and industrial designs of CGI.
Non-disclosure undertaking
CGI Confidential Information
During the normal course of business, members will have access to confidential information about CGI. In some cases, the information may affect the value of CGI shares. Each member must protect the confidentiality of all confidential CGI information and documents. Members cannot discuss them away from work, and cannot divulge any confidential CGI information or any information that could harm CGI. Confidential CGI information could include information from other members or information acquired from outside sources, sometimes under obligations of secrecy. Members are expected to use such information exclusively for business purposes and this information must not be disclosed externally, including to a spouse, partner or relative, without the approval of a members manager.
Third Party Agreements
In cases where information or records are obtained under an agreement with a third party, such as software licenses or technology purchases, members must ensure that the provisions of such agreements are strictly adhered to so that CGI will not be deemed to be in default. Unauthorized disclosure or use of information or records associated with these agreements could expose the member involved and/or CGI to serious consequences.
Disclosure policy
Privileged or Material Information
Privileged or material undisclosed information about CGI or other public companies may not be used as a basis for trading in CGI securities, or the securities of any other company in respect of which CGI or its members, consultants or advisers are in possession of such information. For this purpose, CGI has an established policy regarding the use of insider information and trading in securities. This policy is entitled Insider Trading and
Blackout Periods Policy which extends to all directors, officers and members. The Insider Trading and Blackout Periods Policy is designed to prevent improper trading in the securities of the Company and the improper communication of privileged or material undisclosed information. In addition, this Policy is aimed at preventing directors, officers and members from engaging in activities that, although not illegal, may expose them or the Company to potential reputational risk.
CGIs Policy on Timely Disclosure of Material Information cover the disclosure of information with a material impact, defined as any information that, if disclosed to a potential investor, could affect his or her perception of the value of the Company as an investment. Because CGI is a publicly traded company, any information that may have a material impact on CGIs results or on the perception of the value of the stock must be communicated in accordance with CGIs Policy on Timely Disclosure of Material Information. If a member thinks that he or she is in possession of a piece of information that is not known to management and may have a material impact on the Company, the member must communicate it immediately to either the Executive Chairman of the Board, the Chief Executive Officer, the Chief Legal Officer, or the Chief Financial Officer, without divulging it to anyone else.
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Client Information
Just as CGIs members must protect confidential information about CGI, they must also show discretion at all times with regard to the clients business affairs. Unless a member has the clients express authorization, he or she should never reveal any information that could harm the clients interests and should never use any information that he or she obtains in the course of a project or assignment for any purpose other than that project or assignment. If the client restricts the distribution of certain information within its own organization, the member must comply with those restrictions as well.
Member Information
Subject to applicable law, CGI collects and maintains personal information relating to its members, including medical and benefits information. Access to such information is restricted to CGI personnel on a need-to-know basis. They must ensure that this information is not disclosed in violation of CGIs policies and practices. Personal information is released to outside parties only with the members approval, except to satisfy the requirements considered by CGI to be appropriate for legal reasons.
Intellectual Property
In the course of their duties, members may develop or create new designs, inventions, systems or processes, products or documents. When these achievements have been made as a direct result of a members employment with the Company and through use of CGIs resources, they belong to CGI. Moreover, CGI is free to use this work as it so wishes and members cannot use nor divulge, publish or otherwise disseminate it without prior written consent from CGI. Upon request, members will execute documents made necessary to confirm or complete the assignment of rights to CGI.
Suppliers and Partners Information
All information on CGI suppliers and partners is also confidential and must not be disclosed without the express consent of the persons concerned.
Data Privacy
CGI must comply with industry practices and applicable laws when collecting, maintaining, processing and disclosing personal data of clients, members and third parties. Therefore, any such activities related to personal data must be performed by CGI and its members in accordance with CGIs Data Privacy Policy, processes and standards.
For more information, please refer to CGIs Data Privacy Policy available on our enterprise portal.
1.6. | Conflicts of Interest |
Definitions
The members of CGI must avoid any actual or apparent conflicts of interest and should never engage in any conduct which is, or could potentially be, harmful to CGI or its reputation. A conflict of interest exists when a member favors his or her personal interests over those of CGI or its clients or when an obligation or situation arising from a members personal activities or financial affairs may adversely influence the members judgement in the performance of his or her duties at CGI.
Particular caution should be taken when dealing with initiatives involving contracts with any governmental or quasi- governmental agency.
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Guidelines
The following guidelines provide guidance for members to avoid situations, which are or may appear to be in conflict with their responsibility to act in the best interest of the Company.
| Financial Interests - A conflict of interest exists when a member who is able to influence business with CGI (or family or a close personal friend of such member) owns, directly or indirectly, a beneficial interest in an organization which is a competitor of CGI, or which has current or prospective business as a supplier, customer or contractor with CGI. This does not include the situation where the financial interest in question consists of shares, bonds or other securities of a company listed on a securities exchange and where the amount of this interest is less than one percent of the value of the class of security involved. |
| Outside Work - When a member, directly or indirectly, acts as a director, officer, employee, consultant or agent of an organization that is a competitor of CGI, or which has current or prospective business as a supplier, customer or contractor with CGI, there is a conflict of interest. Similarly, a conflict of interest may exist when a member undertakes to engage in an independent business venture or to perform work or services for another entity should that activity prevent such member from devoting the time and effort to the conduct of CGIs business, which his or her position requires. |
| Gifts or Favors - A conflict of interest will arise when a member, either directly or indirectly, solicits or accepts any gift or favor from any person or organization which is a competitor of CGI, or which has current or prospective business with CGI as a customer, supplier, partner or contractor. For this purpose, a gift or favor includes any gratuitous service, loan, discount, money or article of value. It does not include articles of nominal value normally used for sales promotion purposes, ordinary and reasonable business meals and entertainment expenses if they have a clear business purpose, are permitted under the anti-corruption laws and local laws, conform to generally accepted local customs and are received in a sporadic manner. |
| Commissions - CGI or its members will never accept any commissions from a third-party vendor when recommending software, hardware or any equipment to a client as part of a service agreement. |
| Trading with CGI - A conflict of interest may exist when a member is directly or indirectly a party to a transaction with CGI. |
| Misappropriation of Business Opportunities - A conflict of interest will exist when a member, without the knowledge and consent of CGI, appropriates for his or her own use, or that of another person or organization, the benefit of any business venture, opportunity or potential opportunity about which the member may have learned or that he or she may have developed during the course of his or her employment. |
| Bribes - Neither CGI nor its members will pay bribes to clients or client representatives to obtain business from them. Refer to CGIs Anti-Corruption Policy under Section 4.3 below for further information on this topic. |
| Former Employees of Customers Hiring or retaining the services of former employees of customers, whether in the private or public sector (including quasi-government agencies), may result in actual or perceived conflicts of interest. Accordingly, any such person may not: (i) for a period of two years from the termination of his or her employment with a former customer be assigned to work on, or in any way contribute to, a CGI project or contract that is linked to his or her former functions, unless the customers prior written consent is obtained and the hire is not prohibited by any code of ethics or other restrictions or undertakings applicable to such person; and (ii) disclose to any CGI member any confidential information such person obtained during the course of his or her former functions with the customer. |
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| Personal Relationships The potential for a conflict, or perceived conflict, between personal/family relationships and work responsibilities may arise, for example, where a member interacts with someone in a professional capacity in the course of CGIs business dealings with whom the member shares a close personal relationship or friendship. It may also arise if a member has a direct influence in deciding whether CGI will engage in business dealings with a person, supplier or third party with whom the member shares a close personal relationship or friendship. If the close personal relationship or friendship may be perceived as adversely affecting the members judgment or objectivity, both in the workplace and in any business dealings, a conflict or perceived conflict exists. |
Reporting
Any actual, potential or perceived conflict of interest situation must be discussed with the members management chain or leadership team, or the CGI Human Resources, Ethics or Legal Departments (or, in the case of an executive officer, with either CGIs Executive Chairman of the Board, Chief Executive Officer, Chief Financial Officer or Chief Legal Officer) as soon as possible so that steps can be taken to address the situation.
1.7. | Laws, Statutes and Regulations |
Compliance with the law
It is CGIs policy to comply, not merely with the letter, but also with the spirit of the law. CGI is required to maintain compliance with various acts, statutes and regulations governing activities in the jurisdictions in which it carries on business and expects members acting on its behalf to do likewise. Members are also expected to report any situation of concern as described in section 1.10 below or to the CGI Legal Department.
Guidelines for compliance
This Code does not seek to provide legal guidance for all laws, statutes and regulations that impact CGIs activities. Specialized resources - legal, tax, environmental, government relations, and personnel - are available within CGI for that purpose. There are, however, several items of legislation that warrant specific mention. These are listed below along with some general guidelines for compliance.
Environmental laws
CGI is committed to preserving and enhancing the environment in the communities where its various businesses operate through responsible and environmentally oriented operating practices. Members are encouraged to participate in undertakings geared to improving the environment in both their workplace and their community.
Human rights legislation
Every person has the right to equal treatment with respect to employment and the right to be free of discrimination because of race, ancestry, place of origin, color, ethnic origin, citizenship, religion, sex, sexual orientation, age, pregnancy, record of offences, marital status, social conditions, political beliefs, language, veteran status (U.S. only), family status, disability or means used to overcome a disability.
The following are CGIs policies on equal employment opportunity, anti-harassment and anti-discrimination and modern slavery as well as the procedure for reporting any breach or violation of these policies:
i. | Equal Employment Opportunity - CGI is committed to treating all people fairly and equitably, without discrimination. The company has established a program to ensure that groups, which are often subject to discrimination, are equitably represented within CGI and to eliminate any employment rules and practices |
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that could be discriminatory. CGI regards diversity among its members as a priceless resource and one which enables the Company to work harmoniously with clients from around the world. |
ii. | Anti-Harassment and Anti-Discrimination Policies - CGI recognizes that everyone has the right to work in an environment free of sexual, psychological and racial harassment. CGI will do everything in its power to prevent its members from becoming victims of such harassment. CGI defines sexual, psychological or racial harassment as any behavior, in the form of words, gestures, or actions, generally repeated, that has undesired sexual, psychological or racial connotations, that has a negative impact on a persons dignity or physical or psychological integrity, or that results in that person being subjected to unfavorable working conditions or dismissal. |
CGI will prevent any form of harassment or discrimination against job candidates and members on any of the grounds mentioned above, whether during the hiring process or during employment. This commitment applies to such areas as training, performance assessment, promotions, transfers, layoffs, remuneration and all other employment practices and working conditions.
All CGI managers are personally accountable for enforcing this policy and must make every effort to prevent discriminatory or harassing behavior and to intervene immediately if they observe a problem or if a problem is reported to them.
In their professional capacity, all members must refrain from any form of harassment or discrimination against anyone, including suppliers, customers and constructors.
iii. | Procedure for Reporting Discrimination or Harassment - Any member of CGI who feels discriminated against or harassed can and should, in all confidence and without fear of reprisal, personally report the facts through the reporting channels described in section 1.10. |
The facts will be examined carefully. Neither the name of the person reporting the facts nor the circumstances surrounding them will be disclosed, unless such disclosure is necessary for an investigation or disciplinary action. Any disciplinary action will be proportional to the seriousness of the behavior concerned. CGI will also provide appropriate assistance to any member who is a victim of discrimination or harassment. In addition, retaliation against persons who make complaints of harassment, witness harassment, offer testimony or are otherwise involved in the investigation of harassment complaints will not be tolerated.
iv. | Modern Slavery - CGI recognizes that slavery is both illegal and unacceptable. As a services organization in which most of our members are highly skilled and directly employed by CGI, we consider the risk of modern slavery within CGIs own organization to be low. However, CGI has implemented an additional procurement process to mitigate the risk of slavery in our supply chain. We expect all third parties with whom we work to comply with anti-human trafficking and anti-slavery legislation. To that end, CGIs Third Party Code of Ethics aims to provide suppliers with the appropriate guidance to make informed business decisions while working with CGI. |
Competition act
CGI is required to make its own decisions on the basis of its best interest and must do so independent of agreements or understandings with competitors. The Competition Act (Canada) or corresponding provisions of foreign legislation in matters of competition prohibit certain arrangements or agreements with others regarding product prices, terms of sale, division of markets, and allocation of customers or other practices that restrain competition. It is the responsibility of each manager to comply with the letter and spirit of all competition laws as they apply to CGI.
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Questions concerning competition-sensitive issues must be addressed to ethics@cgi.com or the CGI Legal Department.
Securities laws and insider trading
Members are prohibited from trading in CGI securities while in possession of Privileged Information, subject to the limited exceptions under applicable laws and regulations. They are also prohibited from trading in another public companys securities while in possession of Privileged Information regarding that public company gained during the course of the members work. Members are prohibited from disclosing Privileged Information to, or tipping, another party or recommending that another party trade in CGI securities or another public companys securities while they have knowledge of Privileged Information. Tipping is a violation of laws and regulations even if the person disclosing the information does not personally make a trade or otherwise benefit from disclosing the information.
Privileged Information is information that has not been disclosed to the public and could affect the decision of a reasonable investor, as well as any fact or any change in business, operations or capital that would reasonably be expected to have a significant effect on the market price or value of any security and which has not been generally disclosed. CGI has adopted the Insider Trading and Blackout Periods Policy which extends to all directors, officers and members.
Export and import laws
CGI members may find themselves dealing with goods or services that are the subject of export or import restrictions, such as, for example, information or technology that has military or state security applications. Members who deal with controlled goods and services must comply with the CGI policies and procedures designed to ensure that the controls are respected.
Laws that protect classified information
In the normal course of CGIs business with government clients, our members may be required to hold government security clearances and they may have access to information that is classified or facilities that are restricted. Members must comply with the letter and with the spirit of the laws, rules and regulations that apply to classified information and facilities that are restricted.
Whether a member holds a security clearance or not, members must not seek access to classified information or restricted facilities unless that access is required in order to allow them to carry out their assigned tasks. Members must not accept access to, retain, or otherwise deal with classified information, or enter restricted facilities, unless they hold a current and valid security clearance that entitles them to have the appropriate degree of access. If there is any doubt about whether information is classified or whether facilities are restricted, about the restrictions that may apply to information or facilities, or whether the members security clearance is adequate in the circumstances, the member must first consult with the CGI security officer who has the authority to advise the member.
1.8. | Investor and Media Relations |
Authorized Spokespersons
Initiatives relating to investor and media communications are the responsibility of CGIs authorized spokespersons. Therefore, members are not allowed to make any public statement about CGI without first obtaining the authorization of such authorized spokespersons.
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1.9. | Community Activities and Political and Public Contributions |
As a global organization conducting business throughout the world, CGI is committed to the charitable donation of funds and services for humanitarian and other social needs, particularly in cases of emergencies or disasters.
Monetary and other contributions to charities, social projects and funds, including schools, educational funds and infrastructure projects, should occur outside of work hours and be handled with caution as they can be conduits for corrupt payments. In order to minimize this risk, CGI requires appropriate due diligence be conducted into such charities and projects prior to the approval of any charitable contributions made on its behalf. No contributions of any kind may be made on CGIs behalf to any political party, candidate or campaign. In no event shall any charitable or political donations be made for the purpose of gaining any improper business advantage.
Questions to consider when making charitable payments:
1. | Is the organization or body receiving the payment duly registered and does it otherwise comply with applicable law? |
2. | Is the organization or body, including its board of directors and other representatives, free of any political or other undue influence? |
3. | What is the purpose of the payment? |
4. | Is the payment consistent with CGIs internal guidelines on charitable giving? |
5. | Is the payment at the request of a foreign official? |
6. | Is a foreign official associated with the charity and, if so, can the foreign official make decisions regarding CGIs business in that country? |
7. | Is the payment conditioned on receiving business or other benefits? |
1.10. | Compliance with the Code |
Management responsibilities
CGIs managers have a special duty to be role models of appropriate business conduct and to see that the principles and policies of this Code and of other CGI guidelines and policies referred to in this Code are upheld. This means:
i. | Copy of the Code - Ensuring that all members have a copy of the Code, and that they understand and comply with its provisions. |
ii. | Assistance - Offering assistance and explanations to any member who has questions, doubts or is in a difficult situation. Managers are also required to counsel members promptly when their conduct or behavior is inconsistent with the Code. |
iii. | Enforcement - Taking prompt and decisive action when a violation of the Code has occurred, in consultation with the CGI Legal Department. If a manager knows a member is contemplating a prohibited action and does nothing, the manager will be held responsible along with the member. |
Member responsibilities
Each member is accountable for observing the rules of conduct that are normally accepted as standard in a business enterprise. In addition, they must abide by the following:
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i. | Compliance - CGIs members are expected to comply with the Code and all policies and procedures of the company as well as to actively promote and support CGIs values. |
ii. | Preventing - Members should take all necessary steps to prevent a Code violation. |
iii. | Reporting - Members must promptly report any non-compliance to this Code of which we become aware, including but not limited to: |
● | any suspected violations of the Code and/or of CGI policies; |
● | any known or suspected violation of applicable laws, rules or regulations; or |
● | any observed instances of misconduct or pressure to compromise our ethical standards. |
Reports can be made openly, confidentially and/or anonymously as allowable by law, via any of the following reporting channels:
● | the members manager or any other individual in the management chain or the leadership team; |
● | Any member of the HR Department or the CGI Legal team; |
● | Any Officer of the Company, especially when mandated by the Code; |
● | CGIs internal ethics inbox at ethics@cgi.com; or |
● | CGIs Ethics Hotline |
The Ethics Hotline is an incident reporting system managed by an independent third party mandated by CGI to ensure anonymity of all incident reporters should they chose to remain anonymous, and confidentiality of all reports submitted.
Through this channel, reports may be submitted by phone or online:
● | By Phone: Call (800) 461-9330 |
● | Online: Go to the Ethics Hotline |
To guide members, CGI has established the Ethics Reporting Policy, commonly referred to as the whistleblower policy. This Policy establishes a process by which any person who has direct knowledge of specific incidents of non-compliance can report such incidents anonymously. This process is in place to protect the incident reporter and to ensure confidentiality of the report.
For more information, please refer to CGIs Ethics Reporting Policy available on our enterprise portal.
iv. | Zero Tolerance for Retaliation CGI has zero tolerance for retaliation against anyone who reports incidents in good faith. |
Retaliation is abusive, punishing behavior by managers and coworkers toward members who, in good faith, question established practices, report misconduct or participate in investigations.
Members who believe they have experienced retaliation are expected to report it just as any other violation would be reported. There are serious consequences for retaliation, up to and including dismissal.
v. | Consequences - Unethical behavior, violations of this Code and of CGIs other guidelines and policies, as well as withholding information during the course of an investigation regarding a possible violation of the Code, may result in disciplinary action which will be commensurate with the seriousness of the behavior. Such action could include termination as well as civil or criminal action. |
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1.11. | Administration of the Code |
Periodic review
Responsibility for the periodic review and revision of the Code lies with CGIs Corporate Governance Committee.
Monitoring compliance
The Board of Directors of CGI will monitor compliance with the Code and will be responsible for the granting of any waivers from compliance with the Code for directors and officers of CGI. The Corporate Secretary of CGI shall, when deemed appropriate, make reports to the Board of Directors of CGI with respect to compliance with this Code.
Questions
Questions concerning this Code should be referred to a members manager who, when warranted, shall report to CGIs Corporate Secretary.
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2. Executive Code of Conduct
This Executive Code of Conduct (the Code) is part of the commitment of CGI Inc. (CGI) to ethical business conduct and practices. This Code reflects CGIs firm commitment, not only to adherence to the law, but also to the highest standards of ethical conduct.
This Code specifically covers CGIs principal executive officer, principal financial officer, principal accounting officer or controller, or other persons performing similar functions (collectively, the officers) and supplements the Code of Ethics and Business Conduct.
2.1 | Honest and Ethical Conduct |
Respect and integrity
The officers of CGI are its ambassadors. They must always behave responsibly and demonstrate courtesy, honesty, civility and respect for all other employees of CGI, for its clients and for its suppliers.
Ethics
Supporting CGIs objectives, officers in performing their duties will carry out their responsibilities at all times in a way that promotes ethics in their leadership. The officers will:
i. | Undertake their responsibilities in a vigilant manner in the interests of CGI and to avoid any real or perceived impression of personal advantage; |
ii. | Advance CGIs legitimate interests when the opportunity arises at all times ahead of their own interests; |
iii. | Proactively promote ethical behavior among subordinates and peers; and |
iv. | Use corporate assets and resources in a responsible and fair manner, having regard for the interests of CGI. |
2.2 | Full, Fair, Accurate, Timely and Understandable Disclosure |
Annual and quarterly reports
Each officer shall read each annual or quarterly report filed or submitted under the applicable securities laws and satisfy himself or herself that the report does not contain any untrue statement of a material fact or omit to state a material fact that is necessary in order for the statements made not to be misleading, in light of the circumstances in which such statements were made.
Financial statements
Each officer shall satisfy himself or herself that the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition and results of operations of CGI as of, and for, the periods presented in the report.
Reports to securities regulators
Officers shall perform their responsibilities with a view to causing periodic reports filed with securities regulators to contain information which is accurate, complete, fair and understandable and to be filed in a timely fashion.
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Reporting concerns and complaints
An officer who believes it is necessary or appropriate to do so can refer concerns about the quality and scope of financial or related reporting requirements to the Chair of the Audit Committee. Any officer who receives a bona fide material complaint about financial reporting from any employee shall report such complaints to the Audit Committee. Any officer who has disclosed such concerns in good faith shall not face any form of retribution.
2.3 | Compliance with Laws, Rules and Regulations |
The officers are cognizant of their leadership roles within the organization and the importance of compliance with the letter and spirit of applicable laws, rules and regulations relating to financial and related reporting.
2.4 | Compliance with the Code |
General responsibilities
Officers have a special duty to be role models of appropriate business conduct and see that the principles and policies of this Code and other CGI guidelines and policies are upheld.
Reporting
Any violation or suspected violation of the Code should be personally reported by an officer to CGIs Executive Chairman of the Board, Chief Executive Officer, Chief Financial Officer or Chief Legal Officer.
Accountability
Non-compliance with this Code in every respect by an officer will be a matter for consideration and review by the Board of Directors of CGI.
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2022 ANNUAL INFORMATION FORM A-57 |
3. CGI Anti-Corruption Policy
Policy statement
CGI is committed to conducting its activities free from the illegal and improper influence of bribery and to ensuring compliance with all anti-bribery and anti-corruption laws and regulations that may be applicable to its business world-wide (collectively, Anti-Corruption Laws). It is essential that our members, officers, and directors, as well as all third parties who act on behalf of CGI, comply at all times with the letter and the spirit of all Anti-Corruption Laws.
Overview
Bribery is offering, giving, receiving, or soliciting any item of value to improperly influence the actions of a person in order to obtain or retain business or an unfair advantage in the conduct of business; or to induce or reward improper conduct. Kickback is another term for bribery. Bribery can arise in both the public and the private sphere. It can take place directly or indirectly (e.g. through a Third Party). It can take many forms. Anti- Corruption Laws require companies like CGI to have proactive measures to prevent, detect, and address bribery and corrupt practices.
There are many reasons to care about bribery and corruption.
Bribery and corruption are crimes punishable by fines and/or imprisonment. CGI officers, directors and members, as well as Third Parties, must not engage in any form of bribery or corruption. Whenever members are asked to approve or make a payment, they must ensure that they fully understand the reason for the payment and that the payment is legitimate. If in doubt, they should not make or agree to make the payment and contact the CGI Legal Department or ethics@cgi.com for guidance.
Bribery and corruption have been identified as key factors that limit economic growth and contribute to inequality. By wrongfully benefiting a few individuals, they limit competition, undermine innovation, and corrupt societies.
Bribery is also detrimental to our business studies show that companies where bribery is condoned have lower levels of productivity and lower employee morale. Put simply, it is unethical and against CGIs values.
Individuals and companies can face civil and criminal charges resulting in large fines, imprisonment, and suspension or debarment from government contract processes. Failure to comply puts members, their colleagues, and CGI at risk. This could have a very serious impact on members, and CGIs business and reputation.
Key principles
3.1 | Bribes must not be offered or accepted |
CGI prohibits the offering, giving, receiving, or soliciting of any item of value to improperly influence the actions of a person in order to obtain or retain business or an unfair advantage in the conduct of business; or to induce or reward improper conduct. Items of value can include:
i. | payments of money; |
ii. | extension of credit or loans; |
iii. | travel and accommodations expenses; |
iv. | gifts, meals, and entertainment; |
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2022 ANNUAL INFORMATION FORM A-58 |
v. | political contributions and charitable donations; |
vi. | free use of company services, facilities or property; |
vii. | favors that are of value to a recipient (e.g., offering a job to a member of a persons family); or |
viii. | anything else of value. |
Bribery and corruption can take many forms. Red flags can include cash payments or gifts to individuals or family members; inflated commissions; inflated invoices; fake consultancy agreements; unauthorized rebates; political or charitable donations; and excessive payment of travel expenses for inappropriate non-business related travel. In some cases, simply offering an inducement is unlawful, even if not accepted. This Policy is intended to help you understand how to apply this prohibition in our business. It explores the areas identified above in more depth.
3.2 | Understanding CGI Policies and Identifying Risks |
The first step in compliance is to understand our Code of Ethics, including this Policy, and how it impacts your responsibilities on a day-to-day basis. Knowing what steps to take to prevent risk and to ensure the proper handling of any issues relating to bribery and corruption is essential to compliance.
3.3 | Respond |
CGI will assess bribery and corruption risks on an ongoing basis within each Strategic Business Unit. CGI will implement mitigation plans and training programs as part of its system of internal controls. CGI will also monitor compliance at the local level to ensure that this Policy is being followed by all members. You should always complete all required training and cooperate with ongoing monitoring.
3.4 | Document and Report |
All documentation of financial transactions must be accurate and complete. You should always document your transactions in compliance with the Code of Ethics, and report any issues arising under this Policy that you become aware of as required by CGIs Ethics Reporting Policy. Questions under this Policy can be addressed to ethics@cgi.com.
Areas of Focus
CGI has established procedures and guidelines to translate this Policy and our principles into practice. This section outlines the general requirements and procedures for the following risk areas:
A. | Gifts |
POLICY
Though gifts are recognized as appropriate ways of developing business relationships and promoting the CGI brand, we must ensure that the offering, solicitation and receipt of gifts does not give rise to even an appearance of impropriety. Particular vigilance must be exercised where gifts are extended to Government Officials.
All gifts offered by CGI must:
i. | be permitted under local law and the Anti-Corruption Laws and conform to generally accepted local customs; |
ii. | have a clear business purpose which is directly related to CGIs commercial objectives; |
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iii. | be reasonable in value and not appear lavish or extravagant; and |
iv. | not be intended to create any obligation on behalf of the recipient or to result in CGI receiving any favour or advantage in return. |
Typically, small gifts containing the CGI logo (such as coffee mugs, t-shirts, pens, and the like) offered sporadically to persons at CGI promotional events (such as trade shows) will not violate this Policy as long as they are not excessive.
A chart attached as Appendix A to this Policy provides limits on gifts to Government Officials allowed under the laws of various jurisdictions. All Members must adhere to these limits when offering gifts to Government Officials. When dealing with private parties, these limits should also be used as guidelines for determining if the value of a gift is reasonable. You should consult with the CGI Legal Department if you have any questions related to offering any gifts to Government Officials to ensure that they comply with local laws and the Anti-Corruption Laws. You can also direct inquiries to ethics@cgi.com.
FULL TRANSPARENCY REQUIRED
If offering or accepting a gift meets these standards, it must be made or accepted in a fully transparent way. Gifts which are excessive, frequent, or intended to create an obligation on the part of the recipient are strictly prohibited.
HOW WE ENSURE COMPLIANCE
No reimbursement or payment for any gifts offered by a CGI member that otherwise comply with this Policy will be made without adequate approvals in compliance with the Operations Management Framework and supporting documentation / receipts.
RED FLAGS
Examples of common red flags that could indicate bribery or corruption include the following:
i. | Gifts that would be illegal under local or Anti-Corruption Laws; |
ii. | Gifts to or from parties engaged in a public tender or competitive bidding process; |
iii. | Any gift of cash or cash equivalents, or securities; |
iv. | Any gift where something is expected in return; |
v. | Any gift that appears excessive based on common sense standards or local custom; |
vi. | Any gift that is paid for personally. |
B. | Hospitality, travel, entertainment and meals |
POLICY
As with gifts, providing hospitality, travel, entertainment, and meals (collectively, Hospitality) to any person may be a violation of the law if they are excessive, unreasonable, or do not have a valid business purpose. The same principle applies to soliciting or receiving Hospitality from existing or potential clients. CGI prohibits payment or reimbursement of expenses for any person to attend site visits or other CGI business events unless the expenses are reasonable, reflect actual costs incurred, directly relate to CGI business, and are permissible under local law and custom. CGI discourages the providing of Hospitality to the family members or guests of clients unless a clear business purpose for the Hospitality can be demonstrated.
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2022 ANNUAL INFORMATION FORM A-60 |
HOSPITALITY OFFERED BY OR TO CGI MEMBERS
All Hospitality offered by or to CGI members must meet these requirements:
i. | The Hospitality must be permitted under local law and the Anti-Corruption Laws and conform to generally accepted local customs; |
ii. | The host offering the Hospitality must be present; |
iii. | The purpose is to hold a genuine business discussion or foster better business relations and do not develop any form of obligation; |
iv. | The Hospitality is openly offered and not solicited; and |
v. | The Hospitality is not frequent or excessive, and is reasonable in value, so as to not raise questions of impropriety. |
As with gifts, the chart in Appendix A identifies permissible limits on Hospitality for Government Officials in specific jurisdictions. All Members must adhere to these guidelines when providing Hospitality to Government Officials. When dealing with private parties, these limits should also be used as guidelines for determining if the value of any Hospitality is reasonable.
FULL TRANSPARENCY REQUIRED
If offering or receiving Hospitality meets these standards, it must be made or accepted in a fully transparent way. Hospitality which is excessive, frequent, or intended to create an obligation on the part of the recipient is strictly prohibited.
HOW WE ENSURE COMPLIANCE
Approval for the payment or reimbursement of bona fide and actual Hospitality expenses for clients, potential clients, and Government Officials must be obtained from the CGI Legal Department prior to offering such a payment or reimbursement. All travel expenses must comply with the CGI Travel Policy. Expenses related to Hospitality offered by CGI must be submitted and approved in accordance with CGI expense reporting guidelines so that the expenses are properly categorized and auditable.
RED FLAGS
Examples of common red flags that could indicate bribery or corruption include the following:
i. | Hospitality expenses for persons for which there is not a legitimate business purpose; |
ii. | Hospitality expenses for family members of any person; |
iii. | Hospitality expenses submitted on behalf of non-CGI members (as opposed to being paid by CGI directly); |
iv. | Payment for flights and accommodations for potential or existing CGI clients to meet with CGI representatives when the CGI representatives could just as easily have met with the clients at the clients site; |
v. | Use of travel agencies not approved by CGI for arranging or paying for Hospitality of Government Officials. |
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2022 ANNUAL INFORMATION FORM A-61 |
C. | Third parties |
POLICY
Most Anti-Corruption Laws impose liability on companies which become involved in direct or indirect bribery. This means that CGI may incur liability where a Third Party engaged to represent or provide a service to, or on behalf of, CGI makes an improper payment or otherwise engages in improper conduct in the course of its work for CGI. This exposure may arise notwithstanding that the payment or conduct in question is prohibited by CGI and/or that CGI had no knowledge of this payment. All CGI dealings with Third Parties must be carried out with the highest degree of integrity, visibility, and in compliance with all relevant laws and regulations.
HOW WE ENSURE COMPLIANCE
Professional integrity is a prerequisite for the selection and retention of Third Parties by CGI. Prior to the retention of any Third Party, the CGI member responsible for such retention must ensure that appropriate due diligence is conducted on such Third Party and any compliance red flags that are identified are properly addressed. In certain circumstances, Third Parties will receive compliance training, and all Third Parties are subject to CGIs monitoring requirements and audit to ensure compliance with Anti-Corruption Laws and this Policy. Contracts with Third Parties must, where appropriate, contain appropriate terms to mitigate corruption risks.
CGIs approach to retaining, training and monitoring Third Parties is risk-based, which takes into account a number of factors, including the corruption risk in the country in which the Third Party conducts its activities for CGI, the nature of CGIs relationship with the Third Party, the reputation and notoriety of the Third Party and the value and prospects of CGIs relationship with the Third Party. In higher risk situations, enhanced due diligence, training and monitoring, including the Third Partys agreement to comply with CGIs Third-Party Code of Ethics, will be required in accordance with procedures and protocols to be issued by the CGI Legal Department.
RED FLAGS
Examples of common red flags that could indicate bribery or corruption include the following:
i. | Commissions to third-party representatives or consultants; |
ii. | Third-party consulting agreements that include only vaguely described services; |
iii. | Family, business, or other special ties with government or political officials; |
iv. | Reputation for violating local law or company policy; |
v. | Negative press, rumors, allegations or sanctions; |
vi. | Requests from government officials or clients to engage or hire specific Third Parties; |
vii. | Lack of credentials for the nature of the work being performed by the Third Party; |
viii. | Request to make payment to an entity located in an off-shore tax haven; |
ix. | Lack of an office or established place of business, or a shell-company incorporated in an offshore jurisdiction; |
x. | Requests for payment of non-contracted amounts, or lack of documentation for services performed; |
xi. | Convoluted or complex payment requests (such as payments to third parties or to accounts in other countries, requests for payments in cash, payments without invoices or complete receipts, or requests for up-front payments); |
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xii. | Refusal to provide reasonable information requested or discovery of information inconsistent with what was previously disclosed; |
xiii. | Requests for political or charitable contributions or other favors as a way of influencing official action; |
xiv. | Requests for specific sums of money to fix problems or make them go away. |
D. | Facilitation payments |
POLICY
Facilitation Payments are payments made to secure, facilitate or speed-up routine, non-discretionary government actions (e.g. payments for speeding up customs clearance, loading and unloading cargo or scheduling government inspections or issuing government licenses or port documentation). CGI regards Facilitation Payments to be a form of corruption and strictly prohibits them.
HOW WE ENSURE COMPLIANCE
CGI members who are requested to make a facilitation payment should make a report to ethics@cgi.com immediately. In addition, any CGI member that makes a payment that could reasonably be misunderstood as a Facilitation Payment should make a report to ethics@cgi.com and ensure that the payment transaction is completely and accurately documented in CGIs books and records.
RED FLAGS
Examples of common red flags that could indicate bribery or corruption include the following:
i. | Payments to obtain permits, licenses, or work orders to which you are already entitled; |
ii. | Payments to receive police protection or mail pickup/delivery; |
iii. | Payments to receive phone service or water/power supply; |
iv. | Payments to schedule inspections or transit of goods across border controls. |
E. | Anti-money laundering |
Money laundering is the process by which one conceals the existence of an illegal source of income and then disguises that income to make it appear legitimate. Use by CGI of proceeds tainted by illegality can give rise to liability in the countries in which CGI operates. CGI members should make a report pursuant to the Ethics Reporting Policy or to ethics@cgi.com if they become aware of suspicious circumstances leading them to believe that any transaction might involve the payment or the receipt of proceeds of any unlawful activity.
RED FLAGS
Examples of common red flags that could indicate money laundering include the following:
i. | Refusal to disclose the source of funds or the beneficial ownership of funds; |
ii. | Uncertain qualifications of a participant for a proposed transaction; for example, if the principal business of such participant appears to be unrelated to such transaction; |
iii. | Cash payments; |
iv. | Payments to and from tax haven jurisdictions; |
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2022 ANNUAL INFORMATION FORM A-63 |
v. | Complicated payment and transaction structures, including the use of multiple parties in transactions where payments and shipments are made to or from third parties which are not parties to the underlying contract; |
vi. | Criminal connections of transaction participants. |
Training and Monitoring
In furtherance of CGIs commitment to compliance with the law, this Anti-Corruption Policy is communicated to all CGI directors, officers, members and Third Parties, and is available on the CGI enterprise portal.
Responsibility for compliance with this Policy, including the duty to seek guidance when in doubt, rests with the members or relevant Third Parties.
CGI will provide regular training on this Policy. When necessary, specialized training will be provided to members, directors and/or officers with significant compliance responsibilities or in high risk functions.
CGI will audit and monitor compliance with this Policy on an ongoing basis.
Reporting of Suspected Violations
Subject to applicable law, any suspected breaches of this Policy which directly or indirectly affect CGIs business must be reported consistent with CGIs Ethics Reporting Policy. The process in place protects the incident reporter and ensures the confidentiality of the report. There will be no retaliation for making a report.
For more information, please refer to CGIs Ethics Reporting Policy available on our enterprise portal.
Consequences of Misconduct
The consequences of violating applicable Anti-Corruption Laws are potentially very serious for CGI and individual members. CGI will vigorously enforce compliance with this Policy. Violations may result in disciplinary action, including in serious cases, termination of employment. Violations may also result in criminal and civil exposure for CGI and any individuals involved, including imprisonment, fines and damages actions, and can cause significant damage to CGIs reputation in the market place. CGI may also face suspension and disbarment from public sector contracts as a result of violations by CGI members.
Third Parties who breach the CGI Third Party Code of Ethics may also be subject to prosecution and severe penalties, including the termination of their contract with CGI.
Questions about this Policy
Questions about the application of this Policy to specific circumstances can be directed to ethics@cgi.com. Questions can also be directed to your local CGI Legal Department or Human Resources representative.
© CGI Inc. |
2022 ANNUAL INFORMATION FORM A-64 |
APPENDIX A © CGI Inc. 2022 ANNUAL INFORMATION FORM A-65
Appendix A
Limits on Permissible Gifts and Hospitalities for Government Officials
The following table sets forth guidelines contained in applicable local law for permissible limits on Gifts and Hospitalities being offered or made by CGI members to Government Officials in select jurisdictions where CGI operates its business:
Country | Limit for Gifts | Limits for Hospitality | ||
Australia |
AUD 38 (approximately CAD 30) | AUD 125 (approximately CAD 100) | ||
Austria |
requires opinion of local counsel, except for items of symbolic value, such as pens, calendars and other items with the Company logo | requires opinion of local counsel | ||
Brazil |
BRL 100 (CAD 55) | BRL 100 (approximately CAD 55) recommended | ||
Canada |
CAD 24 | CAD 47 breakfast; CAD 70 lunch; CAD 95 dinner; CAD 29 refreshments | ||
China |
RMB 200 (approximately CAD 29) | RMB 515 (approximately CAD 75) | ||
France |
EUR 21 (approximately CAD 30) | EUR 65 (approximately CAD 100) | ||
Germany |
items of symbolic value EUR 35 (approximately CAD 50), such as pens, calendars and other items with the Company logo | EUR 65 (approximately CAD 100), opinion of local counsel recommended | ||
India |
INR 1,000 (approximately CAD 22) | INR 1,000 (approximately CAD 22) recommended | ||
Ireland |
EUR 30 (approximately CAD 42) | EUR 100 (approximately CAD 141) | ||
Japan |
requires opinion of local counsel, except gift items distributed widely for commemorative purposes, and commemorative gifts at a buffet party where more than 20 guests are in attendance | requires opinion of local counsel, except refreshments at Company premises, e.g., cup of coffee | ||
Netherlands |
EUR 50 (approximately CAD 70), with prior approval of recipients supervisor | meals not permissible, except as part of a seminar, fair or similar event with prior approval of recipients supervisor | ||
New Zealand |
NZD 30 (approximately CAD 19) | NZD 80 (approximately CAD 52)* | ||
Philippines |
gifts, such as Company souvenirs of minor value, e.g., PHP 1,500 (approximately CAD 30) |
PHP 1,500 (approximately CAD 30) | ||
Poland |
Requires opinion of local counsel, except for small Company souvenirs of minor value, e.g., pen | PLN 240 (approximately CAD 100) | ||
Russia |
RUB 500 (approximately CAD 20 | RUB 2,500 (approximately CAD 100) | ||
Singapore |
requires opinion of local counsel, except for items of symbolic value, such as pens, calendars and other items with the Company logo | requires opinion of local counsel, except for modest working lunch/refreshments at Company premises | ||
South Africa |
ZAR 350 (approximately CAD 44) | ZAR 815 (approximately CAD 75) | ||
Spain |
EUR 21 (approximately CAD 30) | EUR 65 (approximately CAD 100) | ||
United Kingdom |
requires opinion of CGI Legal Department | requires opinion of CGI Legal Department | ||
United States |
Requires opinion of CGI Legal Department | requires opinion of CGI Legal Department |
© CGI Inc. |
2022 ANNUAL INFORMATION FORM A-66 |
Insights you can act on Founded in 1976, CGI is among the largest IT and business consulting services firms in the world. We are insights-driven and outcomes-based to help accelerate returns on your investments. Across hundreds of locations worldwide, we provide comprehensive, scalable and sustainable IT and business consulting services that are informed globally and delivered locally. cgi.com CGI
George D. Schindler President and Chief Executive Officer |
Steve Perron Executive Vice-President and Chief Financial Officer | ||||
November 8, 2022 |
George D. Schindler President and Chief Executive Officer |
Steve Perron Executive Vice-President and Chief Financial Officer | ||||
November 8, 2022 |
Notes | 2022 | 2021 | |||||||||
$ | $ | ||||||||||
Revenue | 28 | ||||||||||
Operating expenses | |||||||||||
Costs of services, selling and administrative |
23 | ||||||||||
Acquisition-related and integration costs |
26c | ||||||||||
Net finance costs |
25 | ||||||||||
Foreign exchange loss (gain) | ( |
||||||||||
Earnings before income taxes | |||||||||||
Income tax expense | 16 | ||||||||||
Net earnings | |||||||||||
Earnings per share | |||||||||||
Basic earnings per share | 21 | ||||||||||
Diluted earnings per share | 21 | ||||||||||
2022 | 2021 | |||||||
$ | $ | |||||||
Net earnings | ||||||||
Items that will be reclassified subsequently to net earnings (net of income taxes): |
||||||||
Net unrealized losses on translating financial statements of foreign operations | ( |
( |
||||||
Net (losses) gains on cross-currency swaps and on translating long-term debt designated as hedges of net investments in foreign operations |
( |
|||||||
Deferred gains (costs) of hedging on cross-currency swaps |
( |
|||||||
Net unrealized gains on cash flow hedges |
||||||||
Net unrealized losses on financial assets at fair value through other comprehensive income |
( |
( |
||||||
Items that will not be reclassified subsequently to net earnings (net of income taxes): | ||||||||
Net remeasurement (losses) gains on defined benefit plans |
( |
|||||||
Other comprehensive loss | ( |
( |
||||||
Comprehensive income |
Notes | 2022 | 2021 | |||||||||
$ | $ | ||||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | 27e and 31 | ||||||||||
Accounts receivable | 4 and 31 | ||||||||||
Work in progress | |||||||||||
Current financial assets | 31 | ||||||||||
Prepaid expenses and other current assets | |||||||||||
Income taxes | |||||||||||
Total current assets before funds held for clients | |||||||||||
Funds held for clients |
5 | ||||||||||
Total current assets | |||||||||||
Property, plant and equipment | 6 | ||||||||||
Right-of-use assets | 7 | ||||||||||
Contract costs | 8 | ||||||||||
Intangible assets | 9 | ||||||||||
Other long-term assets | 10 | ||||||||||
Long-term financial assets | 11 | ||||||||||
Deferred tax assets | 16 | ||||||||||
Goodwill | 12 | ||||||||||
Liabilities | |||||||||||
Current liabilities | |||||||||||
Accounts payable and accrued liabilities | |||||||||||
Accrued compensation and employee-related liabilities | |||||||||||
Deferred revenue | |||||||||||
Income taxes | |||||||||||
Current portion of long-term debt | 14 | ||||||||||
Current portion of lease liabilities | |||||||||||
Provisions | 13 | ||||||||||
Current derivative financial instruments | 31 | ||||||||||
Total current liabilities before clients’ funds obligations | |||||||||||
Clients’ funds obligations | |||||||||||
Total current liabilities | |||||||||||
Long-term debt | 14 | ||||||||||
Long-term lease liabilities | |||||||||||
Long-term provisions | 13 | ||||||||||
Other long-term liabilities | 15 | ||||||||||
Long-term derivative financial instruments | 31 | ||||||||||
Long-term income taxes | |||||||||||
Deferred tax liabilities | 16 | ||||||||||
Retirement benefits obligations | 17 | ||||||||||
Equity | |||||||||||
Retained earnings | |||||||||||
Accumulated other comprehensive income | 18 | ||||||||||
Capital stock | 19 | ||||||||||
Contributed surplus | |||||||||||
Approved by the Board of Directors | George D. Schindler | Serge Godin | |||||||||
Director | Director |
Notes | Retained earnings | Accumulated other comprehensive income |
Capital stock |
Contributed surplus | Total equity | |||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
Balance as at September 30, 2021 | ||||||||||||||||||||
Net earnings | — | — | — | |||||||||||||||||
Other comprehensive loss | — | ( |
— | — | ( |
|||||||||||||||
Comprehensive income (loss) | ( |
— | — | |||||||||||||||||
Share-based payment costs |
— | — | — | |||||||||||||||||
Income tax impact associated with stock options | — | — | — | |||||||||||||||||
Exercise of stock options |
19 | — | — | ( |
||||||||||||||||
Exercise of performance share units |
19 | — | — | ( |
||||||||||||||||
Purchase for cancellation of Class A subordinate voting shares |
19 | ( |
— | ( |
— | ( |
||||||||||||||
Purchase of Class A subordinate voting shares held in trusts |
19 | — | — | ( |
— | ( |
||||||||||||||
Balance as at September 30, 2022 |
Notes | Retained earnings | Accumulated other comprehensive income |
Capital stock |
Contributed surplus | Total equity | |||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
Balance as at September 30, 2020 | ||||||||||||||||||||
Net earnings | — | — | — | |||||||||||||||||
Other comprehensive loss | — | ( |
— | — | ( |
|||||||||||||||
Comprehensive income (loss) | ( |
— | — | |||||||||||||||||
Share-based payment costs | — | — | — | |||||||||||||||||
Income tax impact associated with stock options | — | — | — | |||||||||||||||||
Exercise of stock options | 19 | — | — | ( |
||||||||||||||||
Exercise of performance share units | 19 | — | — | ( |
||||||||||||||||
Purchase for cancellation of Class A subordinate voting shares |
19 | ( |
— | ( |
— | ( |
||||||||||||||
Purchase of Class A subordinate voting shares held in trusts | 19 | — | — | ( |
— | ( |
||||||||||||||
Balance as at September 30, 2021 |
Notes | 2022 | 2021 | |||||||||
$ | $ | ||||||||||
Operating activities | |||||||||||
Net earnings | |||||||||||
Adjustments for: | |||||||||||
Amortization, depreciation and impairment |
24 | ||||||||||
Deferred income tax recovery | 16 | ( |
( |
||||||||
Foreign exchange (gain) loss | ( |
||||||||||
Share-based payment costs |
|||||||||||
Gain on lease terminations and sale of property, plant and equipment | ( |
( |
|||||||||
Net change in non-cash working capital items | 27a | ( |
|||||||||
Cash provided by operating activities | |||||||||||
Investing activities | |||||||||||
Net change in short-term investments | ( |
||||||||||
Business acquisitions (considering bank overdraft assumed and cash acquired) |
26 | ( |
( |
||||||||
Purchase of property, plant and equipment | ( |
( |
|||||||||
Proceeds from sale of property, plant and equipment | |||||||||||
Additions to contract costs | ( |
( |
|||||||||
Additions to intangible assets | ( |
( |
|||||||||
Purchase of long-term investments | ( |
( |
|||||||||
Proceeds from sale of long-term investments | |||||||||||
Cash used in investing activities | ( |
( |
|||||||||
Financing activities | |||||||||||
Increase of long-term debt | 27c | ||||||||||
Repayment of long-term debt | 27c | ( |
( |
||||||||
Payment of lease liabilities | 27c | ( |
( |
||||||||
Repayment of debt assumed in business acquisitions | 27c | ( |
|||||||||
Settlement of derivative financial instruments | 27c and 31 | ( |
|||||||||
Purchase of Class A subordinate voting shares held in trusts | 19 | ( |
( |
||||||||
Purchase and cancellation of Class A subordinate voting shares | 19 | ( |
( |
||||||||
Issuance of Class A subordinate voting shares | |||||||||||
Net change in client funds obligations | ( |
||||||||||
Cash used in financing activities | ( |
( |
|||||||||
Effect of foreign exchange rate changes on cash and cash equivalents | ( |
( |
|||||||||
Net decrease in cash, cash equivalents and cash included in funds held for clients | ( |
( |
|||||||||
Cash, cash equivalents and cash included in funds held for clients, beginning of year | |||||||||||
Cash, cash equivalents and cash included in funds held for clients, end of year | |||||||||||
Cash composition: | |||||||||||
Cash and cash equivalents | |||||||||||
Cash included in funds held for clients | 5 |
Buildings | |||||
Leasehold improvements | Lesser of the useful life or lease term | ||||
Furniture, fixtures and equipment | |||||
Computer equipment |
Internal-use software | |||||
Business solutions | |||||
Software licenses | |||||
Client relationships |
As at September 30, 2022 |
As at September 30, 2021 | |||||||
$ | $ | |||||||
Trade (Note 31) |
||||||||
R&D and other tax credits1 |
||||||||
Other | ||||||||
As at September 30, 2022 |
As at September 30, 2021 | |||||||
$ | $ | |||||||
Cash (Note 31) |
||||||||
Long-term bonds (Note 31) |
||||||||
Land and buildings |
Leasehold improvements | Furniture, fixtures and equipment | Computer equipment | Total | |||||||||||||
$ | $ | $ | $ | $ | |||||||||||||
Cost | |||||||||||||||||
As at September 30, 2021 | |||||||||||||||||
Additions |
|||||||||||||||||
Additions - business acquisitions (Note 26a) |
|||||||||||||||||
Disposals/retirements |
( |
( |
( |
( |
( |
||||||||||||
Foreign currency translation adjustment | ( |
( |
( |
( |
( |
||||||||||||
As at September 30, 2022 | |||||||||||||||||
Accumulated depreciation | |||||||||||||||||
As at September 30, 2021 | |||||||||||||||||
Depreciation expense (Note 24) |
|||||||||||||||||
Impairment (Note 24) |
|||||||||||||||||
Disposals/retirements |
( |
( |
( |
( |
( |
||||||||||||
Foreign currency translation adjustment |
( |
( |
( |
( |
( |
||||||||||||
As at September 30, 2022 | |||||||||||||||||
Net carrying amount as at September 30, 2022 | |||||||||||||||||
Land and buildings |
Leasehold improvements | Furniture, fixtures and equipment | Computer equipment | Total | |||||||||||||
$ | $ | $ | $ | $ | |||||||||||||
Cost | |||||||||||||||||
As at September 30, 2020 | |||||||||||||||||
Additions | |||||||||||||||||
Additions - business acquisitions (Note 26b) |
|||||||||||||||||
Disposals/retirements |
( |
( |
( |
( |
|||||||||||||
Foreign currency translation adjustment | ( |
( |
( |
( |
( |
||||||||||||
As at September 30, 2021 | |||||||||||||||||
Accumulated depreciation |
|||||||||||||||||
As at September 30, 2020 | |||||||||||||||||
Depreciation expense (Note 24) |
|||||||||||||||||
Impairment (Note 24) |
|||||||||||||||||
Disposals/retirements |
( |
( |
( |
( |
|||||||||||||
Foreign currency translation adjustment |
( |
( |
( |
( |
( |
||||||||||||
As at September 30, 2021 | |||||||||||||||||
Net carrying amount as at September 30, 2021 |
Properties | Motor vehicles and others | Computer equipment |
Total | |||||||||||
$ | $ | $ | $ | |||||||||||
Cost | ||||||||||||||
As at September 30, 2021 | ||||||||||||||
Additions | ||||||||||||||
Additions - business acquisitions (Note 26a) |
||||||||||||||
Change in estimates and lease modifications | ( |
( |
||||||||||||
Disposals/retirements |
( |
( |
( |
|||||||||||
Foreign currency translation adjustment | ( |
( |
( |
( |
||||||||||
As at September 30, 2022 | ||||||||||||||
Accumulated depreciation | ||||||||||||||
As at September 30, 2021 | ||||||||||||||
Depreciation expense (Note 24) |
||||||||||||||
Impairment (Note 24) |
||||||||||||||
Disposals/retirements |
( |
( |
( |
|||||||||||
Foreign currency translation adjustment |
( |
( |
( |
( |
||||||||||
As at September 30, 2022 | ||||||||||||||
Net carrying amount as at September 30, 2022 |
Properties | Motor vehicles and others | Computer equipment |
Total | |||||||||||
$ | $ | $ | $ | |||||||||||
Cost | ||||||||||||||
As at September 30, 2020 | ||||||||||||||
Additions |
||||||||||||||
Additions - business acquisitions (Note 26b) |
||||||||||||||
Change in estimates and lease modifications |
||||||||||||||
Disposals/retirements |
( |
( |
( |
( |
||||||||||
Foreign currency translation adjustment |
( |
( |
( |
( |
||||||||||
As at September 30, 2021 | ||||||||||||||
Accumulated depreciation | ||||||||||||||
As at September 30, 2020 | ||||||||||||||
Depreciation expense (Note 24) |
||||||||||||||
Impairment (Note 24) |
||||||||||||||
Disposals/retirements |
( |
( |
( |
( |
||||||||||
Foreign currency translation adjustment |
( |
( |
( |
( |
||||||||||
As at September 30, 2021 | ||||||||||||||
Net carrying amount as at September 30, 2021 |
As at September 30, 2022 | As at September 30, 2021 | |||||||||||||||||||
Cost | Accumulated amortization and impairment | Net carrying amount | Cost | Accumulated amortization and impairment | Net carrying amount | |||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||
Transition costs | ||||||||||||||||||||
Incentives | ||||||||||||||||||||
Internal-use software acquired | Internal-use software internally developed | Business solutions acquired | Business solutions internally developed | Software licenses |
Client relationships | Total | |||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Cost | |||||||||||||||||||||||
As at September 30, 2021 | |||||||||||||||||||||||
Additions |
|||||||||||||||||||||||
Additions - business acquisitions (Note 26a) |
|||||||||||||||||||||||
Disposals/retirements |
( |
( |
( |
( |
( |
( |
|||||||||||||||||
Foreign currency translation adjustment |
( |
( |
( |
( |
( |
( |
|||||||||||||||||
As at September 30, 2022 | |||||||||||||||||||||||
Accumulated amortization and impairment |
|||||||||||||||||||||||
As at September 30, 2021 | |||||||||||||||||||||||
Amortization expense (Note 24) |
|||||||||||||||||||||||
Impairment (Note 24) |
|||||||||||||||||||||||
Disposals/retirements |
( |
( |
( |
( |
( |
( |
|||||||||||||||||
Foreign currency translation adjustment |
( |
( |
( |
( |
( |
( |
|||||||||||||||||
As at September 30, 2022 | |||||||||||||||||||||||
Net carrying amount as at September 30, 2022 |
Internal-use software acquired | Internal-use software internally developed | Business solutions acquired | Business solutions internally developed | Software licenses |
Client relationships | Total | |||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Cost | |||||||||||||||||||||||
As at September 30, 2020 | |||||||||||||||||||||||
Additions |
|||||||||||||||||||||||
Additions - business acquisitions (Note 26b) |
|||||||||||||||||||||||
Disposals/retirements |
( |
( |
( |
( |
( |
( |
|||||||||||||||||
Foreign currency translation adjustment |
( |
( |
( |
( |
( |
( |
( |
||||||||||||||||
As at September 30, 2021 | |||||||||||||||||||||||
Accumulated amortization and impairment |
|||||||||||||||||||||||
As at September 30, 2020 | |||||||||||||||||||||||
Amortization expense (Note 24) |
|||||||||||||||||||||||
Impairment (Note 24) |
|||||||||||||||||||||||
Disposals/retirements |
( |
( |
( |
( |
( |
( |
|||||||||||||||||
Foreign currency translation adjustment |
( |
( |
( |
( |
( |
( |
( |
||||||||||||||||
As at September 30, 2021 | |||||||||||||||||||||||
Net carrying amount as at September 30, 2021 |
As at September 30, 2022 |
As at September 30, 2021 | |||||||
$ | $ | |||||||
Prepaid long-term maintenance agreements | ||||||||
Insurance contracts held to fund defined benefit pension and life assurance arrangements - reimbursement rights (Note 17) |
||||||||
Retirement benefits assets (Note 17) |
||||||||
Deposits | ||||||||
Deferred financing fees | ||||||||
Other | ||||||||
As at September 30, 2022 |
As at September 30, 2021 | |||||||
$ | $ | |||||||
Deferred compensation plan assets (Notes 17 and 31) |
||||||||
Long-term investments (Note 31) |
||||||||
Long-term receivables |
||||||||
Long-term derivative financial instruments (Note 31) |
||||||||
Western and Southern Europe | U.S. Commercial and State Government | Canada | U.S. Federal | Scandinavia and Central Europe | U.K. and Australia | Finland, Poland and Baltics | Northwest and Central-East Europe | Asia Pacific | Total | |||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
As at September 30, 2021 | ||||||||||||||||||||||||||||||||
Business acquisitions (Note 26) |
||||||||||||||||||||||||||||||||
Goodwill reallocation | ( |
( |
||||||||||||||||||||||||||||||
Foreign currency translation adjustment | ( |
( |
( |
( |
( |
( |
( |
|||||||||||||||||||||||||
As at September 30, 2022 |
2022 | Western and Southern Europe | U.S. Commercial and State Government | Canada | U.S. Federal | Scandinavia and Central Europe | U.K. and Australia | Finland, Poland and Baltics | Northwest and Central-East Europe | Asia Pacific | ||||||||||||||||||||
% | % | % | % | % | % | % | % | % | |||||||||||||||||||||
Pre-tax WACC |
|||||||||||||||||||||||||||||
Long-term growth rate of net operating cash flows1 |
2021 | Western and Southern Europe | U.S. Commercial and State Government | Canada | U.S. Federal | Scandinavia | U.K. and Australia | Finland, Poland and Baltics | Central and Eastern Europe | Asia Pacific | ||||||||||||||||||||
% | % | % | % | % | % | % | % | % | |||||||||||||||||||||
Pre-tax WACC |
|||||||||||||||||||||||||||||
Long-term growth rate of net operating cash flows1 |
Restructuring1 |
Decommissioning liabilities2 |
Others3 |
Total | |||||||||||
$ | $ | $ | $ | |||||||||||
As at September 30, 2021 | ||||||||||||||
Additional provisions | ||||||||||||||
Business acquisitions | ||||||||||||||
Utilized amounts | ( |
( |
( |
( |
||||||||||
Reversals of unused amounts | ( |
( |
( |
|||||||||||
Discount rate adjustment and imputed interest | ||||||||||||||
Foreign currency translation adjustment | ( |
( |
( |
( |
||||||||||
As at September 30, 2022 | ||||||||||||||
Current portion | ||||||||||||||
Non-current portion |
As at September 30, 2022 |
As at September 30, 2021 | |||||||
$ | $ | |||||||
2011 U.S. Senior unsecured note of $ |
||||||||
2014 U.S. Senior unsecured notes repayable in September by tranches of $ |
||||||||
2021 U.S. Senior unsecured notes repayable of $ |
||||||||
2021 CAD Senior unsecured notes repayable of $ |
||||||||
Unsecured committed term loan credit facility5 |
||||||||
Other long-term debt | ||||||||
Current portion | ||||||||
As at September 30, 2022 |
As at September 30, 2021 | |||||||
$ | $ | |||||||
Deferred revenue | ||||||||
Deferred compensation plan liabilities (Note 17) |
||||||||
Other1 |
||||||||
Year ended September 30 | ||||||||
2022 | 2021 | |||||||
$ | $ | |||||||
Current income tax expense | ||||||||
Current income tax expense in respect of the current year |
||||||||
Adjustments recognized in the current year in relation to the income tax expense of prior years | ||||||||
Total current income tax expense | ||||||||
Deferred income tax recovery | ||||||||
Deferred income tax expense (recovery) relating to the origination and reversal of temporary differences | ( |
|||||||
Deferred income tax recovery relating to changes in tax rates | ( |
|||||||
Adjustments recognized in the current year in relation to the deferred income tax recovery of prior years |
( |
( |
||||||
Total deferred income tax recovery | ( |
( |
||||||
Total income tax expense |
Year ended September 30 | ||||||||
2022 | 2021 | |||||||
% |
% | |||||||
Company's statutory tax rate |
||||||||
Effect of foreign tax rate differences |
( |
( |
||||||
Final determination from agreements with tax authorities and expirations of statutes of limitations |
( |
|||||||
Non-deductible and tax exempt items |
( |
|||||||
Recognition of previously unrecognized temporary differences |
( |
|||||||
Minimum income tax charge |
||||||||
Effective income tax rate |
As at September 30, 2021 |
Additions from business acquisitions |
Recognized in earnings | Recognized in other comprehensive income |
Recognized in equity |
Foreign currency translation adjustment and other | As at September 30, 2022 | |||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Accounts payable and accrued liabilities, provisions and other long-term liabilities |
( |
||||||||||||||||||||||
Tax benefits on losses carried forward |
( |
||||||||||||||||||||||
Accrued compensation and employee-related liabilities |
( |
||||||||||||||||||||||
Retirement benefits obligations | ( |
||||||||||||||||||||||
Lease liabilities | ( |
||||||||||||||||||||||
PP&E, contract costs, intangible assets and other long-term assets |
( |
( |
( |
( |
|||||||||||||||||||
Right-of-use assets | ( |
( |
( |
( |
|||||||||||||||||||
Work in progress | ( |
( |
|||||||||||||||||||||
Goodwill | ( |
( |
( |
( |
|||||||||||||||||||
Refundable tax credits on salaries |
( |
( |
( |
||||||||||||||||||||
Cash flow hedges | ( |
( |
( |
||||||||||||||||||||
Other | ( |
( |
|||||||||||||||||||||
Deferred taxes, net | ( |
( |
( |
( |
( |
( |
As at September 30, 2020 | Additions from business acquisitions |
Recognized in earnings | Recognized in other comprehensive income |
Recognized in equity | Foreign currency translation adjustment and other |
As at September 30, 2021 | |||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Accounts payable and accrued liabilities, provisions and other long-term liabilities |
( |
( |
( |
( |
|||||||||||||||||||
Tax benefits on losses carried forward |
( |
( |
|||||||||||||||||||||
Accrued compensation and employee-related liabilities |
( |
||||||||||||||||||||||
Retirement benefits obligations | ( |
( |
|||||||||||||||||||||
Lease liabilities | ( |
( |
|||||||||||||||||||||
PP&E, contract costs, intangible assets and other long-term assets |
( |
( |
( |
||||||||||||||||||||
Right-of-use assets | ( |
( |
|||||||||||||||||||||
Work in progress | ( |
( |
|||||||||||||||||||||
Goodwill | ( |
( |
( |
||||||||||||||||||||
Refundable tax credits on salaries |
( |
( |
|||||||||||||||||||||
Cash flow hedges | ( |
( |
( |
||||||||||||||||||||
Other | ( |
( |
|||||||||||||||||||||
Deferred taxes, net | ( |
( |
( |
( |
( |
As at September 30, 2022 |
As at September 30, 2021 | |||||||
$ | $ | |||||||
Deferred tax assets |
||||||||
Deferred tax liabilities | ( |
( |
||||||
( |
( |
As at September 30, 2022 | U.K. | France | Germany | Other | Total | |||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
Defined benefit obligations | ( |
( |
( |
( |
( |
|||||||||||||||
Fair value of plan assets | ||||||||||||||||||||
( |
( |
( |
( |
|||||||||||||||||
Fair value of reimbursement rights | ||||||||||||||||||||
Net asset (liability) recognized in the balance sheet |
( |
( |
( |
( |
||||||||||||||||
Presented as: |
||||||||||||||||||||
Other long-term assets (Note 10) |
||||||||||||||||||||
Insurance contracts held to fund defined benefit pension and life assurance arrangements - reimbursement rights |
||||||||||||||||||||
Retirement benefits assets | ||||||||||||||||||||
Retirement benefits obligations | ( |
( |
( |
( |
||||||||||||||||
( |
( |
( |
( |
As at September 30, 2021 | U.K. | France | Germany | Other | Total | |||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
Defined benefit obligations | ( |
( |
( |
( |
( |
|||||||||||||||
Fair value of plan assets | ||||||||||||||||||||
( |
( |
( |
( |
|||||||||||||||||
Fair value of reimbursement rights | ||||||||||||||||||||
Net asset (liability) recognized in the balance sheet |
( |
( |
( |
( |
||||||||||||||||
Presented as: |
||||||||||||||||||||
Other long-term assets (Note 10) |
||||||||||||||||||||
Insurance contracts held to fund defined benefit pension and life assurance arrangements - reimbursement rights |
||||||||||||||||||||
Retirement benefits assets | ||||||||||||||||||||
Retirement benefits obligations | ( |
( |
( |
( |
||||||||||||||||
( |
( |
( |
( |
Defined benefit obligations | U.K. | France | Germany | Other | Total | |||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
As at September 30, 2021 | ||||||||||||||||||||
Current service cost |
||||||||||||||||||||
Interest cost |
||||||||||||||||||||
Business acquisitions (Note 26a) |
||||||||||||||||||||
Actuarial gains due to change in financial assumptions1 |
( |
( |
( |
( |
( |
|||||||||||||||
Actuarial losses (gains) due to change in demographic assumptions1 |
( |
|||||||||||||||||||
Actuarial losses due to experience1 |
||||||||||||||||||||
Plan participant contributions |
||||||||||||||||||||
Benefits paid from the plan |
( |
( |
( |
( |
( |
|||||||||||||||
Benefits paid directly by employer |
( |
( |
( |
( |
||||||||||||||||
Foreign currency translation adjustment1 |
( |
( |
( |
( |
( |
|||||||||||||||
Other | ( |
( |
||||||||||||||||||
As at September 30, 2022 | ||||||||||||||||||||
Defined benefit obligations of unfunded plans |
||||||||||||||||||||
Defined benefit obligations of funded plans |
||||||||||||||||||||
As at September 30, 2022 |
Defined benefit obligations | U.K. | France | Germany | Other | Total | |||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
As at September 30, 2020 | ||||||||||||||||||||
Current service cost | ||||||||||||||||||||
Interest cost | ||||||||||||||||||||
Past service cost | ||||||||||||||||||||
Actuarial losses (gains) due to change in financial assumptions1 |
( |
( |
( |
|||||||||||||||||
Actuarial (gains) losses due to experience1 |
( |
( |
( |
( |
||||||||||||||||
Plan participant contributions | ||||||||||||||||||||
Benefits paid from the plan | ( |
( |
( |
( |
||||||||||||||||
Benefits paid directly by employer | ( |
( |
( |
( |
||||||||||||||||
Foreign currency translation adjustment1 |
( |
( |
( |
( |
( |
|||||||||||||||
As at September 30, 2021 | ||||||||||||||||||||
Defined benefit obligations of unfunded plans |
||||||||||||||||||||
Defined benefit obligations of funded plans | ||||||||||||||||||||
As at September 30, 2021 |
Plan assets and reimbursement rights | U.K. | France | Germany | Other | Total | |||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
As at September 30, 2021 | ||||||||||||||||||||
Interest income on plan assets | ||||||||||||||||||||
Employer contributions | ||||||||||||||||||||
Return on assets excluding interest income1 |
( |
( |
( |
( |
||||||||||||||||
Plan participant contributions | ||||||||||||||||||||
Benefits paid from the plan | ( |
( |
( |
( |
( |
|||||||||||||||
Benefits paid directly by employer | ( |
( |
( |
( |
||||||||||||||||
Administration expenses paid from the plan | ( |
( |
( |
|||||||||||||||||
Foreign currency translation adjustment1 |
( |
( |
( |
( |
( |
|||||||||||||||
As at September 30, 2022 | ||||||||||||||||||||
Plan assets | ||||||||||||||||||||
Reimbursement rights | ||||||||||||||||||||
As at September 30, 2022 |
Plan assets and reimbursement rights | U.K. | France | Germany | Other | Total | |||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
As at September 30, 2020 | ||||||||||||||||||||
Interest income on plan assets | ||||||||||||||||||||
Employer contributions | ||||||||||||||||||||
Return on assets excluding interest income1 |
||||||||||||||||||||
Plan participant contributions | ||||||||||||||||||||
Benefits paid from the plan | ( |
( |
( |
( |
||||||||||||||||
Benefits paid directly by employer | ( |
( |
( |
( |
||||||||||||||||
Administration expenses paid from the plan | ( |
( |
( |
|||||||||||||||||
Foreign currency translation adjustment1 |
( |
( |
( |
( |
( |
|||||||||||||||
As at September 30, 2021 | ||||||||||||||||||||
Plan assets | ||||||||||||||||||||
Reimbursement rights | ||||||||||||||||||||
As at September 30, 2021 |
As at September 30, 2022 | U.K. | France | Germany | Other | Total | |||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
Quoted equities | ||||||||||||||||||||
Quoted bonds | ||||||||||||||||||||
Cash | ||||||||||||||||||||
Other1 |
||||||||||||||||||||
As at September 30, 2021 | U.K. | France | Germany | Other | Total | |||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
Quoted equities | ||||||||||||||||||||
Quoted bonds | ||||||||||||||||||||
Cash | ||||||||||||||||||||
Other1 |
||||||||||||||||||||
Year ended September 30 |
|||||||||||
2022 | 2021 | ||||||||||
$ | $ | ||||||||||
Current service cost | |||||||||||
Past service cost | |||||||||||
Net interest on net defined benefit obligations or assets | |||||||||||
Administration expenses | |||||||||||
As at September 30, 2022 | U.K | France | Germany | Other | |||||||||||||
% | % | % | % | ||||||||||||||
Discount rate | |||||||||||||||||
Future salary increases | |||||||||||||||||
Future pension increases | |||||||||||||||||
Inflation rate | |||||||||||||||||
As at September 30, 2021 | U.K. | France | Germany | Other | |||||||||||||
% | % | % | % | ||||||||||||||
Discount rate | |||||||||||||||||
Future salary increases | |||||||||||||||||
Future pension increases | |||||||||||||||||
Inflation rate |
As at September 30, 2022 | U.K. | Germany | ||||||
(in years) | ||||||||
Longevity at age 65 for current members | ||||||||
Males | ||||||||
Females | ||||||||
Longevity at age 45 for current members | ||||||||
Males | ||||||||
Females |
As at September 30, 2021 | U.K. | Germany | ||||||
(in years) | ||||||||
Longevity at age 65 for current members | ||||||||
Males | ||||||||
Females | ||||||||
Longevity at age 45 for current members | ||||||||
Males | ||||||||
Females |
As at September 30, 2022 | U.K. | France | Germany | |||||||||||
$ | $ | $ | ||||||||||||
Increase of |
( |
( |
( |
|||||||||||
Decrease of |
||||||||||||||
Salary increase of |
||||||||||||||
Salary decrease of |
( |
( |
( |
|||||||||||
Pension increase of |
||||||||||||||
Pension decrease of |
( |
( |
||||||||||||
Increase of |
||||||||||||||
Decrease of |
( |
( |
( |
|||||||||||
Increase of |
||||||||||||||
Decrease of |
( |
( |
( |
As at September 30, 2021 | U.K. | France | Germany | |||||||||||
$ | $ | $ | ||||||||||||
Increase of |
( |
( |
( |
|||||||||||
Decrease of |
||||||||||||||
Salary increase of |
||||||||||||||
Salary decrease of |
( |
( |
( |
|||||||||||
Pension increase of |
||||||||||||||
Pension decrease of |
( |
( |
||||||||||||
Increase of |
||||||||||||||
Decrease of |
( |
( |
( |
|||||||||||
Increase of |
||||||||||||||
Decrease of |
( |
( |
( |
Year ended September 30 | |||||||||||
2022 | 2021 | ||||||||||
(in years) | |||||||||||
U.K. | |||||||||||
France | |||||||||||
Germany | |||||||||||
Other |
As at September 30, 2022 |
As at September 30, 2021 | |||||||
$ | $ | |||||||
Items that will be reclassified subsequently to net earnings: |
||||||||
Net unrealized gains on translating financial statements of foreign operations, net of accumulated income tax expense of $ |
||||||||
Net losses on cross-currency swaps and on translating long-term debt designated as hedges of net investments in foreign operations, net of accumulated income tax recovery of $ |
( |
( |
||||||
Deferred gains of hedging on cross-currency swaps, net of accumulated income tax expense of $ |
||||||||
Net unrealized gains on cash flow hedges, net of accumulated income tax expense of $ |
||||||||
Net unrealized (losses) gains on financial assets at fair value through other comprehensive income, net of accumulated income tax recovery of $ |
( |
|||||||
Items that will not be reclassified subsequently to net earnings: |
||||||||
Net remeasurement losses on defined benefit plans, net of accumulated income tax recovery of $ |
( |
( |
||||||
Class A subordinate voting shares | Class B multiple voting shares | Total | ||||||||||||||||||
Number | Carrying value | Number | Carrying value | Number | Carrying value | |||||||||||||||
$ | $ | $ | ||||||||||||||||||
As at September 30, 2020 | ||||||||||||||||||||
Release of shares held in trusts1 |
||||||||||||||||||||
Issued upon exercise of stock options2 |
||||||||||||||||||||
Purchased and cancelled3 |
( |
( |
( |
( |
||||||||||||||||
Purchased and not cancelled3 |
( |
( |
||||||||||||||||||
Purchased and held in trusts4 |
( |
( |
||||||||||||||||||
Conversion of shares5 |
( |
( |
||||||||||||||||||
As at September 30, 2021 | ||||||||||||||||||||
Release of shares held in trusts1 |
||||||||||||||||||||
Issued upon exercise of stock options2 |
||||||||||||||||||||
Purchased and cancelled3 |
( |
( |
( |
( |
||||||||||||||||
Purchased and not cancelled3 |
( |
( |
||||||||||||||||||
Purchased and held in trusts4 |
( |
( |
||||||||||||||||||
As at September 30, 2022 |
Outstanding as at September 30, 2020 | |||||
Granted1 |
|||||
Exercised (Note 19) |
( |
||||
Forfeited | ( |
||||
Outstanding as at September 30, 2021 | |||||
Granted1 |
|||||
Exercised (Note 19) |
( |
||||
Forfeited | ( |
||||
Outstanding as at September 30, 2022 |
2022 | 2021 | |||||||||||||
Number of options | Weighted average exercise price per share |
Number of options | Weighted average exercise price per share | |||||||||||
$ | $ | |||||||||||||
Outstanding, beginning of year | ||||||||||||||
Granted | ||||||||||||||
Exercised (Note 19) |
( |
( |
||||||||||||
Forfeited | ( |
( |
||||||||||||
Expired | ( |
( |
||||||||||||
Outstanding, end of year | ||||||||||||||
Exercisable, end of year |
Options outstanding | Options exercisable | ||||||||||||||||
Range of exercise price |
Number of options | Weighted average remaining contractual life |
Weighted average exercise price |
Number of options | Weighted average exercise price | ||||||||||||
$ | (in years) | $ | $ | ||||||||||||||
Year ended September 30 | |||||||||||
2022 | 2021 | ||||||||||
Grant date fair value ($) | |||||||||||
Dividend yield (%) | |||||||||||
Expected volatility (%)1 |
|||||||||||
Risk-free interest rate (%) | |||||||||||
Expected life (years) | |||||||||||
Exercise price ($) | |||||||||||
Share price ($) |
Year ended September 30 | |||||||||||
2022 | 2021 | ||||||||||
$ | $ | ||||||||||
PSUs | |||||||||||
Stock options | |||||||||||
Share purchase plan | |||||||||||
DSUs | |||||||||||
2022 | 2021 | |||||||||||||||||||
Net earnings | Weighted average number of shares outstanding1 |
Earnings per share | Net earnings | Weighted average number of shares outstanding1 |
Earnings per share | |||||||||||||||
$ | $ | $ | $ | |||||||||||||||||
Basic |
||||||||||||||||||||
Net effect of dilutive stock options and PSUs2 |
||||||||||||||||||||
Diluted |
Year ended September 30 | |||||||||||
2022 | 2021 | ||||||||||
$ | $ | ||||||||||
Salaries and other member costs1 |
|||||||||||
Professional fees and other contracted labour | |||||||||||
Hardware, software and data center related costs | |||||||||||
Property costs | |||||||||||
Amortization, depreciation and impairment (Note 24) |
|||||||||||
Other operating expenses | |||||||||||
Year ended September 30 | |||||||||||
2022 | 2021 | ||||||||||
$ | $ | ||||||||||
Depreciation of PP&E (Note 6) |
|||||||||||
Depreciation of right-of-use assets (Note 7) |
|||||||||||
Impairment of right-of-use assets (Note 7) |
|||||||||||
Amortization of contract costs related to transition costs | |||||||||||
Impairment of contract costs related to transition costs | |||||||||||
Amortization of intangible assets (Note 9) |
|||||||||||
Impairment of intangible assets (Note 9) |
|||||||||||
Included in costs of services, selling and administrative (Note 23) |
|||||||||||
Amortization of contract costs related to incentives (presented as a reduction of revenue) | |||||||||||
Amortization of deferred financing fees (presented in finance costs) | |||||||||||
Amortization of premiums and discounts on investments related to funds held for clients (presented net as a reduction (increase) of revenue) | ( |
||||||||||
Impairment of PP&E (presented in integration costs) (Note 6) |
|||||||||||
Impairment of right-of-use assets (presented in integration costs) (Note 7) |
|||||||||||
Year ended September 30 | |||||||||||
2022 | 2021 | ||||||||||
$ | $ | ||||||||||
Interest on long-term debt | |||||||||||
Interest on lease liabilities | |||||||||||
Net interest costs on net defined benefit obligations or assets (Note 17) |
|||||||||||
Other finance costs | |||||||||||
Finance costs | |||||||||||
Finance income | ( |
( |
|||||||||
CMC | Umanis | Others | Total | |||||||||||
$ | $ | $ | $ | |||||||||||
Current assets | ||||||||||||||
PP&E (Note 6) |
||||||||||||||
Right-of-use assets (Note 7) |
||||||||||||||
Contract costs | ||||||||||||||
Intangible assets1 (Note 9) |
||||||||||||||
Other long-term assets | ||||||||||||||
Goodwill2 (Note 12) |
||||||||||||||
Current liabilities | ( |
( |
( |
( |
||||||||||
Long-term debt | ( |
( |
( |
( |
||||||||||
Lease liabilities | ( |
( |
( |
( |
||||||||||
Deferred tax liabilities | ( |
( |
( |
( |
||||||||||
Retirement benefits obligations (Note 17) |
( |
( |
( |
|||||||||||
Cash acquired | ||||||||||||||
Net assets acquired | ||||||||||||||
Consideration paid | ||||||||||||||
Consideration payable | ||||||||||||||
2021 | |||||
$ | |||||
Current assets | |||||
PP&E (Note 6) |
|||||
Right-of-use assets (Note 7) |
|||||
Intangible assets (Note 9) |
|||||
Deferred tax assets | |||||
Goodwill1 |
|||||
Current liabilities | ( |
||||
Lease liabilities | ( |
||||
Cash acquired | |||||
Net assets acquired | |||||
Consideration paid | |||||
Consideration payable |
2022 | 2021 | ||||||||||
$ |
$ | ||||||||||
Accounts receivable | ( |
( |
|||||||||
Work in progress | ( |
( |
|||||||||
Prepaid expenses and other assets | ( |
( |
|||||||||
Long-term financial assets | ( |
||||||||||
Accounts payable and accrued liabilities | |||||||||||
Accrued compensation and employee-related liabilities | ( |
||||||||||
Deferred revenue | |||||||||||
Income taxes | ( |
||||||||||
Provisions | ( |
( |
|||||||||
Long-term liabilities | ( |
||||||||||
Derivative financial instruments | ( |
( |
|||||||||
Retirement benefits obligations | |||||||||||
( |
2022 | 2021 | ||||||||||
$ | $ | ||||||||||
Operating activities | |||||||||||
Accounts payable and accrued liabilities |
|||||||||||
Provisions |
|||||||||||
Investing activities | |||||||||||
Purchase of PP&E |
( |
( |
|||||||||
Additions, disposals/retirements, change in estimates and lease modifications of right-of-use assets | ( |
( |
|||||||||
Additions to intangible assets |
( |
( |
|||||||||
( |
( |
2022 | 2021 | |||||||||||||||||||
Long-term debt | Derivative financial instruments to hedge long-term debt | Lease liabilities | Long-term debt | Derivative financial instruments to hedge long-term debt | Lease liabilities | |||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||
Balance, beginning of year | ||||||||||||||||||||
Cash used in financing activities excluding equity | ||||||||||||||||||||
Increase of long-term debt | ||||||||||||||||||||
Repayment of long-term debt and lease liabilities | ( |
( |
( |
( |
||||||||||||||||
Repayment of debt assumed in business acquisitions | ( |
|||||||||||||||||||
Settlement of derivative financial instruments (Note 31) |
( |
|||||||||||||||||||
Non-cash financing activities | ||||||||||||||||||||
Additions, disposals/retirements and change in estimates and lease modifications of right-of-use assets | ||||||||||||||||||||
Additions through business acquisitions (Note 26) |
||||||||||||||||||||
Changes in foreign currency exchange rates | ( |
( |
( |
( |
( |
|||||||||||||||
Other | ( |
( |
( |
|||||||||||||||||
Balance, end of year | ( |
2022 | 2021 | ||||||||||
$ | $ | ||||||||||
Interest paid | |||||||||||
Interest received | |||||||||||
Income taxes paid |
Year ended September 30, 2022 | |||||||||||||||||||||||||||||||||||
Western and Southern Europe | U.S. Commercial and State Government | Canada | U.S. Federal | Scandinavia and Central Europe | U.K. and Australia | Finland, Poland and Baltics | Northwest and Central-East Europe | Asia Pacific | Eliminations | Total | |||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
Segment revenue | ( |
||||||||||||||||||||||||||||||||||
Segment earnings before acquisition-related and integration costs, net finance costs and income tax expense1 |
|||||||||||||||||||||||||||||||||||
Acquisition-related and integration costs (Note 26c) | ( |
||||||||||||||||||||||||||||||||||
Net finance costs (Note 25) | ( |
||||||||||||||||||||||||||||||||||
Earnings before income taxes |
Year ended September 30, 2021 | |||||||||||||||||||||||||||||||||||
Western and Southern Europe | U.S. Commercial and State Government | Canada | U.S. Federal | Scandinavia and Central Europe | U.K. and Australia | Finland, Poland and Baltics | Northwest and Central-East Europe | Asia Pacific | Eliminations | Total | |||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
Segment revenue | ( |
||||||||||||||||||||||||||||||||||
Segment earnings before acquisition-related and integration costs, net finance costs and income tax expense1 |
|||||||||||||||||||||||||||||||||||
Acquisition-related and integration costs (Note 26c) | ( |
||||||||||||||||||||||||||||||||||
Net finance costs (Note 25) | ( |
||||||||||||||||||||||||||||||||||
Earnings before income taxes |
2022 | 2021 | |||||||
$ |
$ | |||||||
Western and Southern Europe | ||||||||
France |
||||||||
Spain | ||||||||
Portugal | ||||||||
Others |
||||||||
U.S.1 |
||||||||
Canada | ||||||||
Scandinavia and Central Europe | ||||||||
Germany | ||||||||
Sweden | ||||||||
Norway | ||||||||
U.K. and Australia | ||||||||
U.K. | ||||||||
Australia | ||||||||
Finland, Poland and Baltics | ||||||||
Finland |
||||||||
Others |
||||||||
Northwest and Central-East Europe | ||||||||
Netherlands | ||||||||
Denmark | ||||||||
Czech Republic | ||||||||
Others |
||||||||
Asia Pacific | ||||||||
Others |
||||||||
As at September 30, 2022 |
As at September 30, 2021 | |||||||
$ |
$ | |||||||
U.S. |
||||||||
Canada |
||||||||
France | ||||||||
U.K. | ||||||||
Sweden |
||||||||
Finland |
||||||||
Germany |
||||||||
India | ||||||||
Netherlands |
||||||||
Rest of the world |
||||||||
2022 | 2021 | |||||||
$ |
$ | |||||||
Managed IT and business process services | ||||||||
Business and strategic IT consulting and systems integration services | ||||||||
Name of subsidiary |
Country of incorporation | ||||
CGI Technologies and Solutions Inc. | United States | ||||
CGI France SAS | France | ||||
CGI Federal Inc. | United States | ||||
CGI IT UK Limited | United Kingdom | ||||
CGI Information Systems and Management Consultants Inc. | Canada | ||||
Conseillers en gestion et informatique CGI Inc. | Canada | ||||
CGI Deutschland B.V. & Co KG | Germany | ||||
CGI Sverige AB | Sweden | ||||
CGI Suomi OY | Finland | ||||
CGI Information Systems and Management Consultants Private Limited | India | ||||
CGI Nederland BV | Netherlands | ||||
2022 | 2021 | |||||||
$ |
$ | |||||||
Short-term employee benefits | ||||||||
Share-based payments |
$ | |||||
Less than one year | |||||
Between one and three years | |||||
Between three and five years | |||||
Beyond five years |
As at September 30, 2022 | As at September 30, 2021 | ||||||||||||||||
Level | Carrying amount | Fair value | Carrying amount | Fair value | |||||||||||||
$ | $ | $ | $ | ||||||||||||||
2014 U.S. Senior Notes | Level 2 | ||||||||||||||||
2021 U.S. Senior Notes | Level 2 | ||||||||||||||||
2021 CAD Senior Notes | Level 2 | ||||||||||||||||
Other long-term debt | Level 2 | ||||||||||||||||
Level | As at September 30, 2022 | As at September 30, 2021 | |||||||||||||||
$ | $ | ||||||||||||||||
Financial assets | |||||||||||||||||
FVTE | |||||||||||||||||
Cash and cash equivalents | Level 2 | ||||||||||||||||
Cash included in funds held for clients (Note 5) |
Level 2 | ||||||||||||||||
Deferred compensation plan assets (Note 11) |
Level 1 | ||||||||||||||||
Derivative financial instruments designated as hedging instruments |
|||||||||||||||||
Current derivative financial instruments included in current financial assets |
Level 2 | ||||||||||||||||
Cross-currency swaps |
|||||||||||||||||
Foreign currency forward contracts |
|||||||||||||||||
Interest rate swaps |
|||||||||||||||||
Long-term derivative financial instruments (Note 11) |
Level 2 | ||||||||||||||||
Cross-currency swaps |
|||||||||||||||||
Foreign currency forward contracts | |||||||||||||||||
FVOCI | |||||||||||||||||
Short-term investments included in current financial assets | Level 2 | ||||||||||||||||
Long-term bonds included in funds held for clients (Note 5) |
Level 2 | ||||||||||||||||
Long-term investments (Note 11) |
Level 2 | ||||||||||||||||
Financial liabilities | |||||||||||||||||
Derivative financial instruments designated as hedging instruments |
|||||||||||||||||
Current derivative financial instruments | Level 2 | ||||||||||||||||
Cross-currency swaps |
|||||||||||||||||
Foreign currency forward contracts |
|||||||||||||||||
Long-term derivative financial instruments | Level 2 | ||||||||||||||||
Cross-currency swaps |
|||||||||||||||||
Foreign currency forward contracts |
|||||||||||||||||
As at September 30, 2022 |
As at September 30, 2021 | |||||||||||||||||||
Interest rate swaps | Notional amount | Receive Rate | Pay Rate | Maturity | Fair value | Fair value | ||||||||||||||
$ | $ | |||||||||||||||||||
Fair value hedges of 2011 U.S. Senior Note | U.S.$ |
LIBOR 1 month + |
December 2021 |
As at September 30, 2022 |
As at September 30, 2021 | |||||||||||||||||||
Receive Notional | Receive Rate | Pay Notional | Pay rate | Maturity | Fair value | Fair value | ||||||||||||||
$ | $ | |||||||||||||||||||
Hedges of net investments in European operations | ||||||||||||||||||||
$ |
From |
€ |
From ( |
From September 2023 to 2028 | ||||||||||||||||
$ |
From |
£ |
From |
September 2024 | ||||||||||||||||
$ |
From |
kr |
From |
September 2024 | ||||||||||||||||
Hedges of net investments in European operations and cash flow hedges on unsecured committed term loan credit facility | ||||||||||||||||||||
US$ |
LIBOR 1 month + |
€ |
From |
December 2023 | ( |
|||||||||||||||
Cash flow hedges of 2014 U.S Senior Notes | ||||||||||||||||||||
US$ |
From |
$ |
From |
From September 2023 to 2024 | ( |
|||||||||||||||
Total | ( |
Average contract rates |
As at September 30, 2022 |
As at September 30, 2021 | |||||||||||||||
Foreign currency forward contracts |
Notional |
Less than one year |
More than one year |
Fair value |
Fair value | ||||||||||||
$ | $ | ||||||||||||||||
USD/INR |
US$ |
( |
|||||||||||||||
CAD/INR |
$ |
||||||||||||||||
EUR/INR |
€ |
||||||||||||||||
GBP/INR |
£ |
||||||||||||||||
SEK/INR |
kr |
( |
|||||||||||||||
EUR/GBP |
|||||||||||||||||
EUR/MAD |
€ |
( |
|||||||||||||||
EUR/CZK |
€ |
||||||||||||||||
EUR/SEK |
€ |
( |
|||||||||||||||
Others |
$ |
( |
|||||||||||||||
Total | |||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||||
euro impact |
U.S. dollar impact |
British pound impact | Swedish krona impact |
euro impact |
U.S. dollar impact |
British pound impact | Swedish krona impact | |||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||
Increase in net earnings |
||||||||||||||||||||||||||
Decrease in other comprehensive loss |
( |
( |
( |
( |
( |
( |
( |
( |
As at September 30, 2022 | Carrying amount |
Contractual cash flows |
Less than one year |
Between one and three years |
Between three and five years |
Beyond five years | ||||||||||||||
$ |
$ |
$ |
$ |
$ |
$ | |||||||||||||||
Non-derivative financial liabilities | ||||||||||||||||||||
Accounts payable and accrued liabilities | ||||||||||||||||||||
Accrued compensation and employee-related liabilities |
||||||||||||||||||||
2014 U.S. Senior Notes | ||||||||||||||||||||
2021 U.S. Senior Notes | ||||||||||||||||||||
2021 CAD Senior Notes | ||||||||||||||||||||
Unsecured committed term loan credit facility |
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Lease liabilities | ||||||||||||||||||||
Other long-term debt | ||||||||||||||||||||
Clients’ funds obligations | ||||||||||||||||||||
Derivative financial liabilities |
||||||||||||||||||||
Cash flow hedges of future revenue |
||||||||||||||||||||
Outflow |
||||||||||||||||||||
(Inflow) |
( |
( |
( |
|||||||||||||||||
Cross-currency swaps |
||||||||||||||||||||
Outflow |
||||||||||||||||||||
(Inflow) |
( |
( |
( |
|||||||||||||||||
As at September 30, 2021 | Carrying amount |
Contractual cash flows |
Less than one year |
Between one and three years |
Between three and five years |
Beyond five years | ||||||||||||||
$ |
$ |
$ |
$ |
$ |
$ | |||||||||||||||
Non-derivative financial liabilities | ||||||||||||||||||||
Accounts payable and accrued liabilities | ||||||||||||||||||||
Accrued compensation and employee-related liabilities |
||||||||||||||||||||
2011 & 2014 U.S. Senior Notes | ||||||||||||||||||||
2021 U.S. Senior Notes | ||||||||||||||||||||
2021 CAD Senior Notes | ||||||||||||||||||||
Unsecured committed term loan credit facility |
||||||||||||||||||||
Lease liabilities | ||||||||||||||||||||
Other long-term debt | ||||||||||||||||||||
Clients’ funds obligations | ||||||||||||||||||||
Derivative financial liabilities |
||||||||||||||||||||
Cash flow hedges of future revenue | ||||||||||||||||||||
Outflow |
||||||||||||||||||||
(Inflow) |
( |
( |
( |
( |
||||||||||||||||
Cross-currency swaps | ||||||||||||||||||||
Outflow |
||||||||||||||||||||
(Inflow) |
( |
( |
( |
|||||||||||||||||
2022 | 2021 | |||||||||||||
$ |
$ | |||||||||||||
Not past due | ||||||||||||||
Past due 1-30 days | ||||||||||||||
Past due 31-60 days | ||||||||||||||
Past due 61-90 days | ||||||||||||||
Past due more than 90 days | ||||||||||||||
Allowance for doubtful accounts | ( |
( |
||||||||||||
Exhibit 99.3
Managements Discussion and Analysis
For the years ended September 30, 2022 and 2021 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
November 9, 2022
BASIS OF PRESENTATION
This Managements 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 requirements 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, 2022 and 2021. CGIs accounting policies are in accordance with International Financial Reporting Standards (IFRS) 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 CGIs 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 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, 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, as well as the reputational and financial risks attendant to cybersecurity breaches and other incidents, and financial risks such as liquidity needs and requirements, maintenance of financial ratios, interest rate fluctuations and the discontinuation of major interest rate benchmarks 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
© 2022 CGI Inc. | Page 1 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
Administrators (on SEDAR at www.sedar.com) and the U.S. Securities and Exchange Commission (on EDGAR at www.sec.gov). For a discussion of risks in response to the coronavirus (COVID-19) pandemic, see Pandemic risks in section 10.1.1. of the present document. 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.
© 2022 CGI Inc. | Page 2 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
KEY PERFORMANCE MEASURES
The reader should note that the Company reports its financial results in accordance with IFRS. However, we use a combination of GAAP, non-GAAP and supplementary financial measures and ratios to assess the Companys performance. The non-GAAP measures used in this MD&A do not have any standardized meaning prescribed by IFRS 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.
The table below summarizes our most relevant key performance measures :
Profitability | 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. 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 to investors for the same reason. A reconciliation of the revenue prior to foreign currency impact to its closest IFRS measure can be found in section 3.4. and 5.4. of the present document.
| |
Adjusted EBIT (non-GAAP) is a measure of earnings excluding acquisition-related and integration costs, net finance costs and income tax expense. Management believes this measure is useful to investors as it best reflects the performance of the Companys activities and allows for better comparability from period to period as well as to trend analysis. A reconciliation of the adjusted EBIT to its closest IFRS measure can be found in section 3.7. and 5.6. of the present document.
| ||
Adjusted EBIT margin (non-GAAP) is obtained by dividing our adjusted EBIT by our revenue. Management believes this measure is useful to investors as it best reflects the performance of its activities and allows for better comparability from period to period as well as to trend analysis. A reconciliation of the adjusted EBIT to its closest IFRS measure can be found in section 3.7. 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. Please refer to 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. Management believes this measure is useful to investors as it best reflects the Companys performance and allows for better comparability from period to period. A reconciliation of the net earnings excluding specific items to its closest IFRS measure can be found in section 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 acquisition-related and integration costs by our revenues. Management believes this measure is useful to investors as it best reflects the Companys performance and allows for better comparability from period to period. A reconciliation of the net earnings excluding specific items to its closest IFRS measure can be found in section 3.8.3. and 5.6.1 of the present document. |
© 2022 CGI Inc. | Page 3 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
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 that this measure is useful to investors as it best reflects the Companys 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 can be found in section 3.8. and 5.6. of the present document while the basic and diluted earnings per share excluding specific items can be found in section 3.8.3. and 5.6.1. of the present document.
| ||
Effective tax rate excluding specific items (non-GAAP) - is obtained by dividing income tax expense, excluding tax deductions on acquisition-related and integration costs, by earnings before income taxes excluding specific items. Management believes that this measure allows for better comparability from period to period. A reconciliation of the effective tax rate excluding specific items to its closest IFRS measure can be found in section 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 Companys 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 quarters revenue over 90 days. Management tracks this metric closely to ensure timely collection and healthy liquidity. Management believes this measure is useful to investors as it demonstrates the Companys ability to timely convert its trade receivables and work in progress into cash.
| ||
Growth | Constant currency growth (non-GAAP) is a measure of revenue growth before foreign currency translation impacts. This growth is calculated by translating current period results in local currency using the conversion rates in the equivalent period from the prior year. 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 to investors for the same reason.
| |
Backlog includes new contract wins, extensions and renewals (bookings), backlog acquired through business acquisitions and adjusted for the backlog consumed during the period as a result of client work performed, cancellation and the impact of foreign currencies to our existing contracts. Bookings and backlog incorporate estimates from management that are subject to change. 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 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 period. This metric allows management to monitor the Companys business development efforts to ensure we grow our backlog and our business over time and management believes that this measure is useful to investors for the same reason. Managements objective is to maintain a target ratio greater than 100% over a trailing twelve-month period. Management believes that monitoring the Companys 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.
| ||
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 uses the net debt metric to monitor the Companys financial leverage and believes that this metric is useful to investors as it provides insight into its financial strength. A reconciliation of net debt to its closest IFRS measure can be found in section 4.5. of the present document. |
© 2022 CGI Inc. | Page 4 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
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 uses the net debt to capitalization ratio to monitor the proportion of debt versus capital used to finance the Companys operations and to assess its financial strength. Management believes that this metric is useful to investors for the same reasons. | ||
Return on equity (ROE) is a measure of the rate of return on the ownership interest of our shareholders and is calculated as the proportion of net earnings for the last twelve months over the last four quarters average shareholders equity. Management looks at ROE to measure its efficiency at generating net earnings for the Companys shareholders and how well the Company uses the invested funds to generate net earnings growth and believes that this measure is useful to investors for the same reasons. | ||
Return on invested capital (ROIC) (non-GAAP) is a measure of the Companys 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 examines this ratio to assess how well it is using its funds to generate returns and believes that this measure is useful to investors for the same reason. |
REPORTING SEGMENTS
Effective April 1, 2022, the Company realigned its management structure, resulting in a reorganization and the creation of two new operating segments, namely Scandinavia and Central Europe (Germany, Sweden and Norway) and Northwest and Central-East Europe (primarily Netherlands, Denmark and Czech Republic) collectively formerly known as Scandinavia and Central and Eastern Europe in the prior fiscal year, and, less significantly, the transfer of our Belgium operations from Western and Southern Europe operating segment to the Northwest and Central-East Europe operating segment. As a result, 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; United Kingdom (U.K.) and Australia; Finland, Poland and Baltics; Northwest and Central-East Europe; and Asia Pacific Global Delivery Centers of Excellence (mainly India and Philippines) (Asia Pacific).
The Company has restated the segmented information for the comparative periods to conform to the new segmented information structure. Please refer to sections 3.4, 3.6, 5.4 and 5.5 of the present document and to note 28 of our audited consolidated financial statements for additional information on our segments.
© 2022 CGI Inc. | Page 5 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
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 Companys 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 |
1.1. | About CGI | 8 | |||
Overview |
1.2. | Vision and Strategy | 9 | |||
1.3.
|
Competitive Environment
|
| ||||
2. Yearly Overview |
2.1. | Selected Yearly Information and Key Performance Measures | 12 | |||
2.2. | Stock Performance | 13 | ||||
2.3. | COVID-19 | 14 | ||||
2.4. | Ukraine Conflict | 14 | ||||
2.5.
|
Investments in Subsidiaries
|
| ||||
3. Financial Review |
3.1. | Bookings and Book-to-Bill Ratio | 16 | |||
3.2. | Foreign Exchange | 17 | ||||
3.3. | Revenue Distribution | 18 | ||||
3.4. | Revenue by Segment | 19 | ||||
3.5. | Operating Expenses | 22 | ||||
3.6. | Adjusted EBIT by Segment | 23 | ||||
3.7. | Earnings Before Income Taxes | 25 | ||||
3.8.
|
Net Earnings and Earnings Per Share
|
| ||||
4. Liquidity |
4.1. | Consolidated Statements of Cash Flows | 28 | |||
4.2. | Capital Resources | 30 | ||||
4.3. | Contractual Obligations | 31 | ||||
4.4. | Financial Instruments and Hedging Transactions | 31 | ||||
4.5. | Selected Measures of Capital Resources and Liquidity | 32 | ||||
4.6. | Guarantees | 33 | ||||
4.7.
|
Capability to Deliver Results
|
|
© 2022 CGI Inc. | Page 6 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
Section
|
Contents
|
Pages
| ||||
5. Fourth Quarter Results |
5.1. | Bookings and Book-to-Bill Ratio | 34 | |||
5.2. |
Foreign Exchange |
35 | ||||
5.3. | Revenue Distribution | 36 | ||||
5.4. | Revenue by Segment | 37 | ||||
5.5. | Adjusted EBIT by Segment | 40 | ||||
5.6. | Net Earnings and Earnings Per Share | 42 | ||||
5.7.
|
Consolidated Statements of Cash Flows
|
| ||||
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.
|
46 | ||||
7. Changes in
Accounting
|
A summary of the accounting standard changes including those proposed.
|
48 | ||||
8. Critical
|
A discussion of the critical accounting estimates made in the preparation of the audited consolidated financial statements.
|
50 | ||||
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.
|
| ||||
10. Risk Environment |
10.1. | Risks and Uncertainties | 55 | |||
10.2.
|
Legal Proceedings
|
|
© 2022 CGI Inc. | Page 7 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
1. | Corporate Overview |
Founded in 1976 and headquartered in Montréal, Canada, CGI is a leading IT and business consulting services firm with approximately 90,000 consultants and professionals worldwide, whom are called members as they are also owners through our Share Purchase Plan. 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 are committed to providing actionable insights that help clients achieve business outcomes. They leverage global delivery centers that deliver scale, innovation and delivery excellence for every engagement.
End-to-end services and solutions
CGI delivers end-to-end services that help clients achieve the digital transformation of their value chains. Together, our end-to-end services and solutions 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 create a path for future growth and sustainable value through business and strategic IT consulting services such as business strategy, business and operating model design, human-centered experience, customer value and operational excellence, organizational change management, sustainability and digital transformation. 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): CGIs 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 and provider-neutral cloud approaches. 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 industries, our leaders regularly participate in cabinet meetings and councils to advance the strategies, services and solutions we deliver to our clients.
© 2022 CGI Inc. | Page 8 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
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 three common attributes:
| They have highly agile business models and are better at operating as aligned teams between business and IT. |
| They have been faster in modernizing the entire IT environmentincluding through automationwhile assuring security and data privacy. |
| They are addressing business transformation holistically, including culture change, ecosystem touchpoints, and the integration of sustainability objectives. |
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 modelCGIs 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.
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):
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
© 2022 CGI Inc. | Page 9 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
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, our range of end-to-end services which allows us to consider a broad range of acquisitions. A second lever is CGIs industry sector mix, which 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 which 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
CGIs 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 CGI members 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: One of our key strategic goals is 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. In addition, a majority of CGI 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.
Comprehensive quality processes: CGIs 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.
Environmental, Social and Governance (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 Compacts 10 principles 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.
© 2022 CGI Inc. | Page 10 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
As the market dynamics and industry trends continue to increase client demand for 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.
CGIs 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 the client operates.
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.
© 2022 CGI Inc. | Page 11 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
2. | Highlights and Key Performance Measures |
2.1. SELECTED YEARLY INFORMATION & KEY PERFORMANCE MEASURES
As at and for the years ended September 30,
|
2022
|
2021
|
2020
|
Change 2022 / 2021
|
Change 2021 / 2020
|
|||||||||||||||
In millions of CAD unless otherwise noted |
||||||||||||||||||||
Growth |
||||||||||||||||||||
Revenue |
12,867.2 | 12,126.8 | 12,164.1 | 740.4 | (37.3) | |||||||||||||||
Year-over-year revenue growth |
6.1% | (0.3%) | 0.4% | 6.4% | (0.7%) | |||||||||||||||
Constant currency year-over-year revenue growth |
10.5% | 1.1% | (0.1%) | 9.4% | 1.2% | |||||||||||||||
Backlog |
24,055 | 23,059 | 22,673 | 996 | 386 | |||||||||||||||
Bookings |
13,966 | 13,843 | 11,848 | 123 | 1,995 | |||||||||||||||
Book-to-bill ratio |
108.5% | 114.2% | 97.4% | (5.7%) | 16.8% | |||||||||||||||
Profitability |
||||||||||||||||||||
Adjusted EBIT1 |
2,086.6 | 1,952.2 | 1,862.9 | 134.4 | 89.3 | |||||||||||||||
Adjusted EBIT margin |
16.2% | 16.1% | 15.3% | 0.1% | 0.8% | |||||||||||||||
Net earnings |
1,466.1 | 1,369.1 | 1,117.9 | 97.0 | 251.2 | |||||||||||||||
Net earnings margin |
11.4% | 11.3% | 9.2% | 0.1% | 2.1% | |||||||||||||||
Diluted EPS (in dollars) |
6.04 | 5.41 | 4.20 | 0.63 | 1.21 | |||||||||||||||
Net earnings excluding specific items1 |
1,487.9 | 1,374.9 | 1,300.1 | 113.0 | 74.8 | |||||||||||||||
Net earnings margin excluding specific items |
11.6% | 11.3% | 10.7% | 0.3% | 0.6% | |||||||||||||||
Diluted EPS excluding specific items (in dollars)1 |
6.13 | 5.43 | 4.89 | 0.70 | 0.54 | |||||||||||||||
Liquidity |
||||||||||||||||||||
Cash provided by operating activities |
1,865.0 | 2,115.9 | 1,938.6 | (250.9) | 177.3 | |||||||||||||||
As a % of revenue |
14.5% | 17.4% | 15.9% | (2.9%) | 1.5% | |||||||||||||||
Days sales outstanding |
49 | 45 | 47 | 4 | (2) | |||||||||||||||
Capital structure |
||||||||||||||||||||
Net debt |
2,946.9 | 2,535.9 | 2,777.9 | 411.0 | (242.0) | |||||||||||||||
Net debt to capitalization ratio |
28.8% | 26.6% | 27.7% | 2.2% | (1.1%) | |||||||||||||||
Return on equity |
20.9% | 19.8% | 16.0% | 1.1% | 3.8% | |||||||||||||||
Return on invested capital |
15.7% | 14.9% | 12.1% | 0.8% | 2.8% | |||||||||||||||
Balance sheet |
||||||||||||||||||||
Cash and cash equivalents, and short-term investments |
972.6 | 1,700.2 | 1,709.5 | (727.6) | (9.3) | |||||||||||||||
Total assets |
15,175.4 | 15,021.0 | 15,550.4 | 154.4 | (529.4) | |||||||||||||||
Long-term financial liabilities2 |
3,731.3 | 3,659.8 | 4,030.6 | 71.5 | (370.8) |
1 | Please refer to sections 3.7. and 3.8.3. of the respective Fiscal years MD&A for the reconciliation of non-GAAP financial measures. |
2 | 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. |
© 2022 CGI Inc. | Page 12 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
2.2.1. Fiscal 2022 Trading Summary
CGIs 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: | 108.21 | Open: | 85.14 | |||||||||||
High: | 116.00 | High: | 93.93 | |||||||||||
Low: | 95.45 | Low: | 73.76 | |||||||||||
Close: | 103.99 | Close: | 75.24 | |||||||||||
CDN average daily trading volumes1: | 653,488 | NYSE average daily trading volumes: | 171,679 |
1 | Includes the average daily volumes of both the TSX and alternative trading systems. |
© 2022 CGI Inc. | Page 13 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
2.2.2. Normal Course Issuer Bid (NCIB)
On February 1, 2022, the Companys Board of Directors authorized and subsequently received regulatory approval from the TSX for the renewal of CGIs NCIB which allows for the purchase for cancellation of up to 18,781,981 Class A subordinate voting shares (Class A Shares) representing 10% of the Companys public float as of the close of business on January 24, 2022. Class A Shares may be purchased for cancellation under the NCIB commencing on February 6, 2022 until no later than February 5, 2023, 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, 2022, the Company purchased for cancellation 8,773,244 Class A Shares for $908.7 million at a weighted average price of $103.57 under the previous and current NCIB. The purchased shares included 3,968,159 and 938,914 Class A Shares purchased for cancellation on March 1, 2022, and August 1, 2022 respectively, each from Caisse de dépôt et de placement du Québec, for total aggregate cash consideration of $500.0 million. 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.
As at September 30, 2022, of the 8,773,244 Class A Shares purchased for cancellation, 113,405 Class A Shares remain unpaid for $11.7 million.
As at September 30, 2022, the Company could purchase up to 12,319,503 Class A Shares for cancellation under the 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 4, 2022:
Capital Stock and Options Outstanding | As at November 4, 2022 | |||
Class A subordinate voting shares |
211,383,087 | |||
Class B multiple voting shares |
26,445,706 | |||
Options to purchase Class A subordinate voting shares |
6,697,421 |
At the onset of the COVID-19 pandemic, we established an executive crisis management team and a network of local crisis management teams to closely monitor the evolving COVID-19 pandemic, and to ensure that we were executing on our business continuity plan and working collaboratively with our clients. We established key guidelines and procedures to ensure that our workplace practices are in line with local government recommendations and requirements and are compliant with workplace readiness certifications.
Our executive crisis management team and our network of local crisis management teams have downgraded our pandemic posture, but we continue monitoring of World Health Organization COVID-19 alerts and changes to local health and government COVID-19 guidance/rules that may impact CGI members or CGIs business. We have defined triggers to re-establish our active crisis management governance if the situation changes.
We are closely monitoring the evolving conflict in Ukraine. CGI does not have any established operations in Ukraine, Russia or Belarus. All of our operations in countries in geographic proximity to Ukraine or Russia are being closely monitored. None of the entities in CGI group are subject to any sanctions or related restrictions. After internal review, it is our belief that we do not have any material supply chain, customer base and/or business reliance in Russia or Belarus. Additionally, none of our directors, officers or our principal shareholders are based out of Russia or Belarus.
© 2022 CGI Inc. | Page 14 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
2.5. INVESTMENT IN SUBSIDIARIES
On October 1, 2021, the Company acquired Array Holding Company, Inc. (Array) a leading digital services provider that optimizes mission performance for the U.S. Department of Defense and other government organizations, based in the United States and headquartered in Greenbelt, Maryland. The acquisition added approximately 275 professionals to the Company.
On October 28, 2021, the Company acquired Cognicase Management Consulting (CMC), a leading provider of technology and management consulting services and solutions, headquartered in Madrid, Spain. The acquisition added approximately 1,500 professionals to the Company.
On February 28, 2022, the Company acquired Unico Computer Systems Pty Ltd (Unico), a technology consultancy and systems integrator, headquartered in Melbourne, Australia. The acquisition added approximately 130 professionals to the Company.
On May 25, 2022, the Company acquired all of the outstanding shares of Harwell Management (Harwell). Based in France, Harwell is a management consulting firm specializing in the financial services industry, headquartered in Paris, France. The acquisition added approximately 150 professionals to the Company.
The Company completed these acquisitions for a total purchase price of $238.4 million.
On March 11, 2022, the Company announced that it had entered into an agreement for the acquisition of all of the shares of Umanis SA (Umanis), a digital company specializing in data, digital and business solutions, headquartered in Paris, France. On May 31, 2022, the Company announced that it had acquired control of Umanis by completing a block purchase representing 72.4% of Umanis share capital (excluding treasury shares) and that it had filed with the French financial markets authority (Autorité des Marchés Financiers) the draft mandatory tender offer to purchase the remaining outstanding shares. By July 18, 2022, the Company acquired an aggregate total interest of more than 90.0% of the outstanding shares (excluding treasury shares) and launched a statutory squeeze-out process through which the remaining shares were acquired on July 29, 2022. The transaction values the entire share capital of Umanis at $420.3 million, on a fully diluted basis. This acquisition added approximately 3,000 professionals to the Company.
© 2022 CGI Inc. | Page 15 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
3. | Financial Review |
3.1. BOOKINGS AND BOOK-TO-BILL RATIO
Bookings for the year were $14.0 billion representing a book-to-bill ratio of 108.5%. The breakdown of the new bookings signed during the year is as follows:
Information regarding our bookings is a key indicator of the volume of our business over time. However, due to the timing and transition period associated with managed IT and business process services contracts, the realization of revenue related to these bookings may fluctuate from period to period. The values initially booked may change over time due to their variable attributes, including demand-driven usage, modifications in the scope of work to be performed caused by changes in client requirements as well as termination clauses at the option of the client. As such, information regarding our bookings is not comparable to, nor should it be substituted for, an analysis of our revenue. Management however believes that it is a key indicator of potential future revenue.
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, 2022 |
Book-to-bill ratio for the year ended September 30, 2022 | ||
Total CGI |
13,966,006 | 108.5% | ||
U.S. Commercial and State Government |
2,616,594 | 117.4% | ||
Western and Southern Europe |
2,061,984 | 97.5% | ||
Canada |
2,059,809 | 95.4% | ||
U.K. and Australia |
1,936,503 | 131.8% | ||
U.S. Federal |
1,660,086 | 94.3% | ||
Scandinavia and Central Europe |
1,636,137 | 99.5% | ||
Finland, Poland and Baltics |
1,265,038 | 165.9% | ||
Northwest and Central-East Europe |
729,855 | 100.4% |
© 2022 CGI Inc. | Page 16 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
The Company operates globally and is exposed to changes in foreign currency rates. Accordingly, as prescribed by IFRS, we value 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,
|
2022
|
2021
|
Change
|
|||||||||
U.S. dollar |
|
1.3756 |
|
|
1.2676 |
|
|
8.5% |
| |||
Euro |
|
1.3454 |
|
|
1.4678 |
|
|
(8.3%) |
| |||
Indian rupee |
|
0.0169 |
|
|
0.0171 |
|
|
(1.2%) |
| |||
British pound |
|
1.5310 |
|
|
1.7075 |
|
|
(10.3%) |
| |||
Swedish krona |
|
0.1236 |
|
|
0.1447 |
|
|
(14.6%) |
| |||
Average foreign exchange rates
|
||||||||||||
For the year ended September 30,
|
2022
|
2021
|
Change
|
|||||||||
U.S. dollar |
|
1.2777 |
|
|
1.2643 |
|
|
1.1% |
| |||
Euro |
|
1.3833 |
|
|
1.5110 |
|
|
(8.5%) |
| |||
Indian rupee |
|
0.0166 |
|
|
0.0172 |
|
|
(3.5%) |
| |||
British pound |
|
1.6333 |
|
|
1.7302 |
|
|
(5.6%) |
| |||
Swedish krona |
|
0.1328 |
|
|
0.1484 |
|
|
(10.5%) |
|
© 2022 CGI Inc. | Page 17 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
The following charts provide additional information regarding our revenue mix for the year:
3.3.1. Client Concentration
IFRS 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 13.3% of our revenue for Fiscal 2022 as compared to 12.8% for Fiscal 2021.
© 2022 CGI Inc. | Page 18 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
Our segments are reported based on where the clients 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 2022 and Fiscal 2021. The Fiscal 2021 revenue by segment was recorded reflecting the actual foreign exchange rates for that period. The foreign exchange impact is the difference between the current periods actual results and the same periods results converted with the prior years foreign exchange rates.
For the year ended September 30, | Change | |||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
In thousands of CAD except for percentages |
||||||||||||||||
Total CGI revenue |
12,867,201 | 12,126,793 | 740,408 | 6.1 | % | |||||||||||
Variation prior to foreign currency impact |
10.5% | |||||||||||||||
Foreign currency impact |
(4.4%) | |||||||||||||||
Variation over previous period |
6.1% | |||||||||||||||
Western and Southern Europe |
||||||||||||||||
Revenue prior to foreign currency impact |
2,351,622 | 1,917,760 | 433,862 | 22.6 | % | |||||||||||
Foreign currency impact |
(199,509) | |||||||||||||||
Western and Southern Europe revenue |
2,152,113 | 1,917,760 | 234,353 | 12.2 | % | |||||||||||
U.S. Commercial and State Government |
||||||||||||||||
Revenue prior to foreign currency impact |
2,053,480 | 1,800,747 | 252,733 | 14.0 | % | |||||||||||
Foreign currency impact |
21,841 | |||||||||||||||
U.S. Commercial and State Government revenue |
2,075,321 | 1,800,747 | 274,574 | 15.2 | % | |||||||||||
Canada |
||||||||||||||||
Revenue prior to foreign currency impact |
1,981,617 | 1,755,804 | 225,813 | 12.9 | % | |||||||||||
Foreign currency impact |
(237) | |||||||||||||||
Canada revenue |
1,981,380 | 1,755,804 | 225,576 | 12.8 | % | |||||||||||
U.S. Federal |
||||||||||||||||
Revenue prior to foreign currency impact |
1,732,272 | 1,607,431 | 124,841 | 7.8 | % | |||||||||||
Foreign currency impact |
18,630 | |||||||||||||||
U.S. Federal revenue |
1,750,902 | 1,607,431 | 143,471 | 8.9 | % | |||||||||||
Scandinavia and Central Europe |
||||||||||||||||
Revenue prior to foreign currency impact |
1,728,366 | 1,663,470 | 64,896 | 3.9 | % | |||||||||||
Foreign currency impact |
(157,248) | |||||||||||||||
Scandinavia and Central Europe revenue |
1,571,118 | 1,663,470 | (92,352) | (5.6 | %) | |||||||||||
U.K. and Australia revenue |
||||||||||||||||
Revenue prior to foreign currency impact |
1,370,299 | 1,355,603 | 14,696 | 1.1 | % | |||||||||||
Foreign currency impact |
(79,174) | |||||||||||||||
U.K. and Australia revenue |
1,291,125 | 1,355,603 | (64,478) | (4.8 | %) | |||||||||||
Finland, Poland and Baltics |
||||||||||||||||
Revenue prior to foreign currency impact |
796,991 | 768,994 | 27,997 | 3.6 | % | |||||||||||
Foreign currency impact |
(67,967) | |||||||||||||||
Finland, Poland and Baltics revenue |
729,024 | 768,994 | (39,970) | (5.2 | %) |
© 2022 CGI Inc. | Page 19 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
For the year ended September 30, | Change | |||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
In thousands of CAD except for percentages |
||||||||||||||||
Northwest and Central-East Europe |
||||||||||||||||
Revenue prior to foreign currency impact |
752,266 | 716,183 | 36,083 | 5.0% | ||||||||||||
Foreign currency impact |
(59,407) | |||||||||||||||
Northwest and Central-East Europe revenue |
692,859 | 716,183 | (23,324) | (3.3%) | ||||||||||||
Asia Pacific |
||||||||||||||||
Revenue prior to foreign currency impact |
826,603 | 680,554 | 146,049 | 21.5% | ||||||||||||
Foreign currency impact |
(26,942) | |||||||||||||||
Asia Pacific revenue |
799,661 | 680,554 | 119,107 | 17.5% | ||||||||||||
Eliminations |
(176,302) | (139,753) | (36,549) | 26.2% |
For the year ended September 30, 2022, revenue was $12,867.2 million, an increase of $740.4 million or 6.1% over the same period last year. On a constant currency basis, revenue increased by $1,276.7 million or 10.5%. The increase was mainly due to organic growth across all vertical markets, as well as recent business acquisitions.
3.4.1. Western and Southern Europe
For the year ended September 30, 2022, revenue in our Western and Southern Europe segment was $2,152.1 million, an increase of $234.4 million or 12.2% over the same period last year. On a constant currency basis, revenue increased by $433.9 million or 22.6%. The increase in revenue was mainly due to recent business acquisitions, as well as the result of organic growth across all vertical markets, predominantly within the MRD vertical market.
On a client geographic basis, the top two Western and Southern Europe vertical markets were MRD and financial services, generating combined revenues of approximately $1,319 million for the year ended September 30, 2022.
3.4.2. U.S. Commercial and State Government
For the year ended September 30, 2022, revenue in our U.S. Commercial and State Government segment was $2,075.3 million, an increase of $274.6 million or 15.2% over the same period last year. On a constant currency basis, revenue increased by $252.7 million or 14.0%. The increase in revenue was mainly the result of organic growth across all vertical markets, predominantly within financial services with additional IP solutions, and business acquisitions.
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 $1,306 million for the year ended September 30, 2022.
3.4.3. Canada
For the year ended September 30, 2022, revenue in our Canada segment was $1,981.4 million, an increase of $225.6 million or 12.8% compared to the same period last year. On a constant currency basis, revenue increased by $225.8 million or 12.9%. The increase was due to organic growth across all vertical markets, mainly in financial services including an increase in IP services and solutions.
On a client geographic basis, the top two Canada vertical markets were financial services, and communications and utilities, generating combined revenues of approximately $1,382 million for the year ended September 30, 2022.
3.4.4. U.S. Federal
For the year ended September 30, 2022, revenue in our U.S. Federal segment was $1,750.9 million, an increase of $143.5 million or 8.9% over the same period last year. On a constant currency basis, revenue increased by $124.8 million or 7.8%. The increase in revenue was mainly due to managed services expansion, higher transaction volumes related to our IP business process services, and the Array acquisition. This was partially offset by the completion of contracts and an adjustment due to a reevaluation of cost to complete on a project.
For the year ended September 30, 2022, 88% of revenues within the U.S. Federal segment were federal civilian based.
© 2022 CGI Inc. | Page 20 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
3.4.5. Scandinavia and Central Europe
For the year ended September 30, 2022, revenue in our Scandinavia and Central Europe segment was $1,571.1 million, a decrease of $92.4 million or 5.6% over the same period last year. On a constant currency basis, revenue increased by $64.9 million or 3.9%. The increase was largely driven by the organic growth in government and MRD vertical markets, and a favourable contract settlement.
On a client geographic basis, the top two Scandinavia and Central Europe vertical markets were MRD and government, generating combined revenues of approximately $1,135 million for the year ended September 30, 2022.
3.4.6. U.K. and Australia
For the year ended September 30, 2022, revenue in our U.K. and Australia segment was $1,291.1 million, a decrease of $64.5 million or 4.8% over the same period last year. On a constant currency basis, revenue increased by $14.7 million or 1.1%. The increase in revenue was due to the Unico acquisition, organic growth within the government, and communications and utilities vertical markets. This was in part offset by the successful completion and related ramp down of projects within the MRD 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 $1,051 million for the year ended September 30, 2022.
3.4.7. Finland, Poland and Baltics
For the year ended September 30, 2022, revenue in our Finland, Poland and Baltics segment was $729.0 million, a decrease of $40.0 million or 5.2% over the same period last year. On a constant currency basis, revenue increased by $28.0 million or 3.6%. The increase was driven by organic growth across most vertical markets, largely within government including higher transaction volumes and related IP services.
On a client geographic basis, the top two Finland, Poland and Baltics vertical markets were government and financial services, generating combined revenues of approximately $442 million for the year ended September 30, 2022.
3.4.8. Northwest and Central-East Europe
For the year ended September 30, 2022, revenue in our Northwest and Central-East Europe segment was $692.9 million, a decrease of $23.3 million or 3.3% over the same period last year. On a constant currency basis, revenue increased by $36.1 million or 5.0%. The increase in revenue was primarily due to the organic growth within financial services, including higher IP service and solutions, government and MRD vertical markets. This was in part offset by successful projects completion within the health vertical market.
On a client geographic basis, the top two Northwest and Central-East Europe vertical markets were MRD and government, generating combined revenues of approximately $450 million for the year ended September 30, 2022.
3.4.9. Asia Pacific
For the year ended September 30, 2022, revenue in our Asia Pacific segment was $799.7 million, an increase of $119.1 million or 17.5% over the same period last year. On a constant currency basis, revenue increased by $146.0 million or 21.5%. This growth was mainly driven by the increasing demand for our offshore delivery centers, predominantly within the financial services, communications and utilities, and MRD vertical markets.
© 2022 CGI Inc. | Page 21 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
Change | ||||||||||||||||||||||||
For the year ended September 30, |
2022 | % of Revenue |
2021 | % of Revenue |
||||||||||||||||||||
$ | % | |||||||||||||||||||||||
In thousands of CAD except for percentages |
||||||||||||||||||||||||
Costs of services, selling and administrative |
10,776,564 | 83.8% | 10,178,164 | 83.9% | 598,400 | (0.1%) | ||||||||||||||||||
Foreign exchange loss (gain) |
4,001 | 0.0% | (3,532) | 0.0% | 7,533 | 0.0% |
3.5.1. Costs of Services, Selling and Administrative
For the year ended September 30, 2022, costs of services, selling and administrative expenses amounted to $10,776.6 million, an increase of $598.4 million over the same period last year. As a percentage of revenue, costs of services, selling and administrative expenses decreased to 83.8% from 83.9%. As a percentage of revenue, costs of services decreased compared to the same period last year primarily due to IP services and solutions and the growth in managed services in Asia Pacific. As a percentage of revenue, selling and administrative expenses increased compared to the same period last year mainly due to the Umanis acquisition, which is in the process of being integrated to achieve planned synergies, and the expected increase of travel costs in support of business development.
During the year ended September 30, 2022, the translation of the results of our foreign operations from their local currencies to the Canadian dollar favourably impacted costs by $465.6 million, which was offset by the unfavourable translation impact of $536.3 million on our revenue.
3.5.2. Foreign Exchange Loss
During the year ended September 30, 2022, CGI incurred $4.0 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.
© 2022 CGI Inc. | Page 22 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
Change | ||||||||||||||||
For the year ended September 30, | ||||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
In thousands of CAD except for percentages |
||||||||||||||||
Western and Southern Europe |
289,730 | 269,350 | 20,380 | 7.6 | % | |||||||||||
As a percentage of segment revenue |
13.5 | % | 14.0 | % | ||||||||||||
U.S. Commercial and State Government |
304,767 | 281,217 | 23,550 | 8.4 | % | |||||||||||
As a percentage of segment revenue |
14.7 | % | 15.6 | % | ||||||||||||
Canada |
463,289 | 390,370 | 72,919 | 18.7 | % | |||||||||||
As a percentage of segment revenue |
23.4 | % | 22.2 | % | ||||||||||||
U.S. Federal |
276,395 | 252,657 | 23,738 | 9.4 | % | |||||||||||
As a percentage of segment revenue |
15.8 | % | 15.7 | % | ||||||||||||
Scandinavia and Central Europe |
125,728 | 138,191 | (12,463 | ) | (9.0 | %) | ||||||||||
As a percentage of segment revenue |
8.0 | % | 8.3 | % | ||||||||||||
U.K. and Australia |
200,117 | 218,624 | (18,507 | ) | (8.5 | %) | ||||||||||
As a percentage of segment revenue |
15.5 | % | 16.1 | % | ||||||||||||
Finland, Poland and Baltics |
96,651 | 114,358 | (17,707 | ) | (15.5 | %) | ||||||||||
As a percentage of segment revenue |
13.3 | % | 14.9 | % | ||||||||||||
Northwest and Central East-Europe |
88,287 | 79,898 | 8,389 | 10.5 | % | |||||||||||
As a percentage of segment revenue |
12.7 | % | 11.2 | % | ||||||||||||
Asia Pacific |
241,672 | 207,496 | 34,176 | 16.5 | % | |||||||||||
As a percentage of segment revenue |
30.2 | % | 30.5 | % | ||||||||||||
Adjusted EBIT |
2.086,636 | 1,952,161 | 134,475 | 6.9 | % | |||||||||||
Adjusted EBIT margin |
16.2 | % | 16.1 | % |
Adjusted EBIT for the year was $2,086.6 million, an increase of $134.5 million from 2021. The adjusted EBIT margin increased to 16.2% from 16.1% for the same period last year. The increase in adjusted EBIT margin was primarily due to organic growth in all vertical markets and in IP services and solutions. This was partially offset by costs of assimilating new hires, the dilutive impacts of the recent acquisitions, which are in the process of being integrated to achieve its planned synergies and the expected increase of travel costs in support of business development.
3.6.1. Western and Southern Europe
For the year ended September 30, 2022, adjusted EBIT in the Western and Southern Europe segment was $289.7 million, an increase of $20.4 million when compared to the same period last year. Adjusted EBIT margin decreased to 13.5% from 14.0%. The change in adjusted EBIT margin was primarily due to the temporary dilutive impact of the recent business acquisitions which are in the process of being integrated to achieve planned synergies, as well as additional tax credits in the prior year. This was partially offset by the organic growth across all vertical markets.
3.6.2. U.S. Commercial and State Government
For the year ended September 30, 2022, adjusted EBIT in the U.S. Commercial and State Government segment was $304.8 million, an increase of $23.6 million when compared to the same period last year. Adjusted EBIT margin decreased to 14.7% from 15.6%. The change in adjusted EBIT was mainly due to additional R&D tax credits in the prior year, combined with costs of assimilating new hires in response to high demand. This was partially offset by organic growth within the financial services vertical market including IP solutions.
© 2022 CGI Inc. | Page 23 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
3.6.3. Canada
For the year ended September 30, 2022, adjusted EBIT in the Canada segment was $463.3 million, an increase of $72.9 million when compared to the same period last year. Adjusted EBIT margin increased to 23.4% from 22.2%. The increase was primarily due to organic growth across most vertical markets mainly in MRD vertical market, an impact of a favourable supplier contract adjustment, and an increase in IP services and solutions. This was offset in part by costs of assimilating new hires in response to high demand, mainly within the financial services vertical market.
3.6.4. U.S. Federal
For the year ended September 30, 2022, adjusted EBIT in the U.S. Federal segment was $276.4 million, an increase of $23.7 million when compared to the same period last year. Adjusted EBIT margin increased to 15.8% from 15.7%. The increase was primarily due to the same factors as revenue offset by higher performance based compensation and additional tax credits in the prior year.
3.6.5. Scandinavia and Central Europe
For the year ended September 30, 2022, adjusted EBIT in the Scandinavia and Central Europe segment was $125.7 million, a decrease of $12.5 million when compared to the same period last year. Adjusted EBIT margin decreased to 8.0% from 8.3%. The change was primarily due to the optimization of our infrastructure business, partially offset by a favourable contract settlement.
3.6.6. U.K. and Australia
For the year ended September 30, 2022, adjusted EBIT in the U.K. and Australia segment was $200.1 million, a decrease of $18.5 million when compared to the same period last year. Adjusted EBIT margin decreased to 15.5% from 16.1%. This change was mainly due to the successful completion of projects within the MRD vertical market, and the temporary dilutive impact of the Unico acquisition, which is in the process of being integrated to achieve its planned synergies.
3.6.7. Finland, Poland and Baltics
For the year ended September 30, 2022 adjusted EBIT in our Finland, Poland and Baltics segment was $96.7 million, a decrease of $17.7 million, when compared to the same period last year. Adjusted EBIT margin decreased to 13.3% from 14.9%. The decrease in adjusted EBIT margin was mainly due to the costs associated with the start up of a large new managed IT services contract and the prior year payroll tax relief. This was partially offset by a prior year asset impairment.
3.6.8. Northwest and Central-East Europe
For the year ended September 30, 2022, adjusted EBIT in the Northwest and Central-East Europe segment was $88.3 million, an increase of $8.4 million when compared to the same period last year. Adjusted EBIT margin increased to 12.7% from 11.2%. The increase in adjusted EBIT margin was primarily due to the same factors as revenue.
3.6.9. Asia Pacific
For the year ended September 30, 2022, adjusted EBIT in the Asia Pacific segment was $241.7 million, an increase of $34.2 million when compared to the same period last year. Adjusted EBIT margin decreased to 30.2% from 30.5%. The change in adjusted EBIT margin was mostly due to temporary lower billable utilization, related to the costs of assimilating new hires in response to high demand. This was partially offset by increasing demand for our offshore delivery centers, predominantly within the financial services, communications and utilities, and MRD vertical markets, and facility optimization.
© 2022 CGI Inc. | Page 24 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
3.7. EARNINGS BEFORE INCOME TAXES
The following table provides a reconciliation between our adjusted EBIT and earnings before income taxes, which is reported in accordance with IFRS:
Change | ||||||||||||||||||||||||
For the years ended September 30, |
% of | % of | ||||||||||||||||||||||
2022 | Revenue | 2021 | Revenue | $ | % | |||||||||||||||||||
In thousands of CAD except for percentage |
||||||||||||||||||||||||
Adjusted EBIT |
2,086,636 | 16.2% | 1,952,161 | 16.1% | 134,475 | 0.1 | % | |||||||||||||||||
Minus the following items: |
||||||||||||||||||||||||
Acquisition-related and integration costs |
27,654 | 0.2 % | 7,371 | 0.1% | 20,283 | 0.1 | % | |||||||||||||||||
Net finance costs |
92,023 | 0.7 % | 106,798 | 0.9% | (14,775 | ) | (0.2 | %) | ||||||||||||||||
Earnings before income taxes |
1,966,959 | 15.3 % | 1,837,992 | 15.2% | 128,967 | 0.1 | % |
3.7.1. Acquisition-Related and Integration Costs
For the years ended September 30, 2022 and 2021, the Company incurred $27.7 million and $7.4 million, respectively, of acquisition-related and integration costs for the integration towards the CGI operating model. These costs are mainly related to professional fees incurred for the acquisitions, terminations of employment, leases of vacated premises, training and integration costs.
3.7.2. Net Finance Costs
Net finance costs mainly include interest on our long-term debt and lease liabilities. For the year ended September 30, 2022, the net finance costs decreased by $14.8 million, mainly due to lower interest charges related to our unsecured notes, primarily as a result of the scheduled repayments.
© 2022 CGI Inc. | Page 25 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
3.8. NET EARNINGS AND EARNINGS PER SHARE
The following table sets out the information supporting the earnings per share calculations:
Change | ||||||||||||||||
For the year ended September 30, |
||||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
In thousands of CAD except for percentage and shares data |
||||||||||||||||
Earnings before income taxes |
1,966,959 | 1,837,992 | 128,967 | 7.0 | % | |||||||||||
Income tax expense |
500,817 | 468,920 | 31,897 | 6.8 | % | |||||||||||
Effective tax rate |
25.5 | % | 25.5 | % | ||||||||||||
Net earnings |
1,466,142 | 1,369,072 | 97,070 | 7.1 | % | |||||||||||
Net earnings margin |
11.4 | % | 11.3 | % | ||||||||||||
Weighted average number of shares outstanding |
||||||||||||||||
Class A subordinate voting shares and Class B multiple voting shares (basic) |
239,262,004 | 249,119,219 | (9,857,215 | ) | (4.0 | %) | ||||||||||
Class A subordinate voting shares and Class B multiple voting shares (diluted) |
242,867,445 | 253,088,880 | (10,221,435 | ) | (4.0 | %) | ||||||||||
Earnings per share (in dollars) |
||||||||||||||||
Basic |
6.13 | 5.50 | 0.63 | 11.5 | % | |||||||||||
Diluted |
6.04 | 5.41 | 0.63 | 11.6 | % |
3.8.1. Income Tax Expense
For the year ended September 30, 2022, income tax expense was $500.8 million compared to $468.9 million over the same period last year, while our effective tax rate remained at 25.5%.
When excluding tax effects from acquisition-related and integration costs, the effective tax rate decreased from 25.5% to 25.4% for the year ended September 30, 2022 compared to the year ended September 30, 2021. The decrease is mainly attributable to a tax rate decrease in France, partly offset by a different 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 2022 and our current profitability mix, we expect our effective tax rate before specific items to be in the range of 24.5% to 26.5% in subsequent periods.
3.8.2. Weighted Average Number of Shares
For Fiscal 2022, CGIs basic and diluted weighted average number of shares decreased compared to Fiscal 2021 due to the impact of the purchase for cancellation of Class A Shares, partly offset by the grant and the exercise of stock options. Please refer to notes 19, 20 and 21 of our audited consolidated financial statements for additional information.
© 2022 CGI Inc. | Page 26 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
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.
Change | ||||||||||||||||
For the year ended September 30, |
||||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
In thousands of CAD except for percentages and shares data |
||||||||||||||||
Earnings before income taxes |
1,966,959 | 1,837,992 | 128,967 | 7.0 | % | |||||||||||
Add back: |
||||||||||||||||
Acquisition-related and integration costs |
27,654 | 7,371 | 20,283 | 275.2 | % | |||||||||||
Earnings before income taxes excluding specific items |
1,994,613 | 1,845,363 | 149,250 | 8.1 | % | |||||||||||
Income tax expense |
500,817 | 468,920 | 31,897 | 6.8 | % | |||||||||||
Effective tax rate |
25.5 | % | 25.5 | % | ||||||||||||
Add back: |
||||||||||||||||
Tax deduction on acquisition-related and integration costs |
5,942 | 1,570 | 4,372 | 278.5 | % | |||||||||||
Impact on effective tax rate |
(0.1 | %) | | % | ||||||||||||
Income tax expense excluding specific items |
506,759 | 470,490 | 36,269 | 7.7 | % | |||||||||||
Effective tax rate excluding specific items |
25.4 | % | 25.5 | % | ||||||||||||
Net earnings excluding specific items |
1,487,854 | 1,374,873 | 112,981 | 8.2 | % | |||||||||||
Net earnings margin excluding specific items |
11.6 | % | 11.3 | % | ||||||||||||
Weighted average number of shares outstanding |
||||||||||||||||
Class A subordinate voting shares and Class B multiple voting shares (basic) |
239,262,004 | 249,119,219 | (4.0 | %) | ||||||||||||
Class A subordinate voting shares and Class B multiple voting shares (diluted) |
242,867,445 | 253,088,880 | (4.0 | %) | ||||||||||||
Earnings per share excluding specific items (in dollars) |
||||||||||||||||
Basic |
6.22 | 5.52 | 0.70 | 12.7 | % | |||||||||||
Diluted |
6.13 | 5.43 | 0.70 | 12.9 | % |
© 2022 CGI Inc. | Page 27 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
4. | Liquidity |
4.1. CONSOLIDATED STATEMENTS OF CASH FLOWS
CGIs 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, 2022, cash and cash equivalents were $966.5 million. Cash included in funds held for clients was $504.7 million. The following table provides a summary of the generation and use of cash for the years ended September 30, 2022 and 2021.
For the year ended September 30, | 2022 | 2021 | Change | |||||||||
In thousands of CAD | ||||||||||||
Cash provided by operating activities | 1,864,998 | 2,115,928 | (250,930 | ) | ||||||||
Cash used in investing activities | (911,947 | ) | (388,507 | ) | (523,440 | ) | ||||||
Cash used in financing activities | (1,591,098 | ) | (1,782,497 | ) | 191,399 | |||||||
Effect of foreign exchange rate changes on cash and cash equivalents | (46,500 | ) | (73,884 | ) | 27,384 | |||||||
Net decrease in cash, cash equivalents and cash included in funds held for clients | (684,547 | ) | (128,960 | ) | (555,587 | ) |
4.1.1. Cash Provided by Operating Activities
For the year ended September 30, 2022, cash provided by operating activities was $1,865.0 million or 14.5% of revenue compared to $2,115.9 million or 17.4% of revenues for the same period last year. The following table provides a summary of the generation and use of cash from operating activities:
For the year ended September 30, | 2022 | 2021 | Change | |||||||||
In thousands of CAD | ||||||||||||
Net earnings | 1,466,142 | 1,369,072 | 97,070 | |||||||||
Amortization, depreciation and impairment | 474,622 | 510,570 | (35,948 | ) | ||||||||
Other adjustments1 | 35,127 | 21,422 | 13,705 | |||||||||
Cash flow from operating activities before net change in non-cash working capital items | 1,975,891 | 1,901,064 | 74,827 | |||||||||
Net change in non-cash working capital items: | ||||||||||||
Accounts receivable, work in progress and deferred revenue |
(120,393) | 7,617 | (128,010 | ) | ||||||||
Accounts payable and accrued liabilities, accrued compensation and employee-related liabilities, provisions and long-term liabilities |
(4,876) | 190,735 | (195,611 | ) | ||||||||
Other2 |
14,376 | 16,512 | (2,136 | ) | ||||||||
Net change in non-cash working capital items | (110,893) | 214,864 | (325,757 | ) | ||||||||
Cash provided by operating activities | 1,864,998 | 2,115,928 | (250,930 | ) |
1 | Comprised of deferred income tax recovery, foreign exchange (gain) loss, share-based payment costs and gain on lease terminations and sale of property, plant and equipment. |
2 | Comprised of prepaid expenses and other assets, long-term financial assets, income taxes, derivative financial instruments and retirement benefits obligations. |
For the year ended September 30, 2022, cash provided by operating activities was $1,865.0 million, down $250.9 million for the same period last year, mainly due to the net change in non-cash working capital items. The net change in non-cash working capital items of $110.9 million for the year ended September 30, 2022 was mostly due to the increase in our DSO.
The timing of our working capital inflows and outflows will always have an impact on the cash flow from operations.
© 2022 CGI Inc. | Page 28 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
4.1.2. Cash Used in Investing Activities
For the year ended September 30, 2022, $911.9 million was used in investing activities, while $388.5 million was used over the same period last year.
The following table provides a summary of the use of cash from investing activities:
For the year ended September 30, | 2022 | 2021 | Change | |||||||||
In thousands of CAD |
||||||||||||
Business acquisitions |
(571,911 | ) | (98,926 | ) | (472,985 | ) | ||||||
Purchase of property, plant and equipment |
(156,136 | ) | (121,806 | ) | (34,330 | ) | ||||||
Proceeds from sale of property, plant and equipment |
3,790 | | 3,790 | |||||||||
Additions to contract costs |
(84,283 | ) | (65,001 | ) | (19,282 | ) | ||||||
Additions to intangible assets |
(137,621 | ) | (113,934 | ) | (23,687 | ) | ||||||
Net change in short-term investments and purchase of long-term investments |
34,214 | 11,160 | 23,054 | |||||||||
Cash used in investing activities |
(911,947 | ) | (388,507 | ) | (523,440 | ) |
The increase of $523.4 million in cash used in investing activities during the year ended September 30, 2022 was mainly due to business acquisitions, as well as more investments in computer equipment to support our growth and in our business solutions.
4.1.3. Cash Used in Financing Activities
For the year ended September 30, 2022, $1,591.1 million was used in financing activities while $1,782.5 million was used over the same period last year.
The following table provides a summary of the use of cash from financing activities:
For the year ended September 30, | 2022 | 2021 | Change | |||||||||
In thousands of CAD |
||||||||||||
Increase of long-term debt |
| 1,885,262 | (1,885,262 | ) | ||||||||
Repayment of long-term debt |
(401,654 | ) | (1,888,777 | ) | 1,487,123 | |||||||
Settlement of derivative financial instruments |
6,258 | (6,992 | ) | 13,250 | ||||||||
Payment of lease liabilities |
(153,996 | ) | (169,674 | ) | 15,678 | |||||||
Repayment of debt assumed from business acquisitions |
(113,036 | ) | | (113,036 | ) | |||||||
Purchase of Class A subordinate voting shares held in trusts |
(70,303 | ) | (31,404 | ) | (38,899 | ) | ||||||
Purchase and cancellation of Class A subordinate voting shares |
(913,388 | ) | (1,502,824 | ) | 589,436 | |||||||
Issuance of Class A subordinate voting shares |
41,691 | 61,133 | (19,442 | ) | ||||||||
Net change in clients funds obligation |
13,330 | (129,221 | ) | 142,551 | ||||||||
Cash used in financing activities |
(1,591,098 | ) | (1,782,497 | ) | 191,399 |
For the year ended September 30, 2022, we repaid $401.7 million of our long-term debt, mainly driven by the scheduled repayments of senior unsecured notes in the amount of $384.6 million (US$300.0 million). In addition, we paid $154.0 million of lease liabilities and used $113.0 million to repay debt assumed from business acquisitions. For the year ended September 30, 2021, we increased our long-term debt by $1,885.3 million, mainly driven by the issuance of senior unsecured notes for the amount of $1,847.3 million and repaid $1,888.8 million of our long-term debt mainly driven by the repayment in full of the 2020 Term Loan in the amount of $1,583.5 million (US$1,250.0 million), and the scheduled repayments of senior unsecured notes in the amount of $259.7 million. We also paid $169.7 million of lease liabilities.
For the year ended September 30, 2022, $70.3 million was used to purchase Class A Shares in connection with the Performance Share Unit Plans (PSU Plans) compared to $31.4 million during the year ended September 30, 2021. More
© 2022 CGI Inc. | Page 29 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
information concerning the PSU Plans can be found in note 20 of the Companys audited consolidated financial statements for the year ended September 30, 2022 and 2021.
For the year ended September 30, 2022, $913.4 million was used for the purchase for cancellation of 8,809,839 Class A Shares, compared to $1,502.8 million for the purchase for cancellation of 15,310,465 Class A Shares over the same period last year.
For the year ended September 30, 2022, we received $41.7 million in proceeds from the exercise of stock options, compared to $61.1 million during the year ended September 30, 2021.
In addition, for the year ended September 30, 2022, the increase in net change in clients funds obligation of $13.0 million and the decrease of $129.2 million for the year ended September 30, 2021 was due to the timing of inflows from our clients and related payments to our clients employees and other payees.
4.1.4. Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents
For the year ended September 30, 2022, the effect of foreign exchange rate changes on cash and cash equivalents had an unfavourable impact of $46.5 million. This amount had no effect on net earnings as it was recorded in other comprehensive income.
As at September 30, 2022
|
Available
|
|||
In thousands of CAD |
||||
Cash and cash equivalents |
966,458 | |||
Short-term investments |
6,184 | |||
Long-term investments |
16,826 | |||
Unsecured committed revolving credit facility1 |
1,495,730 | |||
Total2 |
2,485,198 |
1 | As at September 30, 2022, letters of credit in the amount of $4.3 million were outstanding against the $1.5 billion unsecured committed revolving credit facility. |
2 | Excludes cash and long-term bonds included in funds held for clients for $504.7 million and $94.1 million, respectively. |
As at September 30, 2022, cash and cash equivalents and investments represented $989.5 million.
Cash equivalents include term deposits, all with maturities of 90 days or less. 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, 2022, the aggregate amount of the capital resources available to the Company was $2,485.2 million. Certain long-term debt agreements contain covenants, which require us to maintain certain financial ratios. As at September 30, 2022, CGI was in compliance with these covenants.
Total debt decreased by $134.7 million to $3,267.0 million as at September 30, 2022 compared to $3,401.7 million as at September 30, 2021. The variance was mainly due to the scheduled repayments of senior unsecured notes in the amount of $384.6 million (US$300.0 million), partially offset by a foreign exchange translation impact of $207.6 million and debt assumed from business acquisitions for $36.0 million. On November 1, 2022, the unsecured committed revolving credit facility was extended by one year to November 2027 and can be further extended. There were no material changes in the terms and conditions including interest rates and banking covenants.
As at September 30, 2022, CGI was showing a positive working capital (total current assets minus total current liabilities) of $699.7 million. The Company also had $1,495.7 million available under its unsecured committed revolving credit facility and is generating a significant level of cash, which CGIs 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 Companys liquidity.
© 2022 CGI Inc. | Page 30 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
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 |
3,267,034 | 93,447 | 1,178,103 | 863,125 | 1,132,359 | |||||||||||||||
Estimated interest on long-term debt |
313,496 | 87,287 | 100,508 | 62,479 | 63,222 | |||||||||||||||
Lease liabilities |
709,201 | 157,944 | 254,219 | 146,694 | 150,344 | |||||||||||||||
Estimated interest on lease liabilities |
99,244 | 24,871 | 40,798 | 20,154 | 13,421 | |||||||||||||||
Long-term service agreements |
250,049 | 146,662 | 83,065 | 20,322 | | |||||||||||||||
Total1 | 4,639,024 | 510,211 | 1,656,693 | 1,112,774 | 1,359,346 |
1 | Excludes Clients funds obligations for an amount of $604.4 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. Please refer to note 31 of our audited consolidated financial statements for additional information on our financial instruments and hedging transactions.
© 2022 CGI Inc. | Page 31 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
4.5. SELECTED MEASURES OF CAPITAL RESOURCES AND LIQUIDITY
As at September 30, | 2022 | 2021 | ||||||
In thousands of CAD except for percentages |
| |||||||
Reconciliation between net debt and long-term debt and lease liabilities1: |
||||||||
Net debt |
2,946,908 | 2,535,861 | ||||||
Add back: |
||||||||
Cash and cash equivalents |
966,458 | 1,699,206 | ||||||
Short-term investments |
6,184 | 1,027 | ||||||
Long-term investments |
16,826 | 19,354 | ||||||
Fair value of foreign currency derivative financial instruments related to debt |
39,859 | (76,852) | ||||||
Long-term debt and lease liabilities 1 |
3,976,235 | 4,178,596 | ||||||
Net debt to capitalization ratio |
28.8 | % | 26.6 | % | ||||
Return on equity |
20.9 | % | 19.8 | % | ||||
Return on invested capital |
15.7 | % | 14.9 | % | ||||
Days sales outstanding |
49 | 45 |
1 | As at September 30, 2022, long-term debt and lease liabilities were $3,267.0 million ($3,401.7 million as at September 30, 2021) and $709.2 million ($776.9 million as at September 30, 2021), respectively, including their current portions. |
We use the net debt to capitalization ratio as an indication of our financial leverage in order to realize our Build and Buy strategy (please refer to section 1.2. of the present document for additional information on our Build and Buy strategy). The net debt to capitalization ratio increased to 28.8% in Fiscal 2022 from 26.6% in Fiscal 2021 mostly due by the repurchase of shares and investments in our business acquisitions, partially offset by our cash generation during the last four quarters.
ROE is a measure of the return we are generating for our shareholders. ROE increased to 20.9% in Fiscal 2022 from 19.8% in Fiscal 2021. The increase was mainly due to higher net earnings and, to a lesser extent, the impact of repurchased shares and the impact of translating financial statements of our foreign operations over the last four quarters.
ROIC is a measure of the Companys efficiency in allocating the capital under our control to profitable investments. The return on invested capital ratio increased to 15.7% in Fiscal 2022 from 14.9% in Fiscal 2021. The increase in ROIC was mainly the result of higher net earnings excluding net finance costs after-tax over the last four quarters.
DSO increased to 49 days at the end of Fiscal 2022 when compared to 45 days in Fiscal 2021. This increase is mainly due to the impacts from recent acquisitions which are in the process of being integrated and foreign exchange fluctuations. The Company maintains a target DSO of 45 days.
© 2022 CGI Inc. | Page 32 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
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, representations and warranties, intellectual property right infringement 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. 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 indemnification as at September 30, 2022. The Company does not expect to incur any potential payment in connection with these guarantees that could have a materially 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, 2022, we had committed a total of $19.3 million for these bonds. To the best of our knowledge, we complied with our performance obligations under all service contracts for which there was a bid or performance bond, 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
CGIs 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 2023.
To successfully implement the Companys strategy, CGI relies on a strong leadership team, supported by highly knowledgeable members 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, our professionals and their knowledge 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 Companys 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. CGIs operations maintain appropriate certifications in accordance with service requirements such as ISO and CMMI certification programs.
© 2022 CGI Inc. | Page 33 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
5. | Fourth Quarter Results |
5.1. BOOKINGS AND BOOK-TO-BILL RATIO
Bookings for the quarter ended September 30, 2022 were $3.6 billion representing a book-to-bill ratio of 112.0%. The breakdown of the new bookings signed during the quarter is as follows:
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, 2022 |
Bookings for the year ended September 30, 2022 |
Book-to-bill
ratio for the year ended September 30, 2022 |
|||||||||
Total CGI |
3,636,495 | 13,966,006 | 108.5 | % | ||||||||
U.S. Commercial and State Government |
754,996 | 2,616,594 | 117.4 | % | ||||||||
Canada |
569,124 | 2,059,809 | 95.4 | % | ||||||||
U.S. Federal |
561,208 | 1,660,086 | 94.3 | % | ||||||||
U.K. and Australia |
522,645 | 1,936,503 | 131.8 | % | ||||||||
Western and Southern Europe |
515,637 | 2,061,984 | 97.5 | % | ||||||||
Scandinavia and Central Europe |
340,914 | 1,636,137 | 99.5 | % | ||||||||
Finland, Poland and Baltics |
201,967 | 1,265,038 | 165.9 | % | ||||||||
Northwest and Central-East Europe |
170,004 | 729,855 | 100.4 | % |
© 2022 CGI Inc. | Page 34 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
The Company operates globally and is exposed to changes in foreign currency rates. Accordingly, as prescribed by IFRS, we value 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, |
2022 |
2021 |
Change |
|||||||||
U.S. dollar |
|
1.3756 |
|
|
1.2676 |
|
|
8.5% |
| |||
Euro |
|
1.3454 |
|
|
1.4678 |
|
|
(8.3%) |
| |||
Indian rupee |
|
0.0169 |
|
|
0.0171 |
|
|
(1.2%) |
| |||
British pound |
|
1.5310 |
|
|
1.7075 |
|
|
(10.3%) |
| |||
Swedish krona |
|
0.1236 |
|
|
0.1447 |
|
|
(14.6%) |
|
Average foreign exchange rates
For the three months ended September 30, |
2022 |
2021 |
Change |
|||||||||
U.S. dollar |
|
1.3061 |
|
|
1.2598 |
|
|
3.7% |
| |||
Euro |
|
1.3147 |
|
|
1.4848 |
|
|
(11.5%) |
| |||
Indian rupee |
|
0.0164 |
|
|
0.0170 |
|
|
(3.5%) |
| |||
British pound |
|
1.5360 |
|
|
1.7360 |
|
|
(11.5%) |
| |||
Swedish krona |
|
0.1238 |
|
|
0.1457 |
|
|
(15.0%) |
|
© 2022 CGI Inc. | Page 35 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
The following charts provide additional information regarding our revenue mix for the quarter ended September 30, 2022:
5.3.1. Client Concentration
IFRS 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 14.1% of our revenue for Q4 2022 as compared to 13.1% for Q4 2021.
© 2022 CGI Inc. | Page 36 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
The following table provides a summary of the year-over-year changes in our revenue, in total and by segment, separately showing the impacts of foreign currency exchange rate variations between the Q4 2022 and Q4 2021 periods. The Q4 2021 revenue by segment was recorded reflecting the actual average foreign exchange rates for that period. The foreign exchange impact is the difference between the current periods actual results and the current periods results converted with the prior years average foreign exchange rates.
For the three months ended September 30, | Change | |||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
In thousands of CAD except for percentages |
||||||||||||||||
Total CGI revenue |
3,247,221 | 3,007,458 | 239,763 | 8.0 % | ||||||||||||
Variation prior to foreign currency impact |
13.9 | % | ||||||||||||||
Foreign currency impact |
(5.9 | %) | ||||||||||||||
Variation over previous period |
8.0 | % | ||||||||||||||
Western and Southern Europe |
||||||||||||||||
Revenue prior to foreign currency impact |
618,905 | 458,617 | 160,288 | 35.0 % | ||||||||||||
Foreign currency impact |
(71,389 | ) | ||||||||||||||
Western and Southern Europe revenue |
547,516 | 458,617 | 88,899 | 19.4 % | ||||||||||||
U.S. Commercial and State Government |
||||||||||||||||
Revenue prior to foreign currency impact |
538,660 | 485,748 | 52,912 | 10.9 % | ||||||||||||
Foreign currency impact |
18,501 | |||||||||||||||
U.S. Commercial and State Government revenue |
557,161 | 485,748 | 71,413 | 14.7 % | ||||||||||||
Canada |
||||||||||||||||
Revenue prior to foreign currency impact |
496,429 | 438,619 | 57,810 | 13.2 % | ||||||||||||
Foreign currency impact |
(380 | ) | ||||||||||||||
Canada revenue |
496,049 | 438,619 | 57,430 | 13.1 % | ||||||||||||
U.S. Federal |
||||||||||||||||
Revenue prior to foreign currency impact |
446,750 | 407,704 | 39,046 | 9.6 % | ||||||||||||
Foreign currency impact |
16,344 | |||||||||||||||
U.S. Federal revenue |
463,094 | 407,704 | 55,390 | 13.6 % | ||||||||||||
Scandinavia and Central Europe |
||||||||||||||||
Revenue prior to foreign currency impact |
419,546 | 382,838 | 36,708 | 9.6 % | ||||||||||||
Foreign currency impact |
(54,143 | ) | ||||||||||||||
Scandinavia and Central Europe revenue |
365,403 | 382,838 | (17,435) | (4.6%) | ||||||||||||
U.K. and Australia |
||||||||||||||||
Revenue prior to foreign currency impact |
373,978 | 353,005 | 20,973 | 5.9 % | ||||||||||||
Foreign currency impact |
(42,535 | ) | ||||||||||||||
U.K. and Australia revenue |
331,443 | 353,005 | (21,562) | (6.1)% | ||||||||||||
Finland, Poland and Baltics |
||||||||||||||||
Revenue prior to foreign currency impact |
186,363 | 174,471 | 11,892 | 6.8% | ||||||||||||
Foreign currency impact |
(21,887 | ) | ||||||||||||||
Finland, Poland and Baltics revenue |
164,476 | 174,471 | (9,995) | (5.7%) | ||||||||||||
Northwest and Central-East Europe |
||||||||||||||||
Revenue prior to foreign currency impact |
175,331 | 171,546 | 3,785 | 2.2 % | ||||||||||||
Foreign currency impact |
(19,577 | ) | ||||||||||||||
Northwest and Central-East Europe revenue |
155,754 | 171,546 | (15,792 | ) | (9.2)% |
© 2022 CGI Inc. | Page 37 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
For the three months ended September 30, |
Change | |||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
In thousands of CAD except for percentages | ||||||||||||||||
Asia Pacific |
||||||||||||||||
Revenue prior to foreign currency impact | 223,362 | 182,007 | 41,355 | 22.7% | ||||||||||||
Foreign currency impact | (9,049 | ) | ||||||||||||||
Asia Pacific revenue |
214,313 | 182,007 | 32,306 | 17.7% | ||||||||||||
|
| |||||||||||||||
Eliminations |
(47,988 | ) | (47,097 | ) | (891 | ) | 1.9% |
We ended the fourth quarter of Fiscal 2022 with revenue of $3,247.2 million, an increase of $239.8 million, or 8.0% when compared to the same period of Fiscal 2021. On a constant currency basis, revenue increased by $417.7 million or 13.9%. Foreign currency rate fluctuations unfavourably impacted our revenue by $177.9 million or 5.9%. The increase was mainly due to organic growth across all vertical markets, as well as the business acquisitions.
5.4.1. Western and Southern Europe
Revenue in our Western and Southern Europe segment was $547.5 million in Q4 2022, an increase of $88.9 million or 19.4% over the same period last year. On a constant currency basis, revenue increased by $160.3 million or 35.0%. The increase in revenue was mainly due to the recent business acquisitions, as well as the result of organic growth across all vertical markets, predominantly within MRD.
On a client geographic basis, the top two Western and Southern Europe vertical markets were MRD and financial services, generating combined revenues of approximately $342 million for the three months ended September 30, 2022.
5.4.2. U.S. Commercial and State Government
Revenue from our U.S. Commercial and State Government segment was $557.2 million in Q4 2022, an increase of $71.4 million or 14.7% compared to the same period last year. On a constant currency basis, revenue increased by $52.9 million or 10.9%. The increase in revenue was mainly the result of organic growth across all vertical markets, predominantly within financial services with additional IP solutions, government and health.
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 $357 million for the three months ended September 30, 2022.
5.4.3. Canada
Revenue in our Canada segment was $496.0 million in Q4 2022, an increase of $57.4 million or 13.1% over the same period last year. On a constant currency basis, revenue increased by $57.8 million or 13.2%. The increase was due to organic growth across all vertical markets, mainly in financial services including an increase in IP services.
On a client geographic basis, the top two Canada vertical markets were financial services and communications and utilities, generating combined revenues of approximately $355 million for the three months ended September 30, 2022.
5.4.4. U.S. Federal
Revenue in our U.S. Federal segment was $463.1 million in Q4 2022, an increase of $55.4 million or 13.6% over the same period last year. On a constant currency basis, revenue increased by $39.0 million or 9.6%. The increase in revenue was mainly due to managed services expansion, higher transaction volumes related to our IP business process services, and the Array acquisition. This was partially offset by the successful completion of projects and an adjustment due to a reevaluation of cost to complete on a project.
For the three months ended September 30, 2022, 90% of revenues within the U.S. Federal segment were federal civilian based.
© 2022 CGI Inc. | Page 38 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
5.4.5. Scandinavia and Central Europe
Revenue in our Scandinavia and Central Europe segment was $365.4 million, a decrease of $17.4 million or 4.6% over the same period last year. On a constant currency basis, revenue increased by $36.7 million or 9.6%. The increase was mainly driven by the organic growth within the MRD and government vertical markets.
On a client geographic basis, the top two Scandinavia and Central Europe vertical markets were MRD and government, generating combined revenues of approximately $268 million for the three months ended September 30, 2022.
5.4.6. U.K. and Australia
Revenue in our U.K. and Australia segment was $331.4 million in Q4 2022, a decrease of $21.6 million or 6.1% over the same period last year. On a constant currency basis, revenue increased by $21.0 million or 5.9%. The increase in revenue was due to organic growth within the communications and utilities and government vertical markets and the Unico acquisition. This was in part offset by the successful completion and related ramp down of projects within the MRD 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 approximately $264 million for the three months ended September 30, 2022.
5.4.7. Finland, Poland and Baltics
Revenue in our Finland, Poland and Baltics segment was $164.5 million in Q4 2022, a decrease of $10.0 million or 5.7% over the same period last year. On a constant currency basis, revenue increased by $11.9 million or 6.8%. The increase was mainly due to higher transaction volumes and related IP services in the government vertical market.
On a client geographic basis, the top two Finland, Poland and Baltics vertical markets were government and financial services, generating combined revenues of approximately $104 million for the three months ended September 30, 2022.
5.4.8. Northwest and Central-East Europe
Revenue in our Northwest and Central-East Europe segment was $155.8 million in Q4 2022, a decrease of $15.8 million or 9.2% over the same period last year. On a constant currency basis, revenue increased by $3.8 million or 2.2%. The increase in revenue was primarily due to the organic growth mainly within the MRD, financial services, including IP services, and government vertical markets. This was in part offset by successful projects completion within the health vertical market.
On a client geographic basis, the top two Northwest and Central-East Europe vertical markets were MRD and government, generating combined revenues of approximately $107 million for the three months ended September 30, 2022.
5.4.9. Asia Pacific
Revenue in our Asia Pacific segment was $214.3 million, an increase of $32.3 million or 17.7% over the same period last year. On a constant currency basis, revenue increased by $41.4 million or 22.7%. The increase was mainly driven by the continued demand for our offshore delivery centers, predominantly within the financial services, communications and utilities, and MRD vertical markets.
© 2022 CGI Inc. | Page 39 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
Change | ||||||||||||||||
For the three months ended September 30, | ||||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
In thousands of CAD except for percentages |
||||||||||||||||
Western and Southern Europe |
55,913 | 64,170 | (8,257 | ) | (12.9 | %) | ||||||||||
As a percentage of segment revenue |
10.2 | % | 14.0 | % | ||||||||||||
U.S. Commercial and State Government |
85,376 | 78,323 | 7,053 | 9.0 | % | |||||||||||
As a percentage of segment revenue |
15.3 | % | 16.1 | % | ||||||||||||
Canada |
122,088 | 91,654 | 30,434 | 33.2 | % | |||||||||||
As a percentage of segment revenue |
24.6 | % | 20.9 | % | ||||||||||||
U.S. Federal |
67,999 | 69,365 | (1,366 | ) | (2.0 | %) | ||||||||||
As a percentage of segment revenue |
14.7 | % | 17.0 | % | ||||||||||||
Scandinavia and Central Europe |
30,729 | 33,920 | (3,191 | ) | (9.4 | %) | ||||||||||
As a percentage of segment revenue |
8.4 | % | 8.9 | % | ||||||||||||
U.K. and Australia |
53,163 | 55,090 | (1,927 | ) | (3.5 | %) | ||||||||||
As a percentage of segment revenue |
16.0 | % | 15.6 | % | ||||||||||||
Finland, Poland and Baltics |
26,136 | 29,310 | (3,174 | ) | (10.8 | %) | ||||||||||
As a percentage of segment revenue |
15.9 | % | 16.8 | % | ||||||||||||
Northwest and Central-East Europe |
19,095 | 20,441 | (1,346 | ) | (6.6 | %) | ||||||||||
As a percentage of segment revenue |
12.3 | % | 11.9 | % | ||||||||||||
Asia Pacific |
61,197 | 51,067 | 10,130 | 19.8 | % | |||||||||||
As a percentage of segment revenue |
28.6 | % | 28.1 | % | ||||||||||||
Adjusted EBIT |
521,696 | 493,340 | 28,356 | 5.7 | % | |||||||||||
Adjusted EBIT margin |
16.1 | % | 16.4 | % |
Adjusted EBIT for the quarter was $521.7 million, an increase of $28.4 million from Q4 2021. The adjusted EBIT margin decreased to 16.1% from 16.4% for the same period last year. The decrease was mainly due to the temporary dilutive impact of the recent acquisitions, the costs of assimilating new hires and the expected increase of travel costs in support of business development. This was partly offset by growth primarily in the government and financial services vertical markets.
5.5.1. Western and Southern Europe
Adjusted EBIT in the Western and Southern Europe segment was $55.9 million in Q4 2022, a decrease of $8.3 million when compared to Q4 2021. Adjusted EBIT margin decreased to 10.2% from 14.0% in Q4 2021. The change in adjusted EBIT margin was primarily due to the temporary dilutive impact of the recent business acquisitions which are in the process of being integrated to achieve planned synergies, one less billable day, and additional tax credits in the prior year.
5.5.2. U.S. Commercial and State Government
Adjusted EBIT in the U.S. Commercial and State Government segment was $85.4 million in Q4 2022, an increase of $7.1 million when compared to Q4 2021. Adjusted EBIT margin decreased to 15.3% from 16.1% in Q4 2021. The change in adjusted EBIT was mainly due to costs of assimilating new hires in response to high demand.
5.5.3. Canada
Adjusted EBIT in the Canada segment was $122.1 million in Q4 2022, an increase of $30.4 million when compared to Q4 2021. Adjusted EBIT margin increased to 24.6% from 20.9% in Q4 2021. The increase was mainly due to organic growth across all vertical markets, mainly in financial services, including an increase in IP services and lower tax credits in the prior year.
© 2022 CGI Inc. | Page 40 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
5.5.4. U.S. Federal
Adjusted EBIT in the U.S. Federal segment was $68.0 million in Q4 2022, a decrease of $1.4 million when compared to Q4 2021. Adjusted EBIT margin decreased to 14.7% from 17.0% in Q4 2021. The decrease in adjusted EBIT margin was primarily due to higher performance based compensation, which was in part offset by higher transaction volumes related to our IP business process services and managed services expansion.
5.5.5. Scandinavia and Central Europe
Adjusted EBIT in the Scandinavia and Central Europe segment was $30.7 million in Q4 2022, a decrease of $3.2 million when compared to Q4 2021. Adjusted EBIT margin decreased to 8.4% from 8.9% in Q4 2021. The decrease was mainly due to the optimization of our infrastructure business, partly offset by the organic growth primarily in MRD and government vertical markets.
5.5.6. U.K. and Australia
Adjusted EBIT in the U.K. and Australia segment was $53.2 million in Q4 2022, a decrease of $1.9 million when compared to Q4 2021. Adjusted EBIT margin increased to 16.0% from 15.6% in Q4 2021. The increase in adjusted EBIT margin was driven by the favourable impact of a client resolution in the prior year and to higher billable utilization within the government and communications and utilities vertical markets. This was in part offset by the successful completion of projects within the MRD vertical market and a dilutive impact of the Unico acquisition, which is in the process of being integrated to achieve its planned synergies.
5.5.7. Finland, Poland and Baltics
Adjusted EBIT in our Finland, Poland and Baltics segment was $26.1 million Q4 2022, a decrease of $3.2 million, when compared to the same period last year. Adjusted EBIT margin decreased to 15.9% from 16.8% mainly due to temporary lower billable utilization related to the onboarding of new hires primarily associated with the start up of a large new managed IT services. This was partially offset to higher transaction volumes and related IP services in the government vertical market.
5.5.8. Northwest and Central-East Europe
Adjusted EBIT in the Northwest and Central-East Europe segment was $19.1 million in Q4 2022, a decrease of $1.3 million when compared to Q4 2021. Adjusted EBIT margin increased to 12.3% from 11.9% in Q4 2021 due to the same factors as revenue.
5.5.9. Asia Pacific
Adjusted EBIT in the Asia Pacific segment was $61.2 million in Q4 2022, an increase of $10.1 million when compared to Q4 2021. Adjusted EBIT margin increased to 28.6% from 28.1% Q4 2021. The increase was mainly due to higher demand for our offshore delivery centers, predominantly within the financial services, communications and utilities, and MRD vertical markets, partially offset by the costs of assimilating new hires.
© 2022 CGI Inc. | Page 41 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
5.6. NET EARNINGS AND EARNINGS PER SHARE
The following table sets out the information supporting the earnings per share calculations:
Change | ||||||||||||||||
For the three months ended September 30, | ||||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
In thousands of CAD except for percentage and shares data |
||||||||||||||||
Adjusted EBIT |
521,696 | 493,340 | 28,356 | 5.7% | ||||||||||||
Minus the following items: |
||||||||||||||||
Acquisition-related and integration costs |
14,775 | 1,169 | 13,606 | 1,163.9% | ||||||||||||
Net finance costs |
21,019 | 27,733 | (6,714 | ) | (24.2%) | |||||||||||
Earnings before income taxes |
485,902 | 464,438 | 21,464 | 4.6 % | ||||||||||||
Income tax expense |
123,540 | 118,504 | 5,036 | 4.2% | ||||||||||||
Effective tax rate |
25.4 % | 25.5 % | ||||||||||||||
Net earnings |
362,362 | 345,934 | 16,428 | 4.7 % | ||||||||||||
Margin |
11.2 % | 11.5 % | ||||||||||||||
Weighted average number of shares |
||||||||||||||||
Class A subordinate voting shares and Class B multiple voting shares (basic) |
236,360,510 | 244,068,210 | (3.2%) | |||||||||||||
Class A subordinate voting shares and Class B multiple voting shares (diluted) |
239,891,696 | 248,208,258 | (3.4%) | |||||||||||||
Earnings per share (in dollars) |
||||||||||||||||
Basic EPS |
1.53 | 1.42 | 0.11 | 7.7 % | ||||||||||||
Diluted EPS |
1.51 | 1.39 | 0.12 | 8.6 % |
For the three months ended September 30, 2022, the income tax expense was $123.5 million compared to $118.5 million over the same period last year, while our effective tax rate decreased to 25.4% from 25.5%. The decrease in the income tax rate was mainly attributable to the tax rate decrease in France, partly offset by a different profitability mix in certain geographies.
For Q4 2022, CGIs basic and diluted weighted average number of shares decreased compared to Q4 2021 due to the impact of the purchase for cancellation of Class A Shares during the year. This was partly offset by the exercise of stock options during the year.
© 2022 CGI Inc. | Page 42 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
5.6.1. 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 :
Change | ||||||||||||||||
For the three months ended September 30, | ||||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
In thousands of CAD except for percentage and shares data |
||||||||||||||||
Earnings before income taxes |
485,902 | 464,438 | 21,464 | 4.6 | % | |||||||||||
Add back: |
||||||||||||||||
Acquisition-related and integration costs |
14,775 | 1,169 | 13,606 | 1,163.9 | % | |||||||||||
Earnings before income taxes excluding specific items |
500,677 | 465,607 | 35,070 | 7.5 | % | |||||||||||
Income tax expense |
123,540 | 118,504 | 5,036 | 4.2 | % | |||||||||||
Effective tax rate |
25.4 | % | 25.5 | % | ||||||||||||
Add back: |
||||||||||||||||
Tax deduction on acquisition-related and integration costs |
4,082 | 240 | 3,842 | 1,600.8 | % | |||||||||||
Impact on effective tax rate |
0.1 | % | | % | ||||||||||||
Income tax expense excluding specific items |
127,622 | 118,744 | 8,878 | 7.5 | % | |||||||||||
Effective tax rate excluding specific items |
25.5 | % | 25.5 | % | ||||||||||||
Net earnings excluding specific items |
373,055 | 346,863 | 26,192 | 7.6 | % | |||||||||||
Net earnings excluding specific items margin |
11.5 | % | 11.5 | % | ||||||||||||
Weighted average number of shares outstanding |
||||||||||||||||
Class A subordinate voting shares and Class B multiple voting shares (basic) |
236,360,510 | 244,068,210 | (3.2 | %) | ||||||||||||
Class A subordinate voting shares and Class B multiple voting shares (diluted) |
239,891,696 | 248,208,258 | (3.4 | %) | ||||||||||||
Earnings per share excluding specific items (in dollars) |
||||||||||||||||
Basic EPS |
1.58 | 1.42 | 0.16 | 11.3 | % | |||||||||||
Diluted EPS |
1.56 | 1.40 | 0.16 | 11.4 | % |
© 2022 CGI Inc. | Page 43 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
5.7. CONSOLIDATED STATEMENTS OF CASH FLOWS
As at September 30, 2022, cash and cash equivalents were $966.5 million. Cash included in funds held for clients was $504.7 million. The following table provides a summary of the generation and use of cash and cash equivalents for the quarters ended September 30, 2022 and 2021.
For the three months ended September 30, | 2022 | 2021 | Change | |||||||||
In thousands of CAD | ||||||||||||
Cash provided by operating activities | 488,861 | 526,934 | (38,073 | ) | ||||||||
Cash used in investing activities | (87,111 | ) | (80,448 | ) | (6,663 | ) | ||||||
Cash used in financing activities | (314,995 | ) | (69,132 | ) | (245,863 | ) | ||||||
Effect of foreign exchange rate changes on cash and cash equivalents | 29,151 | 15,468 | 13,683 | |||||||||
Net increase in cash, cash equivalents and cash included in funds held for clients | 115,906 | 392,822 | (276,916 | ) |
5.7.1. Cash Provided by Operating Activities
For Q4 2022, cash provided by operating activities was $488.9 million compared to $526.9 million in Q4 2021, or 15.1% of revenue compared to 17.5% last year.
The following table provides a summary of the generation and use of cash from operating activities.
For the three months ended September 30, | 2022 | 2021 | Change | |||||||||
In thousands of CAD | ||||||||||||
Net earnings | 362,362 | 345,934 | 16,428 | |||||||||
Amortization, depreciation and impairment | 121,020 | 127,619 | (6,599) | |||||||||
Other adjustments 1 | 12,472 | 23,620 | (11,148) | |||||||||
|
|
|
|
|
|
|||||||
Cash flow from operating activities before net change in non-cash working capital items | 495,854 | 497,173 | (1,319) | |||||||||
Net change in non-cash working capital items: | ||||||||||||
Accounts receivable, work in progress and deferred revenue |
16,151 | (22,756) | 38,907 | |||||||||
Accounts payable and accrued liabilities, accrued compensation and employee-related liabilities, provisions and long-term liabilities |
(12,985) | 24,921 | (37,906) | |||||||||
Other 2 |
(10,159) | 27,596 | (37,755) | |||||||||
|
|
|
|
|
|
|||||||
Net change in non-cash working capital items | (6,993) | 29,761 | (36,754) | |||||||||
Cash provided by operating activities | 488,861 | 526,934 | (38,073) |
1 | Comprised of deferred income taxes (recovery) expense, foreign exchange loss, gain on lease terminations and sale of property, plant and equipment, share-based payment costs. |
2 | Comprised of prepaid expenses and other assets, long-term financial assets, retirement benefits obligations, derivative financial instruments and income taxes. |
For the three months ended September 30, 2022, cash provided by operating activities was $488.9 million, down $38.1 million for the same period last year due mainly from the net change in non-cash working capital items. The net change in non-cash working capital items of $7.0 million for fiscal 2022 was mostly due to the decrease related to accrued vacation and income tax payments. This was partially offset by the performance-based compensation to our members.
The timing of our working capital inflows and outflows will always have an impact on the cash flow from operations.
© 2022 CGI Inc. | Page 44 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
5.7.2. Cash Used in Investing Activities
For Q4 2022, $87.1 million was used in investing activities while $80.4 million was used in the prior year.
The following table provides a summary of the generation and use of cash from investing activities:
For the three months ended September 30, | 2022 | 2021 | Change | |||||||||
In thousands of CAD | ||||||||||||
Business acquisitions | 496 | (4,496) | 4,992 | |||||||||
Purchase of property, plant and equipment | (38,243) | (31,992) | (6,251) | |||||||||
Additions to contract costs | (23,990) | (15,201) | (8,789) | |||||||||
Additions to intangible assets | (40,750) | (28,636) | (12,114) | |||||||||
Net change in short-term investments and purchase of long-term investments | 15,376 | (123) | 15,499 | |||||||||
Cash used in investing activities | (87,111) | (80,448) | (6,663) |
The increase of $6.7 million in cash used in investing activities during the three months ended September 30, 2022 was mainly due to higher investment in our business solutions, contract costs as well as computer equipment to support our growth.
5.7.3. Cash Used in Financing Activities
For the three months ended September 30, | 2022 | 2021 | Change | |||||||||
In thousands of CAD | ||||||||||||
Increase of long-term debt | | 1,851,997 | (1,851,997) | |||||||||
Repayment of long-term debt | (67,467) | (1,845,702) | 1,778,235 | |||||||||
Settlement of derivative financial instruments | 6,258 | (6,992) | 13,250 | |||||||||
Payment of lease liabilities | (41,074) | (38,845) | (2,229) | |||||||||
Repayment of debt assumed in a business acquisition | (4,120) | | (4,120) | |||||||||
Purchase and cancellation of Class A subordinate voting shares | (132,923) | | (132,923) | |||||||||
Issuance of Class A subordinate voting shares | 11,775 | 9,498 | 2,277 | |||||||||
Net change in clients funds obligation | (87,444) | (39,088) | (48,356) | |||||||||
Cash used in financing activities | (314,995) | (69,132) | (245,863) |
During Q4 2022, we repaid $67.5 million of our long-term debt mainly due to scheduled repayment of the senior unsecured notes in the amount of $64.9 million (US$50.0 million). In addition, we paid $41.1 million of lease liabilities. During Q4 2021, we increased by $1,852.0 million our long-term debt mainly driven by the issuance of senior unsecured notes for an amount of $1,847.3 million and repaid $1,845.7 million of our long-term debt mainly due by the repayment in full of the 2020 Term Loan in the amount of $1,583.5 million (US$1,250.0 million), and the scheduled repayments of senior unsecured notes in the amount of $259.7 million. We also paid $38.8 million of lease liabilities.
During Q4 2022, $132.9 million was used for the purchase for cancellation of 1,260,114 Class A Shares while for the same period last year, we did not purchase Class A Shares for cancellation.
In Q4 2022, we received $11.8 million in proceeds from the exercise of stock options, compared to $9.5 million during the same period last year.
In addition, during Q4 2022, the decrease in net change in clients funds obligation of $87.4 million and $39.1 million was due to the timing of inflows from our clients and related payments to our clients employees and other payees.
© 2022 CGI Inc. | Page 45 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
6. | Eight Quarter Summary |
As at and for the three months ended
|
Sep. 30,
|
Jun. 30,
|
Mar. 31,
|
Dec. 31,
|
Sep. 30,
|
Jun. 30,
|
Mar. 31,
|
Dec. 31,
|
||||||||||||||||||||||||
In millions of CAD unless otherwise noted |
||||||||||||||||||||||||||||||||
Growth |
||||||||||||||||||||||||||||||||
Revenue |
3,247.2 | 3,258.6 | 3,268.9 | 3,092.4 | 3,007.5 | 3,021.4 | 3,078.5 | 3,019.4 | ||||||||||||||||||||||||
Year-over-year revenue growth |
8.0% | 7.9% | 6.2% | 2.4% | 2.8% | (1.0%) | (1.7%) | (1.2%) | ||||||||||||||||||||||||
Constant currency year-over-year revenue growth |
13.9% | 11.5% | 10.0% | 6.8% | 6.4% | 3.5% | (1.7%) | (3.6%) | ||||||||||||||||||||||||
Backlog |
24,055 | 23,238 | 23,144 | 23,577 | 23,059 | 23,345 | 23,094 | 22,769 | ||||||||||||||||||||||||
Bookings |
3,636 | 3,410 | 3,316 | 3,604 | 2,921 | 3,634 | 3,892 | 3,397 | ||||||||||||||||||||||||
Book-to-bill ratio |
112.0% | 104.7% | 101.4% | 116.5% | 97.1% | 120.3% | 126.4% | 112.5% | ||||||||||||||||||||||||
Book-to-bill ratio trailing twelve months |
108.5% | 104.9% | 108.7% | 115.2% | 114.2% | 119.5% | 112.6% | 103.0% | ||||||||||||||||||||||||
Profitability |
||||||||||||||||||||||||||||||||
Adjusted EBIT1 |
521.7 | 519.9 | 523.6 | 521.5 | 493.3 | 476.8 | 486.3 | 495.7 | ||||||||||||||||||||||||
Adjusted EBIT margin |
16.1% | 16.0% | 16.0% | 16.9% | 16.4% | 15.8% | 15.8% | 16.4% | ||||||||||||||||||||||||
Net earnings |
362.4 | 364.3 | 372.0 | 367.4 | 345.9 | 338.5 | 341.2 | 343.5 | ||||||||||||||||||||||||
Net earnings margin |
11.2% | 11.2% | 11.4% | 11.9% | 11.5% | 11.2% | 11.1% | 11.4% | ||||||||||||||||||||||||
Diluted EPS (in dollars) |
1.51 | 1.51 | 1.53 | 1.49 | 1.39 | 1.36 | 1.34 | 1.32 | ||||||||||||||||||||||||
Net earnings excluding specific items1 |
373.1 | 371.2 | 374.1 | 369.4 | 346.9 | 339.0 | 341.9 | 347.2 | ||||||||||||||||||||||||
Net earnings margin excluding specific items |
11.5% | 11.4% | 11.4% | 11.9% | 11.5% | 11.2% | 11.1% | 11.5% | ||||||||||||||||||||||||
Diluted EPS excluding specific items (in dollars)1 |
1.56 | 1.54 | 1.53 | 1.50 | 1.40 | 1.36 | 1.35 | 1.33 | ||||||||||||||||||||||||
Liquidity |
||||||||||||||||||||||||||||||||
Cash provided by operating activities |
488.9 | 419.2 | 472.6 | 484.3 | 526.9 | 418.9 | 572.6 | 597.5 | ||||||||||||||||||||||||
As a % of revenue |
15.1% | 12.9% | 14.5% | 15.7% | 17.5% | 13.9% | 18.6% | 19.8% | ||||||||||||||||||||||||
Days sales outstanding |
49 | 48 | 42 | 45 | 45 | 44 | 39 | 44 | ||||||||||||||||||||||||
Capital structure |
||||||||||||||||||||||||||||||||
Net debt |
2,946.9 | 3,073.0 | 2,729.7 | 2,687.9 | 2,535.9 | 2,956.6 | 2,938.7 | 2,672.5 | ||||||||||||||||||||||||
Net debt to capitalization ratio |
28.8% | 30.6% | 28.7% | 27.8% | 26.6 % | 30.9 % | 30.9 % | 27.1 % | ||||||||||||||||||||||||
Return on equity |
20.9% | 21.1% | 21.0% | 20.3% | 19.8 % | 18.4 % | 17.2 % | 16.6 % | ||||||||||||||||||||||||
Return on invested capital |
15.7% | 15.8% | 15.7% | 15.3% | 14.9 % | 13.8 % | 12.8 % | 12.4 % | ||||||||||||||||||||||||
Balance sheet |
||||||||||||||||||||||||||||||||
Cash and cash equivalents, and short-term investments | 972.6 | 784.1 | 1,059.4 | 1,185.7 | 1,700.2 | 1,267.1 | 1,339.8 | 1,675.1 | ||||||||||||||||||||||||
Total assets |
15,175.4 | 14,916.4 | 14,475.7 | 14.704.9 | 15,021.0 | 14,599.3 | 14,719.9 | 15,271.0 | ||||||||||||||||||||||||
Long-term financial liabilities2 |
3,731.3 | 3,581.8 | 3,523.5 | 3,608.2 | 3,659.8 | 3,453.0 | 3,508.1 | 3,598.1 |
1 | Please refer to sections 3.7. and 3.8.3. of each quarters respective MD&A for the reconciliation of non-GAAP financial measures for the quarterly periods of 2021 and 2022. For Fiscal 2021 year ending period, please refer to sections 5.6. and 5.6.1. |
2 | 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. |
There are factors causing quarterly variances which may not be reflective of the Companys future performance. There is seasonality in system integration and consulting work, and the quarterly performance of these operations is impacted by occurrences such as vacations and the number of statutory holidays in any given quarter. Managed IT and business process services contracts are affected to a lesser extent by seasonality. Also, the workflow from some clients may fluctuate from quarter to quarter based on their business cycle and the seasonality of their own operations. Further, the savings that we generate for a client on a given managed IT and business process services contract may temporarily reduce our revenue stream from this client, as these savings may not be immediately offset by additional work performed for this client.
Cash flow from operating activities could vary significantly from quarter to quarter depending on the timing of monthly payments received from clients, cash requirements associated with large acquisitions, managed IT and business process
© 2022 CGI Inc. | Page 46 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
services contracts and projects, the timing of the reimbursements for various tax credits, profit sharing payments to members as well as the timing of severance payments related to the integration of our acquisitions.
Foreign exchange fluctuations can also contribute to quarterly variances as our percentage of operations in foreign countries evolves. The effect from these variances is primarily on our revenue and to a much lesser extent, on our margin as we benefit, as much as possible, from natural hedges.
© 2022 CGI Inc. | Page 47 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
7. | Changes in Accounting Policies |
The audited consolidated financial statements for the years ended September 30, 2022 and 2021 include all adjustments that CGIs management considers necessary for the fair presentation of its financial position, results of operations, and cash flows.
CHANGE IN ACCOUNTING POLICY- IAS 7 STATEMENT OF CASH FLOWS
In 2022, the IFRS Interpretations Committee finalized its agenda decision that restrictions on the use of demand deposits arising from a contract with a third party do not result in those deposits no longer being cash and cash equivalents when they are available to an entity on demand. Therefore, they should be included in cash and cash equivalents in the statements of cash flows, with disclosure provided on significant cash and cash equivalents balances with restrictions on use.
The Company has retrospectively applied this guidance and included the cash component of funds held for clients as part of cash, cash equivalents and cash included in funds held for clients in its consolidated Statements of Cash Flows, with the 2021 comparative figures adjusted consequently. The Company determined that as it had access to these funds on demand, despite being held solely for the purpose of satisfying the clients funds obligations. The cash balance under funds held for clients represents $504.7 millions at September 30, 2022 ($456.5 millions at September 30, 2021). The net changes in the client funds obligations are presented within financing activities, while the purchase and proceeds from the sale of long-term investments are presented within investing activities. This retrospective change in accounting policy does not impact the consolidated balance sheets, statement of earnings, comprehensive income, or changes in equity.
ADOPTION OF ACCOUNTING STANDARD
The following standard amendments have been adopted by the Company on October 1, 2021:
IBOR reform with amendments to IFRS 9, IAS 39, IFRS 7 and IFRS 16
In August, 2020, the IASB issued Interest Rate Benchmark Reform-Phase 2, which amends IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures and IFRS 16 Leases. The standard amendments complement those issued in 2019 and focus on the effects on financial statements when a company replaces the old interest rate benchmark with an alternative benchmark rate as a result of the reform.
For financial instruments at amortized cost, the standard amendments introduce a practical expedient such that if a change to contractual cash flow occurs as a direct consequence of the interbank offered rates (IBORs) reform and on economically equivalent terms to the previous basis, it will not result in an immediate gain or loss recognition. As for hedge accounting, the practical expedient allows hedge instrument relationships directly affected by the reform to continue. However, additional ineffectiveness might need to be recorded.
The Company has financial instruments exposed to the 1 month USD Libor rate, which is planned to expire in June 2023. As at September 30, 2022, the only instruments with a maturity date subsequent to June 2023 directly impacted by the IBORs reform are the unsecured committed term loan credit facility and the related cross-currency interest rate swaps (the hedging instruments) expiring in December 2023.
The Company is currently managing the process to transition the existing impacted agreements to an alternative rate.
The implementation of these standard amendments resulted in no impact on the Companys audited consolidated financial statements.
FUTURE ACCOUNTING STANDARD CHANGES
The following standard amendments are effective as of October 1, 2022 for the Company.
© 2022 CGI Inc. | Page 48 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
Onerous contracts Cost of Fulfilling a Contract - Amendments to IAS 37
In May, 2020, the IASB amended IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The standard amendments clarify that for assessing whether a contract is onerous, the cost of fulfilling the contract includes both the incremental cost of fulfilling that contract and an allocation of other costs that relates directly to fulfilling the contract.
The implementation of these standard amendments will result in no significant impact on the Companys audited consolidated financial statements.
The following standards amendments have been issued and will be effective as of October 1, 2023 for the Company, with earlier application permitted. The Company is currently evaluating the impact of these standard amendments on its audited consolidated financial statements.
Classification of Liabilities as Current or Non-current Amendments to IAS 1
In January, 2020, the IASB amended IAS 1 Presentation of Financial Statements. The standard amendments clarify that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period which only impacts the presentation of liabilities in the balance sheet. The classification is unaffected by expectations about whether the Company will exercise its right to defer settlement of a liability.
Disclosure of Accounting Policy Information Amendments to IAS 1 and IFRS Practice Statement 2
In February, 2021, the IASB amended IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements to require the Company to disclose its material accounting policy information rather than its significant accounting policies.
Definition of Accounting Estimates Amendments to IAS 8
In February, 2021, the IASB amended IAS 8 Accounting Policies, Changes in Accounting estimates and Errors to introduce a definition of accounting estimates and to help entities distinguish changes in accounting policies from changes in accounting estimates. This distinction is important because changes in accounting policies must be applied retrospectively while changes in accounting estimates are accounted for prospectively.
Deferred Tax related to Assets and Liabilities arising from a Single Transaction Amendments to IAS 12
In May, 2021, the IASB amended IAS 12 Income Taxes, to narrow the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences.
The following standard amendments have been issued and will be effective as of October 1, 2024 for the Company, with earlier application permitted. The Company is currently evaluating the impact of these standard amendments on its consolidated financial statements.
Information about long-term debt with covenants Amendments to IAS 1
In October, 2022, the IASB has issued standard amendments to IAS 1 Presentation of Financial Statements that aim to improve the information companies provide about long-term debt with covenants.The standard amendments to IAS 1 specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date. Instead, these standard amendments require a company to disclose information about these covenants in the notes to the financial statements.
© 2022 CGI Inc. | Page 49 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
8. | Critical Accounting Estimates |
The Companys significant accounting policies are described in note 3 of the audited consolidated financial statements for the years ended September 30, 2022 and 2021. Certain of these accounting policies, listed below, require management to make accounting estimates and judgements that affect the reported amounts of assets, liabilities and equity and the accompanying disclosures at the date of the audited consolidated financial statements as well as the reported amounts of revenue and expenses during the reporting period. These accounting estimates are considered critical because they require management to make subjective and/or complex judgements that are inherently uncertain and because they could have a material impact on the presentation of our financial condition, changes in financial condition or results of operations.
The uncertainties around the COVID-19 pandemic required the use of judgements and estimates which resulted in no material impact for the period ended September 30, 2022. The Company will continue to monitor the impact of the development of the COVID-19 pandemic in future reporting periods.
Areas impacted by estimates | Consolidated sheets |
Consolidated statements of earnings | ||||||||||
Revenue | Cost
of services, selling and administrative |
Amortization and depreciation |
Net finance costs |
Income taxes | ||||||||
Revenue recognition1 | ✓ | ✓ | ✓ | |||||||||
Goodwill impairment | ✓ | ✓ | ||||||||||
Right-of-use assets | ✓ | ✓ | ✓ | |||||||||
Business combinations | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||
Income taxes | ✓ | ✓ | ||||||||||
Litigation and claims | ✓ | ✓ | ✓ |
1 | Affects the balance sheet through accounts receivable, work in progress, provision on revenue-generating contracts and deferred revenue. |
Revenue recognition
Relative stand-alone selling price
If an arrangement involves the provision of multiple performance obligations, the total arrangement value is allocated to each performance obligation based on its relative stand-alone selling price. At least on a yearly basis, the Company reviews its best estimate of the stand-alone selling price which is established by using a reasonable range of prices for the various services and solutions offered by the Company based on local market information available. Information used in determining the range is mainly based on recent contracts signed and the economic environment. A change in the range could have a material impact on the allocation of total arrangement value, and therefore on the amount and timing of revenue recognition.
Business and strategic IT consulting and systems integration services under fixed fee arrangements
Revenue from business and strategic IT consulting and systems integration services under fixed-fee arrangements is recognized using the percentage-of-completion method over time, as the Company has no alternative use for the asset created and has an enforceable right to payment for performance completed to date. The Company primarily uses labour costs to measure the progress towards completion. Project managers monitor and re-evaluate project forecasts on a monthly basis. Forecasts are reviewed to consider factors such as: changes to the scope of the contracts, delays in reaching milestones and complexities in the project delivery. Forecasts can also be affected by market risks such as the availability and retention of qualified IT professionals and/or the ability of the subcontractors to perform their obligations within agreed budget and time frames. To the extent that actual labour costs could vary from estimates, adjustments to
© 2022 CGI Inc. | Page 50 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
revenue following the review of the costs to complete on projects are reflected in the period in which the facts that give rise to the revision occur. Whenever the total costs are forecasted to be higher than the total revenue, a provision on revenue-generating contract is recorded.
Goodwill impairment
The carrying value of goodwill is tested for impairment annually or if events or changes in circumstances indicate that the carrying value may be impaired. In order to determine if a goodwill impairment test is required, management reviews different factors on a quarterly basis, such as changes in technological or market environment, changes in assumptions used to derive the weighted average cost of capital and actual financial performance compared to planned performance.
The recoverable amount of each segment has been determined based on its value in use calculation, which includes estimates about their future financial performance based on cash flows approved by management. However, factors such as our ability to continue developing and expanding services offered to address emerging business demands and technology trends, a lengthened sales cycle and our ability to hire and retain qualified IT professionals affect future cash flows, and actual results might differ from future cash flows used in the goodwill impairment test. Key assumptions used in goodwill impairment testing are presented in note 12 of the audited consolidated financial statements for the years ended September 30, 2022 and 2021. Historically, the Company has not recorded an impairment charge on goodwill.
Right-of-use assets
Estimates of the lease term
The Company estimates the lease term in order to calculate the value of the lease liability at the initial date of the lease. Management uses judgement to determine the appropriate lease term based on the conditions of each lease. The Company considers all facts that create incentive to exercise an extension option or not to take a termination option including leasehold improvements, significant modification of the underlying asset or a business decision. The extension or termination options are only included in the lease term if it is reasonably certain of being exercised.
Discount rate for leases
The discount rate is used to determine the initial carrying amount of the lease liabilities and the right-of-use assets. The Company estimates the incremental borrowing rate for each lease or portfolio of leased assets, as most of the implicit interest rates in the leases are not readily determinable. To calculate the incremental borrowing rate, the Company considers its credit worthiness, the term of the arrangement, any collateral received and the economic environment at the lease date. Lease liabilities are remeasured (along with the corresponding adjustment to the right-of-use asset), whenever the following situations occur:
| a modification in the lease term or a change in the assessment of an option to purchase or terminate the lease, for which the lease liability is remeasured by discounting the revised lease payments using a revised discount rate; and |
| a modification in the residual guarantees or in future lease payments due to a change of an index or rate tied to the payments, for which the lease liability is remeasured by discounting the revised lease payments using the initial discount rate determined when setting up the liability. |
In addition, upon partial or full termination of a lease, the difference between the carrying amounts of the lease liability and the right-of-use asset is recorded in the consolidated statements of earnings.
Business combinations
Management makes assumptions when determining the acquisition-date fair value of the identifiable tangible and intangible assets acquired and liabilities assumed which involve estimates, such as the forecasting of future cash flows, discount rates and the useful lives of the assets acquired.
Additionally, managements judgement is required in determining whether an intangible asset is identifiable and should be recorded separately from goodwill.
Changes in the above assumptions, estimates and judgements could affect our acquisition-date fair values and therefore could have material impacts on our audited consolidated financial statements. These changes are recorded as part of the
© 2022 CGI Inc. | Page 51 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
purchase price allocation and therefore result in corresponding goodwill adjustments if they occurred during the measurement period, which does not exceed one year. All other subsequent changes are recorded in our consolidated statement of earnings.
Income taxes
Deferred tax assets are recognized for unused tax losses and deductible temporary differences to the extent that it is probable that taxable profit will be available for their utilization. The Company considers the analysis of forecast and future tax planning strategies. Estimates of taxable profit are made based on the forecast by jurisdiction which are aligned with goodwill impairment testing assumptions, on an undiscounted basis. In addition, management considers factors such as substantively enacted tax rates, the history of the taxable profits and availability of tax strategies. Due to the uncertainty and the variability of the factors mentioned above, deferred tax assets are subject to change. Management reviews its assumptions on a quarterly basis and adjusts the deferred tax assets when appropriate.
The Company is subject to income tax laws in numerous jurisdictions. Judgement is required in determining the worldwide provision for income taxes as the determination of tax liabilities and assets involves uncertainties in the interpretation of complex tax regulations and requires estimates and assumptions considering the existing facts and circumstances. The Company provides for potential tax liabilities based on the most likely amount of the possible outcomes. Estimates are reviewed each reporting period and updated, based on new information available, and could result in changes to the income tax liabilities and deferred tax liabilities in the period in which such determinations are made.
Litigation and claims
Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The accrued litigation and legal claim provisions are based on historical experience, current trends and other assumptions that are believed to be reasonable under the circumstances. Estimates include the period in which the underlying cause of the claim occurred and the degree of probability of an unfavourable outcome. Management reviews assumptions and facts surrounding outstanding litigation and claims on a quarterly basis, involves external counsel when necessary and adjusts such provisions accordingly. The Company has to be compliant with applicable law in many jurisdictions which increases the complexity of determining the adequate provision following a litigation review. Since the outcome of such litigation and claims is not predictable with assurance, those provisions are subject to change. Adjustments to litigation and claims provisions are reflected in the period when the facts that give rise to an adjustment occur.
© 2022 CGI Inc. | Page 52 |
Managements Discussion and Analysis | For the years ended September 30, 2022 and 2021
9. | Integrity of Disclosure |
The Board of Directors has the responsibility under its charter and under the securities laws that govern CGIs continuous disclosure obligations to oversee CGIs compliance with its continuous and timely disclosure obligations, as well as the integrity of the Companys internal controls and management information systems. The Board of Directors carries out this responsibility mainly through its Audit and Risk Management Committee.
CGIs Audit and Risk Management Committee is composed entirely of independent directors who meet the independence and experience requirements of National Instrument 52-110 adopted by the Canadian Securities Administrators as well as those of the New York Stock Exchange (NYSE) and the U.S. Securities and Exchange Commission (SEC). The role and responsibilities of the Audit and Risk Management Committee include: (i) reviewing public disclosure documents containing financial information concerning CGI; (ii) identifying and examining material financial and operating risks to which the Company is exposed, reviewing the various policies and practices of the Company that are intended to manage those risks, and reporting on a regular basis to the Board of Directors concerning risk management; (iii) reviewing and assessing the effectiveness of CGIs accounting policies and practices concerning financial reporting; (iv) reviewing and monitoring CGIs internal control procedures, programs and policies and assessing their adequacy and effectiveness; (v) reviewing the adequacy of CGIs internal audit resources including the mandate and objectives of the internal auditor; (vi) recommending to the Board of Directors the appointment of the external auditor, assessing the external auditors independence, reviewing the terms of their engagement, conducting an annual auditors performance assessment, and pursuing ongoing discussions with them; (vii) reviewing related party transactions in accordance with the rules of the NYSE and other applicable laws and regulations; (viii) reviewing the audit procedures including the proposed scope of the external auditors examinations; and (ix) performing such other functions as are usually attributed to audit committees or as directed by the Board of Directors. In making its recommendation to the Board of Directors in relation to the annual appointment of the external auditor, the Audit and Risk Management Committee conducts an annual assessment of the external auditors performance following the recommendations of the Chartered Professional Accountants of Canada. The formal assessment is concluded in advance of the Annual General Meeting of Shareholders and is conducted with the assistance of key CGI personnel.
The Company has established and maintains disclosure controls and procedures designed to provide reasonable assurance that material information relating to the Company is made known to the Chief Executive Officer and the Chief Financial Officer by others, particularly during the period in which annual and interim filings are prepared, and that information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by the Company under Canadian and U.S. securities laws is recorded, processed, summarized and reported within the time periods specified under those laws and the related rules. As at September 30, 2022, management evaluated, under the supervision of and with the participation of the Chief Executive Officer and the Chief Financial Officer, the effectiveness of the Companys disclosure controls and procedures as defined under National Instrument 52-109 adopted by the Canadian Securities Administrators and in Rule 13(a)-15(e) under the U.S. Securities Exchange Act of 1934, as amended. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Companys disclosure controls and procedures were effective as at September 30, 2022.
The Company has also established and maintains internal control over financial reporting, as defined under National Instrument 52-109 and in Rule 13(a)-15(f) under the U.S. Securities Exchange Act of 1934, as amended. The Companys internal control over financial reporting is a process designed under the supervision of the Chief Executive Officer and the Chief Financial Officer, and effected by management and other key CGI personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. However, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis. Management evaluated, under the supervision of and with the participation of the Chief Executive Officer and the Chief Financial Officer, the effectiveness of the Companys internal controls over financial reporting as at September 30, 2022, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013). Based on that evaluation, management, under the supervision of and with the participation of the Chief Executive Officer as well as the
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Chief Financial Officer concluded that the Companys internal controls over financial reporting was effective as at September 30, 2022.
The Companys assessment and conclusion on the effectiveness of disclosure controls and procedures and internal controls over financial reporting excludes the controls, policies and procedures of Umanis, the control of which was acquired on May 31, 2022. The scope limitation is in accordance with section 3.3(1)(b) of National Instrument 52- 109, which allows an issuer to limit the design of disclosure controls and procedures and internal control over financial reporting to exclude controls, policies, and procedures of a business that the issuer acquired not more than 365 days before the end of the financial period in question. Umanis results since the acquisition date represented 0.9% of revenue for the year ended September 30, 2022 and constituted 3.9% of total assets as at September 30, 2022.
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10. | Risk Environment |
While we are confident about our long-term prospects, a number of risks and uncertainties could affect our ability to achieve our strategic vision and objectives for growth. The following risks and uncertainties should be considered when evaluating our potential as an investment.
10.1.1. External Risks
We may be adversely affected by volatile, negative or uncertain economic and political conditions and the effects of these conditions on our clients businesses and levels of activity.
Economic and political conditions in the markets in which we operate have a bearing upon the results of our operations, directly and through their effect on the level of business activity of our clients. We can neither predict the impact that current economic and political conditions will have on our future revenue, nor predict changes in economic conditions or future political uncertainty. The level of activity of our clients and potential clients may be affected by an economic downturn or political uncertainty. Clients may cancel, reduce or defer existing contracts and delay entering into new engagements and may decide to undertake fewer IT systems projects resulting in limited implementation of new technology and smaller engagements. Since there may be fewer engagements, competition may increase and pricing for services may decline as competitors may decrease rates to maintain or increase their market share in our industry and this may trigger pricing adjustments related to the benchmarking obligations within our contracts. Economic downturns and political uncertainty make it more difficult to meet business objectives and may divert managements attention and time from operating and growing our business. Our business, results of operations and financial condition could be negatively affected as a result of these factors.
We may be adversely affected by additional external risks, such as terrorism, armed conflict, labour or social unrest, inflation, rising energy and commodity costs, recession, criminal activity, hostilities, disease, illness or health emergencies, natural disasters and climate change and the effects of these conditions on our clients, our business and on market volatility.
Additional external risks that could adversely impact the markets in which we operate, our industry and our business include terrorism, armed conflict, labour or social unrest, inflation, recession, criminal activity, regional and international hostilities and international responses to these hostilities, and disease, illness or health emergencies that affect local, national or international economies. Additionally, the potential impacts of climate change are unpredictable and natural disasters, sea-level rise, floods, droughts or other weather-related events present additional external risks, as they could disrupt our internal operations or the operations of our clients, impact our employees health and safety and increase insurance and other operating costs. Climate change risks can arise from physical risks (risks related to the physical effects of climate change), transition risks (risks related to regulatory, legal, technological and market changes from a transition to a low-carbon economy), as well as reputational risks related to our management of climate-related issues and our level of disclosure related to such matters (see Our inability to meet regulatory requirements and/or stakeholders expectations of disclosure, management and implementation of ESG initiatives and standards, could have a material adverse effect on our business). Climate change risk, and/or any of these additional external risks, may affect us or affect the financial viability of our clients leading to a reduction of demand and loss of business from such clients. Each of these risks could negatively impact our business, results of operation and financial condition.
As a result of external risks, such as the current armed conflict in the Ukraine, inflation, and rising energy and commodity costs, global equity and capital markets may experience significant volatility and weakness. The duration and impact of these events are unknown at this time, nor is the impact on our operations and the market for our securities.
Prolonged periods of inflation could increase our costs and impact our profitability, which could have a material adverse effect on our business and financial condition.
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High levels of inflation may subject us to significant cost pressures and lead to market volatility. As a result, governments may adopt initiatives to combat inflation (for example, raising benchmark interest rate), thus increasing our cost of borrowing and decreasing the liquidity of capital markets. Our clients may have difficulty budgeting for external IT services or delay their payment for services provided. High inflation can lead to increased costs of labor and our employee compensation expenses. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases, and there is no assurance that our revenues will increase at the same rate to maintain the same level of profitability. Our inability or failure to do so could harm our business and financial condition.
Pandemics, including the COVID-19 pandemic, have caused, and may in the future cause disruptions in our operations and the operations of our clients (which may lead to increased risk and frequency of cybersecurity incidents), market volatility and economic disruption, which could adversely affect us.
A pandemic, including the COVID-19 pandemic, can create significant volatility and uncertainty and economic disruption.
A pandemic poses the risk that our members, clients, contractors and business partners may be prevented from, or restricted in, conducting business activities for an indefinite period, including due to the transmission of the disease or to emergency measures or restrictions that may be requested or mandated by governmental authorities. The COVID-19 pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus, including the implementation of border closures, travel bans or restrictions, lock-downs, quarantine periods, vaccine mandates or passports, social distancing, testing requirements, stay-at-home and work-from-home policies and the temporary closure of non-essential businesses. Companies are also taking precautions, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses. These emergency measures and restrictions, and future measures and restrictions taken in response to the COVID-19 pandemic or other pandemics, have caused and may continue to cause material disruptions to businesses globally and are likely to have an adverse impact on global economic conditions and consumer confidence and spending, which could materially adversely affect our business. While emergency measures and restrictions in response to the COVID-19 pandemic have been eased or, in certain cases, eliminated, resurgence in new COVID-19 cases, or the emergence and progression of new variants, may cause governmental authorities or companies to strengthen or re-introduce additional emergency measures and restrictions, which could materially adversely affect our business.
A pandemic, including the COVID-19 pandemic, may affect the financial viability of our clients, and could cause them to exit certain business lines, or change the terms on which they are willing to purchase services and solutions. Clients may also slow down decision-making, delay planned work, seek to terminate existing agreements, not renew existing agreements or be unable to pay us in accordance with the terms of existing agreements. As a result of increased remote working arrangements due to a pandemic, the exposure to, and reliance on, networked systems and the internet can increase. This can lead to increased risk and frequency of cybersecurity incidents. Cybersecurity incidents can result from unintentional events or deliberate attacks by insiders or third parties, including cybercriminals, competitors, nation-states, and hacktivists. Any of these events could cause or contribute to risk and uncertainty and could adversely affect our business, results of operations and financial condition.
As a result of the COVID-19 pandemic, global equity and capital markets have experienced and may continue to experience significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 pandemic are unknown at this time, as is the efficacy and duration of government and central bank interventions. The extent to which the COVID-19 pandemic impacts our future business, including our operations and the market for our securities, will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of the outbreak, the availability and effectiveness of vaccines and the speed of their distribution, the actions taken to contain the COVID-19 pandemic, and the actions taken to prevent and treat the COVID-19 pandemic. It is not possible to reliably estimate the length and severity of these developments or the negative impact on our financial results, share price and financial condition in future periods. Many of the risks, uncertainties and other risk factors identified are, and will be, amplified by the COVID-19 pandemic. While we have implemented business continuity plans and taken additional steps
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and measures, there can be no assurance that these actions, in response to the COVID-19 pandemic, will succeed in preventing or mitigating the negative impacts of the COVID-19 pandemic on our Company, members, clients, contractors and business partners, which may continue post COVID-19 pandemic.
As a foreign private issuer, we are subject to different U.S. securities laws and rules, which could limit our level of disclosure to investors.
We are a foreign private issuer for purposes of U.S. securities laws and, as a result, are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. In particular, we are exempt from the rules and regulations under the U.S. securities laws related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Securities Exchange Act of 1934 (the Exchange Act). We also are exempt from the provisions of Regulation FD under the Exchange Act, which in certain circumstances prohibits the selective disclosure of material non-public information, although we generally attempt to comply with Regulation FD. These exemptions and leniencies may reduce the frequency and scope of information that we disclose relative to the information generally provided by U.S. domestic companies.
It may be difficult to enforce civil liabilities under U.S. securities laws.
The Company is governed by the Business Corporations Act (Quebec) and with its principal place of business in Canada. The enforcement by investors of civil liabilities under the U.S. securities laws may be affected adversely by the fact that we are organized under the laws of Canada, that some or all of our officers and directors may be residents of a foreign country, and that a substantial portion of our assets and those of said persons may be located outside the United States.
10.1.2. Risks Related to our Industry
The markets in which we operate are highly competitive, and we might not be able to compete effectively.
CGI operates in a global marketplace in which competition among providers of IT services is vigorous. Some of our competitors possess greater financial, marketing and sales resources, and larger geographic scope in certain parts of the world than we do, which, in turn, provides them with additional leverage in the competition for contracts. In certain niche, regional or metropolitan markets, we face smaller competitors with specialized capabilities who may be able to provide competing services with greater economic efficiency. Some of our competitors have more significant operations than we do in lower cost countries that can serve as a platform from which to provide services worldwide on terms that may be more favourable. Increased competition among IT services firms often results in corresponding pressure on prices. There can be no assurance that we will succeed in providing competitively priced services at levels of service and quality that will enable us to maintain and grow our market share.
We derive significant revenue from contracts awarded through competitive bidding processes, which limit the Companys ability to negotiate certain contractual terms and conditions. Risks related to competitive bidding processes also involve substantial cost and managerial time and effort spent by the Company to prepare bids and proposals for contracts that may or may not be awarded to the Company, as well as expenses and delays that may arise if the Companys competitors protest or challenge awards made to the Company pursuant to competitive bidding processes.
Even when a contract is awarded to the Company following a competitive bidding process, we may fail to accurately estimate the resources and costs required to fulfill the contract.
We may not be able to continue developing and expanding service offerings to address emerging business demands and technology trends.
The rapid pace of change in all aspects of IT and the continually declining costs of acquiring and maintaining IT infrastructure mean that we must anticipate changes in our clients needs. To do so, we must adapt our services and our solutions so that we maintain and improve our competitive advantage and remain able to provide cost effective services and solutions. The markets in which we operate are extremely competitive and there can be no assurance that we will succeed in developing and adapting our business in a timely manner nor that we will be able to penetrate new markets successfully. If we do not keep pace, our ability to retain existing clients and gain new business may be adversely affected.
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As we expand our services and solutions into new markets, we may be exposed to operational, legal, regulatory, ethical, technological and other risks specific to such new markets. These factors may result in pressure on our revenue, net earnings and resulting cash flow from operations.
We may infringe on the intellectual property rights of others.
Despite our efforts, the steps we take to ensure that our services and offerings do not infringe on the intellectual property rights of third parties may not be adequate to prevent infringement and, as a result, claims may be asserted against us or our clients. We enter into licensing agreements for the right to use intellectual property and may otherwise offer indemnities against liability and damages arising from third-party claims of patent, copyright, trademark or trade secret infringement in respect of our own intellectual property or software or other solutions developed for our clients. In some instances, the amount of these indemnity claims could be greater than the revenue we receive from the client (see Indemnity provisions and guarantees in various agreements to which we are party may require us to compensate our counterparties). Intellectual property claims or litigation could be time-consuming and costly, harm our reputation, require us to enter into additional royalty or licensing arrangements, or prevent us from providing some solutions or services. Any limitation on our ability to sell or use solutions or services that incorporate software or technologies that are the subject of a claim could cause us to lose revenue-generating opportunities or require us to incur additional expenses to modify solutions for future projects.
We may be unable to protect our intellectual property rights.
Our success depends, in part, on our ability to protect our proprietary methodologies, processes, know-how, tools, techniques and other intellectual property that we use to provide our services. Although CGI takes reasonable steps (e.g. available copyright protection and, in some cases, patent protection) to protect and enforce its intellectual property rights, there is no assurance that such measures will be enforceable or adequate. The cost of enforcing our rights, or our inability to protect against infringement or unauthorized copying or use, can be substantial and, in certain cases, may prove to be uneconomic. In addition, the laws of some countries in which we conduct business may offer only limited intellectual property rights protection. Despite our efforts, the steps taken to protect our intellectual property may not be adequate to prevent or deter infringement or other misappropriation of intellectual property, and we may not be able to detect unauthorized use of our intellectual property, or take appropriate steps to enforce our intellectual property rights.
We face risks associated with benchmarking provisions within certain contracts.
Some of our managed IT and business process services contracts contain clauses allowing our clients to externally benchmark the pricing of agreed upon services against those offered by other providers in a peer comparison group. The uniqueness of the client environment should be factored in and, if results indicate a difference outside the agreed upon tolerance, we may be required to work with clients to reset the pricing for their services. There can be no assurance that benchmarks will produce accurate or reliable data, including pricing data. This may result in pressure on our revenue, net earnings and resulting cash flow from operations.
10.1.3. Risks Related to our Business
We may experience fluctuations in our financial results, making it difficult to predict future results.
Our ability to maintain and increase our revenue is affected not only by our success in implementing our Build and Buy growth strategy, but also by a number of other factors, which could cause the Companys financial results to fluctuate. These factors include: (i) our ability to introduce and deliver new services and business solutions; (ii) our potential exposure to a lengthened sales cycle; (iii) the cyclicality of the purchases of our technology services and solutions; (iv) the nature of our clients business (for example, if a client encounters financial difficulty (including as a result of external risks such as climate change or a pandemic), it may be forced to cancel, reduce or defer existing contracts with us); and (v) the structure of our agreements with clients (for example, some of CGIs agreements with clients contain clauses allowing the clients to benchmark the pricing of services provided by CGI against the prices offered by other providers). These, and other factors, make it difficult to predict financial results for any given period.
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Our revenues may be exposed to fluctuations based on our business mix.
The proportion of revenue that we generate from shorter-term system integration and consulting projects (SI&C), versus revenue from long-term managed IT and business process services contracts, will fluctuate at times, affected by acquisitions or other transactions. An increased exposure to revenue from SI&C projects may result in greater quarterly revenue variations, as the revenue from SI&C projects does not provide long-term consistency in revenue.
Our current operations are international in scope, subjecting us to a variety of financial, regulatory, cultural, political and social challenges.
We manage operations in numerous countries around the world including offshore delivery centers. The scope of our operations (including our offshore delivery centers) subjects us to issues that can negatively impact our operations, including: (i) currency fluctuations (see We may be adversely affected by currency fluctuations); (ii) the burden of complying with a wide variety of national and local laws (see Changes in the laws and regulations within the jurisdictions in which we operate may have a material adverse effect on our global business operations and profitability); (iii) the differences in and uncertainties arising from local business culture and practices; (iv) and political, social and economic instability. Any or all of these risks could impact our global business operations and cause our revenue and/or profitability to decline.
We may not be able to successfully implement and manage our growth strategy.
CGIs Build and Buy growth strategy is founded on four pillars of growth: first, profitable organic growth through contract wins, renewals and extensions with new and existing clients in our targeted industries; second, the pursuit of new large long-term managed IT and business process services contracts; third, metro market acquisitions; and fourth, large transformational acquisitions.
Our ability to achieve organic growth is affected by a number of factors outside of our control, including a lengthening of our sales cycle for major managed IT and business process services contracts.
Our ability to grow through metro market and transformational acquisitions requires that we identify suitable acquisition targets that we correctly evaluate their potential as transactions that will meet our financial and operational objectives, and that we successfully integrate them into our business. There can, however, be no assurance that we will be able to identify suitable acquisition targets and consummate additional acquisitions that meet our economic thresholds, or that future acquisitions will be successfully integrated into our operations and yield the tangible accretive value that had been expected.If we are unable to implement our Build and Buy growth strategy, we will likely be unable to maintain our historic or expected growth rates.
We may be unable to integrate new operations, which could impact our ability to achieve our growth and profitability objectives.
The realization of anticipated benefits from mergers, acquisitions and related activities depends, in part, upon our ability to integrate the acquired business, the realization of synergies, efficient consolidation of the operations of the acquired businesses into our existing operations, cost management to avoid duplication, information systems integration, staff reorganization, establishment of controls, procedures and policies, performance of the management team and other personnel of the acquired operations as well as cultural alignment.
The successful integration of new operations arising from our acquisition strategy or from large managed IT and business process services contracts requires that a substantial amount of management time and attention be focused on integration tasks. Management time that is devoted to integration activities may detract from managements normal operations focus with resulting pressure on the revenues and earnings from our existing operations. In addition, we may face complex and potentially time-consuming challenges in implementing uniform standards, controls, procedures and policies across new operations when harmonizing their activities with those of our existing business units. Integration activities can result in unanticipated operational problems, expenses and liabilities.
Following an acquisition closing date, we may remain reliant on a targets personnel, good faith, expertise, historical performance, technical resources and information systems, proprietary information and judgment in providing any
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transitional services. Accordingly, we may continue to be exposed to adverse developments in the business and affairs of parties with whom we contract.
If we are not successful in executing our integration strategies in a timely and cost-effective manner, we will have difficulty achieving our growth and profitability objectives.
If we are unable to manage the organizational challenges associated with our size, we may not be able to achieve our growth and profitability objectives.
Our culture, standards, core values, internal controls and our policies need to be instilled across newly acquired businesses as well as maintained within our existing operations. To effectively communicate and manage these standards throughout a large global organization is both challenging and time consuming. Newly acquired businesses may be resistant to change and may remain attached to past methods, standards and practices which may compromise our business agility in pursuing opportunities. Cultural differences in various countries may also present barriers to introducing new ideas or aligning our vision and strategy with the rest of the organization. If we cannot overcome these obstacles in maintaining a strategic bond throughout the Company worldwide, we may not be able to achieve our growth and profitability objectives.
Material developments regarding our major commercial clients resulting from mergers or business acquisitions could impair our future prospects and growth strategy.
Consolidation among our clients resulting from mergers and acquisitions may result in loss or reduction of business when the successor business IT needs are served by another service provider or are provided by the successor companys own personnel. Growth in a clients IT needs resulting from acquisitions or operations may mean that we no longer have a sufficient geographic scope or the critical mass to serve the clients needs efficiently, resulting in the loss of the clients business and impairing our future prospects. There can be no assurance that we will be able to achieve the objectives of our growth strategy in order to maintain and increase our geographic scope and critical mass in our targeted markets.
Legal proceedings could have a material adverse effect on our business, financial performance and reputation.
During the ordinary course of conducting our business, we may be threatened with, and/or become subject or a party to, a variety of litigation or other claims and suits that arise from time to time. These legal proceedings may involve current and former employees, clients, partners, subcontractors, suppliers, competitors, shareholders, government agencies or others through private actions, class actions, whistleblower claims, administrative proceedings, regulatory actions or other litigation. Regardless of the merits of the claims, the cost to defend current and future litigation may be significant, and such matters can be time-consuming and divert managements attention and resources. The results of litigation, claims and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some or all of these legal disputes may result in materially adverse monetary damages, fines, penalties or injunctive relief against us. While we maintain insurance for certain liabilities, there is no assurance that such insurance coverage will be sufficient in type or amount to cover the costs, damages, liabilities or losses that can result from these litigations or claims.
Changes in our tax levels, as well as reviews, audits, investigations and tax proceedings or changes in tax laws or in their interpretation or enforcement, could have a material adverse effect on our net income or cash flow.
In estimating our income tax payable, management uses accounting principles to determine income tax positions that are likely to be sustained by applicable tax authorities. However, there is no assurance that our tax benefits or tax liability will not materially differ from our estimates or expectations. The tax legislation, regulation and interpretation that apply to our operations are continually changing. In addition, future tax benefits and liabilities are dependent on factors that are inherently uncertain and subject to change, including future earnings, future tax rates, and anticipated business mix in the various jurisdictions in which we operate. Moreover, our tax returns are continually subject to review by applicable tax authorities and we are subject to ongoing audits, investigations and tax proceedings in various jurisdictions. These tax authorities determine the actual amounts of taxes payable or receivable, of any future tax benefits or liabilities and of income tax expense that we may ultimately recognize. Tax authorities have disagreed and may in the future disagree with our income tax positions and are taking increasingly aggressive positions in respect of income tax positions, including with respect to intercompany transactions.
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Our effective tax rate in the future could be adversely affected by challenges to intercompany transactions, changes in the value of deferred tax assets and liabilities, changes in tax law or in their interpretation or enforcement, changes in the mix of earnings in countries with differing statutory tax rates, the expiration of tax benefits and changes in accounting principles. Tax rates in the jurisdictions in which we operate may change as a result of shifting economic conditions and tax policies.
A number of countries in which the Company does business have implemented, or are considering implementing, changes in relevant tax, accounting and other laws, regulations and interpretations and the overall tax environment has made it increasingly challenging for multinational corporations to operate with certainty about taxation in many jurisdictions.
Any of the above factors could have a material adverse effect on our net income or cash flow by affecting our operations and profitability, our effective tax rate, the availability of tax credits, the cost of the services we provide, and the availability of deductions for operating losses.
Reductions, eliminations or amendments to government sponsored programs from which we currently benefit may have a material adverse effect on our net earnings or cash flow.
We benefit from government sponsored programs designed to support research and development, labour and economic growth in jurisdictions where we operate. Government programs reflect government policy and depend on various political and economic factors. There can be no assurance that such government programs will continue to be available to the Company in the future, or will not be reduced, amended or eliminated. Any future government program reductions or eliminations or other amendments to the tax credit programs could increase operating or capital expenditures incurred by the Company and have a material adverse effect on its net earnings or cash flow.
We are exposed to credit risks with respect to accounts receivable and work in progress.
In order to sustain our cash flow from operations, we must invoice and collect the amounts owed to us in an efficient and timely manner. Although we maintain provisions to account for anticipated shortfalls in amounts collected from clients, the provisions we take are based on management estimates and on our assessment of our clients creditworthiness which may prove to be inadequate in the light of actual results. To the extent that we fail to perform our services in accordance with our contracts and our clients reasonable expectations, and to the extent that we fail to invoice clients and to collect the amounts owed to the Company for our services correctly in a timely manner, our collections could suffer, which could materially adversely affect our revenue, net earnings and cash flow. In addition, a prolonged economic downturn may cause clients to curtail or defer projects, impair their ability to pay for services already provided, and ultimately cause them to default on existing contracts, in each case, causing a shortfall in revenue and impairing our future prospects.
We face risks associated with early termination of our contractual agreements.
If we should fail to deliver our services according to contractual agreements, some of our clients could elect to terminate contracts before their agreed expiry date, which would result in a reduction of our revenues and/or earnings and cash flow and may impact the value of our backlog of orders. In addition, a number of our managed IT and business process services contractual agreements have termination for convenience and change of control clauses according to which a change in the clients intentions or a change in control of CGI could lead to a termination of these agreements. Early contract termination can also result from the exercise of a legal right or when circumstances that are beyond our control or beyond the control of our client prevent the contract from continuing. In cases of early termination, we may not be able to recover capitalized contract costs and we may not be able to eliminate ongoing costs incurred to support the contract.
We may not be able to successfully estimate the cost, timing and resources required to fulfill our contracts, which could have a material adverse effect on our net earnings.
In order to generate acceptable margins, our pricing for services is dependent on our ability to accurately estimate the costs and timing for completing projects or long-term managed IT and business process services contracts, which can be based on a clients bid specification, sometimes in advance of the final determination of the full scope and design of the contract. In addition, a significant portion of our project-oriented contracts are performed on a fixed-price basis. Billing for fixed-price engagements is carried out in accordance with the contract terms agreed upon with our client, and revenue is
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recognized based on the percentage of effort incurred to date in relation to the total estimated efforts to be incurred over the duration of the respective contract. These estimates reflect our best judgement regarding the efficiencies of our methodologies and professionals as we plan to apply them to the contracts in accordance with the CGI Client Partnership Management Framework (CPMF), a framework that contains high standards of contract management to be applied throughout the Company. If we fail to apply the CPMF correctly or if we are unsuccessful in accurately estimating the time or resources required to fulfill our obligations under a contract, or if unexpected factors, including those outside of our control (such as labour shortages, supply chain or manufacturing disruptions, inflation, and other external risk factors), arise, there may be an impact on costs or the delivery schedule which could have a material adverse effect on our expected net earnings.
We rely on relationships with other providers in order to generate business and fulfill certain of our contracts; if we fail to maintain our relationships with these providers, our business, prospects, financial condition and operating results could be materially adversely affected.
We derive revenue from contracts where we enter into teaming agreements with other providers. In some teaming agreements we are the prime contractor whereas in others we act as a subcontractor. In both cases, we rely on our relationships with other providers to generate business and we expect to continue to do so in the foreseeable future. Where we act as prime contractor, if we fail to maintain our relationships with other providers, we may have difficulty attracting suitable participants in our teaming agreements. Similarly, where we act as subcontractor, if our relationships are impaired, other providers might reduce the work they award to us, award that work to our competitors, or choose to offer the services directly to the client in order to compete with our business. In either case, if we fail to maintain our relationship with these providers or if our relationship with these providers is otherwise impaired, our business, prospects, financial condition and operating results could be materially adversely affected.
Our profitability may be adversely affected if our partners are unable to deliver on their commitments.
Increasingly large and complex contracts may require that we rely on third party subcontractors including software and hardware vendors to help us fulfill our commitments. Under such circumstances, our success depends on the ability of the third parties to perform their obligations within agreed upon budgets and timeframes. If our partners fail to deliver, our ability to complete the contract may be adversely affected, which could have an unfavourable impact on our profitability.
Indemnity provisions and guarantees in various agreements to which we are party may require us to compensate our counterparties.
In the normal course of business, we enter into agreements that may provide for indemnification and guarantees to counterparties in transactions such as consulting and managed IT and business process services, business divestitures, lease agreements and financial obligations. These indemnification undertakings and guarantees may require us to compensate counterparties for costs and losses incurred as a result of various events, including breaches of representations and warranties, intellectual property right infringement, claims that may arise while providing services or as a result of litigation that may be suffered by counterparties. If we are required to compensate counterparties due to such arrangements and our insurance does not provide adequate coverage, our business, prospects, financial condition and results of operations could be materially adversely affected.
We may not be able to hire or retain enough qualified IT professionals to support our operations.
There is strong demand for qualified individuals in the IT industry. Hiring and retaining a sufficient number of individuals with the desired knowledge and skill set may be difficult. Therefore, it is important that we remain able to successfully attract and retain highly qualified professionals and establish an effective succession plan. If our comprehensive programs aimed at attracting and retaining qualified and dedicated professionals do not ensure that we have staff in sufficient numbers and with the appropriate training, expertise and suitable government security clearances required to serve the needs of our clients, we may have to rely on subcontractors or transfers of staff to fill resulting gaps. If our succession plan fails to identify those with potential or to develop these key individuals, we may be unable to replace key members who
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retire or leave the Company and may be required to recruit and/or train new employees. This might result in lost revenue or increased costs, thereby putting pressure on our net earnings.
If we fail to retain our key personnel and management, our business could be adversely affected.
The success of our business, in part, depends on the continued employment of certain key personnel and senior management. This dependence is important to our business being that personal relationships are fundamental in obtaining and maintaining client engagements. While our Board of Directors annually reviews our succession plan, if we fail to establish an effective succession plan, or if key personnel or senior management were unable or unwilling to continue employment, our business could be adversely affected until qualified replacements are retained.
We may be unable to maintain our human resources utilization rates.
In order to maintain our net earnings, it is important that we maintain the appropriate availability of professional resources in each of our geographies by having a high utilization rate while still being able to assign additional resources to new work. Maintaining an efficient utilization rate requires us to forecast our need for professional resources accurately and to manage recruitment activities, professional training programs, attrition rates and restructuring programs appropriately. To the extent that we fail to do so, or to the extent that laws and regulations restrict our ability to do so, our utilization rates may be reduced; thereby having an impact on our revenue and profitability. Conversely, we may find that we do not have sufficient resources to deploy against new business opportunities in which case our ability to grow our revenue would suffer.
If the business awarded to us by various U.S. federal government departments and agencies is limited, reduced or eliminated, our business, prospects, financial condition and operating results could be materially and adversely affected.
We derive a significant portion of our revenue from the services we provide to various U.S. federal government departments and agencies. We expect that this will continue for the foreseeable future. There can be, however, no assurance that each such U.S. federal government department and agency will continue to utilize our services to the same extent, or at all in the future. In the event that a major U.S. federal government department or agency were to limit, reduce, or eliminate the business it awards to us, we might be unable to recover the lost revenue with work from other U.S. federal government departments or agencies or other clients, and our business, prospects, financial condition and operating results could be materially and adversely affected. Although IFRS considers a national government and its departments and agencies as a single client, our client base in the U.S. government economic sector is in fact diversified with contracts from many different departments and agencies.
Changes in government spending policies or budget priorities could directly affect our financial performance. Among the factors that could harm our government contracting business are: the curtailment of governments use of consulting and IT services firms; a significant decline in spending by governments in general, or by specific departments or agencies in particular; the adoption of new legislation and/or actions affecting companies that provide services to governments; delays in the payment of our invoices by government; and general economic and political conditions. These or other factors could cause government agencies and departments to reduce their purchases under contracts, to exercise their right to terminate contracts, to issue temporary stop work orders, or not to exercise options to renew contracts, any of which would cause us to lose future revenue. Government spending reductions or budget cutbacks at these departments or agencies could materially harm our continued performance under these contracts, or limit the awarding of additional contracts from these agencies.
Changes in the laws and regulations within the jurisdictions in which we operate may have a material adverse effect on our global business operations and profitability.
Our global operations require us to be compliant with laws and regulations in many jurisdictions on matters such as: anti-corruption, trade restrictions, immigration, taxation, securities, antitrust, data privacy, labour relations, and the environment, amongst others. Complying with these diverse requirements worldwide is a challenge and consumes significant resources. The laws and regulations frequently change and some may impose conflicting requirements which may expose us to penalties for non-compliance and harm our reputation. Furthermore, in some jurisdictions, we may face the absence of
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effective laws and regulations to protect our intellectual property rights and there may be restrictions on the movement of cash and other assets, on the import and export of certain technologies, and on the repatriation of earnings. Any or all of these risks could impact our global business operations and cause our profitability to decline.
Our business with the U.S. federal government departments and agencies also requires that we comply with complex laws and regulations relating to government contracts. These laws and regulations relate to the integrity of the procurement process, impose disclosure requirements, and address national security concerns, among other matters. For instance, we are routinely subject to audits by U.S. government departments and agencies with respect to compliance with these rules. If we fail to comply with these requirements we may incur penalties and sanctions, including contract termination, suspension of payments, suspension or debarment from doing business with the federal government, and fines.
There can be no assurance that our ethics and compliance practices will be sufficient to prevent violations of legal and ethical standards.
Our employees, officers, directors, suppliers and other business partners are expected to comply with applicable legal and ethical standards including, without limitation, anti-bribery laws, as well as with our governance policies and contractual obligations. Failure to comply with such laws, policies and contractual obligations could expose us to litigation and significant fines and penalties, and result in reputational harm or being disqualified from bidding on contracts. While we have developed and implemented strong ethics and compliance practices, including through our Code of Ethics, which must be observed by all of our members, our Third Party Code of Ethics as well as ethics and compliance trainings, there can be no assurance that such practices and measures will be sufficient to prevent violations of legal and ethical standards. Any such failure or violation could have an adverse effect on our business, financial performance and reputation. This risk of improper conduct may increase as we continue to expand globally, with greater opportunities and demands to do more business with local and new partners.
Changes to, and delays or defects in, our client projects and solutions may subject us to legal liability, which could materially adversely affect our business, operating results and financial condition and may negatively affect our professional reputation.
We create, implement and maintain IT solutions that are often critical to the operations of our clients business. Our ability to complete large projects as expected could be adversely affected by unanticipated delays, renegotiations, and changing client requirements. Also, our solutions may suffer from defects that adversely affect their performance; they may not meet our clients requirements or may fail to perform in accordance with applicable service levels. Such problems could subject us to legal liability, which could materially adversely affect our business, operating results and financial condition, and may negatively affect our professional reputation. While we typically use reasonable efforts to include provisions in our contracts which are designed to limit our exposure to legal claims relating to our services and the applications we develop, we may not always be able to include such provisions and, where we are successful, such provisions may not protect us adequately or may not be enforceable under some circumstances or under the laws of some jurisdictions.
We are subject to stringent and changing privacy laws, regulations and standards, information security policies and contractual obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could expose us to government sanctions and cause damage to our brand and reputation.
Our business often requires that our clients applications and information, which may include their proprietary information and personal information they manage, be processed and stored on our networks and systems, and in data centers that we manage. We also process and store proprietary information relating to our business, and personal information relating to our members. The Company is subject to numerous laws and regulations designed to protect information, such as the European Unions General Data Protection Regulation (GDPR), various laws and regulations in Canada, the U.S. and other countries in which the Company operates governing the protection of health or other personally identifiable information and data privacy. These laws and regulations are increasing in number and complexity and are being adopted and amended with greater frequency, which results in greater compliance risk and cost. The potential financial penalties for non-compliance with these laws and regulations have significantly increased with the adoption of the GDPR. The Companys Chief Data Protection Officer oversees the Companys compliance with the laws that protect the privacy of personal
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information. The Company faces risks inherent in protecting the security of such personal data which have grown in complexity, magnitude and frequency in recent years. Digital information and equipment are subject to loss, theft or destruction, and services that we provide may become temporarily unavailable as a result of those risks, or upon an equipment or system malfunction. The causes of such failures include human error in the course of normal operations (including from advertent or inadvertent actions or inactions by our members), maintenance and upgrading activities, as well as hacking, vandalism (including denial of service attacks and computer viruses), theft, and unauthorized access, as well as power outages or surges, floods, fires, natural disasters and many other causes. The measures that we take to protect against all information infrastructure risks, including both physical and logical controls on access to premises and information may prove in some circumstances to be inadequate to prevent the improper disclosure, loss, theft, misappropriation of, unauthorized access to, or destruction of client information, or service interruptions. Such events may expose the Company to financial loss arising from the costs of remediation and those arising from litigation from our clients and third parties (including under the laws that protect the privacy of personal information), claims and damages, as well as expose the Company to government sanctions and damage to our brand and reputation.
We could face legal, reputational and financial risks if we fail to protect our and/or client data from security incidents or cyberattacks.
The volume, velocity and sophistication of security threats and cyber-attacks continue to grow. This includes criminal hackers, hacktivists, state-sponsored organizations, industrial espionage, employee misconduct, and human or technological errors. The current geopolitical instability has exacerbated these threats, which could lead to increased risk and frequency of security and cybersecurity incidents.
As a global IT and business consulting firm providing services to private and public sectors, we process and store increasingly large amounts of data for our clients, including proprietary information and personal information. Consequently, our business could be negatively impacted by physical and cyber threats, which could affect our future sales and financial position or increase our costs.
An unauthorized disclosure of sensitive or confidential client or member information, including cyber-attacks or other security breaches, could cause a loss of data, give rise to remediation or other expenses, expose us to liability under federal and state laws, and subject us to litigation and investigations, which could have an adverse effect on our business, cash flows, financial condition and results of operations. These security risks to the Company include potential attacks not only of our own solutions, services and systems, but also those of our clients, contractors, business partners, vendors and other third parties.
The Companys Chief Security Officer is responsible for overseeing the security of the Company. Any local issue in a business unit could have a global impact on the entire Company, thus visibility and timely escalation on potential issues are key. We seek to detect and investigate all security incidents and to prevent their occurrence or recurrence, by: (i) developing and regularly reviewing policies and standards related to information security, data privacy, physical security and business continuity; (ii) monitoring the Companys performance against these policies and standards; (iii) developing strategies intended to seek to mitigate the Companys risks, including through security trainings for all members to increase awareness of potential cyber threats; (iv) implementing security measures to ensure an appropriate level of control based on the nature of the information and the inherent risks attached thereto, including through access management, security monitoring and testing to mitigate and help detect and respond to attempts to gain unauthorized access to information systems and networks; and (v) working with the industry and governments against cyber threats. However, because of the evolving nature and sophistication of these security threats, there can be no assurance that our safeguards will detect or prevent the occurrence of material cyber breaches, intrusions or attacks.
We are regularly the target of attempted cyber and other security threats and must continuously monitor and develop our information technology networks and infrastructure to detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security and reputational impact. If security protection does not evolve at the same pace as threats, a growing gap on our level of protection will be created. Technology evolution and global trends like digital transformation, cloud and mobile computing amongst others are disrupting the security operating model, thus security should evolve to address new relevant security requirements and build new capabilities to address the
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changes. Increasing detection and automated response capabilities are key to improve visibility and contain any negative potential impact. Automating security processes and integrating with IT, business and security solutions could address shortage of technical security staff and avoid introducing human intervention and errors.
Insider or employee cyber and security threats are increasingly a concern for all large companies, including ours. CGI is continuously working to install new, and upgrade its existing, information technology systems and provide member awareness training around phishing, malware, and other cyber risks to ensure that the Company is protected, to the greatest extent possible, against cyber risks and security breaches. While CGI selects third-party vendors carefully, it does not control their actions. Any problems caused by these third parties, including those resulting from breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks and security breaches at a vendor could adversely affect our ability to deliver solutions and services to our clients and otherwise conduct business.
The Company and certain of its clients, contractors, business partners, vendors and other third parties use open-source services, which can entail risk to end-user security. These open source projects are often created and maintained by volunteers, who do not always have adequate resources and personnel for incident response and proactive maintenance even as their projects are critical to the internet economy. Vulnerabilities discovered in these open source services can be exploited by attackers, which could compromise our system infrastructure and/or lead to a loss or breach of personal and/or proprietary information, financial loss, and other irreversible harm.
While our liability insurance policy covers cyber risks, there is no assurance that such insurance coverage will be sufficient in type or amount to cover the costs, damages, liabilities or losses that can result from security breaches, cyber-attacks and other related breaches. As the cyber threat landscape evolves, and CGI and our clients increase our digital footprint, we may find it necessary to make additional significant investments to protect data and infrastructure. Occurrence of any of the aforementioned security threats could expose the Company, our clients or other third parties to potential liability, litigation, and regulatory action, in addition to loss of client confidence, loss of existing or potential clients, loss of sensitive government contracts, damage to brand and reputation, and other financial loss.
Damage to our reputation may harm our ability to obtain new clients and retain our existing clients.
CGIs reputation as a capable and trustworthy service provider and long-term business partner is key to our ability to compete effectively in the market for IT services. The nature of our operations exposes us to the potential loss, unauthorized access to, or destruction of our clients information, as well as temporary service interruptions. Depending on the nature of the information or services, such events may have a negative impact on how the Company is perceived in the marketplace. Under such circumstances, our ability to obtain new clients and retain existing clients could suffer with a resulting impact on our revenue and net earnings.
Our inability to meet regulatory requirements and/or stakeholders expectations of disclosure, management and implementation of ESG initiatives and standards, could have an adverse effect on our business.
Perceptions with respect to environmental, social and governance approaches have changed and certain shareholders, investors, clients, members and other stakeholders agree that these issues have become a current and imminent concern. As such, perceptions of our operations held by our stakeholders may depend, in part, on the environmental, social and governance (ESG) initiatives and standards that we have chosen to implement, and whether or not we meet them.
Although we actively manage a broad range of ESG matters, including the potential social and environmental impact of our business, there can be no certainty that we will manage such issues effectively, or that we will successfully meet evolving regulation and/or stakeholder expectations, which in turn could affect the Companys market outlook, brand, reputation, competitiveness and financial outlook. Increased public awareness, regulatory expectations, continuing reforms pertaining to mandatory ESG-related disclosure, and growing concerns about climate change and the global transition to a low carbon economy, create a new and evolving set of compliance risks.
We have set a number of ambitious ESG targets to monitor our ESG performance and align our strategic imperatives. Effective management of these ESG targets is a component of good ESG practices, which are an important measure of
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corporate performance and value creation. However, our ability to achieve these targets depends on many factors and is subject to many risks that could cause our assumptions or estimates to be inaccurate and cause actual results or events to differ materially from those expressed in, or implied by, these targets. Failure to effectively manage and sufficiently report ESG matters could lead to negative business, financial, legal and regulatory consequences for the Company.
Our revenue and profitability may decline and the accuracy of our financial reporting may be impaired if we fail to design, implement, monitor and maintain effective internal controls.
Due to the inherent limitations of internal controls including the circumvention or overriding of controls, or fraud, there can only be reasonable assurance that the Companys internal controls will detect and prevent a misstatement. If the Company is unable to design, implement, monitor and maintain effective internal controls throughout its different business environments, the efficiency of our operations might suffer, resulting in a decline in revenue and profitability, and the accuracy of our financial reporting could be impaired.
Future funding requirements may affect our business and growth opportunities and we may not have access to favourable financing opportunities in the future.
The Companys future growth is contingent on the execution of its business strategy, which, in turn, is dependent on its ability to grow the business organically as well as through business acquisitions. In the event we would need to raise additional funds through equity or debt financing to fund any currently unidentified or unplanned future acquisitions and other growth opportunities, there can be no assurance that such financing will be available in amounts and on terms acceptable to us. Factors such as capital market disruptions, inflation, recession, political, economic and financial market instability, government policies, central bank monetary policies, and changes to bank regulations, could reduce the availability of capital or increase the cost of such capital. Our ability to raise the required funding depends on prevailing market conditions, the capacity of the capital markets to meet our equity and/or debt financing needs in a timely fashion and on the basis of interest rates and/or share prices that are reasonable in the context of our commercial objectives. Increasing interest rates, volatility in our share price, rising inflation, and the capacity of our current lenders to meet our additional liquidity requirements are all factors that may have a material adverse effect on any acquisitions or growth activities that we may, in the future, identify or plan. If we are unable to obtain the necessary funding, we may be unable to achieve our growth objectives.
The inability to service our debt and other financial obligations, or our inability to fulfill our financial covenants, could have a material adverse effect on our business, financial condition and results of operations.
The Company has a substantial amount of debt and significant interest payment requirements. A portion of cash flows from operations goes to the payment of interest on the Companys indebtedness. The Companys ability to service its debt and other financial obligations is affected by prevailing economic conditions in the markets that we serve and financial, business and other factors, many of which are beyond our control. We may be unable to generate sufficient cash flow from operations and future borrowings or other financing may be unavailable in an amount sufficient to enable us to fund our future financial obligations or our other liquidity needs. In addition, we are party to a number of financing agreements, including our credit facilities, and the indentures governing our senior unsecured notes, which agreements, indentures and instruments contain financial and other covenants, including covenants that require us to maintain financial ratios and/or other financial or other covenants. If we were to breach the covenants contained in our financing agreements, we may be required to redeem, repay, repurchase or refinance our existing debt obligations prior to their scheduled maturity and our ability to do so may be restricted or limited by the prevailing conditions in the capital markets, available liquidity and other factors. Our inability to service our debt and other financial obligations, or our inability to fulfill our financial or other covenants in our financing agreements, could have an adverse effect on our business, financial condition and results of operations.
We may be adversely affected by interest rate fluctuations.
Although a significant portion of the Companys indebtedness bears interest at fixed rates, the Company remains exposed to interest rate risk under certain of its credit facilities. If interest rates increase, debt service obligations on the variable rate
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indebtedness would increase even though the amount borrowed remained the same, and net income and cash flows would decrease, which could materially adversely affect the Companys financial condition and operating results.
We may be adversely affected by the discontinuation of U.S. LIBOR.
Global reform of major interest rate benchmarks is currently underway, including the discontinuation and replacement of the London Interbank Offered Rate (LIBOR). The interest rates on U.S. dollar loans under various financing agreements are subject to change when relevant U.S. LIBOR benchmark rates cease to exist. We have certain obligations that are indexed to U.S. LIBOR. As such, we have amended our financing agreements to allow us to reference the Secured Overnight Financing Rate (SOFR) as the primary benchmark rate as a fallback in anticipation of the discontinuation of U.S. LIBOR. Because SOFR is fundamentally different from U.S. LIBOR, it is unknown whether SOFR will attain market acceptance as a replacement for U.S. LIBOR and there is no assurance as to how SOFR may perform or that it is a comparable substitute for U.S. LIBOR. As a result, we cannot reasonably predict the potential effect of the establishment of SOFR or other alternative reference rates on our business, financial condition or results of operations.
Changes in the Companys creditworthiness or credit ratings could affect the cost at which the Company can access capital or credit markets.
The Company and each of the U.S. dollar denominated and Canadian dollar denominated senior unsecured notes received credit ratings. Credit ratings are generally evaluated and determined by independent third parties and may be impacted by events outside of the Companys control, as well as other material decisions made by the Company. Credit rating agencies perform independent analysis when assigning credit ratings and such analysis includes a number of criteria. Such criteria are reviewed on an on-going basis and are therefore subject to change. Any rating assigned to the Company or to our debt securities may be revised or withdrawn entirely by a rating agency if, in that rating agencys judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. Real or anticipated changes in the perceived creditworthiness of the Company and/or in the credit rating of its debt obligations could affect the market value of such debt obligations and the ability of the Company to access capital or credit markets, and/or the cost at which it can do so.
We may be adversely affected by currency fluctuations.
The majority of our revenue and costs are denominated in currencies other than the Canadian dollar. Foreign exchange fluctuations impact the results of our operations as they are reported in Canadian dollars. This risk is partially mitigated by a natural hedge in matching our costs with revenue denominated in the same currency and through the use of derivatives in our global hedging strategy. However, as we continue our global expansion, natural hedges may begin to diminish and the use of hedging contracts exposes us to the risk that financial institutions could fail to perform their obligations under our hedging instruments. Furthermore, there can be no assurance that our hedging strategy and arrangements will offset the impact of fluctuations in currency exchange rates, which could materially adversely affect our business revenues, results of operations, financial condition or prospects. Other than the use of financial products to deliver on our hedging strategy, we do not trade derivative financial instruments.
Our functional and reporting currency is the Canadian dollar. As such, our European, U.S., U.K., Asian and Australian investments, operations and assets are exposed to net change in currency exchange rates. Volatility in exchange rates could have an adverse effect on our business, financial condition and results of operations.
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The Company is involved in legal proceedings, audits, claims and litigation arising in the ordinary course of its business. Certain of these matters seek damages in significant amounts. Although the outcome of such matters is not predictable with assurance, the Company has no reason to believe that the disposition of any such current matter could reasonably be expected to have a material adverse effect on the Companys financial position, results of operations or the ability to carry on any of its business activities.
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Transfer Agent
Computershare Investor Services Inc.
+1(800) 564-6253
Investor Relations
Kevin Linder
Senior Vice-President, Investor Relations
Telephone: +1(905) 973-8363
kevin.linder@cgi.com
1350 René-Lévesque Boulevard West
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Montréal, Quebec
H3G 1T4
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cgi.com
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Exhibit 99.4
CERTIFICATION
I, George D. Schindler, certify that:
1. | I have reviewed this annual report on Form 40-F of CGI Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; |
4. | The issuers other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the issuers disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the issuers internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuers internal control over financial reporting; and |
5. | The issuers other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuers auditors and the audit committee of the issuers board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuers ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuers internal control over financial reporting. |
Date: December 16, 2022
/s/ George D. Schindler
George D. Schindler
President and Chief Executive Officer
Exhibit 99.5
CERTIFICATION
I, Steve Perron, certify that:
1. | I have reviewed this annual report on Form 40-F of CGI Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; |
4. | The issuers other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the issuers disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the issuers internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuers internal control over financial reporting; and |
5. | The issuers other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuers auditors and the audit committee of the issuers board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuers ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuers internal control over financial reporting. |
Date: December 16, 2022 |
/s/ Steve Perron | |
Steve Perron | ||
Executive Vice-President and | ||
Chief Financial Officer |
Exhibit 99.6
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Annual Report on Form 40-F for the fiscal year ended September 30, 2022 (the Report) by CGI Inc. (the Company), the undersigned, as the Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:
| the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
| the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: December 16, 2022 |
/s/ George D. Schindler |
George D. Schindler |
President and Chief Executive Officer |
Exhibit 99.7
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Annual Report on Form 40-F for the fiscal year ended September 30, 2022 (the Report) by CGI Inc. (the Company), the undersigned, as the Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:
| the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
| the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: December 16, 2022 |
/s/ Steve Perron |
Steve Perron |
Executive Vice-President and |
Chief Financial Officer |
|
Exhibit 99.8 |
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in this Annual Report on Form 40-F for the year ended September 30, 2022 of CGI Inc. of our report dated November 8, 2022, relating to the consolidated financial statements and the effectiveness of internal control over financial reporting, which appears in Exhibit 99.2 incorporated by reference in this Annual Report on Form 40-F.
We also consent to the incorporation by reference in the Registration Statements on Form S-8 Nos. 333-197742, 333-220741, 333-261831 and 333-261832 of CGI Inc. of our report dated November 8, 2022 referred to above.
We also consent to reference to us under the heading Interests of Experts which appears in Exhibit 99.1 incorporated by reference in this Annual Report on Form 40-F, which is incorporated by reference in such Registration Statements.
/s/ PricewaterhouseCoopers LLP
Montréal, Canada
December 16, 2022
PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.
1250 René-Lévesque Boulevard West, Suite 2500, Montréal, Quebec, Canada H3B 4Y1
T: +1 514 205 5000, F: +1 514 876 1502, www.pwc.com/ca
PwC refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.