Good morning, everyone, once again. We have with us Mr. François Boulanger, COO at CGI. François, thanks a lot for joining us today. My pleasure. How's your day been? Good, good. Very good meetings this morning, good other ones this afternoon, and beautiful day in Toronto. I know. I think it's like, what, + 13? Yeah, yeah. We are enjoying this winter quite a lot, is what I would say. I'm sure Montreal's not been that bad as well. No, it's not that bad. Ok, so while we're talking about Canada, obviously CGI is a company that pretty much is very widely held in Canada, right? Yeah. Can you help us understand what are some of the current strategic priorities for CGI and for fiscal 2024, which looks like more of a year of stabilization than as much of a hockey stick growth year? Yeah, no, for sure, 2024 is a different year than the last couple of years. I don't think we're different than the overall industry and the macro trend. We saw some softness in the, I would say, the short-term investments, especially on perhaps the banking side. And again, that not just in Canada, but the banking industry across the world, but compensated by good growth coming from the government sector. So we think that we're close to bottom on that side. I think even in meeting with some of the CEOs on the banking side, and they are starting to say that we'll need to reinvest, we'll need to they cut the short-term investment, but they have pressure from regulators, they have pressure to come back and win some market share, so they'll need to invest back in the business. We're seeing that the next half, this last six months of the calendar year, we're seeing some growth that will come back. When it comes to the growth, and it's interesting, obviously, a lot of growth has pulled back broadly. What are some of the momentum that we talked about during the earnings call on the SI&C front? What are some of the discussions you've been having on that front lately? Yeah, but again, I think what's happening is that since revenue is stabilizing or going down a bit in some of these industries, the people to produce some bottom line and growth in the bottom line needs to talk about the cost and look at the cost. So they're a bit more critical on the return, if I can say, on these investments. So it's not just try to gain some market share, but how concrete we can see some improvement on the bottom line. So cost saving is a big discussion, and how can you produce short-term saving for their P&L. So that's still a lot of the discussion, again, in the financial sector, in the manufacturing sector. That's the bulk of the conversation today. We'll come back to some of that during the conversation the next 25 minutes here. But you lead the CGI's global CIO function, and that is responsible for the overall digital strategy. Could you elaborate on what are some of the key internal priorities on that front? And could you also talk to us about one of the very, very well-discussed topics right now is the AI-related initiatives across the company? Yeah, but you heard George, we did put money aside for improving our SG&A structure, so that's starting internally with the CIO. So we're naturally looking at how we can put more automation and using AI as a function or a technology to do that. I'll give you some examples with marketing. We are talking about we have so much data related to our bids, our solution that we implement across the world, and sometimes when we're asking for we need to do new bids, we need to have reference. So what did we do elsewhere? And with all the data that we have, having, for example, AI helping us to understand what we did elsewhere in the company, elsewhere in other countries, is a powerful tool. And so that's the kind of implementation that we're doing internally to help marketing and help and producing more reference at a cheaper price. So that's one. Also, more automation, naturally, in processes like in the finance side and the HR side and the recruitment side. So a lot of these functions need technology, and with the help of the CIO, we're implementing this to improve the quality of the service that these support functions can give at a cheaper price, naturally. Yeah, no, that's exciting. So CGI, it has a very long and distinguished history, obviously, as compared to some of the other IT services peers broadly across Canada, if you look at that. You've been through a lot of economic cycles in the past. So using your experience and some of the similarities and differences in this economic cycle versus prior, where do you see how do you see things progressing, and what do you see as some of the challenges or, say, benefits coming out of this economic cycle here? I would say it's pretty similar than the ones that we had in the past. Perhaps the only difference is that we're not in a recession this time. People are talking about recession. They're afraid about the recession, but it's not happening yet. But just the fact that people are talking about it, you see the slowdown to a certain point in the market. So for sure, what's similar to the other ones is that in these kinds of things, the short-term, yes, mandates have a tendency to slow down, but people want to, again, talk about their cost structure. So managed services is a big discussion. And I'm meeting a lot of clients here in Toronto and in North America, and the managed service discussion is there. And we signed, for example, at the beginning of the year, a Circle K, where we're supporting them now across the world. It was really, how can we reduce their costs, their delivery IT costs, while improving their quality of services? Because they had some challenge on that side. It took perhaps a year, a year and a half of discussion to arrive there, but we were able to close it. We have several discussions like that across the world on managed services. It's a bit longer, naturally, to close them, but when we're closing them, we're closing them for a long time. That's what's pretty similar from another cycle. It's interesting, so especially when it comes to while we're talking about managed services, I think we've had some discussions around IP being such an important element of SI&C, but even managed services business. Could you provide a little bit of color to the investors in the room about that? Totally. You're right, because again, more and more now of our IP is sold as in a SaaS model, so a long-term contract. So now we're, what, 60%-65% of our IP revenue that is sold as a SaaS services. So SaaS services, meaning we're sitting down with a client, we're implementing an ERP, and we'll manage that ERP for the next 10 years. And even to a certain point, a SaaS model is that if in 10 years they want to go elsewhere, they need to reinvest or do another big investment. So it has a tendency to be pretty sticky. And so that's why IP is still in the center of our strategy. And also, that's where the profitability is better than other services, because again, a client is choosing first your IP, even before talking about price. So already that sell is done. The price discussion is a lot easier after that. Yeah, no, and maybe we'll come back to the IP discussion a little later. But so with respect to a discussion on these economic cycles, CGI supports almost 30% or 35% of CGI's revenue comes from government contracts. U.S. elections are on the horizon. Where do you see some of the spending across these elections coming from? And could you elaborate on some of the key changes to the business stream over the next few quarters with respect to these? Yeah, good question. First of all, I'll talk overall on the government. You're right, 35% of our business is government. And while I was saying that we have some pressure on the financial sector in the last couple of quarters with some declines, you saw some growth, good growth, in the government side, in the federal side in the U.S., in the U.K. also, that the U.K. is pretty big in government. And you see some good growth in the U.S. and the U.K. related to that. As for the federal government, we're dealing with the U.S. federal government for the last 30 years and more. And Republican or Democrats, one thing is common is that they will continue to invest in IT. Some of it, perhaps more on the defense side, sometimes it's more on the social side, but it's not stopping. Since we are in both sides of the business, it's not necessarily a problem for us. We're also doing a lot of back office work in the government, so we'll do the ERP. We'll do a lot of fees-related also contracts. For example, we're doing visa for the U.S. government across several countries. That's not necessarily having an impact from a change of government or not. That needs to be done, and it will continue to happen in the future. François, I think one thing that I get asked quite a lot, and I would be interested in getting your take on that, is compared to the global IT players, what are some of the benefits CGI or what are some of the benefits CGI sees given its location, given its tenure, given its relationships as compared to the global IT players? I'm really curious to get your take on that. Yeah, one of our differentiators we're always saying is that we're a strong believer of the proximity model. And I'll give you the best example of government. Government doesn't want having the work done in India or the Philippines or in these countries. Some a bit, but majority, they want to have the business in their own country. So having a company like us, where we have still a good footprint in these countries, is very important for them. It's not saying that at the same time we have our nearshore strategy, where we'll have, for example, in the U.S., people in Alabama, people in Southwest Virginia, where you can have a cost saving versus being in Washington or New York or California. So it's still appealing for clients to have that. Same strategy in Canada. We have a small region where we have some pocket of people. I can be 200 in Drummondville. I can be 500 in Sherbrooke. And again, the strategy is to be linked with a university, to train these people sometimes in one or two or three specific technologies, and serving clients inside of that country, but sometimes also serving clients. For example, we have some U.S. clients that we're serving from Canada. So that's a strategy that I still think, for us, it's very good. And even in the large commercial managed services, you have clients who like to be still having the deciders close to them. And when you're doing managed services in Sweden, you can push some work in India, but having somebody Swedish talking Swedish to the client is still very important for them. And so that's one of the differentiators that we have. No, that's great. We'll shift gears a little bit. We'll talk about M&A. So obviously, that is one thing that's been top of my mind. I'm sure that's been top of investors' minds in general. Yeah, M&A has been one of the successful cornerstones for CGI. It's been a few quarters we've been looking for a transformational M&A. There's been quite a significant amount of dollars that CGI committed to M&A. Help us understand where are things going from an M&A standpoint, from the pipeline standpoint, and how do you see that evolving in the next few quarters? To be honest, I'll talk personally. I really thought that in the last 12 months, 18 months, that we would have been able to close more than we actually closed. The momentum is there. The activities are there. The sourcing is strong. Naturally, our team is looking for potential, but we have clients also that are giving us some leads. We have even now put a program in to have our own employees coming with leads. We actually closed a small one last year, but still a relevant one in Canada, where it actually came from a lead of an employee. We thought, and I thought, with the interest rate going up, that would put pressure in the machine to close more than what we actually closed. We had more due diligence. We had more discussion with clients. That's why we're doing due diligence. We're doing due diligence to come to conclusions sometimes that, no, it's not the right fit, or we need to change the price, and the target is not necessarily there to change the price. We are disciplined. We will stay disciplined. It's still a big part of our strategy. We still want to grow 50% by acquisition and 50% organically. It's not a change of strategy, but we won't do an acquisition to do an acquisition. I'll just say it clearly. With respect to the pipeline, are you seeing or potentially considering more metro market acquisitions, or would it be one large transformation? No, it's both. But we want to put, and we are putting a focus on the metro market one, especially in the U.S., for example. We didn't do a, it's not a big one, but we did one in Miami at the beginning of the fiscal year. And again, Miami was one of the places where we were underrepresented. And we said, that's a good company base there. We can have a good relationship. And so we decided to go there. So we have several metro markets like that. Chicago, I'll give you another example, is one that we would like to find a good player in that region because we're underrepresented. And you have a lot of companies' headquarters in Chicago. So that's the kind of strategy that we want to continue, a strategy that fuels also the organic side of the business. We had some very good examples in the past, one in Pittsburgh, for example, where you're purchasing a company. We were underrepresented in Pittsburgh. A good player there. They had a great relationship, for example, at PNC. And PNC, since then, we are growing a lot. It's one of our top clients now in the company. And it came really by this small acquisition, but with a great relationship. No, that's incredible. So are there certain segments and I know George talked about it briefly on the call as well. But are there certain segments where you feel you're underrepresented, and then considering where AI is going? Obviously, there's way too many AI companies right now. But do you think you could potentially fill some of those white spaces with acquisition, or would you rather grow organically on those fronts? On the technology, I'll say it both on different aspects. First of all, where we're focusing, it's more, like I always say, geographically and relationship-wise. So U.S. commercial is one place that we need to grow, and we want to grow by acquisition. U.K. commercial also, we're pretty strong on the government side. We would like to be stronger on the commercial side. Germany, another region where, what, 5,000-ish employees in Germany. For example, I'll give you France. We're 12,000. We can be easily the same number in Germany. It's the biggest country in Europe on the economic side. So that's the focus where we're putting. On the technology side, yes, we want to invest in IP and some of the technology. But again, we don't want to buy technology to buy technology. Yes, we're putting a lot of effort on AI. Yes, we're training our people on AI. Yes, we'll hire some AI specialists. But on the AI technology, for example, we will deal with Google. We will deal with Microsoft. We will deal with all these technology companies who have AI expertise. The idea is that, again, we are a service company serving clients to resolve business issues using IT. And again, we'll use. One day it can be Microsoft technology. The other day it can be Google technology. And sometimes it's our own technology or based on these companies, but modified for our purposes or for some specific clients. So it will be all of the above. Yeah, no, that's great. While we're discussing these different geographies and segments, could you give us a sense of what the demand environment is like? When we look at some of the global peers, some of them talk about Europe being stronger than North America, others see strength in North America. Could you provide some color there? We don't see necessarily a big difference between the countries. Technically, I think Germany now is in recession, so perhaps some pressure there. But we're seeing more of the trend, really, by industry. When I was saying that the financial sector is a certain headwind for us in the last couple of quarters, it's true everywhere. It's not just true in Canada or in the U.S., but we had some pressure in France, for example. And versus government, it's strong mostly everywhere in the company. So it's mostly by industry, I would say. And manufacturing, for sure. Perhaps manufacturing in Germany, it's a little bit weaker. But in other places, like in France, it's still strong. So I would say I don't see that much of differences by country. It's more by industry than anything else. Yeah, no, that's good color. So I want to talk to you a little bit more about AsiaPac. So you were recently on a visit to the APAC region. Yeah, three weeks ago. Yeah, historically, APAC has been a delivery center for the company. However, considering where the growth is trending, I understand you're saying there's no real disparity between growth across geographies, but APAC broadly has been seeing a significant growth lately. Could CGI potentially start to see increased revenue generation coming out of APAC beyond it just being an offshoring, nearshoring center? We're not selling to a specific India market, but we are dealing with a lot of captive in India. I'll give you a couple of names, for example, Shell. Shell has a big captive. Shell is a big client of us. They have a captive. And the captive is also a client of us. So on that level, yes, we have several companies or clients where they have captive in India, and they are a client of us directly in India. And that's growing. That's growing even, I would say, pretty fast. And that will continue in the future. And some of it is also we are creating sometimes captive for companies. So that's another service also that we're coming. India is not just a cost lever anymore. It's really also a place where to find talent. They were telling me again, we're still having 1 million and more students going out every year in IT in India. So just to find capabilities, you cannot go around India. So that's why you see the outpaced growth that we have there versus the other geography. So on that same topic, do you see APAC, India for that matter, being still a profitable geography when it comes to things like wage inflation, labor shortage, or are you seeing the gaps starting to close there? Inflation, we talk about inflation in India for decades now. And I would say, first of all, inflation did go down, where perhaps before it was 9%-10%, we're more in the 5%-6% inflation on salary versus several years ago. And to be honest, compensated for the last decades by rupees going down. So yes, inflation is going up, but the fact that the rupees is going down compensates for that inflation. So that's why you didn't see that much of impact. So today, it's still, I would say, what, 30% of the cost in India versus in North America. So that's pretty stable. And again, with the people coming out of universities, that's where salary didn't change that much, I would say, in the last five to 10 years. So the entry salary, when people are going out of university, didn't grow that much. With the discipline of juniorizing and changing or keeping the pyramid of people in these projects is helping to manage the cost. Yeah, no, that's good color. So while we're talking about the cost management, and we talked about some of the cost optimization initiatives that the company has been driving over the past few quarters here, could you talk to us a little bit more about the EBIT margins? They have trended in that 16% range over the recent quarters. I think it's me. How should the markets perceive the margin trajectory of the company going forward? And could we potentially expect to see some margin expansion on a year-over-year basis? Margin, for me, it's never a ceiling. We can always improve the margin. You see the structure of CGI. We have segments like Canada where we're producing a 20%-21% margin. We have other places like Scandinavia that were barely or not still doing double-digit EBIT margin. So again, I'm not expecting margin in Canada to go up big time. But I don't know why Scandinavia, for example, in some of these countries cannot be at the middle or mid-teen EBIT margin. And if they're capable of going there, naturally, it will improve the margin of the company. So I think in some of the places, we still have a lot of space to grow the EBIT margin. Year over year, it's not something; it's a journey. It's not something you can change from one year to the other. But we still think, for example, we think in the next year, we can still improve by 10 or 20 basis points the EBIT margin. And again, it's a journey that we feel that we can see some improvement again in the future. Yeah, and while we're talking about the margin and the profitability, I think one thing that we hear a lot or get asked quite a lot from investors is on the incentive structure of the company. So how can we be assured that the incentive structure of the employees, and especially the executives, is in line with their shareholder profitability? Yeah, first of all, you know we're a founder-led company. So for sales and for the company in general, the long-term goals are the most important. So we don't want to pay people or think just short-term, but we're asking the people to think about the long-term. So that's why one of our strategies and one of our learnings that we're giving to the people internally is the balance of our stakeholders. We have three stakeholders: our shareholders, the client, and the employees. And we're trying to take always a decision that is the best or the best equilibrium for the three of them. So same thing for incentive. Incentive is based naturally on target, on profitability, and revenue growth target. But it's also based on the score of our clients on our surveys and also the score of our members. To be sure that we're taking a decision that it's also good for them and not just good for the shareholders because that would be just short-term. In a nutshell, we are talking about revenue growth, and we're talking about margin. We're not talking about EPS growth. So again, the use of our cash, for example, to do some share buyback, doesn't have any impact on the incentive of the company. It's really on the revenue growth that it's based naturally on the budget discussion that we have on a yearly basis and the margin, the EBIT margin that we need to produce as a minimum. Yeah, that's good. While we're talking about the profitability here, my last question here would be if you could talk to us a little bit more about the capital allocation priorities. NCIB obviously has been active. Recent surges, buyback was obviously one of the topics of discussion there. What are some of the ongoing capital allocation priorities, obviously M&A, internal reinvestment all included? Again, we're producing, what, $2.1-$2.2 billion of cash from ops. We're putting back in the company $400-$500 million. So we have a free cash flow of $1.6-$1.7 billion. Our strategy, again, is acquisition. We still think we still have a lot of potential for acquisition. So that's the first priority. And if it's not happening, for sure, we'll continue to do some share buyback. We like the flexibility of that tool. And that's why we continue on that side. No, not dividend for now. That will be for another, again, year discussion. We have that yearly discussion. But we still think it's not the right time to do a dividend. One of our coverage companies announced a special dividend today. So maybe that could be a possibility. Ok, perhaps we're not there yet for now. We'll continue the conversation. But like I had the question again this morning from some of these investors, and I'm turning back the question, what do you think? And most of the time, they're saying, well, you don't necessarily need to have a dividend. So that's why for now we didn't do one. And as for Serge, Serge did one in 2018. He did one this year. It's, again, more for family purposes. He still has more than 50% of the vote. He still has more than 10% of participation. He's a very big shareholder. And the intent is that he'll stay a very big shareholder for a very long time. We could potentially expect to see small parts of NCIB being used for such buybacks in future? Like I'm saying, Serge did one in 2018, the last one before. He did one this year. I won't comment when is the next time he'll do one. But like I'm saying, he's at a level that he wants to stay there. So I don't think you'll see a lot of big ones in the future. And in the past, we did some with La Caisse, CDPQ. They are major shareholders. And again, what we did in the past is creating space for them. If another big one is happening and that we need to issue shares, they can be one of the players that we can ask them to participate. But if not, it's business as usual. That's good. With that, we are at time. Thanks a lot for your time, François. We will now break for lunch. Our next session is "Review and Outlook of Canadian Telecom Policy" at 12:30 P.M. We look forward to seeing you there. Thanks, everyone. Thank you.