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CGI Group Inc. (GIB)
Q3 2018 Results Earnings Conference Call
August 1, 2018, 09:00 AM ET
Lorne Gorber - Executive Vice President, Global Communications and IR
George Schindler - President and CEO
François Boulanger - Executive Vice President and CFO
Thanos Moschopoulos - BMO Capital Markets
Steven Li - Raymond James
Richard Tse - National Bank Financial
Maher Yaghi - Desjardins Securities
Stephanie Price - CIBC
Paul Treiber - RBC Capital Markets
Paul Steep - Scotia Capital
Robert Young - Canaccord Genuity
Howard Leung - Veritas Investment Research
Ralph Garcea - Echelon Wealth Partners
Good morning ladies and gentlemen, and welcome to the CGI Third Quarter Fiscal 2018 Conference Call.
I would now like to turn the meeting over to Mr. Lorne Gorber, Executive Vice President, Investor and Public Relations. Please go ahead, Mr. Gorber.
Previous Statements by GIB
» CGI Group (GIB) Q2 2018 Results - Earnings Call Transcript
» CGI Group's (GIB) CEO George Schindler on Q1 2018 Results - Earnings Call Transcript
» CGI Group (GIB) Q4 2017 Results - Earnings Call Transcript
» CGI Group (GIB) Q3 2017 Results - Earnings Call Transcript
The press release we issued earlier this morning, as well as our Q3 MD&A, financial statements, and accompanying notes, all of which have been filed with both SEDAR and EDGAR are available for download on our website along with supplemental slides. Please note that some statements made on the call maybe forward-looking. Actual events or results may differ materially from those expressed or implied and CGI disclaims any intent or obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise except as required by applicable laws.
The complete Safe Harbor statement is available in both our MD&A and press release, as well as on cgi.com. We encourage our investors to read it in its entirety, and to refer to the risks and uncertainties section of our MD&A for a description of the risks that could affect the company. We are reporting our financial results in accordance with International Financial Reporting Standards or IFRS.
We will also discuss non-GAAP performance measures which should be viewed as supplemental. The MD&A contains definitions of each one used in our reporting. All of the dollar figures expressed on this call are Canadian unless otherwise noted.
I'll turn it over to François now to review our Q3 financials and then George will comment on our operational highlights and our strategic outlook. François?
Thank you Lorne, and good morning everyone. I'm pleased to share our results for Q3 fiscal 2018.
Revenue was $2.9 billion, an increase of $104 million or 3.7% compared with Q3 last year. On a constant currency basis, revenue grew 3.8% of which 1% was organic. Bookings in Q3 were $3.5 billion or 118% of revenue of which 57% were new projects or new clients.
Over the last 12 months, total bookings were $12.9 billion or 114% of revenue bringing the total backlog to $22.4 billion up $358 million sequentially and $1.6 billion over the last 12 months. Adjusted EBIT was up into Q3 to $435 million compared with $399 million last year representing a year-over-year increase of 9%. Adjusted EBIT margin improved 70 basis points from 14.1% last year to 14.8%.
Regarding the restructuring program announced last year, we incurred expenses of $20 million in the quarter. To-date we have expensed $169 million or approximately 90% of the program and expect to complete all remaining actions before year-end. We incurred integration expenses of $8.5 million in Q3 as we fully implement the CGI model into the operations associated with our most recent acquisitions.
Turning to income tax, our effective rate in Q3 was 25.7% down from 27.1% last year largely the results of U.S. tax reform. We expect the fourth quarter tax rate to be between 25% and 26%. Adjusting for integration and restructuring expenses, net earnings grew to $310 million in the third quarter up $31 million year-over-year and resulting in a net margin of 10.5%, 70 basis points higher than last year.
EPS on the same basis expanded by 16.1% to $1.08 per diluted share. On a GAAP basis our Q3 net earnings improved to $288 million and EPS was $1 up from $0.92 in Q3 last year.
Our operations generated $317 million in cash during the quarter or 10.8% of revenue. This is inclusive of $22 million and restructuring payments. This compared to $291 million last year or 10.2% of revenue. And over the last 12 months, cash generated from our operations increased to over $1.5 billion or $5.16 per share representing 13.3% of revenue.
We ended the quarter with a DSO of 50 days compared to 46 in Q2 2018 primarily due to the timing of large SI&C milestone billing. With more SI&C revenue in Q3, they are less prepayments from outsourcing clients which temporarily impacted DSO. Our target remains at 45 days and we expect the mix to rebalance over the next several quarters.
In the third quarter, we continued making strategic investment that will advance our business goals. We invested $85 million back into our business including the development of our IP and ramping up of new engagements. We invested $43 million to acquire Facilité Informatique, an IT consulting services firm with a strong local presence of 350 consultants and digital specialists in Montréal and Québec City.