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CGI Group, Inc. (GIB)
Q2 2019 Earnings Conference Call
May 01, 2019 09:00 AM ET
Lorne Gorber - EVP, Investor and Public Relations
François Boulanger - EVP and CFO
George Schindler - President and CEO
Conference Call Participants
Thanos Moschopoulos - BMO Capital Markets
Steven Lee - Raymond James
Richard Tse - National Bank Financial
Daniel Chan - TD Securities
Phillip Huang - Barclays
Paul Treiber - RBC Capital Markets
Robert Young - Canaccord Genuity
Paul Steep - Scotia Capital
James Schneider - Goldman Sachs
Stephanie Price - CIBC
Howard Leung - Veritas Investors
Previous Statements by GIB
» CGI Group, Inc. (GIB) CEO George Schindler on Q1 2019 Results - Earnings Call Transcript
» CGI Group (GIB) Q4 2018 Results - Earnings Call Transcript
» CGI Group's (GIB) CEO George Schindler on Q3 2018 Results - Earnings Call Transcript
Thank you, Donna and good morning. With me to discuss CGI’s Second Quarter of Fiscal 2019 results are George Schindler, our President and CEO; and François Boulanger, Executive Vice President and CFO.
This call is being broadcast on cgi.com and recorded live at 9:00 AM, Eastern Time on Wednesday, May 1st, 2019. Supplemental slides as well as the press release we issued earlier this morning are available for download along with our Q2 MD&A, financial statements and accompanying notes, all of which have been filed with both SEDAR and EDGAR.
Please note that some statements made on the call may be 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.
The complete Safe Harbor statement is available on 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 the 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 in Canadian dollars, unless otherwise noted.
I'll turn it over to François now to review our Q2 financials, and then George will comment on operational and strategic highlights as well as our outlook. François?
Thank you, Lorne and good morning everyone. I'm pleased to share our results for Q2 fiscal 2019. Revenue was $3.1 billion, an increase of $118 million or 4% compared with last year. On a constant currency basis, revenue grew 4.7% of which approximately 4% was organic.
Bookings in Q2 were $3.3 billion or 106% percent of revenue. Findings were driven in part by increases to the scope of services and outsourcing extensions and renewals. In addition, new clients have been leveraging our IP including HSBC and the U.S. Navy.
Again, systems integration and consulting remains strong, accounting for 71% of bookings in Q2. Perhaps even more telling is that 42% of these SI&C signings for new business, ideally positioning us to introduce more of our end-to-end services including outsourcing over time.
Over the last twelve months, total bookings were $13.3 billion dollars or 113% of revenue up, $1.2 billion from the same period last year.
IP bookings were strong, with book to bill of 118% and accounted for nearly 23% percent of revenue in Q2 compared to 21% last quarter.
With the addition of Kendall's portfolio of SI&C services, IP as a percentage of our revenue mix will reset downward in the coming quarters. Going forward, these additional channels provide us the opportunity to pull through our full suite of end-to-end services.
Adjusted EBIT was $454 million, representing a margin of 14.8% this compares with $424 million and a margin of 14.4% up 40 basis points from Q2 last year.
Our effective income tax rate in Q2 was stable at 25.4% compared to 25.5% last year. For the full fiscal year, we continue to expect the tax rate to be between 24.5% and 26.5%.
Turning now to net earnings. When adjusting for expenses of $6 million to complete the integration of CKC, net earnings grew to $324 million in the second quarter, up $21 million year-over-year.
Earnings per share on the same basis expanded by 12.5% to $1.17 per diluted share and net margin was 10.6% top 30 basis points from the year ago period. On a GAAP basis, net earnings were $318 million and EPS was $1.14, up 21% from $0.94 in Q2 last year.
Our operations generated $462 million in cash during the quarter, up $36 million representing 15.1% of revenue compared with 14.4% in Q2 last year. Over the last 12 months, we generated $1.5 billion or $5.34 in cash per share compared to $5 per share for the same period last year.
We ended the quarter with a DSO of 49 days, down 5 days sequentially due mostly to the seasonality of clients paying annual maintenance at the beginning of the calendar year.
Compared with the second quarter last year, our return on invested capital improved by a 140 basis points to 14.9%. As such, we continued allocating capital in the quarter to the opportunities with the highest returns.
We invested $83 million back into our business including the development of our IP and the ramp up on new contracts. We reduce our debt by $11 million. Net debt was $1.6 billion at the end of Q2 representing a net debt to capitalization ratio of 17.4%.