CGI Inc (GIB) 2017 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the CGI first-quarter FY17 conference call.

I would now like to turn the meeting over to Mr. Lorne Gorber, Executive Vice President, Global Communications and Investor Relations. Please go ahead, Mr. Gorber.

Thank you, Melanie, and good morning. With me to discuss CGI's first quarter FY17 results are George Schindler, our President and CEO, and Francois Boulanger, Executive Vice President and CFO.

This call is being broadcast on CGI.com and recorded live at 9 AM Eastern time on Wednesday, February 1, 2017. Supplemental slides as well as the press release we issued earlier this morning are available for download along with our Q1 MD&A financial statements and accompanying notes, all of which are being 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. A 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.

We are reporting our financial results in accordance with international financial reporting standards or IFRS. As before, we'll 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.

As most of you know, we're also hosting our AGM this morning, so we're going to keep our comments brief in order to take as many questions as we can, and to do so within the next 45 minutes. I'll turn it over to Francois first to review our Q1 financials, and then George will comment on both strategic and operational highlights. So with that, Francois?

Thank you, Lorne, and good morning, everyone. I'm pleased to share our results for Q1 FY17.

For the quarter, revenue was CAD2.7 billion, up 3.7% on a constant currency basis and stable year-over-year when considering the negative impact of CAD107 million in currency fluctuations, mainly coming from the pound. We booked CAD3 billion during the first quarter, representing 111% of revenue, with close to 40% coming from new business, and with nearly CAD1 billion from financial services clients. Over the last 12 months, total booking improved to CAD11.5 billion, for book-to-bill of 108%.

Adjusted EBIT was CAD397 million, up 3.3% from last year, while our EBIT margin expanded by 50 basis points to 14.8%. The margin expansion was driven by an increased use of our global delivery network, additional R&D tax credit, and the favorable renegotiation of a lossmaking contract in the UK.

Our effective tax rate in Q1 excluding specific items was 26.6%. We continue to expect a range of 27% to 29% for the full fiscal year.

During the quarter, CAD3 million of integration costs were incurred related to the acquisition of Collaborative Consulting. We expect to incur approximately CAD1 million of expenses this quarter to complete the integration. Excluding the Q1 integration costs, net earnings for the quarter were CAD278 million, up 4.8% from last year, while net margin increased by 50 basis points to 10.4%.

EPS excluding integration costs were CAD0.90 per diluted share, up from CAD0.84 last year. On a GAAP basis, net earnings were CAD276 million, up 16% from Q1 2016. EPS was CAD0.89, up 18.7% from CAD0.75 last year.

Turning to cash, our operations generated CAD350 million in the first quarter, or 13.1% of revenue. Over the last 12 months, we have generated CAD1.4 billion, or CAD4.26 per share.

We continue to use our cash in the most accretive way. In addition to investing back into our own business, primarily our IP, we also acquired Collaborative Consulting midway through the quarter for $113 or CAD151 million; invested CAD350 million of buying back 5.1 million shares; and made a scheduled long-term debt payment of CAD114 million to finish Q1 with net debt of CAD1.5 billion, or CAD82 million lower than last year. As a result, net debt to capitalization was 18.2%.

We continue to view share buybacks as an accretive use of cash. As such, this morning our Board of Directors approved the extension of our NCIB until February 2018. This will give us the flexibility to purchase 21.2 million shares over the next 12 months. Under the current NCIB, we have invested CAD777 million, repurchasing 13 million shares at an average price of CAD58.83. With our revolving credit facility fully accessible and over CAD300 million in cash, we have more than CAD1.8 billion in readily available liquidity, and access to more as needed in order to invest in our build and buy strategy.

Now I'll turn the call over to George.

Thank you, Francois, and good morning, everyone.

I am pleased with the start to our fiscal year. In the first quarter, revenue growth accelerated to 3.7% at constant currency, the third consecutive quarter of growth. Margin expanded to 14.8%. EPS ex items increased to CAD0.90, our operations generated CAD350 million in cash, and clients awarded us with CAD3 billion in new contracts.

We continue to make progress towards our IP30 goal. IP services and solutions account for 21% of revenue in Q1. That's compared with 17% in the same quarter last year and made up 23% of total bookings.

These strong results are driven by the rapid shift to digital taking place for our clients and for our industry. Our end to end expertise is essential to help clients address the complexity of building today's digital organization. We have both the experience and expertise required to connect legacy business and technologies with clients' digital road maps.

With that in mind, let's briefly review the Q1 highlights of our global operations, beginning in Europe. In France, revenue grew 11%, the fifth consecutive quarter of growth. EBIT margin remained strong at 12.5%, even as we make investments to further build a backlog of recurring revenue. Bookings were 117% of revenue, as we remain an expert of choice for major clients such as [solvay] and Societe Generale.

Our teams in France continue demonstrating the power of the CGI proximity model. Consulting-led relationships and engagements are driving new, larger transformational outsourcing deals. In fact, consulting services continued to grow in Q1, while the operations recurring revenue expanded significantly year-over-year.

In the UK, revenue grew 16% as large scale projects across the UK public sector continued to ramp up. EBIT margin expanded to 14.5%, and we booked CAD232 million primarily related to government and utilities. We did experience industrywide delays on commercial awards, but remain optimistic on the opportunities in this market, both to build and to buy.

In this evolving UK environment, incumbency is key, particularly in the public sector. We continue winning strategic and visible deals that leverage our relationships and government framework vehicles in this sector.

For example, we were awarded work with England's environmental agency under one of our 40 framework vehicles, to design, deliver, and run their new future flood forecasting system. In addition, in our important space practice, the UK government recently committed EUR1.4 billion over the next five years to the European Space Agency. This will help ensure the continuity of our UK activities in this market, in particular our work on the Galileo and earth observation projects.

In the Nordics, revenue was down 1.8% as our teams continue executing on strategy, shifting their mix from a traditional infrastructure model towards software as a service, including the CGI IP, and also to higher end digital SINC. In fact, infrastructure revenue across the Nordics contracted year-over-year, reflecting this shift; however our consulting services in the region had positive growth.

EBIT margin held at 11%, and bookings were strong at 119%. With high-quality bookings now converting to revenue, we are confident that the Nordic operation is on the path to profitable growth.

In Eastern, Central, and Southern Europe, book-to-bill was also strong at 110%. Revenue was down 4% and EBIT margin was 7.5%. As previously highlighted, we continue to invest and undergo transformational activities across this region in order to address increasing but shifting client demand.

As our bookings the last few quarters suggest, there is demand for our digital services and solutions. In fact, we continue seeing positive growth in Germany, Belgium, and now across Eastern Europe. In the Netherlands, there are pockets of growth in the transportation and logistics market where, for example, we partner with DHL on their digital journey.

And in Asia-Pacific, revenue grew 13% on the continued strength in global delivery, and EBIT margin increased by 480 basis points to 21%. Offshore, our teams in India and the Philippines continue growing and expanding profitably, reflecting investments in IP, particularly in robotics process automation, demonstrating their ability to work closely with our client proximity teams.

Moving to North America, in Canada, revenue grew 3% as recent outsourcing deals transitioned successfully, with additional work from new deals starting in Q1. EBIT margin remained strong at 22%. And bookings were once again strong at 130% of revenue.

For example, we assigned extensions and/or expansions with Industrial Alliance, Yellow Pages, and CDPQ, as they enlist our help to execute their digital road maps. Over the last 12 months, book-to-bill stands at 147%.

And finally in the US, revenue is stable with CGI federal showing improvement. EBIT margin was 16% and book-to-bill was 119%, the second consecutive quarter of strength. With the integration of Collaborative Consulting nearly complete, we are very pleased with the new team's performance and the opportunities that their digital expertise is already creating in the commercial space.

I would also like to highlight the addition of two new domestic delivery centers in the US, one in Maine and the other in Wisconsin. We now have six onshore delivery centers, creating high-quality American jobs to meet increasing client demand for domestic sourcing options.

To summarize our global operations, we see many opportunities to build and buy in 2017. CGI is one of the few global firms with the talent, the scale, and the experience to lead clients through their digital transformation journey.

Thank you for your continued interest and support. Let's go to the questions now, Lorne.

Melanie, if we could pull up the questions from the investment community, please.

(Operator Instructions)

Richard Tse, National Bank Financial.

Yes. Thank you. George, I wanted to get a better handle on your positioning in digital transformation.

So if you look across your 5,000 customers, what percentage of them have actually engaged you guys to work on these digital transformation projects here? Can you give us a bit of color on that?

Yes. I would say that by and large, Richard, most of our growth and all of our new deals have some element of digital transformation in them. We talked on the last call about the results of our Global 1000. It really is the driver of most initiatives with our clients, particularly on the commercial side.

We don't split it out, as you know, and part of that is because it's part and parcel to what we're doing. And as I mentioned, I believe a differentiator for us in this market is our knowledge of the legacy, and being able to connect that in, because this transformation is exactly that, it's a transformation. It's not just digital point solutions. It really is getting into the guts of the organization and linking that in with their digital initiatives. So it is a driver.

Okay. And then in terms of Europe, it seems that you guys are bucking the trend in there, as the UK and in France in terms of the progress there. So would the bulk of that also be in digital transformation? Or is it something different than that?

No, it's a combination with both our existing and new customers. But as I mentioned, in France specifically, we do have a very mature business consulting group that is helping to engage with clients to even create their digital road maps, which then leads to these digital transformation projects.

And likewise in the UK. So that's some of the strength, even outside of some of the one-timers at that Francois talked about.

Okay. And then last one for me, it might be a difficult one to answer but do you have any early indications, given the change in the US administration, from your existing or prospective clients as to how that might impact their decisions here going forward the next 12 months?

No, I think it's obviously early days. We like our positioning, and it's not as a reaction to this administration's policies or any administration. We believe the right way to serve our clients is that proximity model.

I think given some of the early views of the new administration, that plays a very well because we have most of our 11,000 people in the US, are based in the US. And as I mentioned, we now have six onshore delivery centers. So it plays right into our model.

That's great. Thanks a lot, George.

Thanks, Richard.

Steven Li, Raymond James.

Thank you. Hey, George, good start in Q1 here with the organic growth. (Technical difficulty) -- the industry -- has CGI is positioned. We've heard from some of your, of the Indian heritage vendors about -- traditional services --

You're breaking up a little bit there, Steve. I just want to make sure we understood the question.

Yes. Sorry. I'm trying to get, yes, your thoughts on the some of the pricing pressure on traditional services as software automation increase? I want to get your thoughts on that. And also if you touch on the visa reforms in the US, is that going to be a cost headwind for CGI? Thanks.

Yes. So on your first question, yes, the demand is shifting, but we see this is a tailwind for CGI because given some of the outsourcing contracts we have, we have built in efficiency expectations, so the automation actually helps us achieve that and actually increases our return, doesn't decrease them. But then of course some of the consultant-led engagements and actual transformations requires more on-site, that's a different price point and actually we see opportunities there.

On the visa side, as I mentioned, our model is primarily to have in-country resources, complemented by both onshore in-country delivery centers, as well as offshore. We always had a balanced, blended model. We're very under leveraged, I guess, in comparison to -- or underexposed, I should say, as compared to most of our competitors from a visa perspective.

So there's no expectation of any increased cost there. In fact, it's probably a tailwind.

Okay. And just a quick one, George, on ECS, it's one of your smaller geos but it's been underperforming. Any thoughts yet as you through 2017? What do you see there?

Well I remain positive. If you look at the demand in that area, the growth in some of the larger countries that we will continue to look at both building and buying to increase our strength there. And then the overall book-to-bill, again I think some of the investments we've made are paying off, and we'll continue improving that operation, I'm confident.

Great. Thanks.

Thanks, Steve.

Thanos Moschopoulos, BMO Capital Markets.

Hello, good morning. George, now that growth seems to be accelerating, can you help us understand what that should mean for the margin trajectory?

I'm assuming that growth should be a good thing from the perspective of utilization rates, but will there be some offset from higher bidding costs or from project startup costs? Would that be a mitigating factor on margin expansion?

I think in general, our model, they should go in lockstep. There are some investments that we will continue to make, but we'll make that in concert with that growth. So I don't see any change in our historical views there. In fact, as I mentioned earlier, we're seeing both. We're seeing both expansion from our operational excellence, the type of work, the mix, but also then the revenue growth. So we have multiple levers to continue to increase our margin as we increase our growth.

Okay. And then from a macro perspective, you mentioned some commercial delays in the UK markets, I'm assuming because of the uncertainty there. Any other commentary that you'd make, more broadly speaking? Is the environment looking pretty consistent ti what you saw last quarter?

In the UK?

Well, more broadly speaking, other regions as well? And any real change to the macro?

No, in the macro again we see consistent demand. That demand still requires cost savings. But we see demand to invest in businesses around the world and governments alike, to play into the expectations of customers and citizens around the digital experience they need to have.

So we see opportunities on both sides, on the outsourcing to save costs, and on the transformation side to help them with their initiatives. So no change in that macro environment.

Great. Thanks, I'll pass the line.

Thanks, Thanos.

Jason Kupferberg, Jefferies.

Hello, guys, this is Amit Singh for Jason. Just quickly on the quarter, if you could talk about the contribution from Collaborative Consulting, just trying to get the organic constant currency growth in the quarter? And then related to that, the bookings have been strong last few quarters, and you guys have been seeing an acceleration in topline growth. Should we expect that acceleration to continue from here?

Yes. So on the Collaborative, just to remind you, we purchased that midway through the quarter so it did not have a big material impact on the revenue or the margin. However, it's pretty much now at this point in the second quarter, it's integrated and we're already seeing synergies on both sides.

So we have some consulting-led engagements and relationships with Collaborative where we see opportunities and are already now bidding on opportunities that they would not have had the opportunity to bid on, around larger outsourcing, transformational outsourcing bids. Likewise, we are using some of their resources right now with other existing clients in the region to bid on digital transformation and front-end projects. So we're starting to see the synergies, but that's not in-quarter, so it didn't have a material effect on the quarter.

All right. And just related on the capital deployment, you extended the share buyback authorization. And during the Analyst Day last year, there was a lot of focus on M&A and that generally remains the focus for the company. If you could provide an update there?

I think at the Analyst Day they had laid out a potential pipeline of around 350 companies, and we're trying to narrow it down. Any update there?

Yes. Well all I can say is that the conditions continue to be very favorable. The market as we discussed is highly fragmented.

But the conditions are favorable really for a couple of reasons, as various companies around the world embark on these digital transformation opportunities. They really need partners that can be with them around the globe and also have those skills on both the legacy and on the digital new side, and have the breadth and depth to make those connections.

So that makes it favorable for a company like ours to be very acquisitive. And what I'll give you the update is, in every one of our strategic business units, we do have current targets that we are working on. Priorities continue to be US commercial and UK and Germany particularly.

But Francois, I don't know if you want to add anything from the M&A front?

So like George is saying, we're working very closely with the operations to look at all of these targets, qualify them. And again a lot in the funnel, but for sure needs to be the right one at the right price. So we'll stay always disciplined.

And because of it, depending on the timing and the evaluation of their shares, we'll be looking at share buyback if needed. So that's the strategy.

All right. Great. Thank you very much.

Thanks, Amit.

Paul Treiber, RBC Capital Markets.

Thanks very much. I just wanted to focus a bit on the growth of IP revenue. It's continued to rise, it's getting close to the 30% target that you outlined a couple years ago. From what you see in the backlog and also contract pipeline, do you think there's sufficient customer demand and your business is transforming such that you'd be able to achieve that target of 30% target organically?

Yes. As I mentioned, we're on that path. There are really three ways that we can do that, Paul. One is taking some of the local IP and making that more global, and we continue to see success there.

We're also seeing success in taking some of that local IP and just moving it to software as a service. We're still continuing to see high demand for that service. And then as we embark on these digital transformation projects, we harvest some of the applications that we're building.

We can harvest that and turn that into IP, now that we have the channel and that machine working smoothly. So there are three different ways that we can continue to move towards that path of IP30. So I remain confident that's the path we're on.

Okay. And then just looking at France for a moment, seeing good growth the last couple of quarters. How much of that reflects an improvement in the underlying market in France, and how much do you attribute to CGI's execution?

And then from an execution point of view, what are the lessons you've learned from being in France, and how much can you extend that to the rest of Europe?

Well I think a lot of it has to do with CGI's execution. Our team there is very strong. And you are correct, and that's why I highlighted, starting with that business consulting and moving that into those larger transformational deals is what's driving that growth. And we all are on a path strategically and tactically to repeat that in every market, not just in Europe but around the world.

Okay. And then quick one for Francois, just going back to the cash flow. Working capital has been a headwind to cash flow for I think the last five quarters or so. When should we see that headwind begin to diminish?

I would expect at the end of this year will diminish. We still have some legacy from the [Stanley] acquisition and some of the use of cash on some loss making contracts, but I would expect that we're pretty at the tail of it now.

Thank you, I'll pass the line.

Thanks, Paul.

Phillip Huang, Barclays.

Thanks. Good morning. Just want to go back to the topic of the new US government. Obviously there's quite a bit of focus here. Main question as it relates to the federal business, certainly what appear to us is there's some increased focus on defense under the Trump administration which we believe should benefit CGI.

But obviously there's also a lot of language around changes to Obamacare which could impact your business. I was wondering if you would talk a little bit about your assessment of where the US government could help or hurt the overall federal business in the next four years?

Yes, no, thanks for the question. Yes it's early days, but early indications are that there's probably more of an increase as you suggest on the defense, intel, and international type organizations, maybe prioritized a little over domestic. We think we're well-positioned.

That's why we created a diversified portfolio. And as you may recall, we weren't as diversified before we made the Stanley acquisition. So we are very diversified.

In fact as I look at our first quarter key wins, most were in the areas outside of their traditional domestic units, and in fact that credentialing with DHS is one that I think is important. That's where we're integrating various cybersecurity tools across -- for DHS, on behalf of DHS, but across all agencies, 27 different agencies across the US government.

So it's a nice opportunity but a nice one where you see some of the priorities already starting to shift. So we see this as we're well-positioned as a diversified portfolio. On the health specifically, we don't have any real exposure at this point to Obamacare.

Got it. No, that's very helpful, George. Maybe a question for Francois on US tax reform.

I was wondering if you could maybe share with us the potential range of outcomes in terms of benefits to future earnings, based on what we know so far? I believe you guys are currently paying full taxes in the US, but I was wondering if you could give us a better sense on the magnitude of the benefit?

Yes. So for sure as you know, 30% of the business is in the US, and the example we're talking about the last quarter that -- or the first quarter that we produced close to $115 million EBIT, so you can understand that today we're closer to 40% of tax on that amount, and we would go down to, depending where it's going, 20% to 15% of tax. So that would be naturally a great news for us, and great news would have a big impact on the net earnings of CGI.

Got it. That's very helpful. And then a last one for me.

More broadly of course, what does this mean for your M&A strategy going forward? Obviously I know you guys have mentioned that you guys are sharpening focus on opportunities in the US, but do you really see this as meaningfully expanding the pipeline for CGI in the US? Thanks.

Clearly it's a great opportunity, especially if we can do them before the tax rate is going down. So that's why we're very active in the US region and looking at the all the (technical difficulty) there.

Great. Thanks very much.

Thanks, Phil. Melanie, another question?

Stephanie Price, CIBC.

Good morning. You saw solid bookings in your financials vertical this quarter. I was wondering if you talk a bit about the growth you're seeing there.

Growth in banking continues to be strong across all of our regions, particularly in Canada, the US, and now pockets of Europe including Eastern Europe. So growth is strong. I don't have the actual growth numbers by sector.

I can circle back (multiple speakers) regions that George mentioned.

But that's where it's being driven.

Okay. And what specifically is driving it? What sort of products and services?

It is a combination of those digital transformational opportunities, combined with our [IP]. Our IP is probably most developed in financial services, outside of government.

And so in financial services, our payment application, our trade application, our big opportunities, our collections application, are all opportunities for us to grow. And they are all being delivered in concert with some of these digital transformation projects.

Great. Thanks. And then on your tuck-in acquisition strategy, you've done a couple now. Can you talk about how they've been going, and any key takeaways now that you have a few of them under your belt?

Yes. Actually they're going very well. As I mentioned, the favorable conditions means that on both sides of the transaction, it's beneficial. So our new colleagues that are coming on see more opportunities to have impactful impact on their clients.

And in turn, as we mentioned, it provides us the depth and some of the expertise that we're looking for, particularly in specific metro markets within these larger strategic business units. So it's going very well, which is why we're looking to accelerate our efforts there.

Great. Thank you.

Thanks, Stephanie.

Maher Yaghi, Desjardins Capital Markets.

Thank you for taking my question. Guys, can you discuss your outlook as you're seeing from your clients 2017 budgets? How they look like versus 2016? And the type of work you're seeing them prioritizing?

And the second question I had, you talk a lot about digital transformation. Can you discuss the maturity level of that business into the different verticals? How we moved from, let's say, proof of concept into establishing new use case business models?

And if you can split your comments specifically regarding business to consumer and business to business?

Sure, I can get all that. But on the outlook for budgets across the board, we see, and part of this came out of even our surveys that really were conducted face-to-face with both business and IT, in general IT is increasing across every industry. But one, which is oil and gas, but every other industry, the IT budgets are staying the same or going up.

And this is at the same time that, because of some of the automation, they're saving. So the fact that they're staying flat means they're really going up, and if they're going up, they're going up by a higher rate. So we see the demand out there.

As far as the maturity level, I believe I mentioned that one of the biggest barriers of these transformational projects are actually the readiness for the organization adopting them to actually adapt their own organization, because by very nature, transformation is not just about doing things different or in an automated way. It's actually transforming the way they do business.

So that maturity level, we do see different. It's most accelerated in the consumer industry, so that's the retail banking, it's most in the telecommunications, it's in the retail stores. That's where it's most advanced.

Less advanced as you move more to the business to business. But accelerating in those other areas. And then it varies.

There's not a one-size-fits-all equation. It varies by organization to organization., which is why it's so important for us to have the proximity model, for us to have the relationships, for us to have knowledge of their legacy environments to help them on that journey, because that journey is different for, I would argue, for every industry but also every organization within that industry.

Thank you, George, and good luck for 2017.

Thank you.

Thanks, Maher.

Paul Steep, Scotia Capital.

-- Brexit and maybe the opportunity or what you think the pipeline might look like in financial services, both in the UK and Europe as clients in either region think about what that's going to mean?

Just need first few words there, Paul.

Sorry, the impact of Brexit on opportunities in finserv in UK and Europe, and what that means.

Yes. Well as I mentioned, we did see a slowdown in the large transformational projects specifically in the UK, probably as a result of some of that uncertainty. So some of the smaller projects but the big transformational multiyear deals, we see a slowdown or a push to the right of those projects.

Likewise, we see potentially some strength in government as they look to react to some of those changes. So that's probably a temporary -- it's still to be played out. As we know it hasn't played out and has never been played out. So we'll watch that closely.

But again, we feel we're very well-positioned given the relationships we have, the vehicles we have in government, and the relationships we have at large. So we see it as still a strong market for us in the future.

And then in the Nordics, you had good bookings growth there. Can you talk about what that market now looks like? I would assume you're through the cleanup of contracts that came with Logic, it sounds like we're sort of anniversaried that.

Are there any headwinds at all in terms of expiries? And if those are out of the way, what's the opportunity set look like in the Nordics? Thanks.

Yes. No, thanks for the question. You're right. In the Nordics we've been shifting the business, but we're continuing to shift the business, because as the infrastructure with heavier iron types of projects and maybe limited to infrastructure only, as we look to renew or expand those opportunities, we are doing that with an eye to playing to shifting to the new.

And so the demand we see is more around the same demand we see around the world, around digital transformation projects. And so we'll continue to shift our mix, and move into that higher demand. We're not going to renew the same projects in the same ways necessarily.

So that's part of that shift that I mentioned earlier when I talked about infrastructure, may be changing because of the way we're now playing into the new demand.

Thank you.

Thanks, Paul.

Daniel Chan, TD Securities Toronto.

Hello, guys. US revenue continued to decline, albeit at a much slower pace. The huge US bookings last quarter may have suggested some growth in that market, and you had another solid book-to-bill quarter.

So are the bookings predominantly renewals, or is there something else going on here? And when do you expect this market to return to growth?

Yes, no, I don't have the exact number of new business but -- oh here it is. In the last quarter, in this quarter we had new business was 35%. So we are seeing new business. And that's a shift from where we were before, what was primarily only mor of those renewals, just given the environment we were in at the end of the prior administration, which is natural when you're going through a transition of administration.

So yes, I think that from a government side, we see opportunity. Our commercial continues to grow with Collaborative and some that we have the pipeline, we're going to continue to buy into that growth as well. So I do believe we're on that path, much like we were in the Nordics, to turn here to positive organic growth in that sector or that geography.

Great. Thank you.

Thanks, Dan. Melanie, we'll have time for one last question.

Robert Young, Canaccord Genuity.

Hello, thanks for squeezing me in. Maybe just to continue that last question, you'd highlighted some delays in the UK on large transformational projects. In the near term, should we expect a similar thing in the US, given some of the uncertainties there?

Are you building any of that into your future here? Or how should we think of that?

Yes. I don't think it's the same at all, given that there is a little more certainty in the transition that's going on in the US versus the transition that's never been done in the UK. Given some of the initial changes to less regulation and a better tax outlook, I don't see them the same at all. In fact, particularly on the commercial side, I see opportunities in that.

Great. And then on financial services bookings, very strong. Looking back it looks like Q1 is typically see some seasonal strength, maybe you talk about that and whether we should expect this sort of level of booking? Sounds like there's a good opportunity for any of it. What should we expect as far as bookings growth?

On bookings growth, well, the pipeline is up which is the predictor of bookings. The team has delivered very strong results and I do believe that there is a differentiator that we have in the marketplace. So I see our bookings continuing to grow.

Okay. And last one. Some of the areas you highlighted where there's good strength in bookings and digital information, we've seen some -- seems to correlate with areas where you've had stronger bookings this quarter.

And I look at the split between system integration and consulting, it seems that's a little bit lower, so if you could talk about that, if there's disagreement there, or at 45% [SI] and consulting, is that where you want to see it, or can that grow from here?

Well, we see a balance over time. Point in time, as I mentioned, just given the maturity that organizations are in, we see strong demand for some of that SINC to help them, we're playing into that demand. But over time, we expect that just as I mentioned in France and we've seen in Canada over the years, that's just going to drive that longer term recurring revenue.

And so the two play in hand-in-hand and we'll continue to see a balance, although it may shift, point in time we see that same balance moving forward.

Okay. Thanks a lot.

Thank you, Rob, and thank you, everyone, for joining us. Our AGM again this morning at 11 AM, and as usual I remain available for follow-up questions 514-841-3355. Thank you.

Thank you.

Thank you.