CGI Inc (GIB) 2026 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to CGI's second-quarter fiscal 2026 conference call. I would now like to turn the meeting over to Mr. Kevin Linder, SVP of Investor Relations. Please go ahead, Mr. Linder.

Thank you, Sylvie, and good morning. With me to discuss CGI's second quarter fiscal 2026 results are Francois Boulanger, our President and CEO; and Steve Perron, Executive Vice President and CFO. This call is being broadcast on cgi.com and recorded live at 9:00 a.m. Eastern Time on Wednesday, April 29, 2026.

Supplemental slides as well as the press release, we issued earlier this morning are available for download, along with our 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 in both our MD&A and press release as well as on cgi.com. We recommend our investors read it in its entirety. We are reporting our financial results in accordance with International Financial Reporting Standards, or IFRS.

As always, 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. Now, I'll turn the call over to Steve to review our Q2 financials, and then Francois will comment on the business and market outlook. Steve?

Thank you, Kevin, and good day, everyone. In our second quarter of fiscal 2026, we continue to create value for our shareholders while executing on our AI strategy. In the quarter, we delivered $4.2 billion of revenue, up 3.3% year-over-year or up 1.6% when excluding the impact of foreign exchange.

Growth was driven by our recent business acquisitions and continued demand for our APAC delivery center, especially from our North American clients. APAC reported growth of 7.2%, supported by DigiOps, our award-winning AI-powered offering for the delivery of managed services.

In our UK and Australia segment, with our acquisition of BJSS, growth was 16.5%. In our Western and Southern Europe segment, growth was 8.3%, led by our acquisition of Apside, which added scale for our software engineering services. Our US Federal unit took a bit longer to recover from delays in decision-making and the ramp-up of new contracted work following the fall US government shutdown.

This segment improved sequentially. And based on what we see in the pipeline and our bookings strength in Q2, we expect that CGI Federal will return to positive organic growth in Q3. We also were impacted by delays in decision-making across Europe, mainly with the Nordic countries. Bookings in the quarter were $4.3 billion or a book-to-bill ratio of 104%, led by a strong return in our US Federal segment at 122%.

Other notable segments were concentrated in Europe with Germany at 114% and Scandinavia, Northwest and Central East Europe and WSE both at 111%. Managed Services and SI&C each had a book-to-bill ratio of 104% in the quarter. For SI&C, this represented a continued sequential improvement over the last three quarters.

SI&C projects are shorter in duration relative to Managed Services but realized revenue much sooner after their booking. On a trailing 12-month basis, bookings reached a record high of $18 billion, up 6% or nearly $1 billion. Book-to-bill ratio was 108%, with North America at 117% and Europe at 102%.

On the same basis, Managed Services had a book-to-bill ratio of 118% and the SI&C book-to-bill ratio was 98%. Our contracted backlog stands at $31.5 billion or 1.9x revenue. Of the $31.5 billion, we have almost $12 billion in already contracted revenue to be realized over the next 12 months.

Turning to profitability. Adjusted EBIT in the quarter was $692 million, up 3.9% year-over-year for a very strong margin of 16.6%, up 10 basis points. Including acquisition and related integration costs of $41 million, earnings before income taxes were $618 million for a margin of 14.9%. Our effective tax rate in the quarter was 26.6%, an increase from the 25.9% in the prior year when excluding the tax impacts from acquisition and related integration costs.

The increase is mainly explained by the new corporate tax surcharge in France. Based on enacted rates at the end of the quarter and our current profitability mix, we expect our tax rate for future quarters to be in the range of 26% to 27%. Adjusted net earnings were $483 million for a margin of 11.6%.

On the same basis, diluted EPS was $2.27, an accretion of 7.1% when compared to Q2 last year. Net earnings were $445 million for a margin of 10.7% and diluted EPS was $2.09, an accretion of 10.6% when compared to Q2 last year. Turning to cash. On the back of strong cash generation in our first quarter with $180 million of prepayments from clients, in Q2, we generated $451 million, representing 11% of total revenue.

Our cash on a trailing 12-month basis was $2.5 billion, representing 15% of revenue. DSO was 40 days, unchanged when compared to the prior year. In Q2, we continued to deploy our capital and invested $105 million back into our business, which includes strategic investment in advanced AI, $397 million to buy back our stock. And in addition, we returned $36 million to our shareholders under our dividend program.

Yesterday, our Board of Directors approved a quarterly cash dividend of $0.17 per share. This dividend is payable on June 19, 2026, to shareholders of record as of the close of business on May 15, 2026. At quarter end, CGI had over $2.2 billion in capital resources readily available and a net debt leverage ratio of just over 1.

And yesterday, we increased our credit facility by $1 billion, now totaling $2.5 billion, providing additional financial capacity for our build and buy growth plans. Our capital allocation priorities have always remained consistent to deliver shareholder value, investing back in the business, pursuing accretive acquisitions and share buybacks.

Now, I will turn the call over to Francois to further discuss insights on the quarter, the progress on our AI strategy and the outlook for our business and markets. Francois?

Thank you, Steve, and good morning, everyone. Today, I will focus on our first half performance, the demand outlook for the second half and our enterprise AI growth strategy. Year-over-year, for the first half of 2026, revenue was up 5.5% or 2.5% in constant currency to more than $8.2 billion.

Adjusted EBIT was up 5.4% to $1.35 billion. Adjusted EPS was up 7.4% to $4.38 and cash from operations totaled over $1.3 billion, up by more than $238 million, representing 16.1% of revenue. Each of these results represent a record high for half-year performance, demonstrating CGI's proven discipline and agility to deliver shareholder value.

Importantly, these results also underscore our financial strength and our ongoing capacity to invest in profitable growth to position CGI for the future. CGI's financial health remains a differentiator in the current market for shareholders and for clients. Thank you to our experts, engineers and consultants around the world for earning the trust of our clients every day. Your expertise, insights and commitment made these results possible.

During Q2, many clients again faced an unpredictable business environment. To help them navigate these conditions, many turned to CGI as a trusted, steadfast partner to help them consider new strategies and delivery approaches, notably to address the opportunity to integrate advanced AI at the enterprise level.

Our positioning contributed to strong first half bookings of nearly $8.8 billion, up $141 million year-over-year, even with temporary decision delays impacting some larger agreements, mainly in Finland. Specific to government sector bookings, we saw a return to strong awards in the quarter with a book-to-bill of 111%. This was led by our US Federal segment at 122% as our team closed a combination of large managed services wins as well as IP and AI-led monetization engagements.

The strong quarter raised the US Federal trailing 12-month book-to-bill to 111%. The first time this metric has been above 110% since Q4 of fiscal 2024. With these new projects in US Federal, we expect this segment to grow organically in Q3, as Steve indicated. From a services perspective, bookings were driven by robust demand for our AI and IP integrated managed services, which totaled $10.5 billion on a trailing 12-month basis for a book-to-bill of 118%.

Clients continue to expand core system modernization to drive operational efficiencies and generate savings to reinvest in new priorities, requiring more systems integration and consulting services such as AI advisory and change management. Continuing the trend we signaled last quarter, demand for SI&C rose in Q2 with a book-to-bill of 104%. This also represents a sequential quarter improvement of 5.5%.

Strong SI&C wins in H1 contributed to a trailing 12-month increase of more than $800 million compared to the previous period. Representative Q2 wins included the US Social Security Administration expanded its relationships with CGI through USD198 million contract to provide 24/7 support of mission-critical infrastructure, serving more than 75 million beneficiaries. This reinforces CGI's role in operating large-scale secure government systems.

The US Department of Veterans Affairs extended its partnership with CGI to advance financial management transformation using CGI's Momentum Enterprise Suite. In Germany, Schneider Electric expanded its agreement with CGI to deliver end-to-end AI-enabled solutions for energy providers across three countries, combining consulting, integration and managed services to help utilities optimize operations and navigate regulatory complexity.

And a subsidiary of the Saint-Gobain Group in France selected CGI's retail suite IP to modernize point-of-sale systems across 68 locations, improving checkout efficiency, transaction security, and real-time operational visibility. CGI's global alliance relationships are also contributing to our bookings, and our pipeline of opportunities is up more than 180%. Recently, we expanded our joint go-to-market collaboration with AWS, OpenAI and Google Cloud.

We also continue to deepen our existing partnerships with firms like Microsoft, SAP, Databricks and Salesforce through advanced certifications and recognitions. These developments reinforce CGI's position as a preferred global integrator. Throughout the first half, our financial strength enabled us to continue strategic investments in our business, including M&A.

In the quarter, we announced the acquisition of Stratfield Consulting, further strengthening CGI's position in Atlanta, a key US growth market. The consultants who joined CGI bring expertise in areas critical to embedding AI at enterprise scale, including digital engineering and technology strategy.

I would like to warmly welcome the new consultants who joined CGI from Stratfield. CGI's buy strategy remains a critical element of our growth plan, ensuring we are in proximity with existing and new clients to understand and adapt to their needs. We remain in dialogue with a number of firms from metro market to transformational opportunities.

All opportunities we consider are in line with the evolving skills needed for the future as well as client relationships where we can bring CGI's scale and global offerings. As always, we will be disciplined to ensure that mergers will be accretive to each of our stakeholders.

I will now turn to the market dynamics, how these shape the outlook and our positioning to drive growth, notably through the continued progression of embedding AI across client enterprises. Throughout Q2, we met with more than 1,800 current and prospective clients, mainly C-level business and IT executives, as part of our annual strategic planning. In discussion about their budgets for the next year, two-thirds of executives indicated they plan to sustain or increase their IT budgets.

Our pipeline over the next year validates this as the value of new opportunities grew by over 40%. Executives we spoke with also noted that the alignment gap between business and IT within their organization is starting to expand again, making it more challenging to achieve the expected ROI.

Over the years, we have measured this ROI metric, and this year, the results show a plateau. To jump start their results for monetization, clients are increasingly turning to AI and managed services, particularly at the C-suite level. Enterprise AI adoption rose compared to last year with one-third of our organizations now at the implementation stage, notably for generative AI and a top emerging priority remains Agentic AI integrations.

These findings, a growing alignment gap, stalled ROI, and accelerating use of emerging technologies are a natural effect of earlier-stage AI adoption. All of these findings create new opportunities for CGI to deliver a wide range of end-to-end services. To understand these shifts and what they mean for CGI growth, it is important to recognize the complex systems underpinning our clients' operations. Introducing AI doesn't simplify this complexity overnight. It increases the need to manage and integrate it properly.

As a result, stand-alone AI tools are not a substitute for enterprise IT. They accelerate tasks and processes, but don't solve integration at scale. This complexity is driving new clients' behaviors. For example, organizations continue to move toward fewer trusted IT partners who can deliver end-to-end outcomes. These shifts play directly to CGI's strength.

We are positioned at the center of this change because of how we operate, our enduring client relationships, industry expertise and end-to-end value proposition. This enables us to meaningfully embed AI directly into the systems and processes that run our clients' organizations.

CGI's AI-first approach is based on two core tenets. We make AI real and outcome focused. At the core of every enterprise, including our own, we transform how value is created, how work gets done and how the future is built. We remain well positioned to drive new growth, leveraging this AI-first approach in four ways. We help clients operate more efficiently.

We transform the legacy technology estate. We launch new services and solutions to capture net new areas of spend and growth. And across all of these areas, we deliver consulting services. These four areas are closely integrated and together, they offer significant opportunities for CGI to grow in this market environment. I will now go deeper in each of these elements.

Clients continue to focus on driving efficiency as a top business priority. Through our managed services and IP solutions, we embed AI into IT operations, software delivery and business workflows, reducing manual effort and improving performance. For example, CGI transformed customer service for a global financial institution by deploying an AI-driven operations platform integrated with core systems to handle and self-resolve over 500,000 interactions annually.

And for our health care organization, we implemented an enterprise AI platform to automate workflows and optimize claims driving higher efficiency, increased savings and establishing a scalable foundation for broader AI-driven transformation. Today, every new CGI managed services proposal embeds advanced AI as the rule, not the exception.

The majority of our contracts are outcome-based where the margin gains translate into benefits for both clients and CGI shareholders. As Steve mentioned, our AI-powered managed services platform, DigiOps, was recently recognized with the top innovation honor for helping clients drive practical Agentic AI adoption.

DigiOps integrates CGI IP, accelerators and alliance technologies and spans nearly 200 agents and 400 workflows to automate and improve enterprise operations. As clients realize operational efficiencies, those savings are not all removed from IT budgets. They are often reinvested.

Clients have significant backlogs of modernization programs and AI is now enabling them to tackle those programs faster. This creates a continuous loop to drive growth where efficiency creates new demand for transformation of clients' legacy technology estates. AI cannot be scaled on fragmented data and outdated system.

So we are focused on the foundation, preparing data, simplifying architectures and modernizing applications. This is core to what CGI delivers as it relies on high-end engineering that is designed and scaled for mission-critical complexity. For example, CGI embedded AI across a utility serving 9 million customers, replacing rule-based audit forecasting to improve grid reliability, faster technician onboarding and enabling self-service analytics.

And a leading financial institution partnered with CGI to modernize legacy systems using CGI [InstaCode], our production-grade generative AI platform for code conversion. The project is accelerating the transition to cloud-native architecture, reducing development and testing effort by at least 50% and improving system scalability.

As clients modernize, they typically invest in new areas to drive their growth and improve stakeholder values. This requires new services and capabilities from CGI, which help them address emerging priorities that cannot be resolved without new technologies like AI.

For example, CGI developed and deployed the AI FELIX platform for NATO to modernize large-scale document processing and task management across secure air-gap environments. The system reduced processing time from an average of 7 minutes to 27 seconds. And CGI launched a Finnish national security compliant sovereign AI platform, enabling enterprise and public sector clients to develop and deploy scalable AI solutions with full data sovereignty, regulatory compliance and secure integration within a locally hosted environment.

These new services and solutions are not examples of isolated pilots; they are scaled AI offerings built for complex enterprises to achieve measurable outcomes. Across these areas, consulting plays a critical role as clients seek guidance on where to apply AI, how to structure their operating models and how to embed new ways of working.

This is why we are seeing strong demand for consulting services. In fact, Q2 bookings for our consulting services were up 16% year-over-year. This performance and a double-digit pipeline increase is led by our signature consulting offerings, notably advisory services in AI, change management and risk and cybersecurity.

For example, a leading telecom operator partnered with CGI to scale Agentic AI in the secure on-premises environment by defining and deploying a road map, framework and use cases. And CGI partnered with a large European bank to translate its AI strategy into operational governance aligned with regulatory requirements.

This created structured processes, improved compliance and enabled faster, more consistent adoption of AI across the organization. In closing, we continue to see indicators of gradual improvement for the rest of the year. Our positioning as the AI to ROI partner for our clients is deliberate. It reflects how we help clients move from potential to performance, and it enables our future growth. Clients today are not looking for generic AI capabilities.

They want solutions tailored to their industries and that operate within their constraint, all with a trusted partner who has the capabilities and longevity to be part of their transformation journey. We combine expertise in domains plus technology, including AI. We work inside complex mission-critical environments.

We have proximity and sovereign services and solutions, and we deliver results that are measurable, repeatable and tied to business outcomes. So while the headlines may focus on how easy AI has become, the reality for large enterprises is very different. The real challenge is mastering complexity, and that is exactly where CGI is built to lead and to grow.

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

Thank you, Francois. Sylvie, we can now poll for questions, and I would ask that each participant hold to one question in light of the time we have remaining.

(Operator Instructions)

Suthan Sukumar, Stifel.

My first question, I just wanted to talk about AI, and you guys have announced some recent partnerships with folks like OpenAI and Google. What would you call out as being different about these partnerships relative to what your -- some of the more traditional tech partnerships that you have today?

I don't necessarily see some differences. It's -- for sure, we are close to them. They want us to use their tools and to create platforms that are relevant by industries. And so that's really what we're working on, especially with Google and OpenAI. So it's really to help them, and we had our CTO that went to the Google event last week in Vegas, and that's exactly what he was working with the team of Google is to work on platforms and solutions that are relevant to industries.

Thank you.

Jerome Dubreuil, Desjardins Capital Markets.

Thanks for taking my question. On the SAP call last week, their management team said that the adoption of AI migration tools could possibly reduce system integration budget. Maybe it puts a bit of pressure on integrators to adapt quickly and be nimble. But if this materializes, what would be the net impact of the introduction of AI migration tools in terms of absolute margin per project in the long term? And maybe does it change the total addressable market of tech adoption in general?

Yes. Thanks, Jerome, for the question. But for sure, and I did indicate at the last call that on the life cycle of a project, we are seeing some savings by using AI. We were talking about close to 50% of a project where we can use AI to reduce and we see some savings between 20% easily to 40% and sometimes 50% on that -- on these portions. So for sure, it's reducing the number or the cost of doing this implementation.

But that's the good news on that. It's creating the funnel to do more. And some of these clients -- and when I'm talking to some of these clients, doing this SAP implementation are costly and some people are postponing or trying to delay. And so this will just create new demands to go faster on these implementations. So we're seeing that as potential new projects for the future.

Kevin Krishnaratne, Scotiabank.

Hey, good morning. Francois, you talked about your clients are expressing new behaviors with this new technology, AI. They're talking to fewer IT providers. So I'm wondering if you could talk about maybe your win rates when it comes to some of these AI projects?

And where do you feel you may be better positioned than some of your competitors? Because it seems like everyone is signing a partnership with whether it's Anthropic or OpenAI. I'm just curious as to like why you -- what you bring relative to the others in the industry.

Thanks for the question. First of all, it's our model, proximity model, right? We are close to our clients. We know our clients. We understand their complexity. So we're the best suited people for our existing clients to apply and help them with their AI implementation. We're also built by industry. So we have the capability and the understanding of the industry.

And so again, bringing that expertise to new clients also is a way to showcase that you cannot just use a tool for the tool. You need people and expertise to implement that. And again, we are also very good in complex environment. We know we are working with big companies. We understand how to manage complexity. So all that together, I feel that it's giving us advantage to win and grow in that area.

Stephanie Price, CIBC.

Hi, good morning. Maybe a broader question for you, just characterizing the macro backdrop here. You mentioned some contract signing delays in Europe, but it sounds like US Federal is expected to return to growth next quarter. Just curious macro-wise, what you're hearing from clients and how that varies by geography.

Yes. I would say, first of all, in North America, demand is still good, very good and very happy about the US federal turning back. We are seeing a lot more momentum on the procurement side, on the federal side. And so we saw it in the bookings, and we're seeing it in the pipeline.

And that's why we're pretty comfortable to say that they'll come back to organic growth. So that's still very relevant. And government, I would say, across the world, is still a growth factor with all the investment that they want to do in defense, for example, is potential growth for us in the future. I would say the financial sector is still, as we know, a lot of AI investment, but also very GCCs, managed services is still a lot of discussion on that side. So we're seeing a lot of momentum.

I would say the one that is still in flux is the manufacturing, especially in France and in Germany. As we know, Germany, it's a tough economy for now. And so that's where we're seeing some softness on that side. But like I'm saying, government and financial sector, we're still seeing some good momentum on that side.

Thank you for the color.

Richard Tse, National Bank Capital Markets.

Yes. In your comments, you talked about continuing on sort of both the build and buy strategy. So with AI in the backdrop, how does that impact how you assess and then sort of value these prospects? Has anything sort of changed in terms of that process given sort of the potential disintermediation in the market? But just kind of want to understand how you're thinking about that now.

Well, for sure, like any other merger and acquisition that we looked at, expertise is something that we're always looking at. Also, it needs to be -- yes, we're buying client relationships where, yes, it's important, but we need also to be sure that we have the right expertise.

So for sure, when we're looking at these companies, AI and how much they are advanced in AI technology and AI expertise is a criterion when we're looking at them. So that's for sure one. And as you know, valuations are down. So it's a pretty -- very good market for now. And we're there for long term. So we are always strong -- still believers that this industry will grow in the future if you have naturally the right relationship and the right technology. And that's what we're looking at when we're doing M&A.

Okay, great. Thank you.

Paul Treiber, RBC Capital Markets.

Good morning. You mentioned earlier AI is driving productivity and cost savings for managed services. Can you speak to the pricing, how you're pricing those productivity gains in terms of either how much you're passing along to customers? And then also, is there an opportunity for you to capture some of those savings with higher margin as a result?

Clearly. And you have to -- I would say, two parts. We have our existing one that we signed, right, where we promise a percentage of savings because, again, like I'm always saying, we're mostly all outcome-based pricing, especially in the managed services. So we promised a saving percentage and having AI now it's helping us in accelerating that production of savings.

And so that's our way of giving it back to clients but naturally producing our gross margin and our EBIT margin for us. And for new ones, but naturally, we will take that and put that also in the pricing. But with always the goal to produce our EBIT margin of 16% and up, that won't change. And we are capable of doing both.

And that's how we -- and that's why also it will create new demand. I'm convinced of new demand for managed services because people will see that they can achieve these savings. And it's not everybody who wants to do it by themselves. They don't need experts. And so that's why, yes, it will create new savings and cost reduction, but it will create brand-new demand in managed services.

Thanos Moschopoulos, BMO Capital Markets.

Hi. Can you update us with respect to AI in the context of your IP portfolio? To what extent is that helping accelerate development cycles, helping to bring maybe new offerings to market, creating some upsell opportunities with your existing base just with respect to your IP solutions.

Yes. For sure. Thanks for the question. So yes, we -- most of our development of IP is done in India. And for sure, we deployed all these tools in India to help them to go faster on these upgrade or new version of our tools. So for sure, the cost of producing this new version of IP is going down big time.

We are also naturally putting agents in our IPs for clients. So that's another big focus. We were talking about agents. We have more than 400 agents that is included in our IP, included in our service delivery, like I was saying, like DigiOps. And so we continue to implement these agents for clients and naturally using them for our own development.

Great. Thank you.

(Operator Instructions)

David Kwan, TD Cowen.

Good morning. I was wondering, you talked about customers likely using some of the savings that you help generate from the AI as it relates to on the managed services side. Do you see that, I guess, as a net neutral or maybe even a net positive in terms of the managed services trajectory?

Obviously, it's been -- the growth has come down here, but I was wondering when you could see that potentially reverse and to what extent customers spending savings on new projects could be either neutral or net positive for you?

Yes. I'm seeing it for the future as a net positive. Again, today, when you're meeting with a CIO, most of the time, he'll say that -- or she'll say that they don't have enough budget. Maintenance is, what, 70% to 80% of their budget. So it's giving them 20% to 30% for new projects. It's never enough. And so when they are able to capable of reducing the maintenance or the running cost of their application, they'll use these savings to invest in new product and new services for their own clients.

And that's -- I always -- when I'm meeting CEOs and meeting business people, that's what they're expecting and want from their CIO department. So we see that as future growth. And like I was saying before, it will increase also the demand for managed services because like I'm saying, it's not every company will try to do it by themselves. It's complex. It's not easy tools to implement, and they'll need an expert like us to help them to achieve their goals.

Just, everyone, my apologies. It's Kevin here. I know it's 9:42, and I thought we'd run out of time, but it looks like we have more time. So if folks on the line have other questions, please feel free to pick up in the queue.

Robert Young, Canaccord Genuity.

Hi, good morning. Revenue per employee looks like it's still going higher, and I guess AI will help that. And then you said you target 16%-plus EBIT margins going forward. And looking back to a target you -- I haven't heard you mention it in a while, but the double-digit earnings per share growth that was a target in the past.

Is that something that you can get to? Or is that a function of the top line growth today? Are there other tools you have operating margin expansion or buyback, et cetera, that could get you back to that double-digit earnings per share growth?

Thanks for the questions, Robert. So yes, it's still our aspiration to do double-digit EPS growth, and that will always be the aspiration. On that -- and you touched all these levers. I think the first one, naturally, is growth. And like I was saying, we are seeing a gradual improvement on that growth side.

Acquisitions is also very -- we are very active on that side. Valuations are down, so that will help on the accretion, buyback. We are producing excess cash. We are producing $2.4 billion, $2.5 billion. Free cash flow is close to $2 billion. So before acquisitions. So when -- we can do both acquisitions and share buyback.

And for sure, the EBIT margin will continue, and we have some levers, at least on a long-term basis. It's not all the segments that are at 16%. We have segments of the business at 20%, 21% and 18%, but we have other ones that are still in the low teens. So if we can improve these segments and bring them back to a 15%, 16%, we would be able to come back to an accretion of 10% to 15% in the future.

Okay. Can I ask a second one? The -- seems to be a little more focus on cybersecurity. I mean there's some worry around Mythos, et cetera. And just -- can you just touch on where you're seeing opportunities related to that in your business, and then I'll pass the line.

That's a very good question. For sure, a lot of conversation on cybersecurity. And when we were saying that consulting is picking up, a lot of it is on the cybersecurity side, like you said, with Mythos and all that. For sure, a lot of -- even when I met CEOs lately, that's top of the mind on their mind. And so that's a source of future growth for us for sure because of this.

Jerome Dubreuil, Desjardins.

Yeah, thanks, Kevin, I can ask questions all day. So two more for me. You did -- you touched on the buybacks on a previous answer, but you did a lot of it over the last year, but you did slow down in March, still doing a lot, but still a material slowdown there despite the share price being depressed. I am wondering if there's a particular reason.

And then the second follow-up I have, you for sure heard about the forward-deployed engineering where it seems like software companies' models may be evolving a bit closer to an IT service model. How do you compete with those software companies? And have you seen this trend materialize so far?

Yes. I'll ask Steve to answer the first one, and I'll answer the second one. So Steve?

Thank you, Jerome. On the first one, on the NCIB, look, what we're looking. Each quarter, we're looking at the cash -- the free cash flow that we're generating. And it's really based on that. First of all, as you know, we want to grow with good M&A. So we are making sure that we deployed our cash with M&A.

But in a quarter, if there is no cash outflow coming from the M&A, we'll look at our free cash flow, and we'll purchase some shares. We did, yes, less than Q1, but free cash flow was less. So it was done really by design. And that's really it. We are really looking at our cash generation in the quarter. And based on that, we are adjusting our NCIB program.

And Jerome, for your second question, I would say we are a company of forward deployed engineers. And again, our model with proximity, what we will do better than all of these companies is that because of the proximity, we know our clients, we know their complexity. We know their industries.

So that's what we're bringing. And I think that's something that it's harder for these software companies to do. And again, it's not the first time. I'm a little bit older than you, Jerome. It's not the first time that these technology companies try to go into services and it was always never happened because it's tough -- they're good in their tools, and they're fantastic to know their tools, but it's not the expertise to manage complexity and manage understanding these industries.

Steven Li, Raymond James.

Francois, I heard you on the green shoots. Do you have enough visibility to see positive organic growth exiting the year?

Again, as you know, I'm not giving guidance, Steve, but we are seeing improvement and a gradual improvement. I think the fact that, for example, you had federal government that was pretty tough two quarters ago at minus 12% this quarter at minus 7% and the fact that -- and no acquisition on their side.

So it's all organic and the fact now that we're pretty convinced that they'll be able to come back to organic growth this quarter. For sure, that's helping the overall results of the company. So we are seeing these improvements coming back. And so that's why we're positive to say that this improvement will continue in the next several quarters.

Suthan Sukumar, Stifel.

Hi, guys. Just a follow-up for me. On the discretionary spending segment here, sorry, SI&C and more so discretionary spending, what changes in priorities are you -- have you guys been seeing from clients compared to recent quarters?

And the second part is some of your offshore peers have been talking about pricing compression. What are you seeing in the pricing environment? And where are you seeing pressure specifically? And is that more of a function of kind of the softer discretionary spending backdrop? Or is it more structural from AI or the shift to kind of outcome-based pricing?

Yes, for sure, clients are asking more and more on outcome-based pricing. Already us, and I did state in the past, where more than 60% of our business, close to 65% of our business is outcome-based pricing. And I would say to you that in India, we have -- there also, the majority of our business is outcome-based pricing.

So that's naturally -- we're different than these very large Indian firms where they are input-based pricing. So that's helping on our side. And you see still good growth in the quarter in India and Asia Pac, a lot of demand still for Asia Pac. And I don't see that demand to reduce in the future.

So that's -- and that's where we have also a lot of talent. So that's why we are happy with where our position of our Indian region, and we are seeing that as a growth lever for the future.

Stephanie Price, CIBC.

Hi. Follow-up for me just is on the Canadian region. Curious if you could talk a little bit about the environment there. Is Canada one of the regions where you're seeing a solid government pipeline, just given the push by Canadian? And how should investors think about potential upside in Canada?

Yes. Thanks, Stephanie. For sure, Canada, we are seeing a very good pipeline for government. I think it's just they need to produce these RFPs and go to the market, but we have good discussion with clients on the government side, and they want and they need to invest.

And, for example, on the defense side, and we have very good defense capabilities across the world, as you know, in the US, but also in Europe with NATO. NATO is a good client of ours. We -- and in UK, we have a lot of defense projects there. So -- and the fact that Canada wants to be closer to Europe, we see that as great opportunities for us to help them to achieve their objectives.

Richard Tse, National Bank.

You did have this nice rebound in terms of the US federal bookings. Have the type of services of those sorts of new bookings changed at all in terms of like the profile? Or are they pretty much like a continuation of the stuff that was kind of held off given what's happened in the past year?

You're talking on the federal side or overall?

Yes, yes. On the federal side, yes.

Okay. On the federal side, I think as we know, last year, a lot of slowdown in the procurement in general. And so a lot of agencies put their projects on the side and waiting a bit how it would resolve with DOGE and everything else that was happening. And so now it's a little bit back, I would not say to normal, but at least procurement is now going out with RFPs. And so that's helping to improve the pipeline and actually the bookings.

Like I said, it's now close to two years that we didn't have a booking of that level in the federal government. So -- and we are seeing RFPs going out and continuing to go out. So that's why I'm saying on the federal side and some agencies are even hiring now. So I think it's -- you'll see that continue in the future, and that's why we're positive on the Federal side.

Okay. And I just have one other question. Like recently, you had kind of a local sort of, call it, AI data sort of sovereign win locally. Do you think CGI is in a position to kind of compete globally in that sort of sovereign AI data market looking ahead here as more and more countries and regions look to that?

For sure. And again, when you're talking, especially in Europe, everybody is talking about sovereignty. Again, it's not saying bring everything back. But naturally, they're looking at their data and the most important data, that's where they're saying, perhaps I need to change a bit where we are with that and coming more with the sovereign solutions. And the fact that we are in these -- in each of these regions, the fact that we know these clients, we are well positioned to help them to achieve that.

And again, the idea is not to compete anybody, it's to help them to put that in like the Finnish one that we announced yesterday. It's really to help the Finnish government to help them to bring back some of that data back in the country and having some of these solutions running in their environment instead of having it in the public cloud.

Okay, thank you.

Sylvie, we have time for one question, please.

Certainly sir. Our last question is from David Kwan at TD Cowen.

Hi. Just wondering if you've had conversations with clients and kind of what they're thinking about as it relates to the Iran conflict and how that's impacting their business and their intentions on doing more business with you.

For sure, Iran, it's giving some pressure on the manufacturing side. It's putting pressure in the airlines side. It's putting pressure also a bit even on the supply chain for hardware, for example, we are seeing some of that pressure and slowdown because of the hardware.

So naturally, again, it's giving us the opportunity to see how we can help them on the cost reduction side, especially on the manufacturing side and even on the airline side because it's putting pressure and they need to increase cost and increase price. So that's really the opportunity for us to go and see these clients and showing how we can help them in the cost reduction side.

Are you seeing any slowdown in sales cycles?

Not for now. I would not say that I'm seeing a slowdown on the sales cycle because of it, no.

Great, thank you.

And this time, we have no other questions --

Okay. Thank you, Sylvie, and thanks, everyone, for participating. As a reminder, a replay of the call will be available either via our website or by dialing 1 (888) 660-6264 and using the passcode 74539. As well, a podcast of this call will be available for download within a few hours. Follow-up questions can be directed to me at 1 (905) 973-8363. Thanks again, everyone, and look forward to speaking soon.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we ask that you please disconnect your lines. Enjoy the rest of your day.