GIB 6-K/A
Cgi Inc (GIB)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K/A
REPORT OFFOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of April 2023
Commission File Number 000-29716
CGI INC.
(Translation of registrant’s name into English)
1350 René-Lévesque Boulevard West
25th Floor
Montreal,Quebec
Canada H3G 1T4
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
☐ Form 20-F ☒ Form 40-F
INCORPORATION BY REFERENCE
Exhibit 99.2 to this Form 6-K/A shall be deemed incorporated by reference in the Registrant’s Registration Statements on Form S-8, Reg. Nos. 333-197742, 333-220741, 333-261831 and 333-261832.
EXPLANATORY NOTE
CGI Inc. is filing this Form 6-K/A to correct typographical errors to Exhibit 99.2 of the Form 6-K filed on April 26, 2023. Otherwise, that Form 6-K remains unchanged.
EXHIBIT INDEX
Exhibit Number Description
| **** | |
|---|---|
| 99.2 | Consolidated unaudited financial statements for the three and six months ended March 31, 2023 and 2022. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CGI INC. | |||
|---|---|---|---|
| (Registrant) | |||
| Date: April 26, 2023 | By: | /s/ Benoit Dubé | |
| Name: | Benoit Dubé | ||
| Title: | Executive Vice-President,<br> <br>Legal and Economic<br>Affairs, and<br> <br>Corporate Secretary |
EX-99.2
Exhibit 99.2
Interim Condensed Consolidated Financial Statements of
CGI INC.
For the three and six months ended March 31, 2023 and 2022
(unaudited)
Interim Consolidated Statements of Earnings
For the three and six months ended March 31
(in thousands of Canadian dollars, except per share data) (unaudited)
| Three months ended March 31 | Six months ended March 31 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Notes | 2023 | 2022 | 2023 | 2022 | |||||||||
| $ | $ | $ | $ | ||||||||||
| Revenue | 9 | **** | 3,715,324 | **** | 3,268,946 | **** | 7,165,596 | **** | 6,361,342 | ||||
| Operating expenses | |||||||||||||
| Costs of services, selling and administrative | **** | 3,113,317 | **** | 2,745,776 | **** | 6,012,925 | **** | 5,316,383 | |||||
| Acquisition-related and integration costs | 7c | **** | 20,945 | **** | 2,248 | **** | 40,369 | **** | 4,865 | ||||
| Net finance costs | 6 | **** | 15,366 | **** | 22,539 | **** | 33,507 | **** | 48,117 | ||||
| Foreign exchange loss (gain) | **** | 1,239 | **** | (438 | ) | **** | (2,210 | ) | (111 | ) | |||
| **** | 3,150,867 | **** | 2,770,125 | **** | 6,084,591 | **** | 5,369,254 | ||||||
| Earnings before income taxes | **** | 564,457 | **** | 498,821 | **** | 1,081,005 | **** | 992,088 | |||||
| Income tax expense | **** | 145,042 | **** | 126,833 | **** | 279,211 | **** | 252,652 | |||||
| Net earnings | **** | 419,415 | **** | 371,988 | **** | 801,794 | **** | 739,436 | |||||
| Earnings per share | |||||||||||||
| Basic earnings per share | 5c | **** | 1.78 | **** | 1.55 | **** | 3.40 | **** | 3.06 | ||||
| Diluted earnings per share | 5c | **** | 1.76 | **** | 1.53 | **** | 3.35 | **** | 3.01 |
See Notes to the Interim Condensed Consolidated Financial Statements.
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 1 |
|---|
Interim Consolidated Statements of Comprehensive Income
For the three and six months ended March 31
(in thousands of Canadian dollars) (unaudited)
| Three months ended March 31 | Six months ended March 31 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |||||||||
| $ | $ | $ | $ | |||||||||
| Net earnings | **** | 419,415 | **** | 371,988 | **** | 801,794 | **** | 739,436 | ||||
| Items that will be reclassified subsequently to net earnings (net of<br>income<br>taxes): | ||||||||||||
| Net unrealized gains (losses) on translating financial statements of<br>foreign<br>operations | **** | 76,416 | **** | (271,265 | ) | **** | 423,297 | **** | (365,305 | ) | ||
| Net (losses) gains on cross-currency swaps and on translating long-term<br>debt<br>designated as hedges of net investments in foreign<br>operations | **** | (17,551 | ) | 63,498 | **** | (80,965 | ) | 73,347 | ||||
| Deferred gains (costs) of hedging on cross-currency swaps | **** | 3,080 | **** | (6,137 | ) | **** | 8,770 | **** | (6,965 | ) | ||
| Net unrealized (losses) gains on cash flow hedges | **** | (1,033 | ) | 3,734 | **** | (16,647 | ) | 10,967 | ||||
| Net unrealized gains (losses) on financial assets at fair value through<br>other<br>comprehensive income | **** | 949 | **** | (2,941 | ) | **** | 1,385 | **** | (3,989 | ) | ||
| Items that will not be reclassified subsequently to net earnings (net<br>of<br>income taxes): | ||||||||||||
| Net remeasurement gains (losses) on defined<br>benefit plans | **** | 8,828 | **** | 46,803 | **** | (1,481 | ) | 34,218 | ||||
| Other comprehensive income (loss) | **** | 70,689 | **** | (166,308 | ) | **** | 334,359 | **** | (257,727 | ) | ||
| Comprehensive income | **** | 490,104 | **** | 205,680 | **** | 1,136,153 | **** | 481,709 |
See Notes to the Interim Condensed Consolidated Financial Statements.
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 2 |
|---|
Interim Consolidated Balance Sheets
(in thousands of Canadian dollars) (unaudited)
| Notes | **** | As atMarch 31, 2023 | **** | As at<br>September 30, 2022 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| **** | $ | **** | $ | |||||||
| Assets | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | 8c and 10 | **** | 1,280,800 | **** | 966,458 | |||||
| Accounts receivable | **** | 1,481,277 | **** | 1,363,545 | ||||||
| Work in progress | **** | 1,244,227 | **** | 1,191,844 | ||||||
| Current financial assets | 10 | **** | 56,457 | **** | 33,858 | |||||
| Prepaid expenses and other current assets | **** | 187,722 | **** | 189,366 | ||||||
| Income taxes | **** | 3,329 | **** | 5,137 | ||||||
| Total current assets before funds held for clients | **** | 4,253,812 | **** | 3,750,208 | ||||||
| Funds held for clients | **** | 705,753 | **** | 598,839 | ||||||
| Total current assets | **** | 4,959,565 | **** | 4,349,047 | ||||||
| Property, plant and equipment | **** | 393,054 | **** | 369,608 | ||||||
| Right-of-use<br>assets | **** | 513,364 | **** | 535,121 | ||||||
| Contract costs | **** | 285,469 | **** | 261,612 | ||||||
| Intangible assets | **** | 626,130 | **** | 615,959 | ||||||
| Other long-term assets | **** | 154,407 | **** | 139,666 | ||||||
| Long-term financial assets | **** | 194,145 | **** | 337,156 | ||||||
| Deferred tax assets | **** | 125,407 | **** | 85,795 | ||||||
| Goodwill | **** | 8,850,170 | **** | 8,481,456 | ||||||
| **** | 16,101,711 | **** | 15,175,420 | |||||||
| Liabilities | ||||||||||
| Current liabilities | ||||||||||
| Accounts payable and accrued liabilities | **** | 930,702 | **** | 1,016,407 | ||||||
| Accrued compensation and employee-related liabilities | **** | 1,074,754 | **** | 1,130,726 | ||||||
| Current portion of long-term debt | **** | 756,695 | **** | 93,447 | ||||||
| Current portion of lease liabilities | **** | 156,964 | **** | 157,944 | ||||||
| Provisions | **** | 31,809 | **** | 33,103 | ||||||
| Deferred revenue | **** | 647,922 | **** | 453,579 | ||||||
| Income taxes | **** | 278,004 | **** | 153,984 | ||||||
| Current derivative financial instruments | 10 | **** | 5,188 | **** | 5,710 | |||||
| Total current liabilities before clients’ funds obligations | **** | 3,882,038 | **** | 3,044,900 | ||||||
| Clients’ funds obligations | **** | 709,642 | **** | 604,431 | ||||||
| Total current liabilities | **** | 4,591,680 | **** | 3,649,331 | ||||||
| Long-term debt | **** | 2,413,586 | **** | 3,173,587 | ||||||
| Long-term lease liabilities | **** | 525,472 | **** | 551,257 | ||||||
| Long-term provisions | **** | 18,908 | **** | 17,482 | ||||||
| Other long-term liabilities | **** | 241,654 | **** | 192,108 | ||||||
| Long-term derivative financial instruments | 10 | **** | 7,056 | **** | 6,480 | |||||
| Deferred tax liabilities | **** | 106,177 | **** | 157,406 | ||||||
| Retirement benefits obligations | **** | 171,936 | **** | 155,045 | ||||||
| **** | 8,076,469 | **** | 7,902,696 | |||||||
| Equity | ||||||||||
| Retained earnings | **** | 5,863,374 | **** | 5,425,005 | ||||||
| Accumulated other comprehensive income | 4 | **** | 374,105 | **** | 39,746 | |||||
| Capital stock | 5a | **** | 1,464,124 | **** | 1,493,169 | |||||
| Contributed surplus | **** | 323,639 | **** | 314,804 | ||||||
| **** | 8,025,242 | **** | 7,272,724 | |||||||
| **** | 16,101,711 | **** | 15,175,420 |
See Notes to the Interim Condensed Consolidated Financial Statements.
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 3 |
|---|
Interim Consolidated Statements of Changes in Equity
For the six months ended March 31
(in thousands of Canadian dollars) (unaudited)
| Notes | Retainedearnings | Accumulated<br><br><br>other<br> <br>comprehensive<br><br><br>income | Capitalstock | Contributedsurplus | Totalequity | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | ||||
| Balance as at September 30, 2022 | 5,425,005 | 39,746 | 1,493,169 | 314,804 | 7,272,724 | |||||||||||||
| Net earnings | 801,794 | — | — | — | 801,794 | |||||||||||||
| Other comprehensive income | — | 334,359 | — | — | 334,359 | |||||||||||||
| Comprehensive income | 801,794 | 334,359 | — | — | 1,136,153 | |||||||||||||
| Share-based payment costs | — | — | — | 33,194 | 33,194 | |||||||||||||
| Income tax impact associated with stock options | — | — | — | 11,638 | 11,638 | |||||||||||||
| Exercise of stock options | 5a | — | — | 69,994 | (11,701 | ) | 58,293 | |||||||||||
| Exercise of performance share units | 5a | (2,910 | ) | — | 13,522 | (24,296 | ) | (13,684 | ) | |||||||||
| Purchase for cancellation of Class A subordinate voting shares | 5a | (361,791 | ) | — | (38,209 | ) | — | (400,000 | ) | |||||||||
| Unrealized commitment to purchase Class A subordinate voting<br>shares | 1,276 | — | 103 | — | 1,379 | |||||||||||||
| Purchase of Class A subordinate voting<br>shares held in trusts | 5a | — | — | (74,455 | ) | — | (74,455 | ) | ||||||||||
| Balance as at March 31, 2023 | **** | 5,863,374 | **** | **** | 374,105 | **** | **** | 1,464,124 | **** | **** | 323,639 | **** | **** | 8,025,242 | **** | |||
| Notes | Retained<br><br><br>earnings | Accumulated<br><br><br>other<br> <br>comprehensive<br>income | Capital<br>stock | Contributed<br>surplus | Total<br>equity | |||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||
| Balance as at September 30, 2021 | 4,732,229 | 331,580 | 1,632,705 | 289,718 | 6,986,232 | |||||||||||||
| Net earnings | 739,436 | — | — | — | 739,436 | |||||||||||||
| Other comprehensive loss | — | (257,727 | ) | — | — | (257,727 | ) | |||||||||||
| Comprehensive income (loss) | 739,436 | (257,727 | ) | — | — | 481,709 | ||||||||||||
| Share-based payment costs | — | — | — | 25,016 | 25,016 | |||||||||||||
| Income tax impact associated with stock options | — | — | — | (3,165 | ) | (3,165 | ) | |||||||||||
| Exercise of stock options | 5a | — | — | 25,283 | (4,296 | ) | 20,987 | |||||||||||
| Exercise of performance share units | 5a | — | — | 15,577 | (15,577 | ) | — | |||||||||||
| Purchase for cancellation of Class A subordinate voting shares | 5a | (547,366 | ) | — | (103,147 | ) | — | (650,513 | ) | |||||||||
| Purchase of Class A subordinate voting<br>shares held in trusts | 5a | — | — | (70,303 | ) | — | (70,303 | ) | ||||||||||
| Balance as at March 31, 2022 | 4,924,299 | 73,853 | 1,500,115 | 291,696 | 6,789,963 |
See Notes to the Interim Condensed Consolidated Financial Statements.
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 4 |
|---|
Interim Consolidated Statements of Cash Flows
For the three and six months ended March 31
(in thousands of Canadian dollars) (unaudited)
| Three months ended March 31 | Six months ended March 31 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Notes | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| **** | $ | **** | $ | **** | $ | **** | $ | |||||||||
| Operating activities | ||||||||||||||||
| Net earnings | **** | 419,415 | **** | 371,988 | **** | 801,794 | **** | 739,436 | ||||||||
| Adjustments for: | ||||||||||||||||
| Amortization, depreciation and impairment | **** | 131,020 | **** | 118,770 | **** | 255,280 | **** | 237,025 | ||||||||
| Deferred income tax recovery | **** | (42,459 | ) | (2,193 | ) | **** | (64,663 | ) | (9,464 | ) | ||||||
| Foreign exchange gain | **** | (274 | ) | (1,269 | ) | **** | (1,755 | ) | (2,709 | ) | ||||||
| Share-based payment costs | **** | 16,935 | **** | 9,975 | **** | 33,194 | **** | 25,016 | ||||||||
| Gain on leases termination | **** | (677 | ) | (2,262 | ) | **** | (3,039 | ) | (2,262 | ) | ||||||
| Net change in<br>non-cash working capital items and others | 8a | **** | (54,829 | ) | (22,380 | ) | **** | 53,594 | **** | (30,088 | ) | |||||
| Cash provided by operating activities | **** | 469,131 | **** | 472,629 | **** | 1,074,405 | **** | 956,954 | ||||||||
| Investing activities | ||||||||||||||||
| Net change in short-term investments | **** | 1,565 | **** | (2,106 | ) | **** | 1,469 | **** | (2,106 | ) | ||||||
| Business acquisitions (considering bank overdraft assumed and cash acquired) | **** | — | **** | (36,346 | ) | **** | (3,998 | ) | (158,018 | ) | ||||||
| Loan receivable | **** | 2,168 | **** | — | **** | (19,301 | ) | — | ||||||||
| Purchase of property, plant and equipment | **** | (46,446 | ) | (32,993 | ) | **** | (87,717 | ) | (75,586 | ) | ||||||
| Additions to contract costs | **** | (30,572 | ) | (24,257 | ) | **** | (51,264 | ) | (40,479 | ) | ||||||
| Additions to intangible assets | **** | (30,217 | ) | (31,657 | ) | **** | (61,562 | ) | (57,150 | ) | ||||||
| Purchase of long-term investments | **** | (975 | ) | (2,488 | ) | **** | (88,000 | ) | (8,819 | ) | ||||||
| Proceeds from sale of long-term<br>investments | **** | 5,406 | **** | 4,597 | **** | 20,330 | **** | 11,103 | ||||||||
| Cash used in investing activities | **** | (99,071 | ) | (125,250 | ) | **** | (290,043 | ) | (331,055 | ) | ||||||
| Financing activities | ||||||||||||||||
| Increase of long-term debt | **** | — | **** | — | **** | 948 | **** | — | ||||||||
| Repayment of long-term debt | **** | (2,911 | ) | (4,057 | ) | **** | (5,789 | ) | (330,845 | ) | ||||||
| Payment of lease liabilities | **** | (42,677 | ) | (36,605 | ) | **** | (78,295 | ) | (73,175 | ) | ||||||
| Repayment of debt assumed from business acquisitions | **** | — | **** | — | **** | (56,994 | ) | (84,558 | ) | |||||||
| Withholding taxes remitted on the net settlement of performance share units | 5a | **** | (362 | ) | — | **** | (13,684 | ) | — | |||||||
| Purchase of Class A subordinate voting shares held in trusts | 5a | **** | — | **** | — | **** | (74,455 | ) | (70,303 | ) | ||||||
| Purchase and cancellation of Class A subordinate voting shares | 5a | **** | (400,000 | ) | (400,000 | ) | **** | (410,291 | ) | (666,915 | ) | |||||
| Issuance of Class A subordinate voting shares | 5a | **** | 27,187 | **** | 9,832 | **** | 58,293 | **** | 20,991 | |||||||
| Net change in client funds obligations | **** | 52,729 | **** | 40,004 | **** | 105,108 | **** | 86,062 | ||||||||
| Cash used in financing activities | **** | (366,034 | ) | (390,826 | ) | **** | (475,159 | ) | (1,118,743 | ) | ||||||
| Effect of foreign exchange rate changes on cash, cash equivalents and cash included in funds held for clients | **** | 9,823 | **** | (45,108 | ) | **** | 43,309 | **** | (64,165 | ) | ||||||
| Net increase (decrease) in cash, cash equivalents and cash included in funds held for clients | **** | 13,849 | **** | (88,555 | ) | **** | 352,512 | **** | (557,009 | ) | ||||||
| Cash, cash equivalents and cash included in funds<br>held for clients, beginning of period | **** | 1,809,847 | **** | 1,687,277 | **** | 1,471,184 | **** | 2,155,731 | ||||||||
| Cash, cash equivalents and cash included infunds held for clients, end of period | **** | 1,823,696 | **** | 1,598,722 | **** | 1,823,696 | **** | 1,598,722 | ||||||||
| Cash composition: | ||||||||||||||||
| Cash and cash equivalents | **** | 1,280,800 | **** | 1,056,252 | **** | 1,280,800 | **** | 1,056,252 | ||||||||
| Cash included in funds held for clients | **** | 542,896 | **** | 542,470 | **** | 542,896 | **** | 542,470 |
See Notes to the Interim Condensed Consolidated Financial Statements.
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 5 |
|---|
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended March 31, 2023 and 2022
(tabular amounts only are in thousands of Canadian dollars, except per share data) (unaudited)
| 1. | Description of business |
|---|
CGI Inc. (the Company), directly or through its subsidiaries, provides managed information technology (IT) and business process services, business, and strategic IT consulting and systems integration services, as well as the sale of software solutions to help clients effectively realize their strategies and create added value. The Company was incorporated under Part IA of the Companies Act (Québec), predecessor to the Business Corporations Act (Québec) which came into force on February 14, 2011 and its Class A subordinate voting shares are publicly traded. The executive and registered office of the Company is situated at 1350 René-Lévesque Blvd. West, Montréal, Québec, Canada, H3G 1T4.
| 2. | Basis of preparation |
|---|
These interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim FinancialReporting, as issued by the International Accounting Standards Board (IASB). In addition, the interim condensed consolidated financial statements have been prepared in accordance with the accounting policies set out in Note 3, Summary of significant accounting policies, of the Company’s consolidated financial statements for the year ended September 30, 2022 which were consistently applied to all periods presented, except for the new accounting standard amendments adopted on October 1, 2022, as described below in Note 3, Accounting policies.
These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended September 30, 2022.
The Company’s interim condensed consolidated financial statements for the three and six months ended March 31, 2023 and 2022 were authorized for issue by the Board of Directors on April 25, 2023.
| 3. | Accounting policies |
|---|
ADOPTION OF ACCOUNTING STANDARD
The following standard amendments have been adopted by the Company on October 1, 2022:
Onerous contracts – Cost of Fulfilling a Contract - Amendments to IAS 37
In May, 2020, the IASB amended IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The standard amendments clarify that for assessing whether a contract is onerous, the cost of fulfilling the contract includes both the incremental cost of fulfilling that contract and an allocation of other costs that relates directly to fulfilling the contract.
The implementation of these standard amendments resulted in no significant impact on the Company’s interim condensed consolidated financial statements.
FUTURE ACCOUNTING STANDARD CHANGES
The following standard amendments have been issued and will be effective on October 1, 2023 for the Company, with earlier application permitted. The Company is currently evaluating the impact of these standard amendments on its consolidated financial statements.
Classification of Liabilities as Current or Non-current – Amendments to IAS 1
In January, 2020, the IASB amended IAS 1 Presentation of Financial Statements. The standard amendments clarify that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period and which only impacts the presentation of liabilities in the balance sheet. The classification is unaffected by expectations about whether the Company will exercise its right to defer settlement of a liability.
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 6 |
|---|
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended March 31, 2023 and 2022
(tabular amounts only are in thousands of Canadian dollars, except per share data) (unaudited)
| 3. | Accounting policies (continued) |
|---|
FUTURE ACCOUNTING STANDARD CHANGES (CONTINUED)
Disclosure of Accounting Policy Information – Amendments to IAS 1 and IFRS Practice Statement 2
In February, 2021, the IASB amended IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements to require the Company to disclose its material accounting policy information rather than its significant accounting policies. ****
Definition of AccountingEstimates – Amendments to IAS 8
In February, 2021, the IASB amended IAS 8 Accounting Policies, Changes in Accounting estimates and Errors to introduce a definition of accounting estimates and to help entities distinguish changes in accounting policies from changes in accounting estimates. This distinction is important because changes in accounting policies must be applied retrospectively while changes in accounting estimates are accounted for prospectively.
Deferred Tax related to Assets and Liabilities arising from a Single Transaction –Amendments to IAS 12
In May, 2021, the IASB amended IAS 12 Income Taxes, to narrow the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences.
The following standard amendments have been issued and will be effective as of October 1, 2024 for the Company, with earlier application permitted. The Company is currently evaluating the impact of these standard amendments on its consolidated financial statements.
Information about long-term debt with covenants – Amendments to IAS 1
In October, 2022, the IASB issued standard amendments to IAS 1 Presentation of Financial Statements that aim to improve the information companies provide about long-term debt with covenants. These standard amendments to IAS 1 specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date. Instead, these standard amendments require a company to disclose information about these covenants in the notes to the financial statements.
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 7 |
|---|
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended March 31, 2023 and 2022
(tabular amounts only are in thousands of Canadian dollars, except per share data) (unaudited)
| 4. | Accumulated other comprehensive income | ||||||
|---|---|---|---|---|---|---|---|
| As at | As at | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| March 31, 2023 | September 30, 2022 | ||||||
| $ | $ | ||||||
| Items that will be reclassified subsequently to net earnings: | |||||||
| Net unrealized gains on translating financial statements of foreign operations, net of<br>accumulated income<br>tax expense of $44,278 ($45,419 as at September 30, 2022) | **** | 714,829 | **** | 291,532 | |||
| Net losses on cross-currency swaps and on translating long-term debt designated as hedges<br>of net<br>investments in foreign operations, net of accumulated income tax recovery of<br>$56,302 ($43,936 as at September 30, 2022) | **** | (352,655 | ) | (271,690 | ) | ||
| Deferred gains of hedging on cross-currency swaps, net of accumulated income tax expense<br>of $6,103 ($4,664<br>as at September 30, 2022) | **** | 37,044 | **** | 28,274 | |||
| Net unrealized gains on cash flow hedges, net of accumulated income tax expense of $4,745<br>($10,398 as at<br>September 30, 2022) | **** | 13,627 | **** | 30,274 | |||
| Net unrealized losses on financial assets at fair value through other comprehensive income,<br>net of<br>accumulated income tax recovery of $940 ($1,367 as at September 30, 2022) | **** | (2,687 | ) | (4,072 | ) | ||
| Items that will not be reclassified subsequently to net earnings: | |||||||
| Net remeasurement losses on defined benefit plans, net of accumulated<br>income tax recovery<br>of $13,507 ($12,095 as at September 30, 2022) | **** | (36,053 | ) | (34,572 | ) | ||
| **** | 374,105 | **** | 39,746 |
For the six months ended March 31, 2023, $7,738,000 of the net unrealized gains on cash flow hedges, net of income tax expense of $2,714,000, previously recognized in other comprehensive income, were reclassified in the consolidated statements of earnings ($911,000 of the net unrealized gains on cash flow hedges, net of income tax recovery of $20,000, were reclassified for the six months ended March 31, 2022).
For the six months ended March 31, 2023, $6,362,000 of the deferred gains of hedging on cross-currency swaps, net of income tax expense of $972,000, were also reclassified in the consolidated statements of earnings ($5,325,000 and $1,921,000, respectively, were reclassified for the six months ended March 31, 2022).
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 8 |
|---|
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended March 31, 2023 and 2022
(tabular amounts only are in thousands of Canadian dollars, except per share data) (unaudited)
| 5. | Capital stock, share-based payments and earnings per share | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| a) | Capital stock | |||||||||||||||||
| --- | --- | |||||||||||||||||
| Class A subordinate voting shares | Class B multiple voting shares | Total | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Number | Carrying value | Number | Carrying value | Number | Carrying value | |||||||||||||
| $ | $ | $ | ||||||||||||||||
| As at September 30, 2022 | 211,302,549 | 1,456,275 | 26,445,706 | 36,894 | 237,748,255 | 1,493,169 | ||||||||||||
| Release of shares held in trusts^1^ | — | 13,522 | — | — | — | 13,522 | ||||||||||||
| Purchased and held in trusts^1^ | — | (74,455 | ) | — | — | — | (74,455 | ) | ||||||||||
| Issued upon exercise of stock options^2^ | 1,121,169 | 69,994 | — | — | 1,121,169 | 69,994 | ||||||||||||
| Purchased and<br>cancelled^3^ | (3,445,096 | ) | (38,106 | ) | — | — | (3,445,096 | ) | (38,106 | ) | ||||||||
| As at March 31, 2023 | **** | 208,978,622 | **** | **** | 1,427,230 | **** | **** | 26,445,706 | **** | **** | 36,894 | **** | **** | 235,424,328 | **** | **** | 1,464,124 | **** |
| ^1^ | During the six months ended March 31, 2023, 170,088 shares held in trust were released (230,154 during the six months<br>ended March 31, 2022) with a recorded value of $13,522,000 ($15,577,000 during the six months ended March 31, 2022) that was removed from contributed surplus. | |||||||||||||||||
| --- | --- | |||||||||||||||||
| ^^ | During the six months ended March 31, 2023, the Company settled the withholding tax obligations of the employees<br>under the performance share unit (PSU) plans for a cash payment of $13,684,000 (nil during the six months ended March 31, 2022). | |||||||||||||||||
| --- | --- | |||||||||||||||||
| ^^ | During the six months ended March 31, 2023, the trustees, in accordance with the terms of the PSU plans and Trust<br>Agreements, purchased 640,052 Class A subordinate voting shares of the Company on the open market (643,629 during the six months ended March 31, 2022) for a cash consideration of $74,455,000 ($70,303,000 during the six months ended<br>March 31, 2022). | |||||||||||||||||
| --- | --- | |||||||||||||||||
| ^^ | As at March 31, 2023, 2,311,673 Class A subordinate voting shares were held in trusts under the PSU plans<br>(1,845,426 as at March 31, 2022 and 1,841,709 as at September 30, 2022). | |||||||||||||||||
| --- | --- | |||||||||||||||||
| ^2^ | The carrying value of Class A subordinate voting shares includes $11,701,000 which corresponds to a reduction in<br>contributed surplus representing the value of accumulated compensation costs associated with the stock options exercised during the six months ended March 31, 2023 ($4,296,000 during the six months ended March 31, 2022).<br> | |||||||||||||||||
| --- | --- | |||||||||||||||||
| ^3^ | On January 31, 2023, the Company’s Board of Directors authorized, and subsequently received the regulatory<br>approval from the Toronto Stock Exchange (TSX), for the renewal of the Normal Course Issuer Bid (NCIB) for the purchase for cancellation of up to 18,769,394 Class A subordinate voting shares on the open market through the TSX, the New York<br>Stock Exchange (NYSE) and/or alternative trading systems or otherwise pursuant to exemption orders issued by securities regulators. The Class A subordinate voting shares are available for purchase for cancellation commencing on February 6,<br>2023 until no later than February 5, 2024, or on such earlier date when the Company has either acquired the maximum number of Class A subordinate voting shares allowable under the NCIB or elects to terminate the bid. | |||||||||||||||||
| --- | --- | |||||||||||||||||
| ^^ | During the three months ended March 31, 2023, the Company purchased for cancellation 3,344,996 Class A<br>subordinate voting shares under the current NCIB from the Caisse de dépôt et placement du Québec for a total cash consideration of $400,000,000 (3,968,159 and $400,000,000, respectively during the three months ended<br>March 31, 2022). The excess of the purchase price over the carrying value in the amount of $361,791,000 was charged to retained earnings ($315,112,000 during the three months ended March 31, 2022). The purchase was made pursuant to an<br>exemption order issued by the Autorité des marchés financiers and is considered within the annual aggregate limit that the Company is entitled to purchase under its current NCIB. | |||||||||||||||||
| --- | --- | |||||||||||||||||
| ^^ | In addition, during the six months ended March 31, 2023, the Company paid for and cancelled 100,100 Class A<br>subordinate voting shares under its previous NCIB, with a carrying value of $778,000 and for a total cash consideration of $10,291,000, which were purchased, or committed to be purchased, but not cancelled as at September 30, 2022. During the<br>six months ended March 31, 2022, the Company purchased 2,310,766 Class A subordinate voting shares under previous NCIB for a total cash consideration of $250,513,000 and the excess of the purchase price over the carrying value in the<br>amount of $232,254,000 was charged to retained earnings. | |||||||||||||||||
| --- | --- | |||||||||||||||||
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 9 | |||||||||||||||||
| --- | --- | --- |
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended March 31, 2023 and 2022
(tabular amounts only are in thousands of Canadian dollars, except per share data) (unaudited)
| 5. | Capital stock, share-based payments and earnings per share (continued) |
|---|---|
| b) | Share-based payments |
| --- | --- |
| i) | Performance share units (PSUs) |
| --- | --- |
During the six months ended March 31, 2023, 897,733 PSUs were granted, 291,635 were exercised and 127,912 were forfeited. The PSUs granted in the period had a grant date fair value of $112.44 per unit.
| ii) | Stock options |
|---|
During the six months ended March 31, 2023, 1,121,169 stock options were exercised (Note 5a) and 12,335 were forfeited.
| c) | Earnings per share |
|---|
The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended March 31:
| Three months ended March 31 | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | ||||||||||||||||||||||
| Netearnings | Weighted average number ofshares outstanding^1^ | Earningsper share | Net<br><br><br>earnings | Weighted average number of<br>shares outstanding^1^ | Earnings<br><br><br>per share | ||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| Basic | **** | 419,415 | **** | **** | 235,042,445 | **** | **** | 1.78 | **** | 371,988 | 240,299,030 | 1.55 | |||||||||||
| Net effect of dilutive stock options and PSUs^2^ | **** | 3,462,078 | **** | 3,535,022 | |||||||||||||||||||
| Diluted | **** | 419,415 | **** | **** | 238,504,523 | **** | **** | 1.76 | **** | 371,988 | 243,834,052 | 1.53 | |||||||||||
| Six months ended March 31 | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Netearnings | Weighted average number ofshares outstanding^1^ | Earningsper share | Net<br><br><br>earnings | Weighted average number of<br>shares outstanding^1^ | Earnings<br><br><br>per share | ||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| Basic | **** | 801,794 | **** | **** | 235,590,459 | **** | **** | 3.40 | **** | 739,436 | 241,641,373 | 3.06 | |||||||||||
| Net effect of dilutive stock options and PSUs^2^ | **** | 3,408,492 | **** | 3,713,545 | |||||||||||||||||||
| Diluted | **** | 801,794 | **** | **** | 238,998,951 | **** | **** | 3.35 | **** | 739,436 | 245,354,918 | 3.01 | |||||||||||
| ^1^ | During the three months ended March 31, 2023, 3,344,996 Class A subordinate voting shares purchased for<br>cancellation and 2,311,673 Class A subordinate voting shares held in trusts were excluded from the calculation of the weighted average number of shares outstanding as of the date of the transaction (3,968,159 and 1,845,426, respectively during<br>the three months ended March 31, 2022). During the six months ended March 31, 2023, 3,445,096 Class A subordinate voting shares purchased for cancellation and 2,311,673 Class A subordinate voting shares held in trusts were<br>excluded from the calculation of the weighted average number of shares outstanding as of the date of the transaction (6,428,925 and 1,845,426, respectively during the six months ended March 31, 2022). | ||||||||||||||||||||||
| --- | --- | ||||||||||||||||||||||
| ^2^ | The calculation of the diluted earnings per share excluded nil and 13,260 stock options, respectively, for the three and<br>six months ended March 31, 2023 (322,815 and 318,712, respectively during the three and six months ended March 31, 2022), as they were anti-dilutive. | ||||||||||||||||||||||
| --- | --- | ||||||||||||||||||||||
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 10 | ||||||||||||||||||||||
| --- | --- | --- |
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended March 31, 2023 and 2022
(tabular amounts only are in thousands of Canadian dollars, except per share data) (unaudited)
| 6. | Net finance costs | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three months ended March 31 | Six months ended March 31 | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| $ | $ | $ | $ | ||||||||||
| Interest on long-term debt | **** | 13,689 | **** | 13,228 | **** | 27,694 | **** | 30,095 | |||||
| Interest on lease liabilities | **** | 7,312 | **** | 6,906 | **** | 14,473 | **** | 14,163 | |||||
| Net interest costs on net defined benefit obligations or assets | **** | 1,070 | **** | 535 | **** | 2,161 | **** | 1,334 | |||||
| Other finance costs | **** | 3,008 | **** | 2,257 | **** | 4,057 | **** | 3,511 | |||||
| Finance costs | **** | 25,079 | **** | 22,926 | **** | 48,385 | **** | 49,103 | |||||
| Finance income | **** | (9,713 | ) | (387 | ) | **** | (14,878 | ) | (986 | ) | |||
| **** | 15,366 | **** | 22,539 | **** | 33,507 | **** | 48,117 | ||||||
| 7. | Investments in subsidiaries | ||||||||||||
| --- | --- | ||||||||||||
| a) | Acquisitions and disposals | ||||||||||||
| --- | --- |
There were no significant acquisitions or disposals for the three and six months ended March 31, 2023.
| b) | Business acquisitions realized in the prior fiscal year |
|---|
During the three months ended March 31, 2023, the Company finalized the fair value assessment of assets acquired and liabilities assumed for Unico Computer Systems Pty Ltd with no significant adjustments.
| c) | Acquisition-related and integration costs |
|---|
During the three and six months ended March 31, 2023, the Company incurred $20,945,000 and $40,369,000 respectively of integration costs which mainly include terminations of employment of $8,095,000 and $15,384,000, respectively, and costs of vacating lease premises of $7,774,000 and $9,111,000, respectively.
During the three and six months ended March 31, 2022, the Company incurred $2,248,000 and $4,865,000 respectively of acquisition-related and integration costs. These amounts mainly included integration costs related to terminations of employment of $1,117,000 and $2,115,000, respectively.
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 11 |
|---|
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended March 31, 2023 and 2022
(tabular amounts only are in thousands of Canadian dollars, except per share data) (unaudited)
| 8. | Supplementary cash flow information |
|---|
a) Net change in non-cash working capital items and others is as follows for the three and six months ended March 31:
| Three months ended March 31 | Six months ended March 31 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| $ | $ | $ | $ | ||||||||||
| Accounts receivable | **** | 91,972 | **** | 79,546 | **** | (59,490 | ) | (40,967 | ) | ||||
| Work in progress | **** | (169,232 | ) | (181,337 | ) | **** | (7,643 | ) | (91,503 | ) | |||
| Prepaid expenses and other assets | **** | (981 | ) | (9,647 | ) | **** | 7,491 | **** | 662 | ||||
| Long-term financial assets | **** | (3,791 | ) | 7,950 | **** | (5,803 | ) | 1,900 | |||||
| Accounts payable and accrued liabilities | **** | (122,167 | ) | (5,265 | ) | **** | (113,732 | ) | 55,417 | ||||
| Accrued compensation and employee-related liabilities | **** | (7,290 | ) | 7,354 | **** | (103,736 | ) | (70,875 | ) | ||||
| Deferred revenue | **** | 104,789 | **** | 105,111 | **** | 199,270 | **** | 136,721 | |||||
| Income taxes | **** | 45,541 | **** | (8,868 | ) | **** | 128,341 | **** | 48,102 | ||||
| Provisions | **** | 793 | **** | (10,753 | ) | **** | (3,726 | ) | (30,064 | ) | |||
| Long-term liabilities | **** | 3,040 | **** | (9,674 | ) | **** | 12,453 | **** | (41,532 | ) | |||
| Derivative financial instruments | **** | (49 | ) | (695 | ) | **** | (208 | ) | (987 | ) | |||
| Retirement benefits obligations | **** | 2,546 | **** | 3,898 | **** | 377 | **** | 3,038 | |||||
| **** | (54,829 | ) | (22,380 | ) | **** | 53,594 | **** | (30,088 | ) |
b) Net interest paid and income taxes paid are classified within operating activities and are as follows for the three and six months ended March 31:
| Three months ended March 31 | Six months ended March 31 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |||||||||||
| $ | $ | $ | $ | |||||||||||
| Net interest paid | **** | 22,120 | **** | 33,307 | **** | 29,274 | **** | 48,940 | ||||||
| Income taxes paid | **** | 131,890 | **** | 142,303 | **** | 200,371 | **** | 185,996 |
c) Cash and cash equivalents consisted of unrestricted cash as at March 31, 2023 and September 30, 2022.
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 12 |
|---|
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended March 31, 2023 and 2022
(tabular amounts only are in thousands of Canadian dollars, except per share data) (unaudited)
| 9. | Segmented information |
|---|
Since April 1, 2022, the Company is managed through the following nine operating segments, namely: Western and Southern Europe (primarily France, Spain and Portugal); United States (U.S.) Commercial and State Government; Canada; U.S. Federal; Scandinavia and Central Europe (Germany, Sweden and Norway); United Kingdom (U.K.) and Australia; Finland, Poland and Baltics; Northwest and Central-East Europe (primarily Netherlands, Denmark and Czech Republic); and Asia Pacific Global Delivery Centers of Excellence (mainly India and Philippines) (Asia Pacific).
The operating segments reflect the management structure and the way that the chief operating decision-maker, who is the President and Chief Executive Officer of the Company, evaluates the business. The following tables present information on the Company’s operations based on its management structure. The Company has restated the segmented information for the comparative period to conform to the new segmented information structure.
| For the three months ended March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| WesternandSouthernEurope | U.S.Commercialand StateGovernment | Canada | U.S.Federal | Scandinaviaand CentralEurope | U.K. andAustralia | Finland,Poland andBaltics | NorthwestandCentral-EastEurope | AsiaPacific | Eliminations | Total | |||||||||||||||||||||||||||||||||
| **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | |||||||||||
| Segment revenue | **** | 714,474 | **** | **** | 574,887 | **** | **** | 530,143 | **** | **** | 489,025 | **** | **** | 441,875 | **** | **** | 368,329 | **** | **** | 220,646 | **** | **** | 197,105 | **** | **** | 229,398 | **** | **** | (50,558 | ) | **** | 3,715,324 | **** | ||||||||||
| Segment earnings before<br>acquisition-related and<br>integration costs, net<br>finance costs and<br>income<br>tax expense^1^ | **** | 119,328 | **** | **** | 64,135 | **** | **** | 115,272 | **** | **** | 71,865 | **** | **** | 46,500 | **** | **** | 55,253 | **** | **** | 31,242 | **** | **** | 26,376 | **** | **** | 70,797 | **** | **** | — | **** | **** | 600,768 | **** | ||||||||||
| Acquisition-related and integration<br>costs (Note 7c) | **** | (20,945 | ) | ||||||||||||||||||||||||||||||||||||||||
| Net finance costs (Note 6) | **** | (15,366 | ) | ||||||||||||||||||||||||||||||||||||||||
| Earnings before income taxes | **** | 564,457 | **** | ||||||||||||||||||||||||||||||||||||||||
| ^1^Total amortization and depreciation of $128,832,000 included in the Western and Southern Europe, U.S. Commercial and State Government, Canada, U.S. Federal, Scandinavia and Central<br>Europe, U.K. and Australia, Finland, Poland and Baltics, Northwest and Central-East Europe and Asia Pacific segments is $24,479,000, $21,101,000, $12,865,000, $13,954,000, $23,831,000, $9,927,000, $9,608,000, $7,814,000 and $5,253,000, respectively,<br>for the three months ended March 31, 2023. | ^^ | ||||||||||||||||||||||||||||||||||||||||||
| For the three months ended March 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||
| Western<br>and<br>Southern<br>Europe | U.S.<br>Commercial<br>and State<br>Government | Canada | U.S.<br>Federal | Scandinavia<br>and Central<br>Europe | U.K. and<br>Australia | Finland,<br>Poland and<br>Baltics | Northwest<br>and<br>Central-<br>East<br>Europe | Asia<br>Pacific | Eliminations | Total | |||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Segment revenue | 547,649 | 506,680 | 495,305 | 438,566 | 412,712 | 343,661 | 190,312 | 183,374 | 193,482 | (42,795 | ) | 3,268,946 | |||||||||||||||||||||||||||||||
| Segment earnings before<br>acquisition-related and<br>integration costs, net<br>finance costs and<br>income<br>tax expense^1^ | 85,273 | 72,071 | 108,314 | 70,984 | 30,007 | 57,429 | 23,010 | 18,992 | 57,528 | — | 523,608 | ||||||||||||||||||||||||||||||||
| Acquisition-related and integration<br>costs (Note 7c) | (2,248 | ) | |||||||||||||||||||||||||||||||||||||||||
| Net finance costs (Note 6) | (22,539 | ) | |||||||||||||||||||||||||||||||||||||||||
| Earnings before income taxes | 498,821 | ||||||||||||||||||||||||||||||||||||||||||
| ^1^ | Total<br>amortization and depreciation of $118,565,000 included in the Western and Southern Europe, U.S. Commercial and State Government, Canada, U.S. Federal, Scandinavia and Central Europe, U.K. and Australia, Finland, Poland and Baltics, Northwest and<br>Central-East Europe and Asia Pacific segments is $14,360,000, $16,613,000, $14,682,000, $13,445,000, $24,116,000, $10,121,000, $8,475,000, $10,515,000 and $6,238,000, respectively, for the three months ended March 31, 2022. Amortization<br>includes an impairment in Northwest and Central-East Europe for $2,131,000 related to a business solution. This asset was no longer expected to generate future economic benefits. | ||||||||||||||||||||||||||||||||||||||||||
| --- | --- | ||||||||||||||||||||||||||||||||||||||||||
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 13 | ||||||||||||||||||||||||||||||||||||||||||
| --- | --- | --- |
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended March 31, 2023 and 2022
(tabular amounts only are in thousands of Canadian dollars, except per share data) (unaudited)
| 9. | Segmented information (continued) | ||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| For the six months ended March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| WesternandSouthernEurope | U.S.Commercialand StateGovernment | Canada | U.S.Federal | Scandinaviaand CentralEurope | U.K. andAustralia | Finland,Poland andBaltics | NorthwestandCentral-EastEurope | AsiaPacific | Eliminations | Total | |||||||||||||||||||||||||||||||||
| **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | **** | $ | **** | |||||||||||
| Segment revenue | **** | 1,342,602 | **** | **** | 1,140,900 | **** | **** | 1,036,516 | **** | **** | 953,054 | **** | **** | 840,078 | **** | **** | 698,276 | **** | **** | 423,904 | **** | **** | 375,206 | **** | **** | 450,821 | **** | **** | (95,761 | ) | **** | 7,165,596 | **** | ||||||||||
| Segment earnings before<br>acquisition-related and<br>integration costs, net<br>finance costs and<br>income<br>tax expense^1^ | **** | 196,732 | **** | **** | 146,417 | **** | **** | 234,274 | **** | **** | 145,010 | **** | **** | 77,607 | **** | **** | 100,353 | **** | **** | 60,460 | **** | **** | 52,242 | **** | **** | 141,786 | **** | **** | — | **** | **** | 1,154,881 | **** | ||||||||||
| Acquisition-related and integration<br>costs (Note 7c) | **** | (40,369 | ) | ||||||||||||||||||||||||||||||||||||||||
| Net finance costs (Note 6) | **** | (33,507 | ) | ||||||||||||||||||||||||||||||||||||||||
| Earnings before income taxes | **** | 1,081,005 | **** | ||||||||||||||||||||||||||||||||||||||||
| ^1^Total amortization and depreciation of $252,885,000 included in the Western and Southern Europe, U.S. Commercial and State Government, Canada, U.S. Federal, Scandinavia and Central<br>Europe, U.K. and Australia, Finland, Poland and Baltics, Northwest and Central-East Europe and Asia Pacific segments is $45,040,000, $40,454,000, $26,680,000, $29,910,000, $45,373,000, $19,004,000, $18,581,000, $15,354,000 and $12,489,000,<br>respectively, for the six months ended March 31, 2023. | ^^ | ||||||||||||||||||||||||||||||||||||||||||
| For the six months ended March 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||
| Western<br>and<br>Southern<br>Europe | U.S.<br>Commercial<br>and State<br>Government | Canada | U.S.<br>Federal | Scandinavia<br>and Central<br>Europe | U.K. and<br>Australia | Finland,<br>Poland and<br>Baltics | Northwest<br>and<br>Central-<br>East<br>Europe | Asia<br>Pacific | Eliminations | Total | |||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Segment revenue | 1,051,127 | 990,114 | 960,820 | 855,141 | 817,644 | 642,123 | 382,588 | 365,473 | 377,447 | (81,135 | ) | 6,361,342 | |||||||||||||||||||||||||||||||
| Segment earnings before<br>acquisition-related and<br>integration costs, net<br>finance costs and<br>income<br>tax expense^1^ | 163,710 | 143,754 | 227,584 | 129,843 | 63,917 | 104,595 | 47,986 | 47,094 | 116,587 | — | 1,045,070 | ||||||||||||||||||||||||||||||||
| Acquisition-related and integration<br>costs (Note 7c) | (4,865 | ) | |||||||||||||||||||||||||||||||||||||||||
| Net finance costs (Note 6) | (48,117 | ) | |||||||||||||||||||||||||||||||||||||||||
| Earnings before income taxes | 992,088 | ||||||||||||||||||||||||||||||||||||||||||
| ^1^ | Total amortization and depreciation of $236,612,000 included in the Western and Southern Europe, U.S. Commercial and<br>State Government, Canada, U.S. Federal, Scandinavia and Central Europe, U.K. and Australia, Finland, Poland and Baltics, Northwest and Central-East Europe and Asia Pacific segments is $28,421,000, $33,887,000, $30,222,000, $27,297,000, $48,126,000,<br>$19,782,000, $16,880,000, $19,079,000 and $12,918,000, respectively, for the six months ended March 31, 2022. Amortization includes an impairment in Northwest and Central-East Europe for $2,131,000 related to a business solution. This asset was<br>no longer expected to generate future economic benefits. | ||||||||||||||||||||||||||||||||||||||||||
| --- | --- |
The accounting policies of each operating segment are the same as those described in Note 3, Summary of significant accounting policies, of the Company’s consolidated financial statements for the year ended September 30, 2022. Intersegment revenue is priced as if the revenue was from third parties.
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 14 |
|---|
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended March 31, 2023 and 2022
(tabular amounts only are in thousands of Canadian dollars, except per share data) (unaudited)
| 9. | Segmented information (continued) |
|---|
GEOGRAPHIC INFORMATION
The following table provides external revenue information based on the client’s location which is different from the revenue presented under operating segments, due to the intersegment revenue, for the three and six months ended March 31:
| Three months ended March 31 | Six months ended March 31 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |||||||||||
| $ | $ | $ | $ | |||||||||||
| Western and Southern Europe | ||||||||||||||
| France | **** | 626,666 | **** | 463,427 | **** | 1,176,608 | **** | 895,250 | ||||||
| Spain | **** | 31,195 | **** | 32,001 | **** | 59,242 | **** | 58,896 | ||||||
| Portugal | **** | 30,273 | **** | 27,704 | **** | 57,452 | **** | 53,788 | ||||||
| Others | **** | 15,051 | **** | 15,562 | **** | 27,292 | **** | 26,429 | ||||||
| **** | 703,185 | **** | 538,694 | **** | 1,320,594 | **** | 1,034,363 | |||||||
| U.S.^1^ | **** | 1,116,979 | **** | 981,693 | **** | 2,185,287 | **** | 1,916,989 | ||||||
| Canada | **** | 570,372 | **** | 535,195 | **** | 1,120,990 | **** | 1,037,887 | ||||||
| Scandinavia and Central Europe | ||||||||||||||
| Germany | **** | 245,649 | **** | 208,856 | **** | 453,336 | **** | 407,227 | ||||||
| Sweden | **** | 186,796 | **** | 185,367 | **** | 364,773 | **** | 376,728 | ||||||
| Norway | **** | 34,659 | **** | 38,905 | **** | 69,838 | **** | 74,941 | ||||||
| **** | 467,104 | **** | 433,128 | **** | 887,947 | **** | 858,896 | |||||||
| U.K. and Australia | ||||||||||||||
| U.K. | **** | 395,495 | **** | 370,673 | **** | 765,439 | **** | 697,979 | ||||||
| Australia | **** | 23,072 | **** | 17,572 | **** | 44,468 | **** | 33,726 | ||||||
| **** | 418,567 | **** | 388,245 | **** | 809,907 | **** | 731,705 | |||||||
| Finland, Poland and Baltics | ||||||||||||||
| Finland | **** | 217,372 | **** | 189,964 | **** | 419,182 | **** | 381,699 | ||||||
| Others | **** | 12,394 | **** | 9,019 | **** | 21,568 | **** | 17,724 | ||||||
| **** | 229,766 | **** | 198,983 | **** | 440,750 | **** | 399,423 | |||||||
| Northwest and Central-East Europe | ||||||||||||||
| Netherlands | **** | 146,328 | **** | 128,617 | **** | 279,600 | **** | 255,449 | ||||||
| Denmark | **** | 26,560 | **** | 32,357 | **** | 51,315 | **** | 63,460 | ||||||
| Czech Republic | **** | 19,071 | **** | 13,080 | **** | 35,047 | **** | 26,613 | ||||||
| Others | **** | 16,661 | **** | 17,693 | **** | 32,535 | **** | 34,303 | ||||||
| **** | 208,620 | **** | 191,747 | **** | 398,497 | **** | 379,825 | |||||||
| Asia Pacific | ||||||||||||||
| Others | **** | 731 | **** | 1,261 | **** | 1,624 | **** | 2,254 | ||||||
| **** | 731 | **** | 1,261 | **** | 1,624 | **** | 2,254 | |||||||
| **** | 3,715,324 | **** | 3,268,946 | **** | 7,165,596 | **** | 6,361,342 | |||||||
| ^1^ | External revenue included in the U.S. Commercial and State Government and U.S. Federal operating segments was $625,758,000<br>and $491,221,000, respectively, for the three months ended March 31, 2023 ($540,151,000 and $441,542,000, respectively, for the three months ended March 31, 2022). In addition, external revenue included in the U.S. Commercial and State<br>Government and U.S. Federal operating segments was $1,227,830,000 and $957,457,000, respectively, for the six months ended March 31, 2023 ($1,055,865,000 and $861,124,000, respectively, for the six months ended March 31, 2022).<br> | |||||||||||||
| --- | --- | |||||||||||||
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 15 | |||||||||||||
| --- | --- | --- |
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended March 31, 2023 and 2022
(tabular amounts only are in thousands of Canadian dollars, except per share data) (unaudited)
| 9. | Segmented information (continued) |
|---|
INFORMATION ABOUT SERVICES
The following table provides revenue information based on services provided by the Company for the three and six months ended March 31:
| Three months ended March 31 | Six months ended March 31 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |||||||||||
| $ | $ | $ | $ | |||||||||||
| Managed IT and business process services | **** | 1,953,326 | **** | 1,768,403 | **** | 3,795,528 | **** | 3,480,361 | ||||||
| Business and strategic IT consulting and systems integration | **** | 1,761,998 | **** | 1,500,543 | **** | 3,370,068 | **** | 2,880,981 | ||||||
| **** | 3,715,324 | **** | 3,268,946 | **** | 7,165,596 | **** | 6,361,342 |
MAJOR CLIENT INFORMATION
Contracts with the U.S. federal government and its various agencies, included within the U.S. Federal operating segment, accounted for $485,526,000 and 13.1% of revenues for the three months ended March 31, 2023 ($428,002,000 and 13.1% for the three months ended March 31, 2022) and $946,021,000 and 13.2% of revenues for the six months ended March 31, 2023 ($830,543,000 and 13.1% for the six months ended March 31, 2022).
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 16 |
|---|
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended March 31, 2023 and 2022
(tabular amounts only are in thousands of Canadian dollars, except per share data) (unaudited)
| 10. | Financial instruments |
|---|
FAIR VALUE
All financial instruments are initially measured at their fair value and are subsequently classified either at amortized cost, at fair value through earnings or at fair value through other comprehensive income.
The Company has made the following classifications:
Amortized cost
Trade accounts receivable, long-term receivables within long-term financial assets, accounts payable and accrued liabilities, accrued compensation and employee-related liabilities, long-term debt and clients’ funds obligations.
Fair value through earnings (FVTE)
Cash, cash equivalents, cash included in funds held for clients, derivative financial instruments and deferred compensation plan assets within long-term financial assets.
Fair value through othercomprehensive income (FVOCI)
Short-term investments included in current financial assets, long-term bonds included in funds held for clients and long-term investments within long-term financial assets.
FAIR VALUE HIERARCHY
Fair value measurements recognized in the consolidated balance sheet are classified in accordance with the following levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included in Level 1, but that are observable for the asset or liability, either directly or indirectly; and
Level 3: inputs for the asset or liability that are not based on observable market data.
FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Valuation techniques used to value financial instruments are as follows:
| - | The fair value of the senior U.S. unsecured notes (2014 U.S. Senior Notes), the 5 and 10 year senior U.S. unsecured<br>notes (2021 U.S. Senior Notes), the 7 year senior unsecured notes (2021 CAD Senior Notes), the unsecured committed revolving credit facility, the unsecured committed term loan credit facility and the other long-term debt is estimated by discounting<br>expected cash flows at rates currently offered to the Company for debts of the same remaining maturities and conditions; |
|---|---|
| - | The fair value of long-term bonds included in funds held for clients and in long-term investments is determined by<br>discounting the future cash flows using observable inputs, such as interest rate yield curves or credit spreads, or according to similar transactions on an arm’s-length basis; |
| --- | --- |
| - | The fair value of foreign currency forward contracts is determined using forward exchange rates at the end of the<br>reporting period; |
| --- | --- |
| - | The fair value of cross-currency swaps and interest rate swaps is determined based on market data (primarily yield<br>curves, exchange rates and interest rates) to calculate the present value of all estimated cash flows; |
| --- | --- |
| - | The fair value of cash, cash equivalents, cash included in funds held for clients and short-term investments included in<br>current financial assets is determined using observable quotes; and |
| --- | --- |
| - | The fair value of deferred compensation plan assets within long-term financial assets is based on observable price<br>quotations and net assets values at the reporting date. |
| --- | --- |
There were no changes in valuation techniques during the six months ended March 31, 2023.
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 17 |
|---|
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended March 31, 2023 and 2022
(tabular amounts only are in thousands of Canadian dollars, except per share data) (unaudited)
| 10. | Financial instruments (continued) |
|---|
FAIR VALUE MEASUREMENTS (CONTINUED)
The following table presents the financial liabilities included in the long-term debt measured at amortized cost categorized using the fair value hierarchy:
| As at March 31, 2023 | As at September 30, 2022 | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Level | Carrying amount | Fair value | Carrying amount | Fair value | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||
| 2014 U.S. Senior Notes | Level 2 | **** | 541,189 | **** | **** | 533,969 | **** | 550,177 | 539,752 | |||||||||||
| 2021 U.S. Senior Notes | Level 2 | **** | 1,340,479 | **** | **** | 1,171,126 | **** | 1,361,974 | 1,127,739 | |||||||||||
| 2021 CAD Senior Notes | Level 2 | **** | 596,242 | **** | **** | 519,928 | **** | 595,900 | 503,227 | |||||||||||
| Other long-term debt | Level 2 | **** | 16,075 | **** | **** | 15,590 | **** | 71,278 | 68,991 | |||||||||||
| **** | 2,493,985 | **** | **** | 2,240,613 | **** | 2,579,329 | 2,239,709 |
For the remaining financial assets and liabilities measured at amortized cost, the carrying values approximate the fair values of the financial instruments given their short term maturity.
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 18 |
|---|
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended March 31, 2023 and 2022
(tabular amounts only are in thousands of Canadian dollars, except per share data) (unaudited)
| 10. | Financial instruments (continued) |
|---|
FAIR VALUE MEASUREMENTS (CONTINUED)
The following table presents financial assets and liabilities measured at fair value categorized using the fair value hierarchy:
| Level | As at March 31, 2023 | As at September 30, 2022 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| $ | $ | ||||||||||
| Financial assets | |||||||||||
| FVTE | |||||||||||
| Cash and cash equivalents | Level 2 | **** | 1,280,800 | **** | 966,458 | ||||||
| Cash included in funds held for clients | Level 2 | **** | 542,896 | **** | 504,726 | ||||||
| Deferred compensation plan assets | Level 1 | **** | 83,786 | **** | 71,863 | ||||||
| **** | 1,907,482 | **** | 1,543,047 | ||||||||
| Derivative financial instruments designated as hedginginstruments | |||||||||||
| Current derivative financial instruments included in current<br><br><br>financial assets | Level 2 | ||||||||||
| Cross-currency swaps | **** | 41,265 | **** | 8,740 | |||||||
| Foreign currency forward contracts | **** | 10,455 | **** | 18,934 | |||||||
| Long-term derivative financial instruments | Level 2 | ||||||||||
| Cross-currency swaps | **** | 62,172 | **** | 222,246 | |||||||
| Foreign currency forward contracts | **** | 5,129 | **** | 15,631 | |||||||
| **** | 119,021 | **** | 265,551 | ||||||||
| FVOCI | |||||||||||
| Short-term investments included in current financial assets | Level 2 | **** | 4,737 | **** | 6,184 | ||||||
| Long-term bonds included in funds held for clients | Level 2 | **** | 162,857 | **** | 94,113 | ||||||
| Long-term investments | Level 2 | **** | 18,114 | **** | 16,826 | ||||||
| **** | 185,708 | **** | 117,123 | ||||||||
| Financial liabilities | |||||||||||
| Derivative financial instruments designated as hedginginstruments | |||||||||||
| Current derivative financial instruments | Level 2 | ||||||||||
| Cross-currency swaps | **** | 1,724 | **** | — | |||||||
| Foreign currency forward contracts | **** | 3,464 | **** | 5,710 | |||||||
| Long-term derivative financial instruments | Level 2 | ||||||||||
| Cross-currency swaps | **** | 2,318 | **** | 1,685 | |||||||
| Foreign currency forward contracts | **** | 4,738 | **** | 4,795 | |||||||
| **** | 12,244 | **** | 12,190 |
There were no transfers between Level 1 and Level 2 during the six months ended March 31, 2023.
| CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2023 and 2022 | 19 |
|---|