Earnings Call Transcript
Cgi Inc (GIB)
Earnings Call Transcript - GIB Q3 2020
Operator, Operator
Good morning, ladies and gentlemen, and welcome to the CGI Third Quarter Fiscal 2020 Conference Call. I would now like to turn the meeting over to Mr. Lorne Gorber, Executive Vice President, Investor and Public Relations. Please go ahead, Mr. Gorber.
Lorne Gorber, Executive Vice President, Investor and Public Relations
Thank you, Sharon, and good morning. With me to discuss CGI’s third quarter fiscal 2020 results are George Schindler, our President and CEO, and François Boulanger, Executive Vice President and CFO. This call is being broadcast on cgi.com and recorded live at 9:00 a.m. Eastern Time on Wednesday, July 29, 2020. Supplemental slides as well as the press release we issued earlier this morning are available for download along with our Q3 MD&A, financial statements, and accompanying notes, all of which are filed with both SEDAR and EDGAR, and are available for download on our website along with supplemental slides. Please note that some statements made on the call may be forward-looking. Actual events or results may differ materially from those expressed or implied, and CGI disclaims any intent or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. The complete Safe Harbor statement is available on both our MD&A and press release as well as on cgi.com. We encourage our investors to read it in its entirety. 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. So with that, I’ll turn the line over to François to discuss the quarter.
François Boulanger, Executive Vice President and CFO
Thank you, Lorne, and good morning. I’m pleased to share our results for the third quarter. Revenue came in at $3.1 billion, down 2.2% when compared to last year, representing a constant currency decline of 3.5% year-over-year. IP remained stable both sequentially and year-over-year at 21% of revenue. We had a near-term headwind from transaction volumes on certain SaaS-based IP engagements due to the pandemic's impact. For example, travel restrictions reduced US visa volumes, and increased unemployment had a negative effect on payroll volumes. However, new IP revenue was added to the portfolio from the recent acquisitions of Sunflower, Oasis, and others, which offset these temporary transaction declines. While the impact of the pandemic was felt broadly across our operations in the quarter, we initiated the necessary actions to minimize the bottom-line impact and position CGI for future profitable growth. As such, we expect a gradual improvement in the months and quarters ahead. Despite widespread economic pressures around the world during the quarter, we were able to close $2.8 billion in new contracts for a book-to-bill of 93%, higher than last quarter, as a proof point regarding the strength of our existing client relationships and our ability to win business throughout the crisis. As client executives and CGI consultants continue to slowly and safely return to work, we believe the opportunity for increased collaboration with current and prospective clients will accelerate our book-to-bill going forward. Over the last 12 months, we booked $11.8 billion in new contracts, or 97% of revenue. Our global backlog remains healthy at $22.3 billion, or 1.8 times revenue. The vast majority of which are long-term managed services engagements. Adjusted EBIT decreased in Q3 to $448 million for an EBIT margin of 14.7%, down 50 basis points compared to the same period last year. The decrease was largely due to non-recurring expenses taken in Q3. For example, we took a $10 million impairment charge related to specific IP solutions for both oil and gas and infrastructure. Offsetting this headwind, Canada, the UK, and Asia-Pacific continue to pose higher margins year-over-year. Our effective tax rate in Q3 was 27%, or 26.1% when excluding non-deductible restructuring expenses. This compares with 25.9% last year and remains within our expected range for the full year. Integration costs related mainly to recent acquisitions totaled $20 million in Q3, and we also incurred restructuring expenses of $39.5 million in the quarter, initiating the actions in response to the pandemic we outlined in Q2. At that time, we announced an expected range of 2% to 5% of our professionals to be on temporary layoff status until there was more clarity on evolving crisis. With an additional quarter behind us and more clarity on the business impacts and our recovery prospects, we now expect to permanently restructure approximately 2% of our consultants and professionals. We initiated these actions in Q3 and expect to complete the majority of them in Q4 for a total cost now above $115 million. This amount is higher than previously communicated due to the fact that the majority of permanent actions will be concentrated in Europe, which drives prior restructuring costs. We do not expect additional restructuring related to the pandemic at this time. Excluding these costs, net earnings were solid at $308.4 million for a margin of 10.1% and EPS of $1.18. Cash provided by operating activities was robust at $584.8 million or 19.2% of revenue, representing an increase of $209.6 million compared with Q3 last year. This improvement was driven by a lower DSO of 48 days compared to 52 days in the same period last year, indicating better collections. Government programs allowing for temporary tax payment deferrals and the positive impact resulting from the adoption of IFRS 16 also had contributions. Over the last 12 months, $1.9 billion in cash has been generated by operating activities or 15.2% of revenue. In the quarter, we invested $79 million into our business, largely in IP and managed services engagements. As planned, we did not complete any share buybacks in Q3. Looking ahead, for now, the priority will remain the same: to focus on investments and growth for our business and include the acceleration of both metro market and transformational acquisition opportunities. Net debt to capitalization decreased sequentially due to strong cash generation from 34.8% in Q2 to 28% at the end of June and remains within our comfort zone. With cash of $1.4 billion on hand and a $1.5 billion revolver that remains fully accessible, we now have more than $2.9 billion readily available to pursue profitable growth, including over 1,000 potential merger targets in various stages of our pipeline with more than 20 discussions ongoing. Now I’ll turn the call over to George to provide more details on the operations, our strategy, and the outlook for our business and markets.
George Schindler, President and CEO
Thank you, François, and good morning. The global pandemic has brought forward a unique set of conditions, requiring resolve and agility in order to take action now while continuing to prepare for the future. I’m proud of our consultants and professionals who have remained dedicated to delivering mission-critical technology and business process services to clients around the world. During the quarter, relationships with our clients and professionals have deepened, reaching new highs in terms of satisfaction and engagement. These relationships continue to strengthen our positioning and remain key to CGI’s ability to exit this crisis even stronger than we are today. Our operational rigor and discipline again enabled us to deliver a solid quarter, which underscores the key elements of CGI’s resilience that I spoke about on the last call. It is this combination of diversified industry portfolio, end-to-end services mix, and proximity-based model that enabled us to mitigate the full impact of the business and industry disruptions created by the pandemic. As François just detailed, we converted several of the temporary crisis response measures we took last quarter into permanent restructuring actions. This drove a year-over-year decrease in non-billable headcount and SG&A costs, although this restructuring unfortunately also affects some billable consultants. We accelerated virtual bootcamps and online learning utilizing CGI Academia, our global learning and development platform. This enabled us to reassign many of our professionals across various project opportunities and minimize the extent of the restructuring action. In addition, the executive compensation reductions that I mentioned last quarter remained in effect throughout Q3. All these actions continue to enable margin improvement opportunities now and in the future, and most importantly, the investments in our talent position us to address future growth opportunities as we execute on our buy strategy. Continuing the trend we have seen over the past few quarters, our mix of services is shifting towards longer-term recurring revenue. In Q3, the percentage of managed services revenue is up again over the last quarter to 54%, representing a 500-basis-point increase on a year-over-year basis. In fact, managed services opportunities now make up over 60% of our pipeline. We continue to see strong interest for IP with demand up 8% over this time last year. Many of our clients are currently reprioritizing their business and technology initiatives given the crisis and also reassessing the partners they will turn to for help now and in the future. Our bookings in the quarter demonstrate our positioning as a partner of choice with our clients. In the quarter, we sustained and grew CGI’s share with existing enterprise clients with a 96% renewal rate. Across all bookings, 65% of awards were from new projects. These included a large cybersecurity consulting agreement with the UK government, a multi-year consulting engagement to help modernize Danish Customs operations, instant payment consulting projects with one of Europe’s largest banks, and the modernization of utility asset management for one of the largest utilities in North America, leveraging CGI’s unique IP business solution. As one of the few firms with the scale, reach, capabilities, and commitment to be our client’s global partner of choice, we are well positioned to continue delivering insights and solutions our clients can act on. With this backdrop, let’s turn to the Q3 regional performance highlights. I’ll start with North America. In the US, our revenue margin and bookings growth reflected the strength of our recurring revenue base and intellectual property across industry sectors as we expanded our share of IT spending with existing clients. We continue to see a strong pipeline of opportunities as the industry rebounds and reinvention phases begin to take shape. In Canada, our strong recurring revenue base enabled us to protect the bottom line. The revenue decline in lower bookings was primarily due to the immediate effect of the pandemic, particularly in the oil and gas and manufacturing sectors. We see growing demand across North America for a more transformational approach to managed services to help clients gain immediate cost savings while improving agility to support their evolving business objectives. Moving now to the UK and Australia. The strong results this quarter were again driven by a leadership position in the public sector, where we renewed and expanded existing engagements, notably in the space and defense markets. Now moving onto the rest of Europe, across the Western, Southern Europe, and Central Eastern Europe segment, revenue margin experienced a high level of disruption from the pandemic. This is due to our mix of commercial business in these geographies, which is largely in the manufacturing, transportation, and retail industry. In the quarter, we initiated proactive actions to reduce SG&A and are in discussions with the work councils on these plans. We expect these measures to drive margin improvements across the geographies over the next few quarters. Across our Northern Europe segment, our manufacturing, transportation, and financial services clients experienced high levels of disruptions from the pandemic, resulting in significant softness in demand for higher-end consulting and advisory services, which make a larger share of our mix in this region. In response, we continued our initiatives to restructure our business consulting and infrastructure services businesses to reflect current demand. Our healthy bookings in this region were driven by our focus on managed services, including IP, particularly in the government and utilities industries. While the pandemic has temporarily affected overall market conditions across Europe, we see emerging demand for our services as clients across industries reassess their operations for a post-pandemic environment. Finally, in Asia Pacific, revenue growth was strong as we continue to leverage global delivery centers of excellence in our new managed services engagement. Across this region, we continue to see high levels of productivity throughout Asia. The performance in each of our operating geographies reflects regional differences in client and industry impact resulting from the pandemic. Our collective focus, however, is a commitment to meeting our clients’ needs with rigorous management of our indirect costs and investment in our consultants as we prepare for the future—a future that is already prompting our clients to increase the importance of technology in their own go-forward plans. Over the past few years, we saw technology transition from helping drive business transformation to now being core to how clients create value for their customers and citizens. Over a span of just a few months, organizations' urgent responses to the pandemic became a catalyst for advancing components of clients’ digital strategy. Going forward, clients will need help to transition these quick-response digitization efforts into meaningful and sustainable outcomes. We see this happening in three ways that will be drivers of future growth for CGI. First, partnering with clients to enable their business agility through a range of business and digital initiatives focused on human capital and culture practices, process automation, and data analytics. Second, enabling the future workforce and workplace by helping clients quickly adapt how their organizations operate and collaborate with people and technology at the center of these changes. Lastly, in addition to the physical supply chain, the pandemic disrupted the technology supply chain, which is reinforcing clients’ ongoing efforts to have fewer IT partners. This vendor consolidation is now being driven by a combination of factors including the desire to mitigate risk across their global operations, gain efficiencies of scale, and achieve greater elasticity in their IT solutions, including through the cloud. These three represent longer-term shifts that will require sustained trusted partnerships with enterprise firms like CGI. We’re well-positioned with our end-to-end services and solutions to deliver immediate cost savings through our managed services, accelerate digitization through our IP solutions and help clients drive revenue growth through our consulting and integration services. We also remain committed to accelerating profitable growth through our buy strategy. Our financial capacity, strategic inclination, and operational readiness for both transformational as well as metro market mergers is very high. With further industry consolidation expected post-crisis, we continue to actively assess a growing pipeline of potential merger opportunities. This pipeline is growing in both number of targets and the size of those targets. As always, investments in our buy strategy will follow our disciplined approach as we look for the right company at the right time and for the right price. We are confident that we will emerge post-crisis in an even stronger position to continue executing on our build and buy strategy. Our strategic aspiration remains to double the size of the company over the next five to seven years for the benefit of our members, clients, and you, our shareholders. Thank you for your interest and support. Let’s go to the questions now.
Lorne Gorber, Executive Vice President, Investor and Public Relations
Just a reminder that there’ll be a replay of the call available either via our website or by dialing 855-859-2056 and using the passcode 149-5772 until August 27. As usual, a podcast will be available for download, and any follow-up questions can be directed to me at 514-841-3355. Sharon, if we could pull for questions.
Operator, Operator
First question comes from Thanos Moschopoulos with BMO. Please go ahead.
Thanos Moschopoulos, Analyst
George, can you comment on what the return to work is looking like for CGI and some of the economies that have started to reopen? How have some of your employees been returning to client sites, and are you seeing productivity improvements in the results? To what extent have you been able to leverage a local presence competitively as things are reopening?
George Schindler, President and CEO
Yes, thanks for the question, Thanos. We do plan to return to the office when it’s safe, and that’s important because proximity does drive client intimacy, and client intimacy is needed to have the trust for those larger managed services and IP engagements. So it’s all tied together and we’re seeing that. So we’re up to about 15% of our global workforce in the offices, either our office or a client site, and that ranges from 1% in our India global operation center of excellence to France, where almost half of our members are back, either at the client site or in the office. We’re prioritizing two areas: work that needs to be done on-site, typically for various security and privacy reasons, and business development individuals, because that in-person collaboration is critical—not as much for the existing clients but to gain prospective clients. We’re practicing all the safety precautions, and it is very different. Like I said, it varies in different locations, and we see that being more granular as we move forward. The response will depend on local hotspots.
Thanos Moschopoulos, Analyst
Great, and APAC was obviously quite strong. Is there revenue growth being driven proportionately by customers in one or two specific regions, or is the demand we’re seeing more broad-based across regions? Is there a dynamic where you’re seeing more managed service work, which perhaps lends itself more to APAC and has contributed to growth as well?
George Schindler, President and CEO
Yes, so managed services is definitely driving some of this uptick and work in Asia Pacific. Right now, demand is mainly driven by North America, especially the US and the UK, which are the units least impacted by the pandemic. Our active pipeline for managed services spans every single region, and we’ve seen strong demand, but it varies more by industry than geography. Industries most impacted by the pandemic, such as hospitality and transportation, are much more open to discussing broader managed services agreements because they need the savings now. Other industries, like some leading banks, are looking at savings but also reinvesting them in new opportunities as technology drives their business.
Thanos Moschopoulos, Analyst
Great, thanks, George. I’ll pass on.
Operator, Operator
Next question comes from Maher Yaghi with Desjardins.
Maher Yaghi, Analyst
I wanted to ask you, the first thing I wanted to do is dig into your backlog performance. When you look at the third quarter, you had pretty good bookings given the circumstances with the pandemic, but the trailing 12 months book-to-bill continues to be below one. So George, I wanted to ask you—maybe it’s hard for us here on the outside trying to figure that this is an overall industry dynamic or competitive dynamic versus peers that’s affecting negatively the trailing 12 months book-to-bill. Would you be able to share with us some of your win rates and how those have performed over the last year or so, before and after the pandemic? Second, I wanted to ask you about the restructuring that you announced today. It seems like you have more visibility on your operations to finalize these plans compared to what you discussed last quarter. Could you maybe talk about some of the efficiency improvements you could see from those restructurings and what’s driving them directly?
George Schindler, President and CEO
That’s two pretty broad questions. I’ll take the first one on the bookings and the backlog, and you point out that the bookings were relatively strong this quarter. I want to start there—actually stronger than they look, higher than last quarter despite the pandemic. That’s why I highlighted the 96% renewal rate, and that’s across all businesses, not just managed services, but also IP deals, systems integration, and consulting deals. When you dive into the data, it’s not on the strength of government; even though government has solid growth across every geography we operate in. Government continues to be strong, but they’re buying differently. So the commercial business is really driving that, and as government returns to normal operations, there will be active procurements. So it’s not really a competitive dynamic; if anything, we’re really focused on bringing our value proposition to more clients across each geography to drive pipeline increases. On the restructuring, yes, there are two big areas. One impacts our billable members, and it’s to ensure our business reflects the demand. We’ve talked about this—very rigorous metrics govern SG&A. As we make changes to billable members, we’re also evaluating SG&A—not just ratios but where that SG&A is effective. We’re moving some SG&A to lower-cost centers, leading to sustainable savings regardless of the growth curve and recovery pace.
Maher Yaghi, Analyst
Thank you, and how fast should we expect those restructurings to pass through your P&L?
George Schindler, President and CEO
You should start to see that as early as the beginning of fiscal year 2021.
Operator, Operator
Next question comes from Steven Li with Raymond James.
Steven Li, Analyst
George, in your prepared remarks, you expected gradual improvements through the rest of the year. Will this apply to your organic growth as well in the sense that we think it’s bottomed this quarter?
George Schindler, President and CEO
It’s a great question. Although the pace of the recoveries is still somewhat uncertain, there are many positive signs that provide optimism that we put in the prepared remarks. The solid bookings above last quarter, growing pipeline across geographies and services for managed services, IP, systems integration, and consulting. Continued strength in public sector procurements—all positive signs. Although always these take time to transition from bookings to recognized revenue. But there are positive signs for growth in the next year. So it won’t all happen at once, but there are positive signs there.
Steven Li, Analyst
Okay, that’s great. And I have a question on Scandinavia. The non-renewal of infrastructure incidents—what’s the magnitude of that? Would it represent half of the year-over-year decline? Is it all consulting?
George Schindler, President and CEO
No, the infrastructure would not be all consulting. The consulting is mainly temporary, and necessary for the rebound and reinvention phases. We’ve been taking a rigorous look and aren’t renewing projects that are a race to the bottom, because margin is important. I don't have it quantified but we can get that for you.
Steven Li, Analyst
All right, very helpful. Thank you.
Operator, Operator
Next question comes from Ramsey El-Assal with Barclays.
Unidentified Participant, Analyst
This is actually Ben on for Ramsey. Thanks so much for taking my question. I wanted to ask first for George. Along the lines of organic growth you were just discussing, you mentioned in your prepared remarks that you’re starting to see a return to longer-term recurring revenue contracts. A couple of quarters ago, it seemed like that was almost the reverse, with longer-term deals being broken up. Is this sort of a reversal of that or more just a near-term step up?
George Schindler, President and CEO
Yes, what I mentioned at that time is that we saw the uncertainty driving a temporary pause in those larger deals. If anything, the certainty of the uncertainty has driven a reversal. So yes, it is a reversal, but not the reversal I expected. I don’t think anyone predicted the extent of the global pandemic. The result is that once you got some certainty—a slowing growth market from a GDP perspective—that drives the recurring revenue larger deals for clients.
Unidentified Participant, Analyst
Okay, that’s very hopeful. If I could ask one more, just on the M&A strategy in regard to capital deployment. Would you say you’re more likely to achieve greater scale within the markets you’re in or gear towards entering new geographies?
George Schindler, President and CEO
It’s about going deeper and broader in the markets we’re in. For example, we’re more concentrated in the Northeast or Southeast but aren’t as big in parts of the Southwest, the West, or the Midwest. So these are opportunities to grow in new metro markets. We see this same thing in the UK, Germany, etc.
Unidentified Participant, Analyst
All right, that was great. Thank you so much for taking my questions.
Operator, Operator
Next question comes from Richard Tse from National Bank Financial.
Unidentified Participant, Analyst
This is Mihir calling in for Richard. I just had one question and a follow-up. I’m wondering if you could talk about some of the trends you’re seeing in July with the restrictions lifting.
George Schindler, President and CEO
In July, we’re seeing a return to more normalcy in discussions around new initiatives. Most clients went into a bit of a reprioritization phase after the pandemic, but now we’re having many more discussions around investments in IT, although it might look different than it did six months ago.
Unidentified Participant, Analyst
Okay, thank you for that. And just one more, I was wondering if you could talk about what solutions and services you’re seeing the most affected?
George Schindler, President and CEO
The biggest impacts were on infrastructure services initially due to the need for temporary increases in infrastructure. The most impacted on the downside was consulting activities. This is believed to be a temporary situation; clients have to reprioritize where they’re going, leading to a demand for managed services and IP.
Unidentified Participant, Analyst
Thanks so much for the color. I’ll hop back in line.
Operator, Operator
Next question comes from Jason Kupferberg with Bank of America.
Cassie Walker, Analyst
This is Cassie on for Jason. First question, I just wanted to clarify—not sure if you mentioned this specifically—but what was the organic constant currency revenue growth rate that you recorded at 3Q? When you do your internal scenario analysis, do you see the potential for that to actually turn positive in 2020?
George Schindler, President and CEO
We haven’t been breaking out the difference for organic growth. The reason for that is the integration of new businesses dramatically changes the run rate. We talked about that before, and while we’re seeing tailwinds, growth won't happen overnight. But overtime, we see it gradually improving and returning to growth in 2021.
Cassie Walker, Analyst
Got it. Thank you. And my second question is just overall how have you been seeing the pricing environment evolve? Have you seen an increase in pricing sessions, payment delays, or has that been improving sequentially throughout the quarter?
George Schindler, President and CEO
There’s always some behaviors that change in a crisis. We have remained disciplined in profitable organic growth. We’ve seen some requests for payment delays, but we haven’t changed our practices during this time and are cooperating with clients. Payment hasn’t been an issue, and pricing behaviors have remained stable.
François Boulanger, Executive Vice President and CFO
You saw that our DSO went down from 52 days to 48 days, which reflects our clients' satisfaction with our services and demonstrates good performance.
Cassie Walker, Analyst
Got it. Thank you.
Operator, Operator
Next question comes from Daniel Chan with TD Securities.
Daniel Chan, Analyst
You mentioned earlier that you’re seeing strong demand in managed services, but bookings were 55% from consulting. Is there anything else driving a higher mix of consulting bookings this quarter, and do you expect that to reverse in the future?
George Schindler, President and CEO
Yes, the big wins driving that SI&C growth were government but also health and retail. We’re committed to playing to the demand in those industries while also pursuing larger complex deals that take time.
Daniel Chan, Analyst
Makes sense. Thanks. And then could you remind us what a change in US government would mean for your business? Would that generally be positive for you?
George Schindler, President and CEO
One, we’re apolitical when it comes to which administration wins. But we see increased activity leading up to the election, followed by a slowdown in decision-making around the transition period. Regardless, we see increases in domestic programs, which would be beneficial for CGI.
Daniel Chan, Analyst
That’s great. Thank you very much.
Operator, Operator
Next question comes from Paul Treiber with RBC Capital Markets.
Paul Treiber, Analyst
In light of travel restrictions and social distancing over this past quarter, could you provide some indication of how your proximity model performed in the environment? Do you think that your proximity model allows you to gain wallet share with customers this past quarter?
George Schindler, President and CEO
Yes, the proximity model played into that as intimacy drives trust, enabling faster reactions as pockets reopen. We’ve achieved a 96% renewal rate across various engagements, from systems integration to consulting.
Paul Treiber, Analyst
And regarding the disruption from COVID, as well as the global uplift in new digital initiatives—ecommerce, work from home, etc.—how would you rate CGI’s competitive advantage in digital capabilities compared to peers, and do you expect the digital uptick to be a catalyst for CGI’s market share gains?
George Schindler, President and CEO
I’d rate our consultants very high in this. We’ve invested in talent and training, as well as metro market mergers that bring in outstanding capabilities. We’re well positioned in this digital landscape.
Deepak Kaushal, Analyst
I’ve just got a couple of follow-ups, and I’ll try to be quick. George, you made some good color on North America return to kind of normalcy, US government sensitivity. I was wondering if you could give us more insights into what you’re seeing just over the last month, given some of the disruptions we've seen in certain states—labor-related or protest-related. Does this impact your business or customers reacting differently to the situation today than they were a couple of months ago or a year ago?
George Schindler, President and CEO
The United States is a big geography, and there has been disruption. However, most of our clients, being global companies, are making decisions across the globe. So we haven’t seen much difference in the immediate term. We are prepared for all scenarios.
Deepak Kaushal, Analyst
Thank you. And then just dovetailing off that or segueing into an M&A question. You talked about geographic expansion and metro market expansion in the US. What about industry expansion? Are you looking at specific industries or boutiques focused on certain industries to help build out your business on the M&A side?
George Schindler, President and CEO
Absolutely. We’re looking to build industry expertise, which is critical to our value proposition, and we often see industry concentrations in certain regions. Healthcare is one we’ve enhanced in the US with our merger with Paragon.
Deepak Kaushal, Analyst
Got it, and my last one. To what extent are you seeing customers pull forward spending?
George Schindler, President and CEO
We haven’t really seen that. There was a temporary increase in infrastructure needs; the most impacted was consulting. I don’t see any delays in growth; rather a return to normal discussions around investments.
Lorne Gorber, Executive Vice President, Investor and Public Relations
Sharon, we have time for one last question.
Operator, Operator
You have a question from Stephanie Price with CIBC.
Stephanie Price, Analyst
I just wanted to ask a question around the transactional side of the business, which you highlighted as one of the weaker areas this quarter. Just wondering how we should think of the recovery here and what you’re seeing in fiscal Q4?
George Schindler, President and CEO
I believe this is temporary. Travel restrictions heavily impacted service transactions like visa volume. We anticipate that as these services normalize, we’ll also see volumes returning, potentially even with a bump. Overall, it’s still an integral part of our business.
Stephanie Price, Analyst
Great. Thank you very much. And just maybe one more—on the government pipelines more broadly, you mentioned that’s a driver as well. I’m just wondering what you’re seeing in terms of booking environments and how you think that’s going to change with government rollout stimulus?
George Schindler, President and CEO
I think it’s a big opportunity as they move into economic stimulus. The financial management and accounting tied to those programs always creates opportunities for CGI to partner with governments to implement necessary systems.
Lorne Gorber, Executive Vice President, Investor and Public Relations
Thank you, Stephanie, and thank you everyone for joining us this morning. We’ll see you in early November for our Q4 and fiscal 2020 results. Thank you all.
George Schindler, President and CEO
Thanks, everybody.
Operator, Operator
This concludes today’s conference call. You may now disconnect.