Earnings Call Transcript
Cgi Inc (GIB)
Earnings Call Transcript - GIB Q4 2022
Operator, Operator
Good morning, ladies and gentlemen. Welcome to CGI's Fourth Quarter Fiscal 2022 Conference Call. I would now like to turn the meeting over to Mr. Kevin Linder, SVP of Investor Relations. Please go ahead, Mr. Linder.
Kevin Linder, SVP of Investor Relations
Thank you, Joel, and good morning. With me to discuss CGI's fourth quarter fiscal 2022 results are George Schindler, our President and CEO; and Steve Perron, Executive Vice President and CFO. This call is being broadcast on cgi.com and recorded live at 9:00 a.m. Eastern Time on Wednesday, November 9, 2022. Supplemental slides as well as the press release we issued earlier this morning are available for download, along with our fiscal 2022 MD&A, audited financial statements, and accompanying notes, all of which have been filed with both SEDAR and EDGAR. Please note that some statements made on the call may be forward-looking. Actual events or results may differ materially from those expressed or implied, and CGI disclaims any intent or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. The complete safe harbor statement is available in both our MD&A and press release, as well as on cgi.com. We recommend our investors read it in its entirety. We are reporting our financial results in accordance with International Financial Reporting Standards, or IFRS. As always, we will also discuss non-GAAP performance measures, which should be viewed as supplemental. The MD&A contains definitions of each one used in our reporting. All the dollar figures expressed on this call are Canadian unless otherwise noted. I'll now turn it over to Steve to review our Q4 financial results, and then George will comment on our full year performance and business outlook. Steve?
Steve Perron, CFO
Thank you, Kevin, and good morning, everyone. Our results in the quarter were strong against all key financial metrics, demonstrating the resiliency of CGI's business model and the value that we provide to our clients. In Q4, we delivered $3.25 billion of revenue, up 8% year-over-year or up 13.9% when excluding $178 million of unfavorable foreign exchange and tax. All segments delivered positive constant currency growth, including the following, with double-digit growth: Western and Southern Europe up 35%, Asia-Pacific up 22.7%, Canada up 13.2% and U.S. commercial and state government up 10.9%. From an industry perspective, we also add constant currency growth across all sectors. Notably, financial services grew 21%, manufacturing, retail and distribution grew 14%. Government grew 13% and communication and utilities grew 10%. The number of our consultants and professionals increased year-over-year by 10,000 people, representing a 12.5% increase for a total of 90,000 worldwide. As planned, our offshore delivery centers of excellence are growing at a faster pace, 13.2% year-over-year, and now representing 22% of total employees. We booked $3.6 billion of contract wins in the quarter, up 25% year-over-year, and representing a book-to-bill ratio of 112%. Notably, new business in the quarter was 37% of bookings, an increase from the previous year's 31%, and the IS in the last five quarters. Book-to-bill was over 100% in the majority of our client proximity segments led by U.K. and Australia at 139%, U.S. commercial and state government at 125%, U.S. Federal at 121%, and Finland, Poland, and Baltics at 117%. With respect to our European operations, book-to-bill was 107% for the quarter and 114% for the full year, demonstrating ongoing resilience in relation to the current macroeconomic pressures. And in North America, book-to-bill was robust at 117% for the quarter. On the strength of total Q4 booking, global backlog is now at an all-time high of $24.1 billion. This represents 1.9 times revenue. Bookings related to our IP services and solutions also increased significantly year-over-year, resulting in an IP book-to-bill ratio of 146% in the quarter. With the addition of services acquired from Umanis, which consists almost exclusively of SI&C revenue, IP as a percentage of revenue remained stable sequentially at 20% in the quarter. As a reminder, mergers provide us with new client relationships where we can offer and deliver our full suite of end-to-end services, particularly our IP. In the quarter, multiple segments had notable IP bookings. U.K. and Australia with an IP book-to-bill ratio of 283%, driven by our global trade solutions. Canada, with an IP book-to-bill ratio of 273%, led by new wins for our wealth management solution suite, and U.S. commercial and state government with an IP book-to-bill ratio of 166%, driven by our advantage state and local government ERP solutions. With respect to profitability, adjusted EBIT in Q4 was $522 million, up 5.7% after considering the unfavorable impact from fluctuations against our Canadian reporting currency. EBIT margins were 16.1%, up 10 basis points sequentially. On a year-over-year basis, margins were down 30 basis points, mainly due to the temporary dilutive impact of recent larger acquisitions and also due to the expected increase of post-pandemic travel in support of business development activities. We remain on plan to bring recent mergers to CGI margin targets over the coming quarters. EBIT margins were strongest in the following segment: Asia-Pacific at 28.6%, Canada at 24.6%, U.K. and Australia at 16%, and Finland, Poland and Baltics at 15.9%. Our effective tax rate in Q4 was 25.4% compared to 25.5% in the prior year. We continue to expect our tax rate for future quarters to be in the range of 24.5% to 26.5%. Net earnings were $362 million and diluted EPS was $1.51, representing an expansion of 8.6% year-over-year. When excluding integration and acquisition costs, net earnings were $373 million, reflecting a margin of 11.5%. On the same basis, diluted EPS was $1.56, an accretion of 11.4% when compared to $1.40 in the same period last year. This improvement was mainly driven by the execution of our build and buy possible growth strategy. In Q4, cash provided by operating activities was $489 million, representing 15.1% of revenue. Compared to the prior year, cash from operation decreased $38 million, mostly due to COVID-related income tax refunds in Q4 of fiscal 2021, timing of our payables, and a higher DSO of 49 days. The increase in DSO was mainly due to the impact of recent acquisitions, which are in the process of being fully integrated, as well as foreign exchange fluctuations. Our DSO target remains at 45 days. In the quarter, we invested $103 million back into our business and $133 million in buying back 1.3 million shares at the weighted average price of $105.48. Importantly, our return on invested capital is up 80 basis points to 15.7% compared to 14.9% in the year-ago period, demonstrating our efficient deployment of capital. Looking ahead, our capital allocation focus continues to be on delivering double-digit returns to our shareholders by investing back in our business, pursuing accretive acquisitions, and buying back our stock. Our capital resources totaled $2.5 billion with access to more if needed. Now, I will turn the call over to George to recap the full year results and the outlook for our new fiscal year. George?
George Schindler, President and CEO
Thank you, Steve, and good morning everyone. At this time last year, I outlined CGI's fiscal 2022 plan to drive double-digit earnings per share accretion, with the majority of expansion generated through growth from our build and buy strategy. Today, I'm pleased to share that we delivered on this plan for the fiscal year, with 12.9% year-over-year EPS accretion on an adjusted basis, 10.5% year-over-year revenue growth on a constant currency basis, and $14 billion of bookings with book-to-bill ratios above 100% for all service offerings led by consulting and systems integration at 118%. This strong performance was achieved through the efforts of our now 90,000 talented consultants and professionals who delivered on our client commitments, deepened our relationships, and expanded the business by winning new engagements across our end-to-end portfolio of digital services and solutions. Before turning to a review of the value we created for each of our stakeholders for the full year, I would like to highlight some of the new awards booked in Q4, which reflect continued client demand for modernizations and rising demand for cost savings. CI Financial, a Canadian-based global asset and wealth management company, signed a long-term partnership with CGI to modernize, deliver, and manage their proprietary transfer agency platform in a SaaS-based model. HSBC extended CGI's application management services engagement to support the global rollout of their trade platform, which was co-created with CGI to make trades simpler, faster, and safer for customers through integrated digital experiences. Aktia, a Finnish financial services firm, signed a new partnership with CGI to help them drive operational efficiencies and accelerate the development of new products and services for improved customer experience. The European Space Agency selected CGI to support the development of a dynamic predictive routing tool utilizing CGI's AI accelerator IP, which enables satellite network operations to become more efficient. Vodafone extended their long-term relationship with CGI in the U.K. through a new 15-year engagement to design, build, and extend their internet of things platform to support critical national infrastructure services. And the U.S. Nuclear Regulatory Commission awarded CGI a new agreement to help the agency prepare for emerging cyber threats, including by employing a new digital forensics lab to help evolve their security posture. One of CGI's strategic priorities over the past year has been to broaden our relationships with key platform providers. Our bookings in the fourth quarter were boosted by several new partner-based projects across each of CGI's named global alliance partners, including Microsoft, SAP, AWS, Salesforce, and ServiceNow. Turning to fiscal 2022 performance for each of our three stakeholders: clients, employees, and shareholders, I will start with clients. Critical to our growth agenda remain CGI's deep and trusted relationships with clients who increasingly partner with us to help them in their most important digital transformation efforts. The investments we made this year further enhance CGI's capacity to create client value through our industry and technology expertise, end-to-end services, and delivery excellence. Again, this year, client satisfaction was up on every dimension we measured, with clients' intent to engage CGI again in the future as one of the highest scores at 9.5 out of 10. Turning now to our employees, whom we call members, as 84% are also shareholders of CGI. Our deep and trusted relationships are essential, and therefore, the investments we make in these talented consultants and professionals are paramount to our success. As with our clients, the satisfaction of our members also increased on every dimension this year with one of the highest scores reflecting overall commitment to the company at 9.2 out of 10. As such, our voluntary attrition rate continues to be below the overall IT services industry average. Importantly, hiring is up on a year-over-year basis, surpassing pre-pandemic levels. We remain focused on early career talent, with students and new graduates representing close to 20% of all hires last year. In recognition of our continuing talent investments and our team-oriented inclusive culture, CGI earned a position on Forbes magazine's list of the world's best employers just last month. For our shareholders, the combination of CGI's industry portfolio, geographic presence, end-to-end services, and operating discipline has and will continue to strengthen our resilience and capacity to deliver shareholder value. We closed the year with broad base constant currency revenue growth in all geographic segments and industry sectors, including 22.6% in our Western and Southern Europe geographic segment, 21.5% in Asia-Pacific, 14% in U.S. commercial and state government, and 13.7% in the financial services industry sector, 11% in government, and also 11% in healthcare. A contributor to growth this year was our increased M&A activity as we closed five new mergers and welcomed over 5,000 consultants, a significant acceleration over fiscal 2021. In applying CGI's disciplined evaluation approach in fiscal 2022, we analyzed an increased number of potential merger opportunities, of which more than 40% included IP-based services. A subset of these companies remains active in our current pipeline, and at the same time, we continue to identify and assess new merger opportunities given a highly fragmented IT services environment. Turning to fiscal 2022 profitability, adjusted EBIT was $2.09 billion for a 16.2% margin, up 10 basis points year-over-year. Net earnings were $1.47 billion for an 11.4% margin, up 10 basis points year-over-year. Net earnings on an adjusted basis were $1.49 billion, a margin of 11.6%, up 30 basis points year-over-year. EPS was $6.04, up 11.6%; and EPS on an adjusted basis was $6.13, up 12.9%. These strong returns were driven by a combination of revenue growth and improved profitable business mix and continued operational excellence. Our strong cash generation and capital allocation during the year enabled us to make a number of accretive investments, $374 million back into our business, including in talent, IP offerings, and new managed services contracts; $659 million in acquisitions for an investment of $572 million net of cash acquired; and $913 million to buy back our stock, which remains an accretive and flexible mechanism to return capital to our shareholders. Looking ahead to fiscal 2023, we remain confident in CGI's positioning as one of the few leading global firms with the scale, reach, and capabilities to help clients drive their digital transformations forward. To address the current economic environment, many clients are prioritizing operational efficiencies and placing a sharper focus on business case returns, helping them generate cost savings to fund and accelerate their digitization investments. Across industries, we continue to see clients embed and optimize their technology from end-to-end, transforming the entirety of their business value chains. With demand for this more holistic approach and the need to fund it at least partially through cost savings, we believe demand will continue for all of CGI's end-to-end services and solutions. This view is supported by our bookings over the past year and our future pipeline of opportunities. Over the past year, we saw an uptick in demand for our business and strategic IT consulting services, as clients began to accelerate many key initiatives which required business model transformation, customer experience design, and cloud advisory. In line with this uptick, overall systems integration and consulting bookings increased by over $1 billion in fiscal 2022 and comprise 50% of our total bookings mix of services. Importantly, future client demand remains strong for SI&C as our pipeline of opportunities for these services is up on a year-over-year basis. At the same time, our pipeline over the next year reflects an increased interest in managed services as the total value of these opportunities is up by nearly 40%, and for IP, the pipeline is up 25%. In fact, our managed services and IP bookings in the fourth quarter were the highest over the last five quarters. This shift toward more managed services and IP demand is one we have predicted for several quarters, given the value propositions for these services in the current economic environment. Our portfolio of end-to-end services and solutions and the breadth of enterprise clients working with CGI positions us to quickly identify, adapt, and meet client needs. This enables CGI to profitably grow through our build and buy strategy for the benefit of our shareholders now and in the future. In fact, we have a proven track record of strong financial performance even during previous economic slowdowns. Related to the buy strategy, we see an increasingly positive M&A environment for CGI based on three key dynamics. Valuations are coming down, notably for the publicly traded firms in our pipeline. Currency is in our favor, given the strength of the Canadian dollar, and CGI's strong balance sheet enables us to act on both metro market mergers and transformational mergers. These dynamics, along with our robust pipelines suggest there are and will be more potential merger opportunities that are both attractive and actionable. We will remain disciplined in our approach to ensure investments are accretive for shareholders and have a necessary cultural fit to deliver ongoing benefits for each of our stakeholders. In closing, we've architected our fiscal year 2023 business plans with the capacity to invest in driving revenue growth at or ahead of the markets where we operate while again, delivering double-digit EPS accretion. Thank you for your continued interest and support. Let's go to the questions now, Kevin.
Kevin Linder, SVP of Investor Relations
Thank you, George. Joel, we can now queue up for the questions, please.
Operator, Operator
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from Richard Tse from National Bank Financial. Please go ahead.
Richard Tse, Analyst
Thank you for the great numbers and for providing additional disclosure in your comments about book-to-bill IP. That information is really helpful. Can you discuss where your existing customer base is on their digital transformation journey? Using a baseball analogy, would you say they are in the third inning or the sixth inning? I'm curious to know their current status.
George Schindler, President and CEO
Yeah. No, thanks for the question, Richard. And yeah, we have used the baseball analogy before. But when we look at it, and I talk to our clients, and we look at the voice of the clients, it feels as if this digitization race never ends. And so, I would say still early innings, but it may not even be a nine-inning game.
Richard Tse, Analyst
Okay. Fair enough. And you talk about sort of these surveys you do, I know you do them fairly regularly on an annual basis. When you do them, do you ask sort of questions as to what services your clients may see going forward in the future that they are going to be in demand? And if so, what are they saying about those services?
George Schindler, President and CEO
Yeah. We do ask a number of questions about the trends, both from a business perspective, but also from an IT perspective and what would make a difference for them in their business. And what we hear from them is a lot of the story we've been telling for a while here, which is around some of the technologies that provide more data insights. So, the data analytics is an important element that they talk to. Of course, they talk about some of the operational efficiencies provided by technologies like cloud, and they also talk about though the combination of bringing technology together with the business. And that's why we've invested a lot in the business consulting area of the CGI end-to-end services.
Richard Tse, Analyst
Okay. Just one last question from me. It's great to see the new additions to the team. Could you provide some insight into your hiring plans as you look ahead to next year?
George Schindler, President and CEO
We have slightly slowed down the number of open positions, but we are still up compared to last year. This adjustment is due to a decrease in turnover rates. We continue to experience strong growth and have been effective in hiring. Our turnover rate has been lower than the industry average, and we believe it has reached a plateau. Therefore, we will adjust our hiring strategy accordingly. However, we have not experienced a talent shortage over the past year, as we have been able to hire and retain a higher percentage of employees compared to many others.
Operator, Operator
Your next question comes from Stephanie Price with CIBC. Please go ahead.
Stephanie Price, Analyst
Hi. Good morning. Just following up on Richard's question a little bit there, you've obviously been staffing up offshore. Just curious about offshore demand and how you think about the right mix of offshore and nearshore employees over the longer term.
George Schindler, President and CEO
Yeah. So, Stephanie, thanks for the question. And you know that we remain committed to our proximity model because that's where the relationships are built and housed and has made a big difference in some of those, we believe, in some of those client satisfaction scores that we have. Having said that, especially given some of the inflationary pressures that our clients have, we're giving them more options by building up our global delivery centers of excellence, and that's proven to be very successful for both our clients and enabled us to manage the wage inflation that everybody is facing. So, we believe that we will continue to be able to build that, and as we grow our business, and it's growing a little bit faster than the rest of our business, but you can see that we're also growing in proximity as well.
Stephanie Price, Analyst
Sure. And then just wanted to have the capital allocation just in light of the government's 2% tax on buyback that's supposed to be implemented in January 2024. Just curious if it will change the capital allocation strategy at all in 2023 and beyond.
George Schindler, President and CEO
Steve?
Steve Perron, CFO
Look for 2023, the 2% will not be applicable. So, we're not changing our plan. And for the future you see 2% will be considered in calculations. That's something that we will look at. But we are not anticipating that it will affect significantly our plan for the future.
Stephanie Price, Analyst
Thank you. And maybe I can sneak one more in on Canadian results, which are very strong in the quarter. Just curious what you're seeing in Canada in terms of bookings and in terms of client demand.
George Schindler, President and CEO
We remain very strong in the financial services market in Canada. Digital transformation is progressing with the banks in Canada, and this growth is supported by our intellectual property as we continue to invest and lead in areas like wealth management. Therefore, we are seeing strong demand in Canada.
Operator, Operator
Your next question comes from Thanos Moschopoulos with BMO. Please go ahead.
Thanos Moschopoulos, Analyst
Hi. Good morning. George, to clarify on the macro situation, your message suggests that clients are prioritizing their spending differently, focusing more on managed services and IP. The budgets are not necessarily decreasing. Is that correct? Additionally, have there been any changes in the sales cycles and approval processes, or is everything remaining the same at this point?
George Schindler, President and CEO
Yes, you got it right about the macro environment; we see it as a shift. We might witness a slowdown in consulting as a standalone offering, which only accounts for about 4% to 5% of our total revenues. However, we are integrating some consulting work into the managed services deals that we are observing. This is why we remain optimistic, even amid the current macroeconomic conditions, that we can navigate this shift and continue to support our clients' demands. We have noticed that most of our clients are maintaining or increasing their budgets. With that in mind, they are looking for cost savings, which contributes to the transition towards managed services as well as our commercial off-the-shelf solutions instead of developing their own. Notably, when we examine the current landscape, the top systems integration and consulting deals this quarter have an average duration of about three and a half years. These deals are firmly rooted in digital transformations, aligning with what we have gathered from client feedback. While there is a shift, overall demand remains strong.
Thanos Moschopoulos, Analyst
And sales cycles are not showing any signs of more approvals getting deals completed consistently.
George Schindler, President and CEO
Yeah. Well, on the sales cycles, we're seeing two things that I mentioned on the remarks, right? We talked about a need for cost savings and we talked about a sharper focus on the business case. And when cost savings enter the equation, they actually tend to go a little bit faster. So, it speeds up some of the booking sales cycles. However, when you get a sharper focus on business case returns, that tends to slow things down a little because you want to actually do more evaluations. So, it's kind of a tale of two sides. And so, some deals are moving a little bit faster, some deals are slowing down a little bit. So, overall, I would say it kind of balances each other out, and in the fullness of time.
Thanos Moschopoulos, Analyst
Okay. Maybe one last one is on margins. I mean, some puts and takes, as we think about the next year, I think on the one hand, you should get some uplift from integrating the recent tuck-ins clearing into the IP mix is poised to grow. On the flip side, you're doing more hiring, which can have near-term impacts. As we put this all together, how should we think with marketing trajectory over the upcoming year?
George Schindler, President and CEO
Yeah. Well, I think you summarized that very well. And also, Steve mentioned, we've got some of the expected higher travel costs for business development, now that everything's opened up. And then some of the temporary effects of the hiring, as you said, but many tailwinds for the future quarters, not just completing the integrations, but also the effects of some of the changes and restructuring made in the Scandinavia and Central European operations, particularly the GTOs. They're actually, we believe there will be a utilization increase as our turnover comes down. We won't have to hire as much; that actually, I think could be a tailwind as we move in. And of course, the big one is that shift in the bookings next to more managed services and IP, but also growth in global delivery, and operational excellence. So, we've got a number of tailwinds that will allow us that continued steady growth on the margins, even with some of those headwinds.
Thanos Moschopoulos, Analyst
Great. Thanks. I will turn offline.
George Schindler, President and CEO
Yeah.
Operator, Operator
Your next question comes from Jerome Dubreuil with Desjardins Securities. Please go ahead.
Jerome Dubreuil, Analyst
Hi, everyone. Thanks for taking my questions. First one is on Europe. I mean, you have a unique lens through which you can see a situation there. Are you seeing a more pronounced macro impact? There'll be more opportunities, or is there a bit more risk in the near term? And then second, one from last night's elections in the U.S., not going to ask you for your political opinions there. But wondering if you're seeing a more conducive landscape when the House and Senate are aligned with the White House or a different situation? Thank you.
George Schindler, President and CEO
Let's begin with Europe. Given its proximity to the conflict in Ukraine, you might expect a larger impact on the supply chain and energy there. However, they have been proactive in preparing for potential slowdowns. Many of our European clients are part of global organizations, and they continue to focus on digitization. Regional clients in Europe tend to prioritize cost savings while still keeping digitization on their agenda. It's important to note that 34% of our revenue in Q4 comes from government contracts, and this figure is quite similar in Europe, where it stands at around 30%. While North America has a slightly higher percentage, Europe’s 30% still indicates a robust presence. Government spending tends to be countercyclical during economic downturns, which positions us well to continue growing our business in Europe during these challenging times. Regarding the elections, I'm not going to share my political views, but I find it interesting to observe. Generally speaking, the work we do is bipartisan. IT modernization is necessary regardless of which agency is involved, and agencies may even require more cost-saving measures if budgets are cut. For instance, our work in cybersecurity with the Department of Homeland Security, supporting 35 federal agencies, is a bipartisan concern. Our managed services, including our momentum ERP, also reflect this trend. Much of our work operates across party lines. To address your question, having a budget in place is beneficial, although we are currently under a continuing resolution. I believe that the lack of a clear mandate may actually work to our advantage, as it could lead the Senate to pass more bipartisan spending bills, allowing us to proceed with our projects. With our strong position and existing workload, we have more than double the backlog in our business, which helps us navigate any slow decision-making processes that may arise.
Jerome Dubreuil, Analyst
Thank you, George.
Operator, Operator
Your next question comes from Divya Goyal with Scotiabank. Please go ahead.
Divya Goyal, Analyst
Good morning, guys. Further on this European question. I wanted to understand what is the expected growth rate that you are seeing in? Or how should we model for Western and Southern Europe? I do see there was a slight drop as compared to some of the previous quarters, which had been growing at a little bit higher growth rate. And similarly for Scandinavia and Central Europe, it actually did pretty well this year. Not surprising. So, how should we best think about these two segments in Europe going forward?
George Schindler, President and CEO
Yeah. Well, as you know, Divya, we don't give guidance on growth. But just from an overall services perspective, I think that the overall growth rates in Europe for IT services are staying pretty close to what they are in North America. And that's certainly what we'll be focused on. We do have some tailwinds. Obviously, now with the first full quarter of Umanis in our European operations, over 50% of that is squarely in the digital transformation. So, we have ways to manage through that. And thank you for noticing and calling out the Scandinavia and Central Europe. As you know, we've been working hard on that. So, I think overall, we look pretty good. The shift to managed services is going to be important. That doesn't happen overnight. So, you might see some lumpiness, but for the full year, we're still looking at that growth.
Divya Goyal, Analyst
That's very helpful. And I'll just ask one more question on the M&A side. So, on a quarter-over-quarter basis, your margins did shrink a little bit. And it has to do with the M&A activity as you continue to embark on more M&A, say, a few quarters down. How do you best I know you don't right. But like, how should we best kind of think about it from an SG&A expense standpoint?
George Schindler, President and CEO
Yeah. No, I appreciate the question. And it is temporary, but it does. It's a little more pronounced in when we do European M&A because it takes a little bit longer. And quite frankly, a little more time to execute on some of the activities, just given the regulatory environment in Europe versus the regulatory environment in North America or other parts of the world. So, I think that's how you can maybe think about that. But of course, as you know, we're looking at this M&A as something we want to do across every one of our geographic operations. And so, you'll probably see more in North America, and of course, the U.S. is a little bit faster to get some of those returns. So stay tuned.
Divya Goyal, Analyst
Thanks George.
Operator, Operator
Your next question comes from Daniel Chan with TD Securities. Please go ahead.
Daniel Chan, Analyst
Hi, good morning. Maybe just another question on M&A. Last quarter, you were expecting to do about $1 billion for the year. Where does that target stand now?
George Schindler, President and CEO
We're about two-thirds of the way towards our pricing goals, which also brings in some cash, so we're slightly below our investment expectations. However, there are still significant opportunities ahead. I can't predict the timing of these opportunities, but I can say that we are very satisfied with the acquisitions we completed this year. We're also excited about the pipeline of opportunities with companies that share our vision, and we have plans that may even exceed our current ambitions next year. Overall, we're optimistic about our achievements so far this year and what we may still accomplish, as well as our direction for the coming year.
Daniel Chan, Analyst
Okay. Sounds good. Maybe shifting to the bookings, the new business bookings mix was much higher this quarter than in the past? Is there anything driving that mix higher in particular? And if you look to the pipeline now, is the proportion of new business larger than in past?
George Schindler, President and CEO
It's a great question, and yes, our approach has been very intentional. We have invested in talent, improved our end-to-end services and offerings, formed partnerships, and enhanced our visibility. You are seeing some results from these efforts, which are positioning us as the partner of choice for our clients. This reflects the investments we've made over the past few years. Additionally, from a pipeline perspective, our new business is actually on track to exceed what we booked in the quarter.
Operator, Operator
Your next question comes from Rob Young with Canaccord. Please go ahead.
Rob Young, Analyst
I apologize for that. I was muted. I wanted to make a couple of comments regarding capacity. You mentioned that you have the ability to achieve growth, while some of your peers have pointed out challenges with U.S. capacity. Some are hiring and noting increased utilization, and you just mentioned you expect to see higher utilization as well. I'm interested in your comments about attrition and possibly a slowdown in hiring. How does your capacity appear? Additionally, could you elaborate on whether you are gaining market share because you have more capacity to utilize in the U.S. and other markets?
George Schindler, President and CEO
That's an interesting question. Our success is not just about overall capacity; it's also about our proximity capacity, which may set us apart from some competitors. We are continually building a strong presence both organically and inorganically in the U.S. Additionally, we are growing faster in global delivery due to our proximity, rather than the other way around. This could be one of our advantages that some others lack. Furthermore, our investments in talent, end-to-end services, and quality have contributed to our ability to capture market share. Our understanding of our clients allows us to be flexible in our partnerships, which is a significant differentiator for CGI. Clients often tell me that we approach things differently. While it's hard to quantify, you can see the impact in our bookings and revenue growth.
Rob Young, Analyst
That's great color. The comments about the additions to offshore? I think you didn't implicitly wanted to grow that. And I think you said earlier in the call that maybe you'll be slowing that growth. And did I hear that correctly, the first part? And then the second would be around the impact on margins? I think is it still a situation where you're maybe have less offshore delivery relative to your peers as a percentage of employees? And then as you build up the offshore delivery, does that imply a strong support for margins going forward?
George Schindler, President and CEO
Yeah. Well, on the first question, let me clarify that. What I'm saying is that the pace of hiring can be a little bit less in order to get the same growth when your turnover comes down. And so, that was just making that comment, but certainly, we're continuing to grow. And as I mentioned, grow faster in global delivery. And yes, it does help our margins. In fact, it's one of the ways we've been able to keep the margins where they are and continue to grow them through that mix of talent. So, I mentioned the working on the talent mix from the new hires, the students and the new graduates with 20%, but then that higher growth in global delivery, and then enabling us to do project rotations for the people that are in proximity to higher value work and higher-margin work or higher-rate work, which then comes with a higher margin. That's one of the ways, a big way that we've been able to manage the wage inflation without impacting the pricing on our clients. Now, of course, we're also doing some pricing where we value our services, and through rate increases, but this is a nice way for us to balance that for our clients and for our shareholders.
Rob Young, Analyst
Okay. Great. Last one for me just on the IP booking strength. I know you've been working on that for a long time. But is this driven by outbound efforts? Or is that being driven more demand? Or are your customers seeing you more as a provider of that type of service? Maybe you just give some color around that strength?
George Schindler, President and CEO
It's a mix of both. We've been focusing on expanding our IP reach not only to more clients but also by increasing the deal sizes through bundling with managed services and business process outsourcing. In fact, compared to this time last year, the number of IP deals in our pipeline over $100 million has doubled. This shows the progress we're making. We've also experienced positive momentum across different regions and are leveraging partnerships, having built some of our IP on popular platforms. For example, we’ve collaborated with Salesforce for collections and with Google in retail. This allows us to reach more clients through their channels. Additionally, we are enhancing our IP to make it more appealing. So, it’s really the combination of these strategies that is making a difference. We have been investing in this, which is crucial for us. Lastly, we will keep exploring inorganic opportunities for IP. This year, around 40% of the companies we've evaluated had some form of IP, whether exclusively or mixed with other services. We still believe that this will be an important growth driver.
Rob Young, Analyst
Great. Thanks for taking the questions.
George Schindler, President and CEO
Yeah.
Operator, Operator
Your next question comes from Steven Li with Raymond James. Please go ahead.
Steven Li, Analyst
Thank you. Hey, George. The team has done some good restructuring working in Scandinavia, but the margins are still lagging the group. How realistic is it to expect gross margins to approach the rest of Europe, and what would be a reasonable timeline? Thanks.
George Schindler, President and CEO
Yes, that is certainly the plan. I see that as a positive factor. The growth we are experiencing now is definitely beneficial. Some of the figures you see do reflect some restructuring costs that we accounted for both in this quarter and at the end of last year. So, let’s break it down. We expect to see those improvements as we progress through the next few quarters. It may take a bit longer to reach the more ambitious CGI targets, but you will definitely start to see those improvements in the near future.
Steven Li, Analyst
George, does it mean more IP, for example, or just higher utilization gets you to it?
George Schindler, President and CEO
It's a combination of both. We have some excellent consulting services that we want to integrate with our end-to-end services. This is a significant driver of opportunities for us. We have some great clients and talented individuals involved. However, as we have observed in other regions, this process tends to take a bit more time.
Operator, Operator
Your next question comes from Tyler DuPont with Bank of America. Please go ahead.
Tyler DuPont, Analyst
Good morning, everyone. This is Tyler DuPont on for Jason. Thanks for taking my question. Just jumping off some previous comments regarding hiring. Can you just clarify roughly how many of those new hires are focused more on offshore delivery versus onshore and are there specific segments that you're seeing more robust timing and others? Then, also just to build on that if you can quite an update on the utilization metrics that you've seen during the quarter. I appreciate it.
George Schindler, President and CEO
Sure. Regarding offshore versus onshore hiring, Steve mentioned that we're currently at a 22% growth rate, which is a bit higher than 14%. You can see the trend based on those figures. Now, what was your second question?
Tyler DuPont, Analyst
It had to do with specific segments that are seeing more robust timing than others. And just an update on utilization.
George Schindler, President and CEO
The segments show strong performance in the Asia-Pacific region due to its significant global delivery capacity. However, it is not the only area for global delivery; we are also experiencing robust hiring in the U.S. segments. Additionally, with our inorganic growth initiatives, you can observe this in WFC. Canada has also demonstrated very strong hiring activity. Overall, we are seeing growth across all geographic areas, albeit at varying rates.
Tyler DuPont, Analyst
I appreciate that. Thank you. And then secondly, I just want to ask a bit more about your vertical markets. It looks like financial services definitely saw some really strong growth during the year. Can you maybe just talk about some of the successes we're seeing there? And just balancing that with communication and utilities, which looks like it had more of a growth profile compared to fiscal 2021?
George Schindler, President and CEO
In the financial services sector, which is one of our largest areas after government, we've seen broad growth. Notably, CI Financial, a leader in digital transformation, chose CGI for our business expertise in wealth management, as well as our technological and operational capabilities. We combined this with some business process operations, showcasing a successful partnership with a digital leader in finance. Similarly, with HSBC, we’re collaborating on a trade platform, demonstrating CGI’s combined business knowledge and technology leadership. Aktia also illustrates our role as a partner in their digital transformation journey, as they sought to enhance competitiveness while achieving cost savings. By rebadging some of their staff to join CGI, we’re able to provide cost benefits while offering career opportunities for their employees and assisting with their transformation goals. This indicates the work we’re doing in financial services. On the communication front, our collaboration with Vodafone leverages our technical expertise to support their infrastructure, particularly concerning IoT and 4G for nationally critical systems. While progress in communications has been slow, I believe the opportunities will remain strong as we move forward.
Tyler DuPont, Analyst
Great. Thank you. I appreciate that. I appreciate all the insight.
George Schindler, President and CEO
Yeah.
Operator, Operator
Your next question comes from Paul Treiber with RBC Capital Markets. Please go ahead.
Paul Treiber, Analyst
Thanks very much. Good morning. Just wanted to follow up on the questions around offshore, but in particular, in regards to virtual versus in office. And obviously during COVID there was a shift to virtual and I think that pretty much favored offshore. Do you see the acceptance of virtual as a long-term tailwind to offshore? Or do you think ultimately, in time, it'll settle out and won't be a structural change in the industry?
George Schindler, President and CEO
Yeah. It's a great question. I don't have a crystal ball. I definitely think that some of the tailwind on virtual, given the pandemic, will continue. I think structurally that will continue in the industry. So that's certainly there. The one hesitation I would have is there's also the realities around the geopolitics. There's the realities around regulatory environment that I think will counterbalance that a bit. So that's why I kind of hesitate a bit on the crystal ball. But certainly, in the current environment, it's a tailwind for us.
Paul Treiber, Analyst
Do you think nearshore will also benefit from virtual arrangements? You mentioned the advantages and disadvantages of offshore. Does nearshore address those issues? Do you see it as the ideal setup for your workforce?
George Schindler, President and CEO
I believe you're raising a valid point. We view nearshore as a significant differentiator in our strategy. Although it doesn't provide the same cost benefits as offshore options, it effectively addresses other critical areas. Nearshore has always been an integral part of our offerings and our value proposition, and it seems to be strengthening in that regard. Our focus has always been on global delivery rather than just comparing offshore and onshore options, and the nearshore centers significantly enhance our value proposition.
Paul Treiber, Analyst
Okay. Thank you. I'll pass on.
Kevin Linder, SVP of Investor Relations
Joel, we'll have time for one more call, please. One more question.
Operator, Operator
Your next question comes from Suthan Sukumar with Stifel. Please go ahead.
Suthan Sukumar, Analyst
Good morning. I have a question regarding the competitive landscape and client behavior. Are you noticing any trends related to vendor and service provider consolidation among your clients? If so, how do you see your position in this? Are you finding opportunities to increase your share of their spending, especially since you have recently acquired new capabilities?
George Schindler, President and CEO
We are definitely observing some vendor consolidation across various industries and regions. Much of this displacement involves local providers that previously offered us opportunities for mergers and acquisitions, but we are in a strong position due to the investments we've made in our end-to-end services and global delivery, which set us apart. The client satisfaction scores and the willingness to engage with us are promising. A significant portion of our bookings in 2022 was for new or expanded work, largely stemming from this vendor consolidation. I see this as the next phase of vendor consolidation. During economic booms, clients tend to partner with multiple vendors, but in current times, they are becoming more selective, which presents an opportunity for us at CGI.
Suthan Sukumar, Analyst
Great. Thank you.
Kevin Linder, SVP of Investor Relations
Okay. Thank you. Sorry.
Operator, Operator
Sorry, I was just going to say there are no further questions at this time.
Kevin Linder, SVP of Investor Relations
Thank you, Joel. Thanks everyone for participating. As a reminder, a replay of the call will be available either via our website or by dialing 1-877-674-7070 and using the passcode 333313, as well as a podcast of this call will be available for download within a few hours. Follow-up questions can be directed to me at 1-905-973-8363. Thanks again everyone, and look forward to speaking soon.
Operator, Operator
Ladies and gentlemen, this concludes your conference for today. We thank you for participating and ask that you please disconnect your lines.