Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16]

Approved by the Board of Directors

/s/ George D. Schindler

George D. Schindler

/s/ Serge Godin

Serge Godin

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 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

Exhibits 99.1 and 99.2 to this Form 6-K 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.

EXHIBIT INDEX


Exhibit Number		Description

99.1		Management’s Discussion and Analysis of Financial Position and Results of Operations for the years ended September 30, 2023 and 2022.

99.2		Consolidated audited financial statements for the years ended September 30, 2023 and 2022.

99.3		Press release dated November 8, 2023.

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: November 8, 2023	By:	/s/ Benoit Dubé
		Name:	Benoit Dubé
		Title:	Executive Vice-President,
			Legal and Economic Affairs, and
			Corporate Secretary

Exhibit 99.1

LOGO

Management’s Discussion and Analysis

For the years ended September 30, 2023 and 2022

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

November 8, 2023

BASIS OF PRESENTATION

This Management’s Discussion and Analysis of the Financial Position and Results of Operations (MD&A) is a responsibility of management and has been reviewed and approved by the Board of Directors. This MD&A has been prepared in accordance with the rules and regulations of the Canadian Securities Administrators. The Board of Directors is ultimately responsible for reviewing and approving the MD&A. The Board of Directors carries out this responsibility mainly through its Audit and Risk Management Committee, which is appointed by the Board of Directors and is comprised entirely of independent and financially literate directors.

Throughout this document, CGI Inc. is referred to as “CGI”, “we”, “us”, “our” or “Company”. This MD&A provides information management believes is relevant to an assessment and understanding of the consolidated results of operations and financial condition of the Company. This document should be read in conjunction with the audited consolidated financial statements and the notes thereto for the years ended September 30, 2023 and 2022. CGI’s accounting policies are in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). All dollar amounts are in Canadian dollars unless otherwise noted.

MATERIALITY OF DISCLOSURES

This MD&A includes information we believe is material to investors. We consider something to be material if it results in, or would reasonably be expected to result in, a significant change in the market price or value of our shares, or if it is likely that a reasonable investor would consider the information to be important in making an investment decision.

FORWARD-LOOKING STATEMENTS

This MD&A contains “forward-looking information” within the meaning of Canadian securities laws and “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other applicable United States safe harbours. All such forward-looking information and statements are made and disclosed in reliance upon the safe harbour provisions of applicable Canadian and United States securities laws. Forward-looking information and statements include all information and statements regarding CGI’s intentions, plans, expectations, beliefs, objectives, future performance, and strategy, as well as any other information or statements that relate to future events or circumstances and which do not directly and exclusively relate to historical facts. Forward-looking information and statements often but not always use words such as “believe”, “estimate”, “expect”, “intend”, “anticipate”, “foresee”, “plan”, “predict”, “project”, “aim”, “seek”, “strive”, “potential”, “continue”, “target”, “may”, “might”, “could”, “should”, and similar expressions and variations thereof. These information and statements are based on our perception of historic trends, current conditions and expected future developments, as well as other assumptions, both general and specific, that we believe are appropriate in the circumstances. Such information and statements are, however, by their very nature, subject to inherent risks and uncertainties, of which many are beyond the control of the Company, and which give rise to the possibility that actual results could differ materially from our expectations expressed in, or implied by, such forward-looking information or forward-looking statements. These risks and uncertainties include but are not restricted to: risks related to the market such as the level of business activity of our clients, which is affected by economic and political conditions, additional external risks (such as pandemics, armed conflict, climate-related issues and inflation) and our ability to negotiate new contracts; risks related to our industry such as competition and our ability to develop and expand our services, to penetrate new markets, and to protect our intellectual property rights; risks related to our business such as risks associated with our growth strategy, including the integration of new operations, financial and operational risks inherent in worldwide operations, foreign exchange risks, income tax laws and other tax programs, the termination, modification, delay or suspension of our contractual agreements, our expectations regarding future revenue resulting from bookings and backlog, our ability to attract and retain qualified employees, to negotiate favourable contractual terms, to deliver our services and to collect receivables, to disclose, manage and implement environmental, social and governance (ESG) initiatives and standards, and to achieve ESG commitments and targets, including without limitation, our commitment to net-zero carbon emissions by 2030, as well as the reputational and financial risks attendant to cybersecurity breaches and other incidents, and financial risks such as liquidity needs and requirements, maintenance of financial ratios, interest rate fluctuations and the discontinuation of major interest rate benchmarks and changes in creditworthiness and credit


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

ratings; as well as other risks identified or incorporated by reference in this MD&A and in other documents that we make public, including our filings with the Canadian Securities Administrators (on SEDAR+ at www.sedarplus.ca) and the U.S. Securities and Exchange Commission (on EDGAR at www.sec.gov). Unless otherwise stated, the forward-looking information and statements contained in this MD&A are made as of the date hereof and CGI disclaims any intention or obligation to publicly update or revise any forward-looking information or forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. While we believe that our assumptions on which these forward-looking information and forward-looking statements are based were reasonable as at the date of this MD&A, readers are cautioned not to place undue reliance on these forward-looking information or statements. Furthermore, readers are reminded that forward-looking information and statements are presented for the sole purpose of assisting investors and others in understanding our objectives, strategic priorities and business outlook as well as our anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes. Further information on the risks that could cause our actual results to differ significantly from our current expectations may be found in section 10 - Risk Environment, which is incorporated by reference in this cautionary statement. We also caution readers that the risks described in the previously mentioned section and in other sections of this MD&A are not the only ones that could affect us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial could also have a material adverse effect on our financial position, financial performance, cash flows, business or reputation.


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

KEY PERFORMANCE MEASURES

The reader should note that the Company reports its financial results in accordance with IFRS. However, we use a combination of GAAP, non-GAAP and supplementary financial measures and ratios to assess the Company’s performance. The non-GAAP measures used in this MD&A do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. These measures should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with IFRS.

The table below summarizes our most relevant key performance measures :



Growth		Revenue prior to foreign currency impact (non-GAAP) – is a measure of revenue before foreign currency translation impacts. This is calculated by translating current period results in local currency using the conversion rates in the equivalent period from the prior year. Given that we have a strong presence globally and are affected by most major international currencies, management believes that it is helpful to adjust revenue to exclude the impact of currency fluctuations to facilitate period-to-period comparisons of business performance and that this measure is useful for investors for the same reason. A reconciliation of the revenue prior to foreign currency impact to its closest IFRS measure can be found in sections 3.4. and 5.4. of the present document.
		Constant currency revenue growth (non-GAAP) – is a measure of revenue growth before foreign currency translation impacts. This is calculated by translating current period results in local currency using the conversion rates in the equivalent period from the prior year. Management believes its use of this measure is helpful for investors to facilitate period-to-period comparisons of our business growth.
		Bookings – are new binding contractual agreements including wins, extensions and renewals. In addition, our bookings are comprised of committed spend and estimates from management that are subject to change, including demand-driven usage, such as volume based and time and material contracts, as well as price indexation and options years and services. Management evaluates factors such as prices and past history to support its estimates. Management believes that it is a key indicator of the volume of our business over time and potential future revenue and that it is useful trend information to investors for the same reason. Information regarding our bookings is not comparable to, nor should it be substituted for, an analysis of our revenue. Additional information on bookings can be found in sections 3.1. and 5.1. of the present document.
		Backlog – includes bookings, backlog acquired through business acquisitions, backlog consumed during the period as a result of client work performed as well as the impact of foreign currencies to our existing contracts. Backlog incorporates estimates from management that are subject to change and are mainly driven from bookings. Backlog is reduced when a client decision which decreases contractual commitment such as through contract cancellation. Management tracks this measure as it is a key indicator of our best estimate of contracted revenue to be realized in the future and believes that this measure is useful trend information to investors for the same reason.
		Book-to-bill ratio – is a measure of the proportion of the value of our bookings to our revenue in the quarter. This metric allows management to monitor the Company’s business development efforts during the quarter to ensure we grow our backlog and our business over time and management believes that this measure is useful for investors for the same reason.
		Book-to-bill ratio trailing twelve months – is a measure of the proportion of the value of our bookings to our revenue over the last trailing twelve-month period as management believes that monitoring the Company’s bookings over a longer period is a more representative measure as the services and contract type, size and timing of bookings could cause this measurement to fluctuate significantly if taken for only a three-month period and as such is useful for investors for the same reason. Management’s objective is to maintain a target ratio greater than 100% over a trailing twelve-month period.


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022



Profitability		Specific items – includes cost optimization program and acquisition-related and integration costs. Cost optimization program mainly includes cost related to vacated leased premises and termination of employment. Acquisition-related costs mainly include third-party professional fees incurred to close acquisitions. Integration costs are mainly comprised of expenses due to redundancy of employment and contractual agreements, cancellation of acquired leased premises and costs related to the integration towards the CGI operating model such as training activities.
		Earnings before income taxes – is a measure of earnings generated for shareholders before income taxes.
		Earnings before income taxes margin – is obtained by dividing our earnings before income taxes by our revenues. Management believes a percentage of revenue measure is meaningful for better comparability from period-to-period.
		Adjusted EBIT (non-GAAP) – is a measure of earnings excluding specific items, net finance costs and income tax expense. Management believes its use of this measure which excludes items that are non-related to day-to-day operations, such as the impact of specific items, capital structure and income taxes, is helpful to investors to better evaluate the Company’s core operating performance. This measure also allows for better comparability from period-to-period and trend analysis. A reconciliation of the adjusted EBIT to its closest IFRS measure can be found in sections 3.7. and 5.6. of the present document.

		Adjusted EBIT margin (non-GAAP) – is obtained by dividing our adjusted EBIT by our revenues. Management believes its use of this measure which evaluates our core operating performance before specific items, capital structure and income taxes when compared to the growth of our revenues is relevant to investors for better comparability from period-to-period. This measure demonstrates the Company’s ability to grow in a cost-effective manner, executing on our Build and Buy strategy. A reconciliation of the adjusted EBIT to its closest IFRS measure can be found in sections 3.7. and 5.6. of the present document.
		Net earnings – is a measure of earnings generated for shareholders.
		Net earnings margin – is obtained by dividing our net earnings by our revenues. Management believes a percentage of revenue measure is meaningful for better comparability from period-to-period.
		Diluted earnings per share (diluted EPS) – is a measure of net earnings generated for shareholders on a per share basis, assuming all dilutive elements are exercised. Please refer to note 21 of our audited consolidated financial statements for additional information on earnings per share.
		Net earnings excluding specific items (non-GAAP) – is a measure of net earnings excluding the cost optimization program and acquisition-related and integration costs. Management believes its use of this measure best demonstrates to investors the net earnings generated from our day-to-day operations by excluding specific items, for better comparability from period-to-period. A reconciliation of the net earnings excluding specific items to its closest IFRS measure can be found in sections 3.8.3. and 5.6.1. of the present document.
		Net earnings margin excluding specific items (non-GAAP) – is obtained by dividing our net earnings excluding specific items by our revenues. Management believes its use of this measure which evaluates our core operating performance when compared to the growth of our revenues is relevant to investors to assess their returns and for better comparability from period-to-period. This measure demonstrates the Company’s ability to grow in a cost-effective manner, executing on our Build and Buy strategy. A reconciliation of the net earnings excluding specific items to its closest IFRS measure can be found in sections 3.8.3. and 5.6.1. of the present document.


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022



		Diluted earnings per share excluding specific items (non-GAAP) – is defined as the net earnings excluding specific items on a per share basis. Management believes its use of this measure is useful for investors as excluding specific items best reflects the Company’s ongoing operating performance on a per share basis and allows for better comparability from period-to-period. The diluted earnings per share reported in accordance with IFRS can be found in sections 3.8. and 5.6. of the present document while the basic and diluted earnings per share excluding specific items can be found in sections 3.8.3. and 5.6.1. of the present document.
		Effective tax rate excluding specific items (non-GAAP) – is obtained by dividing our income tax expense by earnings before income taxes, before specific items. Management uses this measure to analyze the impact of changes in income tax rate and profitability mix from day-to-day operations on its effective tax rate and is useful for investors for the same reason. A reconciliation of the effective tax rate excluding specific items to its closest IFRS measure can be found in sections 3.8.3. and 5.6.1. of the present document.
Liquidity		Cash provided by operating activities – is a measure of cash generated from managing our day-to-day business operations. Management believes strong operating cash flow is indicative of financial flexibility, allowing us to execute the Company’s strategy.
		Cash provided by operating activities as a percentage of revenue – is obtained by dividing our cash provided by operating activities by our revenues. Management believes strong operating cash flow compared to our revenues is a key indicator of our financial flexibility to execute the Company’s growth strategy.
		Days sales outstanding (DSO) – is the average number of days needed to convert our trade receivables and work in progress into cash. DSO is obtained by subtracting deferred revenue from trade accounts receivable and work in progress; the result is divided by our most recent quarter’s revenue over 90 days. Management tracks this metric closely to ensure timely collection and healthy liquidity. Management believes that this measure is useful for investors as it demonstrates the Company’s ability to timely convert its trade receivables and work in progress into cash.
Capital Structure		Net debt (non-GAAP) – is obtained by subtracting from our debt and lease liabilities, our cash and cash equivalents, short-term investments, long-term investments and adjusting for fair value of foreign currency derivative financial instruments related to debt. Management believes its use of the net debt metric to monitor the Company’s financial leverage is useful for investors as it provides insight into its financial strength. A reconciliation of net debt to its closest IFRS measure can be found in section 4.5. of the present document.
		Net debt to capitalization ratio (non-GAAP) – is a measure of our level of financial leverage and is obtained by dividing the net debt by the sum of shareholders’ equity and net debt. Management believes its use of the net debt to capitalization ratio is useful for investors as it monitors the proportion of debt versus capital used to finance the Company’s operations.
		Return on invested capital (ROIC) (non-GAAP) – is a measure of the Company’s efficiency at allocating the capital under its control to profitable investments and is calculated as the proportion of the net earnings excluding net finance costs after-tax for the last twelve months, over the last four quarters’ average invested capital, which is defined as the sum of shareholders’ equity and net debt. Management believes its use of this ratio is useful for investors as it assesses how well it is using its capital to generate returns.


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

REPORTING SEGMENTS

The Company is managed through the following nine operating segments: 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). Please refer to sections 3.4., 3.6., 5.4. and 5.5. of the present document and to note 29 of our audited consolidated financial statements for additional information on our segments.


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

MD&A OBJECTIVES AND CONTENTS

In this document, we:

•

Provide a narrative explanation of the audited consolidated financial statements through the eyes of management;

•

Provide the context within which the audited consolidated financial statements should be analyzed, by giving enhanced disclosure about the dynamics and trends of the Company’s business; and

•

Provide information to assist the reader in ascertaining the likelihood that past performance may be indicative of future performance.

In order to achieve these objectives, this MD&A is presented in the following main sections:



Section	Contents		Pages

1. Corporate	1.1.	About CGI	9

Overview	1.2.	Vision and Strategy	10

	1.3.	Competitive Environment	12

2. Highlights and	2.1.	Selected Yearly Information and Key Performance Measures	13

Key Performance	2.2.	Stock Performance	14

Measures	2.3.	Subsequent Event	15

3. Financial Review	3.1.	Bookings and Book-to-Bill Ratio	16

	3.2.	Foreign Exchange	17

	3.3.	Revenue Distribution	18

	3.4.	Revenue by Segment	19

	3.5.	Operating Expenses	22

	3.6.	Adjusted EBIT by Segment	23

	3.7.	Earnings Before Income Taxes	25

	3.8.	Net Earnings and Earnings Per Share	26

4. Liquidity	4.1.	Consolidated Statements of Cash Flows	28

	4.2.	Capital Resources	30

	4.3.	Contractual Obligations	31

	4.4.	Financial Instruments and Hedging Transactions	31

	4.5.	Selected Measures of Capital Resources and Liquidity	32

	4.6.	Guarantees	33

	4.7.	Capability to Deliver Results	33


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022



Section	Contents		Pages

5. Fourth Quarter	5.1.	Bookings and Book-to-Bill Ratio	34

Results	5.2.	Foreign Exchange	35

	5.3.	Revenue Distribution	36

	5.4.	Revenue by Segment	37

	5.5.	Adjusted EBIT by Segment	40

	5.6.	Net Earnings and Earnings Per Share	42

	5.7.	Consolidated Statements of Cash Flows	44

6. Eight Quarter Summary	A summary of the past eight quarters’ key performance measures and a discussion of the factors that could impact our quarterly results.		46

7. Changes in Accounting Policies	A summary of accounting standards adopted and future accounting standard changes.		48

8. Critical Accounting Estimates	A discussion of the critical accounting estimates made in the preparation of the audited consolidated financial statements.		50

9. Integrity of Disclosure	A discussion of the existence of appropriate information systems, procedures and controls to ensure that information used internally and disclosed externally is complete and reliable.		53

10. Risk Environment	10.1.	Risks and Uncertainties	54
10. Risk Environment	10.2.	Legal Proceedings	67


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

1.	Corporate Overview

1.1. ABOUT CGI

Founded in 1976 and headquartered in Montréal, Canada, CGI is a leading IT and business consulting services firm with approximately 91,500 consultants and professionals worldwide. We use the power of technology to help clients accelerate their holistic digital transformation.

CGI has a people-centered culture, operating where our clients live and work to build trusted relationships and to advance our shared communities. Our consultants and professionals are committed to providing actionable insights that help clients achieve business outcomes. They leverage global delivery centers that deliver scale, innovation and delivery excellence for every engagement.

End-to-end services and solutions

CGI delivers end-to-end services that help clients achieve the highest returns on their digital investments. We call this ROI-led digitization. Our insights-driven end-to-end services and solutions work together to help clients design, implement, run and operate the technology critical to achieving their business strategies. Our portfolio encompasses:

Business and strategic IT consulting, and systems integration services: CGI helps clients drive sustainable value in critical consulting areas, including strategy, organization and change management, core operations and technology. Within each of these areas, our consultants also deliver a broad range of business offerings to address client executives’ priorities, including designing and advancing strategies for the responsible use of artificial intelligence (AI), sustainable supply chain management, environmental, social and governance (ESG), mergers and acquisitions, and more. In the area of systems integration, we help clients accelerate the enterprise modernization of their legacy systems and adopt new technologies to drive innovation and deliver real-time and insight-driven customer and citizen services.

ii.

Managed IT and business process services: Working as an extension of our clients’ organizations, we take on full or partial responsibility for managing their IT functions, freeing them up to focus on their strategic business direction. Our services enable clients to reinvest, alongside CGI, in the successful execution of their digital transformation roadmaps. We help them increase agility, scalability and resilience; deliver operational efficiencies, innovations and reduced costs; and embed security and data privacy controls. Typical services include: application development, modernization and maintenance; holistic enterprise digitization, automation, hybrid and cloud management; and business process services.

iii.

Intellectual property (IP): CGI’s portfolio of IP solutions are highly configurable “business platforms as a service” that are embedded within our end-to-end service offerings and utilize integrated security, data privacy practices, provider-neutral cloud approaches, and advanced AI capabilities to provide immediate benefits to clients. We invest in, and deliver, market-leading IP to drive business outcomes within each of our target industries. We also collaborate with clients to build and evolve IP-based solutions while enabling a higher degree of flexibility and customization for their unique modernization and digitization needs.

Deep industry and technology expertise

CGI has long-standing and focused practices in all of its core industries, providing clients with a partner that is not only an expert in IT, but also an expert in their respective industries. This combination of business knowledge and digital technology expertise allows us to help our clients navigate complex challenges and focus on value creation. In the process, we evolve the services and solutions we deliver within our targeted industries and provide thought leadership, blueprints, frameworks and technical accelerators that help client evolve their ecosystems.

Our targeted industries include financial services (including banking and insurance), government (including space), manufacturing, retail and distribution (including consumer services, transportation and logistics), communications and utilities (including energy and media), and health (including life sciences). To help orchestrate our global posture across these


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

industries, our leaders regularly participate in cabinet meetings and councils to advance the strategies, services and solutions we deliver to our clients.

Helping clients leverage technology to its fullest

Macro trends such as supply chain reconfiguration, climate change and energy transition, and demographic shifts including aging populations and talent shortages require new business models and ways of working. At the same time, technology is reshaping our future and creating new opportunities.

Accelerating digitization provides the inclusive, economically vibrant, and sustainable future our clients’ customers and citizens demand. Leveraging technology to its fullest helps clients to lead within their industries. Our end-to-end digital services, industry and technology expertise, and operational excellence combine to help clients advance their holistic digital transformation.

Through our proprietary Voice of Our Clients research, we analyzed the characteristics of leading digital organizations and found three common attributes:

•

They have highly agile business models to address digitization and integrate new technology, are better at operating as aligned teams between business and IT, and extend their digital strategy to their external ecosystem.

•

They have been faster in modernizing the entire IT environment - including through automation - while assuring security and data privacy.

•

They are addressing business transformation holistically, including culture change, ecosystem touchpoints, and the integration of sustainability objectives.

Digital leaders across industries seek new ways to evolve their strategy and operational models and use technology and information to improve how they operate, deliver products and services, and create value.

CGI helps clients adopt leading digital attributes and design, manage, protect and evolve their digital value chains to accelerate business outcomes.

Quality processes

Our clients expect consistent service wherever and whenever they engage us. We have an outstanding track record of on-time, within-budget delivery as a result of our commitment to excellence and our robust governance model - CGI’s Management Foundation.

Our Management Foundation provides a common business language, frameworks and practices for managing operations consistently across the globe, driving continuous improvement. We also invest in rigorous quality and service delivery standards including the International Organization for Standardization (ISO) and Capability Maturity Model Integration (CMMI) certification programs, as well as a comprehensive Client Satisfaction Assessment Program, with signed client assessments, to ensure high satisfaction on an ongoing basis.

1.2. VISION AND STRATEGY

CGI is unique compared to most companies, as our vision is based on a dream: “To create an environment in which we enjoy working together and, as owners, contribute to building a company we can be proud of.” This dream has motivated us since our founding in 1976 and drives our vision: “To be a global, world-class end-to-end IT and business consulting services leader helping our clients succeed.”

In pursuing our dream and vision, CGI has been highly disciplined throughout its history in executing a Build and Buy profitable growth strategy comprised of four pillars that combine profitable organic growth (Build) and accretive acquisitions (Buy):

Pillar 1: Win, renew and extend contracts

Pillar 2: New large managed IT and business process services contracts


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

These first two pillars relate to driving profitable organic growth through the pursuit of contracts with new and existing clients in our targeted industries. As such, CGI engages with new and existing clients on four levers in our portfolio of end-to-end services and solutions: Business and Strategic IT Consulting, Systems Integration, Managed Services and IP-based services. Successes in these pillars reflect the strength of our end-to-end portfolio of capabilities, the depth of expertise of our consultants in business and IT, client satisfaction in our delivery excellence, and the appreciation of the proximity model by our clients, both existing and potential.

Pillar 3: Metro market acquisitions

Pillar 4: Large, transformational acquisitions

The third and fourth pillars focus on growth through accretive acquisitions. The third pillar for metro market acquisitions complements the proximity model and helps to provide a fuller range of end-to-end services. The fourth pillar for large transformational acquisitions helps to further expand our geographic footprint and reach the critical mass required to compete for large managed IT and business process services contracts and broaden our client relationships. Both the third and fourth pillars are supported by three levers. First, is our range of end-to-end services that allow us to consider a broad range of acquisitions. A second lever is CGI’s industry sector mix that helps us mirror the IT spend of each metro market over time. A final lever across pillars three and four focuses on IP-based services firms that offer consulting services and managed services that leverage their solutions.

CGI will continue to be a consolidator in the IT and business consulting services industry by being active across these four pillars.

Executing our strategy

CGI’s strategy is executed through a business model that combines client proximity with an extensive global delivery network to deliver the following benefits:

• Local relationships and accountability: We live and work near our clients to provide a high level of responsiveness, partnership, and innovation. Our local consultants and professionals speak our clients’ language, understand their business and industries, and collaborate to meet their goals and advance their business.

• Global reach: Our local presence is complemented by an expansive global delivery network that ensures our clients have 24/7 access to best-fit digital capabilities and resources to meet their end-to-end needs. In addition, clients benefit from our unique combination of industry domain and technology expertise within our global delivery model.

• Committed experts: One of our key strategic goals is to be our clients’ partner and expert of choice. To achieve this, we invest in developing and recruiting professionals with extensive industry, business and in-demand technology expertise. Individually and collectively, each of our experts embody partnership behaviors in all they do by being consultative and building trusted relationships with each other, our clients, shareholders, and within our communities. In addition, a majority of consultants and professionals are also owners through our Share Purchase Plan, which, combined with the Profit Participation Plan, provide an added level of commitment to the success of our clients.

• Everyday innovation: Our approach to client engagements is to continuously bring forward actionable insights that support clients’ ROI-led digitization priorities. Through our client satisfaction program, we regularly assess the degree to which clients find that CGI introduced applicable innovation to the engagements we deliver for them, including through our ideas, processes, tools and offerings. We also scale innovative solutions co-created with clients through a global governance model.

• Comprehensive quality processes: CGI’s investment in quality frameworks and rigorous client satisfaction assessments has resulted in a consistent track record of on-time and within-budget project delivery. With regular reviews of engagements and transparency at all levels, the Company ensures that client objectives and its own


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

quality objectives are consistently followed at all times. This thorough process enables CGI to generate continuous improvements for all stakeholders by applying corrective measures as soon as they are required.

• ESG strategy: At CGI, our ESG strategy is key to contributing to our strategic goal to be recognized by our stakeholders as an engaged, ethical and responsible corporate citizen within our communities. Our commitments align with the United Nations (UN) Global Compact’s 10 principles and we are recognized by leading international indices, including EcoVadis, Carbon Disclosure Project (CDP) and Dow Jones Sustainability Indices (DJSI). We prioritize partnerships with clients, while also collaborating with educational institutions and local organizations, on three global priorities: people, communities and climate. We demonstrate our commitment to a sustainable world through projects delivered in collaboration with clients and through operating practices, supply chain management, and community service activities.

1.3. COMPETITIVE ENVIRONMENT

As the market dynamics and industry trends continue to increase client demand for ROI-led digitization, CGI is well-positioned to serve as a digital partner and expert of choice. We work with clients across the globe to implement digital strategies, roadmaps and solutions that help clients transform the customer/citizen experience, drive the launch of new products and services, and deliver efficiencies and cost savings.

CGI’s competition is comprised of a variety of firms, from local companies providing specialized services and software, government pure-plays to global business consulting and IT services providers. All of these players are competing to deliver some or all of the services we provide.

Many factors distinguish the industry leaders, including the following:

• Depth and breadth of industry and technology expertise;

• Local presence and strength of client relationships;

• Extensive and flexible global delivery network, including onshore, nearshore and offshore options;

• Breadth of digital IP solutions;

• Total cost of services and value delivered;

• Ability to deliver practical innovation for measurable results; and

• Consistent, on-time, within-budget delivery everywhere the client operates.

CGI is one of the leaders in the industry with respect to the combination of these factors. CGI is one of few firms with the scale, reach, and capabilities to meet clients’ enterprise business and technology needs.


© 2023 CGI Inc.		Page 12

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

2.	Highlights and Key Performance Measures

2.1. SELECTED YEARLY INFORMATION & KEY PERFORMANCE MEASURES

As at and for the years ended September 30,

2023

2022

2021

Change

2023 / 2022

Change

2022 / 2021

In millions of CAD unless otherwise noted

Growth

Revenue

14,296.4

12,867.2

12,126.8

1,429.2

740.4

Year-over-year revenue growth

11.1%

6.1%

(0.3%)

Constant currency revenue growth

8.0%

10.5%

1.1%

Backlog¹

26,059

24,055

23,059

2,004

996

Bookings

16,259

13,966

13,843

2,293

123

Book-to-bill ratio

113.7%

108.5%

114.2%

5.2%

(5.7%)

Profitability

Earnings before income taxes

2,197.9

1,967.0

1,838.0

230.9

129.0

Earnings before income taxes margin

15.4%

15.3%

15.2%

0.1%

0.1%

Adjusted EBIT²

2,312.7

2,086.6

1,952.2

226.1

134.4

Adjusted EBIT margin

16.2%

16.2%

16.1%

—%

0.1%

Net earnings

1,631.2

1,466.1

1,369.1

165.1

97.0

Net earnings margin

11.4%

11.4%

11.3%

—%

0.1%

Diluted EPS (in dollars)

6.86

6.04

5.41

0.82

0.63

Net earnings excluding specific items²

1,680.0

1,487.9

1,374.9

192.1

113.0

Net earnings margin excluding specific items

11.8%

11.6%

11.3%

0.2%

0.3%

Diluted EPS excluding specific items (in dollars)²

7.07

6.13

5.43

0.94

0.70

Liquidity

Cash provided by operating activities

2,112.2

1,865.0

2,115.9

247.2

(250.9)

As a percentage of revenue

14.8%

14.5%

17.4%

0.3%

(2.9%)

Days sales outstanding

(5)

Capital structure

Long-term debt and lease liabilities³

3,742.3

3,976.2

4,178.6

(233.9)

(202.4)

Net debt²

2,134.6

2,946.9

2,535.9

(812.3)

411.0

Net debt to capitalization ratio

20.4%

28.8%

26.6%

(8.4%)

2.2%

Return on invested capital

16.0%

15.7%

14.9%

0.3%

0.8%

Balance sheet

Cash and cash equivalents, and short-term investments

1,575.6

972.6

1,700.2

603.0

(727.6)

Total assets

15,799.5

15,175.4

15,021.0

624.1

154.4

Long-term financial liabilities⁴

2,386.2

3,731.3

3,659.8

(1,345.1)

71.5

¹	Approximately $10.0 billion of our backlog as at September 30, 2023 is expected to be converted into revenue within the next twelve months, $8.6 billion within one to three years, $3.1 billion within three to five years and $4.4 billion in more than five years.

²	Please refer to sections 3.7., 3.8.3. and 4.5. of the respective Fiscal years’ MD&A for the reconciliation of non-GAAP financial measures.

³	Long-term debt and lease liabilities include both the current and long-term portions of the long-term debt and lease liabilities.

⁴	Long-term financial liabilities include the long-term portion of the debt, long-term portion of lease liabilities and the long-term derivative financial instruments.


© 2023 CGI Inc.		Page 13

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

2.2. STOCK PERFORMANCE

LOGO

2.2.1. Fiscal 2023 Trading Summary

CGI’s shares are listed on the Toronto Stock Exchange (TSX) (stock quote – GIB.A) and the New York Stock Exchange (NYSE) (stock quote – GIB) and are included in key indices such as the S&P/TSX 60 Index.


TSX	(CAD)	NYSE	(USD)

Open:	103.94	Open:	75.77

High:	142.31	High:	107.66

Low:	100.74	Low:	72.23

Close:	133.88	Close:	98.49

CDN average daily trading volumes¹:	559,171	NYSE average daily trading volumes:	139,834

¹	Includes the average daily volumes of both the TSX and alternative trading systems.


© 2023 CGI Inc.		Page 14

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

2.2.2. Normal Course Issuer Bid (NCIB)

On January 31, 2023, the Company’s Board of Directors authorized and subsequently received regulatory approval from the TSX for the renewal of CGI’s NCIB which allows for the purchase for cancellation of up to 18,769,394 Class A subordinate voting shares (Class A Shares) representing 10% of the Company’s public float as of the close of business on January 24, 2023. Class A Shares may be purchased for cancellation under the NCIB commencing on February 6, 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 Shares allowable under the NCIB or elects to terminate the bid.

During the year ended September 30, 2023, the Company purchased for cancellation 6,202,546 Class A Shares under its current NCIB for a total consideration of $786.9 million, at a weighted average price of $126.87. The purchased shares included 3,344,996 Class A Shares purchased for cancellation from Caisse de dépôt et de placement du Québec, for a total consideration of $400.0 million. The purchase was made pursuant to an 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 year ended September 30, 2023, the Company paid for and cancelled 100,100 Class A Shares under its previous NCIB for a total consideration of $10.3 million, at a weighted average price of $102.81, which were purchased, or committed to be purchased, but not cancelled as at September 30, 2022.

As at September 30, 2023, of the 6,202,546 Class A Shares purchased for cancellation, 68,550 Class A Shares remain unpaid for $9.2 million.

As at September 30, 2023, the Company could purchase up to 12,566,848 Class A Shares for cancellation under the current NCIB.

2.2.3. Capital Stock and Options Outstanding

The following table provides a summary of the Capital Stock and Options Outstanding as at November 3, 2023:



Capital Stock and Options Outstanding	As at November 3, 2023

Class A subordinate voting shares		205,872,778

Class B multiple voting shares		26,445,706

Options to purchase Class A subordinate voting shares		5,140,727

2.3. SUBSEQUENT EVENT

On October 10, 2023, the Company acquired Momentum Consulting Corp., an IT and business consulting firm specializing in digital transformation, data and analytics and managed services, based in the U.S. and headquartered in Miami, Florida for a total purchase price of $50.5 million. The acquisition added approximately 175 professionals to the Company.


© 2023 CGI Inc.		Page 15

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

3.	Financial Review

3.1. BOOKINGS AND BOOK-TO-BILL RATIO

Bookings for the year were $16.3 billion representing a book-to-bill ratio of 113.7%. The breakdown of the new bookings signed during the year is as follows:

LOGO

Information regarding our bookings is a key indicator of the volume of our business over time. Additional information on bookings can be found in the Key Performance Measures section of the present document. The following table provides a summary of the bookings and book-to-bill ratio by segment:



In thousands of CAD except for percentages	Bookings for the year ended September 30, 2023	Book-to-bill ratio for the year ended September 30, 2023

Total CGI	16,259,144	113.7%

U.S. Federal	2,878,094	148.1%

Western and Southern Europe	2,829,306	110.3%

U.S. Commercial and State Government	2,734,687	110.9%

Canada	2,518,745	112.7%

Scandinavia and Central Europe	1,831,999	105.3%

U.K. and Australia	1,763,767	105.2%

Finland, Poland and Baltics	883,321	101.7%

Northwest and Central-East Europe	819,224	102.4%


© 2023 CGI Inc.		Page 16

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

3.2. FOREIGN EXCHANGE

The Company operates globally and is exposed to changes in foreign currency rates. Accordingly, as prescribed by IFRS, we value assets, liabilities and transactions that are measured in foreign currencies using various exchange rates. We report all dollar amounts in Canadian dollars.

Closing foreign exchange rates

As at September 30,

2023

2022

Change

U.S. dollar

1.3538

1.3756

(1.6%)

Euro

1.4327

1.3454

6.5%

Indian rupee

0.0162

0.0169

(4.1%)

British pound

1.6530

1.5310

8.0%

Swedish krona

0.1243

0.1236

0.6%

Average foreign exchange rates

For the years ended September 30,

2023

2022

Change

U.S. dollar

1.3485

1.2777

5.5%

Euro

1.4399

1.3833

4.1%

Indian rupee

0.0164

0.0166

(1.2%)

British pound

1.6544

1.6333

1.3%

Swedish krona

0.1270

0.1328

(4.4%)


© 2023 CGI Inc.		Page 17

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

3.3. REVENUE DISTRIBUTION

The following charts provide additional information regarding our revenue mix for the year:

LOGO

3.3.1. Client Concentration

IFRS guidance on segment disclosures defines a single customer as a group of entities that are known to the reporting entity to be under common control. As a consequence, our work for the U.S. federal government including its various agencies represented 13.5% of our revenue for Fiscal 2023 as compared to 13.3% for Fiscal 2022.


© 2023 CGI Inc.		Page 18

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

3.4. REVENUE BY SEGMENT

Our segments are reported based on where the client’s work is delivered from within our geographic delivery model.

The table below provides a summary of the year-over-year changes in our revenue, in total and by segment before eliminations, separately showing the impacts of foreign currency exchange rate variations between Fiscal 2023 and Fiscal 2022. The Fiscal 2022 revenue by segment was recorded reflecting the actual foreign exchange rates for that period. The foreign exchange impact is the difference between the current period’s actual results and the same period’s results converted with the prior year’s foreign exchange rates.

For the years ended September 30,

Change

2023

2022

In thousands of CAD except for percentages

Total CGI revenue

14,296,360

12,867,201

1,429,159

11.1

Constant currency revenue growth

8.0%

Foreign currency impact

3.1%

Variation over previous period

11.1%

Western and Southern Europe

Revenue prior to foreign currency impact

2,511,388

2,152,113

359,275

16.7

Foreign currency impact

94,538

Western and Southern Europe revenue

2,605,926

2,152,113

453,813

21.1

U.S. Commercial and State Government

Revenue prior to foreign currency impact

2,158,461

2,075,321

83,140

4.0

Foreign currency impact

119,535

U.S. Commercial and State Government revenue

2,277,996

2,075,321

202,675

9.8

Canada

Revenue prior to foreign currency impact

2,062,794

1,981,380

81,414

4.1

Foreign currency impact

1,865

Canada revenue

2,064,659

1,981,380

83,279

4.2

U.S. Federal

Revenue prior to foreign currency impact

1,831,839

1,750,902

80,937

4.6

Foreign currency impact

103,399

U.S. Federal revenue

1,935,238

1,750,902

184,336

10.5

Scandinavia and Central Europe

Revenue prior to foreign currency impact

1,652,995

1,571,118

81,877

5.2

Foreign currency impact

(4,639)

Scandinavia and Central Europe revenue

1,648,356

1,571,118

77,238

4.9

U.K. and Australia revenue

Revenue prior to foreign currency impact

1,436,525

1,291,125

145,400

11.3

Foreign currency impact

19,004

U.K. and Australia revenue

1,455,529

1,291,125

164,404

12.7

Finland, Poland and Baltics

Revenue prior to foreign currency impact

797,491

729,024

68,467

9.4

Foreign currency impact

31,460

Finland, Poland and Baltics revenue

828,951

729,024

99,927

13.7


© 2023 CGI Inc.		Page 19

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

For the years ended September 30,

Change

2023

2022

In thousands of CAD except for percentages

Northwest and Central-East Europe

Revenue prior to foreign currency impact

723,064

692,859

30,205

4.4

Foreign currency impact

32,837

Northwest and Central-East Europe revenue

755,901

692,859

63,042

9.1

Asia Pacific

Revenue prior to foreign currency impact

930,559

799,661

130,898

16.4

Foreign currency impact

(12,503)

Asia Pacific revenue

918,056

799,661

118,395

14.8

Eliminations

(194,252)

(176,302)

(17,950)

10.2

For the year ended September 30, 2023, revenue was $14,296.4 million, an increase of $1,429.2 million or 11.1% over last year. On a constant currency basis, revenue increased by $1,025.5 million or 8.0%. The increase was mainly due to organic growth across all vertical markets, including an increase in IP-based revenues, as well as to prior year’s business acquisitions. This was partly offset by less available days to bill, including the calendar impact of one less available day to bill in Q4 2023.

3.4.1. Western and Southern Europe

For the year ended September 30, 2023, revenue in the Western and Southern Europe segment was $2,605.9 million, an increase of $453.8 million or 21.1% over last year. On a constant currency basis, revenue increased by $359.3 million or 16.7%. The increase in revenue was mainly due to prior year’s business acquisitions, as well as organic growth within all vertical markets. This was partly offset by less available days to bill, including the calendar impact of one less available day to bill in Q4 2023.

On a client geographic basis, the top two Western and Southern Europe vertical markets were MRD and financial services, generating combined revenues of approximately $1,609 million for the year ended September 30, 2023.

3.4.2. U.S. Commercial and State Government

For the year ended September 30, 2023, revenue in the U.S. Commercial and State Government segment was $2,278.0 million, an increase of $202.7 million or 9.8% over last year. On a constant currency basis, revenue increased by $83.1 million or 4.0%. The increase was mainly due to organic growth across most vertical markets, partially offset by increased use of our Asia Pacific offshore delivery centers for client work.

On a client geographic basis, the top two U.S. Commercial and State Government vertical markets were financial services and government, generating combined revenues of approximately $1,456 million for the year ended September 30, 2023.

3.4.3. Canada

For the year ended September 30, 2023, revenue in the Canada segment was $2,064.7 million, an increase of $83.3 million or 4.2% over last year. On a constant currency basis, revenue increased by $81.4 million or 4.1%. The increase was mainly due to organic growth across most vertical markets, primarily an increase in IP-based revenues in the financial services vertical market.

On a client geographic basis, the top two Canada vertical markets were financial services, and communications and utilities, generating combined revenues of approximately $1,437 million for the year ended September 30, 2023.

3.4.4. U.S. Federal

For the year ended September 30, 2023, revenue in the U.S. Federal segment was $1,935.2 million, an increase of $184.3 million or 10.5% over last year. On a constant currency basis, revenue increased by $80.9 million or 4.6%. The increase in revenue was mainly due to organic growth in managed services engagements, including higher transaction volumes related to our IP business process services.

For the year ended September 30, 2023, 90% of revenues within the U.S. Federal segment were federal civilian based.


© 2023 CGI Inc.		Page 20

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

3.4.5. Scandinavia and Central Europe

For the year ended September 30, 2023, revenue in the Scandinavia and Central Europe segment was $1,648.4 million, an increase of $77.2 million or 4.9% over last year. On a constant currency basis, revenue increased by $81.9 million or 5.2%. The increase was mainly driven by organic growth primarily within the government vertical market. This was partially offset by adjustments of cost to complete on certain projects and less available days to bill, including the calendar impact of one less available day to bill in Q4 2023.

On a client geographic basis, the top two Scandinavia and Central Europe vertical markets were MRD and government, generating combined revenues of approximately $1,215 million for the year ended September 30, 2023.

3.4.6. U.K. and Australia

For the year ended September 30, 2023, revenue in the U.K. and Australia segment was $1,455.5 million, an increase of $164.4 million or 12.7% over last year. On a constant currency basis, revenue increased by $145.4 million or 11.3%. The increase was mainly due to organic growth within the government vertical market as well as a prior year’s business acquisition.

On a client geographic basis, the top two U.K. and Australia vertical markets were government and communications and utilities, generating combined revenues of $1,217 million for the year ended September 30, 2023.

3.4.7. Finland, Poland and Baltics

For the year ended September 30, 2023, revenue in the Finland, Poland and Baltics segment was $829.0 million, an increase of $99.9 million or 13.7% over last year. On a constant currency basis, revenue increased by $68.5 million or 9.4%. The increase was mainly due to organic growth across most vertical markets, including an increase in IP-based revenues. This was partially offset by less available days to bill, including the calendar impact of one less available day to bill in Q4 2023.

On a client geographic basis, the top two Finland, Poland and Baltics vertical markets were government and financial services, generating combined revenues of approximately $520 million for the year ended September 30, 2023.

3.4.8. Northwest and Central-East Europe

For the year ended September 30, 2023, revenue in the Northwest and Central-East Europe segment was $755.9 million, an increase of $63.0 million or 9.1% over last year. On a constant currency basis, revenue increased by $30.2 million or 4.4%. The increase was mainly due to organic growth within most vertical markets, partially offset by less available days to bill, including the calendar impact of one less available day to bill in Q4 2023.

On a client geographic basis, the top two Northwest and Central-East Europe vertical markets were MRD and government, generating combined revenues of approximately $503 million for the year ended September 30, 2023.

3.4.9. Asia Pacific

For the year ended September 30, 2023, revenue in the Asia Pacific segment was $918.1 million, an increase of $118.4 million or 14.8% over last year. On a constant currency basis, revenue increased by $130.9 million or 16.4%. The increase was mainly driven by the continued demand for our offshore delivery centers across all commercial vertical markets.


© 2023 CGI Inc.		Page 21

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

3.5. OPERATING EXPENSES


For the years ended September 30,					Change
	2023	% of Revenue	2022	% of Revenue
	2023	% of Revenue	2022	% of Revenue	$		%

In thousands of CAD except for percentages

Costs of services, selling and administrative	11,982,421	83.8%	10,776,564	83.8%		1,205,857		—%

Foreign exchange loss	1,198	—%	4,001	—%		(2,803)		—%

3.5.1. Costs of Services, Selling and Administrative

Costs of services include the costs of serving our clients, which mainly consist of salaries, performance based compensation and other direct costs, including travel expenses, net of tax credits. These also mainly include professional fees and other contracted labour costs, as well as hardware, software and delivery center related costs.

Costs of selling and administrative mainly include salaries, performance based compensation, office space, internal solutions, business development related costs such as travel expenses, and other administrative and management costs.

For the year ended September 30, 2023, costs of services, selling and administrative expenses amounted to $11,982.4 million, an increase of $1,205.9 million when compared to last year. As a percentage of revenue, costs of services, selling and administrative expenses remained stable at 83.8%.

As a percentage of revenue, costs of services increased compared to last year, mainly due to the impact of less available days to bill, including the calendar impact of one less available day to bill in Q4 2023, the expected increase in travel to support client delivery growth, adjustments due to reevaluation of costs to complete on certain projects, as well as a favourable supplier contract adjustment that did not repeat this year. This was partially offset by profitable growth within most vertical markets and lower performance based compensation accruals.

As a percentage of revenue, costs of selling and administrative decreased compared to last year, mainly due to lower performance based compensation accruals, which was partially offset by the increase in business development efforts, including the expected increase in travel to support growing our business.

During the year ended September 30, 2023, the translation of the results of our foreign operations from their local currencies to the Canadian dollar favourably impacted costs by $312.5 million, which was offset by the unfavourable translation impact of $403.6 million on our revenue.

3.5.2. Foreign Exchange Loss

During the year ended September 30, 2023, CGI incurred $1.2 million of foreign exchange losses, mainly driven by the timing of payments combined with the volatility of foreign exchange rates. The Company, in addition to its natural hedges, uses derivatives as a strategy to manage its exposure, to the extent possible.


© 2023 CGI Inc.		Page 22

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

3.6. ADJUSTED EBIT BY SEGMENT

Change

For the years ended September 30,

2023

2022

In thousands of CAD except for percentages

Western and Southern Europe

355,578

289,730

65,848

22.7%

As a percentage of segment revenue

13.6%

13.5%

U.S. Commercial and State Government

339,410

304,767

34,643

11.4%

As a percentage of segment revenue

14.9%

14.7%

Canada

477,502

463,289

14,213

3.1%

As a percentage of segment revenue

23.1%

23.4%

U.S. Federal

306,362

276,395

29,967

10.8%

As a percentage of segment revenue

15.8%

15.8%

Scandinavia and Central Europe

127,320

125,728

1,592

1.3%

As a percentage of segment revenue

7.7%

8.0%

U.K. and Australia

216,517

200,117

16,400

8.2%

As a percentage of segment revenue

14.9%

15.5%

Finland, Poland and Baltics

110,583

96,651

13,932

14.4%

As a percentage of segment revenue

13.3%

13.3%

Northwest and Central East-Europe

101,871

88,287

13,584

15.4%

As a percentage of segment revenue

13.5%

12.7%

Asia Pacific

277,598

241,672

35,926

14.9%

As a percentage of segment revenue

30.2%

30.2%

Adjusted EBIT

2,312,741

2,086,636

226,105

10.8%

Adjusted EBIT margin

16.2%

16.2%

Adjusted EBIT for the year was $2,312.7 million, an increase of $226.1 million from 2022. The adjusted EBIT margin remained stable at 16.2% when compared to last year, mainly due to profitable growth in all vertical markets and lower performance based compensation accruals. This was offset by less available days to bill, including the calendar impact of one less available day to bill in Q4 2023, the increase in business development efforts and the expected increase in travel, adjustments due to reevaluation of cost to complete on certain projects, as well as a favourable supplier contract adjustment that did not repeat this year.

3.6.1. Western and Southern Europe

For the year ended September 30, 2023, adjusted EBIT in the Western and Southern Europe segment was $355.6 million, an increase of $65.8 million when compared to last year. Adjusted EBIT margin increased to 13.6% from 13.5%. The increase in adjusted EBIT margin is mainly due to profitable organic growth within all vertical markets and lower performance based compensation accruals. This was partially offset by less available days to bill, including the calendar impact of one less available day to bill in Q4 2023, the planned temporary dilutive impact of the prior year’s business acquisitions and the expected increase in travel to support growing our business.

3.6.2. U.S. Commercial and State Government

For the year ended September 30, 2023, adjusted EBIT in the U.S. Commercial and State Government segment was $339.4 million, an increase of $34.6 million when compared to last year. Adjusted EBIT margin increased to 14.9% from 14.7%. The increase in adjusted EBIT margin was mainly due to the impact of a favorable supplier contract settlement and lower performance based compensation accruals. This was partially offset by the impact of temporarily lower utilization due to successful completion of projects and lower proportion of IP revenue from license sales as our clients increasingly shift to a subscription fee-based model with a software-as-a-service delivery.


© 2023 CGI Inc.		Page 23

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

3.6.3. Canada

For the year ended September 30, 2023, adjusted EBIT in the Canada segment was $477.5 million, an increase of $14.2 million when compared to last year. Adjusted EBIT margin decreased to 23.1% from 23.4%. The change in adjusted EBIT margin was mainly due to a prior year’s favorable supplier contract adjustment that did not repeat this year and the impact of temporarily lower utilization primarily within the financial services vertical market. This was partially offset by lower performance based compensation accruals.

3.6.4. U.S. Federal

For the year ended September 30, 2023, adjusted EBIT in the U.S. Federal segment was $306.4 million, an increase of $30.0 million when compared to last year. Adjusted EBIT margin remained stable at 15.8% due to increased margin from transaction volumes related to our IP business process services, offset by increased costs related to business development efforts, including the expected increase in travel.

3.6.5. Scandinavia and Central Europe

For the year ended September 30, 2023, adjusted EBIT in the Scandinavia and Central Europe segment was $127.3 million, an increase of $1.6 million when compared to last year. Adjusted EBIT margin decreased to 7.7% from 8.0%. The change in adjusted EBIT margin was mainly due to adjustments of cost to complete on certain projects and less available days to bill, including the calendar impact of one less available day to bill in Q4 2023. This was partially offset by profitable organic growth primarily within the government vertical market and lower performance based compensation accruals.

3.6.6. U.K. and Australia

For the year ended September 30, 2023, adjusted EBIT in the U.K. and Australia segment was $216.5 million, an increase of $16.4 million when compared to last year. Adjusted EBIT margin decreased to 14.9% from 15.5%. The change in adjusted EBIT margin was mainly due to the expected increase in travel to support growing our business.

3.6.7. Finland, Poland and Baltics

For the year ended September 30, 2023, adjusted EBIT in the Finland, Poland and Baltics segment was $110.6 million, an increase of $13.9 million when compared to last year. Adjusted EBIT margin remained stable at 13.3% due to profitable organic growth across most vertical markets, including an increase in IP-based revenues. This was offset by the costs associated with the ramp up of managed IT services contracts within the government vertical market, higher performance based compensation accruals as well as less available days to bill, including the calendar impact of one less available day to bill in Q4 2023.

3.6.8. Northwest and Central-East Europe

For the year ended September 30, 2023, adjusted EBIT in the Northwest and Central-East Europe segment was $101.9 million, an increase of $13.6 million when compared to last year. Adjusted EBIT margin increased to 13.5% from 12.7%. The increase in adjusted EBIT margin was mainly due to profitable organic growth within the communications and utilities and MRD vertical markets and lower performance based compensation accruals. This was partially offset by less available days to bill, including the calendar impact of one less available day to bill in Q4 2023.

3.6.9. Asia Pacific

For the year ended September 30, 2023, adjusted EBIT in the Asia Pacific segment was $277.6 million, an increase of $35.9 million when compared to last year. Adjusted EBIT margin held strong at 30.2% while gaining efficiencies.


© 2023 CGI Inc.		Page 24

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

3.7. EARNINGS BEFORE INCOME TAXES

The following table provides a reconciliation between our adjusted EBIT and earnings before income taxes, which is reported in accordance with IFRS:

Change

For the years ended September 30,

2023

% of
Revenue

2022

% of
Revenue

In thousands of CAD except for percentage

Adjusted EBIT

2,312,741

16.2%

2,086,636

16.2%

226,105

—%

Minus the following items:

Acquisition-related and integration costs

53,401

0.4%

27,654

0.2%

25,747

0.2%

Cost optimization program

8,964

0.1%

—

—%

8,964

0.1%

Net finance costs

52,463

0.4%

92,023

0.7%

(39,560)

(0.3%)

Earnings before income taxes

2,197,913

15.4%

1,966,959

15.3%

230,954

0.1%

3.7.1. Acquisition-Related and Integration Costs

For the years ended September 30, 2023 and 2022, the Company incurred $53.4 million and $27.7 million, respectively, of acquisition-related and integration costs for the integration towards the CGI operating model.

For the year ended September 30, 2023, these costs mainly included $23.2 million of costs of rationalizing the redundancy of employment ($10.9 million for the year ended September 30, 2022), costs related to vacating leased premises for $10.8 million ($3.5 million for the year ended September 30, 2022) and acquisition-related costs of nil ($3.1 million for the year ended September 30, 2022).

3.7.2. Cost Optimization Program

In Q4, the Company initiated a cost optimization program to accelerate actions to rightsize its real estate portfolio globally and improve operational efficiencies, including the increased use of automation and global delivery, focused on administrative activities. In the quarter, $9.0 million was expensed and the Company plans to incur approximately $65 million of additional expenses over the first half of Fiscal 2024 related to this program.

3.7.3. Net Finance Costs

Net finance costs mainly include interest on our long-term debt, lease liabilities and financial assets. For the year ended September 30, 2023, the net finance costs decreased by $39.6 million, mainly due to additional interest income from our financial assets and lower interest charges related to our unsecured notes repaid in December 2021 as scheduled.


© 2023 CGI Inc.		Page 25

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

3.8. NET EARNINGS AND EARNINGS PER SHARE

The following table sets out the information supporting the earnings per share calculations:

Change

For the years ended September 30,

2023

2022

In thousands of CAD except for percentage and shares data

Earnings before income taxes

2,197,913

1,966,959

230,954

11.7%

Income tax expense

566,664

500,817

65,847

13.1%

Effective tax rate

25.8%

25.5%

Net earnings

1,631,249

1,466,142

165,107

11.3%

Net earnings margin

11.4%

11.4%

Weighted average number of shares outstanding

Class A subordinate voting shares and Class B multiple voting shares (basic)

234,041,041

239,262,004

(5,220,963)

(2.2%)

Class A subordinate voting shares and Class B multiple voting shares (diluted)

237,702,081

242,867,445

(5,165,364)

(2.1%)

Earnings per share (in dollars)

Basic

6.97

6.13

0.84

13.7%

Diluted

6.86

6.04

0.82

13.6%

3.8.1. Income Tax Expense

For the year ended September 30, 2023, income tax expense was $566.7 million compared to $500.8 million over last year, while our effective tax rate increased from 25.5% to 25.8% for the year ended September 30, 2023 compared to the year ended September 30, 2022.

When excluding tax effects from acquisition-related and integration costs, the effective tax rate increased from 25.4% to 25.7% for the year ended September 30, 2023 compared to the year ended September 30, 2022. The increase is mainly attributable to the increase in the U.K. statutory tax rate and a change in profitability mix in certain geographies, partly offset by the decrease in the France statutory tax rate.

The table in section 3.8.3. shows the year-over-year comparison of the tax rate with the impact of specific items removed.

Based on the enacted rates at the end of Fiscal 2023 and our current profitability mix, we expect our effective tax rate before specific items to be in the range of 25.0% to 26.5% in subsequent periods.

3.8.2. Weighted Average Number of Shares Outstanding

For Fiscal 2023, CGI’s basic and diluted weighted average number of shares outstanding decreased compared to Fiscal 2022 due to the impact of the purchase for cancellation of Class A Shares, partly offset by the grant and the exercise of stock options. The table in section 3.8.3. shows the year-over-year comparison of the weighted average number of shares outstanding. Please refer to notes 19, 20 and 21 of our audited consolidated financial statements for additional information.


© 2023 CGI Inc.		Page 26

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

3.8.3. Net Earnings and Earnings per Share Excluding Specific Items

Below is a table showing the year-over-year comparison excluding specific items, namely cost optimization program and acquisition-related and integration costs.

Change

For the years ended September 30,

2023

2022

In thousands of CAD except for percentages and shares data

Earnings before income taxes

2,197,913

1,966,959

230,954

11.7%

Add back:

Acquisition-related and integration costs

53,401

27,654

25,747

93.1%

Cost optimization program

8,964

—

8,964

—%

Earnings before income taxes excluding specific items

2,260,278

1,994,613

265,665

13.3%

Income tax expense

566,664

500,817

65,847

13.1%

Effective tax rate

25.8%

25.5%

Add back:

Tax deduction on acquisition-related and integration costs

11,336

5,942

5,394

90.8%

Impact on effective tax rate

(0.1%)

(0.1%)

Tax deduction on cost optimization program

2,240

—

2,240

—%

Impact on effective tax rate

—%

Income tax expense excluding specific items

580,240

506,759

73,481

14.5%

Effective tax rate excluding specific items

25.7%

25.4%

Net earnings excluding specific items

1,680,038

1,487,854

192,184

12.9%

Net earnings margin excluding specific items

11.8%

11.6%

Weighted average number of shares outstanding

Class A subordinate voting shares and Class B multiple voting shares (basic)

234,041,041

239,262,004

(2.2%)

Class A subordinate voting shares and Class B multiple voting shares (diluted)

237,702,081

242,867,445

(2.1%)

Earnings per share excluding specific items (in dollars)

Basic

7.18

6.22

0.96

15.4%

Diluted

7.07

6.13

0.94

15.3%


© 2023 CGI Inc.		Page 27

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

4.	Liquidity

4.1. CONSOLIDATED STATEMENTS OF CASH FLOWS

CGI’s growth is financed through a combination of cash flow from operations, drawing on our unsecured committed revolving credit facility, the issuance of long-term debt, and the issuance of equity. One of our financial priorities is to maintain an optimal level of liquidity through the active management of our assets and liabilities as well as our cash flows.

As at September 30, 2023, cash and cash equivalents were $1,568.3 million. Cash included in funds held for clients was $269.8 million. The following table provides a summary of the generation and use of cash and cash equivalents for the years ended September 30, 2023 and 2022.

For the years ended September 30,

2023

2022

Change

In thousands of CAD

Cash provided by operating activities

2,112,249

1,864,998

247,251

Cash used in investing activities

(561,858)

(911,947)

350,089

Cash used in financing activities

(1,192,376)

(1,591,098)

398,722

Effect of foreign exchange rate changes on cash, cash equivalents and cash included in funds held for clients

8,884

(46,500)

55,384

Net increase (decrease) in cash, cash equivalents and cash included in funds held for clients

366,899

(684,547)

1,051,446

4.1.1. Cash Provided by Operating Activities

For the year ended September 30, 2023, cash provided by operating activities was $2,112.2 million or 14.8% of revenue compared to $1,865.0 million or 14.5% of revenue for the same period last year.

The following table provides a summary of the generation and use of cash from operating activities:

For the years ended September 30,

2023

2022

Change

In thousands of CAD

Net earnings

1,631,249

1,466,142

165,107

Amortization, depreciation and impairment

519,648

474,622

45,026

Other adjustments¹

(55,113)

35,127

(90,240)

Cash flow from operating activities before net change in non-cash working capital items and others

2,095,784

1,975,891

119,893

Net change in non-cash working capital items and others:

Accounts receivable, work in progress and deferred revenue

91,115

(106,307)

197,422

Accounts payable and accrued liabilities, accrued compensation and employee-related liabilities, provisions and long-term liabilities

(179,052)

(4,876)

(174,176)

Others²

104,402

290

104,112

Net change in non-cash working capital items and others

16,465

(110,893)

127,358

Cash provided by operating activities

2,112,249

1,864,998

247,251

¹	Comprised of deferred income tax recovery, foreign exchange gain, share-based payment costs and gain on lease terminations.

²	Comprised of prepaid expenses and other assets, long-term financial assets (excluding long-term receivables), income taxes, derivative financial instruments and retirement benefits obligations.

The increase of $247.3 million from our cash provided by operating activities was mostly due to improved collections and higher net earnings, partially offset by the timing of accounts payable and accrued liabilities and the payment of integration costs.

The timing of our working capital inflows and outflows will always have an impact on the cash flow from operations.


© 2023 CGI Inc.		Page 28

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

4.1.2. Cash Used in Investing Activities

For the year ended September 30, 2023, $561.9 million was used in investing activities, while $911.9 million was used over last year.

The following table provides a summary of the use of cash from investing activities:

For the years ended September 30,

2023

2022

Change

In thousands of CAD

Business acquisitions (considering bank overdraft assumed and cash acquired)

(13,039)

(571,911)

558,872

Loan receivable

(15,846)

—

(15,846)

Purchase of property, plant and equipment

(159,769)

(156,136)

(3,633)

Proceeds from sale of property, plant and equipment

—

3,790

(3,790)

Additions to contract costs

(102,082)

(84,283)

(17,799)

Additions to intangible assets

(147,200)

(137,621)

(9,579)

Net change in short-term investments and purchase of long-term investments

(123,922)

34,214

(158,136)

Cash used in investing activities

(561,858)

(911,947)

350,089

The decrease of $350.1 million in cash used in investing activities during the year ended September 30, 2023 was mainly due to the cash used in the prior year for the business acquisitions. This was partially offset by the purchase of investments for the funds held for clients.

4.1.3. Cash Used in Financing Activities

For the year ended September 30, 2023, $1,192.4 million was used in financing activities while $1,591.1 million was used over last year.

The following table provides a summary of the use of cash from financing activities:

For the years ended September 30,

2023

2022

Change

In thousands of CAD

Increase of long-term debt

948

—

948

Repayment of long-term debt

(79,150)

(401,654)

322,504

Payment of lease liabilities

(161,211)

(153,996)

(7,215)

Repayment of debt assumed from business acquisitions

(56,994)

(113,036)

56,042

Settlement of derivative financial instruments

2,921

6,258

(3,337)

Withholding taxes remitted on the net settlement of performance share units

(13,879)

—

(13,879)

Purchase of Class A subordinate voting shares held in trusts

(74,455)

(70,303)

(4,152)

Purchase and cancellation of Class A subordinate voting shares

(788,020)

(913,388)

125,368

Issuance of Class A subordinate voting shares

88,316

41,691

46,625

Net change in clients’ funds obligations

(110,852)

13,330

(124,182)

Cash used in financing activities

(1,192,376)

(1,591,098)

398,722

The decrease of $398.7 million was mainly driven by the scheduled repayment of senior unsecured notes in Q1 2022, the purchase for cancellation of 6,234,096 Class A Shares compared to 8,809,839 Class A Shares over last year and repayment of debt assumed from business acquisitions in the prior year. This was partially offset by the net change in clients’ funds obligations.


© 2023 CGI Inc.		Page 29

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

4.1.4. Effect of Foreign Exchange Rate Changes on Cash, Cash Equivalents and Cash Included in Funds Held for Clients

For the year ended September 30, 2023, the effect of foreign exchange rate changes on cash, cash equivalents and cash included in funds held for clients had a favourable impact of $8.9 million. This amount had no effect on net earnings as it was recorded in other comprehensive income.

4.2. CAPITAL RESOURCES



As at September 30, 2023	Available

In thousands of CAD

Cash and cash equivalents		1,568,291

Short-term investments		7,332

Long-term investments		17,113

Unsecured committed revolving credit facility¹		1,495,858

Total²		3,088,594

¹	As at September 30, 2023, letters of credit in the amount of $4.1 million were outstanding against the $1.5 billion unsecured committed revolving credit facility.

²	Excludes cash, term deposit and long-term bonds included in funds held for clients for $269.8 million, $80.0 million and $138.9 million, respectively.

As at September 30, 2023, cash and cash equivalents and investments represented $1,592.7 million.

Cash equivalents include term deposits, all with maturities of 90 days or less. Short-term and long-term investments include corporate bonds with maturities ranging from 91 days to five years, with a credit rating of A- or higher.

As at September 30, 2023, the aggregate amount of the capital resources available to the Company was $3,088.6 million. Certain long-term debt agreements contain covenants, which require us to maintain certain financial ratios. As at September 30, 2023, CGI was in compliance with these covenants.

As at September 30, 2023, CGI was showing a positive working capital (total current assets minus total current liabilities) of $287.9 million. The Company also had $1,495.9 million available under its unsecured committed revolving credit facility and is generating a significant level of cash, which CGI’s management currently considers will allow the Company to fund its operations while maintaining adequate levels of liquidity.

The tax implications and impact related to the repatriation of cash will not materially affect the Company’s liquidity.


© 2023 CGI Inc.		Page 30

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

4.3. CONTRACTUAL OBLIGATIONS

We are committed under the terms of contractual obligations which have various expiration dates, primarily related to long-term debt and the rental of premises, computer equipment used in outsourcing contracts and long-term service agreements.



Commitment type	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years

In thousands of CAD

Long-term debt		3,114,763		1,158,868		813,608		600,449		541,838

Estimated interest on long-term debt		227,600		66,459		73,666		50,110		37,365

Lease liabilities		641,963		198,857		206,898		123,022		113,186

Estimated interest on lease liabilities		80,321		23,020		31,111		16,253		9,937

Long-term service agreements		323,957		151,720		141,768		30,469		—

Total¹		4,388,604		1,598,924		1,267,051		820,303		702,326

¹	Excludes clients’ funds obligations for an amount of $493.6 million payable in less than 1 year.

4.4. FINANCIAL INSTRUMENTS AND HEDGING TRANSACTIONS

We use various financial instruments to help us manage our exposure to fluctuations of foreign currency exchange rates and interest rates. Please refer to note 32 of our audited consolidated financial statements for additional information on our financial instruments and hedging transactions.


© 2023 CGI Inc.		Page 31

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

4.5. SELECTED MEASURES OF CAPITAL RESOURCES AND LIQUIDITY



As at September 30,	2023		2022
In thousands of CAD except for percentages

Reconciliation between net debt and long-term debt and lease liabilities¹:

Net debt		2,134,644		2,946,908

Add back:

Cash and cash equivalents		1,568,291		966,458

Short-term investments		7,332		6,184

Long-term investments		17,113		16,826

Fair value of foreign currency derivative financial instruments related to debt		14,904		39,859

Long-term debt and lease liabilities¹		3,742,284		3,976,235

Net debt to capitalization ratio		20.4%		28.8%

Return on invested capital		16.0%		15.7%

Days sales outstanding		44		49

¹	As at September 30, 2023, long-term debt and lease liabilities were $3,100.3 million ($3,267.0 million as at September 30, 2022) and $642.0 million ($709.2 million as at September 30, 2022), respectively, including their current portions.

During the year ended September 30, 2023, as a result of the interbank offered rates (IBORs) reform and the related expiry of the USD London Interbank Offered Rate (Libor) rate effective June 30, 2023, the Company renegotiated the unsecured committed term loan credit facility and the related cross-currency interest rate swaps (the hedging instruments) both expiring in December 2023 to transition to the one month Secured Overnight Financing Rate (SOFR) rate from the one month USD Libor rate. The change in rate resulted in no significant impact on the Company’s audited consolidated financial statements for the year ended September 30, 2023.

During the year ended September 30, 2023, we have reclassified the unsecured committed term loan credit facility due in December 2023 under the current portion of long-term debt, within current liabilities, for a total amount of $676.9 million.

On November 6, 2023, the unsecured committed revolving credit facility was extended by one year to November 2028 and can be further extended. There were no material changes in the terms and conditions including interest rates and banking covenants.

We use the net debt to capitalization ratio as an indication of our financial leverage in order to realize our Build and Buy strategy (please refer to section 1.2. of the present document for additional information on our Build and Buy strategy). The net debt to capitalization ratio decreased to 20.4% in Fiscal 2023 from 28.8% in Fiscal 2022 mostly due to our cash generation, partially offset by the repurchase of shares during the last four quarters.

ROIC is a measure of the Company’s efficiency in allocating the capital under our control to profitable investments. The return on invested capital ratio increased to 16.0% in Fiscal 2023 from 15.7% in Fiscal 2022. The increase in ROIC was mainly the result of higher net earnings excluding net finance costs after-tax over the last four quarters.

DSO decreased to 44 days at the end of Fiscal 2023 when compared to 49 days in Fiscal 2022. The decrease was mainly due to improved collections and foreign exchange fluctuations.


© 2023 CGI Inc.		Page 32

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

4.6. GUARANTEES

In the normal course of operations, we may enter into agreements to provide financial or performance assurances to third parties on the sale of assets, business divestitures and guarantees on government and commercial contracts.

In connection with sales of assets and business divestitures, the Company may be required to pay counterparties for costs and losses incurred as a result of breaches in our contractual obligations, including representations and warranties, intellectual property right infringement claims and litigation against counterparties, among others.

While some of the agreements specify a maximum potential exposure, others do not specify a maximum amount or a maturity date or survival period. It is not possible to reasonably estimate the maximum amount that may have to be paid under such guarantees. The amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time. No amount has been accrued in the consolidated balance sheets relating to this type of guarantee or indemnification as at September 30, 2023. The Company does not expect to incur any potential payment in connection with these guarantees that could have a material adverse effect on its audited consolidated financial statements.

In the normal course of business, we may provide certain clients, principally governmental entities, with bid and performance bonds. In general, we would only be liable for the amount of the bid bonds if we refuse to perform the project once we are awarded the bid. We would also be liable for the performance bonds in the event of a default in the performance of our obligations. As at September 30, 2023, we had committed a total of $34.3 million for these bonds. To the best of our knowledge, we complied with our performance obligations under all service contracts for which there was a bid or performance bond, and the ultimate liability, if any, incurred in connection with these guarantees would not have a material adverse effect on our consolidated results of operations or financial condition.

4.7. CAPABILITY TO DELIVER RESULTS

CGI’s management believes that the Company has sufficient capital resources to support ongoing business operations and execute our Build and Buy growth strategy. Our principal and most accretive uses of cash are: to invest in our business (procuring new large managed IT and business process services contracts and developing business and IP solutions); to pursue accretive acquisitions; to purchase for cancellation Class A Shares and pay down debt. In terms of financing, we are well positioned to continue executing our four-pillar growth strategy in Fiscal 2024.

To successfully implement the Company’s strategy, CGI relies on a strong leadership team, supported by highly knowledgeable consultants and professionals with relevant relationships and significant experience in both IT and our targeted industries. CGI fosters leadership development through the CGI Leadership Institute ensuring continuity and knowledge transfer across the organization. For key positions, a detailed succession plan is established and revised frequently.

As a Company built on human capital, the knowledge of our consultants and professionals are critical to delivering quality service to our clients. Our human resources program allows us to attract and retain the best talent as it provides competitive compensation and benefits, a favourable working environment, training programs and career development opportunities. Employee satisfaction is monitored annually through a Company-wide survey. In addition, a majority of our professionals are owners of CGI through our Share Purchase Plan, which, along with our Profit Participation Plan, allows them to share in the Company’s success, further aligning stakeholder interests.

In addition to capital resources and talent, CGI has established the Management Foundation, which encompasses governance policies, organizational models and sophisticated management frameworks for our business units and corporate processes. This robust governance model provides a common business language for managing all operations consistently across the globe, driving a focus on continuous improvement. CGI’s operations maintain appropriate certifications in accordance with service requirements such as ISO and CMMI certification programs.


© 2023 CGI Inc.		Page 33

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

5.	Fourth Quarter Results

5.1. BOOKINGS AND BOOK-TO-BILL RATIO

Bookings for the quarter ended September 30, 2023 were $4.0 billion representing a book-to-bill ratio of 113.9%. The breakdown of the new bookings signed during the quarter is as follows:

LOGO

The following table provides a summary of the bookings and book-to-bill ratio by segment:

In thousands of CAD except for percentages

Bookings for the three

months ended

September 30, 2023

Bookings for the year

ended September 30,

2023

Book-to-bill ratio for

the year ended

September 30, 2023

Total CGI

3,996,180

16,259,144

113.7%

U.S. Federal

925,791

2,878,094

148.1%

U.S. Commercial and State Government

739,145

2,734,687

110.9%

Canada

668,465

2,518,745

112.7%

Western and Southern Europe

607,132

2,829,306

110.3%

Scandinavia and Central Europe

377,113

1,831,999

105.3%

U.K. and Australia

306,800

1,763,767

105.2%

Northwest and Central-East Europe

215,284

819,224

102.4%

Finland, Poland and Baltics

156,450

883,321

101.7%


© 2023 CGI Inc.		Page 34

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

5.2. FOREIGN EXCHANGE

Closing foreign exchange rates

As at September 30,

2023

2022

Change

U.S. dollar

1.3538

1.3756

(1.6%)

Euro

1.4327

1.3454

6.5%

Indian rupee

0.0162

0.0169

(4.1%)

British pound

1.6530

1.5310

8.0%

Swedish krona

0.1243

0.1236

0.6%

Average foreign exchange rates

For the three months ended September 30,

2023

2022

Change

U.S. dollar

1.3412

1.3061

2.7%

Euro

1.4593

1.3147

11.0%

Indian rupee

0.0162

0.0164

(1.2%)

British pound

1.6979

1.5360

10.5%

Swedish krona

0.1241

0.1238

0.2%


© 2023 CGI Inc.		Page 35

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

5.3. REVENUE DISTRIBUTION

The following charts provide additional information regarding our revenue mix for the quarter ended September 30, 2023:

LOGO

5.3.1. Client Concentration

IFRS guidance on segment disclosures defines a single customer as a group of entities that are known to the reporting entity to be under common control. As a consequence, our work for the U.S. federal government including its various agencies represented 14.0% of our revenue for Q4 2023 as compared to 14.1% for Q4 2022.


© 2023 CGI Inc.		Page 36

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

5.4. REVENUE BY SEGMENT

Our segments are reported based on where the client’s work is delivered from within our geographic delivery model.

The following table provides a summary of the year-over-year changes in our revenue, in total and by segment, separately showing the impacts of foreign currency exchange rate variations between the Q4 2023 and Q4 2022 periods. The Q4 2022 revenue by segment was recorded reflecting the actual average foreign exchange rates for that period. The foreign exchange impact is the difference between the current period’s actual results and the current period’s results converted with the prior year’s average foreign exchange rates.

For the three months ended September 30,

Change

2023

2022

In thousands of CAD except for percentages

Total CGI revenue

3,507,336

3,247,221

260,115

8.0%

Constant currency revenue growth

2.2%

Foreign currency impact

5.8%

Variation over previous period

8.0%

Western and Southern Europe

Revenue prior to foreign currency impact

546,647

547,516

(869)

(0.2%)

Foreign currency impact

59,881

Western and Southern Europe revenue

606,528

547,516

59,012

10.8%

U.S. Commercial and State Government

Revenue prior to foreign currency impact

551,592

557,161

(5,569)

(1.0%)

Foreign currency impact

15,675

U.S. Commercial and State Government revenue

567,267

557,161

10,106

1.8%

Canada

Revenue prior to foreign currency impact

508,644

496,049

12,595

2.5%

Foreign currency impact

707

Canada revenue

509,351

496,049

13,302

2.7%

U.S. Federal

Revenue prior to foreign currency impact

476,183

463,094

13,089

2.8%

Foreign currency impact

13,630

U.S. Federal revenue

489,813

463,094

26,719

5.8%

Scandinavia and Central Europe

Revenue prior to foreign currency impact

369,023

365,403

3,620

1.0%

Foreign currency impact

22,583

Scandinavia and Central Europe revenue

391,606

365,403

26,203

7.2%

U.K. and Australia

Revenue prior to foreign currency impact

340,934

331,443

9,491

2.9%

Foreign currency impact

34,806

U.K. and Australia revenue

375,740

331,443

44,297

13.4%

Finland, Poland and Baltics

Revenue prior to foreign currency impact

174,026

164,476

9,550

5.8%

Foreign currency impact

19,776

Finland, Poland and Baltics revenue

193,802

164,476

29,326

17.8%


© 2023 CGI Inc.		Page 37

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

For the three months ended September 30,

Change

2023

2022

In thousands of CAD except for percentages

Northwest and Central-East Europe

Revenue prior to foreign currency impact

168,007

155,754

12,253

7.9%

Foreign currency impact

19,094

Northwest and Central-East Europe revenue

187,101

155,754

31,347

20.1%

Asia Pacific

Revenue prior to foreign currency impact

235,764

214,313

21,451

10.0%

Foreign currency impact

(629

)

Asia Pacific revenue

235,135

214,313

20,822

9.7%

Eliminations

(49,007

)

(47,988

)

(1,019)

2.1%

We ended the fourth quarter of Fiscal 2023 with revenue of $3,507.3 million, an increase of $260.1 million, or 8.0% when compared to the same period of Fiscal 2022. On a constant currency basis, revenue increased by $70.6 million or 2.2%. The increase was mainly due to organic growth across most vertical markets, including an increase in IP-based revenues. This was partially offset by the calendar impact of one less available day to bill.

5.4.1. Western and Southern Europe

Revenue in the Western and Southern Europe segment was $606.5 million in Q4 2023, an increase of $59.0 million or 10.8% over the same period last year. On a constant currency basis, revenue decreased by $0.9 million or 0.2%. The change was mainly due to the calendar impact of one less available day to bill. This was partially offset by organic growth across most vertical markets.

On a client geographic basis, the top two Western and Southern Europe vertical markets were MRD and financial services, generating combined revenues of approximately $373 million for the three months ended September 30, 2023.

5.4.2. U.S. Commercial and State Government

Revenue from the U.S. Commercial and State Government segment was $567.3 million in Q4 2023, an increase of $10.1 million or 1.8% over the same period last year. On a constant currency basis, revenue decreased by $5.6 million or 1.0%. The change was mainly due to the calendar impact of one less available day to bill and increased use of our Asia Pacific offshore delivery centers for client work. This was partially offset by the organic growth within the financial services and health vertical markets.

On a client geographic basis, the top two U.S. Commercial and State Government vertical markets were financial services and government, generating combined revenues of approximately $374 million for the three months ended September 30, 2023.

5.4.3. Canada

Revenue in the Canada segment was $509.4 million in Q4 2023, an increase of $13.3 million or 2.7% over the same period last year. On a constant currency basis, revenue increased by $12.6 million or 2.5%. The increase was mainly due to organic growth across most vertical markets, including an increase in IP-based revenues within the financial services vertical market.

On a client geographic basis, the top two Canada vertical markets were financial services and communications and utilities, generating combined revenues of approximately $346 million for the three months ended September 30, 2023.

5.4.4. U.S. Federal

Revenue in the U.S. Federal segment was $489.8 million in Q4 2023, an increase of $26.7 million or 5.8% over the same period last year. On a constant currency basis, revenue increased by $13.1 million or 2.8%. The increase in revenue was mainly due to organic growth in managed services engagements, as well as an adjustment due to a reevaluation of cost to complete on a project in the prior year. This was partially offset by the successful completion of projects.

For the three months ended September 30, 2023, 90% of revenues within the U.S. Federal segment were federal civilian based.


© 2023 CGI Inc.		Page 38

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

5.4.5. Scandinavia and Central Europe

Revenue in the Scandinavia and Central Europe segment was $391.6 million in Q4 2023, an increase of $26.2 million or 7.2% over the same period last year. On a constant currency basis, revenue increased by $3.6 million or 1.0%. The increase was mainly driven by organic growth primarily within the government vertical market. This was partially offset by adjustments of cost to complete on certain projects and the calendar impact of one less available day to bill.

On a client geographic basis, the top two Scandinavia and Central Europe vertical markets were MRD and government, generating combined revenues of approximately $290 million for the three months ended September 30, 2023.

5.4.6. U.K. and Australia

Revenue in the U.K. and Australia segment was $375.7 million in Q4 2023, an increase of $44.3 million or 13.4% over the same period last year. On a constant currency basis, revenue increased by $9.5 million or 2.9%. The increase was mainly due to organic growth within the government vertical market, partially offset by successful completion of projects. This was partially offset by the increased use of our Asia Pacific offshore delivery centers for client work.

On a client geographic basis, the top two U.K. and Australia vertical markets were government and communications and utilities, generating combined revenues of approximately $319 million for the three months ended September 30, 2023.

5.4.7. Finland, Poland and Baltics

Revenue in the Finland, Poland and Baltics segment was $193.8 million in Q4 2023, an increase of $29.3 million or 17.8% over the same period last year. On a constant currency basis, revenue increased by $9.5 million or 5.8%. The increase was mainly due to organic growth across most vertical markets, predominantly in financial services. This was partially offset by the successful completion of IP projects within the government vertical market and the calendar impact of one less available day to bill.

On a client geographic basis, the top two Finland, Poland and Baltics vertical markets were financial services and government, generating combined revenues of approximately $121 million for the three months ended September 30, 2023.

5.4.8. Northwest and Central-East Europe

Revenue in the Northwest and Central-East Europe segment was $187.1 million in Q4 2023, an increase of $31.3 million or 20.1% over the same period last year. On a constant currency basis, revenue increased by $12.3 million or 7.9%. The increase in revenue was primarily due to organic growth within most vertical markets. This was partly offset by the calendar impact of one less available day to bill.

On a client geographic basis, the top two Northwest and Central-East Europe vertical markets were MRD and government, generating combined revenues of approximately $122 million for the three months ended September 30, 2023.

5.4.9. Asia Pacific

Revenue in the Asia Pacific segment was $235.1 million in Q4 2023, an increase of $20.8 million or 9.7% over the same period last year. On a constant currency basis, revenue increased by $21.5 million or 10.0%. The increase was mainly driven by the continued demand for our offshore delivery centers across all commercial vertical markets, partially offset by the calendar impact of one less available day to bill.


© 2023 CGI Inc.		Page 39

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

5.5. ADJUSTED EBIT BY SEGMENT

Change

For the three months ended September 30,

2023

2022

In thousands of CAD except for percentages

Western and Southern Europe

78,068

55,913

22,155

39.6%

As a percentage of segment revenue

12.9%

10.2%

U.S. Commercial and State Government

94,628

85,376

9,252

10.8%

As a percentage of segment revenue

16.7%

15.3%

Canada

127,385

122,088

5,297

4.3%

As a percentage of segment revenue

25.0%

24.6%

U.S. Federal

74,227

67,999

6,228

9.2%

As a percentage of segment revenue

15.2%

14.7%

Scandinavia and Central Europe

20,686

30,729

(10,043)

(32.7%)

As a percentage of segment revenue

5.3%

8.4%

U.K. and Australia

60,638

53,163

7,475

14.1%

As a percentage of segment revenue

16.1%

16.0%

Finland, Poland and Baltics

27,383

26,136

1,247

4.8%

As a percentage of segment revenue

14.1%

15.9%

Northwest and Central-East Europe

26,471

19,095

7,376

38.6%

As a percentage of segment revenue

14.1%

12.3%

Asia Pacific

63,553

61,197

2,356

3.8%

As a percentage of segment revenue

27.0%

28.6%

Adjusted EBIT

573,039

521,696

51,343

9.8%

Adjusted EBIT margin

16.3%

16.1%

Adjusted EBIT for the quarter was $573.0 million, an increase of $51.3 million from Q4 2022. The adjusted EBIT margin increased to 16.3% from 16.1% over the same period last year. The increase was mainly due to the profitable organic growth in most vertical markets. This was partly offset by the calendar impact of one less available day to bill, reevaluation of cost to complete on certain projects, the increase in business development efforts and the expected increase in travel.

5.5.1. Western and Southern Europe

Adjusted EBIT in the Western and Southern Europe segment was $78.1 million in Q4 2023, an increase of $22.2 million when compared to Q4 2022. Adjusted EBIT margin increased to 12.9% from 10.2% in Q4 2022. The increase in adjusted EBIT margin is mainly due to profitable organic growth across most vertical markets, lower performance based compensation accrual and higher employee related government incentives. This was partially offset by the calendar impact of one less available day to bill.

5.5.2. U.S. Commercial and State Government

Adjusted EBIT in the U.S. Commercial and State Government segment was $94.6 million in Q4 2023, an increase of $9.3 million when compared to Q4 2022. Adjusted EBIT margin increased to 16.7% from 15.3% in Q4 2022. The increase in adjusted EBIT margin was mainly due to profitable organic growth within the financial services vertical market. This was partially offset by lower proportion of IP revenue from license sales as our clients increasingly shift to a subscription fee-based model with a software-as-a-service delivery.


© 2023 CGI Inc.		Page 40

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

5.5.3. Canada

Adjusted EBIT in the Canada segment was $127.4 million in Q4 2023, an increase of $5.3 million when compared to Q4 2022. Adjusted EBIT margin increased to 25.0% from 24.6% in Q4 2022. The increase in adjusted EBIT margin was mainly due to profitable organic growth across most vertical markets.

5.5.4. U.S. Federal

Adjusted EBIT in the U.S. Federal segment was $74.2 million in Q4 2023, an increase of $6.2 million when compared to Q4 2022. Adjusted EBIT margin increased to 15.2% from 14.7% in Q4 2022. The increase in adjusted EBIT margin was mainly due to reevaluation of cost to complete on a project in the prior year and lower performance based compensation accruals. This was partially offset by an increase in business development efforts, including the expected increase in travel, as well as the successful completion of projects.

5.5.5. Scandinavia and Central Europe

Adjusted EBIT in the Scandinavia and Central Europe segment was $20.7 million in Q4 2023, a decrease of $10.0 million when compared to Q4 2022. Adjusted EBIT margin decreased to 5.3% from 8.4% in Q4 2022. The change in adjusted EBIT margin was mainly due to adjustments of cost to complete on certain projects and the calendar impact of one less available day to bill. This was partially offset by profitable organic growth primarily within the government vertical market.

5.5.6. U.K. and Australia

Adjusted EBIT in the U.K. and Australia segment was $60.6 million in Q4 2023, an increase of $7.5 million when compared to Q4 2022. Adjusted EBIT margin increased to 16.1% from 16.0% in Q4 2022. The increase in adjusted EBIT margin was mainly due to profitable organic growth within the government and communications and utilities vertical markets, partially offset by higher performance based compensation accruals and the expected increase in travel to support growing our business.

5.5.7. Finland, Poland and Baltics

Adjusted EBIT in the Finland, Poland and Baltics segment was $27.4 million in Q4 2023, an increase of $1.2 million when compared to Q4 2022. Adjusted EBIT margin decreased to 14.1% from 15.9% in Q4 2022 mainly due to successful completion of IP projects within the government vertical market, higher performance based compensation accruals, costs associated with the ramp up of managed IT services contracts within the government vertical market, as well as the calendar impact of one less available day to bill. This was partially offset by profitable organic growth across most vertical markets.

5.5.8. Northwest and Central-East Europe

Adjusted EBIT in the Northwest and Central-East Europe segment was $26.5 million in Q4 2023, an increase of $7.4 million when compared to Q4 2022. Adjusted EBIT margin increased to 14.1% from 12.3% in Q4 2022 mainly due to profitable organic growth within most vertical markets, partly offset by the calendar impact of one less available day to bill.

5.5.9. Asia Pacific

Adjusted EBIT in the Asia Pacific segment was $63.6 million in Q4 2023, an increase of $2.4 million when compared to Q4 2022. Adjusted EBIT margin decreased to 27.0% from 28.6% in Q4 2022. The change in adjusted EBIT margin was mainly driven by the calendar impact of one less available day to bill.


© 2023 CGI Inc.		Page 41

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

5.6. NET EARNINGS AND EARNINGS PER SHARE

The following table sets out the information supporting the earnings per share calculations:

Change

For the three months ended September 30,

2023

2022

In thousands of CAD except for percentage and shares data

Adjusted EBIT

573,039

521,696

51,343

9.8%

Minus the following items:

Acquisition-related and integration costs

—

14,775

(14,775)

(100.0%)

Cost optimization program

8,964

—

8,964

—%

Net finance costs

6,148

21,019

(14,871)

(70.8%)

Earnings before income taxes

557,927

485,902

72,025

14.8%

Income tax expense

143,451

123,540

19,911

16.1%

Effective tax rate

25.7%

25.4%

Net earnings

414,476

362,362

52,114

14.4%

Net earnings margin

11.8%

11.2%

Weighted average number of shares outstanding

Class A subordinate voting shares and Class B multiple voting shares (basic)

231,931,083

236,360,510

(1.9%)

Class A subordinate voting shares and Class B multiple voting shares (diluted)

235,703,369

239,891,696

(1.7%)

Earnings per share (in dollars)

Basic

1.79

1.53

0.26

17.0%

Diluted

1.76

1.51

0.25

16.6%

For the three months ended September 30, 2023, the income tax expense was $143.5 million compared to $123.5 million over the same period last year, while our effective tax rate increased to 25.7% from 25.4%. The increase in the income tax rate was mainly explained by the increase in the UK statutory tax rate, partly offset by the decrease in the France statutory tax rate and a change in profitability mix in certain geographies.

For Q4 2023, CGI’s basic and diluted weighted average number of shares outstanding decreased compared to Q4 2022 due to the impact of the purchase for cancellation of Class A Shares during the year. This was partly offset by the exercise of stock options during the year.


© 2023 CGI Inc.		Page 42

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

5.6.1. Net Earnings and Earnings per Share Excluding Specific Items

Below is a table showing the year-over-year comparison excluding specific items, namely cost optimization program and acquisition-related and integration costs:

Change

For the three months ended September 30,

2023

2022

In thousands of CAD except for percentage and shares data

Earnings before income taxes

557,927

485,902

72,025

14.8%

Add back:

Acquisition-related and integration costs

—

14,775

(14,775)

(100.0%)

Cost optimization program

8,964

—

8,964

—%

Earnings before income taxes excluding specific items

566,891

500,677

66,214

13.2%

Income tax expense

143,451

123,540

19,911

16.1%

Effective tax rate

25.7%

25.4%

Add back:

Tax deduction on acquisition-related and integration costs

—

4,082

(4,082)

(100.0%)

Impact on effective tax rate

—%

0.1%

Tax deduction on cost optimization program

2,240

—

2,240

—%

Impact on effective tax rate

—%

Income tax expense excluding specific items

145,691

127,622

18,069

14.2%

Effective tax rate excluding specific items

25.7%

25.5%

Net earnings excluding specific items

421,200

373,055

48,145

12.9%

Net earnings margin excluding specific items

12.0%

11.5%

Weighted average number of shares outstanding

Class A subordinate voting shares and Class B multiple voting shares (basic)

231,931,083

236,360,510

(1.9%)

Class A subordinate voting shares and Class B multiple voting shares (diluted)

235,703,369

239,891,696

(1.7%)

Earnings per share excluding specific items (in dollars)

Basic

1.82

1.58

0.24

15.2%

Diluted

1.79

1.56

0.23

14.7%


© 2023 CGI Inc.		Page 43

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

5.7. CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended September 30,

2023

2022

Change

In thousands of CAD

Cash provided by operating activities

628,734

488,861

139,873

Cash used in investing activities

(93,002)

(87,111)

(5,891)

Cash used in financing activities

(603,611)

(314,995)

(288,616)

Effect of foreign exchange rate changes on cash, cash equivalents and cash included in funds held for clients

111

29,151

(29,040)

Net increase (decrease) in cash, cash equivalents and cash included in funds held for clients

(67,768)

115,906

(183,674)

5.7.1. Cash Provided by Operating Activities

For Q4 2023, cash provided by operating activities was $628.7 million or 17.9% of revenue compared to $488.9 million or 15.1% of revenue for the same period last year.

The following table provides a summary of the generation and use of cash from operating activities:

For the three months ended September 30,

2023

2022

Change

In thousands of CAD

Net earnings

414,476

362,362

52,114

Amortization, depreciation and impairment

138,097

121,020

17,077

Other adjustments ¹

(4,742)

12,472

(17,214)

Cash flow from operating activities before net change in non-cash working capital items and others

547,831

495,854

51,977

Net change in non-cash working capital items and others:

Accounts receivable, work in progress and deferred revenue

138,603

24,699

113,904

Accounts payable and accrued liabilities, accrued compensation and employee-related liabilities, provisions and long-term liabilities

(1,956)

(12,985)

11,029

Others ²

(55,744)

(18,707)

(37,037)

Net change in non-cash working capital items and others

80,903

(6,993)

87,896

Cash provided by operating activities

628,734

488,861

139,873

¹	Comprised of deferred income tax recovery, foreign exchange gain, share-based payment costs and gain on lease terminations.

²	Comprised of prepaid expenses and other assets, long-term financial assets (excluding long-term receivables), income taxes, derivative financial instruments and retirement benefits obligations.

For the three months ended September 30, 2023, the increase of $139.9 million from our cash provided by operating activities was mostly due to improved collections and higher net earnings.

The timing of our working capital inflows and outflows will always have an impact on the cash flow from operations.


© 2023 CGI Inc.		Page 44

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

5.7.2. Cash Used in Investing Activities

For Q4 2023, $93.0 million was used in investing activities while $87.1 million was used in the prior year.

The following table provides a summary of the generation and use of cash from investing activities:

For the three months ended September 30,

2023

2022

Change

In thousands of CAD

Business acquisitions (considering bank overdraft assumed and cash acquired)

—

496

(496)

Loan receivable

1,754

—

1,754

Purchase of property, plant and equipment

(34,455)

(38,243)

3,788

Additions to contract costs

(24,585)

(23,990)

(595)

Additions to intangible assets

(47,965)

(40,750)

(7,215)

Net change in short-term investments and purchase of long-term investments

12,249

15,376

(3,127)

Cash used in investing activities

(93,002)

(87,111)

(5,891)

The increase of $5.9 million in cash used in investing activities during the three months ended September 30, 2023 was mainly due to higher investment in our business solutions and the purchase of investments for the funds held for clients. This was partially offset by a decrease of investments in computer equipment.

5.7.3. Cash Used in Financing Activities

For Q4 2023, $603.6 million was used in financing activities while $315.0 million was used in the prior year.

The following table provides a summary of the generation and use of cash from financing activities:

For the three months ended September 30,

2023

2022

Change

In thousands of CAD

Repayment of long-term debt

(70,320)

(67,467)

(2,853)

Payment of lease liabilities

(43,713)

(41,074)

(2,639)

Repayment of debt assumed in a business acquisition

—

(4,120)

4,120

Settlement of derivative financial instruments

2,921

6,258

(3,337)

Withholding taxes remitted on the net settlement of performance share units

(29)

—

(29)

Purchase and cancellation of Class A subordinate voting shares

(324,667)

(132,923)

(191,744)

Issuance of Class A subordinate voting shares

12,527

11,775

752

Net change in clients’ funds obligations

(180,330)

(87,444)

(92,886)

Cash used in financing activities

(603,611)

(314,995)

(288,616)

The increase of $288.6 million was mainly driven by the purchase for cancellation of 2,398,900 Class A Shares compared to 1,260,114 Class A Shares over the same period last year and by the net change in clients’ funds obligations.


© 2023 CGI Inc.		Page 45

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

6.	Eight Quarter Summary


As at and for the three months ended	Sep. 30, 2023		Jun. 30, 2023		Mar. 31, 2023		Dec. 31, 2022		Sep. 30, 2022		Jun. 30, 2022		Mar. 31, 2022		Dec. 31, 2021

In millions of CAD unless otherwise noted

Growth

Revenue		3,507.3		3,623.4		3,715.3		3,450.3		3,247.2		3,258.6		3,268.9		3,092.4

Year-over-year revenue growth		8.0%		11.2%		13.7%		11.6%		8.0%		7.9%		6.2%		2.4%

Constant currency revenue growth		2.2%		6.3%		11.4%		12.3%		13.9%		11.5%		10.0%		6.8%

Backlog¹		26,059		25,633		25,241		25,011		24,055		23,238		23,144		23,577

Bookings		3,996		4,388		3,839		4,035		3,636		3,410		3,316		3,604

Book-to-bill ratio		113.9%		121.1%		103.3%		117.0%		112.0%		104.7%		101.4%		116.5%

Book-to-bill ratio trailing twelve months		113.7%		113.3%		109.1%		108.9%		108.5%		104.9%		108.7%		115.2%

Profitability

Earnings before income taxes		557.9		559.0		564.5		516.5		485.9		489.0		498.8		493.3

Earnings before income taxes margin		*15.9%*		15.4%		15.2%		15.0%		15.0%		15.0%		15.3%		16.0%

Adjusted EBIT²		573.0		584.8		600.8		554.1		521.7		519.9		523.6		521.5

Adjusted EBIT margin		*16.3%*		16.1%		16.2%		16.1%		16.1%		16.0%		16.0%		16.9%

Net earnings		414.5		415.0		419.4		382.4		362.4		364.3		372.0		367.4

Net earnings margin		*11.8%*		11.5%		11.3%		11.1%		11.2%		11.2%		11.4%		11.9%

Diluted EPS (in dollars)		1.76		1.75		1.76		1.60		1.51		1.51		1.53		1.49

Net earnings excluding specific items²		421.2		425.7		435.0		398.2		373.1		371.2		374.1		369.4

Net earnings margin excluding specific items		*12.0%*		11.7%		11.7%		11.5%		11.5%		11.4%		11.4%		11.9%

Diluted EPS excluding specific items (in dollars)²		1.79		1.80		1.82		1.66		1.56		1.54		1.53		1.50

Liquidity

Cash provided by operating activities		628.7		409.1		469.1		605.3		488.9		419.2		472.6		484.3

As a percentage of revenue		*17.9%*		11.3%		12.6%		17.5%		15.1%		12.9%		14.5%		15.7%

Days sales outstanding		44		44		41		44		49		48		42		45

Capital structure

Long-term debt and lease liabilities³		3,742.3		3,765.9		3,852.7		3,876.4		3,976.2		3,840.1		3,733.5		3,823.1

Net debt²		2,134.6		2,279.6		2,529.0		2,503.8		2,946.9		3,073.0		2,729.7		2,687.9

Net debt to capitalization ratio		20.4%		21.7%		24.0%		24.1%		28.8%		30.6%		28.7%		27.8%

Return on invested capital		16.0%		15.7%		15.6%		15.5%		15.7%		15.8%		15.7%		15.3%

Balance sheet

Cash and cash equivalents, and short-term investments		1,575.6		1,471.9		1,285.5		1,331.1		972.6		784.1		1,059.4		1,185.7

Total assets		15,799.5		16,080.1		16,101.7		15,915.9		15,175.4		14,916.4		14,475.7		14,704.9

Long-term financial liabilities⁴		2,386.2		2,885.2		2,946.1		2,971.6		3,731.3		3,581.8		3,523.5		3,608.2

¹	Approximately $10.0 billion of our backlog as at September 30, 2023 is expected to be converted into revenue within the next twelve months, $8.6 billion within one to three years, $3.1 billion within three to five years and $4.4 billion in more than five years.

²	Please refer to sections 3.7., 3.8.3. and 4.5 of each quarter’s respective MD&A for the reconciliation of non-GAAP financial measures for the quarterly periods of 2022 and 2023. For Fiscal 2022 year ending period, please refer to sections 5.6. and 5.6.1.

³	Long-term debt and lease liabilities include both the current and long-term portions of the long-term debt and lease liabilities.

⁴	Long-term financial liabilities include the long-term portion of the debt, long-term portion of lease liabilities and the long-term derivative financial instruments.

There are factors causing quarterly variances which may not be reflective of the Company’s future performance. There is seasonality in system integration and consulting work, and the quarterly performance of these operations is impacted by occurrences such as vacations, calendar days and the number of statutory holidays in any given quarter. Managed IT and business process services contracts are affected to a lesser extent by seasonality. Also, the workflow from some clients may fluctuate from quarter to quarter based on their business cycle and the seasonality of their own operations. Further, the savings that we generate for a client on a given managed IT and business process services contract may temporarily reduce


© 2023 CGI Inc.		Page 46

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

our revenue stream from this client, as these savings may not be immediately offset by additional work performed for this client.

Cash flow from operating activities could vary significantly from quarter to quarter depending on the timing of payments received from clients, cash requirements associated with large acquisitions, managed IT and business process services contracts and projects, the timing of the reimbursements for various tax credits, performance based compensation to employees as well as the timing of severance payments related to the integration of our acquisitions and our cost optimization program.

Foreign exchange fluctuations can also contribute to quarterly variances as our percentage of operations in foreign countries evolves. The effect from these variances is primarily on our revenue and to a much lesser extent, on our margin as we benefit, as much as possible, from natural hedges.


© 2023 CGI Inc.		Page 47

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

7.	Changes in Accounting Policies

The audited consolidated financial statements for the years ended September 30, 2023 and 2022 include all adjustments that CGI’s management considers necessary for the fair presentation of its financial position, results of operations, and cash flows.

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 audited consolidated financial statements.

The following standard amendments have been adopted by the Company on May 23, 2023:

International Tax Reform – Pillar Two Model Rules – Amendments to IAS 12

On May 23, 2023, the IASB issued standard amendments to IAS 12 Income Taxes, to address the Pillar Two model rules for domestic implementation of a 15% global minimum tax. The standard amendments introduce a temporary recognition exception in relation to accounting and disclosure for deferred taxes, which was immediately applied, arising from the implementation of the international tax reform. Remaining target disclosure requirements for affected entities such as current tax expense (income) related to Pillar Two income taxes, as well as, qualitative and quantitative information about an entity’s exposure to Pillar Two income taxes will only be effective as for the interim reporting period ending March 31, 2024.

At September 30, 2023, the application of the new standard amendments had no impact on the Company’s audited consolidated financial statements.

The following standard amendments have been early adopted and applied retrospectively by the Company for the year ended September 30, 2023:

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 policies rather than its significant accounting policies.

The implementation of these standard amendments resulted in no significant impact on the Company’s audited consolidated financial statements.

FUTURE ACCOUNTING STANDARD CHANGES

The following standard amendments are effective as of October 1, 2023:

Definition of Accounting Estimates – 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 implementation of these standard amendments will result in no impact on the Company’s audited consolidated financial statements.


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

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 audited consolidated financial statements.

Classification of Liabilities as Current or Non-current and Information about long-term debt with covenants – Amendments to IAS 1

In January 2020, the IASB amended IAS 1 Presentation of Financial Statements, clarifying that the classification of liabilities as current or non-current is based on existing rights at the end of the reporting period, independent of whether the Company will exercise its right to defer settlement of a liability. Subsequently, in October 2022, the IASB introduced additional amendments to IAS 1, emphasizing that covenants for long-term debt, regardless whether the covenants were compliant after the reporting date, should not affect debt classification; instead, companies are required to disclose information about these covenants in the notes accompanying their financial statements.

Supplier finance arrangements - Amendments to IAS 7 and IFRS 7

In May 2023, the IASB amended IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures to introduce new disclosure requirements to enhance the transparency on supplier finance arrangements and their impact on the Company’s liabilities, cash flows and liquidity exposure. The new disclosure requirements will include information such as terms and conditions, the carrying amount of liabilities, the range of payment due dates, non-cash changes and liquidity risk information around supplier finance arrangements.


© 2023 CGI Inc.		Page 49

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

8.	Critical Accounting Estimates

The Company’s significant accounting policies are described in note 3 of the audited consolidated financial statements for the years ended September 30, 2023 and 2022. Certain of these accounting policies, listed below, require management to make accounting estimates and judgements that affect the reported amounts of assets, liabilities and equity and the accompanying disclosures at the date of the audited consolidated financial statements as well as the reported amounts of revenue and expenses during the reporting period. These accounting estimates are considered critical because they require management to make subjective and/or complex judgements that are inherently uncertain and because they could have a material impact on the presentation of our financial condition, changes in financial condition or results of operations.

Areas impacted by estimates

Consolidated

balance

sheets

Consolidated statements of earnings

Revenue

Cost of

services,

selling and
administrative

Amortization
and
depreciation

Net finance
costs

Income

taxes

Revenue recognition¹

✓

Goodwill impairment

✓

Right-of-use assets and lease liabilities

✓

Business combinations

✓

Income taxes

✓

Litigation and claims

✓

¹	Affects the balance sheet through trade accounts receivable, work in progress, provision on revenue-generating contracts and deferred revenue.

Revenue recognition

Relative stand-alone selling price

If an arrangement involves the provision of multiple performance obligations, the total arrangement value is allocated to each performance obligation based on its relative stand-alone selling price. At least on a yearly basis, the Company reviews its best estimate of the stand-alone selling price which is established by using a reasonable range of prices for the various services and solutions offered by the Company based on local market information available. Information used in determining the range is mainly based on recent contracts signed and the economic environment. A change in the range could have a material impact on the allocation of total arrangement value, and therefore on the amount and timing of revenue recognition.

Business and strategic IT consulting and systems integration services under fixed fee arrangements

Revenue from business and strategic IT consulting and systems integration services under fixed-fee arrangements is recognized using the percentage-of-completion method over time, as the Company has no alternative use for the asset created and has an enforceable right to payment for performance completed to date. The Company primarily uses labour costs to measure the progress towards completion. Project managers monitor and re-evaluate project forecasts on a monthly basis. Forecasts are reviewed to consider factors such as: delays in reaching milestones and complexities in the project delivery. Forecasts can also be affected by market risks such as the availability and retention of qualified IT professionals and/or the ability of the subcontractors to perform their obligations within agreed budget and time frames. To the extent that actual labour costs could vary from estimates, adjustments to revenue following the review of the costs to complete on projects are reflected in the period in which the facts that give rise to the revision occur. Whenever the total costs are forecasted to be higher than the total revenue, a provision on revenue-generating contract is recorded.


© 2023 CGI Inc.		Page 50

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

Goodwill impairment

The carrying value of goodwill is tested for impairment annually or if events or changes in circumstances indicate that the carrying value may be impaired. In order to determine if a goodwill impairment test is required, management reviews different factors on a quarterly basis, such as changes in technological or market environment, changes in assumptions used to derive the weighted average cost of capital and actual financial performance compared to planned performance.

The recoverable amount of each operating segment has been determined based on its value in use calculation, which includes estimates about their future financial performance based on cash flows approved by management. However, factors such as our ability to continue developing and expanding services offered to address emerging business demands and technology trends, a lengthened sales cycle and our ability to hire and retain qualified IT professionals affect future cash flows, and actual results might differ from future cash flows used in the goodwill impairment test. Key assumptions used in goodwill impairment testing are presented in note 12 of the audited consolidated financial statements for the years ended September 30, 2023 and 2022. Historically, the Company has not recorded an impairment charge on goodwill.

Right-of-use assets

Estimates of the lease term

The Company estimates the lease term in order to calculate the value of the lease liability at the initial date of the lease. Management uses judgement to determine the appropriate lease term based on the conditions of each lease. The Company considers all facts that create incentive to exercise an extension option or not to take a termination option including leasehold improvements, significant modification of the underlying asset or a business decision. The extension or termination options are only included in the lease term if it is reasonably certain of being exercised.

Discount rate for leases

The discount rate is used to determine the initial carrying amount of the lease liabilities and the right-of-use assets. The Company estimates the incremental borrowing rate for each lease or portfolio of leased assets, as most of the implicit interest rates in the leases are not readily determinable. To calculate the incremental borrowing rate, the Company considers its credit worthiness, the term of the arrangement, any collateral received and the economic environment at the lease date. Lease liabilities are remeasured (along with the corresponding adjustment to the right-of-use asset), whenever the following situations occur:

–

a modification in the lease term or a change in the assessment of an option to purchase or terminate the lease, for which the lease liability is remeasured by discounting the revised lease payments using a revised discount rate; and

–

a modification in the residual guarantees or in future lease payments due to a change of an index or rate tied to the payments, for which the lease liability is remeasured by discounting the revised lease payments using the initial discount rate determined when setting up the liability.

In addition, upon partial or full termination of a lease, the difference between the carrying amounts of the lease liability and the right-of-use asset is recorded in the consolidated statements of earnings.

Business combinations

Management makes assumptions when determining the acquisition-date fair value of the identifiable tangible and intangible assets acquired and liabilities assumed which involve estimates, such as the forecasting of future cash flows, discount rates and the useful lives of the assets acquired.

Additionally, management’s judgement is required in determining whether an intangible asset is identifiable and should be recorded separately from goodwill.

Changes in the above assumptions, estimates and judgements could affect our acquisition-date fair values and therefore could have material impacts on our audited consolidated financial statements. These changes are recorded as part of the purchase price allocation and therefore result in corresponding goodwill adjustments if they occurred during the measurement period, which does not exceed one year. All other subsequent changes are recorded in our consolidated statement of earnings.


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

Income taxes

Deferred tax assets are recognized for unused tax losses and deductible temporary differences to the extent that it is probable that taxable profit will be available for their utilization. The Company considers the analysis of forecast and future tax planning strategies. Estimates of taxable profit are made based on the forecast by jurisdiction which are aligned with goodwill impairment testing assumptions, on an undiscounted basis. In addition, management considers factors such as substantively enacted tax rates, the history of the taxable profits and availability of tax strategies. Due to the uncertainty and the variability of the factors mentioned above, deferred tax assets are subject to change. Management reviews its assumptions on a quarterly basis and adjusts the deferred tax assets when appropriate.

The Company is subject to income tax laws in numerous jurisdictions. Judgement is required in determining the worldwide provision for income taxes as the determination of tax liabilities and assets involves uncertainties in the interpretation of complex tax regulations and requires estimates and assumptions considering the existing facts and circumstances. The Company provides for potential tax liabilities based on the most likely amount of the possible outcomes. Estimates are reviewed each reporting period and updated, based on new information available, and could result in changes to the income tax liabilities and deferred tax liabilities in the period in which such determinations are made.

Litigation and claims

Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The accrued litigation and legal claim provisions are based on historical experience, current trends and other assumptions that are believed to be reasonable under the circumstances. Estimates include the period in which the underlying cause of the claim occurred and the degree of probability of an unfavourable outcome. Management reviews assumptions and facts surrounding outstanding litigation and claims on a quarterly basis, involves external counsel when necessary and adjusts such provisions accordingly. The Company has to be compliant with applicable law in many jurisdictions which increases the complexity of determining the adequate provision following a litigation review. Since the outcome of such litigation and claims is not predictable with assurance, those provisions are subject to change. Adjustments to litigation and claims provisions are reflected in the period when the facts that give rise to an adjustment occur.


© 2023 CGI Inc.		Page 52

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

9.	Integrity of Disclosure

The Board of Directors has the responsibility under its charter and under the securities laws that govern CGI’s continuous disclosure obligations to oversee CGI’s compliance with its continuous and timely disclosure obligations, as well as the integrity of the Company’s internal controls and management information systems. The Board of Directors carries out this responsibility mainly through its Audit and Risk Management Committee.

CGI’s Audit and Risk Management Committee is composed entirely of independent directors who meet the independence and experience requirements of National Instrument 52-110 adopted by the Canadian Securities Administrators as well as those of the New York Stock Exchange (NYSE) and the U.S. Securities and Exchange Commission (SEC). The role and responsibilities of the Audit and Risk Management Committee include: (i) reviewing public disclosure documents containing financial information concerning CGI; (ii) identifying and examining material financial and operating risks to which the Company is exposed, reviewing the various policies and practices of the Company that are intended to manage those risks, and reporting on a regular basis to the Board of Directors concerning risk management; (iii) reviewing and assessing the effectiveness of CGI’s accounting policies and practices concerning financial reporting; (iv) reviewing and monitoring CGI’s internal control procedures, programs and policies and assessing their adequacy and effectiveness; (v) reviewing the adequacy of CGI’s internal audit resources including the mandate and objectives of the internal auditor; (vi) recommending to the Board of Directors the appointment of the external auditor, assessing the external auditor’s independence, reviewing the terms of their engagement, conducting an annual auditor’s performance assessment, and pursuing ongoing discussions with them; (vii) reviewing related party transactions in accordance with the rules of the NYSE and other applicable laws and regulations; (viii) reviewing the audit procedures including the proposed scope of the external auditor’s examinations; and (ix) performing such other functions as are usually attributed to audit committees or as directed by the Board of Directors. In making its recommendation to the Board of Directors in relation to the annual appointment of the external auditor, the Audit and Risk Management Committee conducts an annual assessment of the external auditor’s performance following the recommendations of the Chartered Professional Accountants of Canada. The formal assessment is concluded in advance of the Annual General Meeting of Shareholders and is conducted with the assistance of key CGI employees.

The Company has established and maintains disclosure controls and procedures designed to provide reasonable assurance that material information relating to the Company is made known to the Chief Executive Officer and the Chief Financial Officer by others, particularly during the period in which annual and interim filings are prepared, and that information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by the Company under Canadian and U.S. securities laws is recorded, processed, summarized and reported within the time periods specified under those laws and the related rules. As at September 30, 2023, management evaluated, under the supervision of and with the participation of the Chief Executive Officer and the Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures as defined under National Instrument 52-109 adopted by the Canadian Securities Administrators and in Rule 13(a)-15(e) under the U.S. Securities Exchange Act of 1934, as amended. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as at September 30, 2023.

The Company has also established and maintains internal control over financial reporting, as defined under National Instrument 52-109 and in Rule 13(a)-15(f) under the U.S. Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is a process designed under the supervision of the Chief Executive Officer and the Chief Financial Officer, and effected by management and other key CGI employees, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. However, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis. Management evaluated, under the supervision of and with the participation of the Chief Executive Officer and the Chief Financial Officer, the effectiveness of the Company’s internal controls over financial reporting as at September 30, 2023, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013). Based on that evaluation, management, under the supervision of and with the participation of the Chief Executive Officer as well as the Chief Financial Officer concluded that the Company’s internal controls over financial reporting was effective as at September 30, 2023.


© 2023 CGI Inc.		Page 53

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

10.

Risk Environment

10.1. RISKS AND UNCERTAINTIES

While we are confident about our long-term prospects, a number of risks and uncertainties could affect our ability to achieve our strategic vision and objectives for growth. The following risks and uncertainties should be considered when evaluating our potential as an investment.

10.1.1. External Risks

We may be adversely affected by volatile, negative or uncertain economic and political conditions and the effects of these conditions on our clients’ businesses and levels of activity.

Economic and political conditions in the markets in which we operate have a bearing upon the results of our operations, directly and through their effect on the level of business activity of our clients. We can neither predict the impact that current economic and political conditions will have on our future revenue, nor predict changes in economic conditions or future political uncertainty. The level of activity of our clients and potential clients may be affected by an economic downturn or political uncertainty. Clients may cancel, reduce or defer existing contracts and delay entering into new engagements and may decide to undertake fewer IT systems projects resulting in limited implementation of new technology and smaller engagements. Since there may be fewer engagements, competition may increase and pricing for services may decline as competitors may decrease rates to maintain or increase their market share in our industry and this may trigger pricing adjustments related to the benchmarking obligations within our contracts. Economic downturns and political uncertainty make it more difficult to meet business objectives and may divert management’s attention and time from operating and growing our business. Our business, results of operations and financial condition could be negatively affected as a result of these factors.

We may be adversely affected by additional external risks, such as terrorism, armed conflict, labour or social unrest, inflation, rising energy and commodity costs, recession, criminal activity, hostilities, disease, illness or health emergencies, natural disasters and climate change and the effects of these conditions on our clients, our business and on market volatility.

Additional external risks that could adversely impact the markets in which we operate, our industry and our business include terrorism, armed conflict (such as the current armed conflict in Ukraine), labour or social unrest, inflation, recession, criminal activity, regional and international hostilities and international responses to these hostilities, and disease, illness or health emergencies that affect local, national or international economies. Additionally, the potential impacts of climate change are unpredictable and natural disasters, sea-level rise, floods, droughts or other weather-related events present additional external risks, as they could disrupt our internal operations or the operations of our clients, impact our employee’s health and safety and increase insurance and other operating costs. Climate change risks can arise from physical risks (risks related to the physical effects of climate change), transition risks (risks related to regulatory, legal, technological and market changes from a transition to a low-carbon economy), as well as reputational risks related to our management of climate-related issues and our level of disclosure related to such matters (see Our inability to meet regulatory requirements and/or stakeholders expectations of disclosure, management and implementation of ESG initiatives and standards, could have a material adverse effect on our business). Climate change risk, and/or any of these additional external risks, may affect us or affect the financial viability of our clients leading to a reduction of demand and loss of business from such clients. Each of these risks could negatively impact our business, results of operation and financial condition.

As a result of external risks, such as the current armed conflict in Ukraine, inflation, and rising energy and commodity costs, global equity and capital markets may experience significant volatility and weakness. The duration and impact of these events are unknown at this time, nor is the impact on our operations and the market for our securities.

Prolonged periods of inflation could increase our costs and impact our profitability, which could have a material adverse effect on our business and financial condition.

High levels of inflation may subject us to significant cost pressures and lead to market volatility. As a result, governments may adopt initiatives to combat inflation (for example, raising benchmark interest rate), thus increasing our cost of borrowing and


© 2023 CGI Inc.		Page 54

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

decreasing the liquidity of capital markets. Our clients may have difficulty budgeting for external IT services or delay their payment for services provided. High inflation can lead to increased costs of labor and our employee compensation expenses. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases, and there is no assurance that our revenues will increase at the same rate to maintain the same level of profitability. Our inability or failure to do so could harm our business and financial condition.

Pandemics, including the COVID-19 pandemic, have caused, and may in the future cause disruptions in our operations and the operations of our clients (which may lead to increased risk and frequency of cybersecurity incidents), market volatility and economic disruption, which could adversely affect us.

A pandemic, including the COVID-19 pandemic, can create significant volatility and uncertainty and economic disruption and can pose the risk that our employees, clients, contractors and business partners may be prevented from, or restricted in, conducting business activities for an indefinite period, including due to the transmission of the disease or to emergency measures or restrictions that may be requested or mandated by governmental authorities. A pandemic may also result in governments worldwide enacting emergency preventive measures, such as the implementation of border closures, travel bans or restrictions, lock-downs, quarantine periods, vaccine mandates or passports, social distancing, testing requirements, stay-at-home and work-from-home policies and the temporary closure of non-essential businesses. These emergency measures and restrictions, and future measures and restrictions taken in response to a pandemic, including the COVID-19 pandemic, may cause material disruptions to businesses globally and have an adverse impact on global economic conditions and consumer confidence and spending, which could materially adversely affect our business.

Additionally, the onset of a pandemic may affect the financial viability of our clients, and could cause them to exit certain business lines, or change the terms on which they are willing to purchase services and solutions. Clients may also slow down decision-making, delay planned work, seek to terminate existing agreements, not renew existing agreements or be unable to pay us in accordance with the terms of existing agreements.

As a result of increased remote working arrangements due to a pandemic, the exposure to, and reliance on, networked systems and the internet can increase. This can lead to increased risk and frequency of cybersecurity incidents. Cybersecurity incidents can result from unintentional events or deliberate attacks by insiders or third parties, including cybercriminals, competitors, nation-states, and hacktivists. Any of these events could cause or contribute to risk and uncertainty and could adversely affect our business, results of operations and financial condition.

As a result of a pandemic, global equity and capital markets can experience significant volatility and weakness, leading governments and central banks to react with significant monetary and fiscal interventions designed to stabilize economic conditions.

It is not possible to reliably estimate the length and severity of a pandemic, including any future developments relating to the COVID-19 pandemic, or any impact on our financial results, share price and financial condition in future periods. There can be no assurance that our actions taken in response to a pandemic, including the COVID-19 pandemic, will succeed in preventing or mitigating any negative impacts on our Company, employees, clients, contractors and business partners.

As a foreign private issuer who files using the multijurisdictional disclosure system (MJDS), we are subject to different U.S. securities laws and rules, which could limit our level of disclosure to investors.

We are a “foreign private issuer” for purposes of U.S. securities laws who files disclosure documents using the multijurisdictional disclosure system (MJDS) and, as a result, are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. In particular, we are exempt from the rules and regulations under the U.S. securities laws related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”). We also are exempt from the provisions of Regulation FD under the Exchange Act, which in certain circumstances prohibits the selective disclosure of material non-public information, although we generally attempt to comply with Regulation FD. These exemptions and leniencies may reduce the frequency and scope of information that we disclose relative to the information generally provided by U.S. domestic companies.


© 2023 CGI Inc.		Page 55

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

It may be difficult to enforce civil liabilities under U.S. securities laws.

The Company is governed by the Business Corporations Act (Quebec) and with its principal place of business in Canada. The enforcement by investors of civil liabilities under the U.S. securities laws may be affected adversely by the fact that we are organized under the laws of Canada, that some or all of our officers and directors may be residents of a foreign country, and that a substantial portion of our assets and those of said persons may be located outside the United States.

10.1.2. Risks Related to our Industry

The markets in which we operate are highly competitive.

CGI operates in a global marketplace in which competition among providers of IT services is vigorous. Some of our competitors possess greater financial, marketing and sales resources, and larger geographic scope in certain parts of the world than we do, which, in turn, provides them with additional leverage in the competition for contracts. In certain niche, regional or metropolitan markets, we face smaller competitors with specialized capabilities who may be able to provide competing services with greater economic efficiency. Some of our competitors have more significant operations than we do in lower cost countries that can serve as a platform from which to provide services worldwide on terms that may be more favourable. Increased competition among IT services firms often results in corresponding pressure on prices. There can be no assurance that we will succeed in providing competitively priced services at levels of service and quality that will enable us to maintain and grow our market share.

We derive significant revenue from contracts awarded through competitive bidding processes, which limit the Company’s ability to negotiate certain contractual terms and conditions. Risks related to competitive bidding processes also involve substantial cost and managerial time and effort spent by the Company to prepare bids and proposals for contracts that may or may not be awarded to the Company, as well as expenses and delays that may arise if the Company’s competitors protest or challenge awards made to the Company pursuant to competitive bidding processes.

Even when a contract is awarded to the Company following a competitive bidding process, we may fail to accurately estimate the resources and costs required to fulfill the contract.

We may not be able to continue developing and expanding service offerings to address emerging business demands and technology trends.

The rapid pace of change in all aspects of IT and the continually declining costs of acquiring and maintaining IT infrastructure mean that we must anticipate changes in our clients’ needs. To do so, we must adapt our services and our solutions so that we maintain and improve our competitive advantage and remain able to provide cost effective services and solutions. The markets in which we operate are extremely competitive and there can be no assurance that we will succeed in developing and adapting our business in a timely manner nor that we will be able to penetrate new markets successfully. If we do not keep pace, our ability to retain existing clients and gain new business may be adversely affected. As we expand our services and solutions into new markets, we may be exposed to operational, legal, regulatory, ethical, technological and other risks specific to such new markets. These factors may result in pressure on our revenue, net earnings and resulting cash flow from operations.

We may infringe on the intellectual property rights of others.

Despite our efforts, the steps we take to ensure that our services and offerings do not infringe on the intellectual property rights of third parties may not be adequate to prevent infringement and, as a result, claims may be asserted against us or our clients. We enter into licensing agreements for the right to use intellectual property and may otherwise offer indemnities against liability and damages arising from third-party claims of patent, copyright, trademark or trade secret infringement in respect of our own intellectual property or software or other solutions developed for our clients. In some instances, the amount of these indemnity claims could be greater than the revenue we receive from the client (see Indemnity provisions and guarantees in various agreements to which we are party may require us to compensate our counterparties). Intellectual property claims or litigation could be time-consuming and costly, harm our reputation, require us to enter into additional royalty or licensing arrangements, or prevent us from providing some solutions or services. Any limitation on our ability to sell or use solutions or services that


© 2023 CGI Inc.		Page 56

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

incorporate software or technologies that are the subject of a claim could cause us to lose revenue-generating opportunities or require us to incur additional expenses to modify solutions for future projects.

We may be unable to protect our intellectual property rights.

Our success depends, in part, on our ability to protect our proprietary methodologies, processes, know-how, tools, techniques and other intellectual property that we use to provide our services. Although CGI takes reasonable steps (e.g. available copyright protection and, in some cases, patent protection) to protect and enforce its intellectual property rights, there is no assurance that such measures will be enforceable or adequate. The cost of enforcing our rights, or our inability to protect against infringement or unauthorized copying or use, can be substantial and, in certain cases, may prove to be uneconomic. In addition, the laws of some countries in which we conduct business may offer only limited intellectual property rights protection. Despite our efforts, the steps taken to protect our intellectual property may not be adequate to prevent or deter infringement or other misappropriation of intellectual property, and we may not be able to detect unauthorized use of our intellectual property, or take appropriate steps to enforce our intellectual property rights.

We face risks associated with benchmarking provisions within certain contracts.

Some of our managed IT and business process services contracts contain clauses allowing our clients to externally benchmark the pricing of agreed upon services against those offered by other providers in a peer comparison group. The uniqueness of the client environment should be factored in and, if results indicate a difference outside the agreed upon tolerance, we may be required to work with clients to reset the pricing for their services. There can be no assurance that benchmarks will produce accurate or reliable data, including pricing data. This may result in pressure on our revenue, net earnings and resulting cash flow from operations.

10.1.3. Risks Related to our Business

We may experience fluctuations in our financial results, making it difficult to predict future results.

Our ability to maintain and increase our revenue is affected not only by our success in implementing our Build and Buy growth strategy, but also by a number of other factors, which could cause the Company’s financial results to fluctuate. These factors include: (i) our ability to introduce and deliver new services and business solutions; (ii) our potential exposure to a lengthened sales cycle; (iii) the cyclicality of the purchases of our technology services and solutions; (iv) the nature of our client’s business (for example, if a client encounters financial difficulty (including as a result of external risks such as climate change or a pandemic), it may be forced to cancel, reduce or defer existing contracts with us); and (v) the structure of our agreements with clients (for example, some of CGI’s agreements with clients contain clauses allowing the clients to benchmark the pricing of services provided by CGI against the prices offered by other providers). These, and other factors, make it difficult to predict financial results for any given period.

Our revenues may be exposed to fluctuations based on our business mix.

The proportion of revenue that we generate from shorter-term system integration and consulting projects (SI&C), versus revenue from long-term managed IT and business process services contracts, will fluctuate at times, affected by acquisitions or other transactions. An increased exposure to revenue from SI&C projects may result in greater quarterly revenue variations, as the revenue from SI&C projects does not provide long-term consistency in revenue.

Our current operations are international in scope, subjecting us to a variety of financial, regulatory, cultural, political and social challenges.

We manage operations in numerous countries around the world including offshore delivery centers. The scope of our operations (including our offshore delivery centers) subjects us to issues that can negatively impact our operations, including: (i) currency fluctuations (see We may be adversely affected by currency fluctuations); (ii) the burden of complying with a wide variety of national and local laws (see Changes in the laws and regulations within the jurisdictions in which we operate may have a material adverse effect on our global business operations and profitability); (iii) the differences in and uncertainties


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

arising from local business culture and practices; (iv) and political, social and economic instability. Any or all of these risks could impact our global business operations and cause our revenue and/or profitability to decline.

We may not be able to successfully implement and manage our growth strategy.

CGI’s Build and Buy growth strategy is founded on four pillars of growth: first, profitable organic growth through contract wins, renewals and extensions with new and existing clients in our targeted industries; second, the pursuit of new large long-term managed IT and business process services contracts; third, metro market acquisitions; and fourth, large transformational acquisitions.

Our ability to achieve organic growth is affected by a number of factors outside of our control, including a lengthening of our sales cycle for major managed IT and business process services contracts.

Our ability to grow through metro market and transformational acquisitions requires that we identify suitable acquisition targets that we correctly evaluate their potential as transactions that will meet our financial and operational objectives, and that we successfully integrate them into our business. There can, however, be no assurance that we will be able to identify suitable acquisition targets and consummate additional acquisitions that meet our economic thresholds, or that future acquisitions will be successfully integrated into our operations and yield the tangible accretive value that had been expected. If we are unable to implement our Build and Buy growth strategy, we will likely be unable to maintain our historic or expected growth rates.

We may be unable to integrate new operations, which could impact our ability to achieve our growth and profitability objectives.

The realization of anticipated benefits from mergers, acquisitions and related activities depends, in part, upon our ability to integrate the acquired business, the realization of synergies, efficient consolidation of the operations of the acquired businesses into our existing operations, cost management to avoid duplication, information systems integration, staff reorganization, establishment of controls, procedures and policies, performance of the management team and other employees of the acquired operations as well as cultural alignment.

The successful integration of new operations arising from our acquisition strategy or from large managed IT and business process services contracts requires that a substantial amount of management time and attention be focused on integration tasks. Management time that is devoted to integration activities may detract from management’s normal operations focus with resulting pressure on the revenues and earnings from our existing operations. In addition, we may face complex and potentially time-consuming challenges in implementing uniform standards, controls, procedures and policies across new operations when harmonizing their activities with those of our existing business units. Integration activities can result in unanticipated operational problems, expenses and liabilities.

Following an acquisition closing date, we may remain reliant on a target’s employee, good faith, expertise, historical performance, technical resources and information systems, proprietary information and judgment in providing any transitional services. Accordingly, we may continue to be exposed to adverse developments in the business and affairs of parties with whom we contract.

If we are not successful in executing our integration strategies in a timely and cost-effective manner, we will have difficulty achieving our growth and profitability objectives.

If we are unable to manage the organizational challenges associated with our size, we may not be able to achieve our growth and profitability objectives.

Our culture, standards, core values, internal controls and our policies need to be instilled across newly acquired businesses as well as maintained within our existing operations. To effectively communicate and manage these standards throughout a large global organization is both challenging and time consuming. Newly acquired businesses may be resistant to change and may remain attached to past methods, standards and practices which may compromise our business agility in pursuing opportunities. Cultural differences in various countries may also present barriers to introducing new ideas or aligning our vision and strategy with the rest of the organization. If we cannot overcome these obstacles in maintaining a strategic bond throughout the Company worldwide, we may not be able to achieve our growth and profitability objectives.


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

Material developments regarding our major commercial clients resulting from mergers or business acquisitions could impair our future prospects and growth strategy.

Consolidation among our clients resulting from mergers and acquisitions may result in loss or reduction of business when the successor business’ IT needs are served by another service provider or are provided by the successor company’s own employees. Growth in a client’s IT needs resulting from acquisitions or operations may mean that we no longer have a sufficient geographic scope or the critical mass to serve the client’s needs efficiently, resulting in the loss of the client’s business and impairing our future prospects. There can be no assurance that we will be able to achieve the objectives of our growth strategy in order to maintain and increase our geographic scope and critical mass in our targeted markets.

Legal proceedings could have a material adverse effect on our business, financial performance and reputation.

During the ordinary course of conducting our business, we may be threatened with, and/or become subject or a party to, a variety of litigation or other claims and suits that arise from time to time. These legal proceedings may involve current and former employees, clients, partners, subcontractors, suppliers, competitors, shareholders, government agencies or others through private actions, class actions, whistleblower claims, administrative proceedings, regulatory actions or other litigation. Regardless of the merits of the claims, the cost to defend current and future litigation may be significant, and such matters can be time-consuming and divert management’s attention and resources. The results of litigation, claims and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some or all of these legal disputes may result in materially adverse monetary damages, fines, penalties or injunctive relief against us. While we maintain insurance for certain liabilities, there is no assurance that such insurance coverage will be sufficient in type or amount to cover the costs, damages, liabilities or losses that can result from these litigations or claims.

Changes in our tax levels, as well as reviews, audits, investigations and tax proceedings or changes in tax laws or in their interpretation or enforcement, could have a material adverse effect on our net income or cash flow.

In estimating our income tax payable, management uses accounting principles to determine income tax positions that are likely to be sustained by applicable tax authorities. However, there is no assurance that our tax benefits or tax liability will not materially differ from our estimates or expectations. The tax legislation, regulation and interpretation that apply to our operations are continually changing. In addition, future tax benefits and liabilities are dependent on factors that are inherently uncertain and subject to change, including future earnings, future tax rates, and anticipated business mix in the various jurisdictions in which we operate. Moreover, our tax returns are continually subject to review by applicable tax authorities and we are subject to ongoing audits, investigations and tax proceedings in various jurisdictions. These tax authorities determine the actual amounts of taxes payable or receivable, of any future tax benefits or liabilities and of income tax expense that we may ultimately recognize. Tax authorities have disagreed and may in the future disagree with our income tax positions and are taking increasingly aggressive positions in respect of income tax positions, including with respect to intercompany transactions.

Our effective tax rate in the future could be adversely affected by challenges to intercompany transactions, changes in the value of deferred tax assets and liabilities, changes in tax law or in their interpretation or enforcement, changes in the mix of earnings in countries with differing statutory tax rates, the expiration of tax benefits and changes in accounting principles, including the introduction of the Pillar Two model rules designed to ensure large multinational corporations pay a minimum level of tax on income arising in each jurisdiction they operate. Tax rates in the jurisdictions in which we operate may change as a result of shifting economic conditions and tax policies.

A number of countries in which the Company does business have implemented, or are considering implementing, changes in relevant tax, accounting and other laws, regulations and interpretations and the overall tax environment has made it increasingly challenging for multinational corporations to operate with certainty about taxation in many jurisdictions.

Any of the above factors could have a material adverse effect on our net income or cash flow by affecting our operations and profitability, our effective tax rate, the availability of tax credits, the cost of the services we provide, and the availability of deductions for operating losses.


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

Reductions, eliminations or amendments to government sponsored programs from which we currently benefit may have a material adverse effect on our net earnings or cash flow.

We benefit from government sponsored programs designed to support research and development, labour and economic growth in jurisdictions where we operate. Government programs reflect government policy and depend on various political and economic factors. There can be no assurance that such government programs will continue to be available to the Company in the future, or will not be reduced, amended or eliminated. Any future government program reductions or eliminations or other amendments to the tax credit programs could increase operating or capital expenditures incurred by the Company and have a material adverse effect on its net earnings or cash flow.

We are exposed to credit risks with respect to accounts receivable and work in progress.

In order to sustain our cash flow from operations, we must invoice and collect the amounts owed to us in an efficient and timely manner. Although we maintain provisions to account for anticipated shortfalls in amounts collected from clients, the provisions we take are based on management estimates and on our assessment of our clients’ creditworthiness which may prove to be inadequate in the light of actual results. To the extent that we fail to perform our services in accordance with our contracts and our clients’ reasonable expectations, and to the extent that we fail to invoice clients and to collect the amounts owed to the Company for our services correctly in a timely manner, our collections could suffer, which could materially adversely affect our revenue, net earnings and cash flow. In addition, a prolonged economic downturn may cause clients to curtail or defer projects, impair their ability to pay for services already provided, and ultimately cause them to default on existing contracts, in each case, causing a shortfall in revenue and impairing our future prospects.

We face risks associated with early termination, modification, delay or suspension of our contractual agreements, and our bookings and backlog may not be indicative of future revenues.

The early termination, modification, delay, or suspension of our contractual agreements may have a material adverse effect on future revenues and profitability. If we should fail to deliver our services according to contractual agreements, some of our clients could elect to terminate, modify, delay or suspend contracts before their agreed expiry date, which would result in a reduction of our revenues and/or earnings and cash flow and may impact the value of our bookings and backlog. In addition, a number of our managed IT and business process services contractual agreements have termination for convenience and change of control clauses according to which a change in the client’s intentions or a change in control of CGI could lead to a termination of these agreements. Early contract termination can also result from the exercise of a legal right or when circumstances that are beyond our control or beyond the control of our client prevent the contract from continuing. In cases of early termination, we may not be able to recover capitalized contract costs and we may not be able to eliminate ongoing costs incurred to support the contract.

We may not be able to successfully estimate the cost, timing and resources required to fulfill our contracts, which could have a material adverse effect on our net earnings.

In order to generate acceptable margins, our pricing for services is dependent on our ability to accurately estimate the costs and timing for completing projects or long-term managed IT and business process services contracts, which can be based on a client’s bid specification, sometimes in advance of the final determination of the full scope and design of the contract. In addition, a significant portion of our project-oriented contracts are performed on a fixed-price basis. Billing for fixed-price engagements is carried out in accordance with the contract terms agreed upon with our client, and revenue is recognized based on the percentage of effort incurred to date in relation to the total estimated efforts to be incurred over the duration of the respective contract. These estimates reflect our best judgement regarding the efficiencies of our methodologies and professionals as we plan to apply them to the contracts in accordance with the CGI Client Partnership Management Framework (CPMF), a framework that contains high standards of contract management to be applied throughout the Company. If we fail to apply the CPMF correctly or if we are unsuccessful in accurately estimating the time or resources required to fulfill our obligations under a contract, or if unexpected factors, including those outside of our control (such as labour shortages, supply chain or manufacturing disruptions, inflation, and other external risk factors), arise, there may be an impact on costs or the delivery schedule which could have a material adverse effect on our expected net earnings.


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

We rely on relationships with other providers in order to generate business and fulfill certain of our contracts; if we fail to maintain our relationships with these providers, our business, prospects, financial condition and operating results could be materially adversely affected.

We derive revenue from contracts where we enter into teaming agreements with other providers. In some teaming agreements we are the prime contractor whereas in others we act as a subcontractor. In both cases, we rely on our relationships with other providers to generate business and we expect to continue to do so in the foreseeable future. Where we act as prime contractor, if we fail to maintain our relationships with other providers, we may have difficulty attracting suitable participants in our teaming agreements. Similarly, where we act as subcontractor, if our relationships are impaired, other providers might reduce the work they award to us, award that work to our competitors, or choose to offer the services directly to the client in order to compete with our business. In either case, if we fail to maintain our relationship with these providers or if our relationship with these providers is otherwise impaired, our business, prospects, financial condition and operating results could be materially adversely affected.

Our profitability may be adversely affected if our partners are unable to deliver on their commitments.

Increasingly large and complex contracts may require that we rely on third party subcontractors including software and hardware vendors to help us fulfill our commitments. Under such circumstances, our success depends on the ability of the third parties to perform their obligations within agreed upon budgets and timeframes. If our partners fail to deliver, our ability to complete the contract may be adversely affected, which could have an unfavourable impact on our profitability.

Indemnity provisions and guarantees in various agreements to which we are party may require us to compensate our counterparties.

In the normal course of business, we enter into agreements that may provide for indemnification and guarantees to counterparties in transactions such as consulting and managed IT and business process services, business divestitures, lease agreements and financial obligations. These indemnification undertakings and guarantees may require us to compensate counterparties for costs and losses incurred as a result of various events, including breaches of representations and warranties, intellectual property right infringement, claims that may arise while providing services or as a result of litigation that may be suffered by counterparties. If we are required to compensate counterparties due to such arrangements and our insurance does not provide adequate coverage, our business, prospects, financial condition and results of operations could be materially adversely affected.

We may not be able to hire or retain enough qualified IT professionals to support our operations.

There is strong demand for qualified individuals in the IT industry. Hiring and retaining a sufficient number of individuals with the desired knowledge and skill set may be difficult. Therefore, it is important that we remain able to successfully attract and retain highly qualified professionals and establish an effective succession plan. If our comprehensive programs aimed at attracting and retaining qualified and dedicated professionals do not ensure that we have staff in sufficient numbers and with the appropriate training, expertise and suitable government security clearances required to serve the needs of our clients, we may have to rely on subcontractors or transfers of staff to fill resulting gaps. If our succession plan fails to identify those with potential or to develop these key individuals, we may be unable to replace key employees who retire or leave the Company and may be required to recruit and/or train new employees. This might result in lost revenue or increased costs, thereby putting pressure on our net earnings.

If we fail to retain our key employees and management, our business could be adversely affected.

The success of our business, in part, depends on the continued employment of certain key employees and senior management. This dependence is important to our business being that personal relationships are fundamental in obtaining and maintaining client engagements. While our Board of Directors annually reviews our succession plan, if we fail to establish an effective succession plan, or if key employees or senior management were unable or unwilling to continue employment, our business could be adversely affected until qualified replacements are retained.


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

We may be unable to maintain our human resources utilization rates.

In order to maintain our net earnings, it is important that we maintain the appropriate availability of professional resources in each of our geographies by having a high utilization rate while still being able to assign additional resources to new work. Maintaining an efficient utilization rate requires us to forecast our need for professional resources accurately and to manage recruitment activities, professional training programs, attrition rates and restructuring programs appropriately. To the extent that we fail to do so, or to the extent that laws and regulations restrict our ability to do so, our utilization rates may be reduced; thereby having an impact on our revenue and profitability. Conversely, we may find that we do not have sufficient resources to deploy against new business opportunities in which case our ability to grow our revenue would suffer.

If the business awarded to us by various U.S. federal government departments and agencies is limited, reduced or eliminated, our business, prospects, financial condition and operating results could be materially and adversely affected.

We derive a significant portion of our revenue from the services we provide to various U.S. federal government departments and agencies. We expect that this will continue for the foreseeable future. There can be, however, no assurance that each such U.S. federal government department and agency will continue to utilize our services to the same extent, or at all in the future. In the event that a major U.S. federal government department or agency were to limit, reduce, or eliminate the business it awards to us, we might be unable to recover the lost revenue with work from other U.S. federal government departments or agencies or other clients, and our business, prospects, financial condition and operating results could be materially and adversely affected. Although IFRS considers a national government and its departments and agencies as a single client, our client base in the U.S. government economic sector is in fact diversified with contracts from many different departments and agencies.

Changes in government spending policies or budget priorities could directly affect our financial performance. Among the factors that could harm our government contracting business are: the curtailment of governments’ use of consulting and IT services firms; a significant decline in spending by governments in general, or by specific departments or agencies in particular; the adoption of new legislation and/or actions affecting companies that provide services to governments; delays in the payment of our invoices by government; and general economic and political conditions. These or other factors could cause government agencies and departments to reduce their purchases under contracts, to exercise their right to terminate contracts, to issue temporary stop work orders, or not to exercise options to renew contracts, any of which would cause us to lose future revenue. Government spending reductions or budget cutbacks at these departments or agencies could materially harm our continued performance under these contracts, or limit the awarding of additional contracts from these agencies.

Changes in the laws and regulations within the jurisdictions in which we operate may have a material adverse effect on our global business operations and profitability.

Our global operations require us to be compliant with laws and regulations in many jurisdictions on matters such as: anti-corruption, trade restrictions, immigration, taxation, securities, antitrust, data privacy, labour relations, and the environment, amongst others. Complying with these diverse requirements worldwide is a challenge and consumes significant resources. The laws and regulations frequently change and some may impose conflicting requirements which may expose us to penalties for non-compliance and harm our reputation. Furthermore, in some jurisdictions, we may face the absence of effective laws and regulations to protect our intellectual property rights and there may be restrictions on the movement of cash and other assets, on the import and export of certain technologies, and on the repatriation of earnings. Any or all of these risks could impact our global business operations and cause our profitability to decline.

Our business with the U.S. federal government departments and agencies also requires that we comply with complex laws and regulations relating to government contracts. These laws and regulations relate to the integrity of the procurement process, impose disclosure requirements, and address national security concerns, among other matters. For instance, we are routinely subject to audits by U.S. government departments and agencies with respect to compliance with these rules. If we fail to comply with these requirements we may incur penalties and sanctions, including contract termination, suspension of payments, suspension or debarment from doing business with the federal government, and fines.


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

There can be no assurance that our ethics and compliance practices will be sufficient to prevent violations of legal and ethical standards.

Our employees, officers, directors, suppliers and other business partners are expected to comply with applicable legal and ethical standards including, without limitation, anti-bribery laws, as well as with our governance policies and contractual obligations. Failure to comply with such laws, policies and contractual obligations could expose us to litigation and significant fines and penalties, and result in reputational harm or being disqualified from bidding on contracts. While we have developed and implemented strong ethics and compliance practices, including through our Code of Ethics, which must be observed by all of our employees, our Third Party Code of Ethics as well as ethics and compliance trainings, there can be no assurance that such practices and measures will be sufficient to prevent violations of legal and ethical standards. Any such failure or violation could have an adverse effect on our business, financial performance and reputation. This risk of improper conduct may increase as we continue to expand globally, with greater opportunities and demands to do more business with local and new partners.

Changes to, and delays or defects in, our client projects and solutions may subject us to legal liability, which could materially adversely affect our business, operating results and financial condition and may negatively affect our professional reputation.

We create, implement and maintain IT solutions that are often critical to the operations of our clients’ business. Our ability to complete large projects as expected could be adversely affected by unanticipated delays, renegotiations, and changing client requirements. Also, our solutions may suffer from defects that adversely affect their performance; they may not meet our clients’ requirements or may fail to perform in accordance with applicable service levels. Such problems could subject us to legal liability, which could materially adversely affect our business, operating results and financial condition, and may negatively affect our professional reputation. While we typically use reasonable efforts to include provisions in our contracts which are designed to limit our exposure to legal claims relating to our services and the applications we develop, we may not always be able to include such provisions and, where we are successful, such provisions may not protect us adequately or may not be enforceable under some circumstances or under the laws of some jurisdictions.

We are subject to stringent and changing privacy laws, regulations and standards, information security policies and contractual obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could expose us to government sanctions and cause damage to our brand and reputation.

Our business often requires that our clients’ applications and information, which may include their proprietary information and personal information they manage, be processed and stored on our networks and systems, and in data centers that we manage. We also process and store proprietary information relating to our business, and personal information relating to our employees. The Company is subject to numerous laws and regulations designed to protect information, such as the European Union’s General Data Protection Regulation (GDPR), various laws and regulations in Canada, the U.S. and other countries in which the Company operates governing the protection of health or other personally identifiable information and data privacy. These laws and regulations are increasing in number and complexity and are being adopted and amended with greater frequency, which results in greater compliance risk and cost. The potential financial penalties for non-compliance with these laws and regulations have significantly increased with the adoption of the GDPR. The Company’s Chief Data Protection Officer oversees the Company’s compliance with the laws that protect the privacy of personal information. The Company faces risks inherent in protecting the security of such personal data which have grown in complexity, magnitude and frequency in recent years. Digital information and equipment are subject to loss, theft or destruction, and services that we provide may become temporarily unavailable as a result of those risks, or upon an equipment or system malfunction. The causes of such failures include human error in the course of normal operations (including from advertent or inadvertent actions or inactions by our employees), maintenance and upgrading activities, as well as hacking, vandalism (including denial of service attacks and computer viruses), theft, and unauthorized access, as well as power outages or surges, floods, fires, natural disasters and many other causes. The measures that we take to protect against all information infrastructure risks, including both physical and logical controls on access to premises and information may prove in some circumstances to be inadequate to prevent the improper disclosure, loss, theft, misappropriation of, unauthorized access to, or destruction of client information, or service interruptions. Such events may expose the Company to financial loss arising from the costs of remediation and those arising


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

from litigation from our clients and third parties (including under the laws that protect the privacy of personal information), claims and damages, as well as expose the Company to government sanctions and damage to our brand and reputation.

We could face legal, reputational and financial risks if we fail to protect our and/or client data from security incidents or cyberattacks.

The volume, velocity and sophistication of security threats and cyber-attacks continue to grow. This includes criminal hackers, hacktivists, state-sponsored organizations, industrial espionage, employee misconduct, and human or technological errors. The current geopolitical instability has exacerbated these threats, which could lead to increased risk and frequency of security and cybersecurity incidents.

As a global IT and business consulting firm providing services to private and public sectors, we process and store increasingly large amounts of data for our clients, including proprietary information and personal information. Consequently, our business could be negatively impacted by physical and cyber threats, which could affect our future sales and financial position or increase our costs.

An unauthorized disclosure of sensitive or confidential client or employee information, including cyber-attacks or other security breaches, could cause a loss of data, give rise to remediation or other expenses, expose us to liability under federal and state laws, and subject us to litigation and investigations, which could have an adverse effect on our business, cash flows, financial condition and results of operations. These security risks to the Company include potential attacks not only of our own solutions, services and systems, but also those of our clients, contractors, business partners, vendors and other third parties.

The Company’s Chief Security Officer is responsible for overseeing the security of the Company. Any local issue in a business unit could have a global impact on the entire Company, thus visibility and timely escalation on potential issues are key. We seek to detect and investigate all security incidents and to prevent their occurrence or recurrence, by: (i) developing and regularly reviewing policies and standards related to information security, data privacy, physical security and business continuity; (ii) monitoring the Company’s performance against these policies and standards; (iii) developing strategies intended to seek to mitigate the Company’s risks, including through security trainings for all employees to increase awareness of potential cyber threats; (iv) implementing security measures to ensure an appropriate level of control based on the nature of the information and the inherent risks attached thereto, including through access management, security monitoring and testing to mitigate and help detect and respond to attempts to gain unauthorized access to information systems and networks; and (v) working with the industry and governments against cyber threats. However, because of the evolving nature and sophistication of these security threats, there can be no assurance that our safeguards will detect or prevent the occurrence of material cyber breaches, intrusions or attacks.

We are regularly the target of attempted cyber and other security threats and must continuously monitor and develop our information technology networks and infrastructure to detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security and reputational impact. If security protection does not evolve at the same pace as threats, a growing gap on our level of protection will be created. Technology evolution and global trends like digital transformation, cloud and mobile computing amongst others are disrupting the security operating model, thus security should evolve to address new relevant security requirements and build new capabilities to address the changes. Increasing detection and automated response capabilities are key to improve visibility and contain any negative potential impact. Automating security processes and integrating with IT, business and security solutions could address shortage of technical security staff and avoid introducing human intervention and errors.

Insider or employee cyber and security threats are increasingly a concern for all large companies, including ours. CGI is continuously working to install new, and upgrade its existing, information technology systems and provide employees awareness training around phishing, malware, and other cyber risks to ensure that the Company is protected, to the greatest extent possible, against cyber risks and security breaches. While CGI selects third-party vendors carefully, it does not control their actions. Any problems caused by these third parties, including those resulting from breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks and security breaches at a vendor could adversely affect our ability to deliver solutions and services to our clients and otherwise conduct business.


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Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

The Company and certain of its clients, contractors, business partners, vendors and other third parties use open-source services, which can entail risk to end-user security. These open source projects are often created and maintained by volunteers, who do not always have adequate resources and employees for incident response and proactive maintenance even as their projects are critical to the internet economy. Vulnerabilities discovered in these open source services can be exploited by attackers, which could compromise our system infrastructure and/or lead to a loss or breach of personal and/or proprietary information, financial loss, and other irreversible harm.

While our liability insurance policy covers cyber risks, there is no assurance that such insurance coverage will be sufficient in type or amount to cover the costs, damages, liabilities or losses that can result from security breaches, cyber-attacks and other related breaches. As the cyber threat landscape evolves, and CGI and our clients increase our digital footprint, we may find it necessary to make additional significant investments to protect data and infrastructure. Occurrence of any of the aforementioned security threats could expose the Company, our clients or other third parties to potential liability, litigation, and regulatory action, in addition to loss of client confidence, loss of existing or potential clients, loss of sensitive government contracts, damage to brand and reputation, and other financial loss.

Damage to our reputation may harm our ability to obtain new clients and retain our existing clients.

CGI’s reputation as a capable and trustworthy service provider and long-term business partner is key to our ability to compete effectively in the market for IT services. The nature of our operations exposes us to the potential loss, unauthorized access to, or destruction of our clients’ information, as well as temporary service interruptions. Depending on the nature of the information or services, such events may have a negative impact on how the Company is perceived in the marketplace. Under such circumstances, our ability to obtain new clients and retain existing clients could suffer with a resulting impact on our revenue and net earnings.

Our inability to meet regulatory requirements and/or stakeholders expectations of disclosure, management and implementation of ESG initiatives and standards, could have an adverse effect on our business.

Perceptions with respect to environmental, social and governance approaches have changed and certain shareholders, investors, clients, employees and other stakeholders agree that these issues have become a current and imminent concern. As such, perceptions of our operations held by our stakeholders may depend, in part, on the environmental, social and governance (“ESG”) initiatives and standards that we have chosen to implement, and whether or not we meet them.

We are subject to evolving regulatory requirements and have set a number of ambitious ESG commitments and targets to monitor our ESG performance and align our strategic imperatives, including without limitation, our commitment to net-zero carbon emissions by 2030 as defined under Scope 1, 2, and the business travel of Scope 3 of the greenhouse gas protocol. Our ability to meet these requirements and to achieve these commitments and targets depends on many factors and is subject to many risks that could cause our assumptions or estimates to be inaccurate and cause actual results or events to differ materially from those expressed in, or implied by, these commitments and targets. Failure to effectively manage and sufficiently report ESG matters could lead to negative business, financial, legal and regulatory consequences for the Company.

Our revenue and profitability may decline and the accuracy of our financial reporting may be impaired if we fail to design, implement, monitor and maintain effective internal controls.

Due to the inherent limitations of internal controls including the circumvention or overriding of controls, or fraud, there can only be reasonable assurance that the Company’s internal controls will detect and prevent a misstatement. If the Company is unable to design, implement, monitor and maintain effective internal controls throughout its different business environments, the efficiency of our operations might suffer, resulting in a decline in revenue and profitability, and the accuracy of our financial reporting could be impaired.

Future funding requirements may affect our business and growth opportunities and we may not have access to favourable financing opportunities in the future.

The Company’s future growth is contingent on the execution of its business strategy, which, in turn, is dependent on its ability to grow the business organically as well as through business acquisitions. In the event we would need to raise additional funds


© 2023 CGI Inc.		Page 65

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

through equity or debt financing to fund any currently unidentified or unplanned future acquisitions and other growth opportunities, there can be no assurance that such financing will be available in amounts and on terms acceptable to us. Factors such as capital market disruptions, inflation, recession, political, economic and financial market instability, government policies, central bank monetary policies, and changes to bank regulations, could reduce the availability of capital or increase the cost of such capital. Our ability to raise the required funding depends on prevailing market conditions, the capacity of the capital markets to meet our equity and/or debt financing needs in a timely fashion and on the basis of interest rates and/or share prices that are reasonable in the context of our commercial objectives. Increasing interest rates, volatility in our share price, rising inflation, and the capacity of our current lenders to meet our additional liquidity requirements are all factors that may have a material adverse effect on any acquisitions or growth activities that we may, in the future, identify or plan. If we are unable to obtain the necessary funding, we may be unable to achieve our growth objectives.

The inability to service our debt and other financial obligations, or our inability to fulfill our financial covenants, could have a material adverse effect on our business, financial condition and results of operations.

The Company has a substantial amount of debt and significant interest payment requirements. A portion of cash flows from operations goes to the payment of interest on the Company’s indebtedness. The Company’s ability to service its debt and other financial obligations is affected by prevailing economic conditions in the markets that we serve and financial, business and other factors, many of which are beyond our control. We may be unable to generate sufficient cash flow from operations and future borrowings or other financing may be unavailable in an amount sufficient to enable us to fund our future financial obligations or our other liquidity needs. In addition, we are party to a number of financing agreements, including our credit facilities, and the indentures governing our senior unsecured notes, which agreements, indentures and instruments contain financial and other covenants, including covenants that require us to maintain financial ratios and/or other financial or other covenants. If we were to breach the covenants contained in our financing agreements, we may be required to redeem, repay, repurchase or refinance our existing debt obligations prior to their scheduled maturity and our ability to do so may be restricted or limited by the prevailing conditions in the capital markets, available liquidity and other factors. Our inability to service our debt and other financial obligations, or our inability to fulfill our financial or other covenants in our financing agreements, could have an adverse effect on our business, financial condition and results of operations.

We may be adversely affected by interest rate fluctuations.

Although a significant portion of the Company’s indebtedness bears interest at fixed rates, the Company remains exposed to interest rate risk under certain of its credit facilities. If interest rates increase, debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and net income and cash flows would decrease, which could materially adversely affect the Company’s financial condition and operating results.

We may be adversely affected by the discontinuation of LIBOR.

As the global reform of major interest rate benchmarks continues, the London Interbank Offered Rate (“LIBOR”) has been phased out. We have amended our financing agreements that were indexed to LIBOR to allow us to reference the Secured Overnight Financing Rate (“SOFR”) as the primary benchmark rate. Because SOFR is fundamentally different from LIBOR, there is no assurance as to how SOFR may perform or that it is a comparable substitute for LIBOR. As a result, we cannot reasonably predict the potential effect of the SOFR or other alternative reference rates on our business, financial condition or results of operations.

Changes in the Company’s creditworthiness or credit ratings could affect the cost at which the Company can access capital or credit markets.

The Company and each of the U.S. dollar denominated and Canadian dollar denominated senior unsecured notes received credit ratings. Credit ratings are generally evaluated and determined by independent third parties and may be impacted by events outside of the Company’s control, as well as other material decisions made by the Company. Credit rating agencies perform independent analysis when assigning credit ratings and such analysis includes a number of criteria. Such criteria are reviewed on an on-going basis and are therefore subject to change. Any rating assigned to the Company or to our debt securities may be revised or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances


© 2023 CGI Inc.		Page 66

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

relating to the basis of the rating, such as adverse changes, so warrant. Real or anticipated changes in the perceived creditworthiness of the Company and/or in the credit rating of its debt obligations could affect the market value of such debt obligations and the ability of the Company to access capital or credit markets, and/or the cost at which it can do so.

We may be adversely affected by currency fluctuations.

The majority of our revenue and costs are denominated in currencies other than the Canadian dollar. Foreign exchange fluctuations impact the results of our operations as they are reported in Canadian dollars. This risk is partially mitigated by a natural hedge in matching our costs with revenue denominated in the same currency and through the use of derivatives in our global hedging strategy. However, as we continue our global expansion, natural hedges may begin to diminish and the use of hedging contracts exposes us to the risk that financial institutions could fail to perform their obligations under our hedging instruments. Furthermore, there can be no assurance that our hedging strategy and arrangements will offset the impact of fluctuations in currency exchange rates, which could materially adversely affect our business revenues, results of operations, financial condition or prospects. Other than the use of financial products to deliver on our hedging strategy, we do not trade derivative financial instruments.

Our functional and reporting currency is the Canadian dollar. As such, our European, U.S., U.K., Asian and Australian investments, operations and assets are exposed to net change in currency exchange rates. Volatility in exchange rates could have an adverse effect on our business, financial condition and results of operations.

10.2. LEGAL PROCEEDINGS

The Company is involved in legal proceedings, audits, claims and litigation arising in the ordinary course of its business. Certain of these matters seek damages in significant amounts. Although the outcome of such matters is not predictable with assurance, the Company has no reason to believe that the disposition of any such current matter could reasonably be expected to have a material adverse effect on the Company’s financial position, results of operations or the ability to carry on any of its business activities.


© 2023 CGI Inc.		Page 67

Management’s Discussion and Analysis | For the years ended September 30, 2023 and 2022

LOGO

Transfer Agent

Computershare Investor Services Inc.

+1(800) 564-6253

Investor Relations

Kevin Linder

Senior Vice-President, Investor Relations

Telephone: +1(905) 973-8363

kevin.linder@cgi.com

1350 René-Lévesque Boulevard West

25^th Floor

Montréal, Quebec

H3G 1T4

Canada

cgi.com


© 2023 CGI Inc.		Page 68

Exhibit 99.2

Consolidated Financial Statements of

CGI INC.

For the years ended September 30, 2023 and 2022

Management’s and Auditors’ Reports

MANAGEMENT’S STATEMENT OF RESPONSIBILITY FOR FINANCIAL REPORTING

The management of CGI Inc. (the Company) is responsible for the preparation and integrity of the consolidated financial statements and the Management’s Discussion and Analysis (MD&A). The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and necessarily include some amounts that are based on management’s best estimates and judgement. Financial and operating data elsewhere in the MD&A are consistent with that contained in the accompanying consolidated financial statements.

To fulfill its responsibility, management has developed, and continues to maintain, systems of internal controls reinforced by the Company’s standards of conduct and ethics, as set out in written policies to ensure the reliability of the financial information and to safeguard its assets. The Company’s consolidated financial statements and the effectiveness of internal control over financial reporting are subject to audit by an Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP, whose report follows. PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm appointed by our shareholders upon the recommendation of the Audit and Risk Management Committee of the Board of Directors, has performed an independent audit of the consolidated balance sheets as at September 30, 2023 and 2022 and the related consolidated statements of earnings, comprehensive income, changes in equity and cash flows for the years ended September 30, 2023 and 2022 and the effectiveness of our internal control over financial reporting as at September 30, 2023.

Members of the Audit and Risk Management Committee of the Board of Directors, all of whom are independent of the Company, meet regularly with PricewaterhouseCoopers LLP and with management to discuss internal controls in the financial reporting process, auditing matters and financial reporting issues and formulate the appropriate recommendations to the Board of Directors. PricewaterhouseCoopers LLP has full and unrestricted access to the Audit and Risk Management Committee. The consolidated financial statements and MD&A have been reviewed and approved by the Board of Directors.



/s/ George D. Schindler George D. Schindler		/s/ Steve Perron Steve Perron
President and Chief Executive Officer		Executive Vice-President and Chief Financial Officer

November 7, 2023


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		1

Management’s and Auditors’ Reports

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed, under the supervision of and with the participation of the President and Chief Executive Officer as well as the Executive Vice-President and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external reporting purposes in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

The Company’s internal control over financial reporting includes policies and procedures that:

- Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the assets of the Company;

- Provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with IFRS as issued by the IASB, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and,

- Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements.

All internal control systems have inherent limitations; therefore, even where internal control over financial reporting is determined to be effective, it can provide only reasonable assurance. Projections of any evaluation of effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, under the supervision of and with the participation of the President and Chief Executive Officer as well as the Executive Vice-President and Chief Financial Officer, conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined the Company’s internal control over financial reporting as at September 30, 2023 was effective.

The effectiveness of the Company’s internal control over financial reporting as of September 30, 2023 has been audited by PricewaterhouseCoopers LLP, an Independent Registered Public Accounting Firm, as stated in their report which appears herein.



/s/ George D. Schindler George D. Schindler		/s/ Steve Perron Steve Perron
President and Chief Executive Officer		Executive Vice-President and Chief Financial Officer

November 7, 2023


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022			2

Management’s and Auditors’ Reports

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of CGI Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of CGI Inc. and its subsidiaries (together, the Company) as of September 30, 2023 and 2022, and the related consolidated statements of earnings, comprehensive income, changes in equity and cash flows for the years then ended, including the related notes (collectively referred to as the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2023 and 2022, and its financial performance and its cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022			3

Management’s and Auditors’ Reports

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)

Basis for Opinions (continued)

Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the Audit and Risk Management Committee of the Board of Directors and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		4

Management’s and Auditors’ Reports

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)

Critical Audit Matters (continued)

Revenue Recognition – Estimates of total expected labour costs for business and strategic information technology (IT) consulting and systems integration services under fixed-fee arrangements

As described in notes 3 and 29 to the consolidated financial statements, the Company recognizes revenue for business and strategic IT consulting and systems integration services under fixed-fee arrangements using the percentage-of-completion method over time. For the year ended September 30, 2023, revenue from business and strategic IT consulting and systems integration services under fixed-fee arrangements makes up a portion of the Company’s total revenues of $14,296,360,000. The selection of the measure of progress towards completion requires management’s judgement and is based on the nature of the services to be provided. As disclosed by management, the Company relies on estimates of total expected labour costs, which are compared to labour costs incurred to date, to arrive at an estimate of the progress to completion which determines the percentage of revenue earned to date. Management regularly reviews underlying estimates of total expected labour costs. Management has disclosed that there are many factors that can affect the estimates of total expected labour costs, including, but not limited to, changes in scope of the contracts, delays in reaching milestones, or new complexities in the project’s delivery.

The principal considerations for our determination that performing procedures relating to Revenue Recognition – Estimates of total expected labour costs for business and strategic IT consulting and systems integration services under fixed-fee arrangements is a critical audit matter are (i) there was significant judgement by management when developing the estimates of total expected labour costs; and (ii) there was significant auditor judgement and effort in performing procedures to evaluate the estimates of total expected labour costs, including the assessment of management’s judgement about the Company’s ability to properly assess the factors that can affect the estimates of total expected labour costs.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the determination of estimates of total expected labour costs. These procedures also included, among others, evaluating and testing management’s process, on a sample basis, for determining the estimates of total expected labour costs determined by management by (i) testing total labour costs incurred to supporting evidence; (ii) performing a comparison of the sum of total labour costs incurred and the total expected labour costs to complete to the originally estimated costs; and (iii) evaluating the process of the timely identification of factors that can affect the total expected labour costs including, but not limited to, changes to the scope of the contracts, delays in reaching milestones or new complexities in the project’s delivery.

/s/PricewaterhouseCoopers LLP

Montréal, Canada

November 7, 2023

We have served as the Company’s auditor since 2019.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		6

Consolidated Statements of Earnings

For the years ended September 30

(in thousands of Canadian dollars, except per share data)


	Notes	2023		2022

		$		$
Revenue	29		14,296,360		12,867,201
Operating expenses

Costs of services, selling and administrative	23		11,982,421		10,776,564

Acquisition-related and integration costs	27d		53,401		27,654

Cost optimization program	25		8,964		—

Net finance costs	26		52,463		92,023

Foreign exchange loss			1,198		4,001

			12,098,447		10,900,242

Earnings before income taxes			2,197,913		1,966,959

Income tax expense	16		566,664		500,817

Net earnings			1,631,249		1,466,142

Earnings per share

Basic earnings per share	21		6.97		6.13

Diluted earnings per share	21		6.86		6.04

See Notes to the Consolidated Financial Statements.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		5

Consolidated Statements of Comprehensive Income

For the years ended September 30

(in thousands of Canadian dollars)



	2023			2022

	$			$

Net earnings		1,631,249			1,466,142
Items that will be reclassified subsequently to net earnings (net of income taxes):

Net unrealized gains (losses) on translating financial statements of foreign operations		242,789			(319,698	)

Net losses on cross-currency swaps and on translating long-term debt designated as hedges of net investments in foreign operations		(53,959	)		(4,541	)

Deferred (costs) gains of hedging on cross-currency swaps		(14,733	)		21,705

Net unrealized (losses) gains on cash flow hedges		(18,750	)		25,245

Net unrealized gains (losses) on financial assets at fair value through other comprehensive income		660			(6,263	)

Items that will not be reclassified subsequently to net earnings (net of income taxes):

Net remeasurement losses on defined benefit plans		(36,778	)		(8,282	)

Other comprehensive income (loss)		119,229			(291,834	)

Comprehensive income		1,750,478			1,174,308

See Notes to the Consolidated Financial Statements.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		6

Consolidated Balance Sheets

As at September 30

(in thousands of Canadian dollars)



	Notes	2023		2022

		$		$

Assets

Current assets

Cash and cash equivalents	28e and 32		1,568,291		966,458

Accounts receivable	4 and 32		1,425,117		1,363,545

Work in progress			1,143,685		1,191,844

Current financial assets	32		103,463		33,858

Prepaid expenses and other current assets			198,377		189,366

Income taxes			6,067		5,137

Total current assets before funds held for clients			4,445,000		3,750,208

Funds held for clients	5		488,727		598,839

Total current assets			4,933,727		4,349,047

Property, plant and equipment	6		389,276		369,608

Right-of-use assets	7		482,321		535,121

Contract costs	8		308,446		261,612

Intangible assets	9		623,103		615,959

Other long-term assets	10		84,776		139,666

Long-term financial assets	11		147,968		337,156

Deferred tax assets	16		105,432		85,795

Goodwill	12		8,724,450		8,481,456

			15,799,499		15,175,420

Liabilities

Current liabilities

Accounts payable and accrued liabilities			924,659		1,016,407

Accrued compensation and employee-related liabilities			1,100,566		1,130,726

Deferred revenue			488,761		453,579

Income taxes			250,869		153,984

Current portion of long-term debt	14		1,158,971		93,447

Current portion of lease liabilities			198,857		157,944

Provisions	13		24,965		33,103

Current derivative financial instruments	32		4,513		5,710

Total current liabilities before clients’ funds obligations			4,152,161		3,044,900

Clients’ funds obligations			493,638		604,431

Total current liabilities			4,645,799		3,649,331

Long-term debt	14		1,941,350		3,173,587

Long-term lease liabilities			443,106		551,257

Long-term provisions	13		19,198		17,482

Other long-term liabilities	15		243,592		192,108

Long-term derivative financial instruments	32		1,700		6,480

Deferred tax liabilities	16		31,081		157,406

Retirement benefits obligations	17		163,379		155,045

			7,489,205		7,902,696

Equity

Retained earnings			6,329,107		5,425,005

Accumulated other comprehensive income	18		158,975		39,746

Capital stock	19		1,477,180		1,493,169

Contributed surplus			345,032		314,804

			8,310,294		7,272,724

			15,799,499		15,175,420

See Notes to the Consolidated Financial Statements.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		7

Consolidated Statements of Changes in Equity

For the years ended September 30

(in thousands of Canadian dollars)


	Notes		Retained earnings			Accumulated other comprehensive income			Capital stock			Contributed surplus			Total equity
			$			$			$			$			$

Balance as at September 30, 2022				5,425,005			39,746			1,493,169			314,804			7,272,724

Net earnings				1,631,249			—			—			—			1,631,249

Other comprehensive income				—			119,229			—			—			119,229

Comprehensive income				1,631,249			119,229			—			—			1,750,478

Share-based payment costs				—			—			—			58,214			58,214

Income tax impact associated with stock options				—			—			—			14,423			14,423

Exercise of stock options		19		—			—			106,051			(17,735	)		88,316

Exercise of performance share units		19		(2,885	)		—			13,680			(24,674	)		(13,879	)

Purchase for cancellation of Class A subordinate voting shares		19		(725,538	)		—			(61,368	)		—			(786,906	)

Unrealized commitment to purchase Class A subordinate voting shares				1,276			—			103			—			1,379

Purchase of Class A subordinate voting shares held in trusts		19		—			—			(74,455	)		—			(74,455	)

Balance as at September 30, 2023				6,329,107			158,975			1,477,180			345,032			8,310,294

	Notes		Retained earnings			Accumulated other comprehensive income			Capital stock			Contributed surplus			Total equity
			$			$			$			$			$

Balance as at September 30, 2021				4,732,229			331,580			1,632,705			289,718			6,986,232

Net earnings				1,466,142			—			—			—			1,466,142

Other comprehensive loss				—			(291,834	)		—			—			(291,834	)

Comprehensive income (loss)				1,466,142			(291,834	)		—			—			1,174,308

Share-based payment costs				—			—						48,996			48,996

Income tax impact associated with stock options				—			—			—			460			460

Exercise of stock options		19		—			—			50,236			(8,549	)		41,687

Exercise of performance share units		19		—			—			15,821			(15,821	)		—

Purchase for cancellation of Class A subordinate voting shares		19		(773,366	)		—			(135,290	)		—			(908,656	)

Purchase of Class A subordinate voting shares held in trusts		19		—			—			(70,303	)		—			(70,303	)

Balance as at September 30, 2022				5,425,005			39,746			1,493,169			314,804			7,272,724

See Notes to the Consolidated Financial Statements.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		8

Consolidated Statements of Cash Flows

For the years ended September 30

(in thousands of Canadian dollars)


	Notes	2023			2022
		$			$

Operating activities

Net earnings			1,631,249			1,466,142

Adjustments for:

Amortization, depreciation and impairment	24		519,648			474,622

Deferred income tax recovery	16		(109,496	)		(7,496	)

Foreign exchange gain			(766	)		(254	)

Share-based payment costs			58,214			48,996

Gain on lease terminations and sale of property, plant and equipment			(3,065	)		(6,119	)

Net change in non-cash working capital items and others	28a		16,465			(110,893	)

Cash provided by operating activities			2,112,249			1,864,998

Investing activities

Net change in short-term investments			(81,131	)		(4,881	)

Business acquisitions (considering bank overdraft assumed and cash acquired)	27c		(13,039	)		(571,911	)

Loan receivable			(15,846	)		—

Purchase of property, plant and equipment			(159,769	)		(156,136	)

Proceeds from sale of property, plant and equipment			—			3,790

Additions to contract costs			(102,082	)		(84,283	)

Additions to intangible assets			(147,200	)		(137,621	)

Purchase of long-term investments			(93,275	)		(11,905	)

Proceeds from sale of long-term investments			50,484			51,000

Cash used in investing activities			(561,858	)		(911,947	)

Financing activities

Increase of long-term debt	28c		948			—

Repayment of long-term debt	28c		(79,150	)		(401,654	)

Payment of lease liabilities	28c		(161,211	)		(153,996	)

Repayment of debt assumed in business acquisitions	28c		(56,994	)		(113,036	)

Settlement of derivative financial instruments	28c and 32		2,921			6,258

Withholding taxes remitted on the net settlement of performance share units	19		(13,879	)		—

Purchase of Class A subordinate voting shares held in trusts	19		(74,455	)		(70,303	)

Purchase and cancellation of Class A subordinate voting shares	19		(788,020	)		(913,388	)

Issuance of Class A subordinate voting shares			88,316			41,691

Net change in clients’ funds obligations			(110,852	)		13,330

Cash used in financing activities			(1,192,376	)		(1,591,098	)

Effect of foreign exchange rate changes on cash, cash equivalents and cash included in funds held for clients			8,884			(46,500	)

Net increase (decrease) in cash, cash equivalents and cash included in funds held for clients			366,899			(684,547	)

Cash, cash equivalents and cash included in funds held for clients, beginning of year			1,471,184			2,155,731

Cash, cash equivalents and cash included in funds held for clients, end of year			1,838,083			1,471,184

Cash composition:

Cash and cash equivalents			1,568,291			966,458

Cash included in funds held for clients	5		269,792			504,726

Supplementary cash flow information (Note 28).

See Notes to the Consolidated Financial Statements.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		9

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

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 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 consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

The Company’s consolidated financial statements for the years ended September 30, 2023 and 2022 were authorized for issue by the Board of Directors on November 7, 2023.

3.	Summary of material accounting policies

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated on consolidation.

Subsidiaries are entities controlled by the Company. The Company controls an entity when it is exposed or has right to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the relevant activities of the entity. Subsidiaries are fully consolidated from the date of acquisition and continue to be consolidated until the date control over the subsidiaries ceases.

BASIS OF MEASUREMENT

The consolidated financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities, which have been measured at fair value as described below.

USE OF JUDGEMENTS AND ESTIMATES

The preparation of the consolidated financial statements requires management to make judgements and estimates that affect the reported amounts of assets, liabilities, equity and the accompanying disclosures at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Because the use of judgements and estimates is inherent in the financial reporting process, actual results could differ.

Significant judgements and estimates about the future and other major sources of estimation uncertainty at the end of the reporting period could have a significant risk of causing a material adjustment to the carrying amounts of the following within the next financial year: revenue recognition, deferred tax assets, estimated losses on revenue-generating contracts, goodwill impairment, right-of-use assets, business combinations, provisions for uncertain tax treatments and litigation and claims.

The judgements, apart from those involving estimations, that have the most significant effect on the amounts recognized in the consolidated financial statements are:

Revenue recognition of multiple deliverable arrangements

Assessing whether the deliverables within an arrangement are separate performance obligations requires judgement by management. A deliverable is identified as a separate performance obligation if the customer benefits from it on its own or together with resources that are readily available to the customer and if it is separately identifiable from the other deliverables in the contract. The Company assesses if the deliverables are separately identifiable in the context of the contract by determining if it is highly interrelated with other deliverables in the contract. If these criteria are not met, the deliverables are accounted for as a combined performance obligation.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		10

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3.	Summary of material accounting policies (continued)

USE OF JUDGEMENTS AND ESTIMATES (CONTINUED)

Deferred tax assets

Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable income will be available against which the losses can be utilized. Management judgement is required concerning uncertainties that exist with respect to the timing of future taxable income required to recognize a deferred tax asset. The Company recognizes an income tax benefit only when it is probable that the tax benefit will be realized in the future. In making this judgement, the Company relies on forecasts and the availability of future tax planning strategies.

A description of estimates is included in the respective sections within the Notes to the Consolidated Financial Statements.

REVENUE RECOGNITION, WORK IN PROGRESS AND DEFERRED REVENUE

The Company generates revenue through the provision of managed IT and business process services, business and strategic IT consulting and systems integration services, as well as software solutions as described in Note 1, Description of business.

The Company provides services and products under arrangements that contain various pricing mechanisms. The Company accounts for a contract or a group of contracts when the following criteria are met: the parties to the contract have approved the contract in which their rights, their obligations and the payment terms have been identified, the contract has commercial substance, and the collectability of the consideration is probable.

A contract modification is a change in the scope or price of an existing revenue-generating customer contract. The Company accounts for a contract modification as a separate contract when the scope of the contract increases because of the addition of promised performance obligations and the price of the contract increases by an amount of consideration that reflects its stand-alone selling prices. When the contract is not accounted for as a separate contract, the Company recognizes an adjustment to revenue on the existing contract on a cumulative catch-up basis as at the date of the contract modification or, if the remaining goods and services are distinct performance obligations, the Company recognizes the remaining consideration prospectively.

Revenue is recognized when or as the Company satisfies a performance obligation by transferring a promise of good or service to the customer and are measured at the amount of consideration the Company expects to be entitled to receive, including variable consideration, such as, discounts, volume rebates, service-level penalties, and incentives. Variable consideration is estimated using either the expected value method or most likely amount method and is included only to the extent it is highly probable that a significant reversal of cumulative revenue recognized will not occur. In making this judgement, management will mostly consider all information available at the time (historical, current and forecasted), the Company’s knowledge of the client or the industry, the type of services to be delivered and the specific contractual terms of each arrangement.

Revenue from sales of third party vendor’s products, such as software licenses, hardware or services is recorded on a gross basis when the Company is a principal to the transaction and is recorded net of costs when the Company is acting as an agent between the client and vendor. To determine whether the Company is a principal or an agent, it evaluates whether control is obtained of the goods or services before they are transferred to the client. This is often demonstrated when the Company provides significant integration of the goods and services from a third party vendor into the Company’s goods and services delivered to the client. Other factors considered include whether the Company has the primary responsibility for providing the product or service, has inventory risk before the specified good or service has been transferred to a client, or after transfer of control to a client, and has discretion establishing the selling price.

Relative stand-alone selling price

The Company’s arrangements often include a mix of the services and products as described below. If an arrangement involves the provision of multiple performance obligations, the total arrangement value is allocated to each performance obligations based on its relative stand-alone selling price. When estimating the stand-alone selling price of each performance obligations, the Company maximizes the use of observable prices which are established using the Company’s prices for same or similar deliverables. When observable prices are not available, the Company estimates stand-alone selling prices based on its best estimate.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		11

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3.	Summary of material accounting policies (continued)

REVENUE RECOGNITION, WORK IN PROGRESS AND DEFERRED REVENUE (CONTINUED)

Relative stand-alone selling price (continued)

The best estimate of the stand-alone selling price is the price at which the Company would normally expect to offer the services or products and is established by considering a number of internal and external factors including, but not limited to, geographies, the Company’s pricing policies, internal costs and margins. Additionally, in certain circumstances, the Company may apply the residual approach when estimating the stand-alone selling price of software license products, for which the Company has not yet established the price or has not previously sold on a stand-alone basis.

As an incentive, upon client contract signature, the Company may provide discounts. These incentives are considered in the allocation of the relative stand-alone selling price of the performance obligations. The revenue recognized on the discounted performance obligations in excess of their corresponding invoice is accounted for as a discount incentives in accounts receivable.

The appropriate revenue recognition method is applied for each performance obligation as described below.

Managed IT and business process services

Revenue from managed IT and business process services arrangements is generally recognized over time as the services are provided at the contractual billings, which corresponds with the value provided to the client, unless there is a better measure of performance or delivery.

Business and strategic IT consulting and systems integration services

Revenue from business and strategic IT consulting and systems integration services under time and material arrangements is recognized over time as the services are rendered, and revenue under cost-based arrangements is recognized over time as reimbursable costs are incurred. Contractual billings of such arrangements correspond with the value provided to the client, and therefore revenues are generally recognized when amounts become billable.

Revenue from business and strategic IT consulting and systems integration services under fixed-fee arrangements is recognized using the percentage-of-completion method over time, as the Company has no alternative use for the asset created and has an enforceable right to payment for performance completed to date. The Company primarily uses labour costs to measure the progress towards completion. This method relies on estimates of total expected labour costs, which are compared to labour costs incurred to date, to arrive at an estimate of the progress to completion which determines the percentage of revenue earned to date. Factors considered in the estimates include: changes in scope of the contracts, delays in reaching milestones, complexities in project delivery, availability and retention of qualified IT professionals and/or the ability of the subcontractors to perform their obligation within agreed upon budget and timeframes. Management regularly reviews underlying estimates of total expected labour costs.

Software licenses and Software-as-a-Service (SaaS)

CGI offers its intellectual property (IP) solutions as well as third party solutions in the form of software license arrangements. Most of these arrangements include other services such as implementation, customization and maintenance. For these types of arrangements, revenue from a software license, when identified as a performance obligation, is recognized at a point in time upon delivery. Otherwise when the software is significantly customized, integrated or modified, it is combined with the implementation and customization services and is accounted for as described in the business and strategic IT consulting and systems integration services section above. Revenue from maintenance services for software licenses sold is recognized straight-line over the term of the maintenance period.

CGI also provides its IP solutions in the form of SaaS where the customer cannot terminate the hosting contract and take possession of the software without significant penalty. SaaS are part of the managed IT and business process services offering where revenue is generally recognized over time as the services are provided. Transition activities to bring clients to the SaaS platforms, including hosting set-up and customization, that are not considered distinct performance obligations are capitalized as transition costs and amortized over the service period.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		12

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3.	Summary of material accounting policies (continued)

REVENUE RECOGNITION, WORK IN PROGRESS AND DEFERRED REVENUE (CONTINUED)

Work in progress and deferred revenue

Amounts recognized as revenue in excess of billings are classified as work in progress. Amounts received in advance of the performance of services or delivery of products are classified as deferred revenue. Work in progress and deferred revenue are presented net on a contract by-contract basis. During the year ended September 30, 2023, the revenues recognized from the short-term deferred revenue was not significantly different than what was presented as at September 30, 2022.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of unrestricted cash and short-term investments having a maturity of three months or less from the date of purchase.

SHORT-TERM INVESTMENTS

Short-term investments, comprise generally of term deposits, have remaining maturities over three months, but not more than one year, at the date of purchase.

FUNDS HELD FOR CLIENTS AND CLIENTS’ FUNDS OBLIGATIONS

In connection with the Company’s payroll, tax filing and claims services, the Company collects funds for payment of payroll, taxes and claims, temporarily holds such funds until payment is due, remits the funds to the clients’ employees, appropriate tax authorities or claims holders, files tax returns and handles related regulatory correspondence and amendments. The funds held for clients include cash, short-term investments and long-term bonds. The Company presents the funds held for clients and related obligations separately. Funds held for clients are classified as current assets since, based upon management’s expectations, these funds are held solely for the purpose of satisfying the clients’ funds obligations, which will be repaid within one year of the consolidated balance sheet date. The market fluctuations affect the fair value of the long-term bonds. Due to those fluctuations, funds held for clients might not equal to the clients’ funds obligations.

Interest income earned and realized gains and losses on the disposal of short-term investments and long-term bonds are recorded in revenue in the period that the income is earned, as the collecting, holding and remitting of these funds are critical components of providing these services.

PROPERTY, PLANT AND EQUIPMENT (PP&E)

PP&E are recorded at cost and are depreciated over their estimated useful lives using the straight-line method.



Buildings		10 to 40 years

Leasehold improvements		Lesser of the useful life or lease term

Furniture, fixtures and equipment		3 to 20 years

Computer equipment		3 to 5 years

LEASES

When the Company enters into contractual agreements with suppliers, an assessment is performed to determine if the contract contains a lease. The Company identified lease agreements under the following categories: Properties, Motor vehicles and others as well as Computer equipment.

The Company identifies a lease if it conveys the right to control the use of an identified asset for a specific period in exchange for a determined consideration. At inception, a right-of-use asset for the underlying asset and corresponding lease liability are presented in the consolidated balance sheet measured on a present value basis except for short-term leases (expected term of 12 months or less) and leases with low value underlying asset for which payments are recorded as an expense on a straight-line basis over the lease term.

The right-of-use assets are measured at initial lease liabilities adjusted by lease payments made before the commencement date, indirect costs and cash incentives received. The right-of-use assets are depreciated on a straight-line basis over the expected lease term of the underlying asset.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		13

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3.	Summary of material accounting policies (continued)

LEASES (CONTINUED)

Lease liabilities are measured at present value of non-cancellable payments of the expected lease term, which are mostly made of fixed payments of rent; variable payments that are based on an index or a rate; amounts expected to be payable as residual value guarantees and extension or termination option if reasonably certain to be exercised. Non-lease components, mostly made of fixed maintenance fees and property tax are excluded from the lease liabilities. Payments are recorded as an expense over the lease term as part of property costs.

Discount rate used in the present value calculation is the incremental borrowing rate unless the implicit interest rate in the lease can be readily determined. The Company estimates the incremental borrowing rate for each lease or portfolio of leased assets, as most of the implicit interest rates in the leases are not readily determinable. To calculate the incremental borrowing rate, the Company considers its creditworthiness, the term of the arrangement, any collateral received and the economic environment at the lease date.

The lease liabilities are subsequently adjusted by interest which is recorded as part of net finance costs as well as from lease payments made.

Futhermore, lease liabilities are remeasured (along with the corresponding adjustment to the right-of-use asset), whenever the following situations occur:

–

CONTRACT COSTS

Contract costs are comprised primarily of transition costs incurred to implement long-term managed IT and business process services contracts, including SaaS, as well as incentives.

Transition costs

Transition costs consist mostly of costs associated with the installation of systems and processes, conversion of the client’s applications to the Company’s platforms incurred after the award of managed IT and business process services contracts, including SaaS. Transition costs are comprised essentially of labour costs consisting of employee compensation and related fringe benefits. Labour costs also include subcontractor costs.

Incentives

Occasionally, incentives are granted to clients upon the signing of managed IT and business process services contracts. These incentives are granted in the form of cash payments.

Amortization of contract costs

Contract costs are amortized using the straight-line method over the period services are provided. Amortization of transition costs is included in costs of services, selling and administrative and amortization of incentives is recorded as a reduction of revenue.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		14

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3.	Summary of material accounting policies (continued)

CONTRACT COSTS (CONTINUED)

Impairment of contract costs

When a contract is not expected to be profitable, the estimated loss is first applied to impair the related capitalized contract costs. The excess of the expected loss over the capitalized contract costs is recorded as onerous revenue-generating contracts in provisions. If at a future date the contract returns to profitability, the estimated losses on revenue-generating contracts must be reversed first, and if there is still additional projected profitability then any capitalized contract costs that were impaired must be reversed. The reversal of the impairment loss is limited so that the carrying amount does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of amortization, had no impairment loss been recognized for the contract costs in prior years.

INTANGIBLE ASSETS

Intangible assets consist of software, business solutions and client relationships. Software and business solutions are recorded at cost. Software internally developed is capitalized when it meets specific capitalization criteria related to technical and financial feasibility and when the Company demonstrates its ability and intention to use it. Business solutions developed internally and marketed are capitalized when they meet specific capitalization criteria related to technical, market and financial feasibility. Software, business solutions and client relationships acquired through business combinations are initially recorded at their fair value based on the present value of expected future cash flows, which involves estimates, such as the forecasting of future cash flows and discount rates.

Amortization of intangible assets

The Company amortizes its intangible assets using the straight-line method over their estimated useful lives.



Software		1 to 8 years

Business solutions		3 to 10 years

Client relationships		5 to 7 years

IMPAIRMENT OF PP&E, RIGHT-OF-USE ASSETS, INTANGIBLE ASSETS AND GOODWILL

Timing of impairment testing

The carrying values of PP&E, right-of-use assets, intangible assets and goodwill are reviewed for impairment when events or changes in circumstances indicate that the carrying value may be impaired. The Company assesses at each reporting date whether any such events or changes in circumstances exist. The carrying values of intangible assets not available for use are tested for impairment annually as at September 30. Goodwill is also tested for impairment annually during the fourth quarter of each fiscal year.

Impairment testing

If any indication of impairment exists or when annual impairment testing for an asset is required, the Company estimates the recoverable amount of the asset or cash-generating unit (CGU) to which the asset relates to determine the extent of any impairment loss. The recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use (VIU) to the Company. The Company mainly uses the VIU. In assessing the VIU, estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. In determining fair value less costs of disposal, recent market transactions are taken into account, if available. If the recoverable amount of an asset or a CGU is estimated to be less than its carrying amount, the carrying amount is reduced to its recoverable amount. An impairment loss is recognized immediately in the consolidated statements of earnings.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		15

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3.	Summary of material accounting policies (continued)

IMPAIRMENT OF PP&E, RIGHT-OF-USE ASSETS, INTANGIBLE ASSETS AND GOODWILL (CONTINUED)

Impairment testing (continued)

Goodwill acquired through business combinations is allocated to the CGU or group of CGUs that are expected to benefit from acquired work force and synergies of the related business combination. The group of CGUs that benefit from the acquired work force and synergies correspond to the Company’s operating segments. For goodwill impairment testing purposes, the group of CGUs that represents the lowest level within the Company at which management monitors goodwill is the operating segment level.

The recoverable amount of each operating segment has been determined based on the VIU calculation which includes estimates about their future financial performance based on cash flows approved by management covering a period of five years. Key assumptions used in the VIU calculations are the pre-tax discount rate applied and the long-term growth rate of net operating cash flows. In determining these assumptions, management has taken into consideration the current economic environment and its resulting impact on expected growth and discount rates. The cash flow projections reflect management’s expectations of the operating segment’s operating performance and growth prospects in the operating segment’s market. The pre-tax discount rate applied to an operating segment is derived from the weighted average cost of capital (WACC). Management considers factors such as country risk premium, risk-free rate, size premium and cost of debt to derive the WACC. Impairment losses relating to goodwill cannot be reversed in future periods.

For impaired assets, other than goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the recoverable amount of the asset. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the recoverable amount of the asset since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of amortization, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated statements of earnings.

LONG-TERM FINANCIAL ASSETS

Long-term financial assets are comprised mainly of long-term investments bonds which are presented as long-term based on management’s intentions.

BUSINESS COMBINATIONS

The Company accounts for its business combinations using the acquisition method. Under this method, the consideration transferred is measured at fair value. Acquisition-related and integration costs associated with the business combination are expensed as incurred or when a present legal or constructive obligation exists. The Company recognizes goodwill as the excess of the cost of the acquisition over the net identifiable tangible and intangible assets acquired and liabilities assumed at their acquisition-date fair values. The goodwill recognized is composed of the future economic value associated to acquired work force and synergies with the Company’s operations which are primarily due to reduction of costs and new business opportunities. Management makes assumptions when determining the acquisition-date fair values of the identifiable tangible and intangible assets acquired and liabilities assumed which involve estimates, such as the forecasting of future cash flows, discount rates and the useful lives of the assets acquired. Subsequent changes in fair values are recorded as part of the purchase price allocation and therefore result in corresponding goodwill adjustments if they qualify as measurement period adjustments. The measurement period is the period between the date of acquisition and the date where all significant information necessary to determine the fair values is available, not to exceed 12 months. All other subsequent changes in judgements and estimates are recognized in the consolidated statements of earnings.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		16

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3.	Summary of material accounting policies (continued)

EARNINGS PER SHARE

Basic earnings per share is based on the weighted average number of shares outstanding during the period. Diluted earnings per share is determined using the treasury stock method to evaluate the dilutive effect of stock options and performance share units (PSUs).

RESEARCH AND SOFTWARE DEVELOPMENT COSTS

Research costs are charged to earnings in the period in which they are incurred, net of related tax credits. Development costs related to software and business solutions are charged to earnings in the year they are incurred, net of related tax credits, unless they meet specific capitalization criteria related to technical, market and financial feasibility as described in the Intangible assets section above.

TAX CREDITS

The Company follows the income approach to account for research and development (R&D) and other tax credits, whereby tax credits are recorded when there is a reasonable assurance that the assistance will be received and that the Company will comply with all relevant conditions. Under this method, tax credits related to operating expenditures are recorded as a reduction of the related expenses and recognized in the period in which the related expenditures are charged to earnings. Tax credits related to capital expenditures are recorded as a reduction of the cost of the related assets. The tax credits recorded are based on management’s best estimates of amounts expected to be received and are subject to audit by the taxation authorities.

INCOME TAXES

Income taxes are accounted for using the liability method of accounting.

Current income taxes are recognized with respect to the amounts expected to be paid or recovered under the tax rates and laws that have been enacted or substantively enacted at the balance sheets date.

Deferred tax assets and liabilities are determined based on deductible or taxable temporary differences between the amounts reported for consolidated financial statement purposes and tax values of the assets and liabilities using enacted or substantively enacted tax rates that will be in effect for the year in which the differences are expected to be recovered or settled. Deferred tax assets and liabilities are recognized in earnings, in other comprehensive income or in equity based on the classification of the item to which they relate.

Deferred tax assets are recognized for unused tax losses and deductible temporary differences to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Once this assessment is made, the Company considers the analysis of forecasts and future tax planning strategies. Estimates of taxable profit are made based on the forecast by jurisdiction on an undiscounted basis. In addition, management considers factors such as substantively enacted tax rates, the history of the taxable profits and availability of tax strategies.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		17

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3.	Summary of material accounting policies (continued)

PROVISIONS

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Provisions are discounted using a current pre-tax rate when the impact of the time value of money is material. The increase in the provisions due to the passage of time is recognized as finance costs.

The accrued litigation and legal claims provisions are based on historical experience, current trends and other assumptions that are believed to be reasonable under the circumstances. Estimates include the period in which the underlying cause of the claim occurred and the degree of probability of an unfavourable outcome.

Decommissioning liabilities pertain to leases of buildings where certain arrangements require premises to be returned to their original state at the end of the lease term. The provision is determined using the present value of the estimated future cash outflows.

Provisions for onerous revenue-generating contracts are recorded when remaining unavoidable costs of fulfilling the contract exceed the remaining estimated revenue from the contract. Management regularly reviews arrangement profitability and the underlying estimates.

Provisions for onerous supplier contracts are recorded when the unavoidable net cash flows from honoring the contract are negative. The provision represents the lowest of the costs to fulfill the contract and the penalties to exit the contract. Those are generally related to non-lease components of vacated leased premises that can be incurred under specific initiatives.

Severance provisions are recognized when a detailed formal plan identifies the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs, appropriate timelines and has been communicated to those affected by it.

TRANSLATION OF FOREIGN CURRENCIES

The Company’s consolidated financial statements are presented in Canadian dollars, which is also the parent company’s functional currency. Each entity in the Company determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Functional currency is the currency of the primary economic environment in which the entity operates.

Foreign currency transactions and balances

Revenue, expenses and non-monetary assets and liabilities denominated in foreign currencies are recorded at the rate of exchange prevailing at the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated at exchange rates prevailing at the balance sheets date. Unrealized and realized translation gains and losses are reflected in the consolidated statements of earnings.

Foreign operations

For foreign operations that have functional currencies different from the Company, assets and liabilities denominated in a foreign currency are translated at exchange rates in effect at the balance sheets date. Revenue and expenses are translated at average exchange rates prevailing during the period. Resulting unrealized gains or losses on translating financial statements of foreign operations are reported in other comprehensive income.

For foreign operations with the same functional currency as the Company, monetary assets and liabilities are translated at the exchange rates in effect at the balance sheets date and non-monetary assets and liabilities are translated at historical exchange rates. Revenue and expenses are translated at average exchange rates during the period. Translation exchange gains or losses of such operations are reflected in the consolidated statements of earnings.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		18

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3.	Summary of material accounting policies (continued)

SHARE-BASED PAYMENTS

Equity-settled plans

The Company operates PSU and equity-settled stock option plans under which the Company receives services from employees, officers and directors as consideration for equity instruments.

The fair value of those share-based payments is established on the closing price of Class A subordinate voting shares of the Company on the Toronto Stock Exchange (TSX) for the PSUs and the grant date using the Black-Scholes option pricing model for the stock options. The number of PSUs and stock options expected to vest are estimated on the grant date and subsequently revised on each reporting date. For stock options, the estimation of fair value requires making assumptions for the most appropriate inputs to the valuation model including the expected life of the option and expected stock price volatility. The fair value of share-based payments, adjusted for expectations related to performance conditions and forfeitures, are recognized as share-based payment costs over the vesting period in earnings with a corresponding credit to contributed surplus on a graded-vesting basis if they vest annually or on a straight-line basis if they vest at the end of the vesting period.

When PSUs are exercised, the recorded fair value of PSUs is removed from contributed surplus and credited to capital stock. When stock options are exercised, any consideration paid is credited to capital stock and the recorded fair value of the stock options is removed from contributed surplus and credited to capital stock.

Share purchase plan

The Company operates a share purchase plan for eligible employees. Under this plan, the Company matches the contributions made by employees up to a maximum percentage of the employee’s salary. The Company’s contributions to the plan are recognized in salaries and other employee costs within costs of services, selling and administrative.

Cash-settled deferred share units

The Company operates a deferred share unit (DSU) plan to compensate the external members of the Board of Directors. The expense is recognized within costs of services, selling and administrative for each DSU granted equal to the closing price of Class A subordinate voting shares of the Company on the TSX at the date on which DSUs are awarded and a corresponding liability is recorded in accrued compensation and employee-related liabilities. After the grant date, the DSU liability is remeasured for subsequent changes in the fair value of the Company’s shares.

FINANCIAL INSTRUMENTS

All financial instruments are initially measured at their fair value and are subsequently classified either at amortized cost, at fair value through earnings (FVTE) or at fair value through other comprehensive income (FVOCI). Financial assets are classified based on the Company’s management model of such instruments and their contractual cash flows they generate. Financial liabilities are classified and measured at amortized cost, unless they are held for trading and classified as FVTE.

The Company has made the following classifications:

FVTE

Cash and cash equivalents, cash included in funds held for clients, derivative financial instruments and deferred compensation plan assets within long-term financial assets are measured at fair value at the end of each reporting period and the resulting gains or losses are recorded in the consolidated statements of earnings.

Amortized Cost

Trade accounts receivable, long-term receivables within long-term financial assets, short-term investments in funds held for clients, accounts payable and accrued liabilities, accrued compensation and employee-related liabilities, long-term debt and clients’ funds obligations are measured at amortized cost using the effective interest method. Financial assets classified at amortized cost are subject to impairment. For trade accounts receivable and work in progress, the Company applies the simplified approach to measure expected credit losses, which requires lifetime expected loss allowance to be recorded upon initial recognition of the financial assets.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		19

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3.	Summary of material accounting policies (continued)

FINANCIAL INSTRUMENTS (CONTINUED)

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 are measured at fair value through other comprehensive income and are subject to impairment for which the Company uses the low credit risk exemption.

The unrealized gains and losses, net of applicable income taxes, are recorded in other comprehensive income. Interest income measured using the effective interest method and realized gains and losses on derecognition are recorded in the consolidated statements of earnings.

Transaction costs are comprised primarily of legal, accounting and other costs directly attributable to the acquisition or issuance of financial instruments. Transaction costs related to financial instruments other than FVTE are included in the initial recognition of the corresponding asset or liability and are amortized using effective interest method. Transaction costs related to the unsecured committed revolving credit facility are included in other long-term assets and are amortized using the straight-line method over the expected life of the underlying agreement.

Financial assets are derecognized if the contractual rights to the cash flows from the financial asset expire or the asset is transferred and the transfer qualifies for derecognition as substantially all the risks and rewards of ownership of the financial asset have been transferred.

Fair value hierarchy

Fair value measurements recognized on the balance sheets 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.

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING TRANSACTIONS

The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign currency exchange risks.

Derivative financial instruments are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting date. The resulting gain or loss is recognized in the consolidated statements of earnings, unless the derivative is designated and is effective as a hedging instrument, in which event the timing of the recognition in the consolidated statements of earnings depends on the nature of the hedge relationship. The cash flows of the hedging instruments are classified in the same manner as the cash flows of the item being hedged.

At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management’s objective and strategy for undertaking the hedge. The documentation includes the identification of the nature of the risk being hedged, the economic relationship between the hedged item and the hedging instruments which should not be dominated by credit risk, the hedge ratio consistent with the risk management strategy pursued and how the Company will assess the effectiveness of the hedging relationship on an ongoing basis.

Management evaluates hedge effectiveness at inception of the hedge instrument and quarterly thereafter generally based on a managed hedge ratio of 1 for 1. Hedge effectiveness is measured prospectively as the extent to which changes in the fair value or cash flows of the derivative offsets the changes in the fair value or cash flows of the underlying hedged instrument or risk when there is a significant mismatch between the terms of the hedging instrument and the hedged item. Any meaningful imbalance is considered ineffectiveness in the hedge and accounted for accordingly in the consolidated statements of earnings.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		20

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3.	Summary of material accounting policies (continued)

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING TRANSACTIONS (CONTINUED)

Hedges of net investments in foreign operations

The Company uses cross-currency swaps and foreign currency denominated long-term debt to hedge portions of the Company’s net investments in its U.S. and European operations. Foreign exchange translation gains or losses on the net investments and the effective portions of gains or losses on instruments hedging the net investments are recorded in other comprehensive income. Gains or losses relating to the ineffective portion are recognized in consolidated statements of earnings. When the hedged net investment is disposed of, the relevant amount in other comprehensive income is transferred to earnings as part of the gain or loss on disposal.

Cash flow hedges of future revenue and long-term debt

The majority of the Company’s revenue and costs are denominated in a currency other than the Canadian dollar. The risk of foreign exchange fluctuations impacting the results is substantially mitigated by matching the Company’s costs with revenue denominated in the same currency. In certain cases where there is a substantial imbalance for a specific currency, the Company enters into foreign currency forward contracts to hedge the variability in the foreign currency exchange rates.

The Company also uses interest rate and cross-currency swaps to hedge either the cash flow exposure or the foreign exchange exposure of the long-term debt.

The effective portion of the change in fair value of the derivative financial instruments is recognized in other comprehensive income and the ineffective portion, if any, in the consolidated statements of earnings. The effective portion of the change in fair value of the derivatives is reclassified out of other comprehensive income into the consolidated statements of earnings when the hedged item is recognized in the consolidated statements of earnings.

Cost of hedging

The Company has elected to account for forward element and foreign currency basis spread of forward contracts and cross-currency swaps as costs of hedging. In such cases, the deferred costs (gains) of hedging, net of applicable income taxes, are recognized as a separate component of the accumulated other comprehensive income and reclassified in the consolidated statements of earnings when the hedged item is derecognized.

EMPLOYEE BENEFITS

The Company operates both defined benefit and defined contribution post-employment benefit plans.

The cost of defined contribution plans is charged to the consolidated statements of earnings on the basis of contributions payable by the Company during the year.

For defined benefit plans, the defined benefit obligations are calculated by independent actuaries using the projected unit credit method. The retirement benefits obligations in the consolidated balance sheets represent the present value of the defined benefit obligations as reduced by the fair value of plan assets. The retirement benefits assets are recognized to the extent that the Company can benefit from refunds or a reduction in future contributions. Retirement benefits plans that are funded by the payment of insurance premiums are treated as defined contribution plans unless the Company has an obligation either to pay the benefits directly when they fall due or to pay further amounts if assets accumulated with the insurer do not cover all future employee benefits. In such circumstances, the plan is treated as a defined benefit plan.

Insurance policies are treated as plan assets of a defined benefit plan if the proceeds of the policy:

Can only be used to fund employee benefits;

Are not available to the Company’s creditors; and

Either cannot be paid to the Company unless the proceeds represent surplus assets not needed to meet all the benefit obligations or are a reimbursement for benefits already paid by the Company.

Insurance policies that do not meet the above criteria are treated as non-current investments and are held at fair value as long-term financial assets in the consolidated balance sheets.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		21

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3.	Summary of material accounting policies (continued)

EMPLOYEE BENEFITS (CONTINUED)

The actuarial valuations used to determine the cost of defined benefit pension plans and their present value involve making assumptions such as discount rates, future salary and pension increases, inflation rates and mortality. Any changes in assumptions will impact the carrying amount of pension obligations. In determining the appropriate discount rate, management considers the interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability.

The current service cost is recognized in the consolidated statements of earnings under costs of services, selling and administrative. The net interest cost calculated by applying the discount rate to the net defined benefit liabilities or assets is recognized as net finance cost or income. When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefits that relates to past services or the gains or losses on curtailment is recognized immediately in the consolidated statements of earnings. The gains or losses on the settlement of a defined benefit plan are recognized when the settlement occurs.

Remeasurements on defined benefit plans include actuarial gains and losses, changes in the effect of the asset ceiling and the return on plan assets, excluding the amount included in net interest on the net defined liabilities or assets. Remeasurements are charged or credited to other comprehensive income in the period in which they arise.

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

The implementation of these standard amendments resulted in no significant impact on the Company’s consolidated financial statements.

The following standard amendments have been adopted by the Company on May 23, 2023:

International Tax Reform – Pillar Two Model Rules – Amendments to IAS 12

At September 30, 2023, the application of the new standard amendments had no impact on the Company’s consolidated financial statements.

The following standard amendments have been early adopted and applied retrospectively by the Company for the year ended September 30, 2023:

Disclosure of Accounting Policy Information – Amendments to IAS 1 and IFRS Practice Statement 2

The implementation of these standard amendments resulted in no significant impact on the Company’s consolidated financial statements.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		22

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3.	Summary of material accounting policies (continued)

FUTURE ACCOUNTING STANDARD CHANGES

The following standard amendments are effective as of October 1, 2023:

Definition of Accounting Estimates – Amendments to IAS 8

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 implementation of these standard amendments will result in no impact on the Company’s consolidated financial statements.

Classification of Liabilities as Current or Non-current and Information about long-term debt with covenants – Amendments to IAS 1

In January 2020, the IASB amended IAS 1 Presentation of Financial Statements, clarifying that the classification of liabilities as current or non-current is based on existing rights at the end of the reporting period, independent of whether the Company will exercise its right to defer settlement of a liability. Subsequently, in October 2022, the IASB introduced additional amendments to IAS 1, emphasizing that covenants for long-term debt, regardless whether the covenants were compliant after the reporting date, should not affect debt classification; instead, companies are required to disclose information about these covenants in the notes accompanying their financial statements.

Supplier finance arrangements - Amendments to IAS 7 and IFRS 7


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		23

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

4.	Accounts receivable


	As at September 30, 2023		As at September 30, 2022
	$		$

Trade (Note 32)		1,152,880		1,106,187

R&D and other tax credits¹		157,668		163,608

Discount incentives		57,714		47,906

Other		56,855		45,844

		1,425,117		1,363,545

¹	R&D and other tax credits were related to government programs mainly in Canada, the United States, and France.

5.	Funds held for clients


	As at September 30, 2023		As at September 30, 2022
	$		$

Cash (Note 32)		269,792		504,726

Short-term investments		80,000		—

Long-term bonds (Note 32)		138,935		94,113

		488,727		598,839


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		24

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

6.	Property, plant and equipment


	Land and buildings			Leasehold improvements			Furniture, fixtures and equipment			Computer equipment			Total
	$			$			$			$			$
Cost

As at September 30, 2022		77,371			262,972			152,083			598,725			1,091,151

Additions		1,933			29,301			16,145			111,011			158,390

Disposals/retirements		(167	)		(39,269	)		(20,477	)		(100,769	)		(160,682	)

Foreign currency translation adjustment		2,244			3,800			1,520			11,404			18,968

As at September 30, 2023		81,381			256,804			149,271			620,371			1,107,827

Accumulated depreciation

As at September 30, 2022		23,467			170,647			101,302			426,127			721,543

Depreciation expense (Note 24)		3,234			28,697			12,675			98,759			143,365

Impairment (Note 24)		—			2,163			423			—			2,586

Disposals/retirements		(167	)		(39,269	)		(20,477	)		(100,769	)		(160,682	)

Foreign currency translation adjustment		445			3,022			787			7,485			11,739

As at September 30, 2023		26,979			165,260			94,710			431,602			718,551

Net carrying amount as at September 30, 2023		54,402			91,544			54,561			188,769			389,276

	Land and buildings			Leasehold improvements			Furniture, fixtures and equipment			Computer equipment			Total
	$			$			$			$			$
Cost

As at September 30, 2021		78,907			244,824			150,617			592,892			1,067,240

Additions		5,202			24,040			9,344			117,196			155,782

Additions - business acquisitions (Note 27c)		—			4,776			984			2,404			8,164

Disposals/retirements		(4,116	)		(6,997	)		(6,466	)		(88,261	)		(105,840	)

Foreign currency translation adjustment		(2,622	)		(3,671	)		(2,396	)		(25,506	)		(34,195	)

As at September 30, 2022		77,371			262,972			152,083			598,725			1,091,151

Accumulated depreciation

As at September 30, 2021		21,961			156,012			97,693			439,482			715,148

Depreciation expense (Note 24)		2,888			24,127			11,815			94,821			133,651

Impairment (Note 24)		—			858			—			—			858

Disposals/retirements		(893	)		(6,958	)		(6,424	)		(88,261	)		(102,536	)

Foreign currency translation adjustment		(489	)		(3,392	)		(1,782	)		(19,915	)		(25,578	)

As at September 30, 2022		23,467			170,647			101,302			426,127			721,543

Net carrying amount as at September 30, 2022		53,904			92,325			50,781			172,598			369,608


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		25

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

7.	Right-of-use assets


	Properties			Motor vehicles and others			Computer equipment			Total

	$			$			$			$

Cost

As at September 30, 2022		1,049,445			180,164			40,689			1,270,298

Additions		32,772			48,883			1,030			82,685

Change in estimates and lease modifications		13,940			—			—			13,940

Disposals/retirements		(101,670	)		(36,792	)		(3,121	)		(141,583	)

Foreign currency translation adjustment		28,423			7,246			345			36,014

As at September 30, 2023		1,022,910			199,501			38,943			1,261,354

Accumulated depreciation

As at September 30, 2022		610,007			88,923			36,247			735,177

Depreciation expense (Note 24)		103,249			36,988			2,793			143,030

Impairment (Note 24)		9,649			—			—			9,649

Disposals/retirements		(94,676	)		(31,700	)		(3,121	)		(129,497	)

Foreign currency translation adjustment		15,792			4,589			293			20,674

As at September 30, 2023		644,021			98,800			36,212			779,033

Net carrying amount as at September 30, 2023		378,889			100,701			2,731			482,321

	Properties			Motor vehicles and others			Computer equipment			Total

	$			$			$			$

Cost

As at September 30, 2021		1,080,867			174,354			39,093			1,294,314

Additions		90,830			25,554			3,683			120,067

Additions - business acquisitions (Note 27c)		21,622			492			—			22,114

Change in estimates and lease modifications		(7,946	)		—			—			(7,946	)

Disposals/retirements		(88,546	)		(11,704	)		—			(100,250	)

Foreign currency translation adjustment		(47,382	)		(8,532	)		(2,087	)		(58,001	)

As at September 30, 2022		1,049,445			180,164			40,689			1,270,298

Accumulated depreciation

As at September 30, 2021		606,558			67,975			33,574			708,107

Depreciation expense (Note 24)		103,489			33,260			4,546			141,295

Impairment (Note 24)		3,858			—			—			3,858

Disposals/retirements		(74,973	)		(7,749	)		—			(82,722	)

Foreign currency translation adjustment		(28,925	)		(4,563	)		(1,873	)		(35,361	)

As at September 30, 2022		610,007			88,923			36,247			735,177

Net carrying amount as at September 30, 2022		439,438			91,241			4,442			535,121


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		26

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

8.	Contract costs


			As at September 30, 2023						As at September 30, 2022
	Cost		Accumulated amortization and impairment		Net carrying amount		Cost		Accumulated amortization and impairment		Net carrying amount
	$		$		$		$		$		$

Transition costs		549,848		250,847		299,001		481,836		225,468		256,368

Incentives		52,331		42,886		9,445		50,331		45,087		5,244

		602,179		293,733		308,446		532,167		270,555		261,612

9.	Intangible assets


	Software			Software internally developed			Business solutions acquired			Business solutions internally developed			Client relationships			Total
	$			$			$			$			$			$

Cost

As at September 30, 2022		238,940			104,486			78,580			734,021			1,231,393			2,387,420

Additions		33,963			9,130			19,811			111,894			—			174,798

Business acquisitions (Note 27c)		—			—			—			—			(8,951	)		(8,951	)

Disposals/retirements		(49,103	)		(3,900	)		(9,002	)		—			—			(62,005	)

Foreign currency translation adjustment		4,873			509			750			(4,175	)		25,627			27,584

As at September 30, 2023		228,673			110,225			90,139			841,740			1,248,069			2,518,846

Accumulated amortization and impairment

As at September 30, 2022		189,639			65,323			73,094			408,298			1,035,107			1,771,461

Amortization expense (Note 24)		30,475			13,421			3,274			69,053			47,824			164,047

Disposals/retirements		(49,103	)		(3,900	)		(9,002	)		—			—			(62,005	)

Foreign currency translation adjustment		4,227			343			588			(2,889	)		19,971			22,240

As at September 30, 2023		175,238			75,187			67,954			474,462			1,102,902			1,895,743

Net carrying amount as at September 30, 2023		53,435			35,038			22,185			367,278			145,167			623,103

	Software			Software internally developed			Business solutions acquired			Business solutions internally developed			Client relationships			Total
	$			$			$			$			$			$

Cost

As at September 30, 2021		246,584			98,891			78,641			624,850			1,154,620			2,203,586

Additions		23,400			10,111			1,160			103,309			—			137,980

Additions - business acquisitions (Note 27c)		3,479			—			1,630			—			105,538			110,647

Disposals/retirements		(29,419	)		(2,647	)		(2,007	)		(28,932	)		—			(63,005	)

Foreign currency translation adjustment		(5,104	)		(1,869	)		(844	)		34,794			(28,765	)		(1,788	)

As at September 30, 2022		238,940			104,486			78,580			734,021			1,231,393			2,387,420

Accumulated amortization and impairment

As at September 30, 2021		196,504			53,834			72,731			365,597			1,008,127			1,696,793

Amortization expense (Note 24)		26,603			14,711			3,201			48,211			47,214			139,940

Impairment (Note 24)		—			519			—			2,840			—			3,359

Disposals/retirements		(29,419	)		(2,647	)		(2,007	)		(28,932	)		—			(63,005	)

Foreign currency translation adjustment		(4,049	)		(1,094	)		(831	)		20,582			(20,234	)		(5,626	)

As at September 30, 2022		189,639			65,323			73,094			408,298			1,035,107			1,771,461

Net carrying amount as at September 30, 2022		49,301			39,163			5,486			325,723			196,286			615,959


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		27

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

10.

Other long-term assets


	As at September 30, 2023	As at September 30, 2022
	$	$

Long-term prepaid services	28,674	28,720

Insurance contracts held to fund defined benefit pension and life assurance arrangements - reimbursement rights (Note 17)	19,458	18,877

Retirement benefits assets (Note 17)	836	47,071

Deposits	15,634	17,189

Deferred financing fees	2,531	2,827

Other	17,643	24,982

	84,776	139,666

11.

Long-term financial assets


	As at September 30, 2023	As at September 30, 2022
	$	$

Deferred compensation plan assets (Notes 17 and 32)	88,076	71,863

Long-term investments (Note 32)	17,113	16,826

Long-term receivables	20,774	10,590

Long-term derivative financial instruments (Note 32)	22,005	237,877

	147,968	337,156


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		28

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

12.

Goodwill

The following tables present information on the Company’s operations which are managed through the following nine operating segments: Western and Southern Europe (primarily France, Portugal and Spain); 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 current 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 Company completed the annual impairment test during the fourth quarter of the fiscal year 2023 and did not identify any impairment.

The movements in goodwill were as follows:


	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 Central- East Europe		Asia Pacific			Total
	$		$			$		$			$		$			$		$		$			$

As at September 30, 2022		1,440,019		1,278,176			1,142,148		1,108,267			1,345,346		834,960			567,628		501,307		263,605			8,481,456

Business acquisitions (Note 27)		21,001		—			—		—			—		(67	)		—		—		—			20,934

Foreign currency translation adjustment		94,710		(19,799	)		—		(17,564	)		37,970		61,916			37,257		30,822		(3,252	)		222,060

As at September 30, 2023		1,555,730		1,258,377			1,142,148		1,090,703			1,383,316		896,809			604,885		532,129		260,353			8,724,450

Key assumptions in goodwill impairment testing

The key assumptions for the CGUs are disclosed in the following tables for the years ended September 30:


2023	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 Central- East Europe		Asia Pacific
	%		%		%		%		%		%		%		%		%

Pre-tax WACC		11.7		11.9		11.0		10.3		12.1		13.7		12.2		12.1		20.3

Long-term growth rate of net operating cash flows¹		2.0		2.0		2.0		2.0		2.0		2.0		2.0		2.0		2.0

2022	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 Central- East Europe		Asia Pacific
	%		%		%		%		%		%		%		%		%

Pre-tax WACC		10.0		10.6		10.7		9.2		10.5		10.6		10.7		10.7		19.2

Long-term growth rate of net operating cash flows¹		1.8		2.0		2.0		2.0		2.0		1.9		2.0		1.9		2.0

The long-term growth rate is based on the lower of published industry research growth and 2.0%.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		29

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

13.

Provisions


	Severances¹			Decommissioning liabilities²			Others³			Total
	$			$			$			$

As at September 30, 2022		10,644			22,930			17,011			50,585

Additional provisions		25,839			1,771			18,608			46,218

Utilized amounts		(30,038	)		(4,337	)		(15,237	)		(49,612	)

Reversals of unused amounts		(1,322	)		(1,680	)		(2,634	)		(5,636	)

Discount rate adjustment and imputed interest		—			186			—			186

Foreign currency translation adjustment		596			1,102			724			2,422

As at September 30, 2023		5,719			19,972			18,472			44,163

Current portion		5,719			3,717			15,529			24,965

Non-current portion		—			16,255			2,943			19,198

¹	See Note 25, Cost optimization program and Note 27d), Investments in subsidiaries.

As at September 30, 2023, the decommissioning liabilities were based on the expected cash flows of $20,573,000 and were discounted at a weighted average rate of 0.98%. The timing of settlements of these obligations ranges between one and seventeen years as at September 30, 2023. The reversals of unused amounts are mostly due to favourable settlements.

³	As at September 30, 2023, others included provisions on revenue-generating contracts, litigation and claims as well as onerous supplier contracts, mainly under the cost optimization program (Note 25) and acquisition-related and integration costs (Note 27d).


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		30

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

14.

Long-term debt


	As at September 30, 2023		As at September 30, 2022

	$		$

2014 U.S. Senior unsecured notes repayable, in two tranches, totaling $473,830 (U.S.$350,000) in September 2024¹		473,808		550,177

2021 U.S. Senior unsecured notes of $812,280 (U.S.$600,000) repayable in September 2026 and of $541,520 (U.S.$400,000) repayable in September 2031²		1,342,714		1,361,974

2021 CAD Senior unsecured notes of $600,000 repayable in September 2028³		596,550		595,900

Unsecured committed term loan credit facility⁴		676,886		687,705

Other long-term debt		10,363		71,278

		3,100,321		3,267,034

Current portion		1,158,971		93,447

		1,941,350		3,173,587

As at September 30, 2023, an amount of $473,830,000 was borrowed, less financing fees. The private placement is comprised of two tranches of Senior U.S. unsecured notes with a maturity of 1 year and a weighted average interest rate of 4.01% (3.98% in 2022) (2014 U.S. Senior Notes). In September 2023, the Company repaid the sixth of the seven yearly scheduled repayments of U.S.$50,000,000 on a tranche of the Senior U.S. unsecured notes for a total amount of $67,765,000 and settled the related cross-currency swaps (Note 32). The Senior unsecured notes contain covenants that require the Company to maintain certain financial ratios (Note 33). As at September 30, 2023, the Company was in compliance with these covenants.

²	As at September 30, 2023, an amount of $1,353,800,000 was borrowed less financing fees. The 2021 U.S. Senior Notes are comprised of two series of Senior U.S. unsecured notes with a weighted average maturity of 5 years and a weighted average interest rate of 1.79%.

³	As at September 30, 2023, an amount of $600,000,000 was borrowed, less financing fees. The 2021 CAD Senior Notes are due in September 2028, with an interest rate of 2.10%.

⁴

As at September 30, 2023, an amount of $676,900,000 was borrowed, less financing fees. This facility bears interest based on the 1 month Secured Overnight Financing Rate (SOFR) rate, plus a variable margin that is determined based on the Company’s leverage ratio. The unsecured committed term loan credit facility is due in December 2023, with an interest rate of 6.43%. The unsecured committed term loan credit facility contains covenants that require the Company to maintain certain financial ratios (Note 33). As at September 30, 2023, the Company was in compliance with these covenants.

As a result of the interbank offered rates (IBORs) reform and the related expiry of the USD London Interbank Offered Rate (Libor) rate effective June 30, 2023, the Company renegotiated the unsecured committed term loan credit facility and the related cross-currency interest rate swaps (the hedging instruments) both expiring in December 2023 to transition to the 1 month Secured Overnight Financing Rate (SOFR) rate from the 1 month USD Libor rate. The change in rate resulted in no significant impact on the Company’s consolidated financial statements.

The Company has an unsecured committed revolving credit facility available for an amount of $1,500,000,000 that expires in November 2027. This facility bears interest at variable reference rate benchmarks, plus a variable margin that is determined based on the Company’s leverage ratio. As at September 30, 2023, there was no amount drawn upon this facility. An amount of $4,142,000 has been committed against this facility to cover various letters of credit issued for clients and other parties. On November 6, 2023, the unsecured committed revolving credit facility was extended by one year to November 6, 2028 and can be further extended. There were no material changes in the terms and conditions including interest rates and banking covenants. The unsecured committed revolving credit facility contains covenants that require the Company to maintain certain financial ratios (Note 33). As at September 30, 2023, the Company was in compliance with these covenants.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		31

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

15.

Other long-term liabilities


	As at September 30, 2023		As at September 30, 2022
	$		$

Deferred revenue		112,370		90,371

Deferred compensation plan liabilities (Note 17)		97,745		81,452

Other		33,477		20,285

		243,592		192,108

16.

Income taxes


	Year ended September 30

	2023			2022
	$			$

Current income tax expense

Current income tax expense in respect of the current year		697,402			506,608

Adjustments recognized in the current year in relation to the income tax expense of prior years		(21,242	)		1,705

Total current income tax expense		676,160			508,313

Deferred income tax recovery

Deferred income tax (recovery) expense relating to the origination and reversal of temporary differences		(119,249	)		359

Adjustments recognized in the current year in relation to the deferred income tax recovery of prior years		9,753			(7,855	)

Total deferred income tax recovery		(109,496	)		(7,496	)

Total income tax expense		566,664			500,817

The Company’s effective income tax rate differs from the combined Federal and Provincial Canadian statutory tax rate as follows:


	Year ended September 30

	2023			2022
	%			%

Company’s statutory tax rate		26.5			26.5

Effect of foreign tax rate differences		(0.6	)		(1.0	)

Final determination from agreements with tax authorities and expirations of statutes of limitations		(0.5	)		(0.4	)

Non-deductible and tax exempt items		0.1			—

Minimum income tax charge		0.3			0.4

Effective income tax rate		25.8			25.5


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		32

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

16.

Income taxes (continued)

The continuity schedule of deferred tax balances is as follows:



	As at September 30, 2022			Additions from business acquisitions		Recognized in earnings			Recognized in other comprehensive income		Recognized in equity		Foreign currency translation adjustment and other			As at September 30, 2023
	$			$		$			$		$		$			$

Accounts payable and accrued liabilities, provisions and other long-term liabilities		40,214			—		4,007			—		—		(548	)		43,673

Tax benefits on losses carried forward		51,963			—		2,928			—		—		1,187			56,078

Accrued compensation and employee-related liabilities		51,136			—		14,531			—		2,623		636			68,926

Retirement benefits obligations		19,517			—		(5,601	)		13,078		—		249			27,243

Capitalized research and development¹		—			—		92,880			—		—		—			92,880

Lease liabilities		171,072			—		(5,750	)		—		—		3,966			169,288

PP&E, contract costs, intangible assets and other long-term assets		(151,054	)		2,540		23,567			—		—		1,230			(123,717	)

Right-of-use assets		(132,757	)		—		(6,709	)		—		—		(3,945	)		(143,411	)

Work in progress		(12,828	)		—		(1,283	)		—		—		(261	)		(14,372	)

Goodwill		(81,617	)		—		(6,653	)		—		—		1,011			(87,259	)

Refundable tax credits on salaries		(20,049	)		—		(2,517	)		—		—		(2	)		(22,568	)

Cash flow hedges		(10,398	)		—		(55	)		6,445		—		(2	)		(4,010	)

Other		3,190			—		151			9,339		—		(1,080	)		11,600

Deferred taxes, net		(71,611	)		2,540		109,496			28,862		2,623		2,441			74,351

¹	As required by the U.S. 2017 Tax Cuts and Jobs Act, effective October 1, 2022, research and development expenditures are capitalized and amortized which resulted in higher current tax expense for 2023 with an equal amount of deferred tax recovery.



	As at September 30, 2021			Additions from business acquisitions			Recognized in earnings			Recognized in other comprehensive income			Recognized in equity			Foreign currency translation adjustment and other			As at September 30, 2022
	$			$			$			$			$			$			$

Accounts payable and accrued liabilities, provisions and other long-term liabilities		51,156			6,986			(20,232	)		—			—			2,304			40,214

Tax benefits on losses carried forward		43,181			1,489			9,450			—			—			(2,157	)		51,963

Accrued compensation and employee-related liabilities		40,108			141			17,724			—			(7,194	)		357			51,136

Retirement benefits obligations		17,561			2,425			(2,082	)		1,011			—			602			19,517

Lease liabilities		179,318			1,577			252			—			—			(10,075	)		171,072

PP&E, contract costs, intangible assets and other long-term assets		(121,309	)		(27,347	)		5,912			—			—			(8,310	)		(151,054	)

Right-of-use assets		(134,808	)		(1,405	)		(6,179	)		—			—			9,635			(132,757	)

Work in progress		(22,190	)		—			9,018			—			—			344			(12,828	)

Goodwill		(70,845	)		—			(5,619	)		—			—			(5,153	)		(81,617	)

Refundable tax credits on salaries		(19,673	)		—			(376	)		—			—			—			(20,049	)

Cash flow hedges		(5,626	)		—			4,333			(9,146	)		—			41			(10,398	)

Other		7,447			180			(4,705	)		(223	)		—			491			3,190

Deferred taxes, net		(35,680	)		(15,954	)		7,496			(8,358	)		(7,194	)		(11,921	)		(71,611	)

The deferred tax balances are presented as follows in the consolidated balance sheets:


	As at September 30, 2023			As at September 30, 2022
	$			$

Deferred tax assets		105,432			85,795

Deferred tax liabilities		(31,081	)		(157,406	)

		74,351			(71,611	)


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		33

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

16.

Income taxes (continued)

As at September 30, 2023, the Company had $279,918,000 ($258,244,000 as at September 30, 2022) in operating tax losses carried forward, of which $104,113,000 ($110,918,000 as at September 30, 2022) expire at various dates from 2029 to 2043 and $175,805,000 ($147,326,000 as at September 30, 2022) have no expiry dates. As at September 30, 2023, a deferred income tax asset of $49,742,000 ($46,893,000 as at September 30, 2022) has been recognized on $187,865,000 ($179,329,000 as at September 30, 2022) of these losses. The deferred income tax assets are recognized only to the extent that it is probable that taxable income will be available against which the unused tax losses can be utilized. As at September 30, 2023, the Company had $7,314,000 ($12,450,000 as at September 30, 2022) of unrecognized operating tax losses that will expire at various dates from 2029 to 2032 and $84,739,000 ($66,466,000 as at September 30, 2022) that have no expiry date.

As at September 30, 2023, the Company had $424,736,000 ($421,218,000 as at September 30, 2022) in non-operating tax losses carried forward that have no expiry dates. As at September 30, 2023, a deferred income tax asset of $6,336,000 ($5,070,000 as at September 30, 2022) has been recognized on $24,806,000 ($20,295,000 as at September 30, 2022) of these losses. As at September 30, 2023, the Company had $399,930,000 ($400,923,000 as at September 30, 2022) of unrecognized non-operating tax losses.

As at September 30, 2023, the Company had $1,365,975,000 ($907,578,000 as at September 30, 2022) of cash and cash equivalents held by foreign subsidiaries. The tax implications of the repatriation of cash and cash equivalents not considered indefinitely reinvested have been accounted for and will not materially affect the Company’s liquidity. In addition, the Company has not recorded deferred tax liabilities on undistributed earnings of $8,262,337,000 ($7,100,148,000 as at September 30, 2022) coming from its foreign subsidiaries as they are considered indefinitely reinvested. Upon distribution of these earnings in the form of dividends or otherwise, the Company may be subject to taxation.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		34

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

17.

Employee benefits

The Company operates various post-employment plans, including defined benefit and defined contribution pension plans as well as other benefit plans for its employees.

DEFINED BENEFIT PLANS

The Company operates defined benefit pension plans primarily for the benefit of employees in the U.K., France and Germany, with smaller plans in other countries. The benefits are based on pensionable salary and years of service and most of them are funded with assets held in separate funds.

The defined benefit plans expose the Company to interest risk, inflation risk, longevity risk, currency risk and market investment risk.

The following description focuses mainly on plans registered in the U.K., France and Germany:

U.K.

In the U.K., the Company has three defined benefit pension plans, the CMG U.K. Pension Scheme, the Logica U.K. Pension & Life Assurance Scheme and the Logica Defined Benefit Pension Plan.

The CMG U.K. Pension Scheme is closed to new employees and is closed to further accrual of rights for existing employees. The Logica U.K. Pension & Life Assurance Scheme is still open but only for employees who come from the civil service with protected pensions. The Logica Defined Benefit Pension Plan was created to mirror the Electricity Supply Pension Scheme and was created for employees that worked for National Grid and Welsh Water with protected benefits.

Both the Logica U.K. Pension & Life Assurance Scheme and the Logica Defined Benefit Pension Plan are employer and employee based contribution plans.

The trustees are the custodians of the defined benefit pension plans and are responsible for the plan administration, including investment strategies. The trustees review periodically the investment and the asset allocation policies. As such, the CMG U.K. Pension Scheme policy is to target an allocation up to a maximum of 65% to return-seeking assets such as equities; the Logica U.K. Pension & Life Assurance Scheme policy is to invest 15% of the scheme assets in equities and 85% in bonds; and the Logica Defined Benefit Pension Plan policy is to invest 10% of the plan assets in equities and 90% in bonds.

The U.K. Pensions Act 2004 requires that full formal actuarial valuations are carried out at least every three years to determine the contributions that the Company should pay in order for the plan to meet its statutory objective, taking into account the assets already held. In the interim years, the trustees need to obtain estimated funding updates unless the scheme has less than 100 employees in total.

The latest funding actuarial valuations of the three defined benefit pension plans described above were being performed as at September 30, 2021 and the results were finalized during the year ended September 30, 2022 with the following recommendations:

–

The actuarial valuation of the CMG U.K. Pension Scheme reported a surplus of $34,707,000. It specified that no supplementary contributions were required in order to reach the plan funding objectives. Since January 1, 2022, the Company did not contribute to the plan; and

–

The actuarial valuation of the Logica U.K. Pension & Life Assurance Scheme reported a surplus of $85,000. It specified that no supplementary contributions were required in order to reach the plan funding objectives. During fiscal 2023, the Company contributed an amount of $339,000 to cover service costs; and

–

The actuarial valuation of the Logica Defined Benefit Pension Plan reported a surplus of $17,819,000. It specified that no supplementary contributions were required in order to reach the plan funding objectives. Since November 30, 2019, the Company did not contribute to the plan.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		35

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

17.

Employee benefits (continued)

DEFINED BENEFIT PLANS (CONTINUED)

France

In France, the retirement indemnities are provided in accordance with the Labour Code. Upon retirement, employees receive an indemnity, depending on the salary and seniority in the Company, in the form of a lump-sum payment.

Germany

In Germany, the Company has numerous defined benefit pension plans which are all closed to new employees. In the majority of the plans, upon retirement of employees, the benefits are in the form of a monthly pension and in a few plans, the employees receive an indemnity in the form of a lump-sum payment. There are no mandatory funding requirements. The plans are funded by the contributions made by the Company. In some plans, insurance policies are taken out to fund retirement benefit plans. These do not qualify as plan assets and are presented as reimbursement rights, unless they are part of a reinsured support fund or are pledged to the employees.

The following tables present amounts for post-employment benefits plans included in the consolidated balance sheets:


As at September 30, 2023	U.K.			France			Germany			Other			Total

		$			$			$			$			$

Defined benefit obligations		(535,633	)		(78,612	)		(67,706	)		(92,703	)		(774,654	)

Fair value of plan assets		536,226			—			11,747			64,138			612,111

		593			(78,612	)		(55,959	)		(28,565	)		(162,543	)

Fair value of reimbursement rights		—			—			19,082			376			19,458

Net asset (liability) recognized in the balance sheet		593			(78,612	)		(36,877	)		(28,189	)		(143,085	)

Presented as:

Other long-term assets (Note 10)

Insurance contracts held to fund defined benefit pension and life assurance arrangements - reimbursement rights		—			—			19,082			376			19,458

Retirement benefits assets		593			—			—			243			836

Retirement benefits obligations		—			(78,612	)		(55,959	)		(28,808	)		(163,379	)

		593			(78,612	)		(36,877	)		(28,189	)		(143,085	)

As at September 30, 2022	U.K.			France			Germany			Other			Total

		$			$			$			$			$

Defined benefit obligations		(525,262	)		(77,477	)		(61,420	)		(85,784	)		(749,943	)

Fair value of plan assets		571,909			—			11,028			59,032			641,969
		46,647			(77,477	)		(50,392	)		(26,752	)		(107,974	)

Fair value of reimbursement rights		—			—			18,495			382			18,877
Net asset (liability) recognized in the balance sheet		46,647			(77,477	)		(31,897	)		(26,370	)		(89,097	)

Presented as:

Other long-term assets (Note 10)

Insurance contracts held to fund defined benefit pension and life assurance arrangements - reimbursement rights		—			—			18,495			382			18,877

Retirement benefits assets		46,647			—			—			424			47,071

Retirement benefits obligations		—			(77,477	)		(50,392	)		(27,176	)		(155,045	)

		46,647			(77,477	)		(31,897	)		(26,370	)		(89,097	)


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		36

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

17.

Employee benefits (continued)

DEFINED BENEFIT PLANS (CONTINUED)


Defined benefit obligations	U.K.			France			Germany			Other			Total

		$			$			$			$			$

As at September 30, 2022		525,262			77,477			61,420			85,784			749,943

Current service cost		997			6,106			379			6,251			13,733

Interest cost		27,445			3,093			2,600			4,414			37,552

Past service cost		—			(288	)		—			—			(288	)

Actuarial (gains) losses due to change in financial assumptions¹		(54,598	)		(4,575	)		65			(1,581	)		(60,689	)

Actuarial (gains) losses due to change in demographic assumptions¹		(12,077	)		88			—			2			(11,987	)

Actuarial losses (gains) due to experience¹		33,349			(6,035	)		2,571			3,496			33,381

Plan participant contributions		76			—			—			170			246

Benefits paid from the plan		(26,527	)		—			(229	)		(4,359	)		(31,115	)

Benefits paid directly by employer		—			(2,565	)		(2,992	)		(747	)		(6,304	)

Foreign currency translation adjustment¹		41,706			5,311			3,892			(727	)		50,182
As at September 30, 2023		535,633			78,612			67,706			92,703			774,654
Defined benefit obligations of unfunded plans		—			78,612			—			18,132			96,744

Defined benefit obligations of funded plans		535,633			—			67,706			74,571			677,910
As at September 30, 2023		535,633			78,612			67,706			92,703			774,654

Defined benefit obligations	U.K.			France			Germany			Other			Total

		$			$			$			$			$

As at September 30, 2021		881,008			77,006			94,381			108,561			1,160,956

Current service cost		1,114			5,673			531			5,735			13,053

Interest cost		16,877			740			768			2,969			21,354

Business acquisitions (Note 27c)		—			10,192			—			—			10,192

Actuarial gains due to change in financial assumptions¹		(285,653	)		(20,586	)		(25,735	)		(10,104	)		(342,078	)

Actuarial losses (gains) due to change in demographic assumptions¹		7,882			921			—			(520	)		8,283

Actuarial losses due to experience¹		4,081			12,112			2,214			4,682			23,089

Plan participant contributions		80			—			—			186			266

Benefits paid from the plan		(24,018	)		(622	)		(647	)		(6,421	)		(31,708	)

Benefits paid directly by employer		—			(1,318	)		(2,848	)		(866	)		(5,032	)

Foreign currency translation adjustment¹		(76,109	)		(6,641	)		(7,244	)		(6,444	)		(96,438	)

Other		—			—			—			(11,994	)		(11,994	)
As at September 30, 2022		525,262			77,477			61,420			85,784			749,943

Defined benefit obligations of unfunded plans		—			77,477			—			18,829			96,306

Defined benefit obligations of funded plans		525,262			—			61,420			66,955			653,637
As at September 30, 2022		525,262			77,477			61,420			85,784			749,943

¹	Amounts recognized in other comprehensive income.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		37

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

17.

Employee benefits (continued)

DEFINED BENEFIT PLANS (CONTINUED)


Plan assets and reimbursement rights	U.K.			France			Germany			Other			Total

		$			$			$			$			$

As at September 30, 2022		571,909			—			29,523			59,414			660,846

Interest income on plan assets		29,902			—			1,283			3,370			34,555

Employer contributions		339			2,565			2,983			6,744			12,631

Return on assets excluding interest income¹		(84,003	)		—			(1,668	)		(12	)		(85,683	)

Plan participant contributions		76			—			—			170			246

Benefits paid from the plan		(26,527	)		—			(229	)		(4,359	)		(31,115	)

Benefits paid directly by employer		—			(2,565	)		(2,992	)		(747	)		(6,304	)

Administration expenses paid from the plan		(1,779	)		—			—			(5	)		(1,784	)

Foreign currency translation adjustment¹		46,309			—			1,929			(61	)		48,177
As at September 30, 2023		536,226			—			30,829			64,514			631,569
Plan assets		536,226			—			11,747			64,138			612,111

Reimbursement rights		—			—			19,082			376			19,458
As at September 30, 2023		536,226			—			30,829			64,514			631,569

Plan assets and reimbursement rights	U.K.			France			Germany			Other			Total

		$			$			$			$			$

As at September 30, 2021		986,359			661			33,057			63,869			1,083,946

Interest income on plan assets		18,901			—			274			2,128			21,303

Employer contributions		1,007			1,318			2,638			4,449			9,412

Return on assets excluding interest income¹		(324,003	)		—			(214	)		(1,003	)		(325,220	)

Plan participant contributions		80			—			—			578			658

Benefits paid from the plan		(24,018	)		(622	)		(647	)		(6,421	)		(31,708	)

Benefits paid directly by employer		—			(1,318	)		(2,848	)		(866	)		(5,032	)

Administration expenses paid from the plan		(1,568	)		—			—			(7	)		(1,575	)

Foreign currency translation adjustment¹		(84,849	)		(39	)		(2,737	)		(3,313	)		(90,938	)
As at September 30, 2022		571,909			—			29,523			59,414			660,846
Plan assets		571,909			—			11,028			59,032			641,969

Reimbursement rights		—			—			18,495			382			18,877
As at September 30, 2022		571,909			—			29,523			59,414			660,846

¹	Amounts recognized in other comprehensive income.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		38

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

17.

Employee benefits (continued)

DEFINED BENEFIT PLANS (CONTINUED)

The plan assets at the end of the years consist of:


As at September 30, 2023	U.K.		Germany		Other		Total

		$		$		$		$

Quoted equities		205,130		—		—		205,130

Quoted bonds		139,584		—		—		139,584

Cash		5,566		—		76		5,642

Other¹		185,946		11,747		64,062		261,755
		536,226		11,747		64,138		612,111

As at September 30, 2022	U.K.		Germany		Other		Total

		$		$		$		$

Quoted equities		196,611		—		—		196,611

Quoted bonds		102,658		—		—		102,658

Cash		143,312		—		65		143,377

Other¹		129,328		11,028		58,967		199,323
		571,909		11,028		59,032		641,969

¹	Other is mainly composed of quoted investment funds and various insurance policies to cover some of the defined benefit obligations.

Plan assets do not include any shares of the Company, property occupied by the Company or any other assets used by the Company.

The following table summarizes the expense¹ recognized in the consolidated statements of earnings:


	Year ended September 30

	2023			2022

		$			$
Current service cost		13,734			13,053

Past service cost		(288	)		—

Net interest on net defined benefit obligations or assets		2,998			51

Administration expenses		1,784			1,575
		18,228			14,679

¹	The expense was presented as costs of services, selling and administrative for an amount of $13,446,000 and as net finance costs for an amount of $4,782,000 (Note 26) ($13,053,000 and $1,626,000, respectively for the year ended September 30, 2022).


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		39

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

17.

Employee benefits (continued)

DEFINED BENEFIT PLANS (CONTINUED)

Actuarial assumptions

The following are the principal actuarial assumptions calculated as weighted averages of the defined benefit obligations. The assumed discount rates, future salary and pension increases, inflation rates and mortality all have a significant effect on the accounting valuation.


As at September 30, 2023	U.K		France		Germany		Other

	%		%		%		%

Discount rate		5.60		4.20		4.06		5.62

Future salary increases		0.33		4.15		2.50		2.76

Future pension increases		3.20		—		2.10		0.29

Inflation rate		3.39		2.10		2.00		3.46

As at September 30, 2022	U.K.		France		Germany		Other

		%		%		%		%

Discount rate		4.95		3.75		4.07		5.43

Future salary increases		0.35		3.77		2.50		2.64

Future pension increases		3.30		—		2.10		0.42

Inflation rate		3.60		2.20		2.00		3.44

The average longevity over 65 of an employee presently at age 45 and 65 are as follows:


As at September 30, 2023	U.K.		Germany

	(in years)

Longevity at age 65 for current employees

Males		22.0		21.0

Females		23.8		24.0

Longevity at age 45 for current employees

Males		23.4		24.0

Females		25.3		26.0

As at September 30, 2022	U.K.		Germany

	(in years)

Longevity at age 65 for current employees

Males		22.0		21.0

Females		23.8		24.0

Longevity at age 45 for current employees

Males		23.3		23.0

Females		25.3		26.0


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		40

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

17.

Employee benefits (continued)

DEFINED BENEFIT PLANS (CONTINUED)

Actuarial assumptions (continued)

Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience in each country. Mortality assumptions for the most significant countries are based on the following post-retirement mortality tables for the year ended September 30, 2023: (1) U.K.: 100% S2PxA (year of birth) plus CMI_2020 projections with 1.25% p.a. minimum long term improvement rate, (2) Germany: Heubeck RT2018G and (3) France: INSEE TVTD 2017-2019.

The following tables show the sensitivity of the defined benefit obligations to changes in the principal actuarial assumptions:


As at September 30, 2023	U.K.			France			Germany

	$			$			$

Increase of 0.25% in the discount rate		(15,631	)		(2,370	)		(1,596	)

Decrease of 0.25% in the discount rate		16,416			2,473			1,663

Salary increase of 0.25%		137			2,572			23

Salary decrease of 0.25%		(132	)		(2,474	)		(21	)

Pension increase of 0.25%		8,713			—			834

Pension decrease of 0.25%		(8,503	)		—			(805	)

Increase of 0.25% in inflation rate		12,348			5,660			834

Decrease of 0.25% in inflation rate		(11,948	)		(5,110	)		(805	)

Increase of one year in life expectancy		12,614			943			1,702

Decrease of one year in life expectancy		(12,801	)		(1,258	)		(1,530	)

As at September 30, 2022	U.K.			France			Germany

	$			$			$

Increase of 0.25% in the discount rate		(19,249	)		(2,294	)		(1,512	)

Decrease of 0.25% in the discount rate		20,234			2,500			1,578

Salary increase of 0.25%		193			2,584			20

Salary decrease of 0.25%		(188	)		(2,388	)		(19	)

Pension increase of 0.25%		13,324			—			774

Pension decrease of 0.25%		(12,614	)		—			(747	)

Increase of 0.25% in inflation rate		21,301			2,584			774

Decrease of 0.25% in inflation rate		(16,005	)		(2,388	)		(747	)

Increase of one year in life expectancy		12,957			281			1,511

Decrease of one year in life expectancy		(13,093	)		(320	)		(1,360	)

The sensitivity analysis above has been based on a method that extrapolates the impact on the defined benefit obligations as a result of reasonable changes in key assumptions occurring at the end of the year.

The weighted average duration of the defined benefit obligations are as follows:


	Year ended September 30

	2023		2022

	(in years)

U.K.		13		15

France		13		13

Germany		10		11

Other		9		10


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		41

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

17.

Employee benefits (continued)

DEFINED BENEFIT PLANS (CONTINUED)

The Company expects to contribute $7,574,000 to defined benefit plans during the next year, of which $377,000 relates to the U.K. plans, and $7,197,000 relates to the other plans. The contributions will include new benefit accruals.

DEFINED CONTRIBUTION PLANS

The Company also operates defined contribution pension plans. In some countries, contributions are made into the state pension plans. The pension cost for defined contribution plans amounted to $282,284,000 in 2023 ($241,405,000 in 2022).

In addition, in Sweden, the Company contributes to a multi-employer plan, Alecta SE (Alecta) pension plan, which is a defined benefit pension plan. This pension plan is classified as a defined contribution plan as sufficient information is not available to use defined benefit accounting. Alecta lacks the possibility of establishing an exact distribution of assets and provisions to the respective employers. The Company’s proportion of the total contributions to the plan is 0.57% and the Company’s proportion of the total number of active employees in the plan is 0.48%.

Alecta uses a collective funding ratio to determine the surplus or deficit in the pension plan. Any surplus or deficit in the plan will affect the amount of future contributions payable. The collective funding is the difference between Alecta’s assets and the commitments to the policy holders and insured individuals. The collective funding ratio is normally allowed to vary between 125% and 175%. As at September 30, 2023, Alecta collective funding ratio was 178% (189% in 2022). The plan expense was $25,311,000 in 2023 ($28,868,000 in 2022). The Company expects to contribute $14,867,000 to the plan during the next year.

OTHER BENEFIT PLANS

As at September 30, 2023, the deferred compensation liability totaled $97,745,000 ($81,452,000 as at September 30, 2022) (Note 15) and the deferred compensation assets totaled $88,076,000 ($71,863,000 as at September 30, 2022) (Note 11). The deferred compensation liability is mainly related to plans covering some of its U.S. management. Some of the plans include assets that will be used to fund the liabilities.

For the deferred compensation plan in the U.S., a trust was established so that the plan assets could be segregated; however, the assets are subject to the Company’s general creditors in the case of bankruptcy. The assets composed of investments vary with employees’ contributions and changes in the value of the investments. The change in liabilities associated with the plan is equal to the change of the assets. The assets in the trust and the associated liabilities totaled $88,076,000 as at September 30, 2023 ($71,863,000 as at September 30, 2022).


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		42

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

18.

Accumulated other comprehensive income


	As at September 30, 2023			As at September 30, 2022

	$			$

Items that will be reclassified subsequently to net earnings:

Net unrealized gains on translating financial statements of foreign operations, net of accumulated income tax expense of $44,867 ($45,419 as at September 30, 2022)		534,321			291,532

Net losses on cross-currency swaps and on translating long-term debt designated as hedges of net investments in foreign operations, net of accumulated income tax recovery of $49,991 ($43,936 as at September 30, 2022)		(325,649	)		(271,690	)

Deferred gains of hedging on cross-currency swaps, net of accumulated income tax expense of $1,754 ($4,664 as at September 30, 2022)		13,541			28,274

Net unrealized gains on cash flow hedges, net of accumulated income tax expense of $3,953 ($10,398 as at September 30, 2022)		11,524			30,274

Net unrealized losses on financial assets at fair value through other comprehensive income, net of accumulated income tax recovery of $1,189 (net of accumulated income tax expense of $1,367 as at September 30, 2022)		(3,412	)		(4,072	)

Items that will not be reclassified subsequently to net earnings:

Net remeasurement losses on defined benefit plans, net of accumulated income tax recovery of $25,173 ($12,095 as at September 30, 2022)		(71,350	)		(34,572	)

		158,975			39,746

For the year ended September 30, 2023, $17,937,000 of the net unrealized gains on cash flow hedges, net of income tax expense of $6,278,000, previously recognized in other comprehensive income were reclassified in the consolidated statements of earnings ($4,151,000 and $998,000, respectively, were reclassified for the year ended September 30, 2022).

For the year ended September 30, 2023, $12,244,000 of the deferred gains of hedging on cross-currency swaps, net of income tax expense of $1,870,000, were also reclassified in the consolidated statements of earnings ($10,746,000 and $3,876,000, respectively for the year ended September 30, 2022).

19.

Capital stock

The Company’s authorized share capital is comprised of an unlimited number, all without par value, of:

–

First preferred shares, issuable in series, carrying one vote per share, each series ranking equal with other series, but prior to second preferred shares, Class A subordinate voting shares and Class B multiple voting shares with respect to the payment of dividends;

–

Second preferred shares, issuable in series, non-voting, each series ranking equal with other series, but prior to Class A subordinate voting shares and Class B multiple voting shares with respect to the payment of dividends;

–

Class A subordinate voting shares, carrying one vote per share, participating equally with Class B multiple voting shares with respect to the payment of dividends and convertible into Class B multiple voting shares under certain conditions in the event of certain takeover bids on Class B multiple voting shares; and

–

Class B multiple voting shares, carrying ten votes per share, participating equally with Class A subordinate voting shares with respect to the payment of dividends and convertible at any time at the option of the holder into Class A subordinate voting shares.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		43

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

19.

Capital stock (continued)

For the fiscal years 2023 and 2022, the number of issued and outstanding Class A subordinate voting shares and Class B multiple voting shares varied as follows:


	Class A subordinate voting shares						Class B multiple voting shares							Total

	Number			Carrying value			Number		Carrying value		Number			Carrying value

				$					$					$

As at September 30, 2021		219,171,329			1,595,811			26,445,706		36,894		245,617,035			1,632,705

Release of shares held in trusts¹		—			15,821			—		—		—			15,821

Purchased and held in trusts¹		—			(70,303	)		—		—		—			(70,303	)

Issued upon exercise of stock options²		941,059			50,236			—		—		941,059			50,236

Purchased and cancelled³		(8,809,839	)		(134,409	)		—		—		(8,809,839	)		(134,409	)

Purchased and not cancelled³		—			(881	)		—		—		—			(881	)

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 trusts¹		—			13,680			—		—		—			13,680

Purchased and held in trusts¹		—			(74,455	)		—		—		—			(74,455	)

Issued upon exercise of stock options²		1,646,044			106,051			—		—		1,646,044			106,051

Purchased and cancelled³		(6,234,096	)		(61,265	)		—		—		(6,234,096	)		(61,265	)

As at September 30, 2023		206,714,497			1,440,286			26,445,706		36,894		233,160,203			1,477,180

¹	During the year ended September 30, 2023, 172,018 shares held in trust were released (235,441 during the year ended September 30, 2022) with a recorded value of $13,680,000 ($15,821,000 during the year ended September 30, 2022) that was removed from contributed surplus.

During the year ended September 30, 2023, the Company settled the withholding tax obligations of the employees under the performance share units (PSU) plans for a cash payment of $13,879,000 (nil during the year ended September 30, 2022).

During the year ended September 30, 2023, the trustees, in accordance with the terms of the PSU plans and Trust Agreements, purchased 640,052 Class A subordinate voting shares of the Company on the open market (643,629 during the year ended September 30, 2022) for a cash consideration of $74,455,000 ($70,303,000 during the year ended September 30, 2022).

As at September 30, 2023, 2,309,743 Class A subordinate voting shares were held in trusts under the PSU plans (1,841,709 as at September 30, 2022).

The carrying value of Class A subordinate voting shares includes $17,735,000 ($8,549,000 during the year ended September 30, 2022), which corresponds to a reduction in contributed surplus representing the value of accumulated compensation costs associated with the stock options exercised during the year ended September 30, 2023.

On January 31, 2023, the Company’s Board of Directors authorized and subsequently received regulatory 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 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, 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 year ended September 30, 2023, the Company purchased for cancellation 2,857,550 Class A subordinate voting shares (3,866,171 during the year ended September 30, 2022) under its current NCIB for a cash consideration of $386,906,000 ($408,656,000 during the year ended September 30, 2022) and the excess of the purchase price over the carrying value in the amount of $363,747,000 ($378,340,000 during the year ended September 30, 2022) was charged to retained earnings. Of the purchased Class A subordinate voting shares, 68,550 shares with a carrying value of $558,000 and a purchase value of $9,177,000 were held by the Company and were paid and cancelled subsequent to September 30, 2023.

In addition, during the year ended September 30, 2023, the Company purchased for cancellation 3,344,996 Class A subordinate voting shares from the Caisse de dépôt et placement du Québec for a total cash consideration of $400,000,000 (4,907,073 and $500,000,000, respectively during the year ended September 30, 2022). The excess of the purchase price over the carrying value in the amount of $361,791,000 was charged to retained earnings ($395,026,000 during the year ended September 30, 2022). The purchase was made pursuant to an 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.

During the year ended September 30, 2023, the Company also paid for and cancelled 100,100 Class A 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.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		44

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

20.

Share-based payments

a) Performance share units

The Company operates two PSU plans with similar terms and conditions. Under both plans, the Board of Directors may grant PSUs to certain employees and officers which entitle them to receive one Class A subordinate voting share for each PSU. The vesting performance conditions are determined by the Board of Directors at the time of each grant. PSUs expire on the business day preceding December 31 of the third calendar year following the end of the fiscal year during which the PSU award was made, except in the event of retirement, termination of employment or death. Conditionally upon achievement of performance objectives, granted PSUs under the second plan vest at the end of the four-year period while granted PSUs under the first plan vest annually over a period of four years from the date of the grant.

Class A subordinate voting shares purchased in connection with the PSU plans are held in trusts for the benefit of the participants. The trusts, considered as structured entities, are consolidated in the Company’s consolidated financial statements with the cost of the purchased shares recorded as a reduction of capital stock (Note 19).

The following table presents information concerning the number of outstanding PSUs granted by the Company:


Outstanding as at September 30, 2021	1,416,203

Granted¹	805,699

Exercised (Note 19)	(237,294	)

Forfeited	(175,017	)
Outstanding as at September 30, 2022	1,809,591

Granted¹	899,511

Exercised (Note 19)	(294,203	)

Forfeited	(162,449	)
Outstanding as at September 30, 2023	2,252,450

¹ The PSUs granted in 2023 had a weighted average grant date fair value of $112.49 per unit ($109.07 in 2022).

b)	Stock options

Under the Company’s stock option plan, the Board of Directors may grant, at its discretion, stock options to purchase Class A subordinate voting shares to certain employees, officers and directors of the Company and its subsidiaries. The exercise price is established by the Board of Directors and is equal to the closing price of the Class A subordinate voting shares on the TSX on the day preceding the date of the grant. Stock options generally vest over four years from the date of grant conditionally upon achievement of performance objectives and must be exercised within a ten-year period, except in the event of retirement, termination of employment or death. As at September 30, 2023, 15,353,015 Class A subordinate voting shares were reserved for issuance under the stock option plan.

The following table presents information concerning the outstanding stock options granted by the Company:


				2023					2022
	Number of options			Weighted average exercise price per share		Number of options			Weighted average exercise price per share

					$					$

Outstanding, beginning of year		6,882,845			66.36		8,012,077			64.49

Granted		—			—		11,940			110.10

Exercised (Note 19)		(1,646,044	)		53.65		(941,059	)		44.30

Forfeited		(23,626	)		99.78		(188,130	)		97.55

Expired		(1,703	)		102.70		(11,983	)		104.36
Outstanding, end of year		5,211,472			70.21		6,882,845			66.36
Exercisable, end of year		4,772,088			67.46		5,837,921			61.02

The weighted average share price at the date of exercise for stock options exercised in 2023 was $123.25 ($107.09 in 2022).


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		45

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

20.

Share-based payments (continued)

b) Stock options (continued)

The following table summarizes information about the outstanding stock options granted by the Company as at September 30, 2023:

Options outstanding

Options exercisable

Range of

exercise price

Number of
options

Weighted

average

remaining
contractual life

Weighted

average exercise

price

Number of
options

Weighted
average
exercise price

(in years

)

34.68 to 41.63

550,083

0.90

38.36

550,083

38.36

47.36 to 52.63

590,495

1.98

48.39

590,495

48.39

55.51 to 63.23

2,052,950

3.22

63.19

2,052,950

63.19

67.04 to 85.62

1,078,428

4.94

84.51

1,078,428

84.51

97.84 to 115.01

939,516

6.93

101.51

500,132

102.73

5,211,472

3.86

70.21

4,772,088

67.46

The weighted average fair value of stock options granted in the year and the weighted average assumptions used in the calculation of their fair value on the date of grant using the Black-Scholes option pricing model were as follows:


Year ended September 30

	2023		2022

Grant date fair value ($)		—		20.94

Dividend yield (%)		—		—

Expected volatility (%)¹		—		21.27

Risk-free interest rate (%)		—		1.28

Expected life (years)		—		4.00

Exercise price ($)		—		110.10

Share price ($)		—		110.10

¹	Expected volatility was determined using statistical formulas and based on the weekly historical average of closing daily share prices over the period of the expected life of stock options.

c)	Share purchase plan

Under the share purchase plan, the Company contributes an amount equal to a percentage of the employee’s basic contribution, up to a maximum of 3.50%. An employee may make additional contributions in excess of the basic contribution. However, the Company does not match contributions in the case of such additional contributions. The employee and Company’s contributions are remitted to an independent plan administrator who purchases Class A subordinate voting shares on the open market on behalf of the employee through either the TSX or NYSE.

d)	Deferred share unit plan

External members of the Board of Directors (participants) are entitled to receive part or their entire retainer fee in DSUs. DSUs are granted with immediate vesting and must be exercised no later than December 15 of the calendar year immediately following the calendar year during which the participant ceases to act as a director. Each DSU entitles the holder to receive a cash payment equal to the closing price of Class A subordinate voting shares on the TSX on the payment date. As at September 30, 2023, the number of outstanding DSUs was 122,969 (119,090 DSUs as at September 30, 2022).


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		46

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

20.

Share-based payments (continued)

e)	Share-based payment costs

The share-based payment expense recorded in costs of services, selling and administrative is as follows:


	Year ended September 30

	2023		2022
		$		$

PSUs		55,847		42,148

Stock options		2,367		6,848

Share purchase plan		169,418		136,275

DSUs		5,332		1,455
		232,964		186,726

21.

Earnings per share

The following table sets forth the computation of basic and diluted earnings per share for the years ended September 30:


					2023						2022
	Net earnings		Weighted average number of shares outstanding¹		Earnings per share		Net earnings		Weighted average number of shares outstanding¹		Earnings per share
		$				$		$				$

Basic		1,631,249		234,041,041		6.97		1,466,142		239,262,004		6.13

Net effect of dilutive stock options and PSUs²				3,661,040						3,605,441
Diluted		1,631,249		237,702,081		6.86		1,466,142		242,867,445		6.04

During the year ended September 30, 2023, 6,302,646 Class A subordinate voting shares purchased for cancellation and 2,309,743 Class A subordinate voting shares held in trust were excluded from the calculation of weighted average number of shares outstanding as of the date of transaction (8,839,439 and 1,841,709, respectively during the year ended September 30, 2022).

²	The calculation of the diluted earnings per share excluded nil stock options for the year ended September 30, 2023 (307,272 for the year ended September 30, 2022, as they were anti-dilutive).

22.

Remaining performance obligations

Remaining performance obligations relates to Company’s performance obligations that are partially or fully unsatisfied under fixed-fee arrangements recognized using the percentage-of-completion method.

The amount of the selling price allocated to remaining performance obligations as at September 30, 2023 is $982,531,000 ($919,664,000 as at September 30, 2022) and is expected to be recognized as revenue within a weighted average of 2 years (1.9 years as at September 30, 2022).


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		47

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

23.

Costs of services, selling and administrative


	Year ended September 30

	2023		2022
		$		$

Salaries and other employee costs¹		8,870,235		7,798,407

Professional fees and other contracted labour		1,500,613		1,459,295

Hardware, software and data center related costs		827,613		790,447

Property costs		213,962		214,430

Amortization, depreciation and impairment (Note 24)		506,122		468,334

Other operating expenses		63,876		45,651
		11,982,421		10,776,564

¹	Net of R&D and other tax credits of $159,390,000 in 2023 ($155,856,000 in 2022).

24.

Amortization, depreciation and impairment


	Year ended September 30

	2023			2022
		$			$

Depreciation of PP&E(Note 6)		142,653			133,651

Depreciation of right-of-use assets (Note 7)		143,030			141,295

Impairment of right-of-use assets (Note 7)		2,274			1,495

Amortization of contract costs related to transition costs		55,194			48,594

Amortization of intangible assets (Note 9)		162,971			139,940

Impairment of intangible assets (Note 9)		—			3,359

Included in costs of services, selling and administrative (Note 23)		506,122			468,334

Amortization of contract costs related to incentives (presented as a reduction of revenue)		2,793			2,201

Amortization of deferred financing fees (presented in finance costs)		816			829

Amortization of premiums and discounts on investments related to funds held for clients (presented net as a reduction (increase) of revenue)		(1,832	)		37

Depreciation of PP&E (presented in integration costs) (Note 6)		712			—

Impairment of PP&E (presented in integration costs) (Note 6)		648			858

Impairment of PP&E (presented in cost optimization program) (Note 6 and 25)		1,938			—

Impairment of right-of-use assets (presented in integration costs) (Note 7)		5,143			2,363

Impairment of right-of-use assets (presented in cost optimization program) (Note 7 and 25)		2,232			—

Amortization of intangible assets (presented in integration costs) (Note 9)		1,076			—

		519,648			474,622

25.

Cost optimization program

During the year ended September 30, 2023, the Company initiated a cost optimization program to accelerate actions to rightsize its real estate portfolio globally and improve operational efficiencies, including the increased use of automation and global delivery, focused on administrative activities for which the Company recorded $8,964,000 of costs. This amount includes costs for terminations of employment of $2,613,000, accounted for in severance provisions (Note 13), and costs of vacating leased premises of $6,351,000, composed of impairment of right-of-use assets of $2,232,000 (Note 24), onerous supplier contract costs of $2,181,000 as well as impairment of PP&E of $1,938,000 (Note 24) related to leasehold improvements and furniture, fixtures and equipment.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		48

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

26.

Net finance costs


	Year ended September 30

	2023			2022
		$			$

Interest on long-term debt		53,871			57,752

Interest on lease liabilities		29,115			27,426

Net interest costs on net defined benefit obligations or assets (Note 17)		4,782			1,626

Other finance costs		6,192			8,413
Finance costs		93,960			95,217
Finance income		(41,497	)		(3,194	)
		52,463			92,023

27.

Investments in subsidiaries

a)	Acquisitions and disposals

There were no significant acquisitions or disposals for the year ended September 30, 2023.

b)	Subsequent event

On October 10, 2023, the Company acquired all of the outstanding units of Momentum Industries Holdings, LLC. (Momentum), for a purchase price of $50,492,000. Momentum is an IT and business consulting firm specializing in digital transformation, data and analytics and managed services, based in the U.S. and headquartered in Miami, Florida. The acquisition will be reported under the U.S. Commercial and State Government operating segment. The purchase price is mainly allocated to goodwill, representing the future economic value associated with acquired workforce and synergies with the Company’s operations, as well as customer relationships. The purchase price allocation is preliminary and is expected to be completed as soon as management will have gathered all the significant information available and considered necessary in order to finalize this allocation.

This acquisition was made to further expand CGI’s footprint in the region and to complement CGI’s proximity model.

c)	Business acquisitions realized in the prior fiscal year

The Company made the following acquisitions during the year ended September 30, 2022:

–

On October 1, 2021, the Company acquired all of the outstanding shares of Array Holding Company, Inc. (Array), for a purchase price of $60,337,000. Based in the United States, Array is a digital services provider that optimizes mission performance for the U.S. Department of Defense and other government organizations and is headquartered in Greenbelt, Maryland.

–

On October 28, 2021, the Company acquired all of the outstanding shares of Cognicase Management Consulting (CMC), for a purchase price of $90,900,000. Based in Spain, CMC is a provider of technology and management consulting services and solutions, headquartered in Madrid.

–

On February 28, 2022, the Company acquired all of the outstanding shares of Unico Computer Systems Pty Ltd (Unico), for a purchase price of $39,814,000. Based in Australia, Unico is a technology consultancy and systems integrator, headquartered in Melbourne.

–

On May 25, 2022, the Company acquired all of the outstanding shares of Harwell Management (Harwell), for a purchase price of $47,309,000. Based in France, Harwell is a management consulting firm specializing in the financial services industry, headquartered in Paris.

–

On May 31, 2022, the Company acquired control of Umanis SA (Umanis) through the acquisition of 72.4% of its outstanding shares (excluding treasury shares), for a purchase price of $303,896,000, and filed with the French financial markets authority (Autorité des Marchés Financiers) the draft mandatory tender offer to purchase all remaining outstanding shares.

By July 18, 2022, the Company acquired an aggregate total interest of more than 90.0% of the outstanding shares (excluding treasury shares) and launched a statutory squeeze-out process through which the remaining shares were acquired on July 29, 2022, for a total cash consideration of $116,362,000. Based in France, Umanis is a digital company specializing in data, digital and business solutions, headquartered in Paris.

These acquisitions were made to further expand CGI’s footprint in their respective regions and to complement CGI’s proximity model.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		49

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

27.

Investments in subsidiaries (continued)

c)	Business acquisitions realized in prior fiscal year (continued)

The following table presents the fair value of assets acquired and liabilities assumed for all acquisitions based on the acquisition-date fair values of the identifiable tangible and intangible assets acquired and liabilities assumed as at September 30, 2022:


	CMC			Umanis			Others			Total

		$			$			$			$

Current assets		46,900			106,102			18,267			171,269

PP&E (Note 6)		1,556			5,179			1,429			8,164

Right-of-use assets (Note 7)		3,353			12,855			5,906			22,114

Contract costs		979			—			—			979

Intangible assets¹ (Note 9)		20,657			62,337			27,653			110,647

Other long-term assets		2,336			16,362			—			18,698

Goodwill²		93,638			391,026			146,184			630,848

Current liabilities		(41,055	)		(96,141	)		(26,904	)		(164,100	)

Long-term debt		(37,937	)		(77,973	)		(46,730	)		(162,640	)

Lease liabilities		(3,920	)		(12,919	)		(6,342	)		(23,181	)

Deferred tax liabilities		(2,706	)		(12,688	)		(560	)		(15,954	)

Retirement benefits obligations (Note 17)		—			(9,743	)		(449	)		(10,192	)

		83,801			384,397			118,454			586,652

Cash acquired		7,099			35,861			29,006			71,966

Net assets acquired		90,900			420,258			147,460			658,618



Consideration paid		79,291			420,258			139,643			639,192

Consideration payable		11,609			—			7,817			19,426

¹	Intangible assets are mainly composed of client relationships.

²	The goodwill arising from the acquisitions mainly represents the future economic value associated to acquired work force and synergies with the Company’s operations. The goodwill is not deductible for tax purposes.

During the year ended September 30, 2023, the Company finalized the fair value assessment of assets acquired and liabilities assumed for Umanis with adjustments resulting in an increase in goodwill of $19,060,000 mainly due to a decrease in intangible assets and accounts receivable.

During the year ended September 30, 2023, the Company finalized the fair value assessment of assets acquired and liabilities assumed for Unico and Harwell with no significant adjustments.

During the year ended September 30, 2023, the Company paid $13,039,000 related to acquisitions realized in prior fiscal years.

d)	Acquisition-related and integration costs

During the year ended September 30, 2023, the Company incurred $53,401,000 of integration costs, which mainly include costs of rationalizing the redundancy of employment of $23,226,000, accounted for in severance provisions (Note 13), and costs of vacating leased premises of $10,774,000.

During the year ended September 30, 2022, the Company incurred $27,654,000, of acquisition-related and integration costs. This amount included acquisition-related costs of $3,094,000, and integration costs of $24,560,000. The acquisition-related costs consisted mainly of professional fees incurred for the acquisitions. The integration costs mainly included costs of rationalizing the redundancy of employment of $10,948,000, accounted for in severance provisions (Note 13), and costs of vacating leased premises of $3,496,000.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		50

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

28.

Supplementary cash flow information

a)	Net change in non-cash working capital items and others is as follows for the years ended September 30:


	2023			2022
		$			$

Accounts receivable		(31,120	)		(33,703	)

Work in progress		76,554			(116,260	)

Prepaid expenses and other assets		3,547			(10,907	)

Long-term financial assets		(9,911	)		8,843

Accounts payable and accrued liabilities		(130,172	)		108,188

Accrued compensation and employee-related liabilities		(57,644	)		(43,429	)

Deferred revenue		45,681			43,656

Income taxes		105,577			(2,626	)

Provisions		(10,129	)		(41,561	)

Long-term liabilities		18,893			(28,074	)

Derivative financial instruments		(682	)		(70	)

Retirement benefits obligations		5,871			5,050

		16,465			(110,893	)

b)	Non-cash operating and investing activities are as follows for the years ended September 30:


	2023			2022
		$			$

Operating activities

Accounts payable and accrued liabilities		32,392			7,720

Provisions		1,088			262

Other long-term liabilities		4,768			—

		38,248			7,982
Investing activities

Purchase of PP&E		(14,374	)		(16,732	)

Additions, disposals/retirements, change in estimates and lease modifications of right-of-use assets		(86,691	)		(101,180	)

Additions to intangible assets		(28,944	)		(1,127	)

		(130,009	)		(119,039	)


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		51

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

28.

Supplementary cash flow information (continued)

c)	Changes arising from financing activities are as follows for the years ended September 30:


							2023									2022
	Long-term debt			Derivative financial instruments to hedge long-term debt			Lease liabilities			Long-term debt			Derivative financial instruments to hedge long-term debt			Lease liabilities
		$			$			$			$			$			$

Balance, beginning of year		3,267,034			(146,215	)		709,201			3,401,656			17,187			776,940

Cash used in financing activities excluding equity

Increase of long-term debt		948			—			—			—			—			—

Repayment of long-term debt and lease liabilities		(79,150	)		—			(161,211	)		(401,654	)		—			(160,583	)

Repayment of debt assumed in business acquisitions that occurred in prior year		(56,994	)		—			—			(113,036	)		—			—

Settlement of derivative financial instruments (Note 32)		—			2,921			—			—			6,258			—

Non-cash financing activities
Additions, disposals/retirements and change in estimates and lease modifications of right-of-use assets		—			—			81,656			—			—			95,547

Additions through business acquisitions (Note 27)		—			—			—			162,640			—			23,181

Changes in foreign currency exchange rates		(38,218	)		45,719			15,997			207,561			(169,660	)		(25,153	)
Other		6,701			—			(3,680	)		9,867			—			(731	)

Balance, end of year		3,100,321			(97,575	)		641,963			3,267,034			(146,215	)		709,201

d)	Interest paid and received and income taxes paid are classified within operating activities and are as follows for the years ended September 30:


	2023		2022
		$		$

Interest paid		130,570		115,408

Interest received		87,239		28,247

Income taxes paid		480,607		435,558

e)	Cash and cash equivalents consisted of unrestricted cash as at September 30, 2023 and 2022.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		52

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

29.

Segmented information

The following tables present information on the Company’s operations based on its current management structure. Segment results are based on the location from which the services are delivered - the geographic delivery model (Note 12).


																	Year ended September 30, 2023
	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 Central- East Europe		Asia Pacific		Eliminations			Total
		$		$		$		$		$		$		$		$		$		$			$

Segment revenue		2,605,926		2,277,996		2,064,659		1,935,238		1,648,356		1,455,529		828,951		755,901		918,056		(194,252	)		14,296,360
Segment earnings before acquisition-related and integration costs, cost optimization program, net finance costs and income tax expense¹		355,578		339,410		477,502		306,362		127,320		216,517		110,583		101,871		277,598		—			2,312,741

Acquisition-related and integration costs (Note 27d)																							(53,401	)

Cost optimization program (Note 25)																							(8,964	)

Net finance costs (Note 26)																							(52,463	)
Earnings before income taxes																							2,197,913
¹Total amortization and depreciation of $507,087,000 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 Central-East Europe and Asia Pacific segments is $85,049,000, $83,359,000, $55,589,000, $59,334,000, $90,098,000, $38,423,000, $38,345,000, $31,616,000 and $25,274,000, respectively, for the year ended September 30, 2023.
																	Year ended September 30, 2022
	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 Central- East Europe		Asia Pacific		Eliminations			Total
		$		$		$		$		$		$		$		$		$		$			$

Segment revenue		2,152,113		2,075,321		1,981,380		1,750,902		1,571,118		1,291,125		729,024		692,859		799,661		(176,302	)		12,867,201
Segment earnings before acquisition-related and integration costs, net finance costs and income tax expense¹		289,730		304,767		463,289		276,395		125,728		200,117		96,651		88,287		241,672		—			2,086,636

Acquisition-related and integration costs (Note 27d)																							(27,654	)

Net finance costs (Note 26)																							(92,023	)
Earnings before income taxes																							1,966,959

Total amortization and depreciation of $470,572,000 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 Central-East Europe and Asia Pacific segments is $62,922,000, $70,417,000, $57,528,000, $54,073,000, $91,435,000, $40,765,000, $33,219,000, $34,323,000 and $25,890,000, respectively, for the year ended September 30, 2022. Amortization in intangible assets of $3,359,000 includes impairments mainly from a business solution in Northwest and Central-East Europe for $2,131,000. These assets were 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 material accounting policies. Intersegment revenue is priced as if the revenue was from third parties.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		53

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

29.

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 years ended September 30:


	2023		2022
		$		$

Western and Southern Europe

France		2,277,088		1,846,832

Portugal		116,928		105,225

Spain		114,341		111,515

Others		55,519		52,510

		2,563,876		2,116,082

U.S.¹		4,404,982		3,987,025

Canada		2,232,091		2,143,211

Scandinavia and Central Europe

Germany		925,679		811,458

Sweden		691,240		697,941

Norway		123,366		143,259

		1,740,285		1,652,658

U.K. and Australia

U.K.		1,588,665		1,397,161

Australia		90,576		75,746

		1,679,241		1,472,907

Finland, Poland and Baltics

Finland		820,886		727,853

Others		49,564		34,676

		870,450		762,529

Northwest and Central-East Europe

Netherlands		571,757		494,227

Denmark		95,758		114,849

Czech Republic		72,559		54,621

Others		61,854		64,632

		801,928		728,329

Asia Pacific

Others		3,507		4,460

		3,507		4,460

		14,296,360		12,867,201

¹	External revenue included in the U.S Commercial and State Government and U.S. Federal operating segments was $2,461,366,000 and $1,943,616,000, respectively in 2023 ($2,226,473,000 and $1,760,552,000, respectively in 2022).


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		54

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

29.

Segmented information (continued)

GEOGRAPHIC INFORMATION (CONTINUED)

The following table provides information for PP&E, right-of-use assets, contract costs and intangible assets based on their location:


	As at September 30, 2023		As at September 30, 2022
		$		$

U.S.		557,381		556,075

Canada		427,811		374,757

France		200,842		217,261

U.K.		115,560		112,924

Finland		100,212		97,486

Sweden		94,801		100,088

Germany		85,013		89,527

India		65,664		71,942

Netherlands		49,570		47,274

Rest of the world		106,292		114,966

		1,803,146		1,782,300

INFORMATION ABOUT SERVICES

The following table provides revenue information based on services provided by the Company for the year ended September 30:


	2023		2022
		$		$

Managed IT and business process services		7,674,460		6,980,988

Business and strategic IT consulting and systems integration services		6,621,900		5,886,213

		14,296,360		12,867,201

MAJOR CLIENT INFORMATION

Contracts with the U.S. federal government and its various agencies, included within the U.S. Federal operating segment, accounted for $1,923,977,000 and 13.5% of revenues for the year ended September 30, 2023 ($1,705,173,000 and 13.3% for the year ended September 30, 2022).


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		55

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

30.

Related party transactions

a)	Transactions with subsidiaries and other related parties

Balances and transactions between the Company and its subsidiaries have been eliminated on consolidation. The Company owns 100% of the equity interests of its principal subsidiaries.

The Company’s principal subsidiaries whose revenues, based on the geographic delivery model, represent more than 3% of the consolidated revenues are as follows:


Name of subsidiary		Country of incorporation
CGI Technologies and Solutions Inc.		United States

CGI France SAS		France

CGI Federal Inc.		United States

CGI IT UK Limited		United Kingdom

CGI Information Systems and Management Consultants Inc.		Canada

Conseillers en gestion et informatique CGI Inc.		Canada

CGI Deutschland B.V. & Co KG		Germany

CGI Sverige AB		Sweden

CGI Suomi OY		Finland

CGI Information Systems and Management Consultants Private Limited		India

CGI Nederland BV		Netherlands

b)	Compensation of key management personnel

Compensation of key management personnel, currently defined as the executive officers and the Board of Directors of the Company, was as follows for the year ended September 30:


	2023		2022

		$		$

Short-term employee benefits		36,049		34,430

Share-based payments		30,701		23,819


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		56

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

31.

Commitments, contingencies and guarantees

a)	Commitments

As at September 30, 2023, the Company entered into long-term service agreements representing a total commitment of $323,957,000. Minimum payments under these agreements are due as follows:



			$

Less than one year			151,720

Between one and three years			141,768

Between three and five years			30,469

Beyond five years			—

b)	Contingencies

From time to time, the Company is involved in legal proceedings, audits, litigation and claims which primarily relate to tax exposure, contractual disputes and employee claims arising in the ordinary course of its business. Certain of these matters seek damages in significant amounts and will ultimately be resolved when one or more future events occur or fail to occur. Although the outcome of such matters is not predictable with assurance, the Company has no reason to believe that the disposition of any such current matter could reasonably be expected to have a materially adverse impact on the Company’s financial position, results of operations or the ability to carry on any of its business activities. Claims for which there is a probable unfavourable outcome are recorded in provisions.

In addition, the Company is engaged to provide services under contracts with various government agencies. Some of these contracts are subject to extensive legal and regulatory requirements and, from time to time, government agencies investigate whether the Company’s operations are being conducted in accordance with these requirements. Generally, the governments agencies have the right to change the scope of, or terminate, these projects at its convenience. The termination or reduction in the scope of a major government contract or project could have a materially adverse effect on the results of operations and the financial condition of the Company.

c)	Guarantees

Sale of assets and business divestitures

In connection with the sale of assets and business divestitures, the Company may be required to pay counterparties for costs and losses incurred as the result of breaches in contractual obligations, representations and warranties, intellectual property right infringement and litigation against counterparties, among others. While some of the agreements specify a maximum potential exposure, others do not specify a maximum amount or a maturity date. It is not possible to reasonably estimate the maximum amount that may have to be paid under such guarantees. The amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time. No amount has been accrued in the consolidated balance sheets relating to this type of indemnification as at September 30, 2023. The Company does not expect to incur any potential payment in connection with these guarantees that could have a materially adverse effect on its consolidated financial statements.

Other transactions

In the normal course of business, the Company may provide certain clients, principally governmental entities, with bid and performance bonds. In general, the Company would only be liable for the amount of the bid bonds if the Company refuses to perform the project once the bid is awarded. The Company would also be liable for the performance bonds in the event of default in the performance of its obligations. As at September 30, 2023, the Company had committed a total of $34,323,000 of these bonds. To the best of its knowledge, the Company is in compliance with its performance obligations under all service contracts for which there is a bid or performance bond, and the ultimate liability, if any, incurred in connection with these guarantees, would not have a materially adverse effect on the Company’s consolidated results of operations or financial condition.

Moreover, the Company has letters of credit for a total of $75,888,000 in addition to the letters of credit covered by the unsecured committed revolving credit facility (Note 14). These guarantees are required in some of the Company’s contracts with customers.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		57

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

32.

Financial instruments

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 2014 U.S. Senior Notes, the 2021 U.S. Senior Notes, the 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 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 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 reporting period;

The fair value of cross-currency swaps is determined based on market data (primarily yield curves, exchange rates and interest rates) to calculate the present value of all estimated cash flows;

The fair value of cash, cash equivalents and cash included in funds held for clients and short-term investments included in 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 quotations and net assets values at the reporting date.

As at September 30, 2023, there were no changes in valuation techniques.

The following table presents the financial liabilities included in the long-term debt (Note 14) measured at amortized cost categorized using the fair value hierarchy.

As at September 30, 2023

As at September 30, 2022

Level

Carrying amount

Fair value

Carrying amount

Fair value

2014 U.S. Senior Notes

Level 2

473,808

464,806

550,177

539,752

2021 U.S. Senior Notes

Level 2

1,342,714

1,132,649

1,361,974

1,127,739

2021 CAD Senior Notes

Level 2

596,550

503,984

595,900

503,227

Other long-term debt

Level 2

10,363

9,839

71,278

68,991

2,423,435

2,111,278

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. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		58

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

32.

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 September 30, 2023		As at September 30, 2022
		$		$
Financial assets

FVTE

Cash and cash equivalents	Level 2		1,568,291		966,458

Cash included in funds held for clients (Note 5)	Level 2		269,792		504,726

Deferred compensation plan assets (Note 11)	Level 1		88,076		71,863

			1,926,159		1,543,047
Derivative financial instruments designated as hedging instruments

Current derivative financial instruments included in current financial assets	Level 2

Cross-currency swaps			83,626		8,740

Foreign currency forward contracts			12,505		18,934

Long-term derivative financial instruments (Note 11)	Level 2

Cross-currency swaps			16,130		222,246

Foreign currency forward contracts			5,875		15,631

			118,136		265,551
FVOCI

Short-term investments included in current financial assets	Level 2		7,332		6,184

Long-term bonds included in funds held for clients (Note 5)	Level 2		138,935		94,113

Long-term investments (Note 11)	Level 2		17,113		16,826
			163,380		117,123
Financial liabilities

Derivative financial instruments designated as hedging instruments

Current derivative financial instruments	Level 2

Cross-currency swaps			2,183		599

Foreign currency forward contracts			2,330		5,710

Long-term derivative financial instruments	Level 2

Cross-currency swaps			—		1,086

Foreign currency forward contracts			1,700		4,795
			6,213		12,190

There have been no transfers between Level 1 and Level 2 for the years ended September 30, 2023 and 2022.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		59

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

32.

Financial instruments (continued)

MARKET RISK

Market risk incorporates a range of risks. Movements in risk factors, such as interest rate risk and currency risk, affect the fair values of financial assets and liabilities.

Interest rate risk

To cover the risk of changes in both interest rates and foreign exchange rates of its 2014 U.S. Senior Notes as described below, the Company designates cross-currency interest rate swaps as cash flow hedges for this long term debt.

The Company is also exposed to interest rate risk on its unsecured committed revolving credit facility carrying amount.

The Company analyzes its interest rate risk exposure on an ongoing basis using various scenarios to simulate refinancing or the renewal of existing positions. Based on these scenarios, a change in the interest rate of 1% would not have had a significant impact on net earnings.

Currency risk

The Company operates internationally and is exposed to risk from changes in foreign currency exchange rates. The Company mitigates this risk principally through foreign currency denominated debt and derivative financial instruments, which includes foreign currency forward contracts and cross-currency swaps.

The Company hedges a portion of the translation of the Company’s net investments in its U.S. operations into Canadian dollar, with Senior U.S. unsecured notes. As of September 30, 2023, the Senior U.S. unsecured notes of a carrying value of $1,525,519,000 and a nominal amount of $1,536,563,000 have been designated as hedging instruments to hedge portions of the Company’s net investments in its U.S. operations.

The Company also hedges a portion of the translation of the Company’s net investments in its European operations with cross-currency swaps.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		60

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

32.

Financial instruments (continued)

MARKET RISK (CONTINUED)

Currency risk (continued)

The following tables summarize the cross-currency swap agreements that the Company had entered into in order to manage its currency:

As at
September 30, 2023

As at
September 30, 2022

Receive Notional

Receive Rate

Pay
Notional

Pay rate

Maturity

Fair value

Fair value

Hedges of net investments in European operations

$690,100

From 1.62% to 3.81%

€476,737

From (0.14)% to 2.51%

From September
2024 to 2028

22,966

78,647

$136,274

From 3.57% to 3.63%

£75,842

From 2.67% to 2.80%

September 2024

11,972

24,247

$58,419

From 3.57% to 3.68%

kr371,900

From 2.12% to 2.18%

September 2024

12,087

12,625

Hedges of net investments in European operations and cash flow hedges on unsecured committed term loan credit facility

U.S.$500,000

SOFR 1 month + 1.10%

€443,381

From 1.14% to 1.22%

December 2023

44,386

104,330

Cash flow hedges of 2014 U.S. Senior Notes

U.S.$215,000

From 3.74% to 4.06%

$284,793

From 3.49% to 3.81%

September 2024

6,163

9,452

Total

97,574

229,301

During the year ended September 30, 2023, the Company settled cross-currency swaps with a notional amount of $69,300,000 for a net amount of $2,921,000. The related amounts recognized in accumulated other comprehensive income will be transferred to earnings when the net investment is disposed of.

The Company enters into foreign currency forward contracts to hedge the variability in various foreign currency exchange rates on future revenues. Hedging relationships are designated and documented at inception and quarterly effectiveness assessments are performed during the year.

As at September 30, 2023, the Company held foreign currency forward contracts to hedge exposures to changes in foreign currency, which have the following notional, average contract rates and maturities:



			Average contract rates				As at September 30, 2023			As at September 30, 2022
Foreign currency forward contracts	Notional		Less than one year		More than one year		Fair value			Fair value

							$			$

USD/INR		U.S.$278,814		83.27		87.32		(973	)		(7,803	)

CAD/INR		$292,047		63.77		65.32		4,497			7,865

EUR/INR		€78,476		95.01		96.54		5,076			11,690

GBP/INR		£67,507		107.07		106.76		3,501			12,753

SEK/INR		kr15,000		7.48		—		(33	)		1,047

GBP/EUR		£77,610		1.16		—		649			—

EUR/MAD		€24,466		10.94		—		135			(201	)

EUR/CZK		€15,062		24.80		24.55		(92	)		611

Others		$78,027						1,590			(1,902	)

Total								14,350			24,060


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		61

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

32.

Financial instruments (continued)

MARKET RISK (CONTINUED)

Currency risk (continued)

The following table details the Company’s sensitivity to a 10% strengthening of the euro, the U.S. dollar, the British pound and the Swedish krona, foreign currency rates on net earnings and on other comprehensive income (loss). The sensitivity analysis on net earnings presents the impact of foreign currency denominated financial instruments and adjusts their translation at period end for a 10% strengthening in foreign currency rates. The sensitivity analysis on other comprehensive income (loss) presents the impact of a 10% strengthening in foreign currency rates on the fair value of foreign currency forward contracts designated as cash flow hedges and on net investment hedges.


										2023												2022

	euro impact			U.S. dollar impact			British pound impact			Swedish krona impact			euro impact			U.S. dollar impact			British pound impact			Swedish krona impact

	$			$			$			$			$			$			$			$

Increase in net earnings		1,384			3,598			692			466			2,835			3,604			622			883

Decrease in other comprehensive income (loss)		(155,000	)		(190,539	)		(29,436	)		(7,005	)		(183,986	)		(179,780	)		(31,700	)		(8,577	)

LIQUIDITY RISK

Liquidity risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial assets. The Company’s activities are financed through a combination of the cash flows from operations, borrowing under existing unsecured committed revolving credit facility, the issuance of debt and the issuance of equity. One of management’s primary goals is to maintain an optimal level of liquidity through the active management of the assets and liabilities as well as the cash flows. The Company regularly monitors its cash forecasts to ensure it has sufficient flexibility under its available liquidity to meet its obligations.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		62

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

32.

Financial instruments (continued)

LIQUIDITY RISK (CONTINUED)

The following tables summarize the carrying amount and the contractual maturities of both the interest and principal portion of financial liabilities. All amounts contractually denominated in foreign currency are presented in Canadian dollar equivalent amounts using the period-end spot rate or floating rate.


As at September 30, 2023	Carrying amount		Contractual cash flows			Less than one year			Between one and three years			Between three and five years			Beyond five years
	$		$			$			$			$			$

Non-derivative financial liabilities

Accounts payable and accrued liabilities		924,659		924,659			924,659			—			—			—

Accrued compensation and employee-related liabilities		1,100,566		1,100,566			1,100,566			—			—			—

2014 U.S. Senior Notes		473,808		492,722			492,722			—			—			—

2021 U.S. Senior Notes		1,342,714		1,488,774			24,233			860,746			24,910			578,885

2021 CAD Senior Notes		596,550		663,000			12,600			25,200			625,200			—

Unsecured committed term loan credit facility		676,886		687,419			687,419			—			—			—

Lease liabilities		641,963		722,284			221,877			238,009			139,275			123,123

Other long-term debt		10,363		10,448			8,353			1,328			449			318

Clients’ funds obligations		493,638		493,638			493,638			—			—			—

Derivative financial liabilities

Cash flow hedges of future revenue		4,030

Outflow				328,455			155,450			163,091			9,914			—

(Inflow)				(331,954	)		(154,116	)		(166,967	)		(10,871	)		—

Cross-currency swaps		2,183

Outflow				93,311			93,311			—			—			—

(Inflow)				(91,353	)		(91,353	)		—			—			—

		6,267,360		6,581,969			3,969,359			1,121,407			788,877			702,326

As at September 30, 2022	Carrying amount		Contractual cash flows			Less than one year			Between one and three years			Between three and five years			Beyond five years
	$		$			$			$			$			$

Non-derivative financial liabilities

Accounts payable and accrued liabilities		1,016,407		1,016,407			1,016,407			—			—			—

Accrued compensation and employee-related liabilities		1,130,726		1,130,726			1,130,726			—			—			—

2014 U.S. Senior Notes		550,177		591,467			90,680			500,787			—			—

2021 U.S. Senior Notes		1,361,974		1,537,370			24,623			49,246			862,639			600,862

2021 CAD Senior Notes		595,900		675,600			12,600			25,200			25,200			612,600

Unsecured committed term loan credit facility		687,705		721,807			27,053			694,754			—			—

Lease liabilities		709,201		808,445			182,815			295,017			166,848			163,765

Other long-term debt		71,278		80,324			25,843			11,919			42,557			5

Clients’ funds obligations		604,431		604,431			604,431			—			—			—

Derivative financial liabilities

Cash flow hedges of future revenue		10,505

Outflow				304,698			110,827			193,871			—			—

(Inflow)				(311,446	)		(109,319	)		(202,127	)		—			—

Cross-currency swaps		1,685

Outflow				168,213			74,902			93,311			—			—

(Inflow)				(167,586	)		(74,762	)		(92,824	)		—			—

		6,739,989		7,160,456			3,116,826			1,569,154			1,097,244			1,377,232


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		63

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

32.

Financial instruments (continued)

LIQUIDITY RISK (CONTINUED)

As at September 30, 2023, the Company held cash and cash equivalents, funds held for clients, short-term investments and long-term investments of $2,081,463,000 ($1,588,307,000 as at September 30, 2022). The Company also had available $1,495,858,000 in unsecured committed revolving credit facility ($1,495,730,000 as at September 30, 2022). As at September 30, 2023, trade accounts receivable amounted to $1,152,880,000 (Note 4) ($1,106,187,000 as at September 30, 2022). Given the Company’s available liquid resources as compared to the timing of the payments of liabilities, management assesses the Company’s liquidity risk to be low.

CREDIT RISK

The Company takes on exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, accounts receivable, work in progress, long-term investments and derivative financial instruments with a positive fair value. The maximum exposure of credit risk is generally represented by the carrying amount of these items reported on the consolidated balance sheets.

The Company is exposed to credit risk in connection with long-term investments through the possible inability of borrowers to meet the terms of their obligations. The Company mitigates this risk by investing primarily in high credit quality corporate and government bonds with a credit rating of A^- or higher. The application of the low credit exemption had no material impact on the Company’s consolidated financial statements.

The Company has accounts receivable derived from clients engaged in various industries including government; financial services; manufacturing, retail and distribution; communications and utilities; and health that are not concentrated in any specific geographic area. These specific industries may be affected by economic factors that may impact trade accounts receivable. However, management does not believe that the Company is subject to any significant credit risk in view of the Company’s large and diversified client base and that any single industry or geographic region represents a significant credit risk to the Company. Historically, the Company has not made any significant write-offs and had low bad debt ratios. The application of the simplified approach to measure expected credit losses for trade accounts receivable and work in progress had no material impact on the Company’s consolidated financial statements.

The following table sets forth details of the age of trade accounts receivable that are past due:


	2023			2022
	$			$

Not past due		1,034,795			950,928

Past due 1-30 days		82,536			81,000

Past due 31-60 days		17,630			25,694

Past due 61-90 days		9,925			12,142

Past due more than 90 days		10,913			39,883

		1,155,799			1,109,647

Allowance for doubtful accounts		(2,919	)		(3,460	)

		1,152,880			1,106,187

In addition, the exposure to credit risk of cash, cash equivalents and cash included in funds held for clients and derivatives financial instruments is limited given that the Company deals mainly with a diverse group of high-grade financial institutions and that derivatives agreements are generally subject to master netting agreements, such as the International Swaps and Derivatives Association, which provide for net settlement of all outstanding contracts with the counterparty in case of an event of default.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		64

Notes to the Consolidated Financial Statements

For the years ended September 30, 2023 and 2022

(tabular amounts only are in thousands of Canadian dollars, except per share data)

33.

Capital risk management

The Company is exposed to risks of varying degrees of significance which could affect its ability to achieve its strategic objectives for growth. The main objectives of the Company’s risk management process are to ensure that risks are properly identified and that the capital base is adequate in relation to these risks.

The Company manages its capital to ensure that there are adequate capital resources while maximizing the return to shareholders through the optimization of the debt and equity balance. As at September 30, 2023, total managed capital was $13,645,314,000 ($12,238,427,000 as at September 30, 2022). Managed capital consists of long-term debt, including the current portion (Note 14), lease liabilities, cash and cash equivalents, short-term investments, long-term investments (Note 11) and shareholders’ equity. The basis for the Company’s capital structure is dependent on the Company’s expected business growth and changes in the business environment. When capital needs have been specified, the Company’s management proposes capital transactions for the approval of the Company’s Audit and Risk Management Committee and Board of Directors. The capital risk policy remains unchanged from prior periods.

The Company monitors its capital by reviewing various financial metrics, including the following:

Net Debt/Capitalization

Debt/Adjusted EBITDA

Net debt, capitalization and adjusted EBITDA are additional measures. Net debt represents debt (including the current portion and the fair value of foreign currency derivative financial instruments related to debt) and lease liabilities less cash and cash equivalents, short-term investments and long-term investments. Capitalization is shareholders’ equity plus net debt. Adjusted EBITDA is calculated as earnings from continuing operations before finance costs, income taxes, depreciation, amortization, cost optimization program and acquisition-related and integration costs. The Company believes that the results of the current internal ratios are consistent with its capital management credit facility and unsecured committed revolving credit facilities. The ratios are as follows:

Leverage ratios, which are the ratio of total debt to adjusted EBITDA for its 2014 U.S. Senior Notes and the ratio of total debt net of cash and cash equivalent investments to adjusted EBITDA for its unsecured committed revolving credit facility and unsecured committed term loan credit facility for the four most recent quarters¹_.

An interest and rent coverage ratio, which is the ratio of the EBITDAR for the four most recent quarters to the total finance costs and the operating rentals in the same periods. EBITDAR is calculated as adjusted EBITDA before rent expense¹.

In the case of the 2014 U.S. Senior Notes, a minimum net worth is required, whereby shareholders’ equity, excluding foreign exchange translation adjustments included in accumulated other comprehensive income, cannot be less than a specified threshold.

These ratios are calculated on a consolidated basis.

The Company is in compliance with these covenants and monitors them on an ongoing basis. The ratios are also reviewed quarterly by the Company’s Audit and Risk Management Committee. The Company is not subject to any other externally imposed capital requirements.

¹	In the event of an acquisition, the available historical financial information of the acquired company will be used in the computation of the ratios.


CGI Inc. – Consolidated Financial Statements for the years ended September 30, 2023 and 2022		65

Exhibit 99.3

GLOBAL PRESS RELEASE

LOGO

Stock Market Symbols

GIB.A (TSX)

GIB (NYSE)

cgi.com/newsroom

CGI reports strong fourth quarter and Fiscal 2023 results

Fourth quarter revenue up 8.0% and diluted Earnings Per Share (EPS) up 16.6%

Q4-F2023 performance highlights

•

Revenue of $3.51 billion, up 8.0% year-over-year or 2.2% year-over-year in constant currency¹;

•

Earnings before income taxes of $557.9 million, up 14.8% year-over-year, for a margin¹ of 15.9%;

•

Adjusted EBIT¹ of $573.0 million, up 9.8% year-over-year, for a margin¹ of 16.3%;

•

Net earnings of $414.5 million, up 14.4% year-over-year, for a margin¹ of 11.8%;

•

Net earnings excluding specific items^1,2 of $421.2 million, up 12.9% year-over-year, for a margin¹ of 12.0%;

•

Diluted EPS of $1.76, up 16.6% year-over-year;

•

Diluted EPS excluding specific items^1,2 of $1.79, up 14.7%year-over-year;

•

Cash from operating activities of $628.7 million, representing 17.9% of revenue¹;

•

Bookings¹ of $4.00 billion, for a book-to-bill ratio of 113.9%; and

•

Backlog¹ of $26.06 billion or 1.8x annual revenue.

F2023 performance highlights

•

Revenue of $14.30 billion, up 11.1% year-over-year or 8.0% year-over-year in constant currency¹;

•

Earnings before income taxes of $2.20 billion, up 11.7% year-over-year, for a margin¹ of 15.4%;

•

Adjusted EBIT¹ of $2.31 billion, up 10.8% year-over-year, for a margin¹ of 16.2%;

•

Net earnings of $1.63 billion, up 11.3% year-over-year, for a margin¹ of 11.4%;

•

Net earnings excluding specific items^1,3 of $1.68 billion, up 12.9% year-over-year, for a margin¹ of 11.8%;

•

Diluted EPS of $6.86, up 13.6% year-over-year;

•

Diluted EPS excluding specific items^1,3 of $7.07, up 15.3%year-over-year;

•

Cash from operating activities of $2.11 billion, representing 14.8% of revenue¹; and

•

Bookings¹ of $16.26 billion, for a book-to-bill ratio of 113.7%.

Note: All figures in Canadian dollars. F2023 MD&A, audited consolidated financial statements and accompanying notes can be found at cgi.com/investors and have been filed with the Canadian Securities Regulators on SEDAR+ at www.sedarplus.ca and the U.S. Securities and Exchange Commission on EDGAR at www.sec.gov.

¹ Constant currency growth, diluted EPS excluding specific items, adjusted EBIT, adjusted EBIT margin, net earnings excluding specific items, net earnings margin excluding specific items and diluted EPS excluding specific items are non-GAAP financial measures or ratios. Earnings before income taxes margin, net earnings margin, cash from operating activities as a percentage of revenue, bookings and backlog are key performance measures. See “Non-GAAP and other key performance measures” section of this press release for more information, including quantitative reconciliations to the closest International Financial Reporting Standards (IFRS) measure, as applicable. These are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other companies.

² Specific items in Q4-F2023 include: $6.7 million from the cost optimization program, net of tax; Specific items in Q4-F2022 include: $10.7 million in acquisition-related and integration costs, net of tax.

³ Specific items in F2023 include: $42.1 million in acquisition-related and integration costs and $6.7 million from the cost optimization program, both net of tax; Specific items in F2022 include: $21.7 million in acquisition-related and integration costs, net of tax.

- 1 -

Montréal, Quebec, November 8, 2023 - CGI (TSX: GIB.A) (NYSE: GIB)

Q4-F2023 results

For the fourth quarter of Fiscal 2023, the Company reported revenue of $3.51 billion, representing a year-over-year increase of 8.0%. When excluding foreign currency variations, revenue grew by 2.2% year-over-year. The quarter includes the calendar impact of one less available day to bill.

Earnings before income taxes were $557.9 million, up 14.8% year-over-year, for a margin of 15.9%, up 90 basis points compared to the same period last year. Adjusted EBIT was $573.0 million, up 9.8% year-over-year, for a margin of 16.3%, up 20 basis points compared to the same period last year.

Net earnings were $414.5 million, up 14.4% compared with the same period last year, for a margin of 11.8%. Diluted earnings per share, as a result, were $1.76 compared to $1.51 last year, representing an increase of 16.6%.

In Q4, the Company initiated a cost optimization program to accelerate actions to right-size its real estate portfolio globally and improve operational efficiencies, including the increased use of automation and global delivery, focused on administrative activities. In the quarter, $9.0 million was expensed and the Company plans to incur approximately $65 million of additional expenses over the first half of Fiscal 2024 related to this program.

“CGI’s resilience and strong positioning—strategically, operationally, and financially—underpinned our team’s ability to deliver on our profitable growth plan for the fourth quarter and fiscal year 2023,” said George D. Schindler, President and Chief Executive Officer. “During Q4, clients prioritized cost savings and modernization initiatives, driving a 26% increase in new CGI managed services bookings compared to last year. As we look ahead, we are taking the actions necessary to further strengthen our capacity to continue delivering value for shareholders. This includes cost optimization and strategic investments to advance the next wave of innovation and growth, including the responsible use of AI, a key enabler for bringing the right mix of our end-to-end offerings to clients to help them generate the ROI necessary from their digitization initiatives.”

When excluding the cost optimization program, net of tax, net earnings were $421.2 million. This represents an increase of 12.9% year-over-year, and a margin of 12.0%. On the same basis, diluted earnings per share increased by 14.7% to $1.79, up from $1.56 for the same period last year.

As of September 30, 2023, the number of CGI consultants and professionals worldwide stands at approximately 91,500, representing a year-over-year net increase of 1,500 people and stable on a sequential quarter basis.

Cash provided by operating activities was $628.7 million, or 17.9% of revenue, representing an increase of 28.6% on a year-over-year basis.

Bookings were $4.00 billion, up $360 million on a year-over-year basis, representing a book-to-bill ratio of 113.9%. As of September 30, 2023, the Company’s backlog stood at $26.06 billion or 1.8x annual revenue.

During the fourth quarter of Fiscal 2023, the Company invested $107.0 million back into its business and $324.7 million under its current Normal Course Issuer Bid to purchase for cancellation 2,398,900 of its Class A subordinate voting shares.

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F2023 results

The Company reported revenue of $14.30 billion, representing a year-over-year increase of 11.1%. When excluding foreign currency impacts, revenue grew by 8.0% year-over-year.

Earnings before income taxes were $2.20 billion, up 11.7% year-over-year, for a margin of 15.4%, up 10 basis points compared to the same period last year. Adjusted EBIT was $2.31 billion, up 10.8% year-over-year, for a margin of 16.2%, stable when compared to last year.

Net earnings were $1.63 billion, up 11.3% compared with the same period last year, for a margin of 11.4%. Diluted earnings per share, as a result, were $6.86 compared to $6.04 last year, representing an increase of 13.6%. When excluding acquisition-related and integration costs and the cost optimization program, both net of tax, net earnings were $1.68 billion. This represents an increase of 12.9% year-over-year, and a margin of 11.8%. On the same basis, diluted earnings per share increased by 15.3% to $7.07, up from $6.13 for the same period last year.

Bookings were $16.26 billion, up $2.29 billion on a year-over-year basis, representing a book-to-bill ratio of 113.7%.

Cash provided by operating activities was $2.11 billion, or 14.8% of revenue, representing an increase of 13.3% on a year-over-year basis.

During Fiscal 2023, the Company invested $409.1 million back into its business and $788.0 million under its current Normal Course Issuer Bid to purchase for cancellation 6,234,096 of its Class A subordinate voting shares.

Return on invested capital (ROIC) was 16.0%, an increase of 30 basis points, both on a year-over-year and sequential basis.

As at September 30, 2023, long-term debt and lease liabilities, including both their current and long-term portions, were $3.74 billion, down from $3.98 billion at the same time last year. As of the same date, net debt stood at $2.13 billion, down from $2.95 billion at the same time last year. The net debt-to-capitalization ratio stood at 20.4% at the end of September 2023, down 840 basis points when compared to the prior year.

At the end of September 2023, with cash of $1.6 billion on hand excluding funds held for clients, and a fully available revolving credit facility, the Company had $3.1 billion in readily available liquidity to pursue its Build and Buy profitable growth strategy.

Financial highlights

Q4-F2023

Q4-F2022

F2023

F2022

In millions of Canadian dollars except earnings per share and where noted

Revenue

3,507.3

3,247.2

14,296.4

12,867.2

Growth

8.0%

8.0%

11.1%

6.1%

Constant currency growth

2.2%

13.9%

8.0%

10.5%

Earnings before income taxes

557.9

485.9

2,197.9

1,967.0

Margin %

15.9%

15.0%

15.4%

15.3%

Adjusted EBIT

573.0

521.7

2,312.7

2,086.6

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Financial highlights	Q4-F2023	Q4-F2022	F2023	F2022
Margin %	16.3%	16.1%	16.2%	16.2%
Net earnings	414.5	362.4	1,631.2	1,466.1
Margin %	11.8%	11.2%	11.4%	11.4%
Net earnings excluding specific items¹	421.2	373.1	1,680.0	1,487.9
Margin %	12.0%	11.5%	11.8%	11.6%
Diluted EPS	1.76	1.51	6.86	6.04
Diluted EPS excluding specific items¹	1.79	1.56	7.07	6.13
Weighted average number of outstanding shares (diluted)	235.7	239.9	237.7	242.9
Net finance costs	6.1	21.0	52.5	92.0
Long-term debt and lease liabilities²	3,742.3	3,976.2	3,742.3	3,976.2
Net debt³	2,134.6	2,946.9	2,134.6	2,946.9
Net debt to capitalization ratio³	20.4%	28.8%	20.4%	28.8%
Cash provided by operating activities	628.7	488.9	2,112.2	1,865.0
As a percentage of revenue	17.9%	15.1%	14.8%	14.5%
Days sales outstanding (DSO)³	44	49	44	49
Purchase and cancellation of Class A subordinate voting shares	324.7	132.9	788.0	913.4
Return on invested capital (ROIC)³	16.0%	15.7%	16.0%	15.7%
Bookings	3,996	3,636	16,259	13,966
Backlog	26,059	24,055	26,059	24,055

¹ Specific items in Q4-F2023 include: $6.7 million from the cost optimization program, net of tax; Specific items in Q4-F2022 include: $10.7 million in acquisition-related and integration costs, net of tax. Specific items in F2023 include: $42.1 million in acquisition-related and integration costs and $6.7 million from the cost optimization program, both net of tax; Specific items in F2022 include: $21.7 million in acquisition-related and integration costs, net of tax.

² Long-term debt and lease liabilities include both the current and long-term portions of the long-term debt and lease liabilities.

³ Net debt, net debt to capitalization ratio and ROIC are non-GAAP financial measures or ratios. DSO is a key performance measure. See “Non-GAAP and other key performance measures” section of this press release for more information, including quantitative reconciliations to the closest International Financial Reporting Standards (IFRS) measure, as applicable. These are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other companies.

To access the financial statements – click here

To access the MD&A – click here

Q4-F2023 results conference call

Management will host a conference call this morning at 9:00 a.m. (EST) to discuss results. Participants may access the call by dialing +1-888-396-8049 or +1-416-764-8646 Conference ID: 92584974 or via cgi.com/investors. For those unable to participate on the live call, a podcast and copy of the slides will be archived for download at cgi.com/investors. Interested parties may also access a replay of the call by dialing +1-877-674-7070 Passcode: 584974, until December 8, 2023.

About CGI

Founded in 1976, CGI is among the largest independent IT and business consulting services firms in the world. With 91,500 consultants and professionals across the globe, CGI delivers an end-to-end portfolio of capabilities, from strategic IT and business consulting to systems integration, managed IT and business process services and intellectual property solutions. CGI works with clients through a local relationship model complemented by a global delivery network that helps clients digitally transform their organizations and accelerate results. CGI

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Fiscal 2023 reported revenue is $14.30 billion and CGI shares are listed on the TSX (GIB.A) and the NYSE (GIB). Learn more at cgi.com.

Forward-looking information and statements

This press release contains “forward-looking information” within the meaning of Canadian securities laws and “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other applicable United States safe harbours. All such forward-looking information and statements are made and disclosed in reliance upon the safe harbour provisions of applicable Canadian and United States securities laws. Forward-looking information and statements include all information and statements regarding CGI’s intentions, plans, expectations, beliefs, objectives, future performance, and strategy, as well as any other information or statements that relate to future events or circumstances and which do not directly and exclusively relate to historical facts. Forward-looking information and statements often but not always use words such as “believe”, “estimate”, “expect”, “intend”, “anticipate”, “foresee”, “plan”, “predict”, “project”, “aim”, “seek”, “strive”, “potential”, “continue”, “target”, “may”, “might”, “could”, “should”, and similar expressions and variations thereof. These information and statements are based on our perception of historic trends, current conditions and expected future developments, as well as other assumptions, both general and specific, that we believe are appropriate in the circumstances. Such information and statements are, however, by their very nature, subject to inherent risks and uncertainties, of which many are beyond the control of CGI, and which give rise to the possibility that actual results could differ materially from our expectations expressed in, or implied by, such forward-looking information or forward-looking statements. These risks and uncertainties include but are not restricted to: risks related to the market such as the level of business activity of our clients, which is affected by economic and political conditions, additional external risks (such as pandemics, armed conflict, climate-related issues and inflation) and our ability to negotiate new contracts; risks related to our industry such as competition and our ability to develop and expand our services, to penetrate new markets, and to protect our intellectual property rights; risks related to our business such as risks associated with our growth strategy, including the integration of new operations, financial and operational risks inherent in worldwide operations, foreign exchange risks, income tax laws and other tax programs, the termination, modification, delay or suspension of our contractual agreements, our expectations regarding future revenue resulting from bookings and backlog, our ability to attract and retain qualified employees, to negotiate favourable contractual terms, to deliver our services and to collect receivables, to disclose, manage and implement environmental, social and governance (ESG) initiatives and standards, and to achieve ESG commitments and targets, including without limitation, our commitment to net-zero carbon emissions by 2030, as well as the reputational and financial risks attendant to cybersecurity breaches and other incidents, and financial risks such as liquidity needs and requirements, maintenance of financial ratios, interest rate fluctuations and the discontinuation of major interest rate benchmarks and changes in creditworthiness and credit ratings; as well as other risks identified or incorporated by reference in this press release, in CGI’s annual MD&A and in other documents that we make public, including our filings with the Canadian Securities Administrators (on SEDAR+ at www.sedarplus.ca) and the U.S. Securities and Exchange Commission (on EDGAR at www.sec.gov). Unless otherwise stated, the forward-looking information and statements contained in this press release are made as of the date hereof and CGI disclaims any intention or obligation to publicly update or revise any forward-looking information or forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. While we believe that our assumptions on which these forward-looking information and forward-looking statements are based were reasonable as at the date of this press release, readers are cautioned not to place undue reliance on these forward-looking information or statements. Furthermore, readers are reminded that forward-looking information and statements are presented for the sole purpose of assisting investors and others in understanding our objectives, strategic priorities and business outlook as well as our anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

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Further information on the risks that could cause our actual results to differ significantly from our current expectations may be found in the section titled Risk Environment of CGI’s annual MD&A, which is incorporated by reference in this cautionary statement. We also caution readers that the above-mentioned risks and the risks disclosed in CGI’s annual MD&A and other documents and filings are not the only ones that could affect us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial could also have a material adverse effect on our financial position, financial performance, cash flows, business or reputation.

For more information:

Investors

Kevin Linder

Senior Vice-President, Investor Relations

kevin.linder@cgi.com

+1 905-973-8363

Media

Andrée-Anne Pelletier, ARP, PRP

Manager, Global Media and Public Relations

an.pelletier@cgi.com

+1 438-468-9118

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Non-GAAP and other key performance measures

Non-GAAP financial measures and ratios used in this press release: Constant currency growth, adjusted EBIT, adjusted EBIT margin, net earnings excluding specific items, net earnings margin excluding specific items, diluted EPS excluding specific items, net debt, net debt to capitalization ratio, and return on invested capital (ROIC). CGI reports its financial results in accordance with IFRS. However, management believes that these non-GAAP measures provide useful information to investors regarding the company’s financial condition and results of operations as they provide additional measures of its performance. These measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers and should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with IFRS. Key performance measures used in this press release: cash from operating activities as a percentage of revenue, bookings, book-to-bill ratio, backlog, days sales outstanding (DSO), earnings before income taxes margin, and net earnings margin.

Below are reconciliations to the most comparable IFRS financial measures and ratios, as applicable.

The descriptions of these non-GAAP measures and ratios and other key performance measures can be found on pages 3, 4 and 5 of our F2023 MD&A which is posted on CGI’s website, and filed with SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov.

Q4-F2023

Reconciliation between constant currency growth and growth

In thousands of CAD except for percentage

For the three months ended September 30,

2023

2022

Total CGI revenue

3,507,336

3,247,221

8.0%

Constant currency year-over-year revenue growth

2.2%

Foreign currency impact

5.8%

Variation over previous period

8.0%

Reconciliation between adjusted EBIT and earnings before income taxes

For the three months ended September 30,

Change

2023

2022

In thousands of CAD except for percentage and shares data

Adjusted EBIT

573,039

521,696

51,343

9.8%

Minus the following items:

Acquisition-related and integration costs

—

14,775

(14,775)

(100.0%)

Cost optimization program

8,964

—

8,964

—%

Net finance costs

6,148

21,019

(14,871)

(70.8%)

Earnings before income taxes

557,927

485,902

72,025

14.8%

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Net earnings and Diluted EPS, excluding specific items

In thousands of CAD except for percentages and shares data

For the three months ended September 30,

2023

2022

Change

Earnings before income taxes

557,927

485,902

14.8%

Add back:

Acquisition-related and integration costs

—

14,775

(100.0%)

Cost optimization program

8,964

—

—%

Earnings before income taxes excluding specific items

566,891

500,677

13.2 %

Income tax expense

143,451

123,540

16.1%

Effective tax rate

25.7%

25.4%

Add back:

Tax deduction on acquisition-related and integration costs

—

4,082

(100.0%)

Impact on effective tax rate

—%

0.1%

Tax deduction on cost optimization program

2,240

—

—%

Impact on effective tax rate

—%

Income tax expense excluding specific items

145,691

127,622

14.2%

Effective tax rate excluding specific items

25.7%

25.5%

Net earnings excluding specific items

421,200

373,055

12.9%

Net earnings margin excluding specific items

12.0%

11.5%

Weighted average number of shares outstanding

Class A subordinate voting shares and Class B multiple voting shares (basic)

231,931,083

236,360,510

(1.9%)

Class A subordinate voting shares and Class B multiple voting shares (diluted)

235,703,369

239,891,696

(1.7%)

Earnings per share excluding specific items (in dollars)

Basic

1.82

1.58

15.2%

Diluted

1.79

1.56

14.7%

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F2023

Reconciliation between constant currency growth and growth

In thousands of CAD except for percentage

For the years ended September 30,

2023

2022

Total CGI revenue

14,296,360

12,867,201

11.1%

Constant currency year-over-year revenue growth

8.0%

Foreign currency impact

3.1%

Variation over previous period

11.1%

Reconciliation between adjusted EBIT and earnings before income taxes

In thousands of CAD except for percentage

For the years ended September 30,

2023

% of revenue

2022

% of revenue

Adjusted EBIT

2,312,741

16.2%

2,086,636

16.2%

Minus the following items:

Acquisition-related and integration costs

53,401

0.4%

27,654

0.2%

Cost optimization program

8,964

0.1%

—

—%

Net finance costs

52,463

0.4%

92,023

0.7%

Earnings before income taxes

2,197,913

15.4%

1,966,959

15.3%

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Net earnings and Diluted EPS, excluding specific items

For the years ended September 30,

Change

2023

2022

In thousands of CAD except for percentages and shares data

Earnings before income taxes

2,197,913

1,966,959

230,954

11.7%

Add back:

Acquisition-related and integration costs

53,401

27,654

25,747

93.1%

Cost optimization program

8,964

—

8,964

—%

Earnings before income taxes excluding specific items

2,260,278

1,994,613

265,665

13.3%

Income tax expense

566,664

500,817

65,847

13.1%

Effective tax rate

25.8%

25.5%

Add back:

Tax deduction on acquisition-related and integration costs

11,336

5,942

5,394

90.8%

Impact on effective tax rate

(0.1%)

(0.1%)

Tax deduction on cost optimization program

2,240

—

2,240

—%

Impact on effective tax rate

—%

Income tax expense excluding specific items

580,240

506,759

73,481

14.5%

Effective tax rate excluding specific items

25.7%

25.4%

Net earnings excluding specific items

1,680,038

1,487,854

192,184

12.9%

Net earnings margin excluding specific items

11.8%

11.6%

Weighted average number of shares outstanding

Class A subordinate voting shares and Class B multiple voting shares (basic)

234,041,041

239,262,004

(2.2%)

Class A subordinate voting shares and Class B multiple voting shares (diluted)

237,702,081

242,867,445

(2.1%)

Earnings per share excluding specific items (in dollars)

Basic

7.18

6.22

0.96

15.4%

Diluted

7.07

6.13

0.94

15.3%

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Reconciliation between net debt and long-term debt and lease liabilities

As at September 30,

2023

2022

In thousands of CAD except for percentages

Reconciliation between net debt and long-term debt and lease liabilities¹:

Net debt

2,134,644

2,946,908

Add back:

Cash and cash equivalents

1,568,291

966,458

Short-term investments

7,332

6,184

Long-term investments

17,113

16,826

Fair value of foreign currency derivative financial instruments related to debt

14,904

39,859

Long-term debt and lease liabilities ¹

3,742,284

3,976,235

Net debt to capitalization ratio

20.4%

28.8%

Return on invested capital

16.0%

15.7%

Days sales outstanding

As at September 30, 2023, long-term debt and lease liabilities were $3,100.3 million ($3,267.0 million as at September 30, 2022) and $642.0 million ($709.2 million as at September 30, 2022), respectively, including their current portions.

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