CGI : Q2 F2024 FS EN

Interim Condensed Consolidated Financial Statements of

CGI INC.

For the three and six months ended March 31, 2024 and 2023

(unaudited)

Interim Consolidated Statements of Earnings

For the three and six months ended March 31

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

		Three months ended March 31	Six months ended March 31
	Notes	2024	2023	2024	2023
		$	$	$	$
Revenue	10	3,740,814	3,715,324	7,343,784	7,165,596
Operating expenses
Costs of services, selling and administrative		3,110,185	3,113,317	6,129,300	6,012,925
Acquisition-related and integration costs	8c	145	20,945	2,323	40,369
Cost optimization program	6	43,401	-	91,063	-
Net finance costs	7	7,472	15,366	14,730	33,507
Foreign exchange loss (gain)		2,174	1,239	1,796	(2,210)
		3,163,377	3,150,867	6,239,212	6,084,591
Earnings before income taxes		577,437	564,457	1,104,572	1,081,005
Income tax expense		150,565	145,042	287,904	279,211
Net earnings		426,872	419,415	816,668	801,794
Earnings per share
Basic earnings per share	5c	1.86	1.78	3.55	3.40
Diluted earnings per share	5c	1.83	1.76	3.50	3.35

See Notes to the Interim Condensed Consolidated Financial Statements.

CGI Inc. - Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2024 and 2023

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Interim Consolidated Statements of Comprehensive Income

For the three and six months ended March 31 (in thousands of Canadian dollars) (unaudited)

	Three months ended March 31	Six months ended March 31
	2024	2023	2024	2023
	$	$	$	$
Net earnings	426,872	419,415	816,668	801,794
Items that will be reclassified subsequently to net earnings (net of
income taxes):
Net unrealized gains on translating financial statements of	68,639		115,530
foreign operations	76,416	423,297
Net losses on cross-currency swaps and on translating long-term
debt designated as hedges of net investments in foreign	(37,253)	(17,551)	(29,619)	(80,965)
operations
Deferred (costs) gains of hedging on cross-currency swaps	(3,382)	3,080	1,201	8,770
Net unrealized gains (losses) on cash flow hedges	10,088	(1,033)	(600)	(16,647)
Net unrealized gains on financial assets at fair value through	18	949	1,870	1,385
other comprehensive income
Items that will not be reclassified subsequently to net earnings (net of
income taxes):
Net remeasurement gains (losses) on defined benefit plans	12,082	8,828	10,097	(1,481)
Other comprehensive income	50,192	70,689	98,479	334,359
Comprehensive income	477,064	490,104	915,147	1,136,153

See Notes to the Interim Condensed Consolidated Financial Statements.

CGI Inc. - Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2024 and 2023

2

Interim Consolidated Balance Sheets

(in thousands of Canadian dollars) (unaudited)

	Notes	As at	As at
	March 31, 2024	September 30, 2023
		$	$
Assets
Current assets
Cash and cash equivalents	9c and 11	1,266,854	1,568,291
Accounts receivable		1,427,178	1,425,117
Work in progress		1,219,717	1,143,685
Current financial assets	11	48,257	103,463
Prepaid expenses and other current assets		191,027	198,377
Income taxes		6,806	6,067
Total current assets before funds held for clients		4,159,839	4,445,000
Funds held for clients		525,519	488,727
Total current assets		4,685,358	4,933,727
Property, plant and equipment		375,168	389,276
Right-of-use assets		453,543	482,321
Contract costs		328,179	308,446
Intangible assets		605,005	623,103
Other long-term assets		114,112	84,776
Long-term financial assets		154,204	147,968
Deferred tax assets		145,249	105,432
Goodwill		8,876,606	8,724,450
		15,737,424	15,799,499
Liabilities
Current liabilities
Accounts payable and accrued liabilities		900,846	924,659
Accrued compensation and employee-related liabilities		1,056,344	1,100,566
Deferred revenue		626,073	488,761
Income taxes		175,674	250,869
Current portion of long-term debt		474,956	1,158,971
Current portion of lease liabilities		192,986	198,857
Provisions		54,153	24,965
Current derivative financial instruments	11	4,697	4,513
Total current liabilities before clients' funds obligations		3,485,729	4,152,161
Clients' funds obligations		527,831	493,638
Total current liabilities		4,013,560	4,645,799
Long-term debt		1,942,235	1,941,350
Long-term lease liabilities		418,692	443,106
Long-term provisions		20,893	19,198
Other long-term liabilities		300,269	243,592
Long-term derivative financial instruments	11	2,208	1,700
Deferred tax liabilities		12,664	31,081
Retirement benefits obligations		178,339	163,379
		6,888,860	7,489,205
Equity
Retained earnings		6,772,687	6,329,107
Accumulated other comprehensive income	4	257,454	158,975
Capital stock	5a	1,471,883	1,477,180
Contributed surplus		346,540	345,032
		8,848,564	8,310,294
		15,737,424	15,799,499

See Notes to the Interim Condensed Consolidated Financial Statements.

CGI Inc. - Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2024 and 2023

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Interim Consolidated Statements of Changes in Equity

For the six months ended March 31

(in thousands of Canadian dollars) (unaudited)

			Accumulated
		Retained	other	Capital	Contributed	Total
	Notes	comprehensive
	earnings	income	stock	surplus	equity
		$	$	$	$	$
Balance as at September 30, 2023		6,329,107	158,975	1,477,180	345,032	8,310,294
Net earnings		816,668	-	-	-	816,668
Other comprehensive income		-	98,479	-	-	98,479
Comprehensive income		816,668	98,479	-	-	915,147
Share-based payment costs		-	-	-	31,680	31,680
Income tax impact associated with share-based payments		-	-	-	8,211	8,211
Exercise of stock options	5a	-	-	61,853	(10,208)	51,645
Exercise of performance share units	5a	764	-	13,143	(28,175)	(14,268)
Purchase for cancellation of Class A subordinate voting shares	5a	(373,852)	-	(13,446)	-	(387,298)
Purchase of Class A subordinate voting shares held in trusts	5a	-	-	(66,847)	-	(66,847)
Balance as at March 31, 2024		6,772,687	257,454	1,471,883	346,540	8,848,564
			Accumulated
		Retained	other	Capital	Contributed	Total
	Notes	comprehensive
	earnings	income	stock	surplus	equity
		$	$	$	$	$
Balance as at September 30, 2022		5,425,005	39,746	1,493,169	314,804	7,272,724
Net earnings		801,794	-	-	-	801,794
Other comprehensive income		-	334,359	-	-	334,359
Comprehensive income		801,794	334,359	-	-	1,136,153
Share-based payment costs		-	-	-	33,194	33,194
Income tax impact associated with share-based payments		-	-	-	11,638	11,638
Exercise of stock options	5a	-	-	69,994	(11,701)	58,293
Exercise of performance share units	5a	(2,910)	-	13,522	(24,296)	(13,684)
Purchase for cancellation of Class A subordinate voting shares	5a	(361,791)	-	(38,209)	-	(400,000)
Unrealized commitment to purchase Class A subordinate voting		1,276	-	103	-	1,379
shares
Purchase of Class A subordinate voting shares held in trusts	5a	-	-	(74,455)	-	(74,455)
Balance as at March 31, 2023		5,863,374	374,105	1,464,124	323,639	8,025,242

See Notes to the Interim Condensed Consolidated Financial Statements.

CGI Inc. - Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2024 and 2023

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Interim Consolidated Statements of Cash Flows

For the three and six months ended March 31 (in thousands of Canadian dollars) (unaudited)

		Three months ended March 31	Six months ended March 31
	Notes	2024	2023	2024	2023
		$	$	$	$
Operating activities
Net earnings		426,872	419,415	816,668	801,794
Adjustments for:
Amortization, depreciation and impairment		149,068	131,020	282,274	255,280
Deferred income tax recovery		(47,773)	(42,459)	(61,841)	(64,663)
Foreign exchange loss (gain)		2,558	(274)	(1,701)	(1,755)
Share-based payment costs		12,918	16,935	31,680	33,194
Gain on lease terminations		-	(677)	-	(3,039)
Net change in non-cash working capital items and others	9a	(41,618)	(54,829)	12,117	53,594
Cash provided by operating activities		502,025	469,131	1,079,197	1,074,405
Investing activities
Net change in short-term investments		2,244	1,565	(28,811)	1,469
Business acquisitions (net of cash acquired)	8	-	-	(49,391)	(3,998)
Loan receivable		1,840	2,168	3,622	(19,301)
Purchase of property, plant and equipment		(29,974)	(46,446)	(58,470)	(87,717)
Additions to contract costs		(27,253)	(30,572)	(49,174)	(51,264)
Additions to intangible assets		(45,325)	(30,217)	(80,281)	(61,562)
Purchase of long-term investments		(4,593)	(975)	(4,593)	(88,000)
Proceeds from sale of long-term investments		14,850	5,406	30,054	20,330
Cash used in investing activities		(88,211)	(99,071)	(237,044)	(290,043)
Financing activities
Increase of long-term debt		-	-	-	948
Repayment of long-term debt	11	(4,862)	(2,911)	(678,125)	(5,789)
Settlement of derivative financial instruments	11	-	-	18,087	-
Payment of lease liabilities	11	(45,230)	(42,677)	(78,180)	(78,295)
Repayment of debt assumed from business acquisition		-	-	-	(56,994)
Purchase for cancellation of Class A subordinate voting shares	5a	(259,979)	(400,000)	(386,115)	(410,291)
Issuance of Class A subordinate voting shares	5a	24,814	27,187	51,645	58,293
Purchase of Class A subordinate voting shares held in trusts	5a	-	-	(66,847)	(74,455)
Withholding taxes remitted on the net settlement of
performance share units	5a	(2,058)	(362)	(14,268)	(13,684)
Net change in clients' funds obligations		(86,667)	52,729	33,925	105,108
Cash used in financing activities		(373,982)	(366,034)	(1,119,878)	(475,159)
Effect of foreign exchange rate changes on cash, cash
equivalents and cash included in funds held for clients		20,041	9,823	7,309	43,309
Net increase (decrease) in cash, cash equivalents and
cash included in funds held for clients		59,873	13,849	(270,416)	352,512
Cash, cash equivalents and cash included in funds held for
clients, beginning of period		1,507,794	1,809,847	1,838,083	1,471,184
Cash, cash equivalents and cash included in funds
held for clients, end of period		1,567,667	1,823,696	1,567,667	1,823,696
Cash composition:
Cash and cash equivalents		1,266,854	1,280,800	1,266,854	1,280,800
Cash included in funds held for clients		300,813	542,896	300,813	542,896

See Notes to the Interim Condensed Consolidated Financial Statements.

CGI Inc. - Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2024 and 2023

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Notes to the Interim Condensed Consolidated Financial Statements

For the three and six months ended March 31, 2024 and 2023

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

1. Description of business

CGI Inc. (the Company), directly or through its subsidiaries, provides managed information technology (IT) and business process services, business and strategic IT consulting and systems integration services, as well as software solutions to help clients effectively realize their strategies and create added value. The Company was incorporated under Part IA of the Companies Act (Québec), predecessor to the Business Corporations Act (Québec) which came into force on February 14, 2011 and its Class A subordinate voting shares are publicly traded. The executive and registered office of the Company is situated at 1350 René-Lévesque Blvd. West, Montréal, Québec, Canada, H3G 1T4.

2. Basis of preparation

These interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB). In addition, the interim condensed consolidated financial statements have been prepared in accordance with the accounting policies set out in Note 3, Summary of material accounting policies, of the Company's consolidated financial statements for the year ended September 30, 2023 which were consistently applied to all periods presented, except for the new accounting standard amendments adopted on October 1, 2023, as described below in Note 3, Accounting policies.

These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended September 30, 2023.

The Company's interim condensed consolidated financial statements for the three and six months ended March 31, 2024 and 2023 were authorized for issue by the Board of Directors on April 30, 2024.

3. Accounting policies

ADOPTION OF ACCOUNTING STANDARD

The following standard amendments have been adopted by the Company on 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 resulted in no impact on the Company's interim condensed consolidated financial statements.

CGI Inc. - Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2024 and 2023

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Notes to the Interim Condensed Consolidated Financial Statements

For the three and six months ended March 31, 2024 and 2023

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

3. Accounting policies (continued)

ADOPTION OF ACCOUNTING STANDARD (CONTINUED)

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

On May 23, 2023, the IASB amended IAS 12 Income Taxes, to address the Pillar Two model rules for domestic implementation of a 15% global minimum tax. The standard amendments introduced a temporary recognition exception in relation to accounting and disclosure for deferred taxes arising from the implementation of the international tax reform, which was applied as of that date.

For the reporting period ended March 31, 2024, the Company is subject to additional disclosure requirements on current tax expense related to Pillar Two income taxes, as well as qualitative and quantitative information about the exposure to Pillar Two income taxes. The Company has performed an assessment of its potential exposure to Pillar Two income taxes based on the most recent country-by-country reporting and financial statements for its constituent entities.

The Pillar Two Model Rules - Amendments to IAS 12 have no significant impact on the Company's interim condensed consolidated financial statements.

FUTURE ACCOUNTING STANDARD CHANGES

The following standard amendments have been issued and will be effective as of October 1, 2024 for the Company, with earlier application permitted. The Company is currently evaluating the impact of these standard amendments on its consolidated financial statements.

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-cashchanges and liquidity risk information around supplier finance arrangements.

The following standard has been issued by the IASB and will be effective as of October 1, 2027 for the Company, with earlier application permitted. The Company will evaluate the impact of this standard on its consolidated financial statements.

IFRS 18 - Presentation and Disclosure in Financial Statements

In April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements which is set to replace IAS 1 Presentation of Financial Statements. The new IFRS accounting standard is aimed to improve comparability and transparency of communication in financial statements. While a number of sections from IAS 1 have been brought forward to IFRS 18, the standard introduces new requirements on presentation within the statement of profit or loss, including specified totals and subtotals. It also requires disclosure of management-defined financial performance measures used in public communications outside financial statements and includes new requirements for aggregation and disaggregation of financial information based on the identified roles of the primary financial statements and the notes. Retrospective application is required in both annual and interim financial statements.

CGI Inc. - Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2024 and 2023

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Notes to the Interim Condensed Consolidated Financial Statements

For the three and six months ended March 31, 2024 and 2023

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

4.	Accumulated other comprehensive income
		As at	As at
		March 31, 2024	September 30, 2023
		$	$
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 $44,008 ($44,867 as at September 30, 2023)	649,851	534,321
	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
	$53,283 ($49,991 as at September 30, 2023)	(355,268)	(325,649)
	Deferred gains of hedging on cross-currency swaps, net of accumulated income tax expense
	of $2,181 ($1,754 as at September 30, 2023)	14,742	13,541
	Net unrealized gains on cash flow hedges, net of accumulated income tax expense of $3,794
	($3,953 as at September 30, 2023)	10,924	11,524
	Net unrealized losses on financial assets at fair value through other comprehensive income,
	net of accumulated income tax recovery of $594 ($1,189 as at September 30, 2023)	(1,542)	(3,412)
Items that will not be reclassified subsequently to net earnings:
	Net remeasurement losses on defined benefit plans, net of accumulated income tax recovery
	of $21,526 ($25,173 as at September 30, 2023)	(61,253)	(71,350)
		257,454	158,975

For the six months ended March 31, 2024, $7,556,000 of the net unrealized gains on cash flow hedges, net of income tax expense of $2,663,000, previously recognized in other comprehensive income, were reclassified in the consolidated statements of earnings ($7,738,000, net of income tax expense of $2,714,000, were reclassified for the six months ended March 31, 2023).

For the six months ended March 31, 2024, $2,978,000 of the deferred gains of hedging on cross-currency swaps, net of income tax expense of $455,000, were also reclassified in the consolidated statements of earnings ($6,362,000, net of income tax expense of $972,000, were reclassified for the six months ended March 31, 2023).

CGI Inc. - Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2024 and 2023

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Notes to the Interim Condensed Consolidated Financial Statements

For the three and six months ended March 31, 2024 and 2023

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

5. Capital stock, share-based payments and earnings per share

a)	Capital stock
		Class A subordinate voting shares	Class B shares (multiple voting)		Total
		Number	Carrying value	Number	Carrying value	Number	Carrying value
			$		$		$
As at September 30, 2023	206,714,497	1,440,286	26,445,706	36,894	233,160,203	1,477,180
Release of shares held in trusts1	-	13,143	-	-	-	13,143
Purchased and held in trusts1	-	(66,847)	-	-	-	(66,847)
Issued upon exercise of stock options2	877,466	61,853	-	-	877,466	61,853
Purchased and cancelled3	(2,684,980)	(13,446)	-	-	(2,684,980)	(13,446)
Conversion of shares4	1,422,948	1,985	(1,422,948)	(1,985)	-	-
As at March 31, 2024	206,329,931	1,436,974	25,022,758	34,909	231,352,689	1,471,883

• During the six months ended March 31, 2024, 160,337 shares held in trust were released (170,088 during the six months ended March 31, 2023) with a recorded value of $13,143,000 ($13,522,000 during the six months ended March 31, 2023) that was removed from contributed surplus.
  During the six months ended March 31, 2024, the Company settled the withholding tax obligations of the employees under the performance share unit (PSU) plans for a cash payment of $14,268,000 ($13,684,000 during the six months ended March 31, 2023).
  During the six months ended March 31, 2024, the trustees, in accordance with the terms of the PSU plans and Trust Agreements, purchased 463,364 Class A subordinate voting shares of the Company on the open market (640,052 during the six months ended March 31, 2023) for a cash consideration of $66,847,000 ($74,455,000 during the six months ended March 31, 2023).
  As at March 31, 2024, 2,612,770 Class A subordinate voting shares were held in trusts under the PSU plans (2,311,673 as at March 31, 2023 and 2,309,743 as at September 30, 2023).

• The carrying value of Class A subordinate voting shares includes $10,208,000 which corresponds to a reduction in contributed surplus representing the value of accumulated compensation costs associated with the stock options exercised during the six months ended March 31, 2024 ($11,701,000 during the six months ended March 31, 2023).

• On January 30, 2024, the Company's Board of Directors authorized and subsequently received regulatory approval from the Toronto Stock Exchange (TSX) for the renewal of its Normal Course Issuer Bid (NCIB) which allows for the purchase for cancellation of up to 20,457,737 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 were available for purchase for cancellation commencing on February 6, 2024 until no later than February 5, 2025, 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.
  On February 23, 2024, the Company entered into a private agreement with the Founder and Executive Chairman of the Board of the Company, as well as a wholly-owned holding company, to purchase for cancellation 1,674,930 Class A subordinate voting shares under its current NCIB for a total cash consideration of $250,000,000 excluding transaction costs of $370,000 which were paid subsequent to March 31, 2024. The excess of the purchase price over the carrying value in the amount of $244,821,000 was charged to retained earnings. The 1,674,930 Class A subordinate voting shares purchased for cancellation on February 23, 2024 included 1,266,366 Class B shares (multiple voting) converted into Class A subordinate voting shares on February 23, 2024, by a holding company wholly-owned by the Founder and Executive Chairman of the Board of the Company. The repurchase transaction was reviewed and recommended for approval by an independent committee of the Board of Directors of the Company following the receipt of an external opinion regarding the reasonableness of the financial terms of the transaction, and ultimately approved by the Board of Directors. 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 six months ended March 31, 2024, the Company purchased for cancellation 1,008,500 Class A subordinate voting shares under its previous and current NCIB for a total cash consideration of $136,928,000 (nil during the six months ended March 31, 2023). The excess of the purchase price over the carrying value in the amount of $128,661,000 was charged to retained earnings (nil during the six months ended March 31, 2023). Of the purchased Class A subordinate voting shares, 67,000 Class A subordinate shares with a carrying value of $563,000 and a purchase value of $9,990,000 were held by the Company and were paid and cancelled subsequent to March 31, 2024.
  During the three months ended March 31, 2023, the Company purchased for cancellation 3,344,996 Class A subordinate voting shares under its previous NCIB from the Caisse de dépôt et placement du Québec for a total cash consideration of $400,000,000. The excess of the purchase price over the carrying value in the amount of $361,791,000 was charged to retained earnings. The purchase was made pursuant to an exemption order issued by the Autorité des marchés financiers and was considered within the annual aggregate limit that the Company is entitled to purchase under its previous NCIB.
  During the six months ended March 31, 2024, the Company paid for and cancelled 68,550 Class A subordinate voting shares under its previous NCIB, with a carrying value of $558,000 and for a total consideration of $9,177,000, which were purchased but were neither paid nor cancelled as at September 30, 2023 (100,100 Class A subordinate voting shares, $778,000 and $10,291,000, respectively, during the six months ended March 31, 2023, which were purchased, or committed to be purchased, but were neither paid nor cancelled as at September 30, 2022).

• During the three months ended March 31, 2024, a holding company wholly-owned by the Founder and Executive Chairman of the Board of the Company converted a total of 1,422,948 Class B shares (multiple voting) into 1,422,948 Class A subordinate voting shares.

CGI Inc. - Interim Condensed Consolidated Financial Statements for the three and six months ended March 31, 2024 and 2023

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