Investor Day 2016 Executing a profitable Build and Buy growth strategy with discipline Michael E. Roach – President and Chief Executive Officer © CGI Group Inc.
There is clarity of market demand which is driving growth in digital transformation services Future State Current State pressure Revenue Investments to “Change” challenged
Increasing run cost of legacy platform
Optimize & operate current state
Converged Business and IT Needs Increasing customer / citizen digital expectations
Drive growth… …by building a digital organization…
Increasing demand for Cybersecurity Increasing need to identify new sourcing options to reduce run costs
From legacy to digital: CGI is the end-to-end partner of choice 2
Transform to modern digital platform
Minimize the risk of future state
Competition is shifting as digital transformation evolves
Design Firms
Transformational Outsourcing 15-25% total typical business savings
Increases cost
HR BPO
25-45% total typical business savings
Consulting Firms FinTech Data Firms India-based firms Global integrated firms splitting
Legend Channels
Data
Workforce
Technology
Processes
Digital Transformation
Secure Digital
Discrete specialist firms
Input-based & Discrete Digital Services
3
CGI is best positioned to support clients in their digital transformations
Design Firms
Transformational Outsourcing
Digital Transformation
15-25% total typical business savings
Increases cost
HR BPO
25-45% total typical business savings
Consulting Firms
Secure Digital
Discrete specialist firms
Input-based & Discrete Digital Services
FinTech Data Firms India-based firms Global integrated firms splitting
CGI’s end-to-end capabilities continue to expand Legend Channels
Data
Workforce
Technology
Processes
4
Post-Logica, CGI is on the path to return to profitable organic growth
CGI
CGI Today
1
2
3
Restructuring
Operational Excellence
Transformation
Divested low
quality business Divested and ran
off non-core and non-strategic work Exited low
performing geographies
Implemented one
business and operating model across all SBUs through the CGI Management Foundation Significantly increased
High-end Consulting
enabled by proximity IP30 digital solutions Transformational
Outsourcing
margin and cash – back to best in class
Several large operating entities delivering year-over-year constant currency revenue growth 5
Strategy without execution is hallucination
CGI
Highway to success…
Proven ability to align strategy and deliver consistent, significant value 6
Alignment is critical to our ability to scale and execute our build and buy strategy
CGI
…through the Management Foundation
Proven ability to align strategy and deliver consistent, significant value 7
Focusing on what clients value most drives higher quality recurring revenue Revenue
Net Earnings +114%
Cash from operations +92%
$10.1B $10.3B $1.3B $978M $671M
$456M
F2013 F2015
F2013 F2015
8
F2013 F2015
CGI
A strong and experienced Operations Leadership team committed to executing our operating model
CGI
President and Chief Executive Officer
Michael E. Roach Corporate Shared Services Chief Operating Officer
George Schindler
Asia Pacific
Canada
Eastern, Central & Southern Europe
France, Luxembourg & Morocco
Nordics
United Kingdom
United States
Colin Holgate
Mark Boyajian
João Baptista
Jean-Michel Baticle
Heikki Nikku
Timothy Gregory
Dave Henderson
We are present in geographies which account for 82% of worldwide IT spend 9
Supporting the operations with deep expertise in a global Shared Services model President and Chief Executive Officer
Michael E. Roach
Executive Vice-President Global Human Resources and Strategic Planning
Executive Vice-President and Chief Legal Officer
Julie Godin
Benoit Dubé
Executive Vice-President and Chief Financial Officer
Executive Vice-President Global Client Transformation Services
François Boulanger
Doug McCuaig Executive Vice-President Global Communications and Investor Relations
Executive Vice-President Corporate Performance
Luc Pinard
Lorne Gorber
Senior Vice-President Corporate Development and Strategic Investments
Claude Séguin
A unique check & balance model with operations 10
CGI
Build and Buy profitable growth are directly linked BUILD
Win, renew or extend contracts
Build
BUY
Buy
New large outsourcing contracts
Niche
3 Key Focus Areas 1
2
3
Transformational
3 Key Focus Areas
High-end Consulting enabled by proximity
1
IP30 – Digital Solutions
2
Niche or Sector: Proximity-based growth accelerator. Highly concentrated in a targeted client account to drive immediate growth and provide longer term land & expand opportunities.
IP-based global growth accelerator. Covers a sweet spot in a domain like digital transformation, cybersecurity, or data across multiple accounts or industries to multiply the organic growth opportunity across geographies.
Transformational Outsourcing 3
Transformational
Aspiration: Profitably double over 5 to 7 years 11
Investing in Build growth accelerators to support our clients’ digital transformation High-end consulting: Help our clients grow
1
Investing in business and high-end services through proximity Investing in talent with domain knowledge to help clients transformation from legacy
to digital
+
IP30 digital solutions: Transform our clients’ business models
2
Accelerating growth in IP-based services to meet our IP30 goal Shifting from 18% of IP-based revenue in F2015 to 30% in F2019 with 150+ solutions Moving from local innovation to global scale
+
Transformational Outsourcing: Reduce run costs to re-invest in change Applications: Investing in methodologies and tools to automate and transform
3
application development and delivery, including distributed agile Data Centers: Investing in cloud including hybrid cloud management (Unify360),
automation, IaaS and robotics Continue to add to $21.5B backlog of high-quality recurring revenue 12
Our rigorous Build investment process ensures strategy alignment, tracking and financial returns Executive Committee
Governance & Approvals
Investment Committee
Innovation
IP30 Solutions
CGI Internal Solutions
Member Ideas
Investment Management Group
Intellectual Property
Internal Infrastructure, Digitalization & Automation
Management Recommendation & Performance Tracking
Business Units
Examples of screening of criteria for investment proposals Revenue, contribution and cash flow growth
ROI and riskadjusted hurdle
Payback period
$250M reinvested into our business in F2015 13
Operating cost improvements
Implementing our Buy strategy to deepen our presence in key target markets Right Acquisition
+
Right Price
Fragmented IT Services Industry
+
Right Time
Two Acquisition Growth Pillars
5,000 companies identified
Acquisition of local and IP-based services firms
US$200 billion in combined revenue
Transformational acquisitions
Key Criteria Strategic fit from a geographic and sector point of view, for example commercial in US & UK Focus on IP, higher-end systems integration, consulting, automation, cyber and outsourcing Cultural, operational business model fit Accretive to EPS within the first year Maintain balance sheet strength
14
Accelerating profitable growth & account coverage Niche: JSL (Q1 F2016 close) Strategy
Accelerate penetration in an existing large Canadian bank Leverage capabilities across the banks Acquire Agile and Digital skills Deep trusted advisor relationships
Target Specialized in retail banking Annual revenue run rate of $11M (December start) Almost exclusively working for one large bank’s retail sector
Results
Managing to the Scorecard
Increased client coverage: 1 + 1 = 3 $2.6M of new bookings, including use of JSL capabilities to win work with
other CGI clients $320M in new opportunities added to the sales pipeline Expanding the pipeline of opportunities with other CGI banking clients
15
Accelerating profitable growth & sector coverage Sector: Alcyane (Q2 F2016 close) Strategy
Add scale to the growing France Strategic Business Unit and key global banking centers Increase penetration in existing large accounts Expand within 10 current accounts, including four global banks Expand into one new global financial services account
Target Consulting (process optimization), application services to financial institutions mainly in the Investment Banking sector Annual revenue of €29M (April start)
Results
Managing to the Scorecard
Increase client coverage: 1 + 1 = 3 Accelerates existing growth in France Banking Industry Better positions us for increased growth globally in this sector
16
Transformational acquisition Logica (Q4 F2012 close) Strategy Our largest transformation deal Leverage market condition (financial crisis, weakened valuation) Diversified local geographic and vertical market footprint
Target Revenue of C$6.2B Employees: 41,000 Strong presence in Europe
Results
Positioned to support clients locally as they increasingly globalise Increased critical mass by adding significant scale Broadened global delivery network Synergy of culture: One CGI One of the few firms worldwide able to execute a $6B deal that creates value Accretion rate of 87% within first two years European margins are now best in class Market cap has increased by more than $12B 17
Managing to the Scorecard
A 40-year history of delivering superior financial results Significant momentum in value creation over the last decade EPS
Up 626%
Cash from operations
Up 268%
Backlog
Up 161%
Share price
Up 626% +22% average annual appreciation
18
Key takeaways: Our operating model is aligned with investor interests 1
Our services and solutions are aligned to the market demand for digital transformation
2
Our strong and experienced management team is aligned
3
Our Management Foundation is a significant differentiator and proven to scale
4
We are committed to operating based on the fundamentals and have a proven track record of delivering superior financial results
5
We are in it for the long haul and take a long-term perspective on decision making
6
Profitable growth through consistent and disciplined execution of our build and buy strategy 19
THANK YOU
20
