EX-99.2

EX-99.2 3 d520454dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

Interim Condensed Consolidated Financial Statements of

CGI INC.

For the three and nine months ended June 30, 2023 and 2022

(unaudited)

Interim Consolidated Statements of Earnings

For the three and nine months ended June 30

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


		Three months ended June 30				Nine months ended June 30

	Notes	2023		2022		2023			2022

			$		$		$			$
Revenue	9		3,623,428		3,258,638		10,789,024			9,619,980
Operating expenses
Costs of services, selling and administrative			3,037,083		2,738,041		9,050,008			8,054,424
Acquisition-related and integration costs	7c		13,032		8,014		53,401			12,879
Net finance costs	6		12,808		22,887		46,315			71,004
Foreign exchange loss (gain)			1,524		727		(686	)		616
			3,064,447		2,769,669		9,149,038			8,138,923
Earnings before income taxes			558,981		488,969		1,639,986			1,481,057
Income tax expense			144,002		124,625		423,213			377,277
Net earnings			414,979		364,344		1,216,773			1,103,780
Earnings per share
Basic earnings per share	5c		1.78		1.53		5.18			4.59
Diluted earnings per share	5c		1.75		1.51		5.11			4.53

See Notes to the Interim Condensed Consolidated Financial Statements.


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		1

Interim Consolidated Statements of Comprehensive Income

For the three and nine months ended June 30

(in thousands of Canadian dollars) (unaudited)


	Three months ended June 30						Nine months ended June 30

	2023			2022			2023			2022

		$			$			$			$
Net earnings		414,979			364,344			1,216,773			1,103,780
Items that will be reclassified subsequently to net earnings (net of income taxes):
Net unrealized (losses) gains on translating financial statements of foreign operations		(211,361	)		(126,313	)		211,936			(491,618	)
Net gains (losses) on cross-currency swaps and on translating long-term debt designated as hedges of net investments in foreign operations		49,624			(3,354	)		(31,341	)		69,993
Deferred (costs) gains of hedging on cross-currency swaps		(12,876	)		5,680			(4,106	)		(1,285	)
Net unrealized (losses) gains on cash flow hedges		(2,559	)		4,644			(19,206	)		15,611
Net unrealized (losses) gains on financial assets at fair value through other comprehensive income		(738	)		(1,616	)		647			(5,605	)
Items that will not be reclassified subsequently to net earnings (net of income taxes):
Net remeasurement (losses) gains on defined benefit plans		(12,231	)		37,653			(13,712	)		71,871
Other comprehensive (loss) income		(190,141	)		(83,306	)		144,218			(341,033	)
Comprehensive income		224,838			281,038			1,360,991			762,747

See Notes to the Interim Condensed Consolidated Financial Statements.


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		2

Interim Consolidated Balance Sheets

(in thousands of Canadian dollars) (unaudited)


	Notes	As at June 30, 2023	As at September 30, 2022

		$	$

Assets

Current assets

Cash and cash equivalents	8c and 10	1,468,832	966,458

Accounts receivable		1,509,057	1,363,545

Work in progress		1,238,748	1,191,844

Current financial assets	10	47,063	33,858

Prepaid expenses and other current assets		195,835	189,366

Income taxes		4,482	5,137

Total current assets before funds held for clients		4,464,017	3,750,208
Funds held for clients		669,215	598,839

Total current assets		5,133,232	4,349,047

Property, plant and equipment		394,010	369,608

Right-of-use assets		490,713	535,121

Contract costs		295,823	261,612

Intangible assets		604,869	615,959

Other long-term assets		129,379	139,666

Long-term financial assets		192,818	337,156

Deferred tax assets		133,789	85,795

Goodwill		8,705,513	8,481,456

		16,080,146	15,175,420

Liabilities

Current liabilities

Accounts payable and accrued liabilities		906,306	1,016,407

Accrued compensation and employee-related liabilities		1,101,234	1,130,726

Current portion of long-term debt		738,871	93,447

Current portion of lease liabilities		149,007	157,944

Provisions		25,520	33,103

Deferred revenue		531,444	453,579

Income taxes		310,372	153,984

Current derivative financial instruments	10	7,776	5,710

Total current liabilities before clients’ funds obligations		3,770,530	3,044,900

Clients’ funds obligations		674,021	604,431

Total current liabilities		4,444,551	3,649,331

Long-term debt		2,373,544	3,173,587

Long-term lease liabilities		504,454	551,257

Long-term provisions		18,797	17,482

Other long-term liabilities		247,360	192,108

Long-term derivative financial instruments	10	7,220	6,480

Deferred tax liabilities		81,251	157,406

Retirement benefits obligations		171,720	155,045

		7,848,897	7,902,696

Equity

Retained earnings		6,228,460	5,425,005

Accumulated other comprehensive income	4	183,964	39,746

Capital stock	5a	1,482,117	1,493,169

Contributed surplus		336,708	314,804

		8,231,249	7,272,724

		16,080,146	15,175,420

See Notes to the Interim Condensed Consolidated Financial Statements.


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		3

Interim Consolidated Statements of Changes in Equity

For the nine months ended June 30

(in thousands of Canadian dollars) (unaudited)


	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				1,216,773			—			—			—			1,216,773

Other comprehensive income				—			144,218			—			—			144,218

Comprehensive income				1,216,773			144,218			—			—			1,360,991

Share-based payment costs				—			—			—			45,734			45,734

Income tax impact associated with stock options				—			—			—			15,999			15,999

Exercise of stock options		5a		—			—			90,991			(15,202	)		75,789

Exercise of performance share units		5a		(2,880	)		—			13,657			(24,627	)		(13,850	)

Purchase for cancellation of Class A subordinate voting shares		5a		(411,714	)		—			(41,348	)		—			(453,062	)

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

Purchase of Class A subordinate voting shares held in trusts		5a		—			—			(74,455	)		—			(74,455	)

Balance as at June 30, 2023				6,228,460			183,964			1,482,117			336,708			8,231,249

	Notes		Retained earnings			Accumulated other comprehensive income (loss)			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				1,103,780			—			—			—			1,103,780

Other comprehensive loss				—			(341,033	)		—			—			(341,033	)

Comprehensive income (loss)				1,103,780			(341,033	)		—			—			762,747

Share-based payment costs				—			—			—			36,597			36,597

Income tax impact associated with stock options				—			—			—			(780	)		(780	)

Exercise of stock options		5a		—			—			36,039			(6,127	)		29,912

Exercise of performance share units		5a		—			—			15,821			(15,821	)		—

Purchase for cancellation of Class A subordinate voting shares		5a		(652,233	)		—			(111,830	)		—			(764,063	)

Purchase of Class A subordinate voting shares held in trusts		5a		—			—			(70,303	)		—			(70,303	)

Balance as at June 30, 2022				5,183,776			(9,453	)		1,502,432			303,587			6,980,342

See Notes to the Interim Condensed Consolidated Financial Statements.


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		4

Interim Consolidated Statements of Cash Flows

For the three and nine months ended June 30

(in thousands of Canadian dollars) (unaudited)


			Three months ended June 30						Nine months ended June 30

	Notes		2023			2022			2023			2022

			$			$			$			$

Operating activities

Net earnings				414,979			364,344			1,216,773			1,103,780

Adjustments for:

Amortization, depreciation and impairment				126,271			116,577			381,551			353,602

Deferred income tax (recovery) expense				(27,840	)		4,222			(92,503	)		(5,242	)

Foreign exchange loss (gain)				1,218			(1,396	)		(537	)		(4,105	)

Share-based payment costs				12,540			11,581			45,734			36,597

Gain on leases termination				(26	)		(2,333	)		(3,065	)		(4,595	)

Net change in non-cash working capital items and others		8a		(118,032	)		(73,812	)		(64,438	)		(103,900	)

Cash provided by operating activities				409,110			419,183			1,483,515			1,376,137

Investing activities

Net change in short-term investments				(78,326	)		(1,102	)		(76,857	)		(3,208	)

Business acquisitions (considering bank overdraft assumed and cash acquired)		7b		(9,041	)		(414,389	)		(13,039	)		(572,407	)

Loan receivable				1,701			—			(17,600	)		—

Purchase of property, plant and equipment				(37,597	)		(42,307	)		(125,314	)		(117,893	)

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

Additions to contract costs				(26,233	)		(19,814	)		(77,497	)		(60,293	)

Additions to intangible assets				(37,673	)		(39,721	)		(99,235	)		(96,871	)

Purchase of long-term investments				(5,275	)		(1,234	)		(93,275	)		(10,053	)

Proceeds from sale of long-term investments				13,631			20,996			33,961			32,099

Cash used in investing activities				(178,813	)		(493,781	)		(468,856	)		(824,836	)

Financing activities

Increase of long-term debt				—			—			948			—

Repayment of long-term debt				(3,041	)		(3,342	)		(8,830	)		(334,187	)

Payment of lease liabilities				(39,203	)		(39,747	)		(117,498	)		(112,922	)

Repayment of debt assumed from business acquisitions				—			(24,358	)		(56,994	)		(108,916	)

Withholding taxes remitted on the net settlement of performance share units		5a		(166	)		—			(13,850	)		—

Purchase of Class A subordinate voting shares held in trusts		5a		—			—			(74,455	)		(70,303	)

Purchase and cancellation of Class A subordinate voting shares		5a		(53,062	)		(113,550	)		(463,353	)		(780,465	)

Issuance of Class A subordinate voting shares		5a		17,496			8,925			75,789			29,916

Net change in client funds obligations				(35,630	)		14,712			69,478			100,774

Cash used in financing activities				(113,606	)		(157,360	)		(588,765	)		(1,276,103	)

Effect of foreign exchange rate changes on cash, cash equivalents and cash included in funds held for clients				(34,536	)		(11,486	)		8,773			(75,651	)

Net increase (decrease) in cash, cash equivalents and cash included in funds held for clients				82,155			(243,444	)		434,667			(800,453	)

Cash, cash equivalents and cash included in funds held for clients, beginning of period				1,823,696			1,598,722			1,471,184			2,155,731

Cash, cash equivalents and cash included in funds held for clients, end of period				1,905,851			1,355,278			1,905,851			1,355,278

Cash composition:

Cash and cash equivalents				1,468,832			779,623			1,468,832			779,623

Cash included in funds held for clients				437,019			575,655			437,019			575,655

See Notes to the Interim Condensed Consolidated Financial Statements.


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		5

Notes to the Interim Condensed Consolidated Financial Statements

For the three and nine months ended June 30, 2023 and 2022

(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 the sale of 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 significant accounting policies, of the Company’s consolidated financial statements for the year ended September 30, 2022 which were consistently applied to all periods presented, except for the new accounting standard amendments adopted on October 1, 2022, and on May 23, 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, 2022.

The Company’s interim condensed consolidated financial statements for the three and nine months ended June 30, 2023 and 2022 were authorized for issue by the Board of Directors on July 25, 2023.

3.	Accounting policies

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 interim condensed consolidated financial statements.

The following standard amendments have been adopted by the Company during the three months ended June 30, 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 introduces 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 ended March 31, 2024.

As no new legislation to implement the minimum tax was enacted or substantively enacted as at June 30, 2023 in any jurisdiction in which the Company operates and no related deferred taxes were recognized at that date, the application of the new standard amendments had no impact on the Company’s interim condensed consolidated statement. The new disclosures requirements will be introduced in the Company’s interim consolidated financial statements for the three and six months ended March 31, 2024.


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		6

Notes to the Interim Condensed Consolidated Financial Statements

For the three and nine months ended June 30, 2023 and 2022

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

3.	Accounting policies (continued)

FUTURE ACCOUNTING STANDARD CHANGES

The following standard amendments have been issued and will be effective on October 1, 2023 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 – Amendments to IAS 1

In January, 2020, the IASB amended IAS 1 Presentation of Financial Statements. The standard amendments clarify that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period and which only impact the presentation of liabilities in the balance sheet. The classification is unaffected by expectations about whether the Company will exercise its right to defer settlement of a liability.

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 policy information rather than its significant accounting policies.

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 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.

Information about long-term debt with covenants – Amendments to IAS 1

In October, 2022, the IASB issued standard amendments to IAS 1 Presentation of Financial Statements that aim to improve the information companies provide about long-term debt with covenants. These standard amendments to IAS 1 specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date. Instead, these standard amendments require a company to disclose information about these covenants in the notes to the 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, cashflows 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.


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		7

Notes to the Interim Condensed Consolidated Financial Statements

For the three and nine months ended June 30, 2023 and 2022

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

4.	Accumulated other comprehensive income


	As at June 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 $44,559 ($45,419 as at September 30, 2022)		503,468			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 $48,723 ($43,936 as at September 30, 2022)		(303,031	)		(271,690	)

Deferred gains of hedging on cross-currency swaps, net of accumulated income tax expense of $3,430 ($4,664 as at September 30, 2022)		24,168			28,274

Net unrealized gains on cash flow hedges, net of accumulated income tax expense of $3,838 ($10,398 as at September 30, 2022)		11,068			30,274

Net unrealized losses on financial assets at fair value through other comprehensive income, net of accumulated income tax recovery of $1,199 ($1,367 as at September 30, 2022)		(3,425	)		(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 $17,626 ($12,095 as at September 30, 2022)		(48,284	)		(34,572	)

		183,964			39,746

For the nine months ended June 30, 2023, $12,746,000 of the net unrealized gains on cash flow hedges, net of income tax expense of $4,568,000, previously recognized in other comprehensive income, were reclassified in the consolidated statements of earnings ($1,846,000 and $253,000, respectively, were reclassified for the nine months ended June 30, 2022).

For the nine months ended June 30, 2023, $9,239,000 of the deferred gains of hedging on cross-currency swaps, net of income tax expense of $1,411,000, were also reclassified in the consolidated statements of earnings ($8,035,000 and $2,898,000, respectively, were reclassified for the nine months ended June 30, 2022).


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		8

Notes to the Interim Condensed Consolidated Financial Statements

For the three and nine months ended June 30, 2023 and 2022

(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 multiple voting shares				Total

	Number			Carrying value			Number		Carrying value		Number			Carrying value

					$					$					$

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		—			13,657			—		—		—			13,657

Purchased and held in trusts¹		—			(74,455	)		—		—		—			(74,455	)

Issued upon exercise of stock options²		1,430,251			90,991			—		—		1,430,251			90,991

Purchased and cancelled³		(3,835,196	)		(41,245	)		—		—		(3,835,196	)		(41,245	)

As at June 30, 2023		208,897,604			1,445,223			26,445,706		36,894		235,343,310			1,482,117

¹	During the nine months ended June 30, 2023, 171,735 shares held in trust were released (237,294 during the nine months ended June 30, 2022) with a recorded value of $13,657,000 ($15,821,000 during the nine months ended June 30, 2022) that was removed from contributed surplus.

During the nine months ended June 30, 2023, the Company settled the withholding tax obligations of the employees under the performance share unit (PSU) plans for a cash payment of $13,850,000 (nil during the nine months ended June 30, 2022).

During the nine months ended June 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 nine months ended June 30, 2022) for a cash consideration of $74,455,000 ($70,303,000 during the nine months ended June 30, 2022).

As at June 30, 2023, 2,310,026 Class A subordinate voting shares were held in trusts under the PSU plans (1,841,955 as at June 30, 2022 and 1,841,709 as at September 30, 2022).

The carrying value of Class A subordinate voting shares includes $15,202,000 which corresponds to a reduction in contributed surplus representing the value of accumulated compensation costs associated with the stock options exercised during the nine months ended June 30, 2023 ($6,127,000 during the nine months ended June 30, 2022).

On January 31, 2023, the Company’s Board of Directors authorized, and subsequently received the 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 nine months ended June 30, 2023, the Company purchased for cancellation 390,100 Class A subordinate voting shares (3,431,566 during the nine months ended June 30, 2022) under the current NCIB for a cash consideration of $53,062,000 ($364,063,000 for nine months ended June 30, 2022) and the excess of the purchase price over the carrying value in the amount of $49,923,097 ($337,121,000 for the nine months ended June 20, 2022) was charged to retained earnings.

In addition, during the nine months ended June 30, 2023, the Company purchased for cancellation 3,344,996 Class A subordinate voting shares under the current NCIB from the Caisse de dépôt et placement du Québec for a total cash consideration of $400,000,000 (3,968,159 and $400,000,000, respectively during the nine months ended June 30, 2022). The excess of the purchase price over the carrying value in the amount of $361,791,000 was charged to retained earnings ($315,112,000 during the nine months ended June 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 nine months ended June 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. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		9

Notes to the Interim Condensed Consolidated Financial Statements

For the three and nine months ended June 30, 2023 and 2022

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

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

b)	Share-based payments

i)	Performance share units (PSUs)

During the nine months ended June 30, 2023, 899,511 PSUs were granted, 293,772 were exercised and 146,530 were forfeited. The PSUs granted in the period had a weighted average grant date fair value of $112.49 per unit.

ii)

Stock options

During the nine months ended June 30, 2023, 1,430,251 stock options were exercised (Note 5a) and 18,673 were forfeited.

c)	Earnings per share

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended June 30:


							Three months ended June 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		414,979	233,075,350	1.78		364,344		237,436,642	1.53

Net effect of dilutive stock options and PSUs²			3,808,084					3,366,038
Diluted		414,979	236,883,434	1.75		364,344		240,802,680	1.51

						Nine months ended June 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		1,216,773	234,752,090	5.18		1,103,780		240,239,796	4.59

Net effect of dilutive stock options and PSUs²			3,591,429					3,604,791
Diluted		1,216,773	238,343,519	5.11		1,103,780		243,844,587	4.53

During the three months ended June 30, 2023, 390,100 Class A subordinate voting shares purchased for cancellation and 2,310,026 Class A subordinate voting shares held in trusts were excluded from the calculation of the weighted average number of shares outstanding as of the date of the transaction (1,120,800 and 1,841,955, respectively during the three months ended June 30, 2022). During the nine months ended June 30, 2023, 3,835,196 Class A subordinate voting shares purchased for cancellation and 2,310,026 Class A subordinate voting shares held in trusts were excluded from the calculation of the weighted average number of shares outstanding as of the date of the transaction (7,549,725 and 1,841,955, respectively during the nine months ended June 30, 2022).

²	The calculation of the diluted earnings per share excluded nil stock options for the three and nine months ended June 30, 2023 (1,092,129 and 312,984 stock options, respectively, during the three and nine months ended June 30, 2022, as they were anti-dilutive).


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		10

Notes to the Interim Condensed Consolidated Financial Statements

For the three and nine months ended June 30, 2023 and 2022

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

6.	Net finance costs


	Three months ended June 30						Nine months ended June 30

	2023			2022			2023			2022

		$			$			$			$

Interest on long-term debt		12,878			13,673			40,572			43,768

Interest on lease liabilities		7,276			6,559			21,749			20,722

Net interest costs (income) on net defined benefit obligations or assets		1,102			(83	)		3,263			1,251

Other finance costs		2,846			3,419			6,903			6,930

Finance costs		24,102			23,568			72,487			72,671

Finance income		(11,294	)		(681	)		(26,172	)		(1,667	)

		12,808			22,887			46,315			71,004

7.	Investments in subsidiaries

a)	Acquisitions and disposals

There were no significant acquisitions or disposals during the three and nine months ended June 30, 2023.

b)	Business acquisitions realized in the prior fiscal year

During the three months ended June 30, 2023, the Company finalized the fair value assessment of assets acquired and liabilities assumed for Umanis SA with adjustments resulting in an increase in goodwill of $19,060,000 mainly due to a decrease in intangible assets and other long-term assets. Also, the Company finalized the assessment for Harwell Management with no significant adjustments.

During the nine months ended June 30, 2023, the Company finalized the fair value assessment of assets acquired and liabilities assumed for Unico Computer Systems Pty Ltd with no significant adjustments.

During the three and nine months ended June 30, 2023, the Company paid $9,041,000 and $13,039,000, respectively, related to acquisitions realized in prior fiscal years.

c)	Acquisition-related and integration costs

During the three and nine months ended June 30, 2023, the Company incurred $13,032,000 and $53,401,000, respectively, of integration costs, which mainly include costs of redundancy of employments of $7,842,000 and $23,226,000, respectively, and costs of vacating lease premises of $2,062,000 and $11,173,000, respectively.

During the three and nine months ended June 30, 2022, the Company incurred $8,014,000 and $12,879,000, respectively, of acquisition-related and integration costs. These amounts included acquisition-related costs of $2,483,000 and $2,753,000, respectively, mainly consisting of professional fees incurred for the acquisitions, as well as integration costs of $5,531,000 and $10,126,000, respectively. These integration costs included costs of redundancy of employments of $939,000 and $3,054,000, respectively.


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		11

Notes to the Interim Condensed Consolidated Financial Statements

For the three and nine months ended June 30, 2023 and 2022

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

8.	Supplementary cash flow information

a)	Net change in non-cash working capital items and others is as follows for the three and nine months ended June 30:


	Three months ended June 30						Nine months ended June 30

	2023			2022			2023			2022

		$			$			$			$

Accounts receivable		(58,357	)		(53,772	)		(117,847	)		(94,739	)

Work in progress		(15,009	)		(1,876	)		(22,652	)		(93,379	)

Prepaid expenses and other assets		(3,395	)		(20,652	)		4,096			(19,990	)

Long-term financial assets		(6,425	)		8,887			(12,228	)		10,787

Accounts payable and accrued liabilities		(18,583	)		38,837			(130,615	)		94,254

Accrued compensation and employee-related liabilities		50,532			88,970			(54,904	)		18,095

Deferred revenue		(106,259	)		(79,609	)		93,011			57,112

Income taxes		37,518			(24,195	)		165,859			23,907

Provisions		(5,758	)		(14,710	)		(9,484	)		(44,774	)

Long-term liabilities		5,454			(17,934	)		17,907			(59,466	)

Derivative financial instruments		(421	)		878			(629	)		(109	)

Retirement benefits obligations		2,671			1,364			3,048			4,402

		(118,032	)		(73,812	)		(64,438	)		(103,900	)

b)	Net interest (received) paid and income taxes paid are classified within operating activities and are as follows for the three and nine months ended June 30:


	Three months ended June 30					Nine months ended June 30

	2023			2022		2023		2022

		$			$		$		$

Net interest (received) paid		(757	)		11,021		28,517		59,961

Income taxes paid		133,533			122,113		333,904		308,109

c)	Cash and cash equivalents consisted of unrestricted cash as at June 30, 2023 and September 30, 2022.


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		12

Notes to the Interim Condensed Consolidated Financial Statements

For the three and nine months ended June 30, 2023 and 2022

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

9.	Segmented information

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, 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).

The operating segments reflect the 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 following tables present information on the Company’s operations based on its management structure. For the nine months period ended June 30, 2022, the Company has restated the segmented information to conform to the latest segmented information structure effective since April 1, 2022.

For the three months ended June 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

656,796

569,829

518,792

492,371

416,672

381,513

211,245

193,594

232,100

(49,484

)

3,623,428

Segment earnings before
acquisition-related and
integration costs, net finance
costs and income tax expense¹

80,778

98,365

115,843

87,125

29,027

55,526

22,740

23,158

72,259

—

584,821

Acquisition-related and integration
costs (Note 7c)

(13,032

)

Net finance costs (Note 6)

(12,808

)

Earnings before income taxes

558,981

Total amortization and depreciation of $126,066,000 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 $20,072,000, $21,760,000, $14,122,000, $14,531,000, $22,150,000, $9,330,000, $9,974,000, $7,901,000 and $6,226,000, respectively, for the three months ended June 30, 2023.


							For the three months ended June 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		553,470		528,046		524,511		432,667		388,071		317,559		181,960		171,632		207,901		(47,179	)		3,258,638

Segment earnings before acquisition-related and integration costs, net finance costs and income tax expense¹		70,107		75,637		113,617		78,553		31,082		42,359		22,529		22,098		63,888		—			519,870

Acquisition-related and integration costs (Note 7c)																							(8,014	)

Net finance costs (Note 6)																							(22,887	)

Earnings before income taxes																							488,969

Total amortization and depreciation of $113,902,000 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 $14,878,000, $17,644,000, $13,751,000, $12,460,000, $21,591,000, $11,309,000, $8,410,000, $7,728,000 and $6,131,000, respectively, for the three months ended June 30, 2022.


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		13

Notes to the Interim Condensed Consolidated Financial Statements

For the three and nine months ended June 30, 2023 and 2022

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

9.	Segmented information (continued)


			For the nine months ended June 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		1,999,398		1,710,729		1,555,308		1,445,425		1,256,750		1,079,789		635,149		568,800		682,921		(145,245	)		10,789,024

Segment earnings before acquisition-related and integration costs, net finance costs and income tax expense¹		277,510		244,782		350,117		232,135		106,634		155,879		83,200		75,400		214,045		—			1,739,702

Acquisition-related and integration costs (Note 7c)																							(53,401	)

Net finance costs (Note 6)																							(46,315	)

Earnings before income taxes																							1,639,986
¹Total amortization and depreciation of $378,951,000 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 $65,112,000, $62,214,000, $40,802,000, $44,441,000, $67,523,000, $28,334,000, $28,555,000, $23,255,000 and $18,715,000, respectively, for the nine months ended June 30, 2023.
			For the nine months ended June 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		1,604,597		1,518,160		1,485,331		1,287,808		1,205,715		959,682		564,548		537,105		585,348		(128,314	)		9,619,980

Segment earnings before acquisition-related and integration costs, net finance costs and income tax expense¹		233,817		219,391		341,201		208,396		94,999		146,954		70,515		69,192		180,475		—			1,564,940

Acquisition-related and integration costs (Note 7c)																							(12,879	)

Net finance costs (Note 6)																							(71,004	)

Earnings before income taxes																							1,481,057

Total amortization and depreciation of $350,514,000 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 $43,299,000, $51,531,000, $43,973,000, $39,757,000, $69,717,000, $31,091,000, $25,290,000, $26,807,000 and $19,049,000, respectively, for the nine months ended June 30, 2022. Amortization includes an impairment in Northwest and Central-East Europe for $2,131,000 related to a business solution. The asset was 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 significant accounting policies, of the Company’s consolidated financial statements for the year ended September 30, 2022. Intersegment revenue is priced as if the revenue was from third parties.


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		14

Notes to the Interim Condensed Consolidated Financial Statements

For the three and nine months ended June 30, 2023 and 2022

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

9.	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 three and nine months ended June 30:


	Three months ended June 30				Nine months ended June 30

	2023		2022		2023		2022

		$		$		$		$

Western and Southern Europe

France		572,172		475,589		1,748,780		1,370,839

Spain		29,333		28,756		88,575		89,819

Portugal		30,729		25,840		88,181		79,379

Others		14,403		12,314		41,695		36,825

		646,637		542,499		1,967,231		1,576,862

U.S.¹		1,117,689		1,002,559		3,302,976		2,919,548

Canada		560,674		568,057		1,681,664		1,605,944

Scandinavia and Central Europe

Germany		235,227		196,213		688,563		603,440

Sweden		176,758		175,468		541,531		552,196

Norway		27,953		37,662		97,791		112,603

		439,938		409,343		1,327,885		1,268,239

U.K. and Australia

U.K.		410,521		342,941		1,175,960		1,040,920

Australia		20,986		21,128		65,454		54,854

		431,507		364,069		1,241,414		1,095,774

Finland, Poland and Baltics

Finland		208,526		181,745		627,708		563,444

Others		13,328		9,180		34,896		26,904

		221,854		190,925		662,604		590,348

Northwest and Central-East Europe

Netherlands		145,511		123,300		425,111		378,749

Denmark		24,516		27,249		75,831		90,709

Czech Republic		18,915		13,826		53,962		40,439

Others		15,144		15,616		47,679		49,919

		204,086		179,991		602,583		559,816

Asia Pacific

Others		1,043		1,195		2,667		3,449

		1,043		1,195		2,667		3,449

		3,623,428		3,258,638		10,789,024		9,619,980

External revenue included in the U.S. Commercial and State Government and U.S. Federal operating segments was $623,462,000 and $494,227,000, respectively, for the three months ended June 30, 2023 ($567,964,000 and $434,595,000, respectively, for the three months ended June 30, 2022). In addition, external revenue included in the U.S. Commercial and State Government and U.S. Federal operating segments was $1,851,292,000 and $1,451,684,000, respectively, for the nine months ended June 30, 2023 ($1,623,829,000 and $1,295,719,000, respectively, for the nine months ended June 30, 2022).


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		15

Notes to the Interim Condensed Consolidated Financial Statements

For the three and nine months ended June 30, 2023 and 2022

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

9.	Segmented information (continued)

INFORMATION ABOUT SERVICES

The following table provides revenue information based on services provided by the Company for the three and nine months ended June 30:


	Three months ended June 30				Nine months ended June 30

	2023		2022		2023		2022

		$		$		$		$

Managed IT and business process services		1,950,289		1,743,395		5,745,818		5,212,616

Business and strategic IT consulting and systems integration		1,673,139		1,515,243		5,043,206		4,407,364
		3,623,428		3,258,638		10,789,024		9,619,980

MAJOR CLIENT INFORMATION

Contracts with the U.S. federal government and its various agencies, included within the U.S. Federal operating segment, accounted for $488,159,000 and 13.5% of revenues for the three months ended June 30, 2023 ($417,063,000 and 12.8% for the three months ended June 30, 2022) and $1,434,179,000 and 13.3% of revenues for the nine months ended June 30, 2023 ($1,247,606,000 and 13.0% for the nine months ended June 30, 2022).


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		16

Notes to the Interim Condensed Consolidated Financial Statements

For the three and nine months ended June 30, 2023 and 2022

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

10.

Financial instruments

FAIR VALUE

All financial instruments are initially measured at their fair value and are subsequently classified either at amortized cost, at fair value through earnings or at fair value through other comprehensive income.

The Company has made the following classifications:

Amortized cost

Trade accounts receivable, long-term receivables within long-term financial assets, short-term investments included in funds held for clients, accounts payable and accrued liabilities, accrued compensation and employee-related liabilities, long-term debt and clients’ funds obligations.

Fair value through earnings (FVTE)

Cash, cash equivalents, cash included in funds held for clients, derivative financial instruments and deferred compensation plan assets within long-term financial assets.

Fair value through other comprehensive income (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.

FAIR VALUE HIERARCHY

Fair value measurements recognized in the consolidated balance sheet 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.

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 senior U.S. unsecured notes (2014 U.S. Senior Notes), the 5 and 10 year senior U.S. unsecured notes (2021 U.S. Senior Notes), the 7 year senior unsecured notes (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 and interest rate 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, 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.

There were no changes in valuation techniques during the nine months ended June 30, 2023.


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		17

Notes to the Interim Condensed Consolidated Financial Statements

For the three and nine months ended June 30, 2023 and 2022

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

10.

Financial instruments (continued)

FAIR VALUE MEASUREMENTS (CONTINUED)

The following table presents the financial liabilities included in the long-term debt measured at amortized cost categorized using the fair value hierarchy:

As at June 30, 2023

As at September 30, 2022

Level

Carrying amount

Fair value

Carrying amount

Fair value

2014 U.S. Senior Notes

Level 2

529,478

518,890

550,177

539,752

2021 U.S. Senior Notes

Level 2

1,312,073

1,118,996

1,361,974

1,127,739

2021 CAD Senior Notes

Level 2

596,380

512,270

595,900

503,227

Other long-term debt

Level 2

12,769

12,319

71,278

68,991

2,450,700

2,162,475

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.

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 interim condensed consolidated financial statements for the three months ended June 30, 2023.


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		18

Notes to the Interim Condensed Consolidated Financial Statements

For the three and nine months ended June 30, 2023 and 2022

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

10.

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 June 30, 2023		As at September 30, 2022

			$		$

Financial assets

FVTE

Cash and cash equivalents	Level 2		1,468,832		966,458

Cash included in funds held for clients	Level 2		437,019		504,726

Deferred compensation plan assets	Level 1		88,350		71,863

			1,994,201		1,543,047

Derivative financial instruments designated as hedging instruments

Current derivative financial instruments included in current financial assets	Level 2

Cross-currency swaps			35,603		8,740

Foreign currency forward contracts			8,400		18,934

Long-term derivative financial instruments	Level 2

Cross-currency swaps			57,075		222,246

Foreign currency forward contracts			4,479		15,631

			105,557		265,551

FVOCI

Short-term investments included in current financial assets	Level 2		3,060		6,184

Long-term bonds included in funds held for clients	Level 2		152,196		94,113

Long-term investments	Level 2		19,507		16,826

			174,763		117,123

Financial liabilities

Derivative financial instruments designated as hedging instruments

Current derivative financial instruments	Level 2

Cross-currency swaps			5,036		—

Foreign currency forward contracts			2,740		5,710

Long-term derivative financial instruments	Level 2

Cross-currency swaps			4,094		1,685

Foreign currency forward contracts			3,126		4,795

			14,996		12,190

There were no transfers between Level 1 and Level 2 during the nine months ended June 30, 2023.


CGI Inc. – Interim Condensed Consolidated Financial Statements for the three and nine months ended June 30, 2023 and 2022		19