CGI, the 91,000-employee-strong Canadian consultancy, has chalked up another strong quarter.

The company’s fee income rose 13.7% on an annualized basis to $3.72 billion in the second quarter of its 2023 fiscal year. CGI, which is headquartered in Montreal, makes money by selling IT consulting services to the world’s largest corporations.

Understanding the big-picture story of CGI’s second quarter also requires reviewing its profitability metrics.

For the past few quarters, the firm’s leadership team has been working to strengthen its net income and profit margins. During the second quarter, CGI achieved a major win in that arena.

CGI’s net earnings, that is profit, grew 12.7% year-over-year to $419.4 million. When excluding “specific items”, the firm’s term for one-time expenses that aren’t of particular interest to investors, its net earnings grew $16.3 to $435 million.

CGI’s efforts to improve profitability had a positive effect on its earnings per share.  Diluted EPS excluding specific items was $1.82 in the second quarter, which in percentage terms equals a considerable 19.% year-over-year increase.

Companies usually achieve such major profit improvements by cutting spending on activities like product development. However, CGI’s earnings report emphasized that the firm continues to invest in personnel and solution delivery amid its efforts to boost margins.

Companies use a business metric referred to as backlog to track how much revenue they expect to generate in the future from existing clients. CGI’s backlog stood at $25.24 billion at the end of the second, which is equivalent to nearly twice its annual fee income.

CGI’s revenue comes from a network of more than 5,000 clients. Those organizations include quite a few major banks, as well as many other large corporations.

CGI built that customer base over the course of nearly four decades: the firm was originally founded in 1976. 

One way CGI has kept up its revenue growth over the decades is by investing heavily in acquisitions. It has bought nearly 100 companies to date, mainly other consultancies that focus on providing business advisory and IT services. 

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