CGI Group Inc (GIB) Q2 2021 Earnings Call Transcript

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CGI Group Inc (GIB -0.37%)
Q2 2021 Earnings Call
Apr 28, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. Welcome to the CGI Second Quarter Fiscal 2021 Conference Call. I would now like to turn the meeting over to Mr. Maher Yaghi, Vice President, Investor Relations. Please go ahead, Mr. Yaghi.

Maher Yaghi -- Managing director and Telecom, Media And Technology analyst

Thank you, Jacqueline, and good morning, everyone. With me to discuss CGI's second quarter conference call -- fiscal -- quarter fiscal 2021 results are George Schindler, our President and CEO; and Francois Boulanger, Executive Vice President and CFO. This call is being broadcast on cgi.com and recorded live at nine a.m. Eastern Time on Wednesday, April 28, 2021. Supplemental slides as well as the press release we issued earlier this morning are available for download, along with our Q2 MD&A financial statements and accompanying notes, all of which have been filed with both SEDAR and EDGAR.

Please note that some statements made on the call may be forward-looking. Actual events or results may differ materially from those expressed or implied, and CGI disclaims any intent or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. The complete safe harbor statement is available in both our MD&A and press release as well as on cgi.com. We encourage our investors to read it in its entirety. We are reporting our financial results in accordance with International Financial Reporting Standards, or IFRS. As always, we will also discuss non-GAAP performance measures, which should be viewed as supplemental. The MD&A contains definitions of each one used in our reporting. All of the dollar figures expressed on this call are Canadian, unless otherwise noted. I'll turn it over now to George to give a brief overview of Q2. Francois will then review our Q2 financials, and then George will comment on our operational highlights and strategic outlook. George?

George D. Schindler -- President and Chief Executive Officer

Thank you, Maher, and good morning, everyone. We closed the first half of the fiscal year with strong second quarter results. Our team's performance, combined with the accelerating client demand for our end-to-end services across every industry and geography, positions us well for a return to year-over-year growth in the second half of this year, beginning in Q3. In the quarter, we continued to deliver on our near-term plan to prioritize the preservation and expansion of shareholder value, once again, sustaining EPS accretion and generating strong cash from operations. We also made investments in our Build and Buy strategy to fuel our future profitable growth for the benefit of all three stakeholders, our clients, members and shareholders.

The rising client demand we noted last quarter increased considerably during Q2, as demonstrated in our bookings, which were up over $1 billion compared to the same quarter last year. Demand for new digital and modernization projects was robust across nearly every geography and industry sector, particularly in retail and consumer services, financial services and government. New business comprised nearly 40% of total awards in the quarter, up both sequentially and year-over-year. Included among the nearly $4 billion in contract awards during the quarter were numerous projects in the digital arena, such as a data modernization program with a U.S.-based global communications and media company. Through our consulting and systems integration services, we will help streamline and support the client's cloud-based data management platforms, an expansion and extension of our Trade360 IP engagement with one of Canada's top multinational banks. For this long-standing client, we will continue to support the digital transformation of the trade finance operations through numerous innovations, including blockchain enablement. And an expanded partnership with OP, Finland's largest financial services group. On this managed services engagement, we will collaborate with their insurance business to deliver advanced analytics and automation to support and enhance customer and employee experience as well as generate cost savings. Taking a longer view, bookings over the past 12 months were up over the previous period by more than $1.7 billion.

This reflects CGI's position as a partner of choice to serve clients' needs across a wide range of business transformation and digitization initiatives. In fact, our clients' trust in CGS consultants is reflected in record high client satisfaction scores, and our pipeline is growing as a result, up nearly 20% globally, and strong across every geography and every service. The diversified mix of CGI's end-to-end services again contributed to our strong margins in the quarter as new previously booked projects translated into positive sequential revenue trends across each service offering. As anticipated, our systems integration and consulting services revenue was up nearly 3% compared to Q1 driven by new digital projects, a growth trend we expect to continue. For example, in our U.S.-based human center design practice, which has grown over 30% year-over-year, we bring together user insights and technologies to help clients create engaging customer experiences. Demand remains strong for larger enterprise managed services engagements to integrate the full range of CGI services to help clients increase business agility, enhance customer experience and reduce costs. From an IP perspective, revenue grew 4% compared to Q1 on the strength of new projects, while volumes are now beginning to recover in our transaction-based IP solutions, including those for payroll and travel-related services. Our solutions are industry-leading in areas such as ERP for central and local governments, banking business processes like trade, wealth, payments and collections, end-to-end retail industry processes and future energy grid modernization solutions.

CGI's portfolio of IP are highly configurable business platforms as a service that integrate with our end-to-end offerings and utilize provider neutral cloud approaches, embedded security and data privacy practices. For clients, our IP delivers business benefits while enabling a higher degree of flexibility and customization for their unique modernization and digitization needs. For shareholders, our portfolio of IP solutions deliver sustained high profitability through longer-term recurring revenue engagements. With this in mind and in line with rising client demand, we made additional investments in the quarter to accelerate progress toward our IP30 initiative, which represents IP as a 30% target of total revenue. Specifically, we have dedicated a senior executive to be responsible for global IP strategy, sales and innovation through collaboration with leaders across our client proximity and global delivery units, all with the aim to drive profitable growth. Now I will turn it over to Francois to review our financial results.

Francois Boulanger -- Executive Vice-President and Chief Financial Officer

Thank you, George, and good morning, everyone. I'm happy to share with you the results of our second quarter 2021. Overall, we are pleased with our results. Bookings were once again strong. And over the last few quarters, we continue to add to our sizable book of business. Revenues also continued to see improving growth trends, which, coupled with higher year-over-year margins, led to strong cash generation in the quarter. We delivered revenue of $3.1 billion, down 1.7% year-over-year on a constant currency basis. This is an improvement over last quarter where we saw a 3.6% decrease year-over-year. Particular strength in revenue growth was seen in Central and Eastern Europe with growth of 5.9% on a constant currency basis. Asia Pac delivered 4.7% as well as Canada and U.S. Federal, both growing 1.9%, respectively. Given the current positive market dynamics and the strong bookings in the last few quarters, we would like to reiterate our expectation of returning to year-over-year revenue growth in the second half of fiscal 2021. Total bookings of $3.9 billion were up 40% year-over-year, representing a book-to-bill of 126%, and lifting our trailing 12 months book-to-bill to 113%. It is also important to highlight that all of our geographic segments now have a trailing 12-months book-to-bill of more than 100%.

I would like to call out a few geographies with strong bookings in the quarter, such as Central and Eastern Europe with a book-to-bill of 172%, Canada at 142% and Western and Southern Europe at 139%, each of these seeing material improvements in new bookings, even in the midst of continued shutdowns in their economies due to COVID-19. New business was 38% of bookings, an increase from the previous quarter's 28%. Our global backlog remains healthy at $23.1 billion or 1.9 times revenue, the vast majority of which is comprised of long-term managed services engagements. Adjusted EBIT in Q2 was $486 million, while EBIT margins increased to 15.8%, up 40 basis points compared to Q2 last year. The year-over-year increase was mainly due to a combination of more profitable business mix, lower discretionary expenses and cost reductions. We saw strong margin improvements in the U.K. and U.S. Federal, with margins up 250 and 220 basis points, respectively, partially offset by lower margins in Western and Southern Europe due to fewer billable days and Scandinavia due to lower utilization. Our headcount has also increased by 1,000 professionals quarter-over-quarter as we invest in our business to respond to the continued improvement in client demand. Our effective tax rate in Q2 was 25.7%.

This was the same when excluding integration and restructuring expenses and is within our expected range for the year. Net earnings were $341 million, and diluted earnings per share were $1.34, representing an increase of 13.6% year-over-year. Excluding integration and restructuring costs, net earnings were $342 million for a margin of 11.1%. And diluted earnings per share were $1.35 compared to $1.26 in the same quarter last year for an accretion of 7.1%. In the quarter, we continued to generate strong cash flows as cash provided by operating activities was $572.6 million or 18.6% of revenue, representing an increase of $176 million compared with Q2 last year. This improvement was driven by a DSO of 39 days compared to 44 days last quarter, with the improved mix of services toward IP and managed services, along with strong delivery on SI&C projects. For the last 12 months, cash provided by operating activities was $2.2 billion or 18.6% of revenue. In Q2, we invested $84 million back into our business, largely in IP and managed services engagements. We also bought back $747 million of our stock, canceling in the process 7.7 million shares of CGI.

In addition, just this morning, we announced the acquisition of Sense Corp, which is in line with our buy strategy. We will remain disciplined in investing our cash and are ready to deploy our substantial capital capacity on accretive acquisitions. Net debt to capitalization slightly increased sequentially from 27% in Q1 to 31% at the end of March on increased stock buybacks. Buying back CGI stock has been an accretive and flexible way to return capital to shareholders. At the end of Q2, the company can purchase up to an additional 13 million shares under the current NCIB program. Looking ahead, our cash allocation priority remains the same, investing in our business, pursuing accretive acquisitions and buying back our stock. With cash of $1.3 billion on hand and a $1.5 billion revolver that remains fully accessible, we have $2.8 billion readily available to pursue our Build and Buy profitable growth strategy. Now I will turn the call back to George to further discuss the operations and outlook for our business and markets. George?

George D. Schindler -- President and Chief Executive Officer

Thank you, Francois. I will read the operations and market outlook in the context of the Voice of Our Clients program, which we initiated in the quarter as input to our annual strategic planning. This year, our leaders met with nearly 1,700 existing and new client executives in business and IT positions across every industry sector and geography where we operate. The conversations were in-depth discussions, covering industry trends, business priorities and IT priorities. These interview findings are shared with our clients to bring insights they can act on. And for CGI, they inform our business plans and investments.

We completed discussions a few weeks ago and, not surprisingly, the early findings show progression toward more defined digital strategies that address the complexity of enterprisewide needs. There are three preliminary findings we heard from client executives. Optimizing operations is top of mind with culture and IT supply chain modernization, key areas to address. Environmental sustainability is now viewed as core to future value creation, and meeting customer expectations for better, more innovative digital experiences remains of paramount importance. This is executives globally ranked optimizing operations as their top priority. They cited the need to break down silos and become more agile in order to better sense and respond to changing market dynamics. A key component of optimizing operations in the manufacturing industry focuses on smart factories, starting with an automation of the shop floor to unlock and act on data from product, production machines that, in many cases, are decades old. For example, as part of a top German automakers plan to address the impact of nationwide shutdowns, we are partnering on an ambitious enterprisewide robotic process automation initiative. Through our implementation of factory-based automation solutions, our client will benefit from efficiency improvements and substantive cost savings. To best support manufacturers with a priority of optimizing operations, we continue to invest in offerings and expertise, including for data production, logistics and consumption as well as supply chain sustainability. In the banking industry, the pandemic has underscored the importance of rapid digitization for revenue growth and customer service. However, the pandemic has also highlighted the challenges that legacy systems present to achieving these benefits. As a result, operations optimization and banking institutions often centers on reducing technical debt and seamlessly integrating core systems with customer-facing digital solutions. This enables the banks to identify new product and service opportunities, build them quickly and cost effectively, utilizing automation and low-code, no-code development and deliver them in a secure, scalable way, often through the cloud. For example, we recently started a project with the Federal Reserve Bank of Boston and Vantage Bank of Texas on the Fed now pilot program that will create a new U.S.wide service for safe, efficient and real-time payments. In response to this growing demand and banking, we are hiring and continuously developing subject matter expertise and deepening our technology partnerships. As well, we are investing in creation and enhancement of our global banking IP solution suite to address end-to-end business processes. Globally, financial services demand is strong as evidenced by sequential revenue growth of just over 4% and a 110% book-to-bill in the quarter.

Moving to the second key finding of our client interviews. More than half of executives strongly believe that environmental sustainability is now core to their organization's ability to create stakeholder value. This finding validates what we see with clients across industries who are focused on sustainability in terms of their own organizations as well as their customer-focused products, services and partnerships. This shift is most pronounced in the energy and utility sector, where organizations increasingly recognize the need to address climate risk by reengineering their businesses to implement green operating practices and demonstrating a sustainability commitment to their customers. We are seeing digital technologies and data play an important role in addressing these priorities. In Q2, for example, we announced the expansion of our work with U.K. network operators to enable the decarbonized energy grid of the future. Our consultants are collaborating with Western Power Distribution to build a digital network model using data from core operational systems. This approach uses CGI's integrated network model, which is at the heart of our open grid 360 platform and uniquely positions CGI to help clients manage the energy transition. We also see this convergence of data and sustainability in some of our space industry work. For instance, we kicked off a project in the quarter with the European Space Agency to develop a new service combining recent advances in Earth observation, machine learning and cloud computing to help the agency better map and monitor the impact of wildfires on people and to the planet. As space-based data becomes more integral to helping clients solve everyday challenges, we will continue to leverage our global community of practice for the space sector to help clients across industries address new challenges and opportunities associated with areas like 5G technologies and cybersecurity. Lastly, client executives reinforced again this year that improving customer experience remains a top trend as well as a priority for both business and IT. However, for the first time this year, the importance to deliver new innovative products and services emerge within the top five business priorities as clients focus on meeting the digital-first customer and citizen expectations that deepen during the pandemic. Nowhere is this digital mandate more urgent than for our retail and consumer services clients. Innovative initiatives launched during the early stages of the pandemic are now being assessed for further optimization, scalability and improvements to the customer experience. As announced in the quarter, we are proud to kick off a new partnership with France-based FashionCube for a 10-year managed services engagement to help unite and transform the technology capabilities of their six leading fashion brands in the European market. With several new retail industry awards in the quarter, our bookings are up year-over-year, and we see growing confidence among retailers worldwide as vaccine rollouts proceed. Our largest industry segment, government, is also where we see clients accelerating digitization to enhance the citizen experience and optimize their IT supply chain. We see this in our long-term innovative smart cities and connected communities partnerships. For example, with the recently awarded project with the Bavarian State Ministry of Justice. Under this long-term managed services agreement, we will partner with the ministry on a range of IT modernization initiatives and support of citizen services and upgrades to their digital employee workplace. In our government work around the world, we also see increasing investments in a digital agenda to support various infrastructure spending initiatives and in modernizing IT supply chains to better support the government. CGI has taken an active role in these digital agendas, including through our industry expertise in areas such as environment, health, education and with technology skills in cybersecurity, secure cloud and micro services architectures. Consistent with our results over the past year, our government work continues to grow with a Q2 book-to-bill of 116%. More findings and insights from the Voice of Our Clients discussions will be published in the coming weeks. Now more than ever, clients will turn to partners who can bring the full end-to-end range of services to help them envision and realize the future. Our investments in relevant offerings, including IP, will enable CGI to be a partner and expert of choice and will drive profitable growth at a faster pace. Importantly, our investments are also focused on our people. This includes accelerating project rotations to enable professional development and hiring at all levels, both in client proximity and in our global delivery centers of excellence onshore and offshore. We also ramped up our virtual training with employees completing over 0.5 million courses since our new online university launched this time last year. In addition, thousands of consultants across the company participated in emerging technology boot camps to increase their proficiency in line with client demand. Our investments in our people are making a difference. Their satisfaction and engagement is an all-time high. Billable utilization is above our target. Turnover remains below our industry peers. Hiring referrals are up year-over-year, and 86% of our consultants and professionals are owners of CGI. During the quarter, we also published our Corporate Social Responsibility Report, which details our progress in line with the UN Global Compact and advancing our CSR initiatives across three key areas: people, communities and climate. As we look ahead, we also continue to pursue the buy side of our profitable growth strategy, with a growing number of active discussions in the pipeline and new candidates identified during the Voice of Our Clients discussion. As Francois referenced, this morning, we announced the acquisition of Sense Corp, which will deepen our work across the U.S. Midwest and Texas with clients in the public and commercial sectors. I would like to warmly welcome the nearly 300 new consultants who will be joining CGI. We continue to have the operational strength and financial capacity to move quickly with discipline on the right buy side opportunities. In closing, let me reiterate our positive outlook for the second half of this year. We are proud to be one of the few firms with the scale, reach, capabilities and commitment to be our clients' global partner of choice. Our strategic aspiration remains to double the size of the company over the next five to seven years. Thank you for your interest and support. Let's go to the questions down there.

Maher Yaghi -- Managing director and Telecom, Media And Technology analyst

Thank you, George. And Jacqueline, we're ready to take any questions that might be in the queue.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from Jason Kupferberg from Bank of America.

Kathy Chan -- Bank of America -- Analyst

Hey George and Francois, This is Kathy Chan on for Jason, thanks for taking my question. So first, I wanted to ask about bookings. Obviously, you guys had a very strong quarter of bookings. Could you just unpack that a little bit? And can we continue to kind of expect to see a strong bookings number in the back half of the year as well?

George D. Schindler -- President and Chief Executive Officer

Yes. Thanks, Kathy. Absolutely. We had very strong bookings. They're up in every service offering that we have and most pronounced, as I mentioned on the opening remarks in financial services, government and our manufacturing, retail and distribution industry sectors. But every geography has now book-to-bill on a trailing 12-month basis over 100%. And it really comes from two factors.

Demand is up considerably, and we do expect that to continue. But it's also our ability to bring innovative ideas and offerings to our clients relevant by industry, and we are doing that by industry. And that makes for a very compelling value proposition. And more importantly than ever before, the fact that we backed that up with a very strong delivery track record is -- which gives our clients confidence but also the uncertainty is that they can do that with speed, which is becoming more and more important. So it's really a combination of the demand and our ability to really bring those compelling offerings to our clients. And again, it's happening across every one of our geographies, all of our industries and each of our service offerings. And we do expect that, Kathy, to continue, as I mentioned. It's very clear that we're still in the early stages of the digital transformation that many of our clients still have to go through.

Kathy Chan -- Bank of America -- Analyst

Got it. Got it. Very helpful. And then I wanted to ask a question on margins. So how should we think about margins for the second half? Obviously, you guys are expecting top line to return to positive growth, which obviously should translate to a positive for margins. But can you kind of walk through some of the other pieces that we should be thinking about just in terms of the cadence of margins that we should expect in the back half of the year?

George D. Schindler -- President and Chief Executive Officer

Sure. So yes, we will get some efficiencies associated with the growth and the scale of that growth, but we also -- we will continue to see an improving revenue mix of recurring revenue. You heard me talk about some of the investments we're making in our intellectual property. That will bring more recurring revenue, as well as bookings were up significantly in our managed services, and that brings a -- an improved margin mix.

Of course, systems integration and consulting will continue to grow, but the other items will grow faster, and that will improve our margins in a nice, steady pace. Also, we have opportunities for geographic improvements. And so we'll make some of those changes as we go out through the year, and we should see some improving models there. On the other side, obviously, as we go back with the vaccine rollouts, as we look to return, some of our people will probably go to -- that will be a transition and a hybrid model. But as we start returning, there will be some additional costs that will offset some of the benefits. But overall, we see an improving opportunity on margins.

Kathy Chan -- Bank of America -- Analyst

Okay. Perfect. And just a quick last question. Obviously, you guys announced Sense Corp, and that's going to bring about 300 employees. Is there anything you could share about how much revenue that generates or how fast it's growing? I mean is it fair to assume that it closes the next couple of weeks and bring about 0.5 point of revenues? And is that already baked into your expectation of the returning to positive growth in the back half of the year?

George D. Schindler -- President and Chief Executive Officer

Yes. That's already baked into our expectations. As you know, these -- we work on these inorganic growth opportunities for some time, go through a pretty rapid due diligence, but it takes a little bit of time to get them over the line because, again, we're really focused on the culture aspects. We couldn't be happier with the cultural alignment with Sense Corp. And I'll just remind you, we did one right at the end of last quarter, closed at -- announced at the beginning of this quarter, HMB in the Midwest as well. And that's already driving some organic growth in addition to the inorganic growth.

So it's -- we're very pleased with the opportunity here to merge the two companies. We think we've got some really good opportunities with new logos in areas we weren't as big in and strong in. So that's very good for us to deliver the CGI end-to-end services to those clients. But we also get some very good capabilities, digital capabilities, cloud capabilities from the Sense Corp 300 members -- new members to CGI. So we're very excited about this.

Kathy Chan -- Bank of America -- Analyst

Okay perfect, thanks guys.

George D. Schindler -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from Thanos Moschopoulos from BMO, your line is open.

Thanos Moschopoulos -- BMO -- Analyst

Hi, good morning, Hey, and I appreciate. The color commentary on the industry dynamic. So when I hear those comments, to me, a lot of those initiatives sound like SI&C work. So I just wanted to reconcile that with your comments about how I think you said you see the recurring mix growing, even though it sounds like SI&C is quite active. Is that a function of just the bookings recently and the conversion of those? Or is it also that as you look at the pipeline, there still is a very, very heavy weighting of managed services despite the strength you're seeing in SI&C?

George D. Schindler -- President and Chief Executive Officer

Yes. Well, I mean the managed services bookings were very strong. I was highlighting some of the digital opportunities, which I've often described as kind of the tip of the spear. And it's what gives us the capabilities, but the managed services are still very strong. They were a significant part of our bookings. We had six managed services deals this quarter over $100 million. I highlight some of those, OP, Bavarian Justice, FashionCube, others. So very strong bookings in the managed services side, and we see an increasing demand on the IP side. We had a big booking with the state of Virginia with our procurement solution there and a managed services deal.

Again, these are long-term deals. So I'm very bullish on the recurring revenue increasing but equally bullish on our ability to deliver the digital projects that more importantly and are accelerating into the managed services opportunities. I've been mentioning that for a while. The managed services opportunities are not just about legacy anymore. It's about the digital transformations. And so we're doing both.

Thanos Moschopoulos -- BMO -- Analyst

Great. And you said speed is becoming more important. So is that translating into shorter sales cycles and/or maybe a quicker contract ramp when you do get a booking? What's the dynamic there?

George D. Schindler -- President and Chief Executive Officer

Yes. I haven't seen that yet, Thanos. That's -- that would be nice. But what I see is once they make the decision, it's very important for them to deliver some of the results. And sometimes that's done in phases. They want quick wins, and then that considerably delivered through a period of time more in an agile sense and model. The certainty and the speed, though, of delivering those is where our delivery track record really comes in. That's where the trust comes in. Great, thanks for answering that one.

Operator

Your next question comes from Stephanie Price from CIBC, your line is open.

Stephanie Price -- CIBC -- Analyst

Good morning, based on the digitization initiatives Was just curious -- I wanted to dig a little bit deeper into that around the percentage of revenue coming from IP in the quarter and how you kind of think of that time line for IP30. And maybe even given the increasing demand, do you think that you can get to IP30 organically? Or do you see IP factoring into the M&A strategy here?

George D. Schindler -- President and Chief Executive Officer

Yes. So the dedication of an executive to IP is really going to give us some more focus in a couple of ways: one, on the IPs that are -- have the most compelling value propositions now, and we'll do that by industry. And then we'll invest in bringing them to the broader market. What we're looking at doing, Stephanie, is replicating what has proven to be working in managed services. We have a central team of experts and sales capability, but they'll be embedded in the proximity units. That way, we get the focus, but we also get the benefit of the proximity. And that's really been proven to be working well. And yes, by having that focus, we'll be more focused on the inorganic growth opportunities in intellectual property. And the whole reason to do this is to accelerate. We've been stuck around 21%, 22% for the last several quarters. We think we're entering a market opportunity where we can, in fact, accelerate that. And that's exactly what we're planning to do.

Stephanie Price -- CIBC -- Analyst

That's helpful. And then the mix of new client bookings was strong in the quarter. Just wondering how we should think about the sales environment into these new customers here.

George D. Schindler -- President and Chief Executive Officer

Yes. So the new client bookings, that is significant. I think it does come back to that value proposition -- the compelling value proposition that our talented teams are able to put in front of our clients. I mentioned maybe a couple of quarters ago, interestingly enough, clients more than ever are open to these new ideas and new partners. And that's where some of that new work is coming from.

I'd also caution you that bookings are lumpy. And so you have to look at it on a trailing 12-month basis. But having said that, it really is those compelling offerings that we're putting in front. And then there's the demand side of it. And the demand side is strengthening, and it's also strengthening in the areas that are in our sweet spot as far as really bringing a broader, more holistic IT modernization. There's fewer partners that can deliver that and very few that can do that with a certainty that CGI can do.

Stephanie Price -- CIBC -- Analyst

That's helpful. And then just one final quick one for me. You mentioned that utilization is above your internal targets. Just curious how you see utilization trending and whether you think you could keep to maybe a bit of a higher target just given the hybrid work model you mentioned.

George D. Schindler -- President and Chief Executive Officer

Yes. Yes. Well, we certainly have experienced some higher utilization given the better efficiency, quite frankly, with people being able to work and not be on a plane or a car or a train going to clients. And so certainly, we have plans to capture and keep some of those opportunities. It allows us to bring subject matter experts to our clients faster. They're more open to allowing for that. But we're not going to abandon the proximity model. In fact, it strengthens our proximity model. So utilization, I think, will remain above some of our targets but maybe not quite as high as it is right now.

Stephanie Price -- CIBC -- Analyst

Thank you very much.

Operator

Your next question comes from Richard Tse from National Bank Financial, your line is open.

George D. Schindler -- President and Chief Executive Officer

Hi Richard.

Richard Tse -- National Bank Financial -- Analyst

Hi, how are you?

George D. Schindler -- President and Chief Executive Officer

Good.

Richard Tse -- National Bank Financial -- Analyst

Thanks for sharing that voice of the client's data, thats quite actually helpful. Can you maybe talk about how those results compare to what they would have been sort of pre-COVID? I guess the question is more along the lines is how much has really been accelerated by COVID in terms of order of magnitude here?

George D. Schindler -- President and Chief Executive Officer

Yes. No. Thank you. Well, obviously, environmental sustainability is -- was not really on the list pre-COVID. And that's not just COVID, but I think many say that breathing the clean air during COVID has given more impetus to the realities of this. But I think in general, the IT modernization has definitely risen, and I think that's a recognition and a direct output from the pandemic and the acceleration of digitization.

Many of the -- of our clients are recognizing that maybe there's some technical debt that has been built up that they thought that they could get around because they had a slightly longer runway to get there. And I think that the compression and acceleration has caused IT modernization, which is why I mentioned, it's kind of in our sweet spot. And so it's very good, and it's driving some of our bookings. The other new one, and I think I highlighted this, Richard, and I think this comes up again from the fact of the pandemic is a business priority around introducing new products and offerings. Again, when you're in a more steady state, that becomes less important. The pandemic caused many to have to do that. And what they realized is they were able to do that. And now the opportunity gets even bigger for them to do that. And of course, IT is the big driver of all that.

Richard Tse -- National Bank Financial -- Analyst

Okay. So I guess there probably can be a sort of view that we're kind of in this new cycle of digital transformation, much like there was a cycle at one point for outsourcing. And you've been served in this business for some time, like having sort of been there through that outsourcing cycle. Do you think digital transformation is a bigger opportunity than what outsourcing was?

George D. Schindler -- President and Chief Executive Officer

Yes. I really do because done correctly, digital transformation does two things, right? It gives a better growth opportunity for new offerings, new clients, but it also drives some cost savings. And so it's a twofer, whereas outsourcing was really more around the cost benefits. Of course, you could still reinvest those, but this is now a tighter linkage, which makes, I think, the business cases broader, which makes the opportunity bigger for us.

Richard Tse -- National Bank Financial -- Analyst

Okay. And then just the last one for me. We're obviously all sort of fortunate here to be kind of working and thriving, so to speak. But if you look at the market today in the market that you're in, the competition for talent, I imagine, is quite high, and that's an essential part of your business. So what's your ability to attract talent these days? Are you having to sort of pay up? Or what kind of incentives are sort of being offered here to kind of bring that important talent aboard?

George D. Schindler -- President and Chief Executive Officer

Yes. Well, it's interesting. Today's workforce is not just interested in the dollars and cents. They're very interested in joining a socially minded company. Certainly, our ownership model and our core values play into that in a big way. Of course, what we're doing in corporate social responsibility plays in a big way. What we're doing with the environment and our pledges plays in a big way. But also, they're looking for an opportunity to grow their careers and make a difference. And so we're focused a lot on creative training and advancement. I mentioned the 0.5 million courses and CGI academia, the emerging technology boot camps, et cetera. That becomes a big part of this.

That's why I highlighted the high satisfaction scores that we have because it really starts with retention. And what I mean by that is then we move that into an opportunity to have employee referrals. We get our biggest influx of people through referrals. And right behind that is through hiring new students from colleges and universities. Our student training hires have already surpassed last year's mark, and that's a really important element because that will then allows the backfill and others to continue to grow their career. So it's not a one size fits all. Of course, our onshore centers of excellence have -- tend to have a lower turnover rate. That helps us. And all that allowed us to add a net of 1,000 people in the quarter. But there's one other element that I'd add to that. And I do think that we need to continue to get creative to -- in order to continue to build a talent base. And you know I've talked before about the seven campuses that we have in France. We call it a U'DEV school to attract nontraditional individuals into IT. And it's a combination of apprenticeship and partnering with different universities. We'd like to expand that to -- right here in Canada and then to other locations because you got to get creative on this. And it's not -- I apologize for the long-winded answer, but it's not a one size fits all. You've got to really think about this holistically, and that's exactly what we're doing.

Richard Tse -- National Bank Financial -- Analyst

Thats great, thanks George.

Operator

Your next question comes from Paul Treiber from RBC Capital Markets, your line is open.

Paul Treiber -- RBC Capital Markets -- Analyst

Thanks, good morning. I guess you spent a lot of comment speaking about digital and then also IP. The CGI -- you give IP revenue, the mix there. But typically, your peers give a sort of a broader metric of digital revenue. Should we think about your digital -- CGI's digital mix being higher than just IT? And then why have you found it difficult? Or is it ambiguous to give digital as a percent of revenue just to make a comparisons easier versus peers?

George D. Schindler -- President and Chief Executive Officer

Yes. Thanks for the question, Paul. So to the first part of your question, no, digital is not -- does not equate just to our IP revenue. Our digital -- and that's why I highlighted this quarter some of those digital projects are squarely in the SI&C space, not in the IP space. But again, the reason we don't break that out is that digital is involved in our IP.

Digital is involved in our SI&C, and digital is involved in a lot of our outsourcing contracts. I mentioned the OP engagement. A big part of that is digital modernization of their core platform, but it's wrapped in a longer-term managed services agreement. This is the CGI value proposition. So it's -- it would be inexact at best. But a large percentage of our SI&C business is in the digital arena. And increasingly, a large segment of our managed services includes digital. And that's what I was trying to get across today.

Paul Treiber -- RBC Capital Markets -- Analyst

And then when you look at like the competitive landscapes in digital, I mean, how do you see CGI's competitive advantages in digital? Like, in particular, like when you win deals in digital, why do customers select CGI over peers? And then conversely, if you're not selected, why typically is that the case?

George D. Schindler -- President and Chief Executive Officer

Yes. Well, I would say on the selection side, it's absolutely part and parcel to what I was just describing. It's when it's embedded in a broader relationship, a broader service offering through our end-to-end services. And increasingly, that's what our clients are looking for.

They're not looking for as many of those smaller point solutions. This is why IT modernization rose and the current voice of the clients -- Voice of Our Clients' information, it's why I highlighted it. It's what's -- it's more what's going on right now, and there's fewer players that can do that. It's also what's driving some of the M&A opportunities.

Paul Treiber -- RBC Capital Markets -- Analyst

And just the last one for me. The -- you mentioned inorganic opportunities in IP. I mean should we think about that as CGI increasingly looking at acquiring pure-play software companies? Or do you see it as sort of IP-enabled IT services companies? And then how do you look at balancing your own IP versus being viewed as a trusted advisor to clients?

George D. Schindler -- President and Chief Executive Officer

Yes. It's more the latter, and it's exactly what we got. We got some nice intellectual property with the SCISYS merger. We got some nice IP from the Meti merger, and we'll look to continue and find more of those types of opportunities going forward. So that's an important dimension of our inorganic growth around IP.

Paul Treiber -- RBC Capital Markets -- Analyst

Alright, thank you.

Operator

Your next question comes from Deepak Kaushal from Stifel GNP, your line is open.

Deepak Kaushal -- Stifel GNP -- Analyst

Hi, good morning guys, thanks for taking my question. George, you gave some good color on the retail side and the financial services side. Last quarter, you mentioned the healthcare industry. I'm just wondering how that is progressing. And really a bigger picture here through this COVID pandemic, what kind of organic growth or new opportunities has this afforded you guys in the healthcare industry in particular?

George D. Schindler -- President and Chief Executive Officer

Yes. Well, health actually was a revenue growth engine this quarter. I was talking more about some of the future stuff. But yes, health continues to be a big driver and, quite frankly, both on the government side and on the private sector side and even the linkage between the 2. And so where we're really putting some investments on health is in the government side because they're going to play a heavier and heavier role. Having said that, we've had very strong growth in the life sciences space as they look at continued automation. And then we also -- obviously, telemedicine will be a big opportunity in the future.

I think that's just -- we scratched the surface during this unfortunate pandemic, but I think there's going to be plenty of new opportunities around telemedicine. And again, IT and technology and data play a big role there as does data privacy, cybersecurity, and etc. So I think there'll be a lot of activity in this space. I didn't -- maybe I neglected to highlight that because I did that last quarter. But yes, thanks for asking the question because it's a big opportunity for us.

Deepak Kaushal -- Stifel GNP -- Analyst

Thanks. No, I appreciate that. So it sounds like as the economies open up, you've got these vertical markets like lighting up. So financial services, obviously, trying to deal with blockchain and modernization. You have retail, manufacturing. Even you mentioned energy. When you think of 12 to 18 months out, what other vertical markets should we think about potentially lighting up? Or do you think about being proactive in today to drive momentum in bookings in the next year?

George D. Schindler -- President and Chief Executive Officer

Yes. Well, one that you didn't mention is space. I highlighted that a little bit. I think there's going to be a lot of activity in the space sector, not just where it is today in government, but I think it's going to explode even more in the future, just some of the opportunities around data leveraging and harnessing the data that's available there. I think that education is clearly going to be an area that will continue to blossom. It's certainly been hurt, but I think there's going to be a lot of spending that's going to go in there. Some other opportunities, I think -- well, you mentioned energy. But also, you mentioned financial services focus more on the banks right now, but I think insurance is also an opportunity that's ripe to maybe even leapfrog some of the other industries have been. So these are some of the areas we're also looking at.

Deepak Kaushal -- Stifel GNP -- Analyst

Okay, thats all thanks. How can I [Indecipherable]. Thanks again for taking my question, stay safe for all of us.

Operator

[Operator Instructions] Your next question comes from Kevin Krishnaratne from Desjardins Securities, your line is open.

Kevin Krishnaratne -- Desjardins Securities -- Analyst

Hey there, good morning. Wonder if you could talk about your partner relationships, specifically within SaaS and cloud vendors now. I know you're vendor agnostic, but just given some of the momentum in the space and cloud -- the cloud providers who seem to be pushing new programs and initiatives to help drive sales on their own products, what are you seeing? And how does that tie into the level of unique IP that you're building when you're leveraging other tech? I'm just curious about your thoughts there.

George D. Schindler -- President and Chief Executive Officer

Yes. No, that's -- thanks for the question. And I did highlight that we're putting more and more emphasis on those technology partnerships but in a way that is still appropriate for our clients because different clients have different needs. They have different partnerships. And as a systems integrator, we need to be bringing the partnerships in lockstep with them.

Having said that, we've established partnerships with all of the major cloud providers. We have different executives that run each of those partnerships so that we can maintain the separation. And we're investing in those partnerships, in many cases, cocreating with some of those providers. And it doesn't just end with the cloud providers. It obviously extends into a number of the platform providers. So it's very important opportunity for systems integrators. And then as it relates to our own intellectual property, of course, we want to build our intellectual property to both be agnostic but also architected in a way to leverage and build upon those platform providers. And so we're doing just that. So it's a nice synergistic opportunity. And again, the driver is what's best for our clients.

Kevin Krishnaratne -- Desjardins Securities -- Analyst

That's really helpful. And on that -- on the IP, there were some questions on mix of IP and mix of digital. Have you talked about maybe another way thinking about mix of tech, for example, SaaS? Have you talked about the level of SaaS that's running through your business, whether that's your own or vendor SaaS?

George D. Schindler -- President and Chief Executive Officer

Yes. Well, I mean on our own, I can tell you that well over half of our intellectual property is sold in a SaaS basis. I don't have the other number. Maybe we can look into that. Obviously, it's an important trend. And yet, we're seeing a mix. The reason it's not 100% of our IP is sold in that way is -- there still is a need for differentiation. And some clients -- some of our largest enterprise clients look at that a little bit differently. So -- but I can certainly look at that as well.

Kevin Krishnaratne -- Desjardins Securities -- Analyst

Okay. Very good, thank you. Just one last one for me then just on vertical -- Boston vertical. You see in the last few quarters retail and MRD have obviously contributed to some of the revenue softness, but you did see a nice pickup in the retail and the bookings. When do we start to see some of that translate to revenue? Do you see that in Q3? Is that more of a Q4 dynamic? In terms of revenue growth.

George D. Schindler -- President and Chief Executive Officer

Yes. Well -- yes. Yes. Well, we're -- as I mentioned in my remarks, we definitely are going to see revenue growth globally across the company in Q3, which is right in line with our plan, our expectations and what we talked about. There are some areas that are accelerating faster and -- than others. And I'll remind you, some of the growth is going to come from bookings, not just from this past quarter, but we've had strong bookings in the last three quarters in a lot of these areas. So it's going to come online at different levels. But MRD is recovering in certain areas. And I'll also remind you, if you look at the segment level revenue growth, we did have growth in Central and Eastern Europe in the quarter, and they have heavy manufacturing, retail and distribution, particularly on the manufacturing side. So we're seeing opportunities for growth.

Kevin Krishnaratne -- Desjardins Securities -- Analyst

Great to hear. Thanks a lot [Technical Issues].

Maher Yaghi -- Managing director and Telecom, Media And Technology analyst

Thank you, Kevin, and we're running late here on the call. So I just wanted to remind everyone that a replay of the call will be available either via our website or by dialing one (855) 859-2056 and using the passcode 6169566. As well, a podcast of this call will be available for download within a few hours. If you have any questions, you can direct them to me at (514) 415-3651. Thank you, George and Francois, and thank you, everyone, for participating in today's call. Hope to see you again soon.

Kevin Krishnaratne -- Desjardins Securities -- Analyst

Thank you.

George D. Schindler -- President and Chief Executive Officer

Thank you.

Operator

[Operator Closing Remarks]

Duration: 58 minutes

Call participants:

Maher Yaghi -- Managing director and Telecom, Media And Technology analyst

George D. Schindler -- President and Chief Executive Officer

Francois Boulanger -- Executive Vice-President and Chief Financial Officer

Kathy Chan -- Bank of America -- Analyst

Thanos Moschopoulos -- BMO -- Analyst

Stephanie Price -- CIBC -- Analyst

Richard Tse -- National Bank Financial -- Analyst

Paul Treiber -- RBC Capital Markets -- Analyst

Deepak Kaushal -- Stifel GNP -- Analyst

Kevin Krishnaratne -- Desjardins Securities -- Analyst

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