Computer Modelling Group Announces Second Quarter Results


CALGARY, Alberta, Nov. 13, 2023 (GLOBE NEWSWIRE) -- Computer Modelling Group Ltd. (“CMG” or the “Company”) announces its financial results for the three and six months ended September 30, 2023.

Second Quarter Fiscal 2024 (“Q2 2024”) Overview

Key Financial Metrics

For the Three Months EndedFor the Six Months Ended
September 30, 2023 and compared to the same period of the previous fiscal year, when appropriate:
 
  • Annuity/maintenance license revenue increased by 19%;
  • Annuity/maintenance license revenue increased by 17%;
  • Total revenue increased by 25%;
  • Total revenue increased by 27%;
  • Total operating expenses increased by 14%. Adjusted for acquisition costs in the current quarter and restructuring charges in the prior year’s second quarter, operating expenses increased by 39%, primarily due to stock-based compensation expense, increased headcount and headcount-related costs, higher professional services, travel-related and office-related costs;
  • Total operating expenses increased by 6%. Adjusted for acquisition costs in the current year and restructuring charges in the prior year, operating expenses increased by 28% from the comparative period in the prior year, primarily due to stock-based compensation expenses, increased headcount and headcount related costs, higher professional services, travel-related and office-related costs;
  • Quarterly operating profit margin was 34%, increasing from 31% in the comparative quarter. Adjusted for acquisition costs in the current quarter and restructuring charges in the prior year’s second quarter, operating profit margin was 37%, decreasing from 44% in the comparative quarter;
  • Year-to-date operating profit margin was 40%, increasing from 31% in the comparative period. Adjusted for acquisition costs in the current year and restructuring charges in the prior year, operating profit margin was 42%, which remained consistent with the comparative period;
  • Basic EPS of $0.08, up $0.03 per share from the comparative quarter in the prior fiscal year;
  • Basic EPS of $0.17, up $0.10 per share from the comparative period in the prior fiscal year;
  • Achieved free cash flow per share of $0.14;
  • Achieved free cash flow per share of $0.23;
  • Declared and paid a dividend of $0.05 per share.
  • Declared and paid dividends of $0.10 per share.

Second Quarter Business Highlights

  • Completed the Company’s first major acquisition, Bluware-Headwave Ventures Inc. (“BHV” or “Bluware”), on September 25, 2023;
  • Generated total revenue of $22.6 million in the second quarter of fiscal 2024 compared to $18.1 million in the prior year’s quarter, an increase of 25%;
  • Operating profit margin increased to 34%, compared to 31% in the same period of last fiscal year;
  • Reported free cash flow of $11.0 million, representing $0.14 per share;
  • Subsequent to quarter-end, declared a quarterly cash dividend of $0.05 per share to be paid on December 15, 2023 to all shareholders on record at the close of business on December 7, 2023.

Quarterly Performance

  Fiscal 2022Fiscal 2023Fiscal 2024
($ thousands, unless otherwise stated)Q3Q4Q1Q2Q3Q4Q1Q2
Annuity/maintenance license revenue13,57514,30613,52914,82515,53315,803

15,607
17,610
Perpetual license revenue1,4972,3513867805181,5561,8491,176
Software license revenue15,07216,65713,91515,60516,05117,35917,45618,786
Professional services revenue1,9732,1372,1922,4773,3412,9063,2923,847
Total revenue17,04518,79416,10718,08219,39220,265

20,748
22,633
Operating profit7,7557,3124,9615,5558,4356,9099,7647,726
Operating profit (%)4539313143344734
Profit before income and other taxes7,3106,5635,1825,9898,3507,1279,1488,793
Income and other taxes1,7361,6111,3691,5792,0021,9012,2442,277
Net income for the period5,5744,9523,8134,4106,3485,2266,9046,516
Adjusted EBITDA(1)8,2737,8196,7758,43510,5958,5159,94810,718
Cash dividends declared and paid4,0174,0164,0174,0254,0254,0324,0394,043
Funds flow from operations7,0227,1054,5584,9748,1697,6567,92011,491
Free cash flow(1)6,2276,5844,2554,5057,5455,3967,46311,028
Per share amounts – ($/share)        
Earnings per share (EPS) – basic0.070.060.050.050.080.070.090.08
Earnings per share (EPS) - diluted0.070.060.050.050.080.060.080.08
Cash dividends declared and paid0.050.050.050.050.050.050.050.05
Funds flow from operations per share – basic0.090.090.060.060.100.090.100.14
Free cash flow per share – basic(1)0.080.080.050.060.090.070.090.14
(1)   This is a non-IFRS financial measure. See the “Non-IFRS Financial Measures” section.
 

Revenue

 Three months ended September 30
Six months ended September 30 
 20232022$
change
%
change
20232022$
change
%
change
($ thousands)        
         
Software license revenue18,78615,6053,18120%36,24129,5206,72123%
Professional services revenue3,8472,4771,37055%7,1394,6692,47053%
Total revenue (1)22,63318,0824,55125%43,38134,1899,19227%
         
Software license revenue as a % of total revenue83%86%  84%86%  
Professional services revenue as a % of total revenue17%14%  16%14%  
(1)   BHV consolidated revenue for the three and six months ended September 30, 2023 was $0.6 million.
 

CMG’s revenue is comprised of software license sales, which provides the majority of the Company’s revenue, and fees for professional services. Total revenue for the three and six months ended September 30, 2023 increased by 25% and 27% respectively, over the comparable period of the previous fiscal year due to increases in both software license revenue and professional services revenue.

Software License Revenue

 Three months ended September 30
Six months ended September 30
 20232022$
change
%
change
20232022$
change
%
change
($ thousands)        
         
Annuity/maintenance17,61014,8252,78619%33,21728,3544,86317%
Perpetual license1,17678039651%3,0251,1661,859159%
Total software license revenue (1)18,78615,6053,18120%36,24229,5206,72223%
         
Annuity/maintenance as a % of total software license revenue94%95%  92%96%  
Perpetual as a % of total software license revenue6%5%  8%4%  
(1)   For the three and six months ended September 30, 2023, BHV’s total software license revenue was $0.2 million.
 

Total software license revenue for the three months and six months ended September 30, 2023 increased by 20% and 23% respectively, due to increases in both annuity/maintenance license revenue and perpetual license revenue.

Software Revenue by Geographic Region

 Three months ended September 30
Six months ended September 30
 20232022$
change
%
change
20232022$
change
%
change
($ thousands)        
Annuity/maintenance license revenue        
Canada3,3183,1811374%6,5586,1314277%
United States(1)4,5833,70487924%8,8387,0541,78425%
South America2,4771,89458331%4,3003,59370720%
Eastern Hemisphere(1)(2)7,2326,0461,18620%13,52111,5761,94517%
 17,61014,8252,78519%33,21728,3544,86317%
Perpetual license revenue        
Canada---0%115-115100%
United States-157(157(100%)2331577648%
South America324-324100%324-324100%
Eastern Hemisphere85262322937%2,3531,0091,344133%
 1,17678039651%3,0251,1661,859159%
Total software license revenue        
Canada3,3183,1811374%6,6736,1315429%
United States(1)4,5833,86172219%9,0717,2111,86026%
South America2,8021,89490848%4,6243,5931,03129%
Eastern Hemisphere(1)(2)8,0836,6691,41421%15,87412,5853,28826%
 18,78615,6053,18120%36,24229,5206,72223%
(1)   BHV’s consolidated total software license revenue for the three and six months ended September 30, 2023 was $0.2 million and is predominantly domiciled in the United States and Norway.
(2)   Includes Europe, Africa, Asia and Australia.
 

During the three and six months ended September 30, 2023, compared to the same periods of the previous fiscal year, total software license revenue increased in all regions.

The Canadian region (representing 18% of year-to-date total software license revenue) experienced increases of 4% and 7% in annuity/maintenance license revenue during the three and six months ended September 30, 2023, respectively, mainly due to license fee increases and increased licensing by existing customers. While no perpetual license revenue was generated in the current quarter, it increased by 100% during the six months ended September 30, 2023, due to a license sale in the first quarter of the current fiscal year.

The United States (representing 25% of year-to-date total software license revenue) experienced increases of 24% and 25% in annuity/maintenance license revenue during the three and six months ended September 30, 2023, respectively, due to new customers, increased license fees and increased licensing by existing customers. There were no perpetual license sales in the current quarter. Perpetual license revenue increased by 48% for the six months ended September 30, 2023 due to a new customer license purchase.

South America (representing 13% of year-to-date total software license revenue) experienced increases of 31% and 20% in annuity/maintenance license revenue during the three and six months ended September 30, 2023, due to increased licensing by existing customers. Perpetual license revenue increased by 100% for both the three and six months ended September 30, 2023 due to a new customer license purchase.

The Eastern Hemisphere (representing 44% of year-to-date total software license revenue) experienced increases of 20% and 17% in annuity/maintenance license revenue during the three and six months ended September 30, 2023, respectively, due to increased license fees and licensing by existing customers. Perpetual license revenue increased by 37% and 133% for the three and six months ended September 30, 2023, respectively, primarily due to new perpetual license sales in Asia relating to energy transition.

Deferred Revenue

($ thousands)Fiscal 2024Fiscal 2023Fiscal 2022$ change% change
Deferred revenue at:     
Q1 (June 30)26,61624,409 2,2079%
Q2 (September 30)32,339(1)24,164 8,17534%
Q3 (December 31) 26,71723,0563,66116%
Q4 (March 31) 34,79730,4544,34314%
(1)   BHV represents approximately $2.8 million of the deferred revenue balance as at Q2 2024.
       

CMG’s deferred revenue consists primarily of amounts for prepaid licenses. Our annuity/maintenance revenue is deferred and recognized rateably over the license period, which is generally one year or less. Amounts are deferred for licenses that have been provided and revenue recognition reflects the passage of time.

The above table illustrates the normal trend in the deferred revenue balance from the beginning of the calendar year (which corresponds with Q4 of our fiscal year), when most renewals occur, to the end of the calendar year (which corresponds with Q3 of our fiscal year). Our fourth quarter corresponds with the beginning of the fiscal year for most oil and gas companies, representing a time when they enter a new budget year and sign/renew their contracts.

The deferred revenue balance at the end of Q2 of fiscal 2024 was 34% higher than in Q2 of fiscal 2023. While 12% of the increase is related to BHV acquisition, we did not note significant timing differences in the remaining balance.

Cost of Revenue

 Three months ended September 30
Six months ended September 30
 20232022$
change
%
change
20232022$
change
%
change
($ thousands)        
Cost of revenue(1)2,4931,65783650%4,3983,42197728%
(1)   BHV consolidated cost of revenue for the three and six months ended September 30, 2023 was $0.2 million.
 

Cost of revenue increased by 50% and 28% for the three and six months ended September 30, 2023, respectively compared to the same periods of the previous fiscal year related to increased headcount and headcount-related costs.

Operating Expenses

 Three months ended September 30
Six months ended September 30
 20232022$
change
%
change
20232022$
change
%
change
($ thousands)        
Sales and marketing3,3842,2911,093 48%5,7394,1941,545 37%
Research and development4,7675,043(276)(5%)8,8199,172(353)(4%)
General and administrative4,2633,536727 21%6,9356,88649 1%
Total operating expenses(1)12,41410,8701,544 14%21,49320,2521,241 6%
         
Direct employee costs(2)8,5388,263275 3%14,69615,752(1,056)-7%
Other corporate costs(2)3,8762,6071,269 49%6,7974,5002,297 51%
 12,41410,8701,544 14%21,49320,2521,241 6%
(1)   BHV contributed $0.1 million, $0.1 million, and $0.1 million to sales and marketing, research and development and general and administrative respectively for the three and six months ended September 30, 2023.
(2)   This is a non-IFRS financial measure. See the “Non-IFRS Financial Measures” section.
 

Adjusted total operating expenses, adjusted direct employee costs and adjusted other corporate costs are non-IFRS financial measures. They do not have a standard meaning prescribed by IFRS and, accordingly, may not be comparable to measures used by other companies. Restructuring charges are excluded from total operating expenses. Management believes that analyzing the Company’s expenses exclusive of these items illustrates underlying trends in our costs and provides better comparability between periods.

The following tables provide a reconciliation of total operating expenses to adjusted total operating expenses, direct employee costs to adjusted direct employee costs and other corporate costs to adjusted other corporate costs:

 Three months ended September 30

Six months ended September 30

 2023 2022 $
change
%
change
2023 2022 $
change
%
change
($ thousands)        
Total operating expenses12,414 10,870 1,544 14%21,493 20,252 1,241 6%
Acquisition-related costs(573)- (573)(100%)(573)- (573)(100%)
Restructuring charge- (2,341)2,341 100%- (3,943)3,943 100%
Adjusted total operating expenses11,841 8,529 3,312 39%20,920 16,309 4,611 28%
         
Direct employee costs8,538 8,264 274 3%14,696 15,752 (1,056)(7%)
Restructuring charge- (2,293)2,293 100%- (3,771)3,771 100%
Adjusted direct employee costs8,538 5,971 2,567 43%14,696 11,981 2,715 23%
         
Other corporate costs3,876 2,607 1,269 49%6,797 4,500 2,297 51%
Acquisition-related costs(573)- (573)(100%)(573)- (573)(100%)
Restructuring charge- (48)48 100%- (172)172 100%
Adjusted other corporate costs3,303 2,559 744 29%6,224 4,328 1,896 44%
 

As a technology company, CMG’s largest investment is its people, and approximately 69% of total operating expenses relate to direct employee costs At September 30, 2023, CMG’s full-time equivalent staff complement was 296 employees and consultants (CMGL Canada – 185; BHV – 111; (September 30, 2022 – CMGL Canada - 159). For the three and six months ended September 30, 2023, adjusted direct employee costs increased by 43% and 23% respectively, compared to the same period of the previous fiscal year primarily due to an increase in headcount and share-based payment expense as a result of an increase in share price in the current quarter.

Adjusted other corporate costs increased by 29% and 44% respectively, compared to the same period of the previous fiscal year, primarily due to increased agent commissions and other office-related costs.

Additional IFRS Measure

Funds flow from operations is an additional IFRS measure that the Company presents in its consolidated statements of cash flows. Funds flow from operations is calculated as cash flows provided by operating activities adjusted for changes in non-cash working capital. Management believes that this measure provides useful supplemental information about operating performance and liquidity, as it represents cash generated during the period, regardless of the timing of collection of receivables and payment of payables, which may reduce comparability between periods.

Non-IFRS Financial Measures and Reconciliation of Non-IFRS Measures

Certain financial measures in this MD&A – namely, Adjusted EBITDA, free cash flow, adjusted total operating expenses, direct employee costs, adjusted direct employee costs, other corporate costs, adjusted other corporate costs, adjusted operating profit, and adjusted net income – do not have a standard meaning prescribed by IFRS and, accordingly, may not be comparable to measures used by other companies. Management believes that these indicators nevertheless provide useful measures in evaluating the Company’s performance. Reconciliations of the non-IFRS financial measures to the most directly comparable IFRS financial measure are presented below:

Free Cash Flow Reconciliation to Funds Flow from Operations

  Fiscal 2022Fiscal 2023Fiscal 2024
($ thousands, unless otherwise stated)Q3Q4Q1Q2Q3Q4Q1Q2
Funds flow from operations7,0227,1054,5584,9748,1697,6567,92011,491
Capital expenditures(481)(62)-(130)(211)(1,707)(45)(51)
Repayment of lease liabilities(314)(459)(303)(339)(413)(553)(412)(412)
Free cash flow6,2276,5844,2554,5057,5455,3967,46311,028
Weighted average shares – basic
(thousands)
80,33580,33580,33580,41280,51180,60380,685 80,834
Free cash flow per share – basic0.080.080.050.060.090.070.090.14
         

Adjusted EBITDA and Adjusted EBITDA as a % of Total Revenue

 Three months ended September 30
Six months ended September 30
 20232022$
change
%
change
20232022$
change
%
change
($ thousands, except per share data)        
         
Net income6,5164,4102,10648%13,4208,2235,19763%
Add (deduct):        
Depreciation and amortization1,021937849%1,9821,8681146%
Stock-based compensation2,2914271,864437%2,3955011,894378%
Acquisition costs573-573100%573-573100%
Restructuring charges-2,341(2,341)(100%)-3,943(3,943)(100%)
Income and other tax expense2,2771,57969844%4,5212,9481,57353%
Interest income(692)(377)(315)84%(1,452)(557)(895)161%
Foreign exchange loss (gain)(856)(543)(313)59%51(1,074)1,125(105%)
Repayment of lease liabilities(412)(339)(73)19%(824)(642)(182)27%
Adjusted EBITDA10,7188,4352,28327%20,66615,2105,45636%
Adjusted EBITDA as a % of total revenue47%47%  48%44%  
         

Corporate Profile

CMG (TSX:CMG) is a global software and consulting company that combines science and technology with deep industry expertise to solve complex subsurface and surface challenges for the new energy industry around the world. CMG is headquartered in Calgary, AB, with offices in Houston, Oxford, Dubai, Bogota, Rio de Janeiro, Bengaluru, and Kuala Lumpur. For more information, please visit www.cmgl.ca.

Quarterly Filings and Related Quarterly Financial Information

Management’s Discussion and Analysis (“MD&A”) and condensed consolidated interim financial statements and the notes thereto for the three and six-months ended September 30, 2023 can be obtained from CMG’s website www.cmgl.ca. The documents will also be available under CMG’s SEDAR profile www.sedarplus.ca. Additionally, CMG has published on the Investor Relations section of its website (www.cmgl.ca/investors) a Q2 2024 Investor Presentation.

Consolidated Statements of Financial Position

UNAUDITED (thousands of Canadian $)September 30, 2023March 31, 2023 
    
Assets   
Current assets:   
Cash48,22566,850 
Restricted cash97- 
Trade and other receivables26,62523,910 
Prepaid expenses1,0851,060 
Prepaid income taxes1,739444 
 77,77192,264 
Intangible assets25,0121,321 
Right-of-use assets30,87530,733 
Property and equipment9,91910,366 
Goodwill6,571- 
Deferred tax asset-2,444 
Total assets150,148137,128 
    
Liabilities and shareholders’ equity   
Current liabilities:   
Trade payables and accrued liabilities12,4469,883 
Income taxes payable7533 
Acquisition holdback payable3,561- 
Deferred revenue32,33934,797 
Lease liabilities3,1061,829 
 51,52746,542 
Lease liabilities35,38636,151 
Stock-based compensation liabilities2,0901,985 
Acquisition earnout1,507- 
Other long-term liabilities213- 
Deferred tax liabilities65- 
Total liabilities90,78884,678 
    
Shareholders’ equity:   
Share capital83,24681,820 
Contributed surplus15,61215,471 
Cumulative translation adjustment4- 
Deficit(39,502)(44,841) 
Total shareholders’ equity59,36052,450 
Total liabilities and shareholders' equity150,148137,128 
    

Consolidated Statements of Operations and Comprehensive Income

 Three months ended
September 30
 Six months ended
September 30
 
UNAUDITED (thousands of Canadian $ except per share amounts)2023

 2022
(note 2(e))
 2023

 2022
(note 2(e))
 
     
Revenue
Cost of revenue
22,633
2,493
 18,082
1,657
 43,381
4,398
 34,189
3,421
 
Gross profit 20,140 16,425 38,983 30,768 
     
Operating expenses     
Sales and marketing3,384 2,291 5,739 4,194 
Research and development4,767 5,043 8,819 9,172 
General and administrative4,263 3,536 6,935 6,886 
 12,414 10,870 21,493 20,252 
Operating profit7,726 5,555 17,490 10,516 
     
Finance income1,548 920 1,452 1,631 
Finance costs(481)(486)(1,001)(976)
Profit before income and other taxes8,793 5,989 17,941 11,171 
Income and other taxes2,277 1,579 4,521 2,948 
     
Net income for the period6,516 4,410 13,420 8,223 
     
Other comprehensive income:    
Foreign currency translation adjustment4 - 4 - 
Other comprehensive income 4 - 4 - 
Total comprehensive income 6,520 4,410 13,424 8,223 
     
Net income per share – basic0.08 0.05 0.17 0.10 
Net income per share – diluted0.08 0.05 0.16 0.10 
Dividend per share0.05 0.05 0.10 0.10 
         

Consolidated Statements of Cash Flows

 Three months ended
September 30
 Six months ended
September 30
 
UNAUDITED (thousands of Canadian $)2023 2022 2023 2022 
     
Operating activities    
Net income6,516 4,410 13,420 8,223 
Adjustments for:    
Depreciation and amortization of property, equipment, right-
of use assets
892 937 1,796 1,868 
Amortization of intangible assets129 - 186 - 
Deferred income tax expense (recovery)2,028 235 1,978 81 
Stock-based compensation1,604 (608)1,709 (640)
Foreign exchange and other non-cash items322 - 322 - 
Funds flow from operations11,491 4,974 19,411 9,532 
Movement in non-cash working capital:    
Trade and other receivables(581)1,428 3,301 3,824 
Trade payables and accrued liabilities405 323 (2,389)(622)
Prepaid expenses and other assets291 (360)290 (422)
Income taxes receivable (payable)(1,612)(264)(1,251)(424)
Deferred revenue3,044 (245)(5,137)(6,290)
Change in non-cash working capital1,547 882 (5,186)(3,934)
Net cash provided by operating activities13,038 5,856 14,225 5,598 
     
Financing activities    
Repayment of acquired line of credit(2,012)-  (2,012)- 
Proceeds from issuance of common shares512 415 1,213 415 
Repayment of lease liabilities(412)(339)(824)(642)
Dividends paid(4,042)(4,025)(8,081)(8,042)
Net cash used in financing activities(5,954)(3,949)(9,704)(8,269)
     
Investing activities    
Corporate acquisition, net of cash acquired(23,050)- (23,050)- 
Property and equipment additions(51)(130)(96)(130)
Net cash used in investing activities(23,101)(130)(23,146)(130)
     
Increase (decrease) in cash(16,017)1,777 (18,625)(2,801)
Cash, beginning of period64,242 55,082 66,850 59,660 
Cash, end of period48,225 56,859 48,225 56,859 
     
Supplementary cash flow information    
Interest received692 377 1,452 557 
Interest paid481 486 950 976 
Income taxes paid2,580 1,387 4,358 2,883 
         

For further information, please contact:

Pramod Jain
Chief Executive Officer
(403) 531-1300
pramod.jain@cmgl.ca
orSandra Balic
Vice President, Finance & CFO
(403) 531-1300
sandra.balic@cmgl.ca
   

For investor inquiries, please contact:
Kim MacEachern
Manager, Investor Relations
cmg-investors@cmgl.ca

For media inquiries, please contact:
marketing@cmgl.ca
Cautionary Note Regarding Forward-Looking Statements

This press release contains "forward-looking statements". Forward-looking statements can be identified by words such as: "anticipate", "intend", "plan", "goal", "seek", "believe", "project", "estimate", "expect", "strategy", "future", "likely", "may", "should", "will", and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding the benefits of the acquired technology, the ongoing development thereof; and the ability of data analytics to improve efficiency, cut costs and reduce risks.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements are detailed in the companies’ public filings.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. Except as required by applicable securities laws, we undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.