CALGARY, Alberta, Feb. 07, 2024 (GLOBE NEWSWIRE) — Computer Modelling Group Ltd. (“CMG Group” or the “Company”) announces its financial results for the three and nine months ended December 31, 2023.
CMG Group and its subsidiaries include the following; Computer Modelling Group Inc., CMG Middle East FZ LLC, CMGL Services Corporation Inc., CMG Europe Ltd., and CMG Collaboration Centre India Private Ltd., (together referred to as “CMG”), and CMG Holdings (USA) Inc., Bluware-Headwave Ventures Inc., Bluware Inc., Hue AS, and Kalkulo AS (together referred to as “BHV” or “Bluware”).
As a result of CMG Group’s acquisition of BHV on September 25, 2023, the Company’s operations are now organized into two reportable operating segments represented by CMG; the development and licensing of reservoir simulation software, and BHV; the development and licensing of seismic interpretation software.
THIRD QUARTER FISCAL 2024 (“Q3 2024”) OVERVIEW
CMG GROUP KEY FINANCIAL METRICS
For the Three Months Ended
For the Nine Months Ended
December 31, 2023 and compared to the same period of the previous fiscal year, when appropriate:
Annuity/maintenance license revenue increased by 21%;
Annuity/maintenance license revenue increased by 18%;
Annuity license fees have increased by 100% or $3.8 million as a result of a full quarter of BHV operations;
Annuity license fees have increased by 100% or $4.0 million as a result of a full quarter of BHV operations;
Total revenue increased by 70%;
Total revenue increased by 43%;
Total operating expenses increased by 99%. Adjusted for acquisition related expenses in the current quarter and restructuring charges in the prior year’s third quarter, operating expenses increased by 92%, primarily due to a combination of higher stock-based compensation expense, direct employee costs, professional service costs and office-related costs;
Total operating expenses increased by 35%. Adjusted for acquisition related expenses in the current year and restructuring charges in the prior year, operating expenses increased by 51% from the comparative period in the prior year, primarily due to a combination of higher stock-based compensation expenses, direct employee costs, professional services, travel-related and office-related costs;
Quarterly adjusted EBITDA as a % of total revenue was 38%, decreasing from 49% in the comparative quarter with, CMG achieving 44% and BHV achieving 27% in the current quarter;
Year-to-date adjusted EBITDA as a % of total revenue was 44%, decreasing from 46% in the comparative period, with CMG achieving 47% and BHV achieving 27% in the current quarter;
Basic EPS of $0.07, down $0.01 per share from the comparative quarter in the prior fiscal year;
Basic EPS of $0.24, up $0.06 per share from the comparative period in the prior fiscal year;
Achieved free cash flow per share of $0.09.
Achieved free cash flow per share of $0.32.
THIRD QUARTER BUSINESS HIGHLIGHTS
Our third quarter results represent the first full quarter of operations following the acquisition of BHV, which contributed $11.2 million to total revenue and $1.7 million to net income:
Generated total revenue of $33.0 million in the third quarter of fiscal 2024 compared to $19.4 million in the prior year’s quarter, an increase of 70% with 58% contributed by BHV and 12% by CMG. Geographically, all regions saw increases in annuity/maintenance revenue due to new customers and increased licensing by existing customers. Our existing customers continue to grow their product offerings on contract renewals. Annuity license fee revenue increased due to the acquisition of BHV and was impacted by contract renewals;
Adjusted EBITDA was 38%, compared to 49% in the same period of last fiscal year with BHV achieving 27% and CMG achieving 44% adjusted EBITDA;
Recognition of annuity license fee from BHV had a positive impact on total revenue and adjusted EBITDA (see under “Quarterly Performance” heading for further description);
Reported free cash flow of $7.7 million, representing $0.09 per share;
Subsequent to quarter-end, declared a quarterly cash dividend of $0.05 per share to be paid on March 15, 2024 to all shareholders on record at the close of business on March 7, 2024.
The following press release should be read in conjunction with the Company’s unaudited condensed consolidated interim financial statements for the three and nine months ended December 31, 2023 and the accompanying notes, our Management’s Discussion and Analysis (“MD&A”) for the three and nine months ended December 31, 2023 and with our annual Consolidated Financial Statements, prepared in accordance with International Financial Reporting Standards (“IFRS”) and with our MD&A for the year ended March 31, 2023 which can be found on SEDAR at www.sedarplus.ca and on the Company’s website www.cmgl.ca. Additional information about the Company is also available on SEDAR at www.sedarplus.ca.
QUARTERLY PERFORMANCE
Fiscal 2022(2)
Fiscal 2023(3)
Fiscal 2024(4)
($ thousands, unless otherwise stated)
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Annuity/maintenance license
14,306
13,529
14,825
15,533
15,803
15,607
17,610
18,814
Annuity license fee
–
–
–
–
–
–
–
3,846
Perpetual license
2,351
386
780
518
1,556
1,849
1,176
584
Total software license revenue
16,657
13,915
15,605
16,051
17,359
17,456
18,786
23,244
Professional services revenue
2,137
2,192
2,477
3,341
2,906
3,292
3,847
9,763
Total revenue
18,794
16,107
18,082
19,392
20,265
20,748
22,633
33,007
Operating expenses
11,482
9,382
10,870
9,262
13,356
9,079
12,414
18,434
Adjusted operating expenses(1)
12,398
7,780
8,529
9,262
13,356
9,079
11,841
17,738
Operating profit
7,312
4,961
5,555
8,435
6,909
9,764
7,726
8,217
Operating profit (%)
39
31
31
43
34
47
34
25
Adjusted operating profit(1)
6,396
6,563
7,896
8,435
6,909
9,764
8,299
8,913
Adjusted operating profit (%)
34
41
44
43
34
47
37
27
Profit before income and other taxes
6,563
5,182
5,989
8,350
7,127
9,148
8,793
8,117
Income and other taxes
1,611
1,369
1,579
2,002
1,901
2,244
2,277
2,507
Net income for the period
4,952
3,813
4,410
6,348
5,226
6,904
6,516
5,610
Adjusted EBITDA(1)
7,879
6,775
8,435
9,498
8,520
9,948
10,718
12,634
Cash dividends declared and paid
4,016
4,017
4,025
4,025
4,032
4,039
4,043
4,059
Funds flow from operations
7,105
4,558
4,974
8,169
7,656
7,920
11,491
8,477
Free cash flow(1)
6,584
4,255
4,505
7,545
5,396
7,463
11,028
7,654
Per share amounts – ($/share)
Earnings per share (EPS) – basic
0.06
0.05
0.05
0.08
0.07
0.09
0.08
0.07
Earnings per share (EPS) – diluted
0.06
0.05
0.05
0.08
0.06
0.08
0.08
0.07
Cash dividends declared and paid
0.05
0.05
0.05
0.05
0.05
0.05
0.05
0.05
Funds flow from operations per share – basic
0.09
0.06
0.06
0.10
0.09
0.10
0.14
0.10
Free cash flow per share – basic(1)
0.08
0.05
0.06
0.09
0.07
0.09
0.14
0.09
(1)
This is a non-IFRS financial measure. See the “Non-IFRS Financial Measures” section.
(2)
Q4 of fiscal 2022 includes $0.8 million of annuity/maintenance revenue that pertains to usage of CMG’s products in prior quarters.
(3)
Q1, Q2, Q3, and Q4 of fiscal 2023 include $0.2 million, $0.3 million, $0.3 million, and $0.4 million, respectively, of annuity/maintenance revenue that pertains to usage of CMG’s products in prior quarters.
(4)
Q1, Q2, and Q3 of fiscal 2024 include $0.1 million, $0.4 million, and $0.2 million, respectively, of annuity/maintenance revenue that pertains to usage of CMG’s products in prior quarters.
Total software license revenue for the three months ended December 31, 2023 increased by 45%, compared to the same period of the previous fiscal year, of which 31% is due to BHV acquisition and 14% due to increases in annuity/maintenance and perpetual license revenue of CMG. Total software license revenue for the nine months ended December 31, 2023 increased by 31%, compared to the same period of the previous fiscal year, of which 11% is due to BHV acquisition and 19% due to increases in annuity/maintenance and perpetual license revenue of CMG.
Annuity/maintenance license revenue increased by 21% during the three months ended December 31, 2023, compared to the same period of the previous fiscal year, of which 8% is due to BHV acquisition and 13% due to annuity/ maintenance license revenue increase of CMG. Annuity/maintenance license revenue increased by 18% during the nine months ended December 31, 2023, compared to the same period in the previous fiscal year, of which 3% is due to BHV acquisition and 15% due to increases in annuity/ maintenance license revenue of CMG. CMG’s annuity/maintenance license revenue increases during both three and nine months ended December 31, 2023 were a result of increases in all regions, supported by license fee increases, increased the license usage by existing customers and addition of new customers. We continue to see a strong contribution to revenue from CMG energy transition customers and estimate during the three and nine months ended December 31, 2023, 22% of total software license revenue is related to energy transition.
Annuity license fee revenue relates to BHV and this revenue stream is expected to fluctuate quarterly depending on the timing of contract renewals as the annuity license fees are recognized in revenue when the software license is delivered. Historically, a majority of contracts renew during the third and fourth quarters.
Perpetual license revenue increased by 13% during the three months ended December 31, 2023, compared to the same period of the previous fiscal year, due to perpetual license sales generated in Canada during the quarter. During the nine months ended December 31, 2023, compared to the same period of the previous fiscal year, perpetual license revenue increased by 114% due to increases in all regions.
Professional services revenue for the three and nine months ended December 31, 2023 was $9.8 million and $16.9 million which represents increases of 192% and 111%, respectively, compared to the same periods of the previous fiscal year. The acquisition of BHV contributed 185% and 82% of the increase, respectively, for the three and nine months ended December 31, 2023.The remaining increases are due to increased CMG professional services revenue from consulting projects as a result of expanded services to address customer demand.
Total operating expenses for the three and nine months ended December 31, 2023, increased by 99% and 35%, respectively, compared to the same periods of the previous fiscal year. Adjusted total operating expenses increased by 92% and 51% for the three and nine months ended December 31, 2023, respectively, compared to the same periods of the previous fiscal year. The acquisition of BHV contributed to 46% and 17% of the increase in total adjusted operating costs for the three and nine months ended December 31, 2023, respectively, compared to the same periods of the previous fiscal year. CMG’s total adjusted operating expenses increased by 46% and 34% for the three and nine months ended December 31, 2023, respectively, compared to the same periods of the previous fiscal year, due to an increase in both direct employee costs and other corporate costs.
Operating profit as a percentage of total revenue for the three months ended December 31, 2023 was 25%, down from 43% in the comparative quarter. Adjusted operating profit was 27%, down from 43% in the comparative quarter. Current quarter includes BHV’s adjusted operating profit as a percentage of revenue at 26% and CMG’s adjusted operating profit as a percentage of revenue at 28%. CMG’s adjusted operating profit as a percentage of revenue decreased from 43% recorded in the same quarter of the previous fiscal year, due to an increase in direct employee costs driven by the increase in stock-based compensation, other corporate costs inclusive of the increase in amortization expense as a result of BHV acquisition, partially offset by an increase in revenue. Operating profit as a percentage of total revenue for the nine months ended December 31, 2023 was 34%, slightly down from 35% in the comparative quarter. Adjusted operating profit was 35%, down from 43% in the comparative quarter. Current year-to-date quarter includes BHV’s adjusted operating profit as a percentage of revenue at 26% and CMG’s adjusted operating profit as a percentage of revenue at 37%. CMG’s adjusted operating profit as a percentage of revenue decreased from 43% recorded in the same period of the previous fiscal year, due to the same reasons that affected the quarterly comparison as explained above.
NON-IFRS FINANCIAL MEASURES AND RECONCILIATION OF NON-IFRS MEASURES
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.
Certain financial measures – 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 2022
Fiscal 2023
Fiscal 2024
($ thousands, unless otherwise stated)
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Funds flow from operations
7,105
4,558
4,974
8,169
7,656
7,920
11,491
8,477
Capital expenditures
(62
)
–
(130
)
(211
)
(1,707
)
(45
)
(51
)
(459
)
Repayment of lease liabilities
(459
)
(303
)
(339
)
(413
)
(553
)
(412
)
(412
)
(364
)
Free cash flow
6,584
4,255
4,505
7,545
5,396
7,463
11,028
7,654
Weighted average shares – basic (thousands)
80,335
80,335
80,412
80,511
80,603
80,685
80,834
81,067
Free cash flow per share – basic
0.08
0.05
0.06
0.09
0.07
0.09
0.14
0.09
Adjusted EBITDA and Adjusted EBITDA as a % of Total Revenue
Three months ended December 31
Nine months ended December 31
2023
2022
$ change
% change
2023
2022
$ change
% change
($ thousands, except per share data)
Net income
5,610
6,348
(738
)
(12
%)
19,030
14,571
4,459
31
%
Add (deduct):
Depreciation and amortization
1,555
864
691
80
%
3,537
2,732
805
29
%
Stock-based compensation
2,974
1,094
1,880
172
%
5,370
1,596
3,774
236
%
Acquisition related expenses
696
–
696
100
%
1,269
–
1,269
100
%
Restructuring charges
–
–
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