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

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

Revenue

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

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

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

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

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

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:

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

Adjusted EBITDA and Adjusted EBITDA as a % of Total Revenue

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

Consolidated Statements of Operations and Comprehensive Income

Consolidated Statements of Cash Flows

For further information, please contact:

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.