Computer Modelling Group Announces Year-End Results
CALGARY, Alberta, May 22, 2024 (GLOBE NEWSWIRE) -- Computer Modelling Group Ltd. (“CMG Group” or the “Company”) announces its financial results for the three months and year ended March 31, 2024.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.
*FOURTH QUARTER 2024 CONSOLIDATED HIGHLIGHTS*
Select financial highlights
· Generated total revenue of $32.3 million in the fourth quarter of fiscal 2024, compared to $20.3 million in the prior year’s quarter, reflecting a 15% increase in CMG’s revenue and a 44% contribution from BHV;
· Operating profit increased to $8.3 million, an increase of 20% from the same period of the previous fiscal year. Adjusted operating profit increased by 16% from the same period of the previous fiscal year, with CMG contributing to 9% and BHV contributing to 7% of the increase;
· Adjusted EBITDA Margin was 32%, compared to 42% in the same period of the previous last fiscal year with BHV generating 10% and CMG generating 40% in Adjusted EBITDA Margin;
· Net income during the period was $7.2 million, a 38% increase compared to the prior year’s quarter;
· Earnings per share was $0.09, a 29% increase compared to the prior year’s quarter;
· Reported Free Cash Flow of $0.12 per share, an increase of 71%.
*FISCAL 2024 CONSOLIDATED HIGHLIGHTS*
Select financial highlights
· Generated total revenue of $108.7 million in fiscal 2024, compared to $73.8 million in the previous fiscal year, reflecting a 19% increase in CMG’s revenue and a 28% contribution from BHV;
· Operating profit increased to $34.0 million, an increase of 31% from the previous fiscal year. Adjusted operating profit increased by 30% from the previous fiscal year, in which CMG contributed 19% and BHV contributed 11%;
· Adjusted EBITDA Margin was 40%, compared to 45% in last fiscal year with BHV generating 18% and CMG generating 45% in Adjusted EBITDA Margin;
· Net income during the year was $26.3 million, a 33% increase compared to the prior fiscal year;
· Earnings per share was $0.32, a 28% increase compared to prior fiscal year;
· Reported Free Cash Flow of $0.44 per share, an increase of 63%.
*MANAGEMENT COMMENTARY*
Fourth Quarter
In the fourth quarter, total revenue grew by 59% from the prior fiscal year to $32.3 million, reflecting the acquisition of Bluware (“BHV”) which contributed 44%, and growth within the CMG operating segment of 15%. Adjusted EBITDA Margin was 32% compared to 42% in the prior fiscal year primarily due to the acquisition of BHV which currently operates at a lower margin than CMG. Net income for the quarter increased by 38% to $7.2 million, driven by higher revenue in the CMG operating segment. Free Cash Flow grew by 75% to $9.5 million, or $0.12 per share, from $5.4 million or $0.07 per share in the prior year’s quarter. This substantial increase in Free Cash Flow was driven by both increases in net income and an approximately $4.6 million increase due to the tax deduction for the intellectual property acquired from BHV.
The CMG operating segment delivered strong total revenue growth of 15% in the fourth quarter with 13% growth in the recurring annuity/maintenance license revenue and increases in both perpetual licenses and professional services revenue. Energy transition, as a percentage of CMG software revenue, was 24% for the fourth quarter, evidencing continued strong demand. As expected, direct employee costs increased in the fourth quarter compared to the prior fiscal year, driven primarily by a combination of increased headcount and performance driven variable compensation. Corporate costs increased as we made investments to support our growth. Collectively, these impacts reduced Adjusted EBITDA Margin in the quarter to 40% from 42% in the prior fiscal year.
In the BHV operating segment, as expected, software license revenue of $2.9 million in the fourth quarter was down sequentially from the third quarter of this fiscal year. This is due to annuity license fee revenue, which fluctuates quarterly depending on the timing of contract renewals. This impacted Adjusted EBITDA Margin for the quarter which declined to 10% from 27% in the third quarter of this year.
Fiscal Year 2024
In fiscal 2024, total revenue grew by 47% from the prior fiscal year to $108.7 million, reflecting the acquisition of BHV which contributed 28% and growth within the CMG operating segment of 19%. As expected, due to the current lower profitability margins of BHV, compared to CMG, full year consolidated Adjusted EBITDA Margin was 40% compared to 45% in the prior fiscal year. Net income grew by $6.5 million, or 33% from the prior fiscal year, driven primarily by increased revenue in the CMG operating segment. Free Cash Flow grew by 62% to $35.3 million, or $0.44 per share, from $21.7 million, or $0.27 per share, in the prior fiscal year. Free Cash Flow benefited from stronger net income and the intellectual property tax deduction related to the BHV acquisition. The year ending cash balance of $63.1 million provides flexibility to continue advancing our acquisition strategy.
The CMG operating segment delivered strong total revenue growth of 19% over the prior fiscal year, with 15% growth in the recurring annuity/maintenance license revenue and increases in both perpetual licenses and professional services revenue. Growth in software revenue was evident across all geographies, with the US and Eastern Hemisphere showing the largest contribution, and was driven by a combination of pricing, and new and increased licensing for both energy transition and traditional energy. Energy transition, as a percentage of CMG software revenue, was 23% for the full year 2024.
Compared to the prior fiscal year, CMG operating segment Adjusted EBITDA increased by 19% to $39.5 million, with Adjusted EBITDA Margin remaining stable at 45% compared to the prior fiscal year. In fiscal 2024, Adjusted EBITDA Margin was impacted by a decrease in SR&ED investment tax credits and increased direct employee costs and other corporate costs that represent our investments supporting current and anticipated growth. These investments included additional hires, bringing headcount to 193 (from 165 on March 31, 2023), additional systems to support and accelerate the refinement of our sales and go-to-market strategies, product innovation, and internal processes. We believe these investments position the organization to deliver sustained annual growth in the coming years while maintaining strong profitability.
In the BHV operating segment, performance is tracking to our expectation with total revenue of $20.8 million and Adjusted EBITDA Margin of 18% for the year-to-date, which reflects six months of operations. Software license revenue of $8.1 million, represented two full quarters of operations under CMG ownership. However, it is expected that revenue in the first six months of fiscal 2025 will be lower than that of Q3 and Q4 of fiscal 2024, due to the timing impact of contract renewals. It is also anticipated that Adjusted EBITDA Margin will decrease in the first two quarters of fiscal 2025 for the same reason. Annuity license fee revenue is recognized upfront when the software license is delivered to the customer which is driven by the timing of contract renewals that happen most commonly in the third and fourth quarter. For this reason, BHV performance will be best evaluated on an annual basis.
*SUMMARY OF FINANCIAL PERFORMANCE*
Three months ended March 31 *CMG* *BHV**
* *Consolidated*
($ thousands, except per share data) *2024* 2023 *2024* 2023 *2024* 2023 * * * * * *
Annuity/maintenance licenses *17,864* 15,803 *1,797* - *19,661* 15,803
Annuity license fee *-* - *1,142* - *1,142* -
Perpetual licenses *2,130* 1,556 *-* - *2,130* 1,556
Total software license revenue *19,994* 17,359 *2,939* - *22,933* 17,359
Professional services *3,280* 2,906 *6,078* - *9,358* 2,906
*Total revenue * *23,274* 20,265 *9,017* *-* *32,291* 20,265
Total revenue growth *15%* 8% *59%* 8%
Annuity/maintenance licenses growth *13%* 10% *24%* 10%
Cost of revenue *2,394* 2,365 *4,076* - *6,470* 2,365
Operating expenses
Sales & marketing *3,691* 3,294 *670* - *4,361* 3,294
Research and development *5,830* 4,589 *1,777* - *7,607* 4,589
General & administrative *3,458* 3,108 *2,118* - *5,576* 3,108
Operating expenses *12,979* 10,991 *4,565* - *17,544* 10,991
*Operating profit * *7,901* 6,909 *376* - *8,277* 6,909
Operating Margin *34%* 34% *4%* -% *26%* 34%
Acquisition related expenses *-* - *186* - *186* -
Amortization of acquired intangible assets *575* 19 *89* - *664* 19
Stock based compensation *922* 1,721 *-* - *922* 1,721
*Adjusted operating profit *^*(1)* *9,398* 8,649 *651* - *10,049* 8,649
Adjusted Operating Margin ^(1) *40%* 43% *7%* -% *31%* 43%
*Net income (loss)* *7,365* 5,226 *(136)* - *7,229* 5,226
Adjusted EBITDA ^(1) *9,353* 8,520 *866* - *10,219* 8,520
Adjusted EBITDA Margin ^(1) *40%* 42% *10%* -% *32%* 42%
Earnings per share – basic *0.09* 0.07
Free cash flow per share – basic ^(1) *0.12* 0.07
(1) Non-IFRS financial measures are defined in the “Non-IFRS Financial Measures” section.
Year ended March 31 *CMG* *BHV**
* *Consolidated**
*
($ thousands, except per share data) *2024* 2023 *2024* 2023 *2024* 2023 * *
Annuity/maintenance licenses *68,537* 59,690 *2,993* - *71,530* 59,690
Annuity license fee *-* - *5,146* - *5,146* -
Perpetual licenses *5,739* 3,240 *-* - *5,739* 3,240
Total software license revenue *74,276* 62,930 *8,139* - *82,415* 62,930
Professional services *13,618* 10,916 *12,646* - *26,264* 10,916
*Total revenue * *87,894* 73,846 *20,785* *-* *108,679* 73,846
Total revenue growth *19%* 12% *47%* 12%
Annuity/maintenance licenses growth *15%* 12% *20%* 12%
Cost of revenue *8,858* 7,481 *8,366* - *17,224* 7,481
Operating expenses
Sales & marketing *13,787* 9,968 *1,170* - *14,957* 9,968
Research and development *19,870* 17,857 *3,809* - *23,679* 17,857
General & administrative *14,234* 12,680 *4,601* - *18,835* 12,680
Operating expenses *47,891* 40,505 *9,580* - *57,471* 40,505
*Operating profit* *31,145* 25,860 *2,839* - *33,984* 25,860
Operating Margin 35% 35% 14% -% 31% 35%
Acquisition related expenses *719* - *737* - *1,456* -
Amortization of acquired intangible assets *1,322* 19 *179* - *1,501* 19
Restructuring charge *-* 3,943 *-* - *-* 3,943
Stock based compensation *6,292* 3,317 * - * - *6,292* 3,317
*Adjusted operating profit *^*(1)* *39,478* 33,139 *3,755* - *43,233* 33,139
Adjusted Operating Margin ^(1) *45%* 45% *18%* -% *40%* 45%
*Net income* *24,610* 19,797 *1,649* - *26,259* 19,797
Adjusted EBITDA ^(1) *39,469* 33,229 *3,688* - *43,157* 33,229
Adjusted EBITDA Margin ^(1) *45%* 45% *18%* -% *40%* 45%
Earnings per share – basic *0.32* 0.25
Free cash flow per share – basic ^(1) *0.44* 0.27
(1) Non-IFRS financial measures are defined in the “Non-IFRS Financial Measures” section.
*NON-IFRS FINANCIAL MEASURES AND RECONCILIATION OF NON-IFRS MEASURES*
*Free Cash Flow Reconciliation to Funds Flow from Operations*
Free cash flow is a non-IFRS financial measure that is calculated as funds flow from operations less capital expenditures and repayment of lease liabilities. Free Cash Flow per share is calculated by dividing free cash flow by the number of weighted average outstanding shares during the period. 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. Management uses free cash flow and free cash flow per share to help measure the capacity of the Company to pay dividends and invest in business growth opportunities.
Fiscal 2023
Fiscal 2024*
*
($ thousands, unless otherwise stated) Q1 Q2 Q3 Q4 Q1 Q2 Q3 *Q4*
Funds flow from operations 4,558 4,974 8,169 7,656 7,920 11,491 8,477 *10,367*
Capital expenditures^(1) - (130) (211) (1,707) (45) (51) (459) *(95)*
Repayment of lease liabilities (303) (339) (413) (553) (412) (412) (728) *(803)*
Free Cash Flow 4,255 4,505 7,545 5,396 7,463 11,028 7,290 *9,469*
Weighted average shares – basic (thousands) 80,335 80,412 80,511 80,603 80,685 80,834 81,067 *81,314*
Free Cash Flow per share - basic 0.05 0.06 0.09 0.07 0.09 0.14 0.09 *0.12*
($ thousands, unless otherwise stated) *March 31, 2024* March 31, 2023 March 31, 2022
Funds flow from operations *38,255* 25,357 23,842
Capital expenditures ^(1) *(650)* (2,048) (703)
Repayment of lease liabilities *(2,355)* (1,608) (1,356)
Free Cash Flow *35,250* 21,701 21,783
Weighted average shares – basic (thousands) *80,975* 80,464 80,316
Free Cash Flow per share - basic *0.44* 0.27 0.27
(1) Capital expenditures include cash consideration for USI acquisition in 2023.
Free Cash Flow has increased by 75% and 62%, respectively for the three months and year ended March 31, 2024 from the same periods of the previous fiscal year. These increases are primarily due to increases in net income in fiscal 2024 and an income tax deduction of approximately $4.6 million as a result of the acquisition of BHV’s intellectual property. Additionally, there has been a decrease in capital expenditures in the current year as a result of the acquisition of assets from Unconventional Subsurface Integration LLC (“USI”) in Q4 2023. This is partially offset in the current year due to increased repayment of lease liabilities as a result of the acquisition of BHV office leases.
*Adjusted EBITDA and Adjusted EBITDA Margin*
*CMG**
* *BHV* *Consolidated**
*
*Three months ended March 31* *2024* 2023 *2024* 2023 *2024* 2023
($ thousands) * * * *
Net income (loss) *7,365* 5,226 *(136)* - *7,229* 5,226
Add (deduct):
Depreciation and amortization *1,573* 916 *578* - *2,151* 916
Stock-based compensation *922* 1,722 *-* - *922* 1,722
Acquisition related expenses *-* - *186* - *186* -
Income and other tax expense *1,587* 1,901 *348* - *1,935* 1,901
Interest income *(639)* (705) *(19)* - *(658)* (705)
Foreign exchange loss (gain) *(863)* 13 *120* - *(743)* 13
Repayment of lease liabilities *(592)* (553) *(211)* - *(803)* (553)
Adjusted EBITDA^ (1) *9,353* 8,520 *866* - *10,219* 8,520
Adjusted EBITDA Margin ^(1) *40%* 42% *10%* - *32%* 42%
(1) This is a non-IFRS financial measure. Refer to definition of the measures above.
*CMG* *BHV**
* *Consolidated*
*Year ended March 31* *2024* 2023 *2024* 2023 *2024* 2023
($ thousands) * * * *
Net income * 24,610 * 19,797 * 1,649 * - * 26,259* 19,797
Add (deduct): * * * * * - *
Depreciation and amortization * 4,997 * 3,649 *691 * - *5,688* 3,649
Stock-based compensation * 6,292 * 3,317 * - * - * 6,292 * 3,317
Acquisition related expenses * 719 * - * 737 * - * 1,456 * -
Restructuring charges * - * 3,943 * - * - * - * 3,943
Income and other tax expense * 7,875 * 6,851 * 1,088 * - * 8,963 * 6,851
Interest income * (3,073)* (1,810) * (23)* - * (3,096)* (1,810)
Foreign exchange loss (gain) * (111)* (910) * 61 * - * (50)* (910)
Repayment of lease liabilities *(1,840)* (1,608) *(515)* - *(2,355)* (1,608)
Adjusted EBITDA^ (1) *39,469* 33,229 *3,688* - *43,157* 33,229
Adjusted EBITDA Margin ^(1) *45%* 45% *18%* - *40%* 45%
(1) This is a non-IFRS financial measure. Refer to definition of the measures above.
Adjusted EBITDA Margin for the three months and year ended March 31, 2024, was 32% and 40%, respectively, a decrease from the same periods of the previous fiscal year. Adjusted EBITDA Margins which were 42% and 45%, respectively, for the three months and year ended March 31, 2024.
CMG’s Adjusted EBITDA Margin is 40% for the three months ended March 31, 2024, compared to 42% in the prior year comparative quarter, primarily due to an increase in operating expenses as a result of an increase in headcount and headcount related costs and other corporate costs. Refer to the “Operating Expenses” section of the MD&A for further detail on the increase in operating expenses by category. CMG’s Adjusted EBITDA Margin for the year ended March 31, 2024 was 45%, which was consistent with the prior year.
BHV’s Adjusted EBITDA Margin is 10% and 18%, respectively, for the three months and year ended March 31, 2024. The recognition of annuity license fees as a result of contract renewals in the third and fourth quarters had a positive effect on Adjusted EBITDA. We expect that Adjusted EBITDA will fluctuate on a quarterly basis as a result of annuity license fee revenue recognition which is skewed towards the last two quarters of the fiscal year.
Consolidated Statements of Financial Position
(thousands of Canadian $) *March 31, 2024* March 31, 2023
*Assets*
Current assets:
Cash *63,083* 66,850
Restricted cash *142* -
Trade and other receivables *36,550* 23,910
Prepaid expenses *2,321* 1,060
Prepaid income taxes *3,841* 444 *105,937* 92,264
Intangible assets *23,683* 1,321
Right-of-use assets *29,072* 30,733
Property and equipment *9,877* 10,366
Goodwill *3,745* -
Deferred tax asset *59* 2,444
*Total assets* *172,373* 137,128
*Liabilities and shareholders’ equity*
Current liabilities:
Trade payables and accrued liabilities *16,582* 9,883
Income taxes payable *1,604* 33
Acquisition holdback payable *2,292* -
Deferred revenue *41,120* 34,797
Lease liabilities *2,566* 1,829 *64,164* 46,542
Lease liabilities *34,395* 36,151
Stock-based compensation liabilities *2,593* 1,985
Acquisition earnout *1,503* -
Other long-term liabilities *305* -
Deferred tax liabilities *1,598* -
Total liabilities *104,558* 84,678
Shareholders’ equity:
Share capital *87,304* 81,820
Contributed surplus *15,667* 15,471
Cumulative translation adjustment *(367)* -
Deficit *(34,789)* (44,841)
Total shareholders’ equity *67,815* 52,450
*Total liabilities and shareholders' equity* *172,373* 137,128
Consolidated Statements of Operations and Comprehensive Income
Years ended March 31,
(thousands of Canadian $ except per share amounts) *2024*
2023
*Revenue *
*Cost of revenue * *108,679*
*17,224* 73,846
7,481
*Gross profit * *91,455* 66,365
*Operating expenses *
Sales and marketing *14,957* 9,968
Research and development *23,679* 17,857
General and administrative *18,835* 12,680 *57,471* 40,505
*Operating profit* *33,984* 25,860
* *
Finance income *3,146* 2,720
Finance costs *(1,908)* (1,932)
*Profit before income and other taxes* *35,222* 26,648
Income and other taxes *8,963* 6,851
*Net income* *26,259* 19,797
*Other comprehensive income:*
Foreign currency translation adjustment *(367)* -
*Other comprehensive income * *(367)* -
*Total comprehensive income * *25,892* 19,797
Net income per share – basic *0.32* 0.25
Net income per share – diluted *0.32* 0.24
Dividend per share *0.20* 0.20
Consolidated Statements of Cash Flows
Years ended March 31,
(thousands of Canadian $) *2024* 2023
*Operating activities*
Net income *26,259* 19,797
Adjustments for:
Depreciation and amortization of property, equipment, right-
of use assets *4,187* 3,649
Amortization of intangible assets *1,501* -
Deferred income tax expense (recovery) *3,518* (235)
Stock-based compensation *2,795* 2,146
Foreign exchange and other non-cash items *(5)* -
Funds flow from operations *38,255* 25,357
Movement in non-cash working capital:
Trade and other receivables *(6,697)* (6,403)
Trade payables and accrued liabilities *2,618* 2,315
Prepaid expenses and other assets *(1,183)* (268)
Income taxes receivable (payable) *(1,826)* 535
Deferred revenue *4,910* 4,343
Change in non-cash working capital *(2,178)* 522
*Net cash provided by operating activities* *36,077* 25,879
*Financing activities*
Repayment of acquired line of credit *(2,012)* -
Proceeds from issuance of common shares *4,193* 1,066
Repayment of lease liabilities *(2,355)* (1,608)
Dividends paid *(16,207)* (16,099)
*Net cash used in financing activities* *(16,381)* (16,641)
*Investing activities*
Corporate acquisition, net of cash acquired *(22,814)* -
Intangible asset additions *-* (1,340)
Property and equipment additions, net of disposals *(650)* (708)
*Net cash used in investing activities* *(23,464)* (2,048)
*Increase (decrease) in cash* *(3,768)* 7,190
Effect of foreign exchange on cash *1* -
Cash, beginning of year *66,850* 59,660
*Cash, end of year* *63,083* 66,850
* *
*Supplementary cash flow information*
Interest received *3,096* 1,810
Interest paid *1,908* 1,932
Income taxes paid *7,201* 6,635
*CORPORATE PROFILE*
CMG Group (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. The Company 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 consolidated financial statements and the notes thereto for the three months and year ended March 31, 2024 can be obtained from our website www.cmgl.ca. The documents will also be available under CMG Group’s SEDAR+ profile www.sedarplus.ca.
For further information, please contact:
Pramod Jain Sandra Balic
Chief Executive Officer Vice President, Finance & CFO
(403) 531-1300 (403) 531-1300
pramod.jain@cmgl.ca sandra.balic@cmgl.ca
For investor inquiries, please contact:
Kim MacEachern
Director, Investor Relations
cmg-investors@cmgl.ca
For media inquiries, please contact:
marketing@cmgl.ca
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