CALGARY, Alberta, Aug. 07, 2024 (GLOBE NEWSWIRE) -- Computer Modelling Group Ltd. ("CMG Group" or the "Company") announces its financial results for the three months ended June 30, 2024, and the approval by its Board of Directors (the "Board") of the payment of a cash dividend of $0.05 per Common Share for the first quarter ended June 30, 2024.
FIRST QUARTER 2025 CONSOLIDATED HIGHLIGHTS
Select financial highlights
- Generated total revenue of $30.5 million in the first quarter of fiscal 2025, compared to $20.7 million in the prior year's quarter, reflecting a 12% increase in CMG's revenue and a 35% contribution from BHV;
- Operating profit decreased to $5.7 million, a decrease of 42% from the same period of the previous fiscal year, primarily due to an increase in stock-based compensation in the quarter as a result of the increase in share price. Adjusted operating profit decreased by 5% from the same period of the previous fiscal year, with CMG contributing to 3% and BHV contributing to 2% of the decrease;
- Adjusted EBITDA Margin was 31%, compared to 48% in the same period of the previous fiscal year with CMG generating 42% and BHV generating (4%) in Adjusted EBITDA Margin;
- Net income during the period was $4.0 million, a 43% decrease compared to the prior year's quarter;
- Earnings per share was $0.05, a 44% decrease compared to the prior year's quarter;
- Reported Free Cash Flow of $0.07 per share, a decrease of 22%, primarily due to BHV generating negative cash flows.
MANAGEMENT COMMENTARY
First Quarter
In the first quarter, total revenue grew by 47% from the prior fiscal year to $30.5 million, reflecting the acquisition of Bluware ("BHV") which contributed 35%, and growth within the CMG operating segment of 12%. Adjusted EBITDA Margin was 31% compared to 48% in the prior year period reflecting the acquisition of BHV which currently operates at a lower margin than CMG and a modest decline in Adjusted EBITDA in the CMG operating segment, discussed below. Net income for the quarter declined to $4.0 million from $6.9 million in the prior year period, significantly impacted by an increase in stock-based compensation expense driven by the share price increase. Free Cash Flow declined from $0.09 per share in the prior period to $0.07 per share, impacted by the lower Free Cash Flow generation at BHV resulting from seasonality associated with revenue recognition. At June 30, 2024, the cash balance was $69.1 million. In the first quarter, our effective tax rate increased due to a prior year tax adjustment relating to the acquisition of BHV.
The CMG operating segment delivered solid total revenue growth with a 12% increase in total revenue, comprised of a 14% increase in software revenue while professional services revenue remained constant. Growth was underpinned by the US and Eastern Hemisphere regions and included an increase in usage attributable to energy transition, which, as a percentage of CMG software revenue, was 28% for the first quarter. Operating profit in the first quarter declined by $3.6 million, or 37%, from the prior year period driven materially by an increase in stock-based compensation of $2.8 million as a result of the increase in share price and increased amortization on acquired IP of $0.5 million. The remaining decrease compared to the prior year period relates to direct employee expenses as we increased compensation, both salaries and bonuses, and headcount, across all departments to support our growth. Sequentially from Q4 2024, expenses, adjusted for stock-based compensation and amortization on acquired IP, declined slightly. CMG operating segment Adjusted EBITDA Margin in the quarter decreased to 42% from 48% in the prior fiscal year, due primarily to higher expenses described above, but represented a sequential increase from 40% in the fourth quarter of 2024. We anticipate that the CMG operating segment can achieve low double digit total revenue growth on an annual basis while maintaining Adjusted EBITDA margins in the mid-40% range.
Subsequent to the end of the quarter, Sheldon Harbinson, VP Americas, has transitioned out of the organization. The sales organization is now structured with regional sales directors reporting into Dave Montana, VP Global Sales, who joined the organization on May 28, 2024.
In the BHV operating segment, as expected, software license revenue of $1.8 million in the first quarter was down sequentially from the fourth quarter of this fiscal year. This is largely due to lower annuity license fee revenue, which depends on the timing of both contract renewals, which are currently weighted to the third and fourth quarters, and the addition of new contracts. Professional services revenue also experienced a modest sequential decline which is not unexpected as activity levels can fluctuate in the consulting practice. This combination of factors impacted Adjusted EBITDA and Adjusted EBITDA Margin for the quarter, which declined to ($0.3 million), or (4%), from $0.9 million, or 10%, in the fourth quarter of last year. We anticipate that given the fluctuations in revenue recognition, Adjusted EBITDA will be lowest in Q1 and Q2 of each year and would encourage shareholders to evaluate the BHV operating segment profitability on a full-year basis.
SUMMARY OF FINANCIAL PERFORMANCE
| CMG | BHV | Consolidated | ||||
| Three months ended June 30, ($ thousands, except per share data) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 |
Annuity/maintenance licenses | 17,757 | 15,607 | 1,578 | - | 19,335 | 15,607 |
| Annuity license fee | - | - | 178 | - | 178 | - |
| Perpetual licenses | 2,110 | 1,849 | - | - | 2,110 | 1,849 |
| Total software license revenue | 19,867 | 17,456 | 1,756 | - | 21,623 | 17,456 |
| Professional services | 3,280 | 3,292 | 5,620 | - | 8,900 | 3,292 |
| Total revenue | 23,147 | 20,748 | 7,376 | - | 30,523 | 20,748 |
| Total revenue growth | 12% | 29% | 47% | 29% | ||
| Annuity/maintenance licenses growth | 14% | 15% | 24% | 15% | ||
| Cost of revenue | 2,620 | 1,905 | 3,572 | - | 6,192 | 1,905 |
| Operating expenses | ||||||
| Sales & marketing | 4,141 | 2,355 | 790 | - | 4,931 | 2,355 |
| Research and development | 6,051 | 4,052 | 2,194 | - | 8,245 | 4,052 |
| General & administrative | 4,144 | 2,672 | 1,345 | - | 5,489 | 2,672 |
| Operating expenses | 14,336 | 9,079 | 4,329 | - | 18,665 | 9,079 |
| Operating profit | 6,191 | 9,764 | (525) | - | 5,666 | 9,764 |
| Operating Margin | 27% | 47% | (7%) | -% | 19% | 47% |
| Acquisition related expenses | - | - | 188 | - | 188 | - |
| Amortization of acquired intangible assets | 575 | 57 | 90 | - | 665 | 57 |
| Stock-based compensation | 2,906 | 104 | - | - | 2,906 | 104 |
| Adjusted operating profit (1) | 9,672 | 9,925 | (247) | - | 9,425 | 9,925 |
| Adjusted Operating Margin (1) | 42% | 48% | (3%) | -% | 31% | 48% |
| Net income (loss) | 5,365 | 6,904 | (1,401) | - | 3,964 | 6,904 |
| Adjusted EBITDA (1) | 9,702 | 9,948 | (265) | - | 9,437 | 9,948 |
| Adjusted EBITDA Margin(1) | 42% | 48% | (4%) | -% | 31% | 48% |
| Earnings per share - basic | 0.05 | 0.09 | ||||
| Free Cash Flow per share - basic(1) | 0.07 | 0.09 | ||||
(1) Non-IFRS financial measures are defined in the "Non-IFRS Financial Measures" section.
Q1 2025 Dividend
Computer Modelling Group's Board approved a cash dividend of $0.05 per Common Share. The dividend will be paid on September 13, 2024, to shareholders of record at the close of business on September 5, 2024.
All dividends paid by Computer Modelling Group Ltd. to holders of Common Shares in the capital of the Company will be treated as eligible dividends within the meaning of such term in section 89(1) of the Income Tax Act (Canada), unless otherwise indicated.
NON-IFRS FINANCIAL MEASURES AND RECONCILIATION OF NON-IFRS MEASURES
Free Cash Flow Reconciliation to Funds Flow from Operations
Free cash flow is a non-IFRS financial measure that is calculated as funds flow from operations less capital expenditures and repayment of lease liabilities. Free Cash Flow per share is calculated by dividing free cash flow by the number of weighted average outstanding shares during the period. Management believes that this measure provides useful supplemental information about operating performance and liquidity, as it represents cash generated during the period, regardless of the timing of collection of receivables and payment of payables, which may reduce comparability between periods. Management uses free cash flow and free cash flow per share to help measure the capacity of the Company to pay dividends and invest in business growth opportunities.
| Fiscal 2023 | Fiscal 2024 | Fiscal 2025 | ||||||
| ($ thousands, unless otherwise stated) | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 |
Funds flow from operations | 4,974 | 8,169 | 7,656 | 7,920 | 11,491 | 8,477 | 10,367 | 6,515 |
| Capital expenditures(1) | (130) | (211) | (1,707) | (45) | (51) | (459) | (95) | (93) |
| Repayment of lease liabilities | (339) | (413) | (553) | (412) | (412) | (728) | (803) | (743) |
| Free Cash Flow | 4,505 | 7,545 | 5,396 | 7,463 | 11,028 | 7,290 | 9,469 | 5,679 |
| Weighted average shares - basic (thousands) | 80,412 | 80,511 | 80,603 | 80,685 | 80,834 | 81,067 | 81,314 | 81,476 |
| Free Cash Flow per share - basic | 0.06 | 0.09 | 0.07 | 0.09 | 0.14 | 0.09 | 0.12 | 0.07 |
(1) Capital expenditures include cash consideration for USI acquisition in Q4 2023.
Free Cash Flow per share has decreased by 22% for the three months ended June 30, 2024, from the same period of the previous fiscal year. The decrease in Free Cash Flow is primarily a result of negative cash flow generated in the BHV segment, which primarily relates to reduced net income in the period due to revenue recognition being skewed towards the third and fourth quarters of the fiscal year. Additionally, the repayment of lease liabilities has increased compared to the prior year comparative quarter as a result of the acquisition of BHV resulting in a further decrease in free cash flow for the three months ended June 30, 2024, compared to the same period of the previous fiscal year.
Adjusted EBITDA and Adjusted EBITDA Margin
| CMG | BHV | Consolidated | ||||
| Three months ended June 30, ($ thousands) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 |
Net income (loss) | 5,365 | 6,904 | (1,401) | - | 3,964 | 6,904 |
| Add (deduct): | ||||||
| Depreciation and amortization | 1,498 | 961 | 385 | - | 1,883 | 961 |
| Stock-based compensation | 2,906 | 104 | - | - | 2,906 | 104 |
| Acquisition related expenses | - | - | 188 | - | 188 | - |
| Gain on contingent consideration | (199) | - | - | - | (199) | - |
| Income and other tax expense | 1,614 | 2,244 | 874 | - | 2,488 | 2,244 |
| Interest income | (780) | (760) | (98) | - | (878) | (760) |
| Foreign exchange loss (gain) | (255) | 907 | 83 | - | (172) | 907 |
| Repayment of lease liabilities | (447) | (412) | (296) | - | (743) | (412) |
| Adjusted EBITDA (1) | 9,702 | 9,948 | (265) | - | 9,437 | 9,948 |
| Adjusted EBITDA Margin (1) | 42% | 48% | (4%) | -% | 31% | 48% |
(1) This is a non-IFRS financial measure. Refer to definition of the measures above.
Adjusted EBITDA Margin for the three months ended June 30, 2024, was 31%, representing Adjusted EBITDA decrease of 5% from the same period of the previous fiscal year.
CMG's Adjusted EBITDA Margin is 42% for the three months ended June 30, 2024, compared to 48% 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.
BHV's Adjusted EBITDA Margin is (4%) for the three months ended June 30, 2024. Contract renewals at BHV typically occur in the third and fourth quarters, resulting in and as expected. Adjusted EBITDA fluctuation on a quarterly basis. As a result of annuity license fee revenue recognition being skewed towards the last two quarters of the fiscal year, Adjusted EBITDA is expected to be lower in the first and second quarters of the fiscal year.
Condensed Consolidated Statements of Financial Position
| UNAUDITED (thousands of Canadian $) | June 30, 2024 | March 31, 2024 | April 1, 2023 |
Assets | |||
| Current assets: | |||
| Cash | 69,092 | 63,083 | 66,850 |
| Restricted cash | 251 | 142 | - |
| Trade and other receivables | 22,739 | 36,550 | 23,910 |
| Prepaid expenses | 2,287 | 2,321 | 1,060 |
| Prepaid income taxes | 3,174 | 3,841 | 444 |
| 97,543 | 105,937 | 92,264 | |
| Intangible assets | 23,018 | 23,683 | 1,321 |
| Right-of-use assets | 29,615 | 29,072 | 30,733 |
| Property and equipment | 9,621 | 9,877 | 10,366 |
| Goodwill | 4,467 | 4,399 | - |
| Deferred tax asset | - | - | 2,444 |
| Total assets | 164,264 | 172,968 | 137,128 |
Liabilities and shareholders' equity | |||
| Current liabilities: | |||
| Trade payables and accrued liabilities | 15,471 | 18,551 | 11,126 |
| Income taxes payable | 2,740 | 2,136 | 33 |
| Acquisition holdback payable | 2,315 | 2,292 | - |
| Deferred revenue | 30,890 | 41,120 | 34,797 |
| Lease liabilities | 2,486 | 2,566 | 1,829 |
| 53,902 | 66,665 | 47,785 | |
| Lease liabilities | 35,178 | 34,395 | 36,151 |
| Stock-based compensation liabilities | 1,068 | 624 | 742 |
| Acquisition earnout | 1,320 | 1,503 | - |
| Other long-term liabilities | 359 | 305 | - |
| Deferred tax liabilities | 1,068 | 1,661 | - |
| Total liabilities | 92,895 | 105,153 | 84,678 |
Shareholders' equity: | |||
| Share capital | 90,193 | 87,304 | 81,820 |
| Contributed surplus | 15,545 | 15,667 | 15,471 |
| Cumulative translation adjustment | 532 | (367) | - |
| Deficit | (34,901) | (34,789) | (44,841) |
| Total shareholders' equity | 71,369 | 67,815 | 52,450 |
| Total liabilities and shareholders' equity | 164,264 | 172,968 | 137,128 |
Condensed Consolidated Statements of Operations and Comprehensive Income
| Three months ended June 30, UNAUDITED (thousands of Canadian $ except per share amounts) | 2024 | 2023 |
Revenue | 30,523 | 20,748 |
| Cost of revenue | 6,192 | 1,905 |
| Gross profit | 24,331 | 18,843 |
| Operating expenses | ||
| Sales and marketing | 4,931 | 2,355 |
| Research and development | 8,245 | 4,052 |
| General and administrative | 5,489 | 2,672 |
| 18,665 | 9,079 | |
| Operating profit | 5,666 | 9,764 |
| Finance income | 1,050 | 760 |
| Finance costs | (463) | (1,376) |
| Change in fair value of contingent consideration | 199 | - |
| Profit before income and other taxes | 6,452 | 9,148 |
| Income and other taxes | 2,488 | 2,244 |
Net income | 3,964 | 6,904 |
Other comprehensive income: | ||
| Foreign currency translation adjustment | 899 | - |
| Other comprehensive income | 899 | - |
| Total comprehensive income | 4,863 | 6,904 |
Net income per share - basic | 0.05 | 0.09 |
| Net income per share - diluted | 0.05 | 0.08 |
| Dividend per share | 0.05 | 0.05 |
Condensed Consolidated Statements of Cash Flows
| Three months ended June 30, UNAUDITED (thousands of Canadian $) | 2024 | 2023 |
Operating activities | ||
| Net income | 3,964 | 6,904 |
| Adjustments for: | ||
| Depreciation and amortization of property, equipment, right-of use assets | 1,218 | 904 |
| Amortization of intangible assets | 665 | 57 |
| Deferred income tax expense (recovery) | (653) | (49) |
| Stock-based compensation | 1,892 | 104 |
| Foreign exchange and other non-cash items | (571) | - |
| Funds flow from operations | 6,515 | 7,920 |
| Movement in non-cash working capital: | ||
| Trade and other receivables | 13,811 | 3,882 |
| Trade payables and accrued liabilities | (3,331) | (2,794) |
| Prepaid expenses and other assets | 34 | (1) |
| Income taxes receivable (payable) | 1,424 | 361 |
| Deferred revenue | (10,230) | (8,181) |
| Change in non-cash working capital | 1,708 | (6,733) |
| Net cash provided by operating activities | 8,223 | 1,187 |
Financing activities | ||
| Proceeds from issuance of common shares | 2,249 | 701 |
| Repayment of lease liabilities | (743) | (412) |
| Dividends paid | (4,076) | (4,039) |
| Net cash used in financing activities | (2,570) | (3,750) |
Investing activities | ||
| Property and equipment additions, net of disposals | (93) | (45) |
| Net cash used in investing activities | (93) | (45) |
Increase (decrease) in cash | 5,560 | (2,608) |
| Effect of foreign exchange on cash | 449 | - |
| Cash, beginning of period | 63,083 | 66,850 |
| Cash, end of period | 69,092 | 64,242 |
Supplementary cash flow information | ||
| Interest received | 878 | 760 |
| Interest paid | 463 | 469 |
| Income taxes paid | 1,496 | 1,778 |
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, Oslo, 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 months ended June 30, 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 | or | 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 | ||
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.
