Computer Modelling Group Announces First Quarter Results

About this update from Computer Modelling Group Ltd.

CALGARY, AB / ACCESSWIRE / August 10, 2023 / Computer Modelling Group Ltd. ("CMG" or the "Company") announces its financial results for the three months ended June 30, 2023. Quarterly Performance Fiscal 2022 Fiscal 2023 Fiscal 2024 ($ thousands, unless otherwise stated) Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Annuity/maintenance license revenue 13,239 13,575 14,306 13,529 14,825 15,533 15,803 15,607 Perpetual license revenue 846 1,497 2,351 386 780 518 1,556 1,849 Software license revenue 14,085 15,072 16,657 13,915 15,605 16,051 17,359 17,456 Professional services revenue 1,864 1,973 2,137 2,192 2,477 3,341 2,906 3,292 Total revenue 15,949 17,045 18,794 16,107 18,082 19,392 20,265 20,748 Operating profit 5,440 7,755 7,312 4,961 5,555 8,435 6,909 9,764 Operating profit (%) 34 45 39 31 31 43 34 47 Profit before income and other taxes 5,321 7,310 6,563 5,182 5,989 8,350 7,127 9,148 Income and other taxes 1,175 1,736 1,611 1,369 1,579 2,002 1,901 2,244 Net income for the period 4,146 5,574 4,952 3,813 4,410 6,348 5,226 6,904 Adjusted EBITDA (1) 6,948 8,672 8,795 6,775 8,509 10,595 8,515 9,948 Cash dividends declared and paid 4,016 4,017 4,016 4,017 4,025 4,025 4,032 4,039 Funds flow from operations 4,904 7,022 7,105 4,558 4,974 8,169 7,656 7,920 Free cash flow (1) 4,494 6,227 6,584 4,255 4,505 7,545 5,396 7,463 Per share amounts - ($/share) Earnings per share (EPS) - basic 0.05 0.07 0.06 0.05 0.05 0.08 0.07 0.09 Earnings per share (EPS) - diluted 0.05 0.07 0.06 0.05 0.05 0.08 0.06 0.08 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 0.06 0.09 0.09 0.06 0.06 0.10 0.09 0.10 Free cash flow per share - basic (1) 0.06 0.08 0.08 0.05 0.06 0.09 0.07 0.09 This is a non-IFRS financial measure. See the "Non-IFRS Financial Measures" section. Commentary on Quarterly Performance For the Three Months Ended June 30, 2023 and compared to the same period of the previous fiscal year: Annuity/maintenance license revenue increased by 15%; Total revenue increased by 29%; Total operating expenses decreased by 3%. Adjusted for restructuring charges in the comparative quarter, operating expenses increased by 17%; primarily due to an increase in variable direct employee costs, higher professional services, travel-related, office-related and marketing corporate costs; Operating profit margin was 47%, up from 31% in the comparative quarter. Adjusted for restructuring charges in the comparative quarter, operating profit margin was 47%, compared to 41%; Basic EPS of $0.09 was higher than the comparative quarter's EPS of $0.05; Achieved free cash flow per share of $0.09; Declared and paid a dividend of $0.05 per share. Revenue Three months ended June 30, ($ thousands) 2023 2022 $ change % change Software license revenue 17,456 13,915 3,541 25 % Professional services revenue 3,292 2,192 1,100 50 % Total revenue 20,748 16,107 4,641 29 % Software license revenue as a % of total revenue 84 % 86 % Professional services revenue as a % of total revenue 16 % 14 % 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 months ended June 30, 2023, increased by 29%, due to increases in both software license revenue and professional services revenue. Software License Revenue Three months ended June 30, ($ thousands) 2023 2022 $ change % change Annuity/maintenance license revenue 15,607 13,529 2,078 15 % Perpetual license revenue 1,849 386 1,463 379 % Total software license revenue 17,456 13,915 3,541 25 % Annuity/maintenance as a % of total software license revenue 89 % 97 % Perpetual as a % of total software license revenue 11 % 3 % Total software license revenue for the three months ended June 30, 2023 increased by 25%, compared to the same period of the previous fiscal year, due to increases in both annuity/maintenance license revenue and perpetual license revenue. Software Revenue by Geographic Region Three months ended June 30, ($ thousands) 2023 2022 $ change % change Annuity/maintenance license revenue Canada 3,241 2,950 290 10 % United States 4,254 3,350 904 27 % South America 1,822 1,699 123 7 % Eastern Hemisphere (1) 6,290 5,530 760 14 % 15,607 13,529 2,078 15 % Perpetual license revenue Canada 115 - 115 100 % United States 233 - 233 100 % South America - - - - Eastern Hemisphere 1,501 386 1,115 289 % 1,849 386 1,463 379 % Total software license revenue Canada 3,356 2,950 405 14 % United States 4,487 3,350 1,137 34 % South America 1,822 1,699 123 7 % Eastern Hemisphere 7,791 5,916 1,875 32 % 17,456 13,915 3,541 25 % Includes Europe, Africa, Asia and Australia. During the three months ended June 30, 2023 compared to the same period of the previous fiscal year, total software license revenue increased in all regions. The Canadian region (representing 19% of year-to-date total software license revenue) experienced a 10% increase in annuity/maintenance license revenue, due to increased license fee and licensing by existing customers. Perpetual license revenue increased by 100% during the quarter due to a license purchase. The United States (representing 26% of year-to-date total software license revenue) experienced a 27% increase in annuity/maintenance license revenue, due to new customers and increased licensing and pricing by existing customers. Perpetual license revenue increased by 100% during the quarter due to a new customer license purchase. South America (representing 10% of year-to-date total software license revenue) experienced a 7% increase in annuity/maintenance license revenue, due to increased licensing by existing customers. There were no perpetual sales in South America during the current quarter. The Eastern Hemisphere (representing 45% of year-to-date total software license revenue) experienced a 14% increase in annuity/maintenance license revenue, due to increased license fees and licensing by existing customers. Several perpetual sales were realized during the quarter, which resulted in a 289% increase over the same period of the previous fiscal year. Deferred Revenue ($ thousands) Fiscal 2024 Fiscal 2023 Fiscal 2022 $ change % change Deferred revenue at: Q1 (June 30) 26,616 24,409 2,207 9 % Q2 (September 30) 24,164 21,242 2,922 12 % Q3 (December 31) 26,717 23,056 3,661 14 % Q4 (March 31) 34,797 30,454 4,343 12 % CMG's deferred revenue consists primarily of amounts for prepaid licenses. Our annuity/maintenance revenue is deferred and recognized ratably 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 Q1 of fiscal 2024 was 9% higher than Q1 of fiscal 2023 which was negatively impacted by timing differences on the balance. Cost of Revenue Three months ended June 30, ($ thousands) 2023 2022 $ change % change Cost of revenue 1,905 1,764 141 8 % Cost of revenues increased by 8% for the three months ended June 30, 2023 compared to the same period of the previous fiscal year related to headcount driven direct employee costs. Operating Expenses Three months ended June 30, ($ thousands) 2023 2022 $ change % change Sales and marketing 2,355 1,903 452 24 % Research and development 4,052 4,129 (77 ) (2 %) General and administrative 2,672 3,350 (678 ) (20 %) Total operating expenses 9,079 9,382 (303 ) (3 %) Direct employee costs (1) 6,157 7,489 (1,332 ) (18 %) Other corporate costs (1) 2,922 1,893 1,029 54 % 9,079 9,382 (303 ) (3 %) 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 June 30 ($ thousands) 2023 2022 Total operating expenses 9,079 9,382 Restructuring charge - (1,602 ) Adjusted total operating expenses 9,079 7,780 Direct employee costs 6,157 7,489 Restructuring charge - (1,478 ) Adjusted direct employee costs 6,157 6,011 Other corporate costs 2,922 1,893 Restructuring charge - (124 ) Adjusted other corporate costs 2,922 1,769 As a technology company, CMG's largest investment is its people, and approximately 85% of total operating expenses relate to direct employee costs. At June 30, 2023, CMG's full-time equivalent staff complement was 184 employees and consultants (June 30, 2022 - 173 employees). For the three months ended June 30, 2023, adjusted direct employee costs increased by 2%, compared to the same period of the previous fiscal year primarily due to an increase in headcount. Adjusted other corporate costs increased by 65% for the three months ended June 30, 2023 compared to the same period of the previous fiscal year, primarily due to higher general professional services and legal costs, travel-related, office-related and marketing corporate costs. As the Company resumes post-pandemic operations, travel, marketing and office-related activities have increased as compared to the first quarter of the previous fiscal year. 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 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. Certain additional disclosures for these non-IFRS financial measures have been incorporated by reference and can be found on page 2 in the Company's MD&A for the three months ended June 30, 2023, available on SEDAR at www.sedar.com and on the Company's website under the Investors section at www.cmgl.ca /investors. 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) Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Funds flow from operations 4,904 7,022 7,105 4,558 4,974 8,169 7,656 7,920 Capital expenditures (133 ) (481 ) (62 ) - (130 ) (211 ) (1,707 ) (45 ) Repayment of lease liabilities (277 ) (314 ) (459 ) (303 ) (339 ) (413 ) (553 ) (412 ) Free cash flow 4,494 6,227 6,584 4,255 4,505 7,545 5,396 7,463 Weighted average shares - basic (thousands) 80,307 80,335 80,335 80,335 80,412 80,511 80,603 80,685 Free cash flow per share - basic 0.06 0.08 0.08 0.05 0.06 0.09 0.07 0.09 Forward-Looking Information Certain information included in this MD&A is forward-looking. Forward-looking information includes statements that are not statements of historical fact and which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as investment objectives and strategy, the development plans and status of the Company's software development projects, the Company's intentions, results of operations, levels of activity, future capital and other expenditures (including the amount, nature and sources of funding thereof), business prospects and opportunities, research and development timetable, and future growth and performance. When used in this MD&A, statements to the effect that the Company or its management "believes", "expects", "expected", "plans", "may", "will", "projects", "anticipates", "estimates", "would", "could", "should", "endeavours", "seeks", "predicts" or "intends" or similar statements, including "potential", "opportunity", "target" or other variations thereof that are not statements of historical fact should be construed as forward-looking information. These statements reflect management's current beliefs with respect to future events and are based on information currently available to management of the Company. The Company believes that the expectations reflected in such forward-looking information are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking information should not be unduly relied upon. 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, London, Dubai, Bogota, Rio de Janeiro, Bengaluru, and Kuala Lumpur. For more information, please visit www.cmgl.ca. Consolidated Statements of Financial Position UNAUDITED (thousands of Canadian $) June 30, 2023 March 31, 2023 Assets Current assets: Cash 64,242 66,850 Trade and other receivables 20,028 23,910 Prepaid expenses 1,061 1,060 Prepaid income taxes 254 444 85,585 92,264 Property and equipment 10,102 10,366 Right-of-use assets 30,138 30,733 Intangible assets 1,264 1,321 Deferred tax asset 2,492 2,444 Total assets 129,581 137,128 Liabilities and shareholders` equity Current liabilities: Trade payables and accrued liabilities 7,157 7,158 9,883 Income taxes payable 204 - 33 Deferred revenue 26,616 34,797 Lease liabilities 1,853 1,829 35,830 46,542 Long-term stock-based compensation liability 1,848 1,985 Long-term lease liabilities 35,715 36,151 Total liabilities 73,393 84,678 - Shareholders` equity: Share capital 82,650 81,820 Contributed surplus 15,514 15,471 Deficit (41,976 ) (44,841 ) Total shareholders` equity 56,188 52,450 Total liabilities and shareholders' equity 129,581 137,128 Consolidated Statements of Operations and Comprehensive Income Three months ended June 30, UNAUDITED (thousands of Canadian $ except per share amounts) 2023 2022 Revenue 20,748 16,107 Cost of revenue 1,905 1,764 Gross profit 18,843 14,343 Operating expenses Sales and marketing 2,355 1,903 Research and development 4,052 4,129 General and administrative 2,672 3,350 9,079 9,382 Operating profit 9,764 4,961 Finance income 760 711 Finance costs (1,376 ) (490 ) Profit before income and other taxes 9,148 5,182 Income and other taxes 2,244 1,369 Net and total comprehensive income 6,904 3,813 Earnings per share - basic 0.09 0.05 Earnings per share - diluted 0.08 0.05 Dividend per share 0.05 0.05 Consolidated Statements of Cash Flows Three months ended June 30, UNAUDITED (thousands of Canadian $) 2023 2022 Operating activities Net income 6,904 3,813 Adjustments for: Depreciation and amortization of property, equipment, right-of-use assets 904 931 Amortization of intangible assets 57 - Deferred income tax recovery (49 ) (154 ) Stock-based compensation 104 (32 ) Funds flow from operations 7,920 4,558 Movement in non-cash working capital: Trade and other receivables 3,882 2,396 Trade payables and accrued liabilities (2,794 ) (945 ) Prepaid expenses (1 ) (62 ) Income taxes payable 361 (160 ) Deferred revenue (8,181 ) (6,045 ) Changes in non-cash working capital (6,733 ) (4,816 ) Net cash provided by (used in) operating activities 1,187 (258 ) Financing activities Proceeds from issue of common shares 701 - Repayment of lease liabilities (412 ) (303 ) Dividends paid (4,039 ) (4,017 ) Net cash used in financing activities (3,750 ) (4,320 ) Investing activities Property and equipment additions (45 ) - Decrease in cash (2,608 ) (4,578 ) Cash, beginning of period 66,850 59,660 Cash, end of period 64,242 55,082 Supplementary cash flow information Interest received 760 180 Interest paid 469 490 Income taxes paid 1,778 1,496 See accompanying notes to consolidated financial statements, which are available on SEDAR at www.sedar.com or on CMG's website at www.cmgl.ca For further information, please contact: Pramod Jain Chief Executive Officer (403) 531-1300 [email protected] or Sandra Balic Vice President, Finance & CFO (403) 531-1300 [email protected] www.cmgl.ca SOURCE: Computer Modelling Group Ltd. 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