CALGARY, Alberta, Feb. 14, 2018 (GLOBE NEWSWIRE) — Computer Modelling Group Ltd. (“CMG” or the “Company”) is very pleased to report our financial results for the three and nine months ended December 31, 2017.
Quarterly Performance
| Fiscal 2016 | Fiscal 2017 | Fiscal 2018 |
|||||||||||||
| ($ thousands, unless otherwise stated) | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | |||||||
| Annuity/maintenance licenses | 16,980 | 16,893 | 15,379 | 18,378 | 14,613 | 16,516 | 16,341 | 16,158 | |||||||
| Perpetual licenses | 782 | 579 | 521 | 835 | 3,036 | 1,078 | 290 | 743 | |||||||
| Software licenses | 17,762 | 17,472 | 15,900 | 19,213 | 17,649 | 17,594 | 16,631 | 16,901 | |||||||
| Professional services | 1,254 | 1,345 | 1,027 | 1,082 | 1,409 | 1,392 | 1,350 | 1,418 | |||||||
| Total revenue | 19,016 | 18,817 | 16,927 | 20,295 | 19,058 | 18,986 | 17,981 | 18,319 | |||||||
| Operating profit | 7,040 | 8,975 | 6,905 | 9,811 | 7,630 | 6,978 | 6,615 | 6,908 | |||||||
| Operating profit (%) | 37 | 48 | 41 | 48 | 40 | 37 | 37 | 38 | |||||||
| EBITDA(1) | 7,389 | 9,277 | 7,189 | 10,081 | 7,867 | 7,447 | 7,090 | 7,400 | |||||||
| Profit before income and other taxes | 5,550 | 9,212 | 7,119 | 10,176 | 7,685 | 6,930 | 6,253 | 7,151 | |||||||
| Income and other taxes | 1,668 | 2,398 | 2,128 | 2,917 | 2,480 | 1,973 | 1,647 | 2,054 | |||||||
| Net income for the period | 3,882 | 6,814 | 4,991 | 7,259 | 5,205 | 4,957 | 4,606 | 5,097 | |||||||
| Cash dividends declared and paid | 7,876 | 7,896 | 7,929 | 7,930 | 7,942 | 7,977 | 8,021 | 8,022 | |||||||
| Funds flow from operations(2) | 4,979 | 7,489 | 5,903 | 8,084 | 6,085 | 6,205 | 5,788 | 6,225 | |||||||
| Per share amounts – ($/share) | |||||||||||||||
| Earnings per share – basic | 0.05 | 0.09 | 0.06 | 0.09 | 0.07 | 0.06 | 0.06 | 0.06 | |||||||
| Earnings per share – diluted | 0.05 | 0.09 | 0.06 | 0.09 | 0.07 | 0.06 | 0.06 | 0.06 | |||||||
| Cash dividends declared and paid | 0.10 | 0.10 | 0.10 | 0.10 | 0.10 | 0.10 | 0.10 | 0.10 | |||||||
| Funds flow from operations per share – basic(2) | 0.06 | 0.09 | 0.07 | 0.10 | 0.08 | 0.08 | 0.07 | 0.08 | |||||||
| (1) EBITDA is a non-IFRS financial measure defined as net income before adjusting for depreciation expense, finance income, finance costs, and income and other taxes. See “Non-IFRS Financial Measures”. | |||||||||||||||
| (2) Funds flow from operations is a non-IFRS financial measure that represents net income adjusted for depreciation expense, non-cash stock-based compensation expense and deferred tax expense (recovery). See “Non-IFRS Financial Measures”. | |||||||||||||||
Highlights
During the three months ended December 31, 2017, as compared to the same period of the previous fiscal year, CMG:
- Experienced a 7% increase in annuity/maintenance license revenue, after adjusting for revenue from customers for whom revenue recognition criteria are fulfilled only when payment is received (see “Software License Revenue” for further discussion). Without normalizing for this revenue, annuity/maintenance license revenue decreased by 12%;
- Experienced a 7% increase in total revenue, after the aforementioned adjustment. Without normalizing, total revenue decreased by 10%;
- Experienced an increase in total operating expenses of 9%, mainly due to moving into the new headquarters.
During the nine months ended December 31, 2017, as compared to the same period of the previous fiscal year, CMG:
- Experienced a 3% increase in annuity/maintenance license revenue, after adjusting for revenue from certain customers as explained above. Without normalizing, annuity/maintenance license revenue decreased by 3%;
- Experienced a 5% increase in total revenue, after adjusting for revenue from certain customers as explained above. Without normalizing, total revenue decreased by 1%;
- Experienced an increase in total operating expenses of 15%, mainly due to moving into the new headquarters.
During the nine months ended December 31, 2017, CMG:
- Realized basic earnings per share of $0.18;
- Declared and paid a regular dividend of $0.30 per share.
Revenue
| Three months ended December 31, | 2017 | 2016 | $ change | % change | ||||
| ($ thousands) | ||||||||
| Software license revenue | 16,901 | 19,213 | (2,312 | ) | -12 | % | ||
| Professional services | 1,418 | 1,082 | 336 | 31 | % | |||
| Total revenue | 18,319 | 20,295 | (1,976 | ) | -10 | % | ||
| Software license revenue – % of total revenue | 92 | % | 95 | % | ||||
| Professional services – % of total revenue | 8 | % | 5 | % | ||||
| Nine months ended December 31, | 2017 | 2016 | $ change | % change | ||||
| ($ thousands) | ||||||||
| Software license revenue | 51,126 | 52,585 | (1,459 | ) | -3 | % | ||
| Professional services | 4,160 | 3,454 | 706 | 20 | % | |||
| Total revenue | 55,286 | 56,039 | (753 | ) | -1 | % | ||
| Software license revenue – % of total revenue | 92 | % | 94 | % | ||||
| Professional services – % of total revenue | 8 | % | 6 | % | ||||
CMG’s revenue is comprised of software license sales, which provide the majority of the Company’s revenue, and fees for professional services.
Total revenue decreased by 10% and 1% for the three and nine months ended December 31, 2017, respectively, compared the same periods of the previous fiscal year, due to decreases in software license revenue, which were primarily due to higher receipts in the comparative periods from customers for whom revenue is recognized only when cash is received. These decreases were slightly offset by increases in professional services.
Software License Revenue
| Three months ended December 31, | 2017 | 2016 | $ change | % change | ||||
| ($ thousands) | ||||||||
| Annuity/maintenance license revenue | 16,158 | 18,378 | (2,220 | ) | -12 | % | ||
| Perpetual license revenue | 743 | 835 | (92 | ) | -11 | % | ||
| Total software license revenue | 16,901 | 19,213 | (2,312 | ) | -12 | % | ||
| Annuity/maintenance as a % of total software license revenue | 96 | % | 96 | % | ||||
| Perpetual as a % of total software license revenue | 4 | % | 4 | % | ||||
| Nine months ended December 31, | 2017 | 2016 | $ change | % change | ||||
| ($ thousands) | ||||||||
| Annuity/maintenance license revenue | 49,015 | 50,650 | (1,635 | ) | -3 | % | ||
| Perpetual license revenue | 2,111 | 1,935 | 176 | 9 | % | |||
| Total software license revenue | 51,126 | 52,585 | (1,459 | ) | -3 | % | ||
| Annuity/maintenance as a % of total software license revenue | 96 | % | 96 | % | ||||
| Perpetual as a % of total software license revenue | 4 | % | 4 | % | ||||
Total software license revenue decreased by 12% for the three months ended December 31, 2017, compared to the same period of the previous fiscal year, due to decreases in both annuity/maintenance license revenue and perpetual license revenue.
Total software license revenue decreased by 3% for the nine months ended December 31, 2017, compared to the same period of the previous fiscal year, due to a decrease in annuity/maintenance license revenue, slightly offset by an increase in perpetual license revenue.
CMG’s annuity/maintenance license revenue decreased by 12% and 3% during the three and nine months ended December 31, 2017, respectively, compared to the same periods of the previous fiscal year, due to decreases in South America and Canada.
Our annuity/maintenance license revenue can be significantly impacted by the variability of the amounts recorded from a long-standing customer and its affiliates for whom revenue recognition criteria are fulfilled only at the time of the receipt of funds. The timing of such payments may skew the comparison of annuity/maintenance license revenue between periods. We received payments from these customers during the nine months ended December 31, 2017 and 2016. To provide a normalized comparison, if we remove this revenue from the three and nine months ended December 31, 2017 and 2016, we note that the annuity/maintenance license revenue increased by 7% and 3%, respectively, instead of decreasing by 12% and 3%. Due to the economic conditions in the country where this customer and its affiliates are located, revenue from this customer and its affiliates will continue to be recognized on a cash basis, which may result in fluctuations in our annuity/maintenance license revenue. The increases of 7% and 3% were due to increased licensing to existing and new customers in all of the regions except for Canada.
Perpetual license revenue decreased by 11% for the three months ended December 31, 2017, compared to the same period of the previous fiscal year, due to fewer perpetual sales having been realized in Canada and South America. Perpetual license revenue increased by 9% for the nine months ended December 31, 2017, compared to the same period of the previous fiscal year, mainly due to high perpetual license revenue in the Eastern Hemisphere in the first quarter of the current fiscal year. Software licensing under perpetual sales may fluctuate significantly between periods due to the uncertainty associated with the timing and the location where sales are generated. For this reason, even though we expect to achieve a certain level of aggregate perpetual sales on an annual basis, we expect to observe fluctuations in the quarterly perpetual revenue amounts throughout the fiscal year.
Software Revenue by Geographic Segment
| Three months ended December 31, | 2017 | 2016 | $ change | % change | |||||
| ($ thousands) | |||||||||
| Annuity/maintenance license revenue | |||||||||
| Canada | 4,380 | 4,895 | (515 | ) | -11 | % | |||
| United States | 4,897 | 3,930 | 967 | 25 | % | ||||
| South America | 2,122 | 4,934 | (2,812 | ) | -57 | % | |||
| Eastern Hemisphere(1) | 4,759 | 4,619 | 140 | 3 | % | ||||
| 16,158 | 18,378 | (2,220 | ) | -12 | % | ||||
| Perpetual license revenue | |||||||||
| Canada | – | 114 | (114 | ) | -100 | % | |||
| United States | – | – | – | 0 | % | ||||
| South America | 174 | 250 | (76 | ) | -30 | % | |||
| Eastern Hemisphere | 569 | 471 | 98 | 21 | % | ||||
| 743 | 835 | (92 | ) | -11 | % | ||||
| Total software license revenue | |||||||||
| Canada | 4,380 | 5,009 | (629 | ) | -13 | % | |||
| United States | 4,897 | 3,930 | 967 | 25 | % | ||||
| South America | 2,296 | 5,184 | (2,888 | ) | -56 | % | |||
| Eastern Hemisphere | 5,328 | 5,090 | 238 | 5 | % | ||||
| 16,901 | 19,213 | (2,312 | ) | -12 | % | ||||
| Nine months ended December 31, | 2017 | 2016 | $ change | % change | |||||
| ($ thousands) | |||||||||
| Annuity/maintenance license revenue | |||||||||
| Canada | 13,006 | 14,350 | (1,344 | ) | -9 | % | |||
| United States | 13,954 | 12,142 | 1,812 | 15 | % | ||||
| South America | 6,867 | 9,177 | (2,310 | ) | -25 | % | |||
| Eastern Hemisphere(1) | 15,188 | 14,981 | 207 | 1 | % | ||||
| 49,015 | 50,650 | (1,635 | ) | -3 | % | ||||
| Perpetual license revenue | |||||||||
| Canada | – | 114 | (114 | ) | -100 | % | |||
| United States | 155 | 80 | 75 | 94 | % | ||||
| South America | 394 | 562 | (168 | ) | -30 | % | |||
| Eastern Hemisphere | 1,562 | 1,179 | 383 | 32 | % | ||||
| 2,111 | 1,935 | 176 | 9 | % | |||||
| Total software license revenue | |||||||||
| Canada | 13,006 | 14,464 | (1,458 | ) | -10 | % | |||
| United States | 14,109 | 12,222 | 1,887 | 15 | % | ||||
| South America | 7,261 | 9,739 | (2,478 | ) | -25 | % | |||
| Eastern Hemisphere | 16,750 | 16,160 | 590 | 4 | % | ||||
| 51,126 | 52,585 | (1,459 | ) | -3 | % | ||||
| (1) Includes Europe, Africa, Asia and Australia. | |||||||||
During the three and nine months ended December 31, 2017, on a geographic basis, total software license revenue decreased in South America and Canada, partially offset by increases in the United States and the Eastern Hemisphere, as compared to the same periods of the previous fiscal year.
The Canadian market (representing 26% of year-to-date software license revenue) experienced decreases of 11% and 9% in annuity/maintenance license revenue during the three and nine months ended December 31, 2017, respectively, compared to the same periods of the previous fiscal year, due to a reduction in licensing by some customers. No perpetual sales were recorded in Canada during the three and nine months ended December 31, 2017.
The United States market (representing 29% of year-to-date software license revenue) experienced increases of 25% and 15% in annuity/maintenance license revenue during the three and nine months ended December 31, 2017, respectively, compared to the same periods of the previous fiscal year, mainly due to increased licensing to existing customers. No perpetual sales were realized in the United States during the three months ended December 31, 2017 and 2016. Year-to-date perpetual license revenue increased slightly as a result of perpetual sales realized in the first half of the current fiscal year.
South America (representing 14% of year-to-date software license revenue) experienced a decrease of 57% and 25% in annuity/maintenance license revenue during the three and nine months ended December 31, 2017, respectively, compared to the same periods of the previous fiscal year. Our revenue in South America can be significantly impacted by the variability of the amounts recorded from a customer and its affiliates for whom revenue is recognized only when cash is received. We received payments from these customers during the nine months ended December 31, 2017 and 2016. To provide a normalized comparison, if we remove this revenue from the three and nine months ended December 31, 2017 and 2016, we note that the annuity/maintenance license revenue in South America increased by 27% and 22%, respectively, instead of decreasing by 57% and 25%. These increases are mainly due to reactivation of maintenance on perpetual licenses.
South American perpetual license revenue was down by 30% for the three and nine months ended December 31, 2017, compared to the same periods of the previous fiscal year, as fewer perpetual sales were realized.
The Eastern Hemisphere (representing 31% of year-to-date software license revenue) experienced a 3% and 1% increase in annuity/maintenance license revenue during the three and nine months ended December 31, 2017, compared to the same periods of the previous fiscal year, mainly due to increased licensing to existing customers in Asia. During the three and nine months ended December 31, 2017, more perpetual license sales were realized in the Eastern Hemisphere, compared to the same periods of the previous fiscal year, resulting in increases of 21% and 32%, respectively.
Deferred Revenue
| Fiscal | Fiscal | Fiscal | |||||||||
| ($ thousands) | 2018 | 2017 | 2016 | $ change | % change | ||||||
| Deferred revenue at: | |||||||||||
| Q1 (June 30) | 31,551 | (2) | 26,154 | 5,397 | 21 | % | |||||
| Q2 (September 30) | 23,686 | (3) | 20,787 | 2,899 | 14 | % | |||||
| Q3 (December 31) | 17,785 | 18,916 | (1,131 | ) | -6 | % | |||||
| Q4 (March 31) | 38,232 | (1) | 33,629 | 4,603 | 14 | % | |||||
| (1) Includes current deferred revenue of $36.3 million and long-term deferred revenue of $1.9 million. | |||||||||||
| (2) Includes current deferred revenue of $30.3 million and long-term deferred revenue of $1.3 million. | |||||||||||
| (3) Includes current deferred revenue of $23.0 million and long-term deferred revenue of $0.6 million. | |||||||||||
CMG’s deferred revenue consists primarily of amounts for pre-sold licenses. Our annuity/maintenance revenue is deferred and recognized on a straight-line basis or according to usage over the life of the related 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.
Deferred revenue as at Q3 of fiscal 2018 decreased by 6% compared to Q3 of fiscal 2017. The decrease is mostly due to the fact that the deferred revenue balance at December 31, 2016 included a number of contracts that were not included in the deferred revenue balance at December 31, 2017, because those contracts were finalized and invoiced subsequent to December 31, 2017, whereas in the previous fiscal year those contracts were finalized and invoiced prior to December 31, 2016. After adjusting for these timing differences, deferred revenue increased in Q3 of fiscal 2018, compared to Q3 of fiscal 2017, mostly due to increased licensing in the United States and the Eastern Hemisphere.
Expenses
| Three months ended December 31, | 2017 | 2016 | $ change | % change | |||||
| ($ thousands) | |||||||||
| Sales, marketing and professional services | 4,771 | 4,947 | (176 | ) | -4 | % | |||
| Research and development | 5,028 | 4,086 | 942 | 23 | % | ||||
| General and administrative | 1,612 | 1,451 | 161 | 11 | % | ||||
| Total operating expenses | 11,411 | 10,484 | 927 | 9 | % | ||||
| Direct employee costs(1) | 8,285 | 8,080 | 205 | 3 | % | ||||
| Other corporate costs | 3,126 | 2,404 | 722 | 30 | % | ||||
| 11,411 | 10,484 | 927 | 9 | % | |||||
| Nine months ended December 31, | 2017 | 2016 | $ change | % change | |||||
| ($ thousands) | |||||||||
| Sales, marketing and professional services | 14,467 | 14,094 | 373 | 3 | % | ||||
| Research and development | 15,200 | 11,836 | 3,364 | 28 | % | ||||
| General and administrative | 5,118 | 4,418 | 700 | 16 | % | ||||
| Total operating expenses | 34,785 | 30,348 | 4,437 | 15 | % | ||||
| Direct employee costs(1) | 25,082 | 24,118 | 964 | 4 | % | ||||
| Other corporate costs | 9,703 | 6,230 | 3,473 | 56 | % | ||||
| 34,785 | 30,348 | 4,437 | 15 | % | |||||
| (1) Includes salaries, bonuses, stock-based compensation, benefits, commissions, and professional development. See “Non-IFRS Financial Measures”. | |||||||||
CMG’s total operating expenses increased by 9% and 15% for the three and nine months ended December 31, 2017, respectively, compared to the same periods of the previous fiscal year, mainly due to an increase in other corporate costs.
Direct Employee Costs
As a technology company, CMG’s largest area of expenditure is its people. Approximately 72% of the total operating expenses for the nine months ended December 31, 2017 related to direct employee costs. Staffing levels in the current fiscal year were lower compared to the previous fiscal year. At December 31, 2017, CMG’s full-time equivalent staff complement was 193 employees and consultants, down from 204 full-time equivalent employees and consultants at December 31, 2016, mainly due to the reduction of the CoFlow development team. Direct employee costs increased by 3% during the three months ended December 31, 2017, compared to the same period of the previous fiscal year, due to CMG recording a larger share of CoFlow salaries in the current period as a result of the new agreement with Shell. The 4% increase in direct employee costs during the nine months ended December 31, 2017 was due to the aforementioned new CoFlow agreement and also due to a large credit recorded in the first quarter of the comparative fiscal year as a result of the difference between the annual bonus accrual for the year ended March 31, 2016 and the actual bonus paid.
Other Corporate Costs
Other corporate costs increased by 30% and 56% during the three and nine months ended December 31, 2017, respectively, compared to the same periods of the previous fiscal year, due to higher office costs and depreciation related to moving into our new headquarters. The nine-month period ended December 31, 2017 includes $0.6 million of non-recurring charges related to the move, which were incurred in the first quarter of the fiscal year.
Outlook
Despite posting decreases of 12% and 3% in annuity/maintenance revenue for the three and nine months ended December 31, 2017, we are very pleased with the growth that we experienced during the quarter. The decreases in the current fiscal year periods were due to higher receipts in the comparative fiscal year periods from South American customers for whom revenue is recognized only when cash is received. If we remove the revenue from these particular customers from the three and nine months ended December 31, 2017 and 2016, we will see that annuity/maintenance revenue increased by 7% and 3%. Double-digit growth in the United States continues to be supported by increased activity in shale plays. After adjusting for the aforementioned payments from our South American customers, the South American region also grew annuity/maintenance revenue at double digits, driven by reinstatement of maintenance contracts on perpetual licenses. The Eastern Hemisphere continues to move at a steady pace while growing annuity and maintenance at single digits. During the current quarter and year to date, the weakening of the US dollar had a negative impact of 1% on our annuity and maintenance license revenue.
Another positive indicator comes from our deferred revenue balance. While the quarterly balance was negatively affected by the timing of the renewal of calendar year end contracts, adjusted for the timing differences, deferred revenue experienced single-digit growth during the quarter, a trend that has continued throughout fiscal 2018.
As we’ve seen the price of oil rise to the US$60-$70 per barrel range for the first time since 2014, for most of the regions we have become more optimistic about our customers starting to increase their spending and reducing their focus on cost cutting, resulting in increased licensing of our products, as well as reinstatement of maintenance contracts on perpetual licenses during the fiscal year. We are hopeful that we will continue to observe positive developments in the oil and gas industry. We will continue to support the reservoir simulation market with the best-in-class technology while continuing to enhance functionality and features to support shale development in the United States, where we have seen the greatest increase in activity, and to support the needs of all our customers across the globe. We will also continue to focus on identifying customers for trial modelling work in CoFlow, our newest simulator which will provide a one-vendor solution for integrated asset modelling by combining both reservoir and production networks.
During the first quarter of fiscal 2018, we moved into our new headquarters in Calgary, which we will lease for the next 20 years. The new building features training facilities for customers and brings together our entire team in one location. We invested just under $16 million into the new building infrastructure over the past four fiscal years. Now that the new headquarters is substantially complete, our capital expenditures are expected to recede to their normal levels of a couple of million dollars a year.
Mainly due to costs associated with the new headquarters, our total operating expenses increased by 15% in the nine months ended December 31, 2017, compared to the same period of the previous fiscal year. The other factor contributing to the increase in operating expenses was the new agreement with our CoFlow partner Shell, under which CMG is responsible for a larger share of CoFlow costs starting January 1, 2017.
We ended the third quarter of 2018 with a strong balance sheet, no debt and $52.8 million in cash. Subsequent to quarter end, CMG’s Board of Directors declared a quarterly dividend of $0.10 per share.
For further detail on the results, please refer to CMG’s Management Discussion and Analysis and Condensed Consolidated Financial Statements, which are available on SEDAR at www.sedar.com or on CMG’s website at www.cmgl.ca.
Forward-looking Information
Certain information included in this press release 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 press release, 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.
Non-IFRS Financial Measures
This press release includes certain measures which have not been prepared in accordance with International Financial Reporting Standards (“IFRS”), such as “EBITDA”, “direct employee costs”, “other corporate costs” and “funds flow from operations”. Since these measures do not have a standard meaning prescribed by IFRS, they are unlikely to be comparable to similar measures presented by other issuers. Management believes that these indicators nevertheless provide useful measures in evaluating the Company’s performance.
“Direct employee costs” include salaries, bonuses, stock-based compensation, benefits, commission expenses, and professional development. “Other corporate costs” include facility-related expenses, corporate reporting, professional services, marketing and promotion, computer expenses, travel, and other office-related expenses. Direct employee costs and other corporate costs should not be considered an alternative to total operating expenses as determined in accordance with IFRS. People-related costs represent the Company’s largest area of expenditure; hence, management considers highlighting separately corporate and people-related costs to be important in evaluating the quantitative impact of cost management of these two major expenditure pools.
“EBITDA” refers to net income before adjusting for depreciation expense, finance income, finance costs, and income and other taxes. EBITDA should not be construed as an alternative to net income as determined by IFRS. The Company believes that EBITDA is useful supplemental information as it provides an indication of the results generated by the Company’s main business activities prior to consideration of how those activities are amortized, financed or taxed.
“Funds flow from operations” is a non-IFRS financial measure that represents net income adjusted for certain non-cash items, such as depreciation expense, stock-based compensation expense, deferred tax expense (recovery) and deferred rent. The Company considers funds flow from operations a useful measure as it represents the cash generated during the period, regardless of the timing of collection of receivables and payment of payables, and demonstrates the Company’s ability to generate the cash flow necessary to fund future growth and dividend payments. Funds flow from operations may not be comparable to similar measures presented by other companies.
For reconciliation of the non-IFRS financial measures used in this press release to the most directly comparable IFRS financial measures, please refer to CMG’s Management Discussion and Analysis, available on SEDAR at www.sedar.com or on CMG’s website at www.cmgl.ca.
Corporate Profile
CMG is a computer software technology company serving the oil and gas industry. The Company is a leading supplier of advanced process reservoir modelling software with a blue chip customer base of international oil companies and technology centers in approximately 60 countries. The Company also provides professional services consisting of highly specialized support, consulting, training, and contract research activities. CMG has sales and technical support services based in Calgary, Houston, London, Dubai, Bogota and Kuala Lumpur. CMG’s Common Shares are listed on the Toronto Stock Exchange and trade under the symbol “CMG”.
Condensed Consolidated Statements of Financial Position
| UNAUDITED (thousands of Canadian $) | December 31, 2017 | March 31, 2017 | ||
| Assets | ||||
| Current assets: | ||||
| Cash | 52,823 | 63,239 | ||
| Trade and other receivables | 9,913 | 25,305 | ||
| Prepaid expenses | 1,507 | 1,236 | ||
| Prepaid income taxes | 999 | 72 | ||
| 65,242 | 89,852 | |||
| Property and equipment | 16,293 | 16,873 | ||
| Deferred tax asset | 500 | – | ||
| Total assets | 82,035 | 106,725 | ||
| Liabilities and shareholders’ equity | ||||
| Current liabilities: | ||||
| Trade payables and accrued liabilities | 5,775 | 9,331 | ||
| Income taxes payable | 76 | 190 | ||
| Deferred revenue | 17,785 | 36,303 | ||
| 23,636 | 45,824 | |||
| Deferred revenue | – | 1,929 | ||
| Deferred rent liability | 1,281 | – | ||
| Deferred tax liability | – | 254 | ||
| Total liabilities | 24,917 | 48,007 | ||
| Shareholders’ equity: | ||||
| Share capital | 79,598 | 71,859 | ||
| Contributed surplus | 11,454 | 11,433 | ||
| Deficit | (33,934 | ) | (24,574 | ) |
| Total shareholders’ equity | 57,118 | 58,718 | ||
| Total liabilities and shareholders’ equity | 82,035 | 106,725 | ||
Condensed Consolidated Statements of Operations and Comprehensive Income
| Three months ended December 31 |
Nine months ended December 31 |
||||||
| UNAUDITED (thousands of Canadian $ except per share amounts) | 2017 | 2016 | 2017 | 2016 | |||
| Revenue | 18,319 | 20,295 | 55,286 | 56,039 | |||
| Operating expenses | |||||||
| Sales, marketing and professional services | 4,771 | 4,947 | 14,467 | 14,094 | |||
| Research and development | 5,028 | 4,086 | 15,200 | 11,836 | |||
| General and administrative | 1,612 | 1,451 | 5,118 | 4,418 | |||
| 11,411 | 10,484 | 34,785 | 30,348 | ||||
| Operating profit | 6,908 | 9,811 | 20,501 | 25,691 | |||
| Finance income | 243 | 365 | 648 | 816 | |||
| Finance costs | – | – | (815 | ) | – | ||
| Profit before income and other taxes | 7,151 | 10,176 | 20,334 | 26,507 | |||
| Income and other taxes | 2,054 | 2,917 | 5,674 | 7,443 | |||
| Net and total comprehensive income | 5,097 | 7,259 | 14,660 | 19,064 | |||
| Earnings Per Share | |||||||
| Basic | 0.06 | 0.09 | 0.18 | 0.24 | |||
| Diluted | 0.06 | 0.09 | 0.18 | 0.24 | |||
Condensed Consolidated Statements of Cash Flows
| Three months ended December 31 |
Nine months ended December 31 |
|||||||||
| UNAUDITED (thousands of Canadian $) | 2017 | 2016 | 2017 | 2016 | ||||||
| Operating activities | ||||||||||
| Net income | 5,097 | 7,259 | 14,660 | 19,064 | ||||||
| Adjustments for: | ||||||||||
| Depreciation | 492 | 270 | 1,436 | 856 | ||||||
| Income and other taxes | 2,054 | 2,917 | 5,674 | 7,443 | ||||||
| Stock-based compensation | 601 | 465 | 1,595 | 1,632 | ||||||
| Interest income | (228 | ) | (136 | ) | (648 | ) | (437 | ) | ||
| Deferred rent | 106 | – | 1,281 | – | ||||||
| 8,122 | 10,775 | 23,998 | 28,558 | |||||||
| Changes in non-cash working capital: | ||||||||||
| Trade and other receivables | 1,500 | (11,295 | ) | 15,382 | 3,902 | |||||
| Trade payables and accrued liabilities | 1,103 | 1,038 | (619 | ) | (1,530 | ) | ||||
| Prepaid expenses | 766 | (216 | ) | (271 | ) | (197 | ) | |||
| Deferred revenue | (5,901 | ) | (1,871 | ) | (20,447 | ) | (14,713 | ) | ||
| Cash provided by (used in) operating activities | 5,590 | (1,569 | ) | 18,043 | 16,020 | |||||
| Interest received | 241 | 142 | 658 | 443 | ||||||
| Income taxes paid | (1,704 | ) | (1,141 | ) | (7,469 | ) | (5,758 | ) | ||
| Net cash provided by (used in) operating activities | 4,127 | (2,568 | ) | 11,232 | 10,705 | |||||
| Financing activities | ||||||||||
| Proceeds from issue of common shares | – | 3 | 6,664 | 3,230 | ||||||
| Dividends paid | (8,022 | ) | (7,930 | ) | (24,020 | ) | (23,755 | ) | ||
| Net cash used in financing activities | (8,022 | ) | (7,927 | ) | (17,356 | ) | (20,525 | ) | ||
| Investing activities | ||||||||||
| Property and equipment additions | (630 | ) | (3,796 | ) | (4,292 | ) | (6,380 | ) | ||
| Decrease in cash | (4,525 | ) | (14,291 | ) | (10,416 | ) | (16,200 | ) | ||
| Cash, beginning of period | 57,348 | 70,771 | 63,239 | 72,680 | ||||||
| Cash, end of period | 52,823 | 56,480 | 52,823 | 56,480 | ||||||
See accompanying notes to condensed consolidated financial statements at www.sedar.com.
| For further information, please contact: | ||||
| Kenneth M. Dedeluk President & CEO (403) 531-1300 [email protected] |
or | Sandra Balic Vice President, Finance & CFO (403) 531-1300 [email protected] |
||
| www.cmgl.ca | ||||