Computer Modelling Group Ltd. (“CMG” or the “Company”) announces
its financial results for the three and nine months ended December
31, 2020.
Quarterly Performance
Fiscal 2019 |
|
|
Fiscal 2020 |
Fiscal 2021 |
($
thousands, unless otherwise stated) |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Annuity/maintenance licenses |
16,734 |
15,756 |
16,373 |
16,612 |
15,233 |
14,523 |
14,144 |
13,477 |
Perpetual licenses |
2,891 |
1,159 |
1,146 |
964 |
1,403 |
- |
1,775 |
660 |
Software licenses |
19,625 |
16,915 |
17,519 |
17,576 |
16,636 |
14,523 |
15,919 |
14,137 |
Professional services |
1,513 |
1,208 |
2,354 |
1,699 |
1,879 |
2,149 |
1,933 |
1,901 |
Total revenue |
21,138 |
18,123 |
19,873 |
19,275 |
18,515 |
16,672 |
17,852 |
16,038 |
Operating profit |
8,750 |
7,068 |
9,343 |
7,538 |
7,802 |
5,711 |
9,861 |
8,437 |
Operating profit (%) |
41 |
39 |
47 |
39 |
42 |
34 |
55 |
53 |
Profit before income and other
taxes |
8,400 |
6,439 |
9,350 |
7,054 |
9,613 |
4,405 |
9,360 |
7,410 |
Income and other taxes |
2,426 |
1,997 |
2,482 |
1,942 |
2,550 |
1,143 |
2,600 |
1,535 |
Net income for the period |
5,974 |
4,442 |
6,868 |
5,112 |
7,063 |
3,262 |
6,760 |
5,875 |
EBITDA(1) |
9,250 |
8,118 |
10,426 |
8,644 |
8,923 |
6,767 |
10,933 |
9,509 |
Cash dividends declared and
paid |
8,023 |
8,022 |
8,026 |
8,025 |
8,024 |
4,013 |
4,013 |
4,015 |
Funds flow from
operations |
7,024 |
6,097 |
7,787 |
7,366 |
7,515 |
4,703 |
7,991 |
7,322 |
Free
cash flow(1) |
6,948 |
5,707 |
7,274 |
6,726 |
6,840 |
4,239 |
7,474 |
7,005 |
Per share amounts -
($/share) |
|
|
|
|
|
|
|
|
Earnings per share (EPS) -
basic and diluted |
0.07 |
0.06 |
0.09 |
0.06 |
0.09 |
0.04 |
0.08 |
0.07 |
Cash dividends declared and
paid |
0.10 |
0.10 |
0.10 |
0.10 |
0.10 |
0.05 |
0.05 |
0.05 |
Funds flow from operations per
share - basic |
0.09 |
0.08 |
0.10 |
0.09 |
0.09 |
0.06 |
0.10 |
0.09 |
Free
cash flow per share - basic(1) |
0.09 |
0.07 |
0.09 |
0.08 |
0.09 |
0.05 |
0.09 |
0.09 |
(1) Non-IFRS financial measures are defined in
the “Non-IFRS Financial Measures” section.
Commentary on Quarterly Performance
For the Three months ended |
For the Nine months ended |
December 31, 2020, and compared to the same period of the previous
fiscal year, when appropriate: |
|
• |
Annuity/maintenance license revenue decreased by 19%, primarily due
to the ongoing disruption to the oil and gas industry caused by the
COVID-19 pandemic, consolidations in the industry and reduced
activity in unconventional shale plays both prior to and during the
COVID-19 pandemic; |
• |
Annuity/maintenance license revenue decreased by 14%, primarily due
to the ongoing disruption to the oil and gas industry caused by the
COVID-19 pandemic, consolidations in the industry and reduced
activity in unconventional shale plays both prior to and during the
COVID-19 pandemic; |
• |
Perpetual revenue, which is
variable in nature, decreased by 32%; |
|
Perpetual revenue decreased by
26%; |
• |
Total revenue decreased by 17%,
with lower software revenue being slightly offset by higher
professional services revenue; |
• |
Total revenue decreased by 12%,
with lower software revenue being slightly offset by higher
professional services revenue; |
• |
Total operating expenses
decreased by 35%, as a result of $1.7 million of CEWS and CERS
benefits and the Company implementing compensation reductions
effective July 1; |
• |
Total operating expenses
decreased by 20%, as a result of $4.2 million of CEWS and CERS
benefits and the Company implementing compensation reductions
effective July 1; |
• |
Quarterly operating profit was up
12% and the operating profit margin of 53% exceeded the comparative
quarter’s figure of 39%, mainly due to the CEWS and CERS benefits
and compensation reductions. Without the CEWS and CERS benefit,
quarterly operating profit was 42%, more in line with our fiscal
2019 and fiscal 2020 historic average of 40%; |
• |
Year-to-date operating profit was
level with the comparative period and the operating profit margin
was 47%. Without the CEWS and CERS benefits, year-to-date operating
profit was 39%, essentially tracking to our fiscal 2019 and fiscal
2020 historic average of 40%; |
• |
Basic EPS of $0.07 was slightly
higher than the comparative period; |
• |
Basic EPS of $0.20 was level with
the comparative period; |
• |
Achieved free cash flow per share
of $0.09; |
• |
Achieved free cash flow per share
of $0.25; |
• |
Declared and paid a dividend of
$0.05 per share. |
• |
Declared and paid dividends of
$0.15 per share. |
CMG’s Response to the COVID-19 Pandemic
The COVID-19 pandemic and the related economic uncertainty
negatively impacted our financial results for the three and nine
months ended December 31, 2020, as some of our customers, faced
with the economic uncertainly and decreasing commodity prices,
curtailed spending and chose not to renew their licensing
agreements or to renew them at reduced levels. These factors
continue to contribute to a decrease in software license revenue
during the three and nine months ended December 31, 2020.
CMG realizes that retaining its employees and continuing to
prioritize product development and customer support is important to
its customers as well as the long-term success of the business.
Accordingly, effective July 1, 2020, CMG took the following
pre-emptive actions to minimize the negative impact that the
COVID-19 pandemic is expected to have on its business, and
liquidity:
- reduced the CEO’s annual salary by
25%;
- reduced directors’ cash compensation
by 20%;
- reduced executive officers’ annual
salaries by 20%;
- implemented graduated salary
reductions to staff.
The reductions to compensation are expected to continue
throughout the fiscal year and will be reassessed following review
of the fiscal 2021 results. The staff, executive and CEO’s base
salary concessions were reallocated to variable cash compensation
which is associated with fiscal 2021 corporate performance.
As a result of the decline in revenue, CMG became eligible for
the CEWS and CERS programs and, during the three and nine months
ended December 31, 2020, recorded a CEWS benefit of $1.6 million
and $4.1 million, respectively, and a CERS benefit of $0.1 million
and $0.1 million, respectively.
To further preserve liquidity and maintain balance sheet
strength, CMG’s Board reduced the quarterly dividend from $0.10 per
share to $0.05 per share, starting June 15, 2020. On February 8,
2021, CMG’s Board approved a quarterly dividend of $0.05 per share
on CMG’s Common Shares, payable on March 15, 2020 to shareholders
of record at the close of business on March 5, 2020.
We implemented these measures to protect CMG’s profitability and
optimize free cash flow generation to maintain the strength of our
balance sheet, in all potential scenarios. These measures also
allow for maximum flexibility in our capital allocation decisions,
including delivering a sustainable dividend. At the same time, it
is our intention to continue to invest in research and development,
and sales and marketing efforts. Since the start of the pandemic,
we have been operating almost entirely remotely, and our research
and development activities and technical support for our customers
have continued uninterrupted.
CMG will continue to monitor the impact of the current
environment on its customers, operations and financial performance
and may make further adjustments as appropriate.
Revenue
Three months ended December 31, |
2020 |
2019 |
$ change |
% change |
($
thousands) |
|
|
|
|
|
|
|
|
|
Software license revenue |
14,137 |
17,576 |
(3,439) |
-20% |
Professional services |
1,901 |
1,699 |
202 |
12% |
Total revenue |
16,038 |
19,275 |
(3,237) |
-17% |
|
|
|
|
|
Software license revenue as a
% of total revenue |
88% |
91% |
|
|
Professional services as a % of total revenue |
12% |
9% |
|
|
Nine months ended December 31, |
2020 |
2019 |
$ change |
% change |
($
thousands) |
|
|
|
|
|
|
|
|
|
Software license revenue |
44,579 |
52,010 |
(7,431) |
-14% |
Professional services |
5,983 |
5,261 |
722 |
14% |
Total revenue |
50,562 |
57,271 |
(6,709) |
-12% |
|
|
|
|
|
Software license revenue as a
% of total revenue |
88% |
91% |
|
|
Professional services as a % of total revenue |
12% |
9% |
|
|
Total revenue for the three and nine months ended December 31,
2020 decreased by 17% and 12%, respectively, due to a decrease in
software license revenue, partially offset by an increase in
professional services revenue.
Software License Revenue
Three months ended December 31, |
2020 |
2019 |
$ change |
% change |
($
thousands) |
|
|
|
|
|
|
|
|
|
Annuity/maintenance license
revenue |
13,477 |
16,612 |
(3,135) |
-19% |
Perpetual license revenue |
660 |
964 |
(304) |
-32% |
Total software license revenue |
14,137 |
17,576 |
(3,439) |
-20% |
|
|
|
|
|
Annuity/maintenance as a % of
total software license revenue |
95% |
95% |
|
|
Perpetual as a % of total software license revenue |
5% |
5% |
|
|
Nine months ended December 31, |
2020 |
2019 |
$ change |
% change |
($
thousands) |
|
|
|
|
|
|
|
|
|
Annuity/maintenance license
revenue |
42,144 |
48,741 |
(6,597) |
-14% |
Perpetual license revenue |
2,435 |
3,269 |
(834) |
-26% |
Total software license revenue |
44,579 |
52,010 |
(7,431) |
-14% |
|
|
|
|
|
Annuity/maintenance as a % of
total software license revenue |
95% |
94% |
|
|
Perpetual as a % of total software license revenue |
5% |
6% |
|
|
During the three-month period, CMG’s annuity/maintenance license
revenue decreased by 19%, compared to the same period of the
previous fiscal year. Canada, the US and South America contributed
to the decrease, while the Eastern Hemisphere stayed essentially
level. The decreases in Canada, the US and South America were due
to decreased licensing, some of which was triggered by the COVID-19
pandemic and the resulting economic uncertainty, as well as
consolidation activity in the oil and gas industry and reduced
activity levels in unconventional shale plays.
During the nine-month period, CMG’s annuity/maintenance license
revenue decreased by 14%, compared to the same period of the
previous fiscal year. Canada, the US and South America contributed
to the decrease, while the Eastern Hemisphere increased by 4%, due
to the addition of a multi-year contract and increased licensing by
existing customers.
Perpetual license revenue decreased by 32% and 26% during the
three and nine months ended December 31, 2020, compared to the same
periods of the previous fiscal year. Low commodity prices and
resulting lower cash flows in the oil and gas industry reduced our
customers’ ability to purchase perpetual licenses in the near
term.
Software Revenue by Geographic Region
Three months ended December 31, |
2020 |
2019 |
$ change |
% change |
($
thousands) |
|
|
|
|
Annuity/maintenance license revenue |
|
|
|
|
Canada |
3,097 |
3,950 |
(853) |
-22% |
United States |
3,649 |
5,147 |
(1,498) |
-29% |
South America |
1,320 |
2,015 |
(695) |
-34% |
Eastern Hemisphere(1) |
5,411 |
5,500 |
(89) |
-2% |
|
13,477 |
16,612 |
(3,135) |
-19% |
Perpetual license
revenue |
|
|
|
|
Canada |
- |
- |
- |
0% |
United States |
- |
- |
- |
0% |
South America |
41 |
511 |
(470) |
-92% |
Eastern Hemisphere |
619 |
453 |
166 |
37% |
|
660 |
964 |
(304) |
-32% |
Total software license
revenue |
|
|
|
|
Canada |
3,097 |
3,950 |
(853) |
-22% |
United States |
3,649 |
5,147 |
(1,498) |
-29% |
South America |
1,361 |
2,526 |
(1,165) |
-46% |
Eastern Hemisphere |
6,030 |
5,953 |
77 |
1% |
|
14,137 |
17,576 |
(3,439) |
-20% |
Nine months ended December 31, |
2020 |
2019 |
$ change |
% change |
($
thousands) |
|
|
|
|
Annuity/maintenance license revenue |
|
|
|
|
Canada |
9,452 |
11,653 |
(2,201) |
-19% |
United States |
11,533 |
15,131 |
(3,598) |
-24% |
South America |
4,412 |
5,931 |
(1,519) |
-26% |
Eastern Hemisphere(1) |
16,747 |
16,026 |
721 |
4% |
|
42,144 |
48,741 |
(6,597) |
-14% |
Perpetual license
revenue |
|
|
|
|
Canada |
- |
- |
- |
0% |
United States |
- |
298 |
(298) |
-100% |
South America |
1,020 |
1,280 |
(260) |
-20% |
Eastern Hemisphere |
1,415 |
1,691 |
(276) |
-16% |
|
2,435 |
3,269 |
(834) |
-26% |
Total software license
revenue |
|
|
|
|
Canada |
9,452 |
11,653 |
(2,201) |
-19% |
United States |
11,533 |
15,429 |
(3,896) |
-25% |
South America |
5,432 |
7,211 |
(1,779) |
-25% |
Eastern Hemisphere |
18,162 |
17,717 |
445 |
3% |
|
44,579 |
52,010 |
(7,431) |
-14% |
(1) Includes Europe, Africa, Asia and
Australia.
During the three and nine months ended December 31, 2020, total
software license revenue decreased in all geographic regions except
for the Eastern Hemisphere.
The Canadian region (representing 21% of year-to-date software
license revenue) experienced decreases of 22% and 19% in
annuity/maintenance license revenue during the three and nine
months ended December 31, 2020, compared to the same periods of the
previous fiscal year, due to decreases in licensing by existing
customers, partially caused by consolidation activity in the
industry.
The United States (representing 26% of year-to-date software
license revenue) experienced decreases of 29% and 24% in
annuity/maintenance license revenue during the three and nine
months ended December 31, 2020, compared to the same periods of the
previous fiscal year. The decreases were a result of decreased
licensing by some customers, precipitated by consolidation in the
industry and reduced activity levels in unconventional shale plays
both before and during the COVID-19 pandemic.
South America (representing 12% of year-to-date software license
revenue) experienced decreases of 34% and 26% in
annuity/maintenance license revenue during the three and nine
months ended December 31, 2020, mainly due to the negative impact
of the COVID-19 pandemic and the resulting economic uncertainty on
the renewal of some of our maintenance contracts. Perpetual sales
during the three and nine months ended December 31, 2020 were lower
than in the comparative periods.
The Eastern Hemisphere (representing 41% of year-to-date
software license revenue) experienced a slight decrease of 2% in
annuity/maintenance license revenue during the three months ended
December 31, 2020, compared to the same period of the previous
fiscal year, as decreased licensing by some customers was nearly
offset by increased licensing by others, including a new multi-year
annuity contract that commenced at the end of the previous fiscal
year. During the nine months ended December 31, 2020,
annuity/maintenance license revenue increased by 4%, due to
increased licensing from existing customers and the afore-mentioned
multi-year contract, partially offset by reduced licensing by some
customers. Perpetual sales were up by 37% during the three months
and down by 16% during the nine months ended December 31, 2020,
compared to the same periods of the previous fiscal year.
Deferred Revenue
($ thousands) |
Fiscal 2021 |
Fiscal 2020 |
Fiscal 2019 |
$ change |
% change |
Deferred revenue at: |
|
|
|
|
|
Q1 (June 30) |
25,492 |
29,266 |
|
(3,774) |
-13% |
Q2 (September 30) |
19,549 |
23,849 |
|
(4,300) |
-18% |
Q3 (December 31) |
15,347 |
15,679 |
|
(332) |
-2% |
Q4
(March 31) |
|
33,838 |
35,015 |
(1,177) |
-3% |
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 Q3 of fiscal 2021
decreased by 2% when compared to Q3 of fiscal 2020 and was
positively affected by early renewals.
Expenses
Three months ended December 31, |
2020 |
2019 |
$ change |
% change |
($
thousands) |
|
|
|
|
|
|
|
|
|
Sales, marketing and professional services |
3,335 |
4,744 |
(1,409) |
-30% |
Research and development |
3,092 |
5,171 |
(2,079) |
-40% |
General and administrative |
1,174 |
1,822 |
(648) |
-36% |
Total operating expenses |
7,601 |
11,737 |
(4,136) |
-35% |
|
|
|
|
|
Direct employee costs(1) |
5,590 |
9,202 |
(3,612) |
-39% |
Other
corporate costs |
2,011 |
2,535 |
(524) |
-21% |
|
7,601 |
11,737 |
(4,136) |
-35% |
Nine months ended December 31, |
2020 |
2019 |
$ change |
% change |
($
thousands) |
|
|
|
|
|
|
|
|
|
Sales, marketing and professional services |
11,209 |
13,728 |
(2,519) |
-18% |
Research and development |
11,158 |
14,461 |
(3,303) |
-23% |
General and administrative |
4,186 |
5,133 |
(947) |
-18% |
Total operating expenses |
26,553 |
33,322 |
(6,769) |
-20% |
|
|
|
|
|
Direct employee costs(1) |
20,257 |
25,752 |
(5,495) |
-21% |
Other
corporate costs |
6,296 |
7,570 |
(1,274) |
-17% |
|
26,553 |
33,322 |
(6,769) |
-20% |
(1) Includes salaries, bonuses, stock-based
compensation, benefits, commissions, and professional development.
See “Non-IFRS Financial Measures”.
Direct employee costs for the three and nine months ended
December 31, 2020 decreased by 39% and 21%, respectively, compared
to the same periods of the previous fiscal year. The decrease was
due to the CEWS benefit and salary reductions that were announced
in our March 31, 2020 MD&A and implemented effective July 1,
2020. As a result of the decline in revenue, CMG became eligible
for the CEWS program and recorded a CEWS benefit of $1.6 million
and $4.1 million during the three and nine months ended December
31, 2020.
This decrease was partially offset by an increase in direct
employee costs due to higher staffing levels in the current fiscal
year to date, compared to the previous fiscal year to date. At
December 31, 2020, CMG’s full-time equivalent staff complement was
197 employees and consultants, up from 193 full-time equivalent
employees and consultants at December 31, 2019, the majority of the
increase being due to the commitment under the CoFlow
agreement.
Other corporate costs for the three and nine months ended
December 31, 2020 decreased by 21% and 17%, respectively, compared
to the same periods of the previous fiscal year, due to lower
travel, marketing and office costs as a result of COVID-19
restrictions and the $0.1 million CERS benefit. These decreases
were partially offset by lower SR&ED credits, as explained in
the next section.
Outlook
Through the COVID-19 pandemic and economic crises, we continue
our research and development activities and continue providing
technical support to our customers globally. We have seen increased
support requests, training activity and commercial customers
running “Energy Transition” models related to CO2 enhanced
recovery, carbon sequestration and geothermal projects.
Our third quarter and year-to-date annuity/maintenance license
revenue decreased by 19% and 14%, respectively, compared to the
same periods of the previous fiscal year. The COVID-19 pandemic and
the related economic uncertainty were partially responsible for the
decrease, as were low commodity prices that constrained our
customers' spending. The remaining decrease was due to pre-COVID
licensing cuts by some of our customers, as discussed in the fourth
quarter MD&A for the previous fiscal year.
While annuity/maintenance revenue from the Eastern Hemisphere
essentially remained consistent on a quarterly basis and modestly
increased on a year-to-date basis, annuity/maintenance revenue from
Canada, the US and South America decreased on both a quarterly and
year-to-date basis. On a year-to-date basis, the Eastern Hemisphere
increased by 4%, due primarily to the addition of a multi-year
annuity contract that started at the end of the previous fiscal
year. Revenue from Canada decreased by 22% and 19% for the quarter
and year to date, respectively, as consolidation activity in the
oil and gas industry translated into lower licensing needs by the
new, merged entities. The 29% and 24% decreases in US revenue for
the quarter and year to date, respectively, were caused by a
combination of consolidation in the industry and the slowdown of US
shale production. The 34% and 26% decreases in South America
revenue, for the quarter and year to date, respectively, were
primarily due to the negative impacts of COVID-19 and the related
economic uncertainty affecting the oil and gas industry.
Looking at perpetual revenue, we generated $0.7 million in
perpetual sales in South America and the Eastern Hemisphere during
the quarter and $2.4 million year to date. We are pleased to have
realized 75% of last year’s perpetual revenue over the same period.
One significant perpetual sale during this fiscal year was to a
customer in South East Asia, who chose CMG’s software for enhanced
oil recovery and improving their long-term production declines,
which validates our belief that companies will need CMG’s
technology, even more so, as they engage in complex recovery
processes to mitigate their declining production.
Total operating expenses were 35% and 20% lower than in the
comparative quarter and year-to-date period, respectively, due to
the CEWS and CERS benefits and cost containment measures. CMG
recorded CEWS and CERS benefits of $1.7 million during the quarter
and $4.2 million during the year to date.
Our cost containment measures, which came into effect on July 1,
2020, included reducing the CEO’s annual salary and executives’
annual salary by 25% and 20%, respectively, reducing directors’
cash compensation by 20% and implementing graduated staff salary
reductions. These measures will be reassessed following review of
the fiscal 2021 results and adjusted as appropriate.
The reduction in operating expenses resulted in an operating
profit of 53% for the quarter and 47% for the year to date. If we
exclude the CEWS and CERS benefits from operating expenses,
operating profit was 42% for the quarter and 40% for the year to
date, more in line with our fiscal 2019 and fiscal 2020 quarterly
average of 40%.
Recent progress in the development and distribution of the
COVID-19 vaccine provides a reason for cautious optimism. While we
are not in a position to predict the future, we are focusing on
matters within our control: maintaining liquidity and protecting
our bottom line by adjusting our cost structure. We are working
closely with our customers to address their needs while
acknowledging their ongoing challenges. Our business has remained
comparatively resilient through the pandemic, as even though our
customers are experiencing financial pressures, they recognize that
they need CMG’s technology. We believe that the value of our
reservoir simulation software is even greater during times of
market uncertainty, as companies strive to optimize their
production and improve operating margins.
We closed the quarter with $39.2 million of cash and no debt. We
realized free cash flow per share of $0.09 during the quarter and
on February 8, 2021, the Board declared a dividend of $0.05 per
share.
For further details on the results, please refer to CMG's
Management Discussion and Analysis and Consolidated Financial
Statements, which are available on SEDAR at www.sedar.com or on
CMG's website at www.cmgl.ca .
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 press release – namely,
direct employee costs, other corporate costs, EBITDA and free cash
flow – 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.
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. See “Expenses”
heading for a reconciliation of direct employee costs and other
corporate costs to total operating expenses.
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.
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. Management uses free cash flow
to help measure the capacity of the Company to pay dividends and
invest in business growth opportunities.
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.
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 (“TSX”) and trade under the symbol
“CMG”.
Condensed Consolidated Statements of Financial Position
UNAUDITED (thousands of Canadian $) |
December 31, 2020 |
|
March 31, 2020 |
|
|
|
|
Assets |
|
|
Current assets: |
|
|
Cash |
39,176 |
|
40,505 |
|
Trade and other receivables |
15,420 |
|
26,277 |
|
Prepaid expenses |
983 |
|
913 |
|
Prepaid income taxes |
42 |
|
771 |
|
|
55,621 |
|
68,466 |
|
Property and equipment |
12,459 |
|
13,507 |
|
Right-of-use assets |
36,106 |
|
37,901 |
|
Deferred tax asset |
1,546 |
|
992 |
|
Total assets |
105,732 |
|
120,866 |
|
|
|
|
Liabilities and
shareholders’ equity |
|
|
Current liabilities: |
|
|
Trade payables and accrued liabilities |
5,596 |
|
6,224 |
|
Income taxes payable |
400 |
|
60 |
|
Deferred revenue |
15,347 |
|
33,838 |
|
Lease liability |
1,345 |
|
1,313 |
|
|
22,688 |
|
41,435 |
|
Lease
liability |
40,088 |
|
41,062 |
|
Total liabilities |
62,776 |
|
82,497 |
|
|
|
|
Shareholders’ equity: |
|
|
Share capital |
80,051 |
|
79,851 |
|
Contributed surplus |
14,064 |
|
13,533 |
|
Deficit |
(51,159 |
) |
(55,015 |
) |
Total shareholders' equity |
42,956 |
|
38,369 |
|
Total liabilities and shareholders' equity |
105,732 |
|
120,866 |
|
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) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
Revenue |
16,038 |
|
19,275 |
|
50,562 |
|
57,271 |
|
|
|
|
|
|
Operating
expenses |
|
|
|
|
Sales, marketing and professional services |
3,335 |
|
4,744 |
|
11,209 |
|
13,728 |
|
Research and development |
3,092 |
|
5,171 |
|
11,158 |
|
14,461 |
|
General and administrative |
1,174 |
|
1,822 |
|
4,186 |
|
5,133 |
|
|
7,601 |
|
11,737 |
|
26,553 |
|
33,322 |
|
Operating
profit |
8,437 |
|
7,538 |
|
24,009 |
|
23,949 |
|
|
|
|
|
|
Finance income |
92 |
|
278 |
|
288 |
|
922 |
|
Finance costs |
(1,119 |
) |
(762 |
) |
(3,122 |
) |
(2,028 |
) |
Profit before income and other taxes |
7,410 |
|
7,054 |
|
21,175 |
|
22,843 |
|
Income
and other taxes |
1,535 |
|
1,942 |
|
5,278 |
|
6,421 |
|
|
|
|
|
|
Net and total comprehensive income |
5,875 |
|
5,112 |
|
15,897 |
|
16,422 |
|
|
|
|
|
|
Earnings per
share |
|
|
|
|
Basic
and diluted |
0.07 |
|
0.06 |
|
0.20 |
|
0.20 |
|
Condensed Consolidated Statements of Cash Flows
|
Three months ended December 31 |
|
Nine months ended December 31 |
|
UNAUDITED (thousands of Canadian $) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
Operating
activities |
|
|
|
|
Net income |
5,875 |
|
5,112 |
|
15,897 |
|
16,422 |
|
Adjustments for: |
|
|
|
|
Depreciation |
1,072 |
|
1,106 |
|
3,200 |
|
3,239 |
|
Deferred income tax recovery |
(120 |
) |
(246 |
) |
(554 |
) |
(348 |
) |
Stock-based compensation |
495 |
|
1,394 |
|
1,473 |
|
1,937 |
|
Funds flow from operations |
7,322 |
|
7,366 |
|
20,016 |
|
21,250 |
|
Movement in non-cash working
capital: |
|
|
|
|
Trade and other receivables |
(4,345 |
) |
(1,419 |
) |
10,857 |
|
7,448 |
|
Trade payables and accrued liabilities |
676 |
|
325 |
|
(1,371 |
) |
(1,414 |
) |
Prepaid expenses |
98 |
|
301 |
|
(70 |
) |
211 |
|
Income taxes payable |
(23 |
) |
(15 |
) |
1,069 |
|
(60 |
) |
Deferred revenue |
(4,202 |
) |
(8,170 |
) |
(18,491 |
) |
(19,336 |
) |
Increase in non-cash working
capital |
(7,796 |
) |
(8,978 |
) |
(8,006 |
) |
(13,151 |
) |
Net cash (used in) provided by operating
activities |
(474 |
) |
(1,612 |
) |
12,010 |
|
8,099 |
|
|
|
|
|
|
Financing
activities |
|
|
|
|
Repayment of lease
liability |
(310 |
) |
(289 |
) |
(942 |
) |
(849 |
) |
Dividends paid |
(4,015 |
) |
(8,025 |
) |
(12,041 |
) |
(24,073 |
) |
Net cash used in financing activities |
(4,325 |
) |
(8,314 |
) |
(12,983 |
) |
(24,922 |
) |
|
|
|
|
|
Investing
activities |
|
|
|
|
Property and equipment
additions |
(7 |
) |
(351 |
) |
(356 |
) |
(694 |
) |
Decrease in cash |
(4,806 |
) |
(10,277 |
) |
(1,329 |
) |
(17,517 |
) |
Cash,
beginning of period |
43,982 |
|
47,050 |
|
40,505 |
|
54,290 |
|
Cash, end of period |
39,176 |
|
36,773 |
|
39,176 |
|
36,773 |
|
|
|
|
|
|
Supplementary cash
flow information |
|
|
|
|
Interest received |
91 |
|
277 |
|
289 |
|
931 |
|
Interest paid |
517 |
|
532 |
|
1,563 |
|
1,600 |
|
Income
taxes paid |
722 |
|
1,663 |
|
4,200 |
|
5,723 |
|
See accompanying notes to condensed consolidated interim
financial statements, which are available on SEDAR at www.sedar.com
or on CMG's website at www.cmgl.ca.
For further information, contact:
Ryan N. SchneiderPresident & CEO(403)
531-1300ryan.schneider@cmgl.cawww.cmgl.ca |
or |
Kelly A. TomynInterim Vice President, Finance & CFO(403)
531-1300kelly.tomyn@cmgl.ca |
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