Computer Modelling Group TSE: CMG said first-quarter fiscal 2027 revenue declined as growth from recent acquisitions was outweighed by lower organic revenue and a planned reduction in non-core professional services work, while management reaffirmed its full-year outlook for stable organic recurring revenue and no reduction in adjusted EBITDA from fiscal 2026.
Total revenue for the quarter was C$27.8 million, down year over year. Chief Financial Officer Vipin Khullar said 10% growth from acquisitions was offset by a 16% organic decline. Organic recurring revenue fell 12% during the quarter, which Chief Executive Officer Pramod Jain said marked the final period affected by the comparison with a contract lost last year.
“Our outlook is for stabilization to return to the business,” Jain said, adding that the company remains focused on organic growth, acquisitions and capital deployment toward what it considers the highest risk-adjusted-return opportunities.
Acquisition Growth Offsets Part of Organic Decline
Recurring revenue declined 3% overall in the first quarter. Khullar said acquired businesses contributed 9% recurring revenue growth, including SeisWare and Rose, which were acquired during fiscal 2026. Both acquisitions contributed positively to adjusted EBITDA in the quarter despite seasonal revenue recognition that is weighted toward the second half of the year, he said.
Professional services revenue also declined organically. Khullar attributed the drop primarily to the end of CoFlow-related development funding at the close of calendar 2025 and the continuing wind-down of non-core professional services activity at Bluware. He said CMG had underwritten the Bluware acquisition based on its software growth potential and expected non-core services to be phased out.
Rose partly offset that reduction, with acquired professional services revenue rising 13% and Rose producing a strong first full quarter under CMG ownership, according to Khullar.
Adjusted EBITDA and adjusted EBITDA margin decreased in the quarter because of lower organic recurring revenue and professional services revenue, though the company cited continued cost management. Free cash flow fell to C$3.5 million, reflecting revenue trends and higher income taxes.
Current income tax expense was C$1.5 million, compared with C$900,000 a year earlier. Khullar said the current-quarter amount included a C$400,000 prior-period adjustment and noted that tax expense can fluctuate depending on the jurisdictional mix of income, taxation of cross-border transactions and foreign exchange movements.
Management Reaffirms Full-Year Outlook
For the second quarter, CMG expects organic recurring revenue to increase sequentially as a larger portion of renewals occurs in the period. Khullar said the company’s recurring revenue typically builds through the fiscal year, with the first quarter usually its lightest and the fourth quarter generally its heaviest.
However, CMG expects professional services revenue to decline both sequentially and year over year in the second quarter. The company expects the period to be the fiscal year’s lowest quarter for professional services, citing the completion of the Bluware services wind-down, product timing and lower billable activity during summer months.
CMG also expects adjusted EBITDA to decline sequentially and year over year in the second quarter, driven by lower professional services revenue and higher sales and marketing expenses tied to agent commissions on second-quarter contract renewals.
- Stable organic recurring revenue growth for fiscal 2027.
- No reduction in adjusted EBITDA relative to fiscal 2026.
- Year-over-year improvement in free cash flow.
- A professional services revenue decline of C$6 million to C$7 million for the year, toward the higher end of the range.
Khullar said the revised professional-services outlook reflects a faster-than-forecast wind-down of Bluware’s non-core services operations.
Energy Security and EOR Opportunities
Jain said customer discussions point to greater interest in maximizing recovery from existing assets, including through enhanced oil recovery, or EOR, technologies. He said operators are targeting recovery factors as high as 50% and that CMG is directing sales efforts toward the growing importance of EOR globally.
Management also cited increased opportunities for its portfolio approach, in which customers can use multiple technologies from CMG’s acquired businesses alongside its reservoir simulation products. Jain said CMG is increasingly pursuing joint proposals involving two or three companies in its group.
He highlighted renewed interest from international operators in Venezuela, Mexico, Algeria, Angola, Nigeria and Libya, describing those locations as markets with complex reservoirs, heavy oil and mature fields. Jain cautioned that it remains early but said the company sees opportunities developing across the group.
During the question-and-answer session, Jain said EOR processes can take time to move from requests for proposals to commercial wins, but he is seeing more opportunities nearer to commercialization than in the past. He also said CMG renewed all of its contracts in the Middle East, though prospective business in countries where it did not previously have a presence was delayed by regional conflict.
Share Repurchase to Be Funded Through Credit Facility
CMG announced a substantial issuer bid and expects to draw up to C$20 million from its existing credit facility to fund it. Jain said the company believes its shares are trading below what the business is worth and views the repurchase as an opportunistic use of capital while maintaining its acquisition strategy.
Over the past two-and-a-half years, CMG has deployed more than C$90 million and completed four major acquisitions. Jain said the acquisition pipeline remains active, but the company is maintaining its standards on price and expected returns.
Khullar said expected fiscal 2027 free cash flow should be more than sufficient to deleverage the portion of the credit facility used to fund the issuer bid. Jain said acquisitions and buybacks are not mutually exclusive, and that CMG intends to continue pursuing transactions that meet or exceed its return thresholds.
About Computer Modelling Group (TSE:CMG)
Computer Modelling Group Ltd is a Canada-based provider of reservoir simulation software for the oil and gas industry. Its capabilities include integrated analysis and optimization, black oil and unconventional simulation, reservoir and production system modelling, post-processor visualization, compositional simulation, thermal processes simulation, and fluid property characterization. The firm has operations in over 60 countries in the Americas, Europe, Middle East, Africa, and Asia-Pacific regions.
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