Computer Modelling Group (CMG) Q1 2027 earnings summary

Executive summary

• Strategy centers on organic growth and acquisitions, leveraging a strong foundation in reservoir simulation software and expanding through complementary technology acquisitions, with a 47-year track record and high barriers to entry.

• Four major acquisitions totaling over $90M in the past 34 months have expanded the portfolio, with integration efforts driving cross-selling and portfolio synergies.

• Business outlook is for stabilization, focusing on growing recurring revenue and free cash flow, with management confident in underlying value as shown by an expanded share buyback program.

• Capital deployment prioritizes high risk-adjusted return opportunities, including a substantial issuer bid (SIB) funded by up to $20 million from the credit facility.

• AI initiatives are advancing, with new product releases and productivity gains in R&D.

Financial highlights

• Q1 2027 revenue was $27.8 million, down 6% year-over-year, with a 16% organic decline partially offset by 10% growth from acquisitions; recurring revenue was $20.3 million, down 3% year-over-year.

• Adjusted EBITDA for Q1 2027 was $6.4 million (23% margin), down 10% year-over-year; net income was $1.3 million, down 60% year-over-year.

• Free cash flow for Q1 2027 was $3.5 million, with per share FCF at $0.04, down 22% year-over-year.

• Professional services revenue dropped 16% to $7.1 million, with a 29% organic decline partially offset by 13% growth from acquisitions.

• FY 2026 total revenue was $126.2 million, with 73% recurring revenue and $21.0 million in free cash flow.

Outlook and guidance

• Organic recurring revenue is expected to increase sequentially in Q2, with recurring revenue building through the year and Q4 typically the strongest.

• Professional services revenue projected to decline further in Q2, representing the lowest quarter of the year, and full-year decline forecasted at $6–7 million from fiscal 2026.

• Full-year guidance reaffirmed for stable organic recurring revenue growth and no reduction in adjusted EBITDA versus fiscal 2026, with improved free cash flow.

• Management anticipates stabilization of adjusted EBITDA and free cash flow as integration progresses.

• Organic recurring revenue growth is expected to return in FY27 as recent acquisitions integrate and mature.