Computer Modelling Group (CMG) Q1 2027 earnings summary

Executive summary

• Strategy focuses on organic growth and acquisitions, leveraging a strong foundation in reservoir simulation software and expanding through complementary technology acquisitions.

• Total revenue for FY 2026 reached $126.2M, with 73% from recurring revenue, and Q1 2027 revenue was $27.8M, down 6% year-over-year due to a 16% organic decline partially offset by 10% growth from acquisitions.

• The company has completed four acquisitions totaling over $90M in the past 34 months, expanding its portfolio and scale.

• The board expanded its share buyback program, including a substantial issuer bid (SIB) to repurchase up to $20M in shares, signaling management's confidence.

• Business outlook is for stabilization, with renewed customer interest in enhanced oil recovery (EOR) and high-fidelity seismic interpretation.

Financial highlights

• Q1 2027 revenue was $27.8M, down 6% year-over-year; recurring revenue was $20.3M, down 3% year-over-year, with a 12% organic decline and 9% growth from acquisitions.

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

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

• Free cash flow for Q1 2027 was $3.5M, with a per-share value of $0.04, down 22% year-over-year.

• Recurring revenue as a percentage of total revenue was 73% in FY26, trending toward an 80% target as acquisitions mature.

Outlook and guidance

• Organic recurring revenue is expected to increase sequentially in Q2, with full-year guidance reaffirmed for stable organic recurring revenue and no reduction in adjusted EBITDA versus fiscal 2026.

• Professional services revenue for the year is expected to decline to $6–7M, trending to the higher end due to faster wind-down of non-core services.

• Free cash flow for the year anticipated to be sufficient to de-leverage the SIB-related credit facility draw.

• Adjusted EBITDA and margin anticipated to decline sequentially in Q2 due to lower professional services and higher sales/marketing expenses.

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