Computer Modelling Group (CMDX.F) FY Conference Transcript

Summary of Computer Modelling Group (CMDX.F) FY Conference Call Company Overview - Company: Computer Modelling Group (CMG) - Industry: Oil and Gas Simulation Technology - Founded: 1978 as a nonprofit research foundation at the University of Calgary - Public Listing: 1997 on TSX, raised $11 million at that time - Current Workforce: Approximately 350 employees across 10 global locations - Customer Base: Serves the oil and gas industry in 60 countries, with 9 out of 10 supermajors as clients [8][10] Core Business and Financial Performance - Core Business: Reservoir Simulation, which has been the foundation for CMG's growth for 47 years - Revenue Growth: Total revenue increased from $66 million three years ago to current levels, effectively doubling [11] - Recurring Revenue: Represents 67% of total revenue, with an adjusted EBITDA margin consistently above 40% [11] - EBITDA: Achieved $44 million last year with a 34% margin across the group [11] - Acquisition Strategy: Since 2022, CMG has deployed $73 million in capital for acquisitions, generating $50 million in revenue from these businesses [13] Strategic Initiatives - Four Point Zero Strategy: Focuses on growth, profitability, and acquisitions, with a strong emphasis on the core Reservoir Simulation business [12] - Acquisition Framework: Aims to deploy 100% of available capital at high rates of return, with a focus on enhancing core business capabilities [14] - Recent Acquisitions: Includes GluWare, Sharp Reflection, and Sizware, which are part of a broader platform strategy to integrate seismic solutions [16] Market Dynamics and Challenges - Industry Complexity: The oil and gas sector is characterized by high complexity and significant data requirements, necessitating advanced simulation technologies [4][5] - Transition to Software: CMG is shifting from service-based revenue to software-based revenue, which is expected to improve margins [36][40] - Competitive Landscape: Notable pricing behavior from competitors has been observed, indicating potential market volatility [50] Future Outlook - Expansion Plans: CMG aims to expand into midstream and downstream sectors, as well as adjacent verticals like mining and utilities [18][19] - M&A Pipeline: The company has a robust M&A pipeline and is actively seeking opportunities to enhance its market position [33] - Dividend Strategy: Recently cut dividends by 80% to allocate more capital for acquisitions, reflecting a strategic shift towards growth [32][36] Key Takeaways - Mission-Critical Technology: CMG's products are essential for the oil and gas industry, providing a strong competitive moat [34] - High Customer Engagement: The company emphasizes a high-touch customer success model, which is critical for software adoption and retention [29] - Long-Term Vision: CMG is focused on building a sustainable business model that leverages its scientific expertise to solve complex industry problems [19][34]