Computer Modelling Group Ltd.

Total revenue was $27.8 million, down year over year, as 10% growth from acquisitions was offset by a 16% organic decline. Recurring revenue fell 3% in the quarter, and organic recurring revenue declined 12%. Free cash flow was $3.5 million, and current income tax expense was $1.5 million versus $900,000 a year ago, including a $400,000 prior-period adjustment. For Q2, management expects organic recurring revenue to increase sequentially; professional services revenue to decline sequentially and year over year, with Q2 the lowest quarter for that line; and adjusted EBITDA to decline sequentially and year over year. For fiscal 2027, the company reaffirmed stable organic recurring revenue, no reduction in adjusted EBITDA relative to fiscal 2026, and free cash flow improvement year over year. Professional services decline is now expected to be $6 million to $7 million for the year, toward the higher end of prior expectations.

Pramod Jain framed CMG as a broader technology company than it was three years ago, now combining its core reservoir simulation franchise with four acquisitions completed in just over 2.5 years and over $90 million of deployed capital. He stressed that the strategy has not changed: grow organically and through acquisitions, use capital for the highest risk-adjusted returns, and stabilize organic recurring revenue after several weak quarters. His tone was constructive and confident, citing stronger interest in EOR, more international opportunities, and early AI initiatives that are meant to complement, not replace, physics-based subsurface tools.

Vipin Khullar said Q1 revenue was pulled down by organic declines, while acquisition growth helped partially offset the weakness. He highlighted that free cash flow fell to $3.5 million, with higher current income taxes of $1.5 million versus $900,000 a year earlier contributing to the decline, and noted that SeisWare and Rose contributed positively to adjusted EBITDA despite seasonal revenue weighting. On guidance, he said Q2 should be weaker for professional services and EBITDA because of the Bluware noncore wind-down and higher sales and marketing commissions, but the company still expects full-year organic recurring revenue to be stable, adjusted EBITDA to be no lower than fiscal 2026, and free cash flow to improve. He also said the professional services decline outlook widened to $6 million to $7 million, closer to the high end of prior guidance.

Analysts focused on what supports the full-year organic recurring revenue stabilization after Q1’s 12% decline. Management pointed to renewal timing, improving industry conditions tied to energy security, product investments, and new market opportunities, while Vipin added that acquisitions should contribute more as the year progresses and revenue recognition skews to the back half. Questions also centered on customer spending behavior, EOR opportunities, and whether new wins are upsells or new logos; Pramod said many opportunities are both, with more new-logo potential in emerging regions. On the Middle East, he said renewals were completed and there was no broad business disruption despite regional conflict, though some new conversions were delayed.