Computer Modelling Group Announces Second Quarter Results and Quarterly Dividend

Organic revenue and profit fell sharply; only acquisitions offset deeper declines.

What the company is saying

Computer Modelling Group Ltd. reports a 3% drop in total revenue to $29.3 million for the second quarter of 2027, driven by a 10% organic decline partially offset by 7% growth from acquisitions. The company highlights a 7% increase in recurring revenue to $22.1 million, entirely from acquisitions, with organic recurring revenue flat year-over-year. Management attributes the 31% plunge in professional services revenue to the end of CoFlow development funding and the wind down of Bluware’s non-core services. Adjusted EBITDA fell 16% to $6.4 million, and margin compressed to 22% from 25%. Despite weaker earnings per share ($0.01, down 67%), the company emphasizes a 33% increase in Free Cash Flow to $2.6 million, citing lower capital expenditures. The company also details its capital allocation actions: repurchasing 4,760,700 shares under its NCIB and 4,444,444 shares at $4.50 per share for $20.0 million under a SIB, funded from its credit facility. The board approved a $0.01 per share dividend, payable December 15, 2026. The tone is factual, with clear acknowledgment of negative trends and cautious forward-looking commentary.

What the data suggests

The numbers reveal broad-based deterioration in organic performance. Total revenue for the quarter fell 3% to $29.3 million, with organic revenue down 10% and all recurring revenue growth coming from acquisitions. Adjusted EBITDA dropped 16% to $6.4 million, and margin narrowed to 22%. Earnings per share collapsed to $0.01, a 67% decline. Professional services revenue plunged 31% to $5.9 million, as the company lost CoFlow development funding and wound down Bluware’s non-core services. Free Cash Flow rose 33% to $2.6 million, but this was due to lower capital expenditures, not improved operations. Year-to-date, revenue is down 5% to $57.1 million, and adjusted EBITDA is down 13% to $12.8 million. The company’s share buybacks and increased credit facility ($150 million, up from $100 million) signal active capital management, but do not offset the weak operational trajectory. The company suffered a $1.0 million social engineering fraud in the quarter, partially offset by $0.3 million in insurance proceeds. Guidance for the next quarter is for flat professional services revenue and modest sequential improvement in recurring revenue and EBITDA, but management expects a $6–7 million full-year decline in professional services revenue versus 2026.

Analysis

The announcement is factual and measured, with the tone closely matching the underlying financial results. The company discloses a broad set of realised financial metrics, including revenue, EBITDA, margins, net income, and cash flow, all of which show year-over-year deterioration except for Free Cash Flow in the quarter. Forward-looking statements are limited and cautious, focusing on expectations for sequential improvement in recurring revenue and EBITDA, but these are near-term (next quarter) and not presented as transformative. There is no evidence of exaggerated language or narrative inflation; the release openly discusses negative trends such as organic revenue decline, margin compression, and a significant drop in EPS. Capital allocation actions (buybacks, credit facility increase) are disclosed factually, with no attempt to overstate their impact. The gap between narrative and evidence is minimal, and the company does not attempt to mask the weak organic performance.

Risk flags

• ●Organic revenue and profit are declining, with recurring revenue growth entirely reliant on acquisitions; this exposes the company to ongoing margin and earnings pressure if acquisition-driven growth slows or integration issues arise.
• ●Professional services revenue has dropped 31% due to the end of CoFlow funding and Bluware wind down, and management expects a further $6–7 million annual decline; this structural shift reduces revenue diversification and may pressure future profitability.
• ●Adjusted EBITDA margin fell from 25% to 22% year-over-year, and earnings per share dropped 67%, indicating that cost controls and acquisition synergies are not fully offsetting revenue declines.
• ●The company experienced a $1.0 million social engineering fraud, highlighting operational and cybersecurity risks; only $0.3 million has been recovered via insurance, with $0.1 million spent on legal fees.
• ●Increased reliance on debt-funded buybacks (drawing $29.9 million on a $100 million credit facility, later increased to $150 million) raises leverage and could constrain future capital allocation if operational cash flow remains weak.

Bottom line

Computer Modelling Group Ltd. is facing a clear decline in organic revenue and profitability, with its second quarter showing a 10% organic revenue drop and a 16% fall in adjusted EBITDA. All recurring revenue growth is acquisition-driven, and professional services revenue is structurally shrinking due to lost funding and business wind-downs. While Free Cash Flow improved this quarter, the gain was due to lower capital expenditures, not stronger operations. The company is actively managing capital through share buybacks and a larger credit facility, but these moves do not address the core issue of deteriorating organic performance. The board’s $0.01 dividend and recent buybacks provide some near-term shareholder returns, but future growth depends on integrating acquisitions and stabilizing organic revenue. The most important takeaway is that without a turnaround in organic growth, the company’s reliance on acquisitions and financial engineering cannot sustain long-term value creation.

Announcement summary

(TSX:CMG) Computer Modelling Group Ltd. reported second quarter 2027 consolidated financial results. Total revenue for the quarter decreased by 3% to $29.3 million, reflecting a 10% organic decline and 7% growth from acquisitions. Recurring revenue increased by 7% to $22.1 million, with all growth attributed to acquisitions and no organic growth. Adjusted EBITDA decreased by 16% to $6.4 million, and Adjusted EBITDA Margin was 22%, down from 25% in the comparative period. Earnings per share for the quarter was $0.01, representing a 67% decrease. Free Cash Flow increased by 33% to $2.6 million, and Free Cash Flow per share rose to $0.03 from $0.02. For the six months ended September 30, 2026, total revenue decreased by 5% to $57.1 million, with a 12% organic decline and 7% growth from acquisitions. Year-to-date recurring revenue increased by 2% to $42.4 million, with a 6% organic decline and 8% growth from acquisitions. Adjusted EBITDA for the six months decreased by 13% to $12.8 million, and Adjusted EBITDA Margin was 22%, compared to 24% in the prior year. Year-to-date earnings per share was $0.03, a 57% decrease, and Free Cash Flow decreased by 5% to $6.1 million, with Free Cash Flow per share flat at $0.08. Perpetual license revenue for the quarter increased to $1.3 million from $0.9 million in the prior year period. Professional services revenue decreased by 31% to $5.9 million, attributed to the end of CoFlow development funding and the wind down of non-core services at Bluware. The company repurchased and cancelled 4,760,700 shares under its Normal Course Issuer Bid (NCIB) announced on November 11, 2025, which expires on November 13, 2026. Under a Substantial Issuer Bid (SIB) announced August 11, 2026 and expired September 21, 2026, the company repurchased and cancelled 4,444,444 common shares at $4.50 per share, for a total of $20.0 million, funded from its credit facility. At September 30, 2026, $29.9 million was drawn on the $100 million revolving credit facility, with $70.1 million undrawn. On October 9, 2026, the company amended its revolving credit facility, increasing total committed borrowing capacity from $100 million to $150 million and adding a second lender. The Board approved a cash dividend of $0.01 per common share, payable December 15, 2026 to shareholders of record at the close of business on December 5, 2026. For the three months ended September 30, 2026, annuity/maintenance licenses revenue was $19,712,000, annuity license fee revenue was $2,408,000, recurring revenue was $22,120,000, perpetual license revenue was $1,269,000, total software revenue was $23,389,000, and professional services revenue was $5,879,000. For the six months ended September 30, 2026, annuity/maintenance licenses revenue was $38,960,000, annuity license fee revenue was $3,449,000, recurring revenue was $42,409,000, perpetual license revenue was $1,766,000, total software revenue was $44,175,000, and professional services revenue was $12,938,000. Cost of revenue for the quarter was $5,941,000 and for the six months was $11,602,000. Operating profit for the quarter was $3,093,000 and for the six months was $7,358,000. Net income for the quarter was $711,000 and for the six months was $2,036,000. Adjusted EBITDA for the quarter was $6,378,000 and for the six months was $12,767,000. Adjusted EBITDA Margin for both the quarter and six months was 22%. Earnings per share (basic & diluted) for the quarter was $0.01 and for the six months was $0.03. Funds flow from operations per share (basic) for the quarter was $0.04 and for the six months was $0.10. Free Cash Flow per share (basic) for the quarter was $0.03 and for the six months was $0.08. The company experienced a social-engineering fraud in the second quarter resulting in unauthorized payments totaling $1.0 million, incurred $0.1 million in legal fees, and received $0.3 million in insurance proceeds. The company expects recurring revenue in the third quarter to increase sequentially, professional services revenue to be similar to the second quarter, and Adjusted EBITDA and Adjusted EBITDA margins to increase sequentially but decrease compared to the third quarter of fiscal 2026. The fourth quarter is expected to be the largest renewal quarter and is expected to deliver the recurring revenue growth and Adjusted EBITDA required to achieve the full-year outlook. For fiscal 2027, the company continues to expect a decline in professional services revenue of between $6-7 million relative to fiscal 2026, stable organic recurring revenue, no decline in Adjusted EBITDA, and improved Free Cash Flow relative to the prior year, excluding the impact of future acquisitions.

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