Computer Modelling Group Expects Stronger Revenue Growth

On Thursday before the markets open Computer Modelling Group delivered first quarter of 2015 revenues of $19.5 million and EBITDA of $9.6 million vs. our estimates of $21.3 million and $11.1 million (consensus $21.5 million and $11.1 million).

Our perspective is that the company’s first quarter of 2015 results shown the firm’s firmness to continue to deliver ongoing revenue growth and free cash flow backed up by its noteworthy recurring revenue flow. Software license sales in the quarter remained lower than our anticipation (increased by 6.9%) as strength in annuity and maintenance license revenues (increased by 14.5%) was canceled out by quarterly fluctuations in perpetual license sales (dropped by 38.7%), while professional service revenue was solid (increased by 17.8%).

Company maintains a highly profitable business model, as shown by its first quarter of 2015 free cash flow of $7.1 million (last twelve months free cash flow of $29.5 million and free cash flow margin of 38.9%). We think that the company will continue to generate noteworthy free cash flow from its operations, supporting a variety of shareholder value initiatives.

According to experts, company demonstrates a software pure play in the energy industry backed up by solid organic growth. We think company affirms a premium valuation given its solid market position, ongoing revenue flow, solid free cash flow growth, and shareholder value initiatives. Company stock is trading at a discount to pure-play SaaS vendors while bringing higher levels of profitability and free cash flow.


Joseph Clements, CPA, is a senior analyst for The Downtown Leader. If you have a great story idea for Joseph Clements, you can write at [ ].